COMPETITOR ANALYSIS AND COMPETITIVE ADVANTAGE

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EXECUTIVE SUMMARY

CISCO Technologies is pleased to create this environment analysis having carried out an analysis of the various elements that constitute a proper environmental and strategic management plan. The goal of this paper is to make an analysis of two potential markets in which CISCO can be able to invest in and expand its operations to. For this case an environmental analysis was conducted of China and Vietnam and at the end of the paper the company was able to consider the trade-offs and was able to explain the rationale for the relative risk and opportunity between the two countries. At the end of the paper, the company was able to recommend China as the better destination to invest in and proper reason was backed through the analysis of the environment which had been carried out.

The information that is contained in this analysis paper was gathered after a series of research from websites and national statistics of the two countries. Due to the nature of business that CISCO engages in it was very important to come up with means through which the business could establish its technology and be able to make profits relative to what is already being made in the home country operations.

In this report, there is an indication that China as an economy has been able to experience a very strong annual GDP growth rated at 10% over five years. The momentum is expected to grow and by 2020 China’s economy is expected to outgrow the United States. The country is experiencing high rates of savings, increasing skilled labor, export business growth, and potential urban development. This is expected to drive the country’s economy up over a sustained growth through 2012 up to 2017.

This study has indicated that foreign direct investment has been seen as the biggest driving force for the economic growth in China. The market in China is large and expanding, therefore, it has become a large magnet for large multinationals, and this has encouraged sprouting of small firms and growth in domestic production. The governments in China have been concerned specifically with reforms and simplification of the tax law in the country. The foreign direct investment procedures have been made simpler making China a viable destination for CISCO.

This paper has also indicated that targeting Vietnam as an investment destination is quite complex. In any case a detailed analysis is not carried out then this could only be a risky venture that will not yield important returns. The analysis of Vietnam based on the PESTEL framework is provided in this paper just as it was created by Johnson & Scholes (2008). The political environment in Vietnam has been seen as the most sticking factor that makes it as a country to be less attractive. There is the presence of the uniformed units and the limited political influence of the multinationals. It means that any company that invests here will be extremely limited in exposure to certain advantages that are gained in other countries. At the end of the paper, China is seen as the better destination compared to Vietnam due to the high potential that it brings about.

INTRODUCTION

In the current globalized business environment, it is important for firms to find out new markets in which they can venture into to sustain their profitability. The home markets for most firms are now being seen as inadequate due to a large number of foreign firms that open their branches in these countries. For CISCO Healthcare Technology, it is important to find potential opportunities in other countries to ensure future profitability that is certain. In this case, CISCO has identified China and Vietnam as potential investment destination where they can be able to take their goods and services. In this paper we will try to determine the potential opportunities and threats that exist in these countries through carrying out an environmental analysis through macro level and economic indicators as they are operative in the selected countries (Grant, 2010).

PESTEL analysis can be defined as a simple as well as effective tool that is used in the analysis of the business situation to identify the most important external forces that can affect the business organization. The forces can be both a threat and an opportunity for the business. In this case the aim of this paper is to carry out the PESTEL analysis that will help find out the current factors that are external in China and Vietnam that will affect CISCO and to exploit those changes which are the opportunities and defend against the threats (Grant, 2010).

COMPETITOR ANALYSIS

            In its efforts to provide telecommunication to companies and the healthcare industry in general, CISCO faces stiff competition from other players in the Mexican market. The company is faced with competition from different dimension; locally and globally. For this reason it is necessary for the management of the company to make sure that proper strategies are put in place to make sure that competitive advantage is improved for the benefit of the company. The following is an analysis of the three main competitors of CISCO.

PHILIPS HEALTHCARE ANALYSIS

            This is one of the strongest competitors of CISCO due to its competitive advantages.

Competitive advantages

i.                    Experienced business units strategically positioned in Mexico

An analysis if this competitor reveals that the company has very experienced business units established in the Mexico health industry. This is one of the issues that CISCO is trying to compete with in order to be more relevant in the business environment. Having experience in business units enables a business organization to know how well and where to invest its resources. Philips has a team of experienced employees who are very knowledgeable in this area and have helped the company to invest in the best business projects with the expectation of the best returns. This has enabled the company to be better positioned as compared to CISCO.

ii.                  Market dominance through pricing

Philips enjoys dominance of the healthcare market its tools and equipment are found in most organization. Since the establishment of the company, one of the primary goals has been to command the market in terms of presence. Due to the effective pricing strategies, this goal has been achieved. Many consumers are familiar with Philips’ products and find it difficult to switch to other manufacturers and this is on the best competitive advantages enjoyed by the company because competitors are more expensive. Despite the strong competition in the Mexican market; Philips has stood firm by delivering to its customers who continually demand its products because they are affordable.

iii.                Barrier to other competitors’ entry in Mexico

Philips is considered a barrier to entry into the market by competitors. The basic reason for this is the fact that the company is very aggressive in its strategies which have proved to be effective in Mexico; CISCO is finding it hard to enter the market. Depending on the nature of the strategies utilized by business organizations, they can either be successful or fail. Application of the most effective strategies is beneficial to an organization and works as a barrier to new entrants (Gerard & Amanda, 2015). This is a competitive advantage to the benefiting organization though it is seen as a great challenge by competitors. Philips is enjoying this as one of its greatest competitive advantages.

Competitive Weaknesses

i.                    High cost of establishment

The great performance of Philips’ products in the health industry comes at a cost. The company is forced to invest heavily in the production of its equipment for the industry. This makes it very costly to finance operations as well as compensating employees for the services offered. Apart from the need of businesses to be dominant in the market, it should also be noted that they need to make use of cost effective strategies in order to maximize their profits and be financially stable. Companies must be able to minimize costs of operations. This is one of the weaknesses of Philips as it spends too much in order to provide the best services to its customers.

ii.                  Low profits

Profit maximization is a critical objective of any business organization as it is the major determinant of financial stability. Companies that make larger profits are more financially stable and can easily sponsor other projects to boost their income. Philips faces the challenge of poor profits in Mexico as a result of its high cost of operations. As earlier stated, the company spends a lot of financial resources to carry out its operations and this has affected profits. Most the revenues are immediately used to invest in other business units spread across Mexico. The inability of making sustainable profits has made it necessary for the company to consider adjusting its strategies in order to meet the demands in the market. The future of the profitability of the firm is in doubt since current financial decisions are not guaranteeing future sustainability of profits.

GE HEALTHCARE ANALYSIS

G.E. Healthcare is a technological organization which specializes in medical imaging and information technology, patient monitoring system, medical diagnostics and disease research among others. It is a competitor to CISCO and its assessment is as follows:

Competitive Advantages

i.                    Leadership development

Leadership is the greatest pillar of GE’s competitiveness in Mexico. The company has experienced leaders and managers who make the best leadership decisions at any given time as need may arise. It should be noted that leadership is a critical element in the success of any organization because it makes it possible to make important decisions such as market segmentation. GE noticed how important leadership is and dedicated a lot of effort in it. For this reason, the company is among the best in terms of leadership development. Its leaders are among the best in the industry because of their ability to make the best decisions concerning challenges and matters of attention that may arise. Investment in leadership has enabled GE Healthcare to be among the leading companies and this has worked for its benefit as a competitive advantage because not many companies possess it.

ii.                  Innovation

In the simplest terms, innovation is the ability of coming up with new and creative ideas that are outstanding. GE Healthcare enjoys the advantage of innovation because it has come up with products that are ideal for Mexico. Innovation in GE Healthcare comes in different ways. The first way is strategies such as marketing; the company is able to come up with the best leadership and management strategies that enable it to get the best out of the Mexican health industry. Innovation has also stretched to the field of research and development. The company comes up with new products designed differently from what exists in the market. Creativity and innovativeness of a business organization is a competitive advantage.

iii.                Strong organization structure and culture

The structure and culture of an organization are important factors when it comes to the effectiveness of such an organization in the business industry. GE Healthcare finds this as a competitive advantage because it has worked in its favor. The company makes use of decentralized organization structure for all its branches in Mexico. Despite the existence of the hierarchy; there are many departments which have heads and supervisors that can independently make decisions. Decision-making is a very fast process in the organization and this is one of the competitive strategies that it enjoys. When very little time is taken to make a decision, it makes it easy for other issues to be focused on (Pinson, 2004). In terms of organizational culture, self-motivation is common phenomenon in the organization. Employees do not need to be pushed or supervised to perform their duties; they clearly understand what they need to do and do it to perfection.

Competitive weaknesses

i.                    Fluctuating profits

Financial stability is very important for any organization because this is the main foundation of the organization (Erica, 2012). For this stability to be achieved a business must be making steady profits from its operations. Marketing and pricing are among the fundamental decisions that directly affect profitability. This is a weakness because the company cannot effectively invest in diverse projects. Competitors take this as an advantage to diversify their operations at the expense of GE Healthcare’s weakness; CISCO is one company that has taken advantage of this situation. When competitors realize that a company has a particular weakness, they will adjust their strategies to take advantage of the case.

ii.                  Environmental and legal challenges

GE faces the challenge of continual involvement of legal cases especially with respect to the environment. Mexican authorities always keep a close eye on the company. The products are not very friendly environmentally and this has become an issue of concern. As compared to CISCO and other competitors, GE Healthcare’s products have a higher level of environmental pollution and there are cases recommending that the company should improve its products for interest of conserving the environment. This is a weakness because consumers in the market are also concerned about environmental friendliness of the products they buy. They want products that do not pollute the environment. The company is taking this concern as a weakness because it is likely to affect the demand for its products.

iii.                Product recalls

GE Healthcare has had the largest number of product recalls as compared to its competitors such as CISCO. The recalls are usually as results of realization that there were defects in the manufacturing process that could lead to problems later. Frequent products recalls by manufacturers affects the trust of consumers in the market. Consumers would not be free to consume products from a company that recalls too frequently. They will believe that the products are of poor quality.  This is likely to have negative effect on the demand of the products and the operation of the business will definitely be affected if correct decisions are not made quickly.

SIEMENS HEALTHCARE ANALYSIS

            Siemens Healthcare is a business organization whose main activity is providing supplies to the healthcare industry. The company has ups and downs which affect its business in different ways. It has made great steps in improving the health condition in Mexico after learning about challenges and opportunities in the sector. 40 million Mexicans have incomes not reaching the poverty line (PMC, 2002). The company moved in to provide affordable medical equipment for the locals.

Competitive advantages

i.                    Market segmentation

This is dividing a large market into smaller units in order to achieve efficiency and effectiveness. Market segmentation has enabled Siemens to create a brand image in Mexico; the company has been in operation for just more than five years and created a very strong brand image.  The company has gained a lot of trust from consumers of its products because of their reliability and durability. A strong brand image is a basic win because it improves customer loyalty and creates more demand for products.

ii.                  Market penetration

Siemens Healthcare enjoys the advantage of penetrating the market not only in Mexico but across the globe; This has enabled the company to command a large share of the market. It has significant customer base that has enabled it to remain competitive in the market. Customers are among the most valuable assets of any business organization and therefore efforts must be put in place to make sure as many of them as possible are attracted. Siemens has achieved this by increasing the number of its branches thereby making it easier for its products to be accessed by consumers in the market.

iii.                Stable financial base

Financial stability is the basis of investment for business organizations. Siemens has effective financial strategies in place and has helped a lot in making sure that the business on the right track financially. This is a competitive advantage for the company because it can provide adequate financial support to projects it feels are worth being invested in.

Competitive weaknesses

i.                    Less innovation

Siemens is not very innovative especially when it comes to product development. The company maintains the same design and model of products over a longer period of time as compared to other players in the market. Lack of innovation might cause a business to lose customers in Mexico. Siemens must consider improving its creativity and innovativeness.

ii.                  Weak internal control

Internal control plays a very important role in determining the general direction that an organization takes (Kotler & Kevin, 2009). Poor internal strategies might lead an organization in trouble. Siemens internal control is poorer than competitors’. The greatest weakness comes in decision making; it has centralized decision making system with only few members tasked with the responsibility of making decisions. This causes the company to take a lot of time to make decisions that would have taken shorter if the system was decentralized.

iii.                Overdependence on third-parties

Companies need third parties for operations but should not all the time. Siemens faces a challenge overdependence on third parties and this is likely to harm the organization. There is the risk of privacy and confidentiality being compromised making it easy for the company to be exposed to competitors. As much as third parties are important in operations, businesses should try to be as independent as possible so as to limit how much they are exposed to third parties.

ASSESSMENT OF CISCO’S COMPETITIVE ADVANTAGE

CISCO operates in a very competitive business environment and makes it necessary for the company to be creative and come with means that will enable it survive the present challenges (Cisco Resources, 2015). The ability of a company to remain competitive in a business environment depends on how it deals with challenges met. The company needs to have competitive advantages that it uses against competitors. As compared to its competitors, CISCO enjoys the following competitive advantages:

i.                    Market adaptability

This is the ability of adjusting so as to be in line with change in the market (Miklos, S. (2006). The healthcare business environment is very competitive and dynamic. Many changes occur over a very short period of time and companies are required to adjust their strategies to deal with the latest challenges. Adaptability is the greatest competitive advantage of CISCO; the company adjusts to change quicker than its competitors. With experienced and skilled decision-makers, the company is able to make strategic decisions within a short time. While competitors are still adapting to change, CISCO would be focusing on other projects that would improve its competitiveness.

ii.                  Exceptional customer service

Customers are the largest stakeholders in any business organization; there treatment is critical for business. CISCO provides the best customer service experience to consumers of its products thus making the company preferred by many. Most competitors just focus on expansion and profit maximization but CISCO has noticed the importance of acknowledging customers. The company has put in place measures for customer treatment that give it a competitive edge as compared to competitors. Customers are treated specially and in some cases they are awarded. Customer loyalty is achieved.

iii.                Strategic business alliances

Businesses need partners for the interest of improving efficiency and effectiveness but not all partners can help in achieving this target. Strategy must be applied in order to get the best partners or third parties that will be beneficial to the business. As opposed to Siemens Healthcare that over relies on third parties, CISCO makes only strategic alliances that will be beneficial. Through identification of strategic alliances in China, the company has a great competitive edge that is keeping it ahead (United States International Trade Commission, 2011). After clearly scanning the market and the best partners, the company is able to identify strategic partners that will help in achieving different goals and objectives. Formation of alliances must be done with great care so as not to end up settling on wrong partners. Effective alliances are competitive edges to business organization such as CISCO.

RECOMMENDATION

            The greatest recommendation for a competitive advantage for CISCO is carrying out a market analysis before implementation of any strategies. The company operates in a very competitive environment which is very dynamic and full of challenges. Strategies only become competitive advantages after they are effective. For effectiveness to achieved the strategies put in place must have solved the problem for which they were established. Basically, market research is highly recommended as it will improve the company’s competitiveness as well as mitigate competitive weaknesses. This kind of research will enable an organization to know what works and what does not (Baden & Mary, 2010). This implies that strategies that will be developed and implemented will have a higher chance of being effective. Given the size of CISCO, it is necessary that the market research team provides the best information concerning the market as well as competitors for the benefit of the organization.

References

Baden, C. & Mary, S. (2010). Business models as models. Long Range Planning 43(3): 156-170.

United States International Trade Commission. (2011). China: Effects of intellectual property infringement and indigenous innovation.Washington, DC 20436: United States International Trade Commission.

Cisco Resources. (2015, September 15). Retrieved from Cisco: http://www.investor-relations/resources

Erica, O. (2012). Strategic Planning. New York: John Wiley and Sons.

Flannery, N. (2015). How strong is Mexico’s economy? Forbes. Retrieved from http://www.forbes.com/sites/nathanielparishflannery/2015/09/08/investor-insight-how-strong-is-mexicos-economy/

Gerard, H. & Amanda, H. (2015). Social marketing and communication in health promotion. Medicine and Health 6(2):135-145.

Kotler, P. & Kevin, L. (2009). A framework for marketing management. Upper Saddle River, New Jersey: Pearson Prentice Hall

Miklos, S. (2006). Market Segmentation, Target Market Selection, & Position. Boston: Harvard Business School.

Pinson, L. (2004). Anatomy of a business plan: A step-by-step guide to building a business and security your company’s future. Chicago: Dearborn Trade.

PMC. (2002). Health Care Quality Improvement in Mexico: Challenges, Opportunities, and progress. Retrieved October 6, 2015 from http://www.ncbi.nlm.nih.gov/pmc/articles/PMC1276627/