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Strategic Management
Strategic Management
Why strategy
implementation is often considered the most difficult stage in the strategic
management process? Explain.
The art and science of formulating, implementing, and evaluating cross-functional
decisions that enable an organization to achieve its objectives. Strategic
management is used synonymously with the term strategic planning in this course.
Sometimes the term strategic management is used to refer to strategy formulation,
implementation, and evaluation, with strategic planning referring only to strategy
formulation. A strategic plan is a company’s game plan.
A strategic plan results from tough managerial choices among numerous good
alternatives, and it signals commitment to specific markets, policies, procedures,
and operations.
The strategic management consists of following three stages of strategic
management:
Strategy Strategy Strategy
formulation implementation evaluation
Strategic implementation is the sum of total of the activities and choices required
for the execution of strategic plan. Strategy implementation is often considered the
most difficult stage in the strategic management process. It is because it consists
of allocating resources to support the chosen strategies. It entails converting the
organization's strategy plan into action and then into results. For this, it has to
follow following process to convert the organization's strategy plan into action
and then to results:
i. Determination of annual objectives and plan
ii. Development of functional strategies and tactics
iii. Development of programs, budget and procedures
iv. Managing conflict
v. Matching strategy with structure
vi. Restructuring and reengineering
vii. Linking performance and pay to strategies
viii. Managing resistance to change
Changing a firm's culture to fit a new strategy is usually more effective than
changing a strategy to fit an existing strategy. Therefore, the
implementation of strategy may require the designing of organizational
structure. The organizational structure consisting of division of work,
departmentalization, delegation of authority, supervision and coordination
of activities is directed towards the achievement of organizational goals.
These all should should be considered while implementing the strategy.
Thus, it is concluded as the most difficult stages in the strategic
management process.
2. Strategists believing on Resource Based View (RBV) often state that
‘Internal resources are more important and integral for a firm than external
factors in achieving and sustaining competitive advantage’? Do you agree or
disagree with this statement? Justify your answer.
The resource-based view (RBV) is a model that sees resources as key to superior
firm performance. If a resource exhibits VRIO attributes, the resource enables the
firm to gain and sustain competitive advantage. RBV is an approach to
achieving competitive advantage that emerged in 1980s and 1990s, after the
major works published by Wernerfelt, B. (“The Resource-Based View of the
Firm”), Prahalad and Hamel (“The Core Competence of The Corporation”),
Barney, J. (“Firm resources and sustained competitive advantage”) and others.
The supporters of this view argue that organizations should look inside the
company to find the sources of competitive advantage instead of looking at
competitive environment for it.
The following model explains RBV and emphasizes the key points of it.
According to RBV proponents, it is much more feasible to exploit external
opportunities using existing resources in a new way rather than trying to acquire
new skills for each different opportunity. In RBV model, resources are given the
major role in helping companies to achieve higher organizational performance.
There are two types of resources: tangible and intangible.
Tangible assets are physical things. Land, buildings, machinery, equipment and
capital – all these assets are tangible. Physical resources can easily be bought in
the market so they confer little advantage to the companies in the long run
because rivals can soon acquire the identical assets.
Intangible assets are everything else that has no physical presence but can still
be owned by the company. Brand reputation, trademarks, intellectual property are
all intangible assets. Unlike physical resources, brand reputation is built over a
long time and is something that other companies cannot buy from the market.
Intangible resources usually stay within a company and are the main source of
sustainable competitive advantage.
The two critical assumptions of RBV are that resources must also be
heterogeneous and immobile.
Heterogeneous. The first assumption is that skills, capabilities and other
resources that organizations possess differ from one company to another. If
organizations would have the same amount and mix of resources, they could not
employ different strategies to outcompete each other. What one company would
do, the other could simply follow and no competitive advantage could be
achieved. This is the scenario of perfect competition, yet real world markets are
far from perfectly competitive and some companies, which are exposed to the
same external and competitive forces (same external conditions), are able to
implement different strategies and outperform each other. Therefore, RBV
assumes that companies achieve competitive advantage by using their different
bundles of resources.
The competition between Apple Inc. and Samsung Electronics is a good example
of how two companies that operate in the same industry and thus, are exposed to
the same external forces, can achieve different organizational performance due to
the difference in resources. Apple competes with Samsung in tablets and
smartphones markets, where Apple sells its products at much higher prices and,
as a result, reaps higher profit margins. Why Samsung does not follow the same
strategy? Simply because Samsung does not have the same brand reputation or is
capable to design user-friendly products like Apple does. (heterogeneous
resources)
Immobile. The second assumption of RBV is that resources are not mobile and
do not move from company to company, at least in short-run. Due to this
immobility, companies cannot replicate rivals’ resources and implement the same
strategies. Intangible resources, such as brand equity, processes, knowledge or
intellectual property are usually immobile.
3. Illustrate and explain the Value Chain Analysis Model. Provide a suitable
example?
Value chain analysis is a strategy tool used to analyze internal firm
activities. Its goal is to recognize, which activities are the most valuable (i.e. are
the source of cost or differentiation advantage) to the firm and which ones could
be improved to provide competitive advantage. In other words, by looking into
internal activities, the analysis reveals where a firm’s competitive advantages or
disadvantages are. The firm that competes through differentiation advantage will
try to perform its activities better than competitors would do. If it competes
through cost advantage, it will try to perform internal activities at lower costs
than competitors would do. When a company is capable of producing goods at
lower costs than the market price or to provide superior products, it earns profits.
M. Porter introduced the generic value chain model in 1985. Value chain
represents all the internal activities a firm engages in to produce goods and
services. VC is formed of primary activities that add value to the final product
directly and support activities that add value indirectly.
Although, primary activities add value directly to the production process, they are
not necessarily more important than support activities. Nowadays, competitive
advantage mainly derives from technological improvements or innovations in
business models or processes. Therefore, such support activities as ‘information
systems’, ‘R&D’ or ‘general management’ are usually the most important source
of differentiation advantage. On the other hand, primary activities are usually the
source of cost advantage, where costs can be easily identified for each activity
and properly managed.
4. Critically examine Porter’s three generic strategies.
A firm's relative position within its industry determines whether a firm's
profitability is above or below the industry average. The fundamental basis of
above average profitability in the long run is sustainable competitive advantage.
There are two basic types of competitive advantage a firm can possess: low cost
or differentiation. The two basic types of competitive advantage combined with
the scope of activities for which a firm seeks to achieve them, lead to three
generic strategies for achieving above average performance in an industry: cost
leadership, differentiation, and focus. The focus strategy has two variants, cost
focus and differentiation focus.
i. Cost Leadership
In cost leadership, a firm sets out to become the low cost producer in its industry.
The sources of cost advantage are varied and depend on the structure of the
industry. They may include the pursuit of economies of scale, proprietary
technology, preferential access to raw materials and other factors. A low cost
producer must find and exploit all sources of cost advantage. if a firm can
achieve and sustain overall cost leadership, then it will be an above average
performer in its industry, provided it can command prices at or near the industry
average.
ii. Differentiation
In a differentiation strategy a firm seeks to be unique in its industry along some
dimensions that are widely valued by buyers. It selects one or more attributes that
many buyers in an industry perceive as important, and uniquely positions itself to
meet those needs. It is rewarded for its uniqueness with a premium price.
iii. Focus
The generic strategy of focus rests on the choice of a narrow competitive scope
within an industry. The focuser selects a segment or group of segments in the
industry and tailors its strategy to serving them to the exclusion of others.
The focus strategy has two variants.
(a) In cost focus a firm seeks a cost advantage in its target segment, while in
(b) differentiation focus a firm seeks differentiation in its target segment. Both
variants of the focus strategy rest on differences between a focuser's target
segment and other segments in the industry. The target segments must either have
buyers with unusual needs or else the production and delivery system that best
serves the target segment must differ from that of other industry segments. Cost
focus exploits differences in cost behaviour in some segments, while
differentiation focus exploits the special needs of buyers in certain segments.
5. Make a distinction between vision and mission statements. Explain the
various essential characteristics of good vision and mission statements.
The mission statement of a company is a declaration of what they do every day. It
defines the day-to-day activities of their work and every person who works for
the organization contributes to that mission. Think of it like the person who sets
daily or weekly goals for themselves to accomplish. It describes to employees
and customers what is being done right now. It is present-focused and can change
very quickly depending on the circumstances of the business's market.
For a company's employees, it gives workers a sense of purpose about the value
of their work. It is a broad statement that describes the cohesiveness of an
organization, even if they do multiple and varied types of work in their individual
departments. Many times mission statements often start with statements such as,
"We provide…" or "We offer…" or "We are a…" The mission statements
establish a framework for the behavior of those working in the company.
Performance standards can be based on a company's mission statement and they
can guide decision making for employees at various levels of the company.
Vision Statement
A vision statement is a clear, definitive statement of what you want to
accomplish, and what the world will look like once you've accomplished your
mission. Think of it as the perfect scenario that you're working toward
accomplishing. Also, knowing what is important in the community you are
working in is oftentimes extremely important in crafting a vision statement.
Unlike the mission statement, a vision statement is future-oriented. It provides a
sense of what the company values to those both inside the company and out. At
times, some companies will use their vision statement for public relations
purposes.
Since a vision statement is used to direct overall strategic goals for a company,
they tend not to change very often. Each goal is another step on the path toward
achieving the overall vision of the company. Vision statements are written in the
present tense but still serve the future of the enterprise. When a vision statement
can be read in the present tense and be accurate, an organization will know that
their vision is being achieved. For example, a vision statement for a nonprofit
who works to eliminate homelessness may read, "All children will live in safe,
affordable housing." Therefore, making sure children are in safe, appropriate
housing is the overall strategic goal of that non-profit.
The difference between vision and mission can be explained as below:
Uncertainty around budgets, planning and events is seen as the biggest challenge
for marketers as the coronavirus crisis deepens in the UK and around the globe.
In a survey of 887 UK brand marketers conducted by Marketing Week and sister
title Econsultancy, uncertainty was cited as one of the top three challenges by
69% of respondents. Organising people and systems for remote work was seen as
the second biggest challenge, cited by 45%, while 43% see maintaining strong
communication with clients as a key area of concern.
The survey, which was conducted before the interventions
yesterday by the UK government to shore up the economy, shows businesses
already taking action in response to Covid-19.
Some 45% say their company has created a team specifically to deal with the
implications and impacts of the outbreak, while 44% have changed employee
policies in areas such as remote work, travel and bonuses.
A further 18% have changed marketing strategy, for example shifting messaging
or rethinking discounting. Almost a fifth (17%) have changed customer policies,
for example by waiving fees or updating terms, while 11% have changed vendor
policies through extending timelines or payment terms.
Despite this actions, a majority of businesses are already feeling the impact. So
far, 63% of marketers believe employee morale has taken a hit, while 45% report
reduced productivity due to travel restrictions or new processes, and 39% have
seen lowered demand for their services.
Looking longer-term
Looking ahead to the next two quarters, employee morale remains an area of
concern for 69% of marketers, while productivity (68%), lowered demand (61%),
new requirements for remote working (50%) and supply chain issues (46%) are
also worries.
Of those expecting demand to suffer, 36% believe this hit could be more than
20%, while 16% expect it to be between 16% and 20%. A quarter (24%) have no
ability to gauge.
In case of Nepal, other challenges can be pointed as follow:
Chance of occurring heavy loss even liquidation
Without functioning the organization, the capital interest has to be
paid
Following government regulations suffering from loss
Without contribution of labor and employees, the organization has to
pay waged or remuneration to the employees
Health security of the employees has been challenge to the
organizations
Interest recovery in banking service is one of the challenge
Survival of the organization
Operations after the corona disaster, strategy formulation and
implementation should be changed in accordance
Change management is another challenge
8. Read the Following case and answer the following questions.
a) Explain Corporate Social Responsibility (CSR) and its importance to
organizations today.
Corporate social responsibility is a broad concept that can take many forms
depending on the company and industry. Through CSR programs, philanthropy,
and volunteer efforts, businesses can benefit society while boosting their brands.
As important as CSR is for the community, it is equally valuable for a company.
CSR activities can help forge a stronger bond between employees and
corporations; boost morale; and help both employees and employers feel more
connected with the world around them.
Some clear importance of corporate social responsibility to organization today
are:
Improved public image. This is crucial, as consumers assess your public
image when deciding whether to buy from you. Something simple, like
staff members volunteering an hour a week at a charity, shows that you’re
a brand committed to helping others. As a result, you’ll appear much more
favourable to consumers.
Increased brand awareness and recognition. If you’re committed to
ethical practices, this news will spread. More people will therefore hear
about your brand, which creates an increased brand awareness.
Cost savings. Many simple changes in favour of sustainability, such as
using less packaging, will help to decrease your production costs.
An advantage over competitors. By embracing CSR, you stand out from
competitors in your industry. You establish yourself as a company
committed to going one step further by considering social and
environmental factors.
Increased customer engagement. If you’re using sustainable systems,
you should shout it from the rooftops. Post it on your social media
channels and create a story out of your efforts. Furthermore, you should
show your efforts to local media outlets in the hope they’ll give it some
coverage. Customers will follow this and engage with your brand and
operations.
Greater employee engagement. Similar to customer engagement, you
also need to ensure that your employees know your CSR strategies. It’s
proven that employees enjoy working more for a company that has a good
public image than one that doesn’t. Furthermore, by showing that you’re
committed to things like human rights, you’re much more likely to attract
and retain the top candidates.
More benefits for employees. There are also a range of benefits for your
employees when you embrace CSR. Your workplace will be a more
positive and productive place to work, and by promoting things like
volunteering, you encourage personal and professional growth.
b) Discuss the critical CSR issues confronted by Chun Si Enterprises and the
western companies. What are the challenges associated with these issues?
Corporate social responsibility itself is a challenge to the organizations. It is
because it incurs a huge cost for maintaining it. The prime purpose of including
CSR in corporate business is to make the corporate business activities as well as
the corporate culture both sustainable in three ways: economic, social and
environmental. Paying equal amount of attention to all the three dimensions, but
many companies think that corporate social responsibility is a much exterior part
of their business, whereas most think it to be an irrelevant issue for their business
as satisfying their customers/clients is more important for them. It is further felt
that customer satisfaction is only about price and service, but concentrating on
only these aspects of business makes them blind folded towards other important
changes taking place worldwide that could blow the business out of the water.
The change is named as social responsibility which is an opportunity in itself for
the business.
Chun Si Enterprise is facing the health and safety security as it has been the main
concern of the organization. No organization will be success if it does not
consider the healthiness environment and quality of work life (QWL). Chun Si
Enterprise is also not aware about the heath and security of the employees and
being criticized by the media.
The factory charged $45 a month for food and lodging in a crowded dorm. Health
and Safety measures at workplace were also poor. Liu also found that the
factory’s 900 workers were locked in the walled factory compound making
themselves virtual captives. Recently, news in the Times Magazine published the
fact that western companies including Wal-Mart is promoting the businesses like
Chun Si where workers are severely exploited. This deteriorated the image of not
only the Chun Si but also the Wal-Mart and other western companies.
In conclusion, the challenges associated with issues can be pointed as below:
Chu Si Enterprise as well as the western companies are poor in CSR.
The companies are poor in healthy work environment.
It less considers about the Quality of Work Life.
The workers are performing their works in the closed premises of the
organization.
Workers are exploited in charging the food and lodging expenses.