Strategic Business Plan: Part A – Corporate Strategy Plan
Executive Summary
The focus of this report is to develop a strategic business plan for GM Group of Innovations. The report identifies and discusses the corporate approach in managing the company business in four different regions for the two major product categories i.e. Action -capture (AC) cameras and UAV drones.
The reports discuss the external environmental factors and strategies to direct the company operations in initial three years to achieve the intended goals and objectives. The report highlight the application of strategic management tools such as Pestle model, Porter five forces, STP model, and 4P’s of marketing.
The proposed corporate approach is growth strategy, and business strategies of cost leadership and marketing strategies are market penetration and market development. Based on the discussion, the threats to the drone business and risk to business plan are highlighted for the company.
Company overview and management
GM Group of Innovations operates in the technologically innovative drone industry for cost effective solutions in business and commercial purpose and to improve business efficiencies in sectors like retail, agriculture, construction, real estate, and aerial photography. The company headquarters is in Taiwan. GM Group of Innovations engages in design, assembly, and market of the products i.e. Action- Capture (AC) cameras and unmanned aerial view (UAV) drones. The company sells through its website and to other retailers.
The company has facing high competition in the drone market in its 5 years of operations. The company business has high growth prospects due to surfacing of drones in business and commercial applications, defence and other industries and growing consumer interest which include the products in consumer electronics and remote control toys section for recreation purposes.
The management team includes:
President
Head of Sales and Marketing
Chief financial officer (CFO)
Senior R&D manager (product design, development and innovation)
Senior manager (CSR, communication and citizenship)
The company vision is to become a preferred choice of customers for the drone solution for the business and commercial purpose and to achieve leading position in the drone industry. At GM Group of Innovations, the visualisation is to become a easily assessable and reliable industrial drone solution firm for easy inspection and survey and improve business efficiency and ensure workforce safety through its products.
Thus, the company has a dream to take job towards to remain committed to invest in research & development (R&D) efforts and empower and encourage workforce to improve and innovate the products to develop a winning competitive strategy to exploit market and growth opportunities.
The company mission is to deliver the consumers with latest and high quality technological products in terms of its engineering design, built, and superior product performance while improving its market competitiveness and performance year on year.
The company undertaking is also to help the consumers in various sectors through GM products to develop new perspective for their work operations by bringing more accuracy, efficiency, speed and safety in surveillance and other applications.
The goals of the company are improve its performance on a continuous basis, develop improved products, stay committed to creativity and improve brand value for the company product and keep the customers satisfied.
Another key goal of GM Group of Innovations for its growth is to strengthen its drone and drone camera business into the industrial sector for different business and commercial applications and for small to large industries and also in the consumer hobby and recreation.
To achieve this goals the following key objective are focused by the company management:
Growth of company:
Under this objective, the company will focus on increasing sales in the existing market by improved products features in terms of its aesthetic looks, designs, improved product life and performance. The focus of also to improve workforce efficiency and morale and increase in number of models for different application to cater different needs of customers located different regions through innovation.
The intentions are:
- To increase annual sales by 25 percent on a yearly basis
- To increase sales by 10 percent on a yearly basis from new customers
- To improve products with compliance to quality and achieve 4 star Performance/Quality (PQ) Ratings within three operational years
- To focus on workforce compensation
R&D investments:
Under this objective, the company will focus on the increase in R&D budget, to increase R&D staff moral and efficiency and support creativity by providing an environment of innovation culture.
The intentions are:
- To increase R&D budget by 5 percent on a yearly basis
- To remain committed to innovation
Enhance knowledge and skills:
Under this objective, the company will focus on the identifying and meeting the training needs for technical skills in assembling and testing, data security aspects, quality training, etc. and to keep the engineers updated on high growth technology, aerial intelligence, drone technology, industry-specific analytics and latest trends that may affect the business.
The intentions are:
- To improve technical knowledge, skills and competencies in engineers and marketing workforce
- To develop and implement a strong in-house training program for managers and subordinate
- To provide and achieve consistent and quality customer service and security standards
Image rating and promotions:
Under this objective, GM Group of Innovations plans to promote the company brand to provide a sustainable and reliable solution and promote as an environmental friendly product to improve image ratings.
The intentions are:
- To achieve image rating of 40 in three years
- To educate the potential customer on the benefits of using drones, its costs and applications
- To increase in spending by 10 percent in branding and promotional activities each year
The company decides on the achieving these goals and objectives by following tactics to lower the cost of its operations and production to implement the cost leadership strategy in the first years of its business and in second and third year employ product differentiation strategy once the product increase its penetration in the target market segments.
Overall corporate strategy approach
The approach of corporate strategy in GM Group of Innovations is to identify the company business to manage the resources, identify returns and risk and return and to decide and determine on how to create value for its customers.
The corporate strategy of GM Group of Innovations in its strategic planning places priority to the price as one of the key factors to accomplish its mission and vision. The price factor affects the business profitability and the decision of the buyers and also to a certain extent is a competitive factor in the drone marketplace (Smith, 2015). Thus, the price of the product will be kept at competitive rate so that the customers are not lost to the competitors but the focus will be on other factor like number of models and innovative features so that customers compare price along with other factors like unique design, products life, quality, ease of use, and safety aspects for comparison.
Apart from price, the company consider investment in advertisements to educate about the products benefits over other products, reliable solution for surveillance and other applications and a responsible company reputation by gaining trust of its customers.
Under the corporate strategy approach, the focus will be on the growth strategy as the company look forwards to strengthen and expand its existing business in the different regions. The growth strategy will be supportive to increase its revenue and market share (Doyle, 2009). Thus, the initial focus of the company will be on market penetration and later on the market development/ expansion.
External environmental Analysis – Influencing factors
External environment analysis is important aspect of the business plan to determine the factors impacting the business and know the competition level in the industry. In the context of GM Group of Innovations, the environment and industry analysis will help the company to understand various aspects, predicts and trends of the market.
Figure 1: External factors analysis
(Source: Self-made)
Political and Government aspects
The political situation in the operating regions affect directly on the drone business as regulation of unmanned flying devices restrain to its market growth. In 2015, the drone legislation was regulated in the United States of America by the government (Airware, 2018). The regulation in operating regions like North America and Latin America regarding flight maximum height, night flying prohibition, age restrictions to fly drone (above 18 years only), maximum distance to fly indirectly affect the business. At the same time, in Asia- Pacific, the license and permit are only require for drones fly above 150m below ground level and it needs to be in line of sight (Airware, 2018).
However, the political situation in Asia- Pacific makes the region a safe destination in the context of investment. In addition, Europe- Africa political instability and level of the corruption in Africa affects the business activities and high degree of business uncertainty which cause challenges for the business in the region.
Legal aspects
The legal factors towards compliance to drone rules and regulations are negatively affecting the drone and camera business. The legal obligation increases the cost of using the drones for business and commercial applications as well as for hobby and recreational purposes. The legal factors can impact on the use of drone.
Economic aspects
The factor such as recession, economic downturns, income level and disposable income, prices of raw material, and customers spending on new technologies are likely to the affecting drone industry players. For GM Group of Innovations, these factors can affect its sales of its products and business profitability in the different markets. The growth of GDP and rise in disposable income develop positive economic situation and increase the consumer spending which positive impact GM Group of Innovations. However, the changing economic aspects due to impact of global economy may impact the drone business.
Socio-cultural aspects
The factors like increase in educational level (science and technology) increases awareness level towards the new technologies and their use and more percentage of population having higher education positively affect the demand of such products which positively impact the AC camera and drone industry.
Technology factor
Technology factor shows to the extent of the technology awareness, research and development and automation that support the business operation. This factor is vital for drone industry. The operating region of Asia, Europe and America are highly advanced in technological aspects. GM Group of innovations can access advanced and emerging technology in these markets to focus on technological innovation for improving their products and in designing, assembly and testing abilities and can make use or technologies to reduce the cost of the business and to reach target markets.
Raise environmental awareness
The increasing awareness of the people regarding the environmental aspects and climate change may create better opportunities for the drone businesses. People have started to prefer the products and services which may have no impact or less impact on the environment as they are becoming more aware about the environmental protection and threats of climate change. The impact of drone use is less on the environment as the electrical battery used in this system does not generate harmful emission and also has environmental benefit over other aircrafts. This has changed the focus of people towards the use of drones (Smith, 2015) and they have preferred to start using drones for commercial purposes and residential purposes for homeland security (Floreano & Wood, 2015). However, it is also challenging for the drone businesses to consider the cost aspects while developing such products causing also an issue in terms of price sensitivity of customers.
Threat of rivals
The competition in the drone industry is high because a lot of companies are involved in this industry with competition based on price. But, there are few well known companies that have a good market share in the industry like DJI Innovations, Parrot, Aeryon Labs, cannon Inc., Sony corporations and many other small to mid-sized players which are developing low cost drones (Clothier et al., 2015). The competition is increasing in this industry continuously owing to its high growth potential and use in several applications in various industries. The free market composition has lower the barrier for the existing technologies companies to collaborate with start-ups contribute in elevating the level of competition.
Threat of Bargaining Power of Buyers
In the drone industry, the bargaining power of the buyer is low. On one side, the industry structure does not support the negotiation from the buyers on the other side, the emergence of DIY drone models and their increased use and also availability of low cost drones from new start-ups can increase the risk of buyer bargaining power in future for prices sensitive customers (Alam, 2015). Customers can have an option to choose from low, medium and high quality drone based on their application and purposes and can also go for low cost options.
Threat of Bargaining Power of Suppliers
In the drone industry, the power of the suppliers is low to moderate because drone are increasing their application in several distinct industries which has raised their demands for industrial mapping surveying and surveillance use in other business and commercial areas. This has increased the supplier bargaining power to some extent. Also, more suppliers are increasing to supply materials which are affecting their power to bargain. GM Group of Innovations can get its benefit as procuring the raw materials at the low cost and minimise the overall business cost (Alam, 2015). Therefore, it can be said that threat of bargaining power of supplier is moderate.
Apart from these major influencing external factors, there is some existence of threat of substitute products which is not very visible in drone industry as drones are considered itself to be a substitute product for traditional survey and surveillance tools and techniques.
Company resources and core competencies
The company business will focus on developing its resources to develop its competitive advantages. The company key resources are the pending patent on the aesthetic design of the drones and cameras, proprietary technical know-how for developing and monitoring the drones and cameras (Clothier et al., 2015), and their talented production engineers’ team.
To develop core competencies to support in achieving the corporate growth strategy and business unit level strategy, GM Group of Innovations seeks to invest in training program to promote a strong training to enhance existing skills and update knowledge. Also, there will be high commitment towards the R&D efforts to promote creativity and develop an innovation culture towards improving existing features and product performance and increase compliance to image quality standards and specifications. On the other side, the focus on the management will be to develop and maintain external relationship with government to participate and take benefits of new eco-friendly technology programs and initiatives supported by the government (Smith, 2015), and with suppliers and distributors for gaining access to resources and ensure its availability and with customers to gain their trust and satisfaction.
Thus based on the above points, GM Group of Innovations will place priority on the following core competencies listed below:
- Continuous access to resources (Bai et al., 2018)
- Competent workforce in drone technology
- Improved product performance and consistent high quality
- High R&D capabilities and innovation ability (Bai et al., 2018)
- Strong supplier relationship
- Strong customer relationship
- High image rating
Manufacturing and Operations strategies
The manufacturing strategy preferred by GM Group of Innovations is flexible manufacturing. This strategy will allow the company to adapt to market demands and customer requests and provide support in customisation of the products as per the required facilities. The flexible manufacturing system (FMS) strategy will allow the company technical engineers to run small batches to run and provide demonstration and make modifications to the offered products to match the desired standards and also to make changes in the production volume. This will help the company in making modification to the products as well as developing customised product with minimal time to market and minimal costs to gain a cost advantage (Chen and Barkaoui, 2014). The manufacturing strategy will be supportive to the operation strategies.
The operations strategies of GM Group of Innovations will lay down the allocation of resources for production and marketing, and focus on cost reductions. Considering the cost reduction, the backward integration will be pursued (Puranam et al., 2013) to have a control on the upfront cost associated with the installation of these equipments.
It is a critical aspect for a new business to develop a marketing plan. In the current competitive business environment, it is important for companies to have an effective marketing plan. The marketing plan of GM Group of Innovations will prepare in two steps. In the first step, it will plan on segmentation, targeting and position and in the second step it will prepare marketing mix.
Segmentation, Targeting and Position
Segmentation, Targeting and Position are significant marketing strategy of current business. It is mostly used marketing strategy to achieve the competitive advantage.
Segmentation
Segmentation is a process of dividing the market into the groups of customers. Under this process, customer groups are prepared on the basis of age, gender, family size or life cycle, income, occupation, education religion, race, generation, and nationality. For the new product, the company will target the customers based on different segmentation. Based on the demographic segmentation, the firm will segment the customers by focusing on education level as the educated people will be approached to make them influenced to purchase cameras and drones for personal and official uses (Dhebar, 2015). At the same time, income level segmentation will allow the firm to target the customers with medium and high income levels. At the same time, behavioural based segmentation will be used to segment the customers to purchase cameras and drones as the company will segment the customers who want to get the benefits of these products at personal and official levels.
Targeting
Targeting is an important part of the marketing plan to target the desired target segment to achieve the desired level of sales and access the customers. In relation to the cameras and drones business, the company will target the middle and high income level customers. At the same time, educated people will be targeted by the company as they have understanding of the cameras and drones and their utility. It will also target the people who want to get the benefits of these products at homes and offices and related fields like construction (Dhebar, 2015). To target these customer segments, the firm will use the differentiated target strategy because the product features will be changed for different segments as per their requirements and purposes of use. All the segments will be provided with the different features and benefits.
Positioning
It is the last element of the STP process that shows the specific product attributes. The product of GM Group of Innovations will involve two main attributes such as price and quality.
The positioning map of the company is below:
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The above positioning map shows that GM Group of Innovations will maintain its position between the high quality and low price. It means that the company will provide high quality in its product range. At the same time, the company will also keep its price low as compared to its competition. It will help the company to achieve the competitive advantage.
The marketing mix is a significant part of the marketing that helps the company to deliver the right product, sold at the right price, in the right place, and also allow the company to use the suitable marketing promotion tools. The marketing mix involves four elements such as product, price, place and promotion.
Product
Product is a major element of the marketing mix that refers to what the business is going to sell. In the business environment, product may be a good or a service. In this good is known as the physical product and service is known as intangible product. Product has some special features that that are helpful for customers to fulfil their needs. The product enables the organisation to fulfil the customers’ needs and want. In the context of cameras and drones and installation, monitoring and warranty service will be provided to the customers.
Price
In the marketing mix, price refers to how much a customer will pay for the product. GM Group of Innovations will set the price of its product according to the cost of the product and margin. For this, the company will use competitive pricing as after evaluation of the competitors’ price, company will decide its prices for the product (Leonidou et al., 2013). However, it will provide free of cost installation services to influence the buying behaviour in the initial year of operations.
Place
The place is the third element of the marketing mix that refers to how the company will offer its products for customers. It directly indicates to distribute channels of the products. GM Group of Innovations will follow the below process deliver the good:
Promotion
Promotion is a way communication the product in the market. The main aim of the promotion is to spread the awareness of the product in the market. Under the promotion strategy, the company selects the promotion channels and advertisements in newspaper and company website that helps the company to communicate the product in the market (Leonidou et al., 2013). GM Group of Innovations can select various channels of the promotion such as direct marketing, public relation, special offers and sponsorship and website promotion.
To develop resources and capabilities in GM Group of Innovation, it is essential for the company to sustain profits and achieve competitive advantage over the rivals in the operating marketplace. Referring Michael Porter’s model of competitive advantage, GM Group of Innovation seek to achieve the cost advantage to develop as a cost-efficient player in the AC camera and UAV drone system. Thus, the focus is on cost leadership strategy for this the company will develop its manufacturing capacity and capabilities (Saeidi et al., 2015) and through the approach of backward integration.
Also, the flexible manufacturing system (FMS) will be supportive in achieving economies of scale, enhance the operational efficiency and efficient resource utilisation while lowering the cost in design, design and development of camera and drone systems and product customisations with lower capital expenditure. In addition, the manufacturing strategy will help in better organisation of the working capital at a minimum level to help in gaining cost leadership.
Possible response tactics to the competition
Initially, the company will respond to the competition by keeping a focus on minimising its operational costs and maximising production and operational efficiencies to develop a grip in the competitive drone market. The response will be to offer customised production with minimal cost to penetrate the different market regions.
Also, the possible responses towards the growing competition when the company will be recognised by other competing firms then GM Group of Innovations will bring the change in the strategy under which the company is likely to pursue product differentiation by focusing on adding new features for different applications and providing high and consistent image quality from its AC cameras products. Under this, the company plan to invest and open its own Research and Development (R&D) lab to improve product quality and with better features and product performance and life and develop capabilities to meet the needs of large industries.
Another tactic towards competition of GM Group of Innovations will be to increase the speed of response against the competitor move. For this, the focus will be on innovation to explore and develop new products that harness the new drone technological trends for different household and commercial use and purposes (Floreano & Wood, 2015). The company will also take proactive steps to increase the number of models as per the consumer requirements to provide the potential customers with more selection choices and fit their requirement criteria and preferences. This will also include adding services for free demonstrations, longer warranty period, and other appealing features to keep the customer attracted toward GM camera and drone products. These responses will be useful in developing market competitiveness and increase the possibility of competitors to lose their customers.
The possible threat to business can be situation of future lower prices for drone system, growing competition from new start-ups and other technologies companies investing in drone camera and systems. This is due to the fact as it is an expanding industry with high demands and profitability in long-run.
The competition forms a major threat from the new players and existing technologies companies that are investing in drone technologies (Kuzma et al., 2016).
In addition, the existing competitors like Canon Inc. and Sony Corporation have a cost advantage because of its awareness of the latest technological trends, brand value, well developed R&D labs and financial stability to invest in drone technology and well developed value chain which reduces their digital marketing costs and they can pass on the advantage to its customer in form of lower products price.
The increase in regulatory costs, and change in drone technology are potential threats (Smith, 2015). Also, any further increase in bargaining power of supplier and customers can pose a threat to the company business.
In addition, the AC camera and UAV drone use by customers is affected as the legal and regulatory system and its use dependence on legal permission and rules which is also considered to be a threat in this business.
From a future perspective of the company, the threat also comes from the exchange rate fluctuations which can pose a risk in expanding the business in different market regions.
The business plan of GM Group of Innovations is not risk free considering the threats and external environmental factors like technology and competition in the drone industry. For this AC camera and UAV drone system as technological solutions plan, the major risk can be categorised into five relevant areas which needs to be considered by the company.
The first is products risk which arises when the product is not design and assembled as desired to meet the customer needs/ requirements (Kuzma et al., 2016). There might be uncertainty about how the finished product.
Another related risk is people risk which can arises due to non –availability of talented technological innovation aware and capable engineer in designing and assembling drones (Smith, 2015) in the region due to shortage or skill absence. This is a relevant risk as the business required and has dependence on specific workforce for designing, assembly and marketing role.
Third, there can be financial risk due to mismanagement, exceeding advertisement/ promotional costs or shortage of working capital. This risk can impact on the company plan to invest in R&D and to improve the products features, image quality, data security aspects and applications of models for different purposes,
Another risk can be market risk which occurs when the market growth and response is different from what is expected by considering the market external factors. These risks can affect the future investment decision of the company management in the operating regions
Lastly, there can be competitive risk to the plan as this industry is new and lucrative with growth potential (Clothier et al., 2015) where other competitors may also come with similar competing products to target same customer segments and high investments on advertisements and promotional activities.
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