Strategic Management and Business Policy - Assignment Example

SWOT ANALYSIS AND BUSINESS STRATEGY S & W 2) MAKATUME Submitted by In the current era of globalization the business environment is so rapidly changing that it is difficult for the managers to foresee the changes that are going to occur in future. According to David Fred(2007), organizations have to be continuously take efforts to equip themselves to cope with the ever-changing business environment. In the long run an organization has to create value to the shareholders by providing value for their investments through strategic plans, increases the value of the employees by improving their skills, has to be updated about the trends in the industry and maintain strong relationships with the supply chain intermediaries. All this is possible when the organization is aware of its internal and external environment. Hence, in this paper an attempt is made to analyze the environment of S & W and Makatume, both from the tools industry and appropriate strategies are suggested. Introduction As mentioned in the abstract, the success of any entity is directly dependent on its ability to see into the future. The extent to which an entity can envision itself into the future decides the survival and growth of that entity. But at this point of time, it is not sufficient that a company just grows, but it can serve the best interests of its stakeholders only if it can ensure sustained development. Self awareness in the teams, departmental and organizational level is the first step towards development of strategies (Whetton, 2002). Hence, to have a clear awareness of the internal and external environment, the SWOT analysis is carried out. SWOT analysis of S & W Strengths: 1. Unified strategy for all its products which helps in creating high brand equity 2. Good premium attached to the brand by the supply chain intermediaries 3. Comprehensive range of products under a same umbrella brand name. 4. The brand equity helps in fixing relatively high prices and thereby increasing the profitability. Hence, in case of introduction of new products can be very useful in increasing the profitability. 5. Major markets shares in various countries because of its strong brand image Weaknesses: 1. Not so up to date manufacturing technology. 2. Distributors are not having good perception about the company because of the belief that the company is exploiting them due to its dominant position. 3. Location of manufacturing plants in areas which do not have cost advantage. 4. Difficult to adapt to the changing environment. 5. Lack of clarity in the type of products offered by the company because of the promotion of all the products under the broad brand name Opportunities: 1. Increasing opportunities for B2B and B2C transactions through the internet. 2. Increasing opportunities to develop the sales volume in new markets in Asia and South America 3. Information about new manufacturing technologies and new designs from across the world due to information technology. 4. Demand for products developed in the West in Asian countries. 5. The brand equity leverage can be used to increase the product range. Threats: 1. Recession in the world economy with many countries under financial crisis which may not be the right time for increasing the production capacity. 2. Cannot compete with the Chinese products in the cost front. 3. Weakening of regional currencies in the wake of US economic turmoil 4. Increase in competition in the consumer and professional tools. 5. Change in buying preferences of the consumers to go for specialized tools which adopt modern designs and technology. The dynamic nature of consumer preferences makes development of marketing strategies an very challenging task.(Paul Peter, 1996) Proposed strategy Of the major weaknesses mentioned, two of the weakness are related to its production systems. The plants are outdated and are located in high labor cost area. Also the company is unable to adapt to the changing environment. If we watch closely, all these weakness are related with one another. Hence, the company should adopt change strategies. First the areas of improvement in the production systems have to be identified. Then the plans to make the necessary improvements have to be made. For this purpose the company should form special teams constituting of executives from the various departments. Project management tools such as PERT can be used. Then the action plans have to be devised to achieve the desired objective. The ramifications of these steps in the aspect of product development is that S & W will have more modern production facilities which will help to achieve cost efficiency so that the threat of products from China will be averted. From the market point of view this will help the company to consolidate its position as a market leader in both segments. From the employees point of view, it will help the company to be more positive towards change(Edgar,1985) SWOT analysis of Makatume Strengths: 1. High sales volume in markets like US and Japan 2. Dominant market player as a market leader 3. Good brand image because of the product quality 4. Produces only professional tools, hence well established in that segment. 5. Relatively new production facilities Weaknesses: 1. Does not have a wide range of products under its brand name 2. At present has only the low voltage products 3. Does not have specific plan to enter into new industry. 4. Has not entered other market areas such as the consumer tools segment 5. Lack of long run plans, so now it is not clear whether to enter new markets now or wait for the competitors to venture first. Opportunities: 1. Can enter into high voltage segment 2. Can enter into the consumer tools segment which is yet unexplored. 3. Can develop a new brand in the consumer tools segment and can have separate brand identities. 4. Can enter into strategic distribution agreements with middlemen to have a smooth distribution network across the world 5. Lack of competition in the cordless segment . Threats: 1. Fluctuations in the exchange rate can reduce the profit margins 2. Lull in the construction industry in many economies can cause a dull sales 3. Increasing petroleum pries can cause transportation and freight charges high and can cause decrease in profits 4. Increase in competition from developing economies 5. Introduction of new products will increase the cost and investment levels and thereby reducing the profitability Proposed strategy One of the major weakness the company has to draw attention is the lack of product range. When competition is increasing, the company has to consolidate its position as a market leader by introducing a wide variety of products(Danneels, 2002)Hence, the company can find out ways to add products in its line. This can be done by either increasing the R & D expenses or buying design rights from other companies or planning takeover/ merger with prospective companies. The company has to set analyze the cost and benefits in the long run for the company for each of the option and then choose the best to create more value for the stakeholders. People from very department and division of the firm should be included in the decision making process. This involvement will help the employees to understand why the company is doing the change(Rowe,1982). After discussions the most appropriate strategy has be chosen. The ramifications of the strategy chosen is that the company will have a clear understanding of the new ventures more clearly and the employees will be more motivated to accept new challenges. High voltage products Segmentation is a key to match demand and supply which is one of the thorniest issues in customer service.(George,1968). To have a sustainable growth rate the company should enter into the high voltage segment because competitors will try scramble to find niches, because in the maturity stage most of the consumers have already tried the product and specific products catering to each market segment is essential. So the competitors try to find new niches that can create new opportunities and thereby new markets. Also the company should increase its advertising and promotion budgets because S & W is trying to introduce new products and it will increase its promotion budget. Increase in the R & D budgets to develop product improvements and line extensions is also essential. The company should also make strategic changes because the competitor is trying to reestablish its competitive strategy thereby gaining specific advantage in cost, quality/ technology or service leadership. Conclusion. Growing rivalry among the organizations, forces of globalization, and rapid changes in business practices fueled by innovations in technology has increased the necessity of companies to tune up their strengths according to the opportunities that unfold in the market. It is often realized that the environmental analysis is the initial step in the formulation of strategy. Environmental analysis means internal and external environment to identify the strengths, weakness, opportunities and threats. This essay will help in evaluation of the environment and choice of appropriate strategy because good strategies move the organizations forward with purpose and direction and improving the firm's external and internal strategic position. Sources 1. Alan, Rowe and Mason, Neil (1994)STRATEGIC MANAGEMENT AND BUSINESS POLICY: A METHODOLOGICAL APPROACH. New York, Addison Wesley Publication 2. Claude, George(1968) THE HISTORY OF MANAGEMENT THOUGHT, New Jersey, Prentice Hall 3. Danneels, Evan (2002) "The dynamics of product innovations and firm competencies" Strategic management Journal, 23,no 12 :1095 - 1122 4. David R. Fred (2007) STRATEGIC MANAGEMENT - CONCEPTS AND CASES, New Jersey, Prentice Hall 5. Peter, J. Paul and Olson, C. Jerry (1996) CONSUMER BEHAVIOR AND MARKETING STRATEGY, Boston, McGraw Hill. 6. Schein, Edgar(1985) ORGANIZATIONAL CULTURE AND LEADERSHIP, San Francisco, Jossey Bass. 7. Whetton A. D, Cameron S. K (2005) DEVELOPING MANAGEMENT SKILLS, (6th Edition), New Jersey, Prentice Hall Read More