Part A: Strategic Position
The Macro Environment
An examination of Leax group’s Macro environment as informed by the pestle analysis shows the factors affecting the company’s operations (Johnson, Whittington, Scholes, Angwin, Regnér, 2014) . The political factors include legislations on environmental laws on pollution and carbon footprint levels. There are also laws regarding the quality of goods like bureaus of standards’ approval of products (Johnson et.al. 2014) . There are also trade regulations for foreign countries with contract laws, acquisition laws and operation guidelines varying from one country to another and tax rates (Dima, 2015) . The economic environment is characterized by the foreign exchange rates, the demand, and supply status and the cost of the factors of production. The social environment encompasses the demographic composition, the unionization and socio-cultural factors (Dima, 2015) . The technological environment of LEAX includes their Leax control system, machines, and a skilled IT department. The ecological factors include the environmental conditions like temperatures, pollution levels, natural resources and the availability of renewable and non-renewable resources (Gobetto, 2014) . The legal factors include product safety regulations and labor laws.
Industries and Sectors
The industries and sectors in the LEAX Group’s scope of business can be examined through Porter’s five forces framework (Johnson et.al. 2014) . The five forces include the threat of entry, threat of substitution, bargaining power of buyers, bargaining power of suppliers and the threat of rivalry. The threat of new entrants to the automotive manufacturing industry is relatively small because of the high barriers to entry (Gobetto, 2014) . The high starting capital and strong distribution networks required to enter the market limit new entrants. Additionally, the high brand equity enjoyed by existent firms and their high economies of scale makes it hard to venture into the industry since customers rely on a strong brand name in the automotive industry. Therefore, there is no threat to the Leax group from new firms (Johnson et.al. 2014) . The threat of substitution is relatively high considering that there are many car brands other than those manufactured by LEAX Group which consumers can buy instead of the company’s products. There is no substantial threat to the motor vehicle industry apart from the modern trains, and the escalating fuel prices could lead to less use of motor vehicles though they cannot be fully substituted (Gobetto, 2014) . The bargaining power of the buyers is relatively high. They have different manufacturers to choose from so they are in a position to bargain for lower prices. The bargaining power of suppliers is average (Johnson et.al. 2014) . Since most parts in assembling the vehicles go together, the cost of switching suppliers is high which makes LEAX stick to specific suppliers which could lead to monopolization. However, the suppliers are many in the manufacturing industry (Dima, 2015) . This makes their bargaining power neither too high nor too low. The threat of rivalry is intense. With so many international players in the market, the competition for larger market share is stiff.
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Competitors, Markets, Opportunities and Threats
The competitors in the car manufacturing industry come from both the automakers and the auto part makers (Johnson et.al. 2014). The auto part manufacturers include original equipment manufacturers, replacement parts distributors and producers and rubber fabricators. The major competitors for the LEAX group include Robert Bosch GmbH, Yanfeng Automotive Trim Systems Co. Continental AG, Hyundai Mobis, ThyssenKrupp AG and Autoliv Inc. Markets for the Leax group include the commercial vehicles, and automotive which involve the provision of shafts and gears to companies like Volvo and Scania (Johnson et.al., 2014).They also supply parts like threads and splines to the mining and construction industry with their customers in this sector including Sandvik, Volvo and Atlas Copco (Puranam & Vanneste, 2016). They also have markets in agriculture and the general industry as well as in the Telcom sector where they have customers like Huawei, MTN, and NERA (Melewar & Alwi, 2015). Opportunities for the company include innovation of fuel efficient parts, increased market share in Asian and Bric markets and making strategic partnerships for economies of scale (Johnson et.al., 2014). The threats include fuel prices, the stiff competition, economic uncertainties and the high fixed costs in research and development.
The Strategic Capabilities
Strategic capabilities refer to the resources at the organization’s disposal for cultivating a competitive advantage and value increment (Johnson et.al., 2014). The foundations of capability include the resources and competencies. Resources refer to the assets available to the organization while competencies are how these resources are used. The LEAX Group has resources physical, financial and human resources (Dima, 2015). The physical resources include the factories in Germany, Sweden, China and other parts of the world as well as machines and computer systems (Melewar & Alwi, 2015). The financial resources include the company's cash flow and funds from their customers while the human resource comprises theirs over 1200 employees, the management, and all their stakeholders.
The VRIN capability assessment criteria use v alue, rarity, i nimitability and non-substitutability to diagnose a company’s capabilities (Puranam & Vanneste, 2016). The LEAX group’s strategic capability adds value since it takes advantage of opportunities and neutralizes threats, adds value to customers and is cost conscious (Dima, 2015). The company’s pricing strategy, its product diversification and custom made products as per the customers' directions offer high-quality products to customers while its globalization increases the economies of scale lowering the product costs (Johnson et.al., 2014). The rarity of the company’s strategy is seen in their conservative financial strategy. It does not use factoring which enables the business to receive payments 60-90 days later which they employed during the 2009 crises to stay afloat while their competitors experienced limited cash flow (Gobetto, 2014). The inimitability aspect involves having strategies that competitors can’t imitate or substitute. LEAX group’s inimitable factor is the culture and history of the organization which has earned the company strong brand equity that can only take years to build (Johnson et.al., 2014). The no substitutability of resources is evident in the production process. The company tailor makes parts as per clients’ preference and equipment types.
The Diagnosing capabilities through the value chain analysis help pinpoint the activities that add value and those that are redundant (Gobetto, 2014). The primary and support activities are examined for their value in the business process. The inbound logistics are the activities geared towards receiving, storing and disseminating inputs. Operations convert inputs to outputs while outbound ensure goods reach the market (Puranam & Vanneste, 2016). Marketing and sales involve the promotion of goods and services, and the support activities complement these primary activities. They include procurement, human resource management and technological development (Dima, 2015). LEAX group’s value chain analysis shows that all the activities are adding value to the production and marketing process as evidenced by the profit margins at all stages of the process.
Strategic Purpose
The organizational purpose refers to the guidelines that inform the direction a company takes in the strategic planning process and overall running of the organization (Gobetto, 2014). LEAX group's mission is to produce high-quality components and subsystems for their clients. Their vision is to become the world´s best supplier of advanced machining and industrialization products. Their major corporate value is “The day we cease getting better is the day we stop being good” (Johnson et.al., 2014). Their objectives are; to reduce high dependency on individual customers and to increase their economies of scale through specialization (Dima, 2015). They also aim to improve their IT solutions and to enhance long-term strategic work. The corporate governance refers to the structures and systems that hold managers accountable. The organization follows the stakeholder model of governance whereby shareholders (Gobetto, 2014). Corporate responsibility refers to the commitment of an organization to act ethically and give back to society. The LEAX group has a set code of conduct aimed at ethical business practices (Johnson et.al., 2014). They are legally compliant, insist on transparency in business dealings, and give precedence to human rights and environmentally friendly practices (Dima, 2015). The corporate responsibility is seen in the company’s dealing with the 2009 crisis. They reduced the number of workers and slashed salaries by 15% but built a school to improve employers’ skills as per the union’s directive.
Culture and Strategy
Organizational culture refers to the collective values shared by members of an organization while strategy relates to the actions undertaken to achieve company goals (Johnson et.al., 2014). The organization was started in 1982 by mechanics Lennart Berggren and Alex Seger.They started off with 19 employees, but they currently employ over 1200 people. At inception, the company was reliant on short-term contracts until 1998 when Roger Berggren and turned the company’s strategy around (Dima, 2015). His new strategy entailed acquisitions and long term contracts which were accompanied by energetic leadership, revamped lean and high-quality production and improved manufacturing technology. The culture of the LEAX group is characterized by values like shareholder value creation, production of high quality and high standards of customer relations (Johnson et.al., 2014). The culture is important in the organization strategy because it acts as the glue that holds the organization together. A shared culture enhances the ability of workers to work together harmoniously (Dima, 2015). Positive organization culture is also important in projecting a positive corporate image and identity which is crucial for customer retention and attraction.
Part B: Strategic Choices
Business Strategy
A strategic business unit refers to a particular supplier of goods and services who works under a bigger corporation (Johnson et.al., 2014). At LEAX, the strategic business units are in agriculture, mining and construction, general industry, Telcom and heavy and light vehicles. The competitive strategies applied by the company include their product differentiation (Melewar & Alwi, 2015). The dedication to quality, ability to produce in bulk and the provision of tailor-made products for their customers within set deadlines sets them aside from their customers (Gobetto, 2014). Their pricing strategy is also lower than their competitors a factor that is facilitated by the diversification in the production process and the location of their factories near their target markets (Johnson et.al., 2014). The diversification and specialization enable the company to realize economies of scale, reduces the labor cost and transportation costs which eventually affects the price of the final output (Dima, 2015). The interactive strategies mix the production of high-quality goods and competitive pricing of the products.
Corporate Strategy and Diversification
Corporate strategy refers to the frameworks put in place with the aim of adding value in the business process (Johnson et.al., 2014). The company has embarked on value creation activities through envisioning which involves the establishment of a common goal for the different production units throughout Hungary, Brasil, China, Sweden and Germany and all their subsidiaries (Dima, 2015). The company has also engaged in coaching programs to sharpen the employees at all levels’ skills and increase their productivity. The company invested SEK 4.6 million into building education facilities in 2009 (Johnson et.al., 2014). The company also provides central services and resources from the parent company based in Sweden. The company’s strategic direction is based on diversification, entry into new international markets and radical innovation of the present products (Johnson et.al., 2014). The company uses the BCG Portfolio Matrix. The BCG matrix uses market share and market growth as the determinant factors for lucrative business portfolios.
International Strategy
Internationalization refers to the diversification into new geographical markets (Puranam & Vanneste, 2016). The geographical sources of advantage that drive companies towards the strategy include; untapped markets, the potential for cost advantages, government influence and counter competition (Dima, 2015). Geographical proximity, as well as the value market configurations, is also a determinant. International strategies can either be multi-domestic, global or transnational (Johnson et.al., 2014). The LEAX group's international strategy is global with operations in three continents in Asia, Europe, and South America. The Market selection and entry mode of the LEAX Company are through acquisition and claiming full ownership of factories (Gobetto, 2014). LEAX in 2013 acquired plants in Sweden, Falkoping, Tidaholm, Hungary and China.
Innovation and Entrepreneurship
The innovation dilemmas that face organizations include the technology versus the market pull (Melewar & Alwi, 2015). On the one hand, the companies want to maximize on their technological edge while on the other hand, they may want to consider the market preferences (Johnson et.al., 2014). The organization is therefore torn between prioritizing the market needs or their scientists’ recommendations (Dima, 2015). They are also faced with the product vs. process innovation. Product innovation concentrates on the final product while process innovation centers on the production process. Innovation diffusion refers to the way innovation spreads among users (Puranam & Vanneste, 2016). The LEAX innovation diffusion is on the tipping point of the diffusion S-Curve (Johnson et.al., 2014). The company is an innovator and not a follower and comes up with their product concepts.
Mergers, Acquisitions, and Alliances
The LEAX group has made some acquisitions over the years (Johnson et.al., 2014). Their first acquisition was in 1989 of a small manufacturing company named Åke Ohlsons Mekaniska followed by a 1996 acquisition of Kuggservice in Köping (Johnson et.al., 2014). They acquired the Arkivator Industry and Arkivator-Exir Telecom which gave rise to LEAX Arkivator Sweden, LEAX Arkivator Telecom, LEAX Hungary and LEAX China (Johnson et.al., 2014). The company also acquired a site in Falun from Scania in 2011.
Part C: Strategy in Action
Evaluating Strategies
The current strategies of the LEAX Group are suitable. They address the threats and opportunities that the company faces in the industry and work on capitalizing on the opportunities and defeating the threats (Johnson et.al., 2014). The strategies are acceptable because they meet the expectations of stakeholders which include profit maximization and increased share value. The level of risk is acceptable since the benefits outweigh the losses in case of any in eventualities (Dima, 2015).The likely returns are acceptable because they cover the cost of production and all the other costs incurred in the production and distribution processes. The strategies are feasible because they are workable in practice, are financeable, and the people and the skills required are obtainable.
Part D: Summary Insights
As a group, the analysis of the case study of the LEAX Group has made the members more insightful on concepts like the business environments, strategic capabilities and positioning and strategic purpose (Johnson et.al., 2014). We have also learned about different business strategies, corporate strategies, entrepreneurship, and diversification and how these strategies are applied in businesses. The group has learned about the need for cultivating a competitive advantage for increased profitability and to attain a bigger market share in the competitive world (Dima, 2015). The need for a strategic plan to guide the business process has been emphasized by this analysis and the imperativeness of market assessment before making any business decisions.
References
Dima, I. C. (2015). Systemic approaches to strategic management examples from the automotive industry . Hershey, PA: Business Science Reference.
Gobetto, M. (2014). Operations management in automotive industries: from industrial strategies to production resources management, through the industrialization process and supply chain to pursue value creation . New York: Springer.
Johnson, G., Whittington, R., Scholes, K., Angwin, D., & Regnér, P. (2014). Exploring Strategy: Text and cases . New York: Pearson.
Melewar, T. C., & Alwi, S. F. (2015). Corporate branding areas, arenas, and approaches . London: Routledge.
Puranam, P., & Vanneste, B. (2016). Corporate strategy: tools for analysis and decision-making . Cambridge: Cambridge University Press.
