Cutting Edge: Analysis & Strategic Planning - Case Study Example

 Cutting Edge – Analysis & Strategic Planning Introduction A ten year span in the life of an organization can witness many important events. Events are an outcome of the internal and external situations. In order to sustain in business, maintain competitive edge and grow, it is necessary for all organizations to analyze and reshape strategies from time to time. Such strategic analysis helps a firm to clearly understand its strengths and weaknesses as well as opportunities and threats. The case study on Cutting Edge traces its birth as an off-shoot of an existing business in identical line, gives glimpses of leadership of its promoter, triumphs and set-backs it faced together with reasons, and discusses its growth opportunities and strategies. Based on the case study, this paper makes a detailed analysis of Cutting Edge covering SWOT analysis, developing a mission statement in line with its objectives & goals, suggesting organizational changes to achieve the same, recommending a strategic planning method to exploit opportunities, and finally to discuss the conflicting aims, if any, of stakeholders. Brief history of events Jeannie O'Connor is a person of skill, drive, initiative and ambition – in short a leader in the making. Even as she established herself as a much sought after hair stylist and earned decent wages at Strands, she was alive to the fact that it was Simon Parker the owner of Strands that made big profits. The entrepreneur in her made her to set up Cutting Edge, her own hair styling business unit. She ensured imaginative value addition to the core business of hair styling and succeeded. In the course of expanding her business, she neutralized the threat posed by her erstwhile boss Simon Parker by taking him as a partner. Expansion in local area and regional area followed in quick succession and plans are now afoot for a national presence with brand image. Cutting Edge then came face to face with the issues of internal and external situation that can have a significant bearing upon its plans for nation-wide expansion. SWOT Analysis (relevant to 2007) According to Business Wire, the aim of any SWOT analysis is to identify the key internal and external factors that are important to achieving specified objectives of a business (Business Wire, September 3, 2007). While the internal analysis brings out the strengths and weaknesses, external analysis identifies the opportunities and threats – all with respect to the objectives of a firm. Internal analysis: Jeannie was trained at Strands and built up a roaster of loyal clients, who always preferred her, due to her skills. She is ambitious and intelligent to understand the prospects of setting up and running a business. She also has an eye for spotting talent as is evident in her picking up Lily and other experienced staff from Strands. Above all, she ensured that Cutting Edge differentiated itself from Strands by offering ‘good coffee, a therapeutic chat, a head massage and a manicure’ as add-on services and these are appreciated by the customers. She was not content with achieving her ambition of being her own boss and establishing a large and successful unit. Five years into the business, she is already considering the pros and cons of opening new salons in other parts of the town confident of customer support and financial ability, but was vary of the competition from Strands, her major competitor, whose prices are cheaper. At this time, she displayed her aggressive and imaginative qualities by successfully partnering with Simon to set up the new unit. On the flip side, Cutting Edge suffered from staff shortage due to attrition on one hand, and the long time it takes to train new hands on the other. Experienced staff leaving the organization points to problems with motivation and man-management. In spite of growing from a single centre operation in 1999 to multiple units in the region by 2007, Jeannie & Simon continued to manage practically every aspect of their business without any formal organizational structure and this was proving to be the soft spot of Cutting Edge. It neglected to provide leadership development opportunities for its staff. In addition, it was also not fully focused on quality issues while sourcing consumables like low priced colors. While senior staff gained recognition for their skills, the organization suffered due to inappropriate management. External analysis The external factors that influence Cutting Edge changed character between 1999 and 2007. Generally, the demand for hair styling is cost sensitive and hence, growth of revenues at one location is limited. Competition is intense and customers can be retained only by offering high quality services with warmth and personal touch. With economy remaining steady and low interest rates and low unemployment being the factors, by 2005 Cutting Edge with its good reputation, was in a position to exploit opportunities to increase revenues. The new up-market shopping mall that was being developed to cater mainly to trendy youngsters in the age group of 18 to 35 years, presented such an opportunity. While establishing this new unit, Cutting Edge significantly upgraded its ambience to cater to the needs of upper class customers. Additional opportunities presented themselves when Jeannie & Simon started looking outside of Stafford town and in the Staffordshire region, where even though competition is high, there were no salons of high visibility. Two new salons were set up by 2006 in the region. Staff shortage and poaching from other salons, though unethical and unfair, were issues that bothered Cutting Edge even as it grew from local to regional status. To add to these worries, another national chain Macey and Josh, known for the high quality of their services and innovative management, was expanding aggressively on a national scale, thus posing a challenge to Cutting Edge’s own plans for going national. Mission statement A mission statement is developed in conjunction with strategic planning and embodies the purpose of a business (McNamara, 2008). It is a statement of corporate goals and objectives. It is widely publicized to confirm commitment to honor the promise(s) held out in it. Cutting Edge has positioned itself as a chain of high class salons, initially in the Staffordshire region and is now planning to have nation-wide presence. In this scenario it is bound to face intense competition from other high class salon chains like Macey and Josh. Internally, a mission statement helps in two ways: it provides an opportunity for Cutting Edge to think deeply about its entire gamut of operations vis-à-vis customer expectations, and creates awareness among its staff about the organization’s objectives and goals. Externally, it enables customers to know what to expect from the business. Taking all these factors into account, Cutting Edge must develop its mission statement which may read as follows: Customer satisfaction and customer well-being will be at the centre of all our actions in determining the corporate goals and objectives at Cutting Edge. We aim to offer consistent quality services on a nation-wide basis. We strive to make continuous improvements in our salons through specially trained staff, technology and modern facilities, and offer to our valued customers an experience that is beyond mere hair styling, every time they visit our premises. Common objectives or individual objectives? In answering this issue, it is appropriate to distinguish between objectives and goals. Goals are the ultimate aims of a business while objectives can be considered as sub-goals in order to reach the set goals (Time Management, 2008). From the history of Cutting Edge, it is seen that it is operating in a highly competitive environment, in different locations and plans to cover the entire country in the immediate future. Opportunities in up-market, standard market or low income areas differ significantly. Similarly, demographic distribution will also have a bearing on the kind of services that are offered in a particular location. This would mean different pricing and service package strategies. Further and more importantly, one of the main issues that Jeannie & Simon faced was the dissatisfaction of senior level staff due to the absence of opportunities to develop / show their management skills. As such it is appropriate that objectives which are specific to each location are determined in consultation with the concerned managers. While doing so, Jeannie & Simon should ensure that these objectives, though individual, are within reasonable limits of the overall objectives of the organization. For example, in terms of quality of consumables there should be no compromise, while charges for services may be allowed to vary within limits. Similarly, individual items of service and their volumes can be different in different locations, depending upon the market conditions; but the revenue volumes from each location as planned should be pre-agreed. Thus, for all practical purposes each location should operate like a franchise centre. MBO approach to Strategic planning to analyze profitable business opportunities Major issues facing Cutting Edge have been the dissatisfaction of senior level staff, staff attrition, quality of its outsourced products like the colors, competition from Macey and Josh together with their adoption of technology to enhance customer satisfaction etc. At the same time, it also could identify and exploit some opportunities like the up-market shopping mall area or setting up own academy for staff training or developing branded consumable products used in salons. To this extent their record has been a mixture of achievements and shortcomings. In order to be able to continuously keep in track of opportunities and avoid shortcomings, Cutting Edge may adopt the practice of management by objectives or MBO. In the light of the earlier recommendation for setting individual objectives for the different salons, MBO approach becomes more relevant, if those objectives include scouting for profitable opportunities. As each salon Manager strives to achieve his / her objectives and competes with others to bring out new ideas for profitable growth, the level of job satisfaction increases and attrition rate reduces, even as the business gathers more and more profitable ideas. Till date, all major initiatives have come from Jeannie & Simon only, but a number of important issues have also bypassed them – the quality issue, lack of opportunity for leadership development within the organization, missing out on being the first to adopt technology and inability to foresee the strategic expansion of Macey and Josh and their marketing techniques. In the absence of a formal organizational structure as well as due to the centralized character of management, hardly anyone else took the initiative to spot and discuss these issues. Hence the way forward for Cutting Edge is to decentralize management, encourage ideas generation as part of objectives for running individual salons and to make performance assessment based on MBO analysis. This concept is in line with MBO and strategic planning, as postulated by Peter Drucker in his seminal work, The Practice of Management (Drucker, P. 1954). Stakeholders & conflicting aims The external stakeholders of Cutting Edge are suppliers, customers, financiers & regulatory authorities and the internal stakeholders are employees, owners and managers (Wikipedia, 2008). The aims of these stakeholders are different from those of Cutting Edge, whose main aim is to sustain and grow its profitable business. Towards this end, Cutting Edge (and its owners): expects supply of quality products from its suppliers at economical prices and with just-in-time deliveries to reduce inventory costs, while they are looking to steady source of business with reasonable profits; expects loyalty from customers while they in turn expect quality service at economical costs; expects financial support from financiers for capital expenditure and working capital needs while the institutions demand due diligence & transparency in transactions and prompt repayments; expects support and guidance from regulatory authorities in observing safety and health standards; expects its managers to meet programmed targets of performance while they expect to be given the opportunity to show initiative and receive monetary and other recognition for the same; expects employees to gain skills of performance and show loyalty to the organization while they expect to be compensated in line with the best practices in the industry; Finally, Cutting Edge has responsibility towards the society at large for adopting ethical business practices. On the surface, while there may appear to be a conflict of interests between the organization and its stakeholders, the success of management process lies in reconciling these apparent conflicts (these are common for competitors as well) for achieving the overall aim of the organization. Recommendations At this stage of its growth, Cutting Edge should formalize its organization structure and adopt strategic planning process for good management and future growth. It should capitalize on its strengths of good quality staff and good name. In order to boost staff morale and encourage them, it should adopt a more participative style of operational management. Senior managers should be consulted and committed while formulating individual objects for each salon, with sufficient amount of freedom of action to achieve the set targets. Appointing franchisees in select locations can be considered as a growth plan if resources are a constraint in future. Technology has made its presence in all walks of life and Cutting Edge too should adopt it without delay, lest it is left behind by rivals. Finally, a company with a nation-wide presence can not do without a brand image, duly promoted in the print and electronic media. References Business Wire, SWOT Framework analysis, Sept 3, 2007. Available: http://www.researchandmarkets.com/reports/c67242 [accessed on December 23, 2008]. Case study, Cutting Edge. Drucker, P.F., (1954). The practice of management, HarperPerennial, New York. McNamara, C., Basics of developing mission, vision and values statements, Authenticity Consulting, LLC. Available: http://www.managementhelp.org/plan_dec/str_plan/stmnts.htm. 23-12-08 [accessed on December 23, 2008]. Shapiro J., (2008), Strategic planning toolkit. Available: http://www.civicus.org/new/media/Strategic%20Planning.pdf [accessed on December 23, 2008]. Time Management.com, Setting goals and objectives. Available: http://www.time-management-guide.com/goals-and-objectives.html. [accessed on December 23, 2008]. Value based management.net; Management by objectives –SMART. Available: http://www.valuebasedmanagement.net/methods_smart_management_by_objectives.html [accessed on December 23, 2008]. Wikipedia, Stakeholders, Available: http://en.wikipedia.org/wiki/Stakeholder_(corporate) [accessed on December 23, 2008]. Read More