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Business strategy is defined as a long term approach of implementing a firms business plans to achieve its business objectives. Above all business strategy provides core competencies, differentiation and superior values for an organization.
Context of business strategy:
Objectives: Are the specific outcomes which an organization wishes to achieve by carrying out several activities. Objectives should always be stated precisely so it can easily be measured whether the objectives are been achieved or not. For
example, there should be step by step ways so it than becomes easy to judge to how much is done and how much remains and whether the work is in time and good or not.
Mission: It describes an organizations basic function in a society. It is done specifically to spread the knowledge and belief among the people. For example, it to become a top cellular brand, so society would know its reason for existence.
Vision: The vision statement is concerned with how the future will look like if the mission is achieved. Some often say a vision statement imagines what success would look like. For example, as I mentioned above to become a top cellular brand globally, this is a vision.
Goals: In every organization goals differ, but generally your goals can be regarding improvement in technology, or improving market share, or to improve the quality of the product or the expansion of the business or it can be these all at once. For example, to set an amount of market share in an particular time period can be regarded as a goal.
Core competencies: A core competency is a specific factor that a business sees as being central to the way it or its employees works. For example, they can see their technological factor as their core competency.
Strategic control: The practice of assessing the direction of the organization as evidenced by its implicit or explicit goals, objectives, strategies, and capacity to perform in the context of changing environmental and competitive actions. For example, to be able to have a strategy in place so that every department or different work runs smoothly all together.
P2: The students will be expected to discuss the concept of stakeholders and their types.
Stakeholder analysis is an approach that is frequently used to identify and investigate the force field formed by any group or individual who can affect or is affected by the achievement of the objectives of an organization.
Different types of stakeholder:
Owners, investors, directors.
Banks and creditors.
Customers and buyers.
Interest groups and companies.
P3: The student should conduct the PESTEL and SWOT analysis of the organization/business.
PESTEL analysis of Ericsson:
Political: Political entities played a vital role in the success of Ericsson switches business, Once a relation was built with a PPT in a country, it lead to follow-up contracts again. The U.S market for switches business was closed while the British PPT only used to buy switches from European companies. On the other hand there were no barriers to entry for the mobile telephony business since the product was new and unique.
Economical : In order to start the mobile telephony business Ericsson needed a high market share, which they achieved by selling switches and other radio equipments in U.S.A and various European countries including Netherland .This increased the number of customers, thus increasing market share. After the company got substantially popular, major businesses started to co-ordinate with Ericsson, these included major rivals namely Magnetic, GSM and Radio system .By the end of century the market share for Ericsson mobiles and Radio equipments reached 70 percent.
Socio-cultural: Consumer demanded for new functions and designs while Ericsson was not successful in providing that, a banker expressed 'they are just a bunch of engineers who couldn't care less what the phone looks like'. Also on the other hand consumer complained about the low battery life.
Technological: The Company had inferior technology in start due to financial problems, the SRA was only engaged in selling radio equipment's to the military, these included radiators, gramophones and radars. AXE was their main technology; AXE chips were powerful but big in size, while on the other hand competitors were making smaller switches.
First company to provide mobile phone technology.
High capacity switches (AXE)
Ericsson Information (EIS)
Strong management policies
Providing a wide range of products around the globe .i.e. radio equipments, mobile and telephone business.
New product and technology
Lack of Unity between various departments. They consider each other as lacking from knowledge, stupid and inexperienced.
Poor quality equipments causing dis-interest of customers
Installation in armored cars was a problem.
Switches were Large and expensive
High competitive environment, this leads to more customers
High Sales since the product is new and unique
Major competitors, namely NEC, Motorola, Fijitsu, Northern Telecom, EF Johnson.
Competitors offering financing solutions
Small switches of competitors and cheap in price
Intense competitionSWOT analysis of Ericsson: (Figure 2: SWOT analysis)
P4: Students should apply Ansoff Matrix on the studied business.
STRETEGIC POSITIONING TECHNIQUES
The Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy.
Figure 3: Ansoff Matrix (source: tutors.com, data accessed July 2009)
Ansoff Matrix of Ericsson:
Ansoff matrix can help Ericsson identify their future direction and strategic development. It may help Ericsson find out the choices available in the market in order to use their strategic capabilities. Currently in terms of the case, Ericsson is engaged in production of many existing products and one new product which is mobile telephone. This may sort out Ericsson into three sections of an Ansoff Matrix. These are explained as follows:
Existing product and existing market; Market penetration: For the current production of various radio and telephone equipments, including AXE chip.
Existing product and new market; Market development: For entering new markets including USA, Netherland and Middle East.
Existing market and New Market; Product development: By launching Mobile telephone system in their existing market .
Ansoff Matrix: This is a useful strategic positioning technique advised to Ericsson due to the fact that it helps in suggesting the business attempts to expand on a new or existing market or whether on the markets new and existing products. For the market development Ansoff can help Ericsson identify new geographical areas, for example where to sell the existing switches and radio equipments. They can seek out different pricing policies to attract customers. Similarly in the product development stage they can develop new competencies and modify their products on the basis of consumer appeal. On the basis of these qualities it was advised to use Ansoff matrix as a strategic positioning technique to identify their future direction.
M1: Here the students will be expected to identify at least three of the concepts (discussed in P1) in the organization/business selected. The students should give a brief analysis of how the concepts have been applied in the organization.
Here are the brief analysis of the three concepts that take place in the organization Ericsson.
You always start with small objectives and move onto the larger ones once the initial ones have been taken care off. It is the same with the organization that I am representing. Their prime objective at the start was that they wanted to become one of the leading mobile brand sellers in the world. Not many would argue that they hadn't reached their goal. To make this objective succeed they started off by having small steps of objectives which are key. They wanted to bring something new (they brought Walkman phones), they wanted to increase their market share and increase their profits. Recent performances show a decline in profits and market share and now they are looking forward to go one better than the last time and then to be able to maintain their market position.
When you start an organization you always have a vision for it, as where you want it to be in the future, as in for example 15 years later. Do you want it to be self-sustaining and be somewhere in the middle rather than the top or do you want it to have profits and want it to be at the utmost top. Sony Ericsson vision was one for the future. It wanted to be profit motive as any other organization would want to be, however they wanted to be a leading global mobile seller, to be on the utmost top. And from the time of initial start till now they are heading towards the right direction.
Ericsson wants to be technologically advanced and give its handsets something new which its competitors lack or do not come up with. It spends heavily on its research and development as its motive is to be the best globally. After merging with Sony, Sony Ericsson's Walkman phones are an example of its technological advancement over its competitors and its willingness to bring something new.
Many people often mistake vision for mission or mission for vision. However, both these things differ as vision is how the future would look like and mission is the way of getting there. Ericsson, after merging with Sony, one of its priorities is that it specifically targets the younger generations, as they are mostly mobile fanatics and love entertainment. It wants to be known for specifically entertainment phones providing the best of sounds the technologically up to date cell phones.
M2: The students should identify the stakeholders of the organization under consideration and develop the stakeholder map for the organization. Students are expected to give their rationale for placing the stakeholders in the map.
List of stakeholders associated with Ericsson:
Not all of the stakeholders are mentioned in the current case but their key stakeholder groups include:
Board of directors: Board of directors includes all the major owners of the business who changed with the passage of time. These personal included GE-Marconi, Ake Lundqvist and Lars Magnus Ericsson. The key focus of all the directors was to direct the strategy and major decision making of the business. They wanted an increase in their power and status and wanted to retain control.
Managers : Managers engaged with Ericsson particularly included the sales manager, marketing manager and the production manager, among these included John Meurling and Lars Ramqvist.
Competitors: Throughout time Ericsson expanded their business globally increasing their number of competitors in each of their business sector. Their main competitors included Nokia, Mitsubishi, NEC, Fijitsu, Siemens, Hitachi, CIT Alcatel, EF Johnson, Motorola, Northern telecom.
Customers: The customers of Ericsson want good and valuable products for the money they pay, since they have a buying objective and if Ericsson fails to satisfy their customers then they will go elsewhere.
Shareholders: The shareholders are the main investors in Ericsson, they are not as such mentioned in the given case but mentioning them is important as without their support the company won't have any suitable finance. Investors in Ericsson clearly want to be rewarded for their stake in the business. Their profit depends on the size of after tax profit and plans of director to invest for business expansion and the economy causing fluctuation in share price.
Community: The role of community is also not mentioned in the case but it was certainly necessary to mention their role. Community wants to benefit from the employment which Ericsson creates and indeed Ericsson was successful in doing that by making Stockholm world's most dense telephone city.
Stakeholder Map of Ericsson:
Board of Director
Low Interest High (Fig 1: Stakeholder Map)
As the map suggests and shows itself, that the powerful ones come first. As the main shareholders are the one with the most power. Then come the board of directors, as they have power and are as well very interested in their work. They are followed by managers, employees and competitors with their power and interest accordingly. Last are the small shareholders and the customers with the least power but some interest.
D1: The students should continue their discussion about the application of strategic concepts in the organization, and recommend improvements possible in the application of these concepts.
Following are the strategic concepts and the recommendations for improvements:
Ericsson before and after merging with Sony, was and is one of the leading global brands in the present world. It can be said that mostly the objectives they set for themselves are taken care of appropriately taken care of with time. They set smaller objectives and then the larger ones and they attend to them in order, which is the right way. Being one of the leading brands in the world there is very less room for error, so the way they are presently handling their objectives they should continue handling them in this appropriate order.
As you may already know the meaning of vision and have an understanding of it, it is something you think of your organization being when on a later date when you start. One should not have so many big goals as when it is not taken care of the owner would feel disappoint. So here, their vision (goal) should be their but not a very big one instead something that is realistic and while you are trying to achieve it you can try to overcome it and do better by performing as good as you can in the time period allotted.
Here is something that plays a pivotal role in enhancing the image and use of your product, as being technologically up to date or even advance when compared with you competitors gives you a push ahead of the rest of the pack. The company should invest big in research and development from time to time and should try coming up with new ideas rather than bringing something old back in some new shape, trying something different always pays of in the end.
I would surely suggest a few of my ideas which I think may or can help improve their sales and image in some way. Firstly, they mostly target today's generation which is a hit but now that they have mostly captured them they should try to bring in something simple but luxurious as to try to capture the market of elderly people. Secondly, they should try to give themselves on overall image, as to have a variety rather than just be known for their explosive but sounds.