Strategic management plays a vital role in the development of every organization as it provides the opportunity to the business to expand in the future. The strategic management process is also referred as the science of experimenting and formulating the long term and short term plans for the business including the initiatives with the purpose to optimize the objectives of the organization. The process is important as it is linked with the mission and vision statement of the organization/company. There is a need to supervise and amend/edit the strategies of a corporation with the analysis and demand of external environment. The upper management and mid-level managers are responsible for developing and designing these strategies, but the primary objective is to align the policies of the interest of the stakeholders. Most public companies are the ones that focus on strategies to safeguard and maximize the interest and profits of the shareholders and therefore, it is a very essential and core objective of the business. The formulation of the strategies requires an in-depth analysis of the internal and external analysis of the company to gain/attain higher returns. These strategies help an enterprise to maximize/optimize the internal efficiencies and also to achieve the greatest benefits from the external environment .
The current paper examines the importance of developing and managing strategies within an organization and to highlight their significance to safeguard and maintain competitiveness in the industry. The article stresses the importance of external environment analysis and the importance of competitor’s analysis of AmeriGas Partners LP, a company distributing propane and other related equipment and supplies in the United States. The paper also includes an internal analysis to identify the strengths and weaknesses of AmeriGas Partners LP. The internal and external environment analysis is helpful to develop the Internal Factor Evaluation Matrix, External Factor Evaluation, and a Competitive Profile Matrices.
External Environmental Analysis
Industry Analysis: Gas Utilities
The policy conditions of the United States are very active as it has a stable democratic setup and the rule of laws. The country is also known as a massive super power of the world, and the parties enjoy an influence in the policy making processes of the world. The current policies are favorable for businesses but at the mean time criticism is faced with the everyday world regarding the policies of the United States. The country faces serious threats of terrorism, and all the individuals and businesses are under immense pressure.
The financial situation/circumstances of the United States is exceptional. The US is considered to be the largest economy in the world with a GDP of more than $16.7 trillion. The manufacturing businesses and service industry of the US contribute to the strength of the economy. The recession of 2007-2008 increased adversely affected the overall economy and the unemployment rate reached to an alarming situation. The spending by the residents and business investments in the previous 2-3 years has helped the economy to regain its position. The current budget deficit of the country is enormous, and the economy is at stake for the next couple of years.
The US faces the issue of aging population, and there is an expectation that the economy can face a shortage of labor and tax rates are also expected to rise. The United States is known for the educational and health care systems in the world, and the majority of the population of the region belongs to a liberal mindset. The issue of racism/racial intolerance is also a grave concern. The country also faces a problem of high illegal immigrants (approximately more than 11.7 million) which leads to racial discrimination within the US.
The country is enriched with technological upgradation, and the US economy relies on the advancements. The people and government of the region focus on improving the level of technology from the inception. The country faces serious threats from developing countries of the world, but it is expected that the US will remain supreme in regards to the technology over its competitor countries. The significant contributions of the country are the advancements in nanotechnology, biotechnology, and environmental technology. These contributions and technological advancements also help the companies that specifically work in the mentioned fields/techniques. IT is also one of the most excelling areas in technology, but yet there is an intense competition between the US and other countries like China and India.
PEST analysis explains the current external environmental factors that are important for businesses. The study demonstrates/reveals that the present situation of the economy is satisfactory, and markets are expected to gain benefits from the current conditions. The major threat to the economy and business is the increase in threats of terrorism and racial discrimination in the US.
Quester Corporation focuses on operating as a gas and energy provider, and it is based in Salt Lake City, Utah. The three major businesses of the company are the distribution of gas to the retailers, transportation of interstate gas to different regions, and it provides gas to its customers. The major subsidiaries are the Questar Gas, Wexpro, and Questar Pipeline. The branch named Wexpro produces natural gas and oil in the Rocky Mountains. The company was previously named the Mountain Fuel Supply Company but later the name was changed, and the company operates under holding company from 1984, and the company is traded publically under the name of Quester Corporation .
Clean Energy Corporation
Clean Energy Fuel Corp. operates as a natural gas and another alternative fuel provider for vehicles of all kinds in the United States and Canada. The primary operations of the enterprise are to design it firstly, construct/build, operate, and finally to maintain the stations produce for fueling purposes. The company also provides CNG (compressed natural gas) and Liquefied Natural Gas (LNG) for medium and heavy duty vehicles. Clean Energy Fuels Corp. also manufactures, services, and sells non-lubricated gas fueling compressors and different other equipment used in CHN and LNG stations, and helps consultancy and maintenance services to its clients .
Both the companies are in direct competition of AmeriGas Partners, LP. and therefore, it is necessary that the analyst identifies the significant differences between the companies. The comparison of the groups will help to identify the market leader in the United States.
Competitive Profile Matrix (CPM)
The CP-Matrix highlights the scores on the critical success factors for the three competitors (including AmeriGas as the leading company whereas, Questar and Clean Energy as the direct competitors). The total weight of all the critical success factors is equal to 1, and the factors include strategic direction of the company, product line and services provided by businesses, market share, profit margin, and return on investments. Amongst the critical success factors Market share of the enterprise has the highest weight of 0.3 followed by profitability and variety of products (weight of 0.25), and strategic directions and return on investments with a weight of 0.1 each. The results of the CPM shows that Questor Corporation is the most rated company among the other two competitors with an overall score of 4.6. AmeriGas is the second most attractive business in the Gas Utility sector of United States (with a score of 4.3).
External Factor Evaluation (EFE) Matrix
EFE Matrix helps to highlight the significant opportunities and threats for the business and the results show that the most important occasion for the enterprise is to understand the customers better and to provide better profitability in the future. The EFE Matrix also shows that the major threat to AmeriGas Partners, LP is the government regulations followed by the slow growth of the energy and significance of alternative energy and aging distribution infrastructure. The EFE Matrix show that the company requires replacing the critical infrastructure to gain more customer attention in the future and to earn higher profits.
The service industry in the United States is considered to grow in the coming 3-5 years, and customers are also loyal/satisfied with the level of services provided by the energy and gas providers. The current trends regarding the generation and delivery show that the quality of the products and services is increasing consistently, and the companies are adopting new and improved infrastructure to maintain their position in the market. Mergers and acquisitions are also increasing significantly as the expansion processes for energy and gas industry are under the boom. The businesses are also concentrating on using outsourcing activities to attain efficiency in their business activities.
The issues of global warming and the supply of fuel to different regions of the world are the core reason for the regulatory uncertainty in the market/industry. Finally, the advancement in technology always plays a significant role in attaining efficiency and increasing the profitability of the businesses operating under Gas Utilities.
Internal Environment Analysis
AmeriGas Partners, L.P. distributes propane and related equipment and supplies in the United States. It serves approximately 2 million residential, commercial, industrial, agricultural, wholesale, and motor fuel customers in 50 states through approximately 2,000 propane distribution locations. The company’s propane is used for home heating, water heating, and cooking purposes; to fire furnaces, as a cutting gas, and in other process applications; as a supplemental fuel and motor fuel; and for tobacco curing, chicken brooding, crop drying, and orchard heating applications. It markets propane primarily under the AmeriGas, America's Propane Company, Heritage Propane, Relationships Matter, and Service Mark trade names. The company also sells, installs, and services propane appliances, including heating systems; and offers residential heating, ventilation, air conditioning, plumbing, and related services. AmeriGas Propane, Inc. serves as the general partner of the company. AmeriGas Partners, L.P. was founded in 1994 and is based in King of Prussia, Pennsylvania.
Internal Analysis of AmeriGas Partners LP
The company aims to excel in the market and does so by continually acquiring new (local, regional, and other national distributors). AmeriGas focus to absorb all the acquisitions in the short run to grow in the long term. The functions of the business are mostly carried out by AmeriGas Propane, LP., which is the principal subsidiary of the company. The corporate strategy of the company aligns with the mission statement of the corporation that is to provide reliable, responsive, and safest service of propane provider in the nation. The company is consistently improving its operations by expanding itself and reaching new heights of profitability.
Internal Factor Evaluation Matrix
The results of the IFE matrix shows that the majority of the strengths make up the overall weight of overall strengths and weaknesses (i.e. 0.2+0.2+0.3 =.70). The major weaknesses of the business are the high level of buying the power of customers who have the authority to limit the profitability of AmeriGas and other companies. The current weakness of AmeriGas is that the stocks of the business are under consistent downfall which is not suitable for the investors of business. Finally, the company is very slow to maintain the changes in the infrastructure that are essential to make the business flourish in a more effective and efficient manner. The results show that the company can easily overcome the weaknesses, and the future is satisfactory/bright.
The company currently focuses on expanding its business units, and it is the most efficient way to attain more market share. The strategy of the enterprise to acquire other enterprises will result in higher production and distribution channels that lead to more profitability in the future. The company needs to apply strict rules to implement the infrastructure in the new business acquisitions and also the need for diversification is prominent. The strategy to differentiate the products and services allows AmeriGas to increase the market share and lead the market in the United States. The differentiation strategy can only be possible if the business invests in its research and development department to develop new and more efficient products.
The paper is designed to understand the internal and external environment of AmeriGas Partners LP and to evaluate the strategies that are most effective and efficient to make future profitability of the business. The external analysis includes a PEST of the industry, a CPM, and EFE matrix which highlights that the company requires some additional strategies to become the market leader. The current market leader is Questar Corporation followed by AmeriGas Partners LP and Clean Energy Fuels Corp. The internal analysis includes the identification of the core opportunities, threats, strengths, and weaknesses of the business. The analysis reveals that the company requires implementation plans for the infrastructure and differentiation strategy to convert the weaknesses into its strengths in the future.
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