External Forces, Brand Strategy and Strategic Position - Essay Example

 Business External Forces, Brand Strategy and Strategic Position: A Case Study. Abstract The paper discusses external forces, brand strategy and strategic position within the transport business particularly with the airline and rail divisions. The company has a thirty year history, and since inception the company has gone to ride on the mistakes of the already established big boys thereby winning itself its own niche in the globally competitive industry. The paper explores this concept under three major banners: external forces analysis, performance analysis, brand extension strategy to successfully implement in foreign market, and the reasons that have contributed to scribes commercial growth. Introduction In present business environment, competition had been likened to the battle zone where business rivals throw every manner of jibes to outdo another. It is normally said that the person who arrives first in the battle zone awaits opponents with much ease, and the one who comes later into the battle zone is often weary. It is on this backdrop that the business operations of Scribe Group often enters the market that is dominated by the big boys and competes on the complacency of other companies to win their share of the market and build their brand. To go out for war metaphorically requires strategy; and strategy in simple connotative term implies tactics that have been inculcated to outdo the opponent. The firm faces a number of external challenges myriad with internal dynamics. External Forces Analysis In understanding the Scribe Group’s external forces, the Porters Five Forces Model provides a sufficient mechanism for the analysis. The model recognizes and evaluates five competitive forces that continually bombard and shape companies to allocate their industry’s level of competitiveness and hence understand the development of their strategies (Griffin, 2013). In the paragraphs that will ensue, this paper shall apply the Five-Forces Model for the Scribe Group. First, Barriers to Entry, which is high, the airline industry is synonymous with a high fixed cost required for business development. The Selling and administrative costs can be high within the industry, given the fact that Scribe Group enters into market where there are already established names especially the advertising costs. The report shows that the combined pretax profit realized from rail and airlines in 2013 and 2014 are 90 and 112 respectively against a huge turnover in the same period of £980 and £1101 respectively. The huge difference in turnover and profit is the result of even a comparable larger selling and administrative costs. The company overcomes barriers to entry by focusing on the weaknesses of industry-established rivals. The faith in the strategy has paid off in terms of brand equity and this is valuable to the customers. Second, substitutes, there is a high chance by customers to substitute their services with a number of competitors; some are already house names within the market. The airline industry has a medium substitute risk level; but substitutes exist within the industry, and the switching is relatively higher than that of the rail. However, in this industry, the company is continually affected by the time costs. Third, Buyer Power is moderate, the three major factors considered by buyers in the airline industry are; ticket price, convenience and time. The same may considerably apply to the trail situation. The Scribe Group in its effort to win more customers has focused their energy on rewriting their competitor’s wrongs. Fourth, Supply Power, low in their industry, airplane and wagon manufacturers have a lot of influence on the Scribe group as they are few between. The prices of planes and trains and wagons are high. The industry have some of the best paid and they have a considerable influence on the company. Fifth, Rivalry is high, as the high exit barriers are as a result of huge selling and administrative costs. Other costs that are involved in unseating and creating a niche for oneself such as advertisement have hit rooftop. Performance Analysis Operating profit ratio 2013 2014 Air line *100 11% 12% Rail *100 7% 8% ROCE Ratio 2013 2014 Air line *100 8% 10% Rail *100 6% 5% Asset turnover Ratio 2013 2014 Air line *100 0.76 0.85 Rail *100 0.78 1.23 In the year 2013, the Scribe Group reported turnover totaling to £ 570 million and in the year 2014, the company reported an increased turnover to £ 678 million, for the airline component. This was a 19% increase in the amount of turnover, and an impressive showing for the company under the airline banner. On the other hand, the Rails division reported a turnover of £ 410 million and £423 million in 2013 and 2014 respectively. This was represented by a 3.2% increase in turnover within the rails division, the increase is marginal compared to the airlines impressive 19% growth in turnover during the same period. The pre-tax profit for the airlines division was £ 60 million in 2013 and 80 million in 2014, which represents a 33.3% increase in pretax profit for the airlines division. On the other hand, the rails pre-tax profit for the year 2013 and 2014 had been £ 30 million and £ 32 million respectively. This translated to a 6.7% growth in pretax profit for the rails division. Once again the rails performed dismally compared to the airlines division. The capital employed in the rails increased by £40 million from £750 million to £790 million. Equally, Rails enjoyed an increased capital employment of £110 million from £530 million to £640 million. The growth in the number of passengers reported in the year 2014 from the results reported in 2013 was 200, 000, and increase in miles travelled during the same period was 300 million miles. The growth of the airlines was also demonstrated in the ratio of cabin staff to passengers as the ration rose from 1:10 to 1:12 for the economy class, the ratio also rose for the business class from 1:4 to 1:5. Further, the number of airlines route used by the company’s planes rose by 4 from 40 to 44. However, the rail business hit snag as the number of passengers fell by 200, 000 people from 4.5 million to 4.3 million; equally, the passengers miles travelled also fell by ten million from 160 million to 150 million in the year 2013 and 2014 respectively. The number route was constant at 25 and the standard class and first class ratio of attendants to passengers was 1:100 to 1:120 and 1:20 to 1:25 respectively. Brand Extension Strategy Establishing a brand name in a foreign market demands careful local and global balance of the brand (Kotler & Keller, 2012). In establishing the global brand within a new setting, the firm must uncannily think globally and act locally. To build a strong brand in a new market, most marketers content the following five concepts must be adhered to strictly. First, all marketers need to have a mutual understanding of the market facts and destination at the new market and global levels (Hollis, 2008). This is referred in marketing circles as connection. Connection demands developing trust and interdependent mindset. The local team must believe that the success of the firm in the firm could be replicated in their particular situation. This should be the founding guide for the Scribe Group when targeting the foreign market. Second, huge brands have a global insight that attracts customers and makes their activities to be associated with it. To ensure a stronger internal presence in the foreign country, the chairman through his influential personality must inflame passion to nurture the brand. In establishing the global brand within a new setting, such as Scribe Group, it is vital to think over the ways how to employ its vigilant focus on such viable priorities as attracting customers, retaining them by offering the most favorable facilities and ensuring the strong presence in the foreign market for earning trust in the Scribe brand. Reasons that have contributed to Scribes Commercial Growth The company has successfully employed certain varying strategies, such as product differentiation and successful management, which have in turn led to unprecedented levels of commercial success. Thus, it created terms of reference for a happy customer to become a loyal and retained customer. The chairman’s publicities stunts have emerged as growth potentials for the firm and have catapulted it to high returns. The joint venture techniques employed by the firm in acquiring new business opportunities have worked for the firm’s behest. The strategy of the firm to be different from its close rivals has ensured a clear product differentiation strategy, and in turn this has ensured customers to be more endeared to them. Their management style in this paper’s opinion could have also lead to commercial performance. There are increasingly researchers that are positively linking efficient employee performance to company performance and the case of the Scribe Group is perhaps true. Conclusion and recommendations Competition in modern business demands strategies aided by a strong brand and a thorough analysis of the external forces. Scribe Group is operating in the tricky transport business in two major divisions; airlines and rails. The rail is performing marginally compared to the airlines business. High pre-tax profit is synonymous with the airline business, whereas the rails make marginal profit while at the same time reporting a fall passengers. With the increasing of operating profit of Scribe Group comparing to the 2013, in its rail and airline services, and also with the enhancing of ROCE percentage, it is possible to see that the company moves to the right direction of its development. This is its main strength. The growth in the number of passengers in the airline services of the company illustrates a considerable plus in the strategy of the company. However, the rail business is not that successful and here the company should think over changing of its strategy in order to be achievement-oriented among its main rivals (What you can expect, n.d.). The applying of Porter’s five forces among the industries differs greatly. In the market of aircraft, rivalry between the dominant producers of air carriers and the bargaining power of the planes is strong. However, the threat of entry, the threat of substitutes and the power of suppliers is less (Porter, 2008). With all the difficulties, airline industry provides a unique service for the customers, transporting people with a high level of convenience. Food and drinks that are offered to the consumers as well as entertainment and the welcoming staff make the airline industry more successful. For the Scribe Group, however, entering the new market is quite difficult. Still the company achieves its success by paying more attention on those weaknesses which industry-established rivals have. Besides, having established a good strategy in paying off brand equity is valuable to the customers of Scribe Group. Applying force of threat of substitutes, the Scribe Group faces the problem when the consumers are able to choose other forms of transportation, such as a car or train. They have lower costs, however, with the main cost such as time, for most business people it is more preferably to use airplanes. They are the fastest forms of transportation, convenient and some have better service than bus, for example. Speaking about the buyers power, here the Scribe Group uses rivals weak sides to achieve more. The force of supply power makes great influence on the way Scribe performs its activities. Main competitors, those of huge corporations, purchase and develop equipment to airplanes and trains in Asia where the workforce is cheap. For Scribe Group prices of planes and trains and wagons are high (Porter’s five forces, n.d.). References Griffin, R. W. 2013. Management. Australia, South-Western Cengage Learning. Hollis, N. 2008. The global brand: how to create and develop lasting brand value in the world market. New York, NY, Palgrave Macmillan. Kotler, P., & Keller, K. L. 2012. Marketing management. Boston, [Mass.], Pearson. McDonald, M., Frow, P., & Payne, A. 2011. Marketing plans for services: a complete guide. Chichester, Wiley. Porter, M. 2008, The five competitive forces that shape strategy, The Harvard Business Review, Available from http://www.exed.hbs.edu/assets/documents/hbr-shape-strategy.pdf [Assessed on 9 January, 2015]. Porter’s five forces, The Airplane industry analysis, Available from https://sites.google.com/site/admn703ai/the-team [Assessed on 99 January, 2015]. What you can expect, n.d., Harvard Business School, http://www.exed.hbs.edu/programs/smm/Pages/objectives.aspx [Assessed on 99 January, 2015]. Read More