A company’s ability to factor in its strategy careful analysis of its products as well as market research has enabled it to integrate emerging technologies whereas maintaining low operational cost. The ever-changing global economy that has virtually reduced the world into a global village has greatly informed company’s expansion into the whole market in order to seize the huge market gains in this region. The companies have the ability to implant new trade model thus aligning the trade model to customer operations and needs. Effective relations with customers in this new market as well as technical abilities will be significant in achieving customer relations. Due to social cultural changes in the region, internet has become a powerful tool for most companies and is responsible for exponential growth in most businesses. All these different market segments will be important in ensuring that a company achieves its objectives (Burgelman 2003).
A company is in a field that is facing stiff competition. It faces many hard times and threats particularly from its competitors all of which are giant firms and have financial capability. A Company has potential to regain control of the large market share by merging with other potential companies.
A comparison between two companies in terms of sales for the year 2008 is revealed in the chart below.
A merge between A and B companies would ensure that the conglomerates together control the market. Company A has been operating long enough while B, which became very active in the last 15 years has been growing at a fast pace with its sales increasing steadily. Despite A being more worth than B, it can be noted that the market capitalization of B is currently more than twice compared to that of A. B’s market capitalization stands at $ 140.4 billion while that of A stands at $ 62.27 billion. B has proved to be a very innovative company. A on the other side offers a wider selection than B and its computers have been known to withstand even the most extreme of conditions. Company A products have been commended for their reliability while B has taken the world by their ability to make life easier and they are also very modern and convenient. In both cases, different customers have varying preferences and different purchasing abilities hence they both seem to attract customers (Elmer-Dewitt 1994).
Company A gets revenue of about $63.7 billion with average margins of 5.8%.Its employee population stands at 82,000 and its market gap is about 20 billion. A merge between the two companies, will increase their overall resources, capital base as well as expertise thereby increasing skills hence increasing productivity.
There are a number of limitations facing such a merger. One of the major problems is that the two companies have different management styles hence combining them will require that the management of both companies be consolidated to accommodate a single management style. Despite this, the overall benefits of the merge (synergy) are worth it.
The world has become a competitive landscape and for companies to succeed they need to have a competitive edge. Therefore a company will seek to develop and implement strategies that its competitors are unable to imitate in order to maintain above average returns in its financial portfolio. The 21st century provides companies with an impetus to stay ahead of the park. A rapid change in the world markets where conventional sources of competitive advantage are losing effectiveness has compelled enormous investments in order to compete globally. The world demographic dynamics have allowed good, skills and people to move freely across geographic borders hence giving companies an opportunity to expand into global arena. Similarly, increased economic interdependence among countries where there are goods flowing with services unlimitedly, financial capital and knowledge across borders has led to a high increase in performance, quality, high productivity, production introduction time and operational efficiency. This has encouraged most firms to venture into foreign countries away from their traditional domestic markets but this has come with great challenges about the sustainability of growth in new environment having in mind the time required by firms to learn how to compete in new markets that they are unfamiliar with (Singh 2005).
The rapid technological changes will play an important role in a company’s global expansion, new technologies destroy existing ones and provide a leeway for creating new markets. The ability to access information in a more efficient way has become a paramount source of competitive advantage, information and knowledge is a critical resource in creating a competitive age. This will enhance the company’s strategic flexibility where it will be in a position to respond to various market demands accompanied by opportunities in a competitive environment.
A mission statement developed by a company should ensure employee, customer and community satisfaction.
A company needs full customer satisfaction, newest technology in order to become the most successful computer company:
Firms acquire competitive advantage over their rivals in many ways. By having competitive advantage, a firm will gain above average returns and boost its sales. A nice strategy will bring in competitive advantages over rivals. For a firm to enjoy competitive advantage, several factors must be present. This includes presence of substitutes for the core competence, it should be hard for any other company or organization to duplicate or copy and implement that kind of strategy. Also, the rate of competence resulting from the environment matters a lot (Nescert 2004).
Internal Analysis is core to most organizations that are successful. Internal analysis is the process carried within a company so as to determine the rate of return of the factors within the company. In internal analysis, it is important that the financial position of the firm be understood. Furthermore, performing as well as those that do not perform well within the firm have to be identified such that well performing departments have to receive more support and for poorly performing departments, necessary actions have to be taken to bring its performance up. In internal analysis, outcome analysis must also be carried out so as to determine how to redistribute the firm’s share of resources and capabilities. By understanding the number of resources and capabilities, it is possible to determine how much more resources will be needed in a particular department, how much more personnel and capabilities will bring in an extra income. Global-mind setting is the ability of the organization to detect environmental threats and environmental opportunities, setting targets higher than the resources available. This will enable the company to set higher targets so as to achieve higher results, stretching beyond its limits.
Primary activities in value-chain analysis include creation of the product physically, selling and distributing it and then offering after-sales service. In terms of value-creating potential for the primary activities, there is procurement so as to ensure efficient delivery of inputs, development of human resources and its management along with technological development so as to ensure activities are completed in time in manufacturing and distribution of products.
Is buying of activities add up to the firm’s productivity and this purchase is usually from external sources. The company engages offshore expatriates in ensuring that its production is boosted and efficiency maintained. Outsourcing involves exporting the entire production process to another country or region so that the production process goes on uninterrupted and quality is maintained. Outsourcing is aimed at improving the focus of a business by enabling the company to focus on various operational details since part of its production process will have been reduced hence the firm’s burden will have reduced.
Strategies are the means or plans put in place by an organization to enable it achieve its objectives. The strategies put in place by a firm will determine the direction of its activities, how much more effort the employees will be expected to put into their work and how much more resources will be set aside so as to achieve the intended goals at the end of the financial period. Strategic management refers to administration intended to fit exactly into the set objectives of the firm.
Under multi-domestic strategy, the small business units which are opened up by the main branch have the right to make specific strategic decisions. Also, the markets are assumed to differ by region such that there is sale of more products in the western world much more than in the developing world basically since the demand for the products within the two regions differ a lot (Podolny 2001).
Most strategic plans end up failing because plans of most companies do not show a dedication to check the customer value requirement yet times and needs keep changing with the environment. The second reason is that the plans are not integrated into individual objectives (Modsto 2000).
One of its strategies is to continue holding a wide market share and this comes with allocation of more resources in advertising and maintaining quality output.
Its economies of scale are also another strategic benefit that the company enjoys such that due to its large size, it incurs fewer costs in production and its overall output brings in more profit. Therefore, it is able to use such margins in purchasing more inputs at fewer prices, investing more in advertising its products and in improving the quality of its overall output. Development and Research are enhanced, marketing receives more allocation and the distribution network is made even better as a result of the profits accruing from economies of scale.
However, it is also notable that the firm enjoys location advantages. It even has branches globally so as to be as near the consumer as possible. This reduces expenses that could be incurred on transportation of raw materials from far places. It also saves on the labor costs in that instead of fetching employees from certain specific areas to come and work elsewhere, the employees are drawn from the region where the company branch is located. The only exception in this respect is the outsourcing process in which technical expertise is necessary on the job.
Returns from investment are also another strategic factor contributing to growth of the firm. Long-term investments are particularly essential for a company’s future success as returns on these investments bring about internal and external growth (Capasso 2006).
Cooperative strategy is a plan in which a number of firms agree to work together so as to attain a specific objective. In case there are more than two firms involved, then it is called network alliance. This is a strategy that benefits both the organization (by reducing competition) and the customers of the organization (by ensuring quality).
Strategic alliances result whereby firms agree to put their resources and capabilities together so as to gain mutual advantage in terms of competition. In this strategy, there is maximum cooperation between both firms since it is not only resources that are shared but also the individual capabilities of each firm. Strategic alliances are of three types; non equity alliance, join equity alliance and joint venture. In joint venture kind of alliance, two companies or more form an independent firm, recognized by law, by sharing their capabilities as well as resources. In equity alliance, two or more partners join hands to own a separate company but each of them claims only a certain percentage of the equity in the new company. In non-equity alliance, two firms or more sign a contract so that they can each use the other’s resources and capabilities (Mockler 2001).
Strategic alliance is for various reasons. It can be aimed at getting a way through to a restricted or controlled market or probably for keeping level with the market stability. It can also be aimed at helping one of the firms get into a new market faster; to avoid unnecessary risks (uncertainties).Strategic alliances also help to learn new tricks of doing business, to curb trade barriers. However, the major aim is to continue being in the market forefront or leadership. This alliance can be vertical or horizontal. In horizontal complementary alliances, the firms have the same resources and work capabilities and are in the same stage along the value chain. These alliances break easily due to the tight competition involved. In vertical complementary alliance, the partners are at different levels on the value chain. Outsourcing is a notable example of vertical alliance where the firms involved may have nothing in common in terms of final products or services rendered, technologically or markets ( Woods 2001).
One other very important way in which firms expand is by combining with other already existing firms. This can be by way of take-over, merger, or by acquisition. An acquisition is where one company takes the business of another business completely. In a merger however, both companies have considerable shares in the company. A take over takes place when the firm that is targeted for purchase by another firm fails to solicit the purchasing firm’s bid for complete ownership. Some factors hinder entrance of other firms into an industry. These include the economy of scale in production, which means existing firms advertise their products at low cost hence any new incoming firm will be forced to sell products at equally low prices. This will drive them out of business as they will not have acquired a strong base financially. Also, if in the industry, there are only differentiated products, the incoming firm will be forced to carry out aggressive advertising to convince customers to leave their old accustomed product and try out the additional arrival. This may not yield much to compensate for the advertising costs and desired profits (Probst & Gilbert 2005).
Acquisition is beneficial to the acquiring firm since it will receive more expertise and it will expand technologically. In addition, if the acquiring company and the one being acquired have different management styles, it will be very hard for them to consolidate and work well. Acquisition decreases the harmful effects of tight competition such that areas that were bringing about disputes are handled in a single way by one firm. Merging brings about synergy or what is called’ the 2+2=5 effect’ in which the combined resources of the merging companies will out beat their combined weaknesses. Merging also brings along extra expertise such that there is an increase in the professionals within the company. However, if the merging involves two companies with one of them being financially unstable, the stable one will be forced to cover up for the weak one hence the overall financial position for the two firms will come down.
Market analysis (SWOT)
In achieving its objectives a company will have to formulate and take into account its strengths, weaknesses, opportunities and threats (SWOT) a comprehensive analysis of the above will form the basis of establishing a more efficient strategic management plan. strength will alight what the organization is good at and can perfect this may include a professional work team and adequate and up to date facilities to make their work effective weaknesses may highlight what the organization is not capable of achieving as well as its inadequacy. Opportunities may indicate what the organization might seize to its advantage so that it can accomplish its objectives; this may include taking advantage of favorable government grants as well as tax exemptions to bolster its business strategies. Threats are environmental factors that may include negative legislation agenda which may impact on resources (Singh 2005).
This may be termed as capabilities and internal resources that give the company a competitive edge. Dealing directly with the customer will cut down on middlemen and marketing cartels. This will greatly improve the company’s profit margins and enable it to establish a foothold in the market. Dealing directly with the customers will also ensure that the company gets direct feedback on the products. This will augur well with the company’s strategy of formulating solutions to tackle any customer needs.
In light of its strengths the company will also need to formulate strategies to counter its weakness to effectively balance in the market.
A company needs to take advantage of available opportunities in order to advance its business agenda. The company has many opportunities such as growth in the ICT sector in international markets. The industry is still exponentially growing hence more opportunities in terms of new markets and customers this gives the company a good opportunity to expand its business as well as launch new products in the market (Schultz 2006).
A company will have to contend with a number of threats in its business operations. This includes the ever-changing technology. Technology can only get better and for a company to stay afloat it must change with the technology or even stay ahead of its competitors. The global economy that will see a saturation of other competitors will also play an important role in shaping the financial aspects of its players. It also needs to stay abreast with emerging strategies from its competitors with a bid on improving its products. This will include predicting the dynamics of the market and predicting its competitor’s intentions and formulating effective counter retaliations in case a threat is posed on its markets. New players in the market might bring new products thus complicating its access to distribution channels when substitute products are introduced which may be priced lower. Also when substitute products that are priced lower are of quality and performance, this may pose a threat to dells profits margins (Gopinath& Siciliano 2004).
Critical success factors
The concept of dealing with customers on a one-on-one basis is paramount if a company is to achieve its strategy and increase its profit margins. This will be important in cutting down costs associated with middlemen as well as ensuring that customers get better quality products and more powerful systems. This will enhance customer relations as well as customer loyalty making the company establish a wider market niche. Customer satisfaction in its new markets will be of great significance and therefore customer awareness and customer surveys will be important to ensure that it creates a positive image of itself. Market timing and planning will also be critical in regard to the launching of new products as well as mapping counter strategies in the ever-changing and competitive technology market. If the product is well known and continues to resonate with the customers, it will not have to spend extra finances in product development as well as intense marketing. By carefully analyzing some of these factors a company will overcome its weakness and enhance its strengths to gain significant advantage over its competitors thus bringing success to the business
Strategic Plan Based On SWOT analysis
In case a computer company is experiencing a serious shortage in its sales. The following plan is expected to help it come up.
The following is a review of weaknesses, threats and opportunities that the company could be encountering.
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Company intends to acquire double its current sales and regain stable profit position shortly. It will be manufacturing and selling computers and will also be providing added-value services to its customers throughout the established and potential market segments. Company’s services are expected to offer a range of advantages over competitors’ offerings. It intends to continue expanding through inorganic growth until it achieves target goals.
Long term business objectives are as below:
- To regain full market control.
- To become the leading company in computer manufacturing business.
- Maximize its potential in selling products globally.
- Stabilizing products selling price.
- Improve on customer service and attention to customer needs.
- Pursue strategic alliances with industry participants.
- Triple company sales by 2011.
- Double current profit margin.
- Attain a 50% market control by 2011.
Strategic Action Items
- Improved infrastructure.
- Implementation of financial plan within six months.
- Initiate strategic alliances within and without the industry.
- Complete the merging process with another company within six months.
Technology is ever changing, the global economy has ended up shrinking into a global village; opportunities belong to those who can effectively analyze the market environment by using their strength to spot potential opportunities. The most important aspect of technology based business today is predictive analysis that enables businesses to plan their next move, improve their products and stay ahead of competition this can be achieved through the diversification of products or moving away from the traditional products and launching these new products especially in new markets. Great emphasis should also be placed on marketing, some analysis should be undertaken to ensure that customer reactions are going to be positive will identifying opportunities to capture the market and contain current and future competitions. Generally effective planning and strategy are enough to propel businesses towards success regardless of the market dynamics.
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