The Effect of Business Strategy on Stakeholders - Essay Example

Task Stakeholders Any person, group or other organizations which have an interest in an organization are termed as stakeholders. The organizations actions, policies and strategies have significant effects on and are affected by these stakeholders. However, it must be understood that not all stakeholders are equal. Every stakeholder should be handled according to the importance he/she holds, in terms of power and interest to the organization. Thus, the higher the level of power and/or interest a stakeholder has, the more carefully he/she would be dealt with. Electrolux must conduct its stakeholder analysis before developing a new business strategy. There could be positive or negative effect on stakeholders of any changes in strategy e.g. employee layoffs will have negative effect on employees. On the other hand an increase in revenue and profits of an organization will have positive effects on stakeholders. It is helpful to develop a stakeholder power/influence grid to categorize stakeholders who will be affected by changes in strategy. High Keep Manage Performance Satisfied closely Monitor Keep Low (Min.Effort) Informed Low Interest High While conducting stakeholder analysis, any firm should identify key stakeholders, identify stakeholder concern and issues and consider their level of commitment and resistance to the changes. Task 2 According to Mitchell (2009), it is oftentimes helpful to seek to model the organization in order to analyze the specific activities through which an organization can create a competitive advantage. Michael Porter sought to define such activities known by the handle “the value chain” and described it as follows: Inbound logistics are defined to include the storing, inventory control, and shipment of goods. Operations may be defined as the value-creating activities that can help to transform the inputs into more finished products/goods. Outbound logistics refer to whatever activities might be necessary to ensure that the finished products reach the consumer. This can include but is not limited to storage, order fulfilment, and a litany of other factors. Marketing & Sales may be defined as those activities which are associated with encouraging buyers to purchase the product/service which is being offered. It includes advertising, pricing, branding etc. Service activities include, but are not limited to, repair, support, and other services provided both before, during or after the sale. As such, each and every one of these activities is vital to ensuring that the company/firm is able to integrate with the consumer and continue to fulfil their needs in a reasonable fashion. Within such a dynamic, the reader can and should engage with a simple SWOT analysis of the firm in question; Electrolux. As such, a brief discussion and analysis of strengths, weaknesses, opportunities, and threats will be presented. Strengths: The firm displays more than a few strengths; the first of which is necessarily the fact that it has a long and storied past of offering consumer products to key markets since 1918. Moreover, the firm enjoys a very good reputation with consumers as presenting an extraordinarily high quality and offering expert customer support and service post sale. Additionally, key acquisitions and mergers have worked together to make the firm into a resilient one that encompasses the strengths of other companies such as “ElektroHelios, Finnish Slev, Flymo, Danish Atlas, and Norwegian Elektrag (Lorenz, 1989). Weaknesses: One of the greatest weaknesses is the fact that the firm is a mature one that has currently experienced little growth into other markets; due in part to the fact that its product line is markedly more expensive than the competition. Within such a pricing structure, other competitors find it easy to continually edge out Electrolux with regards to overall total sales and cost of production. Further, the quality that the firm has long engendered has dropped as of late; due partly to outsourcing to Chinese firms in mainland China - operating under the Electrolux brand. Although the product line still represents a nominally higher quality than many of its competitors, this has tarnished its image and will make it more difficult for the product line to re-engage with consumers. Opportunities: Due to the fact that an ever increasing share of available markets are now being opened and key regions within India, the Russian Federation, Brazil, South Africa, and China, it is a key opportunity for brands such as Electrolux to engage with these potential consumers. Such an entry strategy will doubtless be expensive, but it has the opportunity to return massive profits over the long term. Threats: As has been stated within the weaknesses portion of the SWOT, a key threat that Electrolux faces, as compared to several decades past, is a great variety of product offerings within the same scope of offerings that it represents. Moreover, as competitors have gained market share rapidly, Electrolux has lost market share or has grown at a relatively slow rate. Finally, the threat of labour cost increases is a very real and pertinent threat that any manufacturer, regardless of where ultimate product manufacture takes place, must be cognizant of. Support Activities These value chain activities, discussed and elaborated upon above, are facilitated by an array of support activities. In such a way, Porter helped to discussed and identify what he termed as “four generic categories of support activities”. These are as follows: Procurement relates to purchasing of business goods or materials used. Electrolux’s strategy includes decreasing the number of suppliers to a few limited numbers of suppliers who can provide best quality material at the least possible cost. In terms of technological development Electrolux has focused on intensified product renewal and systematic development of both the brand and personnel. The process of product development of Electrolux’s is based upon consumer insight which reduces the risk of incorrect investment decisions. Electrolux has increased its investment in product development to SEK 500 million over the past three years. Their goal is to invest up to 2% of sales in product development for launching new products at high rate. For activities relating to Human Resource Development such as development, recruitment, or compensation activities, Electrolux is trying to recruit competent people, building active leadership, providing international career opportunities and trying to create a result oriented corporate culture. Lastly, an environmental audit is necessitated as it is the only way in which stakeholders within the firm, and shareholders without, can come to an appreciable level of understanding with regards to the future threats and opportunities that present themselves for the companies furthered growth. Task 3 A PESTEL analysis means Political, Economic, Social and Technological, Environmental and Legal analysis. Electrolux’s strategy is to move its factories and plants to under develop countries to gain advantage of low material and labour cost, but such under developed countries have unstable political environment where laws are seldom followed. Electrolux should consider the political environment of such countries before expanding its business in non developed countries. Economic factors are changing at a rapid pace. Every organization must respond quickly to these changing economic environments to remain competitive. Electrolux must take into account the changing economic factors while developing its business strategy. Social factors relate to culture, age distribution, security, education level. All these factors must be considered by Electrolux while entering into new markets of Latin America or elsewhere. Electrolux has mainly developed its business in European countries and U.S.A but as Electrolux is wishing to explore new markets social, environmental and political factors must be taken into consideration for each and every one of these regions. A 2005 analysis showed that Electrolux is losing ground to its competitors (e.g. Electrolux has lost its position as a leader of kitchen appliances to Whirlpool and other name brands). As such, it is necessary to make drastic changes in the overall structure of Electrolux to regain its competitive advantage. Electrolux is focusing on closing unprofitable facilities and shifting its production houses to countries with low production cost. According to Kotler (1997) changes in marketing strategies require careful analysis of all the factors affecting the business such as technological, legal, environmental, political, competitors etc. Task 4 Substantive growth, limited growth or retrenchment Substantive growth strategies include horizontal and vertical integration and diversification. Limited growth consists of Market penetration, product development and market development. Retrenchment strategies contain Divestment, cost reduction. As explained by John (2001) Growth strategies are used to gain efficiency, increase market power, spread risks and meet stakeholders expectation. On the other hand, retrenchment strategies offer the availability to divest unprofitable units and reduce losses. From 1967 to 2005 Electrolux’s focused on substantive growth strategies which include major acquisitions; Electrolux has made 59 acquisitions in 1970 alone. Instead of engaging in major acquisitions which transformed a simple organization into complex organizational structure, Electrolux could have focused on market penetration to hold a tight grip on the existing markets or in product development; introducing new product into the existing markets. It could also have developed its market by utilizing its existing resources. Until 2005 Electrolux has not given due consideration to brand building which is necessary to create a good image in the mind of customers. In such a way, drawing upon the examples of the threats, weaknesses, strengths, and opportunities that the prior SWOT analysis denoted, it will be necessary for the firm to engage in an understanding, appreciation, and application of the Ansoff Matrix. In order to achieve this, it is the understanding of this author that the best utilization of such an approach is with regards to seeking to engage in market development; i.e. the process of introducing an existing product line into some of the new markets that have previously been discussed. Within such a manner, the recommended strategy with relation to the Ansoff matrix can be denoted by seeking not to create new product lines or differentiate existing ones but by seeking to integrate these products with new potential clients (Wolf, 2011). As has also been discussed, this process can be quite cumbersome and cost inefficient within the beginning stages; however, the rewards that can be gleaned later on are immense. Task 5 Electrolux has taken the right step to close non profitable business units. This will doubtless help in the reduction of costs of production and other expenses which will increase profit margin of existing product lines. Similarly, focusing on buying high quality material from selected suppliers at reasonable price will help in reducing material cost and also improves the quality of the final product. Electrolux’s new business strategy should also incorporate an element of building relationship with its employees to raise employee’s morale, promote motivation and further a level of commitment towards Electrolux. A strong, friendly relationship will encourage employees to feel secure and motivate them to provide feedback on important issues and problems to their supervisor. Upward communication is important to understand problems at the working level and a timely solution to such problems will not only improve efficiency but also raise employee commitment as employees feel that their feedbacks considered important at the management level. Electrolux’s acquisitions in the past years have given it a complex structure and a mix of different non compatible cultures; as every newly acquired company have brought their own culture and tradition into Electrolux (Morris, 2007). Thus, Electrolux’s management should focus on building a strong culture in order to make things clear with regards to how employees are required to behave and work in Electrolux. There is a need of starting a huge advertising campaign in order to build a strong Electrolux brand image in the mind of existing and potential customers as well. With regards to the suitability, acceptability, and feasibility that such a path promotes, it is the understanding of this analysis that all of these factors are possible and quite attainable via the utilization of the aforementioned tactics and strategy. As such, whereas there is always a level of cost and benefit that must be sacrificed for each and every business decision, these strategies which have been discussed pose something of an anomaly due to the fact that they are able to be attained in a relatively painless manner for the firm in question; merely by engaging in some key prescribed activities that seek to promote synergy throughout the company. Task 6 Vision Vision is the term used to represent an organization future image of how the organization wants itself to be seen in the future. Vision if articulated properly will motivate the organization staff to go in a particular direction and to achieve its objectives and mission. Missions According to Bart (2008), Mission is the translation of vision into specific overall target to be achieved by the organization. A mission statement include: Aims of the organization, organization’s stakeholders, and the way the entity provide value to theses stakeholders. Goals Division of a mission in to sub parts are called goals. Goals are defined for each individual department. Objectives When goals are translated into quantitative achievable targets then they are termed as objectives. Task 7 As explained by Olsen (2012) and Mckeown (2012) strategic planning relates to the future of an organization, where the organization will be standing in the years to come. It also includes what steps an organization should take to reach these and the position that organization will hold in the industry if it achieves these targets. Strategic planning focuses on the entire organization, while a business plan usually focuses on a particular product, service or program. Development of a strategic plan includes considerations of factor such as the nature of the organizations leadership, culture, complexity; including size of the organization and competence and capabilities of the strategic teams. In planning a strategy it is necessary to conduct market research. As explained by Kotler (1997) market research is a component of business strategy that provides information about potential customers, market trends, and overall position of an industry in the economy. Market research helps in developing an effective business strategy for a product. It helps managers to focus their effort in a particular direction. Market research consists of two basic components; Primary research and secondary research. Primary research is conducted through collection of data from direct sources by an organization’s own research team(s) (CITE). It is done to achieve a particular objective and it provides information that is specific, relevant, reliable comparable and easily understandable. It demands effort from the research team and is an expensive method of conducting research. However, once data it is gathered through primary research means, it provides the best and latest information on which to build an organization’s strategy. On the other hand, secondary research includes gathering data which has already been provided by others. These other sources include governmental research, annual reports, newspapers, magazines, journals etc. The attitude and culture of a company have substantial effects on how the company approaches planning and strategy. Some companies tend to think in terms of the resources available. They make a careful analysis of the resources on hand and possible expansion options available to the company. Other companies take into consideration the market opportunities available to the company without giving much thought about how these resources will be able to finance the strategy to be adopted. Strategic planning serves a variety of purposes in an organization such as: Clearly defining the purpose of the organization. Setting mission, goals and objectives. Communicating goals and objectives to all departments. Ensuring effective use of the resources. Providing and get feedback. Making efficient and effective use of resources. Task 8 Different planning techniques are: SWOT Analysis. PESTEL Analysis. Scenario Planning. Goals Grid Supply chain analysis. SWOT Analysis Armstrong (2006) explained that SWOT (Strengths, Weakness, Opportunities, and Threats) is a strategic planning tool, used for environmental scan. It helps in identifying external factors and internal factors (i.e. strengths and weaknesses) that need to be planned for to determine an organization’s future. PESTEL Analysis Is a specialized technique which focuses on important external factors including Political, Economic, Social and Technological, Environmental and Legal factors. Political factors are those relating to the government intervention in the markets. It includes setting monitory and fiscal policies and tariffs, custom duties, and changes in tax laws. Economic factors relate to growth in the economy. Economic factors have strong impacts on how business establish its future strategy. Where an economy is in its life cycle, whether there is boom or depression in the economy, all of these contribute to the economic factors that are included in PESTEL. Social factors include age, population, culture, security, education etc. Technological factors include research and development, automation of production process and the like. Environmental factors include climate changes etc. Legal factors include different government laws such as health laws, corporate laws etc. Scenario Planning Involves looking into the future, anticipating possible actions and changes, and analysing how these changes will affect the organization in order to do planning to minimize any damage. Goals Grid Goals Grid helps in setting the goals and objectives of an organization. It answers the following questions while developing strategy: What do we want to achieve? What do we want to preserve? What do we want to avoid? What do we want to eliminate? Supply Chain Analysis Supply chain analysis is an efficient planning tool used to match the needs of customers, and the supply of goods and services to these customers and requires planning. It plans all the movement of the raw material from the starting point to the point of its destination e.g. It includes planning raw material to be ordered, keep record of raw material consumption and ordered raw material on time to ensure there is no shortage of material. BCG Matrix From an analysis of the BCG Matrix, it can be determined that the firm has many products that fall firmly within the cash cow and star quadrants. However, although this fact is comforting, it must also be noted that new product development and continual introduction of new goods is a determinent of remaining relevent in any market. Moreover, as the firm can and should seek to integrate with consumers in some of the devleopking regions that have formerly been discussed, it is incumbent upon the firm to seek to engage in new product offerings while at the same time ensuring that product integration of existing lines can take place in an efficient manner in whatever regions are targeted for market growth. Task 9 Olsen (2012) states that strategy implementation is the practical steps taken to achieve strategic goals and objectives. Steps to be taken for implementing a successful strategy are: A new strategy means new priorities and new activities across the organisation. Every activity should be reviewed against its relevance to the new strategy. Create a strategic value measurement tool and analyse initiatives against their strategic value and the impact to the organisation. Organizational performance should be closely aligned to strategy. Employees’ performance should be measured against the strategy. Transformation of structure is required to align the structure with the new strategy. In large organizations structural changes are needed for effective implementation of a strategy. Involving employees in implementation of a strategy. Provide them with all the relevant information required to effectively implement the new strategy. Communicate the strategic vision to all the employees to help them understand there role in achieving the strategic vision. Clarify any ambiguities in the employees mind to provide them with a specific sense of direction. Within such a nuanced understanding, it must be appreciated that the firm must seek to redefine its current and existing strategy as a means of accomplishing the goals that have thus far been denoted within this discussion/analysis. As such, key resources will necessarily be required in order to engage in any strategy that is chosen. Within such an understanding, it comes as no surprise that the ready availability of a very large amount of financial reserves must be engaged as a means of achieving market development and potential new client introduction of the product line. From a human resources standpoint, the resource of expert knowledge must be engaged as only this will ultimately be successful in helping to lead the firm towards a better appreciation for the way in which these aforementioned goals can and should be developed/realized. Task 10 Resources needed for implementing a strategy are: Competent and capable staff. Expand employee skills through training, recruitment, or new hires to include new competencies required by the strategic plan. Realistic time commitment from employees to achieve a goal, a clear identification of expenses associated with a strategy. Additionally, employees must have enough time to implement the strategy successfully. Create a culture that connects employees to the organization’s mission. To reinforce the importance of focusing on strategy and vision, reward success. Availability of funds to finance projects necessary for implementation of a new strategy. New production facilities and increasing the capacity of existing facilities. Information acquired through conducting the market research. From the resource audit standpoint, it must be understood that the firm necessarily retains the first resource which was discussed; in part due to the fact that it has been a dominant player within the consumer products market for such a long period of time. However, with regards to expert knowledge that is necessitated to achieve the goals that have thus far been put forward, this is noticeably lacking; not due to the fact that there is a culture of poor leadership within the firm – rather, it is due to the fact that few if any of the leadership have overseen market development projects or market penetration due to the stoic nature of development that the firm has employed over the past decade or so. Within such a standpoint, a level of cultural change will need to be engaged, and possibly the employment of additional leadership personnel, to ensure that this change/shift takes place in an efficient manner. Task 11 Breaking down the organizations strategy into smaller targets and timescales allows the executives to effectively monitor the implementation of the strategy. It helps analyze which methods work better than others. Rather than focus completely on one fixed strategy, it allows the executives to find the best way to reach higher, longer term achievements. If an organization’s mission is to achieve a target with in a set period of time then division of such target into sub targets will help the management in comparing the actual results with budgeted targets and allow the management to take timely action. It is always considered to be an efficient way to break down complex strategy into easy identifiable tasks and then assigning these sub tasks to individual departments with in an organization. This will create coordination among different departments as only there combined effort will lead to the achievement of the overall strategy set by the top management. Organizations’ should also assign time frames for subtasks in order to ensure that work will be completed with in the planned time period. References Armstrong, M.(2006). A handbook of Human Resource Management Practice, 10th edition. 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Wolf, A 2011, Electrolux Q3 Profits Fall 40% In Third Quarter, TWICE: This Week In Consumer Electronics, 26, 22, p. 60, Academic Search Complete, EBSCOhost, viewed 14 June 2013. Read More