Business Strategy - Exploring Corporate Strategy and Making Sense of Management - Essay Example

BUSINESS STRATEGY Business strategy is an inevitable part of every corporate firm’s management plan on which all its functioning stands. All the organizations either large or small devise methods and apply techniques for the growth and success of their product and merchandise. Such sets of devises are called the organization’s strategic plans that support in enhancing its volume and capacity. Thus, there always exists the need for a comprehensive and transparent methodology of formulating a strategy. Hence, strategic management not only discusses the decision making regarding main issues of grave concern of an organization, but also it focuses on the implementation of the strategy planned in a proper way in order to obtain the appropriate results. “Simply put”, McNamara (2006) opines, “strategic planning determines where an organization is going over the next year or more, how its going to get there and how itll know if it got there or not. The focus of a strategic plan is usually on the entire organization, while the focus of a business plan is usually on a particular product, service or programme.” Q No. 1 (a): Strategies are articulated and implemented for goal attainment. The companies revise their previous strategies and introduce novel ideas in new strategies to achieve targets and maintain reputation in the market scenario. They sometimes adopt dichotomous strategy in this regard. Dichotomy simply means the categorical division into two especially mutually exclusive or contradictory entities. The term, applied in business strategy and exercised in organizations and companies, refers to two opposite policies, nearly pole apart, adopted to get the best of the both e.g. individual-group dichotomy, sequential-simultaneous dichotomy etc. The Honda manufacturers also exercise the same, though in an innovative and unique way. Since its establishment soon after the World War II, Honda Industries has made gigantic achievements in the field of automobiles. The industry had to undergo many trials and to face the competitor companies during more than six decades of its establishment. Being the pioneer of Japanese Automobile Industry, in initiating manufacturing project in Europe and North America, the Honda applied inventive ideas and launched attractive projects to the entire satisfaction of the clients, all over the world. “Western management thinking”, Mair views, “has traditionally assumed trade-offs between products quality, cost and delivery; high quality cost more and took longer; low cost meant low quality too.”(1996:667). On the other hand, the policy that supports Honda towards articulating ingenious strategy is stated as ‘reconciling dichotomy’ by Mair. Honda’s strategy varies in methodology from the Western traditional approach based on twofold dichotomous concepts i.e. trade-off and change management. The trade-off policy signifies adopting the best elements of two opposite strategies to bring changes for the betterment of the product. It drops some positive elements of a strategy to attain benefits of another one. It is therefore, Honda adopted ‘just-in-time’ production strategy. It lays stress on manufacturing style and strategy to present a high quality product. It is therefore, the changes in management style of work are one of the necessary factors behind Honda’s business strategy. The Honda Company’s President, Mr. Nobuhiko Kawamoto, introduced collective and group work rather than individual efforts in the decision-making process. It is therefore, he formulated new sitting plan for the executives and high officials of the top order management. The strategy fastened communication between the executives and decision-making process got tremendous acceleration. Thus ‘right-first-time’ policy upraised quality and controlled the manufacturing cost. All the popularity of Honda is because of company’s policies and strategies, including planning, marketing and advertisement that has very successfully supported in capturing the markets of the world at large from micro to macro level. Q No. 1 (b): Whittington (1993) has presented four schools of strategic thought while identifying strategic matrix. These perspectives include classical, evolutionary, processual and systemic. The Classical perspective, according to him, (deliberate processes, profit maximizing outcomes) offers a ‘rational process of deliberate calculation and analysis, designed to maximize long term [financial] advantage’. (Alvesson, 1996). It also suggests traditional style of management where the management machinery works from top to bottom in a systematic way, with top management giving instructions and the middle and lower ones implementing these all according to the policies announced without consulting the shortcomings the market force undergoes. Q No. 1 (c): Classical school lays stress on proper and long term planning, internal factors, betterment in mode of management, strategic choice and implementation. Further, it suggests planning according to the changing market situation and recommends slight alterations in design to make trademark and logo of the product more and more recognizable and attractive. In addition, it concentrates on the distinction and variety while presenting the new model of a product. The focus remains on the maximum turn out according to the volume of investment with a predominantly systematic set of assumptions about ontology and epistemology of strategic analysis. The Evolutionary perspective articulated by Whittington takes after the gradual process of growth of human beings. It is derived from man’s biological evolution theory “Survival of the Fittest”, articulated by the famous biologist Charles Darwin, indicting perfect competition prevailing in the market; only those can survive who are the fittest according to the changing scenario and latest developments being made within the environment. In other words, the industries those are able enough to mould their strategies according to the alterations being made in commercial environment. In this perspective, no long term plans could be devised and the strategies are completely at the hands of changing market scenario. Q 1 (d): Looking into the market strategies adopted by famous companies and industries, including Coca Cola, Nestle, Lever Brothers and Honda etc, it comes to know that the world class industries and brands adapt the parts of both the above mentioned perspectives. Such industries appear as eager to devise long term strategy by setting their goal of profit maximizing on the one hand, and minutely analyse the market trends so that best quality product within specific time period can be sorted out. Reconciling conflict dichotomy is also one of the examples of the strategic management of the high profile industries. Similarly, an international company like Honda cannot stick to one single perspective in respect of strategic choice as well as implementation. Rather, it must have to extract the advantageous aspects from different theories and schools of thought. It is therefore, Honda administration applies all theories in strategic methodology. It carries out dichotomous conflict by extracting different aspects of individual and group performances. For example, evolutionary perspective bounds a strategist on completely rely on the market situation. Thus, he cannot make decisions, especially long-term ones, while waiting for the changes taking place in market. One perspective may create hurdles on the way to making future plans, goal setting and the strategic implementation. Similarly, classical school urges the organizations in fabricating long term planning. It could prove a total fiasco if industries apply one and the same policy for years and years. Adhering to one business strategy, for long, may put the sales volume in jeopardy. Ultimately, the small, local and alternative companies take the place of even an international product if no changes are brought with the passage of time. Q 2 (a): Johnson and Scholes view strategy as the response of an organization to its environment. Managerial decision-making differentiates an organization with other industries existing under the similar business environment. Many cultural frames of reference influence the managerial decision-makings. These include industry frame of reference i.e. an industry recipe and organizational framework i.e. organizational paradigm. (1993:47). If management is more stable carrying long-term momentum of strategy, the paradigm will be more smooth and homogenous. It is in the benefit of an organization that it must contain and establish clear sets of beliefs that might be altered according to the changes taken place in the commercial environment .“The paradigm”, Johnson & Scholes state, “allows the experience gathered over years to be applied to a given situation so that the managers can decide upon relevant information by which to assess the need for change.” (1993:49). Q 2 (b): Johnson and Scholes view culture and environment of an organization as key factors to regulate strategic planning. Strengths, weaknesses, opportunities, threats, environmental forces and organizational capabilities make up the paradigm. “The core of an organization’s culture”, Johnson and Scholes present, “is encapsulated in paradigms of the organization.” In order to study the paradigm, it is necessary to study the culture of an organization. (1993:162). FIVE FORCES IN STRUCTURAL ANALYSIS Entry Barriers: Competitive environment is one of the strongest external factors while analysing structural environment of an organization. Porter (1980) has defined five factors in order to analysing competitive environment. The threat of Entry is the threat that serves as hindrances for an industry to enter into a market. Economy of scales is the primary threat. The term means the higher rate of product lessens the cost. It is therefore it becomes hard for an international company to enter and capture the market. Moreover, change in economic and legal policies announced by a government also serve as a significant threat of entry, and may disturb the sale. Further, presence of another strong competitor is also a threat. The bargaining powers of suppliers and bargaining powers of customers are also among the five factors described by Porter. Bargaining powers of suppliers identify the ability to influence the price determination. The power of suppliers has reverse relation with the power of buyers, especially at the market where the switching costs from one company to the other are higher. Bargaining power is always high if the brand is powerful. As the Honda industry maintains outstanding powerful brand, its bargaining power is also strong, and the industry can tackle the price situation skilfully. The suppliers having monopoly over the distribution of the product can use tactics to get more shares out of the product. The bargaining power of buyers is also a threat of entry and serves like a challenge especially for the imported product. Control over the balanced ratio between demand and supply keeps the product “in” within the market scenario. The substitutes are a few, and use of local products especially motorcycles present a significant substitute of Honda. Even then, the powerful trademark and popular brand name do not allow any threat to be a great hurdle at all. The same is the case with threat of new entrance and intensity of competitive rivalry. STRATEGIC CHOICE Strategic analysis and strategic choice are essential parts of strategic management. The former discusses the understanding of the strategic situation of a company or organization, while the latter concentrates on the formulation of the organization. “Strategy formulation might”, Johnson & Scholes view, “apparently be obtained through the analysis of the organization’s environment and the extent to which the company’s resources or strategic capability are matched with the environment.” (1993: 156). Strategic choice is one of the most significant aspects as well as the centre of strategic management. Strategic formulation is dependent of strategic choice, without which no strategy can be developed. Strategic analysis supplies foundation for strategic choice. Johnson & Scholes (1993, 20-21) conceive the “concept strategic choice into three parts. These are Generation of Strategic Options, Evaluation of Strategic Options and Selection of Strategy.” While analysing Honda industry, it has laid its foundation on availability, acceptability and affordability. It is an open secret that the company has shown an excellent performance in all these fields all over the world. The product contains affordable price for corporate class and is available in different styles, names and models including Honda Accord, Civic, City and others. The Strategic Choice Approach is used in face to face workshops of a decision making group. STRATEGIC IMPLEMENTATION Strategic implementation simply means the proper execution of a strategy devised by the market experts. In other words, the term refers to the acceptability of such option by stakeholders and its feasibility, given the resources and competencies the administrative institution posses, ensuring that objectives to be met are clearly set up, and that responsibility and resources are correctly allocated. It may also be necessary to change the behaviour, beliefs and assumptions of those working in the organisation in order to achieve these objectives. The main objective behind the making of a strategy is surely its successful application, without which all the planning is shattered. Proper planning by the committee or group or expertise, allocation of resources needed and its application by the technical and skilled staff paves the way towards the journey of triumph. The Honda Company makes planning keeping in mind the perception of change taking place in future. In this age of technological advancement, where the new inventions are made, the strategy is altered as soon as the modern equipments are introduced in the market; the industry immediately adopts it, as it introduced lawnmowers and other products the Company’s by-product. The change in strategy causes the change in the implementation. Many factors and threats including change in government policies, entrance of new or rival company, economics of scale, differentiation and others may lead to the strategic change. Q No. 3(a): STAFFORD BEER’S VIABLE SYSTEM MODEL: Stafford Beer’s Viable System Model defines the tools of managerial cybernetics. VSM identifies communication procedure within an organizational network. The theory is based on the fact that better communication skills and lenient coordination within an organizational structure serves as a turning point in the successful implementation of a strategy. Strategic management is always in need of co-operation from different members and departments. Red-tapism in governmental and non-governmental institutions not only destroys management, but also jeopardizes the strategy. It is essential that an easy and free access of different members from various levels and departments strengthens the working relationship and leads an organization towards success. Q No. 3(b): The culture and structure of an organization play an important part in respect of strategy formulation and alteration. The culture includes routine-wise business interaction of the members of staff. The structural changes in administration at director and managerial levels significantly influence the culture. Alterations in policy making and implementation introduce new cultural traits at organizational level. Moreover, reward and punishment strategies upraise the morale of the staff members. The work hours may accelerate giving boost to the business volume and profit. The enhancement in business activities lead to change of the features described for future strategy. Similarly, the strategic changes have sound impacts on the structure as well as culture of the organization. New strategy may allocate new staff as well as implement the down-sizing policies to reduce the members in different departments. In both the cases, the work load observes transformation in the whole environment causing variation in cultural patterns. Q No.4: CULTURE OF AN ORGANIZATION: Impact of Organization’s Structure and Culture on Strategy: “Traditionally”, Johnson and Scholes view, “strategy has been viewed as the response of an organization to its environment.” (1993: 46). The business environment of an organization includes rituals and routines, control systems, organizational structure, power structure, symbols and stories. (Johnson and Scholes, 1993: 60). It also includes management, departments, individual and group work, inter-connection between different portfolios and others. Top management and board of executives determine, review and regulate the cultural environment of an organization. The culture is based on the management techniques devised for this purpose. There are many factors that affect the culture of an organization. The change in high management and new policies implemented by it may bring a drastic change in the culture of an organization. Some managers suggest daily meetings to estimate the performance of the staff. It is somewhat dichotomous in its nature. The reason behind it is this though the staff remains active and conscious regarding its obligations, but it may cause the alteration in strategy on daily basis, and thus may affect the long term planning work and solid implementation of the strategy. In the same way, training programmes introduced for the uplift and skill improvement of the staff may lead to cultural change. The members of different departments as well as belonging to various ranks get an opportunity of continuous interaction and views are exchanged that can bring changes in strategy formulation, analysis and implementation as well. Further, seminars, symposiums, discussions and debated bring cultural changes in an organization. Similarly, introduction of latest technology in the market significantly affects the cultural environment of industries. The use of latest technology restricts the consumption of old one; thus, the working scenario observes vital alterations in work environment. Leadership plays dominant role in respect of making and applying strategy of an organization. It is the leader who is most important figure in success or failure of a project, strategy as well as organization itself. While discussing Coca Cola, we come to know how successfully new President launched a strategy at the eve of World Cup 2006. He presented the product in soccer shape and attracted the customer all over the world. Similarly, taking the example of Honda, it comes to know that the executives and managers were given different tasks individually and collectively to furnish during the times of Mr. Sochiro Honda, who retired in 1973. With the change in establishment, Mr. Kawamoto brought revolutionary changes in sitting arrangements and structure of management. “The collective process”, Mair (1998:668) views, “was symbolised in the physical layout of the Honda headquarters board room, in which none of the executives had their offices, but shared an open space with individual desks.” Mr. Kawamoto suggested collective efforts to be implied rather decision-making in private cabins and rooms, to save the precious time getting wasted in giving suggestions individually. It fastened decision-making process and cut short the cost as well. As all the ideas, assumptions and principles are part of the organization’s culture, these must be in sharing continuously. These ideas float from top to bottom, and a group psyche is developed in the minds of the members of staff at departmental level. These ideas help in respect of enhancing trust and making strategies. The organizational behaviour inspires continuous interaction and gives way to develop cultural traits among the managerial staff. Johnson and Scholes describe different types of organizational structure i.e. simple, functional, multidivisional, holding company and matrix structure. Honda Industries carries out functional as well as multidivisional structures. In both these structures, different departments are at work to complete the task according to the strategy devised for this purpose to meet the challenges of commercial environment. Q No.5 PEST AND SWOT ANALYSIS OF HONDA: Both micro and macro forces play role in the development process of an industry. Micro factors include internal strengths and weaknesses of a company including staff structure, division of labour, customer care and management network. On the other hand, macro forces of an industry are looked into in order to measure the future growth of some specific industry. One of the most important tasks of a company’s strategic plan includes company action according to the environment. No single factor determines the business environment; rather, many factors are there that regulate it i.e. political, economic, social, technological and legal ones. “New technologies, social shifts, political realignments and pressures as well as the more commonly recognized economic changes, all create problems and opportunities.” (Newman & Logan, 1976, p. 31). Analysts apply PEST method in order to examine and measure the growth and future development of a company. Such examinations are made keeping in view the past influences on the one hand and the changes taking place in future on the other. PEST Analysis PEST stands for political, economic, social and technical factors that regulate the sale of a product. Looking into the automobile industry, we come to know that the Honda industry has witnessed lots of prospects and perils during its long journey towards the way to success at international market. There exist many rival companies in the market, which present the same product at approximately same price, design and facilities, and serve as a direct threat as competitor of the industry. Political environment plays an important role in the growth of an industry. The most dominant feature of the Honda is people’s unshakeable trust in the brand. It is famous as a brand, not due to availability, but because of the quality it offers. Though, change in governments does not affect the automobile market to a significant way, yet overall critical political situation may disturb the commercial activities at large. It is therefore, strategic analyses are made keeping in mind the margins of losses created by unpredictable situation and unexpected calamity. Anyway, the political factors including wars, invasions and instability of governments play negative role in an industry’s growth. Companies enter into business relations with influential political groups to combat any upset regarding sales especially when there is state of perfect competition. Further, changes in tax policies of the countries also determine the increase and decrease of the sale of a product. People start searching for alternative products. In addition, local brands and companies also start appearing in the wake of the price hike. Economic factors also have both positive and negative effects on an industry. Economic factors including rise in interest rate, currency exchange rate as well as inflation rate may alter the sales volume of an industry. During the 1970s, about which Drabble writes as “the ice age”, inflation rose up to a dangerous point in England and it also influenced the automobile industry. Honda underwent low-cost competition in comparison with the products of other countries, so it had to revise its price in different states without making any compromise with its quality because it was the matter of survival in the situation of perfect competition. Social factors are perhaps most dominating to decide acceptance or rejection of merchandise. People are deeply concerned regarding their status and consult specialists even for the use of some specific automobile. Honda cars have been the status symbol especially in Asian countries, and people prefer it to Suzuki and Toyota. Its deluxe models attract the business class and they keep it in their use. Cultural and religious factors may change the market strategy of various companies. “After the drawing of blasphemous caricatures”, Shamaila Khalid views, “instigated the emotions of the Muslims community all over the world and they boycotted a long list of commodities of daily use that were imported from Denmark, the state where the condemnable caricatures were published.” (allphilosophy.com). Technological advancement has brought a significant change in media campaign and has opened new dimensions to the soft drink industry. “Technological change”, Johnson & Scholes view, “reduces the length of the product life cycle and therefore the time to recoup investment.”(1976, p 80). Investment cost can also be increased as the number of technologies in a product is increased. Keeping in view this factor, the Honda Company has engrossed modern apparatus, latest technology, beautiful presentation and innovative shapes of every year. It is essential to present the product in novelty to enhance attraction regarding sales. It also fascinates the young community, who especially welcome the new model with distinguished presentation with open arms. SWOT Analysis SWOT analysis concentrates on both the internal as well as external factors that influence the business strategy of an organization. The business strategy is developed while conducting a comprehensive comparison of an organization’s success factors on the one hand, and competitive resource requirements and the firms internal capabilities and resources on the other. Like PEST analysis, SWOT analysis is also one of the most appreciated methods applied for analyzing a company. SWOT (i.e. strengths, weaknesses, threats and opportunities) reveal all the advantages and disadvantages regarding market position of an organization. Strengths: Making the analysis of the Honda, it comes to know that its committed team, experienced staff, innovative ideas, penetration in international markets, committed customers, reliable partners and joint venture with multinational products and companies, tangible and intangible assets and intellectual property are among the strengths of the industry. Its fast growing products, wide range of consumers, long list of retailers, shareholders, management, policy formulation, inventory, innovation and unique presentation are among its plus points that keep the industry at a higher rank in production and popularity. Weaknesses: Estimating the weakness the industry faces include its high price that is unaffordable by middle class. Its luxurious models are out of the range of the customers. It is therefore the competitors like Suzuki and Toyota fill the vacuum by offering their product at economical and low rates. Opportunities: Rise in commercial activities and that of upper class has made Honda more and more popular. Luxury presentation and dashing outlook inspire the clients to purchase the automobile. Being the deluxe product of the world, the maintenance and spare parts of the Honda automobiles are accessible in the international market. Further, the motorcycles produced by the company have no match in performance and resale. It is therefore people unconditionally trust in Honda. Honda motorcycles are thought to be as ‘cash deposit’ especially in Asian countries. Threats: The insurgence of local automobile companies all over the globe is constantly increasing. It is high time to maintain and upgrade the quality so that no industry can take the place of Honda. The use of glamorous concise, high-quality, luxurious automobile in an extremely pageant presentation can mitigate the threat in the present context of perfect competition market situation. REFERENCES Alvesson, M. and Willmott, H. (1996). Making Sense of Management, Sage, London Johnson, Gerry & Scholes, Kevan. 1993. Exploring Corporate Strategy. Text and Cases. Third Edition. Prentice Hall New York. Whittington, R. (1993). What is Strategy and does it matter?, Routledge, London Wit, Bob De & Meyer, Ron 2003. Strategy Process, Content, Context Third Edition Read More