Strategic Management

In this paper i will analyse and evaluate competetivenes of Formula one Motorsport industry and its dynamic characterictisc influenced by external and internal factors to critically understand and explore strategic management thoery of sustained competetive advantege and its significant importance in order of carrier succes of any Formula one constructors .

I will try to clerly identify external and internal issues and changes , affecting (facing ) development of sustainable competetive advantage within formula One Teams , by presenting and demonstrating appropierate strategic management frameworks and approches . F1 industry its one of the most competetive and dynamic popular motorsport and specialist business worth E 350 billion to E400 billion(A. T Kearney Zygband et, 2011) ,within which many teams , effectivelly compete with each other in designing and constructing bolids prototypes to achieve succes and survival and competetive advantege agaisnt other rivals .

There is significat questions frustrating F1 constructors since decades , regarding to how most effeectively and efficientyly achieve competetive advantege for thier teams to outperform and step ahead of other competitors in industry and how to achieve sustainable competetive advantege for dominance in numbers of seasons . This essay will be devided on four part in which first part will give brief overview about Formula one Industry, then i will demonstrate theories related to sustiable comepetetive advantege with reflection to achievement of the success in the Formula One motorsport .

In the Next part of this paper i will critically eveluate generic model and strategic capabilities based on resource based view and knowledge based view of the startegy which requires constant reference to the resources and knowledge of competitors to achieve competitve advantege . In this section i will focus on the Williams ‘s team during thier dominance and technological reveloution in mid of 1990, where also i will provide my own point of view of why they didnet keep thier dominance and what they could do better at this time to sustain thier sucess futher .

This is industry is strongly competetive and is perceived as very dynamic and very difficult to sustain at the leading position for numbers of season which is proved by the fact that since the start of of the World Championship (1950) only two F1 constructors won the Chapionship consecuitevely more than four times MClaren(1988-1291) and Ferrari (1999-2004). In the end i will write my opinion of which team has created the best source of the competetive advantege and also finally i will draw conclusion based on my analysys and my findings obtained throughout analysing of this case .

Formula one Motorsport became one of the most popular and technologicaly innovative motorsport and sport TV event around the world which enjoyed the third highest audience in the world staright after Olimopics and World cup soocer . Unfortunately being fromula One constructor requires to generate sponsor revenues through increasignly sophiticated marketing strategies and also need to design , develop manufacture and race open wheel signle seat racecar.

This is extremly expensive and requires huge amount of funds from sponsors and stakholders which are essentila to create competetive advantage againts key marekt competitors by implemeting new revolutionary technology innovation into their bolids sucha as the most powerful and reilable engines with innovative design of the chasis with all aerodymanims . in 2008 the top 3 teams were Ferrari , Mclaren and Williams cvbvd ciag dalszy ,. t is not only an season motorsport event its a strong and competetive individual industry within which F1 constructors are business organisations competing with each other for the survival and the success in the every single F1 season . its seen to to be very simply enough to achieve sustained competetive advantege and succeed in in this indystry while having the best car ,the best driver , the best supporting team and all supported by finanse from sposnsors.

Unfortunaterly it does not so simple as not many F1 constructor up to date were not able to manage and linked all available all stretegic capabilieties based on resources and competence to work effectively together to achieve sustained competetive advantege in long term . such as 3 or 4 year or more . Todays strongly competetive and dynamic business environmnet requires from all organsiation and companies to seek developments of their susiable competetive advantege which enables then to stay attractive and innovative for the market and survive in competiton with their competitors .

According to Alderson (1965) firms should strive for unique characteristics in order to distinguish themselves from competitors in the eyes of the consumer for a long period of time that is, sustainable competitive advantage. Sustainable competitive advantage is the ability to offer superior customer value on an enduring or consistent basis, a situation in which competitors are unable to easily imitate the firm? capacity for value creation (Collis and Montgomery, 1995). According to Barney (1991), sustainable competitive advantage arises when the firm? s resources are valuable and the resources help the firm create valuable products and services, they are rare and competitors can not get acces to them, inimitable competitors cannot easily replicate them and appropriate when the firm owns them and can exploit them . .36 KCA JOURNAL OF BUSINESS MANAGEMENT: VOL. , ISSUE 1 (2009). The competetive advantege of an organisation such as Formula One construcotors is likely to be based on strategivc capabilities that are valuable and contribute to its long -term survival or competetive advantage . There are two main components of strategic capabilities resources and competence(ksiazka kopiowana)Resources are the asstes that organisation have or can call upon and competence are the ways those assets are used or deployed effectively.

In this case of formula one constructores resouresec are machinces ,patents ,computer systems , managers , engenires and deisgners as resources are all assets controlled and possessed by the firm (Barney, 1991) and competences are productivity ,organisational values, managerial competencies, organisational structure, process and technology ,knowldege flexibility and experance ,skills as a core competencies according to Prahalad and Hamel (1990) and which are the collective knowledge about how to coordinate the business.

Unfortynately efficiency and effectiveness of physical resources or financial resources or the people in F1 team depend not just on their existence by on the system and processes by which they are managed ,its depend of reletaioshiops and cooperation of the people in the team thier adaptability, thier innovatory capicity and and thier experciance and learnbing about what works well what does not which and develop core competencies within the firm or team .

Core competences are crucial as they linked set of skills ,activities and recourses that togehter deliver value,differentiate business from its competitors . To core competences of teams competing in F1 we may include effective communication between the constructors and the driver, ability to negotiate sponsorships, leadership and motivating abilities of CEOs, efficient use of the budget and royalties, skills, knowledge and experience of the team as a whole. According to Teece (Teece, et al. 1997) firm’s capabilities necessary for effective operations ill not support company’s superior performance. Strategic capabilities of the firm or in this case F1 costructors team can not be static they need to dynamic and change ,renew and recreate to meet the needs of the changing environmnet where Formula one Industry is most technologically developed and competretive motorsprort industry . Dynamic capabilities confirms that in order to remain competitive company must possess the competence to renew and adjust their strategic capabilities to operate effectively and efficiently in changing environment.

As It is significant for F1 team to work on design and development of both engine and car chassis on everyday changing basis, to maintained existing but also retain new sponsors which are crucial for any F1 team , to continuingly motivate and also recruit the new talents. These knowledge resources and capabilities, resulting from learning processes implies an improvement in response capacity through a broader understanding of the dynamic and competetive environment (Dodgson, 1993; Sinkula, 1994).

The organizational learning process such as in F1constructors Team helps tem to discover why problems are seen in a one dimensional frame work posing questions of the current systems and challenging paradoxes as they occur (Murray and Donegan, 2003) . [… ] We believe that the careful study of how capabilities and competition mutually influence each other could be one of the next great opportunities for the field of strategy research. ”

Henderson and Mitchell, introduction to the ‘Summer 1997 Special Issue: Organization and Competitive Interactions’ of the Strategic Management Journal. The issue of firm performance and what startegic approch they should select to achieve sutainale competetive advantege has been disccuesed for decades and encompasses most other questions that have been raised in the field, as for instance, why firms differ, how they behave, how they choose strategies and how they are managed (Porter,1991) (Ansoff, 1976). n this case there are two different startegic approches are presented the positioning approach and the resource based view . In itiated in the mid-1980s by Wernerfelt (1984), Rumelt (1984) and Barney (1986), the resource-based view (RBV) has since become one of the dominant contemporary approaches to the analysis of sustained competitive advantage. A central premise of the resource-based view is that firms compete on the basis of their resources and capabilities (Peteraf and Bergen, 2003). Resource based view theories suggest that in order to take the part of F1 race the team must retain tangible resources such as highly qualified technical staff which would include race engineers, designers, aerodynamicist, composite expert, system specialist, but also CEO, budget, sponsorship and also the driver as the core competent resource inluencing succes of the team .

The positioniong approch for business says that the best way to predict the future is to create it, and companies are often able to position themselves in ways which set and exploit the basis of competition to their advantage. The positioning approach is strongly linked with Porter strategic view , who argues that in order to achieve superior performance company must to understand the structure of the industry, in which it operates.

This will allow the firm to adjust their strategy and exploit the underlying economic factors within the industry even better than their competitors do which might allow to outperform them . From other point of view of (Barney, 1991, Rumelt, 1984) this approch is criticised , as it assumes that all businesses operates on an equal organisational field. As Formula one industry is quite closed industry , creates field of constant formal or imformal shareing of common technoligies innovations , regulationa as also tacticts and stategic approches .

According to Porter (1985) attractiveness of the sector can be defined by the implementation of the five forces model. Implication of this model to F1 motorsport industry presents that this industry is very difficult to enter industry with the low threat of new entrants due to high start-up costs and investments , there is quite low bargain power of customers due considerable number of viewers, power of suppliers is not really strong and very low level of potential substitute within industry but with very strong competetive high intensity of rivalry .

F1 has passed trough maturity stage around 1970-1980’s, an this demonstrat that the major players are in industry for good while what makes them well experiance and determined to achive competetive advantege agaist other top F1 constructors . And this raises the question what can be done to obtain and sustain competitive advantage in such environment? According to the positioning approach business can gain competitive advantage either through cost leadership or product differentiation (Porter, 1979).

A cost leadership strategy requires that a business define the source of cost advantage, which allows it to sell its products and services cheaper than rivals. Differentiation strategy on the other hand concentrates mostly on developing the product which will differ from those manufactured by a business’s competitors. within this type of industry sucha s Formula one motorsport there is no aplication for cost leadership stertegy as F1 constructor are focused on winning championships not looking at spending cost alomst at all .

Formula one Teams using differentiation strategy which is enebling them to used thier avaiable resources in most innovative and attriactive way to achieve competetive advantege which something proved that this is still not enough to suceeddd in the longer term as all F1 constructors are strongly focus on differrttinagn and constant innovating of their teams agaisnt oders competiotrs .

Another singnisicant external factor incluencing sucess of any constructors team are shifts anbd changes in environmnt which can suddenly change the value and importance of particular resoures and this is fundamental to understand and predict this before other to sustain advantege and this is what Williams constructors team has done in mid of 1990s. Williams team presents technological revolution in mid of 1990 by focusing on engerring aspetc which enables them to use many of innovations developed by others teams .

During the period 1992-1994 Williams cars won 27 out of 48races and they secured F1 consctrucor title for there years and they won Race championship in 1992 aand 1993 . By both Frank Williams and Patrick Head designs which were even more functional and innovative than this used in competitiors teams ,they makes thier bolides both very fast and reliable. The car development process was always top priority for Mr . Willinams and Patrick Head where importance of drivers took second less important place in their management of competetive advantege .

Unfortunately they didnet realised importance of the good test driver role which who could help technicain to define and solve the probllems with the car to developed thier deisgn and set up evnen more effectively . Main a source of competitive advantage for Wiilliam team was thier technical excellence created by William and Head and attention in building relationships with thier engine supplier Renault which was very valuable due to human and finacnial resources invested into the project.

Most importnat for Williams’s team was to gain a constructor leadership, by the development of innovative combination of engine and the car chassis. Thier differentiated strategy which focused on the deelopment process of engine and the boilids become also a base of the sustainable competitive advantage where driver was perceived as less important movable resources as they do not belive putting milions in to driver is nessersary , since the development of outstanding bolide . Frank williams and his ‘masculino’ approch unfortunateky was negatively effecting drivers relationships within thier F1 team .

Actually Williams team dominance in mid 1990 was also resulted of many other internal and external factors such as innovative development of thier competitors such as ground effect and active suspension developed by Lotus , carbon-composite monocoque developed by McLaren and and semi automatic gearbox developed by Ferrari . Close business relations with Renault and priceless long-lasting relationship between Patrick Head and Frank Williams. Frank strategy was successful only for three season in constructors championship, longer due to series of negative events occurring between 1994 and 1995 .

Williams team the best driver Ayrton Senna, died in the tragic accident during a San Marino Grand Prix in Imola in 1194. This accident shekad with whole Formula one industry as A. Senna was the most talented driver in F1. After year In 1995 Renault, decided to start manufacture, the engines as well for Benetton team. Furthermore one of Williams ex designers helped Benetton with car development, in which many technological innovations used by Williams in thier boilids influencing slow process of loosing competetive advantege of their tea . Another External factor which imacpt on fuutere ledarship of williams team was that M.

Schumacher joined Benneton team . Thankfully for Williams, Schumacher shortly moved to less competitive Ferrari, giving Williams team a clear way for gaining their sustain competetive advantege lost. Frank strategy was successful only for three season in constructors championship, longer due to series of negative events occurring between 1994 and 1995 . Williams team the best driver Ayrton Senna, died in the tragic accident during a San Marino Grand Prix in Imola in 1194. This accident shekad with whole Formula one industry as A. Senna was the most talented driver in F1.

After year In 1995 Renault, decided to start manufacture, the engines as well for Benetton team. Furthermore one of Williams ex designers helped Benetton with car development, in which many technological innovations used by Williams in thier boilids influencing slow process of loosing competetive advantege of their tea . Another External factor which imacpt on fuutere ledarship of williams team was that M. Schumacher joined Benneton team . Thankfully for Williams, Schumacher shortly moved to less competitive Ferrari, giving Williams team a clear way for gaining their sustain competetive advantege lost.

The critical elements which impact Williams losss of sustainable competitive advantage after mid of 1990 were based of their priority focus on developments of engerering resources to win constructors championship , and laack of startegic management of thier capabilieteis and ability to linked then to each other to achieve superrior performance avoinding crating disadvantege threshold capabilities. I am of the opinion that in some way it created disadvantage for the team. Previously mentions Knowledge based view mentioned confirmed how important or even most important are human resources and the ability to share gathered information. nfortynatek within Williams F1 team this approcha was not really respected especially in relation to the role of the dirver and thier proffesional knowledge that they possesed even if they changed each season . Aityan (2012) described that to expect a high level of loyalty from the employee, the organisation should show similar or even higher level of loyalty to them where in Williams team , Patrics Head together with Franks autocratic leadership style to drivers does not practice that at all and was also blocking flow of valuable information between departments . hats why drivers were leaving after one season (e. g. Mansel, Prost). I i have described Formula one indusrty as closed industry with low probabiolity of new entrants FranK did NOT realised that by this management approch he was disadbventing his team by letting drivers and even engeneires share their knowlded and concepts obtiane in williams team with other competitor teams . According to Pickett (2004) when people leave, their knowledge also does. . Tymon et al. 2010) found that the key predictors of employee’s intention to leave are satisfaction with and pride in the organization and perception of it being socially responsible. Williams’s management to secure their competitive advantage should have a better developed career developemnt program for their key employees where they should be empowerd in decision makin process within the team and and drivers should be respect and not treated as the recruits . The best team

Ferrari would not be able to achieve the succes even with this all tangible resources without proper and effective management strtegies allow all this available resources to be linked together and effiently Ferrari apooitned new boos who was twenty five year old, connected to Fiat owners, lawyer Luca di Montezemolo perceived as young and not necessary familiar with the industry surprisingly he appeared to be a perfect fit for the role due to his managerial skills and ability to put the order into day to day operations.

At the same time new technical director – Mauro Forghieri and a new leading driver Niki Lauda were appointed. Ferrari constructors team with thier autocratic style and thier respect for the importance of human resoursec in any developmnets precess proved to crrate and sustain the best source of competetive advatege by linkeages all tangible and in tangible resourses working together in appropiete manner wirh great copoeration of the key members of the team within the team .

Weekly Reflection During the past week in our Strategic Management Business class, Learning Team C learned more about one another, and I have no doubt several of us has even learned a great deal about ourselves. First, we were educated about certain topics that made each individual feel comfortable discussing such as growth, stability strategies, and retrenchment strategies, also known as the three grand strategies (Hunger & Wheelen, 2010). We reflected on a variety of topics that made us struggle a bit, such as portfolio analysis and the process of strategic choice.

Last, the Team connected what was learned during the former week to one particular field of work; evaluating a current warehouse operation and how the idea of implementing a third party vendor will improve delivery times and inventory management. Comfortable Topics Discussed This week the members of Team C felt comfortable discussing directional strategies. Directional strategies consist of three grand strategies. The three grand strategies are growth, stability strategies, and retrenchment strategies (Hunger & Wheelen, 2010).

The directional strategy that the team focused on this week was growth. The two growth strategies are concentration and diversification. The members of Team C enjoyed learning about and discussing the two concentration strategies, which are horizontal and vertical growth. Businesses achieve vertical growth when they take over a role formerly provided by means of a dealer or by a distributor. “The company, in effect, grows by making its own supplies and/or by distributing its own products” (Hunger & Wheelen, 2010).

On the other hand, businesses achieve horizontal growth by expanding operation to other geographic locations and by increasing the range of products and services offered to current markets (Hunger & Wheelen, 2010). Studies show business that grows horizontally has a higher survival rate. Topics that our team struggled with Learning Team C was intrigued by many topics from this week’s objectives. A topic we struggled with was portfolio analysis, including “BCG Growth-Share Matrix and GE Business Screen’.

According to Wheelen and Hunger (2010), “…since the 1970s and 1980s more than half the largest business corporations used portfolio analysis, it is still used by 27 percent of Fortune 500 firms in corporate strategy formulation” (pg. 220). The Matrix is a bit confusing as the manager is trying to determine the significance of a business unit or product line in terms of profit and assets. The GE Business Screen is even more complicated with nine cells and more data. Another challenging topic of Leaning Team C is the process of strategic choice.

Because there is an ever-changing environment for any organization, it is hard to reach consensus on the best strategic decisions. Therefore, managers must recognize disagreement is part of the task of strategic planning. Learning Team C found this a bit contrary to our current work environments in which consensus is valued and there is an emphasis on de-escalating conflict. Explain how the weekly topics related to an application in a particular field of work A topic that had a direct application to a current job this week was the article on warehouse management in a global market.

One of our company’s is currently in the process of evaluating a current warehouse operation, and the employees are reviewing the options of using a third party vendor with an improved logistics system or consolidating the current warehouses into one more manageable location. This article gave a good deal of insight into the thought on how effective multiple warehouses can be versus one larger warehouse because of delivery times and inventory management. The company is leaning toward using the third party vendor but materials that have been reviewed this week make us more confident about the decision.

Conclusion In conclusion, Team C found some topics difficult to learn initially and others somewhat less difficult to understand. One topic, which is particularly difficult, is portfolio analysis, including BBG Growth-Share Matrix and GE Business Screen. Although these tools can be confusing, they are helpful in determining how organizations should focus their time and money when handling multiple product lines. The topics Team C felt comfortable with were directional strategies, which are comprised of three grand strategies; growth, stability, and retrenchment.

Also discussed were the growth strategies concentration and diversification. When Team C looks at how these topics relate to real-world applications the article on warehouse management in a global market seems, especially fitting. The effectiveness of various warehousing methods is discussed in the article, which one team member mentions as a current work-related project for the company he works for. References Wheelen, T. L. , & Hunger, J. D. (2010). Concepts in strategic management and business policy (12th ed. ). Upper Saddle River, NJ: Pearson Education.

GLOBAL BUSINESS STRATEGIES TOPICS :INSTUTIONAL FRAMEWORKS SUBMITTED BY : JITTO PAUL JAMES 11-PCO-18 Technical framework for global strategies Introduction : Strategies in a global setting involves competition in industries that extends across national boundaries and firms with different national bases that may tap into strategic resources in more than one location. The frameworks for global strategic analysis at four levels are the geographic scope of the industry , the competitiveness of various locations , the geographic reach of the firm and the global integration vs. ocal focus of specific activities . The sustainable growth of the country depends mainly on the quality of a country‘s institutions. Without well-functioning institutions, education and training policies are less effective and factor markets cannot function efficiently. Even the Financial systems, which are a central element in funding new investment, do not function effectively in a weak institutional environment . In short, strong institutions are a central determinant of the ability of economies to compete and to grow successfully.

Level of analysis : issues , frameworks and actions The principal frames of reference required for strategic thinking and action in an international context , these include those required for defining the geographic scope of industries, the competitive advantage of countries and its implications for the locations of activities and tradeoffs between local responsiveness and global integration of different activities in the value chain . While each of these levels is complex, we find it useful to caricature. each of these frameworks graphically , much as Porter has done ith the five competitiveness . These caricature are drastic oversimplifications and omit many relevant variable and feedbacks , but they call to mind the various dimensions that should be considered . The goal is not to master the framework , but to use it to master the strategic issue at hand . This will require modifying the frameworks, often adding or changing dimensions , as the most relevant simplifications will vary from application to application . The basic frameworks and the definition of the various forces are presented below , together with the key references for each .

All of the levels of analysis identified above plays a role in overall strategic process . Often , this process is depicted hierarchically , zooming in , from the most macro to the most micro perspectives from positioning to implementation . In practice , the process is more simultaneous and chaotic , since changes in opportunities or threats may appear at any of the levels , triggering a new round of strategic assessment . Nevertheless , it is useful to present the frameworks as a simple hierarchy from industry structure , location based advantage , and the various dimensions of internationalization of the firm .

Institutional bodies for import / export Institutions engaged in export/ import effort fall in six distinct tiers. At the top is the Department of Commerce in the Ministry of Commerce and Industry and their main function is to formulate and guide India’s trade policy. In the Second tier, there are advisory bodies to ensure that export problems are comprehensively dealt with after mutual discussions between the Government and the Industry. At the third tier are the commodity specific organizations, which deal with problems relating to individual commodities and/or groups of commodities.

The fourth tier consists of service institutions, which facilitates and assist the exporters to expand their operations and reach out more effectively to the world markets. The fifth tier consists 44 of Government trading organizations specifically set up to handle export/import of specified commodities and to supplement the efforts of the private enterprise in the field of export promotion and import management. Finally ,agencies for export promotion at the State level constitute the sixth tier. Reference : International business competing in the global market place ( second edition ) by Charles W. L . Hill * Global business strategy : An introduction by Robin John , Grazia Letto Gilles . * Chamber of commerce * Ministry of trade and commerce * Investopedia for definition * EXIM Report http://www. slideshare. net/hemanthcrpatna/a-study-on-media-as-a-source-of-influence http://www. scribd. com/doc/95124603/A-Study-on-Media-as-a-Source-of-Influence-on-Consumer-Decision-Process-in-Bilaspur http://www. studymode. com/essays/Media-Impact-On-Consumer-Buying-Behavior-268694. html? topic

INTRODUCTION

A success history of the Europe’s second largest budget airline EasyJet began in 1995, when a young entrepreneur Stelios Haji-Ioannou leased two Boeing 737-200 aircrafts to initiate first routes from London’s Luton airport to Glasgow and Edinburgh (http://www. easy. com/PDFs/easyGroup_Brand_Manual. pdf. , 2011) The core business strategy of a new EasyJet airline was borrowed basically from US’s Southwest Airlines. The company has adapted this low-cost airline strategy to European market by cutting operational costs and decreasing the complementary services like providing onboard food or not selling connecting flights (Williamson, 2002).

Unlike its main competitor Ryanair which was mainly concentrated on flights inside the UK, EasyJet strategically pursued a market expansion and accomplished its first international route to Amsterdam in April 1996. To strengthen its market position in European continent, EasyJet has increased the number of base openings and acquisitions. In early 1998, the company has announced about an acquisition of a Swiss airline and became Geneva’s home carrier. Moreover, in 2002 EasyJet purchased its rival Go airline and inherited three new bases at London Stansted, Bristol and Midlands Airports.

Openings of new bases in Italy, Spain, France and Germany between 2003 and 2007 also helped the company to gain a sizeable presence inside the continent (http://www. easy. com/PDFs/easyGroup_Brand_Manual. pdf. , 2011). According to an annual report for the year 2011, Easy Jet was the United Kingdom’s largest airline by the number of passengers carried (54. 5 million), having 19 bases, 204 aircrafts and 547 routes between 118 European, North African, and West Asian airports.

Furthermore, the last year performance indicates that the customer satisfaction rate has increased by 79% and company’s total profit was 226 million pounds (http://2011annualreport. easyjet. com/overview/highlights. aspx. , 2011) Besides going to Initial Public Offering in early 2000, Stelios has decided to extend the Easy brand to other businesses. So, today Easy Group is the owner of the ‘easy’ brand and licences it to all of the ’easy’ branded businesses, including EasyJet plc. , Easy Car, Easy Hotel, Easy Pizza, Easy Cruise, Easy Mobile, Easy Office, Easy Bus, Easy Cinema and many other franchisees (http://www. asy. com/PDFs/easyGroup_Brand_Manual. pdf. , 2011). This report briefly analyzes the budget airline industry and the strategies EasyJet is applying to outperform its competitors and gives recommendations to improve its market standing.

MISSION STATEMENT

The mission statement of each company depicts its business purpose or a reason for existence. The Easy Group’s mission statement: “To manage and extend Europe’s leading value brand to more products and services, whilst creating real wealth for all stakeholders”.

VISION STATEMENT

The vision statement identifies the business’s goal and the steps it is going to pass to reach its business aspirations. Easy Group’s vision statement is: “To be the best low-fare airline in the world”.

BRAND VALUES

EasyJet is building its brand based on five values:

• Safety – Our number one priority, no compromises
• Teamwork – We will get there faster together
• Pioneering – Breaking the mould to find new ways and new opportunities
• Passionate – We are ambitious to be the best we can be
• Integrity – We mean what we say and we do it!

Moreover, the Easy Group is promoting its brand by sounding slogan “More value for less” (http://www. easy. com/PDFs/easyGroup_Brand_Manual. pdf, 2011).

INDUSTRY ANALYSIS

Competitive forces in each industry vary greatly depending on the number of factors. Before formulating and implementing any strategy, management in any industry should clearly identify the strength and possible effects of five different competitive forces. Thus, a formal industry analysis model developed by Michael Porter helps to analyze competitive pressures associated with: rivalry of competitors, bargaining power of suppliers, argaining power of customers, threat of new entrants and threat of substitute products.

RIVALRY AMONG COMPETING COMPANIES

Thompson, Gamble and Strickland indicate that rivalry is mostly fierce in the industry whenever the competitors constantly decrease the costs, buyers’ switching costs to competing products are high and the market growth is slow (Thompson et al. , 2006). In line with high customer’s bargaining power, competition among low cost carriers is leveling down the profits and margins.

Only a limited number of airlines like Ryanair, Air Berlin, Fly BE, German wings, DBA are in a direct competition with EasyJet as all they offer European-wide flights. However, there are numerous regional LCCs which also compete in their local market segment. As customers are very price sensitive, the low prices and other strategies to improve operations can be easily copied by competitors and differentiation based on other soft factors as service quality, additional benefits is becoming very challenging for these airlines (Geiger et al. 2008). Additionally, the major routes among Europe’s main cities are already served by large international airlines which in turn intensify the competition for LLCs.

THREAT OF NEW ENTRANTS

Capital requirements in the airline industry are immense. New entrants should have sufficient amount of aircrafts which also require high maintenance costs. Additionally, if a new entrant wants to gain a market share and remain competitive, it should achieve a maximum level of efficiency by price cuts which in turn may hurt its profits.

Apart from these financial factors, the European sky is already very congested with severe competition on airport slots and legal flight permissions from local authorities is quite difficult (Geiger et al. , 2008). Moreover, many established European airlines such as Lufthansa, KLM-Air France are entering to low cost carriers’ segment with their own low cost brands like Germanwings and Transavia-France, respectively (Cintuglu et al. , 2006). This last factor is indeed very high threat for Easy Jet’s operations in European market.

THREAT OF SUBSTITUTE PRODUCTS

Thompson, Gamble and Strickland point out that the level of pressures from substitute products can be appraised by three factors:

1.  whether substitutes are readily available and attractively priced,
2. whether buyers view substitutes as being comparable or better in terms of quality, performance and other attributes; and
3. how much it costs the end users to switch the substitutes (Thompson et al. , 2006).

Since the unique selling proposition of low cost airlines is speedy travel for a low price, any transportation that can compete on time and price requirements can be a potential threat.

The whole Europe is covered with fast, convenient and well-connected train system at comparatively low cost. For short distance travels, the train can be a better substitute due to time savings for security checks, check-ins and reservations. Moreover, cars are also well suitable for these kinds of trips as well. But for longer distance travel, a flight is much preferred due to a speed and time requirements (Geiger et al. , 2008).

BARGAINING POWER OF SUPPLIERS

In the airlines industry, the bargaining power of suppliers is rather high, as the market for airplanes is very limited worldwide.

Today, mainly two aircraft suppliers Airbus and Boeing are supplying the commercial airliners with airplanes. So, they are controlling the market for planes with a capacity of more than 130 seats and are in a strong competition with each other. This enables budget airlines to receive lower prices at favorable terms and conditions and additional maintenance services when purchasing new aircraft (Cintuglu et al. , 2006). However, as EasyJet has made an agreement with Airbus to purchase only A319 and A320 models, the switching costs to Boeing’s aircrafts would be extremely high.

Company would have to retrain the pilots, reorganize its supply chain for parts and maintenance. Another high cost EasyJet is facing is from airports (http://2011annualreport. easyjet. com/overview/highlights. aspx. , 2011). Due to its strategy, EasyJet is flying to only major small sized airports in the cities, which definitely charge airlines higher prices. In order reduce these costs, EasyJet is choosing off-peak times to flights, which is beneficial for both sides. For EasyJet, the cost of fuel accounts for almost 13% of its ticket price.

So with this rising fuel costs, the company is trying to hedge the price with suppliers beforehand and purchases the fuel in future or option terms (Williamson, 2002).

BARGAINING POWER OF CUSTOMERS

For the LCCs, the highest bargaining power of customers remains in the ticket price. Customers are seeking for transportation that can carry them to their destination within an acceptable amount of time and in the cheapest possible way. Therefore, passengers’ switching costs to other budget airlines or substitute mode of transportation like trains or cars are quite high.

Thus, EasyJet is selling its services directly from the Internet and avoids costly travel agents (Geiger et al. , 2008). Moreover, management is trying to offer the cheapest flight on any route across the Europe to remain competitive.

SWOT ANALYSIS

SWOT analysis is a formal tool for assessing the company’s current resource strengths and weaknesses, and upcoming external opportunities and threats. It provides a clear overview of the business’s market position and lays a foundation for crafting new strategies that will leverage the capabilities, take the opportunities and defend against the external threats (Thompson et al. 2006).

 STRENGTHS

A company’s strengths mainly include something it is competent at doing or any other attribute that enhances its competitiveness. Strengths can take a form of skill or important expertise, valuable physical, human, organizational assets, competitive capabilities or strong intangible assets and strategic alliances (Thompson et al., 2006). EasyJet’s primary strength comes from its strong brand recognition and brand equity. Due to the enormous efforts of the cofounder, the ‘Easy Group’ brand is widely known across the Europe.

Moreover, many customers can easily recognize and associate the orange colour with the EasyJet owing to the high service quality and customer satisfaction. Secondly, EasyJet is holding a very strong financial position. As the annual report for the year 2011 depicts, company’s profit before tax went up by 60 million reaching ? 248 million, despite high fuel costs (http://www. centreforaviation. com/analysis/easyjet-becoming-successful-hybrid-lcc-business-airline-annual-results-show-62977, 2011).

Besides this, company’s physical assets including 204 aircrafts of Airbus A319 and A 320 models are quite new comparing to its competitor Ryan air’s fleet which mainly uses second hand used aircrafts. Therefore, company’s expenses for aircraft maintenance are much cheaper. Another strong position of EasyJet was gained by its intensive short-haul network in Europe with 19 bases and 547 routes and high market shares in valuable markets like London Gatwick, Milan Malpensa, Paris, Geneva and Amsterdam (http://2011annualreport. easyjet. com/overview/highlights. spx, 2011).

WEAKNESSES

Company’s weaknesses are something it lacks or the areas which company does poorly relative to its competitors. Thompson, Gamble and Strickland relate weakness to deficiencies in competitively important physical, organizational or intangible assets, inferior or unproven skills, expertise or intellectual capital (Thompson et al., 2006). In a domestic market, the share of EasyJet is shrinking due to high competition from Jet2, Baby, BMI, Ryan Air plus a host of smaller independent competitors (Curtin, 2012).

Therefore, company should better to drop unprofitable routes inside the UK which just increase the operating costs. The other company’s weakness is that it is not offering in-flight meals to routes longer than two hours (Cintuglu et al. , 2006). Offering this kind of perk for longer distance routes may differentiate it from competitors and attract customers. Even though the share of the business customers are increasing rapidly in EasyJet’s customer base, company has not launched any tailored services for this segment, which may bring high potential revenue.

OPPORTUNITIES

Market opportunities in each industry offer the company a potential for growth. However, the attractiveness of opportunities varies greatly based on the company’s strengths and capabilities, its current strategies and corporate culture and vision (Thompson et al. , 2006). EasyJet’s strong financial position and revenue allows the company to acquire smaller competitors in the UK and European market, even in the Arabian Peninsula and CIS countries. So, there is high potential for the company’s market expansion.

Additionally, as the customers’ strong demand for mobility has increased, company can offer customized routes to different customer segments such as business trips, travelers and students. For the longer distance trips, EasyJet can enter to a strategic alliance with American, Asian or Australian airlines in order to create additional comfort for travelers.

THREATS

Threats are external factors outside the firm’s control and which may pose substantial negative effects on the company’s operations and profitability (Thompson et al. 2006). In the low cost carrier segment, there is a high threat from established national airlines, which are entering to low cost segment with their own budget airlines like did Lufthansa and Air France (Curtin, 2012). The other potential threats for airlines are increasing airport and airspace charges. As major European airports are raising the prices, a drastic affect is seen in decreasing marginal profitability of budget airlines (Geiger et al. , 2008). Another undesirable external factor for EasyJet is still a tremendous oil cost.

Even the company is hedging the fuel price; it is still rising unexpectedly and accounting for the greatest portion of ticket price. Moreover, the UK government is proposing to lower the tax on long distance flights and increase it on short-haul flights due to high carbon emissions (http://2011annualreport. easyjet. com/overview/highlights. aspx, 2011). If this law starts acting, it may dramatically affect the profitability of low cost carriers which mainly fly for shorter distances.

CORE COMPETENCIES

A core competence is a proficiently performed internal activity that is focal to a company’s strategy and competitiveness.

Thompson, Gamble and Strickland point out that most often, core competence is a knowledge-based, resides in people and in a company’s intellectual capital (Thompson et al., 2006). Since the EasyJet follows the low-cost business model, it has built its core competencies by improving its value chain activities and cutting costs to minimum. Company has decreased the cost of its supply chain activities by purchasing fleet of airplanes on a very favorable financing contract basis with Airbus, even achieved discounts up to 50% on list price (Spieler, 2004).

Moreover, as the fuel is one of the highest costs, EasyJet hedges forward, on a rolling basis, between 65% and 85% of the next 12 months anticipated fuel and currency requirements and between 45% and 65% of the following 12 months anticipated requirements. This policy has widely aided the company to reduce short-term earnings volatility (http://2011annualreport. easyjet. com/overview/highlights. aspx, 2011). Other main core competencies of the company lie in efficient operations. EasyJet’s plane utilization rate is relatively higher than other European airlines, about 12-13 hours per day (Spieler, 2004).

Company has achieved this efficiency by low turn-around time in airports. EasyJet’s aircrafts spend less than half an hour in the airport they arrive. Here, aircraft fueling and board cleaning are done simultaneously with passengers boarding and thus, valuable time is saved (Geiger et al, 2008). Moreover, company does not divide the board cabin into classes; rather it has only one class. Therefore, an extra space inside the plane is occupied by seats and EasyJet aircraft carries more people than other national aircrafts.

Due to its large load factor and efficient yield management system, company’s revenue for the year 2011 has increased at a higher rate than its costs. Source: CAPA and company reports EasyJet’s advanced selling, distribution and marketing activities also add to core competencies. From the time it was established, company has avoided extra commissions payable to agents, and designed strong web based platform for selling its tickets only through its web site. By implementing this strategy, EasyJet has cut down administrative costs.

Nowadays, a customer just pays for the ticket using his credit card in the company’s website and when arrives to an airport receives a special number in check-in and enters the board. As the marketing activities are crucial for the sales of tickets, EasyJet is trying to use distinct ‘guerrilla promotional approach’, national newspapers and even TV series which have already created large media buzz (http://www. mba2007. co. uk/dba/studies/Easyjet-casestsudyvaluechain. doc. , 2007). Additionally, company’s efficient human resource management system creates core competencies.

Unlike to other major airlines, EasyJet has a very lean and flat management structure and employs about 2288 people across its whole European network (http://2011annualreport. easyjet. com/overview/highlights. aspx. , 2011). This management structure helped the company to avoid high overhead costs. Moreover, relatively smaller number of employees both in crew, management and administration allows the company to pay competitive wages, profit sharing and results in improved productivity (Williamson, 2002).

BUSINESS STRATEGIES

Among generic competitive strategic options companies can pursue either low-cost provider strategy or differentiation strategy. These competitive strategies enable the company realize their plans to outpace their competitors, better serve their customers and become the industry’s leader (Thompson et al. , 2006). EasyJet has been implementing an overall low-cost provider strategy that helped it to gain a competitive advantage and become the industry’s lowest cost providers.

Company has achieved a cost advantage by efficiently performing value chain activities and controlling the factors that drive the costs of value chain activities. Moreover, it has eliminated some cost-creating activities in the value-chain (Thompson et al. , 2006). * Controlling the cost drivers. Main cost drivers in EasyJet’s operations are inputs. Taking this into account, company has been using a single-fleet strategy. By using a single type of plane, EasyJet is eliminating the costs associated with training of pilots, engineers, ordering new maintenance equipment and changing its supply chain structure.

Secondly, EasyJet contracts with major but small sized airports in cities where they fly. Planes do not land in big airports like London’s Heathrow or Frankfurt airport due to extremely high costs. But company still tries to choose smaller airports inside the cities (Cintuglu et al, 2006). This is beneficial for both customers that they do not have to spend time and money to reach the airport outside the city; and for EasyJet that is paying less amount of money to these in-city airports by mainly using off-peak periods of the day to its flights.

Besides these factors, by high utilization of its planes and efficient operations, company was able to reach economies of scale and experience- and learning- effects, which in turn decreased operational costs significantly (Spieler, 2004). Revamping the value chain. EasyJet came out with some innovative ways to eliminate cost-producing activities in its value-chain. Firstly, company has avoided the services of travel agents and sells its tickets only through its web page www. easyjet. com (http://www. mba2007. co. uk/dba/studies/Easyjet-casestsudyvaluechain. doc, 2007).

This innovative web platform is easy for customers to use, gives 15 language options, enables customers to compare the flights to various routes and destinations, and choose the optimal alternative. Besides the flights, customers can look through other service options such as accommodation, transport, holidays and other essentials (www. easyjet. com, 2012). Moreover, company’s strategy of encouraging customer to book earlier for lower prices assisted it to ensure a high yield management. But as the time of the flight approaches, the prices of the tickets also rise.

In a way to cut its costs, company has decided to strip away the extras and concentrate on only providing basic value – transportation, at low fares and without extra frills. Thus, company do not offer in-flight meals and additional inboard services (http://www. centreforaviation. com/analysis/easyjet-becoming-successful-hybrid-lcc-business-airline-annual-results-show-62977, 2011). Apart from the low-cost strategy, EasyJet has followed some complementary strategies like acquisition and outsourcing (Thompson et al. , 2006).  Acquisitions.

As the UK local market for low cost carriers was extremely competitive, EasyJet has strategically planned to increase its local market share and expand geographically. Company’s healthy financial condition allowed it to acquire its rival Go airline in 2002 and GB airline in 2007. Company’s chief executive Andy Harrison told about acquisition of GB airlines: “This is an acquisition which both strengthens our customer offering at London Gatwick, our biggest base with an attractive catchment area, and allows us to fully capitalize on the potential of the airport through a larger number of slots… e expect to achieve both cost and revenue synergies as we expand our business at Gatwick. ” (Dewson, 2007). These local acquisitions aided EasyJet to increase its slots and access in London Gatwick and Stansted airports. Besides this, the acquisition of Swiss airline in 1998 gave the company a vast opportunity to expand its geographic coverage ( http://www. easy. com/PDFs/easyGroup_Brand_Manual. pdf. 2011) Thanks to this acquisition, these years EasyJet is making almost 60% of its flights outside the UK, mainly inside the European continent (http://2011annualreport. easyjet. com/overview/highlights. aspx. , 2011)  Outsourcing. Outsourcing strategy has become very popular due to two reasons (1) outsiders can often perform certain activities better or cheaper and (2) outsourcing allows a firm to focus its entire energies on those activities that are at the center of its expertise and that are the most critical to

Introduction In today’s world there are many organizations and since there are many organizations it is obvious that there will be a lot of competition in the market. In order to compete with the competitors or rivals an organization develops a strategy to stay or survive in the market. Strategy is very important for an organization, it helps an organization to plan their strategy to attract more customers or for the publicity. This essay is all about the strategy or the plan that an organizations develops in order to spread their products. This essay will concentrate in the meaning & definition of strategy and the key factors of strategy.

Then the essay will shift its focus to what is the strategy of Honda, how does Honda formulate its strategy by analyzing environment of Honda i. e. internal and external. This essay will also explain strategic management and its three main elements. Main body According to Weigl (2007) “strategy definition corresponds with the classical interpretation. It implies some sort of “intended strategies” that can be general or specific and which and which have two essential characteristics: first, they are developed consciously and purposefully; secondly, they are made in advance of the actions to which they apply” (Weigl, 2007: 18).

To achieve a strategy an organization must give importance to some of the key factors of strategy: direction, scope, long-term, advantage to organization, environment, resources & competences and stakeholder expectations. Organizations goals and strategy depends on how organization is designed. It is the direction that helps any organization to get well designed and managed. It is the job of top managements to make sure that the organization is well directed to achieve their goals by designing the organization for suppose changing environment (Daft, 2010: 58).

Honda’s direction is to create a sense of joy when dealing with Honda. This direction of Honda gives the organization a track to pursue their strategies with (Honda, 2010). Scope is another vital element of strategy, for suppose can an organization focus in more areas of activity rather than one? The reason why scope is considered as vital part of strategy is because there is a worry of people (top managements, owners) that are handling or managing a firm conceives the firm’s boundaries. And these boundaries might also include some vital decisions like geographical cover age or product range (Johnson, 2008: 7).

Honda’s scope includes their main line products which are automobiles, motorcycles and power tools. This gives Honda a sense of internal surroundings with which their managers work with and their owners plan with (Honda, 2010). It is important for an organization to have long term strategy rather than short term, as it is mentioned by Leontief in 1978 that it is important for an organization to begin their decision making with long term strategy rather than short term; he gave importance to long term strategy because it is the only strategy that can be believed as serious (Leontief, 1978: 205).

This strategy will be an advantage and enable an organization to compete with other organizations. Another important factor of strategy is environment; this may need a lot of changes in the organization in the future. Strategy is also helpful for an organization in terms of building resources and competences. Recourses and competences give an organization competitive advantage. For example large companies will concentrate on strategies with large brands and small companies may alter the rules in its market in order to suit their own abilities. After all these key factors the main aim of strategy is to satisfy stakeholders.

Strategies can be affected by the environments and also by the expectations and values of stakeholders; however an organization needs to build a good relationship with its stakeholders and satisfy them because without them the organization is nothing (Johnson, 2008: 7). According to Walter in 1996 “strategic management is that part of general management of organizations that emphasizes the relationships to external environments, evaluates the current status of them and the effects of future changes in them, and determines the most appropriate response of the organization to them” (Walter, 1996: 3).

Strategic management consists of three main elements: strategic position, strategic choices and strategy into action. These three elements runs strategic management and this is done by understanding the strategic position of the firm very well, then the strategic choices are done for the welfare of firms future and turning those strategies into action. Strategic position is all about external environment and how does external environment affect an organization, a firm’s strategic capability and the expectations of stakeholders. The external environment deals with PESTEL analysis.

PESTEL factors can affect the external environment of an organization which can bring certain changes; and these changes might bring some opportunities or some threats to an organization. Another main point for strategic position is strategic capability where an organization thinks about their strengths and weaknesses. The purpose of strategic capability is to inspect the internal influences so that an organization develops it and make some strategic choices for the future. Last main point for strategic position is expectations of stakeholders which can also affect or influence the purpose of the firm and its strategy.

It is important for an organization to give importance to their stakeholders; however they should give special importance to those stakeholders that has more power and can benefit an organization (Kleiner, 2003: 120). P derives political which consists of factors that can affect organization in terms of government’s policy, regulations, legal issues etc. For example: tax policy, trade restrictions, tariffs, political stability, employment and labor law. E derives economic which consists of those factors that can affect organization in terms of and business operations.

For suppose the recent recession has allowed many organization to reduce the workforce. For example: interest rate, economic growth, inflation rate. S derives social which can affect an organization in terms of cultural aspects of the environment. For suppose the rise in health consciousness will definitely affect the demand of the product. T stands for technological which can affect the quality and cost of the product. Factors are: rate of technological change, technology incentives, automation etc. E stands for the environment which can affect an organization in terms of climate, weather etc.

For suppose ice cream will not have much demand in winter. L stands for legal which consists of factors that can affect an organization in terms of cost, demand of product and organization’s operation. Other factors are: consumer law, health & safety law, discrimination law etc (Loffler, 2009: 86). Honda’s political factors have led Honda to strategize within the Asian continent as this puts Honda at a competitive position. However Honda has political restrictions that they have to deal with. For example in china there is a car ownership restriction. One of the main conomical factors affecting Honda is oil prices. This effect will create variations in their sales of automobiles. And thus will need to create alternatives i. e. hybrid cars. Honda’s social factors will contribute towards their strategy for the future since social culture in the automobile industry is dependent on high power vehicles, hence their alternatives will take time to accepted by the society. With the technology in the world in the auto motive industry leaning towards achieving products that are more clean towards the environment, this forces the automotive producers to develop engines that are green.

Hence Honda’s technology is focused towards producing hybrid engines to target that market in the future with specific strategies pointing towards efficient production of such engines (BPMgeek, 2011). Five forces that have been explained by Michael porter helps an organization in following the rules for the competition in the market and industry. First competitive force is threat of new entrants; this force deals with the businesses that enter the industry of the existing organization. It is important for an organization to recognize this threat as it brings extra competition and production into the industry.

Second competitive force is the bargaining power of buyers; this is the influence of the customers on the price of the products produced by the organization. This is important for firms to recognize because it allows them to set their prices and manage their costs. Third competitive force is bargaining power of suppliers; this is in relation to the quality of the supplies and a price with which suppliers sell. If the power of suppliers is high, then they can sell at any price even if the quality is low, therefore organizations must realize the affect of this power so that they can make a strategy to that effect.

Forth competitive force is threat of substitutes; this force includes the threat which substitutes of organizations products holds within the market. This allows customers to easily shift from one product to another. The fifth force is competitive rivalry which includes the competitors producing the same products and services to the same consumers (Dransfield, 2004: 446 & 447). In Honda’s industry this threat is minimal since the industry is already saturated with high competitive organizations. Honda’s industry and competitive market allows buyers to have a strong bargaining power due to their being a lot of competitive products.

The threat is very large for Honda because the existing competition with Honda’s products is very powerful. The power within Honda’s industry is not much of an issue as Honda has secured their supplies from loyal suppliers and furthermore in the industry the suppliers generally don’t have a strong influence. Competitive rivalry with Honda is intense as producers such as Nissan, Toyota and General Motors also make competitive products (Termpaper, 2011). For organizations to effectively deliver their strategies they must first evaluate and analyze their external and internal environment.

Organizations should find out about their internal strengths and their weaknesses as no organization is without them, and finding them out is vital because without it manager would not be able to conduct an effective strategy. A good strategy exploits the organization’s strengths and tries to nullify their weaknesses. Exploiting the strengths in the right way create a competitive edge for the organization, however with the environment changing drastically and unpredictably it’s hard for them to sustain that competitive advantage.

Hence organizations can try to sustain their competitive advantage by making their strengths valuable in the changing environment, rare, hard for competitors to imitate. Hence assessing the external factors is vital for an effective strategy as opportunities can arise that can give reason for an organization to prosper however threats can also arise which can put their strategies at risk. Therefore it is important to analyze these factors to that the organization can be prepared for it. A SWOT analysis is one such tool that allows the analyses of the internal and external environment.

The main advantage of using SWOT analyses is that it helps you answers questions such as how can we exploit our strengths at the time of opportunities or how can we use strengths to reduce or eliminate threats also how can organizations use opportunities to nullify weakness along with recognizing threats and weakness to minimize their effect It is without a doubt that internal analyses is vital for any strategy to be in effect, hence there are two tools dedicated to understanding the internal strengths and weaknesses. Honda’s main strengths are their technology and their suppliers which are very loyal to them.

Honda’s weakness includes the fact that their auto mobiles have not covered all the niches within the market for the consumers as much as their competitors have done like Toyota and Nissan. Honda’s opportunities are that their hybrid cars and their technology that relates to the green environment which the future society would want to adopt, hence creating an opportunity for Honda to exploit their technological strengths. Honda’s threats include their competitors which also have started to produce green electric cars along with hybrid cars as well.

This poses a threat to Honda as they can cover large geographical areas for their products which can pose a risk to Honda’s strategy (Manize, n. d). Value chain method allow the organization to break the organization’s operations into parts such as the marketing functions, financial along with others and then determine which one of them are important ones that contribute to the strengths. These parts are known as capabilities and hence the VRIO (i. e. valuable, rare, inimitable and organized) framework helps organizations in determining which of the capabilities can contribute towards sustaining a competitive advantage (Griffin, 2008: 67).

Honda’s technological assets are valuable as they can stand being valuable even with changing times in the environment. Also their suppliers are loyal to them; this again adds value to Honda’s operations. Honda’s ability to build high quality cars with low cost is a rare attribute in the industry as very few competitors have the means to do so with the investment that Honda has put in their low cost and high quality maintenance of their products and services.

Honda’s suppliers have been contracted to remain loyal to Honda, furthermore they have captured the market in Asia for electric cars and hybrid cars even though the society still does not consider these type of vehicles important, they still have the brand loyalty in this sector which was made by their popularity of motorbikes within the Asian continent. These factors which Honda built are hard for competitors to imitate. Honda corporation is well organization with contributing their resources and capabilities towards attaining their strategies.

This is a rare attribute as many competitors have an effective strategy buy fail to implement it, hence Honda is one such firm that has managed to maintain an organized state and hence achieve a sustainable competitive advantage (Erdogan et al, n. d. ). Another main element of strategic management is strategic choices where an organization chooses a strategy for the future for both corporate and business levels. Strategic choices are done at three different levels mainly at corporate level, business level and functional level.

In corporate level the mission, vision and goals of the organization are determined. They basically answer questions like what business are we in, whom do we serve and what are we aiming for. Mission is the purpose of the organization and what they stand for, vision is the future state of what the organization wants to achieve and goals are the short term objectives of achieving the vision. Strategy is developed to gain a competitive advantage and hence specific strategic choices are made to achieve that competitive edge.

Organizations try to recognize their internal strengths and relate that to achieving their specific goals by the means of planning a strategy. This act allows the organization to gain a state of VRIO which gives them the distinct competency as compared to their rivals. Strategic choices are mainly done so that an organization can have the ability to compete at business level; however this needs a well recognition of competitive benefit that comes from the understanding of both customers and market (Jeffs, 2008: 101).

The last main element in strategic management is strategy into action which is done by the functional level. It is mainly responsible for implementing the different strategic choices and informing the top level management of contemporary changes. Michael porter had developed three distinctive competitive strategies which are low cost, differentiation and focused. These generic strategies allow organizations to use their strengths to gain a distinctive competitive edge.

Porter argues that organization must adopt at least one of the following strategies or risk being at a competitive disadvantage. Honda’s have always strived to attain highest standards of quality with reasonable pricing, and this is because they have adopted a low cost approach which keeps there technological investment costs covered and furthermore they have also adopted differentiation as their products meet the demands of large populations of organizations along with customers. (Moon, 2010: 98). Conclusion

This issue might not be considered more important, however if we go deep in this essay we can come into conclusion that how important it is. By reading this essay, we come to know how strategy is important for an organization. Some analysis like PESTEL and SWOT are also important for an organization to show them where they stand. In this essay strategic position is explained which consists of PESTEL and five forces explanation and how it is related to Honda. SWOT, five forces and VRIO are also explained and how it is related to Honda.

VRIO Analysis Valuable To carry out the efficiency and business growth, Ralph Lauren Corp has established a network of distribution center for inspection, sorting, packing and shipment to retail customers. This distribution network is not only responsible for full price retail store but also factory store and Club Monaco which was acquired by Ralph Lauren in 1999.

The company also utilized the technology such as bar code to improve the accuracy and efficiency of inventory management and controls and automated replenishment system, Logility to facilitate the tracking of movement of products and collection information for future merchandise planning. The efficiency of the distribution center of Ralph Lauren Corp is clearly a valuable resource to the organization. Rare Ralph Lauren Corp has a highly recognizable brand name and logo among several market segments.

Their customers normally maintain a high customer loyalty to the brand due to their product’s classic design and guaranteed quality. This gives the organization a competitive advantage and allows it to expand the product width to more than just clothing such as scents and home furnishing. Although there are couple competitor possessed as valuable brand equity but since its not widely possessed in the market, so Ralph Lauren Corp still enjoy some competitive advantage from its brand equity.

Inimitable Ralph Lauren Corp gains efficiency by utilizing technology extensively among the organization. The management information systems greatly improved the marketing, manufacturing, importing and distribution for feeding them the relevant information also the automated replenishment system as I mentioned with the distribution network. However they are not inimitable and non-substitutable resource as other firms can simply acquire them by purchasing the system and training staff using it.

However Ralph Lauren has an inimitable corporation culture. To every employee among the organization, Ralph Lauren is not just a brand but it is about a lifestyle, they are part of the process to create this lifestyle. The established corporation culture gives its employee a sense of belonging, tradition and legacy, which makes them proud of their work and willing to offer more to the organization. Organized

Since Ralph Lauren exploited inimitable, rare and valuable resources, so the organization managed to utilize its available resources which means the company is organized to exploit competitive potential of the resources and capability. Value Chain Analysis Inbound Logistics http://educ. jmu. edu/~gallagsr/WDFPD-Internal. pdf http://mmoore. ba. ttu. edu/ValuationReports/PoloRalphLauren. pdf http://en. wikipedia. org/wiki/Club_Monaco http://www. wikinvest. com/stock/Polo_Ralph_Lauren_(RL)/Distribution http://www. wikinvest. com/stock/Polo_Ralph_Lauren_(RL)/Filing/10-K/2009/F3048066

Executive Summary

The purpose of this report is to provide Rolf Danker and Danker’s Furniture Ltd with some short-term and long-term suggestions on how to successfully implement their new business venture into timber framed conservatories.

This report offers advice on how to successfully incorporate this new venture into the existing processes within the company as well as recommendations on short-term establishment and long-term expansion. Some of the problems that were encountered at the onset of the venture included communication breakdowns between company departments, quality concerns in the two existing Strategic Business Units, and resource constraints. This report suggests that Danker’s adopt a swim lane process map to help with the communications failures as well as improvements in the internal and external supply chains.

Overview of the organization

During the 1800’s, a Danker family from Norway moved to County Meath, Ireland. The family was associated with a tradition of high quality furniture design, and high-class customary made furniture. The Danker family discovered that there was a market for their furniture in Meath, enclosed by rich middle class estates. During the next few generations, the Danker’s family continued the family tradition of making furniture and at the end of the 20th Century, ‘Danker’ was renowned for its ability to produce customised hardwood design based on clients specific requirements and specifications.

The company became known as Danker’s Furniture Ltd and was well established in the manufacturing markets. The company had been very profitable and had obtained a great reputation. But in the late 1990’s the company experienced problems and the newly appointed Managing Director Rolf Danker appointed me as operations manager, which quickly resolved the underlying difficulties in the business at the time. Currently under the management of newly appointed Managing Director Rolf Danker, the business’ strategic focus is to grow and expand through the production of new goods and services.

The massive economic growth in the 1990’s resulted in a huge development in the construction area, Rolf Danker, successfully discovered an opportunity to enter into the standard cabinetry market. The company started making kitchen cabinets and wardrobes to exploit the rapid increase in the number of houses being built which required reasonable priced furniture. Danker’s believed that their established reputation in the customised furniture making industry accompanying the standard cabinets would increase their market share.

Rolf believed that this would be a quick way to increase profits instead of continuing exclusively with the previous business model. But by the 2000’s Rolf’s new initiative caused problems in the company’s business foundations. Fortunately, Rolf appointed me as Operations Manager at Danker’s, which helped to quickly resolve the underlying difficulties in the business at the time. Now in 2002, the company has two independently operated strategic business unites (SBUs), the craft purpose-made and the standard cabinet, the business is performing well again and enjoying good profit margins.

Description of the main issues in the case

The division was completely financed from the company’s reserves, and in 2002, the company’s balance sheet was very strong with no long-term loans or debt equity. Bankers to the company were very willing towards them and the company were constantly being encouraged by the bankers to take up the finance being offered to them and further expand their business. Following a new product concept generation process involving external consultants, a gap has been identified in the market and the Danker’s Board has agreed to enter the timber conservatory market.

The Irish market for conservatories is constantly growing but there is not a huge demand in the home market for hardwood timber framed. But it has been recognised that the UK market is around 20 times the size of the Irish one with a 50% share being for timber framed conservatories. It has been explained that due to the foregoing and rising interest in ‘sustainable construction’, which has been evident in the growth of timber-framed windows, due to improvements in technology and conveniently meets revised Irish Building Regulations.

There is no dedicated manufacturer for timber conservatory in the Irish market and this is where Danker’s have seen the opportunity, coupled with the attraction of the large, growing UK market. Rolf feels before focusing on the export opportunity, the company should focus on the home market first and gain experience, amend any defects in their product and then look to expand into the huge UK market. This will be Danker’s third SBU. Rolf has asked me as Operations manager to plan this new business venture for the company.

Duty as operation manager is the planning, scheduling and control of the activities that transform inputs into finished goods and services. For the new venture to succeed it is important that there is close co-operation between marketing, operations and engineering.  The company already has got expertise knowledge and skills in the marketing and operations areas; was short on engineering skills. Production Engineer, John Brady was appointed by Danker’s.  He is appointed to provide the initial engineering aspects for the conservatory line and then also provide production-engineering support to all the SBU’s. The sales manager drew up a report on the market characteristics for hardwood conservatories to begin the process of conservatory design and to decide on product specifications for the new product line.  The engineering manager drew up a Technical Specification Report (TSR) to develop a bill of materials (BOM) with a detailed analysis of dimensions and specifications for all the items on the BOM.  TSR contained a great deal of Development costs Product costs  Schedules  Materials technical specifications. New product development planning schedule was also developed This plan was presented to the management team meeting and was approved. The plan approved is to have the third SBU first production lot produced in 11/12 months time.  In order for the development plan to be a success, need to strictly adhere to the planning schedule, as any delay will result in extra costs.  This is when some problems began to arise.  Jack, the sales manager, did not see the need to have weekly product design meetings with John because he felt that the marketing and production teams already had enough to worry about with their existing products. In this report, we address this breakdown in communication as well as potential problems that will arise within the short-term and long-term operations and supply chains of the company from implementing their new timber conservatory SBU.

The first problem identified was what could be done to clarify the organizational relationships between marketing, production, and engineering. The issue that arose with the introduction of the third SBU was the smooth functioning of the interdepartmental relationships within the company.

To create a successful new product it involved more work than the primary sourcing of materials and construction of the conservatories. There needs to be a cohesive and common effort made by all departments to achieve success for this new product. We see this problem arising with Jack, sales manager who was slow to hand in the report on the market characteristics of hardwood conservatoires and declined to attend the weekly product design meetings, claiming the marketing department had too much on its plate.

A problem is created in the intrinsic makeup of the product, as now market research is not being contributed to the production of the new product. This could be a fatal flaw for Danker’s as they could be producing something that is not exactly what the customer wants. This increases the riskiness of this new venture. As well as this problem the breakdown in the relationships can result in delays and process breakdown as well as distracting from the two other S. B. U’s of the business.

The approach management took to address the issues raised was to focus on improving the relationship between the departments. This was done with a focus being placed on department approval. This system was going to be implemented at the weekly product meetings. Here the department heads could input on resources available, capacity and ability of their department to input on the production process. Jack would be able to have an input into important feedback in relation to aiming and promoting the product to the right customers.

A recommendation that could effectively deal with the issue is to implement swim lane process maps. The implementation of swim-lane process maps by the management at Danker’s will help to clarify the organisational relationships between marketing, production and engineering and combat the breakdown in their relationships. The swim lane process maps allowed each department to determine exactly what was required of them throughout the new product design process and prevented situations occurring where marketing refused to attend weekly product design meetings because they felt they were being overworked.

Each department was required to attend the weekly product design meetings; this was the first stage of the swim-lane process maps, the second stage involved finalising the product design and this was successfully carried out by the three departments and the third strategic business unit is now ready for launch into the Irish market. There was no ambiguity in relation to what was required from each department and if they were unsure of their role in the development process they re-analysed the swim-lane process map and took corrective action.

The second problem that we focused on was to look at what short-term actions could be done to improve the new product development process. For the new venture to succeed it is important that there is close cooperation between marketing, operations and engineering.  The company already has got expertise knowledge and skills in the marketing and operations areas; was short on engineering skills.  Production Engineer, John Brady was appointed by Danker’s.  He is appointed to provide the initial engineering aspects for the conservatory line and then also provide production-engineering support to all SBU’s. The sales manager drew up a report on the market characteristics for hardwood conservatories to begin the process of conservatory design and to decide on product specifications for the new product line. *The engineering manager drew up a Technical Specification Report (TSR) to develop a bill of materials (BOM) with a detailed analysis of dimensions and specifications for all the items on the BOM.

This approach adopted by management could be successful, but they need to strictly adhere to the planning schedule, as any delay will result in extra costs. The hiring of an engineering production manager was very valuable as he created a TSR which would aid the BOM ensuring the correct materials would be ordered, avoiding a potential loss of earnings. Recommendations which could provide additional help to Danker’s would be for each individual sector to improve their own areas which would impact on the overall development process in the short term. For engineering department important aspects they could focus on would be concept development and design. In the marketing area, it is critical that planning improves as well as commercial preparation.

By encouraging Jack attendance at the weekly meetings, he will have detailed knowledge of the other two departments, which will aid him in designing the marketing strategy for the SBU. In the production sector, it is vital that process for the supply chain is efficient. By implementing a detailed process map, this will ensure that there is an efficient process layout selected. The layout can then be measured using takt time, theoretical minimum and line balancing so that the amount of time idle at the workstation is minimised and the Danker’s can maximise their capacity. This process can then be evaluated at the end of the first year to identify any areas for improvement and opportunity to improve efficiency. The operations manager also needs to ensure that there is good, quality control.

All products produced need to adhere to the ISO 9000 and ensure that all products are inspected before they leave the production’s premises. In order to gain a competitive share of the Irish timber conservatory market, Danker’s must develop a competitive strategy. A business strategy can be defined as the identification of the market(s) in which the business will participate and how the business will gain a competitive advantage in those markets. A strategy is a pattern that integrates an organisation’s major goals, policies and actions into a cohesive goal in order to gain a competitive advantage. There are two main types of strategy;

1. Cost Leadership Focus This strategy involves company managing their costs better than their competitors, so that they can offer a lower cost to their consumers.
2. Differentiation focus The product produced is unique.

Customers are willing to pay premium price for it. Having seen already by the work done by the operations manager, Danker’s imposes two different strategies for its two SBU’s;

1.  Cost leadership focus implemented for the standard cabinet
2.  Differentiate focus for the custom made furniture.

Now that Danker’s are producing their third SBU, it is important they distinguish what strategy they are going to implement with it. As operations manager, we recommend that we implement a cost leadership strategy with the production of timber conservatory market.

If we succeed in managing our costs better than other competitors in the fragmented home industry, this will enable us to offer a lower price to our consumers and enable us to gain a competitive advantage in the market and contribute towards the goal of becoming the market leader in the Irish Market. As operations Manager, my job is to make sure that The business strategy gets translated into operational terms. * Assure the co-ordination with marketing and engineering.  Provide direction and guidance for operation decisions. The operations strategy is a pattern of structural and infrastructural operations decisions that configure the shape and design of the operations function and constitutes the operations strategy.

Currently Danker’s had two production lines, one for craft purpose-made and one for the standard cabinetry. We propose as operations manager that Danker’s changes its operations to three production lines, which would incorporate its new business products production process. In the short-term, we would advise Danker’s to use its retained earnings to fund the creation of the third product, as unknown whether its going to be a success, so should start out small to minimise costs. If Danker’s were having difficulties with three production processes or were struggling to fulfil capacity requirement, we recommend that Danker’s could subcontract out the work.

There would be no production costs involved. They would have to pay the company but if successful they could expand and develop the company. We propose that Danker’s outsource their distribution costs which are not close to their production premises and engage in distribution contracts with company’s in the North, South, West and deliver to companies in the East of Ireland. The third point recognised was the long-term developments of the new product development at Danker’s. Apart from this new product development opportunity on the home market, Rolf and the Danker’s Board were also attracted towards the larger, growing market for timber framed conservatories in the UK.

However Rolf felt that before focusing on this export opportunity, the company should first gain experience in the market / industry sector on the home market first, modify any shortcomings in the product-offer, and then look at how he might make in-roads in the UK. Rolf reckoned that the introduction phase of timber conservatories in the Irish market would need to have 2/3 years experience in Ireland to confirm its viability, before entering the UK market. The UK market is 20 times the size of the home market and up until now it has been described as a fragmented joinery industry. There is great potential to break into the UK market and establish as a leader in the market. This would generate huge profits for Danker’s. It is important to note that Danker’s Balance Sheet has been very strong, with no debt equity, long-term loans, or overdraft.

Bankers to the company were very favourably disposed towards them. Rolf Danker and his accountant brother Erik were constantly being encouraged by their bankers to take up the finance being offered to them and expand their business further. This approach taken by management to gain experience in the Irish market first, evaluate the product, and adjust any shortcomings they may experience before attempting to break into the UK market is crucial. 2-3 year’s experience in the home market would be essential before expanding. Before expansion of the product it is vital that our strategy in the short term is achieved and we successfully become a market leader in the home market first.

This will enable us to establish a reputation while creating a loyal customer base giving us a competitive advantage against competitors in the market. Furthermore, this would provide Danker’s with experience of the market before attempting to make in-roads in the UK. Provided we are successful in the home market, there are a number of tasks that would need to be in place for expanding our product. We would need to expand the business by purchasing a larger warehouse to produce the goods in order to facilitate production in the wider UK market as well as maintaining production in the home market and our other SBU’s. To aid expansion, we recommend on taking up on the Bank’s offer providing us with a loan.

By increasing capacity this will enable Danker’s to avail of a number of capacity considerations. There include economies of scale, technology/labour mix, and learning curves. With economies of scale the average unit cost decreases as output increases. It is essential that Danker’s are able to obtain lower costs by expanding their business. The technology/labour mix means that Danker’s can improve capacity by introducing new technologies, which will increase fixed costs but reduce their variable labour costs. The phenomenon of learning curves results in increasing output overtime, without an increase in resources. The external supply chain would also need to be developed to penetrate the UK market.

The existing supply chain used in the home market would be a template and then extend and adopt it to make it suitable for the UK market. An effective recommendation could be to design a detailed process map. This would allow all staff to ascertain what was required at each stage and the time constraints that would need to be adhered to. As operation manager, it is in imperative to ensure that the process is efficient. However, if Danker’s are finding it difficult to break into the UK market, they could create Strategic Alliance with suppliers from the UK. Distribution costs and warehouse costs will be a major contribution to costs as the firm breaks into the UK market. There needs to be smart decisions made by the operations manager in regards to logistics management.

This involves the planning, implementation, and control of the effective flow and storage of goods from the point of origin to the point of consumption. An effective recommendation for Danker’s would be to outsource their transport requirements, this will provide more control, improve customer service, and would be less expensive for the business. With the money from the loan, Danker’s could look to develop a production center in the UK to cut costs. They should then set up distribution centers close to the market in the UK, which would reduce transportation costs. Danker’s then should evaluate their performance on their third SBU to ensure that they are achieving their goals. A method of performance, which could be used is benchmarking.

This involves comparing the business to others in the industry to gauge where they stand and steps they may need to identify in order to become more successful.

Conclusion

Once Danker’s have their third SBU up and running, they will be able to develop sales and operations plans and forecast for the business by looking at previous sales, which will help them to determine the levels of capacity required, both strategically and tactically. They will also be able to plan for future materials required and gauge what inventory levels are required for their business. This will facilitate them to be able to develop a master production schedule. This will drive the supply chain and set precise production levels.

We believe that once Danker’s follows the short-term objectives and implements our recommendations, they will generate profits from their new product development and facilitate them in becoming a market leader in the home market. As a result, this will enable them to penetrate the wider UK market in the long run and alongside our advice compete with their product on a large scale. By expanding their business and creating a third SBU we believe that they can generate massive profits and become a leader in the timber conservatory market.

References

1. Introduction to Operations & Supply Chain Management; Bozarth & Handfield, 2nd Edition (2008); Pearson International Edition.
2.  BGMT 20010 Operational and Supply Chain Management 2011 Lecture Material, University College Dublin.