Introduction
Strategic
management has the crucial importance of providing a company’s long term
success. Development of successful strategies is an essential and a complex
task. Evaluation of company’s Strengths, Weaknesses, Opportunities and Threats
(SWOT analysis) can help as an instrument for forming management strategies
which can lead to a competitive advantage.
In this paper there are a number of strategies that are considered as
well as a possible changes in the strategy after evaluating how those strategic
moves can help Brazilian Mobile service overcome the competition and lead the
company in becoming a successful business in the global market.
The first part of the paper is an environmental scan
for the company indicating the most significant environmental threats and
discussing how the company should respond to each threat to ensure that the
impact to the business is minimal. Based on the environmental scan, the second
part evaluates the company’s strengths and evaluates how the company can
leverage these strengths so as to yield a competitive advantage in the
marketplace. In the the third part a significant competitor is identified
and some strategies are considered to evaluate how Brazilian Mobile Services
will compete against it in order to maximize profits and create value for
stakeholders. The concept of Katz and Simanekto (1997) about merger
or acquisition was chosen as a possible way to increase corporate
diversification and overcome
the competition.
The
fourth part assumes that the economy is in a state of decline or stagnation
requiring modifications to the strategy and then evaluates how Brazilian Mobile’s
strategy should be modified based on theThompson (et all, 2010) three strategic
alternatives. It also provides a justification of how to use their strengths to
reach the opportunities and therefore help the company continue to compete in
the marketplace even in a declining economy. The last part of the paper evaluates how global competition might
impact the business strategy (Birkinshaw et al.
1995; Buckley and Ghauri 2004; Malnight 1996) and determines that the
strategy of think Global and act Local is more appropriate to increase company’s
competitive advantage.
Environment
Scan
Brazilian Mobile Services is a
leading interactive entertainment software company for soccer teams in Brazil.
The company develops, publishes, and distributes interactive software about
Brazilian soccer team through mobile devices. The following SWOT (Strengths,
Weaknesses, Opportunities and Threats) analysis was drawn up to give a better
idea of the Brazilian Mobile’s environment.
Figure 1:
Analyze SWOT
|
Strengths
|
Weakness
|
|
·
Flexibility: High
technology accessibility via mobile cell phone, combined payment facilities provide superior value
proposition
·
90 million Brazilian
soccer fans(*)
·
Acquisition of one
significant soccer team in the portfolio, attracting the customer base
·
Strong market position
enhancing the brand image
|
·
Customer concentration
increasing risks and reducing bargaining power
·
Only one team in the portfolio
|
|
Opportunities
|
Threats
|
|
·
Increased focus on
online gaming services Growth in mobile spending will strengthen Company’s
core market and revenues
·
Strategic partnerships
with gaming developers can expand subscriber base and improve market share
|
·
Intense competition
·
Free and low cost
alternatives
·
Short lifecycle of
products
|
* Source: Rank Brasil
Flexibility is one of the strengths
of the company because the fact that Brazilian Mobile can provide high
technology accessibility via mobile cell phone, combined with payment
facilities given a superior value proposition. Also the company's portfolio
includes Flamengo, which has more than 29 million fans (Rank Brasil, 2011).
Flamengo strong market position gives it to Brazilian Mobile Services strength
to enhance its brand image.
However, as the only one team in the
portfolio, it concentrates increasable risks reducing bargaining power for the
company. In other hand, although Brazilian Mobile Service faces intense competition
and free low cost alternatives in the software market which could lead to
pricing pressures thereby adversely affecting the revenues and market share of
the company. The market still shows a lot of opportunities as increased focus
on online gaming services and growth in mobile spending can still strengthen
Company’s core market and revenues.
The following figure shows in which environment
the company are inserted and how the competitors, new competitors, suppliers,
consumer and substitutes interact with Brazilian Mobile in this environment.
|
New
En free and low cost alternatives and media organization as
|
|
Substitutes: such as motion pictures,
television, social networking, online casual entertainment and music
|
|
Rivalr
|
he company operates in a highly
competitive industry. It competes for the leisure time and discretionary
spending of consumers with providers of different forms of entertainment, such
as motion pictures, television, social networking, online casual entertainment
and music. It also competes with numerous companies which develop and publish
mobile applications locally and globally. These competitors include Activision Blizzard,
Capcom, Eletronic Arts Inc, , LucasArts, Midway, Namco, Sega, Take-Two
Interactive, THQ and FingerTips.
Diversified local media companies
such as Globo TV, and Record News are also expanding their mobile software
publishing efforts with information about soccer. Also, the company competes
for license agreements and royalties for the device manufacturers’ platform. If
the company is unable to renew its expired platform licenses with these device’s
manufacturers due to stiff competition it will adversely impacts its future
product development. Intense competition may lead to pricing pressures thereby
adversely affecting the revenues and market share of the company.
In order to avoid this
competition Brazilian Mobile Services will invest in marketing to increase
awareness about the differentials of their applications and also work hard with
the device manufactures to somehow create an exclusive channel with potential
customers. Finally as a Brazilian base company the company has a shortage of
employees to develop and provide technical support, given the low number of
technologic schools those future employees are very difficult to retain in a
company. Therefore the company is developing a training program in partnership
with the best Universities to get in contact with potential employees before
they go to the market.
The
company is subjected to threat form free and low cost alternatives such as other
mobile applications that are sponsored by companies making the application free
for download. Again the marketing plan is going to face this challenge to
increase awareness about the technological advances that Brazilian Mobile Service
can provide combined with exclusive information about their soccer team which
makes Brazilian Mobile Services the best option among the competition.
The
interactive entertainment software market is characterized by short product
life cycles and frequent introductions of new products (Day, 1981). However the
key is to focus on the soccer team while the technological issues are being
improved. For example the company might upgrade the game available in the app
but the principal character will always be the soccer team.
Competitive Advantage
The
availability of the information thought mobile phones combined with exclusive
information about a chosen soccer team can provide superior value proposition. With
more than 29 million supporters, Flamengo has Brazil’s largest amount of soccer
supporters. With this team in our portfolio the company has substantial
competitive advantage while the service also has a potential base to grow and enhance the brand image. The
company operates an internet based subscription model which has done away with
many disadvantages experienced in the traditional outlet models. An increased
number of customers opt for Brazilian Mobile application as it is convenient
way to follow their team. Apart from this, the company enjoys additional
competitive advantages. Brazilian Mobilize can provide a wide range of information
about soccer teams which is not possible for other competitors as they contract
with teams to access the information. For instance nowadays most soccer fan get
their information about their team from newspapers or specialized web sites,
however none of them provide exclusive information about a single team as
Brazilian Mobile Service does while giving priority access to events and
information. The company’s technology enables customers to sort through the events
easily which is almost impossible to do in the traditional model. In the applications
customers have access to exclusive games and interactive channels with other
supporters. Customers have to pay a fixed monthly subscription fee and there
are no due dates attached, no late payment fees and other fees. Brazilian
Mobile’s business model provides customers with the most convenient way to view
games at the time they want and the ability replay any time. The business model
that Brazilian Mobile operates gives it a considerable competitive advantage. Revenue
sharing relationships with distributors reduced investments for content
acquisition. The company has revenue sharing agreements with the distributors
and content providers. Under these agreements, the company pays a low initial
amount to obtain the content and then shares the revenues from subscription
fees with the content providers or pays a fee based on content utilization.
This provides the advantage of procuring content at a low cost and an
additional amount has to be paid only if the subscribers use or view the
product.
The
company offers a free trial period as a promotional offer to attract new
customers. The company also provides content streaming through many consumer
electronic items such as PCs or LG and Samsung devices. These consumer
electronics partners are also engaged to assist in generating new subscribers. As
the company gets more subscribers the acquisition cost can be reduced,
therefore invest in marketing programs in acquiring new subscribers can reduce
costs and increase revenues.
Profits and Stockholders
Brazilian
Mobile’s financial condition has been getting better since the start-up of 2
years ago. The company reported increasing revenues; however, the company
initial investments in operations had reduced net profits. The fact is that the
company reported operating gains in the first two years, but due to the initial
investments, the company reported net losses in the same period. As a result of its strong operational
performance, its cash and cash equivalents increased in 2011, compared to 2012.
For the current period Brazilian Mobile strong revenue performance continued
which combined with decrease of initial required investments has increased its
investors’ confidence. With continued strong financial performance, and
decrease in the initial investments, the company will increase net profit and start
to look for acquisitions.
The
company’s high dependence on only one soccer team will reduce its bargaining
power. Further, as a result of the economic downturn, retailers globally
continue to take a more conservative stance in ordering mobile applications.
The concentration of its sales in one, large customers (in this case Flamengo
Soccer Team) leads to a short-term disruption if these team suffers any problem
that make their supporters to significantly reduced their purchases or ceased
to buy the company’s products. Customer concentration makes Brazil Mobile more
vulnerable to collection risk if for instance Flamengo declared bankruptcy.
Our
biggest competitor and also leader in the Brazilian market is Fingertips, they
were the first Brazilian company totally focused on the market for iPhone
applications. However, Fingertips biggest competitive advantage is the fact
that they boast Bradesco bank and the City of Rio de Janeiro as customers. Bradesco
bank is one of the biggest Brazilian banks with more than 10 million costumers
all over Brazil (Lipschulttz, 2000; pg 54), while Rio de Janeiro has population
about 6 million plus tourists, (City
Mayors, 2005).
In
order to overcome the competition Brazil Mobile is focused in areas that no
other company has developed services. A partnership with another software
company would open our portfolio and spread our risk through other market
segments, basically Brazilian Mobile could experiencing a round of corporate
growth via merger or acquisition. According Katz and Simanekto (1997),
merger or acquisition could increase corporate diversification which is one of
the most common methods firms choose when expanding. The first acquisitions
could be made using short-term debt and latter the company could go
public. Equity capital could provide a "war chest" of funds with
which to finance other acquisitions. Additionally, those acquisitions could
improve operations by bringing new, more effective management while increasing
the portfolio and therefore generating gains in revenue and profits.
Modified Strategy
Sometimes the even most promising strategies
can face difficult realities of life in a stagnant or declining market. An
appreciation of these realities is critical because strategies that run counter
to them nearly always fail, while successful strategies are consistent with
market conditions. Aware of the situation, the first thing we can do is to
adopt a set of goals consistent with the market opportunities, and to measure
company’s performance on the basis of return on investment. However the
unpleasant reality is that competition is usually more intense in stagnant
markets than in those that are growing rapidly, because company growth can be
achieved only at the expense of others therefore competition increases. Also
product improvements in the manufacturing process, design, quality etc can make
possible the development of a new market and new demand.
If Brazilian Mobile Services sticks
with a declining industry then according to Thompson (et all, 2010), there are three
strategic alternatives: Pursue a focused
strategy aimed at the fastest-growing within the industry, Strive to drive
costs down and become the industry low cost leader, Stress differentiation
based on quality improvement and product innovation. Perhaps the best way
to avoid some of the unpleasant realities in a stagnant industry is the first
alternative which concentrates on growth segments. However, the question is how
to identify the growth segment, and how to make sure that the company will not
face increasing competition? Another alternative is cost reduction, which
according to Hammermesh and Silk (1979) the most common way to achieve lower costs
seems to be by improving the manufacturing process. However in the Brazilian
Mobile industry one of the challenges is the fact that the industry has many
other alternatives that most times are free or in a very low cost. Therefore
even if Brazilian Mobile Services strives to be a low cost leader the company will
still face high levels of competition.
Finally Stress differentiation based on quality
improvement and product innovation seems to be the best alternative for
Brazilian Mobile Service to deal with a declining and stagnant industry,
because in this way the company will be allowed to align their strengths to the
opportunities. In this way Brazilian Mobile Service’s strategy would change
from providing solutions for Soccer clubs to participate in the mobile market to provide
rich interactive game experiences with a Brazilian environment. For instance high-quality innovative
games, offering better image quality and more Brazilian environment with
flexible payments could grow rapidly and achieved the highest margin of all other
applications. With technology also more expensive than traditional technologies
most software producers will be unwilling or unable to invest in either the
research or the capital equipment necessary to compete in this segment. Thus
this innovation might provide higher margins in a segment with few competitors. Further evidence that high quality
and innovation are particularly important in stagnant industries comes from
analysis of the 1,000 businesses in the PIMS [profit impact of market
strategies) data base. For all these businesses, higher product quality is
associated with a larger return on investment, but the relationship appears to
be most significant in stagnant markets.
Global Competition
The globalization of the world economy
has pushed many organizations, particularly software and mobile applications
companies, to rethink how they compete in this expanded market. The
increasingly interdependent financial, product, and labor markets are all advancing
at a different paces towards a “globalized” system (Buckley and Ghauri 2004).
Internet
increasingly promotes a global environment putting Brazilian Mobile Service in global competition. Company’s global strategy
is largely driven by three structural forces: economies of scale, comparative
advantage, and standardized markets (Birkinshaw et al. 1995). Therefore adopting a global strategy
is crucial to create highly interdependent network. Brazilian Mobile Service global
strategy is thus characterized as developing competitive advantage through
operating in interdependent national markets by exploiting differences in
national resource endowments, the flexibility of independent subunit networks,
and economies of scale and scope, as well as learning (Malnight 1996).
Based on the strategy of thinking Global
and acting Local, the Local market orientation will be underscored by
increasing depth of local market knowledge will lead to higher levels of global
market penetration. The company will
continue working with sports team, in South Africa for example the focus maybe on
rugby because of the games popularity in that country. Although the sport might
change to a local environment the global strategy and the product itself will
not change so much, thus the features will be pretty much the same changing
only by language and local preferences. When coupled with the ability to adapt
to cultural diversity and affinity to
the local market intermediaries’ aspirations to extract common denominators for
many markets, this will likely lead to higher degrees of strategy effectiveness
(Solberg 2000).
Conclusion
To understand the company’s environment it is very
important, however, more than that to understand how the strengths and
opportunities convey to each other as well as how weakness can be treated can
help to develop a strong strategies that can give a competitive advantage for
the company. The company must use their strengths to overcome the competition
and establish their position in a market. Therefore by doing so, the company
will be able to increase market share and profits.
However
sometimes the initial strategy does not work very well and changes must be
considered about continue in the business or not or even changing the focus of
the business can help companies to overcome stagnation while they discover a
more efficient way to run the business or even change the product by increasing
technology and quality. Nowadays
companies are becoming more global, especially in software and applications
development and everything is done on the internet through mobile services which
are available worldwide. Therefore it is important to consider a global
strategy even knowing that the company is now working only in a local Brazilian
environment. Business is in a state continuous change therefore companies must
evaluate their performances and their strategy constantly to go ahead of the
competition and have successful performance.
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