Introduction
This paper is a strategic analysis of three large companies – Severstal, Air Asia & Tune Group Case Studies. Strategic analysis is a way of researching and turning the database obtained from the analysis of the environment into an enterprise strategy. It allows to assess the internal capabilities of the organization, its resource potential, determine the impact of environmental factors on financial and economic activities, assess the market position, identify competitive advantages and unused reserves, as well as justify management decisions to adjust the current strategy of the enterprise.
Severstal is a vertically integrated mining and metallurgical company with significant assets in Russia and a small number of enterprises abroad. Severstal is one of the world’s largest vertically integrated steel and mining companies, with investments in Russia, Belarus, Ukraine, Kazakhstan, Latvia, and Poland. AirAsia is the largest budget airline in Asia. It was founded in 1993 in Kuala Lumpur, Malaysia. The company is not part of any alliances; the home airports are Kuala Lumpur and Kota Kinabalu. The AirAsia fleet consists of 92 Airbus A320 and A321 aircraft. The Skytrax rating awarded the company three stars at the end of 2018 (Whittington et al., 2020). Tune Group is a Malaysian leisure and entertainment corporation. The mission of Tune Group is to ensure the availability and accessibility of leisure and entertainment, primarily in Asian markets.
First of all, PESTLE will be used — as a tool for analyzing the external business environment. It includes political, economic, social, technological, legal, and environmental factors. PESTLE is used to avoid a failed product launch and to identify accents for advertising. Then the attractiveness of the global steel industry in Severstal using Porter’s Five Force Framework will be analyzed. This is a classic method of analysis that helps to assess business prospects for several years ahead. It is used to analyze the external environment. Five forces that exert pressure on the global steel industry will be consecrated in detail: buyers, suppliers, current and potential competitors, and substitute products.
Then the competitive strategy of Air Asia and the Tune Group using Porter’s Generic Strategies will be analyzed. Porter identified four types of basic competitive strategies in the industry. The choice of the kind of competitive strategy depends on the company’s capabilities, resources, and ambitions in the market. The competitive strategy is a list of Air Asia and the Tune Group actions to obtain higher profits than competitors. Next, the direction of growth understood by Air Asia and the Tune Group using Ansoff’s Matrix will be analyzed. The Ansoff matrix is one of the essential business analysis tools, just like SWOT or PEST. The Ansoff Matrix is an analytical tool that helps to develop a company’s development strategy. In conclusion, the results of the conducted analyses will be summarized.
PESTLE model analysis in the Severstal case study
The PESTEL model is an effective tool for assessing a company’s macro environment. the model can identify the key external factors influencing a company’s performance. The key external factors which impact Severstal, a Russian steel company, can be divided into six categories: political, economic, social, technological, environmental, and legal. Political factors refer to the company’s operating environment’s political and legal environment, such as government stability, taxes, and regulations.
Economic factors include macroeconomic indicators such as inflation, exchange rates, interest rates, and GDP growth. The population demographics and culture of the company’s environment are linked to social factors. Technological factors refer to the company’s technological advancements and infrastructure. Environmental conditions, such as pollution and natural resources, are examples of environmental factors. Finally, legal factors refer to the legal framework and regulations that govern the company’s operations (Whittington et al., 2020). These elements can have an impact on a company’s operations, either positively or negatively.
Russia’s political environment is highly volatile, and the government is frequently prone to interference and abrupt policy changes. The condition can significantly impact Severstal because the government has a strong political influence over the company’s operations and can impose new taxes, regulations, and import/export restrictions that can affect the company’s operations and profitability. The government can also impose sanctions or pass laws that limit the company’s ability to operate. Severstal operates in a political environment influenced by other countries’ international relations. Relations with the United States and the European Union have been strained since 2014 due to the conflict in Ukraine and the imposition of economic sanctions (Whittington et al., 2020).
This has made it difficult for the company to access capital, technology, and markets. Furthermore, the company’s access to capital, technology, and markets has been hampered by strained relations with the United States and the European Union due to the conflict in Ukraine and the imposition of economic sanctions (Whittington et al., 2020). Sudden policy changes and political instability are unfavorable factors for any company, so countries should consider enacting policies that benefit the companies that operate in them.
The Russian economy is highly cyclical, with fluctuations in oil prices, exchange rates, and other macroeconomic factors. The Russian economy relies heavily on natural resources, and the steel industry is especially vulnerable to commodity price fluctuations. This could directly impact Severstal’s bottom line, as the company relies on steel prices to stay competitive. Furthermore, Severstal has had to shift its strategic focus to remain competitive. The company has also been impacted by Russia’s economic downturn, which has decreased product demand. Changes in the global economy, such as the US-China trade war and other geopolitical events, also impact the company (Whittington et al., 2020). The economic conditions of a country are critical for a company’s operations.
Russian society is rapidly changing, which may impact Severstal’s operations. For example, the population is aging, and the proportion of working-age people is declining, which may affect the company’s labor costs. The steel industry requires much labor, and Severstal’s workforce comprises people from all over the world (Whittington et al., 2020). This can make managing diversity and ensuring that all employees are treated fairly and equally challenging. Customers increasingly demand higher-quality products and services from Severstal, so the company may need to invest in new technologies. Evidence in the case: Severstal invested in new technologies for its customers to remain competitive.
This included purchasing a new hot-dip galvanizing line, which enabled the company to manufacture higher-quality steel products. Severstal also invested in new software systems to improve its manufacturing processes and research and development to create new products. The company should be innovative to address the problem of labor shortages caused by the aging population, which will positively impact its operations.
Severstal operates in a high-tech industry that is constantly evolving, which can have an impact on its operations. For the company to remain competitive in the steel industry, advanced technology is required. The company has invested in new technologies such as automation and artificial intelligence to stay competitive, ensuring its information technology infrastructure is up-to-date and secure (Whittington et al., 2020). Severstal must also regularly invest in research and development to ensure that it has the most up-to-date technologies and manufacturing processes. Furthermore, critical external factors can have a significant impact on business operations. Changing customer preferences, for example, and increased demand for environmentally friendly technologies can significantly impact the company’s operations. Severstal must continually invest in new technology to remain competitive in the market.
Environmentally, the Severstal steel industry is a resource-intensive industry governed by environmental regulations. The company must comply with these regulations to avoid fines and other penalties. Furthermore, the company must invest in environmentally friendly technologies to reduce its carbon footprint Case Evidence is the location where to demonstrate evidence of its commitment to reducing its carbon footprint; Severstal has invested in new environmentally-friendly technologies, such as a new waste heat recovery system, which is expected to reduce the company’s energy consumption by up to 20% (Whittington et al., 2020).
In addition, the company has purchased a new dust collection system, which is expected to reduce dust emissions by up to 50% (Whittington et al., 2020). These investments enabled Severstal to lower its energy costs while complying with environmental regulations. The company must always abide by environmental laws to evade fines and penalties for breaking the set rules and regulations.
The Russian legal system is constantly changing, which can affect Severstal’s operations. For example, the company must ensure its contracts align with new laws or regulations. The steel industry is subject to some rules and regulations in Russia and globally. Severstal must ensure that it complies with all relevant laws and regulations to remain competitive. In addition, the company must also comply with antitrust and competition laws to avoid fines and other penalties. In 2018, Severstal was fined $4.3 million by the Russian Federal Anti-Monopoly Service for alleged violations of antitrust laws (Whittington et al., 2020).
The investigation found that Severstal had abused its dominant market position by imposing unfair prices on its suppliers. The company was also accused of restricting access to the market for specific products. This case highlights the importance of complying with antitrust and competition laws to prevent costly fines and penalties (Whittington et al., 2020). Severstal may invest in research and development to align with the newly enacted rules and regulations.
Analyzing the attractiveness of the global steel industry in Severstal using Porter’s Five Force Framework
Porter’s Five Forces framework is a tool used to analyze the competitive forces within an industry. It can be used to assess the attractiveness of the sector in which a company operates. The global steel industry is attractive for Severstal, as it is a significant player in the worldwide steel market. Severstal is a major Russian steel producer, controlling over 70% of the country’s metal production (Whittington et al., 2020).
It is one of the largest steel producers in Europe and the world, and it has a strong presence in the automotive, construction, and energy sectors (Whittington et al., 2020). In the case of Severstal, a Russian-based company, the attractiveness of the global steel industry can be assessed by analyzing each of these forces: the threat of new entrants, the threat of substitutes, the bargaining power of suppliers, the bargaining power of buyers, and competitive rivalry.
The company experiences the threat of New Entrants as the steel industry is highly capital-intensive, with high fixed costs and significant investments required to establish and maintain production facilities. Additionally, significant barriers to entry include economies of scale, access to technology, and brand recognition. These factors make it difficult for new entrants to the industry to compete with established players such as Severstal. Furthermore, the steel industry has been subject to high consolidation in recent years, with the top four producers accounting for more than 50% of global steel production (Whittington et al., 2020).
This reduces the potential for new entrants. Case evidence is observed in 2015 when global steel production was dominated by four prominent players, which accounted for more than 50% of the market share (Whittington et al., 2020). This demonstrates the high level of consolidation in the steel industry, which reduces the potential for new entrants to the market.
The global steel industry faces competition from substitutes such as aluminum and other materials though there is no direct substitute. These substitutes are often cheaper and easier to use, making them attractive options for customers. However, steel still has its advantages, such as its structural strength and durability, which makes it versatile and necessary material for many industries and products, so it is unlikely that substitutes will ultimately replace it.
A 2018 survey of aerospace engineers, who frequently use steel, found that most respondents prefer steel for its unique structural strength and durability over aluminum or other substitutes for their applications (Whittington et al., 2020). Additionally, a study published in 2019 found that although aluminum has certain advantages over steel, such as being lighter in weight, steel remains the preferred material for specific applications due to its superior strength-to-weight ratio (Whittington et al., 2020). This data provides evidence that steel’s advantages are still attractive to customers, rendering it less susceptible to the threat of substitutes.
The bargaining power of suppliers is relatively low in the steel industry. This is due to the fact that the steel industry is highly concentrated, and suppliers have few alternatives. As a result, suppliers have limited bargaining power and cannot pressure buyers into increasing prices. Furthermore, Severstal has a vertically integrated business model, meaning it controls its raw materials and inputs (Whittington et al., 2020).
This further reduces the bargaining power of suppliers. An example of how Severstal’s vertically integrated business model decreases the bargaining power of suppliers can be seen in the case study of Severstal. In this case study, the authors describe how Severstal can control its raw materials and inputs, meaning it does not need to rely on external suppliers. This reduces the bargaining power of suppliers as they have limited alternatives and cannot pressure buyers into increasing prices. This is further evidenced by the fact that despite the highly concentrated.
The bargaining power of buyers is relatively low in the steel industry. This is because the steel industry is highly concentrated, and buyers have few alternatives. Global steel has many buyers, such as automakers and construction companies. As a result, buyers have limited bargaining power and cannot pressure suppliers into reducing prices. In 2019, the global steel market was highly concentrated, with the top 8 steel producers controlling over 60% of the market (Whittington et al., 2020).
This industry concentration, coupled with the limited number of steel suppliers, resulted in buyers having little bargaining power and limited their ability to pressure steel suppliers into reducing prices (Whittington et al., 2020). This was evidenced by a 2019 report by the World Steel Association, which stated that steel prices had mainly remained stable despite a period of weak demand (Whittington et al., 2020).
The rivalry among existing firms is relatively intense in the steel industry. This is because the industry is highly competitive, and firms are constantly vying for market share. The steel industry is highly competitive, and there is intense rivalry between the primary producers. Severstal is one of the largest producers, but it is still subject to competition from other producers such as ArcelorMittal, Nippon Steel Corporation, and Baowu.
This rivalry can lead to price wars and other competitive tactics, reducing profits for all major players. In addition, firms are constantly innovating and introducing new products and technologies to gain an edge over their competitors. For example, Severstal has developed an innovative steel production process called ‘cold rolling, which is more efficient and cost-saving than other methods of steel production (Whittington et al., 2020). The innovation has enabled Severstal to gain a competitive advantage over its rivals as it can produce steel more quickly and cost-effectively.
Analyzing the competitive strategy of Air Asia and the Tune Group Using Porter’s Generic Strategies
Porter’s Generic Strategies, developed by Michael Porter, are used to analyze the competitive strategies employed by firms. Air Asia and the Tune Group have hired a few of Porter’s Generic Strategies to gain a competitive edge (Whittington et al., 2020). Air Asia and the Tune Group have employed the Differentiation strategy. Due to incorporating it, the companies gained a competitive edge in the market. Air Asia has differentiated itself from its competitors by providing lower fares and providing more routes and destinations than its competitors. In addition, Air Asia has also employed ancillary services such as online booking and ticketing, online check-in, and baggage check-in to further differentiate itself from its competition.
The Tune Group has also employed a differentiation strategy by offering services such as travel packages, hotel booking, and car rental. The Tune Group has also developed a loyalty program that rewards customers for their loyalty. The case evidence to support Air Asia and the Tune Group’s use of Porter’s Generic Strategies can be found in Air Asia’s annual financial report. The report outlines the company’s efforts to differentiate itself from its competitors by providing lower fares, more routes and destinations, and ancillary services such as online booking and ticketing, online check-in, and baggage check-in.
The report also highlights the Tune Group’s efforts to differentiate itself from its competition by offering a range of services such as travel packages, hotel booking, and car rental, as well as its loyalty program, which rewards customers for their loyalty (Whittington et al., 2020). The services provide further evidence of Air Asia and the Tune Group’s use of Porter’s Generic Strategies to gain a competitive edge which the company successfully achieved.
Air Asia and the Tune Group have also employed a Cost Leadership strategy based on the idea that the companies can achieve a competitive advantage by having the lowest costs in the industry. Air Asia has employed a low-cost strategy by offering low fares, reducing costs, and utilizing a hub-and-spoke route system. The strategy includes reducing overhead and other operational costs (Whittington et al., 2020). Due to incorporating it, Air Asia and the tune group have been able to offer lower fares than their competitors and become the most cost-efficient airline in the industry.
Air Asia and the Tune Group have focused on reducing costs to become the most cost-efficient airline in the industry. For example, the companies have reduced staff costs by using part-time staff and outsourcing some services such as ticketing and catering. Additionally, the companies have reduced operational costs by using a fleet of Boeing 737-300 aircraft, which allows them to reduce fuel costs by 10% (Whittington et al., 2020). The tune group has employed a cost leadership strategy by leveraging its strong relationships with suppliers and service providers to reduce costs. For example, the company has negotiated lower prices with suppliers for aircraft parts, which has allowed them to reduce their operating costs.
Additionally, the company has partnered with key suppliers to reduce costs in other areas, such as marketing and customer service. Finally, the company has implemented a fuel efficiency plan that has allowed them to reduce its fuel costs by 5% (Whittington et al., 2020). Air Asia and the tune group have also employed a focus strategy to gain a competitive edge in the market. Air Asia has focused on providing low-cost flights to regional destinations, while the Tune Group has focused on providing travel packages and services to customers (Whittington et al., 2020). A cost leadership strategy is effective in places where competitors offer the same products but at a different or higher price.
Analyzing the direction of growth undertaken by Air Asia and the Tune Group Using Ansoff’s Matrix
Ansoff’s Matrix is a strategic planning tool used to analyze and plan for product and market growth. It could be a device that can offer assistance trade proprietors and directors in deciding which techniques to utilize for development, such as showcase infiltration, item improvement, advertise improvement, and enhancement. Showcase entrance includes expanding the deals of existing items or administrations in existing markets. At the same time, Item advancement includes creating everyday items or administrations for existing markets. Showcase improvement includes finding new markets for existing items or administrations. Broadening includes making everyday items or administrations for new markets. Acquisitions and mergers are business strategies (Whittington et al., 2020).
Ansoff’s Matrix can be a helpful tool for Air Asia and the Tune Group to identify the direction of growth for their businesses. By centering on procedures such as advertise infiltration, item advancement, advertise advancement, expansion, and acquisitions/mergers, the companies can proceed to develop and create their businesses. These strategies can help them stay competitive and ensure their business remains successful.
Air Asia and the Tune Group have used Ansoff’s Matrix to identify the direction of growth they have taken to expand their businesses. Air Asia has focused on market development by offering low-cost flights to new markets, such as India and Japan. It has also diversified its product offering to include holiday packages and other forms of transportation. The Tune Group has also focused on market development by launching new services, such as Tune Hotels, Tune Insurance, and Tune Talk (Whittington et al., 2020). The case evidence is that Air Asia and the Tune Group have successfully used Ansoff’s Matrix to identify and implement successful growth strategies. This proves that Ansoff’s Matrix is a valuable tool for businesses to analyze and identify the best strategies for growth.
In terms of recommendations for future growth, Air Asia and the Tune Group should focus on market penetration and product development. Advertise infiltration includes extending their existing client base to existing markets, whereas item advancement includes presenting everyday items to existing markets. They could also focus on diversification, which involves expanding their operations by entering into new markets or industries that are unrelated to their current operations. This could involve launching new products or services or entering new geographical markets. It is a way for businesses to minimize risks and increase their growth potential. Finally, they could look into acquisitions and mergers to expand their business.
Conclusion
The PESTEL model analyzes the critical external factors impacting the Russian steel company. Severstal operates in a highly competitive and complex environment subject to external factors, such as political, economic, social, technological, environmental, and legal. These factors can significantly impact the company’s operations and performance, and the company must continually invest in new technologies and processes to remain competitive.
In addition, the company must ensure that its operations comply with all relevant laws and regulations to avoid fines and other penalties. Overall, the global steel industry is relatively attractive for Severstal due to the low threat of new entrants, low bargaining power of buyers and suppliers, low threat of substitute products, and intense rivalry among existing firms. These factors make the steel industry an attractive industry for Severstal’s operations.
Air Asia and Tune Group have used various strategies to gain a competitive edge in the market. Differentiation strategies have been used to set their services apart from the competition and gain a competitive advantage in the market. The strategies have included offering low fares, loyalty programs, and customer service initiatives. Cost leadership strategies have been used to reduce costs and increase profits by increasing efficiency and minimizing expenses. Finally, focus strategies have been employed to target specific customer segments and ensure that their services are tailored to meet their needs.
Overall, this combination of strategies has allowed Air Asia and the Tune Group to remain competitive in the market by providing a unique offering that meets the needs of their customers. By leveraging their competitive advantages, the companies have gained a competitive edge and remain competitive in the industry. These strategies have allowed them to stay ahead of their competitors and ensure that their services remain attractive to customers.
Ansoff’s Matrix provided a helpful tool for Air Asia and the Tune Group to identify the direction of growth they have taken to expand their business. By focusing on market penetration, product development, diversification, and acquisitions/mergers, the companies can continue to grow and develop their businesses, remaining competitive in the market for a long time without being displaced by the new entrants. The strategies help the company always stay ahead of its competitors.
Reference
Whittington, R., Regnér, K., Johnson, D.A.G & Scholes, K. (2020). Exploring strategy. Pearson College Div.