Business Strategy Simulation Report
Benchmarking can be viewed as the process of evaluating the quality of one organization against the performance of another organization (Ray, 2008). According to Rumelt and Schendel (2004), it is the process used in strategic management where by an organization is able to evaluate various aspects in relation to that of a superior company. Benchmarking is part of competitive intelligence carried out in firms to identify opportunities and risks in their markets as well as pressure testing a companies plan against market response.
Competitive intelligence is the real action of gathering and analyzing information on products customers and competitors for both short and long term needs of an organization. In this case I am going to benchmark my firm which is company H against both Nike Inc. and the leading company B. The two companies belong to the footwear industries. I identify my problem areas as financial analysis, market research, advertising, distribution and quality analysis. I will also utilize survey from competitive intelligence sources as well as industry reports to understanding how these companies do their businesses. SWOT analysis will also be used to create sources of competitive intelligence and Come out with proper information for my firm.
Company H Corporate Profile
Being one of the BSGs companies, company H manufactures and sells shoes, textiles and appliances for sports and other related products. We believe that we offer not only quality but also variety to our diverse customers. Company H is ten years old in the industry and is looking forward to being one of the leading firm in America by the year 2030.so far the company has more than 12 sub branches in three states with its headquarter in Denver Colorado. The companies’ greatest challenge is to survive in such a competitive industry.
We have identified our major competitors to include Reeboks, Fila, puma and leanings. others include Nike inc and the leading company B. in order to understand the threats posed by our competitors and their strategy we need to look at the strengths and weakness of the leading company B and also have an in-depth understanding of Nike inc. by having an in-depth corporate profile and the also the business process used by our competitors like inc, we will have a better ground to understand how our competitors are likely to respond to our strategy.
Nike Corporate Profile
Nike Inc came to existence in 1972 from what initially was known as blue ribbon sports. They founder included Bill Bowerman and Phil Knight and they named the organization after the Greek wing goddess of victory. Today it is recognized as global leader in the sporting goods industry. It was known to be the world leading marketers, designer and distributors of athletic footwear accessories and apparel (Kevina, 2007).
Nike currently takes in more than 20,000 employees with total sales of $9.5 billion. There is no doubt that over the years, Nike has evolved greatly as an athletic shoe industry creating the most competitive market in the recent years (Koranteng, 2004). It currently holds total revenues of $19,404,100 and a market capitalization of $20,751,324 with a $41.93 per share (Bunney, 2007). The amount for standing operations stands out at $1,824,200 with free cash flow $1,510,300. However, analysts are predicting slowing down of Nike in the next few years.
The present long term debt stands at $ 407,300 although the company still enjoys a stable profitability and efficiency (Foster, 2001). This slow down according to Barney (2000), Will be as result of change in consumer trends and competitive markets offered by other BSG s companies. For example, younger markets are starting to purchase shoes that are more casual including work boots. It is still not easy to establish the overall sales and profits for Nike Inc but according to analyst, this statistics are likely show a downward trend in the future. According to Barney (2000) cites the high like hood of people switching to more medium priced products from the expensive brand name products.
Comparing stock and financial statistics for 2008, the company operating margin stand at zero with gross margin of 47.40% increase. Return on common equity 23.53% higher than last year with almost the percentage increase in return on invested capital (Smartmoney, 2008). The stock performance in the last three years is reflected by the share price of 22.16% with a high of $22.30 and low of $12.90. In the last five years the dividend grew by $23.48 and dividend payout of $0.24 (Bunney, 2007).
Looking at the market share of Nike Inc., The company accounts for 2% of the world $800 billion footwear and apparel sports equipment (PR Newswire, May 23, 2000). Nike which is considered by its customers as the world largest athletic shoe maker owns retail store in more than 160 countries in the world. The company manufactures its products at 830 factories distributed world wide (Foster, 2001).
The Nike marketing and advertising strategy is very vital for the company’s success. It is well positioned as a premium brand selling unique designed but expensive product. Nike attracts their company with marketing strategy which revolve around their brand image accompanied by distinctive logo and advertising slogan. Their marketing mix has many elements apart from promotion. Their advertising strategy utilizes national television and the media at large. In 1982, Nike launched its first ads during the New York marathon. This marked the beginning of their powerful advertising which saw them being awarded several awards of he advertisement of the year.
Due to this, Nike will face stiff competition from other established companies like our company H. In order for Nike to keep standing in the industry, it will need an exceptional global strategy. If Nike does not penetrate the global market successively it is likely to give other companies including the leading company B a competitive advantage.
Comparing our own company H, with Nike inc and the leading company B, it is clear that the two company are far ahead but not far from reach. The strength for Nike and the leading company B is the tough management team and the good corporate strategy abroad. Our company H is still not through in recruitment hence a weak management team and a good corporate strategy. Our current employee’s intake per year stands at 500with a total sale of $100 million per year. The two companies have strong financial base. Company H current market capitalization is $1,065,132 and total revenues of $1,456,310. Nike has brand recognition; a reputation and a powerful trademark “just do it that has attracted a strong customer base.
Looking at the weaknesses of competitive strategy employed by both Nike and the leading company B, our company can be able to come out with its own strategy to compete well. Company B relied on the strategy differentiation instead of cost strategy which involves identifying criteria used by clients and positioning the company uniquely to meet the criteria. This strategy is however responsible for high product prices beyond what customers can afford.
The major threats for Nike is Bad image because of sweatshops, increase in cost of providing solutions of technology, economic threats in North America and Asians countries. For both Nike and the leading company B, there is increasing competition coming from the major challengers in various branches of business, emerging competitors, free trade and the foreign currency fluctuation is under threat. Also, Nike is losing strong ground in soccer where others competitors companies have highest stake .The leading company B is being faced by Chances of distress due to growing beyond capabilities. Sometimes also, the Company’s reputation in footwear and apparel industry is a threat its own business.
In my analysis, I identify the weaknesses for Nike Inc and the leading company B as our opportunity to penetrate the stiff competition. The two companies are slow in absorbing new technology such as developing system for ecommerce. Moreover, Selling directly to consumer is bringing conflicts with its own reseller and therefore eCommerce will soon turn to be the best option for making good sales.
One of Company H opportunity is the increasing online customers and also the rising demand in the industry for online products, new technology and innovation. We have opportunity in that there is expanding e-commerce to the rest of the world hence high chances of outsourcing in the web. While Nike and company B is focusing in rising interest the basketball sports, company H will take advantage to expand ecommerce to the global market. Also read Axiata strategic management
Strategic plan begins with a mission statement that is clearly defined. The mission describes the basic functions of the organization in the society in regards to the products and services offered. The leading company B mission statement is to be the global leader in the footwear industry with sports brands built with elegance and passion for sporting lifestyle. Our mission statement for company H is to continuously improve the look, feel, image and the overall quality for our products to match and exceed the expectations of our customers.
We are consumer focused and that means we will continue to improve the quality, look, feel and image of our products and our organizational structures to match and exceed consumer expectations and to provide them with the highest value. We are committed to continue strengthening our products and brand to remain competitive and also improve our financial base
In the wake of twenty first century and the reality of globalization, changes in technology coupled with increasing competition have brought with it complexity in modern management (Rumelt & Schendel, 2004). The term strategy is used to refer to the overall managing of the organization with specific reference to an organization arrangement (Hofer & Schendel, 1978).
While competitive strategies provided a competitive advantage to the leading organization B last decade, the same strategies can be used by my company H and the last company G in order to survive in this century. Organizations that work with many branches require a clear distinction between the strategies at the corporate level (Hofer & Schendel, 1978). According to Porter (1980), planning strategically has become a key to success in almost all if not all organizations.
The competitive strategy used by the leading company B has greatly enabled the company to have a competitive advantage over the rest including the last company G. A competitive advantage can be defined as an added advantage which a company may have over the competitors in terms of offering greater value or benefits to the customers. The leading company B uses the four strategies in the Michael porter model. In his work Porter (1980) suggested that four strategies could be used in order to acquire a competitive advantage.
The four strategies depend with several factors including the scope of the business and the extent to which the business could wish to differentiate its product. Porter (1980) came out with a model for categorizing these strategies and in the model he distinguished the differentiation strategy for broad business from cost leadership for narrow scope of business activity.
The leading company B utilized the differentiation strategy which involves identifying several criteria which are used by customers in a market and then focusing on positioning the business towards meeting these criteria. This strategy is associated with raising the premium charge for the product which is intended to reflect the high production cost and more value for the customer. It also involves giving customers elaborate reasons why to prefer one product over the other.
The quality of advertising and marketing is crucial in determining the competition strength of accompany. In his model, Porter (1980) emphasized that there exists five models which determine the industry attractiveness and profitability in the long run. Company B has tried to internalize the threat of new competitors in the industry earlier than company G and have come out with measure to increase product substitute’s availability. In addition, advertisement quality gives the leading company an edge over the last company G. The bargaining power of buyers and that of the suppliers and also the degree of conflict or rivalry between the available competitors is analyzed in the porter’s model.
According to Porter (1980), the threat of new competitors can easily increase the level of competition and there reduce profitability and attractiveness. The threat greatly depends with the barrier to enter the industry which in turn is dependent on factors such as capital requirement, economies of scale e.t.c. the threat of substitute is can as well reduce profitability of accompany. Buyer’s willingness to substitute and the price and performance of substitute are among the factors determining the threat of a substitute.
For my team to beat the leading company B it need to internalize the essential growth strategies. Looking at the Mckinsey model, Mckinsey (1992) elaborates that the business should base their growth strategies on four things: operational skills, privileged assets, growth skills, and special relationships. According to him operational skills are the major competencies that a business can have and it is the foundation for growth strategy. With the understanding of the Mckinsey principles, my team will therefore have strong competencies in the distribution, technology or the better customer service. Moreover, my team intends to utilize the privileged assets to penetrate the market.
The privileged assets are the very assets which are held by the business which are hard to copy by the competitors (Mckinsey, 1992). This include in our company, the direct marketing based businesses and well established brand. A business also needs the growth skills to be able to successively manage the growth strategy. Special relationship was the last key requirement in the Mckinsey model. These are kind of unique relationship threat a business may have with the trade bodies that can allow penetration to the competition easier. The model proposed seven ways of achieving growth which were distributed between existing product
Strategic Action for my team
In my business simulation game I analyzed strategies for improving supply for the company. Supply chain management is a function which is critical to any business success which is responsible for bringing high quality, fast delivery, efficient cost and continuous innovation in any businesses (Belch & Belch, 2001). It is one of the competitive strategies that our teams will employ in order to achieve our objectives. Both leading company B and Nike Inc are part of global companies that try to improve their competitive advantage by strategically managing and using their competitive advantage.
The marketing strategies increase the company fortunes especially when the market is so competitive like it is today. Marketing plays a vital role in decision making, targeting, pricing, market segmentation and positioning (Tucker, 2004). In the past, the leading company utilized major events to pursue their marketing strategy. My team will utilize sports activity like the Olympics where many people attend the activity in order to keep healthy and have fun. In the past the leading company B has always managed to capture the attention of their customers by sponsoring such events.
However, my teams in will do more in order to ensure that we beat the leading company B and survive in the industry. It is also important to bear in mind the rising competition from the last company G. Tucker (2008) attributes this to increasing popularity of alternative footwear, resulting in more constraints than ever before to achieve high profit through effective global sourcing practices.
Positioning strategy is another crucial part of gaining competitive advantage in the 21st century .The strategy can be used as a retrospective measure against our competitors. The goal of any company is to create value of the consumer through development of company resources and capabilities. In the modern economy, intellectual capabilities and capital have become a point of focus (Belch & Belch, 2001).
My team will utilize the Positioning strategy to inform the customer what the company is doing better than its competitor. In my analysis I found out that company B positioning need to be somehow fluid and factors such as evolving pressure to perform must be in hand with constant maintenance of its product and services.
My team must choose which industry to participate in as a key factor in marketing strategy. It will go for an industry that will allow its products and services to preserve difference between its competitors for considerable period of time. To create a competitive advantage dictates that experienced staff of any organization be more innovative in creating a product or service than the rival in the industry (Belch & Belch, 2001).
Endorsement of Tiger Woods, for example, was one of the successes of Nike golf which was an innovative marketing strategy for Nike inc. Nike managed to create a competitive advantage since the most visible athlete in the world was the spokesman of their product. When formulating a marketing strategy for my comapany, my team will bear in mind that allocating corporate resources is an important decision. Making decision on who acquires what is a balancing strategy. More money is however needed to allocate to research and development which will eventually result in better products.
Looking at how company B and company G could have improved their operation, I will start by discussing the marketing methods and market mix. For the purpose of determining proper marketing method for product delivery, it is very essential to keep analyzing certain factors which in this case company B and G ignored in the past. These factors are product, place price and promotion and product. They are referred to as marketing mix (Tucker, 2004).
It is very essential to have a product which in turn should be marked successively to the final person who is the customer. The product must be in such away that it gives the company a competitive edge. It involves asking such question as, what distinguish the goods from others which are already there. Is there a warranty that can convince the client to buy e.t.c? Once this questions are answered and the product is established then one can move to the other part of the marketing mix. Other factors needed to be considered included the distribution cost and the distribution systems in general. Consumer profile and attitudes, customer retention levels, sales and profits by product and the overall cost structure (Tucker, 2004).
Both company B and G needed rot review their prices for the products. As we have mentioned above the type of good that is being marketed affect the price. Price affects the customer perception of a good or service. Although sometimes high price is used to stress that the product is of high quality that is not always the case especially for inferior products. Improving the price and quality is competitive strategy that could have been employed by company B and G to have an edge over their competitors whose products is much more expensive (Tucker, 2004).
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