Strategic Management with Corporate Governance - Assignment Example

Strategic Management with Corporate Governance (Case Study: Penreath & Durgan What strategic considerations caused Penreath and Durgan to undertake changes in the scope and direction of the company over the last decade? Why have these changes been so successful? If the changes had not been undertaken, where might the company now be? (40 marks in total) The last decade has proved to be quite eventful for the company, as it was able to successfully implement new initiatives. The last decade was quite challenging because globalisation policies were in full swing during this period. P&D also experienced the challenging situation in retaining its market share, as a number of new companies and newer experiments started making inroads into the brewery business. Some of the significant changes put into practice by P&D are; Soft drinks production is ceased owing to effectiveness of operational consideration Company also sold its Fruitees brand to one of its main competitors in order to concentrate on its core competency P&D adopted newer strategies for beer sales for example the company entered into strategic tie-up with major supermarket outlets in UK, besides having its own outlets. Tastes of consumers have undergone significant change over the years and P&D has been continuously on the lookout for matching the aspirations of its customers. Company has adopted the strategy of selling seasonal beer. Therefore company is able to come out with different product lines in different seasons. Key strategic considerations which caused P&D to undertake changes in the scope and direction of the company include; The management has been a firm believer in being innovative in approach since the beginning. But it started leading the industry ever since the company became the first brewer to put Best Bitter into a can. P&D was therefore on the trail of regular updates. The drinking habits of consumers have undergone significant changes over the last couple of years. For example, beer consumption at home has increased as the retail outlets are proving to be a convenient way of purchasing the canned and bottled items. Popularity of Lager is on the rise, as it is proving to be much popular amongst the youth. This particular segment is a huge market for beer. Once the company is able to convince the youth about the quality and convert them into loyal customers, the association is bound to remain for many more years. The lighter and lager-type is gaining an upper hand as compared to the traditional real ales. As the figures indicate the sale of ale and stout types has declined from 48.6 percent in 1992 to 29.3 percent in the year 2008. While on the other hand the sale of lager has gone up from 51.4 percent in 1992 to 69.5 percent in 2008. Wine is proving to be a big challenge for the beer market, because it has now become a more socially acceptable drink. Health concerns arising out of the alcoholic drinks have also resulted in putting off the health conscious segment of consumers. Figures indicate that total beer sales for 2008 are down by 22 percent as compared to the peak in 1979. The profit margins have shrunk significantly over the years, which is primarily due the competition and availability a number of other alternatives. The brewing industry is highly competitive and intense competitive pressures have given way for consolidation in the industry. Regional brewers like P&D are also on the lookout for an opportunity to go global by entering into strategic tie-ups with retails outlets or marketing agencies. It is quite clear from the case study that the changes adopted by P&D have been quite successful so far because the management has been able to analyse the prevailing circumstances in market quite well. Terry & Franklin (1994) define management as ‘a distinct process consisting of activities of planning, organising, actuating and controlling, performed to determine and accomplish stated objectives with the use of human beings and other resources’. While on the one hand the company has been able to plan and execute well, on the other it has also been able to keep its workforce motivated. Worthington and Cumberpatch (2006) defined management as; ‘The roles fulfilled by individuals who manage the organisation’ and ‘A process which enables an organisation to achieve its objectives’. Management therefore involves a coordinated approach taking care of all the factors affecting the business operations. Such a coordinated approach has certainly led to better working conditions for the workforce, better profit margins for the company, better products and services for the customers, and a well deserved brand identity. The figures also indicate that had the company not taken due note of the changing circumstances, it would have been in difficult situation as is evident from the disappearance of a number of local and regional and local players from the horizon. 2. What environmental and industry factors are, in your view, the key drivers which should influence Penreath and Durgan in their strategic planning for the next five years? (20 marks in total) Analysing the prevailing environmental and industry factors hold key to relevant planning and successful implementation of the strategies of any company. For P&D the key environmental factors which need to be taken care of in chalking out strategy for the next five years are; i. Growing number of the youth segment. While on the one hand company must view this segment as a potential market, it must also be taken into account that this particular segment must not be introduced to excessive liquor consumption in their teens. ii. The intense competition from all around, including a number of multinational enterprises, is another key consideration which must influence the policy formation initiative at P&D. This would imply that while on the one hand company must keep trying for widening its market base, it should concentrate more on retaining its existing customer base. iii. Innovation has certainly been a forte for P&D and it needs to pursue its policy of remaining innovative in its approach, because product differentiation is bound to earn many more customers for the company. iv. The ongoing recession is another major factor which the company must take into account for devising policies for the next five years. The present lean period requires that the company is able to retain its existing workforce. In fact the lean period provides an opportunity to the company to plan for training and development, as the company would be in a better position to relieve some of its workforce for undertaking training courses. v. Company must be on continuous lookout for diversification into newer drinks, while concentrating on its core competencies. For example, wine is proving to be a big competition for beer, so the company can very well look into blending some of the wine content into its product range. vi. Selling seasonal beers is certainly a great idea for the company as it provides the company an opportunity to bring about changes in its product line. This also provides the company an opportunity to newer segments during different seasons. 3. What strategic options are available for Penreath and Durgan over the coming decade? Explain which you think are most appropriate and justify your answer. (40 marks in total) As is quite evident from the case study the previous decade has proved to be of crucial importance for the company to chart out a distinctive course of business. While on the one hand the drinking habits of consumers have undergone significant changes, the dynamics of business to have led to substantial modifications into the business strategies. Some of the most appropriate strategic options for P&D over the coming decade include; i. Focus on Innovation: P&D has certainly been a pioneer in adopting innovative methods of production and marketing. With the market becoming fiercely competitive, the role of innovation and product differentiation has become all the more important. Innovation, excellence and value go hand in hand in today’s competitive environment. An individual’s beliefs or conceptions about what is desirable, good or bad – forms the value system (Kotler, 1974). Therefore, P&D will have to focus more on firming up the value proposition. Customers and the target market are crucial stakeholders for any company. Configuring value means defining, creating, branding and pricing the offer. With innovative ideas P&D can plan out these parameters so that it proves the toughest competitor in the market. The company can acquire competitive advantage on its rivals on account of marketing efforts, brand building, value creation, operational efficiencies etc. But more important is to sustain the advantage. In order to sustain the advantage, the company will have to be a leader in its innovation efforts. Zebra’s Pride, one of the P&D’s bottled beers was declared champion beer at the International Ale Competition in 2005. Such awards not only provide recognition to the company, but they also provide opportunities for future growth and diversification. ii. More Emphasis on Marketing Communication: Traditional marketing mix concept, first proposed by McCarthy in 1960, consisted of Product, Price, Place and Promotion (better known as the 4Ps). Each particular marketing mix adding up to a certain amount of effort the company is making for the purpose of generating sales. Any plan to develop a competitive advantage must be based on a sound analysis of the company’s competitors. Communication forms a crucial part of managerial activities. Marketing communication in turn helps a company in building a brand, creating brand loyalties, increase in sales, cutting costs, etc. This becomes all the more important if the market happens to be as diverse as the UK market, as it caters to consumers from different walks of life, different cultures, ethnic groups and age groups. In today’s market driven economy concept, the art of communication to existing consumers as well as prospective consumers takes a great deal out of the managerial brain storming sessions. iii. Firming up strategies with retail stores: Of all the changes in distribution during the last century, those taking place in retailing have been the most dramatic. Totally new institutions have appeared in an industry that a hundred years ago consisted mostly of small general and specialty stores. From being road corner shops to superstores to an industry, the retail business has certainly travelled a long distance all these years. With innovative techniques of attracting the customers, supermarket chains have established themselves in a big way. Supermarkets introduced the principle of self-service, wherein the customer is supposed to do the leg work, which resulted in reduction of the personnel cost of the supermarket. Self service also resulted in encouraging impulse purchases, as the consumer could physically touch and feel all the attractively packaged stuff kept on display. Beer cans and bottles neatly packed in a visible corner of the store prove to be quite tempting for the customer. Therefore a strategic tie up with the retails store can help P&D in provisioning of displaying its products at strategic location within the store, which will surely help the customer in widening its market base. iv. Better HR policies: Today we are living in a fiercely competitive world. In order to sustain the business operations in such a competitive environment, a company requires to have sound strategies for marketing, communication, research & development, sales, social responsibility and of course in managing the workforce. In fact, effective HR policies are being a used as a tool to take on today’s competitive environment by many international organisations. The workforce is one of the key stakeholders in the business, requiring fullest attention. Managing other operations and activities become far more convenient if a company is able to have a pool of talented and motivated workforce. From the case study it is quite apparent that P&D has been able to take good care of its workforce all these years the workforce appears to be motivated enough for taking the company ahead. The company needs to vigorously pursue the employee development policies being adopted as of now, while remaining on the lookout for newer avenues to have a healthy partnership with the workforce. Irrespective of the nature and specialisation of company, it can be said for sure that, ‘people’ form the core of its activities and therefore, the behaviour and character of these very ‘people’ will affect the overall character of the organisation. The performance level of this workforce depends upon the types of motivations provided by the organisation. Following a performance and reward strategy also helps in setting newer milestones in performance levels. While focusing his/her eyes on the larger futuristic goal/s, the performance levels of the individual are very much affected by the job design and characteristics. Therefore P&D needs to focus on doing a strategic audit at its facilities in order to come out with future compatible job designs. While the meta-process of finalizing minute details helps the organization in attaining the desired heights, it also helps in the individual by way of improving quality of work experience and greater freedom and flexibility (Dolan and Schuler, 1994). References: 1. Dolan, Shimon L. and Randall S. Schuler. (1994). Human Resource Management: the Canadian Dynamic. Nelson Canada. 2. Philip Kotler, (1974), Marketing Management, 2nd Ed., Prentice Hall. 3. Terry, George R and Franklin, Stephen G. (1994). Principles of Management. Richard D Irwin Inc. USA 4. Worthington, I. and Cumberpatch, Z. (2006) ‘Business organisations: the internal environment’ in Worthington, I. and Britton, C. The Business Environment 5th edition. Harlow, Pearson Education, pp.18-38. Read More