Successful Adoption of Strategic Management Principle - Research Paper Example

 Strategic management denotes the process of organizational planning at the optimal level. It is composed of evaluation, decisions, and implementation an organization carries out so as to build and maintain competitive advantages (Hunger & Wheelen, 2000). It is the task of the leader of the organization. According to Hill and Jones (2011), it concentrates on developing a strong foundation for the organization that will afterward be expanded through the concerted endeavors of the members of the organization. According to Hunger and Wheelen (2000), the strategic management process is composed of four components, namely, strategic analysis, strategic decision, strategic implementation, and strategic review. These components are stages that are carried out sequentially when creating a strategic management plan. It should be followed in the manner shown below: *image taken from Google pictures By dealing with each component of the strategic management process in the way shown in the above figure, organizations can review and re-assess conditions as they emerge, constantly monitoring to be certain the organization has placed itself most favorably in the business environment. Strategic analysis is the most important and first component of the strategic management process. It starts with analyzing the internal and external environments and the situation where in the organization matches those environments (Hunger & Wheelen, 2000). After the completion of the strategic analysis, formulation of strategy follows. This requires establishing the strengths of the organization to choose which strategies can be put into practice. The third stage is strategic implementation. It requires actualizing or executing the formulated strategy (Hunger & Wheelen, 2000). The last stage requires monitoring the outcomes of an implemented strategy. This strategic review is basically similar to strategic analysis, observing the external and internal environments and the situation (Hunger & Wheelen, 2000) of the organization to decide if a plan should be reconstructed. Strategic management contributes largely to the long-term success of an organization. It is effective in the sense that it improves organizational outcomes through a structured process of strategic planning. However, strategic planning is not without cost or difficulties. It is difficult to perform; requires extensive knowledge and rigor; and without the right managerial leadership, it will not be able to maintain the participation of others in the organization (Hill & Jones, 2009). The process of strategic planning will fail if there is no genuine and sustained involvement. However, if an organization chooses not to undergo strategic planning it will generate opportunity costs. Failure to perform strategic planning will weaken the organization’s competitive advantage and overlook the opportunities for its stakeholders. Two of the most successful companies in their respective industries due to effective strategic management are the British Airways and Coca Cola. The British Airways was able to expand its market by adhering to rigid rules of strategic management. Likewise, Coca Cola took advantage of the benefits of strategic management by integrating it into their production, distribution, and promotion (Hill & Jones, 2009). The merging of Citicorp and Travelers Group in 1998 also exemplifies the advantages of strategic management in 21st century business world. The merger initiated the strategic transformation of the United States’ financial industry (Hill & Jones, 2009). Every organization is confronted with the difficulties and opportunities of strategic growths. Question 2: Corporate Social Responsibility Corporate social responsibility (CSR) is the accountability of a firm for the effects of its operations on the environment, its own wealth, and the larger society (Sims, 2003). CSR not only contribute to the strengthening of brand loyalty and equity, they also enhance the wellbeing of the community and the economy (Sims, 2003). As demonstrated by several ethical errors nowadays, the community and the environment endures the negative outcomes which can be attributed to a weakening concern for integrity, regulations, standards, and good reputation. In the past and nowadays, firms like Salomon Brothers, Drexel Burnham Lambert, and E.F. Hutton perpetrated serious ethical blunders, whereas others witnessed their reputes become extremely damaged (Sims, 2003). Many business magnates collapsed, never to restore their past magnificence. As shown by the examples above, CSR is important since without it the business world will throw away a great portion of its reputational asset and its capability of flourishing and surviving in the future. Although a number of corporate ethics blunder attracted the attention of the general public, one infamous case deserves a short consideration here. The fourth biggest underwriter of securities in the world, Salomon Brothers, confessed in 1991 to repetitively breaching the policies of the Treasury against acquiring more than 35% of an issue of securities of the Treasury at public sale (Sims, 2003). The scandal forced the resignation of a few high-ranking officers, among other outcomes. As stated by Sims (2003), it is hence expected that the U.S. Sentencing Commission overhauled federal sentencing rules in 1991 intended to discourage corporate offense by generating incentives for companies to take responsibility for and report unethical activities. Due to the ethical blunders such as those mentioned above, the 21st century business world has been experiencing the most severe inspection it has ever experienced from the community. As an outcome of the numerous accusations, allegations that it has little or no concern for the environment and the public, for the destabilizing social order, for the troubles of minority groups, and has no notion of ethical behavior, attention continues to be given on the responsibilities of companies to the community where in it dwells (Sims, 2003). These issues have created an unparalleled demand for corporate social responsibility. Nobody would question that fact that life in the past business world was much simpler, with slight and plainly recognized expectations among the different sectors of the society. Investors allocate their resources to financially support or start a business, employees and managers sustain business operations, suppliers produce unprocessed resources for production, and the public buys the product/services. In the 21st century business world, companies confront a more difficult and challenging environment. The people understand that current firms or business organizations have transformed to an extent where it is not the exclusive interest or ownership of the founder and owner-investors anymore. That transformation has been a major thrust behind the emergence and the growing importance of corporate social responsibility. Question 3: Michael Porter’s Theories Business leaders can evaluate their competition and decide their strategy by applying Porter’s five forces model and competitive advantage. Porter’s (2004) five forces model analyzes the strong points of five different competitive forces, which, once synthesized, build competition and sustain profitability. The theories of Porter have had a more massive importance for business leaders than any other models in the past decades, and his theories may have the same effect on international competition. Although different forms of organizational strategies have been introduced in the recent decades, the common strategies of Porter are still the most widely used by business leaders and supported in major strategic management literature. Porter (2004) formulated three common strategies building competitive advantage, specifically, focus, product differentiation, and cost leadership. Porter (2004) recommends sustained profitability, or a company should select between one of the aforementioned common strategies. For example, some banks are currently developing their own rates and products. With respect to this the requirement for the evaluation of the appeal of the financial services industry becomes indispensable (Hill & Jones, 2009). The five forces model of Porter has been extensively applied in assessing the appeal of an industry. A specific case is that of Tanzania’s financial sector. It has been growing drastically during the past several years (Hill & Jones, 2009). There are numerous developments within the financial services industry after the sector’s liberalization. The issue of competition is currently critical for banks (Hill & Jones, 2009). The five forces model of Porter is one of the paradigms of strategic management to evaluate the appeal of the industry, whether production or service. The competition among the current banks, rivalry threats and customers’ bargaining rights are determined to be negative forces to the financial sector. Threats of competition and suppliers’ bargaining rights are determined to be positive forces to the financial sector (Porter, 2004). Similarly, Porter’s (2004) theory of competitive advantage is an instrument of proven importance to IT business leader. It can be employed by the IT industry for the investigation of the past, current, and potential performance of the industry, comprising issues of strategic processes, comparative outcomes, and weak performance (Hill & Jones, 2009). It does necessitate several adjustments to explain the particular contexts and environments of the IT industry. Therefore, Porter’s five forces model and theory of competitive advantage are a generic but effective instruments for determining where strength lies in an organizational context. These are valuable for business leaders since it helps them determine the strong points of their present competitive status, and the strong points of a position they are planning to occupy. With an accurate knowledge of where strength is, business leaders can exploit a situation of advantage, recover a weak situation, and prevent ineffective strategies. Hence, Porter’s models become a vital component of strategic management. Traditionally, these models are applied to determine whether new businesses, services, or products have a profitable opportunity. Nevertheless, Porter’s models can be quite enlightening when applied to gain accurate knowledge of the power balance in other contexts. Question 4: Sustainable Management Sustainable management is a process of managing resource that tries to establish the tapping or utilization of natural resources sustainable (Christ, 2011). Hence, the primary objective is to restock depleted resources. Although this objective may not be feasible, sustainable management remains helpful because it can contribute to the conservation of natural resources as much as possible (Christ, 2011). In order to realize its objective, sustainable management normally considers two distinct forces (Christ, 2011): the restocking rate and the consumption rate. In numerous instances, the objective is to balance these two forces. Sustainable management has become a popular management practice in the 21st century because of its consideration of the success of an investment and sustained resourcefulness. The objective is to influence social progress and future development in the long term. Sustainable management includes creating and establishing workable economic and corporate potentials (Christ, 2011). Every business planning to set up at a place in the long term is concerned with the stability of the environment. Political context, threats and opportunities of technology transfer, the value of global providers, and local employee development are concerns (Christ, 2011) that fulfill a vital function here. Current unstable price fluctuations in cotton, fuel, and food items like corn, plastic packaging, and other unprocessed materials have expanded the importance of sustainable management to 21st century business world (Christ, 2011). The extent of the adoption of sustainability principles of companies could have an actual effect on their shareholder value. Hence, according to Christ (2011), sustainability will turn out to be as revolutionary for organizations as the past developments in information technology and quality. Sustainable management has surfaced as a motivating force in establishing which business organizations thrives in the marketplace, and practical managements are spending for a more thorough model of the environment. Numerous companies are beginning to discern the advantages of sustainable management. The most successful companies discern the corporate reputation and brand opportunity. For example, Wal-Mart Stores achieve sustainable success by collaborating with retailers to lessen packaging. That implies lower costs in warehouse and freight (Christ, 2011). In 2009, as mentioned by Christ (2011), Wal-Mart in Japan transformed packages for its food items from oil-based to corn-based packaging. Likewise, International Paper (IP), a multinational packaging and paper firm, understood long ago that its potential successes rely on a stable availability of trees (Christ, 2011). The company declares that it has planted billions of tree saplings during the 1950s and just recently. More current endeavors have placed emphasis on utilizing less energy and water at its production activities (Christ, 2011). In some instances, restocking is less of an alternative, and the single practice of sustainable management that can be put into effect is a harvest or consumption maximum (Christ, 2011). For instance, this is usually carried out with fisheries. According to Christ (2011), catch limits are usually enforced by the government if it is trying to restore or preserve fish supply. Finally, according to Hill and Jones (2009), regardless of the strategy implemented, the adoption of sustainable management practice is financially supported by different techniques. Business organizations may directly compensate for some of it, particularly if they are using particular resources, like corn, trees, etc. Question 5: Strategy Implementation When a strategy has been chosen, the next stage is strategic implementation. Failures usually occur in this stage, which makes it one of the most important stages of strategic management. Strategic analysis can aid in the implementation of strategies. Suitable analysis demonstrates the strategy is vital to the business leaders, facilitate constant attention and follow-through, and build motivation (Hill & Jones, 2009). By functioning as strategic plan’s operational definitions, analysis can enhance the goal of the strategy, supporting members of the organization with particular issues. According to Hunger and Wheelen (2000), the outcome may be immediate changes in regular task and strategic implementation; better accountability, for responsibilities are spelled out by strategic analysis; and improved communication of duties, since the analysis clarify the main duties of each team, which may lessen doubling of effort. Developing a causal business paradigm or strategic map contributes in the identification of vital points. It can be a vital point for transmitting the organization’s mission and vision, and the scheme for realizing wanted goals. The top management can formulate a strategic map by determining and plotting the vital components that will motivate overall outcome or performance (Hill & Jones, 2009). This can be verified through various statistical methods like regression analysis. This strategic map can result in a tool plate encompassing several items that are of vital relevance (Hill & Jones, 2009). The plate does not involve all of the items assessed by an organization, instead those that the senior management can utilize to orient decisions, with the knowledge that deeper information is accessible if they have to excavate for more thorough analysis. These several vital points in strategic implementation are suppliers, partners, people, environment, stakeholders, operations, market, customer, and financial. Each point may possess several important aspects; for instance, the people group may involve innovation, shared beliefs, and leadership (Hunger & Wheelen, 2000). Good strategic implementation measures determine the vital points for a company. When employed to guide a business organization, strategic implementation techniques can be a competitive advantage since they motivate shared values and teamwork all over the organization, concentrating the best abilities of all the members at the objective. However, identifying strategic implementation techniques can be difficult. Teams should keep on reflecting about the effect of a particular measure on the behavior of the members (Hunger & Wheelen, 2000). For instance, if they wanted result is first-rate customer service, gauging the number of customer complaints addressed by customer representatives could motivate the contrary performance. Weak implementation of a chosen strategy may lead to the failure of that strategy. Hence, according to Hunger & Wheelen (2000), an excellent implementation plan will not merely ascertain the effectiveness of a chosen strategy but can also rescue a weak strategy. Substantiation for this assumption, according to Hill and Jones (2009), has arose from a current review of organizations in 31 manufacturing sectors in the United States where in it was found out that organizational outcome is not quite much a product of an organization’s strategy, but of its ability to successfully put that strategy into effect. Case Study Abstract General Motors has faced its lowest profit margin two years ago, but it was able to bounce back through efficient debt elimination, labor cost reduction, and innovation. In order to boost its already high profitability the company is attempting to introduce smaller, fuel-efficient vehicles to strategically deal with the volatility of oil prices. This section discusses the potential success of this new strategy. SWOT Analysis The primary strength of General Motors lies in its ability to quickly adapt to external conditions such as the rising of oil prices. This is evident in the introduction of their fuel-efficient vehicle models—Buick Verano compact and Chevrolet Sonic subcompact. The company’s other strengths are its ability to eliminate debt even under bankruptcy, reducing the costs of labor, innovating more appealing and fuel-efficient trucks and cars, and attaining sustainable profitability. On the other hand, there are also weaknesses inherent to General Motors. One is its erratic management of human capital. The contractual profit-sharing checks for GM’s employees may lead to employee dissatisfaction and disempowerment. Second is its disproportionate focus on external environments, such as its radical adjustment to fluctuations in oil prices. However, in spite of these weaknesses, General Motors has a lot of opportunities ahead of them. One opportunity is the increasing acceptance of the brand in China, North America, and other regions of the world which signals greater brand equity for the company. Second opportunity is consumers’ increasing need for smaller or fuel-efficient vehicles which can be supplied by the company. And third is the oil-price volatility which can increase the demand for GM’s products. The threat to the success of General Motors is apparently the aggressive competition in the auto industry, particularly in the United States. Mergers, such as Chrysler and Fiata, threaten to intensify competition one notch higher by nonstop vehicle innovations and dynamic marketing. Cost Benefit Analysis This section will demonstrate the cost and benefit of focusing on smaller, more fuel-efficient vehicles. It is expected here that oil prices will increase hence boosting the demand for such types of vehicles. Cost: (Sales) 30,000 vehicles (Unit Cost) $10,400 this is based in GM’s prevailing fixed cost/unit (Nunnari, 2010) (Total Cost) 30,000 X $10,400 = $312,000,000 Benefit: (# of customers) 30,000 (extra amount customers are willing to pay) $2,200 (Total benefit) 30,000 X $2,200= $66,000,000 + $312,000,000= $378,000,000 As shown in the above illustration, it would be more beneficial for General Motors to produce smaller, more fuel-efficient vehicles since customers are more willing to pay more for these hybrid vehicles due to increases in oil prices. Therefore, it would be profitable for General Motors to implement this strategy. Implementation General Motors should conduct a thorough situation analysis before implementing the abovementioned strategy. It has to focus on the external (e.g. competition) and internal (e.g. lack of focus on people management) threats. It has to maintain a rigid information dissemination system to systematically monitor the fluctuation of oil prices, which is one of the major concerns of the proposed strategy. A strategic mapping should be conducted by GM’s senior teams to identify the areas which will reinforce or hamper the success of the implementation of the strategy. The case of GM calls for full utilization and motivation of its human resources. Since the products of General Motors is being recognized abroad the management should also consider intensifying production, distribution, and marketing operations in the most profitable countries, such as China. Recommendations and Conclusions General Motors has demonstrated successful adoption of strategic management principles, particularly in the first and second stages of the strategic management process, namely, strategic analysis and strategic decision. However, the increasing profitability of General Motors is not entirely indicative of good strategic planning but of external events that are favorable to the company. Therefore, General Motors should strike a balance between its external and internal environments and try to formulate a strategic plan that is not largely focused on the fluctuating oil prices. One of the strengths that the company should tap into is its ability to innovate, and one of the weaknesses that it should translate into a competitive advantage is its expansive and competent workforce. References Christ, G. (2011) Sustainable Management: Coping with the Dilemmas of Resource-Oriented Management. New York: Springer. Hill, C. & Jones, G. (2009) Strategic Management Theory: An Integrated Approach. Mason, OH: South-Western College Pub. Hunger, J.D. & Wheelen, T.L. (2000) Strategic Management. New York: Prentice Hall. Nunnari, W. (2000) “Making Cars is Cheaper, More Profitable for GM,” GM Authority, r http://gmauthority.com/blog/2010/06/making-cars-is-cheaper-more-profitable-for-gm/ Porter, M. (2004) Competitive strategy: techniques for analyzing industries and competitors. New York: Free Press. Sims, R. (2003) Ethics and Corporate Social Responsibility: Why Giants Fall. Westport, CT: Praeger. Read More