Business Management - Essay Example

Running Head: Business Management Business Management [Institute’s Business Management Introduction Once two company presidents, who contending in the same field made their mind up to talk about a possible merger of their companies. Surprisingly, they choose to go to a camping trip to have this discussion. As they talked about the merger, they hiked deep into the woods. They were astonished to see a huge bear in front them that rose up on its hind legs and snarled like a monster. The first president reacted quickly, took off his knapsack, and took out a pair of jogging shoes from out. The second president while watching this said, “Hey, you can not outrun that bear”. The first president responded by saying that, “Maybe I can not outrun the bear but I am very much sure that I can outrun you!” (Saloner, Shepard & Podolny, pp. 16-23, 2005). This story provides a fair bit of idea about the purpose of organizational strategy, which is to provide organizations with a competitive advantage. This paper is an attempt to evaluate the different models of strategic management and the affect of culture on the strategy of organizations. Specifically, this model would look at the same by applying these models of Tesco PLC, the largest retailer in UK and the second largest in the world if measured in terms of profits. Discussion By definition, “strategic management refers to the managerial process of forming a strategic vision, setting objectives, crafting a strategy, implementing and executing the strategy and then over time initiating whatever corrective adjustments in the vision, objectives, strategy, and execution are deemed appropriate” (David, pp. 56-58, 2007). Quite clearly, strategic management consists of five major tasks. In addition, from the perspective of strategic lenses, one can evaluate strategy as experience, ideas, discourse, and design. Firstly, it asks the organization to develop a strategic vision and business mission of where the organization is headed (ideas). This also includes the core purpose, core values, and mission or vision statement of the organization as well. In this case, Tesco defines its core value as “to create value for customers to earn their lifetime loyalty” (Johnson, Scholes & Whittington, pp. 45-49, 2008). Secondly, an organization goes off by setting objectives for achieving these strategic vision and mission (ideas and experience). These objectives can be both financial and strategic. For example, Tesco has a goal to increase its number of stores to 7000 by the end of 2020, have at least 2000 products in their product lines, strengthen, and establish their non-food business. Tesco also aims to achieve a 15 percent growth in sales by the end of year 2015 (Pearce & Robinson, pp. 11, 2010). Thirdly, the third process includes designing or preparing a strategy for achieving the vision and mission of the business (design). In the case of Tesco, it is following an expansionist strategy, expansion in terms of both new businesses and new geographical segments in Asia, United States, and Central Europe. Tesco has a strong desire to strengthen its core business in UK and at the same time expand into non-food businesses of telecom, finance and others (Lynch, pp. 34-38, 2006). Fourthly, it is about implementing and executing the strategy (experience). It involves many managerial actions. Some of them include building or rebuilding the organization that is capable to pursue the strategy successfully, establishing such policies and operating procedures that support the strategy, motivating people to pursue their goals and target, which are in line with the company strategy. In addition, it includes creating a performance appraisal and salary and compensation system that is supportive of company’s strategy and others (Saloner, Shepard & Podolny, pp. 16-23, 2005). In the case of Tesco, quite clearly, it is treating its employees and customers in a way that supports their expansionist and diversification strategy. Tesco is trying to strengthen its core UK business so that the excess cash flow from the same could be use for its expansion. Sustainable business practices, embracing diversity, disassociating itself from the image of UK based company and moving towards a global company are clearly some steps for implementation and execution of Tesco’s strategy (Johnson, Scholes & Whittington, pp. 45-49, 2008). Lastly, it is about evaluating performance, monitoring new developments, and initiating corrective adjustments (discourse). Quite understandably, Tesco has kept a close eye on its financial, operational, human resource and other performance indicators for the evaluation of performance. As mentioned earlier, the same is being done to initiate any corrective adjustments that appear feasible. For example, during the early years of 2000s, Tesco witnessed a decreasing pattern in their growth rate (David, pp. 56-58, 2007). The same was fueled by the rise of the ethical consumerism market in UK, which has rose to more than 36 billion Euros in UK alone. Strategists of Tesco immediately responded by repositioning itself as environmental friendly, socially responsible, ethical and sustainable business. Now every year, Tesco publishes reports on the activities of Tesco on social marketing, ethical consumerism, sustainable practices, and corporate social responsibility (Lynch, pp. 34-38, 2006). Fred R. David (2007) defines strategic management differently, as a three-stage process with “strategy formulation, strategy implementation, and strategy evaluation” (pp. 5). In this regard, these three stages match their characteristics with design and ideas, experience, and discourse. The first stage (ideas and designing) of strategy formulation consists of various activities ranging from developing the vision and mission of the organization, SWOT analysis, defining the long-term objectives, goals and targets for the company and the individuals. In addition, it includes deciding on a list of alternative strategies and choosing a strategy that appears as the “best fit” for the current organizational conditions. In short, it is about deciding on allocation of organization’s limited resources on activities that generate the most return on investment (Mintzberg, Ahlstrand & Lampel, pp. 25-31, 2001). The second stage of strategy implementation (experience) would make the managers to sit down and devise polices to motivate employees, creating a strategy supportive organizational culture and structure, preparing budgets, allocating and mobilizing the resources (Saloner, Shepard & Podolny, pp. 16-23, 2005). The third stage is the evaluation stage (discourse) where managers try to find out that whether particular strategies are working or not. Moreover, important here to note is that SWOT analysis is usually the basis of strategy formulation. However, in the rapidly changing environment of today, the opportunities, threats, strengths and weaknesses on which strategies are based, are changing quickly then ever before. Therefore, after every now and then, mangers need to sit down and evaluate that whether strategies made five years ago are compatible in today’s world or not (Sadler & Craig, pp. 14-19, 2003). However, David (2007) puts these stages in board and well-defined manner. According to this model, elements that come under strategy formulation are developing vision and mission statements, conducting international audit, conducting external audits, establishing long-term objectives and generating evaluating and selecting strategies. Strategy implementation may issues that are faced by managers during implementation, implementation of strategies at marketing, finance, human resource, accounting, R&D and MIS levels and their respective issues. Lastly, the method of strategy evaluation includes measuring and evaluating performance (pp. 56). As Amar Bhide says, “An organization’s capacity to execute its strategy depends on its “hard” infrastructure - its organizational structure and systems - and on its “sot” infrastructure - its culture and norms” (Mintzberg, Ahlstrand & Lampel, pp. 25-31, 2001). Quite understandably, every organization possess its own unique organizational culture, which is reflected in their business philosophy, “How we do things here”, taboos and political do’s and don’ts, beliefs, behaviors and thought patterns. For example, culture at companies like Semco and Gore is of innovation, employee empowerment, and mutuality. At General Electric, the culture stems from its boundary less organizational system, results orientated approach and hard driving systems. In the same way, at Tesco, the culture can be defined in three small words, “every little helps”. The Tesco culture asks and forces its employees to every thing possible and every little thing possible to ensure customer satisfaction (David, pp. 56-58, 2007). Nevertheless, it is also important to look that how culture can contribute towards a better strategy execution. An organization where the culture is supportive of the organizational strategy, it helps in creating an informal set of rules and peer pressure, which motivates and shapes the mood of the employees to work harder towards the achievement of organizational goals (Mintzberg, Ahlstrand & Lampel, pp. 25-31, 2001). Even at times when the behavior and attitudes of employees is going in the wrong direction, the supportive culture of strategy would act as a barrier of the employees that are trying to go off direction. However, for example, if a company is following an innovative strategy and has a rigid hierarchal culture that leads to tall organizational structure, communication barriers; quite clearly, both of them are a mismatch. Despite the fact that employee would try to come up with innovative ideas, yet the rigidness of the organizational structure would not support the same, thus, leading to a complete disaster for the company (Dess, Lumpkin, Dess & Eisner, pp. 74-79, 2009). Companies may have strong cultures and their cultures may be alarmingly weak. Authors mentioned that there are three factors that lead to strong and strategy supportive organizational culture. Firstly, the presence of strong, visionary committed and dedicated leader that leads the company from the front by making others to share his values (Joyce & Woods, pp. 40-47, 2001). Secondly, the long-standing commitment of the company with its businesses, which supports decision-making, contributes to a strong culture. Thirdly, the company should be concerned with the state of well being of their customers, employees, and shareholders (Sadler & Craig, pp. 14-19, 2003). Conclusion Without much doubts, the culture of Tesco appears to be supportive of its strategy. As mentioned earlier, Tesco is following an expansionist or diversification strategy, it wants to grow into new markets; however, for the same, it needs to first strengthen it self in the current markers so that it can generate a stream of cash flows that would help them to expand. In other words, Tesco wants to be global market leader by beating Wal-Mart. For the same, it needs a collective effort from all it employees to ensure customer satisfaction. Fortunately, it has created a culture, which is exactly in line with the same. When Tesco tells all its employees “every little helps”, it asking its employees to go to all limits for ensuring customer satisfaction and customer delight so that it can build long term relationships with customer based on mutual trust and customer loyalty (Dess, Lumpkin, Dess & Eisner, pp. 74-79, 2009). References David, Fred R. 2007. Strategic management: concepts and cases. Pearson Prentice Hall. Dess, Gregory G., Lumpkin, G. T., Dess, Gregory G., & Eisner, Alan. 2009. Strategic Management: Creating Competitive Advantages. McGraw-Hill. Dobson, Paul, Starkey, Ken., & Richards, John. 2004. Strategic management: issues and cases. Wiley-Blackwell. Johnson, Gerry, Scholes, Kevan, & Whittington, Richard. 2008. Exploring Corporate Strategy. Financial Times Prentice Hall. Joyce, Paul, & Woods, Adrian. 2001. Strategic management: a fresh approach to developing skills, knowledge, and creativity. Kogan Page Publishers. Lynch, Richard L. 2006. Corporate strategy. Financial Times Prentice Hall. Mintzberg, Henry, Ahlstrand, Bruce, & Lampel, Joseph. 2001. Strategy Safari: A Guided Tour through the Wilds of Strategic Management. Simon and Schuster. Pearce, John, & Robinson, Richard. 2010. Strategic Management. McGraw-Hill. Sadler, Philip, & Craig, James C. 2003. Strategic management. Kogan Page Publishers. Saloner, Garth, Shepard, Andrea, & Podolny, Joel. 2005. Strategic Management. John Wiley & Sons. Read More