Strategic Management: Creating Competitive Advantages - Assignment Example

ASSIGNMENT: STRATEGIC MANAGEMENT Introduction: Strategic management is a need of every organization especially when a company wants a competitive edge over its competitor in this globalized business environment. Contemporary organizations use strategic management as a tool, which is used to deal various challenges of competitive environment and it is also very effective for improving the performance. Similarly, it helps in setting and evaluating short term and long term objectives and goals. In other words, strategic management is a process through which an organization makes strategies of their mission, vision, goals and objective that is used to specify directions, proceeding planning and evaluating performance[Tim06].In addition, strategic management provides a detailed framework to understand the management practices and applications. With the help of strategic management, an organization can set appropriate targets to achieve objectives. Likewise, organizations also identify potential advantages and threats during the process of strategic formulation and evaluation. Moreover, strategic management is very useful approach for contemporary organization because it draws “Big picture” of company’s policies, objectives, goals and performance. In addition, contemporary organizations are facing various challenges especially challenges related to competitive environment. Competitive environment has made difficult for the contemporary organizations to maintain high success graph without recognizing the need of changing requirements of business and adopting a plan to tackle those changes and strategic management is the only approach to tackle the issues related to competitive environment[Cha12].Correspondingly, the performance and success of contemporary organizations are totally depend upon the proper implementation of strategic management[Gre05].Thus, this paper describes how contemporary organizations are using strategic management and its theories to achieve success by giving different examples of various contemporary organizations. Moreover, this paper also identifies different areas of strategic management that are considered to be critical to the strategic success of contemporary organization. Strategic management is an important Discipline approach for all contemporary organizations. Different organizations use different theories and models of strategic management to deal various kind of challenges. Some important theories and models are: Whittington theories of strategies, Henry Mintzberg theory of emergent strategies, Porters generic strategies and five competitive forces. There are many other theories but these theories are used by contemporary organizations more frequently and these theories are also contributing in the success of contemporary organizations. Whittington theories are very valuable for an organization because it has given different four perspectives on strategy: the classical perspective, the evolutionary perspective, processual and systematic perspective. The four perceptions of Whittington give different style and way to look different strategies. Each perspective is different in its way and style. Like in classical perspective it is believed that a manager have complete hold on internal and external resources and its allocation [Whi06].According to this perspective a manager can manipulate the internal resources and strategies of organization to deal external challenges and to achieve objectives. On the other hand, evolutionary perspective gives rational view to manager or strategist that allow organization to formulate policies of growth and survival. In addition, processual perspective is based on interaction between individuals and their environment. According to this perspective the economic gain is based on rational process of interaction and their intended results. The last perspective that has been given by Whittington is systematic perspective, according to this perspective all the other approaches give narrow view because they all ignore the important aspect of social system in their strategy formulation and this perspective give emphasis on considering social and cultural aspects of the system in which company operates[Whi03]. These perspective are used by contemporary organization to make their planning process effective. Like Facebook a largest and popular social networking site is famous for its mission of connecting people. It is a remarkable effort of youngest entrepreneur Mark Zuckerberg who just design a small network to connect his university but now it has become a successful social networking site and profitable organization because he chose effective strategic management techniques. He initially used evolutionary perspective to formulate effective strategies for expansion and growth purpose. Facebook introduced different innovative strategies to increase their market share and profitability for making the survival of the company by using evolutionary perspective and now it is also considering processual and system approach to creating positive brand image. Moreover the other most important approach or theory that is being used by contemporary organization is Henry Mintzberg theory of emergent strategies. In Henry Mintzberg theory gives explain a process of how strategies are formed with in the organizations. This theory gives detailed understanding of different types of strategies that an organization can use in different circumstances. According to Mintzberg there are several kinds of strategies like deliberate strategies that are based on intended strategies and their results, realized strategies, unrealized strategies and the most important is emergent strategy[Hen00].Emergent strategy has its own importance because in this globalized world contemporary organizations are facing issues related to dynamic changes. With the help of understanding the emergent strategy a contemporary organization can observe changes and adopt formal planning process. According to Mintzberg, strategies can come from anyone, anywhere and anytime with in the organizations. Emergent strategies are not centrally controlled and planned because they are flexible in nature. An organization can adopt new ideas and improves their practices of doing business. Similarly, Emergent strategies are very useful for organizations because of many reasons like, it give freedom to adopt changes and an organization can introduced new idea without being locked into the existing course of actions. Emergent strategy is used by organization to introduce innovative ideas and new learnings[Kar11]. Contemporary organization are using this theory of Mintzberg of emergent strategy to expand their business and also to differentiate it from their competitor. Like, Qantas airway limited which is the largest and successful airline of Australia because it provides best services to its customers. The Qantas success is totally depend on its emergent strategies. When the Australian economy was facing a global slum the Qantas international implemented number of operational tactics as an effective hedging strategy to manage the forecasted risk. Moreover when Qantas wanted to expand its presence in Asian regions, it introduced restructuring techniques as emergent strategy .This shows that contemporary organizations can eliminate risks and expand their profitability by using Mintzberg theory of emergent theory. Similarly, when chief executive Gary Pert of Collingwood Football Club wanted to expand its business globally and introduced a global presence goal. For this purpose, Collingwood redefined its boundaries in sport administration and choosing this strategies, he decided to give training facilities, building community centres and new football field. By using different innovative techniques as an emergent strategy Collingwood succeeded in increasing the number of members and annual membership of his club. In this way he created positive brand image and differentiation to expand its business and increases its revenues. Therefore, emergent strategy model is considered as the most important model for contemporary organization. It enhance the ability of the organization to predict long-term outcome of changes and also gives sense of direction to manager or a leader to introduce innovative strategies to tackle the challenges of this competitive world. But on the same time organizational culture and structure have to support the emergent changes and manager should have a power to enforce new policies in the organization because these are some important characteristics of developing and supporting emergent change and its related strategies [Bob04]. Furthermore, Michael Porter’s generic strategy is also very advantageous for the success of contemporary organization. Many organization are using porter generic strategies to achieve ultimate goals. According to porter generic strategies there are two kinds of strategies with respect to competitive forces. One strategy is offensive strategy and other is called as defensive strategy. Different organization using different strategy that is totally depend on their nature of business and its profitability. Offensive strategy is designed to differentiate the product for achieving competitive edge over other competitor. On the other hand, defensive strategy is used to design strategies that is only for the survival against the competitor. In addition offensive strategy can also include new features and distinct services and facility to make the brand or product attractive. Like Fortescue Metals Group limited who has gained competitive advantage by designing offensive strategies of accomplishing economies of scale, managing human resource effectively and also maintaining good relations with political community for financial assistance. But these offensive and defensive strategies are dependent on the competitive circumstances and situations. In general porter suggests three important generic strategies that are valuable for performing well in competitive environment in long run. The Porters three broad categories are: cost leadership, differentiation and focus or niche strategy[Por79].The first category cost leadership is included in defensive strategy because it is used to defend the company against its powerful buyer and supplier. It provides flexibility to absorb in input cost whereas the competitor is not having the same flexibility that can prove competitive edge for the company. An organization can create cost leadership with the help economies of scale by investing large sum of money on technology that would be better for company to increase market share even in long run. The second category of Porter generic strategy is differentiation which is the most important strategy for contemporary organizations. All successful organization are using this strategy effectively for gaining market share and competitive advantage[Rit13]. Differentiation means introduce something that is unique for the market and for the buyer. It may include introduction of new technology, new brand, unique features, or new design that can create competitive edge in the market. The third category is focus or niche market strategy in which a small group of buyers are targeted for the unique product. These strategies are helpful for achieve success in competitive market if company managed it well. If a company fails to manage these generic business level strategies then it called “stuck in the middle”. Stuck in the middle means a company has low market share, low capital investment, lack of industry wide differentiation that is necessary to lowering the cost and achieving low cost position in the market[Gre84].therefore it necessary to manage the porter generic strategies well. Like Australian Supermarket Industry is using aggressive cost reduction initiative as competitive advantage. It is difficult for supermarket to introduce differentiation as competitive advantage that is why it is using cost reduction strategy as its competitive edge and defensive strategy. Super markets have price war on items like bread, milk and other products. Those super stores who offer less price, they record good sales. Just like porters generic strategies, Porters five forces model is also commonly used by contemporary organizations to achieve success.it is useful for contemporary firms to make analysis that represent the competitive environment.it is essential for strategic management approach because it gives foresight to manage future risk and ensure firms profitability in long run.[Sno06]. The profitability in long run is mainly depends on the following forces that are: Competitive rivalry with in industry, threat of entrant and substitute products, bargain power of the customers and suppliers[Por79]. In addition, the force of competitive rivalry is determine the strength and weakness of the competitor and threat of new entrant generate the interest to create barriers to prevent its competitor to enter in the market like Huawei banned in Australia because it is a successful Chinese brand that could prove biggest threat to Australian companies if it launched. So to mitigate the risk Australian companies used corporate political strategies to ban the Huawei in Australia. Likewise the threat of substitute products also compel producers to lowering the prices. Similarly bargaining power of suppliers and customers have also effect the overall profitability of the firm. Many supermarkets in Australia are using this strategy to make analysis and strategies to yield long-term profitability by creating competitive edge. Like corporate sector of Indian tea industry is yielding profits because they have strong supply chain and small growers don’t have this advantage so they are yielding low profits then corporate tea sector. Hence in this way contemporary organizations are using strategic management theories and their knowledge in achieving competitive advantage and profitably. Furthermore, undoubtedly strategic management theories are valuable and critical for the success of contemporary organization but at the same time many other factors and areas are also veru important to consider like Sustainability, corporate social responsibility, analysis of global climate change, effective supply chain, brand image, market selection, PESTEL and SWOT analysis all play essential role in strategic management process. The most important areas of strategic management are sustainability and corporate social responsibly. Like, Facebook even a biggest social networking site maintain standards of privacy and considers inappropriate of revealing someone’s private data. In this way it maintains corporate social responsibility. Similarly, Collingwood Football club has also maintained corporate social responsibility by not introducing poker machine in his club. If contemporary organization wants success and growth then it is necessary for them to ensure the standards of corporate social responsibility. Even corporate social responsibility is the base of sustainable global supply chain[Ama081]. Moreover it is also very important to consider geographical factors like global climatic change and environmental conditions before entering in to the new market and also while designing the strategies of new market. Like North Australian Pastoral Company (NAPCO) had faced difficulties due to severe climatic conditions and droughts which disturbed their cattle production and sales. Thus before entering into the business it is essential to consider climatic change factor and formulate strategies to tackle climatic risk. Like NAPCO had chosen environment management and geographical diversification strategies, in which they shift their cattle to other place in the extreme weather condition. In this way NAPCO is tackling climatic and environmental challenges. Furthermore market analysis is also play key role in strategic management. It helps in selecting appropriate entrant model with making detail analysis on PESTEL and SWOT. It clear all the perspective that can prove valuable in formulating strategies and also minimizing the factor of risk. Conclusion: To sum up, it can be deduced that every contemporary organization is using strategic management to handle its affairs effectively and efficiently. Overall success of an organization is also based on implementation of strategies and their continuous evaluation. Different companies use different strategies to achieve success and profitability. Some use Whittington approach, Porters models or Mintzberg theories to formulate the strategies and ensure the success and growth of their business. Moreover many other areas and factors are also crucial for the success of the company that are sustainability issue, corporate social responsibility, effective supply chain and detailed market strategies that are necessary to consider during the process of strategies formulation and evaluation. So the active role of strategic management is to give rational guidance and direction to organization that help the organization in managing risk, increasing profitability, clear the vision and mission, serving in decision making and achieving sustainable growth with the help of competitive advantage. Moreover, strategic management is a need of this globalized business world that helps in determine the crucial factors and these crucial factors give practicality to organizational plans and ensures company’s success and progress in the competitive environment of this global world. References Tim06: , (Blumentritt, 2006), Cha12: , (Charles Hill, 2012), Gre05: , (Gregory G. Dess, 2005), Whi06: , (Whittington, 2006), Whi03: , (Whittington, 2003), Hen00: , (Mintzberg, 2000), Kar11: , (Moore, 2011), Bob04: , (Meyer, 2004), Por79: , (Porter, 1979), Rit13: , (Tanwar, 2013), Gre84: , (Gregory G.Dess, 1984), Sno06: , (Snowdon, 2006), Ama081: , (Amaeshi, 2008), Read More