Strategic Management and Analysis, Cost Leadership Strategy - Essay Example

Strategic Management and Analysis By Question one The microenvironment is too complex for analysis.Discuss the statements using appropriate models. In the recent business environment, completion is the major factor in transactions within markets. The international environment entails all of the factors that work at the transactional, across cultures and across the boundaries of states, which have an influence on the business of the organization. Before the commencement of the complexity in the microenvironment analysis, it was associated with political elements that were essentially with the business and industry. The clarification of the general environment into sectors after the period of world war sheds more light and discloses most of the enterprise into the business environment (Gerry, Richard, Duncan & Kevan, 2014). This assists various firms to get by its complexity thus competing with a variety of factors that influence the operation of business in a specific area. The marketing system of a company must operate within the framework of forces that are made up of the system’s environment. The core environmental forces are external variables, which are not easily manipulated by the board of directors of the organization. Adequate planning must be put in place in order to make sure that the business environment is suitable enough and ready to put the firm or rather organization to the excellent position in the market region. In case a business structure is not well conversant of the environment in which it operates, then it will definitely face challenges that arises from the increasing complexity of the environment within the parameter of operation. The simplest and best method to conduct the analysis of the complex environment in which a business operates is through the PEST analysis concept that simply analyses the elements of Political, Economic, Socio-cultural and Technological factors that causes impact to the organization. The external environment entails variables of opportunities and threats that the top management within the organization cannot control within the short-run. The concept of environmental analysis This concept involves monitoring and evaluation of information from external and internal sources. This is always done in order to know the position of the organization within its environment of operation. Through this, an organization will know whether it has a competitive advantage or it is on the position that is not favourable. Through this process, the organization will face challenges arising from the complexity of the environment of operation. Complexity in the analysis of the macro environment The concept of understanding the management strategy and effectiveness of an organization is not that easy since it involves evaluating how an organization is associated with challenges and opportunities. It needs the proper examination on the level of an organization by analysing whether the adopted strategy is effective and efficient. The complexity arises due to the rampant changes in the methods of operation within the management and the varying rules and regulations within various market structures. According to the model of SWOT analysis, complexity in the market arises on a daily basis. This is because the weaknesses and threats develop rapidly due to different management strategies in various market structures (Gerry, Richard, Duncan & Kevan, 2014). Question two a. Identification of the three advantages of utilizing the VRIN This is a very important concept in strategic management that promotes the production and provision of commodities and services that are of the required standards to the consumers. The abbreviation VRIN simply means Valuable, Rare, Inimitable and Non-substitutable. The advantages of this model are as follows Competitive advantage The business organization whose management applies this model will always be on the safer side in marketing its goods and services since the customers will be aggressive to acquire their products. This is due to the production and provision of goods and services that contain the attributes needed by the consumers. Other organizations may try to over-throw such organizations but will eventually run into losses due to excessive offers that are not appropriate (Gerry, Richard, Duncan & Kevan, 2014). Value The products and services from an organization whose strategic management adheres to the VRIN concept will have appropriate value. Consumers always buy value and not the commodity itself, therefore the higher the value of a product or service, the higher the demand thus customer loyalty. Other competitors may try other techniques such as lowering prices of their commodities but this will not work out as loyal consumer concentrate on the attributes rather than the price. Non-substitutable Competition is always stiff in products and services that have substitution. An organization that utilizes the VRIN concept will always provide goods and services to its consumers that have no substitutes. This will make customers to stick to these organizations since they will have no otherwise but to adhere to the organization for their satisfaction and sustainability. The VRIN concept is always common in monopoly structure where prices of the commodities and services are controlled by the organization and this can lead to optimum profit maximization. It is clear that an organization that applies this concept will automatically maximize returns and it will prevent other competitors from copying their products and services. b. Evaluation of how sustainable capability and competencies can enable competitive advantage. The key to creating a sustainable competitive advantage is in constantly monitoring and influencing the value chain. An organization that is not only better in performance than its competitors are but also creates a suitable value for the customer, builds a competitive advantage. It is clear that all organization have certain skills and capabilities that enable them to compete. The basic capabilities are those that are considered as standard and do not attain a competitive advantage. The concept of core competencies is based on the estimated effort of the company to maximize the value added products and services and the related specialization and division of labour in the chain of value creation. The organization will automatically focus on the area in which it achieves uniqueness in quality and performance thus holding resources for the creation of sustainable competitive advantage (Gerry, Richard, Duncan & Kevan, 2014). It is important to note that at this level there is a pride of owning a competitive advantage thus not transferring it other an external partner because this may lead to various inconveniences. It is therefore clear that a competitive advantage in an organization is very important because it will enable the organization to attain its goals and objectives at the required time span. An organization will also expand faster in order to cater for the great demand from the consumers. Question three Evaluation of the contribution that the five forces framework makes when establishing the bases of competitive advantage The Porter’s Five Forces analysis This concept provides a model that enables organizations to analyse their market of operation in ways that enables them to take the activities of their competitors into account. This is a crucial step in the strategic management and the managers should therefore understand both the internal and external environments. It creates an idea for the management to identify their competitors in the market structure in terms of market needs and opportunities. The Porters Five Forces analysis technique has become common with business and strategy analysts. There is also affirmation in the business sector that it is credible and more practical alternative to the SWOT analysis model. This is because it analyses and evaluates the forces that competitors can exert on your market territory and how this can affect your organization plus its long-term success. Recently, in highly competitive markets, any organization that operates successfully will have a perfect level of intelligence on its competitors. The greatest threat in organizations is therefore likely to come from emerging competitors or modern technologies (Gerry, Richard, Duncan & Kevan, 2014). The competitive rivalry One of the major concepts to success for an organization is the ability to understand effectively and efficiently the actions and the marketing strategies for their competitors. The intensity to which rivalry exists among the competitors is in between the industries and the market sectors within the premises. The number of competitors should not be a threat since the main factor here is laying down appropriate management strategies to throw them out of the competition sector. The business organization whose management applies this model will always be on the safer side in marketing its goods and services since the customers will be aggressive to acquire their products. This is due to the production and provision of goods and services that contain the attributes needed by the consumers. Other organizations may try to over-throw such organizations but will eventually run into losses due to excessive offers that are not appropriate. A competitive advantage will make the organization to operate at levels that the rivals will never reach. There are various strategies that an organization should adopt when protecting their market share in situations of intense competition. Some of the strategies include altering the pricing policies, improving the services levels, seeking methods to use the channel distribution more creatively and improving the product differentiation. According to the Porters Five Forces analysis, an organization should also concentrate on the element of value addition in the value chain analysis. This is because loyal customers do not concentrate on the price of a commodity or service bit rather the attributes that will satisfy their needs fully (Gerry, Richard, Duncan & Kevan, 2014). The competitive advantage will therefore be maintained by an organization whose strategic management do not concentrate on its interest only but also the interests of the customers since the customers are the forces that drive the wheel of competitive advantage. Question four The meaning of Michaels Porter’s comment ‘Stuck in the middle’ The idea of the ‘stuck in the middle’ concept arises when Michael Porter was evaluating the Generic Strategies. The Porter’s generic strategies analyse how an organization evaluates a competitive advantage across it area of operation in the market. Three generic strategies include the lower cost, the differentiated or focus. An organization is therefore advised to select to practice one of the two types of the competitive advantage either through the lower costs than its competitors or by highly differentiating its products by adding their value in order to demand for higher prices. There is also a point of selection of the organization either to choose operating by offering its products and services to specific market segments or to offer its products and services to many market segments (Gerry, Richard, Duncan & Kevan, 2014). The Porters generic strategy leads to the evaluation of the following concepts The cost leadership strategy This refers the organization that offers lowest prices in the market in order to attain highest levels of sales in the competitive market. The lowering of prices will be appropriate only when the organization is sure that it will not run into losses but achieve the required revenue after the sale of large quantity of products. This strategy focuses on attracting customers due to their affordable pricing techniques. The differentiation strategy This element is brought about by the fact that an organization adds more value to its products and it makes the products and services to look unique from the others. The differentiation factor will lead to higher prices since the products will have the appropriate attributes that the consumers need. Consumer loyalty is based on the satisfaction and value they get from the products and services thus they buy the value and not the commodity or service. The focus strategy The focus in this case is the particular buyer group, geographical market and the product market. The low cost and differentiation concepts are always aimed at achieving their objectives in the industry while the focus strategy aims at serving a particular target such as location or customer in an effective and efficient manner. Market segmentation is always a fundamental concept in the focus strategy as it indicates where the level of efforts should be increased in order to serve the interests of the consumers. Stuck in the middle The failure to develop a strategy in one of the three strategies mentioned above makes an organization to be in the state of ‘stuck in the middle’. This indicates that the organization lacks ample market share, an overhead control to be a cost leader and lack of differentiation necessary to create margins of market segmentation (Gerry, Richard, Duncan & Kevan, 2014). Depending on the firm’s abilities and resources, a firm that is stuck in the middle must move towards the low cost, focus or differentiation in order to maintain a competitive advantage. Question five a. Where does the stakeholder mapping fit in the strategic management process Stakeholder mapping The stakeholder mapping refers to the combined process of research and discussion that moves from multiple perspectives to determine a major directory of stakeholders across the whole of stakeholders scale. The stakeholder mapping is therefore an important concept that fits in the process of strategic management. This is because it entails various elements and objectives that will take an organization several steps ahead in the process of achieving the principle of competitive advantage. In the process of strategic management, the stakeholder mapping fits in the process of decision making whereby an organization analyses the internal and external issues through the SWOT analysis in relation to Porters Forces framework. The stakeholder mapping will help in outlining the effective ways of utilizing the strengths and opportunities of a firm and it will provide the top management with the appropriate knowledge to deal with the weaknesses and the threats from the external sources (Gerry, Richard, Duncan & Kevan, 2014). The stakeholder mapping will therefore create an environment that is conducive for the organization to conduct its activities. This will easily make the organization to maximize its profits, as that is the major purpose of an enterprise. This is because it entails various elements and objectives that will take an organization several steps ahead in the process of achieving the principle of competitive advantage. b. Is it a managers task to limit the role of stakeholders and if so how can they do it The managers play various fundamental roles in an organization. The major ones are planning, organizing, directing, coordinating and controlling. All of these concepts will be a success only if the top management considers the element of strategic management. Through appropriate strategic management, the managers will successfully limit the role of stakeholders in an organization. This process entails many procedures in order to make it successful according to the effective management techniques. The managers will limit the stakeholder’s tasks by simply adhering to the appropriate rules and regulations that govern the smooth operation of an organization. The managers will therefore create a good picture to the organization that there will be no need for amendments. Some of the activities that limit the stakeholder’s tasks are paying the taxes as required by the government, paying the employees fairly in accordance to their contribution in the organization, providing recreational services to the community and offering goods and services of appropriate standards to the consumers (Gerry, Richard, Duncan & Kevan, 2014). These actions will create barriers between the organization and the stakeholders as the managers will ensure that the organization plays its sole role to benefit everyone accordingly. Question six Specify and critically evaluate the major factors, which affect how the managers should approach the management of strategic change Although the formulation of a consistent strategy is a challenging activity for any management team to make the strategy work and implementation continuously in the organization is even more difficult. Therefore, various factors affect the process by which strategic plans are converted into organizational factors. As opposed to strategic formulation, the strategic planning is always viewed as an art rather than a science. The managers are therefore advised critically evaluate the approaches in the management of strategic change. The various factors that affect how the managers should approach the management of strategic change include communication, the environment and the knowledge plus experience in the field of management. The Porters Five Forces Framework plays a greater role in this concept since it contains fundamental elements of the environment the top management should be well conversant with in order to maintain a competitive advantage in the market. This provides a lot of knowledge that is needed in the management of strategic change (Gerry, Richard, Duncan & Kevan, 2014). In the recent business environment, completion is the major factor in transactions within markets. The international environment entails all of the factors that work at the transactional, across cultures and across the boundaries of states, which have an influence on the business of the organization. Before the commencement of the complexity in the microenvironment analysis, it was associated with political elements that were essentially with the business and industry. The cost leadership strategy - This refers the organization that offers lowest prices in the market in order to attain highest levels of sales in the competitive market. The lowering of prices will be appropriate only when the organization is sure that it will not run into losses but achieve the required revenue after the sale of large quantity of products. This strategy focuses on attracting customers due to their affordable pricing techniques. The focus strategy - The focus in this case is the particular buyer group, geographical market and the product market. The low cost and differentiation concepts are always aimed at achieving their objectives in the industry while the focus strategy aims at serving a particular target such as location or customer in an effective and efficient manner. Market segmentation is always a fundamental concept in the focus strategy as it indicates where the level of efforts should be increased in order to serve the interests of the consumers. The differentiation strategy - This element is brought about by the fact that an organization adds more value to its products and it makes the products and services to look unique from the others. The differentiation factor will lead to higher prices since the products will have the appropriate attributes that the consumers need. Consumer loyalty is based on the satisfaction and value they get from the products and services thus they buy the value and not the commodity or service. The above factors will affect how managers should approach the management strategic change effectively and efficiently. Question seven Corporate culture and its importance There are various definitions of the concept of corporate culture. One of the most detailed definitions is the common beliefs, values and behaviours of an organization. It is always a symbolic factor for unity and stability of a firm thus difficult to change. The corporate culture enhances teamwork in an organization since everyone within the organization will have a common manner of performing duties. The importance of corporate culture The corporate culture plays a greater role in the strategic management process. These roles make it to be an important pillar in the organization. The importance of the corporate culture is associated with the following aspects: There is creation of an environment that is conducive for the employees and this will facilitate the faster achievement of the goals and objectives of the organization. This is because each employee will be working on a common goal with the aim of taking the organization to the next level. The corporate culture will lead to a competitive advantage since the firm will be producing products and services containing the attributes that will satisfy the customer needs. This creates customer loyalty as most of the consumers stick to the value added to a commodity or service. The products will be highly differentiated, as the employees will be focussing on their areas of specialization that will in turn lead to production of quality products. An employee is always corporative once he or she is taken in the sector that he or she has adequate knowledge in the line of production. Advantages of an organization having strong culture An organization with a strong culture will always benefit from the fact that each employee will strive to produce to maximum levels as that will be the focus of the organization (Gerry, Richard, Duncan & Kevan, 2014). This is because the employees will have one mentality of making the organization produce greater output in order to increase the revenue. The business organization whose management applies this model will always be on the safer side in marketing its goods and services since the customers will be aggressive to acquire their products. This is due to the production and provision of goods and services that contain the attributes needed by the consumers. Other organizations may try to over-throw such organizations but will eventually run into losses due to excessive offers that are not appropriate. Competition is always stiff in products and services that have substitution. An organization that utilizes the corporate concept will always provide goods and services to its consumers that have no substitutes. This will make customers to stick to these organizations since they will have no otherwise but to adhere to the organization for their satisfaction and sustainability. Disadvantages of an organization having a strong culture There are beliefs that may lead an organization into losses. This is because changing the mentality of the top management may be impossible. This therefore shows that an organization with a strong culture will rarely learn new techniques of maximizing their production and methods of improving the quality of their products and services. The organization with a strong culture will always focus on its self-interests and ignore the conditions for the communities around them and this will create rivalry, as the organization will not be providing even necessary recreational services to the community. The concept of strong corporate culture facilitates the issues such as racism and tribalism. This is because only a specific group of individuals will be well conversant with some of the rules and regulations in the organization (Gerry, Richard, Duncan & Kevan, 2014). Reference Gerry Johnson, Richard Whittington, Duncan Angwin, Kevan Scholes (2014) Exploring strategy: text & cases. Read More