Introduction
Business expansion is necessary since it helps the business transform and acquires a new market base. Extension of the business operations and product line allows the business to obtain new customers and create a reliable relationship with the customers. For TAG company to be progressive within the next five years, it must understand its internal and external environmental factors, running all possible activities to expand its audience. The factors affecting the business progress are identifiable through different models that identify the vital areas that influence the firm. Such models include the SWOT analysis, PORTER, PESTLE, and Ansoff models. These help the business program in the future by creating an elaborate plan that highlights the main points of concentration for the business (Klofsten et al., 2019). The company must identify the strategic challenges it faces in its operations and find alternative methods to improve its state and activities. Having a strategic plan for supporting the business for the next five years is appropriate because it gives the company a strong sense of direction.
Background Industry/Market Analysis Using Relevant Frameworks Tools
Population distribution
High population growth within the British Virgin Island increases demand for transport systems. The growing request for more transportation media expands the market for the automotive and other products that TAG motor sells. The information presented in the table below depicts the population growth over the years.
The population often migrates from rural to urban areas, creating a market for the items available in urban areas. The population rural migration is as depicted in the table below.
SWOT Analysis
A business that identifies and understands its strengths, weaknesses, opportunities, and weaknesses enjoy many benefits. First, the company acknowledges different ways it may increase its customer base by using its powers to increase its profits in the long run. One of the strengths of TAG company is its mighty brand name that spreads beyond the borders of the British Virgin Islands. The brand name attracts customers by assuring them of the quality of the motor products that the firm supplies. On the other hand, TAG’s weaknesses lie in the lack of strategic and robust online and offline media advertisement. Failure to run the promotion ideas leads to a decrease in active customers. After identifying the weakness in the lack of vigorous campaign models, the business must structure its operations to accommodate the advertisement strategies and increase the market penetration.
As the business extends its operation through product promotion, it must acknowledge the presence of the millennials and Generation Z as the primary sources of its customer base. The young generation is an opportunity the business may invest in by advertising to attract them to view and purchase the products. Conversely, TAG company’s underlying threats include intense competition from existing and upcoming rival businesses. Competition plays a critical role in improving business ideas and innovation. In addition, competition creates assurance of high-quality products. However, due to the outgrowing competition, the business market share decreases since the potential customer shifts from one provider to another. A strategic competition control system is critical for TAG to ensure continuous maintenance of the current customers.
PESTLE Analysis
This market analyzing model aims to analyze critical external business conditions that the business cannot control. Using the PESTLE model, the factors under research include the political outlook of the underlying market and economic, social, technological, legal, and environmental factors. British Virgin Islands’ political environment is stable and supports TAG’s existence since there are no unique cases of political interference with the business activities. Economic factors are other reasons that the business must consider when initiating and promoting their participation in the British Virgin Islands. The stability of the US dollar, which is the official currency used in the region, is consistent and rarely affected by other economic reasons hence suitable for the company’s use and investment. The primary consumers of the motor products supplied by TAG company are residents of the Island. The region’s social structure influences the number of sales that the company makes through a single financial year. The PESTLE model analysis helps the business select the most suitable market to settle and initiate their operations.
Ansoff Model
This model relays information by using a matrix that indicates the existing and new markets and the strategies that it possesses. The matrix is important because it depicts business situations by dictating the company’s past and future. TAG may use the matrix in the manner below to indicate its previous and current strategies to improve its market size.
Market Product
PORTER Model
The PORTER model focuses on discovering the tactics that competitors use to obtain a market share. The model researches the rivaling companies in the industry and seeks new market entrants. TAG company must use this model to analyze the impact of International motors company and Griffin Automotive limited company on the distribution of the number of customers. Such a model is important because it dissects all the skills that other businesses use to attract customers hence helping the user to create counter strategies to win control over the market. The PORTER mode indicates what customers seek and helps the business identify the appropriate suppliers to deliver the consumers’ demands. TAG company additionally acknowledges the substitute motor items in the market and creates a program to prevent a loss of the need to the rivals.
Business Canvas
A business canvas is a visual presentation of a business model that highlights the key factors that the business considers while running its operations. The process aids in decision-making on the most viable means of developing the business. The business canvas for TAG company should be as illustrated below.
Identification of overall objectives in-line with (defined) shareholder/stakeholder value; relevant KPI selection and justification; selection and justification of critical strategies
Shareholder’s/Stakeholder’s Value
The financial statements used in this analysis are the balance sheet, different sector profitability within the various product lines that the company offers, the cash flow projection tables, profit, and loss analysis, and loan repayment calculator. These schedules provide relevant information for the management to retrieve information about the company’s weaknesses and strengths. Acknowledging these factors that affect their operations positively and negatively affects the response process and decision-making on critical aspects where the company may focus on correcting its failures and seeking more prosperity. Financial statements provide historical data that aids in future decision-making processes. The data’s information is reliable since it indicates the interaction between previous decisions and business performance. Therefore, such critical information helps the company plan for its future by directing resources to projects that have previously positively impacted its progress. It is appropriate for firms to provide reliable information through the financial statements since all stakeholders use the information to make progressive decisions.
These financial statements are the key performance indicators and provide sustainable information for the parties seeking interaction with the company. Understanding the company’s general performance deeply through financial records facilitates the selection of the appropriate investment opportunities. Investors use the information provided by the statements to analyze the investment’s worth and the associated risks, such as closeness to bankruptcy. The key performance indicators include the balance sheet and debt to equity ratio, among other financial ratios that depict the firm’s monetary muscles. As the robust performance indicates, a good investment opportunity attracts more people to attach to the company since they see the potential in benefiting from its operations.
Key Performance Index
Employee Satisfaction
The business will ensure that the employees receive appreciation for their commitment to improving the prosperity of the business. There are different strategies that the business may use to encourage and motivate the workers. First, TAG company will motivate employees to engage proactively in promoting the progress of the business by helping them perceive a free and conducive environment to run their operations. A more significant asset to liability ratio is promising to the industry since it shows the presence of equity hence more stability within the business (Vlados, 2019). TAG company may conduct employee development programs to improve its operations and ensure that they are empowered to enhance the development. The employee satisfaction level is one of the indicators of business progress. Thus, TAG company must ensure that it has a great relationship with its employees to create a strong workforce.
Sector Performance
Another key performance indicator is the sector profitability information that displays the gains attributable to each of the company’s products. This plays a critical role in helping the investors and the management understand which product line is more profitable than the other. The table concludes the investments by relating the cost of providing an item with the revenue that it raises. By doing that, the table helps analyzers to determine the most appropriate good to invest in to gain more income.
Key performance indicators help the management highlight different areas that are strongholds of the business’s progress. TAG company provides the records to the public and ensures that they undergo auditing to eliminate any malicious transactions and determine whether the information processes are truthful and reliable. The data provided in the analysis shows that the business has a high success rate based on the records provided by the company.
Selection and Justification of the Strategies
However, at times strategic planning may be inefficient in determining organizational success and growth. Such failure to meet the business’s goals leads to an ineffective transition of the company from one financial period to another. Firms face various strategic challenges in their operations, thus hindering high success. Some of these strategic challenges facing TAG as per their financial records within the last five years include poor planning and allocation of resources, poor investments, lack of continuous and progressive assets increment, and inconsistent cash flows (Thorén and Vendel, 2018). An increased number of strategic challenges negatively influence the development of business ideas and prohibit the business’s extension from meeting an outstanding market ratio. It additionally affects the brand positioning since the number of investors approaching the company relies on the information that the financial statements provide.
The goal for any profit-oriented business is to maximize its profits while minimizing the cost attributable to the selling process of each product. TAG company has poor planning on the investments since it should be consistent in ensuring that the cost of running its operations remains in line to facilitate efficiency in growing the profit margin. The business increases its spending from 463,180 during the first year to 568,192 by the fifth year. An operating firm must ensure that it installs recent technological equipment to aid in regulating the total amount of money it spends on its operation. Specialized installation deducts some of the company’s cash from acquiring resources and effectively running the production processes. The firm should have specified approaches and models that expound the revenue but maintain low investment capital in the production processes.
There are different reasons why businesses possess business strategies in their daily running. First, the firm utilizes the design to create a friendly environment that encourages employee efficiency, resource management, department cooperation, products, and assembly. Such a strong business enjoys a competitive advantage over its rival companies. The different strategies that the industry should focus on in the next five-year period are cost leadership, differentiation, focused cost leadership, and focused differentiation. Cost leadership is where the business distinguishes itself from other firms by maintaining low costs in its operations or by lowering the prices for its products in the market, attracting more customers. Furthermore, the farm may utilize differentiation in its products by providing a different outcome in terms of quality that is different from the leading competitors. Differentiation attracts a unique audience and creates a strategic positioning for the business in the market. There are particular ways the TAG company may use to create a competition-free environment through differentiation. The company may develop unique procedures for assembling its resources to create the desired item. Differentiation is applicable through functional duties or other special brand processing procedures.
Additionally, the firm may use focused cost leadership in its operations to attract a broader market base. Focused cost leadership’s primary concern is the price of the commodities that the customers receive. It ensures that the selling price is less for customers, creating more revenue since most customers receive their demands at a relatively low price. The incorporation of focused cost leadership in the sales of a commodity by TAG company will build a reputable brand name that helps its target group to understand the company and purchase from them. The final strategy that the business uses is focused differentiation, where the company offers unique features to its product line, fulfilling the demand of a specific market segment. Suppose TAG company incorporates this strategy into its operations for the next five years; it will attain a particular group of customers demanding unique items to feel belonging to a specific class of people. Hence, the firm may draw more revenues and competitive advantage from such an audience.
Having well-articulated day-to-day business information helps the investor strategically define what product to promote and what day under specific conditions. The stakeholders must have easy access to daily transactional details to enhance a responsible attitude from the management regarding the proper administration of resources available for the firm’s operations. A fluent communication system between the finance department and other bodies within the firm daily creates a factual background for stakeholders’ impactful decisions to ensure adequate investment, allocation, and usage of the resources within the business’s environment.
Risk Assessment
Businesses’ strategic challenges hinder their progressive nature and interfere with decision-making by altering the information available to the management. The strategic challenges that TAG company is likely to face in the future include technological and informational risks. Lack of appropriate technology prohibits the business from acquiring the appropriate material to improve product diversification. The main causes of technological risks include wear and tear, depreciation or demand for products that require unavailable skills. A clear business plan must project on the expected depreciation in the future to help the business recover or acquire new materials. Technological risks have a high chance of occurrence either through breakdown or through being outdated TAG company’s management must have a clear outline on how they will control such risks in case of occurrence.
Informational risks occur when the business fails to acquire the appropriate information that supports wise decisions concerning their investments. The lack of detailed business information eliminates preparedness to control any event in the operations. Informational risks prevent the business from creative and innovative ideas, thus lacking product differentiation strategies. The company’s general performance decreases as customers get used to the products. Therefore, product differentiation is mandatory for the business in the coming years to prevent customers shift to other brands by meeting their preferences.
Financial Plans and Projection
TAG company must utilize the new operational strategies to manage its finances and increase the number of its sales. With the growth capital investment each year, the business must incorporate cost leadership strategies to increase the number of products they produce with more money. Cost leadership will help the company enjoy economies of scale due to high fund management through cost leadership (Xu et al., 2018). On the other hand, ensuring focused cost leadership will encourage the business to extract more money from their customer in revenues. Therefore, the company’s earnings are projected to increase within the next five years as more customers become more conversant with the low-cost commodities from TAG company. Cost leadership and focused cost leadership help the firm create and sell more goods, increasing more flow of funds in the business. The reports indicate that the costs of each item that TAG company supplies increases on each year. The company through cost leadership has to control the costs of these products to maximize its profits.
A business has to influence customers to consume its products, including those that demand unique items free from the basic ones. Providing different products from the everyday brands in the market to serve the same purpose gives the firm a chance to attract different people to consume its products. Widening the market base by increasing segmentation by broadening the product types by conducting product differentiation and focused product differentiation helps the business increase its cash flow. Therefore, the business projects to obtain high income from the customization of their products and differentiation from other similar items.
Recommendations and Conclusion
Recommendations
Despite the challenges business faces while delivering profound statements to their stakeholders, the managements may employ different strategies to control the stakeholder’s understanding and widen the market base. The research recommendations include a proper and effective communication system, compiling information in records that stakeholders understand, and improving cash management, among others. The company may constructively achieve its mission and vision by strictly adhering to these recommendations and satisfying all involved parties. These strategies help the business eliminate problems that hinder progressive development by tackling relevant issues during its operations.
Defined cost leadership and ensures that the consumers are satisfied in the long run since they obtain products at low costs. The process involves strict budgeting at the beginning of the financial period to ensure that every department is aware of the resources it will receive hence planning on the most efficient production means. Adequate finance management eliminates unnecessary budgets that may contribute significantly to increased expenditure. A controlled capital spending encourages people to invest in the business since there is a significant display of responsibilities (Pröllochs and Feuerriegel, 2020). The availability of a budget minimizes the number of unplanned expenditures from the industry. TAG company must ensure that majority of its stakeholders work tirelessly to maintain the level of business spending at sustainable levels that caution it from the verge of failing.
Cost leadership is essential for TAG company since it prohibits mismanagement and misappropriation of funds. A strict budget helps the business grow by affirming that all the funds the management budgets for fit in the appropriate expenditure circle. Cost leadership oversees that the management uses the funds allocated for spending by the finance department land into their respective areas to deliver the projected goals and objectives. Hence, TAG company needs to use the process to control the inflow and outflow of money within the organization.
Additionally, TAG company should incorporate debt management strategies to control the level of borrowing to finance the projects for the financial period. A high quantity of external borrowing creates a complex environment for the business to sustain its progress and meet its goals. The mission is to ensure increased profitability, and decreased borrowing increases the probability ratio for colossal prosperity (Xu et al., 2018). Debt management creates a stress-free environment for the creditors and creates an effective environment for the business to extend its operations. When there are minimal cases of borrowing, the firm can quickly clear its debts even through a single payment and still manage to survive in conducting its operations (Lacasa et al., 2020). Another benefit of debt management is that the business eliminates the stress of paying multiple creditors. The process creates a conducive environment for the business to run its operations and clears the pressure of dealing with different debt repayment dates.
Conclusion
Strategic planning is essential for businesses since it equips the management with the power to understand the process of creating a reliable environment for all the participants in developing a sustainable business. The process must be efficient in promoting employee relations, controlling the allocation and usage of funds, and creating a strengthened relationship between the company and its stakeholders. Proper communication between the parties better the interactions by ensuring that they are all satisfied with the existing business conditions. The business’s management plays a critical role in ensuring that every individual is comfortable in the surroundings. Strategic challenges occur when the management fails to account for every event occurring in the daily operations. The managers are the heads of the organization and hence influence the growth and business extension.
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