MGT604 Strategic Management Report 3 Sample

MGT604 Strategic Management

Context

The assessment of this subject supports students in developing their skills and knowledge in topics that include environmental assessment, problem diagnosis, strategy development, and cultural and ethical contexts. Stakeholder meetings are a critical element in strategic management. This assessment task provides experience and immersive understanding of the complex interactions involved in the development of strategic choices, and the need to take an integrative approach to problem solving. The increasing pace of technological change and the increased impact of social media provides many challenges for businesses attempting to navigate towards growth and increased profitability. Rapid cycle times for new products can lead to decisions being made that are not always in the best interests of the long-term survival of the firm. Disruptions to the everyday course of business come from anywhere and need to be responded to often in short time frames.

Introduction

Assessment 3 continues from the scenario in Assessment 2. In Assessment 3, a disruption is introduced which necessitates re-consideration of the white paper done in Assessment 2. Here is a recap of the scenario.

Scenario Recap

Pro-Go Pty Ltd is a privately-owned manufacturer of small, high-quality action cameras based in Geelong, Victoria. Founded in 2004 it has enjoyed continuous year-on-year growth until the last financial year. Pro-Go has a track record of innovation, and technology that provides excellent quality results in a small package able to operate with small batteries for extended periods of time. The video files these cameras produce are known for having superior colour, and operate effectively in lower lighting conditions than competitor’s cameras. They are also marketed on the basis of their extreme ruggedness, and reliability. Much of the technology used in its devices has been patented by Pro-Go and is not currently available to other manufacturers.

The Pro-Go management team recognised that the ability to capture videos is now a feature of most phones. It suggested to them that the future of the stand-alone camera may be limited. At the time, Pro-Go’s CEO requested the executive team meet independently to develop a strategy to guide the company over the next five years.

Additional Information

Pro-Go Pty Ltd has maintained a strong market position over the past year. Despite supply chain issues that have hampered global trade, the company has been able to keep pace with consumer demand because the local market has prioritised Australian manufacturing.

Additionally, mobile phone manufacturers have not been able to offer equivalent camera features and benefits that Pro-Go’s stand-alone camera can, so the threat from mobile phone manufacturers is not currently a concern.

The Adventure Tourism market is strong and last month Pro-Go successfully introduced a new dedicated video sharing platform to enable customers to instantly upload and share video content online.

Disruption

The patents for the technology used in its devices have expired and Pro-Go no longer has exclusive commercial rights to the inventions that made Pro-Go cameras unique. This loss of monopoly will likely result in an increase in competition as competitors move to challenge Pro-Go's dominance in the market.

The Pro-Go management team has tasked the stakeholder team to meet and develop a modified set of strategies to respond to this disruption and articulate the way forward for the company.

Instructions

Re-convene the (emergency) stakeholder meetings to address the disruption scenario. The stakeholder meetings must discuss this disruption and develop a modified set of strategies. Please return to your groups immediately to discuss these events and adjust your strategic approach accordingly.

Your 2,000 word, individual, White paper should be structured as follows:

• Title Page

• Executive Summary – Briefly summarise the entire report

• Table of Contents - Make it look good. Include page numbers and ensure the layout looks balanced on the page.

• Introduction - Provide background and context to the report. Tell the reader what has happened     in the past that has led to this report being needed.

• Aim - State in a single sentence what this report is seeking to achieve.

• Discussion - Cover the content you wish to address in response to the disruption scenario. You must incorporate theory and application of strategy formulation methods.

• Conclusion - Restate the aim and sum up the discussion to demonstrate to the reader that the aim has been satisfied. There should be no new content in the conclusion.

• Recommendations - What are the next steps? What is required to progress into the future? Evaluate/justify your recommendations?

• References - Please ensure you use the correct APA referencing style throughout. Remember EVERY factual statement requires a reference.

• Appendices - Additional material to substantiate or add greater depth to the material presented in the report, and your Teamwork log.

Solution

1. Introduction

Pro-Go is an action camera manufacturing company situated in Geelong, Victoria. The company was founded in 2004 and has constantly provided customers with innovative products. Patents protect most of the technologies used by the company. However, the company is going through a disruption as its patents have expired, and the company fears losing its monopoly status. It is anticipated that competition in the action camera market will increase; hence the disruption made it necessary for the report’s development.

2. Aim of The Report

As per MBA assignment experts, The report aims to make the stakeholders of Pro-Go aware of the disruption and call forward a meeting to formulate strategies which will aid the company in moving forward in the anticipated competitive action camera market.

3. Discussion

3.1 Three Strategic Strategies

3.1.1. Improving Customer Service and Communication

As mobile phones have become a major substitute product for the brand, only focusing on product quality will not be enough for the company to receive a sustainable competitive advantage (Alexander, 2018). Deccanherald.com, (2022), in their recent article have mentioned that Samsung, a global leader in the mobile phone market is bringing professional level camera technologies in their Galaxy A series smartphones. It indicates that customers will have substitutes for Pro-Go’s products. Customers in this industry always look for augmented product qualities such as warranty, service etc. Thus, the company can achieve a competitive advantage by establishing efficient customer service and communication which will use chatbots, personalised help centres and online FAQs to guide customers with the product.

3.1.2. Outsourcing of Manufacturing

Pro-Go will receive an advantage if it outsources its business rather than manufacturing products internally. Pro-Go will have the opportunity to focus more on their present task and work for future strategy implementation (Stephens, 2019). Outsourcing business will help to increase production efficiency. Through outsourcing, Pro-Go can increase productivity, offer better quality products to their customers and provide efficient service by choosing a specialist outsourcing company.

3.1.3 Technological Innovation

Pro-Go no longer holds the sole commercial entitlements to the innovations that made its cameras stand out from the competition since the patents covering those innovations have expired (Ciabuschi et al. 2019). Competition is anticipated to intensify as rivals seek to challenge Pro-market Go's domination in the wake of the company's loss of monopoly. Thus, one of the proposed strategies will be to invest in more R&D and try to establish new patents to maintain a competitive advantage. 

3.2 Preferred Strategy by The Company

Outsourcing manufacturing is the proposed preferred strategy by the company. The most benefit that Pro-Go will receive is cost benefits (Fazlollahtabar & Saidi-Mehrabad, 2019). Pro-Go can produce products at a very low cost and in an efficient way. Outsourcing will reduce wage costs. If Pro-Go manufactures a product by using its internal infrastructure, then the company has to hire a more efficient and experienced worker (Ning et al. 2020). For this reason, the company has to invest a substantial amount in recruiting and selecting experts and engineers, infrastructure and R&D. On the other hand, in outsourcing the manufacturing process, Pro-Go does not have to incur expenses of recruiting and selection, infrastructure, research and development etc. They can easily start their product manufacturing process by choosing an appropriate outsourcing company who are specialised in these fields (Silva et al. 2022). In the case of the internal manufacturing process, the company has to find reliable and cost-effective suppliers (International Conference on Advanced Manufacturing and Materials, 2018). If Pro-Go fails to develop a relationship, the effective supplier product manufacturing process will be stopped in the middle of the production, the company will have to incur wages expenses for the ideal time, and the company will fail to deliver products as per market demand. Outsourcing reduces training expenses for new or existing employees (Ning et al. 2020). If Pro-Go outsources its business to a different outsourcing company, then the company does not need to hire different skilled workers for different types of product parts manufacturing (Ciabuschi et al. 2019). Also, Pro-Go does not need to arrange training programmes for the same. Outsourcing organisations will be handed over to people who are already experts in that trade. It will bring efficiency and quality to work (Kusiak, 2018).

4. Analysis and Application of Framework 

4.1 VRIO Analysis

VRIO analysis is the framework by which the decision of outsourcing production is justified. 

Table 1: VRIO analysis
(Source: Created by Author)

By analysing the company’s resources through the VRIO analysis, it can be said that even though the company has a strong financial position, it has failed to develop any product which cannot be imitated (Gómez et al. 2022). In this scenario, the company needs to invest more in R&D instead of manufacturing facilities. Outsourcing the manufacturing to a country with low labour cost and less bureaucratic hassle will help the company to divest funds towards R&D.

4.2 Analysis of the Chosen Strategy

Based on the VRIO analysis, the following comparison of cost breakdown for in-house manufacturing and outsourcing has been presented.

Table 2: Internal Manufacturing Cost Breakdown
(Source: Created by Author)

Table 3: External Manufacturing Cost Breakdown
(Source: Created by Author)

The above comparison clearly shows that outsourcing manufacturing is more viable for the organisation. 

4.3 Implication

4.3.1 Short-Term Implication

The cost of labour would have made it impossible for new businesses to enter some fields without the availability of outsourcing. Those that are among the first in their business to outsource their work will, initially, have a competitive edge (Hasan,  et al. 2022). However, this advantage will tend to diminish as other rivals adopt the same strategy and newcomers are encouraged to enter the market. When everyone is taking part, the original advantage is rendered null and void. Another way in which outsourcing fosters the growth of new competitors is by contributing to fragmentation as well as the disintegration of supply chains (esa.on.worldcat.org, 2018). In other words, new competitors might emerge to take advantage of the fact that production may take place in one geographic location while product design, as well as customer service, may take place in entirely another region from the first one (Vidales & García-Pérez, 2019). Because every aspect of a corporation is, in effect, subcontracted out, this implies that any new company may engage the same contractors (or rivals of those subcontractors) and create similar goods at prices that are roughly comparable to those charged by the major companies (Kishita & Hayashi, 2020). If an employee is aware that their job may potentially be offered to cheaper workers in another country at any given time, it is possible that they could lose faith in their company and become disheartened (Kusiak, 2018). Even management-level workers have no guarantee that their employment will continue to be safe and secure as a result of the growth of outsourcing, which has expanded beyond unskilled labour to encompass administrative and intellectual roles. The happiness of workers in the workplace as well as their productivity may suffer as a result (Luo et al. 2022). In addition, if a person or group of workers feels that they are being treated unjustly or that they are not being paid enough, they have the option of quitting their job and starting their own business, which would put them in direct rivalry with their previous employer. Because there are fewer obstacles to overcome when beginning an outsourcing venture, the probability of this happening is higher than it has ever been (Ning et al. 2020).

4.3.2 Long-term Implication

When considering outsourcing, one must keep in mind the long-term consequences of their decision. Relationships are not something that should be hurried and, rather, should be something that is thoroughly studied (Parrino, 2019). One of the first things the manager should be concerned about is whether or not outsourcing will have an influence on the talents that the manager has in-house. If the manager continues to outsource some jobs, there is a chance that the manager will no longer have the requisite skills in-house to do such duties (Ross et al. 2020). If the manager waits too long, the manager will lose the knowledge necessary to finish the work in-house, which will make it more difficult for the manager to bring it back in-house if the manager decides to change the manager’s mind (Silva et al. 2022). When contemplating the long-term impacts of outsourcing, it is critical to give serious consideration to the question of whether or not the choice will have ramifications in other parts of the organisation (Usnews.com, n.d.). It may be more difficult to make changes to goods without sufficient understanding of the processes that are involved in their production, especially in areas that need close linkages to the manufacturing activities (Stephens, 2019). When manufacturing is outsourced to a third party, it may be more difficult to adopt modifications to the materials or to the other production processes (Zhang et al. 2021). 

5. Conclusion

The disruption has forced Pro-Go to formulate various strategies to stay competitive in the mobile camera market. In light of this, the report has presented one of the strategies where the company plans to either manufacture its products internally or externally. The report discusses the cost implications of each choice. It highlights the costs Pro-Go has to bear if it decides to manufacture internally in comparison to the costs it has to bear if the manufacturing process is outsourced. Moreover, the report also highlights the sources of capital funding the company can utilise to fund its strategic direction. This is followed by a critical analysis of internal and external manufacturing processes. The aim of the analysis is to determine which is the most viable option for Pro-Go.

6. Recommendations

Based on the discussion and analysis of the options, it is recommended that Pro-Go opts for outsourcing its manufacturing process. The primary reason for outsourcing is the cost-saving possibility. It is recommended that Pro-Go outsource its manufacturing process to one of the reputed companies in China, India or Vietnam. A survey by usanews.com (n.d.) ranked the three countries as the most cost-effective in terms of manufacturing. On the contrary, Australia is ranked #82, hence another reason for not taking up the option of an internal manufacturing process (Usnews.com, n.d.). Moreover, these countries are technologically advanced and have the ready infrastructure to take on ambitious projects.

Reference List

Alexander, J. (2018). Financial planning & analysis and performance management (Ser. Wiley finance series). John Wiley & Sons. Retrieved November 3, 2022, from https://lesa.on.worldcat.org/oclc/1035389825

Ciabuschi, F., Lindahl, O., Barbieri, P., & Fratocchi, L. (2019). Manufacturing reshoring. European Business Review, 31(1), 139–159. https://doi.org/10.1108/EBR-02-2018-0046

Deccanherald.com. (2022, September 05). (Samsung pledges to bring more innovative camera features to Galaxy a series. Retrieved November 5, 2022, from https://www.deccanherald.com/business/technology/samsung-pledges-to-bring-more-innovative-camera-features-to-galaxy-a-series-1142427.html 

Fazlollahtabar, H., & Saidi-Mehrabad, M. (2019). Cost engineering and pricing in autonomous manufacturing systems (First). Emerald Publishing Limited. Retrieved November 3, 2022, from https://lesa.on.worldcat.org/oclc/1089254404

Gómez, J., Salazar, I., & Vargas, P. (2022). Production outsourcing, technological cooperation and e-business adoption by spanish manufacturing firms. Journal of Engineering and Technology Management, 63. https://doi.org/10.1016/j.jengtecman.2022.101677

Hasan, H. M. R. U., Noh, M., & Ward Randolph, A. (2022). Diagnostic analysis of us fashion brand’s bangladeshi outsourcing. Journal of Global Scholars of Marketing Science, 32(2), 162–179. https://doi.org/10.1080/21639159.2020.1808829

International Conference on Advanced Manufacturing and Materials (2nd : 2018 : Tokyo, Japan). (2018). Advanced manufacturing and materials. (U. Kazuo, Ed.) (Ser. Materials science forum, volume 939). Trans Tech Publications. Retrieved November 3, 2022, from https://lesa.on.worldcat.org/oclc/1077769891

Kishita, T., & Hayashi, N. (2020). Controlling flexibility of product cost in market uncertainty. Review of Integrative Business and Economics Research, 9(4), 1–18. https://lesa.on.worldcat.org/oclc/8541529340

Kusiak, A. (2018). Smart manufacturing. International Journal of Production Research, 56(1-2), 508–517. https://doi.org/10.1080/00207543.2017.1351644

Luo, J., Yang, Z., Zhang, Q., & Pan, R. (2022). Service outsourcing strategy decision for value creation in manufacturing firms. Journal of Management Science and Engineering, 7(2), 365–386. https://doi.org/10.1016/j.jmse.2021.09.007

Ning, F., Shi, Y., Cai, M., Xu, W., & Zhang, X. (2020). Manufacturing cost estimation based on a deep-learning method. Journal of Manufacturing Systems, 54, 186–195. https://doi.org/10.1016/j.jmsy.2019.12.005

Parrino, R. (2019). Fundamentals of corporate finance (Third). John Wiley & Sons Australia. Retrieved November 3, 2022, from https://lesa.on.worldcat.org/oclc/1059358660

Ross, S. A., Westerfield, R. W., & Jordan, B. D. (2020). Essentials of corporate finance (Fifth). MGraw-Hill Education (Australia) Pty Limited. Retrieved November 3, 2022, from https://public.ebookcentral.proquest.com/choice/publicfullrecord.aspx?p=5989458.

Silva, S., Vyas, V., Afonso, P., & Boris, B. (2022). Prescriptive cost analysis in manufacturing systems. Ifac-Papersonline, 55(10), 484–489. https://doi.org/10.1016/j.ifacol.2022.10.223

Stephens, M. P. (2019). Manufacturing facilities design & material handling (Sixth). Purdue University Press. Retrieved November 3, 2022, from https://lesa.on.worldcat.org/oclc/1101077921Usnews.com. (n.d.). These countries have cheap manufacturing costs | U.S. News. US News. Retrieved November 3, 2022, from https://www.usnews.com/news/best-countries/rankings/cheap-manufacturing-costs

Vidales, M., & García-Pérez, C. (2019). Financing sources and social development: an empirical analysis. Social Responsibility Journal, 15(5), 640–657. https://doi.org/10.1108/SRJ-06-2018-0149

Zhang, Y. R., Nurmagambetova, A. Z., Abenova, M. H., Berdimurat, N., & Jondelbayeva, A. S. (2021). Transformation of funding sources during the covid-19 pandemic. Economics: The Strategy and Practice, 16(2), 32–45. https://doi.org/10.51176/1997-9967-2021-2-32-45