Business in the Community Ireland - Term Paper Example

Strategy Management Table of Contents Introduction 3 Purpose of the document 3 Outline of the organisation and its sector/industry 3 Environmental Scan 4 Analysis of the key internal activities and Departments 4 Analysis of the external environment 5 PESTLE factors 5 Five Forces Analysis 7 Strategy Formulation- TOWS matrix 10 Development of possible strategies based on the key information 10 Recommendation Strategies 11 Competitive Strategies 11 Directional Strategies 13 Conclusion 14 Reference 16 Introduction Purpose of the document For running a successful business, an entrepreneur or owner has to manage all the activities of his company. Effective and efficient strategic planning is the most vital aspect of a successful organisation. In this process, the management or the decision makers has to consider a number crucial and essential factor. A company must formulate relevant strategies after scanning its internal and external environment. This helps to understand the internal strengths and weaknesses, and external opportunities and threat of a company. This paper will attempt to discuss the concept of strategic management based on a case study. This paper will analyse environmental scanning that helps to develop relevant strategy. In this process, various management models and tools will be used. Finally, some relevant and effective recommendations will be provided followed by a conclusion. Outline of the organisation and its sector/industry Tribe Stout Company (TSC) is small stout manufacturing company situated in Galway city of Ireland. TSC, a family-run company was started by John Murphy in 1980 and it was engaged in making traditional Irish stout for the Galway’s local market. Initially, the company focused on increasing the tourist demand of beer in local bars, pubs, hotels and restaurants. The company is not organised in a systematic manner and moreover, it does not focus on important areas for its marketing operations. However, the company offers very high quality products to its customers. It sells the traditional Irish stout in 250ml and 500ml bottle. Its high quality products has even fetched it international quality awards. The company depends exclusively on the local market and local suppliers, as the founder of company wanted to be popular as a local manufacturing company. Recently, the competition in this sector has increased significantly due to growing number for domestic and international competitors. Environmental Scan Analysis of the key internal activities and Departments An analysis of a company focuses on its strengths and weaknesses. It is very essential for decision makers to indentify the company’s internal position as it reflects the company’s condition and capabilities. A company operates with the help of its internal departments like account and finance, human resource, sales and marketing and manufacturing departments. The primary purpose of internal analysis is to “understand the degree to which the organisation can deal with external opportunities and threats” (Marcus, 2006, p.46). The internal analysis of Tribe Stout Company (TSC) depicts its major advantages and disadvantages. In order to compete with the existing rival, it should attain proper core competencies. It is also helpful for understanding the key issues of the company and for value creation. The primary weakness of TSC is that the company is not organised in systematic way which is very important for the growth of a company. The founder of the company, John Murphy did not have any proper management skill for organising a business. He just focused on the quality of the product. Next, he has not employed any qualified and skilled employees for the sales and other operational activities. Due to inefficient selling strategies, TSC faced huge loss as many of its debtors could not settle their dues. High quality product is a vital strength of the company. John Murphy is an expert in making traditional Irish scout that has experienced rapid popularity and growth. Due to high quality products, the company has also acquired a number of local customers like bars, pubs and hotels. TSC is also popular to provide fast services related to delivery of the products. The company produces bottles 250ml and 500ml beer and the cost of the existing price is quite lower which helps to attract new customers. The company has gained significant amount of market share in the local market. Analysis of the external environment PESTLE factors The macro-environmental factors affect the growth of an industry as well as the companies that make up the industry. Before formulating a set of strategies, it is very important to identify the key issues of macro-environmental factors. In this respect, PESTLE analysis is a very useful management tool that scans an entire economy. It helps to recognise the changing trend of environmental factors. According to Winfield, Bishop and Porter, “the aim of PESTLE analysis is not just to produce a list of environmental influences although, as a checklist, it does help to ensure that important factors are not overlooked” (Winfield, Bishop and Porter, 2004, p.344). The PESTLE analysis includes five factors i.e. political, economic, social, technological, legal and environmental. TSC is situated in Galway city of Ireland and therefore, the PESTLE analysis will be conducted in the context of Ireland. Analysis of these five factors for the TSC has been discussed below. Political: Ireland is a republic parliamentary democratic country and the government is able to maintain a stable political system. The chief of the state is the President of Ireland who is elected by popular vote. The government is managed by the elected prime minister and heads of other departments (CIA, 2010). The government is responsible for encouraging the trade and business of the country and its pro-business policies are favourable for the economic development of the country. Economic: Proper coordination among political departments has made the economic condition of the country quite strong. However, the recent economic crisis brought recession to the country after 20 years. In 2009, its per capita GDP was around US$41,000 (CIA, 2010). The major industries are beverages, food processing, engineering, textiles and clothing and computer equipment etc. 27% of the total GDP is contributed by these industries. The economic treaty between Ireland and other developed countries like USA and UK have added value to its growth of trade and business (U.S. Department of State, 2010). Social: Stable political and economic conditions have influenced the social life of this country. Total population of the country is around 4,622,917 and 99% of the population are literate (CIA, 2010). Ireland is country with low temperature and most of the people prefer to drink, which indicates good opportunity for TSC. The Irish people follow their traditional culture that affects their buying behaviours. Technology: Technological advancement in this country has been encouraged by US investments. Investors from US have tried to modernize the trade and business of Ireland by providing necessary technology (U.S. Department of State, 2010). With transportation and communication, the Ireland Government has developed an extensive network. 2.83million and 5.048million of population are using internet and mobile cellular respectively (CIA, 2010). Legal: The legal system of Ireland is based on the English common law which is further modified to suit the indigenous point of view. The Supreme Court is the highest judicial authority and it is committed to offer equal and fair judgments. The Supreme Court judges are appointed by the President and the Prime Minister of Ireland. The Government has developed strict law against unethical and unlawful business practises. The tax policies are important as they affect trade and business. Environment: Environmental concern has affected the trade and business of Ireland. The Irish companies have become more responsible towards the environment and society. In order to reduce carbon emission from business activities, the government has implemented certain rules and regulations for the companies in Ireland. The business community and the Irish Government have taken collaborative action against global warming. In this respect, proper strategies have been framed and governments are investing in various projects for carbon disclosure (Business in the Community Ireland, 2009). Five Forces Analysis Competitiveness decides the profitability and attractiveness of an industry. To implement strategic planning process, the condition of the industry is very essential. The decision makers must analyse the prevailing condition of an industry for developing effective and relevant strategies. Organisations formulate their strategies to avoid unnecessary competition. Therefore, it is very important for them to identify the factors that affect the degree of competition. Michael E. Porter identified five major factors of an industry that intensifies the degree of competition. These five factors are bargaining power of buyers and suppliers, threat of substitute and new entrants and exiting rivalry among existing competitors. In order to develop business-level strategies for TSC, the beer and beverage industry will be analysed using Porter’s Five Forces. This analysis will disclose key information of the company. Bargaining power of suppliers: The beverage and liquor industry of Ireland is a developed market. Irish manufacturers of liquor products depend on the availability of suppliers. TSC is popular as local manufacturer of traditional Irish scout and it obtains the required raw material from local suppliers. The local suppliers are expensive for TSC. Due to limited availability of suppliers, the bargaining power of suppliers is very high. They demand cash payment from TSC at every delivery. It has affected the flexibility of TSC’s operational process and hence it has to maintain positive cash flow. Bargaining power of buyers: The bargaining power of customers depends on certain factors like switching cost, availability of high quality products etc. The customers of TSC mainly consist of local bars, pubs, restaurant and hotels of Galway city. They buy TSC’s Irish stout in bulk for retailing the product for customers. Their bargaining power is very high as there are other suppliers available for them. The consumer group perceives TSC as small stout manufacturer who heavily negotiates on price and payment. Generally, the consumer group buy stout from TSC on a credit basis and this helps the company to retain its customers. Threat of substitute products: Availability of substitute product is crucial because it increases the competition as it affects demand of industry. Changing lifestyle of Irish people has influenced their preferences significantly. Large variety of substitutes is available like wine, energy drink etc. However, the demand for traditional Irish stout is quite high among the tourists. The local beer of Galway city has become special attraction for these tourists. The increasing threat of substitute is increasing gradually and posing as one of the biggest threats for TSC. Threat of new entrants: The probability of new entrances in an industry increases the number of competitors and the degree of competition tends to move upward. The liquor and beverage market of Galway city has experienced numerous new entrants in recent years. Many new outsiders have already entered this market and other potential entrants are preparing to intrude it. Increasing availability of tourist increases the demand for beer and hence, the profitability of this sector is expected to see a steep acclivity. Existing rivalry among the competitors: Existing rivalry among the competitors is the most vital factor that influences the degree of competition within an industry. The beverage and liquor industry is growing rapidly with increasing demand and competitors. In recent years, the competition in the local Galway market of beer has increased significantly as many domestic and international companies have entered this particular local market. These organisations are fully equipped with necessary resources and are organised in a systematic way. They invest heavily to promote their brands in the local market and this poses a great challenge for TSC. Strategy Formulation- TOWS matrix Development of possible strategies based on the key information The above discussions and analysis on internal and external factors of TSC have revealed vital information regarding TSC’s growth strategies. The internal analysis depicts the key strengths and weaknesses of the company and the external analysis indicates the underlying opportunities and threats for the company. Considering these factors, the TWOS matrix has been used for developing probable strategies for TSC. According to Koontz and Weihrich, “the TOWS Matrix is a conceptual framework for a systematic analysis that facilities matching the external threats and opportunities with the internal weaknesses and strengths of the organisation” (Koontz and Weihrich, 2006, p.107). The TOWs Matrix helps to create four alternative strategies. The following figure shows the strategy formulation using TOWS Matrix. Figure 1: TOWS Matrix for Strategy Formulation (Source: Koontz and Weihrich, 2006, p.108) As per the above matrix, the four probable strategies for TSC have given below. SO strategy: High quality Irish stout is the most crucial strength of TSC as its demand is very high among tourists. Therefore, the company must forth further product development in order to acquire more customers. It should also take into account consumer taste and preference regarding beer and stout. WO strategy: In order to cater to the increasing customer demand, the company must organise itself to develop proper operational process. For capturing the increasing market share, the company must recruit skilled marketing people. ST strategy: Competition from international and domestic players is the biggest threat for the company. The company must use its strengths i.e. high quality products and fast service to gain competitive advantages over its competitors. It should develop a standard benchmark in this respect. WT strategy: Due to unsystematic management, the company is facing hurdles in the market and competitors have become stronger. To compete with them, TSC must inject more money into the business for organising it in a proper way. It should also develop its sales, marketing and promotional activities through investment. Recommendation Strategies Competitive Strategies Competitive strategies are basically meant to increase the market share by competing with other competitors in the market. Appropriate and effective competitive strategies ensure that a company achieves and retains its competitive advantages. “MacMillan defines strategic initiative as the ability to capture control of strategic behaviour in the industries in which a firm competes” with other competitors (Schuler and Jackson, 1999, p.161). As per the situational analysis, Michael E. Porter has developed some competitive strategies. The competitive strategies are positioning, influencing the balance, exploiting the change and diversification strategy (Porter, 1998, p.31). An organisation must choose a proper ITS strategy after analysis the external and internal factors. TSC is a small manufacturer of traditional Irish stout which is very famous in local market among the customers including foreigner tourists. The company is not able to influence the market as it does not have enough resources like money, skilled labours etc. Therefore, the company must follow the combination strategies of positioning and exploiting the change. The positioning strategy helps a company to position itself in the industry considering its strength and weaknesses. It is a defensive strategy which is very useful for countering the weakest competitive forces. TSC also needs to identify changing trend of the industry before its competitors can recognise these changes. A company develops its competitive strategies as per the future trend of the industry. Considering the key information regarding the industry situation and company’s position, some strategies have been developed for the company. High quality product of TSC is the best tool for its positioning itself in the market against the competitors. It must bring further development in its existing product to increase the demand. The company must try to focus on regional suppliers rather than depending on local suppliers. The company must acquire more customers in the local market by offering best services and credit sales. For this, TSC will require some expert marketing employees who can efficient market their product to the new customers. TSC must expand its market area in the regional boundaries. It is expected that its high quality product will capture the regional market. It should also develop its brand by investing in marketing expenditures. The traditional Irish stout is already popular in the local market. The company must acquire some investors for investment purposes. For implementing the above strategies, TSC must be organised in proper way with effective and efficient management teams. Directional Strategies In the process of strategic planning, the development of mission, vision and objective is the first and a important task. The directional strategies are the fundamental strategies that direct an organisation to follow a particular growth oriented strategy. In this respect, TSC must develop its mission and vision statement that will provide a clear road map for its business. It is also helpful in setting long term and short term objective of the company. The short term objective must include the rectification of the prevailing issues in the organisation and long term objective must determine the future of the company. For implementing proper directional strategy, TSC must understand the company value and set realistic benchmark for its products, services and operational activities. In order to develop business level strategies and business network, the directional policy matrix is a valuable model. The following figure shows the directional policy matrix Figure 2: Directional Policy Matrix (Source: Duan and Burrell, n.d.) The above model compares the market attractiveness with the business strength. The current market position of TSC is weak but the market attractiveness is high. At this stage, the primary issue of the company is its weak position. The company has to sustain in the market with this weaknesses at the initial level. Therefore, TSC must aim to build its market and product selectively. The major market of TSC is the Galway city and hence it must expand its market selectively. TSC should supply its product in those areas where competitors’ products are weak and the demand for local beer and stout is high. The product and brand promotions in these regions will be more effective in enhancing the revenue of the company. Conclusion The above discussions and analyses have brought forth important information regarding the growth of Traditional Stout Company (TSC), which will be helpful in developing effective and efficient strategies. Currently, the company is facing challenges due to increasing competition and disorganised company structure. The primary aim of this paper is to provide a strategic report on its business. In this process, the paper has dealt with two major sections. The first section has described and analysed the various internal as well as external factors that have influenced its business performances. This section has also revealed important information for developing a set of relevant strategies for TSC. The second section has discussed and recommended some probable strategies for the growth of TSC. For developing these strategies, some useful management tools have been used like TOWS Matrix and Directional Policy Matrix. These two models have helped to construct some plausible strategies by considering the company’s internal strengths and weaknesses as well as external opportunities and threats. However, the prime drawback of the company lies in its unsystematic way of operation, and the lack of efficient sales and marketing employees. In order to implement the suggested strategies, TSC must be organised properly with efficient workforce. It will require significant amount of investment. TSC must look out for loans or investors or partners for the necessary investments. Reference Business in the Community Ireland, 2009. Green Ireland: The Business of Climate Change. [Pdf]. Available at: http://www.bitc.ie/uploads/Green_Ireland_The_Business_of_Climate_Change_ExecutiveSummary.pdf. [Accessed on November 18, 2010]. CIA. November 9, 2010. The World Factbook: Ireland. [Online]. Available at: https://www.cia.gov/library/publications/the-world-factbook/geos/ei.html. [Accessed on November 18, 2010]. Duan, Y. and Burrell, P. No date. A hybrid system for strategic marketing planning. [Online]. Available at: http://www.emeraldinsight.com/content_images/fig/0200131101001.png. [Accessed on November 19, 2010]. Koontz, H. and Weihrich, H. 2006. Essentials of Management. 7th Edition. Tata McGraw-Hill. Marcus, A. A. 2006. Management Strategy. Tata McGraw-Hill. Porter, M. E. 1998. Competitive strategy: techniques for analyzing industries and competitors: with a new introduction. Simon and Schuster. Schuler, R. S. and Jackson, S. E. 1999. Strategic human resource management. Wiley-Blackwell. U.S. Department of State. August 20, 2010. Background Note: Ireland. [Online]. Available at: http://www.state.gov/r/pa/ei/bgn/3180.htm#people. [Accessed on November 18, 2010]. Winfield, P. W., Bishop, R. and Porter, K. 2004. Core management for HR students and practitioners. 2nd Edition. Elsevier. Read More