Introduction to Strategic Management IP - Assignment Example

Strategic management Q Smith & White (S&W) Corporation has been able to have a dominant market presence in almost all its operational segments in the US with little or no parallel. Despite this dominant status the unfolding scenario in the strategic competitive environment has posed a series of challenges to it right now. Its internal operational environment apart, the external environment has increasingly been becoming difficult due to both domestic and foreign competition. Thus the following strategic planning perspectives might be employed with an intense focus of attention on organization’s strategic outcomes (Lake, 2006). S&W markets a wide range of medium quality professional and consumer tools in the US. Its unified marketing strategy across a diverse number of product market segments has placed it at a strategically advantageous position vis-à-vis its rivals though this position is right now being threatened by other competitors such as Makatume whose strategic advantage lies in being able to cut down cost coupled with its dominance in the cordless market. S&W’s strengths and weaknesses are reflected in its rivals’ strengths and weaknesses. This is a truism in strategic marketing environments where competitors are locked in continuous battles for survival rather than supremacy. The strategic principled stance that the SWOT analysis would enable S&W to take now can be illustrated as follows. Its current strengths such as the unified marketing strategy and the market dominance in almost all the segments it operates can be attributed to its conglomerate level synergies. Indeed scale economies especially in strategic areas like marketing and finance have an inevitably significant impact on organizational outcomes. Thirdly it’s the company’s ability to effectively camouflage its weaknesses by adopting an aggressive strategic posture in an otherwise indeterminate market place. The fourth strength factor is its sustained advertising campaign has enabled it to establish brand equity at a higher level. Finally its fifth factor of strength is associated with retailers’ excessive dependence on its products. As for weaknesses the first factor is associated with its high costs incurred in running and maintaining old manufacturing plants. Secondly there is confusion in the markets between its professional and consumer tools. Thirdly distributors have negative feelings about its perceived abuse of market dominance status. Fourthly it doesn’t have it doesn’t have bigger market share in the cordless segment. Finally its manufacturing plants are located in high labor cost urban areas. These weaknesses have to be overcome with specific focus of attention on market outcomes. In the first instance cost overruns have a negative impact on net positive cash flows. However such positive cash flows don’t occur unless these cost runs are gradually reversed by replacing the old capital stock with new ones. Market confusion cannot be put to an end unless some rebranding of products is undertaken. Market dominance related suspicion on the part of distributors can be overcome through by effectively designing compensation packages for stock accumulation (Simonson and Schmitt, 1997). Cordless market segment is determined by high-end technology that requires persistent investment in new processes and techniques. Finally relocation of its manufacturing plants might help in reducing costs. S&W’s opportunities lie in the ability of the company to make use of its rivals’ weaknesses and project the market driven demand-pull factor to achieve strategic marketing synergies – relatively higher prices that its rivals cannot achieve, advanced product placement, co-opted advertising, high profile shelf space and cross promotion. Threats are associated with rivals’ ability to capture its market share such as lower exchange rates. For instance china might be able to export more of its low-priced products. Its sheer size might be another threat to its own cost cutting exercises. Associated with its inability to improve quality there is a threat to its existing product line being almost taken for granted by consumers. Finally advertising is a response to existing threats and not an anticipatory strategic initiative to promote sales. Q. 2. On the other hand Makatume markets just a range of high quality professional tools that consumers have identified with the company name. With very dominant market position in the Japanese market, it’s able to achieve a qualitative paradigm shift in the highly competitive US market for professional tools. Coupled with favorable exchange rates and its dominance in the cordless market segment in the US with 70% of the market share , the company has been able to achieve a strategically important place though yet again current market-based challenges pose a threat to its future status. Its first strength is the dominant position in the cordless market segment. Secondly its parent company in Japan has an overall dominant position there with almost 50% of the market share. Its current position as the second biggest market share holder has helped it to push its brand to the fore in the market. Next it’s able to achieve good cost advantages. Finally current exchange rates are favorable for the company. This admixture of strengths is both causally and consequentially deterministic of the organizational outcomes. For instance 70% market share in the cordless segment is no mean feat in very intensely competitive markets. Strategic marketing outcomes can still be made better through a sustained marketing campaign supported basically by advertising to promote brand loyalty. Its weaknesses can be connected with its exclusive reliance on favorable exchange rates. Secondly its current operations basically determined by lower voltages can be disastrous if rivals are able to set the standard in the higher voltage battery market so that Makatume would follow the lead rather than setting the standard. Next Makatume is inevitably caught up in some market segments that are increasingly being targeted by Chinese imports. Next Makatume has very little ability to decide on prices because S&W is the price leader. Finally its own market share in the cordless segment can only be protected with a well sustained marketing campaign. Thus what has been captured need s to be sustained at a cost. It’s a weakness. IT has of course a number of opportunities that can be regarded as blessings in disguise. For example its parent company in Japan has enabled the US operations to be cost effective so far. This cost advantage can be converted into a further opportunity by aggressively pursuing a policy of price setting or rather cutting. It also has the best opportunity of creating market niches for high voltage batteries. Fourthly its industrial relations as based on revolutionary Japanese concepts could propel it into a position of leadership, market or/and price. Finally very few companies have the capacity and resource-determined VRIO (value, rarity, inimitability and organization) environment to totally depend on its uncopiable VRIO applications. Makatume has this ability to project a resource-based strategic advantage to the outside market (Saloner, Shepard and Podolny, 2006). Threats scenario for both S&W and Makatume can be immediately guessed by looking at the kind of smaller competitor behavior in the US market. Makatume’s position as the second best company is endangered by the intensity of rivalry taking shape in the smaller rivals’ camp right now. Even a 5% market share can be a stepping stone to a good market share in the future. Secondly Makatume is faced with another impending danger of being caught up with in its cost advantage by S&W soon. This is more vivid with respect to smaller competitors. Thirdly Makatume is faced with the threat of S&W’s ability to get into a price-cutting war. If such a pricing strategy is adopted it can be real threat to the very survival of the company. However this is subject to anti-trust laws in force. Fourthly the company is faced with the threat of smaller rivals ganging up. Finally its own resource base needs to be protected from being imitated. Just now its Japanese business culture stands out as a strength. But how long is a problem. The company needs to adopt a set of strategic initiatives that would enable it to overcome these threats and convert some of the weaknesses into strengths. In the first instance strategic planning perspectives need to be focused on the company’s VRIO environment so that there will be very little freedom for rivals to act in order to capture its own market share. This strategic initiative needs resource-based view of the firm to be more centered on organizational structures. Q. 3. Higher voltage batteries have a considerable demand in the US market. However rivals have not yet thought of setting a standard for them. Manufacturing processes and techniques need to be standardized so that the rest of the market including marketing networks and benchmarking would follow. It’s the latter that this company should concentrate on right now. In other words there is much more to be gained by launching straight away into the high voltage market so that this company can set both the standard and benchmark. Market leader that sets the standard and the benchmark for quality would not only be able to have a head start but also would be able to quality standards in the long run. This kind of market depends on quality improvement stratgegy more than anything else. Finally Makatume Company needs to prove the cost-related advantages of high voltages to the customer rather than harp back on the orthodox advertising technique of promoting sales by making comparisons that have little barging value for the customer. Dynamic strategic positioning in an early lead could have a very significant impact on the organizational outcomes such as market share and revenue. Thus launching the production of high voltages would definitely give the company a benchmarking head start over rivals. REFERENCES 1. Lake, N. (2006). The Strategic Planning Workbook with CDROM (Business Enterp0rise): 2nd Edition, Philadelphia: Kogan Page. 2. Saloner, G, Shepard, A and Podolny, J. (2006). Strategic Management: New York: John Wiley & Sons. 3. Simonson, A and Schmitt, Bernd, H. (1997). Marketing Aesthetics: The Strategic Management Brands, Identity and Image: New York: The Free Press. Read More