Case Analysis Report Costco Wholesale In 2018: Mission, Business Model & Strategy Case Solution
The company’s situation and performance
Zisco was performing well in 2006 and get RMB 180 million profits despite the high prices of raw materials and tough competition. It implemented value creation theory in 2003 and made satisfactory profits for 3 years, but in 2006; its profits slowed down, many competitors copied its strategies and the production level reached to its maximum capacity.
The overall performance of Zisco is satisfactory in terms of its innovation and learning perspective. The company is at a moderate level according to the customer satisfaction and internal business perspective; therefore, it has to pay more attention on making internal improvements and making strategies related to the customer retention. The company should concentrate on cost reduction strategies and improve its quality to enhance its profits. As the organizational system is still not established for strategic management; the culture of the organization is lagged behind in the value creation strategy that was implemented 3 years ago.
The company’s mission is its sustainable growth and enhancing its employee’s competency to continue the improvement of its business processes. Differential value creation and being responsible is the mission of the Zhang company.
To be in global steel industry that could be a benchmark for value creation and corporate responsibility.
Strategies Adopted By Zisco.
Zisco implemented a differentiation strategy or niche market strategy in the past, focused on a domestic niche market that competitors did not want to produce due to less demand, which gave Zisco a competitive advantage. In 2004, Zhang introduced a value creation strategy for the customers and the company. Zhang adopted many strategies to follow this business strategy;
changing the niche market into mass-market strategy, informal communication strategy, the strategy of outsourcing, product development and differentiation strategy and the new business model adapting strategy and cost reduction strategy.
The strategic analysis of the value creation strategy of Zhang is focusing on its mission, its competitive environment, value chain activities and the forces that drive the organization.
Current decisions by Zisco
Zisco redefined the new management in March 2003, there were three stages of this redefining process; one was the establishment of short-term objectives that tended to improve the product quality, production process and key functional performances.
Secondly, they had decisions related to the strategy implementation to consolidate the functional performance, improvement of integration and coordination of cross-functional
Lastly, they took decisions related to continuous integration and capacity building.
Problems and issues faced by the company
Zisco is facing problems in its key areas of production, procurement and marketing due to the marketing strategies which it used to implement in the past.
Gaps in Strategy formulation
Based on its current business strategies;between the environmental business strategy and it’s business strategy the gaps have been identified, and it is determined that the company is positioning its business exclusively in the market.
Solutions to the problems
Zisco was not achieving its novelty due to gaps in the formulation of its strategy, which
it can overcome by implementing strategic options available for Zisco, such as: the generic & direction strategy or marketing strategy.
The company has gained the competitive advantage of being a pioneer in this business and it is the first company to have CSP technology
It is the first company that is practicing the value creation strategy, which gives it a first-mover advantage. It is also good at technology management and executes value creation strategy very well in the metal and construction industry of China.
Low quality of products being produced due to less focus on quality and lack of distribution strategy to launch its products at a larger scale.
It has a huge load of debt and it does not have any resources to pay the liability and loans every year.
When it comes to purchasing raw materials from suppliers;the company has a lower bargaining ability due to limited suppliers. Fewer suppliers of Zisco are also a problem if suppliers do not provide raw material on time; it affects the company’s quality.
The management is not entirely focused on teamwork and its marketing strategies.
As there is a huge demand for steel around the world, so it is an opportunity for the company to avail this opportunity to enhance its growth in sales further.
In China, the entire economy was transforming towards the market and the unsatisfied demand of pot used steel bedding was a great opportunity for Zisco.
New potential entrants in the steel industry are the biggest threat being faced by Zisco
The competitors are copying its marketing strategies and its technology very quickly.
Restriction of government in the metal industry, such as: the restriction of employees being recruited.
Zisco has a very limited number of suppliers, which leads to shortage of raw material, and fluctuation in prices of raw material in the future, which is a threat to Zisco.
Foreign competitors have advanced technology than Zisco due to which it can take over the steel and metal industry.
According to this article, it seems that the political environment of China is stable and favorable for the company, as it can easily make strategies according to the stable political environment. There are certain governmental laws that restrict Zisco to hire more employees, which acts as barriers in its expansion.
As the government is running in the deficit budget according to the case; there are currency depreciation risks, but the overall economic environment is favorable for the company……………………….
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