Analysis of Dyson’s Business Strategy

1.0 Introduction

Dyson is a company that employs in the production and sales of high-end home appliances such as vacuum cleaners and washing machines and so on. The company was located in British. There are about 1200 scientists and engineers who are dedicated to the invention and innovation of products. This company owns a huge market share in the industry and its products are very attractive to consumers although the price is very high. The report will firstly analyze the corporate strategy. Following this, it will discuss the scope of the company, including the vertical integration and M&A activities. Finally, it will use Porter’s five models to analyze the strategic position for Dyson.

2.0 Corporate strategy

One of Dyson’s corporate strategies is the precise market positioning. Dyson’s products precisely target the classification of appliances and its consumers’ group are mainly targeted the middle and high-income group (Marketline 2018). For the improved type of electric appliances such as induction cookers, microwave ovens, and other household appliances, the consumers are mainly targeted at middle-income families.

For the higher-level demand on the home appliances such as cleaner and hairdryer, middle and high-income families choose to purchase, so the target positioning for Dyson is the consumers with high-income level and younger group, who have more pursuit of quality of life more than the price. According to Alibaba data, 94% of Dyson’s Chinese buyers are of a higher consumption level, and 77% of life in the first-tier and second-tier cities such as Shanghai, Beijing, and Dalian (Marketline 2018).

In addition, Dyson focuses on the innovation and upgrading of traditional products. Although Dyson’s product positioning belongs to the luxury of small household appliances, it does not mean that the product can be sold at a very high price (Marketline 2018). It is really the technological content and industrial design of the product itself that distinguishes Dyson’s small appliances from other brands.

Dyson’s unique corporate innovation model is contained in every disruptive product, from vacuum cleaners to curling irons. For this company, there is a distinctive R&D department called NPI. The employees in this department are responsible for finding inspiration (Dyson 2018). They do not need to think about the market demand or the commercial value, but they just need to be bold and imaginative every day. If their ideas are commercially viable, they are taken to another division of NPD for design validation. One of the reasons Dyson has been able to keep coming up with disruptive products is that its engineers are also designers.

Last but not least, Dyson’s corporate strategy is to carry out the huge investment in the research and development of the products. The popularity of Dyson’s products is less due to its good advertising and promotion, but because of the product itself. Consumers are really convinced by the products’ technology feeling and creative design. But behind the high technology, it is a long time of deep cultivation and meticulous work at the research and design in the products. For example, Dyson is best known for its first vacuum cleaner, which was developed in its 5127^th attempt after five years (Dyson 2018). In the following 30 years, Dyson instilled this R&D thinking regardless of time and cost into the minds of every engineer (Dyson 2018).

3.0 The scope of Dyson

Vertical integration and motivations

Vertical integration refers to that a company uses a series of methods to integrate the supply and sales side to enlarge its production scale and reduce the cost, such as merger and acquisition activities to the suppliers and sales (Grundy 2006). Dyson has established its own researching team to develop its products. At the same time, it also established a large number of retail channels in different markets to directly selling its products. The motivation for establishing the researching team is to ensure its product’s quality. It also can help enlarge the scale of the enterprise and enhance its brand image.

Another evidence of vertical integration is that Dyson had selected Singapore as the production base of electric vehicles in 2018 (Marketline 2018). One of the motivations for this choice is that Singapore is proximate to a high-growth market for auto sales. The establishment in Singapore for the production of an electric vehicle can largely reduce the transportation cost and agency costs so as to increase profits.

M&A activity and divestments

In 2015, Dyson spent about $90 million on acquiring Sakti, which was a solid-state battery company (Dyson 2018). Together with Toyota of Japan and Bollore of Europe, Sakti is known as the big three in the solid-state battery development area. The main reason for this acquisition is to solve the battery technology problem for its electric vehicles’ production.

In 2017, Dyson announced the plan to build an electric vehicle and he spent $2.7 billion on battery technology and vehicle design (Sou 2018). Dyson also increased the investment in recruiting the R&D and technical talents from former Rolls-Royce, Tesla, and other British luxury sports car manufacturers, forming an R&D team of over 400 people (Aizawa 2018).

In 2019, Dyson began its divestment in a $3 billion project to build electric vehicles. The company will close electric-car plants in Britain and Singapore. The main reason for this divestment is that this project for the production of electric vehicles is not commercially viable rather than because of the product’s failure and the team’s failure.

4.0 The company’s strategic position

Porter’s five model can be used to analyze the company’s strategic position (see figure 1)

Figure 1: Porter’s five force model

Porter’s five force model to analyze Dyson

Suppliers’ bargaining power

Dyson has strong bargaining power with the suppliers. Dyson established its own R&D team and the core technology of the product is grasped by the company. There are only some basic components and parts that need to be provided by the suppliers (Coelli 2015). Dyson has formed a strong brand position currently in this market and there are a large number of suppliers to provide these parts for the production of appliances, so the company’s bargaining power with suppliers is strong.

Buyers’ bargaining power

For Dyson products, buyers’ bargaining power is relatively weaker because the high technology and appearance design for its product form the product’s high pricing positioning. Consumers have little room to bargain.

The threat of current competitors

The threat of current competitors is relatively low. Dyson accounted a quite part of market share in the industry. It is found that Dyson accounted for 60% of the total retail share of vacuum cleaners in China in 2018, and became the first choice of most consumers (Koch & Wittwer 2018). In the vacuum cleaner market, Dyson’s high price position is not prohibitive, but far ahead.

Threat of substitutes

With the development of technology and the change of consumers’ preference for the product over time, there may be more and more substitutes that threats Dyson if there is more advanced technology applied to the product or they can provide higher cost performance (Koch & Wittwer 2018). In fact, there are a quite lot of consumers who are not capable to pay the high price to purchase a home appliance, so they will search the substitutes with lower prices.

Potential competitors to enter

Although the barriers to enter into the home appliance industry is low, the characteristic of high-end design for the product is difficult for its competitors to follow and replicate. If competitors want to obtain a high market share in this industry, they must employ higher levels’ researchers and make the larger scale of innovation. The cost of doing so is very high, so it is relatively difficult for potential competitors to enter.

In terms of the industry structure of home appliances, due to the low entry barrier, the industry faces fierce competition for some small home appliance companies. According to Statista (2019), the home appliances industry is more and more focusing on smart home devices because of increasing profitability in this industry. Based on the Statistics, the sales of smart appliances present increasing trend since 2016 (see figure 2).

Figure 2: Sales of smart appliances from 2016 to 2019

However, there are some huge challenges for the industry. Due to the home appliances’ homogeneity, innovation requirements are higher for the enterprises to compete in the market. Especially, the smart appliance shows higher innovation rates.

In view of the analysis above, the company should continuously improve its innovation ability and technology level so as to maintain the products’ attractiveness to consumers. The company’s strategic position should be targeting middle and high consumers to strengthen research and development power to design more unique products. In addition, the company should further expand its marketing network channels. More and more young people like purchasing online, so Dyson should establish a direct selling channel online so as to increase sales. In the promotion method, it is suggested to implement the various promotion strategies online and offline to attract more consumers to purchase.

5.0 Conclusion

In conclusion, the company adopts the innovation and precise market positioning strategy to develop its products and attract a large number of consumers. In terms of the business scope, the company has been expanding its business scale through vertical integration activities, including establishing a large number of manufacturing bases in China and Singapore so as to save costs and increase profits.

The company also carried out the acquisition activity through acquiring the solid-state battery production enterprise Sokti so as to begin its production in the electric vehicle. In view of the business feasibility analysis, the company has finally withdrawn investment in the project. Through Porter’s five force model for the company, the company should focus on more innovation and investment in the R&D to maintain its unique product design. The company also should further enlarge the sales channels online and make the various sales channels to attract more consumers to purchase.

References

Aizawa, H., (2018). Current results and future perspectives for Japanese recycling of home electrical appliances. Resources, Conservation and Recycling, 52(12), 1399-1410.

Coelli, T. J (2015). An introduction to efficiency and productivity analysis. Springer Science & Business Media.

Dyson 2018, Corporate Social Responsibility, viewed on October 14, 2019, <https://www.dyson.co.uk/inside-dyson/corporate-social-responsibility/>.

Grundy, T. (2006). Rethinking and reinventing Michael Porter’s five forces model. Strategic Change, 15(5), 213-229.

Koch, H., & Wittwer, P. (2018). A nontrivial renormalization group fixed point for the Dyson-Baker hierarchical model. Communications in mathematical physics, 164(3), 627-647.

Marketline 2018, Dyson Group Plc-Company Profile & SWOT Analysis, viewed on October 14, 2019, <https://store.marketline.com/report/mlch69785sa>.

Sou, K. C., (2018). Scheduling smart home appliances using mixed integer linear programming. In 50th IEEE Conference on Decsion and Control and European Control Conference. IEEE.

Statista 2019, Smart home sales in the U.S. 2016-2019, viewed on October 17, 2019, https://www.statista.com/statistics/798353/us-smart-home-sales/.

Appendixes

Figure 1: Porter’s five force model

Table 1: Porter’s five models to analyze the Dyson

Figure 2: Sales of smart appliances from 2016 to 2019