Strategic Management & Business Policy
State the three-sentence trigger/contingency pair and justify your choice of contingency plan using information from the week’s readings and/or other scholarly or credible resources table for guidance.
The company I had used for my SWOT analysis for this class is the Durr Group to summarize who they would be to describe them as one of the world’s leading mechanical and plant engineering firms with extensive expertise in automation and digitalization / Industry 4.0 (Mergent, 2019). Its products, systems, and services enable highly efficient manufacturing processes in different industries (Mergent, 2019). The company is organized by the following five divisions to serve its customers: Paint and Final Assembly, Application Technology, Clean Technology Systems, Measuring and Process Systems, and Woodworking Machinery and Systems (Mergent, 2019).
Some of the risks that were evident after doing the SWOT analysis of Durr was the fact that they are the best in the industry and are also more expensive than their competitors. Another risk for them was the fact that to grow market share. The competition could be able to underbid a project to gain market share. Based on our text, contingency planning is something companies do in case their current strategic plan is derailed due to economic conditions around them (Abraham, 2012). A trigger is an actual event that causes the contingency plan to act due to the trigger event; the current strategic plan that was working became extinct (Abraham, 2012).
The three-sentence trigger/contingency plan is as follows:
If the competition continues to drop their prices to buy market share and our market share of 85% drops below 80%, then the company should make a strategic investment to place a project at a loss if needed, to maintain and even grow the market share for the company.
Reference:
Abraham, S. C. (2012). Strategic management for organizations. Retrieved from https://content.ashford.edu/
Mergent, (2019). Durr AG Company Details. Retrieved from Mergent Online database.
Thomas
The company I conducted an Environmental Scan and SWOT analysis is Moderna. Moderna is a pharmaceutical company founded to create vaccines for viruses and diseases. They are currently one of four companies working on a cure for COVID-19 and they have 22 vaccines in different stages of development and 11 of them in clinical trials. They were just granted federal funds to help with their research along with over $180 million dollars in donations. One of the risk Moderna faces is that it is a big market. There are bigger companies such as Johnson & Johnson and Pfizer who have dominated the market in recent years. Other risks Moderna faces are strong competition, technological advances, global pandemics, and length of clinical trials. In order for a company to develop a contigency plan, they need to know the triggers. Abraham (2012) states that “triggers should be external, specific and quantitive” and without knowing these, companies would not know when to implement their contingecy plans. (para.2)
Trigger/Contingency Plan
If one of our suppliers is going to be delayed by two weeks, causing the company to reduce productions by 50%, then the company will look at local stores and wholesale suppliers to purchase what is needed at less than 10% of market value.
Abraham, S. C. (2012). Strategic management for organizations. Retrieved from https://content.ashford.edu/
Discussion 2
Brandon
Cannabis Industry
Competitive: The competition and rivalry in the cannabis industry are high. The cannabis industry is an emerging market with publicly traded companies forming. Adding to the competition is distrust from investors due to some firms operating fraudulently. Because of industry uncertainties, legitimate organizations face high pressure to reveal trade secrets as an act of transparency. Also, due to the stock market being in a growth phase, firms must produce strong stock performances and high yields. The most known competitors in the industry are Aurora Cannabis HEXO, Cronos, unregulated street sales.
The threat of entrant: the threat of new entrants is a mixed bag due to barriers. Barriers in the form of licenses and high start-up costs can restrict new entrants in the market (Abraham, 2012). A barrier for some and not others is cannabis is not yet approved for recreational use in all 50 states and is still deemed illegal by the Federal government. There are cautions about cannabis firms using the United States banking system for fear of seizure of revenues. However, the barriers that deter new entrants from entering the market also ensures there will be new firms. As state regulations ease, firms will begin to establish operations in newly legalized states. If cannabis becomes federally approved, traditional pharmaceutical companies may invest in the industry. Therefore, while barriers are high, restricting the number of new entrants into the market, the removal of barriers allows new competitors to enter.
The Threat of Substitutes: The threat of substitutes in the cannabis industry is high. Critical Success Factors (CSF) are a method in which investors ignore generic data and focus on statistics relevant to an industry (Abraham, 2012). In the cannabis industry, buyers also focus on CSF’s; one is the potency of the strains they ingest. Since the production of cannabis for retail recreational sales is regulated, some products will be limited to the amount of Delta-9-THC they contain. However, street sales of marijuana bare no regulation. If a company’s product does not meet the expected potency of buyers, consumers may turn to other firms or illegal means to accommodate their taste.
Power of Buyer
Buyers of cannabis products maintain a strong hand in the balance of demand-supply and price relationships. Since new entrants emerge as states decriminalize and legalize the possession of cannabis, buyers can easily substitute brands. Also, the illegal cannabis market that preceded the creation of its regulated form has its loyalist. Although cannabis remains illegal by some state and federal statutes, the substance has never been hard to obtain. In an attempt to gain leverage over buyers, businesses are selling edible and beverage forms of cannabis to create a new product mix for customers.
Power of Suppliers: Cannabis companies that control their entire supply chain are likely to fare better than others. As suppliers maneuver around the legalities of transferring ownership of their goods, they will be enticed to work with states with fewer restrictions. States with higher barriers on the distribution of cannabis run the risk of raising the cost of goods sold for its cannabis businesses, reducing the state’s tax income. However, if a firm owns its manufacturing facilities, it eliminates the variable cost implied by outside partners. Therefore, the power of suppliers is a result of legal restrictions on who can grow cannabis, giving them leverage in cost negotiations.
How the forces can lower profitability
A shift in Porter’s five forces can lower the profitability of the cannabis market. Using a PEST analysis will help demonstrate why the cannabis market has low profitability concerning Porter’s forces. Legalizing cannabis has been a political bargaining chip, leaving some with the ability to enter the industry earlier than others. Early entrants can build relationships with stakeholders, a disadvantage for firms who must wait to establish operations in the industry. However, new entrants are faced with economic barriers as the use of the country’s financial system is still widely unavailable to the industry. Online stores also pose a threat to profitability as some cannabis-related merchandise can be shipped across the country, reducing the dependence on local retailers. Furthermore, as consumer taste shifts from inhalants to edibles forms of cannabis, firms must rely on R&D to address the call for new products.
References
Abraham, S. C. (2012). Strategic management for organizations. Retrieved from https://content.ashford.edu/
William
Think of another industry where profitability is low. In an initial post of at least 250 words, apply the five forces to your chosen industry and demonstrate how those forces can lower profitability.
The Trucking Industry; over the last couple years profitability has been on the rise, Porter’s five forces(2012) shows this profitability can be easily swayed to minimal if any profits. The five forces include: Competitive Rivalry, Supplier Power, Buyer Power. Substitutes, New Entrants.
Competitive Rivalry: This is an area which the competition can implement actions that may cause customers to go with the competition. On a personal note in the last year I had an used engine shipped to me from California to Iowa, I found a company online that set up many suppliers and they would bid for your shipment, I ended up paying a little over $400 to have a 500 LBS motor shipped almost two thousand miles.
Supplier Power: I could easily a more successful business using their buying power to hoard goods and services from other industries. They could also provide customers services for a loss just to get some permanent contracts or customer switch overs completed.
Buyer Power: In this scenario the customer is essentially setting the profit scale. In this case customers can hold out on shipping until they receive the cost they want, or go from business to business and present other company’s bids for a cut throat cost.
Substitutes: In this situation customers can choose not to use any trucking ship service, there maybe other viable options like flying, sailing, or railroading the goods.
New Entrants: In the case of the over the road truck driver and in inner city deliveries, there is already new competition for the traditional sense of delivery. Autonomous trucks that can drive for hours at a time may still use a human driver for supervision purposes, but having a truck that doesn’t need to sleep can offer transportation times in a much faster time. There are also companies like door dash, Uber, and other services to deliver goods and or food.
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