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Organisational Strategy refers to the sum up of the actions which a company takes in order to achieve its long term goals. These objectives help in the growth of a company and its long term sustainability (Watson, 2013). This report is based on Denso Corporation, which was established in 1949 and is headquartered in Kariya, Japan and provides facilities of vehicle testing in terms of passenger security and harmful emissions. It covers a detail analysis of the external environment and industrial attractiveness. It also includes analysis of its internal resources and capabilities and stakeholders' perspectives.
Macro-environmental factors are those external elements that influence how a company functions (Hillson and Murray-Webster, 2017). For understanding the effects of Macro-Environment Factors on Denso, PESTLE Analysis is the most appropriate approach which is mentioned below:
Illustration 1: PESTLE Analysis
Political Factors: Political Factors includes mainly the policies of the government which affects the working of a company. Major operations of Denso are in developed countries like Japan, Europe, Singapore, where Political condition is stable. This scenario provides more concern upon providence of the operations with the minimal impact upon environment that creates opportunity in front of an organisation to develop new systems for instance Artificial Intelligence and Emission Control System, to ensure maximum safety towards environment and optimum security of cars in Automobile industry (DENSO AI: Artificial Intellegence Supporting People, 2019). However, there are various countries like UK which couldn't provide the firm stability in its operations due to political instability which is a major threat for the firm as changes in policies also tend to change in methods, import prices and policies that might not be favourable.
Economical Factors: These are the factors which includes the economic growth, inflation rates, exchange rates which affects the working of Denso. For instance, quite recently the firm is planning to expand its operations in Christian County, Missouri, United States investing $3.5 million that would help them in creation of 45 jobs. With progressing economy in the US, the company is willing to get support from the local government which could be an opportunity for the company as this will help to setup their business easily (DENSO Air Systems plans $3.5M expansion in Hopkinsville, 2017). However, the company faced a lot of troubles in countries like the UK and India due to events like Brexit and Demonetisation respectively. These events could be a threat for the firm economically as it enhances the risk for potential economic loss.
Social Factors: Social Factors are those factors which a company has to accomplish for the society in which the company is established. Denso is also working upon their contribution to the society as the company is undertaking some activities in order to resolve the issues of local public such as harmony with the environment, ensuring safety and security in communities, and the human resource development. This will creates opportunity for an organisation to become leader in world. However, there are various threats present in this factor as well. For instance, in the automobile industry, there are various companies like Ferrari, Lamborghini and Toyota which prefer testing their vehicles at their own facilities. This enhances the threat for the firm as there is a huge risk that this company will be preferred by less companies.
Technological Factors: In this factor, the innovation in technology is included as these changes can affect a company favourably and unfavourably. The company is creating innovation in its products more faster than other companies. The continuous innovation of R&D Department in its products makes Denso different from others. Artificial Intelligence has deeper roots than those which are already discovered which is a major opportunity for the company to determine effective ways of product testing. The technological threat that the company might face are the cyber breach and technological infringements by other companies that could gain a competitive advantage over Denso and disrupt its image.
Legal Factors: There are various legislations imposed by governments regarding customer safety for instance National Traffic and Motor Vehicles Act in the US that requires vehicle manufacturers to ensure effective safety to the passengers of their vehicle (National Traffic and Motor Vehicle Safety Act, 2019). Such legislations are an opportunity for the firm as it would help them to comply with such laws effectively. However, there are legislations that govern environment too. There are emission standards set by the United States that detects the maximum emission that could be emitted by a vehicle (Emission Standards United States. 2019). There might be cases that some companies use defeat devices to clear their vehicle from such legislations. If these companies have been associated with Denso in any manner, this could get the firm in legal trouble.
Environmental Factors: The affects of this factor is necessary to understand because it is related to the environment on which the production process of Denso creates bad effects such as pollution, emissions of harmful gases. However, it is true that company is now moving towards protecting the environment by its several programs such as “ECO VISION in which the company set three targets which are Energy, Clean, and Green. Also, the company is promoting ten actions in order to achieve these targets. In addition to this, the company is also using that technology which reduces the emission of harmful gases such as CO2 in the environment. Currently, the company is working and testing their products in order to make them eco friendly and make the environment safe and security of the customers using the cars. The threat is that there are chances where technology could fail to provide effective benefits to the environment which will affect the corporate social responsibility of the firm towards society and the nature. This might hamper its future growth completely.
Industrial Position: Porter's Five Forces Analysis helps in getting an information and evaluation about the competitive strength and position of Denso in the industry (Cárcamo and et. al., 2014). It focuses on five components and by doing analysis on these, the position of Denso in the industry can be easily known. The explanation of these components are as under:
Competitive Rivalry: The company is dealing in a very competent environment as there are many companies doing the business in this sector like Valeo, Bosch etc. (ENSO's Competitors, Revenue, Number of Employees, Funding and Acquisitions, 2019). TThese companies apply various different technologies and resources that could effectively enhance their competence and somehow make them better than Denso. This enhances the threat of existing competition for this company. Overall, the threat which is associated with Denso in case of such situation presented under industry is moderate that allows them to perform and grab sufficient amount of market share.
Threat of New Entrants: In the automobile industry, the innovation and the amount of finance required is very high in order to stay in the market. However, due to its popularity, there are various investors that could invest their resources for new companies to enter this industry. But since the firm is quite established this weakens this threat of new entrants. So the threat level is low for Denso.
Threat of Substitutes: Automobile industry is perhaps one of the largest industries of the world and has various sectors with multiple product lines. Denso apart from providing effective testing also deals in component supplying of safety and eco-friendly resources. There are various companies like Manufacturers of Emission Controls Association (MECA) that deals in environmental protection in vehicles (TECHNOLOGY FOR A CLEAN MOBILITY FUTURE, 2019). Such companies could be effective substitute of Denso and thus, the threat of substitutes is high for the firm.
Bargaining Power of Buyers: The main buyers of this company are automobile companies like Toyota, Lexus, etc. and their bargaining power is low as as Denso provides technologies which are unique and limited in the market. So in order to take advantage of the technology of Denso, the buyers must gave to pay the prices. Moreover, the company is having a large customer base, which reduces the power of individual buyers to influence prices. Thus, the bargaining power is high for Denso.
Bargaining Power of Suppliers: The suppliers of the firm are individuals providing them raw materials for testing such as assorted building materials and effective electrical supply. Denso is operating at a very large scale and having a number of suppliers which reduces the power of handful buyers to fluctuate the pricing. The raw material used is available with a number of suppliers so it is easy to acquire which reduces the switching cost. Thus, suppliers' bargaining power is weak in case of Denso. assignments australia
Internal Resources and Capabilities
To analyse whether Denso's internal resources and capabilities are sufficient to have the competitive advantage, the most apt method would be VRIO Analysis. This technique could be used in order to analyse the strengths and weaknesses of the internal resources and capabilities of Denso (Spithoven and Teirlinck, 2015). The Analysis focuses on four major dimensions which are Value, Rareness, imitablity, and Organised to Capture Value. The firm has various resources like monitoring systems like Surround Monitoring Electronic Controller Unit and Driving Assist ECU, Smart ECU and Image Capturing Technology. These resources help in ensuring passenger safety as well as effective environmental protection.
Value: When a resource is valuable to the company, it is providing some benefits to the organisation. Surround Monitoring Electronic Controller Unit is quite valuable for Denso as it focuses on the safety of the customers which is the prime agenda of the company. Moreover, this technology accomplishes the mission of auto-mobile industry to produce vehicles that could guarantee maximum safety to the customers.
Rareness: It refers about the rareness of the resources available to the company. It is imperative to determine this aspect as it could provide the Denso with effective competitive advantage if the company has multiple resources as such. The Image Capturing Technology of Denso is quite rare. This is because it controls the lighting of vehicle's internal cabin as per the climatic conditions outside. This is quite a unique resource and is unavailable with other testing companies which enhances its rareness. Other competitors cannot exploit this resource of Denso.
Imitability: It reflects as to what extent the resources of the firm could be imitated by other companies. If the resources are imitable, the firm has temporary advantage until that resource is replicated. However, if it is too costly for the same, Denso will have a tough time organising itself. Driving Assist ECU and Smart ECU use effective AI and automation to assist drivers in driving in a safe and risk-free manner which is difficult for companies to imitate. Smart ECU however also assists in emission controlling. With enhancements in environment safety, this resource more or less could be imitated by other companies. Denso could clearly gain an advantage from Driving Assist ECU as it is non-imitable.
Organised to Capture Value: When the resources of an organisation are properly organised, it creates the chances of exploiting the opportunities for the company and also further improvement in them if needed. The technologies introduced by Denso are perfectly organised and each resource holds special significance in terms of safety testing and environmental protection. The structure of Denso provides it the ability to utilize resources and take the opportunities. The technology is also for the betterment of society and preventing the environment so it can be said that Denso will have sustainable competitive advantage.
Stakeholders' Perspective: Stakeholders are those people who have their particular interest in the organisation. There are two types of shareholders in a company, i.e., internal and external stakeholders. Internal Stakeholders are those one who are internally working and interested in the organisation. External Stakeholders are those who are outside the organisation and having their interest in the organisation. In case of Denso, Shareholders and Employees are taken as the internal stakeholders and the external shareholders are the Suppliers and the Customers.
Shareholders: These are the persons who are get the dividend from the company for the shares that they purchased. They are interested in getting more dividend from the company. Their perception towards Denso is that the company makes those policies which maximises the wealth of the shareholders. Moreover, they perceive that they get effective and consistent value of their investment by the decisions taken by the company.
Employees: Employees are those persons who work in the organisation. They can contribute in achieving organisational goals by understanding their individual goals and performing them with full efficiency that gives the accurate result. They perceive effective working standards, proper equipments to work with and training programs that could help them in achieving personal growth. Also, they perceive that Denso takes care of their personal agendas in an appropriate manner as well.
Customers:Customers are those persons who are the buyers or consumers of the products of a company. The customers of this company are automobile companies like Toyota, Chevrolet, etc. Their perception towards the company is that it provides good quality products and at affordable prices that fulfils their agenda of passenger and environmental safety.
From the above given data, it can be concluded that the effect of the macro environment factors are not affecting adversely to the company and by doing the PORTER's Analysis, it is clear that Denso is also having competitive strength. The technology that it had introduced makes it internally capable. Also, the stakeholders of Denso are also contributing towards the achievement of organisational goals.
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