Strategic Management of Hytex Company - Case Study Example

Running Header: Strategic Management Report for Hytex Company Student’s Name: Instructor’s Name: Course Code & Name: Date of Submission: Strategic Management Report for Hytex Executive Summary Hytex Clothing is an international company whose bases are in Malaysia that specializes in all the processes of manufacturing in all form of clothes and garments. In order to carry out the strategic management process, the company needs to involve three critical stages; strategy analysis, strategy formulation, evaluation and choice and strategy implementation. Strategy analysis will involve looking on whether the company has the right combination of factors that will help it to carry out the strategic management process. This involves availability of resources, favorable internal and external operating environment and right kind of support structure that will see the entire process through. Hytex has all the favorable factors that are capable of making the process implementable. Based on the findings got in the strategic analysis stage, different possible ways of improving the company operation are determined in the strategic formulation stage. The best strategy that gives the best results is determined which would be implemented, Hytex strategy is based on restructuring the management and the company’s mode of operation in order to suit that which is able to give better performance. Management commitment, communication, resource allocation and strategy monitoring, evaluation and control are the key to the success of strategy implementation in Hytex clothing Company. Table of Content Executive Summary 2 Table of Content 3 1.0 Introduction 5 2.0 Strategic Analysis 6 2.2 External Environment 8 2.1.1 PEST Analysis 8 2.1.2 Perter's 5 Forces 10 2.3 Internal Environment 10 2.3.1Value Chain Analysis 11 2.3.2 Financial Analysis 11 2.4. SWOT Analysis 12 3.0Strategy Formulation 13 Introduction 13 3.1 Corporate Strategy 14 3.1.1 Computer department 14 3.1.2 Management 15 3.1.3 Operations 15 3.2 Porter Generic Competitive Strategy 15 3.3 ANSOFF Matrix Guide 16 3.4 Portfolio analysis 18 3.5 Industry Life Cycle 19 4.0 Strategy implementation 21 4.1Structure 21 4.2 Process 21 4.3 Control 22 4.4 Change 23 4.5 Learning 23 4.6 Leadership 23 5.0 Conclusion  24 Reference 25 Appendices 26 1.0 Introduction Hytex is a company that specializes in manufacturing of garments. Since its establishment in 1981, it has progressively grown from a small company that specialized in screen printing to a big company that does all form of cloths production. In the recent years of its latest phase of development, it put in place computerized systems for designing, knitting, dying, finishing, garment manufacturing, pigment dyeing, garment wash and garment decoration. This has made it possible for Hytex to make any form of cloth either from scratch or uprate it from different design. As a result of this, the company has gained popularity in market both locally and internationally. The company has three major departments, the production department, marketing department and quality and control department. Each of these departments has sub sections that ensure implementation of specific roles within the departments. Due to the progressive growth of the company in the last few years, the company has managed to gain the largest share of the local market. However, after the introduction of the computerized systems in all fields of operation, the cost of the clothes have gown high resulting to decrease of sales in the local market. The company has been exporting its products to American and Asian countries. However, the market for the products in the international market has never been able to fully pick up since many countries put laws that regulate import of foreign cloths in an effort to protect their local markets.Since the establishment of computerized machine for design and weaving, most of the exports are from customers requesting specific design. Daman, W& Schramm (1972, p. 167) observes that proper business planning and implementation of these plans are very critical in development of any business. In this case, for Hytex to remain competitive in the market after acquiring of high technological equipment, it needs to come up with a strategy that is going to ensure it still remains competitive in market. This report looks into the strategies that need to be put in place to ensure the success in the operation of the company. The report starts by looking at the entire environment surrounding the company then comes up with a plan which when implemented shall lead to overall coordination of various department that will subsequently lead to high output and less use of resources. 2.0 Strategic Analysis 2.1 Introduction to Strategic Analysis Strategic analysis is the process of assessing the environment in which the business operates then looks at the organizational structure of the business itself as part of procedure of coming up with long term objective of the company (Ozman, 2010, p. 1140). There are two critical things that are looked at in the case of strategic analysis; what is likely to happen that would affect the business and the likely response or action that the business is likely to take when this kind of situation arises. Strategic management process on the other hand defines the process that the managers comes with mechanisms through which the company is able to achieve good or better performance (Moss &Hollye 2007, p. 123). Through use of strategic management, the company looks its internal operations and comes up with an internal structure that streamlines the company towards achieving its goals within a set time frame. There are three stages of strategic management process, strategy formulation, study formulation and study evaluation. In the case of Hytex Company, most of its competitors are using the old technologies in the manufacture of cloths. This makes Hytex to be the leading company in textile industry and therefore take the largest share of the cloth market. In future however, the other competing companies would take the same form of technology that Hytex is using now, making competition more complicated. This would result to fewer sales by Hytex which might significantly affect the operations of the company. In this case, the company needs to come up with a way through which it could counter this. One way is to ensure that the operations using this technology are efficiently coordinated in order to minimize the operation cost as much as possible. In this case, when a new competitor comes into market, Hytex would have significantly reduced its price making their competitor have problems in balancing between the technology and the price. Further, it should put in place a management structure that is able to match the technology and its application within the company. On a daily basis, the technology is changing in a way that things are being made simpler. The current technology used by Hytex might be outdated in near future by other technologies that would be developed by the competitors. It will therefore require that Hytex put in place a team that is able to monitor the progress of new technologies and how they can be affected or be applied in the company. Being the first company that have acquired the computerized systems, the company needs to come up with a way through which all the departments are well coordinated in order to fit with the entire system of manufacturing and selling cloths. In the first stage of strategic management of this company, the company needs to come to find out the changes that have been brought about by the change of computer system. It further needs to develop strategies that are going to help in integrating the new changes and putting them in business operation. The second stage of strategic management process is implementing the strategies that have been laid down. In this case, Hytex needs to change its management structure so that it reflects that that which involves use of technology. If the system is effectively implemented, then the company will be able to reduce the prices of most of its clothes which are currently too high therefore being able to compete against its competitors. 2.2 External Environment 2.1.1 PEST Analysis Pest analysis is the analysis that is based on Political, Economic, Social and Technology of the environment where a company is in operational. The company is has all its operation being done from Kuala Lumpur. All the operations are centralized in the head office where the factory is. All the past governments of Malaysia have always promoted private companies that create employments and contribute to the development of the nation. Hytex has created over 1000 permanent employments for the citizens of Malaysia. Through exports the company has contributed to bringing foreign income to the country. Therefore, the company enjoys favors politically. Economically, Malaysia has moderate economic growth compared to the rest of the world. In the past five years, the country’s economic growth has been growing at a 5% rate. In this case, the company is able to sustain itself in this environment. Technologically, the company has just acquired new fully automated computerized machines to be used in design, knitting, dyeing, finishing, garment manufacturing, pigment dyeing, garment wash and garment decoration. The government in conjunction with international technological companies has been able to lay the necessary infrastructures to enable establishment of technological companies in the countries. Furthermore, there are many highly trained and specialized persons in the field of technology that would contribute to its development. Presence ofadequate infrastructure and human resource to support growth in technology makes Malaysia an ideal environment for Hytex to grow. Malaysia is one of the leading countries in the world in culture. Art, music, dance, drama are promoted and integrated in the culture of the people. It is this lifestyle that demands variety of clothing for different occasions. Presence of Hytex in this kind of environment makes the company more productive in its effort to deal with different seasons of wears. This is reinforced by the wide market in the surrounding countries that have similar or related cultures. The social environment surrounding HytexCompany offers itself an opportunity to fully perform its functions. Hytex is set up in the Kuala Lumpur, a modern city that has a generally stable environment throughout the year. The city is warm in most part of the year therefore giving a favorable environment for the employee to commute and work in the factory. 2.1.2 Perter's 5 Forces Porter’s five forces analysis is a business strategy development that is derived from five forces to help in determining the competitive intensity that would result to market being more attractive. These forces are competition, substitute of services or products, the power of customer, power of supplier and intensity of competitive rivalry To a company like Hytex which intends to make land mark achievement in now and in future, then it needs to look at all the forces that might make it not to achieve its objectives so that it employs the necessary measures to counter these forces. The main forces likely to influence the success of Hytex are; 1. Threats of new competition: There is a very high possibility that future companies would employ the same or better technology in order to penetrate the market. 2. Substitute products: Some of the available wares that Hytex produces are expensive therefore making the customers to opt to buy either second hand clothes or cheaper ones from other companies. 3. Bargaining power of customer: So far, only high quality clothes which are costly are being produced by the company. Buyers can also be able to have unique designs made for them on request. 4. Bargaining power of the supplier: The cost of supplying the clothes to the company may vary especially for the exports which would make the cost to increase and therefore making Hytex less competitive internationally. 5. Intensity of competitive strategy: The competitive strategy employed by Hytex may require additional resources in order to be fully operational. 2.3 Internal Environment 2.3.1Value Chain Analysis A value chain is the interconnections of all the activities of a firm that helps it to operate in a certain industry (Roland & Jessica 2011, p. 41). It is a business management concept that tries to create sustainable and superior performance and competitive advantage to the associated company. In this case, the associated company develops a chain of activities that are unique to the company, that are going to add value to the company.With, Hytexit has three major department that are able to full the entire operation of the company. The production department deals with all aspects of cloths production which includes product design, knitting, dying etc. The marketing department deals with distribution, marketing and sales. The quality assurance department deals with all aspects that make the customer satisfied. This includes customer services, research and development all done in the effort of giving the customer the quality services. In addition, the company is among the few companies in the textile industry that have the most modern machines capable of high rate of production at low rates. All the staffs are highly trained right from the junior staff to those in management of every department to ensure that they put the priority of the customers first. In this case therefore, the Hytex has the potential of achieving any short term or long term objectives satisfactorily. 2.3.2 Financial Analysis For the 30 years that Hytex has been in operation, it has managed to achieve progressive grown. For the last five years, the company has been making a net profit of 1 billion dollar each year. The profit has been attributed due to a marketing strategy that was customer centered five years ago. Consequently it has been able to purchase the modern machines to improve on its operation in three phases at a cost of 1.7 billion. The machines include computerized and automated design and sewing machines. This have been achieved through savings in three phases, each happening every year at a cost of 0.8 billion dollars. The internal structure has also been periodically reorganized at a cost of 0.4 billion dollars. To carry out an effective strategic management system, the company would only need about an additional of 200 dollars to its budget.It is therefore possible that the company will be able to fully fund its strategic management initiative without any financial hindrances. 2.4. SWOT Analysis Internal environments The major strengths toward the success of implementing a strategic management system is that there are enough finances, the company has been in operation for a long period therefore it is well conversant with the market needs and what it ought to do and that it has advanced to have the best technology to cater for its needs.It further has expert personnel on all fields that are capable of delivering the desired results. The main weaknesses of the company is possibility of unforeseen expenses arising after implementation of the strategic management system, lack of clear structure to integrate new technology with the existing system and need for periodic review of the current technology. There is possibility that the newly acquired machines might be outdated soon due to the rate of technological advance which will require the company to again import new machines to match the new technology. External environments Worldwide, clothing and textile industry is at a level where everyone is concerned with fashion and unique designs. A company that is able to place itself in that position will no doubt be a welcome to the industry. Hytex has already placed itself in that position through acquiring of the state of art latest machine capable of delivering any form of design requested by the customer. This is definitely far ahead of most of the competitor; the company is in a position to deploy a strategic management system that will see the company have better designs, high volume of production and cheaper clothes which will definitely be the preferred choice by the customers. Ahead of their competitors, the company is in a position to put a set the culture that will be followed by the competitors in this industry. This will definitely be a positive move since the Hytex is free to do it in a way that it favors its internal and external operations. The threats of the company is its inability to penetrate most of the foreign countries due to periodic sanctions that foreign countries put on the importation of good and services. The company may not be able to predict the kind of market that they are going to face in future from the foreign countries since they shall be related with the government objectives in the respective countries. 3.0Strategy Formulation Introduction According to Rowold (2011, p. 638), strategy formulation is the process through which one decides the best way to achieve the objectives of the organization in order to accomplice the purpose of the organization. It is after the all the situations that surrounds the company environment are identified do the company come up with a strategy that if implemented is going to help the company achieve better results. In HytexCompany, the strategy formulation is based on ensuring the newly acquired machines are integrated in the operation of the working system in a manner that maximizes the output and customer satisfaction. 3.1 Corporate Strategy Patrick (2007, p. 42) explains that a co-operate strategy is the combination of activities, steps and procedures that needs to be taken in order to achieve the objective of the company. This strategy involves combining of future thinking and strategic intents of the company to adopt a corporate culture that will see the realization of the objectives of the company. In order for the strategy to work, there must be coordination of strategic planning, analysis and evaluation of the process. 3.1.1 Computer department The initial step toward achieving the objective of the company shall be to establish a computer department in addition to the existing departments. This department shall have the role of ensuring that anything to do with the operation of the machines is always achieved. Professionals in this field shall need to be employed in order to assist in the operation of these machines. 3.1.2 Management Currently, all the management board is drawn from head of every department. Sometimes during the implementation of the strategies, some departments fail to agree with the opinion of other department therefore failing to reach a consensus. In this case, a management board that shall oversee the entire operation of the company shall be formed. The management shall consist of members not drawn from any of the departments to ensure that they make independent decision without being biased. 3.1.3 Operations The internal operation of the company will have to be restructured. After the purchase of the new machines, customers are deciding the way they want their garments or clothes designed. This was not possible in the previous technology. As a result, the marketing department shall need to come up with an additional unit that markets this new form of doing business. This unit shall also be responsible for passing the design requirements it gets from the customer to the operations department and specifically to the design office. This will streamline the operation of the company in helping the customers to be served faster. 3.2 Porter Generic Competitive Strategy Portfolio analysis involves studying how certain types of portfolios perform in different circumstances (Ozman 2010, p. 234). In this case, an operation that quantifies the financial and operation impactportifolio is carried out. In case of HytexCompany, the risks that are likely to be involved in the process of strategic management are carefully studied. These risks include those associated with the market and the internal operation of the company. At the same time the prospective returns needs to be carefully studied. This would mean the company’s income after overcoming the risks that are associated risks. From the analysis, a plan is developed to either strengthen the market penetration or make some changes to ensure that the company will be making profit. 3.3 ANSOFF Matrix Guide Ansof is a form of matrix that helps in mapping the organization of a company to the strategic product growth(Moss &Hollye2007, p. 56) . (Moss &Hollye 2007, p. 56) The four main influencing factors in the development of the products are market penetration, product development, development and diversification. At the moment, the local and international market penetration strategy is based on carrying a thorough research on what the customer. The Quality and assurance department does most of the work here. Out of the research that is carried in the target market, it comes with a product that is tailored to fit that market environment. Product development involves coming up with new products that serves the customers better than the previous ones. For example, Hytex initially specialized on round necked, light T-shirt to be worn only during hot weather. However, as the market developed, there was need for developing another T-Shirt model to be worn in the office. Most people preferred heavy T-Shirts with V-shaped neck. To implement this design, the design office came up with the design which led to restructuring of the manufacturing department so that it would be to produce the new design. This process used a lot of resources and time. With the current high technological computerized machine, the design and knitting would need to be integrated into one unit. Any new product developed would be easy to implement using our computerized machine. Market development involves looking for other form of market for the sale of the products. Market development may involve either coming up with new markets for selling of our products or new ways of selling the products. In Hytex Company, this is controlled by the marketing department. Identifying a new market would require very good study of the market to understand what that market lacks so that the products that you come up with would be accepted in that market. Market development would also mean to bring new product in already existing market. This way the market becomes more competitive and the products produced are of higher quality than the ones that initially produced. The product and market diversification are as a result of market development and product development. When the two combines, then they comes up with a new form of doing things that is going to bring an improvement in the market. In this case, Hytex has already acquired new machines and therefore and will need to restructure the design office so that it can be able to come up with more appealing clothing designs. The fact that the customers are able to contribute in the design stage on the kind of the cloth or garment they want is a major move towards development of the product. The company needs to keep a database of the new products that shall be developed so that it will know the kind of designs that are most preferred. Then coming up with a unique design that fulfills the needs of a certain group of people would be easy. The main development in the market for Hytex is through exploring the international market. In this case, the company needs to establish new offices in all the continents. The internal structure of the company allows it to produce any form of cloth; therefore its products are able to penetrate in any form of market. It is after developing the products and the market that the company shall diversify. Diversification would mean that Hytex products would be recognized internationally. 3.4 Portfolio analysis Portfolio analysis is a systematic process where the products and services of an organization to the business portfolio are made. It involves quantifying financial and operational impact of the portfolio. It is very important to evaluate investment performance and timing the returns effectively. In portfolio analysis, risk aversion and returns are the main components are looked at. Clothing industry has been for a long time being very successful. This is one of the reasons that the company has been getting very high returns in the last five year. Therefore, investing in the business would not pose a major risk to any investor as the industry has very high profits. Similar companies in the industries still make very high profits meaning that this business is very vibrant. The returns from the company are also very high. The profit that is made by the company is enough to sustain the company in the industry for few years. On average, the company had been making an average of 1 billion US dollars a year. 3.5 Industry Life Cycle The clothing industry is one that has not had major revolutions since its establishment. Getting of sewing materials is a process in itselfa process. Textile and other clothes are made from both inorganic and organic material. Organic materials consist of materials that have been got from plants while the inorganic materials are made of synthetic substances. The process of getting this thread consists of multiplex of process that adds up to the total cost of the materials. Since the sewing materials were established, not major progress has been made to make the industry more vibrant. In the industry today, the process of getting the thread has reached at an advanced stage that is capable of producing reliable thread for a long period of time. In this case, Hytex does not have many problems on this. The textile industry has also been experiencing so many problems at every cycle from workers and the conditions of work. The manual method would require the workers to work in 24 hours shifts in order to meet the customer’s needs. However with the enactment of the automated system, working will be less stressing and more fun. 4.0 Strategy implementation Strategy implementation is the steps that are taken in order to ensure that the steps in order to make sure that the strategy that has been put in action.MacGregor (2010, p 32) observes that it is a process that involves the coming up with a system that is able to integrate resources, processes, structures and the human resource towards achieving the objectives of the company. 4.1Structure In order to ensure that there is proper coordination of the entire process, the management structure shall be reorganized in order to make the new changes effective. From all the departments and the subunits a quality management team shall be formed. The role of the quality management team shall be to oversee the coordination of all the departments and units within the departments to make the entire strategy a success. The quality management team shall be the overall decision maker on the steps to be followed while implementing the strategy 4.2 Process After the formation of the quality management team, the process of enacting the new changes shall follow. In the first stage, the quality management team shall come up with a detailed plan of the stages that shall be followed with specific time frames. The process of changing of changing from manual system of sewing to computerized process would require that some staffs be relocated, some units in the operations departments be removed and new units be created so as to fit the new system. The 4.3 Control Whitelock (2002, p.348) observes that control process is a very critical stage in the implementation of the strategy since it ensures that the project is always on track. At this time, the strategy would be running and observation; positive and negative would have been made. Out of these observations, the management would need to make quick decisions on the cause of action it needs to take to ensure that the entire process remains relevant to the operation of the company. In this case, at every stage of strategy implementation, there shall be observable results that will require the mode of operation to be strengthened, restructured or completely stopped. The strategy of Hytex Company to penetrate the international market would definitely be faced with some form of challenges some of which were not very clear during the strategy analysis. These challenges are likely to have some influence in the cause of implementation of the strategy. Through monitoring and evaluation of the strategy, the management would be capable of overcoming these challenges. A control strategy is important since it helps the strategy implementation process to always keep on track. This is because in some situations, the implementation of the strategy may be influenced by a number of factors making it to periodically shift from the set objectives. 4.4 Change During and after implementation of the new strategy, there shall be observable changes that shall be seen. The operations of the entire industry shall change, new ways of doing things is observed. Manual machines shall no longer be used and the customers’ way of ordering clothing shall change. Every department will change in a way in order to adapt to the new system. Caution shall be taken to ensure that the entire process stick to the objective of the company. 4.5 Learning In the cause of implementation of the new system, important details concerning the operations of the company shall be recorded. This will include the response of the customer, adaptation of the worker and the income that results after the process is enacted. From the data collected, it shall be possible to point out where the system is going on well and where it is not. Workers shall be made aware of their new responsibilities and how they can be able to effectively maximize their production. At the same time, the marketing department shall be continuously learning which better ways to enable the customer aware of the facilities in the company and how they can be able to make use of them. Over a period of two years since the enactment of the new strategy, there shall be periodic review on the operations of the system to ensure everyone in the system becomes more and more aware of the process. 4.6 Leadership In implementation of the strategy is the leadership commitment is very important. Management commitment sets the pace that would need to be followed by the other processes in order to realize the objective of the company. It is the management that is supposed to give the direction to the entire process, avail the resources and give directions on the areas that need to be emphasized in the course of implementing the strategy. Failure by the management to commit itself to carry out the strategy would create some hindrances that may result to lack of realization of the company’s objective. When the top leadership in Hytex Company is fully committed to implementing the strategy, the first thing to do is to inform the members of the organization. When the members are aware of the direction that the management wants to take regarding the company, then it becomes easier for everyone to realign himself or herself to conform to these strategies. 5.0 Conclusion  Throughout the report it has been shown that Hytex is capable of carrying out strategic management and therefore better its operation output. The company had a very progressive growth in the last years at a time when it had fewer resources. With the acquiring of new high technological machines, the company shall be able to improve the internal operations. Adapting the strategic management report would help in fast adaptation of the new machines in the operation of the company, better service delivery to the customers which will translate to high income generation by the company. Reference Daman, W& Schramm, R1972, ‘A Simultaneous Decision Model for Production, Marketing and Finance, Strategic Management Science, Vol. 3, no. 3, pp. 161-172. Whitelock, J 2002, ‘Theories of internationalization and their impact on market entry’, International Marketing Review, Vol. 19, no. 4, pp. 342-347. Macaulay, S & Cook, S. (2011), A customer-centric action plan, How to Create Effective Customers, 35(5), 14-16. MacGregor, J. (2010), Leadership, Ricky Publisher: San Francisco. Moss &Hollye, K.(2007), Improving service quality with the theory of constraints, Journal of Strategic Management, 3(4), 44-56. Ozman, M (2010), The knowledge base of Products: Implications for organizational structures, Organization Studies,( 3) 8.200-400. Patrick, K (2007), Performance through people’, People Management Strategy,3, (1) 14 -58. Roland, K & Jessica, L. (2011), Working out the quality of work life, International Marketing Review, 19 (3)39-45. Rowold, J. (2011), Relationship between leadership behaviors and performance, Leadership and Organization Development Journal, 32, (6), 628-647. Appendices HytexCompany Profile Hytex started operating in 1981 as a company that does contract silkscreen printing in a rented shop-house. Hytex’s business was then confined to manual silkscreen printing using long wooden tables. Through a deliberate plan of expansion and modernization, the company moved into its own factory premises and gradually acquired several state-of-the-art machines. Hytex is now thelargest automated T-shirt screen printer in Asia capable of producing high quality plastisol prints. In an effort to further improve our services and better serve our customers, we are constantly sourcing for and acquiring more capable and modern machines. Hytex is today a fully integrated garment manufacturer with in-house facilities and services suchas designing, knitting, bleaching, dyeing and finishing, pigmentdye and garment wash, cutting, screen printing, embroidery, sewing, pressing and packing operations. Our entire organizationis geared towards our customer’s needs and schedules. Our trustworthy and efficient customer department is the vanguardof a company-wide commitment to customer satisfaction. The Hytex Group of companies is currently the leading garment manufacturer in Kuala Lumpur, Malaysia with a fully integratedand vertical set-up operation. While Hytex still does contract manufacturing for both the localand export market, diversification into the retail business locallyhas enabled the group to establish a presence in the retail industryin Malaysia as well as Singapore and Brunei. Hytex’s productsare available at all major departmental stores throughout the country. Read More