Strategic Capability Development in Product Innovation

This assignment focuses on the conceptual analysis of strategic capability development within product innovation projects. It explores various aspects of capability modeling as a strategic analysis tool, considering the influence of external factors like culture and market orientation. The student needs to demonstrate understanding of how firms develop capabilities to achieve competitive advantage in innovation-driven environments.

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ASSIGNMENT TITLE: STRATEGIC DECISION MAKING

Abstract
This assignment consists of a detailed discussion on different market strategies for Pilkington.
The current market condition of Pilkington has been dealt with clarity and distinction by using
PESTLE and SWOT analysis. The market strategies are dealt in brief that can be useful to frame
an international strategy. Thereafter, all the referred market strategies are evaluated in detail and
their barriers are also referred. Having done so, a suitable strategy has been selected and the
reasons for selecting that organization are justified accordingly. In the end, recommendations and
a brief conclusion have also been given.
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Table of Contents
A. Strategic purpose of the organization.........................................................................................4
B. The available strategic choices for the organization...................................................................7
C. Evaluation of the strategic choices..............................................................................................8
D. Recommendation of a preferred strategic choice and conclusion............................................11
Conclusion.....................................................................................................................................11
Reference List................................................................................................................................12
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A. Strategic purpose of the organization
Overview of the organization
Pilkington is a glass manufacturing company that has headquarters in St. Helens. It is a
subsidiary company established in 1826. It was acquired by the NSG group in 2006. At that time
it was included in the London Stock Exchange. The main operational area is Germany now for
the company.
Analysis of the external environment factors: (PESTLE analysis)
Political: Domestic and international politics have influenced the business strategy of Pilkington.
Conservative political forces have cropped up and resulted in a stricter domestic market (Swamy
and Naik, 2014, p.334). Greece, Spain and some other east European countries have seen intense
political tensions and in Germany, the anti-migration voices are gaining ground making the
regional business environment politically harsh and stricter.
Economic: The US reserve has lowered the rates but those have not addressed the slowdown
trend much. In Germany and other European countries, crackdown of the banking systems has
made many countries run without any money (Navarro-García et al. 2014, p.743). China has also
slowed down and thus the demand for raw materials has also decreased.
Social: The lifestyle and economic process have also been rapid in the western European region.
Germany and the UK are the focal points. People also love to spend there but the Syrian conflict
and the migration issue has made a section of Europeans skeptic and more conservative. Same is
in the US and the Middle East.
Technological: The road line being made by China that will connect the Western Europe with
China and the open border policy in the whole Europe are great technological prospects for that
region (Yamak et al. 2014, p.98). Pilkington uses a strong network of customers with advanced
technological aspects like Wi-Fi and the Internet across Europe to provide great supply chains.
Legal: The legal battle between the EU and the less powerful European countries continues.
Goods trafficking regulations, safety regulations and regulations relating to export and import
both into the EU and out of the EU have been questioned by many countries (Mihet, 2013,
p.143). New regulations are being framed after the UK’s exit and those are creating new
challenges for Pilkington.
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Environmental: The Paris Summit on global climate and less carbon emission has made the
leading countries in Europe and the whole world become more concerned about their carbon
emissions (Liu and Tyagi, 2016, p.130). A global solar alliance has been framed and France is a
part of that. Technologies that use less carbon are asked to follow and Pilkington has to abide by
that. Environmentally products are also given priority in recent times.
Analysis of the competitive industry: Porter’s five forces
Threat from new firms: As Pilkington deals in glass manufacturing, new companies often enter
into the market with low cost products and challenge it both in quality and reach. This depends
on entry market, government policies, legal framework of the country or business organizations,
capital, reach, quality, brand value, product differentiation and so on (Burke et al. 2016, p.143).
Threat from substitutes: Asahi Group limited, Compagnie De saint-Gobain, Guardian
Industries Corp. are some of the great competitors of Pilkington and there is a possibility that
more and more customers may switch over to substitute products made by these companies. The
number of substitute products is three at this moment and the product differentiation is also
marginal.
Customers’ purchasing power: The ratio of buyers’ concentration and Pilkington’s
concentration is modest. The company also depends a lot on its supply chains. The company has
also higher fixed costs and thus there is less flexibility for the customers. It also takes differential
advantage because of its market penetration and variety in products.
Suppliers’ bargaining potentiality: Labor, raw materials, and services are the main
components that are supplied. The raw material is glass and those are supplied by some old
companies and the suppliers are also very trusted for Pilkington but the availability of better
offer from other companies may influence it to raise the price, substitute raw materials can also
change the equation (Loucopoulos, 2016, p.279). Solidarity on the part of employees and a
robust distribution channel also affect it.
Rivalry with other companies: Asahi Group limited, Compagnie De saint-Gobain, Guardian
Industries Corp. are some of the rival companies of Pilkington and the rivalry also determines the
market competition and product quality for Pilkington.
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Analysis of the strategic capability of the organization: SWOT analysis
Strengths: Pilkington has a diverse product range that includes solar control glasses, thermal
insulation glasses, self-cleaning glasses, and glasses that give protection from fire. These special
features add to the strength and quality of the glasses produced by the company (Kashan and
Mohannak, 2014, p.168). It is also a subsidiary of the NSG Group that has a huge market base
and shops that it can use to market its products.
Weaknesses: It has not developed any manufacturing capability in raw materials and thus it
always depends on its suppliers for its products. It also depends on its subsidiary for many
funding and operational issues that delay many of its projects.
Opportunities: It has a great opportunity to expand its market to the countries in Asia and the
US so that it can recover from the global slowdown as soon as possible. It may also get new
customers and suppliers in those countries as those are full in human resource and the onus of
global growth and global demand have shifted to Asia and South America (Vogel and Güttel,
2013, p.436).
Threats: The threats are: it may face tough competition from the local or domestic
manufacturers in terms of cost and low demand may last long and in that case the stocks may
become useless and of low quality.
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B. The available strategic choices for the organization
Internationalization of the business means that the business organization has many branches
across the globe at different countries which act as independent companies. For Pilkington, there
are several strategic choices and those are the following:
Exports and imports: This strategy includes exporting raw materials, products such as different
glass materials for Pilkington, and services from one country to another (Morris et al. 2015,
p.42). The import pattern is the reverse. There are two types: direct and indirect. The first one
means that Pilkington itself is involved in the processes and the latter one means that Pilkington
is doing the business through some other companies.
Entry through licenses: Pilkington may also get international licenses for manufacturing,
selling and supplying a particular product or products. Under international regulations, it may get
copyright rights and selling rights (Thompson et al. 2013, p.131). It may produce products for
the licensor, sell them in the markets and countries that it wants and then give a percentage of the
revenue earned.
Joint ventures: Two companies come together and manufacture a product either by using one’s
technology and the other’s raw material or by both using any third company’s raw materials. The
partnership may be equal or unequal in terms of its agreement and market power (Turnbull and
Valla, 2013, p.145). Most of the international companies make such agreements with domestic or
regional companies to get a better market control over the target market.
Direct investment: When a company comes to a foreign market and invests on its own in
manufacturing a product or products, it is called a direct investment made by that company. This
is often done in a very demand driven market and where the risk potential is the least and the
political and economic factors are positive for a long period of time (Nguyen et al. 2014, p.792).
Often an agreement between the government and the company follows such an investment.
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C. Evaluation of the strategic choices
Application of the SAFe evaluation criteria
Evaluation of Exports and imports
Suitability If a company takes this measure, it will be able to capture not only the domestic
market but also the foreign market. It may bring down the production cost and
raise the profitability.
Acceptability The stakeholders will have the opportunity to have strong company shares and
build more diverse product strategies (Ktena et al. 2015, p.238).
There is a risk factor involved but if that is to avoid the organization may go for
indirect export and import.
It can be operational in a short term basis and if the raw materials imported are
of low cost, there is a possibility of high turnover.
Feasibility The proposed strategy can be useful for both regional and international
companies.
The strategy can be financed easily by reducing or diverting the supply of raw
materials.
There needs to be a strong network of information and transport to take those
goods from ports and an equally strong packaging technology (Dameron and
Torset, 2014, p.305). Skilled labors in packaging are needed here.
Barriers to implementation:
This strategy of exports and imports has a few barriers:
(1) Trade relations between the countries may not be very well.
(2) The domestic laws may not support import of some raw materials and also export of some
other materials.
Evaluation of entry through licenses:
Suitability This relates to the marketing issue and the innovation problem. If an
organization faces innovation in its products for a long period of time, it may go
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for this strategy.
Acceptability It may meet the expectations of the stakeholders if the marketing part is broad
enough.
If the innovation is a revolutionary one and the manufacturing cost is low then
the risk is worth taking; otherwise, it is not risk worthy.
The stakeholders are not likely to accept this strategy as it lowers the aspirations
of the company.
Feasibility This strategy is not easy to implement on the ground as this requires the assent
of the licensor and many of his desires may not be in accordance with the
objectives of the company (Scholes et al. 2014, p.143).
The strategy can be financed but with prior agreement with the licensor.
Skilled workers are needed but that does not look good as no company wants to
train its workers for a certain production for a limited period of time.
Barriers to implementation:
The barriers are:
(1) It requires assent from the licensor and from the international rules and regulations for
marketing and production.
(2) It also stays for a certain period of time and that does not suit the long term goal.
Evaluation of joint ventures:
Suitability This can remove the barriers in funding and marketing. A company can easily go
for a joint venture as this gives it an opportunity to learn new technologies.
Acceptability The stakeholders’ expectations meet very well as they get new technologies and
experience and a greater market share with low risk.
The level of risk is probably the least in all the four strategies.
There is a great possibility that a high return is possible.
Feasibility The proposed strategy will definitely work in practice if the two organizations
resolve the issues prior to starting production (Hardina, 2013, p.120).
The strategy can be financed as this has long term gains.
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Lots of manufacturing skills and sharing of those skills are required in this case.
Barriers to implementation:
(1) It requires a good and through negotiation.
(2) Partnering company is required to be well equipped and creditable.
Evaluation of Direct investment:
Suitability If the domestic growth has no hope to regain and the manufacturing cost is too
high, this strategy is worth taking.
Acceptability This may and may not meet the expectations of the stakeholders as the
implementation part in such strategies holds the key.
There is a huge amount of risk involved in this strategy. Target market
evaluation holds the key (Felin and Zenger, 2014, p.924).
The stakeholders do not flag up for such a strategy until there is no hope in the
domestic market or the target market is really extraordinary.
Feasibility All the external factors in the target market are the key to implementation of this
strategy.
A lot of manpower and a lot of skilled workers are required.
Barriers to implementation:
(1) Land laws and marketing laws in the target market are often difficult to meet.
(2) Political forces and technological factors are also difficult things to meet.
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D. Recommendation of a preferred strategic choice and conclusion
Recommendation of a strategic choice
For Pilkington, the Joint venture strategy will be the best. It requires another company in a target
market. That has to be a domestic company. As Pilkington is a glass manufacturing company, it
needs a company that has a good reach in a similar domestic market. Pilkington will also be able
to sell its products that are environment friendly.
Justification of that choice in terms of stakeholders’ expectations
The reasons behind selecting this strategy are:
(1) The manufacturing cost would come down significantly. As the partnering company will
bear half of the cost of manufacturing, the market price of the products will be less and that will
attract customers.
(2) Pilkington would be able to access a fully new market in a short span of time. That market
will also include customer relationship, suppliers, transport infrastructure and so on. That is a
huge benefit for the organization.
(3) It will gain a good knowledge about how the marker behaves in the short and long run. This
will help the company decide the future course of action.
(4) Pilkington will get a better marketing share and a great production share for a relatively
smaller investment.
Conclusion
It can be said in the conclusion that the organization needs to well evaluate its current market
condition and focus on innovation more and more so that many marketing problems are solved.
Any marketing strategy is a good one if it is implemented properly the best one is joint venture
as this has the best opportunity to encourage innovation and has the best scope for long term
sustainable market penetration. Pilkington will have a great opportunity if goes for a Joint
venture with a company from China, India or South Africa as these are large developing
economies.
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Reference List
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