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Pake and Payne is virtually operating in a vacuum but in an industry or an environment the external of which poses both opportunities as well as threats to Pake and Payne compromising further the certainty of our future just like any other business. This report therefore presents to the board, a comprehensive strategic audit for Pake and Payne and suggests the short and long term options and strategies for future development of the company.
Business audit is an essentials tool for effective planning and formulation of strategy. According to Hill (2008: 34), a business audit gives an insight in to the organizations to ascertain the resources and ability to support the business both currently and in future while taking care of the uncertainties that comes with it. Consequently therefore those audits presents to the board comprehensive business audit for effective planning at Pake and Payne. In carrying out the strategic audit, the committee undertook a resources audit, company’s value chain analysis the company’s core competences, the SWOT analysis, portfolio analysis and the performance analysis.
The purpose of this analysis as aimed at identifying the resources available to the business to support both current and future operation of the business (Kape, n.d.). In addition, a strategic resource audit related to distinct competence and advantage is offered (Scott, 2002). The company is stronger than competitors in terms of resources: particularly the financial resources (capital) and human resources both the research and development staff and manufacturing staff. Moreover, the company has well established plans across the United Kingdom and beyond which can support more production. Ideally the company’s financial strength relative to the others firms in the industry and which is drawn from a long history of profitability as well as highly innovative research ad development team has greatly enhanced Pake and Payne competitive position in the glass manufacturing industry. In addition qualified labor is very readily available and at very cheap costs thus presenting the company’s with a pool of low cost human resources which can favor the company’s expansion policy.
Value chain analysis
This sets to provide management with an overview of the activities that takes place in the company (Lance, 2007: Para 4). These includes both the basic activities such as glass manufacturing at Pake and Payne and support activities such as marketing, human resources management and research and development among others. At P & P ltd, the key business is to manufacture, distribute and sell the highest quality glass to customers with an objective of offering the best we can to the latter. As such, the future of this company greatly lies in our ability to continue offering this high value while maintaining kaizen focus in relation to delivering value to our customers. As a result, the board as well as manager must aim at continuing the culture of high value delivery in all its operations. The effectiveness in the company in terms of its marketing systems and quality of human resources management coupled by a pool of skills and expertise in manufacturing is particular essential for the company.
According to Menon (1999) core competences refer to all those activities that are particularly vital to give the business a distinctive edge over rivals. To start up the core competence analysis for the company, the team sought to ascertain the level of competition in the UK manufacturing industry and ascertain the company’s position relative to other rivals or firms competing for the same market. Normally companies in perfectly competitive market must find themselves competing for market position and power.
The board must therefore understand that Pake and Payne is not an exception. Irrespective of the fact that the company own a relatively large market share of the UK glass manufacturing industry (75%), has relatively huge market command and that the rivalry in the market currently is less intense, the future is rather uncertain, new firms are coming entering the industry while the weak competitors are quickly reviewing their competitive strategy. Consequently, the company has to maintain a focus strategy in readiness of the threats presented by the uncertainties of the business environment (the industry).
Ideally, the purpose of resources audit, value chain analysis and core competence analysis will enable the management in the identification and definition of the company strategic abilities (Armstrong, 2006: 194). According toHeinz (200: Para 6) however, such analysis must always precede the analysis of the overall performance of the business. Having done so, therefore, this comprehensive performance analysis seeks to find out the current performance in terms of size, general operation, market share growth and development, profitability, among other points of controls.
The performance analysis is based on the strong review of how the resources of the business have grown over the years. First, the company has a superior market share especially in the United Kingdom with a lion share of 75% before it reduced to 57% on the make of 2006 recession perhaps. In addition, the company has particularly enjoyed a high return on investment (ROI) during this period. Furthermore, Pake Payne is perceived to be a very profitable organization and typically liquid in terms of cash.
Product wise, the company’s product quality and aesthetic value of the product is unmatched in the industry; a factor that has enabled Pake and Payne to maintain superiority and incomparable customer loyalty especially in regards to the higher market. In relation to the above, evidence from the case reveals that the company continues to excelled in terms of innovativeness and invention perhaps better that any other rival within the united kingdom glass industry. In regard to strategy the companies fall low in terms of strategic ness a factor that exposes the company to the threats of the external environment.
Evidence shows that Pake and Payne have been particularly vulnerable with the aggressive competitive strategy from the close rival and the effects of the economic down have seen the Pake and payment market share reduce drastically from 75% to 50%. This has affected both the turnover and more significantly the profitability of the company. Furthermore, the company is evidently more vulnerable in its rigidity in maintaining a skimming pricing strategy particularly when the increasing rivalry, increasing buyers bargaining power as well as the increasing threats of substitutes are increasingly making the industry (market) more prices sensitive. The later inarguably calls for the company to adopt as change strategy in terms its pricing mix as being rigid is likely to work against the company.
SWOT analysis is an acronym that stands for strengths, weaknesses, opportunities and threats(Heinz, 2007: Para 10). As a result, it plays a vital role in the analysis of the overall strategic value of the business relative to both the internal and the external environment of the business. For the purpose of this paper therefore SWOIT analysis was performed using the TOW matrix to identify the strengths and weakness Pake and Payne limited presented by the company microenvironment as well as the opportunities and threats as pose by the macro or rather the external environment to the company. Through a clear understanding its position in regard to the results of the SWOT analysis, the company can use its strengths to safeguard itself against the threat presented by the dynamisms of the external environment as well develop its weakness to strengths and take advantage of the ensuing opportunity that it presents .
Strengths: from the analysis, it is evident that the company’s strengths included a well established and highly effective research and development division characterized by its heavy and consistent investment in research and development over the years and have with excellent R&D facilities. In addition, the R& D team at Pake and Payne is viewed is viewed in the industry as begin highly innovative and proactive in developing glass products. This investment has given them a competitive advantage in the UK Perhaps the underlying factor behind the unmatched high quality product that the company boasts of in the UK industry. Other area of strength regarding Pake and pay ltd includes, the financial strengths intermesh of liquidity, and capital, economies of scale, highly established plants, and upper market customer loyalty.
Weaknesses: Most of the weakness that Pake and Payne are greatly rooted in its strategy differentials. Such includes, narrow market targeting (targeting of the upper market only), inability to get patents lack of a coordinated promotion strategy for increased awareness (Scott, 2002). In fact, evidence from the case reveals that despite the fact that the design and production of most of Pake and Payne products has been recognized as innovative and of good quality they have not been successful as expected failure of which is great attributed to a lack of promotion or commercial awareness. Another major weakness of this company is in its organizational structure. By the virtue that leadership in the organization is highly centralized. Collaborative design making is discouraged, resources especially human capital is underutilized and the process and quality of decision making is greatly. In addition, Work practices in P&P LTD'S factories particularly in the UK are inflexible, with many labor grades and delineation of job responsibilities. Also, the company lacks a clear mission and vision statement; a factor that to a great extent hinders organizational planning and development of clear goals and objective for sustainable business and growth.
Opportunities: These represent the opportunities for organizations and better performance on the part of the organization. Both nature of the industry in which Pake and Payne operates in as well as the internal strengths presents the company with a host of opportunities and a factor that makes the future of the business something worth looking forward to for instance evidence the company are on the verge of a significant technological discovery and advancement in the field of electro-optics,( the science of light waves and the interface between plastic and glass) thus raising a possibility of the company diversifying in to new and high-tech products in the area. This is evident because the company has been investing in this field. Also, as many organizations going are out of business there is more property available for rent / lease thus reducing the need for new development of premises. The rival in the industry is also low bus increasing as the market grows. P & P limited therefore has an opportunity to root itself in the market by taking advantage of the first mover advantage and competitive advantage as presented by the strengths of its current business units. The market for glass is growing as well as the possibilities of expanding to the many unexploited markets in other markets including the United States in which the company has only a 2% market share. The existence of vast market therefore presents opportunity for diversification of operations and company growth.
Threats: These are negative points of uncertainty to the business presents by the weaknesses in the business and the dynamisms of the environment external to the organization. In Pake and Payne threats are present by factions such as lack of patent rights placing the inventions and innovations at Pake at the risk of being copied by rivals. Also, the UK motor industry has seen a rapid decline recently, the sale of new cars has been a major concern for all car producers, and the long-term prospects for safety glass production is not promising. Most car manufacturers ether have or are relocating their production operations overseas to take advantage of the low cost structure in developing countries. In addition, the industry as a whole is faced with strict Health and Safety laws and employment policies which have had an adverse affect on production in the UK. Furthermore, Climate change particularly the crisis global warming and the growing issue of ' environmental friendly' business are also likely to have a greater affect on the industry as governments introduce more legislation to ' clean up' industries by encouraging companies to improve their production equipment and plant.
Importance of strategic planning for P & P ltd
Planning in for any business is crucial. In fact it does not only aid in the optimal allocation of the organizational resources but also sets paths for the attainment of the business purpose (Haschak, 2008:18). Ideally, business plans support formulation of strategy for absolute effectiveness and overall success, that is to know where the business has come from (historical analysis), where it is (situational analysis) and where it wants to go (b objectives) and how to reach there (strategies). P & P ltd is no exception particularly when it is operating in the highly dynamic business environment.
The organizational mission and vision statement
The board of directors as well management at P & P ltd must understand that we cannot embark on a journey to the unknown. As such the most fundamental aspect of successful planning and implementation of the plan to achieve results is the mission statement. In fact the mission is the main objective of any business and thus guides all aspects of strategy and operations of the business (Haschak, 2008:19). To support the change strategy therefore, while lying a strong foundation for planning at P & P ltd there development of a clear mission statement on the basis of which specific objectives and strategy will be developed cannot wait any longer. It has to be immediate.
Present strategy at P & P limited
By any standard and going by the results of the company performance analysis, the company is not badly off. Irrespective, of the fact that that the company position could be attributed to the first mover advantage, the both the product and pricing strategy to a great extent makes the Pake and Payne that there is today. First, the company has maintaining a high quality product oriented strategy the latter of which has ensured that P & P limited has created an unmatched identity in terms of the highest product quality and value delivery to consumers, customer loyalty. To match this strategy, the company has adopted and continues to cling on the skimming strategy in pricing of their products. Irrespective of the company targeting a slim upper and middle upper market (those who are quality sensitive rather that exhibiting prices sensitivity), the company believes that by pricing their products highly, it depicts the quality of its products; a fact that is supported by the high degree of consumer loyalty and high sales level especially in the united kingdoms market.
Short term and long-term options for P & P ltd
For the purpose of future growth and sustainability and on the basis of the strategic audit the team suggests the following to the board of directors and P & P management as part of the change strategy
Pricing strategy- Adopt a lower pricing strategy as the market is becoming more price sensitive as well as to suit the company’s diversification objective. Use of low pricing will serve as both the market penetration strategy in new markets and products and competitive strategy in the currents markets where rivalry is intense.
Promotion strategy- the company is to launch and enhance strategic market awareness campaigns for maxima market reach this act both as a competitive strategy as well as market extension
Customer loyalty and need for maintenance strategy- better quality, promotions, and customer reward strategy and relationship marketing, product extras both as a competitive strategy and for the purpose of future business sustainability
In addition, there is need for the company to alter is organizational structure to favor fast effective and efficient planning and implementation of policies. According to Raymond & Charles (2002), the organizational structure is a lattice via which roles and responsibilities are divided among the organizational members. It also represents intuition of power and channels of exception of the latter. For the purpose of planning and P & P ltd therefore we suggest the introduction of a rather decentralized structure at least to favor collaborative decision making and employees motivation.
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