The Term Strategy and Purpose of Strategic Management - Essay Example

Discuss the term ‘Strategy’ and explain the purpose of Strategic Management. Using an example of your choice, outline the industry context and then for one selected organization, complete a SWOT analysis to reveal the potential for leveraging business strengths to capture future opportunities. You are then required to set these opportunities into a framework for growth using the Ansoff Matrix as a model. In terms of coming up with a sound definition regarding “strategy”, many explanations and definitions come into mind. According to Collis & Rukstad (2008), many have responded that strategy is sort of a “game plan”, where there are “set objectives and actions or coordination and alignment of resources all of which are intended to help an organization achieve its long-term goals and vision”. The key which we can derive from this description is that strategy is of foreseeing and planning for the future in order to optimize the performance of a certain group or entity in order to achieve a long term goal. It is the positioning of that certain entity which will transcend into an immediate outcome into a wider and greater scheme of things and objectives. As many a definition people view what ‘strategy’ is, they do not entirely deviate from the real essence of the word. When we translate ‘strategy’ in the matters of business, it is best defined as a specific way a firm competes in the industry, as said by Collis & Rukstad. There is no such thing as general template when it comes to strategic management. There are no pre-defined methods and ways. Every scenario differs from another and each requires a different strategy in order to navigate the complexities and the many variables of the world of business. In order achieve a good strategy, the crucial component is the management. By assessing what components are involved in the formulation of a strategy and discerning how each are related and how one and each of them fit in the larger picture requires an adept management team and skill. Herein comes then the concept of strategic management. This is a field which concerns itself with the course of action that the management section of the company acts on behalf of its owners in order to better utilize its resources so as to enhance the performance of the company when it is pitted in the external environment. It involves itself on the very primal building blocks of the company, which are defining the scope of its objectives and missions and visions (Nag et al., 2007, p. 935). The management should also have a sound and workable policies and plans that are also capable of being flexible in order to cope up with the ever changing and volatile times of the business battlefield. It also oversees how the company equips and gears itself in order to grasp the fruition of its objectives and long term goals. In a more simple definition, strategic management provides the overall direction in reference with and in limitation of what the company has and will have, its liabilities, and its faults, and potential failure points. By creating harmony and orchestrating the performance of the whole company, it shall then function as an efficient organism, capable of covering up its weaknesses with adjustments that will then be played by the strengths and advantages of the company. As many would put it, “strategic management is an on-going process that evaluates and controls the business and the industries in which the company is involved; assesses its competitors and sets the goals and strategies to meet all existing and potential competitors; and then reassess each strategy annually or quarterly to determine its effectiveness’ (Lamb, 1984, ix) One very popular and popular tool in order to come up with a good strategy for the management is the SWOT analysis (Chapman, 2007). This is a very helpful framework for identifying the Strengths, Weaknesses, Opportunities, and Threats (which is also the standing meaning of the acronym). For this paper, the author will evaluate the SWOT of the Starbucks Enterprise. The strengths of the company are the internal attribute that are helpful to the organisation and are the assets and main points of its operations. In the context of Starbucks, their strength is that there have very large profit earnings, and it has earned in excess of $600 million in 2004. Its sales are derived from a very large global market reach what with Starbucks being present in 58 countries (Loxcel, 2012). And aside from its profiteering aspects, Starbucks boasts a very strong and ethically valued organisational system. The weaknesses are the limitations of their internal attributes and the incapabilities of their system design which shall prove to be detrimental or hinder the company in achieving its objectives. Such a weakness is that the company has a tendency and renowned reputation for constantly plugging and developing new products and innovations. The vulnerability here lies when the product does not positively manifest in a good light and will then turn out to be a heavy liability for the company in terms of its investments. They are also dependent on their main competitive advantage, which is the retailing of their coffee. While this is not an altogether glaring weakness, this disables the company to better operate when the need arises to diversify. Also, they are limited with the capabilities of their main stream of products, further expansion moves are limited in order to be kept in line with their main selling point. The opportunities are the ones that the company are capable of taking advantage in the best case that they situate themselves properly in order to optimise their position into gaining ground of such scenario. These “opportunities” are external in nature wherein the company could take shape to take into account these variables that are out of the company’s direct influence (JRC European Commission, 2007). While Starbucks has already dominated the coffee shop industry, they still have a wide array of expansion moves that might also prove to be of a good opportunity for their further growth. For one, they could explore to cater other forms of beverages other than coffee (Schwaner-Albright, 2008). Also, they have been always aggressive in penetrating markets globally, which also then translated into their internal strength because of their assets worldwide. As for the threats; these are also external in nature and these things are the ones which are not only detrimental but, most critically, harmful to the company and its path of achieving its objectives. Such an external threat is the unpredictability of not knowing whether coffee will continue to be a daily staple for its customers. It is not unlikely that a newly developed beverage or another type of coffee could sprout as its competition and eventually bring down the enterprise. Also, since they are very product dependent, fluctuations in the seasons of their prized products will also have a huge impact on the stability of their pricing and financial capabilities. Needless to mention, many other copycat brands have grown into significant competition against Starbucks, capitalizing on their much vaunted idea of a cosy feel of a cafe and its signature coffee. After the SWOT analysis, another tool to complement a strategic management is the Ansoff Model. This was developed by Igor Ansoff with the key challenge in mind is to assure competitiveness and profit capability. To quote, Ansoff said that the company operating in a turbulent environment needs a compass rather than a detailed road map. This only means that it is better to navigate on the immediate things in order to achieve the future goals. So such approach is a means of assessing the risks involved in any of the expansion plans that the company might undertake. And with the management composed of many people, there should be a streaming on the ideas that shall be put into implementation; this tool solves that need. Figure 1 showcases the working matrix on how the Ansoff method is implemented For the opportunities of Starbucks, such as developing new product lines aside from coffee and global market expansion. These two could both go hand in hand since with different global areas come cultural diversity. They could then explore the unique cultures of the countries in order for developing new ideas for products that may specifically find a niche on that certain area. When they are new in the area, they should first strive for penetrating the market, indulging on the market segment where needs of their shop are of prime, or if not they develop new concepts so as to capture new market segments. And when they establish their market, they can then focus on their product development made especially to cater to their cultural niche. 2) To craft new strategy is a creative process but to implement such strategy is a significant management challenge. Discuss this statement and explain how the task of strategy implementation could be approached in a systematic way. There are five (5) key points to be explained in this statement namely a) Craft b) New Strategy c) Creative Process d) Implement e) Significant Management Challenge. First, let’s define each key point so we can clearly delineate the meaning of the statement. Craft here is defined in a verb sense. Craft, according to the dictionary is to make or manufacture with skill and careful attention to detail. Craft encapsulates might, skill, art, science, talent, and courage to name a few (Krueger, 1982). Therefore, craft means both professional skills and extensive experience. With professional skills, a person learns all the theories and concepts. Through the years, the person gains real-time experiences of all the cases, issues, and challenges. He sees all details from the minutest to the most obvious. For example, he learns to dissect each case into minor and major categories and each category to sub-minor and sub-major ones. Learning all the skills through extensive experience does not mean an only haphazard way of learning it. It has to be a creative process. Creative process would involve a scientific method of thinking. Scientific method covers investigating phenomena, acquiring new knowledge or correcting and integrating new knowledge using a body of techniques (Goldhaber and Nieto, 2010). All evidences should be empirical and measurable. With this kind of objectivity, the person characterized the items through observation and experiences in order to arrive at a proposed solution/explanation. The results will then be deduced from this hypothesis which in turn will be tested if it works or not. Since this is scientific and systematic, implementing it through the scientific precedents will predict the outcome. As a follow-through, implementation would require planning, organizing, staffing, directing and controlling in order to ensure that the experiment will be as objective and scientific as possible. It means that all considerations have been checked prior to the experiment. It is an execution of a plan. As it gets executed, managing both the plans and the controls are very crucial. In between the execution process, it is integral to ensure the strict compliance with the plan. It may be unavoidable to experience unexpected occurrences but still sticking to the goal/plan is as important as following the prescription of the Medical Doctor. For example, the study of Adam Smith revealed that from 200 pins per day of a person, with proper tweaking of the production process, can lead to an output of 48,000 pins by only ten (10) specialists (Gomez-Mejia, 2008). Managing a production process scientifically made this productivity possible. That is, with all the plans and goals properly followed and implemented. Now, in a broader sense of the word, there is a very important way that a strategy implementation can be approached in a systematic way. By applying the above definition to a new strategy, it can be done using the following: Table 2. Scientific Strategic Implementation Scientific Method Parameters Strategic Implementation Gathering of Data Observation Planning Hypothesis Proposed Explanation Organizing Deduction Prediction Staffing and Directing Testing Experiment Controlling Strategic Implementation will involve the Principles of Management. This shall be subdivided into 5 categories as below. Principles of Management serve as statements of fundamental truths (Fayol, 1917). Each category below needs these principles of management to ensure strong foundation for a successful outcome. Planning A person should be able to plan of what a future would look like, not just predicting which means a person just forecasts what can happen in the future. This needs extensive gathering of data, and planning for things that may happen in the future. Hence, actual observations, contingencies and flexible processes are a must. Lastly, this needs clarified explanation of purpose, goals, specific plan of action and exact course of these actions. Organizing All gathered information, and evidences need to be organized, categorized and grouped according to goals. This needs to follow several sets of policies and rules to arrive at a specific goal. Creating these policies and rules put forth a strict course of action. This means that things are logically ordered in such a way that things have a correct order of placement. There should be division and specialization of work, differentiated functions and continuity. Organizing will help a person simplify things. It will enable a person to evaluate a plan as simple, measurable, attainable, realistic and time-bound. In doing so, there will be an optimum use of resources. Scarce resources will not be squandered and therefore will have a stronger impact for a successful outcome. Staffing Now that things are planned and organized, putting the right people to the right job is as important as choosing who the doctor will be for a specific special kind of disease. Otherwise, the purpose and goals will go nowhere. Staffing means the right person with the right sets of skills, knowledge and attitude. Skills will mean his experience or inexperience of a particular duty. This will lead to the determination of his strengths and weaknesses. Thereby, a person will know if training is needed or not. Whereas, knowledge is synonymous to what a person already knows and his educational background on the subject matter. Finally, attitude is commensurate as to how a person “looks” at the challenges, goals and purposes of the subject Directing Directing is leading the staff and plans to the right direction towards achieving the goals. It simply means that the original plan is followed, contingencies are in placed and flexible processes are in conjunction with the plans. There is both unity of command and unity of direction. Unity of command means there is one person who looks at the main goal and manages the others creatively. There should be one plan of action per/person or group to have a unity of direction. Controlling It is checking the errors and taking corrective action, if any. Therefore, doing so will arrive at a desired manner. Standards were set, rules were in place and polices were all understood. With these, the situation is controlled. 3. Using classical models of your choice, show how the competitive environment of an organization can be assessed, for a company of your choice, within this industry context, explain how the competitive strategy can be crafted and justified. There are several measures that can be derived in order to assess the company performance and financial standing and also to determine from henceforth where it shall be heading and whether it should need to adapt to new strategies or retain what they have been doing all along. Of course, the strategy should also be flexible enough in order to adopt and vary accordingly with the competition and what it presents to the company. There are also other factors that are stringent to the performance and competition of the company. Strategy also depends on the position of the company in relation to its competitors. Setting objectives should be realistic enough for the limitations and capabilities of the company, otherwise it would only prove to be a very delusionary ghost being chased by an organization inept of a real purpose and goal; in the end, all would only be wasted. The most common classical approach is the one being more widely taught and implemented, and with good reason. It simply asks questions of where the company is now, where it wants to be and how do we do it. The initial task of strategic management is to trickle down the objectives of the company by disseminating and compiling the company mission and vision statements. But in assessing competition, they should be more than capable in identifying how their own company positions with respect to the SWOT of the other companies. This can be achieved through benchmarking, especially if the company or product is just in the infancy stage of development. Benchmarking is a process which compares similar businesses and how they are doing, and also terms of improvement which the company can capitalize on (“Benchmarking”, 2008, p.2). This can then catapult to a smoother implementation of changes once the management sees significant opportunities for aggressive development. It is also an important insight to know how competitors carry out similar and like business operations. In such way, the company’s practices and capabilities are put into a positive scrutiny and evaluation. It can be said that it would be like applying the good traits and discarding the bad ones. Also, a look into the competition will enable a more intelligent and educated strategic management plan, and ironically, benchmarking could also be used for comparing strategies. But, a drawback of such method is that benchmarking will not work if one does not really know one’s company. Therefore, this will only serve as a complementary step after coming up with a good strategic plan. In the context of creating competitive advantages, according to Ehmke (2008, p. 1) the rationale is to create something which can be offered to customers that is of greater value. This can either be achieved through lower costs, or providing additional features or benefits, and even, justifiably, higher prices. One does not always have to be a market leader in order to prosper in business; instead, many are thriving as niche markets that cater on a very select but profitable segment of the market. What is important to note is the process of value creation. The same product, if packaged in a better scenario can be priced in a higher stake. For this paper, we shall use the product iPhone and apply the concept of creating a competitive advantage and competition assessment. In this modern world dominated by wars of smart phones that are now vastly influencing how people go about their daily lives, it is important to put into perspective how such companies like Apple respond to the threats and competition offered by other leading companies. iPhone, differentiates itself from its competitors by incorporating more sophisticated features into their product. It catapulted Apple into one of the biggest global cell phone sales generated, at some points even surpassing giants like Nokia and Samsung. But what really sets them apart, aside from whatever features they decide to conjure with their product, is that they are priced well above any other. They are taking advantage of the niche of the more elite group of individuals who are usually non-conformists and have the purchasing power to not thrift-buy on their product choices. This is their niche spot. They have traded off smaller quality but higher pricing margin than larger quantity and lower price. Also, they have their own operating system designed in monopoly with just their hardware. These are their competitive advantages and they created their value by addressing concerns for the people with higher purchasing power (Raise, 2011). Competition now comes from when the other cell phone companies manage to offer the same [or on several times, much better] features and services than what the iPhone is offering but only on a cheaper price. After a few years of dominating the sales with their high pricing, the other companies have now caught up with the technology and features that they so proudly and much better marketed. Samsung managed to overtake Apple on the top grossing cell phone company (Holwerd, 2011). And Nokia is also not behind in terms of technology and feature offerings. People have already woken up from the illusion that iPhone cell phones entail; that they are the top of the line, that it is the most elite phone that the price is worth the product. More and more elite phones have surfaced and even overshadowed the iPhone. Now we compare these brands and how they fair with their operations. Samsung has a very wide reach on terms of its operational bases and are more operationally efficient worldwide. Whereas Apple is more heavily focused on the developed countries and nations and the bigger market (whose majority of their population cannot afford or is intimidated by the price of iPhone) are being left out. While they have made adjustments to counter thins by bettering their logistics operations, Samsung still has advantage because of their larger reach and proximity to their market. What the iPhone can do now is to engage also in expansion of their operational bases to the more developing countries and try reaching out to the bigger market share. Maybe they could also consider re-evaluating their pricing strategies and offering more iPhone variants which will generate a larger quantity of sales. 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