Strategic Analysis and Choice
Introduction
The mobile Industry has been evolving now and then, from the “brick-size” phone to the size of a credit card, what comes next? In the advent of high-end technology, mobile phones become a necessity at the same time a leisure gadget that most teenagers enjoy. What has these phones got into? Well, they not only serve as communication purposes but it has become an icon, a fashion statement due to its complicated high-end features yet the simplicity of its function captures the heart of its consumers. In the words of Robin Richmond (n.d.), “the mobile phone industry is certain to continue evolving, with some research suggesting that one day phones will take the place of credit cards and the remote control.” We are given the capacity to personalize our mobile phones in every aspect or features. Much more, with the growing innovation of mobile phones it has likely influenced the desires of every consumer; good news for mobile industries that they would be able to advance to next level. The current fads that the consumer has well appreciated are unlimited video clips, video phone calling, camera, photo message, downloadable ring tones, wallpapers and screen saver and most of all, the mp3 player, if this is now? What comes next? That is what we call the never-ending strategy.
An example of a mobile industry is the Orange Mobile Company. It was launched last April 1994, Orange was the fourth entrant into an already crowded UK mobile phone market, with an ambitious aim: to become the mobile provider of choice by making communications an intuitive and easily accessible part of daily life. Orange enlisted the influential brand consultancy Wolff Olins for help in producing a brand identity, name and visual style that would create high awareness … and attract customers. The products and services they offer are: mobile phones where in they work closely with major manufacturers such as Motorola, Nokia and Samsung; the internet where one can go livebox and livemusic. Colour was used simply and confidently, complemented by simple language, short sentences and an easy to read typeface. Words spelt out the customer benefit rather than the technical specification of a product. By the time Orange was sold to Mannesmann AG in 1999 Orange had launched in Switzerland and Belgium and had licensed its brand to companies in Hong Kong, Australia, Israel and India (www.orange.com).
In particular, this paper will be concentrating on Orange Mobile Company; one of the leading mobile industries in UK, with regards to its strategic marketing analysis. This paper will be discussing the importance of understanding competitors and how this understanding may facilitate successful planning of marketing activities and analyze these activities to conceptualize a profitable plan. The purpose of this paper is to give the researcher wide knowledge over strategic analysis and apply this knowledge in assessing the strategic analysis of Orange Mobile Company in particular context with its strategic business units , (France Telecom rebranded Wanadoo, and Equant ) and in the maintenance of the brand value in competition with other mobile industries (Cellnet and Vodafone). An in-depth analysis of product portfolio strategy with the use of its method, the Boston Consulting Group Box (BCG Box) is required as to facilitate the researcher in its aims for the paper.
Strategy
Strategy as defined by Johnson and Scholes (Exploring Corporate Strategy) as the direction and scope of an organization over the long-term; which achieves advantage for the organization through of configuration of resources within a challenging environment to meet the needs of the market and fulfill the needs of stakeholder expectations. Strategies exist in any areas of an organization from a group of businesses to the individuals working with it. The different levels of a business where in strategy became one of their cornerstones. We have the corporate strategy, business unit strategy and operational strategy. Corporate strategy is concerned with the overall purpose and scope of the business to meet stakeholder’s expectation. When we say, market scope it classifies as to which market a business should compete in and what kind of activities to be involved in the business incorporating the values and expectations of those who have power in and around the business. This level often stated their strategic decision-making through their mission statement. The said mission statement would guide them as to what they should do for the betterment of the business for the years to come. Business unit strategy is concerned on how the business competes successfully in the market. This refers as to what products that shall meet the demands of the customers, necessary skills that are required in gaining advantage over the competitors to further exploit and/or create opportunities. The firm’s operational strategy concerns mainly of the assets, finances, technical competence and the people. Job performance is influenced by the employee’s knowledge, attitude and skills in handling their day-to-day activities and issues. This is by upholding work ethics within the organization and during business affairs.
Strategic Management
Strategic Management is showing strategic timing in selling a stock. The diagram shown below clearly pinpoints the corporate, business unit and the operational strategies in the simplified five tasks.
Figure 1: Five Task of Strategic Management
Source: Irwin 1995
In order for the said tasks to be realized there must be a thorough coordination with other departments so that strategic decisions answer the mission statement of the organization. It is an on-going process that challenges the organization to convert their mission statement into organizational objectives that pushes the firm to be inventive intentional and focused. In this way they could keep track of the company’s performance thus, error would be prevented and they would be able to dispose parts of their business that cannot generate adequate returns or that does not generate with their business strategy.
Strategic Analysis
In thorough strategic management process, it has three main components shown in the figure below:
Figure 2: Strategic Management Process
Source: www.tutor2u.net
Strategic analysis by the term itself means it is by using strategic tools in order to methodically assess and analyze the firm’s strength in order to propel company’s ambition to its zenith considering their position or their standing in the competitive market and the influencing environment that might alter or improve their status. The strategic choice would involve the stakeholder’s expectation as their basis in making strategic choices and these choices are screened very well in order to implement these options. Strategic implementation is the crucial and most difficult of the three since; it has to be implemented into an action, and that the organization would act as a whole.
Business Portfolio
The Business Portfolio is the collection of business and products that make up the company. The best business portfolio is one that fits the company’s strengths and helps exploit the most attractive opportunities. The company must (1) analyze its current business portfolio and decide which business should receive more or less investment, and (2) develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained.
Methods of Portfolio Planning
The two best-known portfolio planning methods are from the Boston Consulting Group and by General Electricity/Shell. In each method, the first method is to identify various Strategic Business Units (“SBU’s”) in a company portfolio. An SBU is a unit of the company that has a separate mission and objectives and objectives and that can be planned independently from the other businesses. An SBU can be a company division, a product line or individual brands – it all depends on how the company is organized.
The Boston Consulting Group Box (“BCG Box”)
It is a means of analysing and categorizing the performance of business units in large diversified firms by reference to market share and growth rates. Four main categories are displayed in a two-dimensional matrix, which seeks to identify those business units that generate cash and those that use it, and then to relate the position of the business units to the formulation of an overall business strategy (A Dictionary of Business; 2002).
Resources are allocated to business units according to where they are situated on the grid as follows:
Figure 3: The Boston Consulting Group Box
Source: www.tutor2u.net
Using the BCG Box, a company classifies all its SBU’s according to two dimensions: on the horizontal axis: relative market share – this serves as a measure of SBU in the strength market; on the vertical axis: market growth share rate – this provides a measure of market attractiveness.
By dividing the matrix into four areas, four types of SBU can be distinguished:
· Stars – a business unit that has a large market share in a fast growing industry. Stars may generate cash, but because the market is growing rapidly they require investment to maintain their lead. If successful, they become cash cows (www.quickmba.com).
In relation, Orange mobile company has made strategic partnerships and alliances with some of the world’s leading suppliers and operators. They established the FreeMove alliance in 2003. In 2006 they were joined by leading Nordic operator, Telia Sonera. This alliance ensures that customers have access to the same familiar services, like voicemail or customer service, abroad as well as at home. You can now even see who is calling when you roam on member networks. The services they offered are classifies into two: business and individual services. In the business sector – roaming services for international businesses, each with a consistent call rate for calls made and received when users are roaming abroad, and for international calls made from their home countries; also offered, data services including both GPRS and BlackBerry™. In this sector, they have an International customer service with International Business Care group, a multi-lingual team dedicated to providing great service to multi-national organizations. In the individual sector, they have the FreeMove answer, wherein they just have to dial their usual short codes to access voicemail and see whose calling; there is no need to re-programme the saved numbers for them to work internationally (www.freemovealliance.com). Aside from it, they join with Cingular Wireless combining okay strengths of coverage, network performance and business support services. These functionalities are the STARS of the Orange mobile company; the joint services offered will attract future customers as well as prospect businesses who would like to venture business with them. Thus, an increase demand of services also increases their sales.
· Cash Cow – a business unit that has a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be used to invest in other business units (www.quickmba.com).
France telecom acquired the Orange brand last August 2000 in effort to acquire the power of the Orange brand. Most of France Telecom’s mobile businesses were rebranded to Orange. France Telecom’s ambition is to be the first integrated telecoms operator in Europe and leader for convergence, delivering a ‘New Experience of Telecoms’ for its customers. This includes the rebranding of Equant and Wanadoo on 1 June 2006 – forming part of an international strategy to use the Orange brand commercially for mobile, fixed-line, broadband, multi-play and business offerings. This means a simple, single-company experience for customers as well as an exciting new generation of enhanced communications and converged services. The rebranding of the said business added brand value to the Orange brand. Knowing this, those individuals who use the previous brand now use the power name of Orange. This is an example of Cash cow since, the Equant and Wanadoo are already legitimate brands that are already recognized by the mobile market. The effect of rebranding escalated the number of prospect customers thus, Orange Company can generate fund from this to support other businesses that is still fresh in the competitive mobile market or other projects that has promoted the brand value of Orange. For an instance, the collaboration of Orange with PalmSource in the Palm Powered Mobile World Program, the joint forces of the two will bring a cutting – edge Palm Powered smartphones to the market.
· Question Marks (or Problem Children) are businesses or products with low market share but which operate in higher growth market share at the expense of more powerful competitors. Management have to think about “question marks” – which one should they invest in? Which ones should they allow to fail or shrink?
In this category, these are the probable business units that might not continue to share in the market that will lead to product failure due to poor promotion and advertisement and the price is just costly that people wouldn’t spend a cent; or it might become the Stars and in the long run the Cash cows. The business units I’m referring are of those newly integrated services and products since; it is new there will always be questions that will arise and strategic planning must continue on and on in order, to finalize what particular procedure should be implemented. In addition, it is necessary that management of the marketing function be built upon purposively defined and analytically based marketing strategies. The strategic marketing planning, according to Allen (2006), involves basically three stages: (1) segmenting the market; (2) profiling the market segments; and (3) developing the market segment marketing strategy. Pease refer to Figure 4 for the outline. Considering that globally, it is a competitive market, it is a must that strategic planning must be done before making unnecessary unfit choices. After such strategic choices, strategic analysis is done to further enhance the chance of making it big.
Figure 4: Strategic Marketing Planning
Source: Allen 2006
In strategic analysis, the company must also learn to comprehend the competitors of a business in a given industry and developing methods as to distinguish it from them is a very relevant and critical aspect which influences the development of the competitive strategy of the firm. In addition, it is also an important aspect of the strategic planning process as it (1) facilitates the management to understand their competitive advantage or disadvantages associated to their competitors; (2) creates understanding of the competitors past, present, and future strategies; (3) offer an informed basis to develop strategies to gain and maintain competitive advantage in the future; and (4) to facilitate the firm in forecasting the returns that may be made from future investments (Tutor2u Limited 2005).
Proctor (2000) notes that understanding competitors is the core to making marketing plans and strategy. A firm has to compare its products, prices, channels of distribution and promotional methods with those of its competitors on a regular basis to make sure that it is not at a disadvantage. The process of the competitor analysis basically constitutes three steps. The first step is to identify the firm’s competitors. As for Orange Mobile Company, it has several competitors such as Vodafone and Cellnet.
The second step of the competitor analysis is the assessment of its competitors. This may be done through benchmarking as the firms will first have to determine the objectives of its competitors as well as their objectives, then later on assessing the strengths and weaknesses of its competitors. Lloyd, Elmuti and Kathawala (1997) notes that benchmarking sustains organizational growth as well as facilitates world-class competitive status.
Finally, the third step in the competitor analysis is the selection of competitors to avoid or to attack. After the assessment of the firm’s competitors, the firm will have to formulate the specific strategies that will give them the competitive advantage against its competitors.
It must be noted that during the process of competitor analysis and the implementations of its strategies, the firm will have to assess which of the competitors’ strategies that they will have to follow or not. The second stage which allows the company to compare their operations with others will necessitate some degree of change within the organization. Thus it should be very well noted that the company only as to follow the strategies that will apply to their business as every business is unique in their own nature. These strategies will have to be in lined with the company’s philosophies as well.
· Dogs are the combination of low growth rate and market share is typical of these businesses and products, which operate in mature markets. Firms frequently face strategic decision regarding whether to continue to support dogs or to implement a divestment strategy. Barriers to exit (factors that make it difficult for a company to leave a make a market that is no longer profitable or that has ceased to provide an acceptable return on capital) would also need to be considered (A Dictionary of Business, 2002).
Using the BCG Box to determine the strategy is a way of maximizing the long-run interests of every group. Another is that by balancing properly the interests of major stakeholders, the long-range interests of all will be maximized. However, conventional strategic thinking suggests there are four possible strategies for each SBU: (1) build share: here the company can invest to increase market share like turning the Question mark into a Star (2) hold: the company invest just enough to keep the SBU in its present position (3) harvest: the company reduces the amount of investment in order to maximize the short term cash flows and profits from the SBU. This could be shown by turning the Stars into Cash cows (4) divest: the company can divest the SBU by phasing it out or selling it – on order to use resources elsewhere by investing into more promising Question marks.
Conclusion:
The mobile industry has already extended throughout the world. Firms that operate within the mobile industry are categorized as a market structure that is highly competitive. Orange Mobile Company and its strategic marketing planning has been the focus of this research is that the Orange mobile Company as a market leader in the mobile industry.
The Strategic Management is the process of specifying an organization’s objectives, developing policies and plans to achieve these objectives, and allocating resources so as to implement the plans. There is a need to have a strategy that is concerned with the most important decisions made in an enterprise. The central thrust of these decisions is the future of the organization. In here, strategic planning must be done to “create” more desirable future results by (a) influencing the outside world or (b) adapting current programs and actions so as to have more favorable outcomes in the external environment.
This paper has strongly recognized the importance of understanding competitors in strategic marketing planning for the benefits that it gives to the successful planning of marketing activities. These benefits and advantages include the following. First, understanding competitors will facilitate the firm’s management to understand their competitive advantage and disadvantages in relation to their competitors. Second, understanding competitors will also generate understanding of the past, present and future strategies of the firm. Third, it offers the firm an informed basis to develop strategies in order to gain or maintain competitive advantage against their competitors in the future. Lastly, understanding competitors will also facilitate the firm in forecasting or predicting the financial returns that they made from future investments.
To further influence the strategic analysis of the Orange mobile Company, we use the BCG – share matrix. The experience curve represents a volume-cost relationship. It is argued that, as the cumulative historical volume of output increases, unit costs will fall at a geometric rate. This relationship is said to result from specialization, standardization, learning, and scale effects. The firm with the largest cumulative output will have lower costs, suggesting a strategy of early and price policies to develop volume.
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