Case Study Analysis: The VSM Group
History of VSM Group
Strategic Capabilities Then and Now
PEST Analysis PEST analysis, a useful approach of examining the Political-legal, Economic, Social-cultural, Technological factors of the environment of an organization, can be used to examine the various aspects and trend in one industry by understanding market growth or decline, and as such the position, potential and direction for a business. (David & Nigel, 2006) As there is no evident political-legal and social-cultural influence on the operation of VSM Group in this case study, the main items that impact the organization in economic, technological aspects will be presented as follow: Economic factor
a) Firstly, the demand for sewing machines in the western hemisphere had been declining for more than two decades. Industry profitability had deteriorated, particularly hard on manufacturers of industrial machines and low-price mechanical machines for domestic use. b) Second, the sharp drop in demand for industrial sewing machines has result much more fierce competition on the professional side in Europe and in the US. Technological factor
a) As the development of specialized software, the computer-controlled machines have become popular in the world market. Some world top manufacturers can make the entire range of computer-controlled machines. It makes the rivalry between VSM Group and other powerful manufacturers much more fierce and intensive. b) Moreover, the great e-business shakeout and the plethora of ‘dotcoms’ raised has made the internet become a viable medium for the distribution trades. It has brought sewing machine manufacturers great opportunities to create new powerful distribution system through using the web-shops. After scan the external environment of VSM Group, although the economic environment is not that great, a favorable circumstance can be seen in technological factor. If VSM can develop more creative products than its rivals and retain its customer, I believe it could gain survival and to success in this environment. c) Changes in operating systems and installation of new accounting system in May 1999. This helped in establishing a strategy on the cost control for the company’s independence standing.
THE EXTERNAL ENVIRONMENT AND THE VSM GROUP Using the PEST analysis to evaluate the external environment in which VSM operates, it would be observed that some of the external factors affecting the operation of VSM often serve as an opportunity for the company to thrive and achieve strategic competitiveness while some others often serve as threats to hinder the company from achieving strategic competitiveness. Some of the external factors of importance as identified by Hitt et al (2005: 39) and in relation to the VSM group are: Economic factor The economy in which an organisation operates is vital to the operation of organisation. The unawareness of how well the German – speaking economies in Europe were doing at the time of the integration Pfaff into the VSM group almost cost the group the loss of the entire market in these region. As a result of the decline in the demand of sewing machines in the west at the time of Pfaff acquisition, sales in these regions were at the lowest any where in Europe. This was a threat to the VSM group. On the other hand, the viability of the US economy creates an opportunity for VSM to thrive and make profit in the US. This was an opportunity well exploited by the VSM group. Socio-cultural factor- This is concerned mostly with the societal attitudes and cultural values of the society in which any organisation operates. The diverse cultures of the countries e.g. Czech, Germany, US and the Far East in which VSM group has acquired individual companies or operates is very significant to the growth of its market. Although a threat, it would depend on how well the group is able to use its knowledge of this factor to transform it to an...
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