Strategic Management

Table of Contents
Introduction........................................................................................................................................2

Company Overview..........................................................................................................................2

LO1.......................................................................................................................................................3

Applying PESTLE model to analyse the macro environment of AIG Transport................3

Critically analysing the macro environment to determine strategic management

decisions........................................................................................................................................5

Criticizing and interpreting information and data applying environmental and

competitive analysis....................................................................................................................6

LO2.......................................................................................................................................................7

Analysing the internal environment and capabilities of AIG Transport using SWOT
and VRIO analysis .......................................................................................................................7

Critically evaluating the internal environment to assess strengths and weaknesses

of AIG Transport’s........................................................................................................................9

LO3.....................................................................................................................................................10

Applying Porter’s Five Forces model evaluate the competitive forces of a given
market sector for AIG Transport company...........................................................................10

Devising appropriate strategies to improve competitive edge and market position

based on the outcomes.............................................................................................................12

LO4.....................................................................................................................................................13

Applying a range of theories, concepts and models, interpret and devise strategic
planning for a given organisation...........................................................................................13

Preparing a strategic management plan that has tangible and tactical strategic
priorities and objectives...........................................................................................................14

Conclusion.......................................................................................................................................17

References.......................................................................................................................................18

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Introduction
Strategic management deals with long-term goal and objectives of a company.
Strategic management is very important issue for a company because it determines
whether a company will sustain in future or not (Ansoff, et al., 2018). Strategic
management decision of AIG Transport will be discussed in this report. In the first
phase, macro environment of AIG Transport will be analysed. In the second phase,
internal resources and capabilities of the company will be interpreted. Then,
company strategies will be analysed by using Porter's Five Forces model. Finally, a
strategic plan will be prepared for the company by using various theories, concepts
and models.

Company Overview
AIG Transport is a transportation company which operates its activities in various
countries. The company was established in United States of America in 1919. It has
a subsidiary company in United Kingdom. The company is very well known for its
services. It has an aim of providing quality services to the customers and keeping
customer satisfaction always (Richel, 2015).

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LO1

Applying PESTLE model to analyse the macro environment

of AIG Transport
Every company needs to analyse its external environment before taking and
implementing any decisions. AIG Transport uses PESTLE model for analysing its
macro environment. This model helps the company to understand facilities and
riskiness of its various macro environments. So it becomes easier for the company to
take and implement any decisions. PESTLE model is combination of political,
economic, social, technological, legal and environmental factors of a company
(Duong, 2019). Now this model will be discussed in the context of AIG Transport.

Political factors: Political factors include government policies and regulations such
as employment legislation, tax policies, environmental regulations etc. These factors
also include various trade policies and political decisions of leaders. It has great
impact on AIG Transport as it is a transportation company. Employment legislation
affects the remuneration, pension plan and working policies of the company. Tax
policy affects net income of the company and retain earning decision of the
company. Moreover, decision of government for Brexit issue directly hampered the
company such as 13% loss in revenue in 2017 because it operates it business
activities in Europe countries. (Pan, Chen, and Zhan, 2019).

Economic factors: Economic factors also plays vital role on a company. Economic
factors include currency exchange rates, interest rates, inflation etc. These factors
can impact on purchasing power of AIG Transport and cost of capital of AIG
Transport. For example, 1% increase in inflation can reduce the purchasing power
by 1% of the company and employees. So the company needs to increase salary of
employees. Besides, 1% increase in interest can decrease the investment decision
by 1% of the company. Consequently, these changes currency exchange rate which
alters financial condition of AIG Transport company.

Social factors: Social factors include tastes of consumers, age demographics, rate
of population growth, pandemics and health consciousness of the customers. These
factors affect the service of AIG Transport. When consumers grow older, their tastes

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and need for travelling changes accordingly. The customers can be very busy; so
they can want to travel more fast by flight. So, AIG Transport will lose its customers.
On the other hand, when there is more population growth, there will be need for
more transportation system. This can increase the demand for transportation and
revenue for AIG Transport company. (Pan, Chen, and Zhan, 2019).

Technological factors: Technological factors include technological changes,

innovation in production or services such as automation, electric vehicles etc. New
technologies like electric vehicles which don’t need diesels or use of sophisticated
software for customer service can increase the productivity and revenue of the
company. Thus, the company can become more attractive for the customers.

Legal factors: Legal factors include various laws such as consumer law,
employment law, health and safety law, discrimination law etc. There is a lot of risk
of accident associated with the service of transportation. So AIG Transport company
needs to increase customers' safety by employing well trained and well mannered
drivers. Besides, the company can’t discriminate any of its customers by race or
gender because discrimination is prohibited by law. On the other hand, employees
expects job safety and fixed salary for them which is another matter of consideration
for the company.

Environmental factors: These are the factors which are determined by the
surrounding environment of a company. Environmental factors include weather,
geographic locations, climates etc. where a company operates its business. AIG
Transport company operates transportation service in different areas in UK. Again it
operates its services in many countries of the world. So, bad whether can stop the
company to operate its activities in specific areas or countries. Furthermore,
customers in different geographical location have different financial stability. So, their
income growth can affect the company because customers with higher income can
choose the company for transportation service. (Duong, 2019).

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Critically analysing the macro environment to determine strategic
management decisions
Macro environment plays very important role in running a company successfully. It
influences every step a company takes to implement its strategic decisions which a
company takes to gain competitive advantage over its competitors. Similarly, this
external environment also affects AIG Transport company on its strategic
management decisions (Richel, 2015). Political issues like Brexit issues alters the
revenue and market growth of the company which was very clear in 2017. The
company faced 13% loss in its revenue in 2017. On the other hand, tax policies like
increase in net income tax and capital gain tax badly affected the company in 2018.
Then economic factors are also responsible for changing costs of capital of AIG
Transport company. The company needed to reduce its investment in more vehicles
and places in last year because of increase in interest rate by 2%. These lead the
company to change its financial plan for making any purchasing decisions.
Consequently, the company faced lots of operating costs.

AIG company faced 60% less demand in transportation services in 2020 for
Covid19. This was an affect of social factors. Again, health consciousness of
passengers has increased in this pandemic situation. In contrast, the decision of
implementing new software for managing customers more effectively became
successful.

Besides, the company determined flexible working hour for its employees. So the
company enjoyed increased customers services and loyalty because of increasing
job security of employees. So this is how legal factors affected the company. The
impacts of environmental factors was also too much. These factors affected the
company service in Lebanon and France by sudden disasters. So they are very
crucial matter for the growth of company. The affects of environment factors can be
in many form. There may be floods or storms in some areas where the company
provides its services.

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Criticizing and interpreting information and data applying environmental
and competitive analysis
Analysing environment of AIG Transport company, it is found that environment
factors are affecting the company badly. There is increased competition in the
transpiration industry and again recent pandemics badly hampered the company.
The strategic plans which were taken by the company are discussed below.

Quantitative Objectives: The company expects to achieve 20% growth in income

by the end of 2020. Besides, the company expects to increase its market share by
30% which is impossible right now. Moreover, it anticipated to expand in 2 new
countries by 2022. These are not effective strategies right now (Richel, 2015).

Qualitative Objectives: AIG Transport company expects to improve its service

quality and introduce new services for its passengers. It also wants to employ new
technology for improving its service quality and speed. Again, the company expects
to improve employee performance quickly (Richel, 2015).

These objectives will help the company grow but they are not feasible right now. As
there are pandemic situation and tight economic conditions, the company will face
difficulties in implementing these objectives. So it is not so logical to remain stuck
into these objectives. The company should restructure its strategies and follow those
for improving its recent conditions.

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LO2
Analysing the internal environment and capabilities of AIG Transport
using SWOT and VRIO analysis
Internal environment of a company is very important matter of consideration. Only
external environment analysis is not enough for a company to develop any strategic
decisions. Internal environment also plays vital role in implementing any decisions
(Bull, et al., 2016). There are many frameworks for analysing internal environment.
SWOT and VRIO models are most effective and popular of all frameworks. For
analysing internal environment of AIG Transport company, SWOT and VRIO
frameworks will be used.

SWOT analysis of AIG Transport is discussed below:

Strengths: The company has various vehicles and transportation system. Again it
provides premium services to the passengers. So it has strong and satisfactory
relation with its passengers. Besides the company has historical reputation (Bull, et
al., 2016).

Weakness: AIG Transport company is less focused on international market which

affects its market share. Besides it has some old model vehicles which need to be
repaired vey frequently.

Opportunities: The company has great opportunity of improving its business in

international market. It can increase its service portfolio by increasing its service
areas. Finally, the company can grab the flexible economy of today’s world.

Threats: The government and political leaders change business policies frequently.
It becomes a great barrier for the company. Again, transportation business is
becoming very competitive in the UK market. So, it is another important alarming
issue for the company (Yuan, 2013).

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Further analysis of SWOT framework is given below:

SWOT Impacts

 More than 2500 buses and trucks

 Premium services with Wi-Fi and food
Strength facilities
 Historical reputation
 Strong work ethics

 Less focused on international market

Weakness  Old vehicles
 Some defective vehicles

 Area of improvement in international

market
 Facility of increasing service portfolio
Opportunity
like courier service
 Favourable economy like open
economy, lower inflation rate

 Huge competition
 Changes in government and political
Threats
policies like Brexit issue
 Substitutes like flight or train services

Table 1: SWOT Analysis

Source: Yuan, 2013

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VRIO framework also helps the company to analyse internal environment of AIG
Transport company (Knott, 2015). This is very helpful for determining resources and
capabilities of the company.

Valuable: The company determines whether its resources and capabilities are
valuable or not. AIG Transport company is capable of providing premium quality
services and attracting more customers by strong customer relation (Knott, 2015).

Rarity: The company has strong work ethics and behaviours for its employees which
insist them to follow those ethics and behaviours. This kind of activity provides the
company with huge outputs (Lin, et al., 2012).

Imitability: AIG Transport company has well experienced and skilful employees. It
has strong work ethics and strong financial stability. These are not imitable easily.

Organisation: The company is so well organised that it can deign its work plan
effectively and exploit any opportunities very fast (Lin, et al., 2012).

Critically evaluating the internal environment to assess strengths and

weaknesses of AIG Transport’s
Internal environment of AIG Transport company was discussed in the previous
section. In that analysis, premium quality service and satisfactory customer relation
was highlighted. These two points are the strengths of the company. So the
company should attract new passengers for its services along with retain old
passengers by providing them extra benefits. Besides, it should continuously provide
premium quality services to its customers. On the other hand, it should focus more
on international market and demand of international customers. There is an
advantage of this weakness also. That is the company has made itself specialised in
one specific market.

Besides the company needs to invest in new technology, financial resources and
human resources for making them more skilled. Moreover, the company should
focus on employee relationship and turn its weaknesses into profitable decisions. It
should handle its threats very cautiously so that competitors can’t take its position.
Finally, the company must use its internal resources and capabilities and organize its
business so that it can exploit all of the opportunities it gets in future.

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LO3
Applying Porter’s Five Forces model evaluate the competitive forces of a
given market sector for AIG Transport company
Every company wants to gain competitive advantage over its competitors. So the
companies need to analyse its market where it runs its business. Similarly, AIG
Transport company wants to analyse its market in UK for making strategic decisions.
In this case, Porter's Five Forces model helps to analyse the market (Dobbs, 2014).
How Porter's Five Forces model is used to analyse market will be discussed in this
section.

Bargaining power of suppliers: Suppliers are considered one of the most

important stakeholders of a company like AIG Transport. They supply various
materials like diesel and petrol, repair services and foods for passengers etc. The
company collects 10 million tons of petrol and diesels and foods. The major suppliers
are Nationwide Fuels, Beesley Fuels, Crown Oil Fuels etc. As there are many
suppliers in the industry, it is possible for the company to save its production costs
by switching suppliers. (Indiatsy, et al., 2014).

Bargaining power of passengers: Passengers have low impact on this industry as

fare prices are already fixed by authorities. The passengers who are from high class
are offered premium coaches and who are from middle classes are offered normal
coaches. As the competition is very high in this industry, the passengers can switch
brands easily. By switching brands, they can’t impact on prices.

Threats of new entry: This is very important matter to be considered by AIG

Transport company. The industry is very competitive because there are already a lot
of transport companies in the market. Moreover there are many facilities such as
many suppliers, government’s subsidies, favourable environment etc. in this industry
which attracts new entries. It has been reported that the industry is growing at w rate
of 5% every year. (Dobbs, 2014).

Threat of substitute services: There are some threats of substitute services for
AIG Transport company, because there are already available substitutes like flights
or train services. The costs of flights are somewhat high but it saves the time of
passengers. So, passengers with emergency situation or business meetings like

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flights services. On the other hand, train services are relatively safer than other
services. Again, it provides continuous services without intervention such as it saves
time wasted in traffic jam. So, passengers are also willing to choose this service.

Existing rivalry: From the analysis, it is clear that there is very serious competition
in the transpiration industry. So this affects the market growth and revenue growth of
the AIG Transport company. The main competitors of AIG Transport are National
Express, Megabus, Movia etc. These companies have strong network and they also
have many vehicles. Again competitors are shifting their business in good places for
gaining more competitive advantages (Indiatsy, et al., 2014).

Porter’s Five forces Intensity of factors in

relation to market
Bargaining power of buyer Moderate

Bargaining power of new suppliers Low

Threat of substitute product High

Threats of new entry High

Existing rivalry High

Table 2: Porter's Five Forces Model

Source: (Dobbs, 2014).

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Devising appropriate strategies to improve competitive edge and market
position based on the outcomes
AIG Transport company can improve its competitive edge and market positioning by
taking some strategies (Ansoff, et al., 2018). As Covid19 hampered the company
badly and having threats of new entry and increased rivalry, found by analysing
Porter's Five Forces model, the company should restructure its positioning in market.
To reduce the intense of these threats and obstacles, the company can focus on
innovation and differentiation strategies.

The company can introduce new innovative services to its passengers. It can offer
bonus trips for its passengers. Besides it can maintain enough safety system for its
passengers so that they can feel safe on their whole journey. Differentiation in
services like premium coach along with normal coach for different passengers and
other extra benefits for passengers will help the company to gain competitive
advantage and cover its loses (Hubbard, Rice, and Galvin, 2014).

Finally, cost leadership strategy will help the company to reduce its unnecessary
operating costs. This strategy will enable the company to strengthen its financial
ability by cutting wastes and keeping employees bound. Consequently, AIG
Transport company will gain competitive advantages and make their position strong
in the market.

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LO4
Applying a range of theories, concepts and models, interpret and devise
strategic planning for a given organisation
AIG Transport company can now apply some theories or concepts like Porter's
Genetic strategies and Bowman extended model to interpret and devise its strategic
planning.

Porter's Genetic Theory: Using Porter's Genetic strategies, the company can deal
with different types of issues or threats by considering three different strategies. The
company can use cost strategy to reduce its unnecessary costs and increase profit.
Besides, this strategy helps the company increase its market share by increasing
profit. Then, differentiation strategy helps the company to increase its service
portfolio and attract new customers. This strategy also enables the company to
retain existing customers by providing them different tastes. Finally, the company
can use focus strategy to focus on specific niches like increasing service only in
premium section. This strategy helps the company to gain competitive advantage by
putting best efforts in this section.

Bowman Extended Model: In addition, AIG Transport company can use Bowman
extended model to gain competitive advantage over others. First, the company can
offer low value at low prices. Second, the company should gain cost minimization
strategy so that it can offer good services at low prices. Third, the company can offer
services to passengers which are innovative and have high perceived value under
differentiation strategy. Fourth, AIG Transport can use hybrid strategy which enables
the company to offer integrated services which have mixed aspects of low price and
differentiation (Tukdeo, 2016). Fifth, the company also can use focus differentiation
strategy which enables it to offer services at a high price level to attract customers.
Sixth, it can use risky margin strategy which enables it to charge higher prices for its
services without offering additional value. Seventh, the company can use monopoly
pricing strategy when there is low competition in the market. This enables the
company to change higher prices for its services. Finally, AIG Transport can use loss
market share strategy where it offers higher value services in comparison with the
competition (Echchakoui, 2018).

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Page | 14
Preparing a strategic management plan that has tangible and tactical
strategic priorities and objectives

Strategic Management Plan

Executive Summary

This strategic plan will help the company to overcome obstacles and gain
competitive edge (David, and David, 2013). So, at the first phase, company mission,
vision and background statement have been defined in order to get an overview of
the company. Then using Ansoff Matrix model, market positioning of the company
has been identified. Besides, Porter's Five Forces model has been used to
determine customer demand and service strategy. SWOT analysis helps identifying
internal strengths and weaknesses and external factors of the company. Finally,
management plan has been devised using SAF matrix to evaluate its feasibility and
suitability based on the company’s existing structure.

Background Statement

AIG Transport is a transportation company which was established in 1919 in United

States of America. It has many subsidiary companies. It operates its activities in
many countries. It has a lot of employees. Besides, it is very well known company for
its services. Moreover, it is 100 year old experienced company. So it has positive
turnover every year.

Organisational Structure

The company follows functional structure for running its business. This structure
divides entire organisation into small groups which are specialised in specific
function. This is the main advantage of this structure because it helps the company
to assign specific task to specific group.

Mission

The mission of the company is to provide excellent transportation service to

passengers around the world.

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Vision

The vision of the company is to position its existence in the mind of passengers so
that they can choose the company first.

Values

The core values of the company are customers' trust, care of customers and
employees, partnership and good relations with customers and employees.

Market Analysis

Market for AIG Transport company can be analysed through Ansoff matrix which
uses four key strategies. The company uses on market penetration strategy as it
focuses on UK market more effectively. But it can be anticipated that market
development will be the most effective strategy for the company to explore new
markets. Again, the market of the transpiration industry is very competitive in recent
years (Hussain, et al., 2013).

Competitors Analysis

Using Porter’s Five Forces model, it has been identified that there are many
competitors of AIG Transport company. So, to reduce the intense of the competition,
the company will use differentiation and innovation strategy.

SMART Objectives

 Increasing profit for the company by 20% within 2 years

 Entering new international market within 3 years
 Increasing portfolio of services for attracting customers
 Increasing vehicles and service quality within 1 year
 Increasing customer base by 40% within 2 years

SWOT Analysis

The company has strong relation with its passengers and has a strong and well
written work ethics for its employees. These are the strength points of the company.
Again the company has some old vehicles which consume too much maintenance
costs. Moreover it is less focused on international market. These are weak points for
the company. The opportunities for the company are expansion in international

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market and flexible economy. On the other hand, threats for the company are huge
competition in the industry (Bull, et al., 2016).

Evaluating and monitoring plan

Strategic management plan will be evaluated by using SAF matrix. The process is
discussed below:

Suitability: The strategic plan is suitable for the company because it will help the
company for achieving its objectives, mission and vision. Besides it will enable the
company to provide high quality services to the passengers which are devoted to
increase satisfaction of the passengers.

Appropriate: The plan has been found appropriate for AIG Transport through cost-
benefit analysis. This plan will help the company to minimise the cost of the company
and thus gain more profit and market share. So it is very effective plan for the long-
term benefits.

Feasible: The strategic plan is feasible because AIG Transport company has
enough resources, capabilities which will lead the company to achieve it.

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Conclusion
Strategic management plan decides how a company will sustain in future by
considering every aspects of a company (David, and David, 2013). As today’s
environment is very competitive, every company must have a well planned strategy.
Similarly, Strategic management plan is very important for AIG Transport company
because it helps the company to achieve its vision, mission and goals. Besides, it
enables the company to overcome all of its obstacles and thus become market
leader and gain competitive edge. By strategic planning the company will become
able to cover loses and become sustainable and adaptable to facing any future
changes.

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Dobbs, M.E., 2014. Guidelines for applying Porter's five forces framework: a set of
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Duong, A., 2019. The PESTEL Model.

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