Strategic Management Process - Literature review Example

?STRATEGIC MANAGEMENT PROCESS – ORIGIN ENERGY LIMITED, AUSTRALIA INTRODUCTION In modern business management, strategic management process and the implementation of theoretical business concepts is an essential for ensuring business growth and expansion. According to the Pakistan Institute of Management (2010), “strategic management is the application of strategic thinking to the job of leading an organization.” Strategic thinking is thus defined by the institute as undertaking business assessment “using three key requirements: a definite purpose be in mind; an understanding of the environment, particularly of the forces that affect or impede the fulfillment of that purpose; and creativity in developing effective responses to those forces” (Pakistan Institute of Management, 2010). In certain quarters also, strategic management is explained as “building a solid underlying structure to your business that will subsequently be fleshed out through the combined efforts of every individual you employ” (All Business, 2011). To globally competitive companies such as Origin Energy Limited, strategic management can best be explained to mean plans put in place to take advantage of all distinctive competencies while making use of any available competitive advantages and ensuring that developmental strategies adopted by the company are workable, profitable and as a matter of fact congruent with the company’s mission statement and strategic goals. DISCUSSION Distinctive Competencies of Origin Energy Limited Origin Energy Limited is a company that sees her self to be more than an energy retailer. Rather, the company claims to “find and produce gas, generate electricity and invest in renewable energy opportunities including wind, hydro, solar and geothermal” (Origin Energy, 2011). As a fast growing company in the energy industry (Australian Security Exchange, 2011), Origin Energy is endowed with a number of distinctive competencies that has been the reason behind the company’s performance and growth on the Australian Stock Exchange over the past years. Quoting Bianco (2011) from Kenneth R. Andrews’ 1971 definition of distinctive competences, it can be said that distinctive competencies refers to “the set of activities that an organization could perform especially well in relation to its competitors.” This definition was given as an elaboration from the original theory of distinctive competencies developed by Philip Selznick in 1957 after he studied “vastly differing organizations, from the Communist Party to the Tennessee Valley Authority” (Bianco, 2011). Judging from the definition, it can be pointed out that Origin Energy’s foremost distinctive competencies are in the areas of diversity of business orientation. Origin Energy operates in several sectors of the energy industry. Among these sectors are oil and gas exploration and production, of which the company has several oil and gas reserves across Australia (Silo Breaker, 2011). This is of course a competitive advantage for crisis moments when oil and gas may be in adverse shortage. The fact that the reserves are spread across Australia in regions such as the Cooper Basin of South Australia, the Bass Strait, Queensland, Victoria and Tasmania means the company is assured of nationwide constant supply. This is because there is reduced need for transporting oil over long distances to get various parts of their oil stations with oil and gas supply. Still on oil and gas, the company has a gas field in Australia (Sustainability Report, 2009). This makes Origin an International company that enjoys the benefits of foreign exchange. Apart from oil and gas exploration and production, Origin Energy is into wholesale and retail of gas and electricity (Silo Breaker, 2011). Silva (2011) observes that retail marketing especially “helps increase the revenues of stores and aims to improve the experience consumers get when they visit their favorite shops.” This is of course a benefit that Origin Energy is not exempted from. By wholesale and retail of products their produce, Origin Energy ensures that it controls the market and benefits directly from changes in market prices when market prices shoot up. Currently, the company has retail customers not only Australia but also in New Zealand and South Pacific. One major competitive advantage of Origin as an energy company is the fact that the company generates electricity from natural and renewable sources. According to the ABN News Wire (2011), Origin Energy’s natural electricity generation transcends across Uranquity in New South Wales, Osborne, Townsville, Queensland, Ladbroke and South Australia. Such diversity in trade and location puts Origin at a very good competitive advantage ahead of other players in the same industry in Australia. Intensity of Origin Energy’s Competitors in the Energy Industry Though it is striving hard to be the leader in the energy sector of Australia, Origin Energy is in no means having this done with ease. This is because of the presence of stiff competition in the energy sector in Australia. According to the Sub Sea Oil and Gas Directory, there are over forty (40) companies in Australia who are into oil and gas just as Origin Energy. These forty companies in no uncertain terms present Origin Energy with very stiff competition. As of early morning Thursday, April 7, 2011, the Australian Securities Exchange quoted the energy industry of Australia to be the leading sector or industry with share gains of 17,328.2 with companies like Woodside, AGL and Oil Search performing creditable well on the exchange. This represents the competitiveness of the sector in Australia. In predicting future distinctive competences, Bianco (2011) observes that “if the environment changes such that numerous rivals have obtained competencies identical to those characterizing a particular firm, the firm is in a very poor position and would do well to reconsider its strategy.” This means that Origin Energy is threatened by the presence and ever increasing numbers of energy companies in Australia. Most definitely, the only way to win the fight is to implement a set of developmental strategies that are in consonance with the company’s primary aim in business and their mission statement. Again, it is advised that the company pays more attention to its strengths and opportunities rather than weaknesses and threat. As much as the weaknesses and threats of the company must not be overlooked, it must not be a ‘ghost’ that would hunt the success of the company. Developmental Strategy of Origin Energy Limited Due to the fierceness of the prevailing competition of the energy industry in Australia, Origin Energy has put itself in a position to absorb any possible shocks and continue to strive for growth and development. Even apart from industry competition, there are issues such as tax obligations. For example there has recently been the passage of the carbon tax, which industry players fear would reduce profits of energy companies. The Weekly Times Now (2011) for instance reports of Queensland’s new opposition leader, Campbell Newman who says “he's a climate change believer but he doesn't think a carbon tax is the answer” fearing the carbon tax is “a bad idea” (Newman, 2011). Due to reasons like this, Origin Energy report of embarking on a number of mergers and acquisitions as its major developmental strategy. This move of course comes with its own strengths, weaknesses, opportunities and threats. Strength: “Mergers and Acquisitions can generate cost efficiency through economies of scale, can enhance the revenue through gain in market share and can even generate tax gains and can even lead to a revenue enhancement through market share gain” (Maps of World, 2010). Weakness: Acquisitions and mergers may lead to Origin Energy inheriting all debts and hidden losses of the acquiring companies. Opportunities: Origin Energy’s mergers and acquisitions may lead to the growth and expansion of Origin Energy as these new companies may lead to the diversity and spread of location of the company. Threat: Studies reveal that approximately 40% to 80% of mergers and acquisitions prove to be disappointing (Maps of World, 2010). Justification of developmental strategy in place According to Data Monitor (2010), “The company recorded revenues of A$8,042 million (approximately $6,015.7 million) during the financial year ended June 2009 (FY2009), a decrease of 2.8% compared with FY2008. The operating profit of the company was A$791 million (approximately $591.7 million) during FY2009, a decrease of 33.6% compared with FY2008. The net profit was A$6,941 million (approximately $5,192.1 million) in FY2009, compared to a net profit of A$517 million (approximately $386.5 million) in FY2008”. The statistics above reveals that Origin has been recording downward profit over the past few years. For this reason, it is extremely important for the company to acquire new ventures and merge with other companies increase the capital base. CONCLUSION Strategic management is the secret to business growth and development. For Origin Energy to fully benefit from strategic management, the company must have a thorough assessment of its programs and business activities. As part of the assessment process, there must be a quality assurance system that will be spearheaded by external parties who are outside the company. These external parties may include experts in securities exchange, strategic managers and renowned entrepreneurs. REFERENCE LIST ABN News Wire 2011, Origin Energy Limited; Company Summary, accessed 4 April, 2011 All Business, 2011, What is Strategic Management? Accessed 4 April 2011 Australian Security Exchange, 2011, Origin Energy Limited (ORG), accessed 4 April 2011 Bianco D.P 2011, Distinctive Competencies, accessed 3 April 2011 Burgelman, Robert A., and Andrew S. Grove. 1996 "Strategic Dissonance." California Management Review. Maps of World, 2010, Benefits of Mergers and Acquisition, access 4 April 2011 Maps of World, 2010, Failure of Mergers and Acquisition, accessed 4 April 2011 Mintzberg, Henry, and James Brian Quinn. 1995, The Strategy Process: Concepts, Contexts, and Cases. 3rd ed. Paramus, NJ: Prentice Hall, Origin Energy, 2011, Origin Energy, accessed 5 April 2011 Pakistan Institute of Management 2010, Strategic Management Q&A, accessed 5 April 2011 Silo Breaker 2011, Origin Energy Limited, accessed 5 April 2011 Silo Breaker, 2011, Fact Sheet for Origin Energy Ltd, accessed 5 April 2011 Silva J. D 2011, What is Retail Marketing, accessed 4 April 2011 Sustainability Report, 2009, Global Reporting Initiative Index, Origin Energy Downloads, accessed 3 April 2011 Weekly Times Now 2011, Carbon tax is ‘a bad idea’, accessed 4 April 2011 Read More