Business Policy in Strategic Management: A Comparative Analysis - Coursework Example

Business Policy in Strategic Management: A Comparative Analysis Introduction Strategic management policies have both a functional and a causative element in them while corporate strategies are goal-oriented plans that incorporate the former. Corporate strategy is an approach to future that involves “(1) examination of the current and anticipated factors associated with customers and competitors (external environment) and the firm itself (internal environment), (2) envisioning a new or effective role for the firm in a creative manner, and (3) aligning policies, practices, and resources to realize that vision” (www.businessdictionary.com). Business organizations thus are faced with strategic internal, external and inter-firm factors that force them to adopt certain policies to position themselves in the market with strategic orientation towards the achievement of long term corporate goals. In this sense corporate strategy is the fundamental strategy of the conglomerate firm that seeks to reorient its strategic completion policy while at the same time maximizing the synergy related benefits arising from an acquisition or a merger. This is part and parcel of the whole corporate strategy of ensuring the growth of its market share and profit margins. Analysis Accenture is a global strategic management consultancy firm with braches in a number of countries. Its clientele includes such global giants as Siemens Networks, Pfizer, Vodafone and Best Buy. Its service focus includes management strategy, supply chain management, finance and performance management, customer relationship management, process and innovation performance and talent and organization performance (www.accenture.com). The range of services delivered mostly through internet is not only versatile but also technically sophisticated. The strategic management consulting industry has a wider area of focus in the modern strategy management sector and is particularly significant in the process of strategic management of operations at both inter-firm and intra-firm levels. Its corporate strategy of supply chain management is not only unique but also strategically advanced. Supply chain management activities of a multinational company like Accenture requires highly innovative strategic management capabilities to compete against equally or better positioned rivals. On the other hand the resource-based approach of the organization in countering competition is determined by the selection of a strategy which utilizes the organization’s resources and capabilities to the maximum benefit in relation to the external opportunities; recognize the ability of resources to generate rent and appropriate returns; identify the capabilities of the organization; Identify and categorize organization’s resources; identify organization’s strengths and weaknesses vis-à-vis its competitors; identify differences in resource use and finally invest in enhancing, replenishing and improving its resources. For instance United Parcel Service (UPS), being an industry leader in shipping, freight and tracking goods, has been able to build up a wide range of internal capabilities over the years with special emphasis on internal value chain management capabilities and rationalization of existing resource base. This corporate strategy of creating value within the organization to achieve organizational capabilities within is determined by UPS’s unique strategy of creating performance enhanced capacity to overcome competition. As for Accenture’s strategic external approach Porter’s strategic growth model which starts off by examining the relative strategic situation of the organization within the industry, is applied to understand the importance of strategy (Howes and Tah, 2003, p.60). In other words the performance maximizing organization might adopt a particular strategy in its competitive environment. By contrast the Resource-Based Theory is more or less a strategic process which begins at the very heart of the organization and expands outwards. When organization’s resources are assessed and their value generating capacity is known, the subsequent strategy formulation is not difficult. Thus the external competitive environment is studied as an a priori attempt at evaluating capabilities of resources to map out a strategic competition policy (Armstrong and Baron, 2002, p.52). The parametric growth process of this industry has evolved through a highly complex, volatile and strategically important space-time dimension. In this context, the survival of the average firm in a chaotic environment depends on both known and unknown macrocosmic and microcosmic factors or variables (e.g. Porter’s five forces) which in turn have to be determined to make a reasonable assessment of the outcomes. Strategic management consultancy industry is a service-based industry with a range of functional level deliverables made available through process control systems, interfaces, seamless integration techniques and end-user product deliveries. Thus its scope and depth require a highly sophisticated technological environment for communication and encryption. Accenture operates on a multilevel platform of management service architecture and strategic orientation constructs as a provider of custom-made performance solutions. This operational parameter requires it to position itself against similar competitors in the industry at all levels of operations. The strategic external environment here poses a series of threats (or challenges) and opportunities to the service provider (Kozami, 2005, p.19). It’s this strategically competitive environment that needs an in-depth evaluation here. The external environment consists of specific international events, technological change, demographic trends, legal and political conditions, economic climate and cultural trends. As against this, UPS’s strategy in managing its resources efficiently to face external competition related threats is presumably determined by a different set of variables such as maximum protection against its strategic resources being copied by rivals. Accenture has indisputably positioned itself in the center of this strategically competitive environment with a unique strategic management approach based on R&D capabilities and dynamic management philosophy that gives it a strategic advantage over its rivals (Gans and Stern, 2000, Vol. 9(4), pp.485-511). Unlike UPS which invariably focuses on resources to achieve organizational goals, Accenture derives its capabilities from a host of external environment related orientation strategies. Resource-based view of organizational success (Wernerfelt, 1984, pp.272-280), is determined by the internal strengths of the organization in controlling, rationalizing and utilizing the available resources to the maximum benefit of competitive advantage. Capacity building and enhancement strategies of the company have been well known and its core competencies have been built around this formulaic strength-weakness determination paradigm (Hamel and Prahalad, 1996, p.25). Despite this strategic view of the organization as a pioneer of costly-to-copy resource development processes still there is the looming threat of competition coming from rivals who have been able to develop less costly copies of the originals. Yet its internal value chain is particularly stronger in comparison to most of its rivals because UPS has created a strategic management culture that has both sustainability and transparency as two cornerstones. The resource-based view of the organization and the connected VRIO analytical framework depend on two assumptions – resource heterogeneity and resource immobility (Barney, 1997, pp.519-557). Resource heterogeneity presupposes that each firm would possess a distinctly unique set of resources and connected capabilities thus giving it an advantage in cost over the rest of its rivals. UPS has particularly invested in both the options by adopting a multi-prone strategy of Research & Development (R&D) and Acquisition & Merger (A&M), thus effectively curtailing the degree of freedom enjoyed by rivals in copying its resources. This strategic initiative on internal resource development along with its formidable management culture has enabled UPS to evenly balance itself on the VRIO framework. Resources are those inputs in the production process and they have some specific characteristics. For example capital equipment and labor skills of UPS might not be identical to those of its rivals. UPS has a host of basic internal value chain elements that encompass its resources such as human capital, capital equipment, financial resources, technological capabilities, organizational achievements and economies of scale (Foss, 1997, p.7). These are core competencies that the firm has built up over the years. Internal value chain management process is built on this success though UPS has not been able to match the recent spurt of growth that Accenture recorded during the run up to the current economic downturn. Accenture recorded its success against a particularly disturbing international trend in which outsourcing companies in India competed effectively against it in every sphere of supply chain management process. This phenomenon apart Accenture had to contend with deteriorating US currency also. Conclusion Strategic management practices adopted by Accenture and UPS concerning their respective corporate strategies, i.e. supply chain management and internal value chain management, have been particularly oriented towards enhancing the competitive edge that both companies already have in their markets. Accenture with its successful supply chain management strategy has been able to create a series of gains in its external supply chain through building up a strategically advantageous network of relations in the process. For instance its successful supply chain strategy involves creating outsourcing supplier networks that are strategically located at nodal points in the hierarchical structure. Thus its clientele has been highly impressed by the relative efficiency in executing projects at short notice. Its outward looking management strategy focused on the level of competitive pressure has been highly successful. UPS with an equally successful internal value chain management process as its corporate strategy to create values within the organization to face external competition has not been so successful in the final organizational outcomes, though its strategy has paid off by way of enhancing a paradigm shift in its value chain by way reducing pressures on resources. REFERENCES 1. Armstrong, M. and Baron, A. 2002, Strategic HRM: The Key to Improved Business Performance, CIPD Publishing, London. 2. Barney, J.B. 1997, Gaining and Sustaining competitive Advantage Reading, Addison Wesley Publishing, Massachusetts. 3. Foss, N.J. 1997, Resources, Firms, and Strategies: A Reader in the Resource-based Perspective, Oxford University Press, Oxford. 4. Gans, J.S. and S. Stern, 2000, Incumbency and R&D Incentives: Licensing the Gale Of Creative Destruction, Journal of Economics and Management Strategy, Vol.9, (4), pp.485-511. 5. Hemel, G. and Prahalad, C.K. 1996, Competing for the Future, Harvard Business School Press, Massachusetts. 6. Kozami, A. 2005, Business Policy and strategic Management, Tata McGraw-Hill, New Delhi. 7. Porter, M.E. 2008, The Five Competitive Forces that Shape Strategy, Harvard Business Review, Massachusetts. 8. Wernerfelt, B. 1984, A Resource-based view of the Firm, Strategic Management Journal, Vol. 5, PP. 171-180. Read More