Operational Research for Strategic Planning - Assignment Example

Operational Research for Strategic Planning The of the School The Operational Research for Strategic Planning Introduction A scenario is a company’s potent future. For instance, in the case of Apple, one could easily foresee a world whereby the IOS dominates the mobile operating system as well as the whole lot of computation devices relying on Apple. Likewise for Amazon, one could easily envision a scenario in which e-commerce is dominated by Amazon, and its growth rate goes to about 40% per year. On the worst case, one could also imagine a scenario in which China Mobile is not able to raise prices without haemorrhaging its market share and eventually suffering a cash crunch. For any company, more than hundreds of scenarios may be envisioned. However, only a few and most vital may be picked from. Through development of various scenarios, it is possible to come up with the most valuable strategies that may assist a company forge into the future, which is full of uncertainties. This method of planning the strategies is mainly viable for the firms that tend to have very broad and divergent potential outcomes. Amongst such companies include, Tesla Motors, Amazon, Apple, Coach, Nike, just to mention but a few. Steps of Scenario Planning Usually, scenarios are never very specific strategies to be dealt with, rather, they are just our personal guessed futures created by us. As such, it will only be very practical and realistic in case some of the significant outsiders such as the stakeholders, customers, and even suppliers were involved. This will enhance a much advanced and broadened future both in terms of the key trends and uncertainties. In as much as scenario planning has gained fundamental application across various organizations, various uncertainties still remain with regards to the types and number of scenarios to be involved, the procedure and people to be involved (OBrien & Dyson 2007, 34). As postulated by Shoemaker (2011, 45), the process of developing scenario may be described under ten different steps. These are: Definition of the scope Identification of the primary stakeholders Identification of the primary trends Identification of the key uncertainties Construction of the initial scenario schemes Checking for plausibility and consistency Development of learning scenarios Identification of the research needs Development of quantitative models Evolution towards decision scenarios The scenario development process mainly entails the generation of a list of the main indicators that affect the control that the organization has, both externally and internally. The number of scenarios to be developed should be established. According to Culpan (2002, 25), it is best the participants develop a minimum of two and a maximum of four scenarios. This is based on the general idea that, for just two scenarios, the classification will be either good or bad; hence, adding a third and maybe a fourth scenario may help from the perspective of the middle ground (O’Brien 2009, 80). Effective strategic planning not only articulates the actions that a company puts in place and the direction it takes, but also the evaluation basis to help determine its success. Technique The technique that is going to be used is very simple, whereby five key potential scenarios are envisioned over a period of ten years. For each and every scenario, the current situation will be used to guess into the future. This will help in determining what the company may look like in the end. The probabilities of each scenario occurring are then estimated. Therefore, the is a company that is followed, talked about and most probably the least understood by most. However, it appears to be amongst the largest. Apple Inc.: History Formerly known as Apple Computer Inc., Apple Inc. is a company that provides MAC OS systems, Corporate Server and Operating System. Its primary product lines are iPhones, Macintosh System and iPod. The Apple Computer was developed by the founders, Steve Jobs and Steve Wozniak on the first of April 1976, which they later on integrated into the Cupertino-California based company on third January, 1977. With the company’s introduction of the iPod player in 2001, the company managed to make a breakthrough in the consumer electronics. Currently, the company stands as the biggest technology and telecommunication corporation globally, with annual profits of more than $65 billion. The company has a vast number of employees in its various outlets all over the world, not less than 49,400. Apple has well above 240 stores in different countries all over the world (Wauters, 2011). Vision Statement of Apple: “Man is the creator of change in this world. As such, he should be above systems and structures, and not subordinate to them.” Mission Statement of Apple: “Apple ignited the personal computer revolution in the 1970s with the Apple II and reinvented the personal computer in the 1980s with the Macintosh. Apple is committed to bringing the best personal computing experience to students, educators, creative professionals and consumers around the world through its innovative hardware, software and Internet offerings.” Scenario 1: Decline in growth rate In as much as Apple Inc. continues to grow, the rate is dwindling than the expected speeds. Towards the end of 2013, China Mobile gave it a bit of a short, besides the reasonable iTV. However, as the market competition takes its toll, sales may get to very low levels. From the approximation, the profit margin seems to erode, with the EPS of about $50 as at 2014, and expected only to grow to $60 by 2021 (WooEB, 2013). Scenario 2: Stagnation The rate of growth of Apple is more or less in line with the expectations of most analysts. It is expected to have an annual growth rate of 12-15% for the next five years after which it will stagnate at 10%. This is based on the fact that its growth is reliant on the penetration of enterprise, foreign markets, introduction of new lines of products, and an ecosystem considered to be so held intact. For instance, the introduction of the Apple TV, the iPod and the iPhone as well as another innovation that may arise that is still not visible (Wauters 2011, web). Scenario 3: Apple Never Finds another Steve Jobs In the next few years, Apple has the ability of thriving well on the products that were as a result of Job’s bright ideas. Besides, the company greatly relies on its ability to spot a new big market that it can dominate (WooEB 2013, n.d., web). The question that remains is, without a talented visionary like Steve Jobs, who will steer the company to the next possible great opportunity? Tim Cook may be a great manager; however, the key player that took the company to where it is today was Steve Jobs. Indeed, the technology and machine set by Steve is expected to be very effective in the next at least half a decade. Sooner or later, that will come to pass, so what will remain to be done? Scenario 4: the Apple TV is at stake With the success that the company had in penetrating the tablet and smartphone market, its launch of television was assumed to be a walkover. However, this may turn out to be out of its favour. Indeed, in case the TV flops, the company will have had a drawback that will take it time to recover from. The company will also face the critics of its eminent collapse and an end to its era of dominance. However, in case the TV does succeed, it could be very vital in the boosting of sales and attracting new customers to get the company’s products (Botts 2011, web). Scenario 5: Apple being dethroned by Samsung as the trendsetter of the company These two companies have already started locking horns over whom to control the smartphone market. To counter Apple, Samsung is continually developing new tablets to help compete the iPad. Besides, Samsung is already into the markets that Apple is starting to have an eye on, such as the televisions. According to Enderle, Samsung has been a major supplier of the all the materials that Apple needs for building its devices, right from the screens to chips. The chances are likely that Samsung could cut Apple of the supplies hence, stagnation (Bajarin 2011). Scenario linkage map SWOT analysis Strengths i. iTunes forms an excellent source of revenue for the company. ii. Own Apple computer software and hardware. iii. The company has far advanced technology than the other rivals. iv. The company stands at minimal debt. v. The company enjoys good brand loyalty. vi. The company has a very strong Research and Development department. Weaknesses: i. Fragile relationship with Microsoft and Intel. ii. The life cycle of Apple products is very dismal. iii. Weak market presence. iv. Lags in the market share are due to high prices. Opportunities: i. Development of tie with other companies ii. Development of antivirus solutions due to increasing in worms and viruses. iii. High demand for downloadable MP3 music. iv. Increased online sale of computer and accessories. v. Laptop market is steadily growing; the company needs to develop new models. Threats: i. Most businesses do not recognize Apple as compatible with their software. ii. Intense competition from HP, Dell, Toshiba and Sony in the laptop segment. iii. Several sites provide free downloadable music. iv. The pricing of the Apple products is high. v. The company may be immensely impacted by recession due to high commodity prices. vi. Microsoft is always launching new OS, Windows, 7, 8 and now 9, posing a significant threat to the company. vii. Constant technological changes. SWOT factors Current resources and competencies Strengths Weaknesses Scenarios: future driven Opportunities S-O factors The company enjoys good brand loyalty: develop new products to help increase sales W-O factors Fragile relationship with Microsoft and Intel: Development of tie with other companies Threats T-S factors Constant technological changes: The company has a very strong Research and Development department. W-T factors Weak market presence due to high prices of products: the company should reduce the prices to take advantage of higher sales. Analysis of the current strategies: by using the BCG matrix: Under these, the product portfolio of the firm is classified into four major strategic business units (SBU): questions marks, stars, cash cow and dogs (Grant 2005, 242). Within each category, there are further potential strategies that may be determined: build market share, hold market share, harvest and divest. Star: In this case, the iPad stands out as a star as it takes an enormous share of the steadily growing tablet market. Though in its growth phase, the iPad starts losing the advantages it had as the very first of a kind to be launched as other manufacturers are also launching their products. As such, the company is under the pressure to make massive investments on the marketing of the product in order for them to maintain its market share (Harrison, Lee & Neale 2005, 86). Later on, once the market sales have become stable, the company should then harvest the product in order to change it into Cash Cow to aid in funding other SBUs. Question mark: Despite the efforts made by Apple Inc., the Microsoft-based PCs still continue to dominate the market. This is mainly based on very well founded business-to-business marketing, besides the high costs of switching by the consumers and businesses. However, the company could successfully use these three strategies for their Mac software. Divest: this has the ability of allowing the company to devote most of its time on the products considered most successful. However, this may be challenging as the Mac forms the major component of the brand identity of the firm. Build: apple could successfully make massive investments of its resources into turning Mac into a star. However, the challenge that still presents itself is whether Mac can really ever beat Microsoft powered PCs, even with a massive cash pile it has. Hold: this may be considered the most probable strategy. The company will most probably continue developing new Macs; however, this will mainly be aimed at retaining and supporting the existent customers. Rather, the investment on Mac will be kept at minimal expenditure while the massive investment will target iPad. Cash Cow: The most reliable and steady source of income for Apple is the iPhone and iPad. The mobile phone and MP3 market has gotten fully saturated, yet the company has the highest share in this market. Since the iPad is getting to the stage of decline, the company has started harvesting the product. In doing this, the company is gradually reducing the investment towards marketing the iPods in order to ensure their profitability. Through the generation of more cash, any further investment may be channelled to stars and question marks (Grant 2005, 241). Dog: The Apple TV, which enables the playing of media files in iTunes on TV has never picked up. However, through the launching of the second and third generation, the company has proven its commitment to improving sales. It may be more profitable to divesting the product, unless the digital receiver market grows. Possible future strategies that the firm could pursue In order for a competitive strategy to be developed for any company, there is a need to understand the various expected changes and the industrial structure the company is in. A model of generic strategies was developed by Porter, which tries to analyse how a company may compete in the market in order to develop and sustain it competitive advantage. Under this, three main generic strategies may be developed. These are: Cost leadership Differentiation Focus strategies Any company has the ability of achieving the highest possible profit rates over their competitors in two ways. These are: Through the supply of their products at a comparatively lower cost than their rivals; cost leadership. Through the provision of differentiated products such that they are different from those of their rivals, making the customers ready to make premium payments for the product. This is known as the differentiation strategy (Grant 2005, 242). Cost leadership For the case of Apple Inc., there is a need to see to it that it they can reduce the prices of their products if they are to attain a competitive advantage over their rival companies. In doing this, they must ensure that they maintain the quality as well without making any compromise in the product quality. However, this does not only imply dropping to the lowest market price since such products are considered inferior (Thompson & Martin 2005, 187). Any firm that focuses on this strategy will instead take advantage of increased sales hence higher profit margins. Such a strategy may be attained through focusing on cost reduction such as waste minimization and avoiding the addition of features that the customers do not regard as important (Thompson, 2005). Differentiation This is the firm’s ability to provide superior and unique value to the client in terms of special features, after-sales services and quality (Porter, 1992). Inasmuch as such firms that focus on quality may not be able to make massive product sales, they can compensate for that through the realization of higher profits in sales of a single product. Focus strategies Here, the firm only focuses on a particular product or limited range of market segments. Through this, a company may be able to gain differentiation r cost leadership. This strategy may be subdivided into two: cost focus and focus differentiation. For the case of Apple, the company falls under the differentiation strategy. The company has a wide product range in the field of computers such as iBook, iMac and the G-series machines. The company majors on quality rather than reduced prices to attract more customers. However, due to the differentiation strategy that the enterprise has put focus on, it will be able to make premium charges for its products. Bibliography Bajarin, t. (2011). Apple_vs. Samsung by the numbers. Retrieved [1st Dec, 2014] from www.computerworld.com/S/articles/92157861/apple_vs.Micorsoft_by_the_numbers Botts (2011). Apple Computer Inc. and the two: global Gap analysis and Labot Productivity Bench Marks. (ION Press Release) Retrieved [Dec 1st, 2014] from http://www.icongrouponline.com/pr/apple_computer_Inc_US/Pr.htm/ F. A. OBrien and R. G. Dyson (2007). Supporting Strategy: Frameworks, Methods & Models, Wiley. F. A. OBrien and R G Dyson (1998). Strategic Development: Methods and Models Wiley. John Alwyn Mathews (2006). Strategizing, disequilibrium, and profit. 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Apple Now worth as Much as Microsoft, HP and Dell...combined. Retrieved [1st Dec, 2014] from http://techerunch.com/2011/06/13/apple_nearby_worth_more_than_micorsfot_hpand_dell_combined/ WooEB. (2013, n.d.). Apple Inc_Fiancial Analysis_newcomapny profile. (London (Trans World news)) Retrieved [1st Dec, 2014] from: http://www.news.Wooeb.com/newsstory.aspx?id+716044. Read More