Business Strategy: Analysis of VAUXHALL's External and Internal Environment
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This report analyzes the external and internal environment of VAUXHALL, a British car company, to develop effective business strategies. Includes PESTLE analysis, Porter's five forces, SWOT analysis, and strategic planning.
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BUSINESS STRATEGY 1
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Executive Summary This report included business strategy which refers to business planning that contribute and guide business activities towards achievement of business objectives, and the factors which are required to be analysed before designing and developing business strategies. This report included PESTLE analysis and Porters' five forces for analysis of external business environment. SWOT analysis and VRIO and Value chain analysis for internal business environment analysis. Later strategic planning have also been included in this report and for that Ansoff Metrix have been included for deciding strategy of the market. 2
Table of Contents BUSINESS STRATEGY.................................................................................................................1 Executive Summary.........................................................................................................................2 INTRODUCTION...........................................................................................................................4 External Environment Analysis.......................................................................................................4 Internal Environment Analysis........................................................................................................7 Strategic Planning Process.............................................................................................................11 CONCLUSION..............................................................................................................................15 REFERENCES..............................................................................................................................16 3
INTRODUCTION Business strategy refers to specific plans which are designed and developed by organisations so that they can achieve their objectives in most efficient manner. For designing and developing business strategy company needs to ensure its external and internal environment and their effect onitsoperationsandfunctions.Thisreportincludesinternalandexternalanalysisof VAUXHALL. This is a British Car company headquartered in Chalton, BedfordshireEngland. This company was founded in 1837 and is subsidiary Group PAS. The area served by the companyislimitedtoEngland.Thecompanymanufacturesautomobileandcommercial vehicles. This company have been included in this report for external analysis through PESTLE for Macro analysis and Porters' five forces model for micro environment analysis . Internal Analysis ofVAUXHALL will be analysed through VRIO model for resources and SWOT analysis. Later this report also includes strategic direction available for VAUXHALL and which are suitable and can be adopted by VAUXHALL. External Environment Analysis This refers to external factors which affect the operation of VAUXHALL. This environment is divided in two parts one is Macro and other one is Micro. Macro Factors are those which cannot be controlled by the company and affect the whole industry at a time. On the other hand Micro factors are those which can be controlled by the company but only partially (Perera, 2017). This includes that factors which are related with company but are not part of the company's internal environment. Macro Environment can be evaluated through PESTLE framework. Political This includes political factors of a company which affect operations of a firm. Political ideologies their values which affect operations of firm are included in this factor. VAUXHALL operates in UK and this is why political environment of the UK affects the operations of VAUXHALL. The political factor which affect VAUXHALL are Promotion of Public Transport. This is a factor as use of public transport will reduce demand of the cars of VAUXHALL. This is not in favour of VAUXHALL. 4
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Political stability and political alliances and political rivalries are among top factors which can affect the operations of VAUXHALL (Policy, 2016). In this promotion of using home country products is a positive factor for VAUXHALL. Economical These are related with economic condition of the country. VAUXHALL is a car and automotive company which requires that people of the country and economic condition of the country is positive and stable so that it can have a good business in the country. High growth rate of GDP, economic stability of the country and people of that country. UK's economic condition is favourable and this can make a positive impact on the VAUXHALL. The positive impact for VAUXHALL is that when economic condition of people is favourable than they are more able to buy and have their own vehicles this will positively influence demand of the product. Social This refers to social and cultural factor. This is a good and positive factor for VAUXHALL as this is a British Company and operates in UK only. This is the reason this company known taste and preferences of the people of the country (Fozer and et.al., 2017). This includes changing taste and preference of the people and what they demand. In this increasing demand for electric vehicles and self-driving vehicles is opportunities for VAUXHALL and this should develop strategies and prepare itself so that it can utilize the opportunities.Demand of self driving car is increasing and VAUXHALL can increase demand of its products when it can develop self driving cars. Technological Thisismostaffectingandimportantfactorforanautomotivecompany.Inthisfactor technological advancement of the competitors and technology available for the company are major concern. This technology includes both technology being used in the products and technology through which company manufactures its products and how cost and quality effective the technology is comparing to its competitors. The company can utilize the opportunities in this factor by designing and developing self-driving and electric vehicles. These are in demand and are at the initial time and VAUXHALL can use these opportunities and provide quality products tothecustomersinthiscategory.Thiswillcontributeinincreasingmarketshareof VAUXHALL and its profitability. Legal 5
This factor analyses factor analyse affect of legal factors on the operations of the company. Legal factor includes rules and regulation which govern operations of a company. Increasing regulation on safety of automobile is an opportunity for the company (Fozer and et.al., 2017). Company can follow these rules and increase sale of its products. If VAUXHALL is able to provide cars with increased safety demand of its cars will increase and this will positively affect profit of the company. Environmental This factor includes effect of natural environment on the operations of the firm. Nowadays effect of firms operation on natural environment has also become important factor for consideration. This is why electric cars are an opportunity for VAUXHALL. The reason is that these have less negative impact on the environment and also able to solve the problem of the fuel. The rising concern for air quality is also an opportunity for the company that it can develop cars and vehicles which have less or no effect on quality of air.This will positively affect the goodwill and reputation of the company and at the same will also avoid any legal and regulatory issue. Analysis of Micro Environment This can be analysed through the Model of Porter's five forces. This model analyses the impact of every factor which is outside the business but is important for its operations. In this five forces are- Competition in the industry Potential of new entry into the industry Power of Suppliers Power of CustomersThreat of Substitute Product Competition in the Industry- In this level of competition in the industry is analysed and evaluated. Capacity of the firm to undercut the competitive firms (Moreno-Izquierdo, Ramón-Rodríguez and Perles-Ribes, 2016). Their ability to perform better than the firm. In this larger number of competitors is a negative and can have unfavourable impact on the company. VAUXHALL is a car company and this is why there are many competitors for this firm. This firm not only have to compete with the 6
national firms but have to compete with international firms as well. Company have to make strategy that it can maintain strong company in the country. Potential of New entry There are factors like money and resources required for entering into the firm. VAUXHALL is a car company and which is why the cost and resources required to enter this industry are high. This is a favourable situation for VAUXHALL. This industry has strong barriers to entry and VAUXHALL need not to consider this factor much before its strategies. High barriers of entry are ideal for the companies which already exist in the industry. Power of Suppliers This refers to power and bargaining power of suppliers (Moreno-Izquierdo, Ramón-Rodríguez and Perles-Ribes, 2016). This power of suppliers is high when there are fewer suppliers and resources are rare and valuable. In this suppliers power is strong and they can charge higher prices and which can increase the cost of input for the car. This will either increase the price or will reduce the profit of the company and both of these are not ideal for the company. But in case the resources are easily available then power of suppliers remain weak as company can get resources from other suppliers as well. The resources required for VAUXHALL are easily available as there are many car companies and all of them requires resources there are various suppliers in the market which can supply resources to VAUXHALL. This is an ideal situation for the company. In this competitive force power of VAUXHALL is high. Power of Customers There are two situations in which power of customers in high. In case customers for the product are limited like there are few customers to buy the products of the company and in case there are various sellers in the market and customers can easily switch to other seller and cost of switching is less (Lewis, 2017). Customers available are high but at the same time sellers of the car are also numerous and this requires that VAUXHALL applies adequate strategy for the company so that itcanattractcustomerstowardsit.Inthiscompetitiveforcecustomersarestrongthan VAUXHALL. this make negative impact on operations of the company and at the same time affect its strategy and they are required to be customer centric. Threat of Substitute This means that company have to compete with not only those who are providing same goods and services but also with those who provide goods and services which can be used as substitute 7
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(Zhang, Leng and Zhou, 2020). In this case VAUXHALL is a car company and for this public transport is a substitute that people can use public transport rather than their car.In this competitive force VAUXHALL stands at moderate level in terms of competitiveness, which means that it does not impact the VAUXHALL to much extent but it does have little impact on its operations. Internal Environment Analysis This includes analysing internal environment of the company. This means analysing what are the strengths and weaknesses of the company and what are the opportunities and threats available to the company. For internal analysis strategic capabilities of the firm are analysed. Strategic capabilities refers to capabilities of the firm to compete in the market (Simatupang, Piboonrungroj and Williams, 2017). These capabilities includes resources of the VAUXHALL and its processes which can give this an advantage over its competitors. To analyse its capabilities value chain Model is being applied- This model includes all hoes activities which are taken by companies who manufacture and distribute products and services. This includes all the activities of the company from inception of product to its distribution. In this major nine activities are being categorized and which are divided in two parts which are primary activities and supportive activities. Analysis of VAUXHALL's value chain- Primary Activities Inbound Logistics This includes activities which are undertaken by VAUXHALL to receive its resources and raw material for production of its cars and vehicles (Simatupang, Piboonrungroj and Williams, 2017). Other function in this are warehouse, inventory management. Analysis of this will enable company to know its efficiency in this and what are the factors which can be improved by the company. Operation This includes activities for converting raw material into finished goods. VAUXHALL is a car manufacturer and that is why it needs to analyse its activities through which raw material is converted into the finished goods. In VAUXHALL this can be divided into several parts reason being there are various parts of the vehicle which needs to be prepared before finished goods. 8
This gives a scope to the company should it continue making all the parts themselves or they can hire other firm to do that. Outbound Activities This includes those activities through which finished goods are delivered to the dealers of the goods (Mudambi and Puck, 2016). This is important when company supplies its goods through dealer rather than selling directly to customers. In case company directly sell to customers this includes activities for delivering goods to the customers. Marketing and Sales This includes marketing and sales activities of the company. This includes promotion and attracting customers to buy the products of the company.In this VAUXHALL includes promotion through various traditional and modern platforms. Like Social media and newspaper advertisement. Sales include activities through which VAUXHALL delivers its cars to customers and receives payments against the cars. Services This has become major factor to attract customers and retain them this includes after sale services to customers.This is also important for VAUXHALL this is because it is an automobile company. Services are required to be given after the car has been sold. This includes servicing and maintenance of vehicles. Effective services of car companies always manages to attract customers and this is why this is a value activity. Supportive Activities These activities are those which are undertaken to support the primary activities. These activities are- Procurement This includes analysis of how VAUXHALL obtain its raw material. This is a important consideration for automobile manufacturers (Mudambi and Puck, 2016). If VAUXHALL low cost and good quality material it will be able to produce high quality automobile products. VAUXHALL procures its materials from various suppliers this is because they can have at low and reasonable cost. Right way for procurement ensures that the whole final product is available at reasonable price. Technology 9
This includes how developed technology do VAUXHALL have for its operations and this is important at all level from manufacturing to marketing and sales. Effective and advanced technology can produce and manufacture high quality automobile at low cost.Technology being used in VAUXHALL is latest and benefits of that make it a value activity for the company. Human Resources This refers to the set of talent, skills and experience of the people who are working for VAUXHALL (Owen and et.al., 2016). Effectiveness of the firm is mainly dependent on this factor and this is why firm needs to ensure that it has the best human resources.VAUXHALL employsbesttalentavailablein themarketand employeesadd valuein functioningof VAUXHALL and make human resource management a value activity for VAUXHALL. Infrastructure ThisfactorisaboutinfrastructureofVAUXHALLwhichincludesitsphysicalsetup, management, finance, structure of the company etc (Owen and et.al., 2016). These factors play a major role in success of VAUXHALL. infrastructure of VAUXHALL is a value activity because it ensures that all the operations in VAUXHALL complete easily and effectively. This is more important as VAUXHALL is a manufacturing company. Competitive advantageof VAUXHALL are its strong presence in UK market. Related to its operations that its largest manufacturer of UK. Its strength is that it has strong employee base which are skilled and competent and contribute in its competitive advantage. Its active presence in motorsport whose fame and following is increasing everyday. VRIO Framework for Analysing strategic Capabilities. VRIO model includes analysis and evaluation of resources available to firm. VRIO refers to- Valuable This includes that how valuable are resources and do they add any value for customers (Lopes and et.al., 2018). This also includes that resources add value and enable firm to exploit opportunities that are available to the firm. Technology and design of the VAUXHALL areits valuable resource for the company. 10
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Rare These resources refers to those which are rare. These resources cannot be acquired easily by othercompanyandorganisation(Lopesandet.al.,2018).Thisisveryimportantfor VAUXHALL so that it can specific features in its products through those rare resources. Temporary competitive advantage and strong competitive force is rare for VAUXHALL. Inimitable This refers to resources which are inimitable and costly to imitate otherwise competitors can easily imitate and these resources add value to the competitive strength of the company.Brand name and existence of brand in UK market, corporate value and patents of the company are difficult to imitate. Organised to capture value It does not give any advantage to company if the resources are rare, valuable and costly to imitate if the resources are not organised to capture value (Galpin, 2019). These resources are required to be properly organised in the system of the company so that they can give the best result and add value to the company and its customers. SWOT Analysis for VAUXHALL Strength Strong presence in passenger car segment. Contract with police authorities of UK. Strong employee base (Zhikang, 2017). Its active presence in motorsport along with sponsorship. Largest manufacturer of commercial vehicles in UK. All these are strength of VAUXHALL and through this company can take many advantages in context of its profitability and productivity. These strengths of company also improve its operational efficiency and lead it towards competitive and sustainable advantages. Weaknesses Less known brand in emerging economies. Intense competition and limited market share. Dependent only on UK market. 11
As strength make positive impact on profitability and Productivity Company might face negative impact on its profitability and productivity. Opportunities Promotion of its electric car modelAmpera. Growth opportunities in emerging economies. Through the opportunities available to it VAUXHALL can ensure that it has strong market presence and competitive strength is also strong in the market. Treats Changes in customer preference. Increasing fuel price (Qu and Zu, 2018). Preference to public transport. Government policies regarding environmental issues. Threats like change in customer preferences require that company is always ready to deal with changes and function according to the changing needs. This is difficult to do and this is why threat are not good for the company. Strategic Planning Process Objectives of the Plan This includes whatVAUXHALL want to achieve by implementing this plan in the company. VAUXHALL is a car and automobile company and through this strategic plan the compant intends- To increase its market share to 10% in UK. This objective says that through implementing this pan VAUXHALL intends to increase its market share by 10% in the market of UK. This objective will require that VAUXHALL carry out the plan efficiently. To extend its operations in global market establish its presence in European Countries. Through this objective of theVAUXHALL company wants to increase its operations in European market as currently this is operating in UK. This will also provide basis to company for its global operations in Europe. Strategic Direction 12
Porter's model of generic strategy is a model that explores various options of strategies that can be used by the business organization to gain competitive position with in the target market. There are different strategies can be used by the organization to provide better offer to the customer to gain larger market. This is key challenge for the organization to achieve sustainable competitive advantage in the market place(Laszlo and Zhexembayeva, 2017). Competitive advantage can be gained by offering greater value, means of lower price or providing better services of product quality that justifies the high cost of the product. There are four different strategies are explained in the Porter's Model of Generic Strategies. These strategies are- cost leadership, cost focused, differentiation leadership and last is differentiation focused. These strategies are based on the two dimensions are source of competitive advantages and other one is market place where the business completes. The strategies like differentiation and cost leadership strategies seeks competitive advantage in the broad range of industry sector or market place.For the VAUXHALL two strategy are most suitable to improve their market share in target market among other competitors. These strategies are Differentiation and Cost Leadership part from the differentiation and cost leadership the strategies like differentiation focused and cost focused strategies are used by the organization for the narrowed market. Cost Leadership According to the cost leadership strategy this is goal of the business organization is to produce the product at the lowest cost in the industry. In this strategy producers used to produce the product at low price along with supply in the target market. If the selling price of the product is at least equal to average cost for the market place then organization will be able to generate much higher benefits in the market place. There are different processes like discounts and various offers are provided to improve the sales of product in the market place. All the actions that are performed by the organization are based on the significantly improve the market share of the organization. Some of the processes that are used by the organization can be achieved throughdifferent methods which are- hi productivity, high capacity utilisation, lean method of production and effective use of technology for the production process. Differentiation In this process organization focuses on the large market place to gain competitive advantage through making their product or services different from the competitors. By offering product with extra features company can attract high number of customers. There are different 13
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processes can be used to implement this strategy with in the business of the organization. These processesare-providingproductwithsuperiorqualityand alongwithhighbenefitsfor customers, high durability and high reliability(Kumar and Pansari, 2016). Company also can use branding to gain high market share by effective customer recognition and brand loyalty. By improving the process of promotion organization also can increase the number of customer they have. This goal also can be achieved by improving the distribution channel which is used by the company. This is how VAUXHALL can use cost leadership and differentiation to improve their positioning in the target market among with other competitors. The next step in this planning is to evaluate different ways in which VAUXHALL can expand its operations and business. To do this Ansoff Matrix can be applied. This matrix provides four ways in which business can expand and also suggest strategies which it can apply for its expansion. IncaseVAUXHALLentersinnewmarketwithexistingproductinthatcase VAUXHALL should the strategy of theMarket Development. In new market with new product VAUXHALLdiversificationstrategy needs to applied by VAUXHALL. Expansion in existing market with existing product what VAUXHALL needs to do is market penetration. In existing market with new product what company needs to do is ProductDevelopment. 14
MarketDevelopment This strategy is suitable forVAUXHALL when the company is willing to enter in new market with its existing products (Schawel and Billing, 2018).This strategy is suitable for it. As per the objectives of the company. This strategy is suitable for it. IfVAUXHALL chose this strategy it will need to target different market in context of geography. This allows company to enter in other market in form of other country's market. In this VAUXHALL have to ensure that its existing product is able to compete with other products in the country it intends to expand. This strategy can also be applied by using different channel of sales. In other countries VAUXHALL can select dealers to sale its products. Market segmentation is also a effective way to apply this strategy. Diversification this is most difficult and risky strategy to be applied by the VAUXHALL. In this VAUXHALL intends to enter in new market with new product. This will give one benefit to the company that existing reputation and image of the company will not make any impact on new product (Gurcaylilar-Yenidogan and Aksoy, 2018). In case new 15 Illustration1: Ansoff Metrix. Available Through:The Ansoff Matrix, 2020.
products fails in market it will not affect the reputation and image of the existing products in existing market. Market Penetration To increase market share which is one of the objectives of the company and this strategy is used when company intends to expand in existing market with existing product. This strategy can be used by the company- By developing new marketing strategy which can convince people to buy the products of the company. Introducing a loyalty scheme which will retain its customers. By promotion offers. Product Development In this VAUXHALL is offering new product to its existing customers and market (REZAEI, KHAVARIAN and GHAFURZADEH, 2016). In this company can sell its existing product by modifying them and changing their packing and VAUXHALL which sell cars can do this by upgrading features of existing products and changing their name or modifying their name. This is suitable when customers are not happy with existing product but product have scope for improvement. VAUXHALL can also do this by developing a product which is related with the existing product (REZAEI, KHAVARIAN and GHAFURZADEH, 2016). Presently market is customer oriented and in this scenario company can do this by developing a product which is demanded by the customers. Tactics Here it is recommanded that VAUXHALL have two objectives one is to increase market share and other one to expand operations in international market. In this it is recommended that VAUXHALL should adopt the strategy of differentiation in both national market. Existing customers can be attracted by offering something new and diversified. This requires that VAUXHALL apply the strategy of product development. In international market VAUXHALL should use the strategy of market development by offering existing product. The reason behind this is that all the products of VAUXHALL are new for the 16
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international market and this can promote its best products in international market and also electric car. Later it can take its strategic decision on the basis of success in international market. Here it is recommended that company can work on its promotional activities in order to increase its market share and this will also help company when it starts its operations in other European country. Company in its marketing strategy can include loyalty benefits to its customers and discounts always work. Other than thisVAUXHALL can also offer customized vehicles this should be for a limited time and later it can make its decisions based on the success of the plan. Through this company will be able to achieve both the objectives of increasing market share in UK and expansion of operations in European countries. In relations with its expansion it can also be said that company needs to firstly identify opportunities and later move ahead this is because of competition in the international market. Implementation To implement the plan firstly a documentation will be required for what actions company is taking, later they will be analysed with advantages and disadvantages. Those actions which have more disadvantage than advantages should be avoided (the impact can be visible on financial performance of the company). Later those which are suitable and profitable for the company will be implemented with support of staff of the company and they will require to be told what their role is in the plan. The role of staff and managers is very important in implementing the plan developed. In this most important staffs are production staffs as they will need to prepare cars which are able to meet global standards of the product. Managers are also important as they are the one responsible for controlling the process and operations as per the plan and also along with they are also required to provide all the needed resources so that staffs can fulfil their responsibilities and can provide the high standard products to global customers. This might take minimum time of 1 to 2 months as they are required to improve existing product quality as per global standards. 17
Evaluation For evaluation and control of the plan, the company can measure its success in the plan through evaluating projected increase in customers with actual increase in the customers. Along with this success in establishing company in European market is also a measurement for the achievement of objective. This can be done after 3 months of implementation of the plan. In this time company will be able to get what is the attitude of European customers towards their products and what changes this attitude have made in sales and profit numbers of theVAUXHALL. In case of failure of the plan company can avoid its plan for expanding its operations in Europe market and keep it to UK market only. CONCLUSION On the basis of this report it can be concluded that this report included business strategy for VAUXHALL which is a UK based automobile company. For strategy the report included variousanalysiswhichareexternalandinternalanalysis.Analysisofmacroandmicro environment and analysis of resources and strategic capabilities. Lastly on the basis of this it was recommanded that VAUXHALL should use and apply the strategy of Product Development which is a part of differentiation in its national market. In international market it should use the strategy of market development the reason is that it was earlier operating in national market only and which is why its all products are new and diversified for international market if they are able to compete well with national and international competitors. 18
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