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In the globalization era, competitive pressures are compelling business organizations to be in state of constant change. Changes are bound to occur on account of global exchange of information, knowledge explosion, cross Cultural Revolution, rising customer expectations and increasing competitiveness. Strategic management enable an organization to face challenges by taking resources to restructuring and downsizing, incorporating changes in strategic plans, availing opportunities and taking safeguards against threats.
In today's turbulent business environment, corporates should be flexible and responsive. Corporate parent in a multi firm organization can facilitate creating strategically organization, which have cascading effect on divisions under its control, which can become a true value driver.
Strategic management and planning is one of the most important fields of management. The need of Strategic planning and management has been triggered with the advancement in technology and globalization of markets. With the increase in the global market the organization are focusing on changing their strategies so as to be successful in the competitive world of today. In today's competitive world the corporations needs to be very flexible as well as responsive to have a competitive advantage.
In this paper we will bring into picture the analysis of New Dawn Drilling which operates in South Africa's gold and platinum mines and focuses on acquiring geological information. The company focuses on two types of drilling which includes Surface drilling and underground drilling.
Strategic planning is an important part of strategic management which focuses on developing different strategies of the organization. There are different theories as well as principles which underline the strategic management the most important being Principle of Enactment, this is the theory which focuses on creating the environment is based on leading technologies and innovation by the firm. Different strategies need to be formulated by the companies to have a competitive edge in the market. (Pernell,2008)
Environmental changes needs to be focused on by the companies so as to build an effective strategic planning. For this, the company needs to highly focus on both adaption and enactment.
Model used for Strategic Planning:
A firm needs to focus on three main stages in strategic management, which brings into picture different steps that are involved in setting up of the strategic models:
(Hitt, 2008) Setting the direction is the first stage of strategic planning involves which focuses on setting the vision, mission and value. The vision, mission and values forms the goals of the organization. Environmental scanning is the second stage of the strategic planning, through environmental scanning internal as well as external environment is taken into account. External environment brings into picture political, economic, social, technological, legal and environmental factors whereas internal environment brings into picture the strengths and weaknesses of the organization and opportunities and threats. After the environmental scanning the organization is able to generate and evaluate different strategies.
Models, Tools and techniques used to develop the marketing plan:
There are different tools, and techniques which are used by an organization to develop the marketing plan of the organization. Organization uses different tools and techniques which helps in market segmentation and developing the marketing plan of the organization. Different models used for developing the marketing plan are:
PESTLE analysis - PESTLE Analysis is the analysis which is used for environmental scanning through the analysis of different external environment factors which affects the working of the organization, these are political, economic, social, technological, legal and environmental threats and opportunities which affects the business.
Five force model - Five force model is the model which helps in doing the industrial analysis, through this model the organization is able to know its competitive position in the business of its operations. There are five aspects that are brought into focus in five force model bargaining power of suppliers, buyer, and intensity of rivalry, substitutes and entry and exit barriers. (Porter, 1999)
SWOT analysis - through SWOT analysis the organization is able to bring into picture the internal strengths and weaknesses of the organization and the external opportunities and threats of the organization. (Pernell, 2008)
With the help of these strategies the organization is able to generate and formulate different strategies which help in the working of the organization.
The External Environment
Political - Legal Analysis:
The mining industry is highly governed by different laws and political constraints. Being in a global business, there are several government rules and laws that the company needs to follow in a particular nation of its operations. With the increasing demands of the rare metals across the world the government has implied different taxes and laws on the mining industries.
South Africa being one of the most treasures company, operates on international and global level. The government focuses on implying different taxes on the mining companies depending on the income earned by these companies as well as capital expenditure. The South African government focuses on applying ring fence to the taxable income of the mining companies.
Mining companies have suffered from several political threats from the countries of its operations. There are several political and legal issues which affects the working of the companies working in this segment.
The world has recently witnessed economic downturn which has affected the levels of income and currency instability across the globe. The level of unemployment has increased considerably with the economic down turn which has resulted in inflation, this has considerably affected the purchasing power of the consumers in the market.
Mining is one of the basic sources of employment in South Africa. It has world class industries which focuses on generating wealth and employment opportunities in the country and is one of the major international businesses of South Africa. The government of South Africa focuses on stabilizing its macro environment through the strong focus on mining which supports the economic growth of the country.
The technological advancement and increasing use of e-commerce and internet have made the consumers information oriented. People today are focusing on investment of precious metals which has increased the demand of precious metals across the world.
With the increasing technological advancement, Mining companies are also making a move in adapting technology in its operations. Through innovation and increasing use of technological equipments the mining companies are adopting different measures so as to explore different methods of drilling and exploring the land for ores. Information system and technology is playing a crucial role in geological field.
An essential element in the operations and management of every business today is information. Employees in all positions and at all levels of business need information to do their jobs. An information system may include computers, but it does not have to; people use manual information systems all the time. In addition to computers, information systems use other types of technology, including communication equipment such as telephone lines and satellites and various devices such as fax machines, video cameras, and audio speakers. Taken together, the computers, communications equipment, and other technology used in information systems are called information technology. An information system accepts facts from outside the system, stores and processes the facts, and produces the results of processing for use outside the system. These activities are performed by four functions of an information system: the input function, the storage function, the processing function, and the output function.
Information systems store and process data, but they produce information, which is the basis for good decision making. When a business person makes a decision, he or she selects one of several alternative courses of action. Almost always the person is uncertain about what exactly will happen with each alternative. Information helps reduce the person's uncertainty, and so with better information a business person is more certain about the outcome of the decision. Better information is the principal benefit of many information systems in businesses. With the help of Information system, the company is able to improve on its working and productivity. A business has a competitive advantage when customers clearly prefer its products over those of other businesses. Some businesses gain a competitive advantage by being the least expensive seller of particular products. Others gain it by having products that are different from those of its competitors. Still other businesses concentrate on special or unique products for a small section of the market to gain a competitive advantage. Information systems can help a business gain a competitive advantage.
There are several environmental factors which affect mining which includes erosion, loss of biodiversity, formation of sinkholes, and contamination of soil. The mining companies needs to take care of these environmental factors to a great extend so as to minimize these factors.
Five Force Model (Industry Analysis):
Industry analysis for New Dawn Drilling has been done with the help of the Michael Porter's five forces model. This model brings into picture five forces which determine the competitive intensity and its attractiveness in the market. This analysis highlights the facts that affect the ability of the company in serving its customers and generating profits through the sale. The change in any forces requires a company to re-assess the market place.
Intensity of Rivalry among incumbent firms:
Mining companies works in highly competitive market because these companies deal in highly rare resources which are highly expensive.
The mining companies have comparatively low industry concentration.
Mining industry has been marked with high growth rate, with the changing preferences of the customers; mining industry has seen a tremendous growth in recent years.
The state of economies of scale of mining industry relies on tight local control and maintaining high technological advances and good services. Thus, with these things the firms work under high switching cost.
The mining companies have high exit barriers, with its strong brand positioning, brand image and the demand of products worldwide, so the exit barrier of big firms is quite high.
Threat of New entrant:
Considering the big firms operating in the segment, the threat of new entrant is low as mining companies work under high regulations and needs high investment and knowledge.
Economies of Scale:
New Dawn Drilling has high economies of scale with its high production and volume, the company is able to cater to different mines in South Africa. With its specialization and expertise service the company has achieved economies of scale.
For a firm to operate on a big scale, the companies need high capital requirements. With the high capital requirement, the threat to entrant is low.
The firms which are operating as mines are often controlled by several government rules and regulations. Several regulations in respect of h, safety and environment are levied by government. The companies operating under this segment needs to follow several acts and laws in respect of their working.
Threat of Substitutes:
There are no threats of substitute in this industry.
Bargaining power of Buyers:
The bargaining power of buyers is quite low, as mines that work on extraction of platinum and gold focuses on acquiring best service and geological contractors which help in extracting the metals and ore from the Earth's crust.
Bargaining power of Suppliers:
The bargaining power of suppliers in the high.
Supplier Concentration and importance:
The supplier concentration in the market is low and the suppliers play an important role in the mining industry market, they are the provider of all the required things needed by the buyer.
Strong management: New Dawn Drilling is marked with its strong management capabilities; the firm has been successful in making its place in South African Market.
Strong control over information system: the company has strong focus on information technology; the company has linked all its computers through LAN so as to have efficient working across its locations.
Strong Financial Position: The Company has been successful in attaining a profit of $20 million with a strong focus on controlling its fixed as well as variable cost. The company focuses on performance by improving its profitability.
E-commerce constraint: The Company still has E-commerce constraint.
The company has not focused on strategic planning and innovation so as to succeed in the future.
The company lacks futuristic goals.
Globalization: There are many mining countries in which the company can focus on, which include Latin America, Canada, Guinea, and Peru. With the increasing globalization and demand of the products worldwide, the company has an opportunity to capture the market which is untapped by it.
With the increasing globalization and technological advancement, the company can focus on adopting new technology for extraction and drilling.
Collaboration with different mining and drilling companies across the world.
Increasing demand of ores and metals across the world.
Focus on other extractions like coal, oil and other precious metals.
Economic or subprime crisis around the world
Increase in the price of providing technological solutions (e-commerce) - With the advancement and increase in the use of ecommerce, the prices of ecommerce are touching the sky.
Changing environmental conditions
Challenges in the global trade and different trade policies and duties levied on export and import of products.
Increase in Price of extraction and drilling.
Fluctuation in foreign currency and transactions
Core competency helps an organization in achieving or gaining a competitive advantage from their prospective competitors. They are the core capabilities of the firm. New Dawn Drilling needs to strongly focus on adoption of new technology that can be used in extraction of minerals and extraction of metals. The company also needs to focus on information system which will help in efficient usage of resources and connectivity through its different location.
Grand Strategy Matrix:
New Dawn Drilling must focus on presenting itself in quadrant 1, as it can have strong competitive position and have an opportunity to grow as it is in growth market. It should focus on adopting aggressive strategy and fall under quadrant 1 as that is the quadrant which focuses on rapid growth of the company and different strategies that the company can adopt for growth and holding its position in the competitive market. The few strategies that the company can focus on so as to facilitate growth and its competitive strength are: diversifying and expanding its reach to mass market, delivering value services, adoption of new technology and information systems.
New Dawn Drilling should focus on achieving competitive advantage by utilizing its resources optimally, by utilizing its resources and capabilities it will be able to focus on different functional strategies which will help in creating value thus, creating profitability. It should focus on its five core aspects i.e. technology, service, information systems, people, and place.
By investing in innovation and research, the company will be able to attain competitive advantage. It should make a proper use of external opportunities with a focus on services, technology, and expansion to the global market.
The company should strongly focus on information system and technological advancement along with a strong focus on global markets. Information systems that support or shape the competitive position and strategies of a business enterprise. So a strategic information system can be any kind of information system (TPS, MIS, DSS, etc.) that uses information technology to help an organization gain a competitive advantage, reduce a competitive disadvantage, or meet other strategic enterprise objectives. Investing in information technology enables a firm to build strategic IT capabilities that allow it to take advantage of strategic opportunities when they arise. In many cases, this results when a company invests in advanced computer-based information systems to improve the efficiency of its own business processes. Then, armed with this strategic technology platform, the firm can leverage investment in information technology by developing new products and services that would not be possible without a strong IT capability.