Importance of Human Capital in G8 Education
Strategic Initiative:
The dynamics of today’s world is changing rapidly. Therefore, the organisations need to analyse the internal as well as the external forces that effect the development of the organisations, and plan strategies accordingly. On this context, SWOT analysis is the most useful analytical tool to understand the internal and external forces that effect an organisation (Kajanus et al., 2012) and help to make strategic plans according to the changes (Hill, Jones & Schilling, 2014).
SWOT Analysis:
Strengths Weaknesses
• Steady financial power
• Balance sheet
• Effective Multi-brand strategy
• Strong market position
• Unable to mitigate the challenges of new entrants Opportunities Threats
• Expansion in similar business field
• Expansion in product category
• Expansion in small cities
• Changing consumer behaviour
Strengths: G8 Education has a strong free cash flow, which indicates the company is financially powerful. This free cash flow enables the company to plan new projects and increase its assets. The balance sheet of G8 Education continues to be conservatively geared, and would help the company to increase the acquisition. The company holds a strong osition in the market, which enables it to build reliable relation with the suppliers. The company’s multi-brand strategy that includes Kindy Patch, Early Learning Services, Bourne Learning, Community Kids, and World of Learning, helps the company to gain the combined profit of multiple centres.
Weaknesses: The greatest weakness of G8 Education is that the other companies in his industry could easily copy the company’s strategies. In this way, the strategic value and the competitive advantage of the company would be educed. Another major concern that the company is facing is the challenges of new entrants in the market, as so far, the company has been unable to manage those challenges.
Opportunities: G8 Education has diverse scope of expansion. As the company currently is in early child education business, it is easier for it to expand into similar fields of child development and educational business. Based on the changing demands of the customers, the company has the opportunity of bringing change to its current products and creating new productline. The demand for childcare institutes is significant, which creates the opportunity for the company to expand the business in new market segment, such as in small cities where the population has lower income.
Threats: A significant external threat of the company is the expansion of the Not-for-Profit organisations, as these are giving G8 Education a tough competition with their low pricing. The existing supply chain model of the company is driven by physical infrastructure of the business. Therefore, the change in the buying behaviour of the consumers, that is preferring online channels, is a substantial threat to the company.
Recommendations:
Analysing the internal strengths and weaknesses of G8 Education and the external opportunities and threats of the market, recommendations can be made for the growth of the company. Considering the steady financial growth, strong market position, and the effective brand strategy of the company, it can be said that it has the advantage to initiate new ventures. Therefore, the recommendation would be expansion, which has two crucial elements in it.
• The company has the scope of expanding to smaller cities among the lower income families to gain competitive advantage.
• In order to gain a competitive advantage, G8 Education should provide quality education with lower prices.
Justification for the Recommendations:
Organizational Culture and CSR Responsibilities
The most suitable strategies for G8 Education would be the Business Level Strategy (BLS) and Corporate Level Strategy (CLS). The fundamental conception of the BLS is to enhance the existing company strategy to gain competitive advantage in order to respond to the competitive threats (Wheelen et al., 2017). Gaining competitive advantage is about providing the customers products and services that the competitors are unable to provide, and to do that the company has to differentiate the specific needs of the customers. In other words, the company requires being innovative in product and service designing.
Innovation Through Market Pull:
As opined by Urbancova (2013), innovation is the most significant way of gaining competitive advantage. There are multiple ways to initiate innovation in an organisation, such as technological, product designing and planning, business model, process, and market pull. The suggestion for G8 Education is related to market pull strategy, which is to make innovation based on the market demand. The SWOT analysis clearly indicated that there is a demand for lower price and higher quality products among the customers. Thus, the recommendation has been made to provide lower price and higher quality products to the targeted customers.
Business Level Strategy:
Pricing the products in a way that attracts the customers is another way to gain competitive advantage according to the BLS (Hinterhuber & Liozu, 2017). In order to do that, G8 Education needs to reduce the price differences between the company products and services and that of the competitors. This leads to the cost leadership strategy of the company. On this context, the company employs differentiation cost leadership and integrated cost leadership. Differentiation cost leadership can be followed in two ways. The first is by offering the customers products that have better attributes than the rival companies, and the second is by focusing on a particular segment of the consumers and their needs. The integrated cost leadership strategy indicates offerings that are low in cost and high in quality.
Therefore, G8 Education needs to create a different brand with lower price than the existing ones. Creating and managing a separate business is crucial in this situation, as customers could categorise the lower priced products as lower quality products, as well as think that the company is running at loss. Thereafter, it has been suggested that G8 Education should set up business in smaller cities where the families have lower income rate to make the company’s low price products lucrative to the customer base (Singh, 2012).
Cost Leadership Not employing this strategy of offering the lowest price Focused Cost Leadership Not focusing on offering cheapest priced products to the niche consumer segment Differentiation Offering products with attributes that the rival companies cannot offer Focused Differentiation Not focusing on fulfilling the needs of niche consumer segment Integrated Cost leadership Focusing on offering lower cost products that are high in quality.
Corporate Level Strategy:
Corporate Level Strategy (CLS) is about how and in which direction the company is growing through products and business management (Rothaermel, 2015; Hitt, Ireland & Hoskisson, 2012). In this context, Ansoff Matrix is a useful tool to determine CLS for a company. According to Ansoff, the product-market strategy is a combination of products and reasons for designing them (Proctor, 2014). As per this strategy, there are four alternative ways of business growth – market penetration, new products and services, market development, and conglomerate diversification. The VRIO test presents that G8 Education is capable of gaining larger profits by attracting customers with its existing technological advancements and sustainable practices. Thereafter, the company is recommended to follow the market development strategy by offering lower priced and higher quality productlines to the new customer segmentation that is customers with lower income.
.
Market Penetration New Products and Services No change in market share No new products for existing markets
Market Development Conglomerate Diversification Entering new market of lower income consumers with their high quality products No new products for new markets
Diagram 2: Corporate Level Strategy
DIY or Organic Method:
The most appropriate method in which the company would employ the BLS and CLS is the organic or DIY method. The organic growth of a company is the growth rate that the company gains by factors like output increment and internal sales enhancement (Achtenhagen, Melin & Naldi, 2013). Different from other methods, growth by takeovers, mergers, or acquisitions do not include in the DIY method. Rather, it includes utilization of revenues, developing new products, and enhancing the customer service (Achtenhagen, Melin & Naldi, 2013).
Therefore, as per the recommendation of expanding the business in new markets of smaller cities for the lower income customers with products that are lower in price and higher in quality, employing DIY method is justified. Although, this method have a few disadvantages, such as the growth is slow in this strategy and building market share becomes hard. However of its disadvantages, the advantages are more significant. As the business expands in the industry in which it is already good at, there is less risk. In terms of finance, as the company funds the expansion from its own profits, there is less possibility of risk. Moreover, in this method, the company does not go through major changes, and therefore, it is easier to maintain the employee efficiency and productivity.
References
Achtenhagen, L., Melin, L., & Naldi, L. (2013). Dynamics of business models–strategizing, critical capabilities and activities for sustained value creation. Long range planning, 46(6), 427-442.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Hinterhuber, A., & Liozu, S. M. (2017). Is innovation in pricing your next source of competitive advantage? 1. In Innovation in Pricing (pp. 11-27). Routledge.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2012). Strategic management cases: competitiveness and globalization. Cengage Learning.
Kajanus, M., Leskinen, P., Kurttila, M., & Kangas, J. (2012). Making use of MCDS methods in SWOT analysis—Lessons learnt in strategic natural resources management. Forest Policy and Economics, 20, 1-9.
Proctor, T. (2014). Strategic marketing: an introduction. Routledge.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Singh, M. (2012). Marketing mix of 4P’s for competitive advantage. IOSR Journal of Business and Management, 3(6), 40-45.
Urbancova, H. (2013). Competitive advantage achievement through innovation and knowledge. Journal of Competitiveness, 5(1).
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy. pearson.
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