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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

Capucine, J. &., 2020. Strategic & change management. [Online]
[Accessed 14 May 2020].

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

Epstein, A., 2020. With the world staying home, Netflix had its best quarter ever. [Online]
[Accessed 14 May 2020].

Favaro, K., 2018. Lessons from the Strategy Crisis at Netflix. [Online]
[Accessed 14 May 2020].

Fund, K., 2017. Consumer Discretionary NEtflix Inc, s.l.: s.n.

Hosch, W. L., 2020. Netflix. [Online]
[Accessed 14 May 2020].

Knott, P. J., 2015. Does VRIO help managers evaluate a firm’s, s.l.: s.n.

Moore, A., 2019. Netflix’s Generic Strategy, Business Model & Intensive Growth Strategies. [Online]
[Accessed 14 May 2020].

Netflix, 2020. Company Profile. [Online]
[Accessed 14 May 2020].

Poletti, T., 2020. Netflix doesn’t know what comes next after coronavirus-sparked boom in subscriptions. [Online]
[Accessed 14 May 2020].

Pratap, A., 2020. PESTEL ANALYSIS OF NETFLIX. [Online]
[Accessed 14 May 2020].

Reuters, 2020. Netfix Inc: Key Developments. [Online]
[Accessed 14 May 2020].

Reuters, 2020. Netflix Inc: Company Profile. [Online]
[Accessed 14 May 2002].

Riveria, A., 2019. Netflix VRIO/VRIN Analysis & Value Chain Analysis. [Online]
[Accessed 14 May 2020].

Riveria, A., 2029. Netflix’s Mission Statement & Vision Statement. [Online]
[Accessed 14 May 2020].

Talaja, A., 2012. Testing VRIN framework: resource value and rareness as sources of competitive advantage and above average performance., s.l.: s.n.

Tapalaga, A., 2019. A PESTEL Analysis of Netflix to Show You Its Value in Marketing Research. [Online]
[Accessed 14 May 2020].

TFLIE, 2020. Porter’s Five Forces Analysis of Netflix, Inc.. [Online]
[Accessed 14 May 2020].

 

 

Conflict Management

Pages:10

Symbolic and Instrumental Approaches

Can you describe what goes on when someone uses a definition of culture anti-conceptually? Can you give an example from our reading?

Using an anti-concept definition of culture creates an ambiguity. Cultural analysis should be guessing at meaning, assessing the guesses, and drawing explanatory conclusions from the better theories; not discovering the mountains of definition. An-anti concept of culture lies on the belief that culture is power, which is perhaps a false assortment. Culture is a context in through which we understand civilization, clans, and human behavior; what they live through, the formulae they use to define what happens to them Using an anti-concept of culture makes a delusional perception of one’s mind characteristics, personality, cognitive structure, or whatever. One assumes that it works the same among them as it does among us, as lack of familiarity with the imaginative universe within which their acts are signed. As Wittgenstein said, “one human being can be a complete enigma to another, without understanding the mastery of their language, their people, and if one does not know that then he cannot see his feet with them.” Entities tend to get blurred when an anti-concept of culture is defined. Culture is formed from psychological structures through which groups and individuals guide their behavior. One has to believe in operating in a manner acceptable to its members. A social code exists in every culture, and an anti-concept refracts that code.

This concept is best explained by Ryle, on his discussion of “Thinking of thoughts.”  He explains that two boys are sitting, facing each other. Both of them are contracting the eyelids of their right eyes. In one, this is an involuntary twitch, in the other, a conspiratorial signal to a friend. The two movements are identical, and one could not tell which one was twitch and which one was a wink of if both were twitching or if both were wink. The winker is communicating uniquely, imparting a particular message. As Ryle points out, the winker has done two things contracted his eyelids and winked, while the twitcher has done only one thing, pledged his eyelid. Recruiting your eyelid on purpose when there is a public code which so doing is count as winking. Now, suppose there is a third boy who parodies the first boy’s wink. He does it identically the same way as the other two; but this boy is nor winking nor twitching, he is parodying someone else. Here, too, a social code exists and also a message. If the other think he is winking or twitching, this whole project misfires completely. Even we can go further by saying that he not winking, nor twitching nor parodying he is rehearsing; he has been doing practice with a mirror in the past. From this is affirmed that culture public because meaning is. You cannot wink without knowing what counts as a wink or how to contract your eyelids. Knowing how to wink is(Geertz, 1973)

Can you describe two different operationalization of culture and explain the benefits and limitations of those approaches?

National culture is more distinguishable to foreigners than to the nationals themselves. When we live within a country, we do not discover what we have in common our citizens, we only know what makes us different from them.

Management and organizations are culturally dependent because managing and organizing involve manipulating symbols which have meaning to the people who are managing and managed. Many organizations have adopted foreign management techniques into their culture; this happened in Japan, where mainly U.S. management theories were taken over but in an adapted form. This adaptation led to entirely new ways of practice which in the Japanese case were highly successful. One example is the Quality Control Circle. The Quality Control Circle has been so useful in Japan that now the Americans are bringing it back to the U.S. Still, it isn’t very certain whether most of its present U.S. protagonists realize the role that Japanese educational and social conditions play in the ability of Japanese workers to function effectively in a Quality Control Circle. Not all other countries have been as fortunate as Japan in that a successful adaptation of American management theories and practices could take place. In Europe but even more often in Third World countries, foreign management methods and ideas were indiscriminately imported as a part of “technology transfer.” The evident failure of much of the international development assistance of the 60s and 70s is at least partly due to this lack of cultural sensitivity in the transfer of management ideas. It has caused enormous economic losses and human suffering. Most present-day management theories are “ethnocentric,” that is, they take the cultural environment of the theorist for granted. What we need is more cultural sensitivity in management theories; we could call the result of organizational anthropology or management anthropology. Is unlikely to be the product of one single country’s intellectual effort; it needs by definition a synergy between ideas from different sources. The convergence of management will never come. What we can bring about is an understanding of how the culture in which we grew up and which is dear to us affects our thinking differently from other peoples’ thinking, and what this means for the transfer of management practices andtheories(Hofstede, 1983)

Numeracy, Accounting, and Power

Can you explain why control over numbers, numeracy, and abstraction leads to concentrations of social power?

The control over numeracy and accuracy leads to social power; this was practices by the organization of tobacco in Spain. They used disciplinary cost accounting practices in the RTF, which was linked to the state’s recognition of the importance of tobacco revenue to the treasury and also the RTF was recognized as the symbol industrial prestige. It was noted that the cost accounting practices provided information and techniques that contributed to the promotion of strict work discipline, which helped in the reduction of theft and also culminated in minimizing the cost of production. The cost accounting system used the expected cost of direct labor and material consumption for those parts of the production process that were not susceptible to adequate supervision. They also provided calculations of various expenses. This practice tended to single out the controllable elements of value. Actual production cost was mainly used in experiments seeking to improve production and particular tasks. The quantification of human effort and skill, through the development of different measures – like rate and mix of utilization – which creates a new potential for the those at the top hierarchy to engage in a position of power and management. With these measures, they can compare, differentiate, hierarchize, normalize, and homogenize individuals. They can even isolate and dismiss individuals. Hence, disciplinary power is an exercise through itsindivisibility (Fernando, n.d.)

Can you narrate different cases of attitudes towards accounting in a business or among a group of people?

The two types of ERM model can best explain two different attitudes towards accounting in business; one driven by the shareholder value imperative and the other corresponding to the demand of the risk-based internal control essential. The shareholders’ value imperative drives a particular model of ERM in which risk management is a fundamental feature. It is ERM by the numbers. It is contingent on a vision of uniting and controlling risk & return. This model requires the quantification of risk silos and risk capital need of business. The essential significance of this model is derived through strategic planning and performance management. It is diagnostic. It corresponds to risk management in strategy setting with planning control and using it to manage risk within the company’s risk appetite.

However, the risk-based control imperative is prominent with holistic risk management. It focuses on qualitative assessment; risk management exercises are flexible, allowing the negotiations of risk limits when the business requires it. It is keen to acquire business insights to present an opinion on risk issues that are beyond quantifiable risk-framework. It is interactive. It corresponds more directly to the design requirement that risk should be appliedto (Mikes, 2009)

Can you explain what consequences those attitudes towards accounting have for the actions of the given business or group of people?

Under the definition of operational risk, one finds both quantifiable and non-quantifiable risk. Therefore, businesses need to apply a set of operational risks that are relevant to them. Companies will likely pick issues for entrance into the remit of the executive risk controller. Based on the difference between the two approaches, businesses could expect that with time the management of operational risk will take separate routes, depending on the ERM model they’re adopting. Moreover, further studies on the dynamic of risk management are vital to confirm the validity of each attitude. The study suggested that the interface between accounting and risk-management is riddled with tensions. The quantitative risk approach allowed risk managers to address the problem of risk aggregation, which allowed the risk specialists to examine the risk profile of the institution, set limits, and do the same for separate business units.

The ideal of risk-based management required risk managers to focus on quantifiable risks. Their commitment to a calculative culture of managing risk by the numbers resulted in a boundary around their remit that prevented them from gaining access to the framing of non-quantifiable risk issues. The ideal of holistic risk management was frustrated; hence the paradox of resolving the challenges of risk computation; by doing so, the risk function’s limit became confined and inflexible. The role might have become a cog in the wheel of value creation, but it was not part of the strategicengine (Mikes, 2009).

 

Culture and Materiality

Can you explain the way in which material objects acquire cultural meaning?

Material objects, especially clothing items, can acquire cultural meaning. They sometimes not only represent people but constitute who they really are. An excellent example is the ‘Sari.’ A ‘Sari’ is a piece of cloth, around 6 meters long, worn by women in India. The Sari represents who they are; it represents their identity and makes a woman who she is. The ‘Pallu’ is a more decorated and free end of the Sari which falls over the left shoulder down to the waist. The Pallu represents an artificial decorated quality of the garment that is not shared by any western clothing. It is so remarkable who the Pallu, although the Sari, represents a complete set of culture, hot it reflects a woman’s belief and values. The Pallu is a haven for an embarrassed face and a cover for unfitting emotion.  As an outsider, when one enters a village where all the women wear a sari, he must assume that this has become natural; as something distinct and regular. A woman would have worn a sari for 30 years and still have no command over it; it is like driving a car. Learning to drive a car and learning to wear a Sari both mark a shift in one’s life, sense of age; there is the feeling of becoming an adult with all the new freedom, power, constraints, and fear that growing up entails. Just as the Sari starts off as very oppressive than most western garments, it has now become a symbol of power. Men working in offices complaint that they cannot compete with women simply because they don’t wear a Sari. Moreover, the Sari is like a fellow actor, partnering on stage regularly, for which the whole presence must always be remembered. The Sari makes a woman a person who can interact with others and with the self through this continuously shifting material. A Sari can be exceedingly supportive, when attended to, helping to accomplish all the manner of tasks. But, when ignored, it can be quick to betray and destroy one’s respect and honor, causing other to judge harshly. Such diverse and uncertain experiences with the Sari have a far-reaching bearing upon a woman’s life and sense of herself. There are, however, a multitude of varying expectations and experiences that are the direct result of wearing a particular item of clothing (Miller, n.d.)

Can you offer two different examples of ways that groups have distinguished themselves due to their use of clothing? Why do they dress the way that they do?

A qualitative study done in a rehabilitation center showed how organization members use their dress to represent themselves and negotiate issues. The study showed that the dress took on various and often contradictory meanings. Patients who wear pajamas and see hospital garb around them think of themselves as sick. If patients and their caretakers wear street clothes, then patients are more likely to feel that they are moving out of the sick role and into the rehabilitation. They will have a firm belief that they are ready for life outside the hospital. This is the rehab philosophy, and this is what is distinguish it from the other units.

Moreover, health and medical professionals believe their work is professional by taking care of sick patients; they examine their body fluids and get the patients’ slime all over their clothes and body. Therefore, they’re dressed in scrubs. Both groups work in the same hospital. Yet the portrayals of who they are and who they take care of are remarkably distinguished by their dresses. Dress serves as a symbol that facilitates an organization, like the hospital. Dress serves as a convenient and useful window allowing members of the hospital to look at the multiple and competing for social identities inherent in the hospital (Whetten, 1985) (Dukerich, 1991). The appropriateness of each form of dress facilitated the issues related to the mission, clients, roles, and status of each nurse. The meaning of a symbol, such as the street cloth and scrub, within one organization, like the hospital, may differ from its purpose in another organization or at a different place and time within the same organization. The rehab center members in the hospital wear street clothes because they rehabilitate the clients by giving them information, knowledge, and expertise. The focus is on showing them identify a new state of health. They want the patients to see a difference between the acute care unit and the rehabilitation center. They feel comfortable seeing street clothes; they see a transition in their health and the clothes are the sign of that.

Moreover, the members in the medical unit are likely to wear scrubs because of the acute condition and treatment of patients. The study suggested that symbols represent not only core values and beliefs but also several event-driven issues within an organization. In the case of the hospital, the dress symbolized the change in the patient population. Each dress represents a unit’s mission, patients and employees’role (Rafaeli, n.d.)

 References

Dukerich, D. a., 1991. Keeping an eye on the mirror: Image and identity organizational adaptation, s.l.: s.n.

Fernando, M. &. S. &., n.d. CONTROL AND COST ACCOUNTING PRACTICES IN THE SPANISH ROYAL TOBACCO COMPANY, s.l.: s.n.

Geertz, C., 1973. Thick Description: Toward an interpretive Theory of Culture, s.l.: s.n.

Hofstede, G., 1983. The cultural relativity of organizational practices and theories , s.l.: s.n.

Mikes, A., 2009. Risk Management and Calculative Cultures , s.l.: s.n.

Miller, D., n.d. Why Clothing is Not Superficial . In: s.l.:s.n.

Rafaeli, M. G. P. &. A., n.d. Organizational Dress as a symbol of Multilayered Social Indetities , s.l.: s.n.

Whetten, A. a., 1985. Research in organizational behavior , s.l.: s.n.

 

 

Mega Project Management and Society

Pages:11

Requirements:

Understand the connection between projects and society in the globalized economy
• Analyse theories and emergent ideas in project management
• Identify and critically appraise societal forces influencing projects and the management of projects
• Evaluate the impact of global and mega or major projects on society
• Develop and apply research skills to examine global and mega or major projects

—————————————————————————————————–

Abstract

Globalized framework and economic development are crucial elements for any country. Today, globalization has rapid advancement in terms of better and improved infrastructure, facilities, and complex projects. The current research essay discusses the scope of a megaproject in an economy and its influence on society. In the global economy, the megaprojects are necessary to build better infrastructure, to connect world economies, and to bring sustainability. The project management framework, in this regard, takes the lead to explain the competitiveness in the global economy. Megaprojects are managed under project management forces, concepts, and theories. These theories involve better organizational framework, ideas, and management implications.

The megaprojects work inherently for an economy, as discussed in this research essay. They have a substantial role in global demand and supply-side because it is always preferred to become a cost-effective organization. Due to better equipment, better infrastructure, and workplace, an organization can work better for employees and provide them better opportunities. This set up also help to bring state of the art system of information. This research essay explains the role of megaprojects, their significance, and persistence in today’s economy. The purpose and scope of these projects are discussed. The global environment is related to the structural aspects of extensive projects. The impact of megaprojects on society is also elaborated in this paper. Global suppliers, contractors, and team members are crucial to working under project management. They not only act globally but also provide and achieve the advantage of a professional team and cost-effective systems.

 

Introduction

The current global environment thrives due to intense competition. Organizations must consider their behavioral practices to place the importance of project management. It is critical to know that global projects are managed by integrated informational technology tools. The scope of cultural differences to manage complexity and risk of the project is always extensive when viewed under mega projects (Bovensiepen, J. and Yoder, L.S.M., 2018). Integrated IT tools enhance focus on improving competitiveness, innovation, and effectiveness. A review of research studies provides ample evidence about global project management. The effect of global projects on society and their implementation develops a managerial framework.

The rationale of this study is to explore the impact of global megaprojects on society. When global projects are developed, improved performance and structural maintenance are viewed. The study begins with the premise of megaprojects and project management scope. It will discuss the interaction of integrated IT factors to accomplish megaproject development. The interrelationship of these variables will define the role and responsibilities of project management. To that end, key concepts and theories of project management will be included in this paper. Critical evaluation and reflection is also discussed in the paper.

Global Project Management

Megaprojects, energy infrastructure, transport, urban regenerations schemes, new towns, city clusters, and technology parks are some examples of megaprojects. These are reconfigured spaces that have a prominent role of local and regional elites as well as public-private capital (Cummings, L., 1997). The design and implementation of megaprojects are according to the need for harmonized scales. This structure increases the global visibility and urban competitiveness.  In a diverse socio-economic context, the political power configuration exhibits a unique relationship between regional, national, local, and universal domains. The meaning of planetary urbanization also presents the nature of urban projects and their location that adds to the urbanization process. Due to urban competitiveness and development, the megaproject construction has a significant role in globalization and neoliberalism (Bovensiepen, J. and Yoder, L.S.M., 2018).

The megaprojects actively participate in the planetary urbanization. These projects are nominated as privileged particles that contribute to development. They are also considered as trait making. They not only change the structure of society but also fit in the pre-existing structure of society and attempt to modify it. The megaprojects in urban areas offer different packages of development (Purkayastha, P., 2017). There is a clear relationship in megaprojects and development because massive scale development is attributable to the iconic design that transform the image of a city. The scope of urban governance to entrepreneurialism is based on a global networking that defines perceived linkages to global economy. In regaining global visibility, the quintessential economic strategy serves representational transformation (Fang, J., Fu, Y. and Yao, D., 2010).

Megaprojects are the immense scale investments that attract public attention, so a substantial impact on communities occurs. Megaprojects bring a positive change in the economy, in terms of increased spending and buying. There are different aspects of the city related to megaprojects that deliver long term changes. Though complicated projects face economic fluctuations and many other methods like cost estimation and forecasting, bring shortcomings. The urban megaprojects also effect on societal groups due to their broader domain—the negative and positive effects of their implementation move with demographic migration. In the context of the city, native and non-native groups face change in identity, character, and physical environment.

The concept of sustainable urban development under different purposes serves the urban future. In European cities, minimum use of natural resources, space and efficient administration, protecting public health, and equal access to resources are some main objectives considered before developing megaprojects (Anantatmula, V. and Thomas, M., 2010). The significance of sustainability is related to social, economic, ecological, and cultural needs under urban indices. In Iran, to maintain urban tourism, a complex in Padideh city is formed. The complex is built on more than 50 hectares and consists of shopping malls, hotels, entertainment, Water Park and apartments. This example of megaproject at the municipal level is considered due to its national, local, and regional importance and to attract citizens. Arranging an undertaking is connected to the improved creation and utilization of crude material. Literature has concentrated on critical advantages and structures necessary for an economy to look for financial development (Anabestani, Z., Sarvar, R. and Hajiluie, M.O.M., 2016).

Impact of global projects on society

The socio-economic significance of megaprojects is based on globalization. Four global processes are attributable to neoliberalism and globalization. First is city-based competition at the worldwide level. Second is knowledge economy mobility and growth, third is the movement of investment from physical to human capital, and the fourth is market rule ideology and its dominance. Significant economic and political change is associated with megaprojects. Increased complex projects tend to increase foreign direct investments. This indicates a wide relationship between urban development and globalization. If international direct investment increases, it brings a change in the economy, so the centrality of manufacturing industries move to information-based development (Habison, R., 1985). Global foreign direct investment services increase the extent of global capital mobility. It develops the aim of capturing a world share of mobile wealth; the situation of global competitiveness brings economic survival.

Megaproject impacts positive on economic productivity, development of infrastructure, quality of life, housing, recreational activities, cost of living, and public prosperity perception. Research studies argue that the efficiency of most populated cities is based on accessibility level. There are specific patterns required to use land and transportation that can bring immense scale benefits. The relationship in prosperity and urban growth guides the geographical nature and socio-economic status. The megaprojects work significantly to shape society. In modern project management, customer relations, and economic profitability matter most (Korytárová, J. and Hromádka, V., 2014). The projects are linked to utility values and financial investments. They need initial outlays, but utility value differs from the investment costs. The megaprojects are critical to change the fate of any nation, and in less created economies, these structures improve remote direct venture. They are additionally impressive to upgrade the salary stream in the marketplace.

In public and private undertakings, client or customer holds an important role. The scope of economic performance is linked to megaprojects so they collectively induce change in the society. In the matter of development, the organizational actions work significantly for community. The social impact is all about wellbeing of community in terms of economic growth, better economic opportunities and access to opportunities. The megaprojects always behave positively with the benefit of society and this impact is counted positive in terms of economic value. The scope of global project is linked to globalization because all over the world, economic development is attributable to these megaprojects. Megaprojects give a reasonable guide under undertaking the executive’s system (Purkayastha, P., 2017). They are enduring segment of the task the board on the grounds that in dealing with an enormous scope venture, the industry needs to concentrate on arranging and authoritative structure.

Project Management concepts

Management theory today relates to construction and engineering projects. The management concepts related to organization and labor coordination work since the 19th century under the transition of entrepreneurial capitalism. The classical theory under management framework undertakes two primary schools of thought. The first one is scientific management, and the second is the administrative theories. The scientific management allows efficiency framework, for instance, under the growing industrial production while the managerial theories suggest further discussions. These are bureaucracy and administration. The bureaucracy is based on the principles of bringing changes in society under social sciences. The administration approach was developed by a mining engineer Fayol that categories classical theories into further concepts.

The scientific framework allows for the elemental work under the rule of thumb method that is based on competence and set out some regulations. The other purpose is related to the cooperation carried out to work on a decision-based mechanism (Korytárová, J. and Hromádka, V., 2014). This process is based on specific details that need administration. Under project management, classical theories are related to the human relations movement. The behavioral approach presents that management and organization work on an ongoing process under a dynamic framework to enhance social wellbeing. This process undertakes consideration of human aspects (Purkayastha, P., 2017). For example, a theory of motivation in project management is presented by McGregor that follows motivational dimensions. The motivation theory states that managers can develop a condition where employees confirm the expectations of managers. The behavior can be motivated where it is desired according to the satisfaction. This further needs physiological safety and fulfillment of social needs.

Under a project management framework, dynamic and static concepts highlight the notion of the organizational environment. In a dynamic environment, the exchange of information occurs under either stable systems or chaotic systems. The durable systems are about the input of limited sensitivity, and chaotic systems are about the high sensitivity systems. This concept is based on the chaos theory that highlights individual cases. The dynamic aspect is further based on the non-deterministic element that works on the basis of the global cascade. The complex systems are about the characterization of resilience or sensitivity, which can bring minor changes in the input. The complex system is based on complexity theory.

The project management theory is based on four leading schools of thought. First is industrial, it is about encompassing of Smiths’ labor division to accomplish work activities under administrative approaches. The second is humans that surround human aspects as the behavior of an organization. The third aspect is biological, which represents the system theory and incorporates static and dynamic systems.  Due to the structural framework, the deterministic characteristics are included in this system.  The fourth approach is evolutionary that represents non-deterministic complex systems.  For project management understanding, these essential concepts work integral. Fayol’s function of project management is divided into five parts; for instance, it plans to forecast, to organize, to coordinate, to command, and to control. The traditional approaches of project management are linked to the visibility of work structure, its time scale, and complexity (Purkayastha, P., 2017). Under the project management framework, the process-based systems work integral, while lean and agile methods are moved with traditional theory.

Under project management aspects, the totality of work is linked to semi-permeable boundaries of works that act as influencing vectors. The initial decomposition is related to initial transformation. The strategic business objectives are essential to consider the influencing vectors and their required timeframes. In large projects, the exclusive focus is to satisfy the client; otherwise, it’s not possible to get project success.

Critical Evaluation & Reflection

Megaprojects are a basic need of metropolitan cities. Research studies have discussed that public, private partnership, and regional structures as complex projects form the most significant settlements of the economy. Literature has focused on key benefits and structures necessary for an economy to seek economic growth. The megaprojects are essential to transform the destiny of any country, and in less developed economies, these structures improve foreign direct investment. They are also considered to enhance income flow in the marketplace. The megaprojects are long term transformations for any country that lead the underdeveloped nation to a developed one. They offer the opportunity to many sectors of the economy to boost and increase their rate of economic development. The megaprojects are also a form of power generation for the economy because of the development of related structures, transportation, and raw material (Timo, P., 2013).

They deliver clear benefits to the existing physical assets of the country, some main advantages of megaprojects are; optimal use of natural resources, irrigation expansion, improved quality of life, the opening of new markets, enhanced productivity, opening up of trade, increased efficiency of government and better infrastructure of the economy.

Megaprojects provide a clear roadmap under the project management framework. They are a perennial component of project management because in managing a large scale project, the industry has to focus on planning and organizational structure (Purkayastha, P., 2017). Planning of a project is linked to the enhanced production and use of raw material. Project development is linked to the managing of team members, suppliers, and partners. The global impact of project management is seen from the extended levels of a project team—for example, deployment of a new management system work to involve highly specialized teams under the global company. The relocation of highly advanced machinery and professionals to a certain project is based on expertise to handle a complex project and reduce cost.  In my view, megaprojects are large-scaled functions that are inherent in the global economy, and their influence on the globalized world is significant because one segment attracts others.

Conclusion

Megaproject management and its sustainability is a key issue in the global world. Large scale projects are the cornerstone of any economy because they aid in production and work to enhance development. There are certain factors in urban planning that matter mostly during planning and implementation. Urban context mostly focuses on managers, leaders and entrepreneurs to remember the scope of decision making elements. In viewing the global project management and its influence over globalization, the effective communication, efficient coordination of stakeholders and team members’ interaction is positive to consider. Megaprojects are a key part of any global economy, and this link can be better understood by the connection of project management. The societal forces that work to determine project management are socio-economic, regional, and local factors. Global or mega projects are a key part of an economy, and their influence on society is great in terms of economic development.

References

Anabestani, Z., Sarvar, R. and Hajiluie, M.O.M., 2016. The Effect Of Mega-Projects On Sustainable Urban Development From The Perspective Of Citizens (Case Study: Padideh Tourism Complex Of Shandiz). Turkish Online Journal Of Design, Art And Communication, 6(JLYSPCL), pp.374–396.

Anantatmula, V. and Thomas, M., 2010. Managing Global Projects: A Structured Approach for Better Performance. Project Management Journal, 41(2), pp.60–72.

Bovensiepen, J. and Yoder, L.S.M., 2018. Introduction: The Political Dynamics and Social Effects of Megaproject Development. The Asia Pacific Journal of Anthropology, 19(5), pp.381–394.

Cummings, L., 1997. Waste Minimisation Supporting Urban Tourism Sustainability: A Mega-Resort Case Study. Journal of Sustainable Tourism, 5(2), pp.93–108.

Fang, J., Fu, Y. and Yao, D., 2010. Application of Meta-synthesis Method in Project Management of Large-scale Complex Projects. Management & Engineering, pp.3–10.

Habison, R., 1985. Time and cost securing in complex large-scale projects. International Journal of Project Management, 3(3), pp.178–181.

Korytárová, J. and Hromádka, V., 2014. The Economic Evaluation of Megaprojects – Social and Economic Impacts. Procedia – Social and Behavioral Sciences, 119, pp.495–502.

Purkayastha, P., 2017. Managing innovation projects in the global system. Proceedings of Engineering Management Society Conference on Managing Projects in a Borderless World.

Timo, P., 2013. Development at the Cost of Violations: The Impact of Mega-Projects on Human Rights in Brazil. SSRN Electronic Journal.

Vickerman, R.W., 2012. Cost–Benefit Analysis and the Wider Economic Benefits from Mega- Projects. Decision-Making on Mega-Projects.

 

 

Arcor: Global Strategy and Local Turbulence

Pages:3

Summary

The paper begins with an overview of the confectionery industry and its substantial competitiveness among other industries in the market and states that Western Europe and North America contributed to two-thirds of its sales. Consumers of this industry comprised mostly of teens and adults, who bought chocolates and candy products in very high quantities. Among chocolate and candy, statistics show that 86 percent of overall consumption is due to chocolate, whereas 17 percent is due to candy, which shows significant profit to be belonging to chocolates. According to statistical details obtained, the leading confectionary producers and exporters were renowned chocolate companies like Nestle, Kraft, Hershey, and in this list, Arcor ranked 13th. Amongst the confectionary market, companies have varying categories of chocolate and candy based on their quality, shelf-life and taste (in turn depending on the way cocoa beans were picked and mixed.). The production process was complex, and due to transportation constraints, firms chose to be located near the suppliers for efficiency of time and capital and convenience of employees. Channels for distributing these confectionary goods were mostly supermarkets and self-supporting retailers. But distribution could be a frenzied task, as competition existed therein and creating awareness regarding the product’s reimbursement was necessary. Marketing was mainly via television advertisements. The article then pointed out Arcor and its origin and its journey of success under the sovereignty of Luis Pagani and the 300 percent rise in sales was proof of his efforts. The company’s goal was affordability in terms of prices, popular products in variety, and uncompromised quality of confectionary, and the company strived for these and achieved their desired goals to a huge extent. This brought Arcor corporation, the market, popularity and success it deserved and it spread as far as Brazil and Latin America and moving further overseas. Arcor was smart and diligent enough to develop supply chains of its own and preserved effective production facilities by spending adequate capital on improved technology for production. However, for Argentina, 2003 was the year of disaster. It suffered devaluation of currency, esteemed corporations shutting down and a massive financial crisis. In these times, the Arcor Group, which was one of the more fortunate enterprises to remain financially stable, underwent a change of plans. Arcor planned to put into operation a novel international strategy that would globalize the corporation with respect to distribution networks and facilitation in products. But for Arcor’s produce to spread far and wide across the world, it was primarily necessary for the corporation to have a firm ground at its country of origin, Argentina. Arcor being a stable corporation during the times, contributed in eradicating the adverse effects by increasing worker wages and giving out food necessities. They attempted to build symbiotic relationship with government as an attempt to develop transnational strategy which will act as a tradeoff. They reduced prices of their most popular products by altering the ratios of ingredients, in an attempt to keep sales continued and worked to bring in more revenue from exports by cost effective process of production. Arcor’s plans for globalization included expansion upto countries such as Latin America, North America, Europe, and Asia.

This article is an amalgamation of quite important lessons with respect to business because with its help, I could learn crisis management which is essential in business because there are ups and downs all the time, sometimes within the firm, and sometimes in the world outside too and for businesses to flourish, employees and enterprise owners need to be prepared to face anything. We also get the lesson that the key to important decision making in the face of uncertain times is dependent on the analysis of pros and cons and a long term thought process of the consequences of the decisions. Moreover, the article provides an insight into globalization practices and how to formulate effective strategies to accomplish those for the success of the enterprise.

Phosphate industry in Morocco

Pages:9

Significance of selected industry for the economy

The Moroccan economy is based on tourism, agriculture, and phosphate. The seafood and fish also play an integral role in the Morocco economy. Gross Domestic Product of Morocco is dependent on mining and industry. After China and the US, Morocco is the third large producer of phosphate. Therefore, it holds a central significance for the economy. Morocco phosphate is an important mineral that has diverse usage. Due to the production of mining n four different sectors, its significance is increased. These four sectors are Boucraa, Youssoufia, Benguerir, and Khouribga. The mining in Khouribga is carried out on the deposits of OuladAbdoun phosphate. These phosphates are found 140 kilometers southeast Casablanca.

This mine has greater potential for extraction and estimated as 17-18 million tons on an annual basis. The extracted phosphate from this mine is exported globally. The ores found here are different quality and substantial support to the chemical industry worldwide. Moreover, this is also supportive of the JorfLasfar chemical industry hugely. A state-owned company OCP is responsible for the ownership and control of Morocco phosphate. It stands for Office Cherifien des phosphate. The extraction potential is key to understand the value of chemicals. OCP operates on five continents (Update, 2019). Since 1920, its creation is set up at the international level. Later, the operations are developed into adjustment, anticipation, and flexibility capacities with the requirement of a competitive industry.

Morocco has OCP as the largest enterprise, so it has employed more than 2% population, so it has contributed significantly to reduce the unemployment level in the economy. The company also provides training to the labor force, so it is a contributing buildup of skilled people in the economy (Encyclopedia Britannica, 2019). Morocco houses about two-third of the phosphate reserves of the whole world, so this is a higher league as compared to Russia, China, and the US. Morocco has four main producers of phosphate, so the reserves account for 50% of the global reserves. The consumption growth of phosphate in Morocco is estimated at as1-2% per annum. These economically exploitable reserves hold central significance in the Morocco economy, so it is taking measures to reduce the prices of phosphate in 2008 (Babali, B. 2019).

An estimated investment of $4milllion, the economy is planning to increase the production of phosphate from 30-55 million tons per annum. The analysis provides that the GDP of the economy is significantly affected by this growth and export. So the country is famous for attracting foreign investment and other countries to increase business relationships and collaboration with the phosphate industry (Update, 2019).

Political and Economic Influence of the Phosphate Industry

Morocco’s export market in Europe has faced successive shocks due to the financial crisis. The stronger position of Morocco’s economy is due to strategic advantage. On the political side, it gas faced political issues with Arab neighbors that created difficulty in maintaining growth. World economic forum reported that Morocco is a competitive economy of North Africa and stable in terms of democracy. After the constitutional changes in 2011, the elected government faced a strong role of parliament among developing countries (Rarick, 2011). The plan of government to capitalize on the strategic location was to focus on the African and American markets. The development strategies of the economy regarding mining and chemical have faced a great set of reforms and policies aiming at growth.

The phosphate industry is facing huge advantage of the growth, and its presence in Morocco’s geographical areas has created wealth, job training, and better supplier connections. Due to the wellbeing of its employees and contribution to improving GDP, political influence is increased. Peace and Security Council of Africa decided that Morocco will not enter in the contracts of exploration and exploration of natural resources of Western Sahara. The decision shows that Morocco faced criticism about not showing up at the meeting of Sahara. Morocco aims to be the large producer of fertilizers and phosphates, and by 2017, this production was increased to 12 million tones.

The big plans of OCP under construction framework and fertilizer production are elapsed at US $2.4 billion investment for a period of five years. In 2016, OCP signed a contract with the Dangote group, which is by the wealthiest person from Africa and Nigeria. These domestic and foreign plans of Sahara with Russia show political goodwill about phosphate partnership, which is relevant to the economy of Morocco. In Sahrawi and Nigerian news sources, the phosphate related collaboration can be a misunderstanding because most of the phosphate and fertilizer is sold to factories and mines. Towards political aspects, Morocco is a leader of Arab states and Mediterranean unions. The stable status of politics in Morocco has international influence. For instance, phosphorus is a chemical fertilizer, and this industry will be engaged in more than 65 new production units and by 2017-2021 (Update, 2019). The stable political status of the economy is seen in all the aspects and industries, so effective measures have been taken for universal education and securing human rights as well as employment opportunities.

Demographic Profile of the Labour Force

The living standard in Morocco is not up to the international level, and a decline is seen since 1990. People living below the poverty line are increasing, so since 1991, 19% are below the poverty line. Another reason for this is uneven development and the emergence of the affluent class. The flexibility of the labor market in morocco is not estimated, but it describes financial productivity and inflation rate. The structural changes in labor 2019 have reported that a shift in labor and productivity is seen from industry to services sector. On account of the phosphate industry, the labor force has specific records, for instance, unemployment is a challenging issue, but due to the phosphate industry, a trained labor force exists in Morocco. The North African average is estimated as 10-12% for unemployed people, while 9% of women laborers are a part of regional unemployment when measured on average (International Monetary Fund, 2019).

In Morocco, no specific unemployment gender gap exists, but data by ILO reveals that a steady rate is observed in the past decade. Youth unemployment is also increasing, while in the past ten years, this ratio is hovering over the regional average. As compared to Arab countries, Moroccan workers are manly working in the agriculture and mining sector (Rarick, 2011).

In the Morocco phosphate industry, the unemployment ratio is at a declined level as compared to other sectors. North African estimates state that 65% of the unemployed force is estimated for a year, while 52% are job seekers. The government is paying job security (social) and medical insurance to employees. If the higher education sector is observed, the unemployment rate is high, and since 2012, this ratio is increased to 6.8% (White, 2015). In the mining and quarrying sector, total employment is 67,664 in 2012, while this sectoral share was 0.6%. The ratio of men employed in this sector was 98%. The estimates show a positive result for the phosphate industry that this sector is engaging more people and increasing the employment level (Update, 2019). In addition, the Gross Domestic Product of Morocco due to mining and quarrying was 3.2%, while per-share GDP in US$ is 64,651. Different channels explain the gender gap and growth rate of employment; for instance, women’s participation in the labor force increases the talent of potential entrepreneurs. The participation rate in the labor force is 25% overall that highlights the case of lags. The Moroccan labor market experiences gender gap. There are gender disparities observed in the participation of the rural and urban areas of the labor force (Ashford, D.E.1961).The employment rates in different sectors, particularly the mining sector, face the rate of unemployment, despite training and formal jobs (Prettitore, P.S. 2015). However, this ratio is minimal, and the labor market is facing mismatch under regulation, yet this impact is acute for women.Moroccan has taken measures to reduce the prices of phosphate in the past. Though it is a large country to produce phosphate rock in the world, yet its labor force is facing different issues. Despite training, involvement, and job opportunities for the labor force in Morocco, specifically in the mining sector, there is a gap in labor force participation.

The manufacturing sector in Morocco is contributing to the GDP of the country (Watch, 2020). Raw material and transportation sectors are linked to the mining sector, and there are enormous opportunities for the labor force to participate, yet some lags exist, and a need to improve this labor force participation is inherent. Though the mining sector is attracting the attention of the private sector and other state operations as well as foreign sources. Processing of phosphate and export needs of fertilizers is a key part that needs the involvement of the labor force. The economic activity of this sector, in relation to labor force participation, is a significant attempt of government because, with the increase in global collaboration and investment, the export will be increased (White, 2015). Morocco’s economy needs an emphasis on the added value of phosphate due to the increased focus on exports. The government is attempting to control basic hurdles and challenges for the labor force to enhance their participation in the mining sector since this will enhance the GDP of the economy (Medsocialdialogue, 2016). The involvement of labor in producing phosphate is inherent for the economy, and this will transform the industry as well as its capabilities.

Evaluation of Economic Growth

The economy of morocco needs high investment as well as private sector growth to reduce unemployment and increase job opportunities for youth. There are some weaknesses in a competitive business environment for small and medium enterprises development. The role of the government to improve private sector involvement is supportive for the acceleration of mining sector growth (Rarick, 2011). These reforms are reinforcing and boosting a rich growth tendency. The public sector involvement, efficiency, and governance are linked to anti-corruption policies and transparency. For the progress, administration, and promotion of government policies, there is an increased need to reduce corruption as well as vulnerabilities in all the mechanisms. The information access law is enacted in 2019 to facilitate all feedback received from the public. The economic forces are now aligned with the communication perspectives, and national strategy implementation is focused that will increase the public trust level (Watch, 2020).

Morocco’s economy has stable politics and enormous natural resources, i.e., phosphate industry potential. This scope can easily attract foreign investment and activate anti-corruption policies. The public sector efficiency for the economy is significant. Civil service and quality of public investment are linked to reforms that can help maintain public wages (Hahn, T. and Auktor, G. 2018). These motivating factors for the labor force can increase the engagement of people and youth. In the Morocco economy, fiscal decentralization in 2018 presented transparent criteria for the public resources in the region. The public enterprises are also working for the financial management level, and it is helpful for the adoption of a strategic approach. The public investment management is linked to increasing the efficiency of public investment because of improved execution and better coordination of public, private partnership welcome labor participation (Rarick, 2011).

The Morocco economy has much potential that can be cultivated by focusing on the transparent involvement of private companies (White, 2015). The standard of life and per capita income in Africa can be increased by the increased involvement of youth in different sectors. Moreover, rural-urban migration in different areas is contributing to economic development. Young Moroccans seek employment opportunities in the economy, and if phosphate production is accelerated by advanced technology, the quality of the labor force can be improved. By improving government involvement, the political & economic spheres can be accelerated that enhance the rapid economic development and growth of certain sectors (Fabbe, K. et al. 2018). Authorities in Morocco are focusing on advanced structural reforms since it will be helpful to accelerate capital. The economy needs to reduce inequalities, remove corruption, and create job opportunities for the business environment. There should be mutually reinforcing reforms like social participation & education practices that will empower vulnerable groups.

 

References

Ashford, D.E.1961.Political Change in Morocco in Princeton. Princeton University Press. pp. 25-34.

Babali, B. 2019. Twist of Phosphate. The Business Year. Available at: https://www.thebusinessyear.com/morocco-has-worlds-largest- phosphates-resources-critical-for-global-agriculture/focus [Accessed: 20 March 2020].

China Economic Net. 2012. Reopening border between Morocco, Algeria requires deeper examination: minister. Available at: http://en.ce.cn/World/Africa/201203/27/t20120327_23193309.shtml [Accessed 26 March 2020]

Encyclopedia Britannica, 2019a. History of Morocco. Encyclopedia Britannica. Available at: https://www.britannica.com/topic/history-of-Morocco [Accessed: 26 March 2020]. (把原文中的reference按照这个改过来)

Encyclopedia Britannica, 2019b. Morocco – Local Government. Encyclopedia Britannica. Available at: https://www.britannica.com/place/Morocco/Local- government [Accessed: 26 March 2020]. (把原文中的reference按照这个改过来)

Economic and Commercial Counsellor's Office, 2015. Morocco country profile. Available at: http://ma.mofcom.gov.cn/article/ddgk/201507/20150701038770.shtml[Accessed: 20 March 2020].

El Ouahabi, S. and Bousselhami, A. 2018. Markup estimate of industrial branches in Morocco. Journal of Economics and Political Economy, 4(4), pp.396-407.

Fabbe, K. et al. & OCP Group & Harvard Business School Case 718-002, December 2017 (Revised December 2018). Available at: https://www.hbs.edu/faculty/Pages/item.aspx?num=53639  Accessed: 17 March 2020].

Hahn, T. and Auktor, G. 2018. Industrial Policy in Morocco And Its Potential Contribution to A New Social Contract. Die-gdi.de. Available at: https://www.die-di.de/uploads/media/DP_31.2018.pdf [Accessed: 26 March 2020].

International Monetary Fund, 2019. (2019 ARTICLE IV CONSULTATION—PRESS RELEASE; STAFF REPORT; AND STATEMENT BY THE EXECUTIVE) 这是报告吗? 把报告名字放在这,不要全部大写. 2019 Article Iv Consultation=Press Release:StaffReport:And Statement By The Executive Available at:  ttp://www.imf.org [ Accessed July 2019].

Medsocialdialogue, 2016. MOROCCO: Economic, Social, Political and Institutional Situation and Its Connection with Social Dialogue. Available at: http://medsocialdialogue.org/wp- content/uploads/2018/09/1.1.3_Social_Dialogue_Connection_With_Economic_Social_Political_Institutional_Situation_Morocco_VA.pdf [Accessed 26 March 2020].

Prettitore, P.S. 2015. Family Law Reform, Gender Equality, and Underage Marriage: A view from Morocco and Jordan. The Review of Faith & International Affairs13(3), pp. 32-40.

Rarick, C., 2011. An Element of Concern in North Africa: The Case of Morocco’s Phosphate Industry. SSRN Electronic Journal,.

Update, E., 2019. Morocco’s Economic Update — October 2019. [online] World Bank. Available at: <https://www.worldbank.org/en/country/morocco/publication/economic-update-october-2019> [Accessed 26 April 2020].

Watch, W., 2020. Morocco’s P For Politics In Africa – Wsrw.Org. [online] Wsrw.org. Available at: <https://www.wsrw.org/a105x3788> [Accessed 26 April 2020].

White, N., 2015. Toxic Shadow: Phosphate Miners In Morocco Fear They Pay A High Price | Natasha White. [online] the Guardian. Available at: <https://www.theguardian.com/global-development/2015/dec/16/toxic-shadow-phosphate-miners-morocco-fear-they-pay-high-price> [Accessed 26 April 2020].

 

 

Aldi & Walmart Retail Competition and Growth

Pages:13

Introduction

The internationalization of industry has boomed business, yet it is not a new phenomenon of growth. Many retail sectors are experiencing growth patterns based on innovation and emerging technology (Yadav &Verma, 2015). The speed and breadth in the market expansion are unprecedented. Grocery retailers are facing emerging marketing trends in the face of current consumer demand (Chatterjee, 2017). Increased market share and capabilities are making ways for these stores to make more revenues. In some cases, companies face failure in market performance, so confront unwanted consequences (Cova & Salle, 2017). This report will discuss business marketing strategies by Walmart and Aldi and explore how both of them faced each other and their marketing strategies in the form of distinct capabilities.

Situational Analysis of case

Mainly, the Aldi is targeting consumers and learning to chart their capabilities so that it can deliver value effectively. The firm is adapting to the competitive opportunity as per its rivals. Aldi was initiated from Germany and working to strengthen its economic landscape amid Walmart (Chatterjee, 2017).

Walmart is a strong competitor of Aldi that has substantial experience in the retail industry and managing the supply chain. It came across many challenges and problems in the growth path that helped it thrive in the industry and gain experience from past mistakes (Boswijk, 2017). In 1962, it was opened in Wal-Mart discount city and started selling toys. The essence of the company as wal-martization is to sell goods and bring change around the globe. For a retail store, it is important to unlock the capacity by selling larger than its competitors. Walmart has learned to set up a big picture of its business and bring innovation like Kmart. The business model, unfortunately, did not work more than expectations, and Walmart was not successful in converting it into what the customer wanted. This business model was to achieve predictability about customers’ demand.

The goal of Walmart was to predict and mark the extended value chain for its products on shelves. This capability was managed by offering surplus inventory. In case of lack of inventory, the company faced costs, and lean working capital was started as an innovative aspect of this business model. Walmart shared its point of sale data because of its large vendors. Some of its largest suppliers are Newell and P & G, and its suppliers, as well as logistics, are working on superior precision structure with better efficiency (Hernandez & Simmons, 2006). The stores and the entire inventory of Walmart are passed through check. Its predictability is ensured with the low price mechanism under a steady flow of customers when a period is approaching ending sales.

Aldi is a shorter name of (Albrecht Discount) which established by Kal and Theo Albrecht as a self-owner general store in 1945 in Essen. Aldi is carrying a billion-dollar price competition; this situation must be horrified for the Walmart. Aldi serves 1.5 % grocery market in the U.S, whereas Walmart is 22% (Boswijk, 2017). Aldi’s sales growth increased gradually and rose to 15%, and about Walmart assumed only 2% increased till then 2017.

The business needed strategic and developmental approaches to compete with other followers—this case-based on the Walmart retailing process, and how Aldi overcame the reputation of Walmart. Walmart is a regional company that designed several working models to compete with other organizations on price detecting issues. At that time the Aldi is also making its progress and competing with other grocery stores running into the U.S. The Aldi conducted an exhibition and tried to approach the different customers, where it identified its various abilities, and adjust contentious strategies to serve its products against the competitors (Chatterjee, 2017).

Retail Competition

The Aldi was established in Germany, and now it is increasing its worth in the U.S.A. The Aldi is creating a continuous change into the economic aspects by following the various business patterns. Aldi takes several right decisions associated with its first exhibition. Its first strategy is price control to underserved customers; second is opening the super grocery stores on cut-rate prices into communities for such consumers who are conducting a financial struggle by providing a limited range of merchants (Hernandez & Simmons, 2006).

Aldi follows Walmart and creates a low price conducting business model. But the different business models presented by Aldi, create a competitive environment for Walmart and allow Aldi to open new stores, several new business models are constructed, the step one is prepared to focus on the possible customers, and fixing the competition positions into the market (Voigt, Buliga, &Michl, 2016). Step two is constructed to select a convenient business model to develop the target section. Step three is to maximize the profit constituted in different business models. Four-step is for business development, the profit ratio develops on its priorities, and focusing on different profit-earning aspects.

Walmart is enjoying the developing business model and becoming a substation of business practices. It considered for consumers to buy goods from their stores based on the point of sale (POS) data (Hernandez & Simmons, 2006). By following the industrial methods, Walmart shares its experience of POS data to the other merchants; logistic providers also allow it to start its store to create a network. Further, it established a business network to efficiently the grocery business dealings, all strategies adopted to be an aggressive force in front of its competitors. It slipped because Walmart changed its retail business model to increase its business efficiency model and got stumbled on this practice. Aldi is making its reputation as a hard discounter. It offers such prices that traditional discounters did not offer before yet (Laurenthomas, 2019).

Price-conscious customers purchase a short variety of grocery products. Aldi sells 30,000 grocery products, whereas Walmart has 15,000 items (Alxaedra, 2018).

Aldi believes in discount trade as it did on the Costco megastores chain. Both retailers have influenced the merchants by repackaging their goods to increase the demand for their goods (Manalova, 2018).

Departmental stores provide customers with every kind of product in one place and save time. A superstore provides a complete range of products on a serving pattern. The stock items collection makes it much easier. Aldi does not provide the bag and credit card facility that increases the consumer’s expenses. Consumers use a shopping cart that must be returned after shopping. Aldi connected electronic locks to a shopping cart that fixed the carts to the parking area. Although both retailers focus on the cost of products. Aldi hired experienced staff to maintain control of the price fluctuations in the market. Aldi also appointed a multitasking staff who can perform different kinds of duties on stores, minimum staff hired to perform duties. All tactics helped the retailers to possess the profit (Manalova, 2018). Aldi’s growth is increasing 8% every year, and 40 stores opened in a year from 2004 to 2010 only in the U.S grocery market, and also conscious of increasing the growth into new markets. Most new stores are privately managed. Aldi does not explain its growth to its shareholders.

Aldi focuses on its cost, which has essential performing edges, shows 9.3% in Germany, but its slow success because of its efficient business model (Nassauer, 2018). Aldi establishes its position as a 20th bigger grocer into U.S.A out of 52. All retailer strategies are mentioned in the 2nd exhibition. Product choice, supplier administration, and its workers are pivotal means for Aldi’s business model. Its business methods are easily followed (Meyersohn, 2019).

On the other hand, Walmart shares its sale data with other merchants and analyzes the demand of the consumers and prepares some predictions for its expansion for a particular period. P&G and Newell are also involved in making new and efficient manufacturing plants and to reduce product cost (Mujtaba& Maxwell, 2007). Alternately, the production volume and quantity of stores needed to increase.

SWOT Analysis

Aldi and Walmart are two strong retail brands. Aldi has larger than 1800 stores in California, Mid-Atlantic, Florida, and Mid-west. Aldi is now a strong supermarket chain after Kroger and Walmart in America (Alxaedra, 2018). The aggressive growth rate is forcing the industry to implement new changes that attract customers. Aldi is working on Walmart’s actions and approaching it in competition. Recently it opened a store in Bentonville, which is only one mile away from the corporate headquarters of Walmart. Another strength of Aldi is keeping low prices, so providing the best experience to customers regarding shopping. This privately held company is offering products without reducing quality. According to customers, ’ low priced products provideprovide a distinctive experience (Cova & Salle, 2017).

Another big advantage for Aldi is selling its own natural organic products,, so it makes customers happy, and they save time finding branded goods in the store (Boswijk, 2017). Aldi’s wage rate for workers is higher than average in the market, and it still saves labor costs by hiring few people. Its prices are about 50% cheaper than competitors such as Walmart in Chicago and Houston. Aldi is also investing in its stores to remodel, i.e., $1.9 billion is used to remodel 1300 stores. New technology is the use of zip codes with a $65,822 average household income. It is also providing smart shopping era by offering alternatives like bargain hunters. It is relying on private label brands to win Millennials, who are inclined to low prices and brand agnostic. To counter Walmart, Aldi has opted bare-bones approach under a national advertising campaign. It has pledged to improve sustainable packaging and cut plastic by 2025.

Walmart has lost its way to growth by focusing on thin profit margins and cost leadership strategy. Its key weaknesses are numerous ethical violations and lawsuits it faced against employment discrimination. Poor benefits and a less adequate working environment resulted in high turnover (Yadav &Verma, 2015). Walmart has faced failure regarding experiencing activities like other retailers or make its warehouse a large place to experience; some of its products are of inferior quality (Nassauer, 2018). The growth opportunity it has is to offer more goods to developing countries; it can seek a bargain, including large grocery stores, and offer modern formats (Hardaker, 2018). Aldi has weaknesses in terms of profitability ratio and Net Distribution, which is less than the industry average. Poor financial planning at Aldi is making it vulnerable, so liquid asset ratio and current asset ratio tell that company can use cash efficiently in the current situation. It has a high attrition workforce rat as compared to other retailers.

Aldi has future opportunities in terms of core competencies present, such as GE healthcare research. It has made new environmental policies and better market share due to new technology. This is done with the help of government agreement because free trade agreement is a big opportunity to enter into new markets. Walmart has big opportunities like providing better trendier goods, special products, and gluten-free and organic options. It has also started services like spa, optometry, and banking. Walmart is also facing competition from global retailers, and Aldi is an emerging one.

A successful business always estimates the values which are helpful in business growth. Omnichannel is helpful in examining customer experience. Omnichannel is a multi-business channel that deals with sales of the consumers, and critically analyze the customer needs and expectations and find the solution to meet the consumer’s needs and expectations (Hardaker, 2018). The Omnichannel introduced an online shopping method to give essential retailers.

The omnichannel transformation for Walmart is an advantage because this strategy will improve $1.2 billion. Increased physical stores, fulfillment centers, click and collect, and delivery services are making it successful. This is related to a fully integrated shopping experience and a big approach to marketing. Aldi is also Omni channel retailer with fast development and transformation of its supply chain in the digital growth. The integrated digitalization strategy is acting as a key to transforming it into an omnichannel retailer (Alxaedra, 2018). The financial implications of these processes will be positive and productive for companies and engage better customers.

PESTLE analysis of Aldi & Walmart

Political, economic, social, technical, legal, and economic factors work inherently for any organization. Aldi has applied an approach to analyze and catalog the macro environment and its further perspectives that are implemented on the political, cultural, commercial, environmental, and legal framework which influence a company. This investigation assists in identifying principal factors, these principals consisted of opportunities and threats into the company’s external environment and afterward to overcome these opportunities and threats. Aldi, which is a shorter name of Albert Discount, was operating grocery stores into the U.K environment. Aldi’s achievement was extremely inspired by political and juridical circumstances European Union.

On the other hand, Walmart is an American brand, and dealing with the retail industry, its associated branches render its services around the world. It provides a wider range of products to customers. Grocery, household items, garments, enjoyment, and different other varieties are manufacturing to facilitate its consumers. This company got an unbeatable position to become the world’s best retail industry around the world. Government support retailer business because it provides mixed job opportunities for unemployed people. It also provides job facilities to none experienced and highly attractive payment to experienced, encouraging the living standard of different people by providing them job opportunities.

Aldi also provides part-time job facilities to students and other needy persons. Walmart is based on the macro-environmental factors and such aspects that are directly associated with business and its development. It critically analyzes the positive and negative, direct, and indirect aspects that influence the business structure. It also is known as Walmart PEST. This term helpful to create a trustful relation with U.S.A that implemented on both retailers like Aldi and Walmart. It moderates all political risks that impact business growth, prepares such strategies through the company pay less than five %tax from the other companies, faces an economic crisis, and can control price expansion into the market.

The social factors and social-cultural aspects that impact on consumer attention and inclinations. Social factors present a healthy lifestyle aim, cultural difference, residential movement; these factors create opportunities for the Walmart and Aldi business growth. Thus the companies can increase their production by following various cultural aspects. Aldi and Walmart must follow the technical approaches, by increasing the business self-regulation, business analytics on behalf of data collection, and by providing the transport facility to consumers, these factors are helpful in the expansion of the business growth (Manalova, 2018). The company boosts its production by providing an online facility. Companies can enhance their revenue by using the source of online marketing and selling of products. Environmental protection is a common principle that influences business. According to ecological factors, the impact on business sustainability, and friendly environment is essential for Aldi. To achieve monetary sustainability, Walmart improves its business operations; technical addition also improves business performance.

Change business procedures and production systems that are present to sell into retail stores. Aldi purchased raw material from farmers or other local producers to get sustainable development. Aldi adopts a strategy to attract consumers by providing an attractive label and packaging. Aldi has received Green chill certification by using a viable refrigeration system and adopting an environmentally friendly method. Aldi has faced a copyright issue on brand operational methods. It proves successful for the Aldi brand on Aldi’s products or on non-Aldi, s products. The advertisement also encourages the business into expansion matters. Aldi is a chain of supermarket companies that need to update their technology to meet the production level. Consumers rely on their commodities rather than follow a queue (Hernandez & Simmons, 2006). These retailers provide an e-commerce platform that serves consumers by providing online facilities. Social media like Facebook, Twitter also create the consumer’s interaction with the brand. Walmart is also the largest retailer brand around the world and has a large scale of operations through which it is able to achieve a good economic scale and has developed a technical mode of websites.

Different prosecutions have faced Walmart due to unethical behavior to its workers. Walmart has huge political support. PESTEL analysis on Aldi and Walmart’s business is very valuable and helpful to take initiatives for the business growth to compete with the other business rivals. It provides a complete guideline collection of raw material to production and supply in different stores and countries. It also provides a complete guideline of economic, environmental, and political issues on how to sort out them and how to overcome these situations. It also guides the companies on how to increase productivity growth and how to satisfy the customers. Aldi and Walmart are the two largest retailers’ companies sharing their parts around the world. Thus both companies follow the PESTEL analysis and follow the business growth and focus on its strengthening aspects and gain a trustful relation to customers and making progress day by day (Laurenthomas, 2019).

Conclusion

Aldi’s newest store in Cleveland is making development that Walmart supercenter possessing. Aldi increased its customers by creating a price competition to compete with its rivals. Aldi opened its new stores that are close to Walmart and selling it8s products on discount. Aldi opened new multiple adjoining superstores to Costco in New York City. Its rivals arranged its marketing because a variety of customers trusted Aldi. This plan was constructed to operate 2000 stores into U.S markets in 2018.

Aldi adopts the strategy slowly and steadily wins the race, its slow progress gains the customer trust by providing them the preference, satisfied their expectations at a low price. Aldi and Walmart are two successful retailers performing in many economies of the world. The cut-throat competition of both companies is due to increased demand. This case study shows that Walmart is now becoming vulnerable to Aldi, which is a privately owned firm and working as a grocery chain on an innovative model. Aldi is outcompeting its competitors on the basis of pricing and become a significant competitor in the US grocery market.

 

References

Alxaedra, B. (2018). Business Valuation and Value Drivers. Financial Planning & Analysis and Performance Management, 507–534. doi: 10.1002/9781119491460.ch22

Boswijk, A. (2017). Transforming Business Value through Digitalized Networks: A Case Study on the Value Drivers of Airbnb. Journal of Creating Value, 3(1), 104–114. doi: 10.1177/2394964317697736

Chatterjee, S. (2017). Two efficiency-driven networks on a collision course: ALDI’s innovative grocery business model vs Walmart. Strategy & Leadership, 45(5), 18–25. doi: 10.1108/sl-06-2017-0057

Cova, B., & Salle, R. (2017). Creating superior value through network offerings. Creating and Managing Superior Customer Value Advances in Business Marketing and Purchasing, 317–342. doi: 10.1016/s1069-0964(08)14009-1

Hardaker, S. (2018). Retail Format Competition: The Case of Grocery Discount Stores and Why They Haven’t Conquered the Chinese Market (Yet). Moravian Geographical Reports, 26(3), 220–227. doi: 10.2478/mgr-2018-0018

Hernandez, T., & Simmons, J. (2006). Evolving retail landscapes: power retail in Canada. The Canadian Geographer / Le GéographeCanadien, 50(4), 465–486. doi: 10.1111/j.1541-0064.2006.00158.x

Laurenthomas. (2019, July 3). Walmart’s e-commerce biz is reportedly racking up $1 billion in losses and that’s only one problem it has. Retrieved from https://www.cnbc.com/2019/07/03/walmarts-e-commerce-business-on-track-to-lose-over-1-billion.html

Manalova, T. S. (2018). Small Multinationals in Global Competition: An Industry Perspective. Globalization and Entrepreneurship. doi: 10.4337/9781843767084.00012

Meyersohn, N. (2019). How a cheap, brutally efficient grocery chain is upending America’s supermarkets. Retrieved from https://edition.cnn.com/interactive/2019/05/business/aldi-walmart-low-food-prices/index.html

Mujtaba, B. G., & Maxwell, S. (2007). Wal-Mart In The Global Retail Market: Its Growth And Challenges. Journal of Business Case Studies (JBCS), 3(2), 1–10. doi: 10.19030/jbcs.v3i2.4837

Nassauer, S. (2018, August 31). Why Walmart Shoppers are Finding More Items ‘Out of Stock’. Retrieved from https://www.wsj.com/articles/why-walmart-shoppers-are-finding-more-items-out-of-stock-1535716801

Voigt, K.-I., Buliga, O., &Michl, K. (2016). Striving for Customer Benefit: The Case of Aldi. Management for Professionals Business Model Pioneers, 11–24. doi: 10.1007/978-3-319-38845-8_3

Yadav, R. K., &Verma, M. (2015). Consumer Preference towards Retail Stores for Food and Grocery in Evolving Retail Market. International Letters of Social and Humanistic Sciences, 60, 102–111. doi: 10.18052/www.scipress.com/ilshs.60.102

 

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

 

Role of leaders in driving creativity and innovation

Pages:3

The Importance of Leaders for Innovation

Scholars like Abgor point out that to bring about competitive advantage and effectiveness, organizations place priority upon technology, strategy, innovation, creativity, culture, as well as organizational structure (Agbor, 2008). Creativity and innovation within an organization do not emerge through accident; in fact, they require leaders for controlling and driving deliberate changes within the culture, process, and structure of the organization. Organizational leaders tend to decide what happens within an organization as they bring about vision, momentum, and direction. Thus leaders are the catalysts for innovation, productivity, and for sustaining effectiveness.

Furthermore, leaders themselves must also be interested in the process of promoting innovation; otherwise, they can curb innovation and creativity within the organization (Agbor, 2008). For the spirit of innovation and creativity to foster within an organization, the role of leaders in enhancing creativity must be recognized first. Leaders can encourage innovation by designing and strategizing such a kind of environment that is conducive for innovation.

Leadership Type and Innovation

The leadership type which a manager uses can encourage or curb innovation. This is because not every type of leadership can enhance creativity, which is why organizations invest in certain leadership models that produce better innovation. Organizations that operate through hierarchical, authoritarian, control, and command model, in which leaders happen to make informed decisions from the top of the hierarchy, focus less on empowering employees through creativity. This is known as the heroic approach to leadership, which stemmed from organizations back in the 19th century. The heroic approach, however, does not bring about creativity or innovation as leaders cannot single-handedly lead organizations towards progression; rather, it involves many individuals with the right skills and tools to transform the organization.

The alternative to a heroic approach to leadership is shared leadership, which happens to be a post-heroic perspective on leadership. Pearce and Conger (2003) introduced the shared leadership perspective in which the focus is moved from single leaders to their coworkers who work together in such a way that they broaden the competence (Conger, 2003). Finally, in a new leadership approach, leaders are seen as managers of meaning, those who define organizations by articulating a vision for the organization. Transformational leadership and charismatic leadership are terms that describe this new leadership ideal that enhances creativity and innovation (Crevani, 2007).

Transformational Leadership and Innovation

Transformational leadership takes place when managers elevate as well as expand the interests of their employees in such a way that these subordinates are able to focus on the organizational needs, accept the purpose and vision and motivate other employees beyond their own self-interest. Employees who focus more on the bigger picture and the vision of the company, understand the importance of their work for the organization, and are motivated to be more creative for achieving organizational goals. Wang states that transformational leaders tend to bring about innovation as well as creativity within the employees through intellectual stimulation of the employees, individualized consideration, and through personal charisma (Wang, 2010).

Relevant literature on transformational leadership and employee innovation reveals several mechanisms through which this style of leadership can enhance innovation. For example, the leaders that exert the transformational style of leadership expect their subordinates to not only question the basic assumptions of the task but also to experiment and challenge with the status quo for better approaches such as through intellectual stimulation (Jiang, 2018).

Transformational leaders also provide the necessary support as well as discretion to the employees to act on their individual initiatives. Moreover, these leaders employ motivation as a form of inspiration to their employees by emphasizing on the part that their employees are performing for the company, which motivates these subordinates to provide useful insights as well as creative ideas for facilitating the success of the organization. Transformational leadership enhances employee motivation, which happens to be a key element for channelizing creativity and innovation. For example, transformational leadership provides the followers with heightened feelings of personal direction, vision, contribution to the organization and capabilities, all of which are related to employee motivation. Wang states that lab studies have found a direct relationship between employee creativity and transformational leadership under certain conditions.

 

References

Agbor, E. (2008). Creativity and Innovation: The Leadership Dynamics. Journal of Strategic Leadersh, 39-50.

Conger, C. L. (2003). Shared Leadership: Reframing the Hows and Whys of Leadership. SAGE Publication.

Crevani, L. (2007). Shared leadership: A post-heroic perspective on leadership as a collective. International Journal of Leadership Studies, 40-67.

Jiang, Y. (2018). Integrating Knowledge Activities for Team Innovation: Effects of Transformational Leadership. Journal of Management, 1819–1847.

Song, H. (2017). The role of transformational leadership, entrepreneurial competence and technical competence on enterprise success of owner-managed SMEs. Journal of General Management, Vol 42, 23-43.

Wang, P. (2010). Transformational leadership and follower creativity: The moderating effects of identification with leaderand organizational climate. Human Relations, 1105–1128.

Xenikou, A. (2017). Transformational leadership, transactional contingent reward, and organizational identification: the mediating effect of perceived innovation and goal culture orientations. Frontiers in psychology, 8.

 

 

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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