Competitive Advantage and Sustainable Entrepreneurial Growth - Case Study Example

Analysis Strategic Plan The strategic business plan for any organisation depends on its resource base as well as its capabilities. A strategic business plan is an integration of various elements that propel a business towards overall goal achievement. The strategic business plan depends on effective practice of sustainability theories as well as those of competitive advantage. The company that will be dealt with in this paper is the Anukul Group. This company basically manufactures exclusive designer furniture, stained glass and patchwork linen. It is a company owned by Dipti Mahapatra in India and has been in the business for close to two decades. Having started in the year 1988, this company started out as a small unit with four tailors and has now gone ahead to become one of the most prestigious names in interior decoration in the state of Orissa. Case Study: Anukul Group Mission Statement: To provide exclusive patchwork linen and related interior decoration goods and services. Following is a depiction of the organisational structure of the organistaion: Organisational Structure Basic Aim and Mission behind Structure: The work culture has to be one where there is constant reinvention and innovation. This can be brought about by allotting responsibility to a new man every day. Detailed reporting helps in the psychological molding of the men. This was an important area which the supervisors focused upon. The best use of men came from keeping them at the machines for the longest time. There was an increased use of ramps and pulleys for the transportation of material. Also, there was a consensus among the supervisors that the material handling capacity must be divided for better accountability. SWOT Analysis: Internal Environment Analysis Strengths: Makes use of local strength and therefore cuts cost in recruitment and employment. It offers its employees a variety of development opportunities. There was an increase of 43% in its revenue between 2002 and 2003 - which is a major achievement for any company. Weaknesses: HR base is too widespread and there needs to be more coordination in the work culture so as to make it more flexible. Competitors like Yamini and Shopper's Stop have a greater market share abroad as the Anukul Group emphasises more on its local market share. Opportunities: This company employs people locally and can thus capture the local market in a better way through increased motivation within the work space through which employees will come up with better suggestions. Threats: The company follows a very informal structure within its work culture which might pose a threat in the entrepreneurial control structure. It does not follow a formal structure of performance management. Competitive Advantage and Sustainable Entrepreneurial Growth: Internal and Technological Environment Before laying down the formal plan of action, it is necessary to understand the elements that will be involved in the strategy that has been developed later in the paper, from the perspective of the company. This will help us understand the exact application of the theories through the length and breadth of the paper. A major part of Dipti's plan of action must include following a strategy based on gaining competitive advantage as well as achieving sustainable entrepreneurial growth. Let us first examine competitive advantage to see how and where it will fit in with the overall growth and expansion of the Anukul group. Source: Alan Chapman 2005 We are concerned with the fact that Porter's essentially ahistorical approach cannot provide a full account of either a nation's competitive advantage and corporate strategies or the growth and development of industrial clusters. For this, let us first understand competitive advantage. This has special relevance for the Anukul Group, owing to the following reasons: The company needs to launch a full fledged expansion policy. It needs to zero in on resources which can be procured on easy and regular terms. The company needs to study the market in Bangalore which is at least 10 times larger than that of Orissa. Bangalore is the Silicon Valley of India, which implies that people have greater disposable income and spending power. There needs to a study of the marketing options in order to gain competitive advantage as there are many players involved here. Competitive advantage is the response of afirm to the pressing need to organize and perform discrete activities. While these needs may not be perpetually spelt out, it is the responsibility of the planners and executers of policies to foresee such situations when catering for growth and development of the firm on various levels. So this implies that the Anukul Group needs to employ an individual perspective with an affiliation towards the basic industry type as the market in Bangalore is at least 10 times larger than that of Orissa. Risk Assessment Model: Technological and Competitive Environment Risk, in case of varied operational decisions, is seen as a focus of single determinants of behaviour arising from risk theories. (Stephenson, 2004) Various unresolved contradictions can be reconciled by examining the usefulness of placing risk propensity and risk proportion in a more central role than has been previously recognised through effective risk assessment programs. Based on such analysis, it is believed that the propensity of risk dominates both the actual and perceived characteristics of the situation as a determinant of risk behaviour. (Stephenson, 2004) Such an observation can safely justify the finding that suggests that apart from being central to any and every business or organisation, risk is something that entrepreneurs in general, are averse to. This can be attributed to the fact that at the end of the day, any loss of information has far reaching implications of its own and is deeply rooted in the genesis of risk taking and management. As far as the technological environment is concerned, the Anukul Group may make use of clusters which are groups of firms and other broad industries linked to each other on the basis of various skill and their subsets. These function in the sphere of providing the necessary technical and research based support for various customer services, by making use of various institutions and universities apart from interns and other individuals. Four Types of Market 1. Perfect Competition: Large number of firms; standardisation of product and price. 2. Monopolistic Competition: Many firms with variations of same product; individual control over prices; no control over market entrance. 3. Oligopoly: few firms with two barriers as far as entry is concerned - a) economies of scale; b) government regulation of number of firms. 4. Monopoly: single firm in the market; barriers for entry are strong due to large economies of scale or government regulations. (Source: Simmons, 1995) Marketing: Factors influencing Demand and Supply in the Four Markets Lifestyle products have seen many takers from a variety of income and social backgrounds in the recent past. This has triggered various empirical studies into the nature of the market forces that determine the operational realities of these products in terms of brand identities and knowledge. The branding and positioning of a high end lifestyle products like linen and artefacts is of utmost importance to give its market value a lift. (Bennett et al, 2002) Therefore, for a lifestyle product range like Dipti's, what better than a country where lifestyle solutions are becoming a rage and the norm of the day - India. This Asian country is fast moving away from its traditional colonial bearings to discover style and charm in urban living. The new generation in India does not mind doling out that extra amount of cash to spend on good lifestyle products that will make a statement about their homes, lives and times. Welcome to the new Indian - Sassy, stylish and very, very choosy. (Fernandes, 2000) Therefore, the important element in the application of the entry point strategy for Tutbury's is to recognise the age and income groups that predominantly define the demographics in India, before going on to carry out segmentation and reach suitability in terms of the marketing mix. In this case, the entry point strategy may be used as a preliminary process that will help develop the marketing mix. This entry point strategy has been defined in the various elements of the marketing mix so as to find a suitable base for segmentation and subsequent brand positioning over five years. Entry Point Strategy: Technological and Competitive Environment The first element when entering a new market is the risk factor. For the Anukul Group there has been a strategic management of risk through a change of location. This needs to be followed up by the launch of personalised and online services. There is a need to now focus on changing passive international sales into hardcore business. It is important to capitalise on the opportunities by undertaking risks so as to achieve organisational growth. Therefore, once the entry level mode is applied to this situation, there will be a concerted effort towards arriving at decisions that have to do with control, risk and commitment as demonstrated in the diagram below: To deal with the risk factor at an entry level, this diagram shows that the commitment level needs to be high so as to start by catering to consumer satisfaction. With effective segmentation, it will be easy to find out the areas of investment so as to find an appropriate positioning on the scale where exports start. (Walter et al, 1988) Therefore, a good entry level strategy would involve introducing the fact that the Anukul Group is capable of presenting an international face as far as its products go and can be modified to cater to any kind of culture or country. In this regard, there will be long term growth through the management of the immediate and other short term risks. In this case, the main risk comes from losing its exclusivity which can be tackled through the direct investment strategy. In this regard, the entry level mode can be applied to find the areas where there is competitive advantage so as to find variations in the large consumer base that this product can enjoy in India. This will assist the company in finding an appropriate contractual or intermediate strategy that may be customised to fit into the Indian market in terms of segmentation. With franchising, licensing and other activities that will promote an environment of direct exports will also be a definite draw for most retailers. (Walter et al, 1988) According to the entry level mode strategy, it is important for the product to take the characteristics of its target market into account apart from the investment plan it will follow in the course of going international. This will serve the purpose of revealing the share holders ready to invest within India apart from the niche market that must be targeted. This brand must retain a more or less similar price in order to retain exclusivity. For this, it is also important to determine the dominance as far as risk and returns are concerned so as to command a fitting price accordingly. The level and degree of this dominance can be studied through an application of the entry level mode strategy. Marketing Mix A marketing mix is an amalgamation of the four Ps called Product, Price, Promotion and Place. It is a strategic process of planning and implementing the various elements in a certain combination so as to achieve the organisational goals. In this regard, it is imperative to reach a combination of the said elements along the lines of prevailing market forces and other such factors. In this section, there will be a discussion regarding the Anukul Group's existing elements in order to study how these may be applied to formulate an apt marketing mix for the Indian market for lifestyle and other such products. (Bennett et al, 2002) The reason for the focus on customer satisfaction as well as market segmentation lies in the fact that for this kind of a product range a market like India is vast and diverse with a wide base of consumer and market types. Therefore, these strategies will be implemented in terms of the four Ps - product, price, promotion and place. (Walter et al, 1988) Effects of Technological Environment Financial Projections: The financial projection for the Anukul Group is as follows: Capital Requirement: Marketing Cost of Marketing (Year One to year Two): $250,000 Cost of Marketing (Year Two to Year Three): $250,000 Cost of Marketing (Year Three to Year Four): $300,000 Cost of Marketing (Year Four to Year Five): $350,000 The costs laid down above depend on factors like scale of operations. In the first two to three years, the scale of operations will be low, which will lead to less intensive marketing. Also, in a bid to retain exclusivity, there will be a focus on only certain areas for the promotional activities. The marketing activities will intensify during the fourth and fifth years, where there will be an all time high during the last two years so as to maintain and achieve a certain quality of marketing activities. The total budget for marketing is $1,150,000 Capital Requirement: Entrepreneurial Control Year One to Two: Reorganisation of Departments: $550,000 Weekly Performance Studies: $400,000 Year Three to Four: Control of Economy of departmental operations - This will be done through recruitment of new staff: $200,000 Reorganisation on basis of new staff: $250,000 Creation of Knowledge Management System: $100,000 New Planning Department for better goal actualisation process: $100,000 Year Four to Five: Planning through research and performance reports: $450,000 Expansion in terms of more outlets: $150,000 The entrepreneurial control system reflects a movement towards better HR practices in order to gain more knowledge and carry out better planning. The total budget for this process is $2,200,000 Projections for returns on Investment: Years One to Three: With an inclination towards marketing research and basic reorganisation of the HR base, with regular performance appraisal programs, the returns for the first three years are slated to be $ 5,000,000. Years Four to Five: With a focus on expansion and growth policies, as well as reaching economy of operations, there will be a return of $15,000,000 during the last two years of the implementation of the strategic plan. References: Trump University "Entrepreneurship 101: How to Turn Your Idea into a Money Machine," by Michael E. Gordon, Wiley & Sons, 2007. Thomas Friedman, Farrar Straus and Giroux. The World is Flat. New York, 2005 Gary Hamel, C.K. Prahalad. Competing for the Future. Harvard Business School Press (1 Mar 1996) Henry Mintzberg. The Rise and Fall of Strategic Planning. Financial Times Prentice Hall (24 Feb 2000) Michael E Porter. The Competitive Advantage of Nations. 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