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FACULTY OF BUSINESS AND MANAGEMENT SEMESTER MEI 2013 BBPS 4103 STRATEGY MANAGEMENT NAME :SYED MOHD FAIZAL

FACULTY OF BUSINESS AND MANAGEMENT SEMESTER MEI 2013

BBPS 4103 STRATEGY MANAGEMENT

NAME :SYED MOHD FAIZAL BIN SYED OTHMAN MATRIC NO : 800327016051002 NRIC NO : 800327-01-6051 TELEPHONE NO : 012-7598051 E-MAIL :smfaizal@oum.edu.my

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Assignment 1.
1. The business level strategy for Seven-Eleven.

  • 2. The business level strategy for McDonald’s.

  • 3. The business level strategies for Tesco Store Malaysia Sdn Bhd.

  • 4. Assignment 2.

    • 6 Porter's Five Forces Model in the Automobile Industry.

    • 7 References

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Assignment 1 : Question 1

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An organization's core competency focused on satisfying customer needs or preferences in order to achieve above average returns. This is done through Business level strategies. Business level strategies define are actions taken to provide value to customers and gain a competitive advantage by exploiting core competencies in specific, individual product or service markets and concerned with a firm's position in an industry, relative to competitors.

Retailer 1 : The business level strategy for Seven-Eleven

Seven-eleven (7-Eleven) ® Malaysia Sdn Bhd is the owner and operator of all 7-Eleven® outlets in Malaysia. 7-eleven are the pioneer and largest 24-hour convenience store operator in Malaysia. Incorporated on June 4, 1984, 7-Eleven® Malaysia has made its mark on the retail scene and have been a prominent icon for over 20 years. Following below there are business level strategies use in 7-eleven Malaysia. (Company Factsheet)

Strategy formulation

7-Eleven has put in place a business strategy that is fully cross functional. The strategy incorporates the strengths and potential of all sectors at the functional level and is aligned with the mission statement of the business. The operations and supply chain activities of 7-Eleven are aligned in the ‘Internally Supportive’ stage with the overall business strategy of providing convenience to its customers. This growth has been very carefully planned exploiting the core strengths that 7-Eleven Malaysia has developed in the areas of Information systems and Distribution systems and a variety of storage services.

Strategy implementation

To begin with, 7-Eleven made particular a very efficient franchise system wherein only one out of a hundred applicants received the license and had to adhere to very strict requirements such as operation and management of the store, customer service and appearance in order to keep with

the overall image and reputation of 7-Eleven convenience stores. Additionally, according to Eleven ‘filling in the entire map of Malaysia is a priority, instead look for demand where

7-

7-

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Eleven stores already exist based on the fundamental area dominance strategy of concentrating stores in a specific area. This strategy works wonders for the 7-Eleven stores as the following advantages follow such practice; Boosts distribution efficiency; Improves brand awareness; Increases system efficiency; Enhances the efficiency of franchise support services; Improves

advertising effectiveness; Prevents competitor’s entrance into the dominant area. For example 7-Eleven Group plans to upgrade its logistics function by setting up a new logistics centre of its 4-acre piece of land in Bukit Jelutong, Selangor Darul Ehsan. The new logistics centre will be a dedicated purpose-built facility that is designed to maximize efficient receiving, processing and distribution of goods. (Announcement, 2009)

Strategy evaluation and control

The Company had chosen a direction for 7-Eleven will go up in the future already for control local market. In addition, every franchise that, have a good system and management will be successful. Selection and development of products and services to satisfy each customer group and solve management problems before actual implementation at every branch. The Company has used a product management principles to learn about product assortment and increase efficiency in area utilization such as decreasing the space between shelves in order to gain more shelf space and expanding shelf space. The future plans, strategies and prospects in the following there are:

New Premium Fresh Food And Beverage

The 7-Eleven Group is expanding its food service offerings at its 7-Eleven convenience stores by offering new premium fresh food and beverage items to customers. The 7-Eleven Group plans to work closely with fresh food manufacturers that are located close to its 7-Eleven convenience stores to supply freshly prepared food items are sold in stores has a certified HALAL and undergo stringent quality control to ensure taste and freshness. Following example roast coffee is a combination of some of the finest 100% Arabica coffees from Colombia and Brazil.

Retailer 2 : The business level strategy for McDonald’s

Background

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In December 1980, Golden Arches Restaurants Sdn. Bhd. Won the license to operate McDonald’s in Malaysia. The first McDonald’s restaurant subsequently opened its doors at Jalan Bukit Bintang on 29 April 1982. To date, McDonald's Malaysia employs more than 12,000 local people. The company was named as AON-Hewitt Best Employers in Malaysia in 2009 and 2011, as well as AON-Hewitt Best Employers in Asia Pacific in 2011. (McDonald’s)

Strategy formulation

McDonald’s uses demographic segmentation strategy with age as the parameter. The main target segment are children into consideration, children are more attracted towards toys and delicious meals including today’s youth prefer such places for their entertainment and urban families select McDonald’s on various occasions like birthday party, treat for their children. (McDonald’s)

Following example, mission McDonald’s is to be a customer’s favourite place and way to eat with inspired people who delight each customer with unmatched quality, service, cleanliness and value every time. The external environment can be divided into several sectors. There are two important parts; competitors, social concept (healthy problem) and uncertainty situation, which can greatly influence McDonald’s strategies. The following core values guide actions as we strive to achieve the mission. McDonald’s demonstrate our appreciation by providing with high quality food and superior service, in a clean, welcome environment, at great value for each customer every time.

Strategy implementation

McDonald’s using few growth strategies of the product like as Market Growth Matrix defined by Ansoff. Market penetration occurs when a company enters a market with the current product. In business McDonald’s always within the fast-food industry, but frequently markets new burgers. McDonald’s are always enhancing their existing product along with it; they also try to introduce new and new product they can easily survive in the market. Another way includes attracting non user of the product or convincing current clients to use more of a product or service. Market penetration occurs when the product and market already exists in the market. McDonalds focus to four groups to give more focus to the market segment decision e.g. existing customers,

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competitor customer, non buying in the current segment, new segments. For serving synonymously to the existing customers McDonalds coming up with different menus as per change in taste and preference of their customer e.g. Happy price menu, beverages including ice-cream. The company has its unrelenting focus on speed, with Just-in-Time Delivery and the economies of scale that it reaps on account of its global presence exerting considerable influence on suppliers, serving as its strength.

Strategy Evaluation

Health issues became the biggest stumbling block to the development of McDonald’s. Customers were switching to healthier offering, such as Subway’s sandwiches, or KFC’s mashed potato instead of fried potato. McDonald’s has responded to this healthy trend. In order to compete, McDonald’s has added salads and other lighter options in their menu. If a mother comes in, she is not only buying the happy meal for her children, she will also be likely to buy herself a meal too.

Following competitor analysis McDonald’s has been a leading fast-food outlet. But the understudy has another competitor eating away into its market share. In addition the firm encounters new challenges. McValue Lunch and McVAlue Dinner compete using a back-to-basic approach of quickly serving up burgers for time-pressed consumers. Perhaps in a new environment, fast, convenient service is no longer enough to distinguish firm, at this time, a new critical success factor may be emerging; the need to create a rich, satisfying experience for consumers. This brings McDonald’s more experience based competition which McDonald’s can use for competitive advantages against Kids’ Zone and provided WI-Fi enabled the outlet to cater to the student community.

Retailer 3 : The business level strategies for Tesco Store Malaysia Sdn Bhd.

Tesco Stores (Malaysia) Sdn. Bhd. Was started on 29 November 2001, as a strategic alliance

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between Tesco PLC UK and local conglomerate, Sime Darby Berhad of which the latter holds 30% of the total shares. Tesco opened its first store in Malaysia in February 2002 with the opening of its first hypermarket in Puchong, Selangor.

Strategy Formulation

In 2004, TescoMalaysia launched its own house brand, Tesco Choice. In December 2006, Tesco also acquired Makro Cash & Carry in Malaysia, a local wholesaler which was rebranded to Tesco Extra and provides products for small local retailers. In 2007, Tesco launched ‘Club Card’ for a loyal and way to say thank you to customers by giving back their money to them. Later in the year 2008, Tesco introduces Green Club card and Green bags making Tesco Malaysia to be the first Tesco International business to introduce the Green Club card scheme. As part of its global commitment, Tesco Malaysia is a market leading on tackling climate change in techniques of energy saving, launching Green Club card Points to incentivise customers shopping with their own bags, introduce degradable carrier bags, promote positive behaviour among staff though. (Faisal, 2011)

Strategy Implementation

Tesco currently the focus of a lot of business development and change, provides insight into the small medium business. The stated strategy from elements of flexibility, local operations including customers, cultures, supply chains and regulations, focus on a few loose items, multi- format offerings in order to meet the needs of the local market, capability in people, processes and systems, and brand-building to create lasting customer relationships. The name, Fresh and Easy, was intended to take advantage of the local culture and values. Their product offerings within the store, with a strong emphasis on fresh fruits and vegetables, natural and organic foods, were intended to not only appeal to the tastes of the local culture but also to fill a gap in the current supermarket offerings within the region.

Tesco has a strong own brand value which is becoming known throughout Malaysia due to the existing expansion program. Second strength is competitive Pricing Strategy for example the targeted price cuts. Third are customer loyalty/relationship e.g. Tesco gained customer loyalty or relationship by launching a Club Card scheme.

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Tesco acquires Makro and convert it to Tesco Extra. For example, Makro do not allow customers to buy in small quantity, but Tesco Extra allow but charge higher than those buys in bulk. Last one is the strong hypermarket format, for example develop a new store by adding space to existing locations has contributed to the growth of a Tesco supermarket. Besides that, Tesco runs two types of hypermarket format which Tesco Hypermarket and Tesco Extra Hypermarket.

Strategy evaluation

Tesco aim is to buy and sell products responsibly, so that customers know that everything they buy is produced under decent conditions, and everyone involved is treated fairly. For customers, using trading to put products within the reach of ordinary people, and ensure economic growth. For suppliers, have a wide influence on the way they treat their workforce and the right values in supply chain, decent prices and conditions for suppliers.

Tesco also uses various methods like, Marketing Communication Tools which includes print pamphlets, retail advertising and short send message (SMS) via phone. Free parking are some of the lures used by Tesco seems to work in their favour. Tesco is very good at using design across their own label, especially strategically. Tesco is often used as one of the best examples of own brand label in the retail industry and also use of HALAL logo is consistent in each of the product design.

Today, an Every Day Low Pricing (EDLP) strategy of Tesco is more popular with shoppers than one driven purely by promotions. But a combination of the two is the best means of keeping shoppers happy. Pricing was a key strategy and selling point for Tesco. Low prices were adopted to maximize sales. Tesco's value-added products at low prices attracted many customers. After the launch of 'unbeatable value' campaign, Tesco went in for massive price reductions. The company adopted the strategy of EDLP, while continuing its other promotional activities. The EDLP program aimed to regularize low prices for Tesco customers.

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Assignment 1; Question 2 Question 2 Porter's Five Forces Model in the Automobile Industry

The automotive industry is inherently interesting: it is massive, it is competitive, and it is expected to undergo major restructuring in the near future due to globalization and decreasing oil reserves. Porter's Five Forces, is a way of examining the attractiveness of an industry. It does so

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by looking at five forces which act in that industry. These forces are determinants of that industry's profitability.

  • 1. The threat of new entrants

In the auto manufacturing industry, this is generally a very low threat. Factors to examine for this threat include all barriers to entry such as upfront capital requirements e.g. It costs a lot to set up a car manufacturing facility, brand equity e.g. A new firm may have none, legislation and government policy e.g. Safety and emissions, the ability to distribute the product. These reasons are all tied to the concept of barriers to entry; namely, the obstacles and hindrances that make it difficult to enter the market and restrict competition. One of the greatest barriers to entry in the automobile industry is the extremely high amount of capital that is required to purchase physical manufacturing plants, raw materials, as well as to hire and train employees. New technologies are constantly being discovered that improve the quality of automobiles on the market as well as reduce costs throughout the manufacturing process. Therefore, manufacturing companies must also have the ability to mass-produce so that can make cars affordable to customers. Another barrier to entry is the access of distribution channels. It can sometimes be difficult for a new company in the industry to find an adequate means of distribution because space within a dealership lot is limited.

2. The threat of substitute products

A Porter’s Five Forces Model analysis of the car industry covers the new market, not used or second-hand. Used cars threaten the new market. The product differentiation is important too. In the car industry, typically there are many cars that are similar look at any mid-range for Toyota model and can easily find a very similar Nissan, Honda, or Peugeot.

Also, there are inherent underlying social and cultural attitudes that keep people from owning Automobiles in some parts of the world. Many nations are not as spread out or as mobile as the Malaysia; are constrained either by geography, race, class, or religion and the need for personal transportation is not as great, yet. However, the marketing arms of the global automotive manufacturers are certainly working very hard to change this paradigm, and with unprecedented production volumes worldwide, all signs indicate that they are succeeding. Most with the ability

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and means to own a vehicle, who live in a society with the necessary infrastructure (e.g. Roads and filling stations).

3. The bargaining power of buyers/customers

The auto manufacturer would contract with a limited amount of suppliers who would then contract items further upstream. Proton, in particular, is having trouble with this system due to the current state of the economy. This shift has led to an increase in the power of suppliers than in the former market environment. However, the shift in the market environment has not been a profitable one for suppliers. Given the volatility of current automotive production schedules due to the reduction of consumer demand, suppliers have very limited power over auto manufacturers in this respect.

Following the power of buyer many components used in vehicles is available only from a single supplier and cannot be quickly or inexpensively re-sourced to another supplier due to long lead times and new contractual commitments. This means that a few key suppliers will retain some power. However as the average Malaysian consumer became dissatisfied with the products offered by Japan automakers, they began seeking alternatives; namely foreign auto makers. As the foreign auto companies entered the Malaysia market, the competition became more intense, adding power to the buyer. The foreign auto companies were producing with lower operating and material costs than the Malaysia automakers. Therefore, foreign competitors have been able to offer the Malaysia consumer a high quality product at a lower cost than its domestic competition. In fact, many consumers have opted to maintain and repair their current vehicles rather than purchasing new ones.

4. The amount of bargaining power suppliers.

In the car industry this refers to all the suppliers of parts, tires, components, electronics, and even the assembly line workers e.g. Unions. I founded in the Malaysia the automotive unions are

tremendously powerful. The more powerful a seller is relative to the buyer, the more influence the seller has. This influence can be used to reduce the profits of the buyer through more advantageous pricing, limiting the quality of the product or service, or shifting some costs onto the buyer (e.g. Shipping costs). Suppliers are powerful if suppliers are concentrated or

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differentiated. Significant costs involved in switching suppliers. Customers are less likely to

switch suppliers if there are large costs associated with switching. e.g. In 2002, PROTON cancelled its agreement with Mitsubishi and its sales dropped in the following years. In 2007, PROTON was struggling to manage without an alliance with foreign firms. (Akifumi Kuchiki, 2007) According to Proton’s 2007 annual report, the company intended to improve the quality of manufacturing by investment in new R&D and through partnership with foreign companies. However, according to research conducted by JAMA, the production capability is still low in Malaysia. (Wanrswee Fuangkajonsak, 2006)

5. The intensity of the competitive rivalry.

All firms in one industry and market are subject to the same forces doesn't mean they perform equally. A Porter’s Five Model should always be done in conjunction with other assessments, and should not be regarded as being absolute. It should only serve as an indicator, not absolute fact or even necessarily accurate. For example, a Porter’s Five analysis of the car industry in the Malaysia would not necessarily apply in China or Euro. The markets are totally different, and the product life cycle is not even close to being the same. Another example is the type of the automotive industry. A Porter’s Five analysis of the electric car industry would be entirely different than one of the conventional car industry

However, with an increase in globalization, domestic markets must now compete with foreign competition. As foreign companies have gained accessibility into the local market over the past decade, domestic car manufacturers have found it increasingly harder to compete. Most foreign competitors have been able to obtain lower raw material and production costs while maintaining equal, if not better, quality of their product. The current market has been fuelled by an attraction to Japan automakers and car models. This opened the market for alternative power sources for vehicles for a new market of green-sensitive consumers and gas-pump weary ones. These types of consumers flocked to Toyota with the advent of the highly successful Prius and Insight for Honda Motor.

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References

Question 1

The Business Level Strategy of Seven-Eleven

Company Factsheet. (n.d.). Retrieved Jan 05, 2013, from 7eleven:

hytp://www.7eleven.com.my/html/default.aspx?ID=2&PID=12

Johnson, G., Scholes, K., Whittington, R., (2005) Exploring Corporate Strategy Text and Cases, 7th Edition, FT Prentice Hall

M.E. Porter(1985) Competitive Advantage: Creating and Sustaining Superior Performance, Free Press,

(2010, 10). 7eleven Case Study. StudyMode.com. Retrieved Jun 10, 2010, from http: //www. studymode. Com /essays/7Eleven-Case-Study-452097.html

The business level strategy of McDonald’s

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Corporate Info. (n.d.). Retrieved Jun 10, 2013, from McDonad's:

http://www.mcdonalds.com.my/abtus/corpinfo/history.asp

Han, J. (2008). The Business Strategy of McDonald's. International Journal of Business and Management , 73-73. Vol.3 No 11.

Nielsen. (2005). Asians the World's Greatest Fast Food Fans. Retrieved Jun 1, 2013, from

Nielsen. (2005). A 360º View of Fast Food and Impulse Habits. Retrieved Jun 1, 2013, from

Schroder, M.J.A., & McEachern. (2005). Fast foods and ethical consumer value: a focus on McDonald's and KFC. British Food Journal Vol. 107 No. Jun 4, 2013 pp. 212-224

Vignali, C. (2001). McDonalds: Think Global Act Local The Marketing Mix. British Food Journal , 97-111.

(2009). Corporate Responsibility Report. McDonald'd.

Corporate Info. (n.d.). Retrieved Jun 10, 2013, from McDonad's:

(2009). Corporate Responsibility Report. McDonald'd.

Donald Bradley,Morgan Bruns,Adam Fleming,Jay Ling, Lauren Fleming and Felipe Roman.

(2005, December 05). Automotive Industry Analysis. Retrieved July 07, 2013, from

Han, J. (2008). The Business Strategy of McDonald's. International Journal of Business and Management , 73-73. Vol.3 No 11.

The business level strategies for Tesco Store Malaysia Sdn Bhd.

Datamonitor Report (2003) Company Profile: Tesco PLC Analysis, October;

De Toni A. and Tonchia S. (2003) Strategic planning and firms’ competencies: Traditional approaches and new perspectives, International Journal of Operations & Production Management, Vol. 23 Issue 9, pp.947-976;

Finch P. (2004) Supply chain risk management, Supply Chain Management: An International Journal, Vol. 9 Issue 2, pp.183-196;

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Flavián C., Haberberg A. and Polo Y. (2002) Food retailing strategies in the European Union. A comparative analysis in the UK and Spain, Journal of Retailing & Consumer Services, Vol. 9 Issue 3, pp.125-138;

Ghani, N. (2012). TESCO Strategic Management. Retrieved Jun 19, 2013 , from

Ivory. (n.d.). Strategic Management of TESCO supermarket: PESTLE analysis, Critical success factors, SWOT Analysis, VALUE CHAIN analysis, TESCO’S strategic options, Core Competences & Cultural Web. Retrieved Jun 13, 2013, from Ivory Research:

Palmer M. (2004) International retail restructuring and divestment: the experience of Tesco, Journal of Marketing Management, November, Vol. 20 Issue 9/10, pp.1075-1101;

Retail Markets. (2010, September). Retrieved Jun 7, 2013, from Management Models:

Strategic Management of Tesco supermarket. (n.d.). Retrieved Jun 25, 2013, from

Thomson, J. (2013, April 18). Why big is no longer beautiful for Teso. Retrieved Jun 12, 2013, from The Independent: http://www.independent.co.uk/news/business/analysis-and-features/why-

Woods, M. (2008). Linking risk management to strategic controls: a case study of Tesco plc. Int. Journal of Risk Assessment & Management , Vol.7.

Assigment 1 : Question 2

Donald Bradley,Morgan Bruns,Adam Fleming,Jay Ling, Lauren Fleming and Felipe Roman. (2005, December 05). Automotive Industry Analysis. Retrieved July 07, 2013, from

Patterson, A. (2011, November 11). Porter's Five Forces. Retrieved Jun 21, 2013, from

Donald Bradley,Morgan Bruns,Adam Fleming,Jay Ling, Lauren Fleming and Felipe Roman.

(2005, December 05). Automotive Industry Analysis. Retrieved July 07, 2013, from

Patterson, A. (2011, November 11). Porter's Five Forces. Retrieved Jun 21, 2013, from

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