CRITICAL APPRAISAL REPORT FOR MOBILE PHONE COMPANY

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Critical Appraisal Report for Mobile Phone Company

Background

Justification of department role

As the head of marketing department responsible for the production and R & D for mobile phone, I would ensure that I promote investment in R & D and also encourage capacity allocation since being the head of marketing means ensuring that the new products and services penetrate into the competitive market of mobile phones. The success of the performance of the new products and services entering into the market would mean that I search and identify new knowledge and information relevant for the sale of the product in the market (Johnson, Whittington, and Scholes, 2011, 89). Carrying out an effective search and obtaining existing market environment will enable the department make better and innovative strategic decisions aimed at ensuring high sales for the product. I would also carry out a marketing analysis that involves looking at the current prices and the quantities bought and sold within the target market. It is also important to carry out and analysis on development of technologies and patterns of technological advancement since they tremendously impact on the performance of the product within the target market (Johnson, Whittington, and Scholes, 2011, 67-8).

Position analysis (environmental analysis)

From the marketing outlook point of view and looking at the demand for mobile phones, it is observed that the demand for handsets has significantly increased since passengers are able to use the mobile phones even in the airplanes. However, the demand for handsets in USA is expected to fall by approximately 3% and by about 7% in Asia although the demand in Europe is expected to remain constant (Kotler et al, 2012, 78-9). Looking at the cost analysis, the transportation cost is expected to fall by about 6% while the production cost is expected to remain unchanged. On the other hand, the outsourcing capacity is expected to rise by 13% in the US and 19% in China thus making the outsourcing costs to fall by about 4-6%. In the analysis of finance, it is observed that the corporate tax has been raised up to 22% in Asia. The competitiveness of the economy of China has resulted in its central bank selling huge amounts of Rmb in the FX market. This has consequently made Rmb fall by approximately 10% against the USD as the Euro also rebounds (Cesim, 2013, 77-8). In China, the interest rates have risen by half a percentage while in USA, it has risen by quarter. However in Europe, the interest rates have fallen by quarter.

Critical review of academic literature

The significance of a competitive advantage of the product in relation to its cost, flexibility, delivery, and quality is a necessity. According to the situation analysis of the product, setting up strategies for a competitive advantage of the product will contribute to the company’s developmental strategy (Cesim, 2013, 78-9). Ansoff matrix strategy can be used to generate a strategic direction for the company by establishing ways and means of penetrating into the target market. This can be done based on the product’s category and the geographical dimensions surrounding the target market of the product. The figure below represents the Anoff matrix.

There are theories that can be used for strategic analysis of the product. The first theory to be considered in this aspect is the resource –based theory, which is closely related to the competitive advantage (Brooks and Barnett, 2006, 90-1). It involves four factors that include resources, capabilities, competitive advantage, and strategies. The first factor (resources) requires the manager to identify and classify the resources of the organization and then appraise the weaknesses and the strengths of the organization. The second factor, which is “capabilities”, involves the identification of the capabilities of the organization. The next factor in this theory is to develop a competitive advantage, which involves appraising the potential capabilities and resources in terms of their ability to produce a sustainable competitive advantage. The last factor is to select a strategy that would best exploit the capabilities and resources of the organization relative to the product’s external opportunities (Brooks and Barnett, 2006, 78-9). This theory can help the organization identify the resources that would enable it achieve a competitive advantage thereby making the organization become more successful than other organizations in an environment that is very competitive. The second theory is the Ansoff’s matrix theory, which is presented in the diagram below.

Ansoff matrix theory defines the market growth strategy in terms of the market and the product. Four criteria are used in the identification of the theory such as market development, product development, market penetration, and diversification (Ansoff, 1965, 90-1). The aspect of market penetration criteria can be used to analyze how the existing businesses sell their products in the existing market environments and also determine ways of increasing and maintaining market share of the existing products. A competitive pricing strategy can be used to set the selling price in order to gain and beat more revenue in terms of sales. Sale promotion and advertising can enable the organization attract more customers to buy more of its products due to the good image of the organization created to the target market. Restructuring a mature market that involves driving out competitors is the difference strategy that would ensure that the organization look different and unique compared to other competing organizations. According to Ansoff, (1965, 89), a pricing strategy and a promotional campaign can also be used by the organization to become more attractive.

The next theory is the product life cycle theory, which is presented in the diagram below.4070351882775

Product life cycle describes the possible policies of the product in different stages of the theory as well as helping the organization compare its product with the product of its competitors. The theory can be divided into four major stages that entail introduction, growth, maturity, and then decline. The theory is very appropriate in defining the product stage and performance of the entire market. Tech 3 and 4 are placed in the growth stage while tech 1 and 2 are put in the maturity stage.

The last theory in this aspect is the Boston Consulting Group (BCG), which is a very vital tool used to determine the balance and the attractiveness of business portfolio under market growth and market share criteria. It is of great relevance to estimate the demand for every product in order to properly expand the capacity. As shown in the figure below, tech 4 appears in the stars stage with the highest mark share of about 94.75% in an expanding market (Aburto, 2010, 78-9). There is need for the company to heavily invest in order to raise or sustain the product market share in the stage. Techs 2 and 3 have significantly high market growth but do not show high market share yet. Tech 1 shows high market share in a market segment that requires less investment.1612903150235

The above frameworks and theories are used to support the achievement of business strategies in perspective of production and demand of the product while following the law of demand and supply. An increased price of the product when the demand is higher than the supply is likely. When supply is more than demand, there is likely to be a fall in the product price (Aburto, 2010, 89). There is also the equilibrium point that encourages the organization to balance supply and demand as shown in the figure below.

References

Aburto, T., 2010. Ansoff’s Matrix for Marketing Objectives [online] available from HYPERLINK “http://taydeaburto.com/ansoff-matrix-for-marketing-objective/”http://taydeaburto.com/ansoff-matrix-for-marketing-objective/ [4 June 2013]

Ansoff, I., 1965 .Corporate Strategy. New York: McGraw-Hill

Avadhani, V., 2010. Investment management. Mumbai: Himalaya Pub. House.

Barney, J. and Clark, D., 2007. Resource-based theory. Oxford: Oxford University Press.

Brooks, R. and Barnett, S., 2006, .IMF Working Papers : What’s Driving Investment in China? Washington: International Monetary Fund (IMF)

Cesim, 2013. Ratio and key financial indicators [online] available from http://sim.cesim.com/results/gc/AreaReportGlobalPage?51 [16June 2013]

Douglas, D. and Raghuram, R., 2001 .Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking. journal of Political Economy, 109 (2).

Johnson, G., Whittington, R. and Scholes, K., 2011′.Exploring Strategy’

Kotler et al, 2012 .Marketing Management, 2ed edition, 2009, Pearson Education Limited, Essex, England

Reid, P., P. and Schriesheim, A., 1996 .Foreign Participation in U.S. Research and Development: Asset or Liability? Washington: National Academies Press