Organisation and Its Competitive Environment and Recommendation of a Strategy - Proctor and Gamble - Case Study Example

ANALYSE AN ORGANISATION AND ITS COMPETITIVE ENVIRONMENT AND RECOMMENDATION OF A STRATEGY By Date Introduction Managing an organization successfully is not an easy task since it requires a combination of managerial skills that should be coupled up with a high level of professionalism. The managers need first to understand the organization upfront before they can embark on a mission of making it turn around to profitability or success. The initial stage should involve analysing the organization right from its structure and then proceed to analyse the environment of the organization. The environment of an organization includes both the internal and the external environment (Betz, 2011). The internal environment involves the factors within the organization that is under the control of the management in the sense that they can manipulate them to make them more favourable to ensure they steer the organization to success. The external environment, on the other hand, factors that are beyond the scope or control of the managers, but greatly influence the manner in which the goals and objectives of the organizations are achieved. A competitive advantage is the defining factors, which give an organization a competitive edge over its rivals. Thus its managements duty to come up with suitable strategies so as to help them gain a competitive edge to ensure they are more favourable in the market space than its rivals. Analyse the Current Internal Environment Proctor & Gamble (P & G) is a company that has been in business for quite some time and over the years it has expanded its operations to global markets and currently has presence in over forty countries globally. The reasons behind its success comes from a mix of factors from both within and without the organization that have been fused to develop a winning strategy that has enabled it to gain a competitive advantage over its rivals. The internal environment of any firms is a set of internal factors that helps or distinguishes it from the rest, which aid that it to obtain a competitive advantage over its rivals. For the case of Proctor and Gamble we are going to make an in-depth analysis of its internal environment factors that has enabled it gain competitive advantage over its rivals (Montgomery & Porter, 2001). Large Asset Base Proctor and Gamble is an established business organization that has massive resources spread across the globe where the firm conducts its business operations. The latest statistics indicate as of July 2013 the assets base of Proctor and Gamble stood at approximately $867,000, which is quite a substantial sum for a firm that is keen to expand its operations and expand to new markets. Strong Human Resources and Strong Management Firstly, it is imperative noting that human resource is the most critical assets any organization can have. For instance, the human resource that is employed to work for Proctor and Gamble is composed of a team of dedicated staff who possess high level skills & knowledge in their respective areas of specialization (Sanchez & Heene, 2010). A spot check at the organization reveals that 75% of the labour force in the organization possesses the prerequisite skills and knowledge that are required for the positions they hold. In terms of organizational support the management structure of Proctor and Gamble is designed in a manner that the chain of command is very clear and gives room for feedback from all sectors to ensure speedy communication of policies and the views of the employees to reach the relevant management officials in time (Boisot, 2009). Technology That notwithstanding, the resources would be utilized in the deployment of state of the art technology in the production and management process to ensure the latest technological advancement is implemented in the organization to enhance efficiency and effectiveness in its operations (Montgomery & Porter, 2001). The high-quality products from Proctor and Gamble are basically as a result of the heavy investment in technology due to the huge resource base that is available for the management of the company. Massive Financial Resource Moreover, organization can possess massive financial resource, which are integral for the operation of the business. For instance, for the three months ending 30th June and September 2014, the company registered total revenues of $ 19.018 and 20.792 billion, which translated to net income of $2.579 and 1.990 billion after deducting expenses. Moreover, the company’s working capital ratio of 0.91 that is higher than its peers in the industry, in addition to, an increase of its cash reserves by $2.61billion in for the same period. Thus, this demonstrates the strong financial base of P & G. Finally, the value chain is the last point of analysis as far as the internal environment of Proctor and Gamble is concerned. The firm as established an elaborate value chain that stretches all the way from the firm itself through the suppliers to the retailers and finally to the clients who are the final consumers of the goods that are produced by the company. The core reason for the firm to invest in an elaborate value chain is to enhance the value of the goods the final consumer is going to receive by making them to reach them in a timely manner and in convenient locations where they can easily access them (Betz, 2011). Time and cost constraints are two important factors that greatly influence the manner in which products of the firm are going to beat geographical mobility to reach the desired destination in time to satisfy the needs of the clients. By coming up with a structured value chain Proctor and Gamble is virtually ahead of its market players since the mobility of its products is very efficient and thus the consumers are going to receive the goods whenever they are in demand without any delay hence giving this firm an edge over its market competitors (Sanchez & Heene, (2010). Analyse the Current Competitive Environment The competitive environment does not only encompass setting of process for the products and services, but it takes a multi-facet approach that includes other factors that enable a firm to obtain a favourable edge over its market rivals. In the case of Proctor and Gamble it has three distinct factors, which determines or shapes its competitive environment that gives it an advantage to the consumers over the other market player’s years (Keller & Price, 2011). The first and most important factor concerning the firm’s competitive environment is rivalry. This does not necessary mean competing with other market players in terms of the prices the firm sets for its products but it involves other inherent factors which define the whole concept of competition. Proctor and Gamble has invested a considerable amount of resources in educating its clients on its production process as well as the products they offer by enlightening them of the features of the products and how best they can be utilized to ensure their needs and wants are fully satisfied. This will definitely put them an edge ahead of the other market players since the consumers will feel more catered for by a company that is concerned of their wellbeing by enhancing that mutual relationship of incorporating them in the process of product development (Boisot, 2009). Proctor and Gamble has also established an elaborate channel of distribution that ensures products penetrate to all parts of the globe where demand for its products are required. This has set a precedent, which is unmatched by its rivals since no other player has developed an exclusive channel of distribution in the market that Proctor and Gamble operates. The channel is so elusive to the point that products match the demand on the ground by beating the constraints of time and geographical proximity. Finally concerning rivalry the mechanism Proctor and Gamble has utilized in coming up with the design of its products is so distinct and classy in the sense that its products stands out from the rest thus making them to be easily identified by the consumers hence creating brand loyalty. Barriers to enter is yet another factor that influences the competitive environment of Proctor and Gamble, this element is important to the organization and the market in general as it is the one that regulates the number of competitors who enter the market and the ease of entering that particular market years (Keller & Price, 2011). If the restrictions for entering a certain market are very stiff new firms will find it hard to enter that particular market thus giving the firms that had already established themselves an advantage over them since they will not have to battle with new competitors in that market. Moreover, due to the vast resources that Proctor and Gamble has it can implement the latest technology in the market to enhance the quality of products that they produce (Betz, 2011). The implementation of advanced technology will set the bar high for new market entrants who may be eyeing that particular market niche. This will act as a barrier since most of the firms cannot deploy huge amounts of resources to invest in advanced technology thus they will find it hard to enter that particular market hence giving Proctor and Gamble some kind monopolistic power to entirely run that market without much competition (Jackson & Denisi, 2003). Conversely, the company’s working capital ratio of 0.91 that is higher than its peers in the industry, in addition to, an increase of its cash reserves by $2.61billion in for the same period. Thus, this demonstrates the strong financial base of P & G, which enables it to compete favourably in the industry to gain a competitive edge over its rivals. Finally, profitability is the last element as far as the competitive environment of Proctor and Gamble is concerned. Since the firm has established a considerable links with the clients it will enhance the level of consumer and brand loyalty which will on the other hand increase profitability of the firm thus making the company to be an edge ahead of the rest. The high returns that the company is enjoying over its competitors is mainly due to the strong customer relations that the company has created over the years thus made the customers to be identified with its products leading to high levels of consumptions and thus making the company to be eventually more profitable than the rest of the market players (Macey & Young, 2011). Develop and Describe Potential Scenarios for Future Competitive Environment The future of this particular market is quite uncertain since it is mainly prone to numerous factors that keep on changing thus, making it difficult to predict how the future will unravel itself. However, from the current trends it is safe to note that in the future will be characterized by intense rivalry that will have resulted from increased competition from market players. Currently, Proctor and Gamble dominates the entire market as economies of scale favour it as compared to the smaller firms that are trying to find a grip in the market. It is expected that the small firms will tend to merge through amalgamation or franchises in order to come up with outfits that will be competitively viable to Proctor and Gamble since in their current state they cannot offer any formidable competition since they are not established enough to compete with a firm that has been in the market for over twenty-five years (Keller & Price, 2011). Therefore, Proctor and Gamble should heavily invest on technology and given the current customer loyalty that the company enjoys will ensure that they are always on top of their game thus they will maintain a competitive edge ahead of its market rivals (Sanchez & Heene, (2010). That notwithstanding the market is very dynamic whereby the needs and preferences of the customers keeps on changing/shifting from time to time the company should invest in market analysis techniques whereby they get the feedback of the clients and strategize on how to best satisfy their needs. This will ensure the customers do not shift to alternatives products but maintain brand loyalty with the company to continue supporting its success. That notwithstanding, more market regulations are expected to set in since the more competitive a particular sector of the economy become the more intervention from the authorities it commands (Nilsson & Rapp, 2005). Thus, it is prudent for Proctor and Gamble to brace itself for extra regulation from the relevant authorities in the markets that is serving (Betz, 2011). The company will also invest in advanced technology to ensure its operations are effective and efficient meaning the quality of products that will be produced will be of the highest quality unmatched by any other in the market (McGrath, 2013). Moreover, by first setting high-quality product standards, the consumers will like the products since they will be giving them a value for their money and at the same time satisfying their needs more effectively. This will alternatively set the bar high as far as market standard for goods is concern thus barring many firms from entering the market since they will not be able to meet the specification that have been already set as consumers will be used to high quality goods hence will not accept anything less that quality products (Boisot, 2009). Thus, with these the company will be able sustaining its market share and developing competitive advantages over its rivals. Potential Strategies for Consideration These are aimed at improving the profits and the outlook of the business of the organization. The strategies include the following: The business should bring in advanced technology in the production process. This ensures that high-quality goods are produced and at the right time. Though it’s expensive, it ensures that the business gains higher profits as customers are satisfied with the products of the business venture (Betz, 2011). Technology also ensures the safety of the premises, warehouses and products through the use of CCTV cameras. The business should also increase resources to develop skilled or qualified employees. These employees ensure that the production process goes well without any delays, and the goods that are produced are of high quality, which satisfy the customers. The services of professionals should also be sought in the management of the company to ensure that all functions of management are attained thus this benefits the organization (Sanchez & Heene, (2010). The business venture should improve the value chain. This ensures that distribution of goods is done efficiently. The customers can get goods easily as they are readily available in the market. There should be few intermediaries to ensure that the final prices of the products are not high and that consumers can afford (Macey & Young, 2011). Many middlemen lead to increasing in prices of the products as they have to gain. This impacts the venture negatively as it stands to gain fewer profits. The business entity should adopt the production of distinct goods as a potential strategy (Boisot, 2009). Distinct goods face minimum competition as there is less or no other entrepreneurs are producing them. There is also a high demand for the goods as they prove to satisfy customers’ needs. Therefore, if the business adopts this technique it stands to gain high profits and little or no competition in the market. The organization should also adopt the dynamic policy as another strategy. This is achieved through carrying out research of the market in order to find out the tastes and preferences of the consumers. The venture gets to know what type of goods the consumers prefer to others and hence produce them. The consumers are, therefore, able to derive satisfaction while the business stands a higher chance of attaining more profits (Boisot, 2009). The other potential strategy is organization support. This makes employee’s work hard as they believe that the organization values their contribution and their well-being. This is achieved through motivation of staff, fair remuneration, and staff training. Additionally, the company should consider diversifying into other industries, in addition to, to diversifying into the emerging markets to increase its market share for its products. Strategies for Implementation Strategy formulation is a very crucial exercise in organizations since if the wrong strategies are implemented the organization runs risk of failure in the near future as a result of wrong decisions being made and which will most likely negatively impact the organization’s success. The process of strategy formulation should undergo four steps aimed at coming up with quality strategies that will position the organization at a prime position to tap the opportunities that may be inherent in the marketplace hence obtaining a competitive advantage over its rivals (Sanchez & Heene, 2010). The initial step involves analysing the opportunities and threats that Proctor and Gamble face in the course of their operations. After conducting an in-depth of the threats and opportunities that the company faces the next step will be a fact finding mission which will be basically involved in information gathering. This step serves to pool together all relevant information so as the policy makers will have access to the information material so as to ensure they make informed decision as far as the whole process of policy formulation is concerned. After gathering information the team tasked with strategy formulation will have accessed all the relevant information and thus the decisions that they will make will most likely be informed and of the best interest to the company (Pfeffer, 2005). Thus, this third step involves actual strategy formulation whereby all the concerned parties air their ideas, and the team comes up with collective strategies that have been agreed upon by the entire team. The last step is the strategies that have been formulated are handed over to the organization’s top management for implementation in the real business environment. Using the above-described process the first strategy for implementation by the company is a consumer-oriented approach. Most organizations are being possessed by profit maximization by end up losing touch with the consumers thus, losing their market share. Proctor and Gamble will implement the consumer-oriented approach despite the approach making just substantial earnings for the company it will enhance the image and lead to more profits in the long run (Sanchez & Heene, 2010). Therefore, with these measures and strategies in place, the company will undoubtedly continue increasing profitability and developing more robust competitive advantages enabling it maintain its position in this volatile industry. References Betz, F., 2011. Managing technological innovation competitive advantage from change. Hoboken, N.J., Wiley. Available at http://public.eblib.com/choice/publicfullrecord.aspx?p=698914 [accessed 11 Dec. 2014]. Boisot, M., 2009. Knowledge assets: securing competitive advantage in the information economy. New York, Oxford University Press. Jackson, S. E., Hitt, M. A., & Denisi, A. S., 2003. Managing Knowledge for Sustained Competitive Advantage Designing Strategies for Effective Human Resource Management. San Francisco, CA, Jossey-Bass. Available at http://public.eblib.com/choice/publicfullrecord.aspx?p=158034userid=^u [accessed 11 Dec. 2014]. Keller, S., & Price, C., 2011. Beyond performance how great organizations build ultimate competitive advantage. Hoboken, N.J., Wiley. Available at http://www.books24x7.com/marc.asp?bookid=43168. Macey, W. H., Schneider, B., Barbera, K. M., & Young, S. A., 2011. Employee Engagement Tools for Analysis, Practice, and Competitive Advantage. Hoboken, John Wiley & Sons. Available at http://public.eblib.com/choice/publicfullrecord.aspx?p=822673 [accessed 11 Dec. 2014]. Mcgrath, R. G., 2013. The end of competitive advantage: how to keep your strategy moving as fast as your business. Boston, Massachusetts, Harvard Business Review Press. Montgomery, C. A., & Porter, M. E., 2001. Strategy: seeking and securing competitive advantage. Boston, [Harvard Business School Press]. Nilsson, F., & Rapp, B., 2005. Understanding competitive advantage the importance of strategic congruence and integrated control. Springer E-Books. Berlin, Springer. Available at http://public.eblib.com/choice/publicfullrecord.aspx?p=304658 [accessed 11 Dec. 2014]. Pfeffer, J., 2005. Competitive advantage through people: unleashing the power of the work force. Boston, Mass, Harvard Business School Press. Sanchez, R., & Heene, A., 2010. Enhancing competences for competitive advantage. Bingley, UK, Emerald Group. Read More