Why It Would Be Imperative for Dyson Adopt the Porters Four Corners Model - Essay Example

Word count: 2560   affiliation Every future success of every business is dependent on a couple things including the external factors. In addition, its strategic option and route lay a pivotal in determining the outlook it will have some days to come. Evaluating and analysing the strategic position and route a business has is vitally important in ensuring that it remains profitable, and most importantly, achieve its initial objectives. With the technology advancing at an incredibly high rate, every businessperson ought to be involved in constant analysis and evaluation of his or her business strategies. Besides the technology advancement, competition is rapidly increasing in almost every industry, and this could send some businesses into oblivion. In line with that, this paper seeks to analyse the current position, evaluate the strategic options and recommend the most appropriate strategic route for the Dyson Company. Background Founded in 1993 by James Dyson, Dyson Company is a UK-based firm, which specialises in the designing and subsequent manufacturing of heaters, bladeless fans, dryers and vacuum cleaners. Though based in the UK, the company extends it services to 80 other countries around the globe, and as of December 2013 the firm’s profit stood at a staggering £800,000,000. It currently provides employment to over 5,000 people around the world 1.Innovation has been the key driver of this company as evidenced by the creation of Ballbarrow, an alternative wheel for wheelbarrows that James Dyson invented after finding it hard to use the then ordinary wheelbarrow. Analysis on Dyson current position A business current position is judged through its various parameters including its values, unique selling point (USP) and market share. A business has to remain distinct among other competitors in order to remain not just afloat, but also ensure it achieves its goals. By offering a unique product, a firm sets itself above others; with values that correspond to the needs of people a firm attracts a list of clientele 2. Identifying the market where a firm belongs helps it in focusing on the same to ensure the clients are served properly. In the case of Dyson, the current position is that it is well positioned despite the presence of other players in the market. The above assertions are informed by the recent statistics, which show the firm’s growth increasing each year. For instance, in 2011 the firm’s profits increased by 8% followed by 30% in 2012 and there has no announcement of loss in the last two years either 1. Besides the profits increasing annually, the firm’s market share both in the UK and outside has increased at a tremendous rate. By December 2012, the firm was had the leading market share in the US with 27%; the equipment sold outside UK in 2011 hit the 85% mark compared to the 30% sold in 20051. The above increase of Dyson’s profits has been boosted by the penetration of the Japanese and America’s markets. With the demand for household cleaners expected to grow by 4.9% by 2018, it is appropriate to assert that the current position for Dyson seem well solid. The demand for these products is catalysed by the need for hygiene as well as the rising living standard. Currently, the main competitors for Dyson are Hoovers and Roomba, but as evidenced by the latest findings, the firm has remained atop. For instance, in the US it is estimated that one in every ten households owns a product from Dyson 1. The above sales are achieved through various strategies including having suppliers in various countries. On the company’s website, any supplier willing to have the products in their country can make a request on the same. Additionally, the firm embraces innovation as evidenced by the introduction of the new robot cleaner, a phenomenon that has made the company even more unique. One thing that keeps Dyson going is the tendency to invent and diversify products, as was the case with Ballbarrow, vacuum cleaners and other items that they re-invented to make them more efficient. All the achievement by Dyson could be explained by the strategy chosen by the firm in all its operations. Asnoff’s matrix is the strategy that Dyson has chosen to apply as clearly evidenced by the outcomes that follow the company. This strategy has four major parts including the market penetration, which seeks, have an increase in the market-share whereby more products are sold. In the case of Dyson, this application has been clear because as stated above, the firm operates in over 80 countries. Japan, one of the locations Dyson sells its products has proved to be a ready market for its products. It was reported that in 2013, the company’s sales in Japan increased by a whopping 150% from the previous year 1.As already indicated, the company has since solidified its presence in the United States where its market share is 27%. Product development is the next part of Asnoff’s matrix strategy, and it concerns itself with development of new products mean for existing markets. Normally, this part entails critical thinking about the efficiency the product will offer to the intended market. In addition, it seeks to ensure that the product will be designed not just to offer efficient services, but also outdo competitors. Nothing confirms this to be the current position of Dyson, better than the founder’ decision to invent a vacuum cleaner after experiencing difficulties using a similar brand Hoover. In 1973, James Dyson tried using Hoover’s vacuum cleaner, but it failed after it clogged up. Later when the company was started, this was one of the goals Dyson had 3.Therefore, this explains the current position Dyson is in; the firm invents but its major work is product development. Market development comes as the other step adopted in the Asnoff’s matrix strategy where strategies to have new markets are developed and implemented. In a bid to identify new customers, market segmentation is conducted. In the case of Dyson, this is confirmed to be the case because the firm encourages as many individuals and companies to supply their products. Besides operating in the 80 countries, Dyson remains committed to new markets through remaining open to partnership. For that reason, one can conclude that it is one of the reasons Dyson’s profits keep soaring. Diversification happens to be an imperative part of the Asnoff’s matrix strategy as it embraces diversity to meet almost everyone’s needs. While this is seen by many a risky strategy, it offers companies the chance to introduce new products to new markets. However, diversification proves to be vital when the existing markets and products are threatened2. Though started offering the vacuum cleaning products, Dyson has since diversified in other products including washing machines and bladeless fans. These strategies have helped the firm remain dominant as the profits clearly show, and this could replicate in the future. Strategic options for Dyson Conducting strategic options for any company is important as it helps a firm understand the available options that could be seized to ensure the realisation of its goals. It is conducted using five major considerations including feasibility, complexity, cost, optics and revenues. Each of these determine the options a firm can take including collaborating with other firms, improving the products, forming alliances with other firms and acquisitions. This section will evaluate the strategic options that are available to Dyson Company. Alliance Dyson could opt for the formation of alliance with other firms that specialise in other services so long as they have a large clientele. For instance, Dyson could get involved in an alliance with the American giant, Wal-Mart in having its clients subscribe to Dyson’s products. This option would fit Dyson because it is not costly, the expertise is available at Dyson and most importantly, there would be no conflict of interest. Thus, this option could greatly benefit Dyson especially if the alliance is formed with the major companies. To ensure that this option is effectively implemented, there are five steps used to analyse how well the option would work. The figure below represents the five steps used in implementing strategic options Figure 2.0 Source (Reur, 2008) The first step entails the performance of a pro-forma analysis whereby the business owners focus forecasting the financial statements that are based anticipated events in the future or business trends. Because Dyson could face stiff competition in the future, this option is highly recommended; a pro-forma analysis on Dyson reveals that the financial statements would be friendly. These assertions are informed by the fact that the need for the products sold by the company keep rising. Additionally, with the demand for its products rising every day, this option would be detrimental to its goals. Understanding the risks, a business face and uncertainties help a firm to develop a risk management, which will mitigate the impact of the inevitable risks and uncertainties. The risks that Dyson would face by joining Wal-Mart include if the latter went bankrupt a significant clientele would be lost. In addition, any scandal that could touch Wal-Mart would, to some extent, affect the Dyson’s sales. However, these can be mitigated by ensuring the effective risk management program is developed beforehand. Facilitation of management decision is the third step applied in any option a business entity might decide to pursue. This entails making decisions that are aligned with the findings in the risk management. Once Dyson confirms the feasibility of this option, the top management ought to make decisions that facilitate the start of the plan. Development of value propositions is the fourth step that this strategy entails. Finally, recognition of anticipated impact is the last part of this strategy, and it analyses how the plan will affect the company’s overall outlook. Value creation Value creation is another option that a firm could take where it avoids alliance and instead develops products that are unique. Again, like the alliance option, this one has to take similar steps to ensure that any development of a product is with minimal risks. Dyson could take this option because it has minimal risks as proved by the past strategies and outcomes it has witnessed. The pro-forma analysis for this option would inevitably be positive because, as evidenced by the past sales, Dyson’s products are in high demand. So far, the firm has already showed commitment on this part as it has been reported that the company intends to invest £1 billion on Research and Development (R&D), and figure is expected to rise by 20% in the next ten years 3. That means, the firm could capitalise on its brand and benefit greatly if this is adopted as the strategic option. Nevertheless, the risks and uncertainties involved in this option is that other players could as well improve their services to match or even bypass those of Dyson. Furthermore, if more companies merged, the market-share for Dyson could be reduced significantly. In other words, the other competitors could invest in other areas that would see equal commitment on diversification and invention of products as Dyson has managed. Decision making in this kind of option would not take as much time as the first one because there are no new players being brought on board. Just like in other options, developing value propositions would be a requirement in this case. Concerning Dyson, this would entail devising methods of ensuring that all products produced by the firm offer the much-needed services. Currently, it could be argued that the firm has, to some extent, done this in its operations. As earlier indicated, the main reason Dyson is dominant is embracing value-adding products. Because the firm would be required to invest in other products, which the customers find valuable, understanding the impact that this approach would on the business is great importance. Dyson, if it opted for the value-creation option because the option is feasible, there are not many complexities, the cost is management and the means to have revenues are well organised. Acquisition Another option likely to profitable and ultimately beneficial to Dyson is the acquisition of other players in the industry. For instance, Dyson could seek to acquire the main competitors of Roomba and Hoovers, and this would fast track the realisation of its goals and objectives. First, the pro-forma analysis strongly indicates that the financial outlook of the company would not be negative because the exit of other players would low competition. Consequently, this would imply an increase of market share for Dyson, subsequently meaning more profitability. Analysis of the risks that would face Dyson is this option becomes the preferred one include the challenge of expanding and satisfying all the clients. While low competition implies more profitability in many cases, it also, on the other hand, means that a firm will spend more resources in order to meet the need of the increased number of clients. The risks include dislike of the products by the new clients as well as the prices. Even though the other competitors are currently behind Dyson in terms of profits, they have embraced the low-price strategy. This would mean that either the new clients served by Dyson would have to add money to have their products or the company would to reduce its profit margin by lowering the price. Recommendations In order to continue expanding and remaining dominant in this market, it would be imperative for Dyson adopt the Porter’s four corners model. This mode is different from others because it does not focus solely on the firm’s strategy, but also predicts the likely behaviour of the competitors. Consequently, this action causes a firm to understand which steps to take to reduce the impact of competition. As the title depicts, the model utilises four corners in trying to predict the competitor’s behaviour. These include actions of capabilities, actions of strategy, and motivations of drivers and motivations management assumptions. Motivation of drivers analyses the likely action by the competitor through the understanding of their goals in comparison to the current goals. If it is ascertained that the gap between goals and current position is wide, there is a likelihood of competitor reacting. In other words, this corner seeks to identify what drives a competitor. Dyson needs to take time and understand how Hoovers and other players are likely to react in the future. Management assumptions are needed as already stated, and this entails gasping the perception held by the competitor toward strengths, weaknesses and organisational cultures. Where it is confirmed that a competitor views competition as a necessity for an industry, there is a likelihood of their reaction to remain competitive. Judging from the previous competition wars with Hoovers, it is clear Dyson faces competition in this industry. That is to way, the competitors are likely to act in a way to beat competition, and thus Dyson has to prepare for this occurrence. Actions of both strategy and capabilities are vital in this model, and have to be applied in this industry. Understanding the strategy a competitor uses will help a firm in having a clear picture of its competitive advantage. A competitor will most likely remain with the current strategy as long as it will fruitful; conversely, it could be changed if not productive. The current state facing Dyson is one where the current competitors’ strategies seem unproductive, thus Dyson ought to focus on handling the imminent response. Abilities in this model seek to understand the competitor’s ability in regard to external forces. Bibliography BBC News, (2013). Dyson sales and profits boosted by US and Japan. [online] Available at: http://www.bbc.com/news/business-19515485 [Accessed 9 Apr. 2015]. Powley, T. (2014). Dyson to plough £1bn into R&D - FT.com. [online] Financial Times. Available at: http://www.ft.com/intl/cms/s/f3f0fa7c-70cf-11e4-8113- [Accessed 9 Apr. 2015]. Reuer, J. (2008). Corporate investments and growth options. Strategic Direction, 24(5). Press and publicity management: the Dyson case 2004, Corporate Communications: An International Journal, 9, 3, pp. 209-222, Business Source Premier, EBSCOhost, viewed 13 April 2015. Saebi, T. and Foss, N. (2014). 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