Discuss about the Business Strategy Activities and Portfolio.
The organisation selected for the purpose of this assignment is XXX Co that is based in Singapore and is an industry participant of the private sector. The organisation is engaged in a diversified portfolio and caters to many needs of organisations engaged in different business activities. In light of the various changes in the business environment, the company required further diversification of its business activities. It undertook a re-alignment of its objectives and decided to enter into a new market of Myanmar – the last frontier of South East Asia. In order to expand its activities the management of the company took the decision of investing in the country, primarily in property development. The aim of the company is to develop properties for every industry in Myanmar along with residential properties. One of the main objectives of the company is to expand its market share and recognition by entering into new markets. The decision to enter Myanmar was taken in the year 2013 by the management of the company keeping in view the vision and mission of the company. In essence, the objectives of the company in entering the new market are as follows:
The above objectives are well endowed and form the basis of the expansion intended by the company. The organisation formulates and implements policies and strategies in order to achieve these objectives in an effective manner and enhance its efficiency.
The environment in which an organisation operates is very much important as it exerts a considerable amount of influence on the business activities of the concern. The elements of the business environment are unique and affect the organisation in different manner (Frankland et al. 2013). For a better understanding of these elements, close analyses of these elements are is required to be undertaken separately. Business environment has been broadly classified into macro and micro. Macro environment consists of the external factors that affect the organisation while micro environment consists of the internal factors of the organisation. The most striking difference between macro and micro environmental elements is that the former is uncontrollable and the latter is controllable by the concerned organisation (Yamak, Nielsen & Escribá-Esteve, 2013). In the given case scenario, the selected organisation has entered into a new market and it is imperative to analyse the business environment in order to attain success in this venture of the organisation.
External Analysis
A proper analysis of the external environment can be done with the help of PESTLE analysis. This elaborate framework helps in defining and analysing the key environmental variables and determines their future effect on the organisation and its activities. Identifying opportunities in the business environment and exploiting them tends to increase organisational competitiveness and gives it an edge over its competitors.
PEST Analysis
Myanmar is situated in south Asia and has a predominant cultural background. As a third world country, it is dependent on its core cultural values and it has much influence on the manner in which business is conducted in the country (Shabanova et al. 2015).
Political Factors
Political unrest and corruption in the Myanmar may lead to slower the expansion of the company, thus hindering the growth rate. However, in this country, there is suitable framework for inflow of capital. The changes in the political regime of Myanmar influence the policies that are favourable for international trade. Prevailing tax structure of this nation will affect the quantum of profit made by the organisation
Economic Factors
Healthy growth of the economy and increase in its GDP will increases the demand for the company’s product; i.e., property. In the same way, the lower is the unemployment rate; the higher will be the spending capacity of the nation. High inflow of FDI to the nation will increase in competitiveness in the market. There is an increase in government spending on building infrastructure of the country, will provide a proper set up for the business to establish and grow up. The higher will be the per capita income, the more demand will be generated.
Social Factors
Cultural background of the people influences the company’s success factor. The social status of the people determines the sales of the company’s product. Investment pattern of the people of this country will decide whether company will get support from the new market, to expand its business. Major means of livelihood of the people determines whether they would like to develop property or buying property will be considered as luxurious activity. Social attitudes and social taboo of the local people will also affect the new business.
Technological Factors
Status of technological advancements in the country will determine the process innovation rate to develop new property in the nation. Use of internet and social media will enable the company to promote its product. The development in the telecommunication industry in Myanmar will help the company to operate easily (Granger & Schroeder, 2013). The technologies used in development of real estate will affect the property development.
Opportunities
Following are the most important opportunities for the organisation:
Threats
Following are some significant threats of doing business in the country:
The factors pointed out under the heads of opportunities and threats that will have a significant impact on the business decisions of the organisation. In the present global business environment, business organisations are aiming for maximising the wealth of its shareholders along with profit maximisation. Expanding by making investments overseas tends to fulfil this objective of the organisations (Navarro, Arenas & Rondán, 2014). In the given case, the company tends to exploit the opportunities available to it in the new market of Myanmar. The company has to carefully consider the drawbacks and threats of the new business environment and devise policies accordingly in order to achieve its objectives.
Porter’s five forces is a model that is used to perform an effective industry analysis for business organisations (Lee, Kim & Park, 2012). The analysis of the five forces is as follows:
Threat to New Entrants
Political and social unrest discourage the new entrants to enter the property market. Presence of corruption in this country also hinders the entry of a firm. The cost of property market is uncontrollable. There are several government policies and barriers to entry in the real estate market. The new firm has to create new brand identity in order to gain the market share, which is very challenging in this industry. Moreover, in this country, there is little access to distribution channels.
Power of the Supplier
The location and concentration of the suppliers is strong in this industry. However, the company can made an overall cost differentiation in order to decide from whom to supply its inputs. The firm can get raw materials from the local site. The transportation and insurance of the material purchased from the supplier.
Threats of Substitutes
Buyer behaviour of purchasing property changes with time. Consumption pattern of the customers may reduce the demand for property market, if people want to spend their money more on other goods than in property. Customers may prefer to buy products from the other firms if they find price is too higher. Availability of rent may be considered as substitute of property buying.
Buyer Power
Customer’s perception, tastes and preferences influence the demand generated in property market. Customers are price sensitive and too high price of the property may not be affordable by the people of this country. Moreover, bargaining power of the customers to avail leverages is also high. Buyer-seller ratio is also high, hence seller has much power over price.
Competitive Rivalry
Concentration of the industry causes high competition in the market. If the capacity of the firm is too high, then it will enjoy competency over the rivals. There is barrier to exit; hence the market is more competitive in nature. Through diversifying the products, the firm can gain competitive advantage over its rivals. The cost involve in the business process will influence the competitiveness of the firms. The less cost is involved, the more the firm will enjoy advantage over other firms.
The company has entered into a new territory of Myanmar with the objective of diversifying and expanding its business activities. With this clear-cut objective, the company formulated policies and strategies to give effect to its management’s decision. International trading is a big decision to make for the management of an organisation. The management is required to conduct a thorough analysis of the business opportunities available in Myanmar. As mentioned earlier, business environment is composed of internal and external factors. As external factors are uncontrollable, it becomes imperative to for the organisation to focus on the internal elements so that overall development can be made possible. Internal analysis tends to build efficiency of the organisation and develops core competencies that help the organisation to get a competitive edge over its competitors. Internal analysis closely determines the resources available to the organisation that can be put to use to achieve the business objectives of the organisation through its business activities (Slack, 2015). Internal analysis also encompasses the capabilities of the employees of the organisation to ensure that optimum use of the organisation’s resources is done. Therefore, it can be said that internal analysis deals with resources of the organisation, capabilities of the employees and the development of core competencies. A smooth coordination among all three elements is required for achieving the pre-determined objectives of the organisation.
Value chain can be said to be a set of activities undertaken by an organisation in order to provide valuable goods and services to its customers in the selected market segment. In essence, it can be said that creating value for its customers is one of the main objectives of an organisation. This becomes necessary when an organisation enters a new market with a new set of targeted customers. This concept acts as a tool that helps an organisation in effective decision-making (Cameron & Green, 2015). The concept of value chain can be explained with the help of Porter’s Value Chain template. The concept was developed by Michael Porter in the year 1985 and was explained in his book. The value chain template gives a set of competitive strategies than an organisation can used to gain competitive edge over its competitors by providing superior quality goods and services and that carry a certain quantum of value for the customers (Goetsch & Davis, 2014). The value chain template can be explained with the help of the diagram below:
Diagram 1: Porter’s Value Chain
The template subdivides the activities of an organisation into two broad categories namely primary activities and secondary or support activities. An organisation performs these activities in order to provide value products and services to its customers. The primary activities consist of the following:
On the other hand, secondary or support activities consist of the following:
Operations: These are the main business activities performed by an organisation that determines operational efficiency and profit for it (Hayes, 2014). Operations include managing the entire process of converting inputs into output that are ready to be sold or offered to the customers. In the given case scenario, the selected company is engaged in developing property related to hotels, tourism, hospitality and residential property. Thus, operations will include converting raw materials required to build properties into finished buildings and complexes that will be used as hotels, hospitals and residences.
Marketing & Sales: marketing and sales is one of the most important functions in the real estate sector. Marketing the finished properties to the appropriate target customers is very important in order to sell the properties. Without effective marketing activities, the properties will remain as stock in trade and will tend to block a huge amount of capital investment made by the company (Hill, Jones & Schilling, 2014). Selling of such capital-intensive properties is a daunting task and requires a considerable amount of effort from the sales personnel.
Inbound and Outbound Logistics: Inbound and outbound logistics are important but holds less importance than operations and marketing activities in the given case. Inbound logistics include movement of materials, parts and other inventories that are required for the construction and development work (Hamilton & Webster, 2015). Outbound logistics is less likely to take place in the given case as properties are immovable and disposing off depends on the marketing and sales function of the organisation.
Infrastructure of the Organisation: Infrastructure of the organisation is a very important factor that determines the effectiveness of organisational capabilities. The facilities and the infrastructure of an organisation are required to be strong for their employees to carry out their responsibilities in an efficient manner so that the objectives of the organisation can be achieved (David & David, 2016). A proper infrastructure is very important for an organisation to carry on its daily operations.
Procurement: Procurement is the process of obtaining the required material to carry on the daily operations of the organisation. The procurement process has to be executed and monitored in an effective manner so that costs can be controlled along with increasing the efficiency of the operational activities of the organisation.
Technological Advancements: In order to maintain the market position, an organisation is required to adapt itself with the technological changes that are taking place within the industry. Implementing the advanced technological processes tends to increase the capabilities of the organisation and helps it to develop core competencies (Wild, Wild & Han, 2014). Ultimately such an implementation leads to dynamism and ensures sustainability.
Human Resource Management: Human resource remains at the core of success of every business organisation. An organisation does not work by itself. It is run by the people of the company who are designated specific job roles that are to be performed in an effective and efficient manner (Mellahi & Frynas, 2015). Managing this human resource is an art and determines long-term success of the organisation.
The given company is entering into a new market with the objective of increasing its market share, profit making and achieving economies of scale and time. The strength of the company lies in some of the most important factors discussed above. The first and the strongest point of the company is its infrastructure. The company is capable of expanding itself and has adequate capabilities to adapt to the nee culture and do business. It also excels in its operations and marketing activities (Botha, Kourie & Snyman, 2014). The properties to be developed in the country will be backed by efficient marketing activities so that effective sales takes place generating revenue and profits for the company. Last but not the least is the use of effective and updated technologies in the development of the properties. On the other hand, in the new country and in new market conditions, procurement has to be worked on by the company. Labour is cheap in Myanmar and the company wishes to exploit this opportunity in order to control costs of the projects undertaken and to be executed in future.
VRIN Framework
VRIN model helps the management of the organization to determine the competitive advantage of the company. This particular model emphasize on four different characteristics of the company. These four characteristics are – valuable, rare, inimitable and organization. Below, the competitive advantage of the organization is analysed with the help of VRIN model:
Valuable (YES):
The most important characteristic of XXX Co is its work force, which is highly skilled. The employee base of the company includes experienced engineers, who can design the buildings with styles. At the same time, the lower level employees of the organization also have expertise knowledge in their field of work. The quality of property that XXX Co provide to its customers, makes the company valuable in the industry. At the same time, the customer relationship management is another strong characteristic that enhance the value to the organization.
Rare (YES):
The properties like, buildings for shopping mall or residential apartments that XXX Co provides to its customers is of unique design. The architecture and the raw materials used by the organization to build the properties are of high quality. The quality of the architecture is rare in Singapore and Myanmar.
Inimitable (YES):
The quality of properties and the service that XXX Co provides to its customers are hard to imitate. The competitors need to identify and employ creative workforce, which is not easily available and to employ creative work force, competitors need to invest high amount of money.
Organization (NO):
As XXX Co is in the real estate industry, the products and services provided by the company have substitutes. There are many competitors in the industry, which can provide substitute properties at lower price. However, the quality of the substitute products is not up to the standard of XXX Co’s products or properties.
Analysis
The VRIN framework supports the strengths of the company explained in the above portion. The resources used by the company in the form of its operational efficiency, its capabilities, marketing activities and core competencies and the use of its technology are unique and is an added advantage to the company (Jenkins & Williamson, 2015). The company is to exploit these advantages to achieve economies of scale and generate substantial amount of revenue and profit for itself. This in turn, will increase the wealth of its shareholders as excellence in operations will increase the share price of the company.
Strategic Change Process
Change is inevitable and the business environment is always exposed to various types of changes. Most of the changes take place in the external environment. Accordingly, the internal environment of an organisation has to be changed in order to keep parity with the extensive changes in the external environment (Cai & Yang, 2014). An organisation is required to manage such changes in the business environment in an efficient manner so that it is able to continue its business activities and attain sustainability. The change management process can be explained by the help of evolutionary theory.
Evolutionary Theory
The prime objective of this theory is to represent that organisations are required to evolve in tackling the changing environmental forces that affect its operations and business activities. Change management is a daunting task and has to be addressed in a proper manner so that the exact requirement of the hour or the change is properly identified and resolved. The theory uses four generic processes such as variation, selection, competition and retention (Wetherly & Otter, 2014). These four processes describe the manner in which an organisation evolves from the past in order to adapt to the present required changes and maintain its competitive edge.
These processes serve two purposes. It integrates the adaptive organizational capability into evolutionary theory and lights up features of strategy-making that other theoretical concepts did not inspect. Each firm behaves as ecology, where strategic initiatives emerge.
Variation: When an individual of a company wants to express his/ her special skills and improves career through strategic initiatives, “variation” takes place in the strategy. The initiatives enhance the competencies and everything take new shape if the initiatives draw on the company’s resources.
Selection: By administrative and cultural mechanism selection takes place. Through regulating allocation of resources and attention to strategic initiatives, selection works.
Retention: The organization’s initiative to survive and grow in the external environment is important. Retention can take the form of learning at organizational-level that leads to success of the company.
Competition: Company’s strategic initiatives struggle to acquire resources required for growing and generating the importance of the firm. Internal competition between the strategic initiatives is linked with the external competition.
Therefore, through variation of strategies; selection of proper strategies; retention of effective strategies and using strategies to increase competency can help an organization to grow and sustain over the years successfully.
The evolution process of a business depends on the how well the organizational culture has been understood. At first, it is important to know the function of the firm. Then by continuing with regular business activity, the firm will take different strategic decisions based on the circumstances of the internal and external scenario. With time its approach changes and its strategic plan also varies according to that. New ideas evolute from the top management and the functioning style of the firm do change. The firms try to diversify in various domains and change the idea of the traditional practice of focusing on particular product. With time the, competition pattern of the market also changes. The organization must adapt changes and make changes in its strategic decision. With time, the objective of the organization also changes and new set of goals and objectives evolute. The evolution takes place in the marketing strategy of a company or in the industry as a whole. The role of the employees also changes. Different departments of a business have been evolved to control the numerous business activities. The evolution process of an organization is a continuous improvement process. This is because; a firm’s business practices and its strategies continue to change and improve over time in order to sustain in the ever growing competitive market.
In the given scenario, the selected company is entering into a new cultural arena and is required to devise proper policies and strategies in order to adapt itself to this change. The market conditions are new along with the nature of demand and requirements of its targeted customers. The company is required to adopt a total new approach in dealing with its customers and its employees along with all its stakeholders in the new market (Grant, 2016). In this business expansion plan, the most important factor of the external environment is culture. The company is required to use local labour force for developing its properties. Along with labour, it is required to procure materials locally and is also required to follow the local legislative structure prevailing in Myanmar. Thus, the company is required to adapt to this important change in order to attain success in its activities (Mellahi & Frynas, 2015). Presently, the company is in the process of implementing the policies it has formulated to adapt to the cultural changes and according to the external environmental factors that pose as a barrier to its activities.
This model is actively used in organisations to access, evaluate and monitor internal changes within an organisation. The model can be explained with the help of the following diagram:
Diagram 2: McKinsey 7’s Model
All the elements are required to be coordinated in a proper manner so that the organisation is able to manage the chnages in its internal and external environment (Cavusgil et al. 2014). The model helps in identifying the present requirements and the re-alignment of the organisations objectives and operations.
The SAFE model is used to evaluate the current position and situation of the organisation. It helps in determining whether the policies and strategies developed, adopted and implemented by the organisation is appropriate in achieving the objectives of the organisation. SAFE stands for Suitability, Acceptability, Feasibility and Evaluation. It creates a nexus between strategic objectives and strategic policy making infrastructure of an organisation. In the given case scenario, the SAFE model will help in determining whether the decision of the company to expand its operations to Myanmar is a feasible and profitable one or not (Fleisher & Bensoussan, 2015).
Conclusion and Recommendations
The decision of the company to expand its operations in Myanmar carries with it many strategic advantages for the company. The company will be able to exploit the opportunities in the country with the help of its capabilities and core competences. The company will be able to generate a considerable amount of revenue and profits for its investors. A proper analysis of the business environment has to be done and on a continuous basis as the requirements and demand change over time. In order to achieve the defined objectives of the company, it is required to use its strengths to counter the barriers it is facing or is assumed to face in near future. Risk management has to be done in an effective manner so that company is able to achieve sustainability and remain solvent in the long-run.
After an in depth analysis of the situation, recommendations can be provided for the company. It is suggested that the company should analyse the business environment of the target market at regular intervals. Moreover, it must re-align its business activities with the requirement or aims of the company. It is recommended to put in place an effective risk management mechanism to control and manage risks in the new property market. The company should put in place an internal control and internal check system in its operational function of Myanmar. It is also recommended to co-ordinate in order to alleviate cultural differences. The performance of the organization must be evaluated at a regular interval, in terms of sales and productivity of the workers. It is also suggested to attract stakeholders by maximizing profits to increase the market share. By diversifying in several domains, the company can increase its client base. By offering unique offers or discounts on property market or real estate assets, and by offering quality product, this company can establish brand value in Myanmar. For creating brand value, it is suggested that the company should improve customer’s loyalty by adopting relevant policies. It is recommended to maintain the quality of the property developed by the company, so that with time customers’ trust is entrusted. By innovating different process and with proper implementation of strategic tools, the firm can make itself more competitive in the industry. It is recommended to this company, it must ensure safe-guard against possible risks that can take in the property market. For example, demand may suddenly fall due to economic degradation; sudden outflow of capital and also due to speculation about the property market. By taking precautions, the company can prevent itself from unexpected and unfamiliar circumstances. To achieve sustainability, the company must take into account the environmental aspect of the business and make sure that it does not pollute the nature or it does not have any kind of negative externality on the people of Myanmar.
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