Strategic Management - Nokia, McDonalds, Southwest Airlines - Case Study Example

Strategic management assignment Contents Contents 2 Company Nokia 3 PEST-NED analysis 3 Porters five force analysis 4 Porter’s Generic strategies 6 Vision and Mission 7 Core competencies 7 Company 2: McDonald (Middle East) 7 PEST-NED analysis 8 Porters five force analysis 9 Porter’s generic strategies 10 Vision and Mission 11 Core competencies 12 Company 3: Southwest Airlines 12 PEST-NED analysis 12 Porters 5 force analysis 14 Porter’s generic strategies 15 Vision and mission 16 Core competence 16 Reference list 18 Company 1: Nokia Nokia is considered as one of the global leaders of the telecommunications industry. It is the largest manufacturer of mobile phones and holds almost 30% of the global market share. The success of Nokia largely comes from its highly strategic decision making capabilities and advanced technology. The company generates almost 40 billion Euros on an average and employs approximately 1.3 billion people worldwide. Nokia has its operations spread over 150 nations. In 2013, Nokia was sold to Microsoft for a deal of €5.44 billion (Aspara, et al., 2011). PEST-NED analysis Political Political factors are related to the government of different nations where the company operates. The rules and regulations that are imposed by the government influence the manner in which a company functions and their strategic policies. When Nokia expands its operations into a country, it must ensure that it complies with all the rules and regulations existing in that nation. It is important that the company remains aware of the regulations relating to minimum wages, maximum work hours permitted weekly, health and safety regulations. It is essential for the company to abide by such laws in order to prevent imposition of charges from the government and revolts from the workforce (Aspara, et al., 2011). Economical Nokia’s operations are vital to the growth of Finland’s economy. Nokia is one of Finland’s largest firms and significantly contributes towards nation’s GDP growth and generation of employment. The company also requires remaining aware of exchange rates and international trade policies as the firm operates on a global scale. Drastic changes in the policies relating to the international trade are seen to affect the firms. Nokia’s revenue largely depends upon purchasing power of the consumers. It is, therefore, important for the company to ensure that there is adequate economic stability in its countries of operation. Social From the social point of view, it is important for Nokia to understand the tastes and preferences of consumers. The company should innovate and develop mobile sets that suit requirements of the society. Consumers are consistently looking for improved technology based electronic goods. It is also important that the company develops advanced innovative products helping to develop and capture new markets. Keeping the current trend in mind, Nokia is concentrating largely upon developing greater and improved versions of smartphones and less upon standard mobile handsets (Aspara, et al., 2011). Technological Nokia’s success largely comes from its innovative and superior technology. The technology used by the company is unique and helps to develop new and innovative products. So, the company focuses hugely upon research and development related aspects in order to continue developing better products. Technological advancement made by rival firms has posed as major threat for the company’s growth in recent times taking away a significant portion of company’s market share. Natural environment Nokia pays significant importance to maintaining quality of the environment. Adequate care is taken by the firm for ensuring that production facilities of the company have very low emissions and minimum negative impact upon the environment. The company also aims to maintain a low level of waste generation. Demographics Demographic aspects relate to the target market’s income, age group, ethnicity and social class. Nokia largely targets consumers of the age group 19 to 39. The company focuses upon different types of communication needs of the target market and accordingly develops products for meeting them (Aspara, et al., 2011). Porters five force analysis Threat of new entry The telecommunications industry is characterized by high capital investments, which small investors cannot afford. As a result, entry of new large firms into this industry is less frequent. Millions of dollars are invested in research and development activities for developing advanced mobile phones, tablets and related electronic gadgets. Even if there are new entrants into this industry, it is highly unlikely for them to steal the existing market share and position that Nokia enjoys. Hence, it can be said that barriers to entry into the mobile phone and telecommunications industry is high because of the requirement of high investments in research and development, technology and marketing (Hill and Jones, 2008). Bargaining power of suppliers The bargaining power of suppliers is found to be low in this industry. The strong market position of Nokia helps to gain superior advantage over its suppliers. The suppliers of the telecommunication sector include producers of electronic parts. Nokia can chose to get their parts made by any supplier. This greatly reduces bargaining power of the suppliers. Bargaining power of Buyers The bargaining power of consumers is high because of numerous options available to them in respect of choosing a brand. Nokia does not sell its mobile phones directly to consumers. Consumers purchase the different products through various service outlets. The market, hence, becomes highly sensitive towards pricing. Consumers would choose to buy such a product that provides maximum utility and returns, in terms of quality and price. If consumers do not find products of Nokia to be suitable in terms of price, quality or feature, it may drive the company to make changes (Hill and Jones, 2008). Threat of substitutes The threat of substitutes is significantly low in the mobile phone industry. Nowadays people have become highly dependent upon their mobile phone, which provide a range of functions apart from simply making calls. Mobile phones do not have any direct substitutes. From the software point of view, however, it is seen that majority of Nokia’s phones are based on windows operating software; whereas consumers largely prefer using android phones. This reduces competitive advantages of products of the company. Recently, Nokia has introduced mobile phones based upon the android technology, but since they are based upon open source software, they are seen to lack efficiency. Rivalry between firms The telecommunications industry houses a high level of competition. The prime competitors of Nokia from the view point of high end mobile phone are; HTC, Apple and Samsung. Amongst the cheaper handsets, competitors of the company are LG, Sony Ericsson, Karbonn and Micromax (Hill and Jones, 2008). Porter’s Generic strategies Cost Leadership This strategy helps a firm to become a low cost producer in its industry. Nokia has been able to successfully reduce cost of production for its smartphones in order to specifically attract consumers from emerging nations. Nokia combines low cost advantages with mid-tier offerings to attract consumers who prefer high technology embedded mobile phones. Moreover, the company’s widespread manufacturing facilities and distribution networks have given it further cost advantages, in terms of supply chain (Ireland, et al., 2001). Differentiation strategy Nokia follows a differentiated strategy for its smartphones, which are based upon windows software. Other smartphone companies use iOS and Android technology. Nokia also follows a differentiated strategy in terms of targeted consumers. The company provides high end as well as low end mobile phones with models, that are meant for different types of people based on their specific needs. Focus strategy Nokia aims to develop high quality mobile handsets at low cost in order to maintain its high market share in emerging markets that are extremely price sensitive. Such a focus strategy of Nokia has helped the company to form a niche market. Combination Compared to the other mobile phone brands, Nokia provides its consumers with superior quality phones at a lower price. This gives the firm a high competitive advantage over rivals and helps to gain a larger market share (Ireland, et al., 2001). Vision and Mission The vision of Nokia is to connect people across the globe by use of advanced technology. The company focuses upon developing communication between people from across nations, thereby transforming this big planet into a small village. Through effective communication, the company encourages people to share their thoughts, ideas and experiences (Rugman, 2005). The mission of the company is to strategically take decisions by focusing upon specific needs. The firm aims to achieve a balance between interests of its different stakeholders, ensuring that all their needs are met effectively. The company also believes in suitably motivating employees for developing a work environment, which supports creativity, innovativeness and high productivity (Rugman, 2005). Core competencies Nokia emphasizes upon fast decision making that suitably helps in meeting company’s production and market requirements. The company gives high importance to employees and frequently involves them in the decision making process. Passion towards innovation and concern towards employees and the society are core values of the organization. The firm invests hugely for developing advanced technology. It can be said that one of the driving factors of success for the company is its superior technology that is non-imitable and provides Nokia with high competitive advantage. The company also believes in transforming itself and its resource base as per changing needs of the society. For this reason, Nokia develops newer and innovative technologies from time to time so as to meet consumer needs effectively. The company, therefore, adheres to a flexible structure that can be changed as per company’s strategic policies (Rugman, 2005). Company 2: McDonald (Middle East) McDonald’s is one of the world’s largest fast food restaurants operating in more than 119 countries of the world and serving almost 68million customers on a daily basis. The restaurant was first set up in California, USA. After expanding considerably within the US, the company soon began to open its outlets internationally. Overtime, it became one of the world’s most favored chains of fast food. McDonald’s started operations in the Middle East in the year 1994 at UAE and since then, has been hugely successful in the region. At present, McDonald’s has over 90 restaurants operating in the Middle East (Rugman and Verbeke, 2000). PEST-NED analysis Political The Middle East nations are politically instable owing to constant changes and clashes amongst political parties in many of the Middle East nations. However, developed nations of the Middle East such as, UAE, have comparatively better political conditions. McDonald’s has been operating smoothly in most of developed nations of the Middle East. One of the primary issues faced by the company in the Middle East is differentiated government policies of separate regions, which are also complex. The government of Middle East is extremely rigid when it comes to governance matters and abiding by the law. Also, nature of political policies in the Middle East is notably different from that of western nations. In addition, considering the fact that fast food creates health problems, the government has laid various regulations that are required to be abided by the company (Rugman and Verbeke, 2000). Economical McDonald’s has helped in generating sufficient employment in the Middle East by opening numerous fast food chains. The company has a large number of suppliers in the region who have also hugely benefitted from growth of the restaurant. So, McDonald’s has supported growth of numerous smaller firms in the Middle East. Social Being in the restaurant business, it is important for a company to provide food products that suitably meets tastes and preferences of consumers at large. Different nations have their specialized preferences in this respect. McDonald’s realizes this aspect and has differentiated food products in terms of taste and variety in its different outlets spread across several nations. Apart from the type of food products, McDonald’s also participates in different activities for benefitting the society. The company participates in numerous altruistic programs in the Middle East for enhancing social development (Rugman and Verbeke, 2000). Technological By utilizing advanced technological processes, the company is able to cater to a large number of customers globally. Technological aspects have helped the restaurant to reduce the time required for cooking and serving food within a very short period of time. With the use of well-coordinated technology, the company has also been successful at developing fast food delivery system. Natural Environment McDonald’s uses neutral fuel for processing its food products. Also, there is adequate care taken by the company for reducing wastage of food products. The company takes initiative towards using recyclable and eco-friendly packaging materials for its food products. Demographics The firms target customers from all age groups. Based on differentiated taste and preferences of its customers, the company has developed a range of products. The company is seen to change its strategies in respect of products and its marketing from one nation to another, considering specific needs of the society (Rugman and Verbeke, 2000). Porters five force analysis Threat of new entrants The fast food industry is characterized by frequent new entrants due to the low cost of entry. Small local fast food restaurants are the chief competitors of McDonald’s in this respect. Therefore, McDonald’s faces immense competition from the entry of new smaller firms into the industry. However, new firms cannot take away the high brand value of McDonald’s. It would take a significant amount of time for smaller firms to be able to produce on a mass scale as that of McDonald’s. Such aspects offer McDonald’s significant advantages over new entrants in the market (Van, Raven and Verbong, 2007). Threat of substitutes McDonald’s makes its presence felt by having numerous outlets in major city areas. This helps the company to be able to reach out to target customers in a better manner. The superior quality of products and better tastes make it difficult for competitors to imitate. Hence, due to superior quality and easy availability, the threat of substitutes for McDonald’s is low as very few restaurants are able to offer similar benefits. Supplier powers The suppliers of McDonald’s have low power in terms of bargaining. McDonald’s brand image in the market is strong, which gives it the power to choose amongst numerous suppliers available in the market. Most suppliers of McDonald’s in the Middle East are seen to be dependent upon the company for their success. As a result, they are normally seen to concede to the policies stated by McDonald’s (Van, Raven and Verbong, 2007). Bargaining power of buyers Buyers act as price takers for products sold by the company. They have very low bargaining power. There are very few fast food chains that deliver high quality food and superior services as McDonald’s. As a result, consumers are seen to not switch brands. The unique qualities of McDonald’s ensure superior power over its customers. Rivalry between competitors The prime competitors of McDonald’s in the Middle East are Burger King, Yum Brand Inc. New entrants in the fast food industry such as, Subway have been successful in capturing a significant portion of the market share. Moreover, coffee chains such as, Starbucks, have also started serving fast food, which has increased the level of competition for the company. Consumers are seen to flock around other fast food chains, which offer quality products at a low cost (Van, Raven and Verbong, 2007). Porter’s generic strategies Cost leadership strategy McDonald’s is one of the renowned companies to follow the cost leadership strategy. The firm follows this strategy by controlling its costs of production. The company follows a strict measure of quantity while serving food to consumers. It is ensured that consumers are not served with higher quantities. The company also reduces its cost of operation by hiring inexperienced cheap labor. The company relies on fewer numbers of managers who require to be paid highly (Van, Raven and Verbong, 2007). Differentiation strategy McDonald’s follows a differentiated strategy when it comes to their food products. The company differentiates itself by emphasizing on taste and quality. The services provided by the firm are also superior in comparison with its contemporary competitors. Given that products served by the company are priced higher than its rivals, it becomes important for the company to concentrate upon quality factor. It has been observed that the company strategically locates its outlets in busy city areas and near highway exits making it easily accessible by consumers. Focus strategy McDonald’s chiefly focuses upon quality of its products. In terms of quality, the company ensures that its products remain unmatched by its competitors. McDonald’s also focuses upon keeping cost of operations low and attain greater efficiency. There is also adequate stress upon speedy delivery of food. In order to deliver food faster, it is important to keep the cooking time as low as possible. It is, therefore, assured that processes followed for cooking and serving the snacks are simple and can be easily learned and executed by employees. Combination By keeping low cost of productions, McDonald’s is successful at attaining maximum efficiency in its operations. The company enjoys superior competitive advantages over rival firms by achieving a high brand image and providing better quality fast food (Van, Raven and Verbong, 2007). Vision and Mission The mission of McDonald’s is to become their customer’s favorite restaurant and to provide them with delightful experience through high quality services, cleanliness and value for money. The vision of the company is to expand globally and be present in every corner of the world providing consumers with efficient fast food services. The global strategies of the company are aligned with the specific needs of each region. The company remains committed to consistently improving their services, thereby enhancing customer experience (Delery and Shaw, 2001). Core competencies The company focuses upon delivering their customers with superior dining experience. The company believes in the aspect that customer satisfaction is primary in achieving success. The company has mainly three business groups, owners, suppliers and employees. The company tries to balance interests of these three groups so that it can strategically achieve its objectives. The company also realizes responsibilities that it requires to fulfill being an integral part of the society. The company engages itself in numerous social causes and charitable purposes. The company positively responds to the changes in consumer tastes and preferences. McDonald’s also upholds the concept of conducting business ethically. The company adheres to fair and sound business practices. Honesty, integrity, individual accountability and collective responsibility are some of the core values of the company (Delery and Shaw, 2001). Company 3: Southwest Airlines Southwest Airlines is a major US airline company, which provides low fare, point to point and high frequency flight services. At present, the company operates with 400 aircrafts in 59 cities of US. Southwest has low operating cost structure compared to others in the nation’s domestic airlines industry. The company is reputed for consistently offering low and simple fares. It is also renowned for offering one of the best services in its industry. PEST-NED analysis Political The domestic operations of Southwest airlines are seen to be significantly affected by the rules and regulations imposed by Federal Aviation Administration of US. The frequent changes of policies affect strategic policies of the company. The company has had to face numerous cases from its rivals in the recent years. The positive political support has helped the company to overcome many issues arising from its competitors (Gittell, 2003). Economical factors The airlines industry is severely affected by fuel costs. A rise in the prices of fuel has a major impact upon company’s profits. Southwest airlines tries to implement differentiation by maintaining low fares. It becomes challenging for the company to consistently maintain low prices when the prices of fuel is on the rise. The company incurs almost 40% of its total expenses for fuel. Due to economical meltdown, consumer’s preference towards air travel has slumped significantly. Even so, demand for low fare airlines in general has remained high amongst frequent travelers (Gittell, 2003). Social factors Southwest Airlines has an extremely strong commitment towards providing adequate customer services. The company hires employees based on their behavior and gives lower emphasis upon past experience. The company formulates most of its strategies keeping in mind requirements of customers. The company tries to maintain low fares by controlling cost of production wherever possible in its operation, without compromising on safety related aspects. Technological factors Technological advancements have created both opportunities and threats for the firm. The immense development in communication technology has reduced requirement for flying frequently. Advancement in the field of communication has helped the company to develop online ticketing systems. This feature helps the airlines to reach out to a large section of people. It has, however, been observed that the company’s reservation system is slow and outdated in comparison with rivals. Therefore technologically, competitive advantages of the company are seen to be low (Gittell, 2003). Natural environment Aircraft emissions have a negative impact upon the environment. Due to significant noise pollution created by the aircrafts, airports are generally sited away from crowded residential areas. It is important for airline companies to follow regulations imposed by the government in terms of protecting the environment and regulations relating to aircraft emissions. Violating them can cause major legal consequences for the company. Demographics The airline targets those frequent travelers who require traveling fast without incurring very high costs. Price conscious travelers who are less concerned about frills associated with travelling are primarily targeted by Southwest airlines. The airline also attracts low budget businessmen and short distance fliers (Gittell, 2003). Porters 5 force analysis Bargaining power of suppliers Supplier powers of Southwest airlines are seen to be high. The company requires advanced hardware and software facilities to run its operations effectively. This makes the company dependent upon suppliers of technology. Southwest airlines use only one type of Boeing aircraft model. So, there is a high dependency on this model of aircraft that reduces company’s competitive advantages (Meso and Smith, 2000). Bargaining power of buyers Buyers are seen to enjoy high bargaining powers in the airlines industry and such is the case of Southwest airlines. Almost all airlines offer similar services with low differentiation. Consumers can, therefore, choose any company. Low consumer demand can drive an airline to reduce their prices. For this reason, it has been observed that during off seasons, when numbers of frequent fliers are low, airline companies provide huge discounts on their tickets in order to attract larger number of customers. Southwest airlines provide low frills for customers, which makes the company lose a significant portion of their luxury fliers. Threat of new entrants The threat of new entrant into the airlines industry is low due to the lofty requirement of capital investment in aircraft carriers and technological aspects. However, the company could lose its market share if there are potential airline companies, which enter the market with better technology and cost efficiency. In order to maintain market share, it is important for company to increase its level of investment in research and development (Meso and Smith, 2000). Threat of substitute products There are no direct substitutes for commercial aircrafts as it provides the fastest means of transport in long distance travelling. However high speed trains can act as potential substitute for long distance travelling. In terms of cost customers may consider traveling by bus or car for saving expenditure. Competitive rivalry Southwest airlines face immense competition from several other airlines, which also offer low prices. It is observed that occasionally even the airlines company that charge high prices, offer their services at low prices for attracting more consumers. Different airline companies are seen to come up with varying strategies for attracting consumers such as, offering food and beverage services at lower cost. Southwest airlines, being a low cost carrier, do not offer consumers such benefits. This reduces competitive advantages of the company. Southwest airlines use only one type of aircraft carrier, which is 400 Boeing. Dependence on one type of aircraft reduces strategic advantages of the company (Meso and Smith, 2000). Porter’s generic strategies Cost leadership strategy In order to provide low airfare, Southwest airline reduces its cost of operations by achieving economies of sales. The company attracts a large number of customers whereby it becomes possible for the company to charge lower fares as number of consumers expand. The company also invests hugely on advertising in order to attract more number of customers. The high consumer demand has helped the company to expand its service network across the US. The company tries to enhance profits by reducing time spend by the airplanes on the tarmac and keeps them flying. By offering low frills, the company passes on the cost saving on to customers (Meso and Smith, 2000). Differentiation strategy Southwest airlines adhere to a differentiated strategy compared with its contemporary firms. The company uses a single type of aircraft carrier, thereby avoiding differentiated technical and mechanical support. This also helps the company to avoid spoke and hub operations. A Southwest airline stresses more upon delivering high performance and efficiency as opposed to different types of add-on facilities (Meso and Smith, 2000). Focus strategy The company focuses on providing efficient flight services for customers at a relatively low price. In order to meet the low fare objective, the company strategically manages its operations and implements cost cutting policies wherever possible. There is also high focus in respect of increasing scale of operations by expanding the flight network and increasing number of customers per flight. Combination strategy The company tries to strategically reduce cost of operations by adopting different mechanisms. Southwest Airlines transfers its cost benefits to customers by charging low fares. Hence, in this manner, the company remains successful at achieving its profit objectives (Meso and Smith, 2000). Vision and mission The mission of Southwest airlines is to deliver high class performance at affordable prices. The company strives to provide high quality customer services along with a sense of friendliness, warmth, company spirit and individual pride. The company recognizes its duties towards four different interest groups which are; employees, the society, the planet and company’s stakeholders. The company envisions at developing a sustainable future by collaborating interests of the company with that of the society and environment. The company also aims to sustain its financial stability in order to continue providing low air fare benefits to consumers (Wheelen and Hunger, 2011). Core competence The company consists of highly talented team of management who consistently strive to reduce cost and increase efficiency of services. Another competitive advantage of the firm is widespread flight network of the company, which enables it to reach out to a large number of customers. The company fulfills all norms that are associated with providing flight services and employs highly talented individuals for ensuring the same. The company has been famous for providing timely services. The on-flight teams are provided special training to remain hospitable and friendly towards customers and serve them better. In order to lower costs of operations, the company functions on routes, which are short and less congested with air-traffic. The company adheres to non-stop flights only in order to provide faster services (Wheelen and Hunger, 2011). Reference list Aspara, J., Lamberg, J. A., Laukia, A. and Tikkanen, H., 2011. Strategic management of business model transformation: lessons from Nokia. Management Decision, 49(4), pp. 622-647. Delery, J. E. and Shaw, J. D., 2001. The strategic management of people in work organizations: Review, synthesis, and extension. Research in personnel and human resources management, 20, pp. 165-197. Gittell, J. H., 2003. The Southwest Airlines way: Using the power of relationships to achieve high performance. New York: McGraw-Hill. Hill, C. W. and Jones, G. R., 2008. Strategic Management: An Integrated Approach: An Integrated Approach. Connecticut: Cengage Learning. Ireland, R. D., Hitt, M. A., Camp, S. M. and Sexton, D. L., 2001. Integrating entrepreneurship and strategic management actions to create firm wealth. The Academy of Management Executive, 15(1), pp. 49-63. Meso, P. and Smith, R., 2000. A resource-based view of organizational knowledge management systems. Journal of Knowledge Management, 4(3), pp. 224-234. Rugman, A. M. and Verbeke, A., 2000. Six cases of corporate strategic responses to environmental regulation. European Management Journal, 18(4), pp. 377-385. Rugman, A. M., 2005. The regional multinationals: MNEs and global strategic management. Cambridge: Cambridge University Press. Van, W. W. M., Raven, R. P. J. M. and Verbong, G. P. J., 2007. Strategic niche management for biofuels: Analysing past experiments for developing new biofuel policies. Energy Policy, 35(6), pp. 3213-3225. Wheelen, T. L. and Hunger, J. D., 2011. Concepts in strategic management and business policy. 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