PESTEL analysis
Requires you to strategically investigate a worldwide corporation. The case selected for the portfolio is the Thales Group.
Thales is a French multinational organisation operating in different industries. It primarily builds electrical system and provides services in aerospace, defence and transportation market. The company operates in more than 56 countries and has a workforce of 64,000 employees. It is the tenth largest defence contractor of the world. It has an international subsidiary, which contributes to a significant amount in revenue generation. Basically, the company deals with the manufacturing of electronic equipment for the aerospace and the defence industry. It is a multinational company, which designs and delivers high quality solutions in the area of aerospace, ground transportation, defence and security. In the present report, and analysis of the strategic moves and tactics of the company has been conducted.
The arm industry is the global manufacturing industry dealing with the sale of weapons, research and development, engineering and production building. In the present, the impact of the external factors on the armed companies has been analysed.
Political factors: The arm manufacturing and trade is a complex industry with different divisive policy areas. There are several bodies, which request the ban of the whole industry as they consider that the defence trade is unethical. There are several polices imposed on the arm industry as the companies cannot determine, which actors are actually transferring weapons and the supply chain is getting long and complex. A large number of developed companies have formed a treaty, which controls the export and international trade of arms. France has also applied a domestic arms control regime which establishes rules and procedures to trade in military technology and equipment (Sakas, Vlachos and Nasiopoulos, 2014). The government encourages the companies to share information regarding arm manufacturing and supply to the international bodies. It has taken several measures to prevent and control illicit flow of weapons in different countries. The Australian government supports the research and development in the arm industry (Saeidi, Sofian, Saeidi, Saeidi and Saaeidi, 2015). Recently, Thales has partnered with Australian Universities to design new age submarines.
Economic factors: In the arm industry, the economic profitability of the production plays a key role in the large-scale production of the defence products. The government and the firms benefit a lot by selling the armed equipment in large quantity. It reduces the unit cost. Also, if the item is procured by the other country’s armed forces, it reduces the overall cost to the company and increases the profitability. In the present, the arms and defence industry is characterized by high concentration of production activity within small number of corporate organizations. It has monopolistic market structure and few companies fight to attain maximum market share. The economic factors have little impact on the trade of arms industry as the buyers are the government, who are needed to make a robust armed force for the country (Taber, 2013). It is a major company in France and provides several jobs, as a result, the government supports the operations of the organization.
Porter’s five force analysis
Social factors: The social factors refer to the current trend in the external market, which impacts on the operation of the company. Thales is globally recognized as he to brand in the manufacturing of arms and electronic devices. It has operations in over 120 countries with 3500 customers. It also emphasizes employee engagement. In France, the company has in-house university, which supports employee training and development at all stages of their professional and personal growth (Schilke, 2014). However, in the past few years, the company has faced corruption charges. In 2004, World Bank blacklisted the company as it was found to be engaged in fraudulent practices in Cambodia.
Technological Factors: The arms and defence technologies is one of the most sophisticated technology equipment trading company. It uses cutting edge technology to develop sophisticated products. The arm industry has to constantly indulge in research and development to design innovative products (Tantalo and Priem, 2016). In the current, the company has production facility in the France, the USA and Australia. As a result, the company can access excellent infrastructure and technology in these countries. In Australia, the company has established a production facility at a small town; however, it has established adequate infrastructure for adequate transportation of the raw material.
Legal factors: In the arms manufacturing industry, there is several numbers of laws applicable in the manufacturing and international transfer of the arms. There are also several laws related to prevent corruption in the industry. The USA, France and Australia are part of international framework, for the international trade of the weapons.
Environmental factors: There are a large number of environmental laws and factors, which might impact the operations of the company. However, Thales has promoted itself as an environmentally responsible company and uses product and system design in its operations. The environmental laws present in the USA, France and Australia are strict. Australia has established various laws to protect coral reef and indigenous community. It also emphasizes the strategic environmental programs which increases the sustainability of the organization (Albrecht, Bakker, Gruman, Macey and Saks, 2015).
Major competitors and positioning:
There are several competitors of Thales; however, the major competitors are Rockwell Collins and SAAB. The Rockwell Collins was established in 1933 and had headquarters in Iowa. The company generates $7.2 billion higher revenue than other companies. SAAB is also a top competitor, which has headquarters in Stockholm. It operated in defence industry and generated about 20% of the total revenue (Datafox, 2018).
It is one of the largest arm manufacturing companies. The French multinational company is known to be innovative and highly productive. It has a sound financial backing and operations over hundreds of countries. It has made a distinguished position for itself in the commercial, defence, space and the service industry. However, in the recent times, several competitors such as Boeing has emerged; therefore, the company is trying to become more productive.
Bargaining power of Suppliers: The supplier of the company is electronic manufacturing companies and metal suppliers. Thales heavily depends on its supplier for raw materials for the production of arms and electronic equipment. The raw materials are not limited to aluminium, titanium and composite material. The suppliers also include technology firms, which develops technology for the manufacturing of the aircrafts (Liao, Rice and Lu, 2015). The bargaining power of the suppliers is adequate, which is limited by the monopoly in the market and the financial sounding of the organization.
Bargaining power of the customers: In the present era of information, the power is shifted in the hands of the customers, as the customer market has become Transparent. The primary customers of Boeing Group are government, military and the space agencies. Here, it can be stated that the bargaining power of the customers is high due to several reasons. In this industry, the technological innovation has primary importance and there are only a few brands, which are providing high customer value (Palandeng, Kindangen, Timbel and Massie, 2018). Thales Group is one of the leading brands in the industry; therefore, bargaining power if the customers is average. The major competitors of the organization have established a strong relationship with the governments, which is positively impacting the business of the competitors.
The Threat of Substitutes: In the arms and the electronic equipment manufacturing industry, there are only almost no substitutes. There is almost no competition no the threat of substitute product is low. Further, it can be stated that Thames has carved a specific position for itself by technological innovation and high quality of products. Therefore, there is no fear of competition.
Threat of New Entrants: In the weapon and electronic equipment industry, the barriers for the new entrants are very high. There are several challenges such as high financial investment, supply chain and availability of skilled human resource creates significant barriers to the entry. Along with it, in the weapon manufacturing industry, there are several barriers related to laws, regulatory environment and compliance cost (Yun, Won and Park, 2016).
In the weapon manufacturing industry, there are only a few large-scale companies. However, the competition amongst them is quite high. There are several companies such as BAE systems, Northrop Grumman, Lockheed Martin, Boeing and Textron. They are the major competitors in aerospace and weapon manufacturing companies (Datafox, 2018).
A Business Level Strategic analysis of Thales protected vehicles division (Bendigo),
The Thales protected vehicle are being manufactured at Bendigo. The company has selected Bendigo due to its diverse manufacturing and mining sector. The municipality is always open for business and has been the home of several manufacturing plants. The government has also made high investment in economic and residential growth which offers pool of human resource talent to the business organization. As the company is dealing with the manufacturing of sensitive weaponry, it does not enquire that this technology is leaked to other companies. Establishing the manufacturing plant in Bendigo ensure that the company has adequate level of privacy. The location and weather of Bendigo is ideal for the manufacturing plant. Bendigo is strategically located at the centre of Victoria, which offers a dry climate in the county (Bendigo, 2018). It is easily accessible to other cities and location as it has easy access to ports, rail infrastructure and the airport. However, the outsourcing of important equipment from other parts of the world will be challenging for the organization.
Business Level Strategic analysis of Thales cyber-security division
Thales offer cyber-security system to its customers, which ensures optimal performance of the IT system, resilience and security for the whole organization. It is specifically important in the era of new technology and cyber threats. The company offers cryptographic security, cutting edge strategies and provides security framework for government and military infrastructure, energy utilities and transportation. The company recruits the best talent and has a team of 5000 engineers and 2000 experts in security. The company has established a research and development department with the scientific and technical community. The company is a leader in knowledge sharing and attracting global talents (Thales, 2018). The company has established a human resource department such that it anticipates and innovate business development and organization and environmental support.
The human resource strategy of the cyber security department is aligned with the organization, strategy and the business operations of the company. The HR management becomes an effective management partner in addressing the current talent issues and meeting the needs of the future talent demand (Block, Kohn, Miller and Ullrich, 2015). The organization has established a competitive compensation structure to attract, develop add retain the organization talent. In order to create a pool of talent, the organization emphasizes the professional development through training and development activities.
Benefits of Thales strategic relationships
In the research and development, Thales has built a strategic partnership with the leading edge research agency, CNRS. They have established a long term agreement for five years. In the arrangement, both the organizations will support each other in creating value-added innovation for the customers and users of the organization (Thales, 2015). Thales has also acquired Gemalto, to strengthen its foot in the field of digital security (Helfat, and Peteraf, 2015). The merger was conducted to support each other’s aim of digital transformation and innovation. It will accelerate Thale’s digital strategy in which the company will invest more than 1 billion euro in cyber security, artificial intelligence and data analytics. It will also benefit the stakeholders of the organization.
Conclusion
Thales is a French multinational organisation in weapon manufacturing and electronics manufacturing industry. The external environment of the organization suggests that there are macro factors such as government policies, environmental laws and the economic conditions of the country or government, which might impact the business of the organization. The company is operating in different countries and has adopted several strategic moves to create a specific place in the international market.
References
Albrecht, S.L., Bakker, A.B., Gruman, J.A., Macey, W.H. and Saks, A.M., 2015. Employee engagement, human resource management practices and competitive advantage: An integrated approach. Journal of Organizational Effectiveness: People and Performance, 2(1), pp.7-35.
Bendigo. (2018). Made in Bendigo: City of Greater Bendigo. [Online]. Available at: https://www.bendigo.vic.gov.au/sites/default/files/2016-09/City-of-Greater-Bendigo-Made-in-Bendigo.pdf [Accessed on: 19 March 2018].
Block, J.H., Kohn, K., Miller, D. and Ullrich, K., 2015. Necessity entrepreneurship and competitive strategy. Small Business Economics, 44(1), pp.37-54.
Datafox. (2018). Top 5 Thales Competitors. [Online]. Available at: https://datafox.com/competitors/thales [Accessed on: 19 March 2018].
French Government. (2016). FRANCE AND THE CONTROL OF THE ARMS TRADE. French government.
Helfat, C. E., & Peteraf, M. A. (2015). Managerial cognitive capabilities and the microfoundations of dynamic capabilities. Strategic Management Journal, 36(6), 831-850.
Liao, T.S., Rice, J. and Lu, J.C., 2015. The vicissitudes of competitive advantage: Empirical evidence from Australian manufacturing SMEs. Journal of Small Business Management, 53(2), pp.469-481.
McMohan, A. (2018). Thales partners with Australian universities for Future Submarine research. [Online]. Available at: https://www.defenceconnect.com.au/maritime-antisub/2232-thales-partners-with-australian-universities-for-future-submarine-research [Accessed on: 19 March 2018].
Palandeng, D.I., Kindangen, P., Timbel, A. and Massie, J., 2018. Influence Analysis of Supply Chain Management and Supply Chain Flexibility to Competitive Advantage and Impact on Company Performance of Fish Processing in Bitung City. Journal of Research in Business, Economics and Management,(10), 1, pp.1783-1802.
Saeidi, S.P., Sofian, S., Saeidi, P., Saeidi, S.P. and Saaeidi, S.A., 2015. How does corporate social responsibility contribute to firm financial performance? The mediating role of competitive advantage, reputation, and customer satisfaction. Journal of Business Research, 68(2), pp.341-350.
Sakas, D., Vlachos, D. and Nasiopoulos, D., 2014. Modelling strategic management for the development of competitive advantage, based on technology. Journal of Systems and Information Technology, 16(3), pp.187-209.
Schilke, O., 2014. On the contingent value of dynamic capabilities for competitive advantage: The nonlinear moderating effect of environmental dynamism. Strategic management journal, 35(2), pp.179-203.
Taber, N. (2013). Commercial Interests, Political Influence, and the Arms Trade. Clocks and Clouds 3(1).
Tantalo, C. and Priem, R.L., 2016. Value creation through stakeholder synergy. Strategic Management Journal, 37(2), pp.314-329.
Thales Group. (2018). Thales and the environment. [Online]. Available at: https://www.thalesgroup.com/sites/default/files/asset/document/Thales_Environnement_eng.pdf [Accessed on: 19 March 2018].
Thales. (2015). R&D: Thales and CNRS extend strategic partnership. Press Release. [Online]. Available at: https://www.thalesgroup.com/sites/default/files/asset/document/pr_150924_rd_thales_and_cnrs_extend_strategic_partnership_vf-1.pdf [Accessed on: 19 March 2018].
Thales. (2018). Critical Information Systems and Cybersecurity. [Online]. Available at: https://www.thalesgroup.com/en/global/activities/security/critical-information-systems-and-cybersecurity#who-we-are [Accessed on: 19 March 2018].
Yun, J.J., Won, D. and Park, K., 2016. Dynamics from open innovation to evolutionary change. Journal of Open Innovation: Technology, Market, and Complexity, 2(1), p.7
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