Strategic Analysis of Red Company in the Mobile Phone Industry Report

This report provides a comprehensive analysis of the mobile phone industry, focusing on the Red Company's strategic position and performance within a CEISM simulation. The analysis includes a detailed market analysis, competitor assessments, and examination of buyer preferences and market segmentation. It applies Porter's Five Forces and PESTEL analysis to evaluate the industry's competitive landscape and external factors. The report delves into Red Company's R&D investments, value chain analysis, and sources of competitive advantage, highlighting its strengths and weaknesses. Stakeholder analysis and management are also discussed, alongside strategic recommendations for improvement. The report covers industry and product life cycles, market shares, and global capacity usage, providing a well-rounded view of the mobile phone market. Ultimately, the report aims to assess Red Company's performance and provide strategic insights for future success, emphasizing the importance of cost control and innovation in a competitive market.

STRATEGY

TABLE OF CONTENT
INTRODUCTION...........................................................................................................................1
MARKET ANALYSIS....................................................................................................................1
Competitors.................................................................................................................................1
Geography and technology.........................................................................................................1
Buyers preferences and market segmentation.............................................................................2
Sub strategic groups in mobile phone industry...........................................................................2
Market shares..............................................................................................................................4
Porter five forces model..............................................................................................................4
PESTEL analysis.........................................................................................................................6
Deep dive on varied economic factors greatly affecting busienss..............................................8
Industry life cycle........................................................................................................................9
Product life cycle......................................................................................................................11
Industry size..............................................................................................................................12
Global capacity usage...............................................................................................................13
Sources of competitive advantage.................................................................................................14
Sources......................................................................................................................................14
Value chain analysis..................................................................................................................15
Cost per unit..............................................................................................................................16
Critical analysis of investment in R&D.........................................................................................18
Definition and benefits of R&D................................................................................................18
Industry analysis.......................................................................................................................18
Stakeholder analysis and recommendations as well as stakeholder management.........................19
Stakeholders needed due attention by firm...............................................................................21
Stakeholder management..........................................................................................................21
CONCLUSION..............................................................................................................................22
REFERENCES..............................................................................................................................23

Figure 1Global demand of product..................................................................................................1
Figure 2R&D expenses across firms for years................................................................................2
Figure 3Market share of firms for different years...........................................................................3
Figure 4Porter five force model.......................................................................................................5
Figure 5Business environment........................................................................................................6
Figure 6BOE base rate.....................................................................................................................8
Figure 7Use of mobile phones by people of UK.............................................................................9
Figure 8Product life cycle..............................................................................................................10
Figure 9Industry size.....................................................................................................................11
Figure 10Percentage change in industry size across years............................................................12
Figure 11Capacity use across Asia and Europe.............................................................................13
Figure 12Variable production cost for the firms...........................................................................14
Figure 13Contract manufacturing cost..........................................................................................15
Figure 14Transportation cost for the firms....................................................................................15
Figure 15Average cost of the product.......................................................................................................16
Table 1R&D expenses across firms for years..................................................................................3
Table 2Market share of firms for different years.............................................................................4
Table 3Global capacity use............................................................................................................12
Table 4Cost per unit for the firms across years.............................................................................16

INTRODUCTION
Red is taken as company for analysis in CEISM simulation. Mentioned company operate in
the telecommunication industry and manufacture mobile of all generations from 2G to 4G. In
comparison to rival’s firm is in better position because of its R&D projects and innovation that it
made in its operations. However, on front of cost firm lagged behind its rivals. Dependency on
contractors for production of additional units is one main reason behind high cost of product.
This is the front where Red need to work to improve its performance. Thus, on analysis of
performance it can be said that firm need to make hard efforts to control cost of production.
Management is good and able to retain suppliers which lead to less fluctuation in cost of
products obtained from contractors. However, within premises cost of production is high which
make firm less competitive to rivals. Investment in R&D is made almost equally, if economic
condition become stable and demand of smartphones plunged then in that case firm may failed to
make available technology updated mobiles to people relative to rivals. Such kind of scenario
will make firm less competitive in the market. Thus, it can be said that firm position in front of
rivals to moderately is competitive.
MARKET ANALYSIS
Competitors
In CEISM simulation there are some competitors namely Blue, Leaders, grey, Ochre, Pink,
Navy and Yellow. All these firms operate in the mobile industry and have core competency in
multiple fronts like innovation and cost control etc.
Geography and technology
In CEISM simulation there is one nation USA and two continents namely Asia and
Europe. Markets are very different from each other. In Europe and Asia people prefer to use
products that are different in front of price (Giachetti and Marchi, 2010). Specially, people prefer
cheaper products. Hence, firms need to serve both continent and USA people in different
manner. This creates main challenge for the firms and make competition more tough for them.
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Figure 1Global demand of product
Buyers preferences and market segmentation
Consumer behaviour across country’s is different and due to this reason, it become very
important for the firms to segment market in many ways so that product can be served to people
at right place. All firms invested in tech but in different manner. Some of companies make right
decision while some make wrong decisions. Fast mover advantage is the one of the factor that
leads to achievement of huge success in the business (Liu and Li, 2010). Firms are segmenting
market on basis of tech 1, tech 2, tech 3 and tech 4. Some companies do technology advancement
late and due to this reason, they face loss in the business. Thus, it is very important to ensure that
according to requirement product is offered to the customers on time and in proper manner so
that their satisfaction level can be maintained. Thus, it can be said that there is huge significance
of the market segmentation approaches for the firms in the market.
Sub strategic groups in mobile phone industry
It refers to the way in which positioning of product is done in the market. Positioning
refers to the creating specific image of the firm among customers and motivating them by using
that image to buy a product. Red company is focus on research and development so as to position
its product as innovative product in the market.
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Figure 2R&D expenses across firms for years
Not only Red, its rivals are also spending lots of amount on R&D. from table given above
it can be observed that most of firms are making heavy investment on R&D only in specific year.
However, Red is making balanced investment on R&D each year which make it competitive
towards its competitors.
Market shares
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Figure 3Market share of firms for different years
Facts clearly indicate that globally Red market share increased consistently over past few
years. In line to this market share also increased but at less rate then Red. Other than these two
firms market share all companies decline to large extent. It can be said that Red and Blue are
leading the global market.
Porter five forces model
Mobile manufacturing industry is capital intensive industry and due to this reason, there are
less firms in the domain. After opening a business, it is difficult to survive in the market as
technology advancement take place at fast pace. In order to remain in competition company,
need innovate their products at fast rate so as to give stiff competition to rivals. Industry analysis
of mobile manufacturing is given below by using porter five forces model. Threat of new entry: Industry is highly competitive and require huge investment which
lead to less threat of entry of new players. New entrants do not have sufficient fund to
carry out R&D activities (Hilton and Platt, 2013). Due to all these factors there is less
threat of new entrant. However, interesting fact is that if market is lucrative then MNC
can enter in the industry. In the same way, currently the quoted firm also do not have
threat of new entry and that is why, company only focus on the products and services
which is offered by the firm at reasonable rates.
Figure 4Porter five force model
(Source: Michael Porter’s five forces – Model template Excel., 2019)
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 Buyer power: Buyers power is high because company’s operating in industry make
available phone at competitive price with advance features. Thus, customer is on win-win
situation in both sides as if not get product at appropriate price the it can go for rival’s
mobile phone. Therefore, in the context of CESIM, it is analysed that company have
high buying power which reflected that a firm should provide a good range of the
company’s product so that it will help to meet the define aim and objectives of the firm as
well. Threat of substitution: There are multiple players in the market which provide wide
variety of smartphones (Chavis, Klapper and Love, 2011). Thus, multiple alternatives are
available to customers which means threat of substitution is high in the market. In the
same way, CESIM also face high threat of substitution and that is why, company have to
make strategy in order to make sure that it meet the define aim and objectives of a
business. Supplier power: There is medium power of suppliers because mobile phone producers
trust only on those suppliers which make available quality of components to them at
competitive prices. As CESIM also have medium power of suppliers and that is why, it is
essential for the business to provide best quality of products to their customers so that
they will not go to another place which in turn affect the buying power of the company. Complementary forces: Bargaining power of complementary forces is moderate because
firm specifically rely only on few one to get prepared chargers and batteries as well as ear
phones. As in the telecommunication sector, there are range of new rivals and customer
also shift towards another brand if they find same quality and services from another
company which is turn affect the overall business in opposite manner.
PESTEL analysis
Political factors
 Brexit will negative impacts operations
 Supportive tax rates and
internationalization policies
Economic factors
 Inflation and interest rates are stabled a
bit after recessionary period
 Currently, economic condition of UK is
good
Social factors
 Preferences for low priced and high-
Technological factors
 High focus on using social media sites
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quality mobiles.
 Increasing usage of Smartphone’s
such as Facebook etc for marketing
purpose
 Need to focus on performing activities
in line with the technological
advancement taking at marketplace.
Legal factors
 Need to comply with all the laws and
legislation related to employment,
taxation etc.
Environmental factors
 High level of emphasis on eco-friendly
operations
Figure 5Business environment
(Source: Understanding the Business Environment., 2019)
Deep dive on varied economic factors greatly affecting business
There are number of factors in economic environment which are greatly affecting
business firms. Some of them are given below. Interest rates: Interest rate is the one of the important components of the economic
environment. This is because banks major source of income is deposits and lending of
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same to people (Cantwell, Dunning and Lundan, 2010). Many times, there are less
deposits which affect bank lending capacity. In such situations banks take loan from
central bank at specific rate. Central bank in order to control cash flows usually change
interest rates which directly affect banks and ultimately country economy.
If central bank of UK will keep interest low then banks will be able to make
available business loan at cheaper rate to the mobile manufacturers which will ultimately
lead to heavy investment in R&D projects. All these things lead to elevation in
profitability of the business.
Figure 6BOE base rate
(Source: New historic low for interest rate 0.25%., 2016)
 Inflation rate: It is another important term that buzz specially after 2008 recession across
the market. More inflation rate is high product price increased and lead to less demand of
the product in the market. In current time period in the domestic market there is low
inflation rate and in developing nations or larger markets also (Ullah and Lai, 2011). This
situation is positive for mobile manufacturers and they can expect strong boost in sales
revenue. GDP: GDP is also known as economic growth rate of the nation. Economic growth rate
indicate increase in production of goods and services and trade in the nation. All these
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things ultimately lead to increase in job opportunities and income level of individual. All
these things boost demand in the economy and ultimately lead to increase in profitability
of the business firms. In current time period GDP of the UK is increasing which reflects
that in future time period demand for mobile hand sets will increase consistently. Thus,
there are good earning prospects for mobile manufacturers in the UK. Current account deficit: It is another important term that is used in economic analysis by
experts. Current account deficit refers to the situation where government made more
expenses then it receives as income (Cohen and Kietzmann, 2014). In such kind of
situation infrastructure building reduce which affect nation growth rate. It can be said that
current account deficit must be kept in control in the nation. Trade deficit: Term refers to the situation where import of the nation is higher than
export. Thus, domestic currency gets devaluated and import become dearer. Hence, if
such kind of situation comes in existence then UK mobile manufacturers have to pay
higher amount to purchase raw material from foreign nation. All these things lead to
increase in cost of production. Thus, exchange rates have huge impact on the business.
Industry life cycle
Industry life cycle is the concept which reflect the current state of the industry. It can be
observed that industry have three life cycle stage namely growth, maturity and decline.
Figure 7Use of mobile phones by people of UK
(Source: Percentage of households with mobile phones in the United Kingdom (UK) from 1996
to 2018., 2019)
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Currently, UK smartphone industry on its maturity phase. This is because mobile manufacturers
already make lots of innovation and currently any big innovating features are not coming in the
mobile phones which is clearly indicating that industry is on mature stage. On an average
individual in UK keep their mobile for 18 months which is long time period. Hence, in such a
situation if people do not see any new feature then they will not like to purchase new mobile
(Zeng, Li and Duan, 2012). If such kind of thing happened then in that case industry may enter in
to decline stage. This is because in absence of innovation people will not have any motivating
factor to buy mobile.
Chart given above is clearly indicating that in today time period most of people have
mobile phones with them. Now, demand can only rise when there will be innovative feature in
mobile or its life comes to end (Percentage of households with mobile phones in the United
Kingdom (UK) from 1996 to 2018., 2019). This is the warning signal for the mobile
manufacturers and they need to think out of box so that market share can be retained. They need
to do extensive research on unserved needs of the people. Only by serving needs and making
available something new and different people can be motivated to replace then handsets in few
months or years.
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