Strategic Management Analysis - Assignment Example

Exam s: Strategic Management Analysis Topic Mission, vision and stakeholders Vision The main vision of Better Place is to create a link between car companies, utilities, battery companies and consumers in order to enable the adoption of Electric Vehicles (EVs) in the personal transport industry. Vision The company’s main mission is to reduce the dependence of automobile industry on oil. Values In order to achieve its mission and vision, the company buys batteries from battery companies and electricity from electricity generating companies, and selling miles to consumers. The company makes a difference by providing unique services that ensure that personal transport industry can be used more efficiently and effectively to make the world a better place by 2020. Better Place Company achieves this by providing three tiers of service plans: pay-as-you-go, all-you-can-drive and fixed monthly fee plan. They also utilize renewable energy. These approaches of the company enable it to provide better quality of services and products, and make a difference in the automobile industry. If the company’s services and products were not available, drivers would depend only on oil which may cause gas emissions and could not be reliable by all drivers. Stakeholders The firm is dependent on the stakeholders and some stakeholders are also dependent on the firm. Some of the stakeholders are illustrated in the power/interest matrix below: Level of interest Low High The public Employees, suppliers (e.g. battery and electricity companies) Government Partners Customers, shareholders/creditors Power Fig. 1: power/interest matrix From the diagram, it is clear that the company depends on customers and shareholders because they have high power. Members of the public are of little interest and power on the company Customers and shareholders also depend on the company in order to drive their vehicles. The company also depends on the government because it provides subsidies for the company. Employees and suppliers depend on the company because they have a high interest, but they have minimal power over the company. Therefore, customers and shareholders/creditors are key players of the company. Topic 2: Industry and Scenario Analysis Five Forces that shape strategy Porter (2008) suggests that the main aspect of strategic management if companies is for strategic managers to understand and cope with competitors. He identified five forces that shape competition in any given industry: bargaining power of suppliers, rivalry among existing firms, bargaining power of buyers, threat of substitutes, and threat of new entrants. These forces are shown in the figure below: Fig 2: five forces of competition (Porter, 2008) Threat of entry In terms of threat of entry, Porter (1985) suggests that new entrants in an industry bring new capacity to the industry and attempt to gain market share; hence drive prices down. Tesla Motors is one of the new entrants that have offered competition to Better Place by marketing $100,000 luxury electric vehicles. Other new entrants include REVA of India, TH!NK City of Norway and Mitsubishi. The power of suppliers The suppliers of Better Place Company include battery companies and electricity suppliers. Powerful suppliers force prices of firms down by charging high prices and limiting qualities or services. Better Place has attempted to reduce the power of suppliers by advocating for standardisation of EV infrastructures. Battery developers are also required to adhere to international standards. This gives the company the opportunity to acquire electricity infrastructures such as batteries that are not unique and that they should not lock other users out. The power of buyers Buyers are considered to be strong if they can force prices down (Porter, 2008). Better Place’s strategy was to choose a place that there is a high demand for EVs. Israel was chosen. This means that the power of buyers in Israel is weak. The threat of substitutes In competitive industry, substitutes perform the same functions as the products of the industry (Porter, 2008). Substitutes for EVs include normal vehicles that use oil. Such vehicles transport people and commodities just like EVs. Such a substitute offers lower prices to customers than EVs. Rivalry among existing competitors Firms in an industry compete in terms of product development, price discounting, advertising, differentiation, etc. Better Place Company has various competitors including GM, Nissan, Mitsubishi, Toyota, Ford and Subaru. These companies offer EVs in the market with different price discounting offers. Industry life cycle The EV sector can also be explained using the Industry Life Cycle. This can be summarized in the figure below: Fig 3: Industry life cycle curve The EV industry can be considered to be in its development stage. This is because there is low rivalry and firms have just recently started manufacturing EVs. There is high differentiation in the industry and innovation is the key aspect. For instance, Better Place Company has started recharge stations and switching spots as technologies that can be used by Electric Vehicles. On the other hand, Tesla Motors has established recharge stations on the roofs of customers so that the electricity used to propel vehicles originate from a clean source. Most of these companies are start ups as well. These are all indicators that the industry is in its development stage where differentiation is high and innovation is important. Topic 3: Resources and Capabilities Value chain The resources and capabilities of Better Place Company can be analysed using a Porter’s value chain figure as shown below. The value chain suggests that a strategic company should be composed of primary activities and support activities. Support activities include general administration, Human Resource Management, and Research and Development (Barney, 1991). Primary activities include in-bound logistics, operations, marketing and sales, outbound logistics and service. Fig 4: Value Chain Key Resources and Capabilities There are various resources and Capabilities of Better Place that can be used to achieve its vision and mission: One of the key resources of the company is the effective human resources including the founder of the company Shai Agassi. Having worked as the CEO of SAP, Agassi has a good experience to manage Better Place Company effectively. Furthermore, the founder is also considered as a high-tech entrepreneur who had developed software which he sold to SAP at $400 million. He also has a good vision for the company and is dedicated to making the world a better place by 2020. Better Place also has a research and development resource that helped the company to conduct a market research and establish the appropriate service plans and locations of its business. The company is also endowed with some in-bound logistics. For instance, the company has developed three service plans that are aimed at meeting the needs of customers. Those service plans include: all-you-can-drive, pay-as-you-go and fixed monthly fee. Furthermore, the company has a strong base for recharging infrastructure for its EVs (physical resources). Better Place also has ERGO software which is used in EVs to allow for the recharging of batteries. It also has a good relationship with governments which provide subsidies and rebates for the company to operate successfully. The company has also established partnerships with other companies and agencies in order to achieve its vision. For instance, the company partnered with Israel Electric Commission (IEC) and Hawaii electric Company to invest in renewable energy and support the business of the company. Appraising Resources and Capabilities The above resources and capabilities of Better place are important for the company because they all have specific purposes that lead to the achievement of the company’s vision of enhancing the use of EVs. For example, the ERGO software is a key resource that ensures that the primary activities of the company (especially operations) run successfully; hence contributing to the achievement of the company’s objectives. The use of R&D resources also enables the company to identify key innovations that are necessary for the company’s product development and differentiation; hence gaining competitive advantage. Developing Strategy implications These resources also have key implications on the company’s strategy. For instance, the availability of good human resources and appropriate management results in exploitation of the company’s key strength of competent managers and research and development capabilities (Grant, 2013. Lastly, the key competencies of the company enable the company to manage its key weaknesses and improve on them. For example, the ERGO software can be used to create differentiated services in order to reduce weaknesses of not being able to deal with competitors effectively. Topic 4: Business and corporation strategies Differentiation strategy The main strategy utilized by Better Place Company is differentiation. As technology in the automobile industry changes and competition increase, firms attempt to use various strategies to overcome competitors. Better Place has used a differentiation strategy to provide services that meet the specific needs of customers. To achieve this strategy, the company initiated three service plan tiers that are aimed at meeting different customer needs. This leads the company to attract various types of customers and obtain competitive advantage. For example, all-you-can-drive plan has been established to enable the company meet the needs of heavy users such as taxi drivers. These customers are given a fixed monthly fee with a locked-in price. The locked-in price enables the heavy users to avoid paying extra fee when energy prices rise. Rebates are also offered by Better Pay for customers who subscribe for top tier service plans. This is a differentiation strategy which is aimed at providing differentiated services for customers in order to satisfy them and win their loyalty (Barney, 1995). The second plan is the medium-range plan which is suited for drivers who can predict annual driving range. A driver in this case is allocated a pre-determined amount of miles. The third service plan is pay-as-you-go. This is suited for drivers who drive less frequently. Therefore, all types of customers are provided with services that meet their needs and satisfy them. As a result, the company wins their loyalty and obtains competitive advantage. Better Place Company is also engaging with utilities to invest in clean and renewable energy. The firm’s strategy is also to obtain cost advantages by engaging in activities that minimize costs. Different activities and their importance Some of the activities include: Engaging with governments to obtain subsidies and rebates Partnering with other companies to share costs Working with utilities to source cheap batteries and electricity Cost Drivers The cost drivers for the company include increased competitors, increased prices from suppliers, government and partners. As competitors increase, the company is likely to increase its advertisements and investment in differentiation activities. This will cause higher costs. If suppliers increase the prices of materials such as batteries and electricity, the costs of operating the business will increase. If the government offers tax rebates and subsidies, the company will reduce its costs. Similarly, partnership with other companies leads to reduced overall costs because the partnering firms will share costs. In this case, the opportunities to reduce costs include: Convincing the government to offer tax rebates and subsidies Partnering with other companies such as Toyota Engaging in vertical integration to reduce costs of suppliers Producing in large scale Development of technology Better Place provides product development strategy which involves production of new products and services in existing markets. In Israel where personal transport is common, a new form of personal transport is enhanced through the development of EVs using new technology. Fig 5: ansoff’s matrix (Grant & Jordan, 2012). References list Barney, Jay. 1991. “Firm Resources and Sustained Competitive Advantage.” Journal of Management, vol. 17, no. 1, pp. 99-120. Barney, J. B. 1995. “Looking inside for competitive advantage.” Academy of Management Executive, vol. 9, no. 4, pp. 49-65. Grant, R. M., & Jordan, J. 2012. Foundations of strategy. Chichester: John Wiley and Sons. Grant, R.M., 2013. Contemporary strategy analysis: Text and cases. 8th ed. Chichester: John Wiley and Sons. Harrigan, Kathryn, R. and Porter, Michael E. 1983. “End-game Strategies for declining industries.” Harvard Business Review, July-August, pp. 111-120. Johnson, G., Whittington, R., & Scholes, K., 2011. Exploring strategy: Text and cases. 9th ed. Harlow: FT Prentice Hall. Mendelow, A. 1986. Proceedings of the Second International Conference on Information Systems, Cambridge, MA. Porter, Michael E. 2008. “The Five Competitive Forces that Shape Strategy.” Harvard Business Review, January, pp. 79-93. Rothaermel, F. T., 2013. Strategic management: Concepts and cases. Irwin: McGraw-Hill. Read More