Strategic Management: Concepts and Cases - Case Study Example

Assignment: Essay on areas touching on Strategic Management Student’s Name: Course Code: Date of Submission: Introduction The management in any organisation always strives to make responsible strategic and policy decisions aimed at enhancing and sustaining high organisational performance and managing resources in such a way that societies can benefit from them in the future. This calls for the addressing of specific areas in strategic management. An organisation will have addressed these areas when it implements a strategy that creates value for its customers and other stakeholders and the strategy cannot be duplicated by its competitors or proves to be too costly to imitate. This essay will look at some of those areas and discuss them in relation to provided case studies. Case1---the evolving strategy (Four types of strategy formulation process, 5Ps for strategy) Strategic management is a broad field hence critics purporting that the same as the cause of lack of a unifying theory base. Richard Whittington alienates four theories of strategy; classical, evolutionary, processual and systemic (Grant et al. 2011). The classical theory of strategy is one that postulates that plans and decisions that organisations make are geared towards the making and maximising profits. Here, profitability is the main aim of the business and rational planning is the vehicle to deliver that end. It is characterised by rational analysis, separation of conception from execution and the commitment of profit maximization. Top managers are in charge of formulation of policy and implementation is left to the operational managers (Whittington 2001; Grant et al. 2011). The evolutionary theory of strategy holds that the success of organisations is dependent on the environment rather than rational planning. This theory ignores the role of decision makers and makes the implication that the environment selects and determines kind of organisations that succeed. Successful organisations adapt to the existing environmental pressure (Grant et al. 2011). Processual theories of strategy propose that instead of organisations striving to make changes they should accept the world the way it is. Main aim of this strategy is more than just profit maximization. Here the strategists are supposed to follow the already existing rules and routines of the organisation. Here the strategy emphasises on internal development rather than external foresight and does not believe in rational planning. It holds that strategy emerges from basic everyday operations thus strategy originates from the everyday activities of individuals within the organisation (Whittington, 2001). The systemic approach also agrees on long term planning as the classical approach does. It postulates that success of organisations is influenced by the social and economic systems in which they operate. It stresses the importance of market share and growth more than profit maximisation and it is pluralistic in nature. In this case strategy does not come from the managers but instead it originates from the cultural rules and the social characteristics of the society in which the organisation operates (Whittington 2001). Mintzberg also suggests the 5Ps of strategy; plan, ploy, pattern, position and perspective. In strategy as a plan it implies that strategies are made consciously and purposely in advance. A comprehensive plan is drawn to make sure organisational objectives are achieved. Managers establish a predetermined direction for the organisation (Smith, Berry and Pulford 1999). Ploy has to do with direct attacks on competitors by threats of getting into the market and cutting down prices. Here the organisation employs threats and other manoeuvres to gain a competitive edge in the market (Smith, Berry and Pulford 1999). Pattern concentrates on action. It entails a series of actions that produces consistent behaviour. Behaviours which form part of everyday life of the organisation hence producing a pattern of behaviour specific to the organisation. Strategy is made into a pattern (Smith, Berry and Pulford 1999). Strategy as a position has to do more with how the organisation places itself in the market. How it wants to be seen in the market; a leader or a follower. Strategy here is seen to form a connection between the organisation and environment (Smith, Berry and Pulford 1999). Strategy as perspective is instilling of a shared and common company culture. All the employees identify with the strategy and feel part of it hence forming a common company perspective. In this case study, Facebook has adopted a mix of strategy approaches to stay afloat in the competitive market. But taking precedence here is the systemic approach to strategy where Facebook has its strategy planned out but sticks to the rules inherent in the economic and social spheres in which it operates. Its strategy is not concerned with profit maximisation but rather on growth and increase in market share because it does not charge the users of the site. This is a behaviour that has ingrained in itself since 2006 to date and it has formed a culture within its ranks making it position itself in the market as a leader. Not charging its users is also a ploy to stay ahead in the market. Other manoeuvres that Facebook has employed to stay ahead in the competitive market is value creation to its services case in point being the acquisition of the photo-sharing application, Instagram and its role in corporate social responsibility. Case2—Corporate Governance and sustainability (stakeholder management, brand effect) Corporate governance can simply be taken to mean or depict an environment of trust, ethics, moral values and confidence as a concerted effort of all the stakeholders (Aras and Crowther 2010). It is a system through which business organisations are managed and controlled (Kocmanová, Hřebiček and Dočekalová 2011). Good corporate governance is essential for the better performance of any organisation. Good governance means that the rules and practices that guide and govern the relationship between management and shareholders as well as the stakeholders such as employees, pensioners and local communities exhibit and delivers transparency, fairness and accountability. This will in turn build trust and confidence in customers in the products or services offered by the organisation (Aras and Crowther 2010). Sustainability looks at the future in that the decisions that are made today within the organisation do not constrain choices of resource utilisation in the future (Aras and Crowther 2010). Good governance ensures good decisions are made now which will guarantee the existence of the organisation in the future. It means the acceptance of present costs as an investment for the future. Sustainability encompasses a broad approach aimed at achieving success on both the economic, environmental and social dimensions. Performance in those key areas are relevant to achieving sustainability; economical the organisation focuses on economic performance and market share, environmentally it focuses on its impact on nature with regard to sustainable development and socially it is concerned with the implementation of internationally recommended business procedures and standards in terms of employee management, consumer protection, human rights among others (Kocmanová, Hřebiček and Dočekalová 2011). Qantas airlines in this case study had to pay dearly for mistakes resulting from a poor governance system. The chief executive officer made a decision which when rated under governance scorecard rates as poor, reckless, irrational and emotional to some extent. The industrial dispute between Qantas and its employees drawn from the Australian Licensed Aircraft Engineers Association in 2008 did nothing to improve the way the management handles such crises. The same dispute resulted in punctuality issues and this reduces the trust and confidence of the investors in investing their money in such unpredictable organisation. The customers because of delays in flights also started losing confidence in the brand. The crisis of 2011 was the worst as it led to the grounding of services at Qantas airlines. A decision made by the chief executive officer when negotiations between three unions and the Qantas management broke down. This saw the migration of customers to Virgin Australia. Because of this business strategy of top-down approach where decisions originate from the top a mishap in governance led to the company losing millions of dollars and its reputation as well. Good governance should be inclusive, fair, and transparent and should foster accountability which was lacking in Qantas airlines and this plunged the company into trouble and hence was not able to sustain its brand name and the reputation it had built for itself. Case3---Value Creating Goals Creating value is the aim of any business organisation. Here the organisation engages in activities aimed at addressing fundamental societal issues by identifying new and feasible sources of competitive advantage that bring about profit and community benefit (Accenture 2011). Most companies belief they would have added value if profits are maximised and maximum returns are advanced to shareholders. But adding value does more than just maximise profits but also in building of enduring institutions. Organisations are more than apparatus for generating money they are also engines for accomplishing societal goals and creating meaningful livelihoods for its employees. Thus the value that an organisation creates should not only be hinged on short-term profits but also should be looked at in terms of how the organisation sustains the conditions that allow it to succeed (Kanter 2011). Successful organisations create channels that utilise human and societal value as criteria of making decisions. They believe that stakeholders’ needs can be met through numerous ways; producing goods and services that improve the lives of the users, improving employees’ quality of life, creation of a strong network of suppliers and business partners and ensuring financial viability which provides funds for improvements and innovations as well as returns to investors (Kanter 2011). Fortescue metals group limited has achieved a competitive edge in the mining industry simply by setting and implementing value addition based goals. It has constructed a 256 kilometre rail connecting the mining hubs in Western Australia. It has also within its ranks employees of vast experience in the financial and mining sector, many of whom have an elaborate network within the financial and political community. It has also invested in the well-being of the community and the stakeholders in general. This evident through Fortescue’s housing construction, residential workforce training and employment programs. By June 2011, the company trained and employed 300 Aboriginal people and at the same time it is committed to minimising environmental degradation. It also has enough offs for it employs and has constructed houses for them and established a home ownership scheme. These among others have seen Fortescue cut a niche for itself in the competitive mining industry. Case4---Industry analysis (PESTEL, 5 Porter’s forces) It is pertinent for any organisation to carry out an external appraisal by thoroughly scanning the external business environment for elements that are part and parcel of the organisation’s current and future activities. A PESTEL analysis is a tool used to analysis the external environmental characteristics that influence business plans. From the framework six elements of external environment can be identified; political, economic, social, technological, environmental and legal. These six make up the acronym PESTEL (Norton and Hughes 2009). Political factors are very pertinent in business. They may even guide in locating the corporate headquarters. They include such factors as stability of government, entry regulations, tax policy, trade regulations and social policies which has to do with welfare (Norton and Hughes 2009). The Australian political climate is conducive as the government is stable and trade and tax regulations are flexible that is why foreign supermarkets such as Aldi and Costo have been able to set foot in Australia. Woolworhts and Coles are also doing well because of the favourable political factors in Australia. Economic factors include such factors as levels of inflation, unemployment, economic growth and international trade. This can be gauged through looking at the disposable income og buyers, ease of accessing credit, interest rates and inflation (Norton and Hughes 2009). Purchasing power of buyers in Australia declined during the global financial crisis but supermarkets in Australia are insulated against reductions in disposable income. Reduction in prices in the supermarkets is as a result of this. Social factors deal with the mentality of consumers in a given market. In Australian supermarkets most of the consumers are going for the organic products as a result in the change of lifestyle and trends. Changing age and population demographics have influenced the location of supermarkets and increase in population has led to opening of more outlets. Technological factors such as innovations and discoveries has seen supermarkets in Australia come up with virtual supermarkets and introduce contactless card payment systems. Environmental factors deals with waste disposal laws, environmental protection laws, attitudes towards environment whereas legal factors entail learning and adopting the laws of a particular region (Norton and Hughes 2009). Porter postulates that competition in an industry is influenced by five competitive forces; rivalry among existing firms, bargaining power of buyers, bargaining power of suppliers, threat of new entrants and the threat of substitute products. In the Australian supermarkets they have been able to amass enough bargaining power as buyers from suppliers by virtue of the substantial portion of their purchases. Some have gone ahead and acquired supply chains. Supermarkets in Australia have had excessive dominance over suppliers hence the need to establish a supermarket ombudsman. Substitutes inform of convenient stores do not pose much of a threat to supermarkets because of limitations in the variety of products they offer. Entry barriers have not restricted entry into the business as the returns are worth it. Case5---Analysing resources and capabilities Resources and capabilities are the sources of internal strengths or weaknesses for any organisation. Utilising the unique resources inherent in the organisation to the fullest forms the basis for profitability. Accumulating reserves of resources and capabilities that are in inadequate supply in the organisation corrects the competitive weakness of the organisation (Tallman 2009). India has achieved greatness in tea production by simply harnessing the resources and capabilities within its borders and exploiting these capabilities and resources to the fullest. One of such resource that has enabled growth in tea production in India is the availability of land for planting tea and the conducive climatic conditions of the area that permitted the growing and thriving of tea. This coupled with the ingenuity of the tea planters produced many premium Indian teas. There was also campaign in both India and Great Britain highlighting on the benefits of drinking tea which had an instant mark in terms of providing a market for the industry. Another important capability within the ranks of India in regard to tea is the fact that most of the tea produced is consumed locally. There is also organisational resources where the government through the tea board of India provides financial and extension services to tea planters. Also the production of a brand that is unique to India; Darjeeling tea has cut India a competitive edge in marketing of its tea. Another organisational resource is the dividing of the industry into two sectors the corporate and the small grower. Case6---Corporate strategy (Network, partnership, alliances) Organisations can acquire merger, network or form partnership with competitors. This aspect of corporate strategy has been seen to pay off. Acquisition has to do with purchase or takeover of a company whereas merger is the combining of two companies (Rothaermel 2013). Organisations can also voluntarily form alliances which afford them the luxury of sharing knowledge, resources and capabilities and ensure that such organisations gain a competitive edge in the market (Rothaermel 2013). The takeover of Air Asia by Tune Air Sdn Berhad at such a time when the aviation industry was experiencing challenges has proved that mergers and acquisitions can redeem an organisation. The takeover was by an experienced group in the aviation industry which came with the strategy of targeting that part of the population which has been on the lock out as far as flying is concerned simply because of the high costs of flying. The low cost initiative which was started in Air Asia saw it make enormous profits. It engagement with the Tune Group has afforded Air Asia the opportunity to utilise such services as discounted hotel services in Tune Hotels, mobile phone services under the Tune Talk and financial services under Tune money. Air Asia also entered into an agreement merger with Virgin Airlines by selling ten percent to Virgin Airlines. This saw it succeeding in the long haul budget flight segment. This has enabled Air Asia access new markets and distribution channels as well as strengthen its competitive position in the aviation industry. Conclusion In conclusion, organisations which have embedded in their organisations aspects of strategic management have had tremendous success in terms of increased returns as well as adding value to the lives of employees and the society in general. This has been evident in some the case studies discussed. Thus, strategic management in organisations is very important as it orders the performance of the organisation. References Accenture 2011, Business at its best: Sustainable value creation, viewed 18 May 2015, http://www.accenture.com/sitecollectiondocuments/pdf/accenture_business_at_its_best.pdf Aras, G and Crowther, D 2010, A handbook of corporate governance and social responsibility, Gower Publishing Limited, Farnham Surrey. Grant et al. 2011, Strategic Management: An Australasian Perspective, John Wiley & Sons, Milton Qld. Kanter RM 2011, How great companies think differently, Harvard Business Review, viewed 18 May 2015, https://hbr.org/2011/11/how-great-companies-think-differently Kocmanová, A, Hřebiček, J and Dočekalová, M 2011, Corporate governance and sustainability, Economics and Management, vol. 16, pp. 543-550. Norton, A and Hughes, J 2009, CIMA official learning system: Enterprise management, Elsevier Ltd, Oxford. Rothaermel, FT 2013, Strategic Management: Concepts and cases, McGraw Hill, New York. Smith, P, Berry, C and Pulford, A 1999, Strategic marketing communications: New ways to build and integrate communications, Kogan Page Limited, London. Tallman, S 2009, Global strategy, John Wiley and sons, West Sussex. Whittington, R 2001, What is strategy- and does it matter?, Cengage Learning, London Read More