Strategic Management Questions - Assignment Example

Strategic Management Questions Strategic Management Questions Question One The PNI is performing well in the farm product industry because it dominates the market. One of the main reasons why the PNI is doing well is that it produces quality products. The PNI’s products have given farmers significant economic benefits. One of the factors that can attract customers to the company’s products and services is the quality. This has been due to their heavy investment in research and technological development of quality fertilizers that makes farmers to realize huge productions. Pricing strategy is one of the aspects that can give a company a competitive edge in the market. Apart from high quality, the pricing system of the PNI has been its success in the industry and marketplace. The company uses bundled pricing technique to attract its customers. The company bundle the prices of their products after sale services. These include technological advice, field scouting, soil analysis and application as well as sales consultant’s assessment of price sensitivity of the customer. Depending on the type and amount of services offered to a customer, the pricing of the products and services vary. In order to satisfy both the customers and the company, the company has employed a win-win philosophy in its service provision to customers. Technological services such as soil analysis and application help the company to develop technological advances. Another reason why the company is doing well is that it is performing above all its competitors. The PNI main competitor, the Lancaster County Co-op, is offering application services to farmers. However, farmers have expressed dissatisfaction to the services of the Co-op. Apart from these; the Co-op does not provide other value-added services provided by the PNI. This has helped the PNI to continue gaining the competitive edge and dominate the market segment in the industry. Even though none of PNI competitor’s has done it, the most potential implication is that may face the PNI is that other companies in the industry can easy copy its production and pricing formulation. Question Two The analysis of the PNI’s strategy should be based on the strategy diamond. This is a model that provides the company’s executive and its consultants a precise and coherent way of analyzing, integrating, summarizing, and communicating business operations, production, and the company’s level of strategies. The strategy diamond is a model that of the following features: Arenas, Differentiation, Vehicles, Staging, and Economic logic. Arenas comprise of choices competitive areas. The PNI has managed capture both the products and services markets. The differentiators are factors, which help the company to win the target arenas, especially the external arenas. The main differentiators in the PNI context include pricing, reliability and quality of the products. Apart from quality products that provide farmers with significant production, the PNI also bundle its product pricing with services to its customers. In terms of vehicles, the PNI’s strategy relies on internal research and technological development to reach its goals. This has help in improving the quality of their fertilizers, which has given the company the best competitive edge. The staging is an element of diamond that helps the Company to identify the decision points. This is because the strategic layouts do not have a single possible way. One of the company’s alternative is to explore its existing business opportunities and exploited them further for improvement. For instance, the PNI is considering working the existing business harder by adding a line of seeds into the current business operation. The company is also considering capturing the market segment of large scale farmers by increasing their production. In order to coordinate all pieces of the organizational operations together in order to satisfy its stakeholders, the PNI is using economic logic. Since it is a profit-oriented organization, the PNI’s economic logic targets a combination of economies of scale and premium pricing. Apart from production of fertilizers, pesticides as well as application and soil testing services, the PNI is considering adding line of seed products and other precision services in order to improve its economies of scale. However, this may be disadvantageous to the company, considering that other firms within the market structure are already performing well in seeds production Question Three External environment involves key opportunities and threats that are potential in the business operations. In order to analyze the external environment of the PNI, it is important to apply the PESTLE analysis, which is a useful tool to understand the bigger picture of the firm’s environment where the company if operating, including opportunities and threats that lie within the company. The main opportunity of the PNI lies on the Precision Agriculture Services. These services include Grid Soil Sampling, Topographical Mapping, Yield Mapping, Electromagnetic Mapping, and Remote Sensing Mapping. Even though these services are a coming trend in the broad agriculture industry, there is no firm in the Lancaster Country that has invested on the area. Production of seed products is another opportunity for the PNI to expand its operation and market supply. Even though other firms produce seed products, but through the company’s bundled pricing model, there is a higher possibility of capturing a larger segment market with its seed products and related services. The PNI currently dominates small scale farmers’ marketplace. However, with increase in production and bundled pricing approach, the company has a potential of capturing the large-scale farmers market segment. This will increase the company’s growth and development. Even though the company has succeeded from the quality of products and services due to innovation and technology, one of the biggest threats that the company might face is when its competitors decides copy its production and marketing trends. This will tend to divert some of its loyal customers to other firms. This may include the threat of new entry into the market considering that the Lancaster Agriculture industry still has many opportunities yet to be exploited. This may reduce the production and income rate of the company in future. Question Four The PNI’s current resources are employed towards the production of fertilizers and pesticides as well as their related services. However, the firm is doing well in production of fertilizers than pesticides. One of the major reasons is that the company has limited resources to employ in the production of pesticide products and their related services. In terms of capabilities, the major market segment that the PNI supplies in the medium-scale farmers, followed by the small-scale farmer, with a lower margin of large-scale farmers. The firm is able to 1578 medium-scale farmers, 527 large-scale farmers. What has given the organization its competitive advantage in the market is its innovative and high quality fertilizer production. These include the relevant services to the farmers whose costs are bundled together with the products the customers purchase. These services include soil analysis and application, field scouting, and technology advice to its customers. This is the PNI’s strength because none of the competitors in the industry are providing these services to their customers. However, the company’s sale has been declining. This is because the products sold through the distributing chain have reduced, while the sales that the organization makes to farmers have remained constant. Even though the PNI is planning to acquire new equipment in order to improve its pesticide production, this would cost about $105, 000, including $ 5000 of the cost of operating and maintaining the production resources per year. The company has recorded 584 customers buying fertilizers and 322 customers buying pesticides. This implies that the introduction of new machinery to increase the production and supply of pesticide products may have insignificant improvement, considering the high cost of acquisition and maintenance of the equipment. The PNI intends to add its production in seed products and their related services. The organization also intends to introduce Precision Agriculture Services, a platform that none of the firms in Lancaster County has tried to develop. Question Five There are three alternatives that the PNI should consider in order to increase its productivity. These include investing in seed production and related, increasing the production of its pesticide products and related services, and investing in Precision Agriculture Services. Increasing the production of pesticide will increase the supply ability of the company and hence the profitability. However, considering the high cost of acquiring relevant equipment and technology, including maintenance cost is a bit high. This may result into considerably small profit margin. The Precision Agriculture Services is a new platform in agriculture industry in Lancaster County. The fact that none of the companies in the industry within the country has thought of investing in the platform makes it the PNI’s best alternative to expand its production and market supply. The Precision Agriculture Services is a promising venture to the organization considering that the cost of setting-up relevant resources to kick off the operation is about $ 10, 000, which is considerably cheaper and can be financed by the CdC. However, the main dangers that the organization may face is the negative reception of these services by the customers. Therefore, it is important for the PNI to do thorough market research in order to determine the potential level of the services’ reception and acceptability in the market. Investing in seed production is also among the best alternatives for the company to expand its production. Even though other companies produce seed products, they do not offers related services. This is potential in making the customers of other companies to divert their demand to PNI’s new seed products and related services. Question Six Even though PNI is the leading company in the market segment of the industry, it faces potential risks of declining performances. One of the main potential risks is that its competitors may decide to adopt its current strategies in order to compete in market expansion. These include services offered by PNI together with quality services through bundled. This situation might give the organization hard time to compete with the rivals in the market. Therefore, PNI should take certain steps in order to avoid such market adversities to occur. Instead of increasing its production in pesticide products, PNI should consider investing into new and innovative areas (Hitt, Ireland, & Hoskisson, 2008). For instance, the organization should proceed with its plan to add seed products and related services in its production line. One of the main benefits of doing this is that the company will have the potential of diverting the demand of its current customers of existing products and services to its new seeds products and related services. This will be easy, considering that the competitors who currently sell seeds do not offer related products. This will give the company an added advantage over the current suppliers. Precision Agriculture Services are among the services that are necessary for high quality farm produces. Farmers need these services to improving their farming techniques in accordance with environmental factors. By introducing Precision Agriculture Services, they will be able to attract new customers and probably monopolize the market segment, considering that none of its competitors has ventured into the field of production. However, the PNI should critically evaluate the cost of promoting these services to the customers and do thorough market research to establish the viability of introducing the services into the market segment. This is because potential customers may demonstrate negative attitude towards these services, until they are convinced that the services are important in their operations. Market research and promotion of Precision Agriculture Services in this market segment is important because the services will mean additional expenses to farmers. This is something farmers may not just accept, unless they are convinced that the services will impact their farming activities positively.   References Hitt, M., Ireland, D. & Hoskisson, R. (2008). Strategic management: Competitive and globalization concepts and cases. Mason, OH: Cengage Learning. Read More