Heineken Strategic Management (Term Paper Sample)

Strategic management report: Haier Company (Electrical household appliances business unit)
Executive Summary
The stifling competition in the UK electronic home appliances industry impresses upon industry players to institute very strategic practices. This report looks into the situation and performance of Haier’s electronic home appliances unit in the UK market. This report utilises information obtained from academic books and journals, empirical literatures and even company official website information. A situational analysis is conducted using PESTEL framework and Porter’s Five forces model for external environment analysis and Competence analysis and Value chain models are used to conduct an internal analysis. This report establishes that in light of such prominent players as LG and Samsung, Haier is literally unknown in the UK market. Haier’s differentiation strategy has earned them a market leader position in China. However, it has not done the same for the company in the UK. Therefore, it is recommended that Haier should adopt a hybrid strategy. Through a hybrid strategy, Haier would be able to achieve both cost competitiveness and product differentiation. In this manner, Haier would be able to appeal to both the high and low ends of the UK electronic home appliances market.
Contents TOC \o "1-3" \h \z \u 1. Introduction and company background PAGEREF _Toc355462688 \h 42. External environment analysis PAGEREF _Toc355462689 \h 42.1 PESTLE framework PAGEREF _Toc355462690 \h 42.1.1 Political environment PAGEREF _Toc355462691 \h 52.1.2 Economic status PAGEREF _Toc355462692 \h 52.1.3 Socio-cultural factors and trends PAGEREF _Toc355462693 \h 62.1.4 Technology PAGEREF _Toc355462694 \h 62.1.5 Legal factors PAGEREF _Toc355462695 \h 72.1.6 Environmental issues PAGEREF _Toc355462696 \h 72.2. Industry analysis (Porter’s five market forces framework) PAGEREF _Toc355462697 \h 72.2.1 Buyer’s bargaining power PAGEREF _Toc355462698 \h 82.2.2 Supplier bargaining power PAGEREF _Toc355462699 \h 82.2.3 Competitive rivalry PAGEREF _Toc355462700 \h 92.2.4 Threat of substitutes PAGEREF _Toc355462701 \h 92.2.5 Threat of new entrants PAGEREF _Toc355462702 \h 93. Internal environment analysis PAGEREF _Toc355462703 \h 103.1. Value chain analysis PAGEREF _Toc355462704 \h 103.1.1 Primary activities PAGEREF _Toc355462705 \h 103.1.2 Support activities PAGEREF _Toc355462706 \h 113.2 Competence analysis of Haier’s electric home appliances business unit UK PAGEREF _Toc355462707 \h 114. Competitive Strategy Analysis PAGEREF _Toc355462708 \h 125. Conclusion PAGEREF _Toc355462709 \h 14
1. Introduction and company background
Haier is a Chinese multinational corporation founded in the year 1984 and deals in the manufacture and sale of an array of consumer products ranging from consumer electronics to home furnishings and electric appliances. The company has grown over the years; hailing from a past of near-collapse to its present status as one of the leading brands in the entire globe. Haier which started as a small company is today a globally networked group with an annual turnover of about 160 billion yuan (Haier, 2012). One of the major markets for Haier’s products is the UK which apart from presenting an expansive market for the multinational company has also presented a host of challenges to the company in the form of an ever-growing intensity of competition. This report looks into the present situation of the company; the kind of environment the company operates within together with their competitive positioning in terms of resources, competences and strategies. PESTLE and Porter’s five market forces will be used to critically look into the company’s external business environment while the company’s value chain will be analysed to provide an insight into its internal conditions. Further, a strategy suggestion will be offered based on the strategy dimensions presented by Bowman’s strategy clock.
2. External environment analysis
2.1 PESTLE framework
The PESTLE framework is an effective tool in analysing the various factors in business’s external environment; factors which a business has absolutely no control over. The framework can effectively be utilised as below:
Figure showing the dimensions of the PESTLE framework
Source: Thomson and Martin (2010)
2.1.1 Political environment
First and foremost, political governance issues including inherent aspects of political stability and relative political calm heavily influence the performance of business activities in a particular country or region (Stonehouse et al, 2004). The political calm in the UK can be identified as one of the major contributors to the growth of economic activities in the region; including growth in the household appliances industry (Dyck and Neubert, 2008).The EU trading bloc which recognises the different political boundaries has successfully integrated the different constituent countries (including the UK) into a single business entity and this has ensured growth of individual companies and industries.
2.1.2 Economic status
Consumers’ purchase abilities are very important when it comes to determining the success or failure of businesses within a region (Cunningham and Harney, 2012). Save for the harsh economic times experienced during the financial crisis period and the subsequent credit crunch, there is a trending growth in the average household incomes in the UK region (Oxlade, 2012). This is supported by the 1 percent growth in the last year 2012 and the projected growth of 2 percent in the year 2013. This basically means that there is an increase in purchase abilities of the UK populace presenting a promising situation for all businesses in the region and particularly for this case the household appliances industry.
2.1.3 Socio-cultural factors and trends
Socio-culture encompasses a people’s beliefs, customs, preferences and tastes and especially the impact of these behavioural aspects on business activities. Due to the fact that UK has a large proportion of their population consisting of older persons, there is basically a high rate of purchase of products regarded as of importance to this population; i.e. household items amongst other family-oriented necessities. Also, quality serves as the basis for major purchase decisions made by the UK people; i.e. amongst all other product features including price, quality matters most (Horner and Swarbrooke, 2005). This situation has seen major businesses with extensive brand equity enjoying larger sales than the fresh market entrants with no well established reputations of quality in services and products provision. The UK populace is sensitive to fashion and market trends (Suder, 2008). This means that people gladly purchase items that are in vogue for example there is a present craze for pressure washers in the UK. The sensitivity to fashion trends and demand for quality implies that Haier have to ensure quality in product and even service provisions.
2.1.4 Technology
Increase in technology consumption has greatly transformed domestic and international businesses. Subsequently, the UK is seeing a marked increase in online purchase, marketing and sales of goods and services through ecommerce (virtual stores) to e-consumers (Zinkan, 2012). The present shift of focus to the virtual marketplace has likewise seen businesses change their strategies to suit their online customers leading to adoption of strategies such as online purchase and even delivery of products through company websites (McLoughlin and Aaker, 2008). Also, the increased technology consumption in the UK has seen consumers impress upon producers to operate within cutting-edge technologies in order to remain relevant or else lose their potential and existing customers to competitors. For example, Nokia lost a huge share of the UK market to Samsung and Apple after they failed to relent to the Smartphone wave in the market.
2.1.5 Legal factors
As a business entity within the UK region, Haier is bound to comply with the legal requirements of the region; requirements which control and regulate business practices in the country. The labour laws and taxation policies are of great importance to Haier. More importantly, the UK laws demand that all forms of electrical gadgets and equipments be appropriately maintained and service to avert any forms of danger. This law is underpinned by the factories Act 1961; focusing on safety of electrical appliances. Cases in the UK such as when a woman suffered a 240 volts electric shock while operating a pressure washer justifies some of the strict legislations impressed upon the electrical home appliances manufacturers by the UK government (HSE, 2013). This means that Haier and other industry players should not expect to stop interacting with their customers once after a sale is done but rather, they have to ensure frequency of gadget inspections, user checks and item testing. This means that Haier has to hire an additional number of technicians who would undertake the gadget inspection and testing.
2.1.6 Environmental issues
The influence of the global conventions on climate change and the subsequent government policies regarding environmental conservation has translated into more calls for businesses in the UK and everywhere else in the globe to observe sustainable practices. This together with increasing consumer awareness on the need to conserve the environment means businesses are bound to ensure practices that are environmentally friendly (De Wit and Meyer, 2009). High consumer perception of business goodwill (resulting from environmentally-friendly business practices) is enough to earn a business more customers and especially customers who are environmentally conscious (Chen and Ching-Hsun, 2012). To observ...