Environmental Analysis of North Australia Pastoral Company and Sydney Symphony Orchestra - Case Study Example

Campus: Bundoora Lecture time: Tuesday (9-11am) Lecturer: Mr. Grand Pyle Tutor: Professor Peter Dowling Tutorial Time: Tuesday (11am) Introduction The aim of this essay was to define environmental analysis, Porter’s five forces and sources of competitive advantage and relate to two organizations; North Australia Pastoral Company (NAPCO) and Sydney Symphony Orchestra (SSO). The external environmental analysis investigates the factors external to the firm that affect its performance. When organizations venture into the international markets, conducting environmental analyzes will be essential to understand the effect of competitors, suppliers, buyers and trends in the industry environment (Dragnić, 2014). One of the tools used in external environmental analysis is Porters five forces that evaluate the buyer and supplier power, competitor rivalry, substitutes and entry barriers. Firms that remain competitive are those that have unique sources of competitive advantage (Gasparotti & Jos, 2009). Environmental Analysis and Competitive Advantage The external environmental analysis examines the turbulent conditions in the firms’ environment owing to economic restructuring, technology advancement, and globalization and emerging new markets (Küçükaslan & Ersoy, 1997). Triggers for change in the external environment of a firm are fluctuations in business cycles, organizational growth, increasing competition, supplier requirements, customer expectations and internationalization of business (Banham, 2010). By analyzing external environment, firms can implement innovation and change successfully and make faster decisions to bring about growth (Gasparotti & Jos, 2009). However, non-implementation of strategic plans is due to lack of trust in external stakeholders, lack of skills and confidence in the process and poor familiarity with strategic management processes and techniques (Brakaj, 2013). Porter’s five forces is a tool for measuring firm performance and industry profitability through the analysis of competitor rivalry, substitutes, entry barriers, bargaining power of suppliers and bargaining power of buyers (Grundy, 2006). Although it predicts the rate of return in the long-run in a specific industry, porters five forces oversimplified industry value chains and failed to link directly potential management action. On the other hand, the technique is applied to alliances, acquisition decision making, and negotiation of large contracts and during account management. The competitive advantage of a firm is the differential or asymmetry attributes that enable it to serve customers better than others to achieve superior performance and create better customer value (Kraus & Kauranen, 2009). It is the ability to supply customers with the same value offered by competitors at differentiated prices, efficient production, and elaborate specific activities for value generation. In most firms, the sources of competitive advantage include strong capabilities in research and development (R&D), intellectual property, exclusive distribution or re-selling rights, economic factors, superior customer or product support and high volume production at low cost (Kucukaslan et al. 2007). Other sources include information management, management team, strong marketing strategies, access to working capital and monopoly or barriers to entry (Indiatsy et al. 2014). Strategic management analysis of Sydney Symphony Orchestra (SSO) Munir (2011) suggests that external analysis of an organization considers the use of Porters five forces to assess its strategic performance. SSO is situated in Sydney at Sydney Opera House providing classic music and musical performances. On competitor rivalry, the organization has grown its rival base from 24 to more than 100 in the 1970s. However, Sydney Opera House is the only one that generates significant income from own activities. Pop and rock concert are the substitutes to classical music because young generation prefers lively performances. Most current music events such as annual promotion series are characterized by lively audiences, demographics shifts, and jagged rhythms. Entry barriers to symphony orchestra are high because of costly players needed to performance and the high cost of leasing halls. The music category is considered ‘elitist’ and may require a lot of resources and capabilities to claim a sizeable market. Buyers have high bargaining power because the orchestra has to be attended by classic music lovers with bias on classic concerts. They determine when and how the show should be hosted. On bargaining power of suppliers, they have moderate power especially on sourcing of classic music performers, equipment, and tickets. By regarding themselves as ‘flagship orchestra’ SSO have more power than their suppliers. The four sources of competitive advantage for SSO are; networking, management team, creativity and innovation and physical infrastructure (Porter, 2008). SSO has a first class network of corporate and government contacts and an organized volunteer system. The management team drawn from accounting and banking are tipped to iconic artistic leadership and recruitment of talent. Continuous improvement and attraction of finest conductors and soloists around the world epitomizes creativity and innovation in classical music orchestra. Lastly, the physical infrastructure is stunning with the iconic Opera House in Sydney and colorful beach fronts. Audiences are drawn to the music, artistic bands and environment all contributing to wonderful performances. Strategic management analysis of North Australia Pastoral Company (NAPCO) North Australia Pastoral Company (NAPCO) is a major player in the cattle industry within Australia. Australian pastoral industry continues to have significant changes owing to changes in the physical environment and affected organizations. Population growth is driving demand for beef and increased research and development on cattle breeds. Moreover, Kraus and Kauranen (2009) argue that technological improvements create a competitive advantage for firms. In cattle breeding, cattle research and development positioned of companies in the cattle industry against rigors of the Asian economic crisis of 1997 and drought of 2003. Being export-oriented, the meat production industry in Australia is highly competitive given the low-priced beef from the US exported to Russia, Canada, Mexico, and Asia. Substitutes to beef are also on the increase and include fish, mutton, pork, and chicken. These substitutes are easy to produce especially chicken and fish and least affected by drought or extreme weather conditions. They also have low cholesterol levels compared to beef. Entry barriers (Porters, 2008) are high because excelling in the beef industry requires physical facilities and equipment and human resource. Suppliers of beef have moderate bargaining power given the few companies dealing with beef. On the other hand, buyer bargaining power is very high compared to that of suppliers. For example, Japan being one of the major buyers of beef from the US and Australia is facing a lackluster demand for high-quality beef products. When demand for beef is low, then NAPCO will have a lower bargaining position to negotiate for beef products price increases. The four sources of competitive advantage (Jaradat, 2013) for NAPCO are; superior physical facilities, research and development, technological improvements, and marketing (Duncan et al. 1998). The company has more than 54 hectares of land, five stations, and several properties. NAPCO has an extension and research centers for fast developing beef breeds. Technological improvements have been made on fast growing cattle breeds at lower costs. Marketing strategies have been developed to capture overseas markets especially Japan on high-quality beef products. Strategic management in modern firms Contemporary organizations are facing turbulent times and changing industry environment due to competition, new technologies and aggressive marketing strategies (Porter, 2008). Firms such as NAPCO and Sydney Symphony Orchestra are exposed to a number of challenges that are beyond their control. Drought is a threat to the beef industry, and lively pop concerts are emerging to take over classical music. This implies that the organizations have to key changes in their industry environments so as to remain competitive. Barney (1991) suggests that one strategy is employing key resources and capabilities to overcome problems organizations face and make adjustments to cope with external changes. Moreover, the orchestra has an opportunity to develop business models and distinctive cultural identities given their strong financial outlook. Collaboration with other sources of music such folk, rock genres; jazz and live entertainment will appeal to traditional orchestras and broader demographics. On the other hand, NAPCO has an option of looking for new markets in China and other Asian countries. This will compensate for the collapse of the traditional Japanese market that threatens to paralyze the Australian beef industry. Environmental analysis is vital in determining the strategic performance of the organization by evaluating their mission, vision, goals and objectives (Banham & College, 2010). By conducting an environmental scan, firms can understand their current performance and strive to create the direction of the organization in the next five years (Auzair, 2011). This analysis is critical as it examines the political environment, regulations and laws, technological improvements, environmental sustainability and economic performance of a nation. NAPCO and Sydney Symphony Orchestra being leading Australian companies beef and music industry should consider adoption of strategic plans that will provide sustained competitive advantage and greater market share. Conclusion The external environmental analysis looks at the industry conditions that affect the performance of the firm. One of the tools or techniques used to evaluate external environment of firms is Porter’s five forces (Gupta, 2013). The technique has been used to assess the industry conditions of North Australia Pastoral Company (NAPCO) and Sydney Symphony Orchestra (SSO). This was in relation to the bargaining power of buyers, competitor rivalry, the effect of substitutes, entry barriers, and bargaining power of suppliers (Olarewaju & Folarin, 2012). The essay established that the two organizations have superior capabilities and resources that should be engaged to create sustained competitive advantage and market share. 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