Dyson company is an organization that specializes in manufacturing vacuum cleaners, fans, dryers, spare parts and other accessories. Although the company is a major player within its industry, it is not listed on any stock market because it is privately owned. The company’s success is attributed to the good leadership of its owner, James Dyson. To understand the company’s position on the competitive chart, it is crucial to conduct a SWOT analysis. Moreover, Porter’s five force analysis will demonstrate the nature of the environment within which the company operates.
The SWOT analysis framework evaluates a company’s strengths, weaknesses, opportunities and threats (Abbass, 2003). As such, the analysis can provide a company with crucial information that can guide it in strategy formulation.
One of Dyson’s greatest strengths is its innovative ability. The company has consistently innovated its products, which enables it to be ahead of competitors in terms of product development. The innovative capability has been enhanced by the company’s closed system, where information concerning product designs is highly guarded. Using a closed system is beneficial because core competencies of an organization remains within the boundaries of the firm (Carpenter and Sanders, 2007). As a result, competitors find it hard to imitate the products of the company.
Secondly, the company has a large sales and distribution network that can allow movement of products to around 45 countries. The existence of such a network is essential to the company because any new product can reach a wide market at a fast rate (Cavusgil, Ghauri and Agarwal, 2002). When competing with a firm that has a limited network, Dyson can deliver new products to the market faster than the competitors and secure a large portion of the market share.
Dyson company employs a diverse, skilled workforce that includes experienced and fresh employees. The diversity within the workforce is crucial in nurturing creativity and innovation. While the experienced workers provide their knowledge to the company, the fresh workers provide the company with unique current trends knowledge. The employees at Dyson are encouraged not to think along the normal lines, but think outside the box to enhance their creativity. Encouraging employees to take risks in their work motivates and empowers them to increase their effort. The support the company provides to the employees in their quest to create new and novel products emphasizes the importance of eliminating customization (Armstrong and Kotler, 2011). While the competitors may not be willing to take risks in their product design and development, Dyson thrives on taking such risks since they often pay off.
Since the company is privately owned, its financial sources are limited. This can be disastrous, especially when the owner cannot afford finances required to drive the company to success. At such times, the competitors who are publicly traded may have a competitive edge over Dyson. Publicly traded companies are financed by the shareholders and are unlikely to lack funds compared to privately owned companies (Palenchar and Heath, 2008).
The company’s success relies to a large extent on its patented technologies. The fact that patents expire creates a point of weakness that can be exploited by competitors to imitate and use the company’s technology (Cavusgil, Knight and Riesenberger, 2012). When such imitation occurs, the company may lose valuable competencies and competitive capability.
Dyson can harness its growth in the emerging markets to increase its market share and profitability. The organization’s current markets offer little opportunity for growth. The chances for growth are only found in the emerging markets where consumers have disposable income and need products (Czinkota, Donath and Ronkainen, 2004).
To enter foreign markets, Dyson can initiate acquisitions of local companies in the target market. Such a move would allow the organization to penetrate the market easily and earn the trust of the locals. In addition, the company is likely to benefit from the established structures of the acquired firm.
The leadership of James Dyson has contributed to the great performance of Dyson Company. The exit of the leader from the company’ leadership poses a threat to its future because it may fail to maintain its uniqueness. Lack of visionary leadership at the company may reduce the company’s ability to create innovative products.
The changing government regulations in various markets around the world may inhibit the company’s progress. For instance, if the Malaysian government increases the minimum wage, Dyson’s operations in that country will be negatively affected. The increase in labor costs may prompt the company to hike product prices, which may repel the customers from using the company’s products.
The porter’s five forces framework comprises of bargaining power of suppliers, existing rivalry, threat of substitutes, potential entrants, and bargaining power of buyers (Porter, 2008).
Many companies such as Hoover, Electrolux and Miele, exist in the market within which Dyson operates. All the three companies are larger than Dyson, which is an indication of how fierce the rivalry is among the competitors. These companies, including Dyson compete for the same market share to sell their products. Therefore, the market is very competitive with numerous players.
Suppliers of raw materials are few compared to the demand from various companies. As a result, the suppliers have the bargaining power to decide the prices at which to sell the raw materials. Consequently, Dyson’s decisions are curtailed by the suppliers’ decisions. The relocation of Dyson’s manufacturing plant to Malaysia indicates how powerful the suppliers are. Despite a lot of criticism, the company had no choices, but to relocate the manufacturing plant from the United Kingdom to Malaysia.
From the case study, it is evident that the competitors have tried on several occasions to imitate the products of Dyson. Although they have not succeeded, they have created products that function in similar ways to those manufactured by Dyson. These products from competitors that serve the same functions as those from Dyson represent threats of substitute.
The existence of many large companies has prevented the entrance of new companies through various means. First, the large companies have developed economies of scale, which enable them to manufacture products at a lower price than a new entrant (Herzog, 2010). Secondly, the companies have extensive distribution networks and have taken up most of the markets, limiting the market share for new entrants. However, changes in the market may occur and allow new entrants into the market.
The bargaining power of buyers increases when there are numerous companies selling products in the market (Julia and Colin, 2008). The buyers have alternative products from competing companies and can bargain the prices. Although there are numerous companies in the market, Dyson has been able to maintain high prices for its products. To cushion itself from losing customers due to high prices, the company has focused on providing consumers with superior quality products that seem to warrant the high prices. However, the market has buyers with a lot of bargaining power because of the available product alternatives.
Strategic options refer to the many methods available to an organization to achieve its goals (Hetten, 2011). For Dyson company, there are two main options available and include growth and competitive strategies.
Currently, Dyson operates in 45 countries in the world, a small number in relation to the size of the world. The products the company manufactures can be sold to any country in the world because their use is universal. Therefore, entering new markets, especially in the growing economies is an option available to Dyson.
The second growth option for Dyson is creating new products and selling them to its existing market. This option would increase the size of its portfolio to maximize on the existing distribution channels. The objective is to maximize on the production capability (Kulatilaka, 2009). Once the capability is maximized, the unit cost of production reduces.
In addition, the company can use its existing technology capabilities to create novel products that can solve existing and emerging problems. By creating new products to solve emerging problems, the company will have created a new market (Kurtz, 2010). Consequently, it will become a market leader in the newly created market.
Full utilization of the current distribution channel is another option available to Dyson. This strategy aims at pushing any products that can pass through the channel to the market (Lee, 2009). The objective of this option is to leverage the various products in the channel.
Currently, Dyson uses the quality and innovation strategy options to edge out its competitors. The creation of innovative products has ensured that the quality surpasses customer expectations (Mumford, 2008). However, the organization cannot continually rely on the same strategies since market forces are constantly changing. Therefore, the firm must identify other strategic options to remain competitive.
The first competitive strategic option for Dyson is creating speed capabilities to deliver products that have been ordered by the customers. This option is useful when competitors are slow at delivering orders to the customers (McMillan, 2002). The strategy aims to create convenience for customers by reducing the hustles involved in acquiring products.
Secondly, Dyson can opt to offer excellent support services to consumers as a competitive option (Jerrie and Steven, 2011). The firm sells products that require constant repair and assistance in their application. Although the support service has no direct value to the company, it earns a good reputation and guarantee that products meet the needs of the consumers. Excellent support service entails proper guidance to customers on the usage and installation of the products. Consequently, the consumer feels valued by the company and may develop customer loyalty. Loyal customers cannot be swayed easily by competitors, which means that the company that earned their loyalty is assured of their continued support (Yen-Hao and Soe-Tsy, 2010).
Dyson may focus on low cost to attract increased sales volume. This strategy is suitable when the organization wishes to enter the developing countries (Mun, 2006). The levels of disposable income in these countries are low and cannot compare with those in the developing countries. Therefore, low cost strategy ensures that the firm can acquire a large market share based on its reduced product prices. Focusing on low cost while providing high quality products ensures that customers prefer the company’s products to those of competitors. The high sales volume generated by this strategic option may counteract the low profits created by the strategic option.
Out of all the strategic options available to Dyson, entry into new markets is the best growth strategy. Implementing this strategic option requires Dyson to either acquire a firm in the target market or form a strategic alliance (MacLennan, 2011). The acquired organization will provide Dyson with an easy route into the target market. Entry into foreign markets may be curtailed by regulations that favour domestic firms (Selden, 2011). Acquiring a domestic firm eliminates such barriers. The acquired organization has established channels of distribution, which Dyson can use to distribute its products to consumers. Although only one growth strategy is recommended for Dyson, a combination of several competitive strategies can be utilized in the chosen market.
Since the recommended target market is in developing economies, low cost strategy would be the best competitive strategy for Dyson. To implement this strategy, the company needs to use existing competitors as benchmarks to determine how low to set the prices (Mintzberg, 2007). Dyson has economies of scale and can afford low prices compared to local competitors in the new market. Therefore, the organization will be able to set the price at a level that the local competitors cannot afford. Consequently, the firm will gain a large market share and establish its capabilities as the market leader.
The company can increase its chances of success in the target market by offering support services to its customers. The economies of scale that the company has over its competitors can allow it to incur costs related to support services. The support services will be a competitive advantage because the local firms may not afford to offer such services. Consequently, customers are likely to prefer Dyson’s products because of their ease of use. When customers frequently prefer a company’s product over those of other firms, they become loyal to the organization and ensures that it receives repeat business. Having loyal customers in the international market is essential because competitors may not persuade them easily. To achieve the objective of offering support services, Dyson can set up service centres in various major markets in the market. These centres should have support employees who can respond to the customers’ queries. In addition, the organization should create a support mobile phone number so that the small issues that may not require the technical teams can be solved over the phone through explanations and clarifications.
Another competitive strategy that can support the market growth strategy is the total utilization of existing distribution channels. Managing supply chains is a difficult task that can hinder a company’s success. By using its current distribution channel, Dyson can deliver products to its new market without incurring huge amounts of money on creating entirely new distribution channels. The chance offered by the current distribution channel can create a huge difference between the profits and revenues of two competitors.
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