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Strategic Plan for Waterstones

Pages:10

Executive Summary

The following report aims to critically review the current strategic opportunities available to the Waterstones book chain when it comes to digital transformation. These opportunities arise as a result of various political, economic, social, technological, environmental, and legal factors present within the United Kingdom’s business environment.

With the recent outbreak of the Coronavirus Pandemic, firms are trying to shift to online operations readily.And the firms already having most of their operations online, are looking to capitalize on the opportunities that are present on the digital front. This report not only just reviews these factors, but it will also try to provide strategies on how to make use of these opportunities.

The incorporation of technology, or digitalization, of all business processes, is known as Digital Transformation. It is a structural change that completely changes how a business operates and delivers values to its customers.

Furthermore, some internal and external factors are at play. This report aims to analyze those factors thoroughly and looks to provide strategic solutions on how to counter or make use of such factors.

Lastly, one of the main focus of this report is to identify a new strategic aspect that the Waterstone book chain is yet to discover and capitalize on that before any competitor firm cashes in on that.

Digital Transformation

The digitalization of a business is known as Digital Transformation. Digital Transformation changes how a business conducts its operations and creates value for its customers. Apart from an operational change, a business that introduces digital transformation has to go through a complete cultural reboot. In recent times, the emphasis on e-commerce and the digitalization of businesses has grown a lot. Businesses have started to introduce digital transformation in different areas.

Every firm has a different sort of digital transformation based on its particular business conditions and demographics. However, there are a few common elements that all digitally transformed firms have. Firms having incorporated digital transformation are more customer-centric than other firms. Their idea is to enhance and enrich the customer experience at each touchpoint. A digitally transformed firm is very smooth and agile when it comes to operations. One of the main benefits and motivations for digital transformation is the fact that it enhances operational efficiency.

Lastly, as mentioned earlier, digital transformation means a change of culture. Digital Transformation is not about introducing the latest technologies. Instead, it is more about embracing change and leaving the old practices behind.

With developments made over the last decade, digital transformation is the way to go forward. It will be crucial to any business’s success.

Current Factors

Over the last decade, the world has increasingly been shifting to online businesses. The customers are satisfied with placing their orders online and paying through online channels. Items that can only be used physically are delivered at doorsteps. In contrast, the items that can be used in softcopies are simply being stored in the customers’ computers—for example, books and journals. With the outbreak of the COVID-19 in recent months, social distancing has become mandatory. Going out of the house is considered hazardous and dangerous. With all these circumstances, digital transformation has become even more critical. When it comes to Waterstones, it has been open to digitalization. And hence it seems to be in a pole position to capitalize on the current market conditions.

Politically, the UK government’s policies regarding the use of the internet for conducting online businesses have been somewhat flexible. Through various studies, the government has discovered the growing influence of digital services on multiple age groups across the country, which allows Waterstones, a healthy space online.

The UK has had a rather stable economy over the last decade, and this crucial factor allows Waterstones to introduce digitalization throughout its supply chain. And with the support of government policies, Waterstone can easily benefit through such measures.

Socially, the general direction of the whole world, and now especially with the Coronavirus, the preference has shifted mainly to online purchasing. Since Waterstones mainly sells books, it is a massive opportunity for it to go online.(Pînzaru, Zbuchea and Viţelar, 2019)

The concept of E-Books has become dominant because all the books can now be stored on a computer. This concept saves a lot of time that a consumer takes to make a physical purchase; it saves the space that hardcopies occupy. And for students, it saves the burden of physically carrying multiple books. (Pînzaru, Zbuchea and Viţelar, 2019)

And adhering to the guidelines laid out by the governments around to combat the Coronavirus, E-Books and softcopies comply with social distancing as well.

Although Waterstones is technically well equipped, with the current situation in light of the COVID-19, there will mostly be a sharp increase in the demand for E-Books and softcopies. Hence, Waterstones could benefit from more investment in Cloud or Artificial Intelligence. Technologically, it is an excellent time for Waterstones to expand digitally and adapt to digital transformation.

Through selling books and other related items online, Waterstones can significantly reduce its environmental footprint. For books, the first and foremost thing is paper, through hardcopies the manufacturers of books is directly linked to deforestation and hence leaves a critical environmental footprint. Furthermore, the transportation of raw materials and the deliveries of hard copies of books leads to large amounts of fuel emissions resulting in severe air pollution. Indulging in such practices can seriously taint Waterstones’ brand image. Environment preservation has continued to become quite essential in recent years, and customers prefer to opt for brands who are contributing to the environment. By emphasizing more on online operations, Waterstones can make a crucial contribution to the environment and reduce its environmental footprint to a great extent.(Shaughnessy, 2018)

On the legal front, the UK government, as discussed earlier, has been somewhat flexible and supportive with online businesses. And since most of the regulations and legal issues are related to the environment, conducting business online is considerably safer in that regard.

Implementation of Strategies

The recent shift towards technology and consumer preference of buying online, combined with the business atmosphere in the UK have presented Waterstones with a bunch of opportunities that it can use. (Berman, 2012)

Waterstones can look to increase investment on its online platforms. Since the government is supportive of such ventures, there is minimal risk of any political invention in Waterstones’ online operations. Having supportive government policies can also help Waterstones in expanding abroad. Since the business is online, Waterstones doesn’t have to have a physical outlet in overseas countries. The buyers from abroad can simply connect with Waterstones on its online platform and purchase E-Books and softcopies. (Matt, Hess and Benlian, 2015)

Apart from that, the UK’s stable economy means that the general business conditions are right, and firms are having a good time conducting business. Waterstones can use this opportunity to invest in digital transformation throughout its supply chain. With each touchpoint of the supply chain introduced to digital transformation, Waterstones can drastically increase its operational efficiency. The firm policy, inflation, and unemployment rates also mean that it will be more comfortable for Waterstones to expand through obtaining cheaper loans. Moreover, such stable conditions indicate that the customers will also have enough buying power to shop online in an instant without thinking twice.

Socially, with the COVID-19 situation, the growing awareness of the general population about using digital services makes it an excellent opportunity to go digital. Waterstones can develop its smartphone app that is accessible for almost everyone. This concept makes for a unique consumer experience since each user is carrying their virtual library in their pockets. The app is a quite convenient option since everyone has a smartphone in this day and age. Waterstones can earn a lot of revenue through its app downloads and then the in-app purchases.

Furthermore, through digital transformation, Waterstones has a massive opportunity to collaborate with online giants like eBay, Amazon, and Alibaba. With its books being displayed on their platforms, Waterstones can dramatically increase its market size. Moving on, Waterstones can partner with Universities and research centres and provide special discounts to the university’s students and the members of the research centre on their E-Books. This strategy will increase Waterstones’ customers base and help it to make a long-lasting mark. Lastly, one of the best strategies the Waterstones can implement is to partner with Schools, Colleges, Universities, and NGOs. Waterstones can provide digital library services to Universities and research centres. And with the increasing shift towards technologies, students prefer carrying their course materials on their computers rather than

coursebooks to the students through their digital application. This strategy will solve the students’ burden of physically carrying books while also providing the schools with a one-stop solution for coursebook provision across all levels of the school. All of this will do wonders for Waterstones’ brand positioning and market share.

By digital transformation and automation, Waterstones automatically becomes environment friendly. And with the increasing shift towards environmental sustainability, a brand that is contributing to environmental preservation outshines others. By merely conducting its operations online, Waterstones can attract a cumbersome amount of customers, which will increase its sales, brand reputation, and successful performance.

Challenges associated with Digital Transformation

One of the main challenges faced while shifting online and using digital transformation is that it is particularly hard to gauge consumer sentiment. In the business atmosphere today, customer experience matters the most. For an online business, it is harder to gauge customer experience. An unsatisfied customer may simply stop purchasing from your online store. (Schwertner, 2017)

The results of resistance to change, show themselves in a plethora of ways. Advanced ventures crucial to an organization’s going-concern can experience difficulty in getting subsidies, resources, or advertisements. These ventures might be changed so as not to compromise retail or accomplice brands. They are kept down by worries about tearing apart other income sources. They are approached to legitimize ROI to an unusual degree of conviction. They are sent through interminable lawful audits.

Kodak envisioned the automated camera, yet it was the inside assurance from a change that drove the association to cover it since it subverted the association’s legacy film business. Did mobile phones beat the landline business? The truth is out. Regardless, Bell Atlantic “guaranteed” itself by enduring that change was not very far away, and changed by choosing the irksome decisions required to conform to that change.

Another challenge that a company faces when adapting to digital transformation is the risk of employee pushbacks. The introduction of technology across the whole business might severely demotivate the existing workforce. With technology comes a massive threat of layoffs for the current employees. This threat brings the morale and productivity of the employees down drastically. There is a massive skill gap between those employees who know how to operate technology and those who don’t. The gap means that the skilled workforce already has hands full and hence, don’t have the time to train the old employees. (Digital Transformation- The Internet of Things- Opportunities and Challenges, 2020)

One of the most crucial challenges faced by companies operating online is the problem of substandard analytics. Whenever a customer visits an online store, they like personalization. They like to be shown what they’ve been buying or products of a similar nature. Substandard analytics ruin the customer experience, having the potential to convert profits into losses. (Digital Transformation- The Internet of Things- Opportunities and Challenges, 2020)

Associations that adequately “cross the void” to modernized reasonability consistently discover they need to oblige free what they used to charge for, sell as participation what used to be “independently.” Adapt through publicizing things that used to be paid for in various habits, and reconsider how they get pay from the value that they make. Those that do so deftly can every now and again find that the gathering of an electronic procedure offers more scale, pay, and advantage than the legacy approach. However, it takes experimentation, a notion of danger, and – to be uncaring – some mistake on the way. In spite of the fact that this approach is comprehensively recognized among new organizations, it is one that the organization and money related masters being developed associations, generally, fear. Notwithstanding, this is the gauntlet they should race to gain electronic ground.

Overcoming Challenges

Challenges are there to be faced and overcome. Hence is why the challenges that are present with shifting majorly to digital transformation can be faced. Its a fact that with online businesses, it is nearly impossible to gauge customer sentiment. If the customer has a bad experience, they might silently go away without any conversation at all. To overcome this crucial challenge, Waterstones can make sure that it is not just trying to achieve a higher sales target. The focus should primarily be on customer experience. By improving and enhancing all the touchpoints throughout the customer experience, Waterstones can firmly place itself in the minds of the customers. It will also help in automatically boosting sales, and retaining customers, providing stability in future growth.

To counter the employee pushback issues, Waterstones needs to think out of the box. It can tackle this challenge by incorporating a customer-centric culture. The focus needs to be on the customer more than anything. When a company strives to provide the best experience to its customers, there is a cultural reboot from top to bottom, which ultimately leads to employee training and development. Such actions help in massively boosting the morale of the employees, and they try to produce the best results as a result. (Borate and Borate, 2014)

Waterstones might not be able to delete uncertainty and vulnerability from employees’ brains. However, you can positively reduce them. Being steady and straightforward is vital. Keep your workers connected through the entire procedure. Engage them and paint them a future they would all be able to move in a specific direction. By helping its workers comprehend what’s in question, you can positively motivate them.

The issue of substandard analytics can be resolved through investment in better AI systems. Through introducing high-quality Artificial Intelligence systems, Waterstones can dramatically increase its database and gather more data efficiently. Through a comprehensive database, personalization becomes very simple and easy. When the customers are provided with interface personalization, they are displayed content of their interest, which enhances the customer experience and satisfaction significantly. (Pichan, Lazarescu and Soh, 2015)

 

Bibliography

Berman, S., 2012. Digital transformation: opportunities to create new business models. Strategy & Leadership, 40(2), pp.16-24.

Borate, N. and Borate, S., 2014. A Case Study Approach for Evaluation of Employee Training Effectiveness and Development Program. SSRN Electronic Journal.

Journal of Xidian University, 2020. Digital Transformation- The Internet of Things- Opportunities and Challenges. 14(4).

Journal of Xidian University, 2020. Digital Transformation- The Internet of Things- Opportunities and Challenges. 14(4).

Matt, C., Hess, T. and Benlian, A., 2015. Digital Transformation Strategies. Business & Information Systems Engineering, 57(5), pp.339-343.

Pichon, A., Lazarescu, M. and Soh, S., 2015. Cloud forensics: Technical challenges, solutions and comparative analysis. Digital Investigation, 13, pp.38-57.

Pînzaru, F., Zbuchea, A. and Viţelar, A., 2019. Digital transformation trends reshaping companies—proceedings of the International Conference on Business Excellence, 13(1), pp.635-646.

Pînzaru, F., Zbuchea, A. and Viţelar, A., 2019. Digital transformation trends reshaping companies—proceedings of the International Conference on Business Excellence, 13(1), pp.635-646.

 

Schwertner, K., 2017. DIGITAL TRANSFORMATION OF BUSINESS. Trakia Journal of Sciences, 17(Vol. 15, Suppl. 1), pp.388-393.

Shaughnessy, H., 2018. Creating digital transformation: strategies and steps. Strategy & Leadership, 46(2), pp.19-25.

 

Strategic International Business Management

Pages:15

Introduction

Management performance tends to handle the operational process in organizations through regular feedback. The scope of business management is enhanced when a business model is invigorated. It is vital for a company’s success that several changes should be implemented (Korsgaard, Rask &Lauring, 2007). The process of strategic management is to implement a strategy in an organizational framework that allows the accomplishment of strategic goals. This kind of operation is to get more customers who spend more, so longer retention is made. (Lechehab&Kamassi, 2016) The monitoring and planning analysis in an organization need specific processes to meet the objectives. This report will discuss international strategic business management in IKEA regarding Malaysia. The report will discuss the mission, strategic goals, and SWOT analysis.

Company Overview

IKEA is a global brand that was found in 1943 by Ingvar Kamprad. The company is famous for its famous and modern stores. Its different kinds of products are eco-friendly and cost-effective. IKEA operates in 389 stores worth of 42.9 billion. It also has few branches across the world with such as KungensKurva, in Shen Zhen, and Texas. It has presented an example of trendiest with low-cost furniture. IKEA is considered a recognizable brand at the globe with best practices. The trademark of the company is well designed and functional regarding frugality experience. These practices are related to the principle that offers competitive advantage (Soh, Wong & Chong, 2015). The image, quality, and affordability of products is an asset for the company. The company has the opportunity to be streamlined about its customs, franchising, and popularity.

IKEA is successful in terms of its management operations. Its formulation processing is based on the right demographic framework. IKEA stores are customized to offer a better experience to customers in terms of fluid shopping (Hultman, Johnsen, Johnsen & Hertz, 2012). The living room and domestic style experience for customers are exciting. They need to take a code linked to the selected item when they buy furniture. The functional layout of products is seen as a mass service for a product offering that fulfills the basic needs of consumers.  Some basic features of the firm are high quality, wide variety, the flexibility of products, less disruption, and easy supervision.

Mission

The mission of the company is to build a strong culture that will deploy crucial factors for the continued success of IKEA. The concept of sustainability is inherent because furniture is considered a necessary value for people’s lives (Korsgaard, Rask &Lauring, 2007). The recognizable brand name and concept are linked to low valued price and home furnishing products. The company has a wide range of its products and allow frugality practices for being the first choice of consumers as compared to other brands. The culture of IKEA is to work within everyone, create and develop it further, so people live with this vision. This concept is building a core competency of the company against others. IKEA has established its long going capacity in Malaysia with the science and technology concept and managerial practices. The developing economy of Malaysia is offering huge potential to the company to produce furniture due to newly identified competitive advantages (Garnier&Poncin, 2019).

SWOT Analysis

IKEA is a valuable furniture brand in the world, and in 2019, its worth is estimated at US$45.4 billion. The strengths of the company are its brand image and brand name. The reputation and awareness of the company are its key strengths (Johansson &Thelander, 2009). A most significant strength is its low-cost affordable furniture because it aims to sustain in the lives of people, so it is cost-conscious. The philosophy of IKEA is to keep costs low and incorporate new technologies, advances, and innovation to allow profit margins(Arrigo, 2005). This is associated with the profitability, efficiency solutions, and cost-effectiveness methods in handling products. In Malaysia, IKEA has a competitive advantage in producing products.

The combination of effective packaging and low price furniture startup in Malaysia is a big strength for the company. The products of the company are new, different, and allow extraordinary shopping experience to people, so consumers are engaged in decision making (Soh, Wong & Chong, 2015). It is different from other brands because of the wide variety, selection, and offering a chronological order. Just as its competitors are working in Malaysia, IKEA aims to maintain long term relationships with customers, so optimizing its cost and transport timing.

Its weaknesses are less focused on improvement policies while working in less developed countries like Malaysia. It also has inadequate support policy as well as limited visibility regarding marketing and promotion. The sparsely located few stores in Malaysia can be less responsive to increased demand of the population (Minkes&Minkes, 2005). It has to employ more staff to enhance the buying experience of customers by attracting them. The packaged furniture and its technical nature is different and needs more focus on assemblage. It depends on the third party to assemble and assist in purchasing products that can be a weak point for IKEA. There is an absence of detailed instructions that can accompany products and retain consumers when they go for detailing.

There are some opportunities for IKEA to further develop and boost its concept in Malaysia. It can increase its clientele by educating people more about environmental waste and pollution. If wastes are reduced regarding furniture usage, it can develop a strong concept as an opportunity in corporate social responsibility (Hultman, Johnsen, Johnsen & Hertz, 2012). With Malaysia and other less developed counties like India and Indonesia, IKEA can fully develop its network of furniture supply. It has the advantage of working on broader concepts by developing effective solutions for business. This will provide solutions to reduce environmental pollution, so a sustainable life at home will be easy. In Malaysia, the potential exists regarding natural resources and others like advanced technology and science, so it can promote a technical friendly product (Garnier&Poncin, 2019).

Some external factors can work as threats to the company in Malaysia. There are many low-cost retailers in Malaysia that can share market value and specialty of furniture with IKEA; there is a need to produce more economical and consumer-friendly products to compete with the rivals. The financial conditions of a country are other luring threats for IKEA. Any financial crisis and economic downturn in the economy can cause threats to IKEA (Lechehab&Kamassi, 2016). The size and scale of the company is also a threat because it has to focus on the operating economy where experts believe watering down of innovation due to less targeted consumers in Malaysia. The company is steadily acquiring a household place in masses, so it has to improve quality and standard with its expansion (Fröding& Lawrence, 2017).

IKEA strategies and its associated plans

IKEA’s marketing strategy through which the organization searched out cultural and advanced customers and also searched a sufficient market to sell its products. IKEA sends its designs to concern professional people to its homes and provide them feedback(Arrigo, 2005). This strategy allows the ministers to make the market decisions that are based on people’s life’s experience; this experience might be collected from survey and data collection. IKES Strategies considered all elements that are involving around product and price into mixed marketing. IKES tries to present its best product on the lowest market rate, and it is also called the 7Ps of marketing, in which position, development, methods, characters, and material elements are taking place (Hultman, Johnsen, Johnsen & Hertz, 2012). IKEA was established by Kamprad in 1943; this term developed when the home furnishing stores are used for monetary purposes around the world. All IKEA retailers are running their own franchise business.

IKEA of Sweden concerns all product ranges, which are associated with IKEA; the entire production differentiated with tags, designs, and quality. To start IKEA’s strategies, find the solution to various questions.  IKEA knows about consumer satisfaction and how much it is important. Consumer relations influence the business significantly (Stanciu, Zlati, Antohi&Bichescu, 2019).

Different research objectives also take place in this term, like investigating the consumer demand theory. Establish a referencing and suggestion system for company development. The basic purpose of this theory is to satisfy the consumer at any cost, either the consumer belongs to any category of life. In those days’ customers have awareness about the brand and its worth; at first, the consumer judges the product, and its services afterward estimate his personal experience and, at last, make a decision whether the product is appropriate and meets its exceptional level or not. After using the product, if the product fulfills its requirements, then the customer will purchase it again. Otherwise, he contacts any other commodity. In this fast business establishment affairs, customer relations are critical to managing. Customer satisfaction shows that he will purchase the commodity afterward to satisfy the demand that would be a long-term relationship to company and customer till then the other product may not facilitate its needs. An efficient marketing program consisted of all terms and conditions to evaluate the mix marketing concerning the market objectives which a company has to occupy to compete for the other rivals (Fröding& Lawrence, 2017).

IKEA base the business success on superior marketing strategies that must be the same around the world, which consisted of the description list it must be in written form in 17 languages and color should be blue and yellow, the color of the Swedish flag. This technique applied to the customer that they are free to purchase any commodity. The price also is shorter than other brands because the consumers, first of all, focused on the price (Johansson &Thelander, 2009). To understand the IKEA business strategy, it is necessary to be based on business conception and formulation prepared by IKEA 12th January 2009. It also provides a wide variety of sketches, functional, and other home decorating products at a low price thus can purchase every kind of class. The main objective must be centralized the objectives and purposes of IKEA’s business strategy. It also provides a guideline on work; these rules implement all sectors of the strategy, whether they belong to the country or around the world. IKEA focused that the environmental designs are presented into its home decor items; for this purpose, it launched a plan in 2015(Arrigo, 2005). This plan will combine the cultural, environmental, and financial and commercial crises. IKEA follows SWOT analysis to gain its objectives (Carter, 2009). This is a developmental business tool. It also assists the business to focus on its fundamental issues. SWOT is a planning stage and focuses on strengthening and weakening and also deals with the internal and external aspects of the business, and also face all threats that are affecting the company matter and associated with other business merchants. The SWOT business plan also concerns retailing, production departments. It also can deal with economic situations, social variations, and technological advancements. IKEA also emphasizes that every business holder has to sense its strengthening aspects to overcome its future challenges. IKEA also focuses on attracting the fundamental group of customers to establish a brand in a world community. It also provides different business techniques at a low price (Alänge, Clancy &Marmgren, 2016).

To maximize the profit, the brand has to establish a trustful relation to the supplier, retailer, and customers. It also embraces several strategic techniques to create customer trust and gain worth in a market. Long term relations to customers or retailers also provide a profitable sense to the business. IKEA emphasizes making good relations with customers by fulfilling their expectations and trying to find out how the new customers ties in a long-term relationship (Baxter & Landry, 2017).

Successful Strategic Goals

The world economy is booming, so the furniture market is also going up with rapid development. 70% of the global market is acquired by traditional furniture companies. The scenario is easy to understand due to increased production capacity, technical advancement, and strategic management. IKEA has also managed to enter in China, Indonesia, and Malaysia by focusing on the key significant strengths and its strategic goals. In many less developed countries, it has developed its concept of competitive advantage and working to show greater potential. Its production is increasingly focused on matching quality standards in Malaysia and beat its competitors. The clear mission of the company is to sell a wide range of furniture with reasonable prices that allow people to buy and get involve (Baxter & Landry, 2017). The wide range offering is a keyword in functionality because consumers, in this way find a place where everything is present. The strategic goals that IKEA has considered to enter in Malaysia are creating high efficient sales department, offering best ideas for home furnishing and serving customers with the best shop of furnishing ideas.

The aim of IKEA at Malaysia to offer them successful appearances and a perfect shopping experience for whole family (Carter, 2009). The people and environment is always a concern for IKEA so its management try to manage every day’s life with a better notion of commitment. It has also responded any rising public concern regarding sustainability, choice of the communication and product range. In Malaysia, effective focus on transportation and raw material was easily maintained due to easy access and prevalence of raw material. This situation helped company get its green targets and spread impact. In Malaysia, it is working on the original approach of dealing customers, i.e. self-serving method. The catalog allow people select whatever they want so they choose their products and put and assemble at home.  The centralized strategic direction at IKEA is increased with its expansion (Alänge, Clancy &Marmgren, 2016).

The rapid internationalization has enhanced the challenges for company in a broader scenario so there is also increasing difficulty of managing and responding needs. It is considering cultural and social factors while operating in new premises so emerging demographic trends are easy to tackle with a focused strategy(Arrigo, 2005). IKEA is also focusing on varied level consumer groups by implementing its strategies. The power of strategic management is significant under the organizational structure. It is focusing on maintaining a balance between autonomy and country-level centralized intervention, which will be attributable to franchisee autonomy and subsidiaries. Its suppliers are located in low-cost countries that are an advantage for Malaysia based IKEA (Stanciu, Zlati, Antohi&Bichescu, 2019). They can access raw materials so effectively reach out to distribution channels. The suppliers are selling standard products with broader dealing at the same time.

IKEA’s brand is focusing on innovation mix, advanced, and quality furniture. A combination of low-cost high quality furniture is the business model that is further being tackled with new innovations and techniques to expand and cut costs. Its simple idea of keeping costs low for manufacturers and customers is workable because it doesn’t own its sole manufacturing facilities. The upstream innovation and research & development activities are centralized in Malaysia. The strategic and operational strategies are workable and acquired a steady scope due to global policies.

Challenges

While operating in a global market, an international brand may face some challenges. For instance, while operating in Malaysia, it has to focus on its internal capabilities, ceasing activities, and incorporate key strategies to make its reputation (Carter, 2009). It has to work in an intensely competitive environment because targeting consumers is not easy, and there are multiple brands considering similar operations. It has been facing external and internal challenges in Malaysia regarding raw material, transportation, and availability of the latest technology. Some competitors are focusing on influential corporate decision-making strategies to make effective decisions for the firms. The management team has identified key threats from this business point objective so IKEA has to implement consumer related methods. It is facing diversification issues to boost sales (Alänge, Clancy &Marmgren, 2016). Some internal cultural issues are also prevalent. Due to geographic factors, IKEA is facing different taboos in Malaysia so it has to focus on to improving furniture design.

Conclusion

IKEA in Malaysia is working on competitive strategy with low cost initiatives. It has opened new stores, with an aim to use stability strategy. This will be helpful to monitor performance of the products and allow well operating conditions for business. The stability factor increases productivity of a company so it can take profit based features. Low cost operating methods, effective decision making approach and a business formulating method for its consumers are main pillars of Malaysian market that company is focusing. IKEA is working at global level so a focus on price and differentiation is a key to maintain. The price cost of company is linked to the cost of production, under strategic management framework, this scope is maintained. Globalization is a central aspect of strategic management, so IKEA in global market places, is expanding this view by gaining better competitive advantages and profits. The trend of consumer products at global marketplace is emerging and IKEA is viewing this phenomenon in Malaysia to reap a better growth.

References

Alänge, S., Clancy, G., &Marmgren, M. (2016). Naturalizing sustainability in product development: A comparative analysis of IKEA and SCA. Journal Of Cleaner Production, 135, 1009-1022. doi: 10.1016/j.jclepro.2016.06.148

Arrigo, E. (2005). Corporate Responsibility and Hypercompetition. The Ikea Case. Symphonya. Emerging Issues In Management, (2). doi: 10.4468/2005.2.04arrigo

Baxter, M., & Landry, A. (2017). IKEA: Product, pricing, and pass-through. Research In Economics, 71(3), 507-520. doi: 10.1016/j.rie.2017.03.003

Carter, R. (2009). Will consumers pay a premium for ethical information?. Social Responsibility Journal, 5(4), 464-477. doi: 10.1108/17471110910995339

Fröding, K., & Lawrence, G. (2017). Sustainability at IKEA. Linnaeus Eco-Tech, 67. doi: 10.15626/eco-tech.2010.008

Garnier, M., &Poncin, I. (2019). Do enriched digital catalogues offer compelling experiences, beyond websites? A comparative analysis through the IKEA case. Journal Of Retailing And Consumer Services, 47, 361-369. doi: 10.1016/j.jretconser.2018.12.011

Hultman, J., Johnsen, T., Johnsen, R., & Hertz, S. (2012). An interaction approach to global sourcing: A case study of IKEA. Journal Of Purchasing And Supply Management, 18(1), 9-21. doi: 10.1016/j.pursup.2011.11.001

Johansson, U., &Thelander, Å. (2009). A standardised approach to the world? IKEA in China. International Journal Of Quality And Service Sciences, 1(2), 199-219. doi: 10.1108/17566690910971454

Korsgaard, S., Rask, M., &Lauring, J. (2007). The Diversity Management Paradox in Globalization – The Swedish IKEA Way. SSRN Electronic Journal. doi: 10.2139/ssrn.1135570

Lechehab, S., &Kamassi, A. (2016). The Benefits of Implementing Lean Management System at IKEA Malaysia Company. مجلةالباحث, (16), 55-66. doi: 10.12816/0034358

Minkes, J., &Minkes, A. (2005). Decentralisation, Responsibility and Ethical Dilemmas. Social Responsibility Journal, 1(1/2), 16-20. doi: 10.1108/eb045790

Soh, K., Wong, W., & Chong, C. (2015). Strategic Choices: A Composite Model for Logistics Service Providers. Journal Of Southeast Asian Research, 1-10. doi: 10.5171/2015.652416

Stanciu, S., Zlati, M., Antohi, V., &Bichescu, C. (2019). The Development Analysis of the Romanian Traditional Product Market Based on the Performance Model for Sustainable Economic Development. Sustainability, 11(4), 1123. doi: 10.3390/su11041123

 

Strategic Analysis of Netflix

Pages:18

Instructions:

to analyze the strategic position of an organization
b)
Assess the strategic choices available to the organization to achieve substantial growth and make relevant recommendations(for the purpose of the plan, you will assume that a strong investor has been found who can fund the recommended strategies)
To this end, you need to select the organization on which your entire project will be based. It can be the organization whereyou are working or have worked in the past, an organization with which you are familiar, or if you are not employed, an organization you are able to research.
•
Part 1: Select the organization which will form the basis for your project. Provide a brief introduction of the selected
(10)organization (what it does, size etc.)
•
Part 2: Analyse the broad macro-environment of the organization in terms of political, economic, social, technological,
ecological and legal factors (PESTEL). Construct alternative scenariosas necessary.
(15)Use Porter’s five forces analysisin order to define the attractiveness of the industries and markets in which the
organization operates. Use the above analysis in order to recognise threatsandopportunitiesin the market place.
•
Part 3: Using suitable frameworks (e.g. benchmarking, value chain, value system) diagnose the strategic capabilities of the
(15) selected organization and classify them using the VRIO criteria. Prepare a suitable SWOT / TOWS matrix summarizing the
findings of the analysis of strategic capabilities and the analysis of the external environment (from Part 2).
•
Part 4: Express the strategic purpose of your selected organization through suitable statements of mission,vision,valuesand
(10)objectives. Take into consideration any influences from the type of ownership, the adopted social responsibility stance and
the expectations of the various stakeholders (perform a stakeholder analysis).
•
Part 5: Perform a cultural web analysis of your selected organization. Can you discern any inimitable capabilities embedded in
(10) the culture and which could enrich your answer to Part 3 of the project?
•
Part 6: Identify the strategic business units (SBUs) which exist in your selected organization. Using Porter’s framework and the
(10) strategy clock, identify the various generic strategies (e.g. cost-leadership, differentiation, focus and hybrid strategies)
currently followed by each distinct SBU. Given the desire of the organization for substantial growth, would you suggest a
change in any of the generic strategies followed by any of the SBUs? Please explain.
•
Part 7: Given the desire of the organization for substantial growth, generate a list of possible choices which could be pursued
(15) by the organization (e.g. market penetration, diversification, vertical integration, internationalization, innovation and
entrepreneurship) and the various methods for achieving them (e.g. organic development, M&A, strategic alliances).
•
Part 8: Evaluate the options (choices) compiled in Part 7 in terms of the SAFe criteria (suitability, acceptability, feasibility).
(15) Regarding the likely return (part of acceptability) there is no need to perform an in-depth financial analysis (you probably
do not have such data available anyway). Regarding financial feasibility, simply assume that the found investor can
provide the necessary funding for each of the identified options. Provide your recommended option(s) for the organization.
(3000 –5000 words)

Answer:

Introduction

Netflix. was founded Reed Hasting. In 1999, it was established as a movies rental service. The business model of Netflix, then and now, is the same – that is subscription model. The business was at first only a DVD-dispatch service, subscribers would pay for particular membership that would include the number of DVDs that could be rented at one time. DVDs were shipped to the customers, and then the customers would send it back (Hosch, 2020)

With thriving business for years, the company incorporated new segments, along with the DVDs rental service, into its model, including streaming services. The mission was to increase the number of subscribers and reduce cost – the cost associated with shipping and postage of DVDs. The streaming segment was initiated in 2007, with almost seven thousand titles available instant-watching; by 2010, the titles had grown up to twenty thousand. Customers had the option to avail the DVD subscription, the streaming option, or both. All three was available to them. In 2010, Netflix started its streaming services in Canada, and in 2011 it had initiated in 43 other countries. In the United States, member can still order DVDs to their homes. By 2016, Netflix was providing streaming services to more than 190 nations. Now, Netflix has three operational segments: International streaming, Domestic Streaming, and domestic DVD. Domestic Streaming and Domestic DVD are only available in the U.S (Reuters, 2020).

Although Netflix was founded a decade earlier, it was known mainly in 2010 as the most customary and famous subscription online streaming platform. Customers were consistently increasing, and Netflix was taking on the majority of the market subscribers. In 2011, the company announced that it would no longer provide a package subscription that includes both the DVDs-rental services and the streaming subscription. However, the company faced criticism from its customers, and the stock price fell drastically.

In 2014, Netflix announced that it had raised $400 million in new capital through equity investing. On April 22, 2020. Netflix proposed $1 billion worth of Senior Notes for its production, development, capital acquisition. On April 21, 2020. The company announced its Quarterly Earnings Per Share of $1.57; the Quarterly revenue was $5.77 billion (Reuters, 2020).

Netflix has a very aggressive business strategy; in 2012, it was initiated in new countries; Netflix provides free one-month access to the streaming service. The reason for the international expansion was to generate more profits, but not all foreign markets have such strong capabilities for streaming. For example, in Latin America, the company faced many issues due to the unavailability of internet-capable devices for the people. The company’s marketing strategies include customer guarantees, a user-friendly website, and witty advertising.

External Analysis

PESTEL Analysis

Worldwide economic condition is the primary factor of Netflix operations, therefore, understanding these things are crucial. Additionally, Netflix has majority international business which makes the PESTEL analysis even more salient (Favaro, 2018)(Fund, 2017).

Political

  • Political factor is increasing in relevance to tech companies worldwide. Netflix is a streaming service, but it is also a tech company so it is liable to the government scrutiny. Governments around the world has put a cap with regard to data collection and other practices. Particularly in EU, the government has taken strict measures against tech companies that overindulgean anticompetitive behavior by targeting users through data collection processes (Pratap, 2020)
  • Netflix has tailored its services accordingly, depending on a region’s regulation. Another factors that affect companies like Netflix is the new tax regime in the EU.
  • Copyright and Patent ordinance.
  • Piracy statute in services sector.

Economic

  • Exchange rate fluctuation is a fundamental issue especially in third world countries where a rise in exchange rate makes Netflix a luxury.
  • Market efficiency and capital requirement to sustain presence.
  • Economic growth affects the purchasing power. As income rises, people tend to spend more on entertainment and luxuries (Tapalaga, 2019)
  • The growth in global economy, in past years, has resulted in more spending, by people around the world, on services like Netflix (Tapalaga, 2019)
  • With the global pandemic of coronavirus and lockdowns, Netflix has witnessed a temporary rise in membership and viewers around the world (Pratap, 2020)
  • Unemployment has risen radically, and if the situation continue people are likely to cut on unnecessary expenditure and save for basic necessities only.

Social

  • Continually changing of customer preferences. Netflix is entertaining customers worldwide, it must adhere to the tastes and preferences from different cultures and societies.
  • Social class. The success of Netflix has been linked with the influence it has on social media networks and promotions, and the fact that it leans more toward the young generation (Tapalaga, 2019)
  • Consumer attitude towards health and environment, that may affect the viewership.
  • Continual adaptation of new segments and genres.

Technology

  • Communication with consumer is the most important marketing strategy. Netflix uses social media, which is linked with technology (Tapalaga, 2019)
  • Netflix uses numerous algorithms and machine learning that make relevant recommendation to consumer, while considering their preference and choice based on their previous search and watch (Pratap, 2020).
  • Requirement for internet connection.
  • Increase Video on Demand (VOD) demand.

Environmental

  • Laws of production affecting environment. In 2019, Netflix reduce its energy consumption by 50% and they are planning to lower it by 80% and shift completely to sustainable energy products like solar panels and wind turbines (Tapalaga, 2019)
  • Competitors using sustainable energy products.

Legal

  • Tariffs in service industry
  • Employment regulations
  • A stern censorship regime in large markets – like China.

Porter Five Forces Analysis

This analysis will help understand profit potential for Netflix and the implication that these forces have on Netflix.

        i.            New Entries Threat

  • Low barriers to entry – easy to emulate, broadly available technology
  • Easily accessible – no switching cost.
  • Lower pricing strategies
  • New value promotion and subscription to customers
  • Higher product differentiation

      ii.            Bargaining Power of Suppliers

  • Supplier has higher power as they produce content and decide which content provider they want to partner with.
  • Bidding negotiations
  • Strong relation with the suppliers is the key
  • Some most-watched shows will be removed, therefore increasing risk of power of suppliers (TFLIE, 2020)

    iii.            Bargaining Power of Buyers

  • Consumer power will rise as Netflix competition rise – such as the newlylaunched Disney+ and Amazon Prime. Switching costs are low
  • Higher customer expectation.
  • Minimum consequences for cancelling subscription
  • In contrast to traditional media platform, it is less expensive.

    iv.            Threats of Substitutes

  • Traditional medium of viewing trend is declining (TFLIE, 2020)
  • Reluctance to adopt new technologies.

      v.            Competitive Rivalry

  • Competitors like Amazon Prime, not only offers free one-month access, but also free and fast delivery, music, and books.
  • Long term fixed cost
  • New technology and video streaming platform are continuously increasing.
  • In 2018, Netflix had 8 of the top most-viewed shows in the world, in its streaming list.

Takeaway from Netflix’s P5 analysis

Switching to Netflix is carries a low cost. Netflix takes into consideration customers’ preference. Netflix must refine its brand. Build capacity and R&D. Association with potential and devoted suppliers whose business depend on Netflix. Expanding customers’ base. Innovate & produce new content rapidly. Build a sustainable point of differentiation. Collaborate with competition.

 

Internal Analysis

VRIO/VRION

Organizational Resources and Capabilities V R I O N
Competitive disadvantage
Highly dependent on third-part-production content
Competitive Parity or Equality
Innovation Potential P
Tech-savvy Assets P
Temporary Competitive Advantage
Licence from entertainment content creators P P
Undevoloped Competitive Advantage
Music segment P P P
Video Games P P P
Textual Content
VRIO Core Competencies
High Equity P P P P P
Large base of customers and producers P P P P P
Original Content Production Capacity P P P P P

 

Competitive Disadvantage. Netflix’s negative aspect is its dependence on third party production content. Although it has its own production series as well, the company mostly put content from other production sources to attract more customers by providing a variety of content. This factor endangers Netflix to competitive forces of producers. Platforms, like Disney and Disney+, offer only its original content. In the resource context, Netflix is a value chain source supports competitive advantage. Based on the VRION analysis, this platform is difficult to imitate. Competitors may produce more content, but Netflix’s customers base, funding of streaming business and its global reach are its solid points. Netflix value chain is big enough to produce original content. The value chain does include not only the supply of content and products but also the supply of information for the ease of subscribers/customers: the algorithms and content management. The VRIO analysis makes the original content production a fundamental beneficiary to the company’s sustained competitive advantage.  The high equity build up the company’s supply chain and its value chain by expanding its customers’ base (Knott, 2015) (Talaja, 2012)(Riveria, 2019)

SWOT Analysis

Strengths

  • First mover advantage
  • Small operating cost
  • Netflix has made agreements with manufacturers for integrated Netflix app in their devices.
  • Tons of consumer data/expertise
  • High quality ratings for in-house production content

Weaknesses

  • Heavy dependence on suppliers.
  • Large fixed cost
  • Small resources, as compared to competitors like Amazon
  • Netflix originals require high cost
  • Subject to technological changes.

Opportunities

  • Potential growth for subscription
  • Expansion of movie download option
  • Technological advancement – such as 4K, Virtual Reality (VR)
  • Video streaming in china
  • Leverage niche markets

Threats

  • Few barriers
  • Content Piracy
  • Fiercely competitive market
  • Amazon aiming to acquire live sports broadcasting platform.
  • Increasing cost could lead to higher subscription rate which lead to consumer switching to competitors.

Cultural Web Analysis

Introduction

  • 130 million users worldwide
  • Turnover of more than 10 billion dollars
  • 114 million people

Culture

  • Freedom and responsibility
  • World leader in online entertainment

Stories

  • Founded in 1997 by Reed Hasting
  • The company’s fundamental business is movie streaming- subscription-based

Rituals and Routines

  • Encourage independent decision making by members and employees
  • Freedom and responsibility
  • Corporate team-work
  • Work is not too demanding

Symbols

  • Smartphones and Laptops
  • Free vending machine
  • Pop-corn machine
  • Transport and vehicles provided by the company
  • Own corporate language
  • Free breakfast and dinner

Power Structures

  • Regional functions
  • Worldwide company

Paradigm

  • Multinational presence
  • World leader in online entertainment
  • Growth potential company
  • Freedom company (Capucine, 2020)

Possible Strategies for Growth

  1. Partnership with Multinational Television Provider

Netflix could further expand its global reach by partnering with television providers and TV channels. Netflix will likely reach areas where internet access is not very simple by partnering with local and famous TV channels. Such as the HBO, Sahara, Showtime. It will broaden and strengthen Netflix; it will provide an additional communication mean to consumers. It would also benefit from it in term of association with big names like the HBO.

  1. Acquire HBO

HBO content and seasons are by far the most popular and watched content around the world. Netflix should acquire HBO powerhouse. Production costs are rising, and they are likely to expand at a higher rate in future. So, instead of making its Netflix original, HBO will make its production. They are widely accessible and most-watched than the Netflix originals. Such as the Game of Thrones, West world, Succession.

  1. Continue International Expansion

Netflix is the leader in multinational reach and online entertainment, because of its aggressive expansion plans. But, there are still countries where Netflix do not operate fully, such as China and the middle east. Netflix is likely to double its size with these markets, reach economies of scale, and early movers benefit into these integrated markets. Netflix must deliberately control its cost and capital management in its growth plans.

  1. Initiate a sport broadcasting segment

Netflix is likely to further expand its customer, and not just millennials and generation Z, but people of every age and demographic by incorporating sports broadcasting into its services. Sports fans are more likely to purchase subscription, even at a higher price, than people who only binge-watch movies and seasons.

  1. Leverage Latest Technology

4k and Virtual Reality are becoming is popular worldwide. Initiating these segments into services are likely to increase brand image and quality content. Netflix should incorporate these (Diagle, 2019)

  1. Strategic Recommendations
  • It is recommended that Netflix initiate a strategy like YouTube – where third party content providers can sell their content directly so subscribers, but prices must be controlled by Netflix.
  • Providing a platform for third party content provider will make Netflix a more integrated and comprehensive platform for online entertainment
  1. Continue Focus on Original Contents Production, allocating capital towards content licensing, with time.

It is thought of that Netflix should emphasize its original content production. The company takes great measures in analyzing and contemplating customer’s preferences from all around the world and produces content that are acceptable, highly-rate, and appealing to customers.

Strategic Analysis of Netflix Vision and Mission Statement

Netflix vision and mission statements, both revolves around entertainment industry. The company’s vision statement directs the corporate decision making and the mission statement aim towards higher achievement. Netflix operational management involve handling multinational business growth. The company has the biggest market shares in international market.

Netflix Mission Statement

Netflix mission statement is to accustom the world with entertainments. It depends on the idea Netflix providing on-demand entertainment content. Like the vision statement, the mission statement put emphasis on the industry, as the company flourishes in fulfilling purchasers’ desires about the media they get to. The two main points of Netflix corporate mission are

  1. World Wide reachability and measures
  2. Entertainment

The primary purpose of Netflix mission statement is to show the company’s nature and role in the entertainment industry. Be that as it may, this business class extensively incorporates motion pictures, arrangement, performance art, stage plays, and others. Subsequently, this purpose of the statement might be excessively expansive in determining Netflix’s activities, even though it demonstrates conceivable vital plans of differentiating the business. A factor to consider is that the organization’s center procedure is to develop the streaming membership business.

This strategy framework suggests Netflix’s regular philosophy for high ground and genuine advancement methods and intentionally derives the corporate mission statement. For example, to reasonably entertain the world, the streaming business must build up its cooperation and membership to a grander overall scale. It is the spot where the second reason for Netflix’s corporate mission comes in, as the organization expects to contact gathers all around and reach the global audience. This overall size of assignments also includes that Netflix’s legitimate structure is fit to offering on the online services of help to diverse groups and markets. The on-demand media spouting association’s corporate vision clarification similarly addresses such an essential goal of the overall working

scale (Riveria, 2029)

Netflix Vision Statement

The vision is to be the leader in online entertainment streaming service. The vision is aligned with the corporate statement of purpose, and this vision has helped Netflix with its fundamental goal of being the leader in the competition, against huge players like Amazon and Disney.Netflix states that it points “To continue leading by offering an astounding entertainment experience.” The vision statement is composed of three main things:

  1. Leadership
  2. Entertainment
  3. Internet

Netflix’s strategic underpins the objective of leading with authority, demonstrating that the organization has accomplished its past corporate vision explanation of worldwide industry leadership. The business expects to keep up its authority and operational viability, while developing its enrollment to fulfill the corporate vision’s targets. The business qualities listed in the SWOT analysis of the above add to this industry initiative. The ‘internet’ some portion of the corporate vision explanation speaks to online media as an essential factor in business operations. Additionally, Netflix’s tendency as an entertainment business is incorporated as a point in the corporate vision, like how the corporate statement of purpose portrays the company as an entertainment organization. Prominent is Netflix’s Cultural Web, which spurs and motivates employees to help the business ceaselessly advance to fulfil the vision explanation by guaranteeing consumer loyalty and industry

initiative (Riveria, 2029)

Generic Strategies of Netflix

The company’s generic strategies line up with the company’s growth strategies – the Porter Five Forced model – and the in-depth growth strategies. Generic strategies play a significant role in Netflix’s on-demand content segment. Netflix focuses only on series, movies, and its own production content. Besides, Netflix’s development procedures and growth strategies for competitive advantage require the management activities that degree beyond online streaming entertainment.

Netflix Business Model

Netflix operations has these models:(Moore, 2019):

  1. Platform Model: Digital media marketplace. Through this the company’s content reach the customers. It is in the stage plan of action that the generic strategy is generally huge, considering the competitive advantage dependent on cost efficiencies conceivable through data advances for worldwide computerized content circulation
  2. Pipeline: Entertainment content production. Netflix utilizes the conventional pipeline approach to deal with and create moviesand series. This approach action empowers the organization to control content creation and bring sustainable growth, while the business development potential by means of business platform model cushions Netflix’s development and nonexclusive system for competitive advantage.
  • No Middle-Man Model. The company removes the middleman and distribute its original content via its own streaming service. For example, the new movie The Irishman was shown in a very limited number of cinemas, after Netflix’s approval.
  1. Unlimited Subscription model. The business model is designed in such a way to accommodate unlimited subscription.

Netflix Generic Competitive Strategy

Cost Leadership

Netflix has low charges. Netflix’s customers’ base is the largest as compared to its competitors. The approach relies on the company’s business model and value chain, which satisfy customers partly through personalized customizations, such as in mobile app settings. Through intensive growth strategies, the cost leadership generic strategy for competitive advantage gains the most significant market share, relating to Netflix Inc.’s corporate mission and vision statements which point to the strategic plan and goal of attaining and maintaining leadership in the international online entertainment.  industry(Moore, 2019)

Differentiation

Despite the fact that Netflix essentially applies cost administration as its generic strategy for competitive advantage, the business additionally utilizes separation in its tasks. As a nonexclusive technique, separation includes building up the online business and its items in manners that make them unique in relation to the opposition (Moore, 2019)

Netflix Growth Strategy

Market Penetration

It is the fundamental intensive strategy. This development system’s target of developing incomes and market share relies upon how Netflix’s generic strategy keeps up upper hands to pick up and hold more customers in current markets (Moore, 2019)

Market and Product Development

This strategy backs the company’s organizational development.Market improvement works by selling the organization’s present online streaming services and unique content to new markets. The Product development strategy goal is to create and sell new content in the organization’s current markets(Moore, 2019)

Suitability, Acceptability, and Feasibility (SAF)

Suitability Criteria

 

Criteria Hybrid Differentiation
Partnership Not in the long term. It requires capital and current prices are unlikely to generate profits in the long run Yes. Higher profit could lead to more investments.
Expansion Not in the long term. Due to international expansion and limitations in some countries Yes. Collaboration with other entertainment providers
Sports Broadcast Long run feasibility is unlikelyAs the sports industry is dominated by players like ESPN Yes. Collaboration with the big players in market.

 

Acceptability Criteria

Criteria Hybrid Differentiation
Risk of Loss High. Expansion to other regions and countries will double the short term cost. High capital is required because content productions are costly and too much of it will bring uncertainty and risk.
Investment Returns Low. Prices are not high enough to generate enough profit High. Collaboration would result in safer profits and high barriers to copying content.
Customers’ Reaction When customers are not loyal, they are more likely to switch to other online streaming platforms if Netflix prices are high and competitors prices are low or they provide better content. Customers will be loyal and will not switch to any other platform, because the content is differentiated and better.
Suppliers’ Reaction Subscription video on demand considered second tier as they do not generate enough profits. When suppliers have no power over content, price are likely to fall as a result. Thus reducing the cost.
Investors’ sentiment Short on shares. Netflix’s stock price has shown variation because of the sudden rise during the global coronavirus pandemic (Epstein, 2020) High profits will bring in more customers, as profits generated by the company rises.

 

For investors, decline is profit is unbearable. Therefore, they will not adhere to the hybrid strategy as it will result in profit decline. Prices might get down too, with hybrid adaptation.

Feasibility

Criteria Hybrid Differentiation
Do the current technology assets support the company’s strategy ? Yes. Company’s data levels have reached high levels.
Are the current financial resources enough to implement strategies effectively? Yes. However, not in the long term. Companies cash is expected to fall when the global lockdown is over and everything is back to normal(Poletti, 2020) Cash is abundant with Netflix, but need to quit the international expansion to stop the loss.
Is available data/information enough to implement strategies? Yes. Netflix is continuously investing to implement algorithms and machine learning into its management systems. Yes. Netflix was aware why its original content is going to be a hot because of the years of data collected. This was (still is) a great advantage in the ‘Netflix Original’ creation.

 

Netflix capabilities can sustain both hybrid and differentiation strategy.

 

 

References

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Diagle, B. &., 2019. Netflix , s.l.: s.n.

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Hosch, W. L., 2020. Netflix. [Online]
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Poletti, T., 2020. Netflix doesn’t know what comes next after coronavirus-sparked boom in subscriptions. [Online]
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Talaja, A., 2012. Testing VRIN framework: resource value and rareness as sources of competitive advantage and above average performance., s.l.: s.n.

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Strategic International Business Management

Pages:13

Introduction

Management performance tends to handle the operational process in organizations through regular feedback. The scope of business management is enhanced when a business model is invigorated. It is vital for a company’s success that several changes should be implemented (Korsgaard, Rask &Lauring, 2007). The process of strategic management is to implement a strategy in an organizational framework that allows the accomplishment of strategic goals. This kind of operation is to get more customers who spend more, so longer retention is made. (Lechehab&Kamassi, 2016) The monitoring and planning analysis in an organization need specific processes to meet the objectives. This report will discuss international strategic business management in IKEA regarding Malaysia. The report will discuss the mission, strategic goals, and SWOT analysis.

Company Overview

IKEA is a global brand that was found in 1943 by Ingvar Kamprad. The company is famous for its famous and modern stores. Its different kinds of products are eco-friendly and cost-effective. IKEA operates in 389 stores worth of 42.9 billion. It also has few branches across the world with such as KungensKurva, in Shen Zhen, and Texas. It has presented an example of trendiest with low-cost furniture. IKEA is considered a recognizable brand at the globe with best practices. The trademark of the company is well designed and functional regarding frugality experience. These practices are related to the principle that offers competitive advantage (Soh, Wong & Chong, 2015). The image, quality, and affordability of products is an asset for the company. The company has the opportunity to be streamlined about its customs, franchising, and popularity.

IKEA is successful in terms of its management operations. Its formulation processing is based on the right demographic framework. IKEA stores are customized to offer a better experience to customers in terms of fluid shopping (Hultman, Johnsen, Johnsen & Hertz, 2012). The living room and domestic style experience for customers are exciting. They need to take a code linked to the selected item when they buy furniture. The functional layout of products is seen as a mass service for a product offering that fulfills the basic needs of consumers.  Some basic features of the firm are high quality, wide variety, the flexibility of products, less disruption, and easy supervision.

Mission

The mission of the company is to build a strong culture that will deploy crucial factors for the continued success of IKEA. The concept of sustainability is inherent because furniture is considered a necessary value for people’s lives (Korsgaard, Rask &Lauring, 2007). The recognizable brand name and concept are linked to low valued price and home furnishing products. The company has a wide range of its products and allow frugality practices for being the first choice of consumers as compared to other brands. The culture of IKEA is to work within everyone, create and develop it further, so people live with this vision. This concept is building a core competency of the company against others. IKEA has established its long going capacity in Malaysia with the science and technology concept and managerial practices. The developing economy of Malaysia is offering huge potential to the company to produce furniture due to newly identified competitive advantages (Garnier&Poncin, 2019).

SWOT Analysis

IKEA is a valuable furniture brand in the world, and in 2019, its worth is estimated at US$45.4 billion. The strengths of the company are its brand image and brand name. The reputation and awareness of the company are its key strengths (Johansson &Thelander, 2009). A most significant strength is its low-cost affordable furniture because it aims to sustain in the lives of people, so it is cost-conscious. The philosophy of IKEA is to keep costs low and incorporate new technologies, advances, and innovation to allow profit margins(Arrigo, 2005). This is associated with the profitability, efficiency solutions, and cost-effectiveness methods in handling products. In Malaysia, IKEA has a competitive advantage in producing products.

The combination of effective packaging and low price furniture startup in Malaysia is a big strength for the company. The products of the company are new, different, and allow extraordinary shopping experience to people, so consumers are engaged in decision making (Soh, Wong & Chong, 2015). It is different from other brands because of the wide variety, selection, and offering a chronological order. Just as its competitors are working in Malaysia, IKEA aims to maintain long term relationships with customers, so optimizing its cost and transport timing.

Its weaknesses are less focused on improvement policies while working in less developed countries like Malaysia. It also has inadequate support policy as well as limited visibility regarding marketing and promotion. The sparsely located few stores in Malaysia can be less responsive to increased demand of the population (Minkes&Minkes, 2005). It has to employ more staff to enhance the buying experience of customers by attracting them. The packaged furniture and its technical nature is different and needs more focus on assemblage. It depends on the third party to assemble and assist in purchasing products that can be a weak point for IKEA. There is an absence of detailed instructions that can accompany products and retain consumers when they go for detailing.

There are some opportunities for IKEA to further develop and boost its concept in Malaysia. It can increase its clientele by educating people more about environmental waste and pollution. If wastes are reduced regarding furniture usage, it can develop a strong concept as an opportunity in corporate social responsibility (Hultman, Johnsen, Johnsen & Hertz, 2012). With Malaysia and other less developed counties like India and Indonesia, IKEA can fully develop its network of furniture supply. It has the advantage of working on broader concepts by developing effective solutions for business. This will provide solutions to reduce environmental pollution, so a sustainable life at home will be easy. In Malaysia, the potential exists regarding natural resources and others like advanced technology and science, so it can promote a technical friendly product (Garnier&Poncin, 2019).

Some external factors can work as threats to the company in Malaysia. There are many low-cost retailers in Malaysia that can share market value and specialty of furniture with IKEA; there is a need to produce more economical and consumer-friendly products to compete with the rivals. The financial conditions of a country are other luring threats for IKEA. Any financial crisis and economic downturn in the economy can cause threats to IKEA (Lechehab&Kamassi, 2016). The size and scale of the company is also a threat because it has to focus on the operating economy where experts believe watering down of innovation due to less targeted consumers in Malaysia. The company is steadily acquiring a household place in masses, so it has to improve quality and standard with its expansion (Fröding& Lawrence, 2017).

IKEA strategies and its associated plans

IKEA’s marketing strategy through which the organization searched out cultural and advanced customers and also searched a sufficient market to sell its products. IKEA sends its designs to concern professional people to its homes and provide them feedback(Arrigo, 2005). This strategy allows the ministers to make the market decisions that are based on people’s life’s experience; this experience might be collected from survey and data collection. IKES Strategies considered all elements that are involving around product and price into mixed marketing. IKES tries to present its best product on the lowest market rate, and it is also called the 7Ps of marketing, in which position, development, methods, characters, and material elements are taking place (Hultman, Johnsen, Johnsen & Hertz, 2012). IKEA was established by Kamprad in 1943; this term developed when the home furnishing stores are used for monetary purposes around the world. All IKEA retailers are running their own franchise business.

IKEA of Sweden concerns all product ranges, which are associated with IKEA; the entire production differentiated with tags, designs, and quality. To start IKEA’s strategies, find the solution to various questions.  IKEA knows about consumer satisfaction and how much it is important. Consumer relations influence the business significantly (Stanciu, Zlati, Antohi&Bichescu, 2019).

Different research objectives also take place in this term, like investigating the consumer demand theory. Establish a referencing and suggestion system for company development. The basic purpose of this theory is to satisfy the consumer at any cost, either the consumer belongs to any category of life. In those days’ customers have awareness about the brand and its worth; at first, the consumer judges the product, and its services afterward estimate his personal experience and, at last, make a decision whether the product is appropriate and meets its exceptional level or not. After using the product, if the product fulfills its requirements, then the customer will purchase it again. Otherwise, he contacts any other commodity. In this fast business establishment affairs, customer relations are critical to managing. Customer satisfaction shows that he will purchase the commodity afterward to satisfy the demand that would be a long-term relationship to company and customer till then the other product may not facilitate its needs. An efficient marketing program consisted of all terms and conditions to evaluate the mix marketing concerning the market objectives which a company has to occupy to compete for the other rivals (Fröding& Lawrence, 2017).

IKEA base the business success on superior marketing strategies that must be the same around the world, which consisted of the description list it must be in written form in 17 languages and color should be blue and yellow, the color of the Swedish flag. This technique applied to the customer that they are free to purchase any commodity. The price also is shorter than other brands because the consumers, first of all, focused on the price (Johansson &Thelander, 2009). To understand the IKEA business strategy, it is necessary to be based on business conception and formulation prepared by IKEA 12th January 2009. It also provides a wide variety of sketches, functional, and other home decorating products at a low price thus can purchase every kind of class. The main objective must be centralized the objectives and purposes of IKEA’s business strategy. It also provides a guideline on work; these rules implement all sectors of the strategy, whether they belong to the country or around the world. IKEA focused that the environmental designs are presented into its home decor items; for this purpose, it launched a plan in 2015(Arrigo, 2005). This plan will combine the cultural, environmental, and financial and commercial crises. IKEA follows SWOT analysis to gain its objectives (Carter, 2009). This is a developmental business tool. It also assists the business to focus on its fundamental issues. SWOT is a planning stage and focuses on strengthening and weakening and also deals with the internal and external aspects of the business, and also face all threats that are affecting the company matter and associated with other business merchants. The SWOT business plan also concerns retailing, production departments. It also can deal with economic situations, social variations, and technological advancements. IKEA also emphasizes that every business holder has to sense its strengthening aspects to overcome its future challenges. IKEA also focuses on attracting the fundamental group of customers to establish a brand in a world community. It also provides different business techniques at a low price (Alänge, Clancy &Marmgren, 2016).

To maximize the profit, the brand has to establish a trustful relation to the supplier, retailer, and customers. It also embraces several strategic techniques to create customer trust and gain worth in a market. Long term relations to customers or retailers also provide a profitable sense to the business. IKEA emphasizes making good relations with customers by fulfilling their expectations and trying to find out how the new customers ties in a long-term relationship (Baxter & Landry, 2017).

Successful Strategic Goals

The world economy is booming, so the furniture market is also going up with rapid development. 70% of the global market is acquired by traditional furniture companies. The scenario is easy to understand due to increased production capacity, technical advancement, and strategic management. IKEA has also managed to enter in China, Indonesia, and Malaysia by focusing on the key significant strengths and its strategic goals. In many less developed countries, it has developed its concept of competitive advantage and working to show greater potential. Its production is increasingly focused on matching quality standards in Malaysia and beat its competitors. The clear mission of the company is to sell a wide range of furniture with reasonable prices that allow people to buy and get involve (Baxter & Landry, 2017). The wide range offering is a keyword in functionality because consumers, in this way find a place where everything is present. The strategic goals that IKEA has considered to enter in Malaysia are creating high efficient sales department, offering best ideas for home furnishing and serving customers with the best shop of furnishing ideas.

The aim of IKEA at Malaysia to offer them successful appearances and a perfect shopping experience for whole family (Carter, 2009). The people and environment is always a concern for IKEA so its management try to manage every day’s life with a better notion of commitment. It has also responded any rising public concern regarding sustainability, choice of the communication and product range. In Malaysia, effective focus on transportation and raw material was easily maintained due to easy access and prevalence of raw material. This situation helped company get its green targets and spread impact. In Malaysia, it is working on the original approach of dealing customers, i.e. self-serving method. The catalog allow people select whatever they want so they choose their products and put and assemble at home.  The centralized strategic direction at IKEA is increased with its expansion (Alänge, Clancy &Marmgren, 2016).

The rapid internationalization has enhanced the challenges for company in a broader scenario so there is also increasing difficulty of managing and responding needs. It is considering cultural and social factors while operating in new premises so emerging demographic trends are easy to tackle with a focused strategy(Arrigo, 2005). IKEA is also focusing on varied level consumer groups by implementing its strategies. The power of strategic management is significant under the organizational structure. It is focusing on maintaining a balance between autonomy and country-level centralized intervention, which will be attributable to franchisee autonomy and subsidiaries. Its suppliers are located in low-cost countries that are an advantage for Malaysia based IKEA (Stanciu, Zlati, Antohi&Bichescu, 2019). They can access raw materials so effectively reach out to distribution channels. The suppliers are selling standard products with broader dealing at the same time.

IKEA’s brand is focusing on innovation mix, advanced, and quality furniture. A combination of low-cost high quality furniture is the business model that is further being tackled with new innovations and techniques to expand and cut costs. Its simple idea of keeping costs low for manufacturers and customers is workable because it doesn’t own its sole manufacturing facilities. The upstream innovation and research & development activities are centralized in Malaysia. The strategic and operational strategies are workable and acquired a steady scope due to global policies.

Challenges

While operating in a global market, an international brand may face some challenges. For instance, while operating in Malaysia, it has to focus on its internal capabilities, ceasing activities, and incorporate key strategies to make its reputation (Carter, 2009). It has to work in an intensely competitive environment because targeting consumers is not easy, and there are multiple brands considering similar operations. It has been facing external and internal challenges in Malaysia regarding raw material, transportation, and availability of the latest technology. Some competitors are focusing on influential corporate decision-making strategies to make effective decisions for the firms. The management team has identified key threats from this business point objective so IKEA has to implement consumer related methods. It is facing diversification issues to boost sales (Alänge, Clancy &Marmgren, 2016). Some internal cultural issues are also prevalent. Due to geographic factors, IKEA is facing different taboos in Malaysia so it has to focus on to improving furniture design.

Conclusion

IKEA in Malaysia is working on competitive strategy with low cost initiatives. It has opened new stores, with an aim to use stability strategy. This will be helpful to monitor performance of the products and allow well operating conditions for business. The stability factor increases productivity of a company so it can take profit based features. Low cost operating methods, effective decision making approach and a business formulating method for its consumers are main pillars of Malaysian market that company is focusing. IKEA is working at global level so a focus on price and differentiation is a key to maintain. The price cost of company is linked to the cost of production, under strategic management framework, this scope is maintained. Globalization is a central aspect of strategic management, so IKEA in global market places, is expanding this view by gaining better competitive advantages and profits. The trend of consumer products at global marketplace is emerging and IKEA is viewing this phenomenon in Malaysia to reap a better growth.

References

Alänge, S., Clancy, G., &Marmgren, M. (2016). Naturalizing sustainability in product development: A comparative analysis of IKEA and SCA. Journal Of Cleaner Production, 135, 1009-1022. doi: 10.1016/j.jclepro.2016.06.148

Arrigo, E. (2005). Corporate Responsibility and Hypercompetition. The Ikea Case. Symphonya. Emerging Issues In Management, (2). doi: 10.4468/2005.2.04arrigo

Baxter, M., & Landry, A. (2017). IKEA: Product, pricing, and pass-through. Research In Economics, 71(3), 507-520. doi: 10.1016/j.rie.2017.03.003

Carter, R. (2009). Will consumers pay a premium for ethical information?. Social Responsibility Journal, 5(4), 464-477. doi: 10.1108/17471110910995339

Fröding, K., & Lawrence, G. (2017). Sustainability at IKEA. Linnaeus Eco-Tech, 67. doi: 10.15626/eco-tech.2010.008

Garnier, M., &Poncin, I. (2019). Do enriched digital catalogues offer compelling experiences, beyond websites? A comparative analysis through the IKEA case. Journal Of Retailing And Consumer Services, 47, 361-369. doi: 10.1016/j.jretconser.2018.12.011

Hultman, J., Johnsen, T., Johnsen, R., & Hertz, S. (2012). An interaction approach to global sourcing: A case study of IKEA. Journal Of Purchasing And Supply Management, 18(1), 9-21. doi: 10.1016/j.pursup.2011.11.001

Johansson, U., &Thelander, Å. (2009). A standardised approach to the world? IKEA in China. International Journal Of Quality And Service Sciences, 1(2), 199-219. doi: 10.1108/17566690910971454

Korsgaard, S., Rask, M., &Lauring, J. (2007). The Diversity Management Paradox in Globalization – The Swedish IKEA Way. SSRN Electronic Journal. doi: 10.2139/ssrn.1135570

Lechehab, S., &Kamassi, A. (2016). The Benefits of Implementing Lean Management System at IKEA Malaysia Company. مجلةالباحث, (16), 55-66. doi: 10.12816/0034358

Minkes, J., &Minkes, A. (2005). Decentralisation, Responsibility and Ethical Dilemmas. Social Responsibility Journal, 1(1/2), 16-20. doi: 10.1108/eb045790

Soh, K., Wong, W., & Chong, C. (2015). Strategic Choices: A Composite Model for Logistics Service Providers. Journal Of Southeast Asian Research, 1-10. doi: 10.5171/2015.652416

Stanciu, S., Zlati, M., Antohi, V., &Bichescu, C. (2019). The Development Analysis of the Romanian Traditional Product Market Based on the Performance Model for Sustainable Economic Development. Sustainability, 11(4), 1123. doi: 10.3390/su11041123

 

Strategic Overview – European Aviation Industry

Pages:14

Executive Summary:

The report portrays a fundamental analysis of European Airline Industry with particular focus on Ryanair. Initially the report highlights the overview of European industry and demonstrates the key importance and highlights of the industry. After discussing industry overview, the report touches upon the introduction of Ryanair and carries out following analysis to strategically analyze the profitability and position of Ryanair.

The report used analytical tools like PESTLE, VRIO and Porter Five Forces analysis to recommend few useful strategies for Ryanair for the long term and sustainable profitability.

Introduction:

The main task of this report is to study the European Airline Industry and Ryanair to apply strategic and management concepts about Strategic Choice and Strategic Position. To assess the attractiveness of the European Airline industry, we would be using tools like Porter Five Forces Analysis to evaluate the competitive forces of the industry. We would also incorporate PESTEL analysis to do scenario analysis by which we would be able to judge the key opportunities and threats related to Ryanair. Moreover, VRIO analysis would also be used further to determine the capabilities and resources of the chosen airline.

The main target of this report would be to do the strategic analysis of the current position of Ryanair and suggest appropriate strategic choices for Ryanair.

Overview – Aviation Industry:

The aviation industry has never been as vital as it is in the current era; rapidly increasing interconnectedness among countries and growing levels of globalization have provided this industry a definitive boast. Global traffic of air travel passengers has increased by an average annual growth rate of 6.58% from 2010 to 2019, whereas the revenue of commercial airlines worldwide grew at a CAGR of 4.5% during the same tenure. Moreover, as per IATA, consumers are expected to spend around a total of $908 billion, amounting to approximately 1% of the total global GDP, on air travel in 2020. All of these statistics help us in understanding the current and future potential associated with the aviation industry.(IATA, 2019)

The aviation sector’s performance heavily relies on macroeconomic factors like GDP growth, level of personal income, and unemployment rate; any sluggishness in such factors can negatively impact the revenues of the sector. Furthermore, the dynamics of the aviation sector tend to vary from region to region. The European market is way different than that of the United States of America, where one key distinguishing factor between the two markets is “fragmentation.” Four airline groups control an 80% share of the total aviation market. In contrast, the European market is far more segregated, which results in fierce competition and a high level of rivalry among competing peers. Airliners in Europe are now taking robust and innovative measures like cost-cutting and utilization of technologies to remain competitive and sustainable in the current environment.(CAPA, 2019)

Moreover, in recent days, COVID 19 has severely damaged the revenue of the aviation industry; most of the Global, including several European airlines, is grounded as due to the ban on traveling. Amid such circumstances, Flybe has collapsed, and Norwegian Air stock has lost about 70% of its value in March 2020, with no end to the crisis in sight. Other key issues that are or will hinder the growth of the European aviation sector are geopolitical issues, slowing down of local economies, rise in the cost of maintenance, and increased rate of the cost of borrowing. (IATA, 2019)

As per the executive board of Lufthansa Group, the largest airline of Europe, the group has reduced its unit costs of operations for the fourth year in succession;

“2019 was another demanding year for the European airline industry. Slower economic growth worldwide, trade disputes, uncertainty surrounding Brexit, overcapacities the resulting price erosion also affected the performance of the Lufthansa Group.”

Overview – Ryanair:

Ryanair is one of the largest airline groups of Europe, which started in 1996 with just 12 aircraft; currently, the airline has more than 450 aircraft with around 19,000 aviation professionals. Ryanair also owns other small airlines like Lauda, Malta Air, Buzz, and Ryanair DAC.(Ryanair, 2019)

Ryanair claims to carry approximately 154 million passengers every yearfrom 82 different bases on more than 2,400 flights daily. The airline group travels over 200 destinations in 40 different countries. (Ryanair, 2019)

Competitive Forces Analysis (Porter Five Forces):

The intensity of Industry Rivalry:

Generally, the aviation industry is considered as one of the most competitive industries where the rivalry among the peers are very rigid. As it is challenging to differentiate the services from other competing peers, the airliners have to be very keen and determined to offer the best services at the most optimal prices. As mentioned in the overview paragraph, Lufthansa Group has successfully cut its operating cost per unit for the 4th consecutive year; such an attitude has to be a must if airliners want to survive and thrive in this throat, reducing competitive environment. Other aspects that make the aviation industry very high in the rivalry is negligible consumer switching cost, overcapacity, and high concentration. (Laurence Frost, 2020)

As a general rule, the more competitors, the more intense the rivalry; the European aviation industry is very highly fragmented with several large and small carriers. The population of the European Union is roughly 50% more than that of the United States of America, amounting to 500 million approximately. But in the USA there are just ten airlines which carry millions of passengers in a year. In contrast, the European aviation industry is quite splintered, having 20 airlines that are comparably equal in size.(Natasha Frost, 2019)

Due to a large number of aviation players, overcapacity is another factor that comes into play when considering industry rivalry. However, European airlines have understood this issue and are gradually slowing their pace of the growing number of seats. In 2019, the number of available seats increased by a mere 3.1%, the slowest since 2013, and lower than the ten-year CAGR (2009 to 2019) of 4.5%. (CAPA, 2019)

The threat of Potential Entrants:

The risk of potential new entrants is generally considered low in the aviation sector amid its requirement of significant capital, regulatory issues, need of highly technical staff, and the cost advantage to large players due to economies of scale.

Establishing an airline from scratch and entering into a market that is already highly fragmented with players that have deep pockets is a tough task. However, airliners these days have opted lease and rental model instead of purchasing aircraft, still, the initial amount of capital required is staggering. Amid high risks attached to the aviation sector, the cost of raising money is also higher than the average lending rates. As per the financial statements of the Lufthansa group, the weighted average cost of capital in 2019 was 4.2%; even though Lufthansa is one of the biggest names of the aviation sector, its cost of capital is higher than the standard lending rates.

Other hindrances in entering the aviation sector are acquiring the licenses and fulfilling other regulatory requirements, which can be time and capital consuming. Recruiting and retaining technical aviation professionals in a highly competitive industry is another key hurdle. Finally, airline groups gain from economies of scale, and so players who have bigger fleets are advantageous over players who are small in comparison.

All of the above-discussed factors make entering into the aviation industry difficult, which means high barriers to entry.

Bargaining Power of Buyers:

Considering the aspects that the aviation industry is highly splintered, service is homogeneous, several substitutes are available (number of airlines), the negligible switching cost for consumers and a large number of frequent air travelers are very price sensitive; this makes us conclude that the bargaining power of buyers is substantially high.

Bargaining Power of Suppliers:

Suppliers of the aviation industry can be segregated in few categories like; suppliers of aircraft and providers of maintenance services (giants like Airbus and Boeing), fuel suppliers, catering suppliers, and hoteliers who rent out their rooms to the transit passengers and aircraft operators.

Bargaining power of suppliers that supply aircraft, their parts, and maintenance services to the aviation industry is robustly secure as the number of such suppliers is quite concentrated. Amid such circumstances, several large airliners are investing heavily in research and development and trying to move towards backward integrations.

The bargaining powers of other suppliers, like fuel, catering, and hotel rooms, are not that strong.

The Threat of Substitutes:

The aviation industry on an industry level doesn’t face any risk of substitutes; however, the substantial threat of substitutes exist when talking at a level of the company. As mentioned previously, the homogeneous nature of service, no cost of switching from one company to another for consumers, a large number of players, and intense competitive rivalry enlarge the threat of substitute of the airline groups.

It matters a great deal these days that how an airliner can differentiate itself from the other competing players, and if we analyze carefully, we can see notable attributes on which a plane can differentiate itself from other players.

PESTLE Analysis

Political:

Being an international airline, it is of crucial importance that airline keeps its harmony with the political forces of the region where it travels. Political factors play a very fundamental role in the profitability of any airline; moreover, who successful an airline is in making its revenue sustainable heavily relies on its political linkages. Several political threats can hinder the growth of Ryanair and damage profitability.(Ryanair, 2019)(Laurence Frost, 2020)
Increase in taxes: If the government decides to increase the taxes on air travel, it will negatively impact the profitability of Ryanair. People will lessen their air travel and would prefer to use other means of local travel like buses and trains. What Ryanair can do is to anticipate any such hike in the tax rate beforehand and make strategies to deal with such an increase in taxes.(Ryanair, 2019)(Natasha Frost, 2019)
BREXIT: Another key challenge faced by all European airlines, including Ryanair, is of BREXIT. Ryanair is a persistent traveler in Europe, and flying to and from England is a prevalent and profitable route. However, till now, no objection or ruling putting restrictions or ban on crossing the air space of England has been coming out, but still, it remains a threat. Ryanair should envisage new destinations and shouldn’t be dependent on just a single goal. (Ryanair, 2019)

Fuel Cost: One of the main operating expenses for all airline groups is off fuel, which highly depends on the geopolitical environment of the world. Any heat up among key oil players like Saudi Arab, Russian, Iran, or USA can shoot up the prices of crude oil. However, it is so challenging to hedge such risk, Ryanair should strategize the usages of derivatives to minimize the risk and should also focus on increasing the fuel storage.

Economical:

A macroeconomic indicator such as interest, inflation rates, GDP growth rate can have a straightforward impact on the performance of the airline sector. During the financial crisis of 2009, several airlines went into severe losses. Slow growth in the economy of the region can severely harm the business of the airline. Sluggish growth of GDP can give rise to unemployment and lower the income level, which can result in lower revenue as people will give up business and leisure traveling.(Sean D.Barrett, 2014)

Another critical impact of the economy on the financial health of Ryanair could be of the weakening of Euro in which the company maintains its books. (Natasha Frost, 2019)

Social:

The current era has been dominated by millennials who are obsessed with traveling. Such demographic changes can have a positive impact on the revenues of Ryanair. However, to take complete advantage of such demographic and social changes, Ryanair should focus on what these millennials want. The management should focus on their likes and dislikes and should introduce customized services for the younger generation.(CAPA, 2019)

Technological:

Technology has been rapidly changing the travel and logistics industry. If we analyze the taxi industry, now it is being ruled by tech giants like Uber and Lyft. Tech gurus are predicting that such massive innovations can also disrupt the airline industry. To be relevant and sustainable in this era, Ryanair should embrace technological advances. It should allow secure booking systems through an app or mobile phone with quick and secure payments. (Laurence Frost, 2020)

Legal:

One of the critical challenges faced by European Airlines currently is off dealing with two regulatory bodies, the European Union and England. This will surely present a tough time for Ryanair. (Natasha Frost, 2019)

Environmental:

The world has started to worry about the carbon emissions and other pollutants been released by industries and automotive sectors. Airlines are also facing the heat as planes emit a little amount of carbon while traveling. To deal with these issues effectively, Ryanair should invest in research and development and improve its fuel efficiency, which will help in reducing carbon emissions. (CAPA, 2019)

Scenario Analysis

Case Scenario 1: Rising of regulatory issues after BREXIT

Brexit has happened now the decision remains pending that what changes would European airlines face in terms of regulations regarding air boundaries. Would there be new clauses or restrictions for the airlines entering the boundary of England or not. This issue can rise troubles for Ryanair and can hurt its profitability a England is one of the key destinations for Ryanair.

Case Scenario 2: Hike in the crude oil prices

As discussed in the PESTLE analysis, crude oil prices are highly dependent on geopolitical environment, any upheaval in the tension between key oil states like KSA, USA or Russia can push the oil prices up. If there is a hike in oil prices it can severely hurt the profit margins of Ryanair.

Case Scenario 3: Slow-down in the regional economy

As mentioned above, revenue of airline industry highly correlates with the performance of global and regional economies. Any sign of slow down or sluggishness can impact negatively on the profitability of Ryanair.

Case 4: More restrictions on Carbon Emission:

As the world has started to worry over the grave issue of global warming due to high emissions of carbon particles, it has raised new issues for global airline industry as one of the main sources of carbon emission is the burning of jet fuel. If such movement against the carbon emissions take pace, it can create problems for Ryanair which can result in low revenue.

 

VRIO Analysis:

 

Resources / Capabilities Value Rareness Inimitable Organization Competitive Advantage
Low operating costs Yes No No Yes Sustained/Above Normal
Global and Local Presence Yes Yes Yes Yes Sustained/Above Normal
Large Fleet Yes No No Yes Sustained/Normal
Strong Brand Portfolio Yes No Yes Yes Sustained/Above Normal

 

For VRIO analysis, five most essential and critical resources/capabilities have been picked, which are its ability to operate at low cost, widespread global and local presence, its large fleet, and robust portfolio of brands.

Low Operating Costs:

The fundamental reason behind the success of Ryanair is its ability to function at a little cost. This ability indeed provides value, but when it comes to rareness, it might not be the only airline to do so. There are several low cost operating airlines like Southwest or Airjet. However, it is not effortlessly perfect and the organization itself is very well organized to take advantage of this capability; hence it is a sustained competitive advantage. (Ryanair, 2019)(Paolo Malighettia Stefano Palearia Renato Redondib, 2009)(Thomas M. Box,, 2005)(Friedrich Gröteke and Wolfgang Kerber, 2016)

Global and Local Presence:

Ryanair enjoys a ubiquitous presence, both locally and globally. Such resources provide great value in terms of economies of scale, are also rare, and very hard to imitate. Moreover, the organization is very well poised to take full advantage of this resource. Hence it is a sustained competitive advantage. (Ryanair, 2019)

Large Fleet:

Another reason for how Ryanair has been so successful in providing low fare flights. A resource which indeed offers excellent value but isn’t rare as there are several airlines which have even larger fleets. Whereas the organization in itself is very well established to enjoy the benefits.(Alberta Giorgi e Luca Raffini, 2015)

Strong Brand Portfolio:

Ryanair is a parent group of few other aviation giants which provides an ultimate edge to its consumer preferences and competitive advantage. A strong brand portfolio, however, is not rare, but indeed it is hard to imitate, hence being a sustained competitive advantage of Ryanair.(John F.O’Connell, 2005)

Strategic Choices Ryanair should adopt to improve its chances of being persistently profitable:

 

After a thorough analysis of strategic position of Ryanair, we can recommend few strategies to the management to improve its chances of being persistently profitable:

  1. As it has been observed by our analysis that its key strength is that it is a very low cost operator, the airline should continue the trend and should invest more in research and development by which it can introduce other different ways to cut cost further ahead.
  2. Technology is taking over almost all industries; in order to remain profitable and sustainable the Ryanair should focus on new technological advances and embrace new innovation by which it can make it further easier for the travelers to travel and book flight tickets.
  3. Try to be more environment friendly by investing in new planes which have better fuel efficiencies.
  4. Build good relationships with regulators and institutions.

 Bibliography

Alberta Giorgi e Luca Raffini, 2015. Love and Ryanair : academic researchers’ mobility. Mobilidade Científica & Imigração Qualificada.

CAPA, 2019. European Airlines: 2020 outlook characterised by uncertainty. CAPA, 26 december.

Friedrich Gröteke and Wolfgang Kerber, 2016. The Case of Ryanair – EU State Aid Policy on the Wrong Runway. ORDO.

IATA, 2019. Annual Report 2019, s.l.: IATA.

IATA, 2019. ECONOMIC PERFORMANCE OF THE AIRLINE INDUSTRY, s.l.: IATA.

John F.O’Connell, 2005. Passengers’ perceptions of low cost airlines and full service carriers: A case study involving Ryanair, Aer Lingus, Air Asia and Malaysia Airlines. Journal of Air Transport Management.

Laurence Frost, 2020. Coronavirus to drive European airline industry shakeout. Reuters, 19 March.

Natasha Frost, 2019. European airlines are confronting the same grim reality their US counterparts faced decades ago. Quartz, 6 November.

Paolo Malighettia Stefano Palearia Renato Redondib, 2009. Pricing strategies of low-cost airlines: The Ryanair case study. Journal of Air Transport Management.

Ryanair, 2019. Annual Report 2019, s.l.: Ryanair.

Sean D.Barrett, 2014. The sustainability of the Ryanair model. International Journal of Transport Management.

Thomas M. Box,, 2005. RYANAIR (2005): SUCCESSFUL LOW COST LEADERSHIP. JOURNAL OF THE INTERNATIONAL ACADEMY FOR CASE STUDIES.

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Strategic Management Costco

Pages:4

Strategic management is a critical component that decided how a company should compete in the industry. It explains the basic framework of the company’s perception and core competencies. Through strategic management, practical strategies that help to generate revenue and sales of the company are implemented (Boström & Karlsson, 2013). The consumer trends are variable, and this transition is attributable to prevailed strategies and preferences. Costco cooperation is an expanded business, founded in 1983, has many warehouses, and has core fame due to this concept. This paper is about the strategic management of Costco, and it will focus on the Vertical Integration strategy. The innovative approach is suitable for any management firm when it comes to performing smart.

Verticalization and its Significance

Due to the changed social atmosphere, the key to growth is alternating managerial approaches. A strategy for a firm is mere like a centric approach that helps determine the successive path. All the companies need sustainability, and they implement a plan that can help them thrive in the competitive industry. The role of sustainability is different for value-based companies. To follow and focus on consumer trends, vertical integration is quite significant. The way to innovation and adoption of digital tools is strengthened by implementing new and better strategies. The world of hyper-competitiveness need structures that help them stay ahead of the competition (Edmonds, 2017). Vertical integration is about two or more production of stages that are opted by two companies. It tended to focus on the quality control format with better economies of scales and a declined level of cost. This strategy works for the high competition to acquire a high market share, even in the situation when barriers to entry are high. Costco Company is experiencing a fast-growing culture and progress. The working of the company as a big retail corporation is aligned with consumer purchasing power. The perception of consumers is beneficial to stay in the competitive market.

Due to the maintenance of competitive advantage, Costco is ensuring long term viability. Currently, the company is working on expanding its growth on the basis of the quality of affordable goods and services. The mission of the company is to bring forth quality products with a specific selling point — the integral component of quality matters due to the presence of many firms. Offering a low price is specific for the company, and it acts as a significant selling point. The Costco warehouses are always available for the consumers because its strategic objective is to follow growth on the basis of its competitive strength. Due to the intent of sustenance and long term market positioning, it is bringing customers’ value. The financial objectives of Costco are to attain high profitability in the market that can help a company survive through its revenues.

The vertical integration strategy by Costco is adopted to achieve market excellence. The company is operating at low margins to provide ease of access to its consumers. The company, as a retail store, tends to face many problems, such as supply chain management. Its focus is to provide goods worldwide customers with mastery to manage supply chain practices. Any main attributes for a large supply chain company are time and costs (Gudlaugsson, 2018). Time is all about effective delivery to shelves from the store. Late delivery creates issues for customers so that shortages can affect the business process. Cost is maintained by not passing it to consumer goods always.

There are infinite possibilities in vertical integration that can help manage the supply chain effectively. Costco can apply vertical integration strategy as an innovation to run its business model without any difficulty or disruption. The vertically integrated model of business provides the basis of taking control of the supply chain full or partial. Costco is a wholesale multinational firm that needs an effective supply chain to manage small businesses and to fulfill significant family needs. The vertical integration model will control supply chain practices with active participation. It involves suppliers’ investment and any form of business. Through vertical integration, Costco can set up a separate production facility. Its annual revenue is US138.4 bn with card holder of all category 94.3 million.

The vertical integration as a new business model in Costco will not necessarily be successful, but some factors can increase the success ratio. In the US, three companies, i.e., Pilgrim’s Pride, Tyson, and Perdue, are famous for poultry. Costco is operating at low margins, so it is not able to offer Rotisserie chicken at $5 due to competition, so the vertical integration model will allow the company to set up its processing center for poultry. It will open a chicken farming operation in Nebraska that will offer the company to engage customers with 100 million chickens (Yang, 2017).

The vertically integrated business model can be successful for Costco because its financials are very strong, i.e., annual membership fees $3.14 billion and 2.27% made net sales in 2018. It is also a lean company on overheads, so pallets are filled up with products followed by bulk packaging. It is found out that annual sales of Rotisserie chicken are the US $300 million, with the estimated project cost the US $275 million. This estimate provides a fundamental tendency to get market share, and this model can be a game-changer for the industry.

Engaging in different joint ventures is not new for Costco. It is operating with enterprises since after its establishment. It has maintained hot dog and soda deal priced at the US $1.50 since the company is engaged in hot dog products at a meat plant in California. In addition to this, the Nebraska poultry plant will manage supply chain disruption by creating economies of scale. Costco, with the help of vertical integration, can affectively build up business conditions and make farmer unions. It will also jack up project outlay as well as operational costs. The partial vertical integration strategy in Costco will help develop their business further with the incorporated distribution system. It also has cross-docking distribution centers. This kind of system allows for the stability in value chains (Zhou & Wan, 2016). The cross-docking system undertakes pre-assigned inventory to the destination. The center activities are only shipping and sorting. Costco is using the sophisticated infrastructure of IT, and it has eliminated expensive functions.

Moreover, Costco has also used a backward integration method with the Kirkland brand. The strategy of Costco about vertical integration is likely to be successful because it is working to protect the famous product line by highlighting the risk of exposure. The company is strongly performing in the retail climate, with an inherent focus on in-housing sourcing, enhancing member value, and driving costs down.

References

Boström, M., & Karlsson, M. (2013). Responsible Procurement, Complex Product Chains and the Integration of Vertical and Horizontal Governance. Environmental Policy And Governance, 23(6), 381-394. doi: 10.1002/eet.1626

Edmonds, C. (2017). Can Costco Reign in Spain?. SSRN Electronic Journal. doi: 10.2139/ssrn.2934940

Gudlaugsson, T. (2018). THE IMAGE OF COSTCO IN ICELAND AND ITS IMPACT ON THE GROCERY STORE MARKET. Journal Of Academy Of Business And Economics, 18(3), 93-103. doi: 10.18374/jabe-18-3.10

Yang, C. (2017). Could Vertical Integration Increase Innovation?. SSRN Electronic Journal. doi: 10.2139/ssrn.2930780

Zhou, Y., & Wan, X. (2016). Product variety and vertical integration. Strategic Management Journal, 38(5), 1134-1150. doi: 10.1002/smj.2540

 

Strategic Plan of Youvic Technologies

Pages:8

Introduction

 

A strategy plan helps determine the potential of a business. Information technology offers details about the management of a project with technology-enabled services (Fitzpatrick, Nguyen & Cayan, 2015). This strategic plan is about Youvic Technologies. It will discuss Porter’s five forces, the role of competitors, the potential strengths and weaknesses of the company under SWOT analysis. The paper will also focus on the PESTLE framework for the technology company. The blue ocean strategy will also be discussed to get an idea about the low-cost operations to capture the market space and generate new demand.

Porter Five Forces

 
Youvic Technologies is a technology company that provides significant results to different businesses. It is working with the latest trends and innovations to maintain a strategic place in the industry. This role will be analyzed under the Porter five forces framework.

The bargaining power of buyers for Youvic Technologies is high. In the case of a product with a large number of competitors, the value is increased, and undifferentiated products tend to represent a high cost for the client. The technology-based functions of the company in the industry allow it to switch in the loyalties and offer quality to its customers. The company is offering quality management to its potential business clients while the sector has several rivals. 

The bargaining power of suppliers is low; in the technology industry, the inputs are purchased on different degrees of cost (Author, 2019). This accounts for the varying proportions of demand and hence, different levels of profit for the respective company. The one or two suppliers for an input provide the evidence of essential products, and if switching among suppliers is expensive, the supplier acquires a high level of power.

The threats of new entrants for the Youvic Technology company is high because due to advancement in technology and science, the accounting and management techniques are improved, and it needs more companies to work. A high level of demand is coped up with multiple firms, and this scenario constitutes that new companies can start producing products and offer services just like their competitors.

Threats of substitutes are low in the case of technical management, mainly due to the established demand of potential clients for the company (Business, 2019). The modern business management by the company is diversified, and it has engaged several customers by taking care of all their needs in a single place. Youvic has offered different tools to its customers and improved the performance ratio. The high threat of substitutes is based on the attractive price-performance level of trade, and when the cost of the buyer to switch, the alternative product is low.    

The rivalry among existing competitors is intense. In the case of technical firms, the scope of the value of products is high, and they offer different software and related product that are close to their rivals. The competitors in this way are numerous and they are roughly equal in size and market competition to Youvic technologies. The exit barriers are high, and there are fixed costs due to price cuts and incentives.

 SWOT Analysis

 

The SWOT analysis in a company is to discuss the potential strengths, weaknesses, threats, and opportunities for the technology industry. The company has inherent advantages in the form of offering the latest technology trends, business management solutions, and accounting business frameworks. It is providing advanced technology aid for doing business, assistance for client management, payroll, and HR activities. The role of management solutions is integral to build its customer base (Fitzpatrick, Nguyen & Cayan, 2015). Through HR-based services, several new horizons are explored. The functions related to technology development, software, and different applications are the key strengths of the company.

Potential weaknesses of the company are its interconnectivity among staff and low collaboration. It is facing difficulties in collaborating among staff members and effectively serve customers with technical trends (Author, 2019). There is a need to improve customer management services by hiring more staff and focusing on potential outlets to expand its services. The improved cooperation and affectivity of the team in responding to queries about services and products will not only help the technology company but will also advance the growth of the company.

The Youvic technologies have several opportunities; for instance, due to business expansion, it can introduce the latest software and management solution, client perspectives, scheduling, and the latest innovation about HR management (Business, 2019). It can improve its position by engaging more service outlets and broadening the exposure of staff. Working close to HR management aspects and developing new integrated software applications are liable to generate potential customers in the future.

There are significant threats to the company, for instance, increased rivalry, and a high level of new entrants that are potentially working on different projects. The scopes of Technology companies become limited if it does not focus on new techniques, software, and management solutions. There is a need to implement project management solutions with efficacy to retain its customers and position in the market.

Blue Ocean Strategy

 

 A significant pursuit that can help to develop the low-cost techniques and functions for an established firm is the blue ocean strategy (Chang & Luo, 2010). For Youvic technologies, the role of the blue ocean strategy is significant because it will not only compete with its rivals but also focus on low-cost methods for its services. This strategy is workable in case of capturing the uncontested market and reducing the competition. In technical frameworks, the scope of the competition is high, based on the latest demand and trends. It will help Youvic company to get the appropriate opportunity for marketing and make the competition less relevant (Carton, 2017).

The blue ocean strategy is useful for technology companies because it will depend on the available data for ideas and services. This approach also focuses on the goals of the company and to serve the company integrally that it will act as the best service offering a place. By redrawing the boundaries of the industry will provide a suitable marketing scope. The HMBL accounting business is providing a wide variety of ease and real-time visibility. Under the blue ocean strategy, this facility will offer brand recognition and a potential solution to its clients (Carton, 2017). It is suitable to cater to business needs and tailored to keep accounts track and connect all the clients.

PESTEL Analysis

 

The PESTLE analysis is a comprehensive framework of the macro environment of a company that identifies the potential climate of the industry. It constitutes political, economic, social, technical, environmental, and legal factors.

There is substantial scope for political factors in Youvic Technologies. It caters to business needs; serves different entities like private and public businesses; therefore, the cost framework and services offered by the company will fulfill political demands and best cooperation among various parties (Author, 2019). The full scope of its functioning is appropriate for the legislative framework in Canada.  The economic conditions for technical services and business management are open. It is rational for the company to work smoothly in an economically viable environment (Business, 2019). The business management solution, software, and application for HR imply a better economic framework under improved demand and supply mechanism.

Socially integrated platforms, business companies, and entities depend on technical-oriented functions, just like Youvic Technologies. The demographic segments in Canada provide value for the technical businesses, connectivity, freedom approach, and flexibility. Social networking is increasing due to an increase in the latest methods of connectivity. Technology savvy people are growing, and increased demand for management solutions is suitable for Youvic technologies. Different financial companies need assistance related to business management, and socially applicable software is helpful for them.

The technological factors such as new technology, implementation, and use of the internet and management solution framework are some critical aspects of the company. The public technical assistance in Canada is helpful for people to grow their businesses. The scope of accounting business under the technical framework is essential to discuss. Ecological factors that the company should focus on are a green business, ethical responsibility framework, and corporate responsibility (Chang & Luo, 2010). The environmental factors like natural calamities and disasters also matter for a company to implement its setup.  The legal framework for the Youvic technologies is different such as taxes, labor unions, government regulations, and special software licenses. Focusing on these factors will serve the company better and streamline its growth. The startup of professional business in any new country will consider these factors to get smooth functioning and better productivity. For the Youvic Technologies, it is significant to identify the potential operating environment in a place where there is increased usage of internet, better connectivity, and use of business solutions (Fitzpatrick, Nguyen & Cayan, 2015).   This will help developing accounting business and offer better and productive options for business customers.

Conclusion

 

The strategy for the technical business undertakes various aspects. It focuses on significant parts, functions, and processes of the company that can help develop new potential clients. Through business management solutions, software applications, and accounting business perspectives, in Canada, Youvic Technologies will perform significant functions. By focusing on business and corporate strategy, the company can bring long term growth rate. On accounting perspectives, it has a scope for the next ten years to flourish and use marketing activities based on PESTLE analysis. 

 

References

 

Author, A. (2019). HMBL Accounting Business by Youvic Technologies Inc. Retrieved 23 October 2019, from https://appadvice.com/app/hmbl-accounting-business/1473248855

Business, A. (2019). HMBL Accounting Business | YouvicTech. Retrieved 23 October 2019, from https://youvictech.ca/HMBLAccountingBusiness

Carton, G. (2017). A Blue Ocean Strategy for “Blue Ocean Strategy”: on Performativity of Strategic Management. Academy Of Management Proceedings, 2017(1), 17635. doi: 10.5465/ambpp.2017.17635abstract

Chang, H., & Luo, C. (2010). Analyze innovation strategy of technical‐intensive industries: scenario analysis viewpoint. Business Strategy Series, 11(5), 302-307. doi: 10.1108/17515631011080713

Fitzpatrick, B., Nguyen, Q., & Cayan, Z. (2015). An Upgrade To Competitive Corporate Analysis: Creation Of A Personal Finance Platform To Strengthen Porters Five Competitive Forces Model In Utilizing. Journal Of Business & Economics Research (JBER), 13(1), 54. doi: 10.19030/jber.v13i1.9081

 

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