The Processes for Managing Strategy in Multinational Company: Bluescope Steel - Term Paper Example

TOPIC: STRATEGIC MANAGEMENT This research paper discusses the processes for managing strategy in multinational companies using Bluescope Steel Company as an example. In doing so, it extensively reviews pertinent literature on the subject in the context of a global world. It also highlights how the test company applied some of the concepts, theories and tools reviewed in its operations. ===============================================================Several strategic management concepts, theories and tools have been developed to enable companies function well and prosper in a glabal world ( 1, 2, 3.). Today, the impact of the force of globalization is being felt everywhere by multinational companies and small companies alike. Principal factors fostering this development are advances in information and communication technologies, international travel and the greater emphasis being given to formation of regional groupings by nations. Consequently, the world can now be best described as a small village. Resources can easily be acquired from any part of the world. For a multinational company as is even with a small company, competitors extend well beyond its immediate business environs. It is in this business environment that companies are supposed to manage their resources optimally for growth and development. Concepts, theories and tools on strategic management help companies to better understand their environment and optimize their resources for profit. Two approaches of strategic management exist (4). These are the industrial organization approach and the sociological approach. The former had its roots from economic theory and considers strategic management principally from the point of view of resource allocation. The latter, on the other hand, places greater emphasis on human interactions and gives premium to intuition and satisfying behaviour. Structurally, multinational companies are built in several ways and forms. They can be structured based on functional specialization such as production, marketing, finance, etc or on products and services. With the latter, each product or category grouping has its own functional units. Multinationals can also be patterned along divisions. The test company (Bluescope steel), for example, is structured in this manner. It has three regional divisions in Australia, Asia and North America (NAFTA)(5). In addition to these, there is the matrix-type of structure, where functional specialization is built around products, projects, or programmes. This structure thrives on team working. Once an assigned task is completed, the team is dissembled and reconstituted for a new one. In recent times, modern forms of communication allow virtual companies to be formed easily. These are made up of freelance businesses and /or individuals. Irrespective of the company structure and setting, processes for strategy development take three forms. Strategy can be developed from the bottom to the top or the other way round. The third form is more collaborative, where several employees of the company and management sit together to fashion it out. Bluescope steel 's plan captioned by the company as "Our Bond" is a collaborative one, involving 200 employees of the company. A plan of this nature is likely to have collective ownership, devoid of the "we think and they do'' mentality. Various tools are available for analyzing the business environment. Andrews (1971) built on the work of Selznick (1957) and came up with the SWOT analytical tool. This tool enables companies to match their strengths to available opportunities, whilst dealing with their weaknesses and threats. The tool has been criticized for its tendency to lead its users into inflexible positions (3). Also, until Nigel Piercy (2001) developed simple procedures for accurately evaluating a company's strengths and weaknesses, no such method was available. The outcome was that in SWOT workshops, strengths and weaknesses of companies were often coloured in motherhood statements. The failure of some corporate plans in the past could be attributed in apart to this shortcoming. Porter's five competitive forces model (Porter, 1980) also enables companies analyze the industry in which they operate in, with the view to identifying areas where value can be added. This can be from a local or global perspective. The forces that impinge upon a company are (a) threat of new entrants into the industry (b) the power suppliers and (c) buyers weld over a company through bargaining, (d) threat posed by products considered to be substitutes to existing ones and (e) rivalry between existing competitors. The competitive position occupied by a company at any given time is dependent on the sum total of the aforementioned forces. The theory behind this model, therefore is that, if a company had good understanding of these factors, it could with the resources at its disposal manipulate some of them to its advantage. Thus, the model's practical usefulness depends on gaining an accurate estimation of these f actors. In a business environment, where constant change is the norm, making such assessments can sometimes be difficult. This problem notwithstanding, the model enables a company position itself better in a market to enhance its competitiveness. Porter is credited for coining the term competitive advantage. In a book on this subject (Porter, 1985), he recommended for two ways in which companies can achieve this goal, namely through (a) low cost orientation and (b) differentiation. There are other ways a multinational company can position itself in a market. Trout and Ries (2001) championed the concept in marketing circles more than two decades ago. To them, positioning meant getting the customer to retain your product or brand in his or her mind. They emphasized the hard forms of promotion such as aggressive advertising as the way to achieve this purpose. Today, the lustre on this approach is fading. Softer approaches such as supporting social causes such as environmental protection, philanthropic gestures, etc are more appealing. Igor Ansoff's model (1984) has had useful application in the corporate world. It enables a company assess its capabilities for market and product development. Multinationals can use this model to devise strategies for promoting their old products vigorously in existing markets or in new ones in other parts of the world. Similarly, they can develop new products for countries they already operate or new markets can be harnessed for them. It is vital concept to consider where product and market expansion policy is being pursued. As a concept, generally it is easy to apply, except where the axes of the matrix are incorrectly labeled. The Mckinsey/Shell composite portfolio model (13) also allows a multinational company to tailor its competitive positions to the attractions of the industry they operate in. Such analyses aid investment decisions. A competitive position can be the company's size, relative market share, distribution prowess, patents ad technological capabilities. Others are the strength of its brands and loyalty of customers, profit margins, etc. Attractions of an industry are its present and future growth potential, intensity of competition, degree of profitability, existing regulations and laws, price and sophistication of technologies needed to enter and operate successfully, among others. As a tool, it can be used at the strategic business unit (SBU) level or on a company-wide basis. The model itself is an adaptation of the popular growth/share matrix developed by Henderson (1970). This matrix helps its users measure market growth of a business with its market share in relative terms. The theory underlying this model is that businesses with high relative market share in high growth markets should be given preference in investment terms to those with low relative market share in less attractive markets. Difficulties, users of this model encountered in the past, were largely due to their inability to properly define the business units. Application of the theory in cash management also led to erroneous investment decisions (3). Scenario planning or writing is another popular analytical tool. This tool enables a company face its future challenges by developing multiple scenarios of how it would deal with them. Such plans cover a period of 5 or 10 years. In a business environment where change has been likened to the speed of the net, the usefulness of such tools is becoming increasingly doubtful. Consequentially, decision-making based on rigorous analytical techniques is presently being de-emphasized in favour of fast experimentation and refinement of outcomes as better information becomes available. A concept similar to the Japanese kaizen. Decision support systems presently aid decision-making process. More sophisticated ones are being made available that do not only help identify problems but also provide solutions. Another issue that confronts a multinational or any company for that matter, is whether to develop universal products for all its markets or they should modify or adapt their products to suit a particular locality or market. Such matters require strategic management decisions. Kenichi Ohmae (1990) introduced the concept of multilocals in the vocabulary of multinationals. He argued that people in a particular locality who knows the market insider out should be involved in crafting products and services that better serve the needs of customers in that locality. He recommended for multinationals to adopt local globalization policies (16). The word ' multinationals " itself is losing its true meaning with the advent of the internet. If the word meant having physical presence in multiple countries, even small companies through the internet are achieving the same effect. A company may not have a physical presence in a particular country but could have a strong web presence and receive more orders from foreign countries other than its own home country. Having recognized the importance of the internet, presently there is no multinational company without a website. Bluescope steel provides a good example of this development. A careful review of the company reveals that it is exploiting its strengths as a low cost steel producer and strong brands to the opportunities presented in a global world. Asia offers to the company cheap raw materials and low wages. These advantages it has exploited by expanding its operations downstream into this region. It has grown and positioned itself so well in this region that presently it is the largest Australian company in China. Considering the huge market potential of this particular country, this is an enviable feat. To have achieved this, meant it has been successful in outwitting competing companies with similar interests in the region. It is currently pursuing an accelerated growth policy, essentially through acquisitions and Greenfield setups. The former is the policy orientation in North America. Different products are being tailored to each of the regional centers. One billion dollars has been committed to this programme. This paper has reviewed available pertinent literature on strategic management theories, concepts and tools. What is clearly evident is that no one set of prescriptions fit all companies everywhere. The best solution does not even lie in combining elements of best performing companies for a specific company. At least, the groundbreaking work of Peters and Waterman (1982) has perfectly proven this. The companies that were touted as excellent were no longer so, after a few years. It is therefore important for each situation of a company to be studied indepthly before a set of solutions are given based on the resources that particular company has. These concepts and tools help us do this. REFERENCES 1. Mintzberg, H., Ahlstrand, B., and Lampel, J. (1998). Strategy Safari: A guided tour through the wilds of strategic management. The Free Press, New York. 2. Harding, S. and Long, T. (2000). MBA Management models, 2nd Edition, Grower Publishing Ltd., Hampshire. 3. Koch, R. (2000). Guide to strategy - How to create and deliver a useful strategy, 2nd Edition, Pearson Educational Ltd. 4. Abell, D. (1993). Managing with dual strategies, The Free Fress (Macmillan Inc), New York. 5. www.bluescopesteel.com 6. Andrews, K.R. (1971). The concept of corporate strategy, Dow Jones-Irwin. 7. Selznick, P. (1957). Leadership in administration: A sociological interpretation, Evanston, IL. 8. Piercy, N. (2001). Market-led strategic change: Transforming the process of going to market, 2nd Edition, Butter-worth-Heinemann. 9. Porter, M.E. (1980). Competitive strategy: Techniques for analyzing industries and competitors, The Free Press, New York. 10. Porter, M.E. (1985). Competitive Advantage: Creating and sustaining superior performance, The Free Press, New York. 11. Trout, J. and Ries, A. (2001). Positioning: The battle for your mind, 2nd Edition, The Mc Graw Hill Companies Inc. 12. Ansoff, H.I. (1984). Implementing strategic management, PrenticeHall International, Englewood Cliffs, New Jersey. 13. Doyle, P. (2002). Marketing management and strategy, 3rd Edition, Prentice Hall 14.Henderson, B. (1970). The product portfolio, BCG Inc. New York. 15.Ohmae, K. (1990). The mind of the strategist: The art of Japanese Business, 2nd Edition, Mc Graw Hill Inc, New York. 16.Ohmae, K. (1995). The end of the nation state: The rise of regional economies, Mckinsey and company. 17.Peters, T. and Waterman, R. (1982). In search of Excellence, Harper Collins, New York. Read More