Macro Environmental Analysis for Strategic Management - Assignment Example

? Part Question For the purpose of this paper, Alan Firmin Ltd will be analyzed. It is a transport and logistics company operating not only in United Kingdom but also in also internationally (Brian 2000, p.98). From the analysis of the company, strategy can be defined as the objective plans taken by the management for making a company gain competitive edge. Some of the strategies for instance may include price leadership. With the increased competition in this industry, Alan Firmin may use the strategy of pricing to gain a competitive advantage over the competitors. This is achieved by lowering the cost of transportation, which is likely to attract more customers. Another form of strategy may involve availability of large warehouses to take goods closer to customers. This assists in cutting down the cost of operation and subsequently increasing profits. Alan Firmin Ltd explains what mission, vision, goals, objectives, and core competencies are. In most companies, it is difficult to distinguish between missions and visions. However, the two have a difference if one does a proper analysis. While the mission focus on what the business intends to do currently, vision focus on future achievements. For instance. Alan Firmin Ltd has a main mission of delivery goods and services to the customers at the right time while mitigating environmental pollution. Its vision has been to ‘become a global transport and logistics company.’ however; vision is an extension of the main mission of the company. In most cases, companies may have missions but no vision (Fahey 1999, p.87). To achieve the mission of the company, objectives and goals become imperative. Objectives objective ways or strategies, which the business must use to reach the mission of the business. Objectives are related to goals with only exception being that the latter are more refined and specific to the mission of the company. Core competencies are the things that a given company or organization is able to perform with easy. There are also the strengths of such a company. In Alan Firmin Ltd for instance, the main core competency has been delivery of services to the clients at the right time. The company has been in existence for the long time and therefore has experience needed to provide quality services. Question 2 Strategic planning is a long process involved in focusing on the overall assessment of the company. The main questions are ‘what needs to be done, why, to whom and when?’ the aim is to make the company more effective and competitive in the market. It is the process where rational objectives are highlighted to assist in achieving the mission and vision of the company. Question 3 The SWOT analysis and PESTEL are the most suitable planning techniques or tools used to achieve the strategies. In the first category, the strengths, weaknesses, opportunities, and threats of the business are analyzed. Under this, the competitor analysis for instance can provide a company with strategies needed to make the business more competent. PESTEL involves the analysis of political, economic, social, technological, environmental, and legal factors, which may affect a business. Question 4 The economic downturn has contributed to many challenges within the world of business. For the 2007/2008 economic depression prompted many companies to downsize in order to reduce the cost of operation. On the other hand, companies had to reduce the scope of their businesses due to reduced revenue. However, companies should go beyond their normal business activities and include others that are closely related (Lorenzen 2006, p.56). The selected business activities however must reduce the cost of operation and increase the business revenue. For the purpose of this company, two main activities ought to be included within the strategic structure. Outsourcing and construction of large warehouses are the two main activities proposed. The two play an important role of providing the business with a competitive edge over its main competitors. The construction of warehouses for instance ensures that goods are closer to the company and helping to reduce cost of transportation. For instance, if the company makes warehouses, goods can be transported from the seaports to the facilities using the cheapest means of transportation such as railway. All the goods under the ownership of this company will be transported near or at its warehouses in bulk. This reduces the cost of transporting goods all the way from the seaports. This significantly assists the company to remain strong even under economic threats. On the other hand, warehouses make it possible for the clients to plan themselves before they can receive such goods. Such plans may involve clearing the old stock or availing other important equipment. Secondly, warehouses are fitted with coolants making it possible to store even the perishable goods. This minimizes losses that companies face. Outsourcing is another business activity that has become a major phenomenon. It involves getting human resources from overseas (Michael 2005, p.54). The work force must however not compromise the quality of services within the company. Companies are able to obtain cheap, qualified, and competent labor from overseas. This becomes an advantage for the company due to reduction of cost of operation. Alan Firmin Ltd for instance can take advantage of this by using local employees for its activities in oversea countries. If the management decides to use employees from UK to work in foreign countries, the cost is likely to double. Question 5 For the two activities to be incorporated within the existing structures, a number of things have to be done. Firstly, the management must communicate effectively to all stakeholders why this change is imperative. According to integration theory, resistance to this kind of change may occur where there is ambiguity, divergence and where members sense impossibility (Stephen 2004, p.53). Communication is an important tool according to this theory. Any proposed change within the business may be resisted not because it will not work for the benefit of the business but because the stakeholders do not understand the motives and how they will be affected. Any form of ambiguities and fear of unknown will make it impossible to incorporate any changes within the business. The business management must ensure that all stakeholders are involved in the decision-making before taking any actions. They should also expect to face resistance by the stakeholders. However, change agents must be prepared to give their contribution as to why they think such changes will work for the company. Being activities that are likely to affect all the internal and external stakeholders, it will be imperative that such people are given time to think about the issue. The management must be ready to communicate effectively and make such members understand the motive behind such major changes. For instance, the stakeholders want to know how they will benefit if changes are made. The stakeholders will also analyze to see whether such changes are in line with the mission and vision of the company. Therefore, for the successful integration of these activities within the strategic structure of the company, it will be vital to involve all the necessary individuals. They must be given time to digest and give their opinion on the matter. However, the change agents within the company must be willing to communicate effectively and ensure that stakeholders understand the need to diversify the business. Though the process may take time, the advantage is that if all internal and external stakeholders agree on the changes, incorporating the suggested activities become easy. Question 6 There are various advantages and disadvantages of using the diversity proposed above. The main advantages include the increase in revenue and reduction of the cost of production. The two are the core objectives of a given business. As indicated before, the revenue is likely to increase due to different business activities. Widening the scope of operations makes it possible for the business to increase its revenue. On the other hand, the proposed activities have the potential to reduce the cost of operation (Turner 2010, p.87). However, there are also disadvantages with these activities. They include failure to achieve to the mission of the company, lack of sustainability and constant resistance from the stakeholders. Diversifying the business activities may interfere with provision of quality services to the customers, which is the main mission of any business. The focus become may shift from customers’ services to how the company can make more profits. Secondly, the business requires enough capital to facilitate any new developments. Sustaining such diversities might also affect a business in the short-run. Where a business lacks enough funds, a company will be adversely affected and probably fail to deliver basic services to the clients. It is also imperative to note that the stakeholders will blame the business management if such proposed changes lead to more challenges within the business. This is especially if there was no agreement for such changes to be adopted. The conflict between the stakeholders and the business management may lead to other problems. These may include the close of the business. It is therefore vital for the management to include all stakeholders in any decision making to avoid such situations in future. Part 2 Question 1 Substantive growth, limited growth and entrenchment strategies are imperative for any business success. The latter refers to the strategies which a firm or company uses to acquire another competitor. Mergers and acquisition becomes vital when there is increased competition within the business. For instance, though the British Airways has continued to dominate over its competitors, the entrances of other airway companies have posed increased threats. A company might use the limited growth strategy where nothing is done to control the situation. This is where the business may be making little improvement in terms of revenue but the management does little to control the situation. While some companies may be quick to act and provide new products in the market, a company applying this type of strategy may not. This owes to the fact that there is the right time to employ such strategies. In the substantial growth however, the company contributes significant revenue to the business, which is also perpetual. This gives the business competitive advantage over its main competition. Apart from that, the business is able to create wealth while at the same time enjoying exponential growth. The British airways for instance have been able to invest in many countries all over the world by establishing direct routes. At the same time, there has been diversity within the company. Apart from the provision of passenger services, the company also offers cargo services. This has made the company become one of the most reliable companies. The following illustration demonstrates the above-mentioned strategies. Source (self-constructed) Question 2 In the past 5 years, the company has experienced exponential growth due to a number of strategies employed by the company. Firstly, the company has taken the advantage of the high demand for cargo transport and increased its capacity. This has provided the company with a competitive advantage over its main competitors. There has been a sharp increase in the number of goods transported through the company. On the other hand, the capacity of passengers for instance has been on the increase due to expansion of its target customers. The company has provided directed routes to several countries in the world. Direct routes are most preferred due to convenience and cost on the part of passengers. Individuals for instance are able to move from London to United States without making unnecessary stops. On the other hand, the company has played important role as far as motivation of employees is concerned. According to the theory of motivation, provision of incentives to work force is imperative to make the employees more effective. The British Airways understands that employees are an integral part of the company. The company has some of the most qualified and competent work force in the world. The company has however faced challenges due to increased completion in the market. To overcome this, the company has employed a number of strategies including acquisition and mergers. For instance, to mitigate the competition gained within France markets, the company bought 49.9% assets of Tat European Airlines and about 70% of the Air Liberte (Gregory 1996, p.76). It has also gained stakes in most companies. This includes about 25% of Quantas Company in Australia and 22% of USAir. These strategies are used to curb unhealthy competition, which may plunge a company to major losses. Question 3 Mergers and acquisition is one of the best strategies that the company has used successfully (Kono 2000, p.76). This strategy is imperative in the sense that it has assisted the company to expand its business and therefore more revenue. However, the main aim of this strategy is to ensure that the company deals with competition in the market. The main reason why I have selected this strategy is its effectiveness. For instance, apart from just eliminating unhealthy competition, it also ensures that more revenue is generated. The increased revenue has the ability to make the company expand to other places. It has also been able to increase the number of passengers. Before these acquisitions were made, the company was experiencing stiff competition from companies such as Eastjet. This is a low-cost carrier, which has become a major threat to not only British airways but also other major airlines. Mergers and acquisition therefore becomes important. Question 4 One of the major alternative strategies that the British Airways should focus on is price leadership. Mergers and acquisition might fail to work in the long run. For instance, purchasing the assets of Easyjet airline, which has been a major threat, is almost impossible. This owes to the fact that the company has had an outstanding performance. With subsidiaries in many parts of the world, being a low-cost carrier, the company is likely to beat British Airways. Customers for instance are very sensitive to price. They will move to companies, which offer cheaper prices and provide similar services. Therefore, one of the main strategies that the business ought to focus on is how to reduce the cost of transportation. However, before this can be done, it will be imperative for the company to carry out a customer analysis process. The management can understand what the customers require through this process. Attitudes of the customers towards the company can be understood. For that matter, the company can understand that some of its customers are not sensitive to price but want to be associated with the brand. This will make it easy for the company to employ the marketing segmentation strategy when determining the price to use. For instance, price discrimination mechanisms are used to ensure that individuals in high-income areas are charged more than those in low-income areas. The company will therefore ensure that the needs of all customers are addressed. When the issue of price is addressed, the company will be in a position to enjoy exponential growth. It will be able to attract customers from other companies. The management should therefore focus on serving a large number of passengers at a high cost, rather than a few of them at high cost. Question 5 The main role of the strategy proposed strategy is to increase the number of the customers within the company. In addition to that, the strategy ensures that the company gains competitive edge over its main competitors. However, to achieve this, the management has the responsibility of assessing the implementation of such a strategy. Some of the main strategies include communicating the intended change with the stakeholders. Secondly, the company focuses on how the company will be affected in both the short and long run. The management has also the responsibility of communicating to the customers about the intended changes. Question 6 To implement the proposed change of price reduction, the company needs a number of resources. These include the marketing research experts with the ability to assess the market situation and how such a change will mean form the company. The reduction of prices may affect the company in the short run in the sense that revenue might decrease. When this happens, the company might not be able to meet some its expenses. Therefore, the company will need to use some of its accumulated funds to support the implementation of the above strategy in the short run. The company should also be prepared to increase the number of its flights due to the expected rise in the number of passengers. Question 7 The goal above will only be achieved through a series of steps and timelines. This gives the management time to assess and make any adjustment at any given stage. The proposed strategy should be implemented in phases. The company can choose to focus on one particular region and see how the effect will be for the company. For instance, the focus can be Africa where the company will focus on whether the reduction in price will have significant increase in the number of passengers. Successful implementation in this region will therefore make the company focus on the next region. Working on such phases assists, the company makes any necessary changes. Bibliography Brian Tracy 2000. The 100 Unbreakable Laws of Business Success. Berrett, Koehler Publishers. Fahey and V. K. Narayman 1999. Macro environmental Analysis for Strategic Management. West Publishing. Gregory, Martyn 1996. Dirty tricks: British Airways' secret war against Virgin Atlantic. Warner. ISBN 0-7515-1063-7. Kono, T. 2000"Changing a Company's Strategy and Culture", Long Range Planning, 27, 5 pp: 85-97 Lorenzen 2006. Strategic Planning for Academic Library Instructional Programming. In: Illinois Libraries 86, no. 2 (Summer 2006): 22-100. Michael Allison and Jude Kaye 2005 Strategic Planning for Nonprofit Organizations. Second Edition. John Wiley and Sons. Stephen G. Haines 2004. ABCs of strategic management: an executive briefing and plan-to-plan day on strategic management in the 21st century. Turner, Graham 2010. A Comparison of the Limits of Growth with Thirty Years of Reality. CSIRO Working Paper Series, Read More