Discussion 1
The cargo shipping industry is a major factor behind globaliza?on (Geersbro, J., & Rizer, T., 2014, Journal of Business Market Management).
Evalua?ng only the compe??ve external forces could bring the assump?on that the amount of profit poten?al to the industry is fixed which limits considera?on to the general environment and its opportuni?es.
Elements of the general environment can be organized into factors
using the PESTEL analysis. This tool will assist in iden?fying how those factors influence an industry and the companies within it. (Chapter 3,
Evalua?ng the External Environment p. 78, The Saylor Founda?on).
The PESTEL analysis studies the:
Poli?cal environment of the firm and the industry. How does the government influence the evolution and regula?ons of the business
Economical, condi?ons within which organiza?ons operate Social factors inflic?ng changes to the business strategies and cultural trends.
Technological improvement that might affect industry or organiza?on's ac?vity and profits
Environmental changes or physical condi?ons that directly affect organiza?on's opera?ons Legal enforcements, regula?ons that influence organiza?on's ac?vity.
Changes in the business environment can create opportuni?es or threats for organiza?on. Studying the environment shapes strategic decision that execu?ves make to azempt to lead the organiza?on to success.
Discussion 2
Interna?onal container shipping industry headquartered in Europe - CMA CGM
CMA CGM Group is the world's third largest shipping company. They have a fleet of 471 vessels that call at 420 ports in 160 countries. In total they have 765 offices around the globe.
Their largest ship is the CMA CGM Georg Forster which can handle 18,000 twenty-foot containers. Their name is a French acronym which stands for "Mari?me Freigh?ng Company - General Mari?me Company."
Actvity 1:
1. How did the five forces of Porter affect the company in its industry based on the five forces analysis? Compe??ve Rivalry
CMA CGM is ranking 3rd in the top 15 of interna?onal container shipping companies (PR Newswire, 2017.) Studying its compe??ve rivalry will include an analysis of its level of compe??on in the industry (Business Banking Coach, 2016, Using Porter's Five Forces Model). Being a billion dollar company places it as one of the dominant and compe??ve organiza?ons in the concentrated shipping industry. This also puts the firm in
a threatening posi?on against its imminent and subs?tute compe?tors and creates a need to ?ghten strategy around the protec?on of market share. Because the cargo shipping transport market is projected to grow at a CAGR of 3.50% from 2016 to 2021, high rivalry will be imminent along with an increase in industry concentra?on, a more diverse pool of compe?tors and less differen?a?on between them ul?mately
forcing the firms to compete based on prices rather than on uniqueness of their services. A bazle to maintain low fixed costs will be necessary to avoid shiWing the surplus to customers and risking to lose them. Exi?ng the industry will most likely not be an op?on since the focus would be on maintaining market shares and seize opportuni?es.
Barriers to Entry
The forecast predicts a rather easy entry to the shipping industry and the growth is noted especially in container transporta?on. New entrants to an industry tend to reduce the profit poten?al of the industry by increasing its compe??veness.
Founda?on) Because the growth is supposed to be mainly no?ced on ground level, poten?al new entrants may be local or foreign transporta?on companies or contrac?ng cartage firms that enter the industry as a compe?tor to CMA CGM. The companies can be in the truck transport or the trail transport such as CMA CGM.
Threat of Subs?tutes
As a core leader in the industry, CMA CGM had so far secured its compe??ve advantage in the cargo shipping industry. Due to the poten?al growth, the organiza?on will need to strengthen its service performance and uniqueness to create customer loyalty. Execu?ves will need to pay close azen?on to the subs?tute industries' performance and define new counter strategies for readiness.
The Bargaining Power of Suppliers
The power of suppliers helps shape the profit poten?al of the industry by providing an input needed to create the goods and services to sell to buyers .
Being able to control this force determines how the organiza?on can respond to a dominant industry supplier's bargaining so as to be able to control its own profitability. In 2011, Ship Finance Interna?onal acquired two ships from CMA CGM to allow more cash flow into the company.
"Ship Finance Interna?onal has been acquiring second-hand container vessels from liner companies...when the downturn in world trade and vessel overcapacity led to a similar downturn in vessel prices" (Leach, Peter T., JoC Online. 3/21/2011, p14-14. 1p., Container Ships*Industrial procurement). It is crucial for the company to carefully manage suppliers' input to avoid Forward Ver?cal Integra?on.
The Bargaining Power of Buyers
The rela?ve bargaining power between the industry's compe?tors and its buyers can help shape the profit poten?al of the industry. It is in CMA's best interest to maintain low buyer leverage for poten?al price raise to achieve greater profit. Also avoid standardized products and services to limit switching of costs, changing of vendors and keep the organiza?on's iden?ty.
2. How are the five forces affec?ng the general business environment of the container shipping industry, and CMA CGM's overall strategic planning processes, unique to the industry in general and the organiza?on in par?cular. The five forces of Porter model was used to analyze the azrac?veness of the container shipping industry structure and evaluate CMA CGM's compe??ve posi?on. The external environmental state impacts the internal environment of the company. Thus, an analysis of the industry's sustainability and its level of profitability will be a useful support during the strategic planning process and future investment decisions
Discussion 3
Chosen Company: GSK ( GlaxoSmothKline plc) Headquarters: London, UK
This pharmaceu?cal company was established from a merger in 2000 with the companies of Glaxo Wellcome and SmithKline Beecham. In regards to Porter's Five Forces GSK has been through its fare share of challenges and the pharmaceu?cals industry itself is a strong force to be wrecked with. The following is Porter five forces model analysis for both the GSK and pharmaceu?cal industry.
1.The intensity of rivalry: The pharmaceu?cal business is very money-oriented industry which means compe?tors in this industry have a large amount of funds to keep up with high cost of the industry. GSK specializes in respiratory, cardiovascular, neurological, and dermatology drugs. Its biggest compe?tor is the american pharmaceu?cal company called Pfizer("GLAXOSMITHKLINE PLC", n.d.).
2. Threat of New Entrants: The level of complexity and cost associated with developing and studying pharmaceu?cals lowers the number of compe?tors in this par?cular industry. Furthermore there are strict rules that are enforced not only by England but to the world when it comes pharmaceu?cals. The only new entrants that GSK would have to worry about is current compe?tors merging to form bigger corpora?ons.
3. Threat of Subs?tutes: The current threat of subs?tutes for GSK and its compe?tors are the demand from consumers to have products that have less chemicals or less major effects on the body. Consumers want products that are going to have less of effect not only on themselves but on the environments.Consumers are spending more and more ?me looking into the medicine they are prescribed. Consumers are becoming more and more open to alterna?ve methods of healing versus paying money to major pharmaceu?cals. About 30% of americans are using alterna?ve medicine ("Complementary, Alterna?ve, or Integra?ve Health: What's In a Name?", 2017)).
4. Threat of Suppliers: GSK supplied over 28,000 products in 2016(). The pharmaceu?cal industry relies heavily on its suppliers. GSK needs all its suppliers to maintain top quality service and regula?ons throughout the whole process. If any one of the suppliers fails in the process, GSK could risk poor quality products. This goes for rest of the industry as well. All major companies acknowledge that with the constant contact of social media, a fault in the process whether it be through the suppliers side or the company side could lead to major nega?ve effects.
5. Threat of Buyers: GSK is like almost every other pharmaceu?cal companies and spends most of its ?me researching and developing. The threat of new buyers in the industry is very slim. In May 2017, it was ranked number 61 in top mul?na?onal performers not just pharmaceu?cals by Forbes magazine . It made over $99 billion dollars("Top Mul?na?onal Performers", 2017). A company with that amount of funds at its availability, ensures that their will be no issues with keeping up technology or no lack of fresh ideas. There is no threat of buyers for GSK or any powerhouses in the pharmaceu?cal industry.
Discussion 4
1. Only studying the limita?ons for one selected industry or company is very one sided. There are always external forces outside the industry or company environment. An example of this would solely studying the pharmaceu?cal industry and not thinking the current economic or financial environment. Consumers might be not be able to afford the newest and great research for the top product. Furthermore, studying one industry or company excludes the importance of following what external regula?ons (laws) are being dropped or created (Essays,November 2013).
2. Porters five compe??ve forces is extremely good at analyzing a whole industry. It can break down an industry very efficiently and look at the short-term goals of that par?cular industry. However it can not plan or expect long-term goals. It does not breakdown the finiacials or weakness of a par?cular industry like SWOT analysis (Bea?e, 2016).
3. I would use SWOT analysis or the EFE Matrix to iden?fy the addi?onal external factors that were excluded previously. EFE matrix looks the social, economic, poli?cal, and legal factors. It is based a weight system and it assess the current business condi?ons compared to the external factors ("EFE Matrix (External Factor Evalua?on)", 2017) .