Strategic and Competitive Advantages of Next - Report Example

Strategic and Competitive Advantages of Next Table of Contents Introduction 2 Q1: Discussion on Strategic management 3 Defining strategy 3 Implantation issues: Strategic drift 3 Managing Organizational Change 3 Implementation of Strategic Change 5 Strategic environmental change 5 Q2: Competitive Advantages 5 Organizational Culture 5 Culture model 6 Making the Culture Work 6 Leadership Style 6 Making the Leadership Style Effective 7 Innovation 7 Making the Innovation Process Work 8 Decision making: Rational Model 8 Social Impact 8 Influence on stakeholders 8 Question 3: Overall assessment 9 Conclusion 9 Reference List 11 Appendix: Organizational Information 12 Introduction Modern day organizations operate in highly uncertain and dynamic environmental conditions. In order to effectively deal with strategic change, organizations are required to implement various strategies which not only facilitate in meeting the uncertain conditions existing in the external environment but also facilitate in gaining strategic advantages (Grant, 2005). Organizations are required to be aware of possible changes in the external environment and perceive how such alterations would impact their activities and their long run strategic position (Bensoussan and Fleisher, 2013). The current paper evaluates how Next plc develops their core strategies so that they are able to cope up with change and maintain a competitive position in the market. Such an evaluation would facilitate understanding how organizations actually manage issues and changes occurring in the industry, external environment and also internally so that productivity levels are adequately maintained. The paper would throw light upon the various techniques and model used by Next so as to gain sustained advantages in the market and manage competition most effectively (Doherty, 2000). Q1: Discussion on Strategic management Defining strategy Strategy may be defined as the set of plans and decisions which guides an organization towards achievement of their earlier set organizational missions and visions. Such strategies guide the organizations with managing their operations and resources effectively (Doherty, 2000). Such strategies are essential for effectively managing competition which arises in the industry. Companies are required to analyses the external environment, recognize the strengths and weaknesses existing therein and accordingly determine how they must function so that strategic advantages can be received. Often firms engage themselves in assessing the strengths and weaknesses of other rival firms and accordingly develop strategies. Competitive advantage can only be received when a firm offers something which no other organization in the industry has (Pearce and Robinson, 2000). Implantation issues: Strategic drift While implementing strategies, an organization is required to move from their existing plans towards new ways of functioning. This includes making a complete change in existing plans and developing new models of functions in all or few of the areas of the organization. Managing such a strategic drift becomes a challenge aspect. Implementation of a strategic change requires organizations to make employees understand the benefits of implementation of change. Training may also be required to provide to the employees so that they can easily accommodate such strategic drift (Doherty, 2000). Managing Organizational Change Change is a constant phenomenon occurring in organizations so that adaption with external and internal conditions becomes feasible. Considering the fact that the retail sector is constantly changing, Next plc is required to frequently alter their operational tactics to ensure competitiveness (Lennox, 1994). The change management process followed in Next is similar to Kurt Lewin’s change management process. Figure 1: Kurt Lewin’s Change management model (Source: Author’s creation) Kurt Lewin describes change as a simple process of unfreezing, changing and refreezing. The retail sector is constantly changing due to alterations in the tastes and preferences of consumers, technological changes and changes in the demand conditions for luxury items. Since change becomes a constant factor, it is effective if the process of managing such change is simple and swift (Jones, 2010). The initial step in managing strategic change at Next plc is to unfreeze the existing performance system (Tushman and OReilly, 2013). The unfreezing stage facilitates in creating the groundwork which is necessary for a firm to adopt change (Burt, 2000). Figure 2: Change process Next plc tries to integrate its strategic change management process with its long term organization vision (Johnson, Scholes and Whittington, 2008). Once the change process is carried out effectively, it is essential that the organization refreezes. The refreezing process makes organizational changes well rooted (Pettigrew, Woodman and Cameron, 2001).. Implementation of Strategic Change Managers Next plc crucially understand that in order to make strategies work, it is essential that the same are well integrated with the firms processes, existing tools and people. Additionally, since change is a constant process, the established plans should be flexible so that they can be made subject to alterations in the future (Next Plc, 2014b). Hence, scope for implementing innovation should always be present in the change management process. Next plc is seen to most commonly adopt change in the areas of product features, pricing policies, marketing tactics, training methods, operational methods and human resource management tactics (Next Plc, 2014a). 5C’s model The 5C framework is considered to be an essential tool for implementing strategic change. The aspects considered under the 5C model for the implementation of change are coordination, communication, command, control and conflict. Next plc implements strategic change by ensuring that factors of production and employee tasks are well coordinated. A coordinated effort is essential for avoiding confusions. Communication plays an important role in enhancing the coordination efforts between various factors and departments. Next plc follows the matrix system of communication where every organizational member is able to communicate with any other member, directly or indirectly. Similarly another important area of strategic change management is the proper dissemination of command power. Next plc ensures that power to give commands is not misused and is used most effectively by providing it to the right people. Controlling the activities taking place within the organization is essential to ensure that change management is process carried out in the right direction. Such control is exercised by Next plc through constant appraisals, follow ups and feedbacks. Change implementations are bound to give rise to conflict as not every organizational member might be equally happy with the new strategic processes. Conflict management is therefore essential. Next plc ensures that grievances of members are settled earliest. Moreover through such conflicts Next plc mangers is able to procure feedback from organizational members in respect of further improving their strategic management processes (Pearce and Robinson, 2000). Strategic environmental change Information in respect of strategic environmental change can be procured through analyzing the political, economical, technological and social changes. It also becomes essential to analyze the competitors and the needs of the target market segments so that suitable strategies can be implemented. Next plc is seen to conduct in depth and frequent environmental scan so that their activities are suitably aligned with the conditions existing in the environment. In order to analyze the conditions of the internal environment it becomes essential to understand the resource advantages and the strengths and weaknesses occurring internally across different departments (Pearce and Robinson, 2000). Q2: Competitive Advantages Organizational Culture A well established organizational culture is essential for firms to achieve growth and development. From the perspective of achieving strategic advantages, it becomes essential to ensure that organizational culture is set in a manner such that they can easily embrace any type of change occurring in the environment. Organizational culture is also an important variant for achieving competitive advantages (Hitt, Ireland and Hoskisson, 2012). Culture model Charles Handy had discovered four important types of culture types which are observed to exist in commercial institutions. These are essentially the power culture, the role culture, the task culture and the person culture (Altman and Baruch, 1998). According to the frame work suggested by Charles Handy, Next plc is seen to follow a mixture of the role and the task culture (Altman and Baruch, 1998). Since Next requires having a functional excellence, a role oriented culture is seen to be beneficial. Employees clearly know their responsibilities and what is expected out of them (Miroshnik, 2002). . However, the task culture is seen to exist only in few of the departments such as marketing, creative department and those areas of work which require team work. Making the Culture Work Next has its organizational structure based on role culture. The role culture makes individual roles and responsibilities specific and organized. Next’s internal culture is seen to be a mixture of the role and the task culture. Task culture specifically brings together employees so as to perform certain organizational functions (Johnson, et al., 2011). Leadership Style Next Plc effectively follows the participative leadership model, which essentially has the following characteristics: Figure 3: Components of participative leadership style (Source: Author’s creation) The participative leadership model is suitable for organizations which essentially follows a democratic style of culture, such as in Next plc (Kerr, 2006). Under such a model, employees are made to feel as important members and their opinions are taken seriously (A. Shriberg, D. Shriberg and Lloyd, 2002). Making the Leadership Style Effective Managers at Next often encourage employees and subordinates to provide important suggestions to the firm and ask them to participate in meetings. Since employees deal with the grass root level work and are familiar with the types of issues that exist at the lower levels, they are able to provide better suggestions during the decision making process (Harris, R. T. Moran and S. V. Moran, 2004). It is leadership style which facilitates in boosting employee morale. They are made to feel as important assets of the company (Grojean, et al., 2004). Innovation Innovation is a highly important component which drives organizations such as Next plc to continue procuring competitive advantages in the industry (Dooley, 2004). Being in an industry where consumer tastes play a crucial role, Next plc is required to undertake innovation related measures in a serious manner so that new goods and services can be offered. The retail industry also requires organizations to frequently alter or make additions to their product lines. Since the industry is highly competitive, only those firms which indulge in innovation are able to move ahead and procure success (Dodgson, Gann and Salter, 2008). Next is essentially seen to follow the flexible innovation model. Making the Innovation Process Work The flexible innovation model which is followed by Next upholds the concept that innovation can have its source form anywhere in the organization. Based on the flexible innovation process, new processes or products may be developed simultaneously (Whitley, 2000). The flexible model seeks to achieve fast implementation of newly developed processes, technologies and product development. However, before the innovation process is initiated, Next seeks to assess the needs of the stakeholders. Next understands that stakeholders are important members of an organization and are required to be deeply integrated with the new product development processes. For meeting such an objective, the flexible model is deemed to be most suitable for the company (Baldwin and Gellatly, 2003). Decision making: Rational Model An important aspect of strategic reformation is to take effective decisions. Next plc often requires to chose amongst various plans and implement only those which add value to the organization. Next is seen to follow the rational model of decision making which incorporates the following aspects: Identification of the issues Solution evaluation Selecting suitable solutions Implementation process planning The rational model is simple and based on logical thinking. It is also considered easy to implement such a decision making model when the organization is engaged in frequent alterations and restructuring (Pearce and Robinson, 2000). Social Impact Companies must take into consideration the impact of their activities upon the society. Social responsibilities of a firm incorporate four important dimensions. These are economic, legal, ethical, social and environmental responsibilities. Economic responsibilities are associated with earning profits in a legitimate way. A firm is required to provide salaries to employees and managers and make payments to suppliers of goods and finance (Aaronson, 2003). It is also required to provide returns to shareholders. These responsibilities cannot be met if there are insufficient profits. Ethical responsibilities are associated with ensuring justifiable treatment of managers, employees and workers and meeting the needs of stakeholders. Social responsibilities include providing high quality products while the environmental responsibilities include minimizing wastes and efficient energy consumption (Dyllick and Hockerts, 2002). Influence on stakeholders It is crucial for Next plc to consider the impact of their strategic decisions upon their stakeholders. Stakeholder’s interests are crucial for the long term success of an organization. Whether stakeholders agree with new strategically plans can be known by informing them about the same and obtaining feedback. Through such a process it becomes possible for an organization to gain additional information from stakeholders regarding how they can make their strategies work (Gao and Zhang, 2006). Reputed firms such as Next are crucially evaluated by their stakeholders in respect of meeting corporate social responsibilities (CSR). Next plcs’s CSR policy radically involves fulfilling the responsibilities towards interest groups such as suppliers, customers, employees, the society and the environment. The company’s production and operation policies are adequately based upon sustainability strategies. A large amount of investments are made by the company so that their functions have low environmental footprint. Next believes that since all the resources which are required by the firm are provided by the society, it is the crucial responsibility of the company to ensure that high quality products are provided back (Benn, Dunphy and Griffiths, 2014). Question 3: Overall assessment The strategies adopted by Next plc are directed towards developing virtues that provide it with strong competitive advantages. The retail sector adequately necessities firms to alter their strategies from time to time so that parity with the environmental conditions can be maintained. Alongside change strategies, leadership style and culture play a vital role in achieving competitive advantages. Under the participative leadership style, a better relationship can be fostered between the superiors and subordinates of Next plc. This makes it easier for employees to accept change. Next plc is seen to follow a mixture of the task and the role oriented culture. Based on the role culture, the responsibilities of each employee are well structured and organized. The task culture facilitates bringing employees together as a unit based on their roles. Through continuous innovation Next is able expand and the firm is able to provide more job opportunities. Innovation also facilitates achieving competitive advantages. Employee engagement in meeting social needs is deemed important by the firm. Next plc tries to develop products and services which facilitate in enhancing social value. It participates in a number of charitable projects and encourages their suppliers and other business associates to undertake similar initiatives. The company believes that providing timely and correct information to the society in respect of their activities is a vital part of their CSR. Another crucial aspect taken into consideration by Next is their reporting activities. Next operates in a rapidly changing environment. Therefore, a radical innovation process is deemed to be essential and is seen to provide the firm with required levels of excellence. Due to the existence of a combination of the task and the role cultures, Next plc is able to create an environment whereby employees are creative as well as deliver excellence. The company crucially believes in establishing effective communication channels (Easey, 2009). This virtue is not commonly found in most organizations which are based in the U.K. due to the combination of the role and task oriented culture, Next has evolved into becoming a learning organization (Straub, et al., 2002). Conclusion Competitive advantages are crucial in the retail sector for making market progress. Evaluation of goals coupled with resource and compatibility analysis is crucial for a firm to make long term success. Next plc is seen to frequently indulge in changing their strategic policies and alliances in the market so that competitive advantages can be achieved. An important aspect of achieving success in the market is to ensure effective decision making. Most strategies adopted by the firms are likely to fail if the right types of strategies are not accommodated. Next plc depends upon the skills and abilities of their workforce to ensure that their selected strategies are fulfilled. 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Lennox, M., 1994. Model Strategy for Change Management. Management Development Review, 7(6), pp.16–19. Miroshnik, V., 2002. Culture and international management: a review. Journal of management development, 21(7), pp. 521-544. Next Plc, 2014a. Annual reports and accounts. [Online] Available at: [Accessed 22 May 2015]. Next Plc, 2014b. Corporate Responsibility Report To January 2014. [Online] Available at: [Accessed 22 May 2015]. Pearce, J. A. and Robinson, R. B., 2000. Strategic management: Formulation, implementation, and control. New York: Irwin/McGraw-Hill. Pettigrew, A. M., Woodman, R. W. and Cameron, K. S., 2001. Studying organizational change and development: Challenges for future research. Academy of management journal, 44(4), pp. 697-713. Shriberg, A., Shriberg, D. and Lloyd, C. A., 2002. Practicing leadership: Principles and applications. New Jersey: John Wiley and Sons. Straub, D., Loch, K., Evaristo, R., Karahanna, E. and Srite, M., 2002. Toward a theory-based measurement of culture. Human factors in information systems, 1(1), pp. 61-82. Tushman, M. L. and OReilly, C. A., 2013. Winning through innovation: A practical guide to leading organizational change and renewal. Boston: Harvard Business Press Whitley, R., 2000. The institutional structuring of innovation strategies: business systems, firm types and patterns of technical change in different market economies. Organization Studies, 21(5), pp. 855-886. Appendix: Organizational Information Next plc is a British multinational retailer specialising in clothes, accessories and home products. Next is considered to be an important retailer in the markets of Europe. The overall business of Next plc can be classified into three important segments. These are essentially: Next Retail Next Directory Next international Next retail includes 541 stores located in the U.K and Ireland. Next Directory consists of mainly the online transactions of the company. It has approximately 4 million customers and accounts for 71,000 transactions each day. Next International consists of the companies 173 franchise stores located overseas. It also includes Next stores located in six nations. Additionally the Next international also takes into account the company’s overseas online business, catering to almost 70 nations. Next products are premium priced so as to match their high quality product features and superior brand value. The company’s turnover as on January 2014 was seen to be £3,740.0m. Profits of the firm have been continuously rising and the underlying earnings per share during the financial year 2014 were approximately 366.1p. The annual reports of the firm depict adequate financial strength enabling it to undertake growth related strategies frequently. Next plc also invests adequately in research and development (Next Plc, 2014b). Next basically targets the high end customers and focuses upon enhancing their brand image. The organizational culture is based on the principles of; motivating employees to perform better and undertaking innovation so as to align themselves with the needs and changes in the environment. Also the firm ensures that stakeholder participation and support with the organization is positive. Read More