Factors related to strategic management and leadership that make the company highly successful - Essay Example

STRATEGIC MANAGEMENT ………………………….. College ……………………………… ……………….. Words count: 2576 Table of Contents Table of Contents 2 Introduction 3 Deckers Outdoor Corporation: Company overview 3 Strategic Management and Leadership perspectives 4 Strategic Management in Deckers Outdoor Corporation 5 The Value Chain Analysis of Deckers Outdoor 6 Strategic Management and Success of Deckers Outdoor Corporation 8 Reasons behind the success 9 Main focuses of Strategies 11 Contribution of Leadership to Decker’s success 12 Conclusion 12 References 14 Introduction Business strategy is an extremely important and perhaps one of the most frequently used buzzwords in the contemporary business literature. Business firms are finding their ‘strategies’ as pathways to success, because strategy of an organisation necessarily incorporates planning, people, processes, patterns, procedures and perspectives. Strategy within an organisation is a specific pattern of decisions that defines and determines the objectives of the firm to provide certain structures related to achieving the goals (Mintzberg, Lampel and Quinn, 2003, p. 72). Managing human as well as non-human resources and utilizing the organisational capabilities effectively are at the very heart of formulating and implementing the business strategy. This piece of research analyzes the business case of Deckers Outdoor Corporation and attempts to apply relevant principles and management perspectives with a view to find what specific factors related to strategic management and leadership make the company highly successful. This paper lists out major reasons why Deckers Outdoor Corporation succeeded in the business and evaluates the contribution of leadership to its success. Deckers Outdoor Corporation: Company overview Deckers Outdoor Corporation designs, manufactures and markets stylistic, innovative and high quality footwear for men, women and children for causal and outdoor wearing. The company was founded in 1973 by a student of California University to produce sandals for beachgoers and surfers. The company markets its footwear products and accessories such as handbags and outerwear under three brands, namely UGG, Teva and Sanuk primarily through U.S retailers and international distributors. The company also markets its products directly to end-users both in home and abroad through its website. Deckers Outdoor gives more importance to finding and building niche brands in to global lifestyle leaders through its innovative design and brand differentiation. Its brands are designed with a view to meet specific needs of different groups, activities, jobs and people around the world. What makes the company and its brands different is that it never caters ordinary outwears (Deckers.com, 2013). Apart from the three major brands- UGG, Teva and Sanuk, it markets TSUBO, Ahnu, MOZO, Hoka etc. TSUBO is designed to providing a line of casual footwear and Ahnu for outdoor performance and lifestyle footwear. MOZO is developed with a view to provide a line of footwear that combines running shoe technology with work shoe toughness for people who spend long hours working on their feet and Hoka to provide customers with different capacities of runner designed to alleviate fatigue and muscle pain. Strategic Management and Leadership perspectives The process of bringing about the strategy is ‘strategic management’. Strategic management is about analyzing environmental factors affecting the firm, formulating a strategy on the basis of this analysis and finally implementing the strategy at organisational level (Henry, 2008, p. 8). Cole (2003, p. 3) argued that strategic management is basically about setting the underpinning aims of an organisation by choosing the most appropriate goals towards those aims and fulfilling both of them overtime. Manager’s as well as leaders’ role in formulating and implementing the strategy is critically important because strategic management involves thinking and actions that are focused on the long term future of the organisation and these are conducted in conditions of considerable unpredictability. Thompson and Martin (2010, p. 10) argued that managers at organisational level are strategy-makers up to an extent. Strategic management not only incorporates major changes of direction for the whole business such as diversification and growth strategy, but also involves smaller changes in strategies for individual products and services. Strategies generally lead the firms to success, but it largely depends on appropriateness of the strategies to the circumstances firms face, feasible in respect the resources and capabilities of the firms and desirable to the important stakeholders. In strategic management, leadership plays an important role to designate the use of strategy process as a systematic method for decision making and helping the firm achieve its objectives. Strategy doesn’t work alone, but managers as well as leaders need to take their role in formulating and implementing the strategies appropriate for the firms. Strategic Management in Deckers Outdoor Corporation The very first and fundamental component of strategic management process is crafting the mission statement of the organisation to provide the framework or context within which strategies are formulated (Hill and Jones, 2012, p. 14). Out of various components to strategic management initiative in a firm, Tyndall, Cameron and Taggart (1990, p. 10) considered defining the mission, goals and objectives of the organisation as most critical to the process of strategic management. Mission statement of an organisation describes what the company does and what it should be in the future. It has basically four components; a statement showing the reason for existence, a statement of desired future goal usually referred as vision, a statement of the key values that the firm is committed at and a statement of major goals (Hill and Jones, 2012, p. 14). Deckers Outdoor Corporation is very specific about its mission. The company is promised to build niche products in to global lifestyle brands by designing and marketing innovative, functional and fashion-oriented lines of footwear and shoes, designed and developed for both high performance outdoor purposes and casual everyday use (Deckers.com, 2013). The mission statement precisely describes the reason why Deckers outdoor exists, its future goal to become a global lifestyle brand, key values the company delivers to its people through innovative, functional and fashion-oriented products and its main objective to provide footwear and related goods for both high performance outdoor as well as causal every day use. The key elements of the business strategy of Deckers Outdoor Corporation are 1) Build leading global brands, 2) sustain brand authenticity, 3) drive demand through innovation and technical leadership, 4) maintain efficient products process and ongoing development, 5) growth strategies, 6) introduce new categories and variants to existing lines, 7) expand domestic distribution, 8) expand international presence, 9) pursue licensing f brands, and 10) build new brands. The Value Chain Analysis of Deckers Outdoor Value chain analysis is one of the most useful tools in strategic management process, because value is an important concept to strategic management and value chain analysis helps a firm understand parts of its operations that create value and those that don’t. It is a template that organisations use to analyze their cost positions and to identify the multiple means that can facilitate implementing a specific business strategy (Hitt, Ireland and Hoskisson, 2010, p. 85). The value chain analysis is a primary tool to find sources of a company’s competitive advantages. In order to do this, the whole organisation can be divided in to several activities so that strategically relevant activities become evident (Bischoff, 2011, p. 3). Michael Porter developed value chain analysis to propose an organisational system composed of systematic transformation process with inputs and outputs to a distinct level. For customers, value is what they expect in return of the money they are willing to pay for goods or services. A marketer is able to generate profits when he is able to make a difference between the total costs and the value which in turn equal to that of a product’s price. In the value chain analysis, a company’s total activities are divided in to a chain of activities and each element in the in the chain contributes a part of total value to the customer as well as a part of total profits to the company (Sekhar, 2009, p. 115). Inbound logistics, operations, outbound logistics, marketing and Sales and Service are the major components of Porter’s value chain analysis. The support activities include administrative infrastructure management, Human Resource Management, IT, procurement etc. As depicted above in the diagram, the value chain analysis of Deckers Outdoor Corporation reveals that the company has taken sufficient strategic measures to ensure delivering of maximum values to its customers. Decker’s online business is an important component in the inbound logistic to contribute to the value that company delivers to its customers as well as the profits it earns because of that it can drive both domestic and international sales. Deckers Outdoor Corporation aims at driving demand by fostering innovation and technical leadership and this strategic focus has been found to distinguish Decker’s products from those of competitors with significant competitive advantages. Deckers continues to develop innovative styles, products and product categories for its three lifestyle brands; UGG, Teva and Sanuk. Deckers Outdoor Corp strongly believes in the good business. For the company, footwear is merely a vehicle to communicate its brand message to its customers and therefore it enhances ethical business practices and social responsibility concerns to inspire the community, environment and the younger generation (Martinez, 2013). The social responsibility, as an important element to outbound logistics, contributes significant part to the values Deckers provides to its customers. Support activities such as innovation, technology, HRM and infrastructure represent the competitive advantage of the company. Deckers Outdoor Corporation focuses on efficient development in production process and strategic leadership to effectively implement the strategic management process. Littler (2006, p. 17) stressed that business reform and innovation are key elements to bringing competitive advantages. Strategic Management and Success of Deckers Outdoor Corporation The three primary brands; UGG, Teva and Sanuk have always brought success to the company. Since incorporated in 1993, Deckers outdoor corporation has continually witnessed growth in both domestic and global markets and success in both revenues and net profits. The diagram given below shows that there have been increased earnings, (shaded in yellow area) until 2002, and then a very clear upward trend in earnings-growth, resulting an average of 16.7 percent per annum (Carnavale, 2012). The fourth quarter review of the financial performance of Deckers outdoor corporation revealed that the net-sales of the company has been increased by 2.2 percent with a record $617 million sales compared to the $ 603 for the 4th quarter in 2011. UGG brand sales increased by 2.9 percent to $ 584 million compared to the $ 568 million for the previous year. Sanuk brand-sales have been increased by 39.2 percent whereas Teva brand sales increased by 29.5 percent. Retail sales increased by 37.1 percent whereas online sales increased by 30.6 percent. Though sales within the US has been decreased by 2.1 percent, the global sales, especially sales in China and UK, increased by 15.6 percent (Business Wire, 2013). Reasons behind the success Deckers outdoor Corporation has long been focusing on the strategic management with great vision and mission to build niche products into global lifestyle brands by designing innovative, functional and dynamic fashion-oriented products of footwear and accessories. The strategic management process has been one of the major reasons behind the success of the company. The major ten-strategies of the company- global brands, authenticity, innovation and technical leadership, efficient products process, growth strategies, newer lines of products, expanding domestic and international distribution and building new brands- have played significant roles in the success of the company. 1- Building leading global brands: Company’s mission is to develop niche footwear lines in to global brands with leadership position in both domestic and international markets. Decker’s specific styles and fashion-orientation remain true to the brand’s heritage. 2- Sustaining brand Authenticity The company not only proposes to build leading brands, but also to sustain strong gross margins and maintain stronger market share from consumer loyalty to heritage of Decker’s brand. 3- Driving demand through innovation and technology advancement Innovation and technology, especially in high-performance shoes and footwear can drive increased demands to Decker’s products. Sports and high-quality shoes as well as stringer footwear products are getting increased demand from all over the world and this will be an important opportunity for the firm. 4- Maintaining efficient development and production process By developing efficient production system, Deckers aims to produce leading edge products on timely and cost-effective basis. 5- Growth strategies Growth itself is success and growth strategy has been an important drive to Decker’s success. Its growth depends on broadening of the products offered under each brand by expanding both domestic and international operations. 6- Introducing new categories and styles under the existing products Product differentiation, either by developing new or by designing and developing new variants of the existing, has always helped companies place distinct position in the market. Deckers outdoor corporation aims to develop additional footwear products under the existing brands. 7 & 8- Expanding domestic as well as international distribution The company finds increased opportunities through efficient logistics and distribution system in both home and foreign business. The company proposed additional retail channels for specialty outdoor sporting goods. 9- Licensing of brands in complementary product lines Another important strategy is to license its brand names in products categories beyond footwear. It can be achieved by ensuring the licensing of products complements for the trademark protected goods. 10- Building newer brands Since the company proposes to build niche markets in fashion and stylistic footwear, it has to design and develop new brands in order to meet varying needs and individual preferences of customers especially for outdoor performance. Main focuses of Strategies Out of the above mentioned ten-strategies implemented by Deckers, Buliding leading global brands and driving demand through innovation and technology advancement seem to be most important reasons behind the continuing success of the company. Becoming global leaders in footwear is a bigger challenge, but company takes this to be an important strategic goal and management plays significant leadership role in achieving the same. Similarly, increasing demand by innovating explains how strategically the company creates demand for its footwear products. Deckers outdoor corporation not only produces to supply goods for the existing demands, but produces to drive demands too. This also implies the leadership role its managers play to make strategies work for the company. Contribution of Leadership to Decker’s success Leadership is the relationship between people in which one person influences others to do what he wants them to do. When it comes to Deckers outdoor corporation, building niche product lines to global lifestyle brands is at the core of its management strategy. In order to achieve this goal, people within the organisation need to work collaboratively and as a team being motivated and committed towards achieving the goal. They, therefore, need to be influenced by managers or leaders. Decker’s success in previous years has also been driven by the leaders’ role in implementing the strategies successfully and managing the human capital within the firm efficiently. Conclusion This paper described the theoretical framework and underpinning concepts about strategic management to apply these theories and concepts with the business case of Deckers Outdoor Corporation. Strategic management is about studying and analyzing the factors affecting an organisation and formulating a strategy on the basis of this analysis and implementing the same at organisational level. Deckers Outdoor Corporation has successfully implemented ten strategies with a view to achieve its goals- building niche products in to global lifestyle brands-. This paper has presented a detailed value chain analysis of Deckers and described that many factors such as innovation, technology advancement, leadership, corporate social responsibility etc contribute much to the values people find from Deckers’ footwear products and to the profits the company earns. This paper has also explained how the leadership contributed to the strategic management and success of the firm. References Bischoff, A.L, 2011, Porters Value Chain and the REA Analysis as an Accounting Information System, GRIN Verlag Business Wire, 2013, Deckers Outdoor Corporation Reports Fourth Quarter and Fiscal 2012 Financial Results, Market Watch, Retrieved from http://www.marketwatch.com/story/deckers-outdoor-corporation-reports-fourth-quarter-and-fiscal-2012-financial-results-2013-02-28 Carnevale, C., 2010, Deckers outdoor, Sprinting for success, seekingalpha.com, Retreived from http://seekingalpha.com/article/194653-deckers-outdoor-sprinting-for-success Cole, G.A., 2003, Strategic Management: Theory and Practice, Second edition, Cengage Learning EMEA Deckers.com, 2013, Deckers Outdoor Corporation, Company, Retrieved from http://www.deckers.com/company Henry, A., 2008, Understanding strategic management, Oxford University Press Hill, C.W.L and Jones, G.R., 2012, Strategic Management Theory, Tenth edition, Cengage Learning Hitt, M.A., Ireland, R.D and Hoskisson, R.E., 2010, Strategic Management: Competitiveness and Globalization, Concepts, Ninth edition, Cengage Learning Martinez, A., 2013, CEO Statement, Deckers Outdoor Corporation, Retrieved from http://deckers.com.s117066.gridserver.com/our-company/csr-ceo-statement.php Mintzberg, H, Lampel, J & Quinn, JB 2003, The Strategy Process: Concepts, Contexts, Cases, Global Fourth Edition, Prentice Hall, Pearson Education, Inc Sekhar, G.V.S, 2009, Business Policy and Strategic Management, I. K. International Pvt Ltd Thompson, J.L and Martin, F., 2010, Strategic Management: Awareness & Change, Sixth edition, Cengage Learning EMEA Tyndall, G.R., Cameron, J and Taggart, R.C., 1990, Strategic planning and management guidelines for transportation agencies, Issue 331, Transportation Research Board Read More