Introduction
Empire is a United Arab Emirates (UAE) – a based technology company that started its operations in 2011. The company designs develop and sell consumer electronics products, such as mobile phones and televisions. It also offers networking solutions to small tech-based companies in the UAE and some parts of the Middle East. Although its operational headquarter is in the UAE, it has many branches in selected Middle Eastern countries, such as Saudi Arabia and Qatar. The company’s short-term plan is to have a market presence in selected South-East Asian countries, such as South Korea and Vietnam, and its long-term plan is to have overseas operations in Eastern Europe. Within the company’s few years of operation, Empire has grown to be the UAE’s largest technology company, by revenue and assets. It is also among Middle East’s largest publicly traded technology companies.
This paper is a strategic evaluation of Empire Technology Solutions. It uses two strategic evaluation tools (SWOT analysis and Porter’s five-force analysis) to identify and solve problems facing the company. These two strategic analysis tools are important in evaluating the company’s internal and external environments. Using the same analytical scope, this paper also includes a competitive analysis, which allows us to understand the market-based problems influencing the company’s strategic direction and all the stakeholders affected by the same problems. The information obtained from these assessments would help us to identify possible solutions to the Empire’s problems and predict possible obstacles to attaining them. However, before embarking on this analysis, it is important to point out the affected stakeholders
Affected Stakeholders
Empire’s business plan affects all aspects of its business. Similarly, it affects different stakeholders. Customers, suppliers, employees, and the community from which the business draws its resources are the main stakeholders. The effects of the company’s strategic plan affect these stakeholder groups in different ways. Conversely, some of these stakeholders affect the company’s strategic plan in different ways. Porter’s five-force and the SWOT analysis outlined below show how these stakeholders affect the company’s strategic direction.
SWOT Analysis
A SWOT analysis is a tool for understanding a company’s strengths, weaknesses, opportunities, and threats (Kim & Mauborgne, 2014). This section of the paper uses the SWOT analysis tool to evaluate the strategic performance of Empire Tech Company. This analysis provides us with information that the company would use to maximize its growth by leveraging its competencies. Thus, this assessment highlights key issues that the company should address, regarding its internal environment.
Strengths
This section of the SWOT analysis evaluates the strengths that Empire Tech Solution could use to overcome some of the threats that exist in its business environment. In Empire’s case, three strengths emerge as the most significant factors that would affect the company’s performance – strong brand image, higher profit margins, and effective innovation process. The strong brand image stems from the company’s reputation for developing trusted technology products in the UAE. It allows the company to produce new products that would gain significant attention in the market because of its trusted brand image. The company also has a flexible pricing strategy that allows it to cater to different market segments. For example, it gives room for the company to adjust its prices, depending on the market characteristics. Empire’s innovation is also another company’s strength, which stems from its growth strategy. The company’s rapid innovation helps it to keep abreast of the latest technology in the market.
Weaknesses
This section of the paper focuses on the Empire’s weaknesses and incompetency, which may impede its growth. Broadly, a strategic analysis of Empire Tech Company reveals the following organizational weaknesses – limited distribution networks, variable selling prices, and limited sales in developed markets (products mainly appeal to developing markets). Highlighting these weaknesses is an exclusivity policy that the company uses to market its products as part of a premium brand. Empire’s exclusivity policy underlies the creation of a limited distribution network as the first weakness of the company. For example, the company has a strong evaluation criterion for approving its dealers. While this strategy could improve its control over its business segments, it minimizes its potential to increase its market outreach (Böhm, 2009). Furthermore, because of its variable pricing strategy, the company is unable to make huge profits from high-end markets, which are synonymously associated with exclusivity (Kim & Mauborgne, 2014). In this regard, the company’s pricing and distribution strategies are unfavorable to support an expansion strategy beyond the Empire’s primary markets.
Opportunities
An analysis of a business’s strategic direction involves an evaluation of the opportunities present for a company to improve its competitive position (Böhm, 2009). This section of the paper highlights significant opportunities that Empire Tech Company could exploit while formulating its overall business strategy. A broad overview of Empire’s internal analysis reveals the following factors as its main opportunities – potential to increase its distribution network, increasing demand for network services, rising regional demand for smart-phones, and the creation of new product lines. Factoring these opportunities in the company’s growth plan, Empire has an opportunity to expand its distribution network by changing its value chain processes and its overall distribution model (Lorette & Dames, 2014).
This opportunity stems from the company’s current distribution network, which has a closely guarded chain of command of all its dealers. Introducing more flexibility in the company’s distribution chain could help to improve its market outreach, beyond its primary markets (Lorette & Dames, 2014). Furthermore, with the increased demand for new technology, the Empire has an opportunity to venture into new product lines. Currently, it has successfully promoted its existing product lines. Venturing into new ones could help to develop new brands to complement the company’s growth strategy. Overall, this section of the SWOT analysis reveals that the company has an opportunity to grow, despite the presence of strong competition.
Threats
The threats facing Empire Tech Solutions come from its external environment. They include competition from rivals, product imitation, and rising costs of production. These threats could influence the financial performance of the company. Tough competition emerges as the most significant threat because of competitor aggressiveness from rivals in the market. For example, Empire technology struggles with overcoming the increased popularity of Samsung in the Middle East smartphone market because the latter engages in aggressive marketing and innovation (Kim & Mauborgne, 2014). The threat of imitation is also real because many companies could develop products that resemble the company’s flagship brands. The increase in labor costs in some of the Empire’s production facilities also means that the company could soon face increased production costs that it would have to transfer to its customers. Such an outcome would reduce the company’s profit margins. Based on the above-mentioned factors, the Empire’s performance could suffer because of aggressive competition and imitated product designs (Lorette & Dames, 2014). In this regard, the company should take proactive measures to prevent, or avoid, these threats. The following table summarizes this SWOT analysis
Figure 1: SWOT Analysis.
Porter’s Five-Force Analysis
Porter’s five-force analysis is a strategic tool for assessing a company’s external environment. Researchers commonly use it to analyze an organization’s competitive environment and its business strategy development (Magretta, 2012). Through this assessment, it is easy to understand the attractiveness of an industry and its relation to a company’s key internal competency (usually identified in the SWOT analysis). The five forces in porter’s assessment are the threats of new entrants, the threats of substitute products, customer bargaining power, supplier bargaining power, and the intensity of competitive rivalry (Magretta, 2012). This section of the paper analyses these forces, relative to the external environment of the Empire Company.
Threats of New Entrants
In the context of this paper, the threat of new entrants in the market denotes the effects of new entrants venturing into the Empire’s primary market. For the company, the threat of new entrants is moderate. This assessment comes from three factors in its external business environment – high capital requirements, high cost of brand development, and the capacity of new entrants to venture into the Empire’s primary markets. The high capital requirements and the high cost of brand development have a weak force on the company’s overall strategic direction. However, there is a strong capacity for new entrants to venture into this industry (Magretta, 2012).
This is a strong force in the company’s overall strategic outlook. Nonetheless, starting a new business to compete with the Empire requires a lot of capital. More so, it is difficult for companies to develop a new brand and compete with existing ones, especially in markets where dominant companies enjoy a strong brand following (Kim & Mauborgne, 2014). A combination of these factors decreases the threat of substitute products in the market. However, different firms have the capacity to enter the market and compete favorably with Empire Solutions. The market expansion of dominant global giants, such as Cisco, also shows that many firms have the capacity to compete with the Empire. These factors show that the UAE-based company has a moderate threat of new entry. To maintain a competitive advantage, the company must continuously innovate.
Threats of Substitute Products
This section of the paper analyzes the possible influence of substitute products in influencing the Empire’s strategic direction. Broadly, the company experiences a weak influence from the threat of substitute products in its primary business segment. The weak force of substitute products stems from two factors – the high availability of substitutes (moderate force) and the low performance of substitutes (weak force). Indeed, the Empire’s products are easily substitutable. For example, customers could easily use cameras to take pictures instead of buying the company’s smart-phones for the same purpose. Similarly, they can subscribe to landline telephone services to make a phone call instead of using a mobile phone to do the same. However, the threat of substitution is low because the substitute products do not have advanced features present in smart-phones. Thus, the threat of substitution does not have a strong impact on the Empire’s overall strategic direction. For example, the company’s marketing and product design divisions would not be easily affected by the threat of substitution.
Intensity of Competitive Rivalry
An understanding of the intensity of competitive rivalry for Empire stems from comprehending the influence of competitive actions on the firm’s business processes. For Empire solutions, the analysis of competitive forces depends on two issues:
- Competitive aggressiveness of rival firms
- The cost of switching products
Empire faces strong competition from its rivals in the technology sector. The aggressiveness of competitor actions emerges from rapid innovation and aggressive advertising that most rival firms display in the market. Characterizing this fierce competition is the low switching costs for customers because they could swop one smart-phone brand for another. This characteristic increases the level of competition that Empire experiences (McNeilly, 1996). Based on this understanding, the analysis of competitive rivalry shows that competition is a dominant force in the strategic analysis of Empire Solutions.
Customers’ Bargaining Power
An analysis of customer bargaining power reflects the influence of company demands on a company’s strategic decision. The bargaining power of customers who buy the Empire’s products is strong in most of its business segments. The strong bargaining power stems from two factors – low product switching costs and the small size of individual buyers. The low product switching cost has a strong influence on customer bargaining power, while the small size of individual bargaining power has a weak force on the customer’s bargaining power. Indeed, as this paper demonstrates, most of the Empire’s customers could easily change brands, thereby increasing their power in influencing the company to heed to their demands (increased customer satisfaction). However, considering the vast nature of the Empire’s business portfolios, strong customer bargaining power does not have a significant impact on the company’s revenues. This fact makes the Empire’s customers weak, individually. However, the low switching costs still make them powerful enough to influence the company’s strategic direction (Lorette & Dames, 2014).
Bargaining Power of Suppliers
The bargaining power of suppliers refers to the influence that a company’s suppliers would have on the strategic direction of a business. The bargaining power of the Empire’s suppliers is low because of two factors – a high number of suppliers and a high overall supply of product components. Both of these factors exert a weak force on the company’s strategic direction. Although the Empire has more than 50 support businesses, the large number of suppliers in the global technological market reduces the power of existing suppliers in the UAE. Furthermore, the high number of suppliers for the Empire’s product components makes it difficult for them to impose their demands on the company. Based on these insights, this section of the strategic analysis shows that the Empire should not emphasize on the bargaining power of suppliers when making its strategic decisions.
Competition Analysis
Porter’s five-force analysis has shown that the Empire’s main area of specialization is in the computer networking solutions sector, smartphone market, and the microcomputer industry. In the microcomputer industry, Empire’s main competitors are HP, Dell, Apple, Toshiba, and Compact. Apple, Blackberry, and Samsung are competitors in the smart-phone industry. However, relative to the competition in the market, Empire Solutions has relatively new products in the market because it is a new company. Nonetheless, the intensity of competitive rivalry is strong in the smart-phone market because other mobile phone companies such as Apple, Blackberry, and Samsung command a strong market share in the Middle East.
Possible Obstacles
The above-mentioned porter’s five-force analysis shows that the Empire should focus on managing the competitive rivalry and the bargaining power of buyers because these two forces have the greatest impact on its strategic direction. In the same way, the SWOT analysis has shown that the company should focus on managing aggressive competition and product imitation as the possible challenges for realigning its internal competencies to exploit the potential that exists in its external environment. Nonetheless, the threat of employees failing to support changes in the organization and the possible use of anticompetitive practices by rivals may impede the realization of these goals (McNeilly, 1996). Strategies for overcoming these challenges appear below.
Proposed Solutions
The above section of this paper shows that competition and product imitation are possible obstacles to the realization of the Empire’s goals. To address the problem of product imitation, Empire should use a strong patent portfolio. Similarly, to address the problem of aggressive competition, the company should continuously innovate to make sure its competitors have a difficult time imitating the company’s product competencies (Kim & Mauborgne, 2014). To overcome the challenge of a lack of employee buy-in and the possible use of anticompetitive business practices by its rivals, the company should adopt a bottom-up management structure and advocate for the adoption of a stringent regulatory framework to curb both challenges respectively. These solutions would help the company realize its goals.
Summary and Conclusion
Understanding the strategic direction of a company is an important step in helping it to achieve its goals. However, the process is subject to changing internal and external organizational dynamics. This is why it is important to understand how these forces affect a company’s strategic direction. From this background, this paper has undertaken a SWOT analysis and Porter’s five-force analysis of Empire Tech Company for purposes of understanding its internal and external environments respectively. The SWOT analysis showed that the Empire had strengths that could compensate for its weaknesses. The company could also leverage the same strengths and catalyze its growth potential. For example, this paper has shown that its strong brand image could be instrumental in promoting new products that the organization wishes to introduce in the market. However, aggressive competitive practices from its rivals and the threat of product imitation could slow down the company’s progress in this regard. To address this problem, this paper has shown that the company should use a strong patent portfolio. Similarly, the company should continuously innovate to make sure its competitors have a difficult time imitating the company’s product competencies.
An analysis of Porter’s five forces reveals that the Empire’s strategy partly focuses on managing external business forces. However, the negative effects of some of these forces on the company’s business model show that the company stands a high risk of suffering from a reduced or diminished market share. Nonetheless, the overall analysis revealed that competitive rivalry and customer bargaining power both had strong forces on the company’s strategic plan. Comparatively, supplier bargaining power and the threat of substitute products both had weak forces. However, the threat of new entry had a moderate force. Based on this analysis, the Empire should focus on managing the competitive rivalry and the bargaining power of buyers. To do so, the company should adopt the recommendations outlined earlier.
References
Böhm, A. (2009). The SWOT Analysis. New York, NY: GRIN Verlag.
Kim, C., & Mauborgne, R. (2014). Blue Ocean Strategy, Expanded Edition: How to Create Uncontested Market Space and Make the Competition Irrelevant. Cambridge, MA: Harvard Business Review Press.
Lorette, K., & Dames, E. (2014). How to Open & Operate a Financially Successful Collection Agency Business: With Companion CD-ROM. New York, NY: Atlantic Publishing Company.
Magretta, J. (2012). Understanding Michael Porter: The Essential Guide to Competition and Strategy. Cambridge, MA: Harvard Business Press.
McNeilly, M. (1996). Sun Tzu and the Art of Business: Six Strategic Principles for Managers. Oxfrod, UK: Oxford University Press.