Corporate Culture as an Essential Ingredient of Strategic Management - Research Paper Example

Details A Chief Executive Officer (CEO) plays a crucial role in setting ethical standards for an organization as ethical culture of a firm is very important in determining its degree of market repute. While designing an organization’s ethical standards, the CEO must make sure that they are free from any form of external influence. In addition, the CEO must scrutinize each and every aspect of the proposed ethical framework to ensure that these standards do not discriminate people on the ground of sex, religion, or politics. CEO is the person responsible for determining who and how many should represent the panel of members that develops the basic framework for ethical standards. In addition, the CEO needs to encourage employees to openly express their views and suggestions regarding the ethical culture of the organization so as to ensure a comprehensive ethical framework. The essential elements needed for the establishment of an effective ethical framework may vary from culture to culture as ethics is related to perceptions of people. Therefore, the CEO must acquire thorough knowledge regarding different cultural aspects of the region in which his company operates. For this, the CEO has to directly or indirectly analyze the traditional beliefs and practices and living standards of people who reside in the company’s target business territory. Before setting the ethical standards of an organization, the CEO should evaluate what his competitors do and to what extent they are effective. It is clear that finance is an essential component in the design and implementation of proposed ethical standards. Here, the CEO has the responsibility to find potential sources of finance and distribute them among different divisions of the organization. Hence, the CEO needs to choose appropriate means of market survey to understand what people expect from the company. Similarly, the CEO has to convince personnel about the significance of ethical culture since effective employee participation is inevitable for the successful implementation of the designed ethical standards. Therefore, the CEO must also ensure that the proposed ethical framework does not hurt the employees’ worksite interests. In order for setting up ethical standards effectively, upward and downward flow of communication is necessary at various management levels. Ethical standards and practices would not benefit an organization if bad behavior of managerial persons or other employees goes unreported. Hence, the CEO must design a well structured reporting system by focusing on various departmental divisions. Furthermore, the CEO has to remember the fact that generational differences can raise ethical changes and hence he should not focus too much on traditional ethical practices of the organization. Gable highlights the point that people with different work styles can demonstrate same commitment and work efficacy. Hence, individuality of people has to be admired while framing ethical standards of an organization. In other words, the ethical standards must make the employees feel that the company is loyal to them. In sum, the CEO must ensure that the proposed ethical standards are authentic and not too liberal. 2. In macroeconomics and management, vertical integration is a process through which several phases in production and/or distribution of a product/service are owned and operated by a single company in order to increase business territory and market power. A vertical integration strategy has the following advantages and disadvantages; Advantages Improved supply chain coordination is the most notable benefit of a vertical integration strategy as this feature assists an organization to increase its operational efficiency and thereby profitability. In most times, it seems that a vertical integration results in closer geographic proximity and it is beneficial for the integrated firm to take advantages of reduced transportation costs. Economists opine that vertical amalgamation is useful for organizations to obtain increased control over inputs and this condition in turn provides them more opportunities to differentiate product lines and market operations. In addition, this strategy reduces the threat of new potential entrants, and this process may also provide a company sole access to scarce resources. Experiences show that vertical mergers allow organizations to obtain access to downstream distribution channels. This opportunity would not be available under normal circumstances. Moreover, this business expansion policy enables a firm to invest in highly specialized assets in which downstream and upstream players hesitate to invest. Undoubtedly, the vertical integration strategy will improve the degree of competitiveness of the merged company. As Harrison and John point out, “vertical integration may be associated with reduced administrative, selling, and R&D costs’ (Harrison and John, 116). Another significant benefit of a vertical integration strategy is the synergy resulted from the coordination and integration of vertical activities; this synergy helps an organization improve its access to customers. It also assists a firm to gain economies of scale by eliminating intermediaries, simplifying supply chain activities, and by reducing coordination costs. Disadvantages Many of the vertical integration experts are of the opinion that this strategy would allow an unprofitable business division to operate at the expense of other profitable sectors. When a business concern excels in one area of the vertical supply chain, it does not mean that the firm will excel in other too. Higher production cost is identified to be the most noticeable demerit of vertical mergers and this higher cost is attributable to “lack of incentive on the part of internal suppliers to keep their costs down” (Harrison and John, 116). The authors add that the vertical integration process contains a risk element which is almost similar to concentration. To illustrate, if a vertically merged firm’s principal activity undergoes a recession, the whole organization may be affected unless its value chain activities are flexible enough to be employed for other category of products and services. A vertical integration process involves high degrees of technical change and increased levels of competition. And both these changes may reduce the rate of expected profits. It is clear that a vertical integration strategy involves an organizational change that often becomes a tough task for a firm to deal with. In addition, different activities associated with a vertical integration process may lead to an increase in overheads, a fall in flexibility, and different business conflicts. 3. As the CEO of a local manufacturing company, I would expand my business to India first. While comparing the economic landscapes of India and China, it seems that China is one foot ahead of India. Presently, China is the world’s second largest economy in terms of purchasing power parity (PPP) whereas the Indian economy is the fourth largest in the world on the basis of PPP. According to reports, India “has been close to emulating Chinese growth rates” (Oxford Economics). The Indian economic spectrum offers extensive opportunities to foreign firms although still industrial investors consider India as an uncertain economy where a range of risk elements exists. The Indian legal framework gives great emphasis on the investor interests and hence foreign companies would obtain great government support in India. In contrast, China follows communist ideologies that suggest common ownership of the means of production. Hence, the Chinese legal framework adopts more regulative approach toward foreign firms and often such a policy would not benefit investor interests. In other words, as foreign investors face operational restrictions in China, this situation will prevent organizations from taking maximum advantages of the available opportunities. As the World Bank states, the Indian government has significantly liberalized policies of licensing and bureaucratic administration since 2000 (AltAssets). In terms of firms’ perception on policy restrictions, India scores better than other emerging economies like China and Brazil. Indian government allows manufacturing organizations to incorporate either as Indian companies or as foreign companies. Although corporate taxation is high in India as compared to European and US rates, it has noticeably reduced over the last 15 years; and the top taxation rate got reduced from 48 percent to 35 percent in 2004 (AltAssets). For a manufacturing company, it is necessary to analyze the level of infrastructure development in the target country while planning its market entry. It is observed that Indian corporate planners nowadays greatly focus on infrastructure development as they believe that this component is vital for stable economic growth. The Oxford Economics reports that Chinese manufacturing sector is striving to regain its momentum of the last decade due to several reasons. Similarly, cost of raw materials and labor have been significantly increased in China over the past few years and such a situation would not be favorable for a local manufacturing company. A global sources survey identified that Chinese suppliers implemented 6 to 10 percent price hikes during 2010. In addition, the survey observed that most of the Chinese manufacturing firms raised their quotes up to 10 percent. The survey also predicts that this cost increase in materials and components is likely to continue throughout the coming years despite the positive impacts of the strong Yuan (“Global sources”). In contrast to this, Indian market offers relatively cheap raw materials and other components. Obviously, India has abundant natural resources which would serve the market interests of manufacturing concerns. Skilled and cheap labor is another attractive feature of India as it assists companies to cut down its cost of production to a large extent. 4. Corporate culture is a broad concept which includes values, conventions, practices, and meanings that make a company distinct from others. The term corporate culture is often referred to as “the character of an organization” because this concept reflects the vision of the company. The corporate culture greatly influences the ethical standards as well as the managerial practices of an organization. Similarly, corporate culture is an inevitable component in the successful execution of a strategy. Corporate culture defines the work environment, ways of management, processes and politics of an organization and this concept also reflects how a firm approaches its day to day managerial issues and other unforeseen contingencies. Since every business strategy is designed to achieve the fundamental vision of the company, corporate culture must be a crucial factor in executing a strategy. Both internal factors such as employee hiring and staff turnover and external factors like technology formulate the corporate culture of an organization. Hence, the executed strategy will not reflect the ideologies and customs of an organization unless corporate culture is not taken into account while framing a strategy. Management practices show that corporate culture greatly promotes successful strategy implementation. More precisely, shared thoughts in practices, traditionally accepted norms, and other operational peculiarities within the organization stimulate employees to perform their tasks effectively. To illustrate, if an organization’s corporate culture specifically focuses on customer feedbacks and employee empowerment, it would promote the implementation of a strategy which emphasizes on superior customer services and quality work environment. Since a firm’s major products always try to dominate culture, sometimes a new strategy may deviate from the framework of corporate culture. However, if a firm ignores the corporate culture factor while executing a strategy, it means that the firm is moving away from its basic norms and ideologies. Hence, such a practice would cause investors to lose their trust in the way the company operates and it may lead the company to a profitability downturn. If the executed strategy deviates from the corporate culture framework, the strategy may not be performed properly; and this in turn will cause difficulties to the company management. Hence, it could be stated that corporate culture is an essential ingredient of strategic management. An organization should not restructure its corporate culture in order to match with the proposed strategy but redesign the strategy in a way so as to comply with the corporate culture norms. Evidently, thoughtless strategic planning and implementation adversely affect socially defined ideologies and practices of corporate culture; and such practices often result in corporate failures. In the modern competitive business world, organizations need to change their overall strategies and operations. This “willingness to change” is the central aspect of corporate culture. However, organizations must keep their corporate culture same while implementing strategic changes. Moreover, every strategy is an opportunity for organizations to enhance their corporate culture without any cost. Likewise, corporate culture is an essential element for firms to distinguish their products and services in the market from those of competitors. In short, strategic planning, design, and implementation must revolve around the central concept ‘corporate culture’. Works Cited AltAssets. “Manufacturing in India: Opportunities, challenges, and myths.” (200&). Web. 11 December 2011. Gable, Lori. “Top managers play key role in setting ethical standards.” Rochester Business Journal. 23.8 (2007). Global Sources: China Supplier Survey. “Expect higher China prices in months ahead.” (2011). Web. 11 December 2011. Harrison, Jeffery S & John, Caron H. Foundations in Strategic Management. USA: South-Western Cengage Learning, 2010. Print. Oxford Economics. “Can India catch up with China?: Executive summary.” (2009). Web. 11 December 2011. Read More