Companys Strategic Management Analysis - Report Example

Strategic Management – the case of Macpac Stakeholder Mapping The role of stakeholders in the development of firm’s strategic decisions is important. The potential failure of the firm to respond to the needs of the market could be evaluated using different criteria. In this context Morgan et al. (1998, 190) stated that ‘quality strategies have failed to deliver anticipated performance benefits and that ineffective interfunctional relationships may be to blame’. In the case of Macpac, stakeholders would affect the firm’s strategic options; their power to intervene in the development of the firm’s plans is depended on their interest in the firm’s activities, see also Figure 3 – Appendix. More specifically, using the diagram in the Figure 3, Appendix, the firm’s stakeholders could be categorized as follows: a) the Owners should be found at the level of the relevant hierarchy having the strongest interest in the firm’s performance, b) the firm’s employees would follow, c) suppliers would also be interested in the firm’s position in its market – indicating its ability to continue its cooperation with its suppliers, d) customers would be at the next – lower – level; they would be benefited from the firm’s performance – but only up to the point that they could not identify other firm with similar products and lower prices; e) the state would be at the last level of the relevant list; the firm’s performance would be important for the state affecting its contributions in the national economy – tax paid for the firm’s profits. 2. External Macro Environment Scanning The performance of the firm within its market can be differentiated under the influence of a series of factors. These factors have been identified and explained using the Pestel Analysis; at a next level the industry globalisation drivers are presented – at the level that they are related with the firm’s operational initiatives. In accordance with Neely (2002) ‘the key benefit in the process of deciding what to measure appears to lie in the fact that the process forces management teams to be explicit about their priorities’ (Neely, 2002, p.295). In other words, the identification and the evaluation of key strategic values for the development of corporate activities are quite important for setting the criteria on which the restructuring of the firm’s strategies will be based. 2.1. Pestel Analysis In the PESTEL analysis, the firm’s operations are related to specific factors, the following ones: a) Political; it refers to the government’s strategies regarding the entrepreneurial activity in the specific industry; even if in the specific country the government promotes a series of measures for the funding of firms operating in this industry, still there is the issue of global financial crisis – which leads to the limitation of the funds available for the support of commerce; the country’s exports are also likely to be adversely affected, b) Economic conditions are extremely adverse – not only in the specific country but also worldwide; more specifically, after the severe failures that the firm faced because of the events of the September the 11th, the limitation of the buying power of customers – referring to clothes – is another severe problem for the firm’s managers; moreover, the firm’s transactions are also negatively affected by the turbulences in the prices of currencies worldwide, c) the trends in the clothing industry – Social Environment - have been changed; clothes’ patterns and quality have to be aligned with those of the high street – at least a similarity would exist – as close as possible, d) the Technology used in the development of the firm’s operations should be updated – following the similar practices of competitors, e) environment is of high importance for all countries worldwide; all industrial activities need to be restructured ensuring the limitation of their effects on the environment – especially after the extreme climate changes developed globally within the last 10 years; e) under these conditions, the Legal environment for the development of corporate activities is expected to be rather hostile – especially to foreign investors who are interested in entering the specific country 2.2. Industry Globalisation drivers The development of the firm’s activities in the global market would be influenced from the following factors: a) the average performance of foreign firms in the specific industry – market trends in the clothing industry worldwide, b) the governmental decisions regarding the expansion of the activities of firms operating in the clothing industry, c) the cost related with the expansion of the firm in the global market, d) the employees’ ability to respond to the specific initiative – skills and competencies of the firm’s employees and e) the position of the competitors – referring to the multinational firms operating in the clothing industry. 3. Industrial Analysis In order to evaluate the ability of the firm to achieve a high growth in the long term – despite the current turbulences in markets worldwide – it is necessary to proceed to a detailed analysis of the industrial environment – referring to the industry in which the firm operates even if the overall conditions of the national market could adversely affect the firm’s effort to improve its position. Within the context of the industrial analysis, the Porter’s model has been employed. This model offers the basis for the identification and the evaluation of the role of external forces on a firm’s performance. At a next level, after the analytical presentation of these forces, the evaluation of the industry’s perspectives for the years to come would offer the chance to understand the rate of the industry’s development but also the strengths and the weaknesses of the national market. 3.1 Porter’s Five Forces In accordance with the Porter’s Five Forces Model (see Figure 1, Appendix), the firm is likely to face severe pressures from the following directions: a) the industry itself – the firm would have to fight for keeping its position in its industry taking into consideration the position of its competitors, the changes in the customers’ preferences but also the limitation of support from the financial institutions – a problem faced by most firms worldwide, b) the suppliers – in the specific case, the most severe problem for the firm seems to be its inability to control its suppliers – the latter are more powerful than the firm and can control the prices in the material supplied to the firm; the only solution available to the firm would be to seek for suppliers in other markets – possible offering products at lower prices, c) the threat of substitute products; it has to noted that the firm’s products are unique – in terms of their quality; however, it would be always possible for the customers to find similar products in lower prices; the reduction of prices of the firm’s products would not be a solution feasible at this point – at least for now; d) the power of buyers – customers cannot be precisely estimated; because this power is likely to change – under the influence of financial turbulences – the power of buyers on the firm’s strategic decisions and its performance can be differentiated; e) potential entrants; the power of other entrepreneurs to enter this market is strong – there are no particular barriers for entrepreneurs to enter the specific market – anytime the power of the firm’s competitors would be increased – a fact adversely affecting the firm’s performance. 4. Snap-shot of the industry – a 5 years’ perspective The development of the industry within the next 5 years is expected to be based on the following criteria: a) the ability of the firm to respond to its financial obligations (Grossman et al., 2006), b) the support of the state, c) the customers’ trends (Humphreys et al., 2002), d) the position of competitors and e) the stability of the national market (Lal, 2007). Within the next 5 years, the following trends are expected to be observed in the local market: a) the firms still operating in the specific industry will be limited – compared to the current number of competitors in this industry; the number and the power of these firms will be depended on the customers’ buying power but also on the shareholders’ decisions (Berger et al., 2006); b) the prices of products will be increased – the performance of the firm’s will be increased – since their number will be decreased as explained earlier (Neely, 2002) – but the operational costs of the firms will be high; the support offered by the state to entrepreneurial activities will be decisive for the survival of the firms in all industrial sectors. 5. Conclusion The development of strategic decisions in firms of various industrial sectors is depended on a series of factors. On the other hand, it is noted that ‘nonmarket actions have a positive and significant impact on performance, measured in three ways: profits, market share, and capacity utilization’ (Shaffer et al., 2000, p. 126). The initiatives taken by firms’ managers regarding the expansion of corporate activities can have different forms and aim at different targets. All these decisions are likely to be evaluated after being tested in practice, either in the short or the long term. On the other hand, it is supported that ‘many performance measures currently in use are output variables, usually quantitative and based on what is easy to measure rather than what is important to measure’ (Humphreys et al., 2002, p. 264). The usefulness of strategic decisions is likely to be evaluated using the firm’s performance – most commonly within a specific period of time. However, because different criteria of evaluation can be used each time that this task is attempted it is preferable to check the feasibility of each strategic plan in advance – any damage at a later stage will be difficult to be recovered – even the identification of the relevant failure may takes quite a long until it is revealed. Bibliography Berger, P., Eechambadi, N., Morris, G. (2006) From Customer Lifetime Value to Shareholder Value - Theory, Empirical Evidence, and Issues for Future Research. Journal of Service Research, Vol. 9, No. 2, 156-167 Brookes, M., Brewster, C. (2005) Social Relations, Firms and Societies - A Study of Institutional Embeddedness. International Sociology, Vol. 20, No. 4, 403-426 Grossman, W., Cannella, A. (2006) The Impact of Strategic Persistence on Executive Compensation. Journal of Management, Vol. 32, No. 2, 257-278 Humphreys, I, Francis, G (2002) Performance Measurement in Airports. Public Works Management & Policy, Vol. 6, No. 4, pp. 264-275 Lal, K. (2007) Globalisation and the Adoption of ICTs in Nigerian SMEs. Science Technology & Society, Vol. 12, No. 2, 217-244 Laskin, A. (2009) A Descriptive Account of the Investor Relations Profession - A National Study. Journal of Business Communication, Vol. 46, No. 2, 208-233 Morgan, N, Piercy, N (1998) Interactions between Marketing and Quality at the SBU Level: Influences and Outcome. Journal of the Academy of Marketing Science, vol., 26, no. 3, pp. 190-208 Neely, A (2002) Business Performance Measurement: Theory and Practice. Cambridge University Press, Cambridge Peichi, C. (2008) New Media for Social Change - Globalisation and the Online Gaming Industries of South Korea and Singapore. Science Technology & Society, Vol. 13, No. 2, 303-323 Porter, M. (1998) On Competition. Harvard Business School Press Shaffer, B, Quasney, T, Grimm, C (2000) Firm Level Performance Implications of Nonmarket Actions. Business & Society, Vol. 39, No. 2, pp. 126-143 Short, J., Palmer, T. (2008) The Application of DICTION to Content Analysis Research in Strategic Management. Organizational Research Methods, Vol. 11, No. 4, 727-752 Sinha, R. (2006) Corporate Governance and Shareholder Value Analysis. Global Business Review, Vol. 7, No. 1, 1-16 Wang, J., Hutchins, H. (2009) Exploring the Strategic Role of Human Resource Development in Organizational Crisis Management. Human Resource Development Review, Vol. 8, No. 1, 22-53 Macpac, corporate website http://www.macpac.co.nz/ Also: company overview of Macpac - slides Appendix Figure 1 – Porter’s Five Forces Model (source: Porter, 1998, 22) Figure 2 – Porter, Value Chain Analysis Model, 1985 (available from http://www.provenmodels.com/26/value-chain-analysis/porter) Figure 3 – Stakeholder mapping (source: G. Johnson & K. Scholes, Exploring Corporate Strategy, Financial Times/Prentice Hall, 2002 , available from http://www.lmcuk.com/management-tool/stakeholder-mapping) Read More