Week 2 Collaboration: Part 1: Environment analysis

Week 2 Collaboration: Part 1: Environment analysis

In this first part of a Collaboration taking place over two weeks, you will select a multinational organisation and complete an analysis of the industry or the environment in which it operates, using an analytical framework of your choice.

Last week, you focused on reviewing organisations’ internal structure. In this week’s Collaboration, you will consider the impact of external environment in shaping those internal structures. To this end, you will practice deconstructing organisational environments to see how analytical models, tools or frameworks help managers understand the real world. Furthermore, you will try to tease out the strengths and weaknesses of these different analytical frameworks.

You will analyse a multinational corporation (MNC) of your choice from the top 50 on the Fortune 500 list (note, do not use the same organisation you have chosen for your Module Project).

Identify the current and emergent forces impacting your chosen MNC that are most likely to require the organisation to adapt and respond. In this module, we introduce Porter’s (2008) Five Forces model, and Daft, Murphy and Willmott’s (2014) ten sector analysis of an organisation’s environment; and Burt et al.’s (2006) scenario planning, which you can use to carry out the analysis of your MNC. However, you may use any environmental analysis framework for this assignment. It can be one that you have used in the past, or one that you discover via your own research.

To prepare for this Collaboration:

• Choose a MNC as instructed above from http://fortune.com/fortune500

For your Initial Response, in 300 to 500 words:

• Outline your analysis of your chosen MNC environment and/or industry, using an analytical framework of your choice (e.g. Five Forces Model, ten sector analysis of an organisation’s environment, scenario planning)
• Based on your analysis findings, present your chosen MNC with some recommendations to improve the alignment of its organisational structure with its external environment.

ANSWER

Week 2 Collaboration: Environment Analysis

Introduction

Porter’s Five Forces Framework refers to one of the major tools of analyzing the competition levels in a business’ environment (Porter, 2008). The five forces include competitive rivalry (competition), the customers’ bargaining power, the suppliers’ bargaining power, the threat of substitutes in the market, and the threat of new entrants into the industry. A market whose effect of the five forces reduces the profits expected is regarded as unattractive, while that whose profitability is high after considering these forces, is attractive. Apple Inc. is a mobile device and computers manufacturer that has been quite successful in the American market and the larger technology industry. It is ranked third in The Fortune 500 Companies list. The following is an analysis of the industrial environment of Apple Inc. through the Porter’s Five Forces Framework.

Apple Inc.

Looking at Apple’s market environment, the strongest forces among Porter’s five forces that the organization faces are the threat of competition or competitive rivalry and the force of customers’ bargaining power. The other three forces are quite weak, given that Apple enjoys customer loyalty and trust, and its sales beat the sales of any other substitute products in the market. Moreover, it is extremely difficult for any new entrants into the technology industry, especially the smartphone category, to catch up with or even beat Apple’s success.  Apple Inc. is faced with competition threats from firms that are very aggressive in business. According to an article on Fortune Magazine (How Samsung, LG, and Sony Are Preparing for Apple’s iPhone 8.), companies such as LG and Samsung are in pursuit of beating Apple in the mobile device industry, conducting competitive advertising and sales promotions, quick innovation, and imitating Apple’s products. The cost of switching between the competitors is also low, which means that it is quite easy for Apple’s customers to shift to products of its competitors. The customers of Apple’s products have strong bargaining power, and this factor largely affects the profitability of the organization. The low cost of switching from one product to another in the technology industry gives customers the strength to bargain for lower prices from Apple. The company is therefore forced to lower their prices and ensure that its customers are satisfied, so as to keep them from buying products of other companies.

The rest of the three forces are quite weak, with respect to Apple Inc. the bargaining power of its suppliers is weak, mostly because they are many, giving the company a wide range to select from. The suppliers cannot, therefore, impose any unfavorable demands to the company, as they risk being dropped. The threat of substitutes is also weak. Despite there being many substitute products in the market, these substitutes do not meet the quality of Apple’s products or lack certain features that the products of Apple Inc. have. This ensures that consumers prefer Apple Products. The threat of new entrants is not strong, due to factors such as a high capital requirement for the technology industry and the high cost of developing a brand to achieve the level of the Apple brand (Forbes Magazine article: The Worlds Most Valuable Brands). However, companies such as Google and Samsung have developed new products such as the Nexus, which should be observed to ensure that Apple’s customers do not switch to them.

Recommendations

Apple Inc. must formulate strategies to maintain customer loyalty and satisfaction, so as to prevent the threat of competition from companies such as Google and Samsung at bay. It should also introduce new and revolutionary features in its products to ensure that the strength of the customers bargaining power is reduced or controlled. These strategies will keep the company above its competitors and ensure profitability levels are maintained.

References

Porter, M. E. (2008). Competitive strategy: Techniques for analyzing industries and competitors. Simon and Schuster.

The Worlds Most Valuable Brands. (n.d.). Retrieved March 29, 2018, from https://www.forbes.com/powerful-brands/list/

How Samsung, LG, and Sony Are Preparing for Apple’s iPhone 8. (n.d.). Retrieved March 29, 2018, from http://fortune.com/2017/09/05/apple-iphone-8-samsung-lg-sony/