Strategies Ansoffs Matrix would execute for British manufacturing


In a period of economic recession, which of the strategies in Ansoff's Matrix would you execute for a British manufacturing MNE? Conduct a PEST analysis for British MNEs. Will the benefits of new technology off-set the investment in R+D for international business in an era of globalization?

Introduction: Background of British MNEs:

Multinational business is a business that operates in more than one nation. Coca cola, Kellogg's, IBM, McDonald etc are few examples to mention. They bring investment to both nations that they have their operations in and their home base. They are supported by government for setting up as they uplift the nation's economy.

According to findings made by Jerry Jones¹ there has been a decline in manufacturing company due to more emphasis being put into service industry. Although manufacturing contributes to the high extent to GDP of Britain still manufacturing industries are being relocated to developing countries for their economies to grow and serve as a market to British exported goods. Developing countries have the advantage of low cost production due to access to cheap raw materials and lower wages compared to advanced countries.

1.1. Economic Recession

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Economic recession is when the business suffers a decline due to the fall in demand of consumers as the purchasing power and ability declined. This happens when the quantity of the goods manufactured and consumed are not matching. During recession goods produced are in excess due to high prices. Employment is also in decline many companies even reduce wages for its employees and this is also a cause for the purchasing power to fall.

PEST Analysis for British MNEs:

Analyzing risk is essential in today's time where there is a growing expectation from stakeholders and colliding priorities. There are internal factors that affect the organization which the organization have control upon but there are factors that are external to the business which they have no control over e.g. political, economical, social and technology. These changes can be evaluated and analyzed by carrying out PEST analysis in order manage them before hand.

Political analysis:

Minimum wage legislation that increased British's minimum wage is beneficial to British firms as the people will have more income and therefore spending power would increase yet at the same time the wages to pay the firm's employees would go high causing the decline in profit margins. As Act of government would increase the cost of production for the firms therefore firms have to come up with strategy that would maximize their profits while taking the rising wages in mind.

The efforts of government to increase the level of workforce by offering allowances for interviews and attendance to colleges in order to increase the workforce and give companies the benefit of choosing the right candidate for the right post.

The United Kingdom is also a member of the G7, G8, G-20 major economies, the Commonwealth of Nations, the Organization for Economic Co-operation and Development, the World Trade Organization and EU this gives the multinationals the opportunity to capture larger market and also learn from the other competing companies. It also collaborates by third world countries by providing grants and support for growth facilitating into business relations.

Economical analysis: - {Appendix 2}

Recession led to stock prices fall in stock market and that damaged investment greatly. Investors avoid investing in industrial production companies that are seen vulnerable to withstand the intensity of recession and could dissolve in long run. Big companies are strong and can strive to get through those with lesser resource base would find it difficult to manage the recession.

The currency has depreciated compared to other competing currencies of the world this enables the cost of running the business to be similar to the other countries but it has also affected the importation. Due to recession the cost cannot be forwarded to the end consumer to due to price reduction worldwide therefore for companies relying on imports requires them to pay more while exports become cheaper. {Appendix 1}

Interest rates on loans went high that reduced the rate of borrowings as there was no money in the economy. Companies relied on organic growth which was very slow. As the companies were to borrow with high interest rates the cost of production went high and so did the prices. As a recovery process the government intervened. Its intervention also resulted in increased national debts and therefore less to spend on development. Spending was emphasized on rescuing the suffered companies. Even the taxes paid ended up being used to stabile or boost the financial institutions.

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Interest rates, production costs and other cost of running the business went high therefore pay cuts and redundancies were the immediate outcome. This led to low demand as those who lost their jobs were also the potential market and recession also led to demand as there was low disposable income. Decline in purchasing power was inevitable.

Socio-economical analysis:

The social lifestyle, culture, personality of the people, population size, gender etc build up a social network of any country. Britain has a multi cultural environment as it's among the industrialized countries with mixed population of different origins of the world.

Due to recession and unemployment there was a big gap between the social classes of the people. As many middle managers were downsized and others lay off this led to degrading of people who were once in a higher social class. (Appendix 3)

The stages that people go through in life also was affected by the recession as number of people were laid off and some were losing out on their businesses that led to people retiring before time, others just become struggler and that also affected the market as a whole. (Appendix 4)

Technological Analysis:

The development of graphic designing and 3D has facilitated the companies to communicate to the masses by means of advertising while presenting their products or services with special effects making them more attractive and appealing to end users. Companies benefit by creating positive awareness to their targeted market and also increase the demand for such items.

Production and material management has been boosted by the advanced technology. Time saving, environmental friendly and efficient latest equipments and machinery facilitated in producing in bulk at a shortest time possible with minimum wastage and reusable materials.

The banks cash handling system, electronic transfers and direct debits facilitate the easy payment modes e.g. visa cards, online banking. Internet also serves as market and advertising area e.g. E-Commerce therefore saves times.

Technology in media and communication and computers e.g. web cameras, video conferencing and cell phones which are now as useful as the computers has also facilitated in the growth of business as it helps keep control over different branches across nations and also facilitated in fast decision making as information can easily be communicated.

Transport and distribution has enabled businesses to effectively carry out business across the globe with reasonable cost due to technology. Faster jets are facilitating easier movement of people and goods across the globe.

MNE's Growth and Ansoff's Matrix:

Every company strives to grow in all aspects of market share, market growth, experiences and profit margins. Therefore the mission and vision of all the businesses is to grow bigger and better in all aspects possible.

After years of research and writing Igor Ansoff came up with model that would gain the company competitive advantage and growth. His analyses based on 2 dimensions product and market. Whether the company should use the existing product or develop a new product and whether the company should find a new market or remain in existing market. After analyzing these strategies are then formulated to suit the situation.

This can elaborate further in the matrix below:








Market penetration is when the same products are sold in the same market. This could be by making them more attractive to the market or finding more uses of the product and then convincing the current users to buy more of it. With the recession striking this strategy would help manufacturing companies to continue with their production but emphasis on the promotional aspects of the product. As we have seen unemployment and other economic factors have lower the demand and therefore with intensive promotions companies can boost the demand and gain high market share and returns. They can even lower prices and cut on the cost of production in order to match up with the demand during the recession period e.g. resize the package and reduce its cost this will not only satisfy the buyers need but also in a budgeted manner. For a basic needs items not much emphasis is necessary as it won't be affected much e.g. food, education, medical etc.

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Product development: is when new product is developed to serve the current market. Environment is dynamic and so new products should be produced in order to meet up the changing needs of the environment and the people. Manufacturing companies will have to be more innovative and creative to come up with new products or modify current products to go with the latest trends in order to gain competitive advantage in this recession period. With the innovation they can even charge premium prices and return their investment in the short time (skimmed price) or charge lower prices to penetrate the market even further and gain higher market share.

Market Development: this is a strategy that really is emphasized by many companies during this recession period as markets are saturated demand has fallen therefore the need to develop a new market for their products have increased. This could be by regional expansions or transnational. One reason companies become multinational is because domestic markets are either saturated or there is high competition which doesn't allow the company to maximize its profits with the amount of resources its utilizing. Fall in the currency and interest rates have also facilitated in expansion of the market as less developed countries haven't been affected much by recession and therefore be ideal markets for the British produced goods.

Diversification: is when the company goes beyond its core business and indulge in a completely different business targeting different market all together. This could be backward integration towards the supply side of the existing product or forward towards the distribution side of the existing product. At times it's a complete conglomerate meaning that it engages in a completely different business from it core business. This strategy if used can be beneficial as it spreads the risk across different business. This would also serve different needs of the people. Many British companies have diversify e.g. Virgin group is a perfect example of diversification.

With recession hitting so bad companies should try exploring all the strategies to maximize their profits and earn returns to their investments and cost.

Globalization and Technology

It's evident that with technological advancement globalization has risen e.g. advancement in transportation increased the number of people moving around the globe and therefore making the world a smaller place.

It also facilitated in production, distribution and better serving of customers. Companies would benefit to greater extent in terms of getting better raw materials, knowing better their market etc. Technological advancement of internet, satellites and e-commerce has facilitated to globalization as people are aware of other cultures and keep pace with trends and fashion through technology.

4.1. Research and Development

Today's dynamic and competitive environment requires greater extent of research and development. Customers needs have become similar through globalization and technological advancement. To withstand the competition businesses need to have research and development or they may dissolve in the long run. For instance increasing levels of diseases in the world would require the medical specialists and pharmaceutical companies to come up with solution for these or they will fail to meet the changing needs and this can only be possible if research and development is in place.

Researches' are costly as it works with try and error concept therefore businesses should be aware of the cost incurred and compare it to the returns achieved by that venture. There should be a balance between the two so as to have effective research rather than going bankrupt.

Technology has also facilitated in reducing the cost of research e.g. internet facilitates in gathering information without personally flying around the world to get specific information. Also the use of online instant chatting helps in finding out what people actually like without sending the questionnaires and other paperwork.

Technology has also facilitated in terms of satellites and mobile media to learn more about any country before even visiting. This not only reduces the cost but also saves time to enter the market and gain competitive advantage.

In Britain many businesses keep their lab links between universities research centers to share findings and come up with innovative products and technological advancement with minimum cost. This is time saving and also cost effective way to handle research. Government also carries out research and development programs in order to develop the nation.

Innovations is appreciated in today's global economy people like to live simple and easier lives and are willing to pay a price for that therefore research and development cost can be recovered by charging premium price for a well innovated and sophisticated product.

5.0. Conclusion/Recommendations:

With the political, economical, technological and social risks around companies have to make use of the research and development to minimize or avoid risk and also be innovative in serving the market. With the recession situation there is a need not only to serve the market well but better then the competitors.