Analysis of GKN’s Internal and External Environment

This report will explore the analysis of GKN. It will investigate the internal and external business environment which will comprise of five different sections. The first section will consists of the external environment which will be the Pestel-C analysis and Porters Five Forces Framework. The second section will involve the resources in the company which are the human, technological and financial factors. The third section comprises of the competencies and capabilities of GKN.

The fourth section will be the SWOT analysis. Finally the last section will be the conclusion of the report. 1.1 Introduction to the company GKN is known for the engineering and technology they provide for vehicles, agriculture, construction equipment, aircrafts and aero engines to the world's major manufacturers. They are currently 40,000 people working within GKN companies and joint ventures.

This factor plays an important part to GKN business, as they trade in various countries; they need to adopt issues from the government. They have recently opened a new plant last year in the Isle of Wight, which focused on the science and technology of composite aircraft structures and their related production processes. This facility was part of a UK Government scheme to develop a strong national materials capability and is been funded by the government and South East Economic Development Agency.

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This demonstrates the government are behind schemes to help and improve the development of aerospace aircrafts. This is an advantage towards the government as GKN produces aircrafts for the military. This also shows for now that it appears the government is stable. But with elections to come you can never be sure of the future. Legal The current legal framework within the UK seems to support the GKN business operations. Alun Michael said: "GKN's new Advanced Composite Facility is one of five planned centres which will form the National Composites Network - a �30 million project launched last year to develop a strong, thriving composite materials capability in the UK".

Employment laws within the UK are coming under criticism "in the wake of Peugeot's decision to close its Coventry factory". It was perceived that workers were easier to make redundant in the UK than in France. This would affect GKN by new employees that they require would want to feel secure if they take a position with them. Economic "The apparent UK market for motor vehicles and components is estimated to have been worth GBP 59bn in 2005, up from GBP 57.82bn in 2004. The market has demonstrated year-on-year growth since 2001".

Business Wire This shows there is a positive economic framework for GKN to engage in. Economy within the UK is growing rapidly thus creating more opportunities for GKN. Social Recently GKN opened a new facility for truck engine cylinder linears in China. When assessing whether to move to this location GKN consider the social factors which are based on whether there were sufficient people to work over in the new plant, education and training within communities among other factors.

GKN has been operating "successfully in China for 17 years" and currently employs "2,000 people across our wholly owned businesses and joint ventures". This demonstrates that they are currently operating well within China and the prospect of new plant will benefit the country as employment will be increased by "4,000, doubling China's workforce". (GKN) Technological Technology plays an important part to the overall running of GKN. Manufacturing and producing components for aerospace and vehicles, GKN require being efficient when reviewing their development of technology.

GKN plan to introduce "breakthrough technology" (Indiciar), that will provide lighter driveshaft components and improved fuel economy. Therefore this will improve the business overall vehicle performance. Natural Environment Businesses nowadays are more aware of promoting an image of being environmentally friendly. The green scheme is a scheme which recognizes and rewards group companies which have shown ways of reducing their environmental impact. GKN was the overall winner in 2005 "for the development of a technique for composting organic and other wastes arising from the production process". GKN Report

Therefore GKN strives to be more aware of the damage their business plays in the environment and shows potential customers that they are a company which is not wholly concerned with their profits. Businesses have to be more culture aware for them to operating in various countries. GKN adopted China's culture when opening their facility. They looked at various factors for instance beliefs and customs, language barrier among other things.

Competitive environment analysis Another way of looking and evaluating the external environment of GKN PLC would be by using the model of the five competitive forces which was developed by Michael E Porter in his book 'Competitive Strategy: The Techniques For analyzing Industries and Competitors (1980). The model claims that the structure of an industry and the ability of firms in that industry to act strategically depend upon the relative strengths of five forces (The Business Environment): bargaining power of the suppliers, bargaining power of the customers, threat of new entrants, threat of substitutes and competitive rivalry between existing players.

This is the model of Porters five-force model of industry competitors: In the case of GKN being a manufacturing company it produces the components it needs in the production process; therefore the power of suppliers is very low as the products from the design to the manufacturing of the materials and the production of automotive driveline systems such as constant velocity joints are highly specialized products that the firm manufacturers therefore this also reduces the power of other suppliers cutting theirs costs.

2.2.2 Bargaining power of the customer The competition between buyers will have an impact on the firms external environment, As GKN is an independent supplier of composite of aircraft structures therefore is specialized and therefore is evidently targeted at a specific customer base which include aircraft companies including major customers such as military aircrafts, however the company do have a large enough market share as they have competitors such as Arvin Meritor, Dana and Midas which does raise the bargaining power of the buyer however as the products are specialized and will always be needed the firm have a stronger position then the buyers.

2.2.3 Threat of new entrants The threat of new entrants in the manufacturing of vehicles and aircrafts industry can be seen quite high due to the fact that there are not very many companies that specialize in products that GKN PLC does therefore the barriers to entry can be seen quite high which can lead to unexpected competition which can potentially harm the firm, however one advantage the firm to possible potential competitors is that GKN's production process is as the firm continues to expands they are subject to economies of scale which reduces the average cost of production, this therefore reduces any potential competitors harming their business.

2.2.4 Threat of substitutes As GKN produce specialized products there are no alternative products that are cheaper that can be used therefore face very little competition and have a great deal of market share. As GKN have differentiated their products they have reduced the threat of substitute products. 2.2.5 Threat of competitive rivalry between existing players. GKN do have a large market share in their industry, however do not have a monopoly which is firstly illegal and secondly competition can be seen healthy for a firms external environment, however firms have gained a competitive advantage as competitors are offering the same concept of production as GKN which can harm the firm slightly, however as GKN has expanded to other areas apart for aerospace they still have a competitive advantage amongst other competitors.

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