Organisational Audit Using Porters Five Force Model - Assignment Example

Strategy formulation Table of Contents Task 3 a)Brief analysis of company 3 Company profile 3 Mission and vision ment 3 Goals and objectives 3Core competencies 4 b)Formulation of strategic plan 4 Factors important in strategic plan development 4 Implementation of Ansoff’s matrix at Pret-A-Manger 5 c)Evaluation of effectiveness of strategic planning techniques 6 Task 2 6 a)Organisational audit using Porter’s five force model 6 b)Importance of stakeholder analysis in strategy formulation 8 c)Development of strategy based on organisational audit and stakeholder analysis 8 Task 3 9 a)Development of possible alternatives 9 b)Appropriate future strategy and rationale for the same 10 Task 4 11 a)Strategy implementation 11 i.Role and responsibilities 11 ii.Resource requirement 11 b)Role of SMART targets in strategy implementation 12 Reference list 14 Task 1 a) Brief analysis of company Company profile Pret-A-Manger is a United Kingdom based quick serving or fast food restaurant chain that was opened in 1986. The company initially focussed on only ready-to-eats and sandwiches but with time product offerings have been increased by the company and hot and cold drinks and various beverages have been included in the menu. The company started in the UK but presently operates in other countries such as the United States, France, China, Hong Kong and Japan. The company operates in a unique fashion and most restaurants of Pret have kitchen while a few has kitchen in nearby area. However, the company maintains strict policy regarding not selling factory-made food products. The leftover food is donated in charity and nothing is refrigerated (Pret A Manger, 2014). Mission and vision statement The mission of the company is to serve consumer with fresh food that are free of preservatives, additives and chemicals. Another mission of the company is to live up to consumers’ trust and accommodate their suggestions in the organisational practices. The vision of the company is to win consumers’ confidence by serving high quality food. The long term vision of the company is to maintain transparency in its business practices and witness growth by integrating every organisational member (Pret A Manger, 2014). Goals and objectives The company aims at opening stores worldwide but not by pursuing fast growth. The company is a believer of slow but steady growth. Innovation and organisational commitment is very essential for the firm. The other goals and objectives of the company are to be known for quality and innovation (Pret A Manger, 2014). Core competencies The core competencies of the company lie in its committed workforce, local supply chain, effective training programs, consumer involvement, product diversification and innovation (Pret A Manger, 2014). b) Formulation of strategic plan Factors important in strategic plan development Strategic planning is referred to the process of determining organisation’s long term and short term strategies while incorporating various internal and external factors that are also referred as environmental components (Linn, 2008). The essential factors to a strategic plan are discussed as follows: Organisational culture: Organisation culture is referred to the process of sharing various assumptions, values and beliefs in the organisational framework among its members. For strategic achievement, positive organisational culture is essential which should be driven by motivation and appropriate leadership style (Schein, 2010). Market segmentation, targeting and positioning: STP is essential for understanding and collaborating offerings of the organisations with the requirements of consumers. An organisation can never satisfy every consumer sector and consequently, should select and focus on specific consumer sector (s) (Dibb and Simkin, 1991). Competitors’ profile: Competitors play an important role in determining an organisation’s strategy as strategies are primarily formulated to counter competitor’s steps. For this purpose, strength and weakness assessment of the competitors is very important (Linn, 2008). Optimum utilisation of resources: A strategic plan should be able to make maximum use of its resources and this notion should be necessarily incorporated while devising the strategic plan. The plan must make appropriate use of all the human and non-human resources (Linn, 2008). Waste management: For every organisation, waste management is very important as it not only contributes towards sustainability but also helps a firm in cost optimisation. Therefore waste management and reduction should be a part of a firm’s corporate strategy (Linn, 2008). Implementation of Ansoff’s matrix at Pret-A-Manger The Ansoff matrix presents alternative growth strategies for an organisation in new and existing market with respect to new and existing products. Market penetration: Market penetration is recommended for the company when it is planning to operate in the existing market with its current offerings. Product development: Pret should pursue product development strategy if it is planning to introduce new product in the industry. Market development: New markets are difficult to conquer and may create problematic situation. Therefore, the strategy of Pret while entering a new market should be focused on developing the market in such a manner that the consumers accept its products. Diversification: Product diversification is a relatively useful strategy when an enterprise is planning to penetrate a new market. With greater product diversification, the company can diversify its offerings and thereby can meet varied demand in the new market (Watts, Cope and Hulme, 1998). c) Evaluation of effectiveness of strategic planning techniques A firm need to evaluate financial as well as non-financial aspects of a business for developing an appropriate business strategy. From non-financial perspective, environmental component assessment is very important. The non-financial planning techniques are PESTLE analysis, Stakeholder analysis, Competitor analysis and Market analysis while financial planning techniques comprises capital budgeting and cost benefit analysis. PESTLE analysis and market analysis are essential for strategy development because this technique analyses a firm’s external environment and helps in recognising various hidden opportunities and issues thereof. Stakeholders and competitors are essential for an organisation for stakeholders are interested parties of an enterprise while competitors’ analysis helps in enhancing competitiveness of a firm’s strategy. Financial assessment is essential so as to understand long term viability of a firm’s investment. Capital budgeting evaluates proceeds from a project while taking in account time value of money. Cost benefit analysis determines whether the strategy delivers sufficient benefits with respect to the cost that is being invested by the firm (Hudson, 2011). Task 2 a) Organisational audit using Porter’s five force model The five force model was proposed by Michael Porter for assessing industry environment of a firm with respect to certain factors discussed as follows. Bargaining power of buyers: Pret generally sells food and beverages to individual consumers who are relatively large in number and impact of a single consumer does not affect the firm. The firm has around 240 shops in the UK alone. Since the firm is relatively different from other fast food restaurants in terms of its quality of offerings, the bargaining power of buyers is moderately lowered by this. However, considering the ongoing economic slowdown, consumers prefer to cook at home instead of eating outside. This situation strengthens the bargaining power of buyers. Bargaining power of suppliers: In food service industry, suppliers play an important role as poor quality of supplies from low cost suppliers can affect firm’s reputation as the firm will fail to meet quality requirements. Pret sources its products from local suppliers in Europe so that sustainability is maintained and excess cost is minimised. The suppliers’ power is fair for Pret. Threat of new entry: The fast food industry has relatively low barrier to entry and exist as a result a number of companies are consistently entering the industry. Another reason for high level of entry in the industry is that fast food, as the name suggests is low on nutrition and is quickly cooked and served; therefore, investment is low. However, business model of Pret is significantly different from that of its competitors because the company is focused on serving healthy food whose sourcing requires comparatively more investment. Therefore, it can be suggested that the threat is low for Pret. Threat of substitute: The substitutes for fast food selling restaurants are restaurants that are selling organic food products and home cooked food. Threat of substitute from home-cooked food is fairly high for Pret considering impact of recession on most of the developed economies where the company operates. Degree of rivalry: The growth of large scale multinational firms in the hotel and restaurant industry has increased the level of competition thereof. Pret is no exception to this situation and is facing competition from various small and medium food service companies in different locations worldwide (Porter, 2008; Market line, 2014; Pret A Manger, 2014). b) Importance of stakeholder analysis in strategy formulation The understanding of important role that is played by various stakeholders in policy formulation, implementation and in determination of outcome has resulted in framing stakeholder analysis as an essential management tool for strategic analysis and development. The process of stakeholder analysis covers several methodologies that help managers in assessing interest of various stakeholder groups. Stakeholder analysis is considered important in strategy formulation because stakeholders within and outside an organisation influence firm’s behaviour, strategic planning and organisational achievements. The influence of stakeholders differs from one organisation to another because different industry exerts different impact on stakeholders. Stakeholder analysis helps in determining the right groups of stakeholders that should get priority in strategy formulation (Brugha and Varvasovszky, 2000). Studies suggest that stakeholders can make strong contribution in strategy formulation by providing their innovative ideas. Careful consideration of stakeholders in business formulation helps in maintaining transparency, honesty and accountability thereof. Clear communication helps consumers and other stakeholders to voice their opinion and helps in better formulation of strategy. Stakeholders present their views from an outsider’s point of view and consequently, they are not generally biased towards the organisation. Greater involvement of stakeholders also helps in building strong positive image of the firm in community (Ramirez, 1999). c) Development of strategy based on organisational audit and stakeholder analysis Based on organisational audit and stakeholder analysis, it can be recommended that the company should develop new offerings for consumers. Consumers are price sensitive as well as are concerned about their health while stakeholders are increasingly expressing concern towards environmental sustainability. It has been determined that fast food preparation require cooking at high flame which generate large amount of green house gases as well as destroys nutritional factors. Considering all these aspects, it was determined that the restaurant should offer slow cooked food that are equivalent to home cooked food to consumers at a comparatively low cost. Since slow cooked food does not consume excessive energy therefore are environmentally sustainable and cost effective. This strategy was considered to have long term implications on the business as it takes in consideration consumers’ need for low cost food products and ensures environment safety. Task 3 a) Development of possible alternatives Market entry: According to the Ansoff matrix, entry in new market can unfold tricky situation as consumers have limited knowledge about the concern and its offerings. If Pret enters a new market, the essential strategies of the company can be merger and acquisition, joint venture and franchising and licensing. The company must take into account market research and strong promotional measures for convincing its consumers about its offerings. Alongside, competitors’ profile and other environment factors should be thoroughly assessed (Chung and Enderwick, 2001). Substantive growth: Substantial growth in new market is rare; therefore, it is assumed that the company is witnessing robust growth in its existing market. As Pret is enjoying substantial growth in its existing market, the appropriate strategy can be of product diversification. Pret can offer new products to consumers, which are expected to witness strong sell as a result of the company’s strong brand image. Other strategies in this regard can be horizontal and vertical integration (Porter, 2008). Limited growth: During limited growth phase, the company should not heavily invest in new product development and mass production. The strategy shall be to focus on most profitable areas. The company should produce and serves those food products that are mostly demanded by consumers and adopt measures to curtail additional expenses. Therefore, the strategy should be market penetration, cost leadership and innovation (Porter, 2008). Retrenchment: Situation related to retrenchment is witnessed by a firm when economic slowdown is spurred and it is very much related to external business environment which has direct impact on internal environment. The retrenchment strategy of the firm should be focused on minimisation of cost. The firm should try to optimise cost by investing in purchases proportionate to the net sales. Unnecessary investment will only block fund. The most appropriate strategy in retrenchment situation is divestment; that is, selling off unproductive business areas (Benito, 2005). b) Appropriate future strategy and rationale for the same The world economy was determined to be in the recovering phase from the various economic crises it has undergone in recent years. The report by the United Nations suggests that the economic outlook of world will strengthen in the upcoming years. It was established that inflation is expected to stay low in the coming years; however, commodity price will increase consistently. Overall economic prospect for various developed as well as developing economies will improve eventually (United Nations, 2014). Keeping in view the assessment, cost leadership strategy with respect to Porter’s generic strategies is proposed for Pret for long term sustainability in the industry. It was determined that the commodity price is on rise and will continue increasing in the recent future. Therefore, by means of cost leadership the company should integrate its suppliers in such a manner that it can avail raw materials at a relatively low cost. Cost leadership will also provide competitive advantage to the company because the company is already selling distinguished products to consumers and if it is able to lower its product price further then consumers will prefer it over other fast food eateries. Task 4 a) Strategy implementation i. Role and responsibilities Successful strategic implementation strongly depends on managerial leadership within the organisational framework. Planned leadership is essential on the part of managerial bodies such as senior managers and chief executives for implementation and management of change. In this regard, it is important for the managers and senior executives to have clear communication with other organisational members regarding intention of the strategy and its role in accomplishing future objectives of the corporation. Additionally, the leaders should provide a clear definition of long term vision of the firm to various stakeholders for their cooperation. Open and two-way communication is very helpful in ensuring various information gaps are minimised in the process of strategy implementation. The firm should ensure that team activities are encouraged so that intra-organisational competitiveness and conflicts are minimised. Pret can also deploy organisational charting for clear communication of roles and responsibilities to every organisational member. Change management can often be difficult; consequently, managers should be accountable for continuous motivation and uplifting employees’ confidence level (Mullins, 2007). ii. Resource requirement Pret’s business sustainability and competitive advantage significantly depends on resources that can be availed at reasonable cost and can be substituted easily. Resources are important for an organisation because they make significant contribution towards development of capabilities and competencies. Additionally, resources contribute heavily towards adequate functioning of operational processes of a firm. For implementation of the previously discussed strategy at Pret, the enterprise require resources such as human capital, financial resources, physical commodities and set up materials, information (regarding market, consumer demand and economic trends). The physical resources of the company involve developing more restaurants in various locations across the world for business expansion and development of competitive advantage (Barney, 2001). Manpower or human capital of an organisation is essential for effective implementation of the required strategy. Since restaurant industry is considerably capital intensive, consequently manpower or human resource management is very important for Pret. The future strategy of Pret is focused on cost optimisation and therefore, it should hire limited yet highly skilled employees for restaurant management and other activities. The financial resources can be obtained either by means of raising share capital or obtaining loan. Since Pret is a private firm, therefore the latter choice is viable for funding. For information gathering, the company can develop a database for managing record of its consumers and also make maximum utilisation of other information sources for obtaining information regarding external environment (Barney, 2001). b) Role of SMART targets in strategy implementation Pret is an innovative fast food restaurant chain presently operational in countries such as the US, the UK, China and Hong Kong. In this paper, strategy for global expansion of Pret’s business has been discussed so that the company can have restaurants in other countries. SMART business targets imply that the business goals of the firm should be specific, achievable, measurable and relevant to the mission and vision of Pret. One of the short term goals of the company should be developing market, increasing market share and monitoring and reviewing. The other goals can be internal assessment, quality control and assessment at specific time interval and individual and team performance appraisal. Short term goals are an essential part of long term goals and therefore should be dealt with sincerity. The management of Pret can divide the complete strategy in small clusters of goals and objectives with specific timeline within which it should be attained. Time framework provides great scope of measuring the goals that has been achieved and difficulties in those which could not be achieved by the firm (Boxall and Purcell, 2003). Reference list Barney, J. B., 2001. Resource-based theories of competitive advantage: A ten-year retrospective on the resource-based view. Journal of management, 27(6), pp. 643-650. Benito, G. R., 2005. Divestment and international business strategy. Journal of Economic Geography, 5(2), pp. 235-251. Boxall, P. and Purcell, J., 2003. Strategy and human resource management. Industrial & Labor Relations Review, 57(1), pp. 145-146. Brugha, R. and Varvasovszky, Z., 2000. Stakeholder analysis: a review. Health policy and planning, 15(3), pp. 239-246. Chung, H. F. and Enderwick, P., 2001. An investigation of market entry strategy selection: Exporting vs foreign direct investment modes—a home-host country scenario. Asia Pacific Journal of Management, 18(4), pp. 443-460. Dibb, S. and Simkin, L., 1991. Targeting, segments and positioning. International Journal of Retail & Distribution Management, 19(3), pp. 4-10. Hudson, M., 2011. Advanced strategic planning techniques. [pdf] Compass Partnership. Available at: [accessed 13 January 2015]. Linn, M., 2008. Planning strategically and strategic planning. The Bottom Line, 21(1), pp. 20 – 23. Market line, 2014. Global – Restaurants. [Pdf] Market line. Available at: [accessed 13 January 2015]. Mullins, L. J., 2007. Management and organisational behaviour. New York: Pearson Education. Porter, M. E., 2008. Competitive advantage: Creating and sustaining superior performance. London: Simon and Schuster. Pret A Manger, 2014. About our company. [online] Available at: [accessed 14 January 2015]. Ramirez, R., 1999. Stakeholder analysis and conflict management. Cultivating peace: conflict and collaboration in natural resource management, pp. 101-126. Schein, E. H., 2010. Organizational culture and leadership (Vol. 2). New Jersey: John Wiley & Sons. United Nations, 2014. World Economic Situation and Prospects 2014. [pdf] UN. Available at: [accessed 14 January 2015]. Watts, G., Cope, J. and Hulme, M., 1998. Ansoff’s matrix, pain and gain: Growth strategies and adaptive learning among small food producers. International Journal of Entrepreneurial Behaviour & Research, 4(2), pp. 101-111. Read More