Strategic Planning and Management - Assignment Example

Strategic Planning and Management 1. a. The first major problem with Company X’s vision statement is that it targets earning its shareholders more money and increasing the value of their investment. In other words, the vision is all about what the company can do for itself, rather than what it can do to its target market. Another problem with Company X’s vision statement is that it is too long. Ideally, a vision statement should be short, concise, and easy to remember. While it is easy to remember the vision statement that Company X has, it is arguably not for its brevity or good content; rather, it would be because it targets making money, something that other businesses would intend to be the result of satisfactorily serving the needs of their customers. While it is common knowledge that every profit-making business has an intention of growing the business, controlling the assets and structuring the balance sheet in a manner that ensures that the business gets a return on its invested capital, the details do not have to go into the vision statement. Company X has described what its profit motives are, while in reality, a vision statement indicates where the company hopes to be in the future. Ideally, the vision statement should focus on the outcomes – for instance by indicating that the company hopes to become the largest distributor of quality and affordable computers in the region. Company X’s vision statement has also failed the simplicity test. It is too long and too detailed. The company could for example rectify this by indicating that it intends to get a computer on every office in the region. The foregoing example is simple, yet clear on what the company seeks to achieve. The use of initials EPS is also unnecessary in the vision statement, especially because the vision statement is supposed to be easy to decipher. Coded language would therefore force the same employees that the vision statement is supposed to guide, to go searching for meaning. Employees who are not proactive enough to search for meaning would continue working in the company without gaining a full understanding of the second part of the vision statement. Ideally, the framers of Company X’s vision statement should not have included the second part of the vision statement, which explains how the company will attain its purpose. Additionally, the first part of the vision statement indicates that “the purpose of Company X...”, and hence creates the impression that the framers of the vision statement confused the company’s purpose with its vision. A purpose statement indicates what the company does, why it does what it does and why the company exists. A vision statement on the other hand aligns leaders and their followers by ensuring that the followers are well aware of what the company intends to be in the future. Overall, it would appear that Company X’s vision is all about making money and getting a return on investment and nothing else. Notably the product, which should drive such profits, is not even mentioned. As a guide to employees, the vision statement is thus an indirect way of telling the employees to make money for the company regardless of the tactics used. A critic would hence inquire whether Company X values its customers. The company can rectify its vision statement by including the products and the customer (albeit through inference) in the vision statement. For example, the company could indicate its vision statement to be: To be the single largest distributor of quality affordable computers in XYZ region. Quality and affordability are two aspects that consumers look out for when making purchasing decisions. Being the single largest distributor of computers in a specified region would mean that the company has high sales volumes, which in turn guarantees profits and a return on the investment. b. It is important for organisations to have a good vision statement because it indicates the company owners’ aspirations in a manner that is clearly understood by the employees. In other words, a good vision statement communicates what the company hopes to achieve in the future to the employees who are critical players in driving the company’s agenda. Ideally, a good vision statement helps prepare a company for the future. It also helps in strategy, decision-making, prioritising, and planning. Additionally, a good vision statement helps the company in aligning people through hiring and promoting since the leaders understand the importance of hiring and promoting the right people, who will in turn help the company to attain its aspirations for the future. 2. Reckitt Benckiser is a global company, which is known in Australia for such brands as Dettol®, Air Wick®, and Harpic® among others. The company pursues a product differentiation approach in that it promotes its products as being unique, and hence sells them at a higher price compared to other ‘ordinary’ products in the same category. Dettol® (both the antiseptic and soaps) is for example, marketed as having the ability to fight 99% of all germs. Woolworths on the other hand is a global company, known in Australia as a retailer of fresh food and other assorted consumer items. Woolworths uses a cost leadership strategy to compete with its market rivals such as Coles, which incidentally has also adopted a similar strategy. Reckitt Benckiser markets its product values directly and sometimes lets the consumer market know that the premium prices on its products are a reflection of the value contained in those products. To enhance its value chain system, Reckitt Benckiser for example coordinates with retailers (e.g. Woolworths) for its product to be placed where they attract the most consumer attention. The company can also arrange for companies not to sell a product below a specified price (regardless of the discounts afforded by the manufacturer) to avoid devaluing the products in the eyes of the consumer. Reckitt Benckiser sometimes also coordinates with retailers to address customers’ needs for value – for instance through product promotions. The company can for example arrange for Woolworths customers who purchase a specific quantity of Dettol antiseptic bottles to get free Dettol wet wipes. Woolworths on the other hand seeks to let its consumers know that they can get the best price for different products in its stores. Woolworths uses a combination of cost drivers, capacity utilisation, bargaining power, supply chain efficiencies and outsourcing vertical integration to bring down costs. Consequently, it is able to pass the cost advantages to consumers through price discounts. Since Woolworths is a large retailer, it is able to bargain for lower prices from the suppliers (e.g. for items such as bread and milk). Additionally, the retailer is able to use management concepts such as just-in-time (JIT) management in its grocery sections thus ensuring that consumers get fresh produce and the retail store does not remain with unsold grocery items. Effectively, this approach to managing time enhances efficiencies in the supply chain and cuts costs for the retailer. The benefits from the bargains and other cost-cutting measures are then passed to the consumers in the way of price cuts and discounts. As a big retailer, Woolworths is also able to deal with manufacturers who supply directly to the store, hence by-passing dealers and distributors. Effectively, this means that the price margins that the dealers and distributors would have added is not included in the retail price. Woolworths also streamlines its operations by for example, having already packed meat delivered by suppliers. For Reckitt Benckiser, competitive advantage is attained from product quality, but for Woolworths, competitive advantage is obtained from pricing discounts and price cuts, which are made possible through effective cost management by the retailer. 3. a. Procter and Gamble (P&G) is an international company, whose presence in Australia is felt through products in the health, beauty, snacks, beverages, snacks, fabric and homecare products. P&G pursues a cost leadership strategy, and its value has both primary and supporting activities. The primary activities include sourcing and procurement, operations, outbound logistics, and sales and customer service. The sourcing and procurement activity involves sourcing raw materials, procuring them and transporting them to the P&G manufacturing plants. The operations activity includes the assembly plants and branch operations. The outbound logistics activity at P&G includes warehousing, shipping and fulfilment. P&G has to deal with large retailers such as Woolworths and Coles among others, who have implemented JIT inventory management systems. The company has therefore had to create a database that it uses to create, review, approve and distribute products. This enables the company to lower its costs on different items and also reduce the development time of different products. A different company that uses the cost leadership strategy and which has a similar value chain to P&G is Woolworths. As a supermarket retailer, Woolworths uses the cost leadership strategy to obtain a competitive advantage over its rivals. Woolworths’ core value chain activities include inbound logistics – it uses its own distribution centres, procures in bulk, reduces cost price and takes advantage of discounts offered by suppliers; operations (e.g. through JIT management); outbound logistics – the retailer uses a vendor quality management system that ensures that consumers get quality and fresh products; and sales and marketing – the retailer creates brand awareness through extensive marketing which in turn translates into high sales volumes. b. Despite being in different industries, P&G and Woolworths have cross-business strategic fits mainly because P&G can act as a supplier to Woolworths, while Woolworths can act as a vital marketing place for P&G products. Should P&G and Woolworths choose to follow a related diversification strategy, the two companies can benefit from technological know-how and valuable expertise. For example, Woolworths can pass some JIT information to P&G as a way of helping the latter become more efficient in delivering products as and when they are needed in Woolworths stores. The two business entities can also exploit a well-known brand name to their business advantage. When marketing its products for example, P&G can mention that its products are found in all Woolworths stores and other retail outlets. Such a mention would be also be marketing Woolworths as the only store where consumers cannot fail to get their preferred P&G products. The two businesses can also use related diversity to combine related activities in the respective business. For example, Woolworths can use P&G warehouses when importing products. This would then imply that the cost of running its own warehouse would be significantly reduced. Woolworths on the other had can enhance P&G’s product placement in its stores by placing the products in strategic places where they would attract the consumers’ attention most. Q.1 (a) Theoretically, a company’s vision statement should provide its long-term direction based on a mixed consideration of its product, market and customers. In Company X’s vision statement, the focus seems to have been placed more on the profitability aspect of the business and the need to have a return on investment. While profitability is desirable in every organisation, a vision should provide a sense of where the business is going, and why going to the specified place makes good business sense for the organisation. Company X could have visualised its quality computers in every school, home and office, and this would have captured the imagination of employees in the company, since they would question how they are supposed to ensure that such a feat is attained. Is it for example by being good to customers, placing the prices a bit lower than other computer retailers, or simply relying on the quality of the computers. The second shortcoming in Company X’s vision statement is that it is neither distinctive nor specific. Every organisation wants to be profitable; indeed, every for-profit organisation wants to have a return on its investment. Employees and the company at large however need to be directed on how best to attain profitability. Such directions need to be contained in the vision statement, which should be used by the management to guide the organisation into a desired future. The first sentence of the vision statement is also not rightly phrased since it gives the impression that the shareholders are the only stakeholders who will benefit from the profits generated by the company. Ideally, the vision statement should uphold the interests of all stakeholders. Arguably, the vision statement of Company X is not memorable. This is because a company cannot even be remembered for wanting to be profitable; after all, it is common knowledge that all for-profit organisations want to be profitable. Ideally, profitability should be mentioned as part of the larger vision that indicates that the company intends to make business sense in its activities. However, the vision statement should also have elements that show the company’s feasibility, flexibility and forward-looking nature. Company X’s vision statement can be improved making it graphic through painting a picture of where the company wants to be in future (e.g. to be a leading supplier of quality computers). The vision can also be improved by introducing direction and focus into it (e.g. through partnering with organisations, schools and other consumers). Keeping the vision focused would also improve it. In the end therefore, the vision statement can lead like ‘To be a leading supplier of quality computers by partnering with organisations, schools and general consumers.’ Q.1 (b) A good vision statement is necessary for every organisation because it serves as an essential management tool, through which employees get to understand where the company is headed and for what reasons. Without a good vision statement, employees may fail to commit fully to the organisation because they may not understand what the company’s future plans are. Ideally, the vision statement should inspire and motivate employees while providing direction to managers. Without a good vision statement therefore, the managers would not know the direction to take, and employees would be uninspired. As a common phrase says, ‘if you don’t know where you are going, any road will take you there’. Similarly, the absence of a good vision statement is comparable to not knowing where the company is going. Such an absence would therefore result in confusion as some managers may give directions depending on where they think the company should be in the future. Notably, the vision statement provides the ‘where’ of a company’s ultimate position in the future. The managers and employees then find it easier to work towards an identified position that the company wants to achieve in future. Some companies (such as the Company X example) have what can be regarded as ‘ineffective’ vision statements. Notably, a vision statement can be rejected by the same people it is supposed to direct and inspire. In that case, it can be regarded as an ineffective vision statement. In Company X’s vision statement, the employees can wonder what their fate will be after helping the company to become profitable. For example, would increased profits lead to better salaries for them? How would the company even become profitable if it does not mention the product in its vision – would it for instance, change to marketing something different from computers along the way? The foregoing questions would have been addressed by a good vision statement. = Qn. 2 Solaris Paper Pty Ltd established its presence in Australia in 2010 and since then, has dedicated its efforts in the manufacturing of bathroom tissue, paper towels, wipes, napkins and facial tissue. Although it has one product that competes on a product differentiation strategy (i.e. Paseo Absolute Silk), most of its products compete on cost differentiation. Understandably, the paper tissue, towels and napkins market in Australia has several players, all ‘fighting’ for some market share. Curtis Australia (CA) is on the other hand a family-owned business which manufactures handmade pens and jewellery, which it sells at a premium price. CA pursues a product differentiation strategy because their entire products are handmade and unique. Inbound logistics for CA involve the materials used to manufacture jewellery and pens. Most such inputs are light and do not require extensive storage (e.g. in the form of warehouses). Operations on the other hand involve product development, whereby the jewellery and pens are designed and manufactured. Outbound logistics relate to the transportation and storage of manufactured items to specific markets or retailers. Finally, marketing and sales at CA is rather straightforward. For example, the pens and jewellery are delivered to identified retailers and customers in different parts of the world, hence meaning that the company does not incur unnecessary costs. From the two companies, it is obvious that they pursue different markets. Solaris for example targets the mass market while CA pursues a niche market. CA’s value chain is quite interesting because in addition to getting jewels (e.g. gold and diamonds) used in the manufacture of their pens and jewellery products, the transformation process is usually more intimate as the designers and hand crafters put specific attention to ensuring that the products meet the quality expectations of the consumers. Once they are ready for the market, they are transported to luxury stores throughout the world. CA does not produce in bulk and as such, does not incur costs related to warehousing and storage. Rather, the company has worked a retailing arrangement with jewellery stores across the world. On its part, Solaris’ value chain includes inputs (some of which are imported and hence require warehousing), thus accounting for inbound logistics, the transformation processes which include the manufacturing process and which accounts for most of the company’s operations, and the output process which includes distributing the tissue products to the retail markets hence accounting for the outbound logistics. Marketing and sales is also a value chain activity that is more detailed in Solaris compared to CA, mainly because the former targets a mass market, while the latter targets specific consumers who purchase their items from specific shops. Notably, CA appears like it is able to control the cost in its value chain better, mainly because its operations are of a smaller scale when compared to Solaris, which operates on a larger scale and uses cost differentiation as a competitive strategy. Read More