Strategic Management Theories - Essay Example

? Topic: Lecturer: Presentation: Introduction Modern organisations operate in a very competitive and dynamic environment especially due to globalisation and advances in technology. Gaining sustainable competitive advantage is therefore the main goal of any organisations that wishes to achieve success and continued profitability. As a result, organisations no longer rely on crisis management hence strategic management has gained importance over the years. This involves scanning the environment and developing strategies and policies that enable the organisation to keep up with the changing environment and at the same time be able to meet the ever increasing needs of customers and other stakeholders. Strategic management theorists have over the years developed various tools to help managers in formulating strategies for organisational success. These include the SWOT analysis, Ansoffs matrix, PESTLE, and Porters five forces among others. These tools assess the threats and opportunities as well as the strengths and weaknesses for the firm and enable it to capitalise on them. The Porters five forces and the generic strategies have been widely used by companies to assess the attractiveness of the industry and their competitive position hence are able to formulate strategies to gain competitive advantage in the industry. The five forces include: competitor rivalry, threat of close substitutes, bargaining power of buyers, bargaining power of suppliers, and threat of new entrants. The five forces will be used in this paper to assess the competitive position of the UK fire service and the strategies employed by the company. Rivalry in the industry is more apparent where are there are existing businesses and threat of entry and exit is high. Firms compete on price, new products, technology, advertisements and on customer service. According to Porter (1998) rivalry results from slow growth within the industry, high fixed costs, lack of differentiation, diverse competitors, and equally balance companies among others. Intense rivalry has a great impact on price and profitability of the firm especially if there are close substitute products in the industry. The UK fire service is a parastatal which operates under separate legislation and administrative arrangements of devolved governments of England, Wales, Scotland, and Northern Ireland. The Fire and Rescue Service (FRS) is funded and governed by the fire authority. There are various fire brigades in each country under local authorities but in North Ireland, there is only one statutory corporation funded by department of health, social services and public safety (UK Fire Service, 2012). As such, there are no strong competitors in the fire industry since most services are offered for free by the government. However, there are competitors such as DDA fire ltd which is the largest private fire service in UK offering specialist fire and safety, high profile health and safety consultancy and sales services to private sector (DDA, 2012). Some of the FRS in UK include: fire fire and rescue services in Scotland, Strathclyde with 111 fire stations strategically placed in Scotland, NIFRS in N.Ireland with 68 stations and the London FRS under the fire authority. There is no intense rivalry in the industry hence it is attractive for investment. Another force as portrayed by porter is the bargaining power of suppliers in the industry which has an effect on prices and quality of products. According to Porter (1998) a high bargaining power is achieved when there are few companies or suppliers in the industry. It also occurs when there are no close substitutes such that even if the suppliers offered high prices, the industry would still take it since there is no option. If the product is essential in the industry, the suppliers may also have power over it. The suppliers can also threaten to integrate forward hence becoming a threat to the industry. However, De Wit and Meyer (2010) argue that forming the right strategy can alter the power of suppliers. However, when there are many suppliers in the industry, firms have power over suppliers since they can switch to another supplier and suppliers’ threat to integrate forward would have no effect on the industry. The UK fire service has a lot of suppliers and has formed strong relationship with the surrounding communities who act as buyers and suppliers of essential services such as voluntary labour. It has also formed partnerships with providers such as safelincs which provides all its safety products to customers such as fire extinguishers, Anti Arson letter boxes, gas detectors, smoke alarms, carbon monoxide detectors, and servicing. It offers customer service, support and delivery to customers thus “removing the hassle of shopping about for products by connecting them with the best provider” (Fire service, 2011). The local authorities in various countries also receive supplies from companies such as Argus which is the leading independent designer and installer of fixed fire protection and detection systems. The company is ISO certified for quality and competency by British standards; ISO 9001:2008 (Argus Fire, 2012). Since its supply channel is well established, there is minimal threat by suppliers hence the industry is attractive. The threat of entrants poses great challenge to the existing industries in that the new entrants share in the profits thus reducing profits for other firms. Where new firms find it easy to enter the market, firms incur zero economic profit since the prices are pushed down due to increased competition. Barriers to entry in the industry may result from economies of scale where existing industries incur low unit cost of production compared to new firms due to production of large quantities. New firms can either produce large quantities at high costs or produce low quantity hence are unable to compete with existing firms (Grant, 2005; Whittington, 1993). New entrants may also be discouraged by high capital requirements, high switching costs, lack of access to distribution channels or existing customers already have formed brand loyalty for existing firms’ products hence not easy to win them over (Porter, 1998). The threat of entry enables the existing firms to enjoy profits and minimise competition hence the industry is attractive for them. The UK fire service industry is free for entry by providers who help the government in times of disasters like floods, earthquakes, Tsunami and also in fighting terrorism. However, the industry is governed by stringent rules and regulations that dictate how the fire stations are operated. Furthermore, most of the services are offered for free hence the private sector may not be willing to enter the industry. However, most large companies have employed the services of private fire and rescue services. The ministry of Defence, the Royal family, and British Airports Authority have their own independent fire brigades. Other forces that affect the attractiveness of the industry include the bargaining power of customers and the threat of substitutes. The result of carrying out competitive analysis of an industry is to formulate a strategy which De Wit and Meyer (2010) refer to as strategy content. In Porter’s view, there can only be three generic strategies that can be used to gain sustainable competitive advantage by a firm in the industry. These include: cost leadership, differentiation and focus strategies. Johnson et al (2008) argue that strategies may arise from three sources; entrepreneurial where an individual develops a strategy from own thinking, emergent strategy that arises from day to day activities and intended strategy which is a deliberate effort by leaders through some process. Strategic management deals with deliberate and emergent initiatives. For structuralists such as Porter, strategy is constructed around existing environment whereas for Reconstructionists environment is reconstructed around new strategic move (Kim & Mauborgne, 2009). The firm therefore needs to position itself in the market to gain competitive advantage though differentiation or cost leadership for Porter. Johnson et al (2008) observe that strategic options are evaluated on the basis of suitability, feasibility and acceptability. Suitability involves addressing key issues recognised during the process. Feasibility involves availability of resources to realise the strategy while acceptability involves fulfilling the expectations of stakeholders. Whatever the strategy, there should be a fit between firm and the environment as well as internal consistency (De Wit & Meyer, 2010, p. 234). To gain sustainable competitive advantage, the company should have a good business system that creates value for buyers such as superior product offering and unique value proposition thus providing better, faster, and nicer services (Lynch, 2006). The activities of the business must therefore be unique if a firm has to stand out and edge out rivals in the industry. This includes the way it deals with human resources, use of improved technology, marketing and sales, processing and offering services. Differentiation can also be from the use of resources such as having a strong knowledge base, capabilities, and attitudes which cannot be imitated by rivals (De Wit & Meyer, 2010). Each country in the UK develops its strategies that serve the community best. It thus focuses on different market segments depending on population and its characteristics. For the example, the airports are required to have independent fire and rescue services due to their nature. The fire fighters are also offered extensive training in all local authorities to ensure superior services for customers. Fire and rescue services are free but specialised services are paid for hence the FRS can serve many customers. Employees are also supposed to have personal qualities (PQAs) such as confidence, situational awareness, diversity, integrity, and openness to change among others (Fireservice, 2011). These form the core values of the organisation that differentiates it from others. Conclusion The competitiveness of the industry is better analysed using Porter’s five forces which result in three generic strategies. These include rivalry among competitors, bargaining power of customers and suppliers, threat of substitutes, and threats of entry. The UK fire service is a parastatal and therefore offer most of the services to the public through the various governments and local authorities hence it doesn’t face stiff competition in the industry. To position itself, it focuses on the needs of each segment in the industry since various segments have different needs. It also ensures high quality services and products by partnering with safelincs. References Argus Fire (2012) www.argusfire.co.uk [Accessed 31 May 2012] DDA (2012) DDA Fire Limited Available at: www.ddafire.co.uk [Accessed 1 June 2012] De Wit, B. and Meyer, R., (2010) Strategy: Process, Content, Context: An International Perspective. 4th edn. UK: Cengage Learning EMEA. Fireservice (2011) The UK Fire Service. Available at: www.fireservice.co.uk [Accessed: 1 June 2012] Grant, R.M (2005) Contemporary Strategy Analysis. 5th edn. UK: Blackwell Johnson, G., Scholes, K. and Whittington, R (2008) Exploring Corporate Strategy. 8th edn. Essex: F/T Prentice Hall Kim, W.C. and Mauborgne, R (2009) How Strategy Shapes Structure. Harvard Business Review. Vol 87(9): 72-81 Lynch, R (2006) Corporate Strategy. London: Prentice Hall Porter, M.E (1998) Competitive Strategy: Techniques for Analyzing Industry and Competitors. New York: Free Press UK Fire Service (2012) Available at: www.fireserviceuk.com/about [Accessed 1 June 2012] Whittington, R (1993) What is Strategy and Does it Matter? London: Thomson Read More