BSG-Online Game: Managing Strategy, PESTEL Analysis

Management Strategy
Student’s Name
Date
Institution
Management Strategy
Table of Contents
TOC \o "1-3" \h \z \u Introduction PAGEREF _Toc499127303 \h 3
Competitive Strategy PAGEREF _Toc499127304 \h 4
Industry Overview PAGEREF _Toc499127305 \h 4
PESTEL Analysis PAGEREF _Toc499127306 \h 5
Five Forces Model PAGEREF _Toc499127307 \h 7
Opportunities and Threats PAGEREF _Toc499127308 \h 8
Company Overview PAGEREF _Toc499127309 \h 9
Decisions Made PAGEREF _Toc499127310 \h 10
Final Results PAGEREF _Toc499127311 \h 13
Reflection PAGEREF _Toc499127312 \h 13
Underlying Strategic Principles PAGEREF _Toc499127313 \h 13
Key Learning Points about Strategy PAGEREF _Toc499127314 \h 14
Conclusion PAGEREF _Toc499127315 \h 14
References PAGEREF _Toc499127316 \h 15
Appendices PAGEREF _Toc499127317 \h 16
Appendix 1 PAGEREF _Toc499127318 \h 16
Appendix 2 PAGEREF _Toc499127319 \h 17
Appendix 3 PAGEREF _Toc499127320 \h 18
Introduction
Having an effective business strategy is essential in today’s competitive environment. Strategy includes the decisions, choices, and plans that a company makes in order to achieve success and profitability. In this regard, a weak strategy may lead to a failure of a company while a strong one can help in achieving success. For a company to formulate an effective strategy, it has to understand the nature of the business environment in terms of competitors and customers.[Kourdi, J. Business Strategy: A Guide to Taking Your Business Forward. Hoboken: Wiley, 2009. P3] [Camillus, C. Strategic Planning and Management Control: Systems for Survival and Success. Lexington Books: Lexington, 1986. P49]
This paper presents the case of E-company that operates in the footwear industry. The report will provide relevant information relating to the decisions that E-company took as it sought to achieve success in the competitive environment. The company is competing against seven others in the industry in four geographic regions: Asia Pacific, Latin America, Europe Africa, and North America. E-company ships the footwears to all these geographical locations. In the current business environment that is characterised by technology, E-company sought to take this advantage and offer customers in the various regions the products through an online platform. This paper begins by reporting on the competitive strategy undertaken by the company. This will be followed by an overview of the industry and company, examination of the decisions made, results, reflection, and the underlying strategic principles. Finally, the report will conclude on the main issues and lessons learned through the simulation exercise.
Competitive Strategy
Competitive strategy is critical in any industry as it determines how a company performs in comparison with other players in the industry. It outlines the path that the organisation intends to follow in order to compete favourably with other firms. In this regards, the strategy undertaken by E-company to achieve competitive advantage involved was differentiation strategy and cost leadership strategies. These are among the three competitive strategies that a company can use to achieve a competitive advantage with the other one being focus strategy. E-company utilized differentiation strategy in year 11. In this case, the company believed that it could deliver better benefits that the other players in the industry through engaging in CSR practices such as the use of recycled packaging and green footwear materials. In year 12 through to year 15, E-company used cost leadership strategy in both the internet segment and wholesale segment. Therefore, these were the strategies that E-company undertook as it tried to achieve a real competitive advantage in the footwear industry.[Paley, N. Mastering the Rules of Competitive Strategy: A Resource Guide for Managers. Boca Raton: CRC Press, 2007. P22] [John R.. Management. Hoboken: Wiley, 2010. P223]
Industry Overview
As mentioned before, the footwear industry was comprised of seven other firms that compete for the global market share. In this section, the industry is examined using the PESTEL model which is significant in analysing macro environment. The industry is also examined using the five forces model. Finally, the threats and opportunities in the footwear industry environment are identified. This model is useful in understanding the macro-environment.[Faarup, K. The Marketing Framework. Copenhagen: Academica, 2010. 49]
PESTEL Analysis
In regards to the global political environment, the conditions are different depending on the region. The trade policies, therefore, vary in the different regions. In North America, the trade policies are more liberal compared to other regions such as Asia Pacific and Latin America. In Europe Africa region, the trade varies because of the difference in development levels. Europe is made up mostly of developed countries while Africa is comprised mainly of developing ones. In Europe, the European Union dictates the environment and therefore am firm has to be aware of its provisions in the region.
The economic factors such as exchange rates, currency fluctuations, and the GDP of countries also affect the conditions in the footwear industry. These factors affect the financial decisions that industry players undertake. While some regions have high economic developments, others have low.[Witcher,J., and Vinh Sum Chau. Strategic Management: Principles and Practice. Boston: Cengage Learning, 2010. P91]
Socio-cultural factors also have a significant impact on the footwear industry particularly because of its global nature. The global market environment is comprised of customers belonging to different social and cultural backgrounds. These determine their tastes and preferences when it comes to their footwear choice. For example, the products meant for the Asia Pacific region have to be different from those directed to customers in North America or Latin America regions. In each of the regions, it is critical that the products reflect the underlying social and cultural aspects.
Technological aspects are perhaps the most significant factor that affects operations in the footwear industry. Almost all operations of the industry players are influenced by technology. Right from selling to shipping, technology occupies a central place in industry operations. Therefore, having a superior technology can help a firm have a competitive advantage over other players.[Jeffs, C. Strategic Management. Thousand Oaks: Sage, 2008. P28]
The environment is also a significant factor, particularly in today’s market conditions. CSR characterizes the operations of many industry players and can determine how it performs in the market. Therefore, the environment offers an opportunity that a firm in the industry can explore. For example, a firm can engage in green business practices and the use of recycled packaging in order to be responsible towards the environment. Such strategies can help a firm stand out from others in the industry.
Finally, in regards to the legal environment, the different regions have different laws that regulate the business environment. Understanding how the regulations influence the operations of the industry is critical for industry players. In Europe, for example, the EU has regulations that determine the regulations that govern the region. Being aware of these regulations helps a firm stay away from possible lawsuits.[Smilansky, S. Experiential Marketing: A Practical Guide to Interactive Brand Experiences. London: Kogan Page, 2009. P87]
Five Forces Model
Porter’s five forces can be used to analyse the competition factors that are present in the industry. The footwear industry is highly competitive, and an examination of each of the five forces is critical to the success of the company.[Orcullo, N. Fundamentals of Strategic Management. Quezon City: Rex Bookstore, 2007. P48]
The threat of new entrants is one of the forces as identified by Porter. There are low threats of entrants because of the high initial investment required for operation in the global footwear market. For a company to enter the industry, it has to have a high investment in the form of capital that will help in setting up of plants that are necessary to supply in the global market. This makes it hard for firms to enter the market.
The buyers’ bargaining power is a significant force that industry players have to carefully analyse. In the industry, there are seven other sellers of footwear products. This means that consumers can easily switch to competitors. Therefore, in the footwear industry, there is a high buyers’ bargaining power.
Industry players also have to examine suppliers’ bargaining power. Since the industry is made up of seven other players, suppliers can easily switch to brands that are favourable to them. This means that the power of suppliers in the industry is relatively high. Therefore, they dictate to some extent the prices they charge for their materials.
Consideration of the threats that substitutes can pose for the products of a company is also essential for industry players. The footwear industry is composed of many players that produce footwear, and this means that the threats of substitutes are low. The only probable threat that can come from substitutes is from local companies in countries in which the industry serves. Such products may be cheaper but will not appeal to consumers that are conscious about a footwear brand. Therefore, substitutes pose a low threat to the companies operating in the footwear industry.[Peng, MW. Global Strategy. Boston: Cengage Learning , 2008. P43]
Finally, competitive rivalry among the industry is a force that has to be taken into consideration. There is a high competition in the industry since it is made up eight players that have access to similar resources. It is the aim of each of the firms in the industry to increase its market share, and this means that competition is stiff.
Opportunities and Threats
These factors in the external environment as well as the forces in the market present threats and opportunities for firms in the footwear industry. Technology, for example, can be a threat if it a competitor uses the latest technologies in its operations. In addition, it can offer an opportunity for a firm to achieve competitive advantage by using the latest technology. The regulations can also limit or promote the operations of the business in certain regions. Competition poses a significant threat to the operation of ...