Running head: ORGANIZATIONAL STRATEGY ORGANIZATIONAL STRATEGY 1 ORGANIZATIONAL STRATEGY 2 STRATEGY MANAGEMENT Organizations mission and vision are part of their success architecture. An organization mission is what its business is. While the vision is the long-term direction the organization has. In the case of Starbucks as an example, its mission statement reads, "to inspire and nature human spirit- one person, one cup, and one neighborhood at a time" this explains why Starbucks has grown globally quite rapidly (Aiello, 2014). It was founded in 1985 with a single store to 26696 stores worldwide (Sept, 2017 reports). The mission has guided Starbucks to success in China, where many multinational corporations fail over cultural differences (Yang et al, 2016). The vision of a company, on the other hand, is very long term, it remains unchanged over time. Google's vision statement reads, "To organize the world's information and make it universally accessible and useful" this explains why Google too, is a leading global firm. Starbucks and Google have crystal clear visions and missions. An organizations business model is built on two pillars customer value proposition and the profit formula. This implies what value a customer will derive from using your product or service. The higher the value perceived the higher the price customers are willing to pay. For Google searching for information is free, their revenue generation model is through advertising. In the case of Starbucks their roast premium coffee, it is a niche premium product. The more customers they are able to serve the more revenue they collect. In terms of the profit formula, Google makes money through advertising and selling data, on the other hand, Starbucks makes many through providing value in the coffee it serves "Premium coffee- high quality." Competitive advantage is what makes a firm stand out even in presence of competition. This competitive advantage is inherent in the internal structure of the organization. It includes its shared knowledge within, organizational skills and the culture. These attributes are not easily ORGANIZATIONAL STRATEGY 3 copied. A product or service can be copied since coffee is just coffee- what makes Starbuck coffee unique is the extra effort the organization makes to be able to serve that premium coffee consistently. Sustainable competitive advantage is when a company has continuously maintained a competitive advantage that it becomes a culture. This allows an organization to attract a sufficiently large number of customers to buy goods and services it offers. Financial strength refers to the ability of an organization to acquire financial resources and be able to use those resources to provide a reasonable return to the shareholders. In the case of Starbucks, it had annual sales of over $ 19 billion in 2015. This is a massive metrics of its financial performance. In a media crisis in the United Kingdom when Starbucks was accused of tax evasion, it managed to overcome the storm, agreed to pay 10million British pounds over a two year period while the subsidiary was still loss-making (Diana et al, 2017). Having a strong financial strength helps overcome challenges. Strategic objectives refer to the metrics used to monitor and evaluate performance in respect the strategic plan. It usually has sales objectives, return on investment (ROI), and expansion and growth objectives. Organizations use objectives to develop operational tactics and activities that drive day today at the operational level. In the case of Starbucks how many new stores by the end of 2018? What is the growth in the number of employees- This is a social measure (helping to create jobs)? How many farmers are benefitting from our patronage? What are the quality measures in place to guarantee consistency in quality? Strategic decisions are what make an organization stand even when faced with uncertainties. The organization founder comes up with the vision. From the vision- the direction, a mission is developed. The mission is the business. Organizations can control the internal environment – this is their main competitive advantage, which is immutable, rare and not easily copied. It forms the culture of the organization. Strategic management practice is an essential ORGANIZATIONAL STRATEGY 4 part of the strategic management process. It involves the identification of benchmarks, realigning resources both human and financial and providing leadership to supervise the deployment of the services and products. The company can only meet their goals when they use strategic management to extend their internal and external communication plans. Conclusion Organizations mission and vision are part of their success architecture. An organization mission is what its business is. While the vision is the long-term direction the organization has. An organizations business model is built on two pillars customer value proposition and the profit formula. This implies what value a customer will derive from using your product or service. The higher the value perceived the higher the price customers are willing to pay. Competitive advantage is what makes a firm stand out even in presence of competition. This competitive advantage is inherent in the internal structure of the organization. It includes its shared knowledge within, organizational skills and the culture. Financial strength refers to the ability of an organization to acquire financial resources and be able to use those resources to provide a reasonable return to the shareholders. In the case of Starbucks, it had annual sales of over $ 19 billion in 2015. This is a massive metrics of its financial performance. Strategic decisions are what make an organization stand even when faced with uncertainties. The organization founder comes up with the vision. From the vision- the direction, a mission is developed. In conclusion, company’s vision and mission are very essential in its operations since they give it a brand that last in the mind of the existing clients and draws potential customers. ORGANIZATIONAL STRATEGY 5 References Aiello, G. and Dickinson, G. (2014). Beyond Authenticity: A visual- Material analysis of locality in the Global Redesign of Starbucks Stores. Visual Communication, 13 (3), p. 303-321 Diana, C. S, and Shannon A. Bowen. (2017). Reputation Management and Authenticity: A case Study of Starbucks UK Tax Crisis and #spreadthecheer campaign, Journal of Communication Management, 21(3), p. 287-302 Yang, Qian. and Tu, Xing. (2016). Starbucks vs Chinese Tea-Starbucks Brand Management Strategy Analysis in China. International Business and Management 12 (1), p. 29-32 Gamble, J., Thompson, A. A., & Peteraf, M. A. (2016). Essentials of strategic management: The quest for competitive advantage. (5th ed.). Dubuque, IA: McGraw-Hill Education. Running Head: STRATEGIC MANAGEMENT STRATEGIC MANAGEMENT 1 STRATEGIC MANAGEMENT 2 Strategic Management Question 1 Consider the organization’s macro-environmental factors using PESTEL analysis and describe which two are most relevant to the organization at present. Answer The PESTEL analysis looks at organizations operating environment and their favorability. It represents the Political, Economic, and Social-cultural, Technological, ecological and legal regulatory environment. The above elements of PESTEL are important in analyzing and describing organization at present. Putting this into consideration may help executives to make decisions which are significant in the management of the company. The two most relevant are immediate industry and competitive environment. This implies how competitive the industry is at the moment, what strategies the competition is using and how is the market organized. How large is the market in terms of size and who are the leading players? The second important is the economic environment, this entails the growth rate, interest rates, inflation metrics, rate of unemployment, balance of payment, market structures, rate of economic growth, national growth projections, free market or controlled market, the level of disposable and the level of income among the population Reference Gamble, J., Thompson, A. A., & Peteraf, M. A. (2016). Essentials of strategic management: The quest for competitive advantage (5th Ed.). Dubuque, IA: McGraw-Hill Education. Day, G. S. and Wensley, Robin. (1988). Assessing Advantage: A framework for diagnosis Competitive Superiority, Journal of Marketing, Vol. 52 (2) Question 2 STRATEGIC MANAGEMENT 3 Consider the competitiveness of the organization’s industry using the Five-Forces Model of competition, and describe which of the five forces is creating the strongest competitive pressure in the organization’s industry Answer The Porters Five Forces Model is a tool used to evaluate the attractiveness of an industry. It evaluates the different levels of competition that may influence decisions and plans of an organization. They entail the power of buyers- the ability of buyers to bargain and push down prices can hurt an organization. The power of suppliers- this means that in a market with few suppliers or the largest suppliers are able to control the market, they can fix prices thereby reducing an organization ability to be competitive. They can hoard goods to bring about an artificial shortage with aims of raising their profit margins. Competition from substitute products can hinder an organizations competitiveness whereby there is little differentiation and products are almost generic in nature. The threat of new entrants- how easy is it for a new firm to set base in a particular industry. Having barriers tend to safeguard the industry limiting the number of potential players. Lastly rivalry among industry players- intense competition may bring about efficiency and competition through innovation: looking for ways to beat others. It may reduce attractiveness forcing out other players. Understanding the model and its application is very significant in the operation of the company since it helps management to understand both the internal and the external environment. Reference Gamble, J., Thompson, A. A., & Peteraf, M. A. (2016). Essentials of strategic management: The quest for competitive advantage (5th Ed.). Dubuque, IA: McGraw-Hill Education. STRATEGIC MANAGEMENT 4 Day, G. S. and Wensley, Robin. (1988). Assessing Advantage: A framework for diagnosis Competitive Superiority, Journal of Marketing, Vol. 52 (2) Question 3 Assess the organization’s primary tangible and intangible resources using the VRIN test for sustainable competitive advantage. Answer VRIN test stands for valuable, rare, immutable and non-substitutable. These are the characteristics that give an organization a competitive advantage. When it is sustained over time it becomes the sustainable competitive advantage. The tangible resources include physical resource (machinery, premises, proximity to a market), financial resources (capital) and organizational resources (the infrastructure that supports the firm) in terms of communication, distribution systems, and retailers. The skills an organization uses to combine the tangible resources in a way that the process is rare, not easily copied is a form of competitive advantage. In most cases, these resources are easy to get. On the other hand, intangible resources includehuman and intellectual capital, brand image, relationship with clients and partners, company culture. These resources are specific to a particular organization, it is not easy to copy, and transfer they are valuable to the organization. Build over a time it forms a culture of the organization. It is not easy to substitute a team that has developed tacit knowledge known only to team members. The experience and skills form bedrock of competitive advantage unique the organization. Understanding the model and its application is very significant in the operation of the company since it helps management to understand both the internal and the external environment. STRATEGIC MANAGEMENT 5 References Gamble, J., Thompson, A. A., & Peteraf, M. A. (2016). Essentials of strategic management: The quest for competitive advantage (5th Ed.). Dubuque, IA: McGraw-Hill Education. Day, G. S. and Wensley, Robin. (1988). Assessing Advantage: A framework for diagnosis Competitive Superiority, Journal of Marketing, Vol. 52 (2) Question 4 Conduct a SWOT analysis on the organization. Answer The SWOT analysis is used to examine the organizations current status. Strengths and weaknesses are internal to the organization and there is something the organization can do. Opportunities and threats are external to the organization in most cases an organization responds to the opportunities and reacts to the threats. Strengths form the backbone for building a strategy that takes advantage of the core strengths and capabilities. Weakness is gaps that an organization needs to work on to reduce exposure, minimize risks and enable it to remain competitive in comparison with its peers. Opportunities are areas of growth in terms of new products development, expansion into new markets, increasing products range, joint ventures, and areas of investment. Threats are possible risks, occurrences that may reduce an organizations market size, competitiveness, introduction of new technology by competing firms can make a firm less competitive. The understanding of the strength, opportunities, threats and weaknesses of a company is the first significant thing the any competent management to know. With these, the executive is able to make proper decision and execute their plan with utmost finality. STRATEGIC MANAGEMENT 6 References Gamble, J., Thompson, A. A., & Peteraf, M. A. (2016). Essentials of strategic management: The quest for competitive advantage (5th Ed.). Dubuque, IA: McGraw-Hill Education. Robert M. Grant (1996). Towards a Knowledge-based Theory of a firm, Journal of Strategic Management, Vol 17, 109-122. Day, G. S. and Wensley, Robin. (1988). Assessing Advantage: A framework for diagnosis Competitive Superiority, Journal of Marketing, Vol. 52 (2) Running head: COMPETITIVE STRATEGIES Competitive Strategies 1 COMPETITIVE STRATEGIES 2 Competitive Strategies 1. Describe the organization’s current competitive strategy using the five generic strategies framework. There are 5 generic strategies used by companies at the operational activities level. The generic competitive strategies are; Low-cost strategy, Broad differentiation, focused low-cost strategy, focused differentiation and lastly a hybrid strategy combining both cost and differentiation. The low-cost strategy involves underpricing, providing lower costs than rivals. This strategy works best in cases of potential high volume sales namely mass market. Walmart a large retail chain uses its large size to get better prices from suppliers enabling it to offer its clients lower prices. In terms of organization, the firm outsources non -essential services that lower its costs further. Use of technology enables networking of branches and having a lean management further driving costs down. Broad Differentiation strategy is used for high-value products and services e.g. Rolex watches or Mercedes Benz cars. This strategy is used where customer needs are so diverse that standardizing them I almost impossible. Value is created through the efficient use of technology, robust research and development supporting innovation. This enables charging premium prices per unit of goods sold or services offered. Value is increased by using high-quality inputs, management efficiency in offering superior customer service. Focused (Market Niche) Strategy this strategy is used with fast food chains like Safeway's and McDonald's. This enables a company to choose specific niches to serve that are large enough and profitable with few rivals. Offering the best low cost against rivals. The challenge is when competitors copy and implement the same in a much cheaper manner. It's a narrow buyer segment. COMPETITIVE STRATEGIES 3 Focused differentiation in this strategy there is limited market segments and ability to offer differentiation. This is used in the hotel industry or high-end fashion brands like Gucci, the ability to offer premium goods and services to a limited market segment. It is not attractive to many players owing to the limited market size. The challenge is constantly changing customer preferences can get one out of Business. Hybrid best-cost strategy- this is where cost and branding are used to find a middle-level playground for the choosy customer who wants value and is not ready to pay premium prices. This is used by companies like Multi-choice giving paid TV. There is the possibility of offering different bundles of value. 2. Describe what generic competitive type, from the five generic strategies framework, is being used by the organization’s primary rival. There exist three major strategies to use in the marketplace, namely offensive, defensive or blue ocean strategy. Low-cost strategy- the market leader can be challenged by using offensive strategy, this happens when a follower or number two in the market has managed to use organizational skills to lower costs thus being able to challenge market leaders through price cuts. In the Broad differentiation strategy, a company can be challenged when rivals happen to have better technology and superior products to the market leader. Apple managed to beat Nokia in the mobile telephone market through innovation and superior research and development. Apple products fetch premium products. Focused low cost- the market leader can be challenged with better technology and efficiency through offensive pricing strategy. The Market leader can respond to a defensive strategy where they offer a selected product range at lower prices and making profits through other products portfolio. It gives the impression that they are price friendly COMPETITIVE STRATEGIES 4 Focused differentiation- offensive strategy done through enhanced value to the customers. Giving more for less. In a hotel given two nights and a third free, while making money on another product offering like restaurants, bar rather than have hotel rooms empty. Rewarding loyal customers. This endears customers to the firm for repeat business. A hotel can Partner with an airline to lower customer acquisition cost for hotels challenging established brands. Hybrid strategy uses both offensives as well as defensive strategies. Large firms have human and financial resources that enable them to create new markets a disruptive new way of growth while defending its market positions in markets the firm operates. Toyota created a hybrid car that uses gasoline and a battery to reduce reliance on fossil fuels; it expanded its market to the USA. This is a combination of offensive expansion and Blue Ocean with new products. 3. Describe whether the organization is using an offensive or defensive strategy type. Offensive strategy is used by a firm to expand or grow its market share. This is done by creating new products, aggressive marketing, and advertising and entering new markets. Starbucks used offensive strategy to grow in the market share globally. A defensive strategy is used by a company to protect its market share through cutting costs, matching competitor prices, engaging in promotions to increase sales volumes. A company can also acquire companies downstream or upstream to build its muscle in the market. 4. Describe the organization's merger, acquisitions, or outsourcing options/status. A merger happens when a company joins forces with another company to form a new firm. This is usually negotiated where management is merged; resources are merged with some people declared redundant. Mergers usually create a more competitive firm with a wider product range. A merger allows companies to have a greater presence in a larger geographical. Pharmacia a pharmaceutical company merged with Upjohn to form Pharmacia-Upjohn. The merger resulted COMPETITIVE STRATEGIES 5 in combining pharma products, Research, and development resources and a larger market share globally. An acquisition occurs when one company buys another company and takes over its products, management, employees, and market. Sanofi a French firm acquired Aventis forming SanofiAventis the name they used for a number of years before reverting back to the name Sanofi. Acquisition results into an acquired company losing control over the company. Reorganization occurs with job loses making a more vibrant company, that is competitive, greater product portfolio and resources to grow. Outsourcing occurs when a company decides to concentrate on its core business and gives non-core activities to other suppliers (companies). Outsourcing is a tool used to reduce manpower costs and enables a company to concentrate on the activities it has a competitive advantage in. Airlines can rent or lease aircrafts, while the supplier maintains and repairs the fleet. This releases valuable resources for an airline to concentrate on getting customers and cargo to operate profitably and be able to pay for rental or outsourced services. COMPETITIVE STRATEGIES 6 References Gamble, J., Thompson, A. A., & Peteraf, M. A. (2016). Essentials of strategic management: The quest for competitive advantage. Kaya, N. (2015). Corporate Entrepreneurship, Generic Competitive Strategies and firm performance in Small and Medium Size Enterprises, Proceeding 11th International Strategic Management Conference (2015), Procedia-social and behavioral sciences 207, p. 662-668. Kim, W.C., and Mauborgne, R. (2005). Blue Ocean Strategy: How to Create Uncontested space and Make the Competition Irrelevant, HBR- Press. Boston, USA. Ritika, Tanwar. (2013). Porters Generic Competitive Strategies, Journal of Business and Management (IOSR-JBM), 15 (1). Rothaermel, F.T. (2015). Strategic Management, 2nd Ed. McGraw Hill Education, New York, USA. Running Head: MANAGEMENT Strategic Management (Homework Week Four) 1 2 STRATEGIC MANAGEMENT Strategic Management 1. Describe the organization’s current or potential strategic approach to compete internationally. In the current century, companies are putting in place enough strategies to ensure that they are the most competitive internationally. The world economy is increasing as companies that initially serve within a country boundaries expand to global market and venture to different sectors to be more stable. The integration of information technology into the company operations has reduced the significance of geographical distance and help a lot in building customer service delivery that enhances company operations. First, the company should adopt a multi-domestic strategy to localized strategies specific to each country market. A strategy should meet market demand in a specific country by addressing the customer demand in the specific country application. The regional managers should have proper knowledge of his or her area for easy application of strategy. Secondly, the company should implement a global strategy that cut across and harmonizes all the specific strategies to achieve the company goals (Deresky, 2017). Lastly, the strategy applied should provide a transitional mechanism from one marketing technique to another without a gap. The international operations should enhance the general competitiveness of the company. Mapping of the geographical market to help reduce the cost of production or product differentiation policy should be encouraged. Favorable export strategies should be applied for example allowing domestic industries to produce and then the product exported since the cost of exportation will be preferably cheaper. Also, foreign wholesalers will be ideal since they have good knowledge of the market in their home country to help the company expand their market. To further the competitiveness of the company, the company can license the technology or other STRATEGIC MANAGEMENT 3 necessary production rights to a foreign firm to help distribute risks involved in entering a new market. 2. Identify which of the organization’s resources and capabilities make it attractive to compete internationally. Company strength makes it outshine other companies and succeed. The size of the company and expected growth rate has influence in its ability to compete beyond the home country borders. Lager industries are preferable than small ones. The company should have high growth rate since fast-growing firms are more competitive and attractive than those having slower growth rate. The company should move its competitive scale higher level where it handles high competitive pressure in market opportunities and threats (Goetsch and Davis, 2014). Diversification is the ultimate technique for a firm to survive in the market. It should adopt value chain principles to attract other firms with same goals to work together. To establish competitive advantages, the firm must make consideration whether to run internal operations in few countries or disperse the operations to many countries and also they must specify which county to carry out the operations. The company should look at the cost of running a process in a geographical location compared to other. The location of the major base of operations should have superior resources to facilitate service delivery. 3. Describe the organization’s current or potential diversification strategy options. Once a company decides to diversify, the best strategic option is either to expand into related business, unrelated business or some mix of both groups. Diversifying into a connected business which is said to when their value chains matchups present the current opportunities for STRATEGIC MANAGEMENT 4 the business to perform better. These firms possess valuable competitively the cross-business value chain and even the resources. The strategy enhances the shareholder by possessing the cross-business strategic fits for transfer of skills and the scarce resources from one business to the other, cost sharing of facilities or resources, everyday brand name use between business units that have same customers and lastly a combination of resources for innovation of strengths and the capabilities. Diversifying into unrelated businesses which have dissimilar resource requirement as well as the value chains, with no competitively essential cross-business value chain relationships. The strategy focuses on entering and operating the business in some industries that allow the whole company to increase the earnings. The organization that pursues this kind of business always enters new businesses by acquiring the established organization rather than by internal development. This business normally spread the risk across completely different businesses. They build the shareholder value through upward trending earnings and the revenues (Wheelen and Hunger, 2017). However unrelated diversification strategies have some pitfalls such as limited competitive advantages and the very demanding managerial requirements. Diversifying into both related and unrelated businesses. Diversifiable companies usually vary considerably but they are known to be dominant business enterprises .some diversified can be narrowly diversified around either related or unrelated business while others are said to be broadly diversified around a collection of both the businesses. 4. Identify how chosen diversification strategy options would lead to a strategic fit with the organization. Diversification into a related business will lead to a strategic through the following: STRATEGIC MANAGEMENT A) 5 Sharing of the facilities and the resources required to reduce the cost. Such cost sharing is between the separate businesses where the value chain activities can be put together. B) Transfer of skills and the capabilities of the one business to another. This includes the technological know-how, valuable resources and the expertise in the field. C) The use of standard brand name between the business units whose interests are of the same kind and they can draw upon the common core competencies. Since unrelated diversification strategy discounts the essence of pursuing crossbusinesses strategic fits, the corporate executives, therefore, doing the superior job of choosing the business can produce consistent earnings and returns on investments. Performing an excellent job, by negotiating the favorable acquisitions prices, can be nerve racking at times. However, it’s through the negotiations process that the company will be able to understand all the stake holder needs and put mechanisms in place to achieve them. 6 STRATEGIC MANAGEMENT References Gamble, J., Thompson, A. A., & Peteraf, M. A. (2016). Essentials of strategic management: The quest for competitive advantage (5th Ed.). Dubuque, IA: McGraw-Hill Education. Deresky, H. (2017). International management: Managing across borders and cultures. Pearson Education India. Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence. Upper Saddle River, NJ: Pearson. Wheelen, T. L., & Hunger, J. D. (2017). Strategic management and business policy. Pearson.
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