STRATEGIC ANALYSIS

by admin on April 29, 2009

in ASEAN

This project paper will utilise analytical tools such as PESTEL to review the present macro-environment of the mobile hand-held PCs industry, and employing competence to assess the attractiveness of the consumer electronics industry notably handheld PCs, for long term sustainability and profitability. From the analysis, this paper will construct optimistic and pessimistic scenarios for the industry in ten years from now, the key trends in the environment will then be identified, how the industry works and the position of Palm, Inc. within the industry can be ascertained. The paper then moves on to assess Palm, Inc.’s espoused strategy with regard to its suitability to international competitiveness, during which SWOT analysis will be used to re-examine Palm, Inc.’s internal capabilities in relation to the strategy being followed, an overall analysis of the company’s performance in terms of financial, marketing, operations and human resources will also be conducted to assess and compare Palm, Inc.’s capabilities with those of its competitors. Gaps in the capabilities and environment, with respect to Palm, Inc.’s business strategy can then be identified.

Finally, several choices of strategies to reposition Palm, Inc. as ASEAN’s leading player in hand-held PCs, will be recommended and evaluated in terms of appropriateness to the issues reviewed, feasibility in carrying out the options and acceptability within the key stakeholders and decision makers. Several key implementation issues related to managing strategic change will also be addressed as well.

INTENDED LEARNING OBJECTIVES

By delving into this project paper, the author intends to have better anlysis about the status of the industry for the next 10 years and insights on typical entrepreneurial issues, i.e. how strategies are thought up, formulated and then imparted down into its subsidiaries. Utilizing strategic analytical tools such as PESTEL, SWOT and employing competence analysis, the author hopes to have an in-depth understanding as to how Palm, Inc. as an organization is able to compete effectively and profitably in this era of internationalisation or for the next ten years where competition is extremely intense.

Two key focal issues were focussed upon i.e. innovation and diversity. Innovation is discussed with regard to strategic change where Palm, Inc. is renowned for its research and development and manufacturing capabilities to constantly innovate. Diversity comes under strategic thinking and formation as the company must consider the diverse culture, political climate, economic surroundings, social environment, technological settings, government policies and legal systems in reposition its strategy to become a leading player in the ASEAN region. Palm, Inc. is a leader in mobile computing and strives to put the power of computing in people’s hands so they can access their most important information. Perhaps the most significant development to come from the consumer electronic industry is the growth of mobile computing that allows users to browse the web, access e-mail and files without being linked to a wired personal computer.

OVERVIEW OF PALM, INC.

Palm, Inc. is a business entity specializing in mobile computing. Its products enable its customers to put the power of computing in their hands, along the process accessing the information they need. Palm, Inc. was established in 1992 by which later co-invented the Palm Pilot (, 2001).

In 1995, Palm, Inc. was acquired by U.S. Robotics Corporation. In June 1997, Palm, Inc. became a subsidiary of 3Com when the U.S. Robotics Corporation was acquired by 3Com. As its subsidiary, 3Com then made Palm, Inc. an independent company on March 2, 2000 through a public trade under the ticker symbol PALM. In August 2003, the company renamed its hardware division to palmOne, Inc. In April 2005 palmOne was bale to buy PalmSource’s share in the ‘Palm’ trademark for about US$30 million. Then just last July 2005, palmOne launched its new name and brand going back to Palm, Inc. and trading under the ticker symbol PALM ( 1997).

METHODOLOGY

A. PESTEL ANALYSIS

Political Trends

The possibility of the occurrence of political and electoral crises within ASEAN region will be helpful at all to Palm, Inc.’s strategy to solidify its top position in the mobile computing industry. While the implementation of AFTA promotes common tariffs among member countries, other non-member countries will have no choice but to follow the individual national tariffs imposed on their products. Nevertheless, Palm, Inc. should view the liberalization of the mobile computing industry as an opportunity rather than threat as the earlier issues have identified (. 2001).

Economic Trends

The possibility of the occurrence global recessions brought about by companies closing down and the loss of jobs may have a direct impact on Palm, Inc.’s strategy of dominating the world market. Also, there are huge differences in terms of the GDP per capita earnings among the ASEAN member countries. This situation should make Palm, Inc. ponder about its positioning strategies in certain ASEAN countries ( 1989). And from this, there is a large possibility that the organization will sustain its progress for the next ten years.

Social/Cultural Trends

With the rise in the middle to upper-middle class households in certain countries within the ASEAN region, there exists a strategy mismatch for not considering the potential for consumer market.

Technological Trends

There is a need for Palm, Inc.’s business strategy to be aligned to any revolutionary technological changes impacting the mobile computing industry.

Legal Trends

The company has to be aware of any changes in terms of government legislations within the ASEAN member countries.

B. SWOT ANALYSIS

Strengths:

* Palm, Inc. has products that boast of a very powerful retail. This includes a reputation for value of money, convenience and a wide variety of products
* Palm, Inc. has grown significantly over the years, and has experienced global expansion.
* Palm, Inc.’s main competence lies on the use of information technology (IT) to fully support its international logistics system. Therefore, Palm, Inc. can see how their individual products perform within the United States, or even at stores at a glance. IT also supports Palm, Inc.’s efficient procurement.
* Palm, Inc. is able to deliver good customer care, as the limited amount of work would mean plenty of time to devote to customers.
* Palm, Inc.’s lead consultants have established a strong reputation within the market.
* Palm, Inc. can afford to change direction quickly if its management finds that the company’s marketing strategy is not effective.
* Palm, Inc. has little deficits and overheads. Therefore the company can offer good value to customers on a consistent basis.

Weaknesses:

* Palm, Inc. is one of the world’s largest company in mobile computing and but has a weak control of its empire, despite its IT advantages. This could lead to a decrease in productivity in some areas where they have the least control of.
* Since Palm, Inc. sell products across many sectors, the company may lack the flexibility that some of its more focused competitors possess.
* Palm, Inc. operates globally, but its presence is located in only relatively few countries worldwide.
* Some of the company’s weaker branches lack market presence or reputation.
* Some of the company’s personnel still lack the essential skills base in many areas.

Opportunities:

* Taking over, merging, or forming strategic alliances with other IT companies while focusing on strong markets like Europe or the Greater China Region.
* The opening of new locations and branches offer Palm, Inc. the opportunities to exploit market development. This could lead to the diversification of the company’s branches from large super centers to local-based sites.
* Opportunities exist for Palm, Inc. to continue with its current strategy of establishing large branches worldwide.
* Palm, Inc. is continuously expanding, with plenty of future opportunities to exploit for success.
* The local councils of Palm, Inc. are in the process of encouraging local businesses with work whenever possible.
* The competitors of Palm, Inc. may be slow to adapt to new technologies especially the ones that Palm, Inc. releases.

Threats:

* Being number one means that Palm, Inc. is the target of competition, the company to beat, both locally and globally.
* Being a global retailer means that Palm, Inc. might be exposed to political problems in the countries where the company has operations.
* The production costs of most consumer products have the tendency to fall because of lower manufacturing costs. Manufacturing costs fall because of outsourcing to low-cost regions around the globe. This phenomenon could lead to competition in prices, which in turn would result in the deflation of prices in various ranges. Intense price competition must definitely be considered a threat.
* The latest developments in information technology which could possibly change the markets might challenge the company’s ability to adapt to these changes

C. EMPLOYING COMPETENCE ANALYSIS

a. Financial Competence

In the fiscal year of 2003, Palm, Inc. was able to experience a significant progress in several key metrics. The inventory was reduced from $55 million to $23 million and inventory turns rose from 12 to 26. The cost of revenues, excluding the benefit from previous special charges and the applicable portion of the amortization of intangible assets, decreased from 72.3% of revenues to 67.8% of revenues. The combination of sales and marketing, research and development, and general and administrative expenses was reduced from $ 435 million to $339 million, while at the same time improving on the pace of innovation. Palm, Inc.’s total revenue has approximately grown from $1 million in fiscal year 1995 to $ 871. 9 million in fiscal year 2003 ( 2002).

b. Human Resources

Palm, Inc. knows that its future depends on the company’s ability to attract new personnel and retain existing personnel in key areas including engineering and sales. None of the company’s employees is subject to a collective bargaining agreement. The company considers its relationship to its employees to be good. As of June 30, 2003, Palm, Inc. has a total of 982 employees operating within a company organization structure. is the current President and CEO of Palm, Inc., while is the current Chief Technology Officer (.1997).

CAPITALIZING ON KNOWLEDGE of the MARKET

The Palm, Inc. directors could capitalize on their knowledge of the market through the continued pursuit of their company’s competitive advantages, namely:

· Economies of Scale and Scope in manufacturing and research and development arising from its numerous facilities situated in the United States and other countries worldwide.

· Differentiated Products

Through the production and marketing of differentiated products originating from their research and development activities, Palm, Inc. is able to create its own firm-specific advantages. The continuous pursuit of research and development processes enables Palm, Inc. to produce a steady stream of originally differentiated products which makes it difficult for competitors to find substitutes. Because of this differentiated approach, Palm, Inc. is able to market their products worldwide, which enables them in turn to maximize the returns on research and development expenditures ( 1997).

KEY ELEMENTS FOR EXPANSION

For Palm, Inc. to be a viable player in the mobile computing industry for the next ten years, the following elements for expansion are critical:

· Financial Stability

Financial stability is crucial especially in the pursuit of research and development activities. In the mobile computing industry, it is important to remain updated with the latest technological developments to be able to stay competitive in the market.

· Marketing Strategy and Distribution

High brand awareness among the buyers has created the need for aggressive marketing, and access to strong distribution channels is critical for the introduction of new models (, 2001).

OVERCOMING LACK OF CAPITAL INVESTMENT

Palm, Inc.’s strategy for overcoming lack of capital investment in the mobile computing market lies on product differentiation. The differentiated Palm products are able to satisfy the needs of customers through a sustainable competitive advantage. This allows Palm, Inc. to desensitize the prices of their products and instead focus on the values that generate not only a comparatively higher price but also a better margin (, 2002).

UNDERSTANDING of BUSINESS MANAGEMENT ISSUES

Palm, Inc. is committed on its efforts to continuously develop original technology that generates a high appeal to the general public due to its quality and cost effectiveness. Over the years, Palm, Inc. has been able to build and is continuing on building a strong management team meant to boost the company’s understanding and analysis of the current business management issues in the mobile computing industry (2001). This enables the company to bring to markets truly original and more importantly mobile devices that are reasonably priced and able to meet the demands of the consumers and possibly sustain the progress of development for the next ten years. The Palm, Inc. directors and the rest of the management team of Palm, Inc. also play a crucial role in the achievement of this feat. The company also believes that making a positive impact in the society through their quality products is the very essence of being a manufacturer.

RESTRUCTURING ISSUES

Palm, Inc. has now and then been involved in various mergers and alliances with other mobile computing companies in its bid to become an even more dominant force in the mobile computing market. Along with these alliances comes the inevitable situation of restructuring among departments and management. Palm, Inc. sees restructuring as an integral part towards upgrading the operations of their company. This is done through the careful examination and analysis of the cultures and expectations of the two merging companies. When this is achieved, the smooth bonding and team-up of employees and management can be expected.

CORE STAFF MEMBERSHIP

The extra person that Palm, Inc. should hire is a Strategic Alliances / Development Officer. This person will be responsible for the establishment of the Palm Economy and attract more developers to Palm, Inc. Other responsibilities of this position include corporate development, strategic alliances, platform-growth strategies and developer relations. This position will be crucial since Palm, Inc. relies on expansion to dominate the mobile computing market. This will also ease off the load and pressure to other members of the Palm, Inc. management team as a specific individual will be in-charge of the overall strategic development of the company (,1993).

RECOMMENDATIONS
A. Business Level Strategy

To sustain the development of Palm, Inc. for the next ten years, there is definitely a need to reconcile both the inside-out and outside-in capabilities. While Palm, Inc.’s business strategy involves focusing on its core competencies with market position following its resource base, the company will be possibly put into a disadvantageous position should it choose to neglect both the macro as well as industry environment. Therefore, Palm, Inc. has to be aware of the latest technological changes, as well as changes in political, economic, legal and even demographic trends in order to develop the outside-in capabilities, such as market sensing, customer linking, channel bonding and technology monitoring ( 2002).
B. Corporate Level Strategy

Understanding the strategic importance of its subsidiaries is something Palm, Inc. has to be familiar with. Palm, Inc. normally practices a centralized and globally scaled configuration of assets and capabilities among its subsidiaries. This allows information dissemination to be retained at the corporate headquarters of Palm, Inc (, 1995).

C. Network Level Strategy

There are various strategic options available for Palm, Inc. These are enumerated as follows:

· Tie up with various local telecommunications company

· Collaborate with either Microsoft or Compaq

· Alliances with leading players in technology such as suppliers

CONCLUSION

The results of the PESTEL analysis carried out on the macro-environment of the ASEAN region indicated very significant effects for the mobile computing industry, even amidst the threats of political unrest. Therefore, we could conclude that the mobile computing industry could still be expected to grow faster than average. Through this trend, stable status of the industry for the next ten years is possible.

The review of Palm, Inc.’s employment competence revealed very little inconsistencies regarding the company’s strategies. This is coherent with Palm, Inc.’s traditional inside-out approach. However, the need to reconcile both the inside-out and outside-in approaches becomes imperative now for Palm, Inc.

The SWOT analysis among the environment, strategy and capabilities of Palm, Inc. revealed certain gaps, most of which are biased towards the environment. However, these gaps paved the way towards determining a number of recommended strategic options to secure Palm, Inc.’s international competitiveness.

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STRATEGIC ANALYSIS

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