Analysis of Organizations Current Position - Dyson - Assignment Example

Corporate Strategy Contents Contents 2 Task Analysis of organization’s current position 3 PESTLE 3 Five forces 4 Industry life cycle 5 Strategic group 7 VRIO 8 Strategic Resources and Capabilities 9 Task 2: Evaluation of Strategic Options 9 Corporate strategic directions 9 Business strategies for existing and new product lines 11 Internationalization approach 12 Innovation 13 Task 3: Recommendations 14 Strategic Route 14 Implementation 15 References 16 Task 1: Analysis of organization’s current position PESTLE Political Dyson is a large scale private organization, actively indulged into manufacturing vacuum cleaners. In UK market, fund raising has been a major issue for all companies. Interest rates are significantly higher in this country in comparison to other regions. The company is investing in research and development, in order to retain position in matured vacuum cleaner industry of UK. Economic The current market trend does not predict favourable conditions for any industry. There is unfavourable demand observed within vacuum cleaner industry. Market share of Dyson has decreased in past few years. Social Dyson has been able to address replacement demand prevalent in the industry. Investment in advanced technology has been a key to success for Dyson. Technological Technological advancements in the country are well adopted by the company. There are currently 175 new inventions, worked on by Dyson. It is the current market leader in vacuum cleaner industry of UK. Environmental Dyson has never been subjected to environmental allegations. The company utilizes best techniques so as to manufacture products which represent cleanliness (Allen, 2006). Legal UK trademark has challenged trademark registration of the company as it focused more on clarity. In-house trade mark attorney of Dyson can be considered as an alarming aspect in terms of latest development. Five forces Five forces framework has been elaborated in figure 1. Figure 1: Five Forces Framework Competitive rivalry in home appliance industry is intense since there is increased demand towards modernized equipments. The main competitors of Dyson are Electrolux, Hoover, Miele and Excel Dryer Corporation. Switching costs is comparatively low in this particular segment and this has increased bargaining power of customers. There is wide range of firms offering similar products to customers at different prices. Threat of substitute products is relatively high due to evolution of alternatives. These alternatives might decrease need towards vacuum cleaners. Bargaining power of suppliers is high since industry encompasses many players. All these firms rely greatly on suppliers because product manufacturing depends on availability of raw materials. Threat of new entrants is low in home appliances industry. This is simply because; lump sum investment is needed at initial stage while manufacturing innovative appliances (Mintzberg, 2006). Cost of establishment is high in this industry and with presence of big players it becomes difficult for new entrants. An efficient research and development team is needed in order to achieve growth and success in this particular sector. Industry life cycle Industry life cycle is a strategic model that is used to analyze maturity of industries. The industry life cycle model has been outlined in figure 2. Figure 2: Industry Life Cycle (Source: Cole, 2003) Industry life cycle has four distinct stages like emerging or embryonic phase, growth phase, mature phase and declining phase. At the emerging phase, industry output or profit exhibits an increasing trend. Growth phase is supposedly most desirable phase for any company since it denotes acquiring high profit margins through designing innovative products. Maturity phase is an industry stage where maximum profit can be gained by a firm but it even encompasses increased level of risk. This risk factor if not addressed properly might lead to declining stage. It can be stated that Dyson belongs to an industry which falls in the maturity stage. This stage demands for continuous innovation so as to remain competitive in the market place. Dyson is continuously investing in its research and development activities so as to manufacture highly innovative products for its target audience. In the home appliance industry, Dyson products are treated as different, new and a radical change. Strategic group The disposable income of UK residents has increased in past few years by 17% and this has supported growth of home appliances industry. There is more demand towards energy efficient machines such as modern vacuum cleaners, dryers, etc. Demand for compact models has altered dimensions of this particular industry. Dyson’s main competitive advantage is its wide array of innovative models. This company focuses on innovation and considers it to be a tool to attract as well as retain customer base. Strategic group map usually has four dimensions which is able to appropriately position companies in respective domain. The strategic group map for Dyson is given below. The players in this industry are inclined towards offering best quality products at competitive prices. However Dyson has gained competitive advantage through manufacturing high quality and innovative products. This organization comparatively offers competitive prices and it enables the firm to acquire desirable profit margins (Pringle, 2008). Competitive position of the company can be well evaluated with the support of strategic group map. On basis of this map it can be stated that the main competitor of Dyson is Hoover. VRIO The VRIO framework represents four aspects – valuable, rare, costly to imitate and resources being exploited by organization. VRIO framework also highlights essential resources which has strengthened competitive advantage of an organization. The most valuable resource of Dyson is its brand name. Brand value is an important intangible asset possessed by a company. Over the years Dyson has acquired sufficient experience in context of selling, designing and manufacturing unique vacuum cleaners. These skills and experience is utilized by the company in order to retain market position in the industry. Rareness of the company is its engineering practices in terms of designing innovative products. Dyson’s products are rare in comparison to competitors since their operational function is highly unique. Hand blade hand dryer of Dyson is a unique model compared to standard hand dryers. These dryers are capable of removing water without evaporating it, by using less energy. Inimitable competency possessed by the company is its combination of manufacturing and design engineering practices (Porter, 2008). These competencies are secured through patents and cannot be imitated by competitors. The company is holding copyright and patents in context of their innovative designs and advanced technologies. Dyson mainly exploits their financial, operational and human resources. It is clearly evident that the firm invests lump sum amount in research and development activities. Dyson also focuses on building a creative team who can contribute innovative ideas for business growth. Strategic Resources and Capabilities Resources and capabilities of an organization can be divided into two segments such as threshold capabilities and distinctive capabilities. Threshold capabilities and resources are required by a company in order to compete effectively in the market place. On the other hand, distinctive capabilities and resources are needed to gain competitive advantage. Threshold resources of the company are its wide base of talented employees and sufficient funds availability. Human resources supported by financial capital are essential resources to compete. Distinctive resources of Dyson are its manufacturing and production functions. Innovative designs produced forms its distinctive competency for long-term. Other such resources are its research and development team, large base of loyal customers, expanded market share and industry experience. These resources enable the company to retain its market share and incorporate new strategies for future development. Task 2: Evaluation of Strategic Options Corporate strategic directions The product range offered by Dyson is vacuum cleaner, airblade hand dryer, washing machines, handheld rane and various other electronic products. Market share of the company in comparison to its competitors have been represented in figure 3. Figure 3: Market Share of Dyson (Source: Lasserre, 2012) Corporate strategic directions mainly comprises of four strategies based on products or services and markets. These strategies are market penetration, new products or services, market development and conglomerate diversification as outlined in figure 4. Figure 4: Corporate Strategic Directions On basis of figure 4, it can be stated that Dyson has always emphasized on product development strategy. This strategy is all about designing innovative products or undertaking product modification for existing market segment (Johnson, Whittington, Scholes, Angwin and Reigner, 2013). The company currently has been able to distribute its product range across 45 countries. Their product line clearly defines innovation and varied customer preferences. Business strategies for existing and new product lines Strategy clock is able to portray different business strategies which are adopted by real world organizations. Figure 5 further elaborates the concept of strategy clock. Figure 5: Strategy Clock The existing product line of Dyson clearly indicates that the organization has incorporated hybrid strategies. These strategies are based on high product benefits and medium price range. Dyson offers highly innovative products to its customers and this has supported the firm to increase upon its market share to 21%. Hybrid strategy encompasses competitive prices along with product differentiation. The company did not confined its product line to vacuum cleaners but it even includes wide range of other electronic goods like washing machines, hand dryers, etc. New products designed by the company would also be based on hybrid strategies. Cost reductions and seeking high volumes are common factors associated with hybrid business strategies (Henry, 2011). Resources available with the company in terms of human and financial resources shall be sufficient to design new products like solar powered lighting, microwaves, etc. Dyson’s competitive advantage is aligned with its technologically advanced production techniques. Internationalization approach Dyson in current scenario operates across certain competitive markets like China, UK, USA and Japan. Internationalization approach basically denotes foreign market entry mode strategies adopted by companies. International market entry modes are well represented in figure 6. Figure 6: IME This company has been operating across different countries on the basis of joint venture strategies or export strategies. However in long run, it is advisable that a company should invest more in product design rather than in market entry mode. Franchisee market entry mode encompasses less risk in comparison to other entry modes. Dyson franchised stores would be an effective mode to explore untapped market segments. International strategy of the firm will be offer products as per customer preferences (Peng, 2013). Energy efficient devices shall be promoted by the company in international markets such as Middle East regions and unexplored European regions. Innovation Innovation in all product areas is essential for Dyson because there are strong players in the market place. Innovation can be facilitated through offering modified products to existing markets, launching new products in existing markets, distributing products in untapped regions and incorporating changes in product features as per customer demand in new markets. These four strategies shall be evaluated on basis of SAF framework, where they are named as Strat 1, Strat 2, Strat 3 and Strat 4.   Criteria Strategies     Strat 1 Strat 2 Strat 3 Strat 4 Suitability Brand Awareness 3 3 4 3   In next 5 years, growth in market share by 10% 2 4 3 4 Feasibility Sufficient human resources 3 3 3 3   Availability of expertise or skills for proposed strategy 3 2 3 5   Cost within £30M budget 3 3 3 4 Acceptability Positive reaction of stakeholders 3 2 3 5   ROI in less than 5 years 2 3 3 4   Total 19 20 22 28 The rankings in this framework are given on a scale of 1 to 5 where 1 represents least significant strategy corresponding to respective criteria’s and 5 indicates most significant strategy. Appropriate strategic options available to Dyson are product distribution in untapped market segments and designing new product features as per customer demand in international markets. Task 3: Recommendations Strategic Route The strategic routes are of various kinds which can be incorporated by companies like differentiation strategies, hybrid strategies, low-price strategies and non-competitive strategies. Hybrid strategic route shall be most convenient for Dyson. This route would be dependent on price and perceived benefits. Product related benefits usually differ from one region to another. For instance, strategic options that can be implemented by the company are diversifying its product range into international markets of Middle East and untapped European regions. This would enable the company to gain competitive advantage in terms of expanded market share. Hybrid strategic route is inclined towards implementing differentiation strategy correlated with offering competitive prices. Cost reductions through this route support an organization to accomplish desirable goals and objectives. Firstly it is recommended that Dyson should be able to determine those market segments offering future growth and success. These international markets will be targeted by Dyson. On the other hand, hybrid strategic route denotes reduction in operational costs. These costs can be regulated only through adopting franchisee market entry mode. In Middle East regions, Dyson can spread brand awareness by focusing on franchised stores. This strategic route ensures least risk and more profit margins. Internationalization will be exhibited through entering into completing new markets with new products or modified products. It is recommended that for initial years Dyson should not shift from its core corporate values. The company belongs to home appliances industry and it shall be retained even during internationalization. Implementation In short time frame, the strategic route would be implemented through marketing activities. Dyson can be successful in untapped market regions only by emphasis on effective promotional programs. These programs shall outline product features and its associated benefits. Promotional programs before market entry or product launch often proves to be beneficial because it drags customer attention. Strategic route implementation in shorter time frame would also include conducting market survey where customer taste or preferences can be well analyzed. This data obtained can be further utilized by the company in context of designing innovative products. Medium term time frame will reflect upon forming franchisees in international markets. These franchisees will help the company to gain greater accessibility of market segment. The company needs to design proper training program through which it can transmit required skills and knowledge to team members. Product design and manufacturing activities are some unique characteristics of Dyson that needs to be communicated across franchisee stores. Medium term time frame will also comprise of allocating financial resources to specific locations. These stores holding Dyson products would be opened in major cities of international markets. Sufficient funds are recommended for sales promotion activities. References Allen, M., 2006. Analyzing the organizational environment. UK: Select Knowledge Limited. Cole, G.A., 2003. Strategic management. Singapore: Cengage Learning EMEA. Henry, A., 2011. Understanding strategic management. New York: Oxford University Press. Johnson, G., Whittington, R., Scholes, K., Angwin, D. and Reigner, P., 2013. Exploring strategy: text & cases. Harlow, England: Pearson. Lasserre, P., 2012. Global strategic management. Singapore: Palgrave Macmillan. Mintzberg, H., 2006. Crafting strategy. Harvard Business Review, 46(2), pp. 239-342. Peng, M., 2013. Global strategy. New York: Cengage Learning. Porter, M. E., 2008. Competitive advantage: creating and sustaining superior performance. New York: Simon and Schuster. Pringle, H., 2008. Brand immortality: how brands can live long and prosper. Great Britain: Kogan Page Publishers. Read More