A manager was considering buying a new car. He had driven Jaguars for some time. However, he thought it would be a good idea to review the options systematically. He obtained the brochures for a range of luxury car maker, identified the major factors that were important to him and considered all the performance indicators for each of the cars against these. He even allocated a weighted score to the factors that meant most to him. The analysis told him that a BMW or a Mercedes might be a better choice that a Jaguar.
This surprised him and he didn’t much like the answer. He had always driven a Jaguar, he was used to it, felt it had an especially English character and that it suited his personality. He was also looking forward to having the new model. So his inclination was to buy another Jaguar.
Actually he ended up buying a convertible Mercedes sports. This was because his wife thought he needed to liven up his image and liked the idea of driving it on holidays. With some reluctance he bought the new Mercedes. This proved to be a good decision. They both liked the car and it depreciated in value much slowly than a Jaguar.
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So what are the lessons? The planning and analysis was there; and if it didn’t end up informing directly, it did indirectly. His wife justified the purchase of the Mercedes in part on the basis of that analysis. He would have ended up with another Jaguar; a continuity of what he was used to. He actually chose what (to him) was a novel, innovative option that, in the long run, significantly changed his approach to car buying, Of course, if his wife had not intervened, his inclination to the Jaguar based on past experience would probably have prevailed. This depended on him and his circumstances-the context. Some ideas get through, some do not, depending how attractive the ideas were to him. Or it could have been that the power of analysis had been such as to overcome this. All these had to do with the strategy formulation, planning, evaluation and selection, and finally, the implementation. So it is with organizations.
Source: Adapted from Johnson and Scholes (2004) Exploring Corporate Strategy. 6th edition, Page 25.
Select an organization of your choice and present critical internal and external environmental analysis based on the following tasks:
Give a meaningful definition of the contexts of business strategy and discuss a company’s external environment using Porter’s 5-force Analysis and Pest analysis.
Discuss the company’s internal environment using value chain analysis and SWOT analysis.
Review the existing strategy or strategies practised by this company and propose a better strategy for this company based on available options.
A business organization cannot survive a void. It requires living persons, natural resources and places and things to survive. The totting up of all these factors and forces is called the business environment. Business environment consists of Micro environment and macro environment (The MBA Official 2013). Business environment divides into two sections. One is microenvironment and one more is microenvironment. Micro means internal structure and macro means outer structure. Microenvironment means factors or elements in organisation’s immediate area of operations that affect its performance and decision making freedom. These factors include competitors, customers, distribution channels, suppliers and general public. Macro environment defines major external and uncontrollable factors that influence an organization’s decision making, and affect its performance and strategies. These factors include the economic factors; demographics; legal, political, and social conditions; technological changes; and natural forces. Specific examples of macro environment influences include competitors, changes in interest rates, changes in cultural tastes, disastrous weather, or government regulations (Business Dictionary 2013).
ANSWER TASK 1
Business strategy defines long term plan that designed to achieve a target or goal. Business strategy states on how to conduct and run a business towards the desired goal. It has stated that having a good strategy doesn’t always lead the business to the success path. An organisation faces plenty of circumstances though. This is where business intelligent comes in where people need to constantly monitor how the strategy and the goals are being executed (Rapid Business Intelligence 2013).
Introduction to Mitsubishi Motor’s
Mitsubishi Motors Malaysia Sdn Bhd is the exclusive distributor of Mitsubishi Motors passenger cars in Malaysia. Mitsubishi Motors Malaysia was established in Malaysia on 29 January 2005. The company was formed by Mitsubishi Corporation who owns 52% share and EON Bhd who owns 48% share with paid up capital of RM60 MILLION. (Mitsubishi Motor’s 2013)
The Porter’s five analysis
Named after Michael E. Porter, this model identifies and analyzes 5 competitive forces that shape every industry, and helps determine an industry’s weaknesses and strengths. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you’re considering moving into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. However it can be very illuminating when used to understand the balance of power in other situations. (Mind tools, 2013). Five Forces Analysis assumes that there are five important forces that determine competitive power in a business situation. These are: Supplier power, threat of entry, industry rivalry, threats of substitutes, and buyer power. The Five Forces Model has some limitations but it is still a powerful framework that can provide a useful set of insights from its competitive analysis and used in conjunction with other tools such as SWOT can help to define an effective competitive strategy.
Porter’s five analysis of Mitsubishi Motor’s
The first analysis is supplier power. Suppliers are the most important component in a company. Without a supplier we can’t run a business. Same goes to Mitsubishi Motor’s. Mitsubishi maintains high standards consistent with industry leaders through fair practices and their comprehensive procurement process. Mitsubishi encourage their suppliers to value the same high standards in their procurement processes. The more the usage of the materials, the higher the demand in the market will be.
The second analysis is threat of entry. In Porters five forces, threat of new entrants refers to the threat new competitors pose to existing competitors in an industry. A profitable industry will attract more competitors looking to achieve profits. The threat of new entrants porter created affects the competitive environment for the existing competitors and influences the ability of existing firms to achieve profitability. A high threat of entry means new competitors are likely to be attracted to the profits of the industry and can enter the industry with ease. Mitsubishi motor’s are always in a high position in the market. People demand for Mitsubishi vehicles. The profitability requires the economics scale.
The third analysis is Industry rivalry. Porter’s intensity of rivalry in an industry affects the competitive environment and influences the ability of existing firms to achieve profitability. High intensity of rivalry means competitors are aggressively targeting each other’s markets and aggressively pricing products. This represents potential costs to all competitors within the industry. And of course, if the opposite is true for any of these factors, the intensity of Porter rivalry among competitors will be low. For example, a small number of firms in the industry, a clear market leader, fast industry growth, low fixed costs, highly differentiated products, prevalent brand loyalties, high consumer switching costs, no excess production capacity, lack of strategic diversity among competitors, and low exit barriers all indicate that the Porter intensity of rivalry among existing firms is low. So Mitsubishi should always maintain their quality on cars and produce innovative workers.
The fourth analysis is threat of substitutes. The threat of substitution in an industry affects the competitive environment for the firms in that industry and influences those firms’ ability to achieve profitability. The availability of a substitution threat affects the profitability of an industry because consumers can choose to purchase the substitute instead of the industry’s product. The availability of close substitute products can make an industry more competitive and decrease profit potential for the firms in the industry. On the other hand, the lack of close substitute products makes an industry less competitive and increases profit potential for the firms in the industry. A threat of substitute’s example is the beverage industry due to a market with many competitors.
The fifth analysis is buyer bargaining power. Porter’s Five Forces of buyer bargaining power refers to the pressure consumers can exert on businesses to get them to provide higher quality products, better customer service, and lower prices. When analyzing the bargaining power of buyers, the industry analysis is being conducted from the perspective of the seller. According to Porter’s 5 forces industry analysis framework, buyer power is one of the forces that shape the competitive structure of an industry. The idea is that the bargaining power of buyers in an industry affects the competitive environment for the seller and influences the seller’s ability to achieve profitability. Strong buyers can pressure sellers to lower prices, improve product quality, and offer more and better services. All of these things represent costs to the seller. A strong buyer can make an industry more competitive and decrease profit potential for the seller. On the other hand, a weak buyer, one who is at the mercy of the seller in terms of quality and price, makes an industry less competitive and increases profit potential for the seller. The concept of buyer power Porter created has had a lasting effect in market theory.
CPESTLE analysis, which is sometimes referred as CPEST analysis is a concept in marketing principles. Moreover, this concept is used as a tool by companies the world over to track the environment they’re operating in or are planning to launch a new project/product/service etc. CPESTLE is a mnemonic which in its expanded form denotes C for competitive, P for Political, E for Economic, S for Social, T for Technological, L for Legal and E for Environmental. It gives a bird’s clear view of the whole environment from many different angles that one wants to check and keep a track of while consider on a certain idea/plan.
CPESTLE ANALYSIS OF MITSUBISHI MOTOR’S
First of all competitive. Mitsubishi motor’s has various competitors all over the world. They are well-positioned to answer all manner of client demands by proposing consulting-driven solutions and high-quality and multifaceted services. To ensure they properly realize these solutions, they strive to upgrade and extend their unique competitive advantages in terms of professional knowledge, information gathering skills, and third-party network, with the view to enhancing and maintaining the quality of their product line-up.
Second factor is political. These factors determine the extent to which a government may influence the economy or a certain industry. For Mitsubishi government imposes a new tax or called as duty due whereby it had change the entire revenue generating structures of organisations. Political factor includes tax policies, fiscal policies, and trade tariffs. That a government may levy around the fiscal year and it may affect the business environment to a great extent.
Third factor is economic. These factors are determinants of an economy’s performance that directly impacts a company and have resonating long term effects. Mitsubishi Motor’s rise in the inflation rate of any economy would affect the way companies’ price their products and services. Adding to that, it would affect the purchasing power of a consumer and change demand/supply models for that economy. Economic factors include inflation rate, interest rates, foreign exchange rates, economic growth patterns etc. It also accounts for the FDI (foreign direct investment) depending on certain specific industries who’re undergoing this analysis.
Fourth factor is social. These factors scrutinize the social environment of the market, and gauge determinants like cultural trends, demographics, population analytics etc. Mitsubishi motors’ realizes that most of their customers are domestic customers. Their lifestyle and cultures affects the demand of Mitsubishi Motor’s. They applied different strategies to increase the demand of the customers according to demographic and population.
Fifth factor is technological. These factors pertain to innovations in technology that may affect the operations of the industry and the market favourably or unfavourably. This refers to automation, research and development and the amount of technological awareness that a market possesses. Mitsubishi allows the customer to book their cars through internet. They make use of the technological thoroughly in order to satisfy their customer’s.
Sixth factor is legal. These factors have both external and internal sides. There are certain laws that affect the business environment in a certain country while there are certain policies that companies maintain for themselves. Legal analysis takes into account both of these angles and then charts out the strategies in light of these legislations. For example, consumer laws, safety standards, labour laws etc. On order to make any changes in Mitsubishi Motor’s they need to follow the laws, rules and regulation.
Seventh factor is environmental. As everyone knows Mitsubishi motor’s maintained their quality of their vehicle. They maintain their standard in the market. It all depends on the customer’s. They maintain by manufacturing the best vehicles.
ANSWER TASK 2
VALUE CHAIN ANALYSIS
A value chain analysis, providing both qualitative and quantitative background information, is to be undertaken for all case studies (products) included in the project before an econometric analysis is undertaken. Sources of information for this analysis may include secondary data, published or unpublished literature, surveys, focus groups, and rapid appraisal. The value chain analysis includes the following stages Production, processing, transportation, final consumption, regulations, market stricture, and data availability. Mitsubishi Motors is making great efforts to achieve the revitalization targets set in the Mitsubishi Motors Revitalization Plan, and to strengthen its financial position. These targets include rolling out new models, increasing sales volume by reinforcing the sales capabilities of distributors and providing high-quality services. (Research and Markets, 2013)
VALUE CHAIN ANALYSIS OF MITSUBISHI MOTOR’S
Mitsubishi motors’ get their raw material for their vehicle and the parts from a standard supplier based on their manufactured items. Till now Mitsubishi motor’s maintaining their quality on the vehicles. During manufacturing they also provide a very good trainee to ensure and to maintain the quality of the vehicle. They always choose the well skilled person to manage the company. Till now they do maintain a very good relationship with the customers and also suppliers. Mitsubishi motor’s always strengthen it is dealership to secure their product in order to maintain the standard in the market. As per the customer’s demand’s increases, Mitsubishi motors’ provide the best quality service after sales and also continuous to improve the values of the products and services. Mitsubishi Motors North America (MMNA) today reported a year-over-year sales increase of 27.8 percent in February. The 6,051 units sold marked Mitsubishi’s largest monthly sales total since March 2012. Mitsubishi Motors North America, Inc., (MMNA) is responsible for all manufacturing, sales and marketing operations for Mitsubishi Motors in the United States. MMNA sells cars and light trucks through a network of approximately 400 dealers. The Mitsubishi Motor is not an exception in this regard and the implementation of new CRM system has already proved its efficiency. In fact, the company is mainly concerned with the provision of customers to communicate with agents of the company by means of the call centre. In such a way, the call centre becomes a strategically important part of the company-customer relationship because the company attempts to demonstrate its openness and readiness to help customers when they need such assistance. At the same time, the company attempts to optimize the functioning of its call centre using new technologies which increase the efficiency of the work of its call centres. Moreover, the company outsources these services which leads to the increase of efficiency of call services, on the one hand, and saves costs the company spends on the call centres, on the other. In such a way, Mitsubishi Motor manages to combine the high quality of services with high customer satisfaction and efficient communication between the company and customers. (Essay 911, 2013) Mitsubishi Electric purchases a wide variety of materials and components from both overseas and domestic markets. We recognize our corporate responsibility and are eager to provide business opportunities for the communities in which we operate. Ensuring compliance with laws and regulations. Respecting human rights and prohibiting discrimination, child labour, and forced labour. Creating proper work environments. In 1994, MC established an International Human Resources Office to advance the internationalization of its human resources. The principal initiatives of this are to (1) strategically promote the transferring personnel to Head Office from the regional offices around the world, between overseas bases, and to business investment companies; (2) promote the strategic hiring of personnel to fill management leadership posts; and (3) develop human resources through training.
INTRODUCTION OF SWOT ANALYSIS
SWOT is a short form for Strengths, Weaknesses, Opportunities and Threats. By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you have some measure of control. Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which you have fundamentally no control. SWOT Analysis is the most well-known tool for audit and analysis of the overall strategic position of the business and its environment. Its key purpose is to identify the strategies that will create a firm specific business model that will best align an organization’s resources and capabilities to the requirements of the environment in which the firm operates. In other words, it is the foundation for evaluating the internal potential and limitations and the probable/likely opportunities and threats from the external environment. It views all positive and negative factors inside and outside the firm that affect the success. A consistent study of the environment in which the firm operates helps in forecasting/predicting the changing trends and also helps in including them in the decision-making process of the organization. Strengths are the qualities that enable us to accomplish the organization’s mission. These are the basis on which continued success can be made and continued/sustained. Strengths can be either tangible or intangible. These are what you are well-versed in or what you have expertise in. Weaknesses are the qualities that prevent us from accomplishing our mission and achieving our full potential. These weaknesses deteriorate influences on the organizational success and growth. Opportunities are presented by the environment within which our organization operates. These arise when an organization can take benefit of conditions in its environment to plan and execute strategies that enable it to become more profitable. Threats arise when conditions in external environment jeopardize the reliability and profitability of the organization’s business. They compound the vulnerability when they relate to the weaknesses.
SWOT ANALYSIS OF MITSUBISHI MOTOR’S
Mitsubishi Motor’s are the one of the most popular brands in the automobile industry with excellent advertising and brand presence. Wide range of products from sedans to SUV’s to hatchbacks to motorsports. The corporation has seven vehicle manufacturing facilities in five countries, Japan, Netherlands, Philippines, Thailand, United States and Brazil. Mitsubishi motor’s has over 30,000 employees in the company. They only appoint high skilled employees. It is a global brand having a wide geographic reach with strategic alliances.
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Mitsubishi motor’s once faced economic crisis due to earthquake in Japan hurt the company financially. All auto manufacturers were trying to increase their profits by increasing their sales and decreasing their operating costs. Along the way they were also trying to increase their market share and gain a competitive advantage. All auto makers were operating in highly dynamic environments where they had to continuously change themselves in response to changing market conditions, while managing huge long-term capital asset commitments.
Mitsubishi motor’s developed hybrid car’s and fuel efficient cars for the future. Tapping emerging markets across the world and building a global brand. Moreover, Mitsubishi motor’s is one of the top fast growing automobile markets. Mitsubishi never fail to grab the top position in the market. It is all because of the value of the vehicle that they produce.
Government policies for the automobiles sector across the world. When the fuel price increases, the demand of the car decreases. This would be the dangerous threat to Mitsubishi. It is also a threat when the society prefers to travel by public transport like buses, trains and etc. This called as substitute’s mode.
ANSWER TASK 3
Introduction of Ansoff’s Product-Market Matrix
The Ansoff’s Growth Matrix was first introduced in the Harvard Business Review in 1957 in an article called ‘Strategies for Diversification’. The matrix (also known as the Product Market Matrix) is used to show the opportunities for growth available to an organization. The matrix helps strategists think about not just strategic direction, but also enables them to take account of risk and reward in their considerations.
Market Penetration – where the company tries to grow using its existing products and market segments – essentially this is a play to increase market share.
Market Development – where the company tries to grow by taking its existing products to new market segments.
Product Development – where the company tries to grow by taking new products to its existing market segments.
Diversification – where the company tries to grow by taking new products to new market segments.
This strategy aims to increase market share of a growing market to ensure dominance in that market, but it could also mean to shake up a mature market to capture more market share. Mitsubishi motor’s often improve penetration, including enticing customers away from their competitors, and encourages existing customers to become more frequent user of their product. This strategy had especially successful in increasing volumes of the economic sales in their motor’s organisation.
This strategy aims to secure growth by selling existing products to new markets. It refers to markets in the broadest sense and could mean new customer segments or new overseas markets. Mitsubishi applied this strategy and had revisited the marketing mix. Mitsubishi did new promotions to get new customers, new distribution channels even new price points to attract their new target customer’s.
Here, the firm aims to secure growth by creating new products for its existing markets. Mitsubishi new products come in many differ forms. Example improved speed, improved quality, and to complement their product. They tend to come up with a standard idea which they have plenty of competitors around them.
Using this strategy the company aims to grow by offering new products to new market segments. This strategy is clearly the highest risk, but conceptually it can offer the highest rewards. There are two broad types of diversification. One is related diversification and one more is unrelated diversification. They tend to produce new products in line.
PROPOSE A STRATEGY (MARKETING DEVELOPMENT)
As far as Mitsubishi investments are concerned, they are active in metals raw materials, including coking coal, coal, iron ore, copper, aluminium, stainless steel, and uranium. As the world economy continues to grow, future demand is expected to be quite robust for coking coal in particular. Mitsubishi are also undertaking ventures in new fields like platinum and palladium. With respect to trade, they are leveraging high-quality services and functions to strengthen their supply structure, including raw materials and intermediary products. By accurately assessing customer needs in each industry, they aim to develop our group’s businesses further and respond even better to global markets. In doing so, they hope to maximize their profits and business value. (Mitsubishi Corp 2013)
Furthermore, Strategic management is an essential aspect of managing modern businesses that involves forming goals and instituting programs that fulfil those goals. Environmental scanning is a component of strategic management where mangers study various economic, political and social factors that might affect the business. Environmental scanning can help small businesses to identify untapped markets and avoid costly mistakes. SWOT analysis and PESTLE analysis are two common strategic management tools that can help managers brainstorm and organize ideas during the environmental scanning process.
Moreover the Ansoff’s Product Market Matrix is also important for an organisation like Mitsubishi Motor’s. In the same way, people within organizations often have many different ideas about how they want to progress their careers. Perhaps they want to develop new skills, move into new roles, and even work in new industries. This is where you can use a strategic approach, such as the Ansoff’s Matrix, to start screening your options, so that you can narrow these down and choose the ones that best suit your situation.
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