The global business environment is dynamic with globalization and technological changes affecting many businesses. Because of these changes, it is necessary that firms establish the best strategies that can sustain their future objectives rather than make them quit the market. Following these challenges, firms have increased competitiveness using strategic planning with the management establishing existing business conditions in the business environment that are used to establish the best strategies that can increase competitiveness of the firm after their implementation.
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This paper will look into business factors in Singapore and UAE that will inform the entry of General Electric to either market. Following the analysis, the author will make an informed decision that will be instrumental to the management of GE when entering either of these markets. The author will use factors such Porters five forces analysis tools, weighted averages of factors and logic reasoning to arrive at the relatively better location.
GE is a global company with presence in over 160 countries. In some of the countries, the company has regional operations. This has been the model of operations, which had helped the company to trounce major players in many industries such as Energy. However, since the global economic downturn, the company has experienced major reshuffle in its operations strategy to remain relevant and competitive.
The company has developed two business groups with different focuses. One focuses on the developed market while the other focuses on the emerging markets. The two market groups are christened the mature market group and the emergent market group respectively. The former covers traditional markets such as United States and Australia. The latter covers emerging markets such as Brazil, Africa and a huge part of Asia. Using this two-pronged strategy the company has continued to localize its operations. The localizations have gone a notch higher whereby the company is producing some of its products in certain nontraditional countries such as Russia and Brazil. According to the company’s strategy, this is to cater for localized markets and to retain local jobs, which is what immediate governments need. This ultimately creates loyalty and drives sales levels of GE’s products.
The magnitude of GE’s operations requires a coordinated and focused supply chain. The company is decentralizing operations with the view that this will strengthen the supply chain even further. While the company is steadily gaining markets globally, it still treats its headquarters (USA) as an emerging market with vast untapped potential. Hence, the company is still finding ways to continue appreciating the potential of USA market.
The company’s long-term focus is to be the best producer of PCs in terms of sophistication of design and engineering. Hence, the company taps into innovative resources such as research and personnel. In recognition of the ever-growing interest in other gadgets apart from PCs and the declining nature of appeal of personal computers in traditional and emerging markets, the company has intensified its productivity and creativity to create relevant products. Hence, the company needs to continue its steadfast adherence to operational efficiency to understand the performance of all these products in the various markets.
Porter’s 5 Forces Analysis
Threat of New Entrants
The economies of scale current players are experiencing, the level of product differentiation, and the capital required to begin operations in the industry determine this force. The UAE toy industry has relatively high barriers of entry. Large companies already experience huge economies of scale because of widespread operations and have the advantage of experience.
Threat of Substitute Products
Substitute products serve almost a similar purpose as the industry product but may not be in the same product line. There are few substitutes for toys in the UAE. The major alternative for toys is hiring nuns or television exposure. With the economic downturn, consumers have been unable to use as many company products as they used to.
Bargaining Power of Buyers
The power of buyers is low. There are very many buyers and the market is fragmented. Company services buyers seldom make collective purchase decisions in order to minimize costs. Usually, individual buyers decide what products to buy and from which company. Toys are not a critical commodity. This gives the supplier a lesser hand and increases the buyer’s bargaining power. In Singapore, the bargaining power of buyers is high because of a better economy with higher per capita incomes.
Bargaining Power of Suppliers
The bargaining power of suppliers is high if there are few suppliers and many buyers and if the product supplied is critical to the buyer’s business. In the UAE toy industry, there are many independent toy retailers and resellers. Hence, the bargaining power of a company such as GE is relatively low as opposed to bargaining power in Singapore.
Competitive Rivalry within the Industry
This is the strongest force in operation within the UAE toy industry. There are few dominant companies fighting to maintain their market shares. The smaller companies are competing in market growth. Companies have employed extensive product differentiation to crowd out competition. They have also invested heavily in research and development. They compete on first mover advantage and innovation. Those who manage to innovate, charge competitive charges on their products. High competitive rivalry reduces an industry’s profit potential.
Weighting and choice of location
To determine location, management develops several factors that will be influential in the company’s decision. The following are the factors. The factors are categorized into exogenous and endogenous typologies. The exogenous factors refer to external factors that a company is not in control of while endogenous factors are factors within the control of the company. For example, a company can control salaries and wages but cannot control the availability of markets.
- Salaries and wages
- Internal Infrastructure
- Laws and Regulations
- Industry Competitiveness
- Infrastructure external
- Human Resources Availability
- Cost of Expert Expatriation
- Regional Growth potential
- Plant Expansion possibility
- Cost of leasing
- Market availability
After that, the team develops weights for each criteria depending upon the hierarchy of importance to the company operations.
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Examples of factors
The industries GE operates in have been recording slumps in profits intermittently since 2000. For example between 2001 and 2006, the energy industry recorded cumulative profits amounting to $42 billion. GE tries to operate in predictable markets to avoid losses. It had been making profits even in a time when the industry was recoding losses. For example, it has signed exclusive contracts to operate in particular countries (e.g. US and Canada) to increase profitability and enhance predictability. For the past decade, the prices of crude oil have been unpredictable because of terminal wars and global economic crises. This makes the industry to operate at a state in which it cannot accurately predict costs. Additionally, in 2008 the world plunged in an economic crisis emanating from the finance systems of United States.
Role of Government
Competitors and critics have constantly complained that success of GE is not attributable to its strategies. They have painted a picture where environmental forces, specifically governments, play a key role in the success of GE. The industrial climate in those countries is favorable compared to other nations. That is why the company has invested in few different countries since inception and subsequently written off those investments. Critics argue that this indicates GE can only succeed in its own country. However, this is untrue, according to management and GE proponents, as the company operates in a similar environment as other competitors and they have not matched GE’s global success.
The External Factor Evaluation (EFE) Matrix
The following external factors will be critical in determine the attractiveness of a particular location. The country that scores the highest will have a higher chance. External factor evaluations assign values to the different external factors. The values are multiplied with the weighted scores to obtain the final score. The country with the highest score is chosen.
In this case, UAE scores higher than Singapore. Hence, UAE is a better location for GE as opposed to Singapore.
Competitive Profile Matrix (CPM)
|Laws and Regulations||0.2||12.2||18.6|
|Salaries and wages||0.08||6.8||5.68|
|Human Resources Availability||0.15||7.8||8.85|
|Cost of Expert Expatriation||0.05||2.9||2.5|
|Regional Growth potential||0.05||3.45||2.9|
|Plant Expansion possibility||0.12||6.36||6.72|
|Cost of leasing||0.06||5.46||3.06|
The results indicate that the United Arab Emirates option obtains a higher weighted score of 70 than Singapore, which scores 67. This indicates that the location of the plant in United Arab Emirates will be beneficial to the company’s operations more than, if it is located in Singapore.
Business Process Reengineering
Reengineering of business processes is one of the most radical and effective methods of dealing with change. Reengineering is also effective in reducing costs and improving quality of service. A far-reaching method requires thorough evaluation before a firm embarks on it to refine its processes. Many firms unlike GE have tried and failed to carry out Business Process Reengineering successfully. The reason is that the process requires a lot of time, resources, and knowledge for successful implementation. At GE Company, there have been changes to the processes carried out by management in the past. These changes were informed by previous needs and market assessment.
Advantages and Disadvantages of BPR
Currently, the economic environment is quite competitive and unpredictably dynamic. A firm has to review its operations, processes, and policies continually in order to align them with contemporary methods of doing business. Because of the dynamic nature of the business environment, it is crucial for a firm to embrace change if it is to survive or even maintain the same influence that it has in an industry. The need to meet changing and somewhat sophisticated consumer needs and to find cost effective ways of operation has made Business Process Reengineering a necessity. The advantages of this process are far-reaching and quite essential.
Business Process Reengineering is the essential rethinking and revamp of processes in a business in order to achieve enhancement in current measures of operations strategy performance and strength such as cost, quality, and delivery (Chase & Jacobs 191).
Vertical Integration Strategies
Approach to IT Planning
IT planning is critical in ensuring that current IT solutions reflect changing technological and market changes. Therefore, it is logical that the company should have high end IT planning. GE Company is quite sensitive to changes in the market that may affect its operations. The company forecasts future trends through a careful analysis of current changes in IT. This way the company anticipates future products and sets up teams to develop them. This includes software and hardware. The company is also a huge fan of reverse engineering which trail blazed its success.
IT Strategy and Planning Methodology
Different methodologies may be adopted to carry out planning and strategy in IT effectively. It is crucial to note that IT is the bedrock of current organizational operations. Hence, a possible failure or fault in IT could have catastrophic ramifications. GE should adopt a leveraged 6-point IT strategy and planning methodology in its operations. The 6-point methodology is outlined below (Gray & Larson 171).
Indentify Business Strategy and Capabilities
In this step, GE defines its overall enterprise strategy. This is the strategy developed by top management. Generally, it outlines future goals, vision, and objectives. In addition to, GE divides its operations into units and strategies, for example, the Abu Dhabi Unit. Lastly, the business defines operational capabilities that are prevalent to ensuring the realization of the business strategy.
Outline Business Process Framework
In this step, business processes are identified, roles are outlined and business scenarios forethought. All this is done in respect to the business capabilities. Additionally, the business indentifies areas that starkly differentiate it from other players in the same field.
Define Targets and Enabling Applications
In this step, GE should indentify its main targets and strategies. This way, applications maybe developed to cater for key integration points that the company indentifies. Additionally, GE should indentify components and services for its business.
Indentify Core Data and their Sources
In this step, the business indentifies and clearly outlines the most critical data and the data points. GE should clean these data points to come up with trusted sources of data. These may be clients, suppliers, consultants, or business analysts. The data aids in ensuring smooth business processes. Additionally, GE should develop standards for which to accept or reject a data point.
Directions and Support of Infrastructure
In this step, the company describes IT strategy and necessary infrastructure. GE also outlines the standards for the development of that infrastructure.
In this step, GE details the timelines for the achievement of the plan, defines milestones, and relevant targets. It also highlights the critical success factors. Lastly, GE outlines future steps after realization of the plan.
SWOT Analysis-Strengths and Opportunities
The company’s competence can be accounted for various factors within its structure. Firstly, the company has a wide network within the United Arabs Emirates. It has an already established market. This enables the company to reach many clients in its system and get higher returns. The high number of customers enables the company to compete with the other companies favorably. As a result, the output is very high and the income rates are economically viable (Kloppenborg 78).
GE Company uses technology for operations and advertisement. This approach is a competitive strategy that helps them to gain popularity and attract the attention of investors in the company. It has integrated into almost every technology that is useful to the customer in its operation. For example, the company uses online advertising, mobile advertising, and phone advertising. The integration of the various forms of technology enables the company to serve the clients in an easy manner. Customer’s satisfaction encourages them to carry out transactions in GE Company.
Another crucial source of its competence is the marketing approach they use. They assert that the advertising messages should follow the four Cs rule. The rule asserts that the messages should confident, combative, clear, and cheeky. It advertises itself by maintaining a firm economic stand during economic downturns and depression. The stand induces the clients’ confidence and encourages investment.
SWOT Analysis-Weaknesses and Threats
Management is the process of engaging resources in an organization for the ultimate realization of strategies and goals. Though there are management principles applicable universally, different scenarios call for a personalized input. This is what differentiates success from failure. Sometimes, strategies and directions emanate from personal experience, expertise, and sometimes sheer intelligent guesses. The latter is what should be sharp, visionary, and organization-centric. At GE, not all decisions need to be based on critical expert and consultants’ opinions. Rather, the management may play a crucial role in realization of a successful BPR
The BCG matrix is a business tool that evaluates both growth and relative market share factors to come up with investment options for the future. The Boston Consulting Group created the tool. BCG looks at a business as a unit. In this case, the author will determine the attractiveness of UAE using BCG.
|GE BCG matrix|
|Brands||Revenues||% of corporate revenues||Largest competitor’s market share||Your brand’s market share||Relative Market Share||Market Growth Rate|
The results indicate that the UAE option obtains a higher weighted score Singapore. Hence, results indicate that the location of the plant in UAE will be beneficial to the company’s operations more than Singapore. Hence, it is prudent for the company to operate in UAE since it will enjoy higher potential for growth, an available market, better taxation regime, stable laws, and regulations among others. However, it crucial to note that the difference between the two scores was quite small which may indicate that the difference may be down to small factors such as difference in laws. Additionally, the team should understand that these small differences could lead to catastrophic outcomes in the operations of the firm. Hence, the differences should be taken into account while making decisions.
Chase, Richard, and Jacobs Richard. Operations Management for Competitive Advantage, New York: McGraw Irwin, 2006. Print.
Gray, Carlos, and Larson Edwin. Project Management: The Managerial Process, Singapore: McGraw–Hill Education, 2008. Print.
Kloppenborg, Timothy. Contemporary Project Management, New York: Cengage Learning, 2011. Print.