Strategic Planning of Any Company - Coursework Example

CONTENTS Introduction Page Macro Analysis Page 2 PESTLE Analysis Page 3 Five Factors Page 7 Strategic Choice Page 7 Strategic Implementation Page 8 STRATEGIC ANALYSIS INTRODUCTION Planning is an inevitable part of every corporate firm on which all its functioning stands. All the organizations either large or small devise methods and apply techniques for the growth and success of their product and merchandise. Such sets of devises are called the organization’s strategic plans to enhance its volume and capacity. Thus, there always exists the need for a comprehensive and transparent methodology of formulating a strategy. Hence, strategic management not only discusses the decision making regarding main issues of grave concern of an organization, but also it focuses on the implementation of the strategy planned in a proper way in order to obtain the appropriate results. “Simply put”, McNamara opines, “strategic planning determines where an organization is going over the next year or more, how its going to get there and how itll know if it got there or not. The focus of a strategic plan is usually on the entire organization, while the focus of a business plan is usually on a particular product, service or programme.” (McNamara, 2006). The contemporary world is fast growing and turning into global village. It has also enhanced commercial activities to the great extent and trade and business find unabated boost everywhere. These activities have introduced new trends and dimensions in the changing market scenario. The companies have established strategic departments in order to make plans for the future years. The same is the case with the ABC beverage company. ABC, the famous beverage multinational company of global repute, is among the top level soft drink industries, whose name, brand-title and catchphrase are recognized everywhere from villages to cities and from metropolis to small towns all over the world. All young and old, men and women and children and the aged are familiar with its brand-logo, flavour and product. Both individuals and industries seek the company’s assistance for sponsorship during ventures of different types including domestic functions, business conferences, sports events and various ordinary or mega ceremonies of international level. All this is because of company’s policies and strategies, including planning, marketing and advertisement that has very successfully supported in capturing the markets of the world at large from micro to macro level. Since its establishment, some quarter past one century ago in an American state, ABC was introduced as medicine syrup as well as a substitute for wine. However, with the passage of time, it won an admirable status of the most favourite soft drink and an essential part of dinners, gatherings, functions and parties. The company’s most distinguished feature is that its logo and taste remain one and the same in all the countries of the world, which support the fact that people have internationally appreciated the product formulae and business strategy of the industry as well. MACRO ANALYSIS Both micro and macro forces play role in the development process of an industry. Micro factors include internal strengths and weaknesses of a company including staff structure, division of labour, customer care and management network. On the other hand, macro forces of an industry are looked into in order to measure the future growth of some specific industry. One of the most important tasks of a company’s strategic plan includes company action according to the environment. No single factor determines the business environment; rather, many factors are there that regulate it i.e. political, economic, social, technological and legal ones. “New technologies, social shifts, political realignments and pressures as well as the more commonly recognized economic changes, all create problems and opportunities.” (Newman & Logan, 1976, p. 31). Analysts apply PESTLE method in order to examine and measure the growth and future development of a company. Such examinations are made keeping in view the past influences on the one hand and the changes taking place in future on the other. PESTLE Analysis Looking into the soft drink industry, we come to know that the ABC industry has witnessed lots of prospects and perils during its long journey towards the way to success at international market. There exist many rival companies in the market, which present the same product at the same price, tint, form and almost the same taste, that is direct threat as competitor of the industry. Political environment plays an important role in the growth of an industry. While the most dominant feature of the ABC beverage company is people’s unshakeable trust in the brand. It is known as brand, not due to availability, but because of the quality it offers. Anyway, the political factors including wars, invasions and instability of governments play negative role in an industry’s growth. After nearly fifty five years of the company’s birth, World War II broke out. The German political leaders devised policies to ban the products of rival countries and their allies to paralyse their economy. The ABC Company also had to suffer a lot during the years, and its sale got a crucial set back. The soft drink started providing the US soldiers its product free of cost, which badly damaged its repute in Germany and her allies, and they boycotted this specific soft drink costing the industry the reduction of 15% to 20% in sales. But in the same way, the company got a golden opportunity of introducing the drink even in the yonder lands. It gave support to the company in the future years to come. The same is the case with this international product in Afghanistan and Iraq in the contemporary times. The political policies of the motherland of this soft drink terribly reduced its sale in the war afflicted zones. The Company has to enter into business relations with influential religious and political groups to combat the decrease of sales during war. Further, tax policies of the countries also determine the increase and decrease of the sale of a product. People start searching for alternative products i.e. squash, syrups, fresh lime and juices as an alternative to the soft drink. In addition, local brands and traditional drinks also start appearing in the wake of the price hike. “The increase in sales duty leads towards revision of price of soft drink and the actual sale has got a decrease of nearly 10%”. (Quoted in Daily The News, Pakistan. June 2003). Economic factors also have both positive and negative effects on soft drink. Economic factors including rise in interest rate, currency exchange rate as well as inflation rate may alter the sales volume of soft drink. During the 1970s, about which Drabble writes as “the ice age”, inflation rose up to a dangerous point in England and it also influenced the soft drink industry. The ABC underwent low-cost competition in comparison with the commodities of other countries, so it had to revise its price in different states without making any compromise with its quality because it was the matter of survival in the situation of perfect competition. Social factors are perhaps most dominating to decide acceptance or rejection of merchandise. People are deeply concerned regarding their health and consult medical specialists even for the use of some specific commodity especially in case of edibles. According to a survey conducted in Pakistan in 1999, black-coloured soft drinks i.e. cola and toxicity involved in it, are thought to be highly dangerous for the health of kidney and stomach. “Injurious chemicals used in black-colour soft drinks create acidity and indigestion in stomach and causes diabetes, disturbs usual liver working and destroying kidney function.” (“Monthly Diabetes” Pakistan, July 2005 Edition). Cultural and religious factors may change the market strategy of various companies. “After the drawing of blasphemous caricatures”, Shamaila Khalid views, “instigated the emotions of the Muslims community all over the world and they boycotted a long list of commodities of daily use that were imported from Denmark, the state where the condemnable caricatures were published.” (allphilosophy.com) Though, change in governments does not affect the soft drink market to a significant way, yet overall critical political situation may disturb the commercial activities at large. It is therefore, strategic analyses are made keeping in mind the margins of losses created by unpredictable situation and unexpected calamity. The Health bolt journal in its August review states coca soft drinks very dangerous to health and the readers of this journal are startled by acknowledging the side effect of the product. In its words: “Your blood sugar spikes, causing insulin burst. Your liver responds to this by turning any sugar it can get its hands on into fat. (There’s plenty of that at this particular moment). Caffeine absorption is complete. Your pupils dilate, your blood pressure rises, as a response your livers dumps more sugar into your bloodstream. The adenosine receptors in your brain are now blocked preventing drowsiness.” (Quoted in healthbolt.net, August, 12, 2006.). Such medical reviews settle the minds of the consumers to use some other drink as an alternative to cola drinks. Moreover, they serve as a serious threat to the sale of the drink. Age group is also one of the important social factors of the soft drink sale. According to the sociological analyses, children and young are the strata to welcome fashionable products related to wearing and eating. The strategic analyses can be made keeping in mind the growth rate of different countries, and launching of some specific commodity, as KFC and McDonalds did in most of the Asian and African countries. They exercised their methods by involving children in the advertisement campaigns. Technological advancement has brought a significant change in media campaign and has opened new dimensions to the soft drink industry. “Technological change”, Johnson & Scholes view, “reduces the length of the product life cycle and therefore the time to recoup investment.”(1976, p 80). Investment cost can also be increased as the number of technologies in a product is increased. Keeping in view this factor, the ABC Company has engrossed modern machinery, latest freezers, beautiful packing and innovative shapes of bottling according to some special mega event being held in the world. It is essential to present the product in novelty to enhance attraction regarding sales. It also fascinates the children folk, who especially welcome the commodity that offers prize schemes or distinguished presentation. The ABC Company introduced new bottles resembling soccer during the Football World Cup 2006 that became highly popular during the event. Legal Economic factors include changes in the laws and government policies regarding some specific industry. It some times happens that the rival company is selected as the official drink of the government. In the same way, war in Iraq and invasion of US-led forces created hatred for the American product that really had bad affects in the sale of the product and government promoted local brands as well as the brands introduced by and imported from the friendly nations and the brethren countries. FIVE FORCES IN STRUCTURAL ANALYSIS Entry Barriers: Competitive environment is one of the strongest external factors while analysing structural environment of an organization. Porter (1980) has defined five factors in order to analysing competitive environment. The threat of Entry is the threat that serves as hindrances for an industry to enter into a market. Economy of scales is the primary threat. The term means the higher rate of product lessens the cost. It is therefore becomes hard for an international company to enter and capture the market. Moreover, change in economic and legal policies announced by a government also serve as a significant threat of entry, and may disturb the sale. Further, presence of another strong competitor is also a threat, though it is not very significant in respect of ABC Beverage Company. The bargaining powers of suppliers and bargaining powers of customers are also among the five factors described by Porter.Bargaining powers of suppliers identify the ability to influence the price determination. The power of suppliers has reverse relation with the power of buyers, especially at the market where the switching costs from one soft drink to the other are higher. Bargaining power is always high if the brand is powerful. As the ABC soft drink industry maintains outstanding powerful brand, its bargaining power is also strong, and the industry can tackle the price situation skilfully. The suppliers having monopoly over the distribution of the product can use tactics to get more shares out of the product. The bargaining power of buyers is also a threat of entry and serves like a challenge especially for the imported product. Control over the balanced ratio between demand and supply keeps the product “in” within the market scenario. The soft drink industry also undergoes threat of substitute products. It is especially the case with the ABC industry. The substitutes are though very few, yet use of local drinks and juices present a significant substitute of cola drinks. Even then, the powerful trademark and popular brand name do not allow any threat to be a great hurdle at all. The same is the case with threat of new entrance and intensity of competitive rivalry. Only one cola drink is there in the market, but it cannot deteriorate the ABC’s monopoly to a great extent. Further, so many cola beverages have been introduced in different countries all over the world, but the popularity of ABC is as superb as it had been in past. STRATEGIC CHOICE Strategic analysis and strategic choice are essential parts of strategic management. The former discusses the understanding of the strategic situation of a company or organization, while the latter concentrates on the formulation of the organization. “Strategy formulation might”, Johnson & Scholes view, “apparently be obtained through the analysis of the organization’s environment and the extent to which the company’s resources or strategic capability are matched with the environment.” (1993: 156). Strategic choice is one of the most significant aspects as well as the centre of strategic management. Strategic formulation is dependent of strategic choice, without which no strategy can be developed. Strategic analysis supplies foundation for strategic choice. Johnson & Scholes (1993, pp. 20-21) conceive the “concept strategic choice into three parts. These are Generation of Strategic Options, Evaluation of Strategic Options and Selection of Strategy.” While analysing ABC beverage industry, it has laid its foundation on availability, acceptability and affordability. It is an open secret that the company has shown an excellent performance in all these fields all over the world. The product contains affordable price and is available in different packing at village and town level too. Latest schemes and innovative ideas like presentation in tin pack, family pack and Diet pack (for diabetic consumers) are welcomed with open arms. The Strategic Choice Approach is used in face to face workshops of a decision making group. STRATEGIC IMPLEMENTATION Strategic implementation simply means the proper execution of a strategy devised by the market experts. In other words, the term refers to the acceptability of such option by stakeholders and its feasibility, given the resources and competencies the administrative institution posses, ensuring that objectives to be met are clearly set up, and that responsibility and resources are correctly allocated. It may also be necessary to change the behaviour, beliefs and assumptions of those working in the organisation in order to achieve these objectives. The main objective behind the making of a strategy is surely its successful application, without which all the planning is shattered. Proper planning by the committee or group or expertise, allocation of resources needed and its application by the technical and skilled staff paves the way towards the journey of triumph. The ABC Company makes planning keeping in mind the perception of change taking place in future. In this age of technological advancement, where the new inventions are made, the strategy is altered as soon as the modern equipments are introduced in the market; the industry immediately adopts it, as it introduced filtered mineral water as the Company’s by-product. The change in strategy causes the change in the implementation. Many factors and threats including change in government policies, entrance of new or rival company, economics of scale, differentiation and others may lead to the strategic change. CONCLUSION The ABC Company has devised such planning that stakeholders happily accept the stock of the product and are always ready to make investment for this product without having any fear of loss at all. All this is because of untiring efforts to developing a comprehensive strategy of sales and marketing. The industry has witnessed many fluctuations and untoward events during the course of time; it is therefore, it keeps the ability to mould its methods to remain popular and matchless in the market. It is by the virtue of its commitment that it is always engaged in making plans for the future. The launching of by-products including fruit juices, filtered water, vending machines and food products under the supervision of a world class brand, is sufficient to maintain its position in future. The main threats and dark aspects include the rival company’s imitation in all fields. Secondly, the competitor company has made penetration in the market by entering into contract with the sports boards of national and international level. It has drawn a hole into the monopoly of the company. Secondly, local drinks are also being used to reduce the sale of soft drink products. The most drastic thing the company undergoes is the people’s concern regarding health problems. The medical specialists do not recommend cola soft drinks to people especially suffering from diseases related to throat, stomach, liver, kidneys and bladder. RECOMMENDATIONS Scenario Options: Scenario planning is an important method to identify the future trends of an industry in the market. It shows the future picture of the industry by calculating the prospects and potentials on the one hand, and hurdles and barriers on the other. In view of managing threats properly in the future, companies pay considerate attention to uncertainties and risks in the course of presenting innovative investments. Realization of major trends supports regarding the construction of future scenario of the industry. While discussing the optimistic option of soft drink industry, it is prudential to look into the strengths of the industry, which is the most important aspect of optimism. Since the ABC Company has been working very actively for the last one hundred and twenty years continuously, the management has extracted the ways of successfully running the company. Based on the methods of PESTLE and SWOT analyses on the one hand, and the historical background on the other, ABC Company should be determined to adjust its price in an economical way, where the change of government policy in respect of price hike cannot increase the burden on the consumers. It will be very beneficial for the company to combat the competitors in the international market in a better way. The announcement of disclosing the caffeine content on all of its beverages, as part of the companys rollout of expanded nutrition labelling in the US .food stuff too will also be beneficial in popularising the product especially in children. It has always been observed that children like small and colourful packing while choosing a product. Major share of world population consists of children, so the industry should look into it carefully. Further, the company must enter into long term contract with local and international food chains so that more and more markets could be captured. Furthermore, hiring of technical marketing persons is extremely essential for the future growth since the rival company has been making headway to reaching the markets that belong to ABC Company. The unsuccessful attempt of the company on not being able to become official drink of all sports events may shatter its dreams of enjoying the status of monopoly in future that had been its market skill in the past. Pessimistic Option: The ABC Company cannot penetrate in all the offices and markets unopposed. As the consumers have developed taste for some specific drink, it sometimes looks hard to mould hem according to one’s own will. In this respect, popularity among children folk by announcing incentives and colourful prize schemes may enhance the sale in future. Big prizes, which are very few in quantity, as the companies perform, gives negative results instead of positive ones. The same is the case with this company, which has lost its credibility to great extent because children are unable to get anything in reward even they have purchased the product in bulk. This may disturb the sales ratio in future years. REFERENCES Culbert, Samuel A. & McDonough, John J. 1985 Radiant Management. Power Politics and the Pursuit of Trust. The Free Press New York. Drabble, Margaret, 1977. The Ice Age. Johnson, Gerry & Scholes, Kevan. 1993. Exploring Corporate Strategy. Text and Cases. Third Edition. Prentice Hall New York. Newman, William H And Logan, James P. 1976. Strategy, Policy, and Central Management Seventh Edition, South-Western Publishing Company, West Chicago. McNamara, Carter 2003. Strategic Planning (in non-profit or for-profit organizations). Adapted from the Field Guide to Non-profit Strategic Planning and Facilitation. (Quoted in http://www.managementhelp.org/plan_dec/str_plan/str_plan.htm). Porter, M. E. Competitive Strategy: Techniques for Analysing Industries and Competitors, Free Press, New York 1980. http://www.fao.org/docrep/W5973E/w5973e0a.htm www.allphilosophy.com Health bolt Journal. 12.08.2006. “What Happens To Your Body If You Drink A Coke Right Now?” http://www.brandingstrategyinsider.com/brand_accessibility/index.html Read More