Final assignment

Abstract:

A case study of a medium sized company is discussed in this assignment which manufacture, maintain, service and support scientific machinery. In order to accomplish the given demand, the following tasks are dealt in this respect.

Task A.

Applying at least five analytical tools in strategic management formulate a suitable E-business strategy for the company. Your proposed strategy should be based on your analysis, and supported by evaluation of your proposed approach, indicating its suitability for the organization, and also its relation to the company’s business strategy.

Task B.

Discuss the challenges of adoption of e-business and evaluate the Critical Success Factors (CSFs) for E-business in relation to the company

Task C.

Critically review the process analysis that the company should conduct in relation to operations in a new country with a view to improving performance.

Table of contents

The strategic management process means defining the organization’s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises its competitors; and fixes goals to meet the entire present and future competitor’s and then reassesses each strategy.

Task A

1- Introduction:

Strategic Analysis is:

“The process of conducting research on the business environment within which an organization operates and on the organization itself, in order to formulate strategy.’

(BNET Business Dictionary )

A theoretically informed understanding of the environment in which an organization is operating, together with an understanding of the organization’s interaction with its environment in order to improve organizational efficiency and effectiveness by increasing the organization’s capacity to deploy and redeploy its resources intelligently. (Andersen, 1999)

The term e-business is defined here as the use of electronic means to run company’s business.This includes all business activities within an organization both internal (Intranet) and external(Internet). The latter is often associated with selling of products and services online, that is E-commerce. (Swahney, 20001)

An e-Business strategy defines how the organization will use internet technology to satisfy strategic goals. It provides a high level, prioritized; portfolio of projects to help the organization successfully implement its business strategy... e-Business strategy formulation takes the strategic goals of the organization and the supporting business strategies as its starting point. (ed. Philipson 2002)

To engage in e-Business, companies need to be able to unlock data in their legacy (back-end) computer systems, so that they can share information and conduct electronic transactions with customers, partners, and suppliers via the Internet.

Definitions of strategic analysis often differ, but the following attributes are commonly associated with it:

1. Identification and evaluation of data relevant to strategy formulation.

2. Definition of the external and internal environment to be analyzed.

3. A range of analytical methods that can be employed in the analysis.

All analytical tools rely on historical, backward looking data to extrapolate future assumptions. It is important to exercise caution when interpreting strategic analysis results.

The goal of e-business strategy analysis and formulation lies in gaining an understanding of different strategy options and their implications. in a systematic way, about e-business strategy development. As an anchoring point for the remainder of this book, we propose a three part e-business strategy framework consisting of:

(1) Strategic analysis;

(2) Strategy formulation; and

(3) Strategy implementation

The first part of this framework entails the strategic analysis, which consists of two different perspectives: (1) the external analysis and (2) the internal analysis (Luthens, 2008)

2- Analytical methods used in strategic analysis include:

• SWOT analysis

• PEST analysis

• Porter’s five forces analysis

• Four corner’s analysis

• Value chain analysis

One of the key skills of a strategic analyst is in understanding which analytical tools or techniques are most appropriate to the objectives of the analysis. Below is an overview of some of the more commonly used strategic analysis tools. (Rogers, 2004)

2.1- SWOT analysis

A SWOT analysis is a simple but widely used tool that helps in understanding the strengths, weaknesses, opportunities and threats involved in a project or business activity.

It starts by defining the objective of the project or business activity and identifies the internal and external factors that are important to achieving that objective. Strengths and weaknesses are usually internal to the organization, while opportunities and threats are usually external. Often these are plotted on a simple 2x2 matrix.

2.1.1- Application of tool:

In order to take a general view of the company, the swot analysis is applied which basically consists of the internal and external analysis of the company.

2.1.1.1Strengths:

  • Annual turnover of over twenty five million pounds
  • Comprehensive maintenance and servicing support throughout the world along with the total support and cost effective solution
  • Good quality products and services
  • Competitive pricing strategy
  • In-house training for customers in all aspects of machinery and instrumentation use
  • Good working relationships with manufacturers and developers throughout the world.
  • Highly educated and experienced GM.
  • Main focus on customer satisfaction
  • IT literate MD

2.1.1.2- Weaknesses:

  • Happy with limited profit margin and sometimes just to break even.
  • Lack of resources and absence of commercial awareness of innovation
  • Limited performance measurement
  • The financial accounts (balance sheet, cash flow statement and profit & loss account) are reviewed monthly instead of regularly by group consultant
  • No immediate plan for incorporating e-business facilities.

2.1.1.3- Opportunities:

  • Intention to introduce new products and innovative solutions to customer’s requirements
  • Setting up agencies in new territories for worldwide growth
  • Benefit from the opportunities that are not considered profitable for the large organizations.
  • Trying to develop new technologically advanced products to get competitive advantage
  • Creating more flexible working environment by encouraging creativity within the company
  • Trying to develop strategic alliances with sector manufacturers and developers globally

2.1.1.4- Threats:

  • Competitive UK markets
  • International markets
  • Big players in the market
  • New technology & innovative products
  • Series of accessories of products some of which are obsolete

2.2- PEST analysis

PEST analysis is a scan of the external macro-environment in which an organization exists. It is a useful tool for understanding the political, economic, socio-cultural and technological environment that an organization operates in. It can be used for evaluating market growth or decline, and as such the position, potential and direction for a business. (Luthens, 2003)

2.2.1- Application of tool:

2.2.2- Political Factors:

The government regulations such as employment laws, environmental regulations and tax policy may affect the company’s growth and normal running procedure as the company has an international customer base in different areas of science and technology.

Other political factors may also affect the company such as trade transactions and political stability.

2.2.3- Economical Factors:

Economical factors affect the cost of capital and purchasing power of an organization. For example economic conditions of home country as well as overseas may increase or decrease the purchasing power of the company by affecting its cost of capital.

Economic growth, interest rates, inflation and currency exchange rates have a direct affect on the cost of capital and purchasing power of the company.

2.2.4- Social Factors:

Company’s future strategies maybe affected by population growth, age demographics and business consumer’s attitude towards the usage of internet and on line transactions.

Business consumers may demand extra-value added and innovative products and services.

Due to having international business relationships with in-home and overseas business parties, the company may face cultural diversity having impact on its growth and future decisions.

2.2.5- Technological Factors:

Latest technology: the company is trying to develop new and technologically advanced products to get a competitive advantage.

Focus on innovation: focusing on innovation, upgrades and instrumentation and avoidance from obsolete accessories may affect company’s future.

Adding value to internet in the company may have a marvelous affect on the e-business of the company.

2.3- Porter's five forces analysis:

Michael Porter’s analysis is done for assessing and evaluating the competitive strength and position of a business organization. This theory is based on the concept that there are five forces which determine the competitive intensity and attractiveness of a market. Porter’s five forces help to identify where power lies in a business situation. This is useful both in understanding the strength of an organization’s current competitive position, and the strength of a position that an organization may look to move into.

Strategic analysts often use Porter’s five forces to understand whether new products or services are potentially profitable. By understanding where power lies, the theory can also be used to identify areas of strength, to improve weaknesses and to avoid mistakes.

2.3.1- Application of tool:

2.3.2- Rivalry among existing competitors:

Rivalry among existing competitors of the company can be felt due to the latest technology, innovation in products and services. Competitive pricing policy is another bone of contention in company’s industry. The company is also facing international rivalry due to its customer base.

2.3.3- Bargaining power of buyers:

Bargaining power of buyers for this company is moderate due to competitive conditions in the pricing policy of this industry. Due to this reason, the company is compelled to agree upon low profit margin and sometimes on break even. Also due to the technology advancement and more availability of innovative brands, the switching cost from one supplier to another is low and the bargaining power of buyers is relatively high. Buyers on the internet may easily compare the products and prices of the products and services and can easily switch over from one supplier to another.

2.3.4- Bargaining power of suppliers:

As the company has developed its highly experienced service and support capabilities, and they still remain as the sole authorized manufacturer of all parts, accessories, upgrades and instruments for the company who initially sold the business, showing that the company has a competitive advantage over the rivals. So the bargaining power of supplier is relatively high. But due to the access to the internet often results to the low switching cost of buyer from one supplier to another as it is easy for them to compare products and services and switch over easily.(Smith, 1997)

2.3.5- Threat of new entrants:

A number of barriers can be felt for entering in the company’s industry. Mostly the profitable markets attract new entrants which erode profitability. If company wants to stop new entrants it should create strong barriers to their way. In a situation which the company is facing by investing insufficient capital due to unavailability of resources and lack of commercial awareness of innovation, threat of new entrants is high. But other strong barriers on their way are technologically advanced products and services, high investment and qualified and experienced work force which may stop them to enter in this industry.

2.3.6-Threat of substitute products:

Normally in the market if substitute products are available having almost same prices and quality then buyers can easily switch over from one brand to another. Because it reduces their attractiveness in the market which ultimately reduces the bargaining power of supplier. In this case study, if the company does not try to develop and innovate its products and services, although it has competitive pricing strategy, it may face threat of substitute products and services. Only technologically advanced, unique and innovative products can lessen this threat.

2.4- Value chain analysis:

Value Chain Analysis helped identify a firm's core competencies and distinguish those activities that drive competitive advantage. The cost structure of an organisation can be subdivided into separate processes or functions assuming that the cost drivers for each of these activities behave differently. Porter's strength was to condense this activity based cost analysis into a generic template consisting of five primary activities and four support activities. The nine activity groups are:

Source: Porter (1980)

Figure 2.5: Value Chain Analysis

2.4.1- Primary activities:

Inbound logistics: raw material, inventory control,

Operations: design and manufacturing of scientific machinery, instrumentation, production, spares manufacturing, in-house training, accessories and upgrades and information system design.

Outbound logistics: distribution of products and services in the local and international markets.

Marketing and sales: to enhance sales, the company has adopt a competitive selling price strategy, channel management. To increase sale, the company has its own web site for an initial contact to customers or to get feed back.

Service: maintenance spares and repairs service, service support contracts, relocation and refurbishment facilities.

2.4.2- Support activities:

Company’s infrastructure: it includes managing director, general manager, administration, service, sales department, operations and IT department.

Human resource management: Human resources are increasingly becoming an important way of attaining sustainable competitive advantage. The main features of this company regarding human resource management are new recruitment policy, the urgency to promote innovation and creativity among work force. In-house training for customers in all aspects of machinery and instrumentation use is done.HR has also focused on creating a more flexible working environment by encouraging creativity within the company.

Technology development: this area is concerned with technological innovation, training and knowledge which are crucial for survival of this company. The company has consolidated their maintenance, spares and repairs service, moving into scientific machinery and instrumentation production, only after establishing their customer support platform. The plans for the production side of the business are an indication of the company’s vision for the future, and the desire to introduce new products and innovative solutions to customer’s requirements. Another aspect of this vision can be described in the company’s commitment to grow worldwide by setting up agencies in new territories.

Procurement:purchasing raw materials, supplier contract negotiations.

2.5- Four corners analysis:

Profiling a specific competitor is often important to management. However, manycompetitive profiles will fail to give management insights into how competitors willrespond to your own strategy. Understanding this inter-relationship is important forknowing how to position your company in relation to the competition. One of the mostpopular models for this type of competitor analysis is the so-called Four Corners analysis, developed by Michael Porter of Harvard Business School. The model has fouranalytical corners:

1. What drives the competitor? Look for drivers at various levels and dimensions soyou can gain insights into future goals.

Competitive pricing strategy policy, latest technology, innovation solutions to customer’s requirement, setting up agencies in new territories and company’s international customer base status drives the competitor.

2. What is the competitor doing and what is the competitor capable of doing?

In this case study, pricing policy of competitors is in competition. They are also introducing technologically developed products and services as per customer’s requirements and demands.

3. What are the strengths and weaknesses of the competitor?

Strengths:

  • Pricing policy

Weaknesses:

  • Their production and services is not customer base.
  • No advancement in technology.
  • No e-business strategies

3- Main objectives of the e- business strategy:

Keeping in view the vision of the company and evaluation of the applications of analytical tools, the following objectives are recommended for the company’s ebusiness strategy.

  • To concentrate more on customer satisfaction
  • To introduce new technologically advanced and innovative products to get a competitive advantage in the market
  • To develop strategic alliances with the similar organizations that would provide required resources for setting up agencies globally to find out new territories
  • To develop an immediate plan for incorporating e-business facilities within the country or at international level

4- Suggested E-Business Strategy (Including Evaluation and Alignment with Business Objectives):

In order to meet the set objectives, the company needs to pay more attention towards investment. In this case study this is not possible due to insufficient resources and lack of awareness about innovation. This requirement can be fulfilled by doing strategic alliance with bigger but similar organizations throughout the world.

In today's environment, creating sustainable value for customers and shareholders requires creating effective alliances. Alliances are essential building blocks for companies to achieve stronger and more effective market presence. Alliances are now a fact of life for business, an important piece of current operations as well as future strategy.

In recent years, there has been an explosion of alliances around the world and across industries. For example, in February 2001, The Coca-Cola Company and Procter & Gamble announced a $4.2-billion U.S. dollars joint venture to use Coca-Cola’s huge distribution system to increase reach and reduce time to market for the P&G products Pringles and Sunny Delight.

Strategic alliances would be beneficial for the product development of the company as well as to raise the revenues from international markets. But before this the company needs to adopt and apply e-commerce facilities to its net work.

Alliances can be extremely useful in situations of great uncertainty and in markets with growth opportunities that a company either cannot or does not want to pursue on its own.(Brinkerhoff, 1994)

It is clear from the swot analysis that lack of e-commerce facilities is one of the main weaknesses of the company. A well planned e-commerce aided business can generate revenues easily as compared to without it. With e-commerce facility its contact with actual and potential buyers would be on immediate basis on local as well as on international level.