SoundFacts Strategic Analysis - Essay Example

Introduction SoundFacts case study provides an interesting insight on the firm’s focusing on developing the products without actually understanding the overall range of applications and lack of market niche. On the face of it, the technology may see really interesting but it lacks the commercial aspects of the business with clear lack of focus on customers. Though the firm has been able to develop an effective technology but the range of applications of the technology simply rendered company ineffective. In order to successfully make an invention into an innovation, it is important that the firm must be able to look into the commercial aspects of the technology and focus on what market requires and what it can deliver. Firm’s core competencies were based upon its ability to produce high quality technology however it clearly lacked the ability to transform its core competencies into the commercially viable products. It is important to understand that the organizations have made a transition towards focusing on the mass customization where firms focus on delivering highly customizable products through a mass market. The firm though has a large and diversified market to serve however due to sheer size of the applications and potential market niches; it may not be possible for the firm to focus on developing commercially feasible products and services. This paper will discuss the internal and external analysis of Soundfacts firm and will provide strategic analysis and alternatives for the management to reposition the company and become commercially more successfully and viable. Analysis of Macro Environment PESTLE Analysis Political Factors Firm operates in Denmark which is one of the advance countries in the world with favorable political system. There is little or no interference from the bureaucracy and the overall political structure of the firm favors the free markets and private enterprises. The transfer of private property laws are in favor of the organization and as such firms can easily move their assets in and out of the country with low level of political interference. Apart from this, the overall tax environment is relatively favorable for the firms with government acting as a welfare state. The higher ratio of taxes imposed on the individuals is off-set by the State being a welfare State. Further, Denmark is also part of European Union thus it enjoys the relative political support at the regional level. (Dimireva, 2009) Economic Factors Denmark is one of the highest ranked economies in the world with good per capita income thus suggesting that the consumers have the required purchasing power to buy and consume. During the economic crisis, Danish economy along with the international economy went through recession however Danish came out of the recession in the first quarter of 2012 and then again slipped into recession. (Fraende & Scrutton, 2012).s It is also important to note that other neighboring countries such as Sweden as well as Norway also came out of the recession giving the economy a relative boost. It is critical to note therefore that the economic forces will have positive impact on the business of the firm and will pose relatively low level of threats. Social Factors Denmark has its religious freedom guaranteed since 1849 and majority of the residents of the country show their affiliation with the church of Denmark which is also supported by the State. Population of Denmark is only 5.5 million 65% people falling into the age group of 15-64 years suggesting that Denmark has a rich and capable workforce. (Indexdmundi.com, 2012) It is also important to understand that Danish society put more emphasis on the work ethics and existing workforce is fully capable of delivering high value services. The level of skills as well as literacy rate is higher in the country thus giving the firm enough opportunity to actually look for favorable social factors. Technological factors Technology would be most challenging factor for the firm to manage because it is not only technology oriented but may also face a drastic change in the technology. During recent times, technology has remained only aspect of doing business which has constantly changed over the period of time. Constant and rapid change in technology has made many established companies to look for new ways of doing business and improve their overall response time to the new changes occurring due to technological change. The firm can seriously face consequences of change in technological forces and need to become more agile in terms of anticipating new trends in technology and accordingly make changes which can suit the change in technology along with making the technology more suitable for the commercial purposes. Legal Factors The overall legal environment of the country is relatively favorable for the private organizations. Laws in Denmark are business friendly and government usually does not interfere into the overall affairs of the private organizations. It is however important to note that there may be some challenges in terms of the pressure groups advocating for the protection of environment. It is critical to understand that sound is considered as one of the main factors behind the creation of environmental pollution therefore new technologies need to be more environmentally efficient in order to avoid any legal complications in the future. Environmental Factors Increasingly, organizations are facing challenges in terms of environment protection and there has been serious legislation at the national as well as international level to reduce the impact of environmental damage. Increasingly industrial activity has resulted into the degradation of environment and there are legislation made both by UN as well as the countries themselves to ensure that organizations comply with the legislation. (Faucheux, OConnor, & Straaten, 2005) Considering the very nature of the business of the firm, it is therefore quite possible that the firm may face serious implications in terms of environmental issues and need to focus more on developing technology in a manner which can support the environment. Internal Analysis Core Competencies One of the most important core competencies of the firm is high valued and best quality technology which is state of the art. The very foundations of the firm are based upon developing an state of the art technology which can better capture the sound based upon the technology which have not been previously tested. Another important aspect of the technology is that it is relatively unique with different and large applications. This diverse nature of the technology therefore can ensure that it may be difficult to replicate and firm can take competitive advantage of the same over a longer period of time. It is also important to note that marginal cost related with the technology is zero thus making it extremely profitable for the firm to produce cost effective and cheap technological replacements. It is also important to understand that this technology and the core competency of the firm may not be easily imitated by the competitors. The use of patented and exclusive technology and the research involved behind the creation of such technology may serve as a natural barrier to entry for new firms to enter into the market. Further, considering the wider re-use and application of the technology to various other uses make it relatively more important. The widespread and diverse use of the technology in other fields make this sound technology more effective and further strengthen the ability of the firm to actually delivering more value to the customers. This core competency is also contributing towards creating more value for the end consumers and creates end user experienced benefits. This is evident from the fact that the technology has multiple uses and can help a diverse range of end consumers. Such widespread use of technology therefore can further contribute towards better consumer experience. Firm needs to focus more on ensuring that it can replicate same level of experience for all end consumers. SWOT Analysis Strengths 1. Best and State of the Art Technology 2. Technology is cost effective with zero marginal cost of production. 3. Diverse application of technology. Weaknesses 1. Lack of Commercial feasibility 2. Lack of proper management 3. No defined market niche Opportunities 1. Large market to tap. 2. Opportunity to expand in international market. 3. Already developed market in Denmark Threats 1. Market dynamics and competition 2. Lack of effective pricing model The above discussion indicates that the firm is effectively lacking in defining an effective market niche which can help it to focus more on the market and less on the product. The threats such as existing market dynamics as well as lack of effective pricing model make it more difficult for the firm to actually focus on developing a commercial product which can deliver more value for the customers. Firm needs to ensure that it can better utilize its core competencies. It is important for the firm to actually focus more on leveraging its strength of low marginal cost so that it can take advantage of pricing in terms of developing new and unique products offered at the range of product uses. Firm need to focus more on leveraging its strengths in order to ensure that It can take advantage of available opportunities in the market. Strategic Challenges Considering the above analysis, following strategic challenges are being faced by the firm: Changing Technology It is important to note that the firm is having business in a sector which keeps on changing with the introduction of new and more agile technology. New firms are introducing technologies which are more effective and relatively cheaper and may provide effective challenge to existing firms. One of the key strategic challenges for the firm therefore is based upon its ability to continue to develop and upgrade the technology. In the absence of effective back-up technology, it may be relatively difficult for the firm to actually focus on making its technology compatible with the new changes. It is also important to understand that the firm is still thriving on the venture capital money and lack of commercial support may not help it to avail new financing. Lack of financing can therefore make it difficult for the firm to actually develop resources required to develop new technology. The firm therefore has to first ensure that its existing technology is sufficient enough to make it a commercially viable. Lack of Defined Market Another important and probably significant strategic challenge faced by the firm is lack of defined market niche. Considering the overall quality and usability of the technology, it is important that firm must be able to define and focus on developing a niche for itself. Lack of defined market niche may make the firm more vulnerable to the market changes that it may face over the period of time. (Jeffs, 2008) Recommendations for Overall Strategy Considering the overall situation described above and the analysis made, it is important that the organization follow certain strategies which can help it revive the overall situation and become commercially more viable. First, it is extremely important that the firm must focus on developing its niche market because without a proper segmentation strategy, it may not be able to focus its efforts in highlighting the market required to be served. Different criteria may be used for defining the overall niche for the firm however; SoundFacts need to focus more on defining exact market segmentation. (Sadler, 2003) Another important strategy for the firm which it may consider is to focus on the product development process. Since the technology has multiple uses, it is therefore important that the firm focus on product development and further penetrate into its existing markets. Extensive exploitation of the existing markets through the use of innovative product development is therefore important for the new management to focus its energy and efforts on making the project more viable. New market development is also another potential strategy for the firm to focus on developing. Developing new markets would require the firm to either expand itself into the different new markets outside Denmark i.e. China or innovate further and launch products which can cater to the different markets. It is also important to note that the firm is relatively cash strapped and may not have the resources and credibility to expand itself into international markets. It is therefore critically more important that the firm should look for market development by expanding the overall use and marketability of its products. Recommended Strategy In order to overcome the current situation, it is important that the firm should focus on the product development because right now it is clearly lacking a focus on the product development. It has focused on developing technology but lacked the clear plan to transform that technology into commercially viable products. Product development is usually involved existing markets of the firm where in order to further penetrate into the existing markets, firm focus on bringing in new and existing products in much innovative manner. By developing new products, firms not only keep its existing base of customers intact but can also tap into the new customers. However, it also requires a careful development of strategy which can allow it to focus on the exact needs of the customers. (Amason, 2010)s According to the given facts in the case study, it is evident that technology has the potential to actually to be used in different applications. The available range of the products to be developed therefore provides a systematic edge to the firm to actually look for new products which can be developed with the help of the technology. It is also important to note that the firm should also need to sort out the pricing issue before it can engage itself into the product development process. In order to skim the market through product development, firm needs to specifically sort out as to how its pricing could provide it strategic advantage. Appendix Porter’s Five Forces Bargaining power of suppliers 1. Suppliers have relatively low power because the technology is exclusively produced by the firm. 2. Suppliers can have the inclination towards forward integration. Bargaining Power of Buyers 1. Since the overall range of technology application is diversified therefore firm will not be dependent on few customers. Threats of Substitutes 2. Technology can be reproduced therefore there are strong chances that new substitutes can be introduced in the market. Threat of New Entrants 3. Given the fact that technology may be difficult to replicate and is patented, new entrants may find natural barriers to entry into this market. Rivalry among firms 4. Considering the above factors, it may be assumed that the overall rivalry among the firms will be low and firms can compete with each other easily. VRIN Table Resource or Capability Valuable Rare Inimitable Non-substitutable Core competency that provides a Sustained competitive advantage? State of the Art Technology Yes. SoundFact’s new Harmoni Technology is valuable No because other similar technologies are existing in the market. No- it can be easily modified No Yes it provides a temporary competitive advantage to the firm. Technology has a diverse use Yes. The technology has diverse applications which can be applied to many different industries. Yes because very few technologies can actually have such an impact on different other industries. No Yes Provides constant competitive advantage to the firm. Bibliography Amason, A. C. (2010). Strategic Management: From Theory to Practice. New York: Taylor & Francis. Dimireva, I. (2009, October 23). Denmark Investment Climate 2009. Retrieved January 27, 2013, from EU Business: http://www.eubusiness.com/europe/denmark/invest/ Faucheux, S., OConnor, M., & Straaten, J. (2005). Sustainable Development: Concepts, Rationalities and Strategies. Frankfurt: Springer. Fraende, M., & Scrutton, A. (2012, November 15). Danish economy may be in recession: finance minister. Retrieved Januar 27, 2013, from Reuters: http://www.reuters.com/article/2012/11/15/us-denmark-economy-idUSBRE8AE12U20121115 Indedmundi.com. (2012). Denmark Demographics Profile 2012. Retrieved January 27, 2013, from Indedmundi.com: http://www.indexmundi.com/denmark/demographics_profile.html Jeffs, C. (2008). Strategic Management. London: SAGE. Sadler, P. (2003). Strategic Management. New York: Kogan Page Publishers. Read More