Strategic Management Analysis - Columbia Forest Products - Case Study Example

Strategic management analysis – Columbia Forest Products SECTION MISSION, VISION, AND STAKEHOLDERS The release of a mission ment by a firm’s strategic team is usually decided for showing the key elements of the firm’s strategy (Johnson, Whittington & Scholes 2008). This mission statement can be followed by a vision statement which plays a similar role (Johnson, Whittington & Scholes 2008). A firm uses its mission statement for showing to its stakeholders ‘its overall purpose and raison d’ etre of the organization’ (Johnson, Whittington & Scholes 2008, p.164). On the other hand, the vision statement reveals ‘what the organization aspires to be’ (Johnson, Whittington & Scholes 2008, p.164). In the organizational website the mission of Columbia Forest Products (CFP) is described as follows: ‘Our ideas will be groundbreaking, and our stewardship will be forever mindful of the ground we live on’ (CFP, About, 2014). The above mission statement can be characterized as too broad, not containing information in regard to the area in which the firm operates; also, the particular mission statement does not highlight the key points of the firm’s strategy and seems to focus just on sustainability. After reading the case study, the mission and vision of CFP could be, alternatively, stated as follows: ‘Being currently the most powerful firm in the hardwood plywood and veneer products industry, CFP aims to expand further in the international market by focusing on quality and sustainability’. It should be noted that the success of CFP has been mostly related to its ownership structure: since 1976 the ownership of the firm has passed to its employees (Marshall et al. 2009, case study, p.2). In other words, in the case of CFP business growth has been secured because of the high support of a particular stakeholders group: employees. The term ‘stakeholders’ is used for referring to the ‘individuals or groups who depend on an organization to fulfill their goals’ (Johnson, Whittington & Scholes 2008, p.138). The interests of stakeholders should be taken into consideration by each firm when developing its mission statement (Johnson, Whittington & Scholes 2008). Level of Interest Low High Low A B Minimal effort Keep informed Power C D Keep satisfied Key players High Figure 1 – The power/ interest matrix of stakeholders (Mendelow 1991, in Johnson et al. 2008) Because the interests of a firm’s stakeholders can be opposed, creating a mission statement that addresses all these interests can be difficult. The above problem could be possibly avoided if each business emphasize on the interests of stakeholders who have the power to influence business operations at high level. The relationship between stakeholders’ power and the interest given by the firm is presented in the graph in Figure 1. Using the graph in Figure 1 the strategic managers in CFP should set the interests of employees, who are the key stakeholders, as a key element of the organization’s mission/ vision statement. According to the graph in Figure 1 the employees of CFP should be informed on all the firm’s strategic decisions as they are key players in the organizational activities; in other words, the firm should pay the highest interest to its employees since their power to influence business performance is high, as implied through the graph in Figure 1. SECTION 2. SCENARIOS AND INDUSTRY ANALYSIS In order to evaluate the competitiveness of a business it is necessary to check carefully its environment. Business environment is divided into many layers (Figure 2). Figure 2 – Business environment (Johnson, Whittington & Scholes 2011) Various theoretical models are available to business managers for evaluating each of above layers. For example, in regard to the business macro-environment reference can be made to the PESTEL model (Figure 3). According to the particular model the external environment of a business is evaluated by referring to six elements, as presented in Figure 3. Figure 3 – PESTEL model (Johnson, Whittington & Scholes 2008) Based on the findings of the PESTEL analysis business executives can develop a scenario analysis. This analysis includes three steps: a) the products or the markets that need to be evaluated are selected, b) the factors of the firm’s external environment that highly affect business performance are selected; those factors are also known as key drivers and c) the outcomes of each of these factors are identified and evaluated (Johnson, Whittington & Scholes 2011). At the next level the outcomes identified above are used for explaining the external environment of the organization; each of these descriptions can be called a scenario (Johnson, Whittington & Scholes 2011). Finally, the consequences of each of these scenarios for the organization are identified and are taken into consideration when developing the strategy of the business involved (Johnson, Whittington & Scholes 2011). After completing the scenario analysis, as indicated above, business executives would need to evaluate the industry in which their firm operates. For understanding the position of a firm in its industry it would be necessary to use a model that supports such tasks: the Five Forces Model of Porter (Figure 4) is the most common model of such type. Figure 4 – Five Forces model (Porter 2008) In the case of CFP the Porter’s model could reveal the key challenges that the firm has to face for securing its competitiveness: a) Buyers; buyers can seek for products similar to those of CFP in other businesses; from this point of view, buyers could press the firm to lower its prices; it should be noted that the products of CFP are available to the public through ‘intermediates, wholesalers and merchandisers’ (case study, p.2); these entrepreneurs could seek for similar products in other manufacturers at lower price; b) Suppliers; according to the case study CFP covers most of its manufacturing needs through its own production plants; also, CFP buys its raw materials from a variety of countries, including ‘Russia, Indonesia and Malaysia’ (case study, p.2), meaning that the sources of its raw materials are not standardized but they can replaced, if necessary; therefore, the firm’s suppliers do not have the power to press the firm for an increase in their prices; c) Substitute Products; it would be rather difficult for substitute products to appear in the industry since the cost of materials is rather high; if such products would appear then their disadvantages, in terms of quality, would be clear, as compared to the products of CFP, d) New Entrants; the specific industry is quite demanding at the level that costs for manufacturers can be high unless a broad network of suppliers is in place; experience in this industry would be also required; moreover, due to the crisis in the housing sector the industry’s profits are at low to average level; new entrants would not easily appear since the investment made would be difficult to be paid back; e) Competition; the competition in the particular industry is quite strong and the industry’s key competitors tend to proceed to acquisitions for securing survival, at the level that profits have been significantly reduced, compared to the past (case study, p.3). In addition to the above, emphasis should be given to the firm’s critical success factors (CSF), i.e. the factors that can make the business more attractive to consumers or those that can offer to a firm an advantage towards its competitors in regard to the cost of the material (Johnson, Whittington & Scholes 2011). The process of identifying CSF/ KSF is presented in the graph in Figure 5. Figure 5 – The identification of KSF (Grant & Jordan 2012) Using the process presented in Figure 5 the Critical Success Factors of CFP would be the following: a) extensive supply chain, so that the firm has access anytime to materials required in its production process, b) effective cost policy, so that prices are kept low, as possible, without quality to be affected. SECTION 3. RESOURCES AND CAPABILITIES The strategy of each firm has to be developed taking into consideration the resources available. When referring to resources in regard to business, emphasis is given to the assets that the business has under its control and which are divided into two categories: tangible and intangible (Johnson, Whittington & Scholes 2008, p.95). Intangible resources refer to organizational elements such as ‘reputation, knowledge and information’ (Johnson, Whittington & Scholes 2008, p.95). In the case of CFP the firm’s tangible resources would include: the production plants with all their elements, such as buildings, machinery and raw materials; the firm’s offices, including all their physical elements and its cars are also included in the organization’s tangible assets. The intangible resources of CFP would include: the brand name and the information/ data stored in the firm’s online and offline files/ databases; the patents developed by the firm, such as the PureBond@ adhesive (case study, p.6) can be also characterized as intangible assets. The certifications that the firm holds in regard to its industry’s standards, such as the standards of the ‘Forest Stewardship Council’ (case study, p.6) are also parts of the firm’s intangible assets. The resources of CFP could affect its capabilities in the way presented in the graph in Figure 6. Figure 6 – Resource-based approach on business strategy (Grant & Jordan 2012) The resources and capabilities of CFP could be analyzed using the VRIO criteria. The findings of the relevant analysis are presented in the table in Figure 7. According to the VRIO analysis of CFP the organization needs to emphasize more on its relationship with customers/ wholesalers. Keeping prices at competitive level, compared to competitors, could help CFP to secure the loyalty of its customers. Also, the results of the firm’s acquisition strategy are not clear, so far, as noted in the case study. The fact that the profits of the firm remain at rather low level shows the need for updates in the firm’s strategy: instead of acquisitions emphasis should be given on R&D and on cost control, so that the firm is able to provide to its customers high quality products at average prices. In other words, CFP should focus on the acquisition of unique resources/ capabilities (Johnson, Whittington & Scholes 2008). Resources/ Capabilities of CFP Valuable? Rare? Can be imitated? Exploited by Organization? Performance of CFP Acquisition/ investment strategy Y N Y Y Average Relationship to stakeholders/ employees Y Y N Y High Relationship to stakeholders/ wholesalers Y Y Y Y Average Innovations/ PureBond@ Y Y N Y High Certifications on Industry Standards Y Y N Y High Supply chain Y N Y Y High Figure 7 – VRIO criteria in regard to the resources/ capabilities of CFP (as the table has been developed using the VRIO analysis table included in Peng, 2013, p.71) SECTION 4. BUSINESS AND CORPORATE STRATEGIES After checking and evaluating a firm’s external environment and its resources the development of its strategy could proceed. In general, the strategy of a firm at business level should focus to the achievement of a competitive advantage (Rothaermel 2013). It should be noted that when referring to a ‘business-level strategy’ (Hitt, Ireland & Hoskisson 2014, p.26) emphasis is given to the processes that a firm needs to develop in order to check its position towards its rivals. At corporate level, a firm needs to choose its industry; the ways in which the business will compete in the chosen industry are included in the business strategy (Harrison & St.John 2013). On the other hand, businesses that operate globally need to emphasize on different issues, in regard to business strategy formulation and implementation, compared to firms operating only domestically (Grant 2013). In any case, business strategy can be differentiated depended on the priorities set by executives. The four categories of business strategies are included in the Generic Strategies model of Porter (Figure 8). By choosing one of these strategies a firm can secure its competitiveness. It is implied that the strategy chosen would be feasible in terms of the firm’s resources and capabilities. In the case of CFP the strategy that should be chosen for enhancing the firm’s competitiveness would be the ‘Cost Leadership’ (Figure 8). Of course, product innovation has been also found to be critical for CFP but among the two factors cost is considered as more important, especially in the particular industry where competition is quite strong but demand is rather low (case study, p.3). Figure 8 – Porter’s Generic Strategies model (Porter 1980, as in Clarke 2005) Another known model for identifying a business strategy that can enhance business competitiveness is the Strategy Clock (Figure 9). If employing this model, the managers of CFP would adopt an “Hybrid’ strategy, i.e. a strategy focusing both on price and on differentiation. Such strategy is considered as more appropriate for CFP and has many similarities to the firm’s current strategy. Figure 9 – Strategy Clock (Johnson, Whittington & Scholes 2011) Today, the approach that has become quite popular in regard to strategy formulation in business is the Sustainable strategic management, a concept denoting a series of tasks related to the analysis of a business but also the design and implementation of a business strategy which ‘is economically competitive, socially responsible and does not threaten the environment’ (Stead & Stead 2013, p.18). The current strategy of CFP seems as influenced by the above trend, at the level that the firm’s leaders have set sustainability as a priority in regard to the firm’s strategy. REFERENCES Clarke, R., 2005. The Path of Development of Strategic Information Systems Theory. Available at http://www.rogerclarke.com/SOS/StratISTh.html Grant, R.M., 2013. Contemporary strategy analysis: Text and cases. 8th ed. Chichester: John Wiley and Sons. Grant, R. M., & Jordan, J. 2012. Foundations of strategy. Chichester: John Wiley and Sons. Harrison, J. & St. John, C., 2013. Foundations in Strategic Management. Belmont: Cengage Learning. Hitt, M., Ireland, D. & Hoskisson, R., 2014. Strategic Management: Concepts: Competitiveness and Globalization. Belmont: Cengage Learning. Johnson, G., Whittington, R., & Scholes, K., 2011. Exploring strategy: Text and cases. 9th ed. Harlow: FT Prentice Hall. Johnson, G., Whittington, R., & Scholes, K., 2008. Exploring strategy: Text and cases. 8th ed. Harlow: FT Prentice Hall. Peng, M., 2013. Global Strategy. Belmont: Cengage Learning. Porter, M., 2008. The Five Competitive Forces That Shape Strategy. Harvard Business Review. Available at http://hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1 Rothaermel, F. T., 2013. Strategic management: Concepts and cases. Irwin: McGraw-Hill. Stead, J. & Stead, E., 2013. Sustainable Strategic Management. New York: M.E. Sharpe. Read More