International Strategic Management: An Analysis of the Moomba Festival

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INTERNATIONAL STRATEGIC
MANAGEMENT
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Contents
Introduction................................................................................................................................3
Macro and Micro environmental analysis of the company........................................................3
Company’s competitive advantage over its rivals.....................................................................5
Generic strategies followed by the company.............................................................................6
Company’s growth strategies.....................................................................................................7
Recommendations......................................................................................................................8
References..................................................................................................................................9
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Introduction
Strategic management plays a vital role in accomplishing business goals and objectives in the
required manner. It ensures that management rolls out strategies or policies systematically.
The tourism industry has become one of the leading industries in today's world by
contributing highly in economic growth and development of every nation. It is experiencing
high growth as well as diversification over the years. In countries like – Australia, it has
become a major contributor to the economy generating large proportions of national income;
at the same time tourism also increases employment opportunities within a nation. It assists to
improvise per capita income due to which GDP rate of Australia automatically increased
(Jackson, et. al., 2014). Future of tourism industry is still bright; it is assuming that the sector
will provide potential market growth to the nation in terms of viability and diversification.
For this entire discussion, the chosen event is the Moomba Festival which is held annually
in Melbourne, Australia. It is Australia's largest free community festival present report is
going to be formulated to analysis the macro and micro environmental factors relate to the
tourism industry. A brief discussion will also highlight the competitive advantage of the
company over its rivals. Furthermore, it will define Porter's Generic strategies and growth
strategy of the company so as managers can identify growth opportunities in the target
market. At lasts, certain recommendations will also provide which helps managers to make
necessary modifications in their current business strategies.
Macro and Micro environmental analysis of the company
While formulating business strategies and policies at the international level, the foremost step
which must take into account by managers is the identification of macro and micro
environmental factors. In a business environment, there are certain factors that may affect
decision making activities and operations in a direct and indirect manner. Within which the
macro environment consists of all external factors whereas micro environment refers to all
internal factors (Brouthers, et. al., 2015). At the time of implementing international business
strategies, it is essential for managers to analyse these factors. This will support in obtaining
high competitive edge as well as ensure long term market survival of the company. Following
is given Macro and Micro environmental analysis of the tourism industry, such as -
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Micro environmental factors can be analysed through SWOT analysis
Strength –Tourism industry has superb performance in the target market; this sector has built
expertise in new markets and achieves higher success over there. It also has strong or reliable
distribution network which helps the company to arrive in potential markets. Every year
several people come to visit the Mommba Festival which helps in increasing tourism demand
in Australia.
Weaknesses – It has been overviewed that most of the tour operators are unable to handle or
manage all challenges in a competitive market; recently, Australian Tourism industry has lost
small market share in niche categories (Doz, 2017). Their % of net contribution and
profitability is also below average in the global tourism industry.
Opportunities – Increasing customers' spending on tourism activities would be a great
opportunity for the tourism industry. Investment in the online platform may increase sales
and helps tour operators to serve better to target audiences.
Threats – New environmental legislation could be a big threat to the tourism industry. Every
year, a wide range of people come to celebrate Mommba Festival, thus currency fluctuations
also affect its international sales revenues and profit margins.
Macro environmental factors can be analysed through PESTLE analysis
Political factors - These factors involve government policy, i.e. degree of intervention in
economic activities of the nation; thus political decisions and conditions put a huge impact on
business areas. Political risks may occur from sudden changes in current political regimes as
well as decisions taken by the government of the nation. For example – Australian
government regulate some laws, such as – contract law which dictates what the tourism
industry can do or what not. Apart from this, sometimes the government does not have any
policies for the protection of the Intellectual property of the country. All these activities may
affect the growth and market survival of tourism companies in the target market (Hitt and
Duane Ireland, 2017). Although, the political environment of Australia is stable, progressive,
open and providing a high degree of certainty.
Economic factors – It pertains alteration in inflation rates, interest rate, bank rates, foreign
exchange rate, the current stage of the economic cycle and the gross domestic product etc. All
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these attributes highly affect the aggregate demand, investment as well as business climate.
For example- interest rates can hinder the ability of individuals to borrow and invest; higher
rates would mean increasing growth of the tourism sector. Australia has strong economic
growth in comparison with UK and US; its GDP is also higher which would be beneficial for
tour companies to expand the business over the nation and achieve desired outcomes in the
required manner.
Social factors – These elements reflection of the society towards a business in which it
operates; social factors, i.e. cultural, attitudes, beliefs, morals and values of the population.
While developing a business strategy, organisers of Mommba Festival needs to ensure health
standards, the importance of environmental protection, and fulfilment of social
responsibilities and so on.
Technological factors – In the present scenario, technology is developing at a fast pace so that
it has become most important for tourism sectors to consistently and constantly innovate. It
supports them to become a market leader. Mommba Festival is organised every year in
Australia so that management should focus on implementing new technology so as to reach a
wide range of target audiences in a certain time period.
Company’s competitive advantage over its rivals
Competitive advantage is a favourable position of a business association carries to be more
profitable among its rivals. To retain its competitive position, the company should be able to
identify greater comparative and differentiate the value of products over competitors. In the
context of travel and tourism industry, managers should focus on implementing effective
strategies and policies that enables to provide a highly competitive edge (Michael, et. al.,
2017). An effective strategy requires huge market knowledge and assessment of potential
market threats; in relation tour providers can emphasis on doing research and development
activities over the domestic and international market. In order to determine its competitive
position, Porter’s 5 five forces model can be used by marketers then accordingly changes
necessary changes can be implemented.
Rivalry among existing competitors – It is the most important aspect that should be analysed
in the strategic management process. This force provides information about the number of
competitors and their impact on the company's existing and future market position. As
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Mommba Festival is operating in Australia, a wide range of tour operators provided their
services; it resulted there is a huge competition between companies. Thus, chances of
obtaining higher sales and profitability may reduce, in this relation the organisation needs to
find out the best strategy which enables to compete over rivalries’ and provide the high
competitive edge to the industry.
A threat of new entrants – Due to globalization, the wide range of new companies are coming
up in markets because less time and cost requires to enter in markets. Although, the tourism
industry has strong barriers to entry which is an effective feature helps companies to operate
in a market with fewer rivals.
The threat of substitute products or services – In this competitive era, buyers can easily get a
substitute for products on easy prices and effective quality as well. It increases brand
switching from one product to another, thus to reduce brand switching it is essential for tour
service providers to offer attractive products to customers which can satisfy their needs or
wants in a best possible manner.
Power of buyers – Customers are the market king as they have the power to demand lower
prices with the effective quality of products. Higher quality rise production costs whereas
lower prices reduce sales revenues; although Mommba Festival is organised once in a year
and everyone is willing is to go over there. Hence, there is fewer customers' bargaining power
because they have fewer options for effective travelling packages.
Power of suppliers - It addresses how effectively or easily suppliers driver up the prices of
products and services. A number of suppliers a company have plays a vital role in increasing
or decreasing the prices of tourism services. As Mommba Festival operated at broadening
level in Australia, in this relation the brand has numerous suppliers so that suppliers
bargaining power is high.
Generic strategies followed by the company
In the process of strategic management, generic strategies provide direction or guidelines to
it. Porter’s Generic strategies ensure that organisation can acquire one strategy among all four
variables as per its competitive positive in a target market.
There is given Porter’s four Generic strategies, such as –
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Cost leadership – It permits managers to target a wider market where large demand of
products and offer products over there at lowest possible prices. Cost leadership contains 2
options, in which either company can opt to remain low costs as much as possible or ensure
to gain large market share with average prices. Tourism companies can acquire this strategy
by making substantial investment capital in their disposals and focus on internal practices.
Differentiation – It will allow the tourism industry to target broad markets by ensuring that
products have unique features (Foss and Hallberg, 2014). The prime objective of a
differentiation strategy is to make products more exclusive and make them attractive to
customers.
Cost focus – Under this dimension, tour operators can target a niche market where there are
little competition and offer products there on the lowest possible prices. Here, management
should focus on the proper understanding of niche markets so as to determine customers’
demands and other market dimensions.
Differentiation focus – As same as cost focus, this strategy also requires to target a niche
market and sell products with unique features or qualities over there. Differentiation focus
strategy often involves strong brand loyalty among customers; it products remain to stay
ahead in the competition.
Company’s growth strategies
In order to ensure its market position over the target market, organisers of Mommba Festival
can follow Ansoff Matrix. It is an analytical technique which is used in strategic management
process; Ansoff matrix allows managers to select the appropriate product-market strategy as
well as monitor potential risks. Below is given four dimensions of Ansoff Matrix -
Market penetration – This dimension helps a firm to sell its products or services in the
existing market. In other words, if a company wants to enhance its market share then it can
use a market penetration strategy. In the context of Mommba Festival, the event is catered in
the same market so that it can apply market penetration strategy by improving promotion and
distribution activities as well as offer tour packages at introductory prices (Sakas, et. al.,
2014).
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Market development – This strategy is acquired by firms when they wish to enter in new
markets with their existing products. Market development strategy emphasis expanding the
business into new geographics, regions and customers segments. With an aim to operate a
business in Asian countries, Managers of Mommba Festival can acquire market development
strategy; it helps the event obtain high market share and ensure leading global market
presence.
Product development – Under this dimension, companies develop new products or adds new
features to existing products in its existing markets. This move typically encompasses
extensive market research and increasing product range.
Diversification – This strategy will allow companies under the tourism sector to enter into
new markets with new products with an aim to obtain a high competitive edge. Although, this
kind of growth strategy is quite risky and may affect adversely (Rothaermel, 2015).
Recommendations
After assessing the above discussion, it is recommended to Mommba Festival that the
members of the association should focus on formulating effective strategies which enable it
to compete with external market rivalries. The action plan of the event should rely upon
certain aspects, such as – benchmarks, resources (human, financial, technical and physical) as
well as the deployment of products and services so as to accomplish all goals and objectives
in the required manner. It is also essential for management to timely conduct market research
and recognises the current market trend. This will be supportive in formulating effective
business strategies and achieve desired outcomes of the company in the international market.
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References
 Brouthers, K.D., Nakos, G. and Dimitratos, P., 2015. SME entrepreneurial
orientation, international performance, and the moderating role of strategic
alliances. Entrepreneurship Theory and Practice, 39(5), pp.1161-1187.
 Doz, Y.L., 2017. Strategic management in multinational companies. In International
Business (pp. 229-248). Routledge.
 Foss, N.J. and Hallberg, N.L., 2014. How symmetrical assumptions advance strategic
management research. Strategic Management Journal, 35(6), pp.903-913.
 Hitt, M. and Duane Ireland, R., 2017. The intersection of entrepreneurship and
strategic management research. The Blackwell handbook of entrepreneurship, pp.45-
63.
 Jackson, S.E., Schuler, R.S. and Jiang, K., 2014. An aspirational framework for
strategic human resource management. The Academy of Management Annals, 8(1),
pp.1-56.
 Michael, S., Storey, D. and Thomas, H., 2017. Discovery and coordination in strategic
management and entrepreneurship. Strategic entrepreneurship: Creating a new
mindset, pp.45-65.
 Rothaermel, F.T., 2015. Strategic management. McGraw-Hill Education,.
 Sakas, D., Vlachos, D. and Nasiopoulos, D., 2014. Modelling strategic management
for the development of competitive advantage, based on technology. Journal of
Systems and Information Technology, 16(3), pp.187-209.
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