STRATEGIC MANAGEMENT
1.
Using
any industry with which you are familiar, please analyze the industry using
Porter's Five Force Model. Please explain your rationale.
One
of the most significant industries in the modern day US is the automobile
industry. The global automobile has it advent in the 18th century,
1769, when the steam propelled invention by Nicholas Joseph Cugnot was
introduced into the roads for purposes of hauling people and goods from one
point to another. The automotive industry in the US commenced in the year 1893
when the Duryea Motor Company by brothers Frank and Charles Duryea; the first
vehicles to be sold by the Duryea Company were the costly limousines which were
produced up until 1920. A Porter’s Five Forces Model analysis is important for
a company or industry due to the fact that it enables the affected
organizational heads to maneuver their business operations in a manner that
gives than an advantage over their rivals. Moreover, such an analysis provides
knowledge to the firm on the nature of the industry context in which its
commercial operations are based. An evaluation of the American automobile
industry using the Porter’s Five Force model requires that the three major
automobile companies in the US are analyzed. These three companies are general
Motors, Ford and Chrysler.
(a)
Threats of New Entry/ Barriers to Entry
This
force assesses the levels of complexity or ease for new companies to enter the
automobile industry. General Motors, Ford and Chrysler hold 20%, 16.8% and
12.1% of the US market share respectively. The threat for new entrants in the
US in low due to the high barriers to entry; this is due to the large amount of
capital, advanced technology and business capabilities necessary to start a
successful automobile company. Moreover, the dominance of these three American
companies for a long time is an indicator of less rivalry. Nevertheless, Toyota
and Honda have already entered the US market and are competing with America’s
big three.
(b)
Threat of Substitutes
In
the American market bicycles, train services and transportation by bus are
options that are available to consumers. The recent inconsistencies in price of
fuel as well as the increased operating costs of personal automobiles may cause
American consumers to opt for substitutive transportation. The switching costs
for consumers are also low. Consumers in geographic places like New York and
other suburbs have no alternatives but to own locomotives. Nevertheless,
customer loyalty and vehicle branding are also important in determining whether
or not customers opt for substitutes in the market.
(c)
Competitive Rivalry
This
force refers to the level of competition in the automobile industry. The US
automobile industry is characterized by great rivalry, both domestically as
well as in regions such as Japan and Europe. The competition has increase with
the entrance of foreign companies which compete for a market share. The
automobile companies have thus had to invest largely in advertisements.
(d)
Bargaining Power of Buyers
The
bargaining power of consumers in an automobile industry is based on their
volume and density, the information they possess, their awareness of costs as
well as the competitive prices in the market. The bargaining power of the
American consumer is restricted. The oligopoly in the industry implies that the
options for consumers are limited. Moreover, substitutes such as public
transportation are only available in urban centers.
(e)
Bargaining Power of Suppliers
The
concentration of dealers, their positions and presence of a monopoly affects
their bargaining power. Dealers in American automotive industry are found in
every town; the supplies are dependent on the automobile companies for
inventories of manufactured products. Consequently the dealers have to maintain
good relations with automobile industries. Other supplies are those that offer
automobile constituents such as seats, navigations structures and tires.
2. Form a strategic management
prospective; examine the U.S domestic automobile industry. Which of the influences in the broad (remote)
environment do you see as having the greatest impact in the next 18 months?
Why? Please explain your rationale
There
are a number of important features that characterize the American automobile
industry. The very first important aspect is the market structure. The market
structure of the American automobile industry is described as being an
oligopoly; this implies that is controlled by a few dominant companies. As
already indicated the three big domestic automobile companies are ford, General
Motors and Chrysler; this oligopoly in the US automobile industry also includes
two foreign companies: Honda and Toyota. The manufacture and dissemination of
automobiles in different markets is a very significant process that
necessitates that the involved commercial organizations and their shareholders
be prepared to maker great investments in terms of raw materials, work force,
technology utilized, haulage as well as R&D.The American domestic
automobile industry plays a very significant role in the financial systems and
economy of the nation. As a matter of fact, an estimated 20% of the American
production resources have historically been perceived as being connected to the
manufacturing, logistics and supplies activities in the automobile industry. In
recent days, the opening up of national and regional trade boundaries, commonly
described as a consequence of globalization, have decreased the conspicuousness
that initially existed between the foreign and domestic industries in the
United States of America, particularly in the automobile industry.
3.
Explain
the relationship between a firm and the various levels of external
environment. Which stakeholder in the
operating environment do you believe to be the most important? Why? Please
explain your rationale.
Commercial
firms forge relations with different people and institutes in society; the term
‘stakeholder’ is used to describe the individuals and organizations that are
affected by the activities of a business organization. These include workers,
customers, suppliers, shareholders, the media, government and societal in
general. It is generally agreed that the most important stakeholder for a
commercial institute is its workforce. This is due to the fact that the work force
is tasked with the responsibility of carrying out operations to produce quality
goods and services. In addition to this, workers play a significant role in
creating a positive image for their organizations. The PESTEL model has been
used in the last couple of years to analyze the Political, Economic, Social,
Technical, Ecological and Legal environment in which commercial organizations
and industries exists. While the economic environment refers to the rivalry
faced by a company and its products in the market as well as the company’s
financial resources, social environment refers to the demographical
transformations and way of life of people in a society. The technical
environment refers to the inventions, techniques of organization or cognitive
patters fashioned to deal to classical or emergent issues in the commercial
organization. Political and legal environment refers to the influences of the
government and legal decrees on the region in which a firm operates on the
commercial firm.
4.
How
do you identify direct competitors and what are some of the common mistakes in
identifying them? What tools are used to assist executives in examining direct
competitors?
A
company’s direct competition refers to firms that offer consumers with similar
products and services at the same prices; the competitors may be direct or
indirect. A company needs to identify its direct competitors so as respond to
them effectively. This is usually done by assessing the competitor’s business
objectives, market presuppositions, resources, abilities and group target; the
geographic and sector target is also important. It may be difficult to identify
one’s competitors due to the fact that they may arise from demand or supply
sides. Managers often make the mistake of concentrating to much on the product
market segment in the analysis of their competition and ignoring the
competition emanating from the resources and aptitude of indirect or
prospective rivals.
5. In Porter's model we are asked to
consider potential entrants and substitute products as additional competitors.
On What basis do we judge whether a firm is a potential entrant? On What basis
do we determine if a competing product is a substitute?
In
competition analysis it is important to determine whether or not a competing
product is a substitute. A product is considered a substitute in the event that
it is similar in characteristics, purpose and cost. Product is perceived as differentiated if
their price change does not affect its sales significantly. A possible entrant
is that which offers similar products or services in a similar industry.
6. Please compare and contrast the
terms environmental determination, strategic choice, stakeholder approach,
enactment, and adaptation.
Organizational
choice and environmental determinism are independent factors in the sets of
procedures involved in adaptation. Institutions are able, in their decision
making processes, to establish, get rid of or reconstruct the objects of their
environment. The importance of stakeholder approach is demonstrated in its
strong connection with the application of its principles and financial
performance.
7. What do we mean by saying a
resource-based view of the firm? What are these resources and what makes them
valuable?
A
resource based view of the firm refers to the manner in which the important and
identical resources at the disposal of a commercial organization are utilized
to give the form a competitive edge. The said resource may be tangible or
intangible and heterogeneous in characteristic. Such resources are very
valuable due to the fact that they not easily imitated or substituted with
others.
8. Please compare and contrast
Porter's five forces model with blue Ocean prospective. Are these competing
approaches? Please explain your rationale.
Porter's
Five Forces model highlights a firm’s major competencies that offer it a
competitive edge over its competitors; the Blue Ocean Prospective inclines on
the establishment of increased demand rather than competing for the existent
demand. This implies that the two approaches are not competing but rather
complementary; organizational firms can benefit a lot from utilizing a model
that blends the two approaches.
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