Stratsim is an car industry with seven companies. Initial all firms were getting the same strategic capabilities this means the same resources and competences i. e. same: capital, technology capacities and range of vehicles from there managers was likely to deploy those functions to put their solid brands well on the market.
Competing to get into market sections and develop services is way of attaining competitive gain at the Strasim industry.
The industry is highly competitive but attractive since demand for vehicles is increasing across the world promising for return on investment and profit.
Making good strategic decisions and proper execution of these strategies is the key to success because strategy is way of reaching the firm's mission and aims it aims to attain.
"Strategy is the path and scope of your organisation over the long term, which achieves advantages in a changing environment through its settings of resources and competences with the purpose of fulfilling stakeholder objectives'. (Johnson et al, 2009: pp3).
Firm B's basic strategy is growth through differentiation where by customers will be lead to pay high quality price for the best identified value. We aim to change the rule of game from price based mostly to quality established competition. This will help to yield more earnings and competitive edge from rivals.
Mission is defined as 'overriding purpose in line with the values or goals of stakeholders'
'Desired future status: the aspiration of the organisation' (Johnson et all 2009 pp 9)
Our mission is to become the superior in the auto industry by offering qualitable and progressive vehicles to fulfill our customers more effectively and efficiently
The firm's target is to set-up value to the shareholders and maintain long-term success.
Firm does indeed operate in the macro environment. Professionals need to create an open company system to be able to receive the inputs that can come from its environment. The information from the surroundings will lead the manager to build the strategy. To do so there is a need of doing a solid examination of the firm's environment (external and internal). The diagram below shows the company's macro-environment which need to be analysed. This report will analyse the motor vehicle industry and organization B's internal advantages and weaknesses.
A. Thomson, Jr. A. J Strickland 111.
According to Thompson and Strickland there are two most significant situational concerns:
1-industry and competitive conditions
2-a company's own competitive functions, resources, internal strengths and weaknesses and market position (Thompson and Strickland, 2003 pp73)
Analysing the exterior environment is very important for a tactical manager as it provide the real situation for success or inability of the firm's strategy. This environment is changing at unprecedented rate; organisations need to act in response quickly to survive because those changes have effects on the organisational performance it creates opportunities and hazards. An automobile industry can not escape the effects as it is rarely impacted with environmental changes throughout its background.
The analytical tool to analyse the external environment is PESTEL, five causes modal of Michael Porter and SWOT research. These frameworks supply the set of possible influences to success or inability of an automobile industry and the stratsim industry as a foot of the analysis.
It includes the Political, Economic, Community, Technological, Environmental and Legal factors. (see appendix 1)
The Macro-environmental factors show the extensive picture of firm's environment. Professionals should think about both factors while making decisions to observe the developments and the changes happening because they impact the organisation strategic performance in one way or another diversely with regards to the type of the industry/sector and organisational features.
Political factors those mentioned previously can impact the automotive industry issues such as environmental air pollution is of great important in this industry. Also administration balance is important because politics instability affects the success of vehicle supplier investors in several countries it reduce its appeal and profitability potential.
Industry efficiency and profitability might be afflicted by changes in interest levels, , inflation, unemployment and GDP. E. g. car industry was badly damaged by recession
A change in consumer taste is an opportunity for fast movers to grab the market and the danger for supporters to loss the marketplace. Also Changes on the throw-away income effects the consumers buying behaviour particularly when it involves buying a car they might consider it an extravagance.
Advances and immediate changes in technology have transformed business processes in the automotive industry. Coping and adapting to the people changes is the main element to success in this industry. Adapting to E-commerce modes is crucial for success.
Environmental issues such a using green production resources to lessen greenhouse gas is important to adhere to international environmental insurance policies e. g. the Kyoto standard protocol is emphasising vehicle manufacturers across the world to take methods to reduce the specific emission for vehicles.
Porter's five forces framework helps identify the elegance of an industry or sector in conditions of competitive forces. (Johnson et all 2009 pp 30) This model will be utilized to explore the surroundings in which automobile industry operates. (see appendix 2)
The industry is profitable this appeals to new players to get into however they have to handle barriers such as high capital requirements for: buildings, equipment and advertising. Economies of size loved by incumbent businesses, their usage of resources and experience pose the barrier and reduce danger to least because New players may use other styles such as creating strategic alliances with existing companies and penetrate the marketplace.
The use It systems such E-commerce weaken the bargaining electric power of suppliers of vehicle components since manufacturers can source for their requirements such as materials and labors worldwide and deal for price. The transition cost in one supplier to some other is low. Manufacturers can incorporate backward and go into the suppliers industry.
Emergence of new information technologies such as internet raise the bargaining electricity of potential buyers, as they can access information and compare price. The attributes of vehicles are less differentiated; they are simply virtually similar as observed in the Stratsim this makes easier for customers to transfer from one firm to another especially for price sensitive customers. Manufacturers need to differentiate their products to create a customer loyalty so that reduce the buyers capacity to minimum.
Companies in one industry come under competitive pressure from the activities of companies in a carefully adjoining industry whenever purchasers view the products of both industries nearly as good substitutes. (Thompson et all 2006 pp 59)
There is an in depth replacement of vehicles as the method of travel. Railway, seaway and airway are substitutes for automobile in conditions of quality, security and performance. But some of them such as airway is wii substitute in conditions of price since it is priciest compared to road way this decrease the pressure of swap to minimum. Progress in technology paves just how for substitutability in conditions of communication purposes Internet since it reduces the necessity of in person communication.
Firm B rivals are companies A, C, D, E, F, G and other identified brands such as Toyota, Tata etc The rivalry is strong since number of players is large. The industry is older where progress is low this increase the dangers of price-based competition which copy the industry profit to consumers. Firms are battling for development opportunities to obtain more market shares and gain dominance. This is naturally in a Stratsim as companies are rivalling to enter in the market sections.
The research reviled that collective durability of the competitive causes in the automobile industry is modest making the industry to be attractive and profitable.
A SWOT analyses the main element issues from the business environment and the strategic capability of a business that are mainly likely to impact on strategy development. (Johnson et all 2009 pp 81)
Firm B's SWOT evaluation will look on the firm's exterior opportunities &Threats and internal Strengths & weaknesses
- Limited resources to pursue new opportunities such as bringing out new vehicle class
- Loss of market share in a family vehicle class
- Low productivity
- Highly in debit $4, 836. 0
- Weak in pickup truck class where there was the most market potential
- Market head in economy class
- Good reputation.
- quality products; Buzzy has an increased winning market because it was perceived as the most qualitable car in the market
- Good management team
- Innovation & creativity
- Strong syndication capability
- New Markets segments
- Advancement in technology will permit the firm to create environmental friendly vehicles
- Collaborative arrangements
- Global extension to increase markets
- Competition from existing and new entrants.
- Globalisation pressures
- Rapid change in technology
- Volatility in Price
- Economic recession
- Raise in oil and gas prises
This evaluation helps the organization to identify the key internal and external factors that are essential to the firm's performance. (see appendix 3)
In order to analyse the inner environment of the company we need to examine the effectiveness of the firm's resources and competences ( Strategic capability) to be able to learn if the organisation have a competitive advantages over the rivals.
Strategic capability is the ability to perform at the level required to survive and prosper. (Johnson et all 2009 pp 62).
Tangible resources are physical possessions of the firm it offers the physical, financial, individual and intellectual capital recourses. Intangible are non physical resources.
Firm B gets the following resources: complexes, machines, vehicle (Employer, Boffo and Buzzy) employees, managers (four managers with innovative functionality) capital and cash made from sales.
The pursuing resources are unique which means they give the firm a competitive advantage over the competitors plus they cannot obtain them just as as organization B
- Strong customer base
- Recognized brand
- Innovation - to cope with technical changes
- Creativity - to produce unique designs
- CRM techniques- good customer service in order to maintain our stocks.
- Flexibility- ability to cope with changes of customers
- Strong brand -Buzzy is a exceptional brand
Firm B has were able to achieve the bigger position since it were able to build and preserve the competitive advantage over the rivals. The resources and capabilities are unique.
According to Barney and Hesterly the VRIO construction is a good tool to examine the internal environment of a firm. They state that VRIO "means four questions one must enquire about a source of information or capacity to determine its competitive probable:
4. Company? Barney and Hesterly (2006),
The above VRIO framework show that organization B is competent to maintain its competitive gain as time passes.
Firm B through the differentiation strategy got managed to create value to its customers by offering quality products more ideally and effectively. Its resources such as skilled management team with an adaptive capacity are unique where by rivals can't posses (uncommon) and it is difficult to imitate. Creativity, innovation, good customer support and other features face the risk of substitution and imitation due to progression in technology.
The automobile industry is in the maturity stage where development opportunities go down. Knowing that the firm keep on making regularly slight improvements on all characteristics at different times in order differentiate our products and be more up to date. to increase and enhance the existing features which become obsolete as time moves.
In order to keep up our industry leading throughout the market class and boost the stocks of other classes director were forced to become more impressive and creative through good mixture of marketing combination ( products, prices, advertising and place)by making modification in the creation techniques and marketing approach. We increased dealerships and increase the training budget in order to establish assisting services. We were cost delicate so that to keep cots down to accomplish that we concentrated on the characteristics that was needed by customers such as protection and quality. This help to gain reputation and create a loyal customer base. (see appendix 2 )
Being competent in the current business environment requires managers to believe strategically and respond proactively in order to develop and make it through. Carefully environmental scanning is crucial to success since it provide a usefully information from the environment in which the firm is working. Changes of the environment has great effect on the success of the organizations strategies, therefore the ears and eye of professionals should be open to be able to really know what is happening in the surroundings.
Innovation and creativity is the only path organisation and companies may survive whereby an organisation can develop a learning culture. Teamwork is also very important in managing tasks as I experienced in the stratsim.