Strategic Marketing: Objective Formulation and Implementation - Term Paper Example

? Business Policy Contents Strategic Management 4 From Competitive Advantage to Corporate Strategy 7 Strategic Mapping 8 Comparison of five generic competitive advantages and the link between them 9 Strategies 11 Diversification 12 Comparing processes 13 International and global competition strategies 14 Internet and e-commerce-driven competition and business models 15 Identifying the key steps in assessing and building internal organizational strengths and capabilities 16 References 16 Strategic Management Strategic Management is a process of making strategic decision. Every organization has to make some strategic decision from time to time this includes decision regarding mergers, acquisitions, launching a new product, penetrating into a new market etc. All these decision are taken following the strategic management process. Strategic management is a complex process which has the following steps: Establishing the strategic intent: Strategic intents include defining the ‘mission, vision and the objective’ of the organization. Vision is that broad spectrum where the organization wants to go. It signifies what the organization wants to achieve. It is the long term goal which the organization wants to achieve. It is the purpose of the business. The vision of the company should be very clear so that the company could identify where it is heading to. Good visions can inspire and exhilarate the employees as well as the management. Mission statement links the organization with the society. It states why the company exists. Mission statements comprises of a set of activities which are related not only with the individual but also with the global and national needs and priorities. Mission statements should be short but clear, feasible and distinctive and should motivate the employees as well as the customers. They must feel that working in that organization is worthwhile. The mission statement signifies how the company can achieve the objectives. Objectives can be defined as the set of targets which the company has to achieve in a given period of time. These are the short term goals of the organization. Objectives are specific compared to goals which are more general in nature. The organization’s vision is achieved through its objectives. It enables the management to concentrate on those areas where strategic decisions should be taken. Objectives should be clear and precise, time bound, measurable, achievable, challenging and should be made keeping in view the available recourses. All the objectives must correlate with each other. Strategy formulation: Once the vision, mission and the objective of the organization is determined the next step is to formulate the strategy. Strategy formulation involves deciding on the strategies which are to be implemented to achieve the organizational objectives. Formulation of strategy starts with scanning the environment. Environment includes both internal as well as the external environment affecting the organization. These environmental factors are then analyzed through various techniques; these are SWOT analysis, PEST analysis, Porter’s five force model etc. SWOT analysis enables the company to analyze its strength and weakness and also the opportunities it have and the threats it is facing. It is very important tool in making strategic decisions. PEST analyses the various political, economic, social and technological factors affecting the organization. After this the organization decides upon the corporate level strategies that is whether they have to integrate its activities or diversify. Decisions are taken on whether there will be vertical diversification that is a new product should be made or not, horizontal diversification that is whether the company should make a new brand or merge with someone to make that product or they shall outsource the work to some organization. In case the company is incurring loss then the company has to decide on the options of retrenchment, selling a part of the company that is divesture or whether they should liquidate the company. After considering the various options the company chooses the best option as per their mission and objective (Thenmozhi, 2007). Strategy implementation: This part is the most important part of the whole process of strategic management because unless and until the strategies are properly implemented the company cannot achieve the objective. The implementation of the strategies is done in six steps they. The first step is forming the organizational framework. This step is also known project implementation. The second step is to prepare the legal frame work need to operate in that country so that the objectives can be achieved without any obstruction. After the organizational and legal frameworks are set the recourses are allocated for various operations. The fourth step of implementation is designing or redesigning the organizational structure which is most suitable for the strategy because some organization needs matrix form of organizational structure other may need functional line structure. The fifth step deals with the various styles of leadership which are required successfully implementing the strategy. This may include the corporate social responsibility (CSR), the organizational structure, value, power and politics. The sixth and final step deals with the operational aspect of the organization. This will include the production capacity, process used in production etc (Kazmi, 2008, p.22). Evaluation and control: This is the final step in there process of strategic management. Once the strategies are implemented the company has to evaluate the performance of the company from time to time. It enables the company to decide whether the strategies were properly implemented and whether they are heading towards the accomplishment of their objectives. The process of evaluation comprises of five basic steps. The first one is to determine the area which has to be appraised and measured. After the areas are determined the next step is establishing the standards. These standards act as the yardstick for measuring the performance. After the standards are established the actual performance is measured. This is done with the help of some quantitative and qualitative techniques such as calculating the return on equity, return on investment, profit margin, earning per share, using balance score card etc. The fourth step involves comparing the actual performance with the planned performance. If the actual performance deviates from the planned performance then in the last step actions are taken to control the deviations (HR Folks International, 2003). From Competitive Advantage to Corporate Strategy All types of strategies can be classified into three broad categories Corporate (companywide) strategy: The corporate strategy involves making decisions for the whole organization. These strategies are undertaken mainly to decide the business in which the company should operate. These types of strategies are under taken to decide which type of structure the organization should adopt and in which way the activities of the company should be managed. The decisions regarding acquisition, takeovers, selling off a part of the company of liquidating that closing up the company are taken as corporate strategy. Porter’s five force model helps the company to analyze in which sector or business the company should operate (Thompson, Martin and Thompson, 2010, p.28). Business unit (competitive) strategy- Many companies produces different type of products. These products have different markets and different methods of production. As the products are diverse in nature they are treated as separate business units or strategic business units who develop, manufacture and market their products as a separate entity. These units try to take advantage over its competitors which can be done by offering products at low price or providing better service. These types of strategies are known as competitive strategy (Thompson, Martin and Thompson, 2010, p.27). Plan for a diversified company – A company which is in a declining phase or incurring losses often goes for diversification. Diversification can be done be done by switching to a new product line and to a new market. To diversify the company needs new techniques and technology, new shills etc leads to major changes in organizational structure. It is the last alternative which the company undertakes for future growth (Ansoff, n.d). Strategic Mapping Strategy maps cam be defined as diagrammatical representation of strategies which is used by the management to accomplish its mission and objective. Origin of strategy maps: The origin of strategy maps can be found in the preparation of the balance scorecard. The balance score card is a tool which helps th4e managers to identify the deviations from the desired plan so that the managers can take appropriate actions and the strategy is properly implemented. During this process the manager found it difficult to locate the activities which are to be monitored. Thus a strategy map was developed to help the manager to identify the activities which are to be monitored. Perspective: Perspectives are the views or the sector or sections under which the activities are classified as per the strategy. In general every strategy map is prepared under the sectors or sections they are finance, marketing, process, customer and learning. Creation of the strategy map: The strategy maps are created keeping in view the hierarchical relationships of the perspective. A successful strategy map can be constructed after considering the extent of the interdependence of each perspective. The objective of one perspective may influence the objective of the other. Hence their hierarchical relationship should be studied. Environmental scanning: It is a technique of analysis the internal and external environment of the organization. Internal organization comprises thee customer, creditors, vendors, shareholders, management, employees etc. Value chain technique is used to analyze the internal environment of the organization. The external environment is analyzed through the technique of PEST analysis where the external factors such as the political, economic, social and technological factors which affect the business are analyzed. SWOT Analysis: Every company before making any strategic decision should analyze its strength and weaknesses so that correct decision can be made. SWOT analysis is a technique which is used to identify and analyze the company’s strength, weakness, opportunity and threats. As per the finding the company decides upon its strategic move. Comparison of five generic competitive advantages and the link between them To take competitive advantage on competitors the company often practices a number of strategies. The main strategies are mentioned below:- Overall low cost strategy: In a market where the purchasing power of the target customers is low, there to gain a competitive advantage companies. Using the low cost strategy the companies try to manufacture and distribute goods at the lowest possible cost. Overall low cost strategy does not signify making cheap goods but making goods available to the consumers at lesser cost compared to others. For practicing the overall low cost strategy the companies should make assure that the target market has consumers whose purchasing power is low, any change in budget is properly assessed and there is entire organizational participation in controlling cost (Orcullo, 2007, p.226). Broad differentiation strategy: Broad differentiation is a strategy which is used to gain competitive advantage over competitors by providing customers goods or services which are different from the competitors in terms of providing benefits to the customers. This can be done by adding various features which are not in the competitor’s product. To practice broad based differentiation strategy the company should understand the need of the customers including the features which could attract them and identify and analyze the main competitors. The differentiation should be made in such a way that the competitors cannot follow that strategy. Focused low cost strategy: Focused low cost strategy is just like overall low cost strategy the only difference is that this strategy is used to target a niche group which can be of customers or a product line or a country, city or state. This type of strategy focuses not on the entire market but a particular area of the market. Focused differentiation strategy: this strategy aims at differentiating products offered to a particular group of customers of a particular product line. Unlike broad differentiation strategy the focused differentiation strategy aims at a niche group (Koontz, Heinz, 2008, p.112). Best cost provider strategy: This strategy is a combination of low cost strategy and differentiation strategy. As per this strategy the customers are offered more value added products at a lesser cost compared to the other competitors. This strategy helps the company to attract the customers not only through differentiating the product in a better way but also differentiating it at a low cost (Thompson, et al, p.131). Offensive and defensive strategy: Offensive strategy is used to achieve a definite objective like capturing market share and customers from the competitors. It enables the company to expand and reduce competition. On the other hand defensive strategy is used to protect the company from its competitors who want to achieve the formers market share, customer etc. Defensive strategy can be practiced by eliminating the weakness of the company, identifying the potential competitor and maintaining strong hold on its important markets. It helps the company to identify its weakness. Offensive strategy can be practiced by identifying the weakness of the target company as well as its strength and achieving the objective as soon as possible. This type of strategy made the company to concentrate only on its target. Strategies For competing in emerging industries: When the company enters into an emerging industry they follow a number of strategies to compete and get a hold in the industry. For this will try to make the customer aware of their products. They can either price the product high and spend high amount of money in promoting it or keep the price high and spend less on promotion. The other way of competing is to keep the price low promote more or promote more keeping the price less. For volatile industry: in the volatile industry many strategies are followed by the companies to compete in the given situation. They aim at improving the quality of the product; new features are added to the product to get a competitive advantage in the volatile market situation; the companies enter into new segment of the markets; creating brand image. For mature industry: To compete in the mature industry the main aim of the companies is to identify those products which are making profit and also those product which are not adding any value to the comp[any so that they can be eliminated. This is mainly done by entering into the market where their products are used if not their brand, modifying the product etc. For declining industry: In the declining stage the strategy which is followed mainly is diversification. The company can be in a declining stage for many reasons such as change in choice and taste of consumers, technological changes etc. in this type of situation the company may leave from the present market and entre intro a market where there is a need of their products if not their brand or may scrap its present product line which is not generating profit and start a new product line (Kotler, et al, 2009, p.300). Diversification As mentioned earlier diversification is a corporate level strategy which is mainly used to increase the growth of the organization. There are three type of diversification, they are mentioned below: Related diversification: related diversification can be defined as a strategy of making new products targeting new markets using its existing capabilities and resources. One typical example of this diversification is Hindustan Uniliver who had diversified itself into a number of products but all of them belong to the fast moving consumer goods category which uses same wholesalers and retailers for its distribution (Johnson, Scholes & Whittington, 2009, p.285). Unrelated Diversification: Unrelated diversification is opposite to related diversification. In related diversification, diversification is made using the present resources but in unrelated diversification companies has to acquire new resources and capabilities and skills to launch a new product line or to enter in a new market due to this the companies has to bear a huge amount of cost in unrelated diversification compared to related diversification (Johnson, Scholes & Whittington, 2009, p.288). Efficient diversification: Efficient diversification is based on the theory of portfolio selection, given by H M Markowitz. The corporate manager uses this theory to select the product or the market which will be most profitable to therm. This model enables the manager to make the selection while considering both return and risk associated with the diversification (Cardozo, 1985, p.85). Efficient diversification is a planned diversification which is done after considering the volatility and return from the new product line on market. Assess the opportunity of a good return: Diversification is a dynamic and strategic decision. The company has to analyze all the possible return as well as the risk associated with the diversification. Markowitz model is generally used to assess the possibility of good return while considering the risk associated with it. Challenges and benefits: The main challenge of diversification is to identify the right product line and the right market in which the company will diversify them. Any error in this regard will result in huge loses. The main advantage of diversification is that it helps the company to regain its growth. Comparing processes Business unit: A business unit is a department or section of the company which does a specified business activity. To compare the processes of two or more business units benchmarking system is followed. Resource fit: The process can be compared on the basis the resources available to the company which can be used for strategic actions. Mergers and acquisition are done on analyzing the available resources. Strategic fit: Strategic fit process signifies the right combination of opportunities with skills and resources available in the company. This is mainly done by employing the right strategy. The expansion should be made in that part where the company has abundance of opportunities and has the right skill to tap them. International and global competition strategies Globalization has increased the competition in business. Now the companies not only face competition in its own country but also from rest of the world. Hence the companies have to follow some strategies in order to compete in the global arena. The main international and global competition strategies are mentioned below:- Export: To take advantage of the oversea market companies use the export strategy. If the company’s product is in a declining stage in its home country but is exportable then the export strategy is used. Exportable product means a product which is unique and cannot be imitated by the foreign companies. If the company has such type of product it export if after considering the cost involved, the return expected, company’s objective etc (Credit research foundation, 2002). Licensing: It can be defined as permitting a company to use one’s own intellectual properties such as trade mark, design, technology, name etc. Through licensing a company can operate into another market without incurring any extra cost. Franchising: It is a type of corporate strategy which is used for expanding business. The franchiser or the owner permits the franchisee or the other firm to use its trademark or marketing channels and technique on payment of a fee or royalty from the franchisee. Comparison: Exporting deals with the selling of the goods to another foreign company or foreign retailer. This is done exclusively to tap the foreign markets. While both licensing and franchising can be done in the domestic market. Licensing is used to enter into a new market without incurring any extra cost. Like Calvin Klein Inc permits its designer’s name to be used by other manufacturer of undergarments. While in franchising the firm can enter into a new product line by using the trademark and marketing techniques of the established company. Internet and e-commerce-driven competition and business models With the rise in information technology and internet a new sector of business has evolved which operates electronically. This is known as electronic business. One of the main models of e business is e commerce. E commerce means doing commercial activities like buying and selling things using electronic medium. The main types of e commerce are business to business, business to customer, business to government, customer to customer etc. through e commerce the companies can now sell, promote and distribute the products at the same time. This has increased the competition to higher level. The main activities performed in e commerce are electronic fund transfer, inventory management etc. Identifying the key steps in assessing and building internal organizational strengths and capabilities The internal organization’s strengths and capabilities can only be built up if they can identify their weaknesses and the strength. For this the company mainly uses SWOT analysis. Once the strength and the weakness the organization rectifies them and this in turn builds the organization’s strength and weakness. 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