Strategy is the backbone for laying the foundation of a successful process and planning as it includes all the vital decisions that are needed to visualize them. This framework is an essential part of strategic approach as it directs the growth and optimum use of available resources to meet the needs of the organization as well as its stakeholders. In this report, focus is highlighted on the strategic planning process and its significance. Also, various techniques of planning, resources needed and roles to be handled for strategic implementation has been discussed here with focus on various companies taken as examples to help understand the various aspects involved in a simple way.
a) Discuss the steps of the Strategic Planning Process. In this discussion, you should include definitions and examples for corporate vision, mission and objectives along with brief descriptions of the concepts of ‘core competencies’ and ‘competitive advantage.
Strategic planning is the direction planning of a business which drives and leads it to most desirable probability ensuring growth from where a business stands to move it to where it is expected to reach in future. This likely process meets the interests of all the stakeholders to achieve the business vision and mission. But like any other business risks this road map also includes barriers which need to be overcome and adjusted to achieve the objectives of the business. The success of strategic planning depends on effectiveness of evaluating both internal and external business environment, competitiveness of employees and on effective communication. (Gaggl & Grunig, 2013)
- Corporate vision: It defines the visualization of the business i.e. where the owner wants it to go in future and it outlines significant measures such as statements of R& D, profit earnings and share, competitive position relative to rivals and relations with stakeholder’s and customer value. Example, the vision statement of an automotive parts distributor company reads as: Delivering quality at low cost and best customer value to lead distribution market in automotive parts. Serving with right need at right time and place!
- Mission: It defines the identity of business describing their market offer, unique selling proposition and recognition to their value commitments. It clarifies business products, target markets, their culture and financial aims. Example, the mission statement for automotive parts Distributor Company reads as: To distribute quality products to auto after market, provide right information and service guarantee to customers, being a reliable company to all and gain profitability with reasonable performance.
- Objectives: It defines the desired outcomes a business plans to achieve with their available resources. Example, the objective statement of auto-parts Distributor Company reads as: Aiming to provide quality materials at competitive price and valued distributorship by understanding necessities to offer right solutions. Additionally empowering employees with knowledge and recognition to value worthy associations. (Chernatony, 2008)
Once the business mission and vision is defined and objectives are framed, then a strategy needs to be produced so that activities and roles are designed in order to accomplish them. Then this strategy needs to be put into action or implementation with the use of various resources and in a timeframe. The last step in strategic planning process is to monitor the progress of strategy to recognize its developments, need for improvements and overall reviews.
- Core competencies: It describes the attributes by which a business differentiates from industry rivals by powerfully identifying its uniqueness and value. Example, the core competency for distributors of auto-parts is driven by its USP (Unique Selling Proposition) to provide quality material at competitively low costs in market.
- Competitive advantage: It describes the market favorability by which a business holds customer preferences and advantage sales over its rivals. Example, the competitive advantage of automotive parts Distributor Company is its market reliability for quality excellence at relatively low costs.
b) Role of strategy and issues involved in Strategic Planning
The strategic planning is the description of the business road map and it talks about competitive and strategic approaches that are undertaken to meet the interest of their entire stakeholder’s and achieve the business objectives successfully. It specifies the business mission, vision and plan to fulfill those (Objectives). In this process how, when, what is decided for resource allocation and implementation. This process helps a business to perform efficiently. (Simerson, 2011)
As strategy is basically a business directional plan so its role is to provide focus or define its approach in a competitive way. It clarifies activities to meet objectives by diagnosing the business strengths or characteristics with changes in environment so that efficient planning can be designed to respond. This helps to make able decisions for successful outcomes with available resources. Overall strategy helps to analyze and monitor business for its growth. According to Mintzberg, strategy has 5 P’s:
- Perspective: which describes the thinking and attitude of the business and its people. This pattern moulds the behavior, response and aptitude depending on culture of an organization. Example, for the auto-part distribution company discussed above, the focus is on excellence in quality at low cost, so their strategy should talk about how their services are built on this aspect.
- Plan: which describes how objectives are to be achiev ed step-by-step. Example, for auto-parts distributor the strategy should focus on optimum use of resources to cut costs effectively.
- Pattern: which describes the conscious or consistent approach of business. Example, for this distributor, decision is based on cost strategic advantages that are designed after consistent market research to optimize entire resources.
- Position:which describes how a business responds to align the organizational needs with environment needs. Example, for this distributor, strategy is positioned on low price differentiation with good quality as advantage over rivals.
Ploy which describes witty advantage over competitors. Example, for this distributor, the strategy plotting can be low priced bulk sales. This will increase sales volume keeping the costs marginally low compared to rivals. (Prahalad & Hamel, 2010)
Though useful but strategy can also be countered with problems such as lack of clarified purpose, communication, information, approach, competence, resources etc. There can also be other issues such as problems within leadership, organizational culture, unrealistic expectations and unplanned changes faced from customer, environment or employees.
BCG matrix is planning for potential of product or business portfolio for investments and markets. They define existing competence and future probability creation. This helps to decide on investments, developments or decline of products. It decides on growth and market share dimensions based on aspects of stars, cows, dogs and questions mark. (Griffin, 2007). This is illustrated in the figure below.
SPACE Matrix is planning for competitive positioning for business based on four determinants: aggressive, conservative, defensive and competitive.
c) Discuss in details, the utility and application of either the BCG matrix (Boston Consulting Group) as a growth planning technique OR the SPACE matrix as a strategic positioning technique for managers
BCG Matrix as growth planning technique:
This matrix evaluates the positioning of product in response to environmental challenges to help decide business strategies for growth and market share. It helps to identify current strength and future potentials. This is determined by:
- Stars: where products have strong growth and market share. To sustain this dominance and future development they need to keep investments flowing. Examples, for Amazon star products are e-movies, kindle
- Cash cows: where products sustain high market share but have low scope for further growth. These are money maker products but face low competition. Examples, Amazon e-books hold market dominance but low growth.
- Dogs:where products have low market share and weak growth. These should be divested as they show poor returns on inputs such as investments, resources, time and efforts. Example, in Amazon there are no products which are in this quadrant.
- Question mark: where products show high growth prospects but capture low market shares. So, they need proper promotion or penetration in market to balance income compared to high investments done on them. Example, certain software and on demand video’s of Amazon fall in this quadrant. (Krumova, 2013)
a)Explain to the interns how the ANSOFF Matrix OR the SWOT Analysis has helped you to carry out an organizational audit for one of your client companies
To carry out the organizational audit SWOT is a useful analytical tool as it evaluates the internal and external competence and resources with the micro and macro environments of the business. This tool helps a business understand their own capacity and competitive advantage, evaluate competitor’s situation, recognize own opportunities and strategic response. (Bohm, 2009)
As per the case scenario, I have been working as strategy consultant where I used to carry out organizational audits for my client companies. The use of SWOT tool has helped me carry out my analysis. Example, I would like to discuss SWOT analysis for Mulberry and how it has improved their functioning.
b) Discuss with the interns, how your firm would carry out an environmental audit for one of your clients by either utilizing the PORTER Five Forces OR the PESTEL framework
Porter’s 5 Forces model is an analytical tool by which a counter strategy can be planned against competitive forces. This helps to evaluate and hence formulate the position of the business and its economic intensity in a manner that is difficult to be attacked.
- Threat of Substitutes: Mulberry practically faces no sustained threat of substitutes as their products bear significant quality which is hard to imitate. Also, their production process and operational functions are technically so well built that their products can’t be substituted in terms of quality and hence they own their individuality. Moreover, as the customers for their products are highly exclusive by nature, so their switching to substitute products is minimal.
- Bargaining power of Buyers: Mulberry faces high bargaining power of their buyers or customer’s who prefer value bargaining and not cost switching. These powerful and affluent mass of buyers are faithful to designer than to retailer. Hence, Mulberry is bound to maintain its value chain.
- Bargaining power of Suppliers: Mulberry is a great fashion house which maintains its legacy of craftsmanship. Also, as there is significant decline of skilled craftsmen, hence, bargaining power from suppliers is low. Even, Mulberry significantly values its suppliers and believes in retaining relationships with them to continue their legacy with quality and creativity. Hence, both Mulberry and their suppliers have win-win situation.
- Competitive rivalry: Mulberry is a great name in luxury fashion which has established its own individuality among customers. Also, it faces low switching costs. Though it faces modest competition from similar status brands such as Burberry, Armani etc but it faces absolutely no competition from young arrivals in industry as this would need huge worthy investments to compete on equivalent level. And, this financial strength in emergents is visibly low.
- Threat of New Entrants: Mulberry faces little to almost no threat from new entrants as they are established name in luxury industry. Also, matching their excellence and individuality would mean large economic value for new entrants which need long time to establish. (Porter, 2008)
c) Explain to the interns the significance of stakeholder analysis, that is usually carried out for your client companies by mapping stakeholders using the MENDELOW Matrix
Stakeholder analysis is about recognizing the interests and power of all individuals, groups and organizations that are directly or indirectly involved with a business or project. It is also about managing their interests to keep them convinced and faithful. Significance of stakeholder mapping: healthy relationships, strong cooperation, un-interrupted flow of resources, effective performance, strong decision-making and strategic approaches to respond to environments, changes and risk management. (Blokdijk, 2015)
The significance of stakeholder analysis can be understood with the mapping of stakeholders for Mulberry.
|Stakeholder||Stakeholder Interest||Assessment of Impact||Potential Strategies|
|Shareholders||Profit, Income, Stability of business, growth and sustainability||High power and high interest||Growth strategies that can sustain high market share and revenues.|
|Investors||Growth of capital and economies of scale from investments done.||High power and high interest||Participation in decision making process to keep them informed.|
|Employees||Career growth, adequate compensation, recognition and job security.||High power and low interest||Provide personal development, engagement and keep them satisfied.|
|Suppliers||Value partnership||High interest and low power||Long term trade contracts and benefits, strong relationship and timely payments|
|Customers||Quality and value||High power and low interest||Product innovation, creative designs|
|Government||Compliance with regulatory frames, giving employment to community and value return for using public resources.||High interest and low power||Transparently communicating financial statements and other documents, timely taxes and practicing with regulations fairly.|
|Media||Information||High interest and low power||Keeping them informed|
|Community||Responsive giving to society||Low interest and low power||Giving employment, scope for development|
a) Explain the differences between Vertical Integration AND Horizontal integration when used by managers as a substantive growth strategies. Provide a detailed explanation, with one company example for each strategy and also highlight four major differences when comparing Vertical and Horizontal integration growth strategies.
Substantive growth strategies are the growth strategies which are led by four factors: Horizontal integration, Vertical integration, related diversification and Un-related diversification. These are done by mergers or acquisitions.
Vertical integration is strategy that leads to gaining of control or ownership in the same industry such as acquiring production, distribution or delivery chains. This helps to enjoy all the profits by single player and helps to gain more power, minimize costs and control different channels or component parts involved. Example, Google one of the leading software giants have acquired Motorola Mobility which is a mobile company to integrate its software and hardware approach. It plans to enter into manufacturing android based mobile devices and television set-top boxes by providing them operating systems and software solutions under one name. ([email protected], 2012)
Horizontal integration is strategy that integrates another business or activities at the same stage of operation in similar or different industry. This helps to expand and strengthen the resources, economies of scale and cut-down competition within supplier and customer chain. Example, Walt Disney Group which is a leader in entertainment industry has horizontally integrated by acquiring other creative studios such as Marvel Comics, Lucasfilm and Jim Henson Studios. This has helped Walt Disney’ s to create new themes such as “ The Avengers”, “Star Wars” and “The Muppets”. (Hanks, 2015)
b) Select an appropriate future strategy for one of your firm’s clients. This should illustrate one future market entry strategy such as Organic Growth OR Mergers and Acquisitions (M&A) OR Strategic Alliances
Merger and Acquisitions are the strategies that are undertaken by business to increase and expand their combined value which is greater than the parts. This helps to improve strategic positioning by minimizing competition, expanding on market size, improving business gains, creating new developments and ideas, using resources judiciously to eliminate loses and facilitate growth. This helps to distribute risks involved to create more favorable and secured environment. Example, Royal Dutch Shell’s recent acquisition with UK’s oil and gas company BG Group Plc. This would help Shell to benefit from expansion during changing market environment where prices in oil and gas are declining substantially. This will enable them to increase their economies of scale and remain competitive to changing environment though being limited with market shares. This would also influence competition strongly particularly in exploration and liquefaction of gases and in oil supply facilities in Europe and North Sea, with more projects being built to increase capacities. (Walker & Fairless, 2015)
a) Discuss three roles and responsibilities, and three business activities that are necessary for proper implementation of the selected strategy. Additionally highlight which human, financial and material resources are indispensable during strategy implementation.
The effective implementation of strategies can be visualized by the following roles and responsibilities and the business activities that are undertaken:
- The top level executives of Royal Dutch Shell would be responsible to design the strategic approach in terms of new ideas or business process re-engineering. This would include market analysis and situation evaluation in the context of recent changes that are sustaining due to price changes in oil and gas. Their knowledge and experience would be advantage to plan resource allocation, utilization and strategies that would help to create benchmarks. Additionally they are responsible for risk and change management along with monitoring the progress of strategic implementation so that arising issues and consequences can be countered tactfully.
- The middle level of management would be responsible for data analysis and report presentation that has been gathered from market research and stakeholder mapping. These statistics based on informative facts help to plan and decide strategies that would fit with purposes of Royal Dutch Shell and the interests of their stakeholders. This level of management is also responsible to supervise and support the administrative working and operational functions needed to realize the strategies planed.
- The success of strategies lies over working of employees and supervisors who are at the lower end of the hierarchy. They are responsible to shape the framed strategies into end results with their efforts in production, operation and other functional processes. (Bodenmuller, 2014)
- For implementation of the above M&A strategy of Royal Dutch Shell, the following resources need to be allocated:
Human resources are most important inputs for the success of strategies. This goes true for Royal Dutch Shell also. They need competent and skilled employees who have through knowledge of all the technical details required in the process of oil exploration, drilling, processing etc. They need to have expert field employees as well as management level employees who can maintain the other in-house functions right from procurement, production, distribution etc.
In addition to manpower needs Royal Dutch Shell also needs to have strong budget planning so that adequate resources are procured and allocated for production process. In addition, they need to have budget for R& D activities, PR activities as well as for supply and distributions.
Material resources needed for Royal Dutch Shell are crude oil supplies, equipments for drilling and exploration, production equipments and materials, storage and distribution materials and also transport.
b)For the selected strategy in Task 3 b, produce a Gantt chart as a proposed timeline for agreed strategy targets and milestones
The proposed timeline for the above strategy implementation of Royal Dutch Shell can be understood with the following Gantt chart and task schedules, as illustrated in the figure.
Step 1: starts with market research and analysis. These activities are estimated about 44 day’s time. Next activity is arrangement of capital for which investors are looked into, it is allocated 24 days. Then, after the investments are arranged, an on-site and off-site property is finalized for production and other operations which are allocated 6 days.
Step 2: starts beginning with supplier seeking which is allocated 17 days time. Then, it is followed by tender quotation which is given 3 days. After this suppliers are finalized. Then on-site and off-site units are developed for infrastructure support and equipment installation.
Step 3: begins with human resource planning which is allocated 24 days and employees are then recruited for this plan. Last step is material procurement which is given 16 days and after all set up is prepared, production process begins to operate.
From this discussion it can be concluded that strategies are vital for recognizing and utilizing every business input judiciously so that growth objectives of a business are met with long term sustainability, high productivity, performance and profitability. This planning helps to make capable decisions so that various roles and activities are effectively achieved and on proper time. This is important for the successful operation and functioning of a business.
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