Global Business Strategies and Strategic Innovation - Coursework Example

Global Business Strategies Topic Business Level Strategy and Resources Introduction Strategies within an organization can be basically divided into three categories. These are corporate, business and functional level strategies. Business level strategies are mainly a set of plans which are related to effective utilization of resources and to the development of strategies which facilitates in conducting business at the functional level. While corporate strategies are focused on bringing in resources and expanding the size of the organization, business level strategies incorporates the proper utilization of these resources. The core competencies of an organization must focus on the fulfilment of the needs of consumers and meeting the objectives of the organization. Business level strategies make it easy to meet such needs of an organization. Such plans of action are mainly developed by the managers. Business level plans mainly focus on gaining competitive advantages so that the resources possessed by the organization can be exploited effectively. Business level strategies are also concerned with the position which a firm occupies in the industry (Porter, 1985). Literature Business level strategies are all about determining three important aspects, namely, whom the business aims to serve, what are the needs of customers and how the needs are to be satisfied. Porters five force model is considered to be one of the most effective theories which guides in developing suitable business level strategies (Porter, 1985). The five force model incorporates the dimensions of bargaining power of suppliers, bargaining power of buyers, rivalry in the industry, scope of new entry and the existence of substitutes. As suggested by Porter, a firm must consider these dimensions before forming suitable business level theories (Barney, 1991). Porter’s five forces are related to reacting to the market forces of competition in a manner such that competitive advantages can be created. Business level strategies are mainly of three types, namely; Cost leadership, Differentiation and focus strategy. Firms are required to choose one of these positions in order to operate in the market (Day and Moorman, 2010). Market side of Paradox From the markets point of view, the business level strategy requires firms to develop an ‘outside-in approach’. This requires organizations to consider the situation existing in the industry and the policies followed by the competitors. Accordingly, suitable plans of operations require to be formed. The markets view of the business level strategies also suggest that managers are required to formulate plan of action on the basis of the situation which exists in the external market such as demand relating to different products, the product insights and consumer perceptions regarding the products (Porter, 1985). Hence, a large amount of market data is required to be gathered and used while formulating business level strategies. The markets paradox of the business level strategies requires that firms must develop competitive advantages in a manner such that customer value can be created. When strong customer values are created, it becomes possible for organizations to retain market power for long. Additionally, business level strategies also involve identifying market opportunities which facilitates in future growth (Barney, 1991). Resource side of Paradox The resource based view of the business level strategies state that competitive advantages are created out of resources. The manner in which organizations procure and use resources, aids in producing products and services which provide a distinctive advantage to the consumers. The resource based paradox may be considered to be in opposition of the market based view (Teece, Pisano and Shuen, 1997). While the market paradox focuses on market information for developing competitive advantages, the resource based view suggests that it is mainly the resource pool held by an organization which provides it with power and hold in the market. Resources can be held as the basic element which makes an organization superior to others. Hence, firms which have adequate human resource, technology and other resources related to production, are expected to survive in the industry and withstand competition (Porter, 1985). However, it can be argued here that the type of resources providing a distinctive advantage to the organisation depends upon the market. On the basis of the market survey, it requires to be understood that producing what type of products may provide an organization with distinctive advantages. Accordingly, firms must arrange to procure those resources. Therefore, business level strategies are mainly driven by the market based view rather than the resource based view (Teece, Pisano and Shuen, 1997). Practical Examples One of the best examples of how business level strategies are effectively formulated and followed can be understood from the manner in which McDonald’s functions. McDonalds being a fast food chain requires understanding of who are the customers they should target and what are the specific needs of the target market segment. McDonald’s products are mainly targeted towards attracting youngsters, teenagers and office goers. The brand tries to understand the needs of their target population and accordingly formulates their product line so that their needs are satisfied. Hence, the business level strategies of McDonalds can be seen to be largely market driven. From the resource perspective, a suitable example can be McKinsey & Company. The firm procures numerous resources and then identifies way in which the resources can be used in a strategic manner. The resource based manner of formulating business plans are seen to be effective for McKinsey because the firm operates in a diverse number of fields. Since their product portfolio is diversified, it becomes difficult to develop broad business strategies based on a particular products market. Hence, the company analyses the market, acquires resources accordingly and then formulates strategies which facilitates in utilizing those resources effectively, so that competitive advantages can be created (De Wit, Meyer and Heugens, 2004). Summary The business level strategies are aimed towards meeting the needs of consumers in a manner such that all stakeholder groups are benefitted. Organizations may either use the resource based approach or the market based approach in order to develop the business level strategies. In most cases, it is identified that when the products of a firm are not very diversified and they operate in a single industry, the market based approach is seen to be most suitable. Alternatively, when the firms operate in diverse industries, the resource based approach is seen to be more suitable for framing business level strategies. However, the fundamental aim of business level of strategies is to exploit different market conditions and resources so that competitive advantages can be created (Hambrick, 1980). Topic 2: Missioning and Visioning Introduction Organizational visions are mainly plans envisaged for a longer term period. It corresponds to the ambitions of a firm and the things it hopes to achieve in the long run. On the other hand, organizational mission explain the reasons for their existence and their operations. Organizational missions are more specific than visions. Both missions and visions of an organization are developed on the basis of the needs of the stakeholders. Stakeholders are essentially the interest groups with whom an organization is directly or indirectly related. Hence the profits, sales, growth and goodwill earned by an organization directly or indirectly affect the needs of the stakeholders. Responsible organizations are therefore required to ensure that the missions and visions set by a firm fulfil the needs of the stakeholders adequately (Friedman, 2007). Literature Visions are organizational aspirations that are looked upon as ideals, which organizational members through their collaborated efforts wish to achieve. Vision must be realistic and must consider the needs of the society in which the organizations operate. Firms must develop visions which help in adding value to the society. This would necessitate careful utilization of resources and operating in a sensible and responsible manner. While setting organizational visions, it is essential to consider the aspect of making unique contributions to the society (Friedman, 2007). Missions on the other hand explain the means that an organization chooses to achieve their visions. While visions are related to what an organization does in the long run, a realistic view regarding how the firm wishes to achieve their objectives in the long run can be understood through their mission statement. Hence, mission statements are the practical aspects which are associated with the vision statements. While visions include the needs of stakeholders from a broader perspective, the missions of an organization deeply explains the responsibilities which it determines to undertake to fulfil stakeholder needs. An essential aspect of the mission factors set by an organization is that firms must take into consideration the legal requirements (Goh, 2003). Legally, they must know what they are allowed to do and what is prohibited in the commercial world. Accordingly, suitable organizational missions must be set (Porter and Kramer, 2011). Profitability Paradox Organizational mission and vision are mainly set from the view point of providing maximum returns to shareholders. It is generally perceived that when the shareholder value is maximized, firms automatically gain higher profits. It is also believed that when a firm functions so as to meet their shareholder needs, all other stakeholder related needs are also automatically met. However, such an approach is believed to be highly concentrated upon the returns which an organization earns. It is also believed that when firms acquire large amount of profits, all the needs and responsibilities can be fulfilled effectively. The profitability approach towards setting of missions and visions is focussed on increasing the value of a firm in the stock market. When shareholder value is created or enhanced, it automatically proves that an organization is using their resources in an efficient manner. Profits can only be earned if employee participation and contribution is satisfactory. Hence, the all around needs of the stakeholders is taken care of through the profitability approach (Goh, 2003). Responsibility Paradox It can be argued that the profitability view of setting visions and missions are mainly related to the needs of the shareholders than other interest groups. However, the responsibility approach takes into account the needs of all stakeholders. This approach is not centric towards shareholders alone, but others as well such as employees, suppliers of materials, customers, the government and the society at large (Ifinedo, 2008). The responsibility approach towards development of organizational mission and vision is more acceptable. It is believed that stakeholders have superior power on the continuity of an organization. Employees and customers in this respect hold high importance. Organizations must be able to understand the need of the consumers before they venture into developing different kinds of products and services. Meeting market demands more effectively becomes feasible under the responsibility approach. Similarly, the needs of the employees are also important. Satisfied and committed employees offer better services to an organization. Therefore, it becomes essential to understand and fulfil the needs of the employees and include the same while setting organizational missions (Ifinedo, 2008). Practical Example The mission and vision of Amazon.com is to become one of the most customer focused companies of the world. They aspire to grow into a company that is able to provide all types of products and services to the customers. From the mission statement of Amazon, it can be understood that their approach towards developing long term strategic plans is more responsibility centric than being profitability centric. Similarly, Microsoft’s mission is to be able to provide people and businesses across the globe with the ability to realise their complete potential and make use of resources in the most effective manner. Microsoft also adopts a responsible approach towards developing their long term strategic goals. Hence, it can be understood that developing a more responsible approach towards developing company missions and vision is more suitable in facilitating an organization to emerge successful. The profit centric approach might not be acceptable to all stakeholders of an organization, especially customers (McDonald, 2007). Summary Organizational objectives must be set in a manner such that they not only facilitate in meeting the needs of the stakeholders but also that of the business itself. This means that firms must not completely neglect the aspect of profitability while developing their long term objectives. It is also essential that organizations earn sufficient profits so that they are able to fulfil the needs of their stakeholders. While developing long term objectives, it is essential that the needs of all the interests groups as well as the organization’s own profit related interests are taken into consideration (Wit and Meyer, 2004). As a result, it would facilitate efficient utilization of resources, customer and employee satisfaction, timely return to shareholders and developing long term strategic relations with suppliers. In the recent times, there has been a number of dispute and controversy in respect of the reporting systems which companies follow. Many companies do not provide correct reports to their stakeholders which lead to wrong decision making. Hence, Modern organizations must also take into consideration the aspect of correct reporting to stakeholders within their long organizational mission and vision statements (Wit and Meyer, 2004). Topic 3: Strategic Innovation Introduction Innovation is deeply related with the growth of an organization. Strategic innovation consists of aspects such as development of new products and development of technologies that aid in easier, faster and cheaper production. Modern day organizations rely heavily upon innovation for enhancing their strategic position in the market and to develop competitive advantages. Firms which continue to innovate are able to succeed in the market and emerge as successful competitors. Firms who lack the capability to innovate are seen to lose their position in the market and cease to exist in the long run. Innovation is not the task of a group of mangers, but it is the collaborated efforts of the organization as a whole. In order to be able to continue to innovate and develop new products or methods of production, it becomes essential to invest heavily in different types of research and development initiatives. As a result, much capital and financing is required to be made. This is one reason why many firms cannot invest in innovation related actions (Imai, 2004). Literature Strategic innovation may be explained as a process whereby executives apply their creative abilities to develop products and services that facilitate in providing a distinctive advantage to the society and enhance the overall value of the firm. Strategic planning is often looked upon as a means by which organizations are able to bring changes to their existing products, services and methods of production. With the passage of time, it is observed that the need of the consumers changes (Imai, 2004). As there are changes in the pattern and the lifestyle of the consumers, organizations are also required to bring about changes in their products and services and also in the manner in which they are manufactured. Strategic innovation must not be considered to be the responsibility of few individuals. It involves the efforts of every member present in the organization. Innovative measures can be acquired from any department or level within an organization (Gupta, Smith and Shalley, 2006). Modern organizations are therefore required to remain flexible and motivate their employees to continuously develop measures by which the organization is able to attain strategic advantages. One of the most crucial areas of innovation in modern day organization is the efficient usage of power, resources and minimization of cost of production. The ultimate aim of every organization through innovation is to be able to provide distinctive advantages to the society (Christensen, 2013). Exploitation Paradox The exploitation paradox of strategic innovation considers that firms must be able to develop continuous advantages through the effective utilization of resources. However, while carrying out exploitation of resources it must be ensured that environmental harm or resource depletion is low. Hence, exploitation must be done in a limited and sustainable manner. Firms must be able to understand and distinguish between useful innovation and non value adding innovation projects. This would facilitate in preventing wastage of resources. The exploitation paradox mainly suggests that innovation is all about finding useful and convenient ways of exploiting different types of resources. The most important thing organizations are required to keep in mind is how value addition and innovation can be helpful for the organisation towards exploring resources related to exploitation (Gupta, Smith and Shalley, 2006). Exploration Paradox The exploration paradox suggests that firms who invest in innovation related activities are required to adequately understand the needs of the consumers and other stakeholders. These needs are then required to be aligned with suitable resources. Hence, much exploration requires being carried out in respect to resources as well as market conditions before innovation measures are undertaken. The exploration measures are mainly required to remain customers focussed. In many cases, it is observed that strong demand conditions may prevent an organization to innovate and bring changes to an existing product. Under such circumstances, it becomes essential to develop measures by which new products and services can be formed. This would facilitate in development of a new target segment or entry of a new product market altogether. Such strategies are required to be undertaken after careful exploration of different options and market opportunities (Bruce and Bessant, 2002). Practical Examples One of the reasons why Japanese organizations are able to do well in the long run is due to the fact that they continuously innovate and develop products and services which add value to the organization and the society (Abraham and Knight, 2001). Toyota can be considered to be a suitable example in this respect. Toyota believes in continuous innovation through understanding the needs of the modern society. The company provides innovative solutions to its clients so that they are able to grow. Toyota not only believes in innovation but considers in doing so from a qualitative perspective. The company ensures that every product which it manufactures remains qualitatively supreme. In order to facilitate such an initiative, much investment is made in research and development activities. Innovation in Toyota not only refers to development of high quality products but also to develop ways in which cost of operation can be reduced and maximum returns can be provided to consumers (Abraham and Knight, 2001). Summary Before undertaking strategic innovations, organizations are required to consider what objectives they are trying to fulfil. It is important to develop sustained competitive advantages. Not all innovative solutions are considered to be beneficial or related to product development. Hence, it becomes essential to understand exactly what type of strategic innovations may add value to the organization. In many cases, innovation may also be developed in the form of process improvement and technological innovations that facilitates in easier production (Charitou and Markides, 2003). Reference List Abraham, J. L. and Knight, D. J., 2001. Strategic innovation: leveraging creative action for more profitable growth. Strategy & Leadership, 29(1), pp. 21-27. Barney, J., 1991. Firm resources and sustained competitive advantage. Journal of management, 17(1), pp. 99-120. Bruce, M. and Bessant, J. R., 2002. Design in business: Strategic innovation through design. New Jersey: Pearson education. Charitou, C. D. and Markides, C. C., 2003. Responses to disruptive strategic innovation. MIT Sloan Management Review, 44(2), pp. 55-63. Christensen, C., 2013. The innovators dilemma: when new technologies cause great firms to fail. Harvard Business Review Press, 1(1), pp. 123-150. Day, G. S. and Moorman, C., 2010. Strategy from the outside. New York: McGraw-Hill. De Wit, B., Meyer, R. and Heugens, P., 2004. Strategy: Process, content, context: An international perspective. London: Thomson Learning. Friedman, M., 2007. The social responsibility of business is to increase its profits. Berlin: Springer. Goh, S. C., 2003. Improving organizational learning capability: lessons from two case studies. The learning organization, 10(4), pp. 216-227. Gupta, A. K., Smith, K. G. and Shalley, C. E., 2006. The interplay between exploration and exploitation. Academy of management journal, 49(4), pp. 693-706. Hambrick, D. C., 1980. Operationalizing the concept of business-level strategy in research. Academy of Management Review, 5(4), pp. 567-575. Ifinedo, P., 2008. Impacts of business vision, top management support, and external expertise on ERP success. Business Process Management Journal, 14(4), pp. 551-568. Imai, M., 2004. Kaizen: the key to Japan’s competitive success.  New York: West Publishing Company. McDonald, R. E., 2007. An investigation of innovation in nonprofit organizations: The role of organizational mission. Nonprofit and voluntary sector quarterly, 36(2), pp. 256-281. Porter, M. E. and Kramer, M. R., 2011. Creating shared value. Harvard business review, 89(1/2), pp. 62-77. Porter, M. E., 1985. Competitive strategy: Creating and sustaining superior performance. New York: The free. Teece, D. J., Pisano, G. and Shuen, A., 1997. Dynamic capabilities and strategic management. United Kingdom: Taylor and Francis. Wit, B. D. and Meyer, R., 2004. Strategy: process, content, context-an international perspective. London: Thomson Learning. Read More