Sample on STRATEGIC MANAGEMENT
Table of Contents INTRODUCTION......................................................................................................................1 a. STRATEGIC PURPOSE....................................................................................................... 1 b. STRATEGIC CHOICE FOR THE ORGANIZATION.......................................................10 c. Evaluation criteria and evaluation of strategic choices........................................................ 11 d. Selection and justification of the optimum strategy.............................................................13 CONCLUSION........................................................................................................................ 14 REFERENCES.........................................................................................................................15
INTRODUCTION The term strategic management concerns both the strategy formulation and how it should be put into actual practice. While still conducting forecasting and analysis, far bigger prominence is placed on execution process. The consideration is with change management and transforming the company in an increasingly turbulent environment of business. A useful model in 1999 was provided by Johnson and Scholes by summarizing core elements of strategic management. Strategic issues can be seen as having three different aspects. First is analysis, the management executives is required to understand resource capabilities and business environment. It should be considered in the context of aspirations and culture of company as well as stakeholders (suppliers, employees, customers, investors, etc.) expectations. Secondly, managers are required to make selection of best strategies. This can be attained through the procedure of evaluating, selecting and identifying options. The company also require to define the basis of its strategy, i.e. generic strategy, market/product areas in which it will operate and forming particular strategies to accomplish organizational objectives. At last, issues should be considered that might be raise during strategy implementation. Here, the paper is elaborating about strategic positioning of Aston Martin Company by exploring its strategic purpose in the industry. The content further proposing strategic choices for the company and then defining best evaluation method to meet stakeholder’s expectations.
a. STRATEGIC PURPOSE Aston Martin Lagonda Limited is a British producer of grand tourers and luxury sports cars. The company was founded by Robert Bamford and Lionel Martin in 1913. Aston Martin is an organization that presents three essential pillars for possible growth, such as product differentiated, iconic brand and financial support. The brand itself carries 100 years of history, competitiveness and tradition, without any fall in its image. Also, Aston Martin is a brand with excellent reputation not only because of its performance and quality but due to its status and aura that cars offer to owners as well (Alkhafaji and Nelson, 2013). Toll Free No. +44 203 8681 670 Mail Us: help@assignmentdesk.co.uk Assignment desk provides assignment help from professional UK writers.
Aston Martin provides exclusive range of products at premium rates in a segmented and mature market. The industry is complete of niche producers plus surrounded by universal manufacturers and the market is characterized by these features as specifically segmented and highly competitive. In the year 2011, UK was registered for 1,688,038 new vehicles, while by top ended cars only 45,000 automobiles were considered. Aston Martin accounted for more sales and presently placing at the third position in the market with total 6 percent share, after Porsche and Mercedes-Benz as well as closely followed by Ferrari (BARNAT, 2014).
The company’s mission statement exhibits its dedication to cars production that are creative plus advantageous from machine-driven discipline. Such vehicles not just required to look good but also significant to provide excellent driving experience to customers. This dedication of company to produce quality vehicles has ensured its name the international Toll Free No. +44 203 8681 670 Mail Us: help@assignmentdesk.co.uk Assignment desk provides assignment help from professional UK writers.
market. Moreover, the brand is synonymous of consolidated carriers and professional achievement (Boulton, 2001). “Aston Martin is dedicated towards manufacturing hand-made cars with creativity and benefit automotive discipline. The organisation is engaged in developing cars on the basis of three essential aspects, i.e. soul, beauty and power. Customers view owning Aston Martin as a success symbol”. Due to the collapsed of sales in UK, the brands of luxury cars have turned to developing markets for their business development and growth. The particular strategy of universal expansion will decrease the level of investment in mature regions like USA and Europe and diversify the markets. The strategy of Aston Martin is to raise capital for supporting global expansion strategy, for the reason to reach developing markets successfully (Clegg, Carter, Kornberger and Schweitzer, 2011). The following external, competitive and capability analysis of company will outline its strategic positioning in the market: External environment analysis – PESTLE Political – The legal and political environment comprises government agencies, pressure groups and laws, which influence many individuals and organizations. Also, new laws has been established by European Commission by covering product standards, competitive behaviour, commercial transactions and product liability for European Union’s 27 member’s nations. As a private organization Aston Martin operating in the territory of UK and in other nations, it is subjected to laws recognized by superior power, i.e. government. More legislation influences the business as well as distracts attention of employers from development and management. Moreover, the novel mandatory laws related to recycling has boosted enhanced costs for automotive producers and developed an opportunity of business for dozens of new organizations making final output from industrial wastage (Conant and Norgaard, 2011). As a niche producer, Aston Martin aspiring to be an international luxury manufacturer, still struggles with less production. Conscious of its limitations, the Toll Free No. +44 203 8681 670 Mail Us: help@assignmentdesk.co.uk Assignment desk provides assignment help from professional UK writers.
organization outsources Rapid model to Austria and bring engines from the Cologne city in Germany. The outsourcing strategy for the reason to transcend less production, exposes the organization to distinct restrictions plus involve governments established regulations. Being an international brand through territorial strategy of growth will expose the organization to distinct market restriction and export taxes. Restrictions in relation to minimum wage which increase labour cost and working time are some examples that how badly the organization can be influenced by political factors. Moreover EU regulations contributes to increase in export prices (Flury, 2005). Economical health – Purchasing power depends on availability of price, savings, income, credit and debit. Economic downturns can negatively influence businesses, specifically organization whose offerings are targeted to price-sensitive and high income customers. Economic crisis spread chaos across global and local markets plus its main victim is top end car market. In two different manners, economic crisis directly influences the market of Aston Martin, such as acquisition and goods retention. During the economic instability period, the customer’s natural trend is to cut superficial and unnecessary costs. The owners of Aston Martin by following this thought are running in the opposite side of road by making monetary expenses on taxes, insurance, high petro consumption and expensive maintenance service (Grant, 2010). Therefore, owners begin to get rid of their vehicles producing brand and product value depreciation. Also, the models of acquisition negatively influenced throughout the instability times due to credit crunch. The results of increment in rate of mortgage automatically enhances money loans price, like market is restricted by leasing and financing. Moreover, the economy plays an important role in the behaviour of customers by decreasing or increasing their purchasing power through price inflation (Hiscutt and Ishikawa, 2008). Social trends – The company and brand Aston Martin presents on internal level and sociocultural aspects define its external environment. Managing around 135 dealerships in 42 distinct nations throughout the world is an obstacle for communication and deliver same messages and values cross cultures. The percentage of individuals that have spending power Toll Free No. +44 203 8681 670 Mail Us: help@assignmentdesk.co.uk Assignment desk provides assignment help from professional UK writers.
to purchase Aston Martin vehicle is rather low around the globe, the target market is very small plus characterized by high money concentration in the small fraction of population. The characteristics of present society, traffic jam, urban chaos, lack of parking place, high fuel price and environmental influences are leading customers to face the behavioural transition period, by enhancing customers tendency to purchase small cars that are fuel-efficient and environment friendly, which are Aston Martin’s opposite features (Hitt, Ireland and Hoskisson, 2014). Many producers are looking forward for extracting maximum torque and power from small engines, prepared with compressor and turbochargers to re-use the produced energy, whereas the production by Aston Martin is based on big blocks of V12 and V8 engines. Such social trends leads to an interesting behaviour of customers basically described as a change through sublevels of the vehicle categories. This means, that there is a trend, which can shift top end cars customers to hybrid or smart cars. Such social tends would definitely put the manufacturer of UK at stake in case the Cygnet model does not launch into the market (Hotten, 2015). Technological drivers – The capitalism essence is to tolerate technology destructiveness as the progress of price. By following such thought, television hurt the newspaper, cars hurt the railroads and these both are hurts by internet. It depicts that organizations that ignore novel techniques would face decline in their business. The technology can be competitive advantage for the top end car market, however for Aston Martin in can be considered as a success gap. Also, for the reason to overcome such weakness the organization rely on outsourcing components of electronic offered by Porsche (Jones, Conway and Steward, 2001). By considering the old-fashion in manufacturing terms, the corporation that emphasize on the utilization of manual labour identified a mid-term solution to does not have restricted production. At present, Aston Martin has an automatic line of production but the overall finishing is hand-made, keeping the attention and essence to details. The engineering of modern car is split in between electronic and mechanical. Considering such two elements,
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Aston Martin provides a well-balanced product with desirable technical features and vintage elegance (Kaynak, Mockler and Dologite, 2014). Ecological factors – Road transport is one major pollution source in UK, contributing to climate change, poor air quality, noise disturbance and congestion. At present, there are 33 million of vehicles running on our roads in which 27 million are cars only. Concerned with quality of health and life for the coming years, the government of EU is improving regulations in relation to pollution produces by four wheelers (Trim and Lee, 2006). Aston Martin will impacted badly by the new restrictions and laws, when their cars release three times the accepted CO2 level. The organization is attempting to adapt their vehicles to EU new regulations related to CO2 emissions of cars. All car making companies by 2012 required to begin effective reduction in the emission of CO2. New rules will badly impact Aston Martin in near future. Also, the government is analysing law to force owners of high emission cars to plant a tree every year for compensating their cars emission (Leask, 2004). Porters Five Forces Potential entrants – It required high investments of capital plus well developed synonymous of brand image to the present established brand, like Porsche. Furthermore, usually consumers prefer to trust well-known brands that have excellent reputation plus seldom go for fresh brands as far as automobiles sector is taken into consideration. Customer loyalty to major brands, higher fixed cost, lack of resources, high cost of switching and government regulations are the major barriers to entry which also reduces the competition at some extent for already established brands like Aston Martin (MacNeill and Liu, 2008). Buyer’s power – Customer have low power to negotiate when it comes to select automotive sector, as there is no scope for changing premium cars price. For the particular automobiles segment there are very less firms in comparison to low segments as a consequence the customers have less choices to purchase exclusive cars (Sobrero and Roberts, 2002).
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Supplier power – There are distinct type of suppliers available in the automobile sector. Some suppliers for exclusive organizations in automotive sector turns out to be their competitors. Ford supplies Aston Martin with V8 and V12 engines. If the industry of automobile is taken commonly than Ford is a rival of Aston Martin as it is trying to break excellent segment car. Furthermore, Aston Martin being a premium cars manufacturer requires suppliers that make materials of high quality premium (Misra, 2014). These producers in less numbers because of high costs incurred in manufacturing process. Thus, such organizations are not negotiable in comparison to counterparts of minor segment vehicles. The presence of few suppliers for the particular product constitutes to high pressure exerted from suppliers on Aston Martin as alternatives would be very expensive. Substitutes – The elite car of Aston Martin is purchased by rich individuals who to own luxury products. There are several other things that can own by people apart from top end cars, which would also be taken as luxury items, such as private jet or Rolex watch (Peattie, Ottman and Polonsky, 2002). Competitive rivalry – There is high rivalry among manufacturers of elite car. From past century several brands have developed and are indulged in strong competition among one another. Main rivals of Aston Martin are Porsche, McLaren, Rolls Royce and Bentley. Because of high competition in the industry often profit margins are limited and to sustain in the highly competitive market, the Aston Martin is required to offer value added services to customers like easy finances, extended warranties (Ritson, 2009). Threshold and distinctive resources/capabilities Distinctive and threshold are two kinds of competency or resource. A company required threshold for fulfilling necessary requirements in order to compete in current market as well as to achieve parity with rivals presented in that specific market. Threshold capabilities are considered as basic things required by a company. Aston Martin threshold resources are raw material supplier, manufacturing space, engineering design equipment, Toll Free No. +44 203 8681 670 Mail Us: help@assignmentdesk.co.uk Assignment desk provides assignment help from professional UK writers.
facilities plus offices, sufficient customers and adequate personnel (Roos, Bainbridge and Jacobsen, 2001). Additionally, the organization have well performance global network of distribution, which supports it in distributing products around the globe. The distinctive resources of Aston Martin comprises James Bond, top-end brand, product portfolio, good investment in R&D for improving features of car, laboratory at headquarters for promoting innovation, extensive advertising plus P&R to promote products that can control over employees working conditions. Furthermore, the organization develop production plants in nations where low costs labour is available (Sharman, 2015). At Aston Martin, Threshold competencies comprise skills of general management including marketing and distribution, quality control plus assurance, cost control by producing in low cost regions, capability to attract customers through innovative designs. The most significant threshold competencies is skills that is bring by 350 scientists and engineers, which have also let the organization receive the doubled operating income. On the basis of Aston Martin website, their engineers at all the time bring competitions for designing cars that shows best designs are created by engineers for customers (Reid and et.al., 2014). Furthermore, engineers of Aston Martin have an effective psychological conditions for tolerating failure reasonable to rivals and facilitate them to take more risks, which might bring competitive edge. Distinctive competency involves regular inspirational leadership in the engineering, unified value chain system in spite of manufacturing and design take place in distinct locations, attracting early adopter by offering some new things in the market and products that never being boring as well as always surprise the target customers (Aaltonen and Ikävalko, 2002).
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SWOT analysis STRENGTHS
WEAKNESSES
➢ Access to production facilities cutting ➢ Competitors sales are increasing ➢ Less
edge ➢ Powerful influence in the events of
current
product
portfolio
in
comparison to competitors like Porsche ➢ More pricing in comparison to other
motor racing ➢ Rich ancient heritage
commodities offered by rivals in same
➢ Great brand ability and image to charge
segment
premium rates ➢ Loyalty of brand due to excellent connect of customer ➢ Excellent customer services ➢ Recognised high loyalty of customers because of ultimate comfort and luxury OPPORTUNITIES
THREATS
➢ Expanding and investing into developing ➢ New entries into segment of elite market economies like Asian markets ➢ Product portfolio expansion ➢ Investing and expanding into emerging ➢ Economies of scale
auto maker Toyota’s upper segments ➢ Rising awareness of eco-friendly and electric cars
➢ Indulging into ecological practices ➢ Diversifying into segment of niche market, i.e. electric cars
can stand as competitors, like Japanese
➢ UK’s present financial climate and excess industry capacity ➢ Company’s poor management by new owners and concerns over cash flow and profitability
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It can be said from above analysis that Aston Martin has to execute some strategies to enhance present market standing and sustain fierce competition. Also, the prevailing financial climate can restrict elite car sector sales, so Aston Martin would require to diversify its product portfolio through available options (Ramsey and Duhe, 2010).
b. STRATEGIC CHOICE FOR THE ORGANIZATION The Porter’s generic strategy will assist in proposing adequate strategic choice for Aston Martin. The following strategies included in this model that can provide best competitive advantage to the organization: Cost leadership strategy – To gain competitive edge, Aston Martin should lessen involved cost in delivering services and products. In turn it means that the organization has to search for options that provide cost advantage to business. Few areas into which the corporation can explore are proprietary technology, developing partnership with main suppliers, economies of scale and low cost outsourcing. In order to attain cost leadership, an organization must have capital to bring efficient logistics, low cost base and changes (Allio, 2005). Differentiation strategy – It comprises making more attractive plus different products or services than the existing rivals. Such differentiation greatly depends on the sector. But some of them are support, brand image, functionality, features and durability. A big corporation that is following differentiation tactic requires to stay responsive with its process of product development. The differentiation is done by focusing on some dimensions that is valued by customers. In order to cater with customer’s specific needs, the organization places itself in unique place that brings loyalty of customers as well (Pugh and Bourgeois III, 2011). The differentiation strategy success depends on capability to deliver high quality services and products, research plus innovation and creation of valuable marketing strategy. Aston Martin cars are unique in the market not only in the way they looks but also in the way they drive. Unconventional features, intelligent technologies, and advanced solutions are what set Aston
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Martin cars apart. The differential strategy creates a reason for customers why to go for Aston Martin and not to other competitors (Balmer, 2006). Focus Strategy – Organizations use focus strategies to comprehend customer’s unique requirements in specific market and utilize such knowledge to create services and products that suit best to the client needs. Since, Aston Martin are so concentrated on their consumers, they require to develop strong loyalty of brand. Usually, the focus strategy is combined with either differentiation or cost leadership to make their services and products sought after. Differentiation focus exploits the buyer’s particular needs in some definite segments (Blenko, Mankins and Rogers, 2010).
c. Evaluation criteria and evaluation of strategic choices Strategy evaluation criteria concerns with assessing the overall effectiveness of Aston Martin strategy. Johnson and Scholes SAFe model is used to vet strategic options ascertaining three criteria – Suitability, Feasibility and Acceptability. This model provides with logical and comprehensive approach to evaluate strategic choices effectively. However it should be noted that it is unlikely that any one option can be the most perfect. Suitability – It talks about whether the proposed strategy address the key opportunities or threats by examining the organization’s strategic position. PESTLE, Porter’s five forces, SWOT etc. helps in understanding and identifying the dynamics of existing external environments. The fundamental criteria to evaluate the same is to assess whether the proposed strategy would exploit the opportunity while avoiding threats and capitalise on strengths while fixing on weaknesses. Once identified, there are several useful tools available to screen these strategic options like Ranking, Decision Trees, Screening against competitive advantage, Using scenarios and Life cycle analysis. Suitability analysis evaluates each strategic options to determine their usefulness in identified circumstances of external markets (Cousins and Spekman, 2003).
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Acceptability – It concerns with meeting expectations of stakeholders (investors, employees, customers etc.) expected performance. Three key aspects of acceptability are – Risk, Return and Reactions of stakeholders. Risk deals with the extent of consequences of strategy failure and can be assessed using tools like Break-even analysis, Sensitivity analysis and financial ratios. Returns are expected benefits that stakeholders seek from the organizational strategy. Cost-benefit analysis, Shareholder value analysis and other financial analysis like ROCE (return on capital employed), payback period, DCF (discounted cash flow) are the tools which help in evaluating Returns criteria for strategic options (Partovi, 2001). Reaction of stakeholder involves likely reaction of stakeholders for example, concerns of customers over a low-cost strategy with regards to product quality or employees negative reactions to a proposed merger strategy. Stakeholder mapping using the power – interest matrix can be used to understand the likely reactions of stakeholders to a particular strategy. The stakeholder aspect might be qualitative thus difficult to assess but important otherwise unsuccessful implementation of strategy might be caused without stakeholders support (Evanschitzky and et.al., 2012). Feasibility – It concerns with the practicability of the strategic option that talks about assessing whether the organization have resources and capabilities for effective implementation of the particular strategy and if not whether that can be obtained by them. Successful integration of key resources area essentially required for implementing a strategic option that could involve human resource, financial resource, physical resource, information technology, time and resources from suppliers (Okumus, 2003). This criteria can be applied to Aston Martin in any of their strategy decision choice that can be whether competitive strategies like low-cost, differentiation, focus etc. or the growth strategies like market development, product development, diversification, or even the development methods like organic, mergers alliances etc (Ho, Dey and Lockström, 2011).
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d. Selection and justification of the optimum strategy The business strategy of Ford is focused on creating a well and broad thought out sustainability tactic for remaining competitive. The existing trend have shown that all main players in the market of automobiles are moving in the direction of hybrid vehicles. The slowly and steady increase in the prices of fuel and the enhanced concentration of green techniques has pushed all the manufacturers of car to look at vehicles utilizing alternate sources of fuel and Aston Martin is not missing out on the wave of this electric vehicle (Ip, and Koo, 2004). But what works actually in the favour of company is that unlike its rivals, Aston Martin is following distinct alternatives in place of concentrating only on single technique. The organization has taken an approach of multi-pronged towards productions of cars for the target customers. Furthermore, advanced techniques like the system of cross traffic alerts, i.e. SYNC (generally available in top end four wheelers like BMW), which allows customers to use their phone, choose music and make calls without taking hands off from the wheel (Jones and Craven, 2001). The differentiation focus strategy of Porter’s holds good for the undertaken reorganization within the business of Aston Martin. At a period when the organization was going through a condition of crisis with increasing debt, the owners was decided to make investment in developing new vehicles that are feasible for all rather than restricting themselves to less main products (Nonaka and Toyama, 2007). The consideration was on what is really required by customers and in what best manner it can be provide to them. Regardless of any nation in which Aston Martin is performing business activities, every customer required seek for some core aspects while purchasing a car, such as safety, after sales services to customers, brand reliability, etc (Karlsson and SkÜld, 2007).
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CONCLUSION The above report concludes that an exclusive range of cars at premium prices is provided by Aston Martin. The company’s products are mainly targeted to mature market. The pie chart is showing that the organization is having total 6% of UK market share and still lacking behind the top end automobiles manufacturers, i.e. Porsche and Mercedes Benz. The designers at Aston Martin consider three main elements while developing cars, such as power, beauty and soul. The strategic positioning of company in the overall market is outlined through external environment analysis, strategic capability analysis, competitive analysis as well as SWOT analysis. The political factors are in favour of company, as government of UK is supporting export activities and Aston Martin will able to increase global sales. Due to rising awareness of customers for environment protection, the company is required to invest more in hybrid cars production. By considering automatic production line and handmade finishing, the organization is balancing products with vintage elegance and desirable technical features. Moreover, the competitive analysis is showing that new entrant’s threat is low because of more capital required to start business in automobiles sector. There is high power of supplier, as some of them are turn out to be competitors of existing firms. The power of buyers is low because of elite car costs less flexibility. Also, substitute threat and intensity of rivalry is high due to availability of competitors producing similar luxury products and adopting same process of manufacturing plus distribution. Furthermore, porters generic strategies of company is defining that Aston Martin is following differentiation focus strategy to differentiate its offering from others and concentrating on specific segment of the market. However, the present financial condition of market is forcing organization to produce cars that can be bought by all segment of customers.
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REFERENCES Alkhafaji, A. and Nelson, A. R., 2013. Strategic Management: Formulation, Implementation, and Control in a Dynamic Environment. Routledge. Clegg, S.R., Carter, C., Kornberger, M. and Schweitzer, J., 2011. Strategy: theory and practice. Sage. Grant, R.M., 2010. Contemporary strategy analysis and cases: text and cases. John Wiley & Sons. Hitt, M., Ireland, D. R. and Hoskisson, R., 2014. Strategic Management: Concepts and Cases: Competitiveness and Globalization. Cengage Learning. 11th ed. Kaynak, E., Mockler, R. and Dologite, G. D., 2014. Multinational Strategic Management: An Integrative Entrepreneurial Context-Specific Process. Routledge. .
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