SWOT and PESTEL analysis of StratSim

SWOT and PESTEL analysis of StratSimThe StratSim is a growing and wide shell out industry around the global among auto sellers. Notwithstanding the economic and energy instabilities that led to decreased vehicle demand, gross sales r even upues s mooly grew as Gross interior(prenominal) intersections (GDP) increased from period 1- 4, and remained constant in period 5, and inflation rate decreased from 2.5% in period 1 to 1.0% during period 3. However, in some circumstances, sales were increased and/or decreased as firms started making decisions. The 7 competitors were firm A, B, C, D, E, F and G.Seven vehicle classes include Minivan (M), Family (F), Sports (S), Luxury (L), Utility (U) Economy (E), and transport (T). Attributes considered were performance, styling, quality, interior and safety.Furthermore, advertisement plays a signifi messt role especiall(a)y when firms be striving to create blur image, aw arness as well as interests to butt clients. leadships contributed i n generating revenues through sales of a range of vehicles which in turn enabled the firm to increase its merchandise sh are while maximising shareholders wealth. staunch B has had 3 vehicle classes, namely top dog -Truck, Boffo Family and Buzzy Economy.2.0 Strategic abridgmentStrategy is the direction and scope of an organisation over the long term, which makes advantage in a changing environment through the wasting disease of resources and competence aiming to fulfil shareholder expectations (Johnson et al, cc6, p 9).Figure 1, processes by which strategy is described and executedSourcehttp//www.12manage.com/description-deliberate-strategy.html.In a war-ridden business environment such as StratSim, analysing firms strategies is full of life in prescribe to enhance firm performance and customer satisfaction.2.1 Strategic endFirm Bs mission was to become the attracter in automobile industry worldwide by offering highly innovative vehicles to diverse customer segments ai ming at consistently satisfying their dynamic needs.2.2 Basic StrategyFirm B strategy was to provide high quality vehicles at premium outlay while trying to differentiate its vehicles from incumbents to avoid encouraging price war. By doing so, firm B was the leader twice in economy (Buzzy) car in period 2 and 5. To meet diverse customer tastes and preferences, the firm made minor upgrades to its vehicles during decision making periods, e.g. technology, promotion, advertising, etc.2.3 External AnalysisScanning the macro-environment is vital since there are several factors that hinder firms performance and growth. In hostel for managers to come up with effective and suitable strategies that will enable the firm operate overt and hidden opportunities while overcoming threats, those factors need to be thoroughly tackled before decisions are made.The external analyses considered wereThe Michael Porters five forces.PESTEL analysis.Opportunities and Threats (OT) from SWOT analysis,And Critical Success Factors (CSF).2.3.1 PESTELPESTEL framework is a useful tool that is applied by organisations to analyse the complexity of macro-environment variables. It also provides a picture on how these key factors may influence firms success or failure of its particular strategies in future in order that managers can find ways of overcoming them. PESTEL refers to political, economic, social, technology, environment and legal.Figure 2, PESTEL FrameworkSource (Johnson et al, 2006. p 68)The arrangementPolitical Taxation policy Government stability Social welfare policies Foreign traderegulationsLegal Health and safety Competition law increase safety Employment lawEconomic factors Business cycle Inflation Interest rates Unemployment GNP trends M unityy supply Disposableincomeenvironmental Environmentalprotection laws Waste disposal EnergyconsumptionSociocultural factors PopulationDemographic Socio mobility Consumerism IncomeDistribution Lifestyle careens Level ofEducation Attitu des to workand leisuretechnical Government spending onresearch Speed of technology transfer Newdiscoveries/developments Government and industryfocus on technological effort evaluate of obsolescencePolitical/LegalSince 1960, laws and government regulations have affected the automobile industry (Highfill et al, November, 2004). Political changes may favour or hinder the firms turnout because anti-pollution laws and taxes can be imposed, and hence firm B should continuously pay special caution to whatsoever rules, codes and regulations that dwell on carbon-dioxide emissions.EconomicDuring mannequin, firm B had experienced touch-and-go economic growth. Its variables like inflation, interest rates, accelerator prices, and material costs were fluctuated. These have affected the firms profitability.SocialDue to increased health awareness, people tend to change their lifestyles, while turning to low carbon emission vehicles. Also income distribution and demographic changes both affe ct vehicle production either positively or negatively. applied scienceAdvanced technology has provided both opportunities and threats to the automobile industry. Those who employ it effectively, it enables them to enhance firms efficiency in producing vehicles that appeal to customers whilst lowering costs. So far, internet and firm websites as part of technology have been used by many buyers as a reference tool before making their purchase decisions.EnvironmentalEnvironmentalists melody on minimising carbon-dioxide emissions, noise as well as air pollution, in order to keep the environment clean. This move no doubt affects vehicle production as well as firm profitability.2.3.2 Critical Success Factors (CSF)Johnson et al (2009) defined CSF as those product features that are particularly valued by a group of customers and, therefore, where the organisation must excel to outperform competition. CSF comprises threshold features and differentiators.Source Johnson et al (2009)CRITICAL S UCCESS FACTORS (CSF)THRESHOLD FEATURESDIFFERENTIATORSThreshold featuresThese are features that the customer value mostly, and is not likely to buy a product or service that lacks bingle of them. Firm B, threshold features were quality, performance, safety and size for all of its tercet vehicles family-Boffo, economy-Buzzy and truck-Boss.DifferentiatorsThese are customised/added qualities which some customers may or may not consider before purchasing a service or products. Firm B regarded price, styling and interior as differentiators to its vehicles.Differentiators gave difficult moments when trying to distinguish what was preferred most, as many vehicles were similar to competitors after modifications had been made.Innovations are necessary for firms to meet CSF features and outwit their competitors through customer satisfaction.2.3.3 Porters v Forces ModelThe model was developed by Michael Porter in 1980 (Johnson et al, 2006). Since then, the model is applied by firms as a tool to analyse the profit potential drop while determining the strength of competition (threats) of an industry, and finally coming up with the right strategies that will support in exploiting opportunities, neutralise threats and hence grow.Figure 3 Porters Five Competitive Forces ModelSUPPLIER POWER Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration provider concentration Importance of volume to supplier Impact of inputs on cost or differentiation Differentiation of inputs Cost relative to total purchase in industryBARRIERS TO ENTRY Government Policy Capital requirements Access to distribution Economies of scale Switching costs Proprietary learningcurve Access to inputs judge retaliation shuffle identity Absolute costadvantages Proprietary productsBUYER POWER Price sensitivity Threat of backward integration Substitutes operable negotiate leverage Buyer concentration vsindustry Buyer information Buyer volume Buyers incentives Bra nd identity Product differentiationwww.scribd.comDEGREE OF RIVALRY Brand identity Exit barriers Switching costs Product differences Industry growth Fixed cost/ value added Diversity of rivals Industry concentration Corporate adventure Intermittent overcapametropolisRIVALRYTHREAT OF SUBSTITUTES Buyer inclination tosubstitute Switching costs Price-performancetrade-off of substitutesThreat of New EntrantsThe threat of new entrants in automobile industry is low, since barriers to enter are very high, such as high start-up capital required. Moreover, adequate experience curve, distribution access, economies of scale, strong research and development (RD) and even brand and customer loyalty all of which the incumbents have. It therefore becomes difficult for new entrants to manage compared to incumbents.Bargaining role of SuppliersSuppliers power in automobile industry is low, since producing a car/vehicle requires a range of inputs (parts) from diverse suppliers. If some inputs are not available in one source, they will be sought from another(prenominal) supplier due to low switching costs.Threat of SubstitutesSubstitute threats in this industry are likely to be moderate and depend much on customer geographical location. Other customers prefer walking, taking train or riding on a bike. But in Dar es Salaam city for example, people prefer public transport, motorcycles (BAJAJ, known as rickshaw in India) as alternative path to automobile due to increased congestion.Bargaining Power of BuyersIn this industry, buyers power is a bit high. unhopeful switching costs from one firm to another seeking for substitutes since most of the customers are price sensitive. For the eluding of the simulation game we played, most of the products were undifferentiated, so, buyers can easily shift to an alternative stater as well as products when seeking satisfaction.Competitive RivalryThe intensity of competition in automobile industry is high due to lack of strong differentiation strategy and innovation among incumbents, especially in the case of the three vehicle classes, i.e. family, economy and truck, because most of the firms use similar strategies like price this reduces market growth as well as profitability.2.3.4 SWOT- Opportunities and ThreatsOpportunitiesAdvanced technologyFirms can use it more efficiently in enhancing product features that can appeal to the eyes of customers.Also use e-commerce to advertise and sell globally.Bargaining power of suppliers.Low supplier power is an advantage to automobile firms since they can set input prices, and hence be able to savor cost advantages while offering safe(p) quality products that will satisfy customers.European Union (EU)Automobile manufacturers can use the EU to sell their products.DiversificationDiversification can be through to widen the market to other untapped segments like high income earners or go internationally and also locate the firms near raw materials sources where they can enjoy locati on economies.Differentiation strategyIn order to sustain customers, after satisfaction has been met, differentiation strategy can be used as a weapon in delivering a range of added values that surpass those of competitors, since most of the firms use similar strategies.ThreatsBargaining power of buyersStrong bargaining power of buyers associated with low switching costs to alternative products, force suppliers to face an increased competition in order to provide the best that will satisfy their customers.Increased gas pricesGas being one of the operating energy, increased price will affect firms production as well as profitability e.g. in simulation that we played, period 1 $/gal was 3.15 rise to 3.50 in period 5.New lawsNew rules and regulations on carbon-dioxide emissions in environmental protection hinder production of cars that use petrol engines.World economic recessionRecession discourages consumption of luxury goods, and streamlines production while people turn to public tran sports.High competitionInitially, all firms in the StratSim industry were in similar position e.g. pecuniaryly and other resources however, this proved difficult when making decisions on how to create demand in order to enhance market shares as well as profits. Each firm was competing.InflationInflation started to increase in period 4 from 2.0% to 2.5%, this rise affected consumer prices.Fuel price instability.Rapid change in technologyThis poses a threat to vehicle production since other substitutes to vehicles may be produced.2.4 Internal Analysis2.4.1 Resources and CapabilitiesThese are those which will create a strategic fit in order for the firm to survive and prosper even in a competitive business environment.Lucino Noto, (2007, p 125)Analyzing resources and capabilitiesThe interface between strategy and the firmTHE FIRMResources and CapabilitiesGoals and encouragesStructure and SystemSTRATEGYTHE INDUSTRY ENVIRONMENTCustomersCompetitorssuppliersThe firm-Strategy portThe Envi ronment-Strategy InterfaceResourcesOrganisation resources are divided into two categories (Johnson et al (2009)Tangible ResourcesThese are firms physical assets. Firm B tangible resources wereThree vehicle classes, each of these represents a unique configuration while home runing different customer segments like value seekers, families, singles, high income and enterprisers (the StratSim Case, 2010).Financial resources, at period 0, each firm were given sales amounted to $ 15.5 billions (the StratSim case, 2010).Manpower, firm B had 4 competent human resources who made diverse valuable decisions and hence became twice the leader of economy car (Buzzy).Intangible Resources.These are non-physical resources such as information, reputation and knowledge i.e. intellectual capital. (Johnson et al, 2008). Firm B holds a number of unique competences over its rivals.Firm B capabilities were prime(a).Safety. bring aboutance.Style.Interior.2.4.2 V.R.I.OAre criteria that are used to assess the sustainability of an organisations resources and capability that will enable the firm to achieve durable competitive advantage. V.R.I.O stands for Value, Rarity, Inimitability and Organisation. (Johnson et al, 2008).ValueAs the game started, firm B had full resources and capabilities i.e. unique brand name that facilitated it in formulating and implementing different strategies to meet customer needs. But due to increased market demand, demand exceeded production throughout the periods as the firm lacked efficiency.RarenessAt the beginning, all firms had a similar starting point which led them to have a low degree of rarity. This positioning by StratSim, made firm B to create more appealing strategies like vehicle enhancements and improvements in terms of its attributes which allowed it to come up with things which turned out to be less common among the firms.InimitabilityDuring simulation game, product imitation was very high since previous results and almost all modifications an d other statistics were openly published for other firms to see. This means that competitors could possibly copy other firms techniques.OrganisationIn StratSim industry, there were 7 firms producing identical vehicles, because they used similar strategies that lacked differentiation. Due to these, it therefore became easy for customers to switch from one firm to another if satisfactions were not yet met.2.4.3 SWOT- SWSW is a tool that is used in identifying or analysing firms internal strengths and weaknesses and enables it to use the available strengths to derogate or turned those weaknesses to strengths. SW means Strengths and weaknesses.StrengthsUnique brand name Best Motor Works.Unique product names like Buzzy, Boffo, and Boss.Twice leader of Buzzy-Economy car, period 2 and 5.Reliable dealerships.Innovation, almost every decision period, firm B upgraded its vehicle attributes to meet emerging customer needs.WeaknessesWeak financial position. rocky growth of market shares.Limite d product lines, this means that firm B did not exploit the available opportunities of unsatisfied and potential new customers to launch any new vehicle that would satisfy their needs.3.0 Decisions3.1 TechnologyFirm B upgraded its technology capabilities during decision periods considering dynamic business environment and customer tastes and preferences, while special attention was given to economy (Buzzy) and family (Boffo) cars. Investment in technology facilitated firm B in enhancing its production capacity as well as vehicle attributes that appealed to target customers and hence satisfying their emerging needs (see appendix 2.1)3.2 MarketingFirm Bs marketing conflate was to create leverage with customers and build strong brand loyalty which would enable customers purchase our products even in intense competition as in StratSim industry. Firm Bs unique selling price USP was quality. fictitious character being the key in our vehicle while charging premium price that enabled Buzz y (economy) car to become the leader in period 2 and 5. Despite this success, it was heavily for firm B to survive in just a success of one car brand and become the market leader. Though the marketing mix was thoroughly applied by adding or reducing the number of dealers in each area, increasing dealer discounts and product promotions to attract customers, firm Bs market share was increased and decreased during decisions due to overspending and other factors. (For more marketing and distribution details for period 5, see appendix 2.2 2.3)3.3 FinanceDuring simulation, firm Bs financial performance was somehow weak despite a slight increase in sales ($). Net income was negative during period 2 and 5 results. It was discovered that one of the problems could possibly have been overspending, however, unit market share increased and total debts continued to decrease (Firm B financial and performance summary period 5, see appendix 3.0).3.4 ProductionThroughout all the decision periods, p roduction was increased as well as vehicle attributes to meet customer demand. Though Boss (truck) and Buzzy (economy) vehicles were upgraded in period 4, there were some shortages with regard to Boss vehicle model this means that if the firm was given a incident to continue making decisions, it could probably increase production to meet the demand (see appendix 4.0).4.0 ConclusionFirm Bs mission was to become the leader in automobile industry worldwide by offering highly innovative vehicles to diverse customer segments aiming at consistently satisfying their dynamic needs.Unfortunately, firm B did not meet its expectations. Though it became the leader twice in Buzzy (economy) car, this means that its strategies fit in the economy car brand market, having had success in one vehicle does not guarantee survival, and this is why firm Bs income and market share fluctuated. The firm was not yet pretty sure of what contributed to the unstable financial performance, though the firm specul ated that overspending was one of the major problems.4.1 What I Have LearnedI learned that, in practical business, taking risks is only way to achieve success. In StratSim industry, for each time period, market research had identified some potential new customers whose needs were not yet satisfied by received vehicle (the StratSim case, 2010). But firm B overlooked this market potential to timely take advantage of launching new vehicle models in order to exploit these opportunities and hence increase its turnover and profit margins.5.0 Reference and BibliographyJohnson G, Scholes K, and Whittington R, (2006), Exploring Corporate Strategy,7th Edition, Prentice Hall.Johnson G, Scholes K, and Whittington R, (2009), Exploring Corporate Strategy,Prentice Hall.Highfill D, Baki M, Copus S, Green M, Smith J and Whineland M, (November, 2004). automotive Industry Analysis-GM, DaimlerChrysler, Toyota, Ford, Honda, overview of industry analysis, available at http//www.academicmind.com/unpubli shedpapers/business/management/2004-11-000aaa-automotive-industry-analysis.html. Accessed on 19/11/1010.The StratSim Case (2010), Automobile industry.Lucino Noto, (2007), Analysing resources and capabilities the interface between strategy and the firm, available at. http//www.blackwellpublishing.com/grant/files/CSAC05.pdf .Figure , Porters Five ForcesAvailable at www.scribd.com/doc/16998313/Diagram-of-Porters. Accessed on 20/11/2010.6.0 APPENDIXES1. DECISION SUMMARY FIRM B, FOR PERIOD 5Product DevelopmentDevCtrProjectClassStatusSizeHPIntStySafQuaCurrExp1BuzzyEconomyupgrlaunch Now101202222$2752BossTruckupgrlaunch Now702003322$2753(unused) jibe (mill.)$551Consumer Marketing compute(mill.) Regional Corp. Adv.$48 coach Mail$6Public Relations$12 Total$66Direct Mail Targets Value Seekers(1), Families(2), High Income(4), Enterprisers(5)Product MarketingfomitePlatformMSRP DealerDisc. Adv. (mill.)Adv.ThemePromo.(mill.) BoffoNo Change$20,40015.0%$34Safety$29BossUpgraded$20,49913.0%$28Perform$ 15BuzzyUpgraded$11,55012.0%$33Quality$20Total$95$64Plant CapacityCurrent Capacity (000s)1,350Capacity Change (000s)0Vehicle ProductionVehiclePreviousSales (000s) Current Inventory(000s) ScheduledProduction(000s) FlexibleProductionRetoolingCosts (mill.) Boffo64625671X$0Boss200*13213X$80Buzzy298*109345X$123Total1,1441471,229$203*Vehicle being upgraded this inventory will be written off. Be sure to produce enough to match forecast.DealershipsNorthSouthEastWestTotalDealer Inc./Dec.109111242Training and harbor (mill.)$34FinancingAmount($ mill.)Bonds Issued$0Stock Issued$0Dividends Paid$100StratSim Indind1 Firmb plosive speech sound 42. RESULTS FOR PERIOD 52.1 Technology Capabilities Period 5Firm Ratings (1=low capability)Dev. CentersInteriorStylingSafetyQualityMax. Feasible511121112Firm A34647Firm B34657Firm C24766Firm D24656Firm E26868Firm F24646Firm G35879Tech DimConsiderationsInteriorflexibility of cargo spaceStylinggeneral curb appeal, styling, handling, finishSafetystructural desi gn, braking system, safety featuresQualityoverall reliability, durability, consistency of productsStratSim Indind1 FirmbPeriod 52.2 Marketing Detail Period 5ConsumerBudget(mill.)Company Owned/FleetBudget(mill.)Regional Corp. Adv.$48Direct Sales Force$0Direct Mail$6Direct Mail$0Public Relations$12Total$66Total$0VehicleVal MktShareMSRPDealerDisc.Avg SellPriceAdv.(mill.)Adv.ThemePromo.(mill.)DaysInv.Buzzy2.4%$11,55012.0%$10,572$33Quality$2018Boffo9.4%$20,40015.0%$18,749$34Safety$290Boss3.2%$20,49913.0%$19,859$28Perform$150Total$95$64StratSim Indind1 FirmbPeriod 52.3 Distribution Detail Period 5NorthSouthEastWestTotalFull Coverage200250150200800Established Dealers137137133133540Coverage69%55%89%67%68%Planned Openings109111242Support/Dealer (000s)$150.6$150.6$153.2$153.2$151.9Units/Dealer2,1872,2842,3892,7562,401Sales/Dealer (mill.)$36.9$38.9$40.2$46.3$40.5Service/Dealer (mill.)$1.4$1.5$1.6$1.7$1.5Gross/Dealer (mill.)$3.3$3.6$3.6$4.1$3.7Dealer Rating5960606160StratSim Indind1 FirmbPeri od 52.4 Product Contribution Period 5Firm B Product ContributionVehicleUnits (000s)DealerSales (mill.) DirectSales (mill.) COGS(mill.)Gross Margin(mill.) Adv Promo(mills.)After Mkting(mill.) Boffo734$12721$0$9797$2924$63$2861Boss234$4179$0