Strategic Management Analysis - Based on case study - Essay Example

?Strategic Management analysis-Case Study Strategic management involves the analysis, decisions as well as the actions undertaken by an organization in the creation and sustenance of competitive advantages. Strategic management is therefore involved with the strategic analysis of the goals of an organization (Strategic objectives, vision and mission) together with the organizations internal and external environment and also involves competitive advantage to determine why some firms do outperform others (Dess, Lumpkin, Eisner, McNamara, & Kim 2012). Better Place opened its first car demonstration center in Israel back in February 2010. The opening of the demonstration center helped the company in showcasing its ambitious plan in challenging the status quo in the rigid and complex industry. The performance of the company has since been outstanding with the formation of partnerships and increased capital funding. Strategic purpose: Mission, Values and mission The mission of the company was to reduce and eventually eliminate oil dependence of the automobile industry. The company aims at reducing the associated health, political and environmental issues that arise from the dominance and ubiquity of internal combustion engine (ICE). The increasing number of vehicles around the globe that have high emission of carbon monoxide and hydrocarbons from the use of oil is responsible for the greenhouse gas emissions. With the growing ratio in the world populations as well as the demand for personal transportation, the environment and economic sustainability of an ICE dominated transportation sector is highly likely to increase The company aims at attaining a widespread adoption of electric vehicles (EVs) by the creation of links between battery companies, car companies, utilities and consumers. The strategic objective of the company is to take over the market on product performance and delivery of quality and emission free cars to the consumers. This involves having a broader and deeper use of technological capabilities and they believe that the solution to electric cars does not lie in re-engineering the battery but in the re-engineering of the car. Stakeholder analysis Shareholders all those groups of individuals or individuals who depend on a given organization in order to fulfill their goals where the organization ends up benefiting. The main stakeholders of Better Place are the consumers, political groups, suppliers and competitors (Johnson, Whittington & Scholes 2011). Stakeholder management is very high in Better Place as they have been factored into the development of Electric Vehicles. For example, Shai Agassi the founder of Better Place believes that overcoming the problem of limited mobility is the only way that consumers would be enabled to adopt the Electric Vehicles (EVs) on a massive scale. The different stakeholders for Better Place influence each other in a positive way. The electric vehicle solution has made provisions and considerations of all the stakeholders. The political stakeholders include the state. For example, the State of Hawaii has launched a Clean Energy Initiative that is aimed at the development of clean energy alternatives by 2030. Adoption of EVs in the State would be the best clean energy alternative for people. This has had positive impacts on the consumers, suppliers and competitors. For the consumers, the move by the state will lead to the reduction of risks which results from carbon monoxide emissions and to enhance adaptability and flexibility. Maintenance costs of electric vehicles are much lower than the ICE vehicles for consumers. It is a social, economic and ethical responsibility for companies to produce and manufacture those cars that will not cause any environmental harm. Better Place owes this to its stakeholders hence the reason for the EVs. External environment analysis The macro-environment (Porter’s 5 forces analysis) Supplier power- There is few suppliers in the supply of electric vehicles around the globe. Better Place is a powerful supplier due to the uniqueness of the product which it manufactures and sells. Better Place purchases batteries and electricity and this means that those suppliers have a bargaining power over the company. Buyer power- Better Place is in the growth stage. Growth stage is also evident in the company as the company is characterized by high growth and weak buyers and low entry barriers. The bargaining power of the buyers is very low and is unable to put pressure on the firm. Competitive rivalry- the intensity of competitive rivalry is a determinant of industry competitiveness. Better Place has a powerful competitive strategy that includes differentiation of the cars from ICEs to EVs which has reduced the level of competition. Threat of substitution- Better Place’s quest for a competitive advantage has seen the company manufacture EV vehicles that are highly differentiated and cannot be substituted. Threat of new entry- So far, Better Place is the only company that is providing EVs and no competitors in the market. The high technology required in the manufacture of EVs as well as the required capital costs have decreased the threat of new market entry. The strong position enjoyed by Better Place has prohibited quick and new entry into the automobile market. That is, Better Place has had a durable and strong barrier to entry which has enabled it preserve its market position. The industry There are two major factors that usually drive the evolution of the industry and these are the production and diffusion of knowledge as well as the demand growth. Better Place is in the development and growth stage of the industry life cycle (Grant 2013). Development stage has a low rivalry with differentiation as the innovation key. The EVs are highly differentiated from the ICEs and this is through innovation of the founder of the company. Growth stage is also evident in the company as the company is characterized by high growth and weak buyers and low entry barriers. The company also has the high growth ability. There is a large customer based ready to adopt the EVs and lack enough knowledge and the way forward. The type of industry structure evident in Better Place is a monopoly. So far, Better Place is the only company that is providing EVSs and no competitors in the market. Industry life cycle Resource and capabilities Resources and capabilities of the company act as an interface between the company and its strategies. The Better Place Company has tangible, intangible and human resources which make up a wonderful organizational capability. Technology is an intangible asset to the company as the EVs are technologically designed. Reputation is another intangible resource that Better Place has earned in terms of its EVs brands. Human skills include motivation, capacity for collaboration and communication and skills that are used in re-engineering of cars. The service plans, strategies, software and infrastructure development in the company are all as a result of human skills. Tangible assets include finances and equipments for implementation of the EVs and infrastructure. The internal resources and capabilities in Better Place Company have offered the company with a secure basis for strategy and have enabled the company to become profitable. Better Place also has a marketing capability when it comes to its responsiveness to market trends on the demand for EVs in order to reduce the environmental impacts of carbon monoxide emission by ICEs. Value chain analysis: Porter’s value chain Value chain analysis separates firm’s activities into a sequential and also explores the linkages between activities in order to gain an insight into the firm’s competitive capabilities and position. Firm infrastructure- Better Place has adopted a customer focused approach as a way of meeting the demand for environmentally clean cars; cars that do not emit carbon monoxide leading to greenhouse effects. Governments have had mixed reactions on the reduction on the use of personal cars as a way of curbing emissions and oil consumption. The strategy by the company will reduce oil dependence and let consumers continue enjoying their personal vehicles (Fearne, Soosay, Stringer, R., Umberger, Dent, Camilleri, Henderson, Mugford 2009). Human resource management- To achieve it set goals, it is important for Better Place to train its staff and ensure skills development. This will lead to better management of the infrastructure and in the management of the EVs plans. Technology development- The Company engages in technologically linked manufacturing sales as well as technologically managed the design and manufacturing in the manufacture of electric vehicles. Procurement- Procurement in Better Place Company is through the supply chain integration and coordination and by purchasing batteries and electricity and then selling miles (Rothaermel 2013). Strategic formulation: Business strategies The level of business strategy determines the strategic position of the company as well as the company’s quest for competitive advantage. Better Place has adopted Porter’s generic strategies that have been helping the company in the acquisition of competitive advantages. The company is highly focused on product differentiation and is highly focused on the cost of the EVs. Differentiation strategy is the main strategy in Better Place Company as the company aims at improving the quality of vehicles from ICEs to EVs. Cost leadership strategies in the company include process innovation, design for manufacture, control of overheads and incentives that are linked to quantitative targets. Differentiation strategies in the company include new product development, quality, design, services, creativity, product engineering skills, creativity, and research capability (Williamson, Cookie, Jenkins & Moreton 2013). Strategic formulation: Business strategies and innovation Focus on business environments where technology is a key driver of change and an important source of competitive advantage. Product and process innovation Better Place Company is a new developing industry and this has highly favoured innovation. The company also enjoys first mover advantages as it is the first to venture into the manufacture of EVs. These advantages are reputation, buyer switching costs, scale benefits and pre-emption of scarce resources (Rothaermel 2013). The company has also been engaged in different organizational initiatives that have been quite useful in stimulating innovation and these initiatives are open innovation, product champions and cross functional new product development. The company is also engaged in innovation plans like Electric Recharge Grid Operator (ERGO) that enables it in the provision of a menu of service plans to all consumers. The service plans by the company to its consumers in three tiers that include fixed monthly fee, all you can drive and pay as you go. Corporate strategy Corporate strategy defines where a company competes; the industries in which a company competes. New product and services are some of the corporate strategy directions taken by Better Place Company. The company has also developed EVs which are new products into the market and has huge plans on how to conglomerate its product diversification (Johnson, Whittington & Scholes 2011). The company has also diversified in growth as well as value creation to all its stakeholders. Better Place has also implemented the three dimensions of corporate level strategy which include vertical integration (stages of industry values chain), geographic scope (national, regional and global markets) and horizontal integration (services and products). Corporate strategy directions: The Ansoff matrix References Barney, J. B. 1995. Looking inside for competitive advantage. Academy of Management Executive, 9(4): 49-65 Fearne, A., Soosay, C., Stringer, R., Umberger, W., Dent, B., Camilleri, C. Henderson, D., Mugford, A. 2009. Sustainable value chain analysis: A case study of South Australian wine. Project report. Government of South Australia. Fine, C. H., Vardan, R., Pethick, R., & El-Hout, J. 2002. Rapid-response capability in the value chain design. MIT Sloan Management Review, 43(2): 69-75. Grant, R.M., 2013. Contemporary strategy analysis: Text and cases. 8th ed. Chichester: John Wiley and Sons Johnson, G., Whittington, R., & Scholes, K., 2011. Exploring strategy: Text and cases. 9th ed. Harlow: FT Prentice Hall. Porter, M. E. 1985. Competitive advantage: Creating and sustaining superior performance. New York: Free Press, New York Porter, M. E. and Kramer, M. R., 2011. Creating shared value. Harvard Business Review, 89(1), pp. 62-77 Rothaermel, F. T., 2013. Strategic management: Concepts and cases. Irwin: McGraw-Hill Thompson, A. A., Peteraf, M. A., Gamble, J. E., Strickland, A. J., Janes, A., & Sutton, C. 2013. Crafting and executing strategy: The quest for competitive advantage: Concepts and cases, European Edition. Maidenhead: McGraw-Hill Williamson D, Cookie P, Jenkins W & Moreton K.M, 2013. Strategic Management and Business Analysis. Routledge Read More