Discuss about the Strategic Management – Case Study of Thales Group.
The paper presents a case of strategic management with the case of Thales Group. They have expanded strategically through mergers and acquisitions and have a trained workforce in operation. They have access to a wide range of skillsets in different divisions or domains of work. The paper shows their position in different segments of operations globally and comments on their scopes for expansion.
The Thales group operates in more than 56 nations and has 64000 employees. It is owned partly by the French government and their headquarter is in La Defense, Paris. They conceptualize and make electrical systems. They cater to sectors like aerospace, defence, transport and security. Thales Group is the 10th largest defence contractor globally. They earned a revenue of €15.8 billion (6.1% increase over previous year) in the year 2017-18 and Market capitalization of €19 billion (Craft, 2018). The group is led by their CEO Patrice Caine. Their predecessor was Thomson-CSF founded in 1893. They have expanded through acquisitions, mergers, joint ventures. In 2006 they had acquired the Australian Defence Industries and in 2008, British Hardware security module. Their last acquisition in 2017 was the Guavas.
The Thales Group functions in three segments – Aerospace, Transport and Defence & Security. In the aerospace segment, they offer aircraft control systems. The services in this sector comprise generation of electricity and conversion, entertainment services within the flights and systems for connectivity. They also manage air traffic and other maintenance services. In transport area, the group deals in signalling systems of railways for traditional and also the other areas like high end mainline, freight, metro and tram networks, etc. critical information and solutions for cybersecurity and ticketing. In the defence and security area, they provide telecommunication systems and secure information (Som, 2009).
Political
Geopolitical tensions – Since Thales provides services to the defense sector, geopolitical tensions help boost its sales. Since Thales is supplier of defense products, the company can foresee great business prospects when countries increase their investments on security and defense. For instance, Thales provides services to Australia’s new fleet of submarines which is worth $35.83 billion. According to the chairman of Thales, the geopolitical tensions that exist in the Asia Pacific region has induced countries to focus more on their safety and security infrastructures (Roy Choudhury, 2016).
Growing populists’ sentiments –There is a rising trend of trade constraints and anti-globalization sentiments across countries. With popular sentiments on both sides of Atlantic moving towards anti-immigration, the need for border security becomes enhanced. For instance, to curb migration France has signed a new deal with Britain to increase border security. As such defense service companies like Thales can make financial deals with countries that increase their focus on border security (UK, France agree on new border security measures, 2018).
Economical
Defense budgets – Since there is growing trend of defence and security in countries due to various political reasons, many countries are opting to increase their defense budgets. This means countries spend more on buying defense services from companies and thus Thales stands to make massive gains from this. Australia for instance had decided to increase its defense budget by 6 percent in the fiscal year 2017-2018. By 2020-21, the country’s defense expenditure is estimated to reach 2 percent of its GDP (Gady, 2017). Thus Thales, in near future have huge business prospects in Australia.
Brexit and currency volatility – Any company can make profits in an increasingly volatile market. George Soros who is one of the successful investors in the world has stated that British’s exit from the EU has influenced all aspects of macro economy. With growing uncertainties in the money market, market volatility increases which can become a platform for making profits for Thales (Why would Brexit affect the currency market? 2017).
Social
Growing urbanization and smarter cities – Thales can have huge contribution to growing urbanization by providing services to enhance sustainability. For instance, Australia is considered as the most urbanized country in the world with 9 million of its 24 million people living in its two major cities, Melbourne and Sydney (Wyeth, 2017). With big cities there is need of efficient functions and Thales can provide comprehensive solutions. Every sector like transport, defense and public services need flow of information and each sector has different database to maintain data. Thales can provide solution to collect and merge all data by keeping in view limitations of each sector. This makes all sectors collectively work more efficiently (Smart City, n.d.).
Aviation demand in emerging markets – there is growing demand 5 aircraft manufacturers in the French market. These manufacturers namely Airbus, Airbus Helicopters, Dassault Falcon Jet, ATR and Daher are controlled by parent company Airbus Group. Thales can make huge benefits by selling its products and services to these aircraft manufacturers.
New work force – With growing defense and security measures in countries across the globe, it is natural that Thales is making investments in new deals every day. With such investment prospects Thales is set to create 500 new opportunities for jobs. Moreover, Thales constantly invests in research and development which demands new and more sophisticated workforce (Thales announces new capital investments and job growth in the state of Florida, 2016).
Technological
Innovation for differentiation advantage – innovation has always been an integral part of Thales group. This is a huge advantage for the company since it deals with service products that cater the dynamic industries life defense, aviation and transport. The 5 aviation companies in France require product assessment and qualification, both of which are strong elements of Thales considering its high investments in research sector (France – Civil Aircrafts and Parts, 2017).
Legal
Revised quality management regulations – Thales has its team of experts who improve competitive strategies, enhance working processes and improves customer satisfaction.
Intellectual property rights – Since Thales makes massive investments on research and development therefore it needs protection by property rights to get financial benefits from its investments.
Environmental
Shift towards renewable energy sources – Thales is founder of Clean Sky which is one of the largest research programmes in Europe (Brunet, Aubrey and Lafage, 2015). The program focuses on making greener designs for its products which usually have long design cycles and product lifetimes. This Clean Sky will reduce 50 percent of carbon dioxide emissions and 80 percent of nitrogen oxide emissions (Cassaro et al, 2013). It will also reduce noise levels by 50 percent.
Power of bargaining of suppliers:
Boeing is a huge company and its financial status is extremely strong in the market and so it has greater bargaining power with its suppliers. This advantage comes from the fact that it is strongly capable of paying off its debts.
Airbus has an upper hand over all its suppliers. In the context of product quality and power, suppliers of Airbus needs to comply with certain rules and regulations. As such bargaining power of supplier is low (He,Hipel and Kilgour 2017).
Power of Bargaining of Customers
Although in today’s business world, customers hold high bargaining power, for Boeing the picture is different since it has high backlog.
Airbus manufactures high quality aircrafts which are highly in demand with the customers. Its overall image and delivery of extremely fine quality products gives moderate powers to the customers.
Substitute Threats
Boeing almost has no substitute threats due to high quality maintenance. Although there are other rival companies who provide equal quality products, the threat that exists is minimal.
Airbus, on the other hand, caters to niche audience and so it has low threat of substitutes. Its products are unique and so there is always specific customer demands(He, Hipel and Kilgour 2017).
Threat from New Entrants
Since Airbus invests greatly on innovations and research there is low threat from new entrants. Aviation industry requires high investments and many rules and regulations. This can be discouraging for new entrants.
Rate of new entrants entering this market is very low due to huge investments in skilled labour and technological research and development. Apart from this, high level of legal regulations and compliances in this industry make entry difficult. Therefore, Boeing has very low threat from new entrants (Barrows, 2017) .
Level of Competition within Industry
For Boeing, quality of products and brand image are very strong factors.Moreover, financial stability of Boeing in market helps it to remain competitive in the market. Still, competitive rivalry is very high for Boeing.
Although there are few players in aircraft industry, but still level of competition is high amongst them and advantage is gained by delivering high level of quality and brand image(Barrows, 2017).
Business Level Strategic analysis of Thales protected vehicles division (Bendigo), with your strategic perspective on the advantages and disadvantages of locating this division in a small regional town.
Soldiers in Hawkei are supposed to gain from the protection and mobility provided by the 4×4 strong vehicle which can be modified to suit different missions. Thales also successfully showed their expertise with protected vehicles in Bendigo. Their support centres are in Brisbane and Townsville. Their Bendigo division is leading to make of new vehicle. There is a new arrival of their vehicle General Dynamics Land Systems’ LAV(CRV) in Bendigo itself (Slocombe, 2014). The Bendigo based Thales Australia was given the contract for making armoured vehicles of the defence sector of Australia. At Bendigo, this operation assured employment for 300 workers in manufacturing and design area (Slocombe, 2013). Also manufacturing is locked in for next five years. So this helps in enhancing reputation of the city with respect to high quality manufacturing. Around 6939 direct and indirect jobs will be provided to the larger economy of Bendigo (Bendigo Advertiser, 2018). So the strategic advantage lies in the fact that the company earns a good repute and acceptance in the economy. Also there is hardly any competitor for them in the small regional town. Their credibility as an investor will also improve. Disadvantage could lie with the available skillsets in the small town where people were perhaps not skilled and hence unaware of the technology used in protected vehicles. The company has to train the workforce in their respective roles such that they will perform as per expectations.
Business Level Strategic analysis of Thales cyber-security division, with your strategic perspective on how to ensure the best human talent is attracted to this division worldwide
Thales has earned a reliable reputation with respect to providing solutions for disruptive technologies and cyberthreats. Thales is a global leader in producing cryptographic security packages. They work with cutting edge strategies and is involved with several business sectors (Sadourny and Conan, 2003). They provide solutions for infrastructures of the government and military segments, satellite networks, energy & utilities, banking and insurance, high tech areas and transportation. With a team of 5000 IT experts and 2000 skilled cybersecurity professionals Thales work in close association with their clients across the world. They have gathered around 40 years’ experience in protecting classified information. They have a lot of experience in operating and monitoring critical information systems of more than 100 customers. The company provides solutions for information security and apart from identifying and preventing attacks they react fast when the attacks take place. The company designs and operate completely secured information systems which can help gain expertise over critical data (Thales Group, 2018). Technologies like cloud computing, Big Data and Internet of Things have provided more opportunities for taking business forward. In order to attract best talents they can approach the top level Universities of the world to absorb new skills from the IT area. Their activities and strategies could be taught in engineering universities and colleges such that they attract interest of young skilled graduates all over the world. They can take part in training workshops in these Universities.
Explanation of the benefits of Thales strategic relationships, inclusive of at least one major shareholder and one merger and acquisition
In 2017 Thales Group completed acquisition of Guavus, a big player in real time Big Data analytics.This will help Thales get access to the large expert workforce of the Guavus. According to their CEO, “the acquisition of Guavus represents a tremendous accelerator of ourdigital strategy for the benefit of all our customers, whether in aeronautics, space, rail signalling, defence or security”(Thales, 2018). Like the usual cases of mergers and acquisitions Thales has benefitted from this merger by getting access to innovative experts in the field of Big Data. This will help them expand their cybersecurity division as well. With new technology and expertise Thales is set to expand its operations.
Conclusion
Thales Group has expanded through acquisition and merging apart from certain strategic decisions of their production locations. They have kept pace with new technology and skills while catering to different economies at the same time. Managing different cultures could be a challenge but Thales’ subsidiaries hire local people usually. They have strategy of guiding senior executives an engineers to accommodate them in new positions (Koc-Menard,2008). The participants are selected according to their knowledge, experience, level of motivation and ability to achieve in jobs which are outside their skills. They are trained as consultants and coached in new domains. For instance a senior engineer is appointed to work in human resources unit. They cater mainly to the defence sector and irrespective of their competitors like Boeing and Airbus Thales successfully expands and grows their business worldwide.
References
Barrows, SD (2017). With Increased Market Power, Do Aircraft Industry Stock Returns Beat Global Market?,International Review of Management and Marketing, 7(5), 63-69
Brunet, M. Aubry, S. and R. Lafage.(2015). “The Clean Sky programme: environmental benefits at aircraft level”, 15th AIAA Aviation Technology, Integration, and Operations Conference, AIAA AVIATION Forum, (AIAA 2015-2390) https://doi.org/10.2514/6.2015-2390
Cassaro et al (2015). Propulsion System Modeling for a Multi-Aircraft Simulator, Conference Paper, American Institute of Aeronautics and Astronautics.
Craft (2018). Thales Group, Available at: https://craft.co/thales-group
France – civil aircrafts and parts (2017). Export.gov, Available at: https://www.export.gov/article?id=France-Civil-Aircrafts-and-Parts
Gady, F. (2017). Australia to increase defense budget, The Diplomat, Available at, 2018 from: https://thediplomat.com/2017/05/australia-to-increase-defense-budget/
He, S. Hipel, K. and D.M. Kilgour (2017) Analyzing market competition between Airbus and Boeing using a duo hierarchical graph model for conflict resolution, Journal of Systems Science and Systems Engineering 26(6), 683–710
Koc-Menard, S. (2009). Training strategies for an aging workforce, Industrial and Commercial Training 41(6), 334-338
Lumsden, A. and L. Knight (2017) Australia’s foreign investment approval regime: a new way forward, International Journal of Public Policy 13(3).
Roy Choudhury, S. (2016). Thales, Finmeccanica say geopolitical uncertainty boosts defense, security spending, CNBC, retrieved on May 19, 2018 from: https://www.cnbc.com/2016/02/16/thales-finmeccanica-say-geopolitical-uncertainty-boosts-defense-security-spending.html
Smart City (n.d.). Thalesgroup, Available at: https://www.thalesgroup.com/en/global/activities/security/city/smart-city
Sadourny, Y. and V. Conan (2003). A proposal for supporting selective encryption in JPSEC, IEEE Transactions on Consumer Electronics 49(3),846-849
Som, A. (2009). Innovation and R&D in the global environment: the case of group Thales, International Journal of Business Innovation & Research 3(3), Available at: https://www.inderscienceonline.com/doi/abs/10.1504/IJBIR.2009.024179
Slocombe, G. (2014). Project Redfin Phase 1b – Special forces operations vehicles ordered [online]. Asia-Pacific Defence Reporter , 40(9): 14-15. Available at:https://search.informit.com.au/documentSummary;dn=709963287485802;res=IELBUS
Slocombe, G. (2013). Land 400 phase 2 – Land Combat Vehicle System (LCVS) Part III [online]. Asia-Pacific Defence Reporter 39(5): 26-28. Available at: https://search.informit.com.au/documentSummary;dn=392357031798793;res=IELBUS
Thales Group (2018) Available at: https://www.thalesgroup.com
Thales announces new capital investments and job growth in the state of Florida (n.d.).Thalesgroup, retrieved on May 19, 2018 from: https://www.thalesgroup.com/en/ worldwide/press-release/thales-announces-new-capital-investments-and-job-growth-state-florida
UK, France agree on new border security measures (2018). Daily Sabah, Available at: https://www.dailysabah.com/europe/2018/01/20/uk-france-agree-on-new-border-security-measures
Why would Brexit affect the currency market? (2017). Trade finance global, Available at:https://www.tradefinanceglobal.com/posts/why-would-brexit-affect-the-currency-market/
Wyeth, G. (2017). Time for Australia to embrace urbanization, The Diplomat, Available at: https://thediplomat.com/2017/01/time-for-australia-to-embrace-urbanization/
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