SM REPORT Essay Example

SM REPORT Essay Example SM REPORT Essay SM REPORT Essay Furthermore, this permitted ISM to assess the types of opportunities and threats that might arise from the industry environment. This report will also examine both threats of new entries and substitutes, and both bargaining powers of buyers and suppliers that will affect the decision making process of ISM. With the addition of competitive rivalry, this report will demonstrate how ISM can use innovation and various business strategies to stay ahead in the industry. The findings of this report will highlight the financial profitability and stability of ISM. It will analyses how training and development will help improve the skills and motivation of Isms employees. It will also depict how research and development would allow ISM to innovate and improve on its manufacturing processes. This report will also indicate how the positive brand image, along with other business strategies influence the decision making recess of ISM, allowing it to remain competitive and achieve sustainability in its growth within the industry. 2. Background Information ISM International Limited is the global leader in branded healthy lifestyle products. Listed in the Singapore Stock Exchange, ISM has over 30 years of experience and uncompromising dedication in developing innovative and reliable healthy lifestyle products (ISM AAA). Established in 1 980, ISM is a niche marketing company with a focus on the consumer. The Group is innovation-driven and is an Intellectual Property (IP) developer. ISM uses innovative selling approaches and constantly enhances its innovation capabilities to produce successful products with superior designs, features and quality. As an IP developer, ISM controls its brands, designs, technologies and concepts. ISM operates a wide point-of-sales network of more than 1 1 93 outlets in more than 369 cities across 31 countries in Asia, Oceania, Africa, the Middle East, Europe and North America (ISM 2012). The ISM business consists of 4 focuses which together reflect the brands holistic approach to healthy lifestyle. 3. Macro-environment Analysis Macro-environmental analysis is the initial stage in comprehensive strategic planning. The purpose of the analysis involves the study of current and potential change and the assessment of the impact of changes on the organization (Ginger and Duncan 1990). . Optical Singapore government offers loans, grants, tax incentives and Nan-financial assistance to help organizations grow their business. SPRING Singapore provides funding such as the Customer-Centric Initiative to support projects undertaken by organizations in the healthcare sector to improve customer experience and benchmark themselves against industry standards. ISM has achieved significantly la rge amount of government development grant as shown in Figure 1 (refer to Appendix 9. 1). 3. Economics The global macroeconomic conditions have stabilized in recent months against the backdrop of improved financial market conditions, and the outlook for Singapore economy remains positive. According to Singapore Department of Statistics (2013), Singapore has grown by 1. 3 per cent in 201 2 and real GAP growth in 2013 is expected to be 1 to 3 per cent. With the global economy continuing to show affirmative signs of improvements, we hence see potential in the group to rake up more sales going forward, given its huge outwork of outlets. 3. Social As Singapore continues to grow and develop, maintaining the quality of life has become increasingly important. Healthcare products are no longer deemed as a luxury good but a necessity, as society trends towards a more sophisticated and healthy lifestyle. With higher population densities and rising expectations of individuals well-beings, the l ifestyle needs of a more diverse society will be a key challenge as well as an opportunity for ISM. With an increasing ageing population in many societies, ISM can consider how they can better cater to the lifestyle needs of this particular group. 3. Technological The new competitive landscape, driven by the technological revolution is moving towards an increasing focus on innovation, both in technology and new products or services. Being the global leader in healthy lifestyle products, ISM is in the forefront of innovation and the development of a wide range of products to bring the greatest health benefits to consumers. In order to stay competitive, companies are required to use the latest technology in product innovation, continue to develop new technology, actively participate in global markets, and structure themselves to gain advantage in these markets (Hit, Keats and Demark 1998). Furthermore, new technology is allowing firms to customize products to consumers more quickly and economically in terms of production output and cost reduction activities. 3. Relating Key drivers for change with Opportunities and Threats A PASTEL analysis of the macro-environment enables organizations to anticipate opportunities, reveal threats, and carefully develop responses to change (Johnson, Whetting and Schools 201 1). It is important to analyses how the factors in the framework are changing and how they are inter-connected. The technology developments in ISM may affect the social factor such as nonusers lifestyle by introducing more leisure. For a Health and Lifestyle industry, the two most important key drivers for change are social and technological changes. Societal change such as emphasis on overall well- being for longer life expectancy may drive the potential for producing a more comprehensive range of healthy lifestyle products. Similarly, major technological advancements may have a positive impact on Isms research and development (R) activities. An example is ISM massage chairs which are designed in combination with the convenience of the mobile app technology, the ISM divine app (ISM Bibb). On the contrary, a social change in consumers preference for more outdoor leisure activities may pose a threat to Isms future home healthy lifestyle products. Similarly, the global economic conditions may pose a threat to Isms business. The nature of ISM products make them more susceptible to reduced demand in times of economic downturn than other kinds of business as their products may not be considered as essential health products (ISM 2011). . Porters Five-Forces Porters five forces model helps managers recognize and analyses competitive forces within the industry, predict new prospects and challenges and prepare bible strategies against future challenges and threats (Hills and Jones 2008). 4. 1 Threat of new entry In the healthy lifestyle products industry, scale and experience, technology and high capital investment pose as high bar riers of entry. Established industry players enjoy optimal levels of economies of scale whereby there is large-scale production at a lowest cost. This deters new entrants as it would be expensive for them to compete due to higher unit costs. New entrants do not have the relevant experience and technology that existing competitors have that allows them to enjoy cost advantages through efficiency. In addition, regulations such as patent protection and trademarks safeguard the rights of established industry players and prevent new entrants from tapping on their knowledge and resources. The high barriers of entry lead to low threat of entry due to the high level of experience, cost savings and technology that existing large operators possess. Overall, the threat of entrants is relatively low. 4. Threat of Substitutes The presence of many key players in the international market evidently shows a relatively high substitution level in the healthy lifestyle products industry. Global consumer trends have observed that consumers have become more cautious about their spending habits; however, they are still willing to spend on items that are durable and value for money (Remuneration International 2012). This trend recognizes the threat of substitutes that results from the ratio of price to performance. Environmental-wise, there is an increasing demand for products that are more sustainable, environmentally friendly and ethically produced. Lastly, technological innovations have resulted in relatively low cost of transfer to another industry, such as the beauty industry, increasing the level of substitution. Overall level of substitutes to latherer lifestyle products is relatively high. 4. Bargaining power of buyers In this industry, quality, innovation, product diversity and the ratio of price to performance factors play vital roles. Economically, emphasis should be placed on understanding and considering the expectations and experiences of consumers before prices are adjusted, irrespective of the prevailing economic conditions (Analogy and Kari 2003). Technologically, the Internet age has resulted in a group of more informed consumers. Coupled with the wide variety of options in the market the power of buyers is enhanced as they are blew to switch to other brands easily. As buyers hold high bargaining power in the industry, differentiating ones brand through product innovation and development would prevent buyers from switching to other comparative substitutes easily. Overall, the bargaining power of buyers is high. 4. 4 Bargaining power of suppliers Economically, it is more cost effective to stay with the original supplier, especially during periods of high inflation rates. Due to goodwill, the original supplier would give companies longer credit terms, which would in turn increase the liquidity of companies in the business. Technology such as analytic, software tools and telecommunications are part of providing better information to existing industry players at a lower cost, and in product distribution. Besides, employees as suppliers for knowledge in the production process have placed operators in a vulnerable position. The high bargaining power of suppliers creates an unfavorable situation for industry players. ISM recognizes the importance of their employees and tries to reduce the bargaining power of suppliers by providing their employees with good welfare and benefits (ISM 2011 Overall, the power of suppliers in this industry is high. Competitive Rivalry This force identifies the level of competition posed by direct competitors whose target market is similar to the organization. Although political measures strive to reduce the presence of inferior quality and unsubstantiated products in the market, weaker economic conditions gave rise to more conservative spending, resulting in the growth of the bl ack market and stiffer competition within the industry. The extent of competitive rivalry has also increased due to current technological advancements that have quickened the growth rate of research and development in the industry. Even though the extent of competitive rivalry is high, existing operators should continue to innovate and build brand loyalty so as to compete and differentiate themselves in the industry. Otherwise, the extent of competitive rivalry in the healthcare lifestyle products industry is high. 4. Overall Five Forces Impact Using the five forces model to analyses the industry, it is increasingly favorable and attractive for potential and new industry players. 5. Resources and Competences Based on the resource-based view of strategy, the competitive advantage and superior performance of an organization is determined by its distinctive abilities (Heartfelt 1984). Strategic capabilities refer to the capabilities of an organization that contribute to its long-term survival which consists of its resources and competences (Mentors 2004), and when resources are deployed efficiently and effectively, it is said to be the firms core competences (Johnson, Whetting and Schools 2011 5. Financial Resource 2012 201 1 (AS million) Growth (%) Sales 602 554 Profit 87 69 +32 Cash and cash equivalents at beginning of year 193,813 73,157 Cash and cash equivalents at end of year 201 ,731 According to ISM (201 3), the Group has achieved its third consecutive year f record profit despite a tough economic environment. Isms ability to manage its cash flow has been reflected in the increased of cash and cash equivalents at end of both 2011 and 2012. For its balance sheet, it was evident that ISM has been improving its cash position and paring down its borrowings consistently, due to its strong positive operating cash flows over the years. They had done well in building a strong balance sheet with a net cash position of SASS million (ISM 2013), and showed superior management in its cash flows. 5. Inhuman Resource Johnson, Whetting and Schools (201 1) propose that the efficiency and effectiveness of the people in an organization depend not just on their existence, but on the relationship and cooperation between customers, partners or suppliers. In an attempt to build relationships across valuable networks, ISM signed a cooperation agreement with LEG Electronics Inc to enlarge its presence and market share in South Korea (ISM 2007). The Group has also gone into several partnerships (Figure 2; refer to Appendix 9. 2) whereby ISM can leverage on their nationwide specialty outlets across numerous states. Brand is always foremost in the company and consumers minds; hence, ISM ensures that everyone gets involved to ensure consistency In customers experience with the brand. It achieves this by implementing continuous improvement to keep the skills of its staff updated (Tem portal 2006). . Intangible Resource Hall (1992) argued that a companys reputation is perceived as one of the most significant resources which make the most important contribution to business success. ISM Asia No. 1 is an independent research conducted by Syncopate an international market research company, to determine Saiss most preferred brand of healthy lifes tyle products. The study found ISM to e a leading international brand with a strong presence in its key markets. The value reflected the brands ability to deliver a compelling and consistent experience that was relevant to its customers. Its superior brand image is clearly shown in Figure 3 (refer to Appendix 9. 3). 5. Vern Strategic Capabilities as a Basis of Competitive Advantage A firm achieves sustainable competitive advantage when the implemented value creating strategy is not similar to the strategies of current or potential competitors, and benefits of this strategy are not easily replicated by competitors (Barney 1991). In order to understand sources of sustainable nominative advantage, the value chain of ISM is considered in the diagnosis of its strategic capabilities. . 4. 1 V- value of Strategic Capabilities Considering the primary activity (marketing and sales), and support activities (technology development and human resource management) of ISM value chain in Figure 4 (refer to Appendix 9. 4), these capabilities provide the exploitation of opportunities and neutralist threats. Technology development, such as Isms in-house team enables the Group to enhance its R competencies to provide greater value-add t o its business and greater input to the design of its products. According to COBS (201 0), ISM has been actively adding its product range by renewing its product line by up to 25% every six month to cater to the changing needs of consumers. In addition, Isms message of We focus on attracting and grooming great talent committed to our companys goals (Temporal 2006) has proven that its human resource is seen as providing potential competitive advantage. It supports the notion of Happy staff, happy customers through providing training and development. In terms of marketing and sales, ISM has an extensive point-of-sales network and geographical coverage in their markets (refer to Appendix 9. Whereby consumers are made aware of their products and are able to purchase it. 5. 4. 2 R-rarity of Strategic Capabilities Rare capabilities are those possessed uniquely by one organization or by a few others. ISM has worldwide technology patents that give it advantage. For example, Isms patented Music-Synchronized Massage technology and patented ISM Human-AD mas sage programmer which are designed together with its massage chairs. Andrea and Cobra (1996) argued that rarity provides competitive advantage if it meets customer needs, and are of value to them. The convenience of the mobile app technology on its massage hairs has significantly eased the control and transformed into an intelligent, multi-sensory enjoyment for consumers. In summary, ISM has a number of strategic capabilities that are valuable and rare. However, it is not difficult for competitors to imitate the tangible resources of ISM as these can be acquired or imitated over time, and the risks of its product and service substitution are relatively high given the increasing demand for sophisticated and healthy lifestyle. ISM needs to develop products that are inimitable and non-substitutable to increase its bases of sustainable competitive advantage. 6. Business Strategy There are three generic types Of business strategies; cost-leadership, differentiation and focus strategies, with cost-focus and differentiation-focus strategies as subsets of focus strategy (Johnson, Whetting and Schools 201 1). The strategies that ISM is implementing are identified to be differentiation-focus strategies, which refer to the focus on the specialization of creating valuable good and services to answer specific needs of consumers in order to achieve price premium. MM, being the pioneer in the healthy lifestyle industry, focuses on bringing the lifestyle of well-being to their customers (MUM 2007). As a result, the numbers of ISM outlets have continuously grown in many shopping malls. ISM maintains strong relationships with shopping mall owners such as Capitalist and Nameplate in order to be invited as a tenant in their newly opened malls (COBS 2010). Their continuous expansion plans have evidently shown their focus on bringing the lifestyle of well-being to consumers through extensive presence in most shopping malls. In addition, in comparison to Isms competitors such as TOT Boatyard and Gawk, Isms focus on their customers well-being is their differentiating factor amongst other healthcare products providers. Isms continuous innovation and growth has exemplified their mission of delivering well-being to their customers. It couples innovation with passion to drive steady growths and continuous product launches in order to promote positivist to their customers and providing them with the ultimate product usage experience (ISM 2007). In contrast, TOT Boatyard (2011) focuses on using innovation to produce products at low cost to reach out to consumers with right pricing strategies and Gawk (2007) concentrates on producing quality products. Isms usage of innovation is more inclined to producing valuable products hat cater to the healthcare needs of consumers. Another source of focus differentiation originates from Isms commitment to RD to develop their products. Nations Matrix serves as a good strategic management approach for improving competitiveness (Taylor 2012). With reference to Figure 5 (refer to Appendix 9. 5), Isms incorporation of technology and product development has led to the creation of new products for existing markets. Continuous launches of new products via RD innovations to existing markets serve as a defensive strategy to retain customers (Koch 2008). 7. Suitability of Isms Business Strategy Strategy evaluation is an appraisal of how well a business performs. As the environment changes, companies need to alter their strategies to adapt to the environment in order to prosper (Miller 1988). An external environmental analysis and internal capability evaluation has been carried out to determine Isms strategic position, and the suitability of each strategic choice is evaluated in terms of the environment and its capabilities (Table 1 and 2; refer to Appendix 9. 6 and 9. 7). It is clear that Isms competitive strategy (differentiation focus), strategy direction (product development), and ethos of pursuing strategies (acquisitions and alliances shown in Figure 6; Appendix 9. 8) work together as a package. ISM is in a favorable position within its industry given its first-mover advantage, and its strategic option of product development has proved to provide a basis of competitive advantage by reducing competitive intensity and development of barriers to new entrants. It has leveraged on its in-house RD team which is considered as one Of its strategic capabilities to deliver differentiation benefits as valued by its consumers. In addition, ISM has adapted to its environment by exploiting n the opportunity that consumers are trending towards a healthy and positive lifestyle.