Introduction to Strategic Management - Essay Example

Strategic Management May 2009 Contents Sl No Page No 0 Introduction .... 3 2.0 Global Expansion of Able Corporation: Strategic Management Issues .. 4 3.0 Conclusion ..... 9 4.0 References ........ 10 Section-1.0 Introduction Able Corporation is a successful US manufacturing company located in Tennessee that builds power tools, lawn mowers, lawn furniture, microwaves, and ranges. All products are manufactured locally and sold through large retailers like Sears, Best Buy, and Wal-Mart. Although it has a thriving business in the US and Canada, Able is trying to break into the global marketplace. This report lays the foundation to Able's complete business plan for its strategic initiative to penetrate the global marketplace. The report defines the process of development of an identity definition and mission statement, and goes on to develop one for Able. The report discusses the different priorities that need to be balanced while working on an implementation plan. The report also discusses the feedback mechanisms and legal and ethical issues in setting up an overseas business. Section-2.0 Global Expansion of Able Corporation Strategic Management Issues Identity and Mission: Every organization needs to have a unique identity. Obringer (2009) says that "clearer your overall business identity is, the more likely your business is to survive and thrive". The identity also needs to be nurtured and developed to present a consistent image of the business to the outside world. At the outset, this involves understanding the positioning and capability aspects of the organization. While positioning is concerned with external factors like customer needs, competitors, legislation, environment, etc, capability covers internal factors like technology, culture, processes, skills, etc. (Thompson, 1995). These two interrelated aspects help an organization to understand where it came from, where it is now, and where it wants to be in the near future. This requires understanding of segmentation of the customer by the firm's common capability, the firm's competitive stance, and its organizational classification. This will help Able Corporation narrow down on its broad positioning, i.e., technology leadership, low cost leader, etc.. The specific positioning can then be worked out based upon its product features and benefits. Once a specific positioning is decided for the organization, the company's identity needs to be communicated to its stakeholders, which includes customers, employees, and suppliers. This involves creating a company culture, creating a visible brand, and creating its vision and mission statements. A clear mission statement acts as an "invisible hand" that guides people in the organization so that they can work independently and yet collectively toward overall organization goals (Kotler & Armstrong, 1996). The statement should be market oriented; it should not be too narrow or too broad; its should be based on its competencies; and should be motivating. Missions are best when guided by a vision, an almost impossible dream. The mission statement should give a clear direction for the company for the next ten to twenty years. Such statements are typically developed after brainstorming. Able Corporation is a successful US manufacturing company located in Tennessee that builds machine tools for home use, and sells its products through large retail chains. It is currently trying to break into the global marketplace. Accordingly, its mission statement could be developed as "to be amongst the top ten home tool makers of the world in terms of reliability, technology, and safety as perceived by our shareholders and customers". Prioritizing Implementation Steps: Once the strategic objectives are defined, proper implementation is critically important. The processes of designing and carrying through the changes must be managed, monitored and controlled (Thompson, 1995). For proper implementation a few organization control systems like a hierarchical reporting structure, proper management information and control system, and a robust employee performance reward system should be in place. The organization should also motivate its people by adopting a suitable change in culture and an appropriate social and political behaviour for this purpose (Stacey, 1996). Implementation of a strategic plan involves several trade-offs between various stakeholders. The three potential conflicting influences are the shareholders, the customers, and the competitors. The shareholders are the owners of the organization and will not tolerate any slack in performance; the returns and growth of the organization need to be stable and consistent. If the shareholders have a short term performance motive, some of the long term goals of the organization might need to be sacrificed. The expectations and aspirations of the customers need to be carefully balanced. Competitors actions in the market also need to be monitored and defensive plans developed without losing on the organization's own innovativeness. It is mostly agreed that shareholders requirements must be met both in short term and long term. This can not be achieved by ignoring the customers, which needs support from its retailers, distributors, suppliers, and people within the organization. None of the above can be achieved without regard for the competition. Finally, the implementation plan needs to conform to socially and ethically responsible norms. Feedback Mechanisms: Instituting a post implementation feedback mechanism to measure the effectiveness of the plan is of utmost importance to the success of the strategy. The purpose of the feedback system is to identify problematic issues before they can affect the overall plan. At the outset, measurable metrics need to be established. This can include the number of new global sales, the number of potential global customers Able Corporation would like to reach, or employee responsiveness on a measurable scale. The next step is to monitor the results. Monitoring would determine which of the business strategies are working and which are not. This involves gathering feedback on each business strategy using two primary sources as detailed below. External feedback - Feedback from customers and retailers can be obtained through advertisement firms specialized in doing such work using online and print media, or during the actual sale process, or during after-sales service. Feedback questionnaires will be structured to include typical questions such as - Which media was most effective in reaching out to the customers What percentage of customers was aware of the product before and after the launch of the marketing plan What percentage of customers really understood the product What percentage of customers actually bought the product Internal feedback - Feedback from MIS or from employee tests and surveys can reveal important data such as sales data, overhead and inventory costs, and employee response level. The strategy will be fine tuned on the basis of such feedback. Once decided, it is important to commit to a business plan for a definite duration; the plan should not be tweaked unnecessarily at short intervals. Legal and Ethical Issues: "Ethics is a discipline for dealing with questions of good or bad, right or wrong " (Singer, 1993). Several legal and ethical issues need to be considered especially when the company is treading into a relatively unknown geography. In Britain the Cadbury Committee was set up to consider how companies could be governed more ethically with higher employee accountability and with higher regard to shareholder interests. This is a voluntary code, and Able Corporation could consider adopting it especially when operating in foreign countries. Corporate governance is also enforced by organizations like Securities and Exchange Commission. The other ethical issues that a corporation frequently encounters are related to bribes, stealing competitor information, sexual harassment. Bribes to foreign government officials are now punishable under Foreign Corrupt Practices Act (FCPA). While some other behaviour may not be punishable under law, they can cause problems in business dealings especially in foreign countries where ethics could be different from acceptable western ethics. Able should carefully acclimatize itself with the local culture at the time of setting up its global business. Several companies ask their employees to adhere to a code of ethics, which ask them to declare should any conflict of interests arise. The company's operations could be affected owing to influences from pressure groups. Information dissemination to its customers and its environment is essential to avoid any misunderstandings. Other ethical issues that could affect an organization are supplier management, executive compensation, and environmental responsibility (or the lack of it). Many leading companies now publish a sustainability report along with their annual report; Able is also advised to follow this practice. In face of the several recent financial debacles, it is important to keep an arms length distance with the firm's auditors. The auditors should not be entrusted with other commercial activities of the firm such as management consulting, which could create a conflict of interest situation. Section-3.0 Conclusion Every organization needs to have a unique identity. Creating an identity this involves understanding the positioning and capability aspects of the organization. Once a specific positioning is decided for the organization, the company's identity needs to be communicated to its stakeholders, which involves creating a company culture, a visible brand, and a mission statement. Able Corporation's mission statement could be developed as "to be amongst the top ten home tool makers of the world in terms of reliability, technology, and safety as perceived by our shareholders and customers". Once the strategic objectives are defined, proper implementation is critically important. The three potential conflicting influences in implementation are the shareholders, the customers, and the competitors. Their individual needs to be carefully balanced to meet the strategic objectives of the organization. Instituting a post implementation feedback mechanism to measure the effectiveness of the plan is of utmost importance to the success of the strategy. The purpose of the feedback system is to identify problematic issues before they can affect the overall plan. For developing a feedback mechanism, measurable metrics need to be established, monitored and measured. Feedbacks could be external and internal, and is used to fine tune the strategy. There are several aspects of ethics and law that needs to be considered while developing the strategy, especially for a global organization. Each aspect needs to be carefully understood and conformance assured to ensure sustainable business for the corporation. Section-4.0 References Obringer, L.A., 2009. How Building a Business Identity Works. Howstuffworks, [Online]. Available at: Howstuffworks http://money.howstuffworks.com/biz-identity.htm/printable [Accessed May 8, 2009]. Kotler, P. & Armstrong, G., 1995. Principles of Marketing. 6th ed. NJ: Prentice-Hall International, Inc. Stacey, R.D., 1996. Strategic Management & Organisational Dynamics. 2nd ed. London: Pitman Publishing. Thompson, J.L. ed., 1995. The CIMA Handbook of Strategic Management. Oxford: Butterworth-Heinemann Ltd. Singer, A.W., 1993. Can a Company be too Ethical. In: Thompson, J.L. ed., 1995. The CIMA Handbook of Strategic Management. Oxford: Butterworth-Heinemann Ltd. Ch.7. Read More