Internal Value Chain - Term Paper Example

Leadership in Strategic Planning due Topic one Internal value creation is an important process that may determine the success of an organization. The value chain is the totality of all internal activities that the firm engages in while transforming raw materials and other inputs into outputs. To achieve the best possible returns from the investment, it is necessary for the firm to perform an analysis of the value chain. A value chain analysis comprises of all processes engaged by the firm in identifying its principal and support activities that increase the value of its final products. These activities are then analyzed with an aim of reducing costs of production or increasing the variety. Internal value chain identification is an important procedure for the firm. It is particularly important in strategic leadership because when managed well, the value chain can offer a competitive advantage over rival organizations. These activities can be categorized broadly into two categories i.e. the primary activities and support activities. The main activities include logistics, operations, marketing, and service. Support activities are determined by the firm’s infrastructure, procurement, technology, and human resource management (Porter, 2008). Once the organization identifies all the processes involved in the production, it is possible to tailor them to change with the trends. Topic two As stated earlier, conducting a value chain analysis can be instrumental in creating a competitive advantage over other firms in the industry. Competitive advantage can occur in two forms: cost advantage or differential advantage. Cost advantage involves reduction of costs of production to increase the profit margin, while differential advantage aims at increasing the value of products of a firm, which may capture a larger market and/or increase sales (Jurevicius, 2013). Both are important and can be implemented together or solely. The cost advantage approach involves five steps. First is the identification of the primary and support activities of the firm, then the establishment of the vitality of each activity in relation to the cost of the product. The next step involves identification of the cost drivers, the links between the different activities, and finally the opportunities for reduction of costs. The differentiation advantage involves identification of customers’ value-creating activities. Differentiation strategies for improving customer value are then formulated and evaluated, after which the most sustainable differentiation is selected (Jurevicius, 2013). Value chain analysis should be conducted on a regular basis to stay up-to-date with the constantly changing consumer market and competition. Topic three Business strategies are made on three organizational levels: corporate, business unit and functional levels (Jones, 2010). At the corporate level, strategies are made to achieve the long-term goals of the entire company. At the next level is the business unit, which is an autonomous division or unit of an organization whose responsibility includes the production of certain goods and services of the owning organization. The unit is small enough to allow flexibility but large enough to control most of the factors that affect its long-term success. Strategy at the functional level involves making decisions that will help achieve the business and corporate objectives and strategies effectively. At the functional level, objectives are more specific and provide guidelines to how actions will be taken in line with the set strategies (Jones, 2010). Functional level strategies are important in the management of the firm because they are capable of creating a competitive advantage over the organization’s competitors. At the functional level, the company is in contact with the business community, thus easier to obtain competitive data. It is the mandate of the functional level to collect such data which will be used by the higher management levels to determine the long-term competitive strategies to be implemented in the firm. This information may also be used by functional level managers to effect changes in their respective departments to obtain a competitive advantage (Jones, 2010). Topic four Strategic management is important in keeping a company relevant in the industry. According to the industry life cycle theory, a company goes through five stages i.e. the pioneering phase, early growth phase, mature growth phase, stabilization phase, and deceleration/decline phase. In the mobile technology industry, several companies have emerged and dialed while others continue to make huge profits each year. Motorola is an illustration of an enterprise that follows the industry life cycle. It pioneered mobile technology in the mid-20th century and became one of the biggest mobile device manufacturers until early in the 21sr century when it began failing and was finally purchased by Google (Finkelstein, 2006). The main reasons for the decline can be traced back to inadequate market research and failure of functional level management. Apple, on the other hand, has registered continuous success in the mobile phone industry since its formation. It is currently one of the biggest developers of smartphones worldwide. The demand for Apple mobile devices has been increasing gradually over the years, and it can be said that the company is currently at the stabilization phase, owing to its large market share. The company’s ability to differentiate its products puts it at a competitive advantage over rival companies such as Samsung and Google. Topic five There are several techniques of determining the position of a company in the industry. The most common is by comparing its stage of development based on several criteria such as the market share, presence of competition and net worth among others. For instance, in the pioneering phase, most companies have few sales and the demand for its products is still low. In the growth phase, most companies will experience a growing demand for their products, thus rapidly increasing sales. Competitors also begin to emerge at this stage. At the stabilization phase, companies typically attain a normalized return on equity, and the growth is average (Sabol, Sander & Fuckan, 2013). The stage of development of a company determines its strategic choices to a large extent. For example, the priority of companies in the lower development phases would be centered on reduction of production costs due to the low amount of revenue being collected by the firm. Established companies, in contrast, would invest most of their resources in research and development to attain product differentiation. These differing goals and priorities in companies at different stages of development dictate the strategic choices made by the management (Sabol, Sander & Fuckan, 2013). Topic six Although high technology innovations share several challenges with other industries, some of the challenges are exclusive to or have a bigger impact on the technology industry. Most of the technology innovators describe the benefits of the technology rather than the business potential for the innovation. Finding a source of funding, therefore, becomes difficult. Innovations in high technology products also face the high risk of becoming phased out by newer technology. Technology is a highly dynamic industry where new ways are being developed continually. Thus, the innovation may be phased out before achieving the expected returns on investment (Al Natsheh et al., 2015). The high uncertainty typical of high technology products also poses challenges to commercialization. Technological innovations are characterized by a high risk of failure due to changing consumer needs and the high chances of unpredicted competition (Al Natsheh et al., 2015). As a result, most innovations do not receive funding and fail to reach the commercialization stage. Another challenge that affects the technology industry to a great extent is patenting and ownership of intellectual property. Patenting battles are common in the technology industry as has been witnessed by major smartphone manufacturing companies. All these challenges impede the progress of high technology commercialization. Topic seven Risk management is an important factor to consider when introducing a high technology product in the market. Risks to the success of the product can be evaluated based on the product life cycle model. The product undergoes four stages of development, each with different risks. These are: imagine, define, realize, use/support, and retire/dispose of (Stark, 2011). At the imagination stage, the product is still an idea, yet to be implemented. At the definition stage, the ideas are being developed into a detailed description of the product. At the end of the realization stage, the product has been completed and exists in its final form. The next stage involves support from the company to the consumer who is already using the product. The process carries on until the product is no longer useful, and the company retires the product to the consumer who disposes it (Stark, 2011). At each stage of development, the product faces several risks that are unique to the phase of development. For instance, at the imagination phase, the manager should ensure that the idea of the product is not lost. In the next two phases, the management should ensure that they analyze beforehand anything that may prevent the production team from attaining their objectives. Implementation of the product also has its challenges which will be identified and preventive measures taken. The product users should also be assured of support throughout the product life cycle until it is safely disposed through the help of the company (Stark, 2011). Topic eight Adopting a global strategy is important for any firm eyeing the international market. Companies adopt global strategies as it helps to plan effectively for market entry (Peng, 2013). A global strategy will help the manager of the firm plan items such as the product appearance, price, place, and processes among others. Also, a global strategy determines the chances of success or failure of the product in the new market and gives a clear picture of the international market. It would not be wise for any company to explore the international market without a global strategy. To determine the appropriate strategy for the firm, the management should ensure that they conduct a market survey first. A market survey provides information regarding the economic profile of the country, thus makes it easier to select the correct strategy. Also, the management should perform a SWOT or PEST analysis to determine the best strategy to adopt, to capitalize on their strengths while preventing exploitation due to their weaknesses. Market entry strategies include franchising, foreign direct investment and partnerships with local companies (Peng, 2013). Topic nine Strategic alliances and joint ventures have got several advantages as wells as shortcomings. Some of the advantages include shared risks, better opportunities for growth, merging of complementary strengths and access to more resources and in some cases, target markets (Government of New Zealand, 2015). Companies also engage in partnerships to bypass country trade laws. Some limitations of partnerships include less profits, difficulty splitting property in case of a split up, cultural differences, high level of commitment, and the larger partner may overwhelm the smaller one (Government of New Zealand, 2015). To determine whether a strategic partner is a good choice, several criteria have to be met. The partner should be investigated on their reputation among customers if they are financially secure, and if they are in any existing partnerships that may result to a conflict of interest. A written agreement between the two partners should be made. The agreement should stipulate every detail of the partnership such as the communication channels, terms of payment, management of the venture and any other details that may pertain to the partnership. Most importantly, the agreement should agree on the method of arbitration to be used in case a dispute arises between the two parties (Government of New Zealand, 2015). Topic ten Ethics can be described as human behavior that coincides with the moral values of a society. Moral values constitute the beliefs that are held by a person or society and guide the manner in which the person thinks, behaves, and perceives things and events as either good or bad (Fritzche & Oz, 2007). Value systems are defined by the society and reflect in other laws such as national constitutions, religion, and policies in organizations. An organization’s ethics can contribute to a change of the value system through continuous practice by employees who adopt them as the normal way of living. Ethics can be utilized to formulate business processes. For instance, most business processes are formulated around concepts of ethics such as trust, fairness and mutual benefit. Constructive ethical practices are essential for optimum business performance. Companies that are conscious of their actions and engage in ethical practices such as corporate social responsibility have a better image among the consumers. These organizations are, therefore, at a better chance of attracting a larger consumer base, compared to other organizations that do not engage in ethical activities. Topic eleven Corporate social responsibility is one of the ways in which the company acknowledges its debt to the society in which it operates (Joseph, 2009). GlaxoSmithKline Consumer Healthcare is an example of a company that has contributed significantly to the communities living around the company, regardless of the geographical location. The link to their corporate social responsibility page: http://www.gsk.com.pk/61/Corporate-Social-Responsibility.aspx Global citizenship of a company is an important factor to consider for any company. Corporate global citizenship implies that international companies can become involved with the communities they serve, regardless of their geographical location. Global citizenship is beneficial to the stakeholders in a number of ways. For instance, the customer increases their trust in the company as well as benefitting directly from the social responsibility activities that the company carries out in their communities (Joseph, 2009). The company benefits from the good reputation that these activities bring and the brand image of the products increases in value. For the shareholders of the company, they will benefit from increased sales and profits due to the large customer base that the company is likely to attract. Furthermore, companies that engage in corporate social responsibility activities are usually recognized and awarded in various business awards. Such awards include The Peer Awards for Corporate Social Responsibility, LowCVP Low Carbon Champions Awards, and Green Apple Awards for Environmental Best Practice among others. Topic twelve The organizational structure is an important aspect of the company. It determines the way a company is run and the responsibilities of each staff member, thus dictating the chances of success or failure of the business. There are two major types of organizational structures i.e. formal and informal. Formal organization structures are further divided into two categories: functional and divisional matrix structures. The functional structure is based on the skills of the employees. It includes departments such as marketing, human resource, production, and logistics, etc. Functional structures lead to a high level of staff specialization, although they may acquire very little experience outside their specialty areas. The divisional structure, on the other hand, is based on product lines of the company. A dedicated team works in different product lines, concentrating on the production of specific products and services. There can be as many divisions as there are products. This structure is best suited for a highly competitive market, although it may lead to employment of more staff compared to functional structures. These structures can be hybridized to come up with new structures suited for the specific market or company objectives. An informal culture does not have any set structure but involves the various interactions of the employees, based on their skills or interests, which accomplish the organization’s objectives. An organizational structure that is suited for the future has got several characteristics. For example, the structure should ensure maximum employee involvement. In addition, the authority should be assigned based on ability, not other factors such as age or stereotypes. The structure should also allow the formation of alliances and partnerships with other companies, and adopt a decentralized form of governance. Most importantly, the structure should allow flexibility and rapid response of the organization to change (Carchidi & Peterson, 2000). Topic thirteen Strategic control systems include the processes that are utilized by organizations in evaluating the formation and implementation of strategic plans. Strategic control systems differ from other forms of management control because they place much importance on risk assessment of implementing new strategies. Strategic control systems can be applied to value creation and reward systems effectively through assessing the uncertainty and ambiguity of new projects. Certain elements are mandatory for the correct functioning of the strategic control systems. Muralidharan (2004) proposes four standard elements of strategic control systems. They include the articulation of the expected strategic outcomes; a description of the actions to be taken to achieve the outcomes; definition of a method to track the progress of the project; and identification of an intervention method in case the project needs improvement. Topic fourteen Ethical perspectives help us to define and identify problems, encourage systematic thinking, emphasize the need to view issues from different angles, and provide decision-making guidelines (Case, 2006). There are five major perspectives that a company may decide to adopt in corporate social responsibility. The first is utilitarianism, which involves doing the greatest good to the greatest number of people. Although it appeals to human nature, most of the time it is difficult or impossible to evaluate long-term risks and consequences from this perspective. The second perspective is Kant’s categorical imperative. It states that companies should always do good regardless of the consequences. A major shortcoming of this perspective is on the variation in the definition of what is right or wrong (Case, 2006). Communitarianism is another perspective that emphasizes promoting shared moral values. It is important in implementing social responsibility activities since it addresses the cultural differences in different communities. However, critics maintain that most communities fall short of the communitarian ideals, thus less applicable in real life (Case, 2006). Altruism (concern for others) is another ethical perspective that is important in the implementation of corporate social responsibility. Caring for others is a powerful force that drives people to engage in social responsibility. However, most of the time, rarely do people engage in action apart from the good motive, thus little is done (Case, 2006). References Al Natsheh, A., Gbadegeshin, S. A., Rimpiläinen, A., Imamovic-Tokalic, I., & Zambrano, A. (2015). Identifying the Challenges in Commercializing High Technology: A Case Study of Quantum Key Distribution Technology. Technology Innovation Management Review, 5(1). Carchidi, D. M., & Peterson, M. W. (2000). Emerging Organizational Structures. Planning for Higher Education, 28(3), 1-15. Case, C. E. (2006). Ethical Perspectives. Sage Publications Finkelstein, S. (2006). Why smart executives fail: Four case histories of how people learn the wrong lessons from history. Business History, 48(02), 153-170. Fritzsche, D., & Oz, E. (2007). Personal values’ influence on the ethical dimension of decision making. Journal of Business Ethics, 75(4), 335-343. Government of New Zealand. (2015). Strategic alliances and joint ventures. Retrieved April 21st, 2015 from http://www.business.govt.nz/support-and-advice/advice-mentoring/for -exporters/strategic-alliances-and-joint-ventures Jones, G. R. (2010). Organizational theory, design, and change. Pearson. Joseph, A. V. (2009). Successful examples of corporate social responsibility. Indian Journal of Industrial Relations, 402-409. Jurevicius, O. (2013, April 25). Value Chain Analysis. Retrieved April 20, 2015, from http://www.strategicmanagementinsight.com/tools/value-chain-analysis.html Muralidharan, R. (2004). A framework for designing strategy content controls. International Journal of Productivity and Performance Management, 53(7), 590-601. Peng, M. (2013). Global strategy. Cengage learning. Porter, M. E. (2008). Competitive advantage: Creating and sustaining superior performance. Simon and Schuster. Sabol, A., Šander, M., & Fuckan, D. (2013). The Concept of Industry Life Cycle and Development of Business Strategies. In Active Citizenship by Knowledge Management & Innovation: Proceedings of the Management, Knowledge and Learning International Conference (pp. 635-642). Stark, J. (2011). Product lifecycle management (pp. 1-16). Springer London. Read More