Strategic Management of Kone Company - Essay Example

Strategic Management Contents Contents 1.Executive Summary 4 2.Mission ment and Corporate Objectives 4 2 Mission/Values ment 4 2.2.Corporate Objectives 5 3.External Analysis 5 3.1.Macroeconomic Analysis 5 3.2.Competitive Analysis 6 4.Internal Analysis 7 4.1.Portfolio Analysis 7 4.2.Analysis of Strategic Capabilities 8 5.Strategic Marketing Framework 8 5.1.Analysis of Bowman’s Strategy Clock 8 6.Strategic Choice 9 6.1.Key directions for future growth 9 7.Strategic Implementation: Digital Marketing Strategies 11 7.1.Digital Marketing Strategy Objectives 11 7.2.Market Segmentation Analysis 11 7.3.Online Channels 12 7.4.Identify a number of KPIs 12 8.TOWS Matrix 13 References 14 Appendices 15 Appendix 1: 15 Appendix 2: 15 Appendix 3: 16 Appendix 4: 16 Appendix 5: 17 Appendix 6: 18 1. Executive Summary This study is centred towards highlighting various dimensions of strategic management. KONE is a renowned company in escalator and elevator industry. The company has its business operations spread across wide geographical areas. KONE Great Britain is operating in this industrial segment from past 30 years. This firm’s expertise is closely knitted with large base of skilled workforce and loyal customers. KONE is known for its innovative designs and adoption of safety measures across the globe. Over the years, this organization has given more importance to customer experience. The company believes in developing exceptional flow experience for its people. In this study different strategic frameworks have been included to determine strategic position of the firm in market place. These models are PESTLE analysis, Porter’s five forces model, competitor array, strategic group mapping, GE-McKinsey 9 box matrix, Bowman’s strategy clock, Ansoff’s matrix and TOWS matrix. The digital marketing strategy of the company has been outlined which shall support KONE in terms of offering new products to new geographical markets. There is intense competition in the industry and it can be addressed only through implementing innovating business strategies. KONE needs to explore new market opportunities through offering new products to target segment. Digital marketing strategies shall help the firm to easily access target market and acquire desirable profit margins. 2. Mission Statement and Corporate Objectives 2.1. Mission/Values Statement The mission or value statement of the company is to create best flow experience for people. KONE is regarded as the global leader in context of elevator industry. From past many years the company is actively indulged in offering superior quality escalators or elevators to its client base. KONE aims at achieving cost competitiveness and operational excellence through innovative processes and people leadership. 2.2. Corporate Objectives KONE’s strategic objectives can be divided into four dimensions such as expanding base of loyal customers, initiating employee empowerment, enabling best experience for users and seeking profitable growth. Financial objective is to grow at a rapid rate in comparison to market growth rate. KONE aims at enhancing working capital rotation and reaching 16% EBIT. 3. External Analysis External environmental analysis indicates all possible external influences which have significant impact on business operations. KONE Great Britain has been operating in elevator and escalator industry from past many years. The entire business operations of KONE can be categorized into two distinct business lines - New Equipment Business and Service Business. KONE’s operations are expanded across five geographical regions such as North and Central Europe, Middle East and Asia-Pacific, South and West Europe, America and Greater China. In Great Britain, KONE has been able to deliver innovative designs. The company in order to facilitate customer focus has incorporated a unit for Customer Experience. 3.1. Macroeconomic Analysis The political impact on KONE Great Britain business operations is significant since it needs to be aligned with legislative measures. These measures are usually witnessed to alter from one region to another which results into complexities for the company. Economic stability of its operating region can be regarded as a positive factor for the firm. KONE offers services in specific areas like residential buildings, hotel, medical facilities, airports and public transportation, office buildings, retail centres. Economic downturn is not observed in its business region and this has contributed towards increased profit margins or sales development of KONE. Social factors in favour of the firm are growing rate of urbanization which is estimated to be 14 billion in coming years and ageing population expected to rise to 31% from 18%. Technological advancements influence the company to adopt innovative measures in order to fulfil customer expectations. Modernized solutions have changed entire product range dimensions of KONE so as to enhance equipment’s performance, eco-efficiency, aesthetic appeal and accessibility (Ulwick, 2005). Safety standards are a part of legal framework of various regions and this in turn demands for equipment replacement or modernized solution while operating in elevator or escalator industry. There is increasing environmental awareness across the globe. Sustainability issue is a common factor in this industry which drives attention towards scarce resource management. Eco-efficient devices are designed by companies like KONE. 3.2. Competitive Analysis Porter’s five forces model have been elaborated in Appendix1. On basis of this model, there is intense competitive rivalry in this industry due to growing demand for innovative escalators, elevators, etc. Threat of new entrants is moderate because of lump sum initial investment. Bargaining power of buyers is high due to availability of large number of players. On the other hand, bargaining power of suppliers is moderate to high since demand is more in comparison to supply. Threat of substitutes is low since this industry offers exceptional flow experience to people. Strategic group mapping given in Appendix2 denotes the position of the company in intensely competitive market place. There are three main competitors of KONE in elevator/escalator industry in Great Britain – Otis, Schindler and Thyssen. According to strategic group map, in comparison to its competitors, KONE has greater market coverage and offers products or services at considerably higher rate (Porter, 2013). Their major strategic advantage is in terms of market presence and a large base of loyal customers. Competitor array encompasses key success factors of an industry. Appendix 3 briefly outlines competitor array model which has been applied on KONE. The key success factors of the industry are brand knowledge, quality, prices, customer experience and delivery chain excellence. KONE has been ranked against Otis and Schindler. On basis of the model it can be stated that KONE offers tough competition to other players in the market place. The company mainly excels in product quality and customer experience. 4. Internal Analysis 4.1. Portfolio Analysis GE-McKinsey 9 box matrix comprises of multiple factors that indicates current strategic position of a company in a particular industry. The model has been further elaborated in Appendix 4. As per this model it is clearly evident that there is high industry attractiveness. This factor has enabled further company growth and development. On the other hand, competitive strength of KONE’s business units falls between moderate and high zone. KONE Great Britain belongs to invest to build dimension. In coming years the company will shift its strategic position to the next dimension which is of ‘protect position’. The current dimension highlights that KONE is inclined towards enhancing service leadership approach. It aims at becoming one of the best companies in escalator/elevator industry. There are some key strengths of the company and management believes in developing business strategies based on those strengths (Proctor, 2014). KONE is now focusing on investing in different areas which would ensure long term growth for the company. 4.2. Analysis of Strategic Capabilities KONE over the years have been able to sustain its brand image through offering superior quality products to its customers. Strategic capabilities are an essential factor for any business since it facilitates accomplishment of both short term and long term objectives. Unique resources of the company are its financial strength, operational resources and human resources. Employee engagement is consistently entertained by the company. KONE believes in collaborative working style and this has initiated development of innovative designs. The company witnessed growth in revenue margins since past five years. There was 9.4% increase in sales development as per financial year 2013. Operational resources are mainly in context of technology based equipments, safety measures and widespread research and development centres. Core competencies of the company are of various types such as delivery chain excellence. Cost-competitive deliveries are observed from installation phase to suppliers (Mintzberg, 2006). Innovative solutions are incorporated by the company in the form of industry leading technologies, appealing and eco-efficient designs. Their competency also lies in developing superior interactions with customers. Human capital is another competency of the organization as managers’ focus on developing a strong team by taking into consideration safety and well-being of employees. 5. Strategic Marketing Framework 5.1. Analysis of Bowman’s Strategy Clock Bowman’s Strategy Clock is considered to be one of the most efficient strategic tools that are used to analyze marketing environment of an organization. KONE is stated as a global leader within elevator and escalator industry. Appendix 5 outlines Bowman’s Strategy Clock. It comprises of eight dimensions such as low value and low price, standard price or low value, flow values or increased price, standard product and increased price, focused differentiation, differentiation, hybrid and low price. Every organization belongs to one of the categories as stated in the strategy clock. KONE over the years have created magnificent customer experiences through innovative elevators or escalators. Differentiation strategy has been adopted by the organization in order to deliver exceptional designs to clients. There are certain key market segments of KONE which has enhanced its value proposition. These segments are residential buildings, medical facilities, airports and public transportation, retail centres, hotels, office buildings and special buildings. The company incorporates best practices within its system with the support of R&D. These practices are in the form of project specification and planning, solution design, installation services, solutions for construction use time, monitoring and maintenance, modernization services, etc (Neil, 2010). Its various practices can be categorized into three segments like new equipment development, modernization and maintenance. KONE has been able to sustain its competitive advantage by being aligned with innovation. Customer feedback is taken into consideration while designing new products so as to ensure it is able to meet specific customer requirements. 6. Strategic Choice 6.1. Key directions for future growth Ansoff matrix is basically utilized by a firm in order to select most appropriate strategy for future growth and development. There are four important dimensions of this matrix as stated in Appendix 6. The industry in which KONE operates is highly profitable segment due to growing rate of urbanization. In the coming few years, KONE can opt for diversification strategy. This is simply because it has an innovative product line which can be expanded and applied across wider market segments. New markets can be targeted by the company in order to secure high profit margins. Product quality and wide base of loyal customers will support the company in terms of entering into new geographical markets. SFA framework is an efficient tool used for selection of a particular strategy. There are wide array of strategic choices available to KONE like entering into new market segments with innovative products, developing new product line, exploring new markets and offering products or services at competitive prices. These strategies can be classified as strat1, strat2, strat3 and strat4. The ranking in this framework is done on a scale of 1 to 5, where 5 means strong and 1 is weak.   Criteria Strategies     Strat 1 Strat 2 Strat 3 Strat 4 Suitability In next 5 years, market share growth by 10% 4 3 2 3   Brand image utilization 5 4 3 3   Profitability optimization for new market expansion 3 3 3 3 Feasibility Sufficient financial resources 4 4 3 4   Presence of skilled workforce 4 4 2 4   Total cost within budget of $80M 4 3 4 4 Acceptability Positive reaction of stakeholders 5 3 3 2   In next 5 years, ROCE to be improved by 15% 3 2 2 2   Expected ROI in less than 4 years 4 2 3 3     36 28 25 28 As per the above framework, strat1 is the most appropriate strategy for the company in future years. This strategy not only ensures return on investment in expected time frame but would even enhance brand image. 7. Strategic Implementation: Digital Marketing Strategies 7.1. Digital Marketing Strategy Objectives In real world scenario, digital marketing plays a critical role since customers can be accessed easily on basis of digital platform. The different components of digital marketing are branding, content marketing, social media, video production, email marketing, web design, SEO, SEM, etc. It can be stated that KONE shall be able to access wider geographic markets through implementing digital marketing strategy. The main aim of digital marketing strategy will be spreading awareness about KONE and its business operations as a whole. There can be different digital marketing techniques utilized by the company like website design, advertisement campaigns on social media, branding activities and email marketing. 7.2. Market Segmentation Analysis Market segmentation analysis helps to determine probable target audience for an advertisement campaign. Online platform shall be chosen by the company in order to transmit brand message to target audience. Architects are the major target audience of this advertisement campaign. They would be attracted with new innovative designs along with some additional facilities. On the other hand, owners of business firms, retail centres, hotels, etc., can be regarded as another set of target audience for the new campaign. Durability and reliability will be the basis of new campaign to be launched for spreading brand awareness across the globe (Lasserre, 2012). There are untapped markets which can be explored by this organization with new products like security systems based on advanced technology, escalators or elevators in new designs, etc. KONE Great Britain can even emphasize on entering into new markets like creating designs of buildings, investing more into architectural sites, etc. 7.3. Online Channels Online channels need to be aligned with customer interests. The main target audience is clients, general public, architects, consultancy firms, etc. It has been observed that digital platform is quickly accessed by people in modern world. Social media can be regarded as an effective media for target audience. Innovative advertisement campaigns can be broadcasted through social media channel. On the other hand, email marketing is also a suitable medium in order to reach out to target segment located across wider geographical markets. Content marketing in terms of blogging is an innovative measure to drive attention of target audience. Architects or business clients are always attracted towards content marketing since they are able to avail larger base of knowledge about new products being launched by KONE. 7.4. Identify a number of KPIs Key performance indicators will be designed on basis of three different online channels – social media, blogging and email marketing. The company needs to identify the overall effectiveness of new advertisement campaign. It can be done through determining number of clicks on advertisement given on social media sites. Management can even analyze number of shares or comments on blogs written for new products designed by KONE. Email marketing is denoted the best way to identify effectiveness of a campaign. The company should keep a track of the clients who possibly give a reply to the email been forwarded. 8. TOWS Matrix The strengths of the company in terms of financial resources, human resources and operational resources can be used to explore market opportunities. These opportunities are entering into new markets and developing new product line. On the other hand, strengths can be used to eliminate threats such as intense competition in the market place, new entrants in the industry, changing safety standards and technological advancements. Technological advancements are at times considered as an external threat since it influences a company to invest lump sum amount in the procedure. Organizational weaknesses are in context of limited product range, greater dependency on suppliers and more focus is on specific market segments. As a part of WO strategy, KONE can incorporate additional features in its product line and expand upon its client base through entering into new geographical markets (Barney, 2006). WT strategies will be centred towards training workforce of the company so as to ensure that they are aligned with new product development strategy. KONE can also emphasize on incorporating new products in the system like security systems, etc. This would help in eradicating a major threat in the form of new entrants in the market place or limited product range of the firm. References Barney, J.B., 2006. Looking inside for competitive advantage. Academy of Management Executive, 23(2), pp. 197-245. Lasserre, P., 2012. Global strategic management. Singapore: Palgrave Macmillan. Mintzberg, H., 2006. Crafting strategy. Harvard Business Review, 46(2), pp. 239-342. Neil, B. O., 2010. Acting as a business: strategies for success. New York : Random House LLC. Porter, M., 2013. On competition. USA: Harvard Business Press. Proctor, T., 2014. Strategic marketing: an introduction. New York: Routledge. Ulwick, A. W., 2005. Business strategy formulation: theory, process and the intellectual revolution. USA: IAP. Appendices Appendix 1: Porter’s Five Forces Model Appendix 2: Strategic Group Mapping Appendix 3: Competitor Array Key Industry Success Factors Otis Schindler KONE Factors Wt. Rating Weighted Rating Rating Weighted Rating Rating Weighted Rating Product Quality 0.2 7 1.4 8 1.6 8 1.6 Brand Knowledge 0.2 5 1 7 1.4 8 1.6 Price 0.2 6 1.2 7 1.4 7 1.4 Customer Experience 0.2 7 1.4 6 1.2 8 1.6 Delivery Chain Excellence 0.2 8 1.6 8 1.6 7 1.4 Total wt 1   6.6   7.2   7.6 Appendix 4: GE-McKinsey 9 box matrix Appendix 5: Bowman’s Strategy Clock Appendix 6: Ansoff Matrix Read More