Organizational capabilities and resources being possessed by the contemporary business organizations are important to determine their effectiveness and competencies in operating in the current competitive market scenario. Thus, contemporary business organizations are initiating effective strategic management in order to compete in the challenging global scenario (Vogel & Guttel, 2013). Strategic management is more important due to the reason that, in the global business environment, the competition and other environmental factors are more diverse and varied.
Magna international is one of the leading business organizations based in Canada. Since 2014, they are the largest automobile parts producer in the entire North America. Currently, they are having their market presence in more than 29 countries around the world with having more than 159000 employees (Magna: About Magna, 2018). Thus, they are a truly global organization with having global operation and stakeholders. Thus, in due to their global operation, they are also having effective strategic management to deal with the emerging global challenges.
This report will discuss about the impact of the various environmental factors on the business operation of Magna international. Moreover, strategic models will be used in determining the resources, capabilities and competitive advantages being possessed by Magna international. In accordance to the factors being identified, the strategic approach of them will also be discussed in this report.
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Political |
· Political environment of Magna international is diverse due to the reason that, they are having their business operation in different countries around the world. · Level of corruption is increasing in political system of different countries (Wroe, Allen & Birch, 2013). Thus, it is having negative impact on their business operation. · Increasing the risk of terrorism is also having negative impact on the business operation. · Difference in the political system between the countries is also having negative impact. This is due to the reason that, in the global operation, it becomes difficult for them to adhere to the differences. |
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Economical |
· The average global economy is enhancing and thus, the demand for automobiles is also increasing. · Increase in the free market and reduction in the trade barriers is helping magna international in increasing the volume of their international business (Hamza & Zetter, 2013). · However, with the rise in the local competitors along with the growing popularity of the counterfeited products, the market size is shrinking for Magna international. · Having the manufacturing units in the developing countries is helping them reducing the cost of the production and offering products in more competitive prices. |
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Social |
· With the increase in the younger population, the demand for motor vehicles is increasing. · The positive brand image of Magna international helps in attracting new customers. · Social inclination towards the use of the genuine parts for automobiles is increasing, which is having positive impact on the business operation (Messner, 2013). · With the growth in the economy, the social preferences for having automobiles are increasing in the developing and underdeveloped countries. |
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Technological |
· Advancement of the technology is going rapidly in the recent time (Baden-Fuller & Haefliger, 2013). Thus, more investment in this sector is important for Magna international. · However, Magna international possess updated technologies in their business operation and with having huge financial resources, they are the frontrunner in introducing new technologies. · However, technological up-gradation of the suppliers is difficult for them to manage. |
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Legal |
· Difference in the legal formalities in different countries is a challenge for them due to the reason that, complying with diverse legal regulations is difficult. · Various regulations are being implemented by different countries in the recent time regarding foreign investment. This is creating barriers for the foreign operation of Magna International. · Legal restrictions related to the transfer of the technologies are also having negative impact (Steurer, 2013). · However, legal assistance in promoting the use of authentic and original parts for automobile is the positive factor for them. |
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Environmental |
· Different countries are having different laws regarding environment, which are having different impact on the financial performance of them (Le Bourhis et al., 2013). · The official website of Magna international states the various activities in relation to the environment are discussed. · Recycling of the materials will be one of the key sustainable options for them. |
Thus, from the analysis of the external environment of magna international, various factors are being identified. However, the factors are more negative compared to positive. Thus, it depicts that, the global environmental factors are challenging for them. It further amplifies the need of effective strategic response from Magna international.
Resource based model will be used in this report in order to determine and identify the key resources and capabilities being possessed by Magna international.
As discussed earlier, Magna international is the leading supplier of automobile parts in the world. This intangible resource of them can be termed as valuable due to the reason that, the positive brand value of them helps to attract more customers along with more clients. This is due to the reason that, positive brand image of them is the contributor in attracting car brands to have their parts from them. Wider market reach of Magna international also provide values for them due to the reason that, presence in wider geographical areas is helping them in targeting more customers.
Financial position of Magna international is high due to being the market leader in its sector. This helps them to invest more technology and innovation along with taking more risks in their operation (Camisón & Villar-López, 2014). It helps them in staying ahead in the competition. Human resources of them can also be termed as valuable due to the reason that, the individual skills possessed by their internal stakeholders helps them to gain competitive advantages in the market. The official website of Magna international states various updated technologies being used by them. This helps them in regulating the cost of production along with offering innovative products in the market.
The brand value possessed by them is not rare due to the reason that, other players are also having positive and huge brand value in the market. However, the status of market leadership along with the penetration of the brand is rare and creates competitive advantages. Human resources of them are also not rare resources due to the reason that, every other players in the industry are having diverse human resources. However, the skill set of them can be considered as rare.
The brand value of Magna international being gained is inimitable due to the reason that, huge cost involved. Moreover, the positive brand value gained by them is the outcome of their rich operational history and offerings. This cannot be imitated by other players. Wider market reach of Magna also cannot imitate due to the reason that, it involves huge cost and operational experience to have the market presence in different locations around the world (Leonidou et al., 2013). Various technologies involved by them are not imitable. This is due to the reason that, regulations regarding patent and intellectual property are associated.
With having years of experience in the related field, magna international is having organizational capability to maintain their organizational capability. With having their operational facilities in different locations around the world, they are now having more experience in international business (Martelo, Barroso & Cepeda, 2013). Moreover, they also maintain effective policies of human resource management in managing their internal stakeholders. This helps them to gain competitive advantages from the enhanced skill sets of the employees.
This section will discuss about the competitiveness being possessed by Magna international in their business operation. Porter generic strategies will be used in determining the competencies of them. According to the model of generic strategies, there are mainly three strategies that help the business organizations in gaining competitive advantages. Magna international involves few of them. Cost leadership and market focus strategies are mainly promoted by them over product differentiation. This is due to the reason that, the products of them are being made according to the client’s specifications.
Cost leadership strategies are being involved by Magna international. According to various reports, in the recent time, they are looking to have their production bases more in the developing countries. This will help them in reducing the cost of production due to the reason that, the resource cost especially the cost of human resources are quite low in the developing countries as compared to the developed countries. According to the reports, Magna international is initiating to move their production bases more in the developing countries (The Globe and Mail, 2018). This strategy is being initiated by them due to the reason that, it will help them to offer the products in more competitive pricing. The client base of Magna international also includes affordable and mass market automakers. Thus, according to their specifications, cost effective products are important.
The customer segment of Magna international is diversified and can be classified in different social classes. This is due to the fact that, they are the suppliers of the auto parts for high end as well as for the affordable automakers also. In accordance to that, the requirement of these clients is also different. Therefore, market focus strategy is being initiated by them in order to segment the entire market and meet the individual criterion accordingly. Initiation of the market focus strategies helps them to offer different products, which in turn cover more customer segments.
The above sections discussed about the various factors that will have more negative and positive factors on the business operation of Magna international. However, various strategies are being involved by them in order to operate in the challenging business scenario. The following sections will discuss about the strategic approaches of them.
Conclusion
Thus, from the above discussion, it can be concluded that, Magna international is facing various challenges in the global market. The external factors faced by them are diversified and frequently changing. This report also discussed about the competitive strategies being maintained by them in their business operation. The core competencies and resources being possessed by them are also being discussed in this report by using various theoretical models. This report concludes that, there are various resources of Magna international, which are valuable, rare and inimitable. These resources are helping them to gain competitive advantages in the market. Competitive strategies of them are also being discussed in this report along with analyzing the strategic approach of them in their global operation. It is being concluded that, they involved extensive and diverse strategic approaches in order to cover all the relevant areas and to stay ahead in the competition.
Reference
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Camisón, C., & Villar-López, A. (2014). Organizational innovation as an enabler of technological innovation capabilities and firm performance. Journal of business research, 67(1), 2891-2902.
Facing higher costs, Magna puts brakes on new plants in Canada. (2018). The Globe and Mail. Retrieved 6 February 2018, from https://www.theglobeandmail.com/report-on-business/magna-posts-higher-profit-sales-climb-7-per-cent/article18550841/
Hamza, M., & Zetter, R. (2013). Market economy and urban change: Impacts in the developing world. Earthscan.
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Leonidou, L. C., Leonidou, C. N., Fotiadis, T. A., & Zeriti, A. (2013). Resources and capabilities as drivers of hotel environmental marketing strategy: Implications for competitive advantage and performance. Tourism Management, 35, 94-110.
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