Advanced Strategic Management Issues - Essay Example

Lecturer: Presentation: Introduction The greater the consumer satisfaction, the more the organization becomes competitive in the market (Andrews 1987 p 54). This is because consumers have the capacity to determine its competitiveness through acceptance of its products. The organization’s capability of attracting and retaining customers is enhanced by a well developed business strategy. Ineffectiveness in the competitive ability arises when it undertakes strategies which are not well organized and critically evaluated before being put in to practice. Such organizations fail even having established a strong command earlier in the market. This essay is a critical evaluation of an organization facing a problem associated with a strategic issue. It focuses on Woolworths Group Plc. which is a renowned organization dealing with entertainment and media in the United Kingdom. The risks associated with focusing and directing most of the resources on improvement of operational effectiveness. Potential avenues for addressing this problem have been discussed focusing on the various techniques and models available, including the regression and the time series models. Problems of Woolworths Group Associated with Strategic Issues The organization expanded rapidly since its establishment in 1909, leading to expansion in foreign markets for its entertainment products. It began going global in its operations, initially establishing in Liverpool and later expanding in the whole of the UK. By 2001, the company entered the London stock exchange after it broke off from its merger with Kingfisher Plc. The organization had been doing well in its recovery strategies, mainly focused on doing away with the huge amounts of stock that was in excess as well as offsetting the debts acquired while it was in a merger with Kingfisher. The management had to be strengthened. The organizational performance rose considerably since 2001 (Johnson et al 2004 p 66). The organization was focused on improving its operational effectiveness through approaches aimed on reinforcement of infrastructure, whereby there were improvements in managing stocks, and the supply chain. Other aspects of operational effectiveness included reduction of suppliers and improvements in branding. More offices were bought in order to bring better services to customers in foreign markets such as Hong Kong (Johnson et al 2004 p 67). The organization also focused on product improvement, a factor that improved its competitive advantage in the short run. It established two operation lines, whereby according to Johnson et al, it had a woolies arm for retail while on the other hand it distributed products on wholesale (p 68). The problem with strategic issues arose in the organization’s quest to improve organizational effectiveness alone while disregarding other important aspects of business strategy such as positioning. Operational effectiveness of an organization is about offering consumers with similar products as those of competitors, but in a better way that increases the organizational competitive advantage. Woolworth was faced with high competition especially due to its focus on operational effectiveness. There are certain theoretical constructs that the organization disregarded, and these could have been more appropriate than focusing on the risky operational effectiveness. They include job satisfaction, aggressiveness, motivation, performance, trust, commitment. Woolworth’s competitiveness was not sustained due to the fact that despite maintaining superior methods of production, there were chances that competing organizations would emulate the same activities thereby requiring the organization to input more resources to keep ahead of the rest. However, this involved extra costs, and it affected the profits since there was no limitation for the competitors in imitating the organization’s advancement. The supermarket chains offered stiff competition since 2001, and this, coupled with its enormous debts that had been inherited from the merger with Kingfisher led to a melt down in the retail section based in the United Kingdom. The massive entertainment chains were faced with problems associated with the organizational strategic issues, and is currently not in a position to compete effectively (Raman 2001 p 137). Avenues for Solving the Problem This problem with organizational strategy could have been avoided if the management could have adopted certain techniques and models to strategically position their products in order to improve organizational competitiveness. The first and most important activity that should have been carried out should have been to assess the risks involved in undertaking the measures that focused on the improvement of operational effectiveness. This is because of the uncertainty that is associated with all the activities that an organization undertakes to improve its competitive advantage. These risks are usually associated with both the internal and the external business environments (Grant 1991 p 115). There are several models that can enhance risk minimization in a business. These include; the descriptive models that facilitate understanding in regard to the impending activities, explanatory models that assist the management in establishing the factors that affect the outcome of the undertaking, and the normative models that the business focuses its rules as well as the manner in which to carry out the activities (Raman 2001 p 142). Woolworth had a number of risks associated with its recovery plan. The management should have assessed these and evaluated the impact that they had on the organization’s profitability. This could have saved the organization from the problems that it faced after undertaking the strategic recovery process without risk assessment. In any business, the management should focus on strengthening its capability to cope with changes in the operating environment (Grant 1991 p 116). Instead of focusing on organizational effectiveness, Woolworth’s management should have used explanatory models to assess the risks involved, in order to protect the business from the factors emanating from the external environment such as the area of operation and competition. The two techniques for minimizing risks in the organization should have come from the organization’s decision makers. These are essential in such a process since they help in the identification of alternatives in terms of plans and techniques that do not put the business at a higher risk. In Woolworths, no alternative decisions were made other than improvement of the operational effectiveness, which was considered to be the major factor that could help the organization to compete effectively. In an ideal situation, the organization’s decision makers should have considered the potential of each approach and then narrow down to those that were capable of generating a higher value within the organization as well as improve its competitiveness (Mintzberg and Waters 1985 p 258). The Regression Model This is an explanatory model that could have assisted the organization to categorize the major factors that need to be combined in order to minimize risks as well as ensure that they are valid and capable of producing the best result (Kotler 2006 p 35). For example, when deciding to pay off the debts it had accumulated while in the merger with King Fisher, considerations should have been made in order to establish the impact of this on the organization’s finances, especially the expenditures towards promotion and sales. Other factors focusing on issues such as employee productivity are essential in establishing whether the organization could have managed to employ skilled workers while engaging in the improvement of its operations. On the other hand, it is important to focus on the sales volume while venturing on improvement of operations. This is because general improvements raise the cost of production, and not unless the sales volumes increase, the business will be running at a loss. Customer loyalty is another factor that another issue of interest that is determined by factors involved in production. It is always important to consider the meaning of certain undertakings in the production process that may affect customer satisfaction. They usually tend to go for what they feel that they have maximum satisfaction, and that they will always get it when need arises. Failure to assess the implication of particular changes in the production process led to the problems that the organization encountered (Kotler 2006 p 36). All these are issues of interest that can be determined through the use of the regression model. It helps in analyzing the impact of a particular shift in the business operations. This is because changing a certain factor in the production process brings about a change in another. The management is capable of analyzing the independent and dependent variables in order to maintain competitiveness in the business. Fig. 1.0: Regression model In the figure above CL represents consumer loyalty; EP is the expenditures; PC is the production cost; REV is the earnings from products that have been introduced; AE is the expenses incurred through advertising; MS is the available market segments. All these are amongst the factors that are considered in the regression model. It helps in ensuring that the business does not loose money as it engages in activities of new product development. After identification of the key factors that may affect the profitability of the organization, the management needs to identify the competitive positions that improve the competitiveness of the organization. The regression model is useful in this case since it helps in analyzing the variables that influence the competence of the organization (Clarke 2003 p 41). This model is useful in decision making since managers are capable of identification of the best strategies to adopt in the organization. After a critical evaluation of the alternatives available, the organization can adopt those that are likely to impact positively on the organizational productivity. It helps in setting strategies aimed at improvement of productivity such as targeting strategies. Such strategies could also have assisted the managers to be effective and efficient in allocation of resources in production. This would have been useful in meeting the needs of customers in a better way through value addition hence increased profits. Consequently, customers could have developed particular interest in the value added products which would have improved the organization’s competitive advantage (Wilson and Gilligan 2005 p 90). On the other hand, customer satisfaction through these strategies could have ensured that consumers repeatedly purchase the organization’s products. Such strategies enhance the tendency of consumers to pass positive information to other potential consumers, thereby boosting the product sales. It is also a significant approach of reducing competition as well as maintaining market share. This model is useful in framing, which is a tool that is significant in building confidence among consumers. The organization capitalizes on the strengths of the business and suppresses its weaknesses in order to ensure that there is maximum customer satisfaction. Framing is just like an art that informs the consumers what they would like to hear in regard to satisfying their needs. The Time Series Model This is a significant model that has been developed in business operations through the discovery by organizations that time is a factor that affects the profitability of businesses. There are usually two dependent variables in this case. These are time and money. The more time spent in decision making and delays in business operations, the more an organization loses in terms of profitability. It is important to note that when the business operations are running smoothly, there are usually more goods that are produced, hence increased profitability. This model involves forecasting in order to know how certain decisions may affect the business operations in future. It is usually not conspicuous to the management that the are using the time series model, but in reality, it occurs when the organization analyzes its future prospects as well as making decisions related with management and situations where there is uncertainty. The business goals determine what is to be achieved over a particular period of time. The time series model is important in tracking progress (Blythe 2006 p 87). Woolworths could have managed to maintain productivity through adoption of this model which could have minimized the risks of using the approach that it adopted. This is a predictive technique that is useful for management. The model helps the managers in the identification of the potential consumers of their products. With this knowledge, they are able to produce goods depending on consumer desires; hence improving consumer satisfaction (Kotler 2006 p 34). It is also significant in helping managers to identify a particular group of consumers, which becomes the target segment. This group is usually the one that responds positively towards the organization’s products and therefore the managers are able to concentrate on product improvement to satisfy this group. Effective forecasting improves the ability of managers to conduct research as well as product development. The model can assist the organization in positioning, which makes the organization’s products unique compared to other competing businesses, thereby improving the organizational productivity. It could have helped in building customers’ confidence in the organization’s products through offering them according to their desires (Blythe 2006 p 81). The ability to forecast is superior in terms of time management. It is one aspect of management that is useful in ensuring that risks are minimized, and that the organization decision making is sound and time conscious. It also helps in identifying particular eventualities that may hamper successful implementation of the organization’s operations. The model promotes approaches that help in ensuring that goals are set, and that they are focused on achieving the organizational objectives. After setting goals, it should ensure that their importance is evaluated as well as their potential towards accomplishing the organizational prospects. After this evaluation, the best option needs to be taken; that is, the one that enhances realization of maximum utility for the consumers. Focusing on operational effectiveness in Woolworths made the management to disregard utility for the consumers, which led to decreased organizational competitiveness (Andrews 1987 p 54). The organization needs to improve its effectiveness in ensuring that its products meet customer expectations. This is one factor that can help it in developing a lasting relationship with consumers. It makes its strategy flexible, allowing it to be quick to respond to the varying needs of consumers. This is because the needs of consumers usually change with time. Targets can also be achieved through successfully informing consumers on the benefits of purchasing the company’s products compared to those from other companies (Clarke 2003 p 41). In order to recover from the crisis, Woolworths needs to focus the time series model as a tool for forecasting and determining where it will be and when, at a particular time. The organization’s focus on operational effectiveness was devoid of time series analysis and therefore the approach used increased the costs as the management tried to improve its competitiveness through sacrificing more resources for as Mintzberg and Waters argue, basing competition on operational effectiveness is destructive to the business in the sense that it may lead to movement of skilled workers who aim at moving to other organizations that may offer better packages in order to acquire the knowledge possessed by competing organizations (p 258). Companies may face the problem of diminishing returns. Woolworths is an example of organizations that went global, investing highly on operational effectiveness. Mintzberg and Waters further state that they have been faced with problems that are hindering their ability to maintain long term profitability. The time series model is useful in determining the three utilities that characterize dynamic business operations. The expected utility usually forms the basis of the business forecasting. However, this utility may change depending on the experiences that a business faces in the process of implementing its strategies (Blythe 2006 p 66). The model is important in helping the management to avoid the situations whereby unexpected problems adversely affect the organizational performance because the management does not have any intimation of what might happen in future. It could have assisted Woolworth’s management to avoid the endowment effect, which as the prospect theory states, “Losses usually have an adverse impact than what the gains can satisfy”. This means that the business can avoid making huge gains that correspond to the losses incurred (Andrews 1987 p 33). Instead, it helps in planning ahead in order to maintain losses at the lowest level while gains constantly increase. Conclusion The regression and time series models are important econometric tools that enhance the competitiveness of a business as well as assisting in risk avoidance. They help in maintaining profitability in an organization through effective forecasting and decision making. The two models could have helped Woolworths in ensuring that the strategies reflect the organizational goals, and also the ensuring that the approaches used enhance the achievability of organizational objectives. Organizations need to ensure that decision making is based on these models that are important in the planning stage. Bibliography 1. Andrews K. 1987. The Concept of Corporate Strategy, 3RD edition, Richard D Irwin. 2. Blythe, J. 2006. Principles and Practice of Marketing, Thomson. 3. Clarke, D.B. 2003. Consumer Society and the Postmodern City. London: Routledge 4. Grant, R. M. 1991. The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation. California Management Review, vol. 33, 3, pp. 114-136. 5. Johnson, M. E., M. Gozycki, and H. Lee 2004, “Woolworths ‘Chips’ Away at Inventory Shrinkage through RFID Initiative”, Tuck School of Business, Dartmouth College. 6. Kotler, P. 2006. Marketing Management 12th Ed, FT Prentice Hall. 7. Mintzberg, H., & Waters, J. 1985. Of Strategies, Deliberate and Emergent. Strategic Management Journal, vol. 6, pp. 257-272. 8. Raman, A., N. DeHoratius, and Z. Ton 2001. “Execution: The Missing Link in Retail Operations,” California Management Review, 43, 136-154. 9. Wilson M S, Gilligan C, 2005. Strategic Marketing Management, CIM/Elsevier. Read More