Mba701 | Strategic Analysis Report Assessment Answers

Discuss about the trategic analysis of an organisation of your choosing. You are to assume the role of a team of management consultants who have been retained your chosen organisation’s senior management to evaluate the strategic position of the organisation, and provide recommendations for its future strategic position.

Strategy analysis facilitates in analyzing strengths and weaknesses faced by the companies in its operating environment that can facilitate in developing effective business strategies (Bergh, Sharp, Aguinis and Li 2017). Blackmores Limited is involved in business of developing and marjrting of healthcare goods for animals and humans. It also includes herbal, vitamins along with mineral nutrition-based supplements. The objective of this paper is to carry out the strategic analysis of Blackmore Company through evaluating its internal and external business environment factors along with competitive advantages through corporate or business strategies. Moreover, the report will also offer effective recommendations on improving strategic capability of the company.

External Environment Analysis of Blackmore

PESTEL Analysis of Blackmore

Political	· Stable political system in Australia · Australian trade agreement facilitates Blackmores in attaining benefit from low taxes · Deregulation can benefit businesses and bring profitable changes in political environment (Bettis, Gambardella, Helfat and Mitchell 2014)
Economic	· Blackmores Products being desirable faces the issue of profit reduction when economy is sluggish · Increasing unemployment rates and slow economic growth of the nation has resulted in decreased profit over years
Social	· Supporting “Equal Opportunity for Women in Workplace Agency”, Blackmores have attained 70% women employees for supporting them (Durand, Grant and Madsen 2017) · Constant investment in people by means of training and development programs
Technological	· Blackmores have considered increased investment in technology for improving its supply chain distribution structure · In-built smartphone application facilitates its target consumers to attain all the information regarding its healthcare products
Environmental	· Blackmores Company complies with all the aspects within the environmental laws (Engert, Rauter and Baumgartner2016) · Several steps have been taken in decreasing packing wastes through participation with “National Packaging Covenant” · Mission of the company is also to make sure compliance with “People and Corporate Environment Responsibility”. This is to make sure that its responsible product sourcing can decrease carbon footprints in the environment.
Legal	· China-Australia free trade agreement has facilitated Blackmores in ensuring increased involvement with China (Grantet al.2014)

Porter’s Five Forces Analysis of Blackmores

Threat of New Entrants	New entrants within the personal and household products brings innovation that is excreting pressure on Blackmores to implement competitive pricing strategy and new value propositions for consumers (Grantet al.2014).
Supplier Bargaining Power	Most organizations in household and personal products industry purchase raw material from several suppliers. Suppliers holding dominant position can reduce the company’s margin in the market. To deal with this, the company can maintain effective supply chain with several suppliers.
Buyer Bargaining Power	Buyers are observed to be demanding those desire to purchase best available offerings in low prices as possible that impacts Blackmores profitability in long term. New products innovation is considered by the company to decrease the buyers bargaining owner (Durand, Grant and Madsen 2017).
Substitute Products or Services Threat	New services and products address consumer demands in distinct manner such that industry profitability suffers. To deal with such situation increasing switching cost for consumers is considered by Blackmores.
Existing Competitor Rivalry	Blackmores has its business operations in highly competitive personal and household products sector. Maintaining a sustainable differentiation can facilitate the company in ensuring a sustainable edge.

Industry Analysis

The vitamin and dietary supplement industry of Australia is anticipated to grow at a CAGR value of 2% at constant prices (Grant2016). The industry is also estimated to attain advantages from demand of consumers in the future years. Changing public perception towards maintaining healthy lifestyle along with complementary goods is persuading industry leaders to supply their goods within big retail chains such as Woolworths and Coles. The industry is dominated by established companies such as Swisse and Nature’s Own. However, Blackmores is observed to attain second position within the industry (Hill, Jones and Schilling 2014). Moreover, therapeutic goods administration maintains strict regulation in decreasing misleading information on labels.

Critical Forces and Key Success Factors Analysis

Critical forces owned by Blackmores Company that facilitates it in attaining success within the global marketplace (Hill and Schilling2015). The resources and competencies attained by the company acts as its critical forces. One of critical force is its extensive health care product ranges along with its digital marketing and education programs. Another critical force is its financial aspect that is focused maintaining low operational cost. The key success factors of Blackmores are focused on three aspects such as people, product and passion (Hill 2017).

• Product- Blackmores offers compelling products that is callable of increasing sales
• People- Successful business is maintained through maintainingstrong corporate culture and by understanding value of people
• Passion- Passionate employees are motivated to attain larger organizational goals

Internal Environment Analysis of Blackmore

Financial Performance Analysis

• Profitability Ratios- It has been observed that gross margin, net margin and return on capital employed for Blackmores Company has decreased from the year 2016 to year 2017. This is for the reason that the company is dealing with issues related to generating earnings in comparison to its expenses. Gross margin has decreased from 23.92% to 14.92%from 2016 to 2017 and then increased to 36.93% in the year 2018.This can be stated to be a good rate of growth as the organization has adopted various strategies to increase operations and reduce the costs associated with them.  Net margin has decreased from 13.96% to 8.30% from 2016 to 2017 and come back to a stable rate of 11.65% in the year 2018. Hence, this shall improve the financial standing of the organization on a whole. Return on capital employed has decreased from 27.82% to 20.75% from 2016 to 2017 and then come up to 35% inthe year 2018. Therefore, it can be stated that the performance of the organization has improved considerably in the current year and its strategies seem to be working well. Such decreased profitability ratio is because of the reason that the Australian-Chinese consumers stopped buying at that point of time. However, as the firm has targeted new markets, profitability stabilized recently. This also indicates that Blackmores was not able to use its assets profitably in generating sales signifying decreased return on assets, however the changing strategies helped the firm to perform well later (Blackmores Annualreports.com. 2018).
• Liquidity Ratios- It is gathered that the liquidity ratios such as current and quick ratios of Blackmores are observed to decrease in the year 2017 from 2016. Current ratio of the company has decreased from 2.07% to 1.35% from the year 2016 to 2017 and then increased to 1.73% in the year 2018. Quick ratio of the company has decreased 1.25% to 0.90% from 2016 to 2017 and then came up to 1.14%in the year 2018. This is because of the reason that the company was not that capable to pay its debt obligations for maintaining its safety margin in attaining increased cash flows. However, recently, the finances of the firm have improved and it has improved its accounts payable and receivable which has led to the increased ratio. This also indicates that the company was facing increased difficulties in selling inventories or prepaid assets in case of any emergency but now it has improved its position (Ingram et al.2015). Liquidity issues are generally being faced by the company as the debt levels for the company increased because of its new Warriewood site construction.
• Asset Efficiency Ratios- The asset efficiency ratios of Blackmores are indicating a decreasing trend from the year 2016 to 2017 in the average total assets. Asset efficiency ratio of Blackmores is observed to decrease from 0.76 to 0.46 from year 2016 to 2017 and 0.23 in the year 2018.This is because of the reason that it is not able to employ its assets effectively to generate enough sales. This is because of the reason that Blackmores have dealt with decrease in 41% because of declined sales in its vitamin supplement segment.
• Gearing Ratios- The gearing ratios of Blackmores is signifying a decreasing trend in interest cover ratio and an increasing trend in debt-to-equity ratio in the year 2017 in comparison to year 2016. Debt to equity ratio of Blackmores has increased from 0.10 to 0.25 over the years from 2016 to 2017 and 0.26 in the year 2018.Interest cover ratio of the company has also decrease from 36.83 to 10.00 over the years 2016 to 2017 and 5 in the year 2018. This is because the company is able to net interest obligations from operating earnings which is a good sign because the firm is being able to meet its obligations (Jenkins and Williamson 2015). However, the company is unable to generate sufficient cash to address its debt obligations.

Company Culture, Core Competencies and Cross-Cultural Competencies

Corporate culture of Blackmores is focused on two aspects, behavioral ad aspirational. The work practices within the company are supported by the legal procedures and policies. Moreover, the company also follows a culture of passion for health, integrity, respect, leadership and social responsibility among the employees (Lasserre 2017). The cross-cultural core competencies are explained below:

• Effective working capital management through decreasing short-term obligations to consumers
• Investment within additional warehousing all over Western Sydney
• Partnership agreement with Asian universities for following pharmacy education programs
• Offering online learning program intended for health care professionals in distinct languages

Political and Resource Issues

Blackmores Company deals with certain political and resource-based issues as it is not being must capable to address the challenges presented by new entrants within the industry and has lost a considerable market share in niche categories (Morden 2016). In consideration to resources, the day`s inventory is observed to remain high in contrast to business rivals. This is deemed to affect long term growth of the company. To deal with such concerns the company is focused on maintaining automation of activities that can manufacture based on market demands.

Competitive Advantages through Business and Corporate Strategies

Business Level Strategies

The business level strategies developed by Blackmores Company in order to attain suitable competitive advantages in the global market are explained under:

• Through developing effective pricing strategy, Blackmores has focused on differentiating itself from its business rivals through charging premium pricing. Certain other benefits offered by the company to attain business advantages of attaining excellent consumer satisfaction through its innovative technologies (Omar et al.2014).
• Another strategy implemented by Blackmores is to increase its product portfolio through offering wide range of products in its online and departmental stores. This has facilitated in ensuring increased visibility and availability of all its products through RTL voice picking and Pick-to-Light systems (Rothaermel 2015).

Level of Vertical Integration

Vertical integration strategies are followed by Blackmores Company in which it controls more than one aspect of its supply chain. In following this strategy, the company made sure that Vertical integration strategy of the company facilitates in maintaining increased control over production (Trigeorgis and Reuer 2017). The company has implemented backward integration in its business with aligning with its units supplying raw materials to it. Blackmores has considered opening its own showrooms for its healthcare products increased visibility and has decreased costs by means of its own distributors and suppliers. Such vertical strategy implementation has made its product distribution and after sales services in the global market highly efficient.

Diversification and External Associations

Blackmores diversification strategy is focused on developing new growth sources all through Asia. The company also has expanded its business operations and is continuously offering innovative health care products in Indonesia and India. The vitamin supplements organizations have developed long term sights in entering these markets and attained decent returns (Uechi et al.2015). In future the company has also planned to expand thousands of outlets all over China through implementing a “Bonded Store” model and implementing three pilot stores in Hangzhou. In built smartphone application of Blackmores facilitates its target consumers to attain all the information regarding its healthcare products

Blackmores is making external associations with conductingretail partnerships for attaining enhanced business platform. The business associated with Alibaba strategic partnerships for better store purchasing andmanagement. Moreover, it also associated with “China We-Chat Stores” for increasing social impressions and online page views (Wahlen, Baginski and Bradshaw 2014).

Performance Outcomes and Industry Characteristics

Effective implementation of the business strategies by Blackmores Company has facilitated in attaining exceptional performance outcomes. The company has attained several awards for its exceptional performance such as Yunji strategic partnership award and “Tmall Global 100+ million Club of 2018” award in the international partners summit that is considered as Oscar in e-commerce. The industry is also estimated to attain advantages from demand of consumers in the future years (Vogel 2014). Blackmores is observed to attain second position within the industry. Moreover, therapeutic goods administration maintains strict regulation in decreasing misleading information on labels.

Organizational Design Enabling Strategies

Recent Organizational Structural Changes

Organization structure of Blackmores has been revised in order to make sure that it attains best support for its future growth. The company has made changes in leveraging operational along with manufacturing efficiencies (Wahlen, Baginski and Bradshaw 2014). The structure of the company has made structural changes to be highly consumer focused all across its channels and the employees must focus on following culture of constant innovation. The operational forces are also better aligned ad new allocation of accountabilities and responsibilities in the senior executive level that can ensure minimal disruption to its business.

Level of Centralization

The strategies developed by Blackmores Company are focused on maintaining level of centralization. This is focused on implementing strategies that can enhance the supply chain process of the company through involving in aggressive marketing strategies. Increased investment within its inventory, research and development and developing consumer touchpoints that is centered on increasing direct sales (Bettis, Gambardella, Helfat and Mitchell 2014).

Horizontal Structural Characteristics

Horizontal structural characteristics of Blackmores is focuses on developing effective strategies such as company’s acquisition of similar or competitive business or getting involved in merger to strengthen its position in the global market. Such strategy has also facilitated the company in increasing its capacity for attaining increased economies of scale and uniqueness of product rat can decrease competition and related risks. For attaining a competitive advantage, the company has taken the decision of acquiring Catalent Australia. Such acquisition is intended offer the company with high control along with agility for agility for responding to the changing market situations that facilitates the company in attaining assistance on employment and corporation tax.

Structure Diversification Affects and Integrating Mechanisms Being Used

Structure diversification has been ensured by Blackmores in manufacturing, wholesaling, distributing, marketing and retailer their products in order to develop a stable and reliable business surrounding within which can develop a reliable environment for the company. The company is focused on delivering strongbusiness performance through distributing majority of its goods to pharmacies, supermarkets and health food stores. The business structure is integrated with such business mechanisms of the company through maintaining continuous improvement. This can be done through increasing acquisition and product diversification in international markets by not being reliant on a particular product.

Recommendations on Strategic Capability Improvement

Functional and Business Strategy Options

In terms of functional and business strategy options, Blackmores is suggested to increase operational capacity by 50% by the end of 2019 so that the challenges related to supply, e-commerce channels and healthy food stores in Australia could be addressed accordingly. Moreover, it needs to follow competitive pricing strategy for raising its overall group sales by 50% in contrast to the past year(Bettis, Gambardella, Helfat and Mitchell 2014). The operating cash flows need to increase by minimum of 25% over the period starting from 2018 to 2019. Finally, Blackmores is needed to raise the number of research symposia and clinical trials at its research institute along with doubling education touch points for the healthcare experts within three years.

Vertical and Horizontal Integration

In terms of vertical integration, Blackmores is required to enhance its supply chain by ensuring fast supply of vitamin products in the accurate specifications needed(Bettis, Gambardella, Helfat and Mitchell 2014). Focus needs to be kept on distribution and after sales services to make them more efficient by initiating new showrooms in the operating market. Moreover, it needs to absorb upstream as well as downstream profits, which include the earnings passed over to the vitamin manufacturing companies and showrooms, which are not owned by Blackmores. Furthermore, entity barriers could be increased for the new entrants through minimization of costs from the distributors and suppliers.

In terms of horizontal integration, Blackmores is suggested to increase its product differentiation by including more healthcare products to the customers(Bettis, Gambardella, Helfat and Mitchell 2014). It could plan to merge with popular foreign companies operating in the same industry to gain access to the cross-border market.

Diversification and Alliance Changes Considering both Fit and Stretch

For Blackmores, it could enter the new markets with the help of mobile advertising, which would enable cell phone carrier for providing alerts to the customers regarding the location of the closest store(Bettis, Gambardella, Helfat and Mitchell 2014). Moreover, it could enter into partnership with global brands for advertising its products by displaying selling advertisements and short clips. In built smartphone application of Blackmores facilitates its target consumers to attain all the information regarding its healthcare products, which could be considered as strategic fit of the organization.

Risk and Return Inherent in Suggestions

There are certain risks and returns associated with the recommendations offered to Blackmores (Bettis, Gambardella, Helfat and Mitchell 2014). Certain risks with the strategy implementation must be considered by the company in dealing with them. The onset of the sluggish economy can persuade the company in changing its schedule. In such scenario, the demand for the company’s products can get decreased than anticipated. In such situations scaling back the marketing plan is decreasing its costs. Considering another risk of increasing new entrants in the market Blackmores must focus on launching innovative healthcare nutrition products in competitive prices (Helfat and Mitchell 2014).

Conclusion

The objective of this paper was to carry out strategic analysis of Blackmore Company through evaluating its internal and external business environment factors and competitive advantages through corporate or business strategies. It was gathered from the report that Blackmores Company deals with certain political and resource-based issues as it is not being must capable to addressthe challenges presented by new entrants within the industry and has lost a considerable market share in niche categories. Certain recommendations are provided to the company in planning to expand thousands of outlets all over China through implementing a “Bonded Store” model and implementing three pilot stores in the nation.

References 

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