In chapter one, based on my understanding, it covers the basics of how to create a competitive advantage in a working environment or an organization. The section gives a detail explanation of what exactly strategy management means and also talking about its key four attributes. Even mentioning the facts about how strategic management should process and its interrelated and principal activities. The other main areas covered in the sections are about the vital role of corporate governance and stakeholder management and also the importance of a social responsibility that requires greater empowerment throughout the organization.
Highlights of my Understanding
Strategic Management and its four key attributes
An organization may face many challenges and opportunities in the global marketplace; that the managers should able to prove themselves to survive in a competitive environment even if it is in a long period of any difficulty of a company in any size. The managers must able to think beyond, to create incremental management in an organization which will create a slight change for improvement in the efficiency of the firm’s operation. A good leader can say to be who acts proactively and have the ability to anticipate changes for refining when there is a sudden and dramatic change occur in the strategy of the organization. By defining strategic management means having the ability to analyze, make decisions and put into action in the organization for creating a sustainable competitive advantage (Dess, McNamara, Eisner and Lee, 2014). Other highlighted elements in strategic management first, it's an ongoing process; the analysis, decision and action are considered as a continuous process of an organization where the leaders able to tackle the problems occur in the organization in expected and unexpected times. The analysis in strategic goals focuses on the vision, mission and the strategic objectives of the organization, which also includes the internal and external environments. The decision part raises the question of what all industries should be competing and how, based on the organization’s domestic and international operations. The action in the strategic goals means that measures should be taken to implement their strategies, for that the leaders or the managers have to provide proper operational effectiveness when compared to the outperformance of other organizations.
Strategic management must first direct closer to an organization's desires and objectives. Usually, the company will prepare with a mission, a vision developed, declaring a purpose and direction of the overall corporation. The dreams and goals set with the aid of the supervisor's act as a stepping stone to keep that imaginative and prescient. These dreams need to be evident throughout the organization to permit the essential thing players to attain buy-in as the group moves in the direction of conducting these desires (Dess et al., 2014). Secondly, the strategic management of a business enterprise should include more than one stakeholders in decision making. Generally, the stakeholders have demands on distinctive areas of the enterprise. Managers should recall the outcomes of the way reliable decisions will affect every stakeholder group. Stakeholders will consist of owners, shareholders, employees, clients, suppliers, and the network. Decisions may benefit the owners consisting of taking quick cuts in safety may additionally have drastic consequences on the employees or a local network's environment. Third, strategic management requires consolidating both short term and long-term perspective. Managers need to maintain the vision for the future and as well as awareness of the present needs (Dess et al.,2018). Strategic managers must fourthly apprehend the trade-off between effectiveness and efficiency. That described as " doing the right thing" or "doing things right." Managers ought to make decisions that guide the organization toward its overarching goals and perform actions which create cost-saving and build a culture of a positive corporation (Dess et al.,2018). Sometimes doing the right thing may cost the company more money to stay on the focus of the challenge. Companies may make organizational decisions that inhabit the fulfillment of the organization.
The Strategic Management Process
As the chapter mention strategic management as an ongoing process which consists of analyses, decision and actions. While putting the concept into practice, the three methods can refer to as strategy analysis, strategy formulation and strategy implementation, according to Dess et al. (2014) “are highly interdependent and do not take place one after the other in a sequential fashion in most companies.”
Strategy analysis: In simple words, it is the advanced work on the external and internal environment, which matches the organizational vision and goals of the firm. In other words, it consists of advance work done in the organization for an effectively formulate and execute procedures. Presumably these days, many strategies are failing due to lack of advance work in careful analysis of goals of the firm along with the external and internal environment. Analyzing the organizational goals and objectives means having the vision, mission and strategic objectives to achieve the goals bases for competitive advantage to specific, measurable strategic objectives. Analyzing the external environment consists of several elements which include such as demography, economy. Other external factors are competitors, and other organizations threaten the success of a firm’s product and services. Analyzing the internal environment of the firm means finding the strengths and relations among the actions that describe a firm’s value chain (e.g., operations, marketing and human resource management) may be a means of revealing potential causes of competitive advantage for the firm (Dess et al.,2014). Another essential factor of strategy analyses is assessing the firm’s intellectual assets, having knowledgeable workers and other intellectual assets like patents are the vital elements of competitive advantage of the firm.
Strategy Formulation: Means the firms make a decision based on the investments, commitments and other aspects of operation which helps in building the sustainable competitive advantage. In this, the company mainly focus on what the business is to compete and how the company can manage to achieve efficiency in the operating and also the managers must express effective entrepreneurial initiative. Strategy formulation in Business-Level Strategy mainly focuses on creating a base on competitive advantage through cost leadership and also concentrate on the industrywide market segment. In the case of corporate strategy formulation, the company mainly focus on the firm’s portfolio of businesses, which means what the business should be competing with and how to achieve the portfolio of companies to create collaboration among the companies. For international strategy formulating the markets will have both sides with excellent opportunities and pitfalls. The leaders will maintain to manage how to create competitive advantage in global markets (Dess et al.,2014).
Furthermore, in the case of entrepreneurial strategy and competitive dynamics, the activity mainly focuses on creating value for the economic growth of the organization.
Strategy Implementation: In this method, it is all about execution. Strategy Implementation involves strategic control and organizational designs and leadership. Leadership have a crucial position in the business enterprise committed to excellence and moral behaviour. Moreover, it gives importance to studying and continuous development and acts entrepreneurially in developing new opportunities (Dess et al., 2014). To create a perfect strategy implementation, the manager or the leaders have to focus on strategic control and corporate governance, creating effective organizational designs, giving importance to ethical behaviour and learning organization and also encouraging corporate entrepreneurship. The firm has to focus on two things in case of control and corporate governance, which is informational control and behavioural control. To create a successful strategy, the company have to scan the environment continuously and respond to threats and opportunity (Dess et al.,2014).
The role of corporate governance and stakeholders management
Corporate governance is the connection among various participants in determining the management and performance of organizations. Corporate Governance mechanisms consist of two parts that can broadly say as internal and external. Internal governance tools include shareholders (owners), management (led by the chief executive officer), and the Board of Directors. External control applied by auditors, banks, analysts, and a progressive business press as well as the competitors. In all organization, there are five main stakeholders, which include owners, customers, suppliers, employees, and society at large. Successful firms always look forward to satisfying the interest of their owners (Dess et al., 2014). Whereas the managers must act more for a socially responsible manner to enhance the innovativeness of the firm. The managers also should identify and incorporate issues related to environmental sustainability in their strategic operations. In other section of the chapter, it discussed factors of unpredictable changes that the managers are facing these days. More importantly towards the final part mention the need for compatibility among a firm’s vision, mission, and strategic objectives and pointing out that are vital to ensuring that the organization is aiming towards fulfilling its vision and mission (Dess et al.,2014).
ANALYZE AND EVALUATION
One of the examples quoted in the section by David Novak of Yum Brands, he mentioned the fact that a manager or a leader should consider the job as their own, which means they have to run the place as they own it and work for it. Also, it is the place where the ego should stand out and have the ability to identify what precisely the business need. Think about the business from a narrow perspective and also as in its entire business. That is why companies like Southwest Airlines and IKEA are having outstanding performance because they develop uniquely, internally consistent and always check on the rivals and also have a constant outlook on the similarities which are available in as in the external environment.
Another instance came into mind is how changes happen to the company Hudson Bay and Nordstrom Vancouver, Canada. As a Sales Associate in Hudson Bay for three years, recently there have been some drastic changes in the company. After the establishment of Nordstrom, Hudson Bay has a considerable competitor in the market. For the past two years, when compared with these two companies; Nordstrom able to satisfy their customers with high-end brands and services. Whereas in the case of Hudson Bay, they used to have high-end products which customers are looking for, but now those brands have retail outlet stores available in the market with much more collection and better deals, this means the customers prefer the customers are more preference on retail stores. In the case of Nordstrom, they analyze the internal and external environment in detail; they have much more successful strategic goals which match to the purpose and objective of the organization. Nordstrom is focusing on the nitch market, like the Asian market in Vancouver. In the case of Hudson Bay recently during the daily meeting, our manager said that we have a vast lose stockmarkets. As an employee, what I felt is instead of introducing so many new brands along with the current brands the company have to focus on the what exactly the company wants and how effectively they can manage it. I think these will be an example of failing in creating a successful strategic operation, facing by the managers in these days because the company fails to access the threat and opportunities and lack in proper analysis internal and external environment. According to my understanding by putting yourself in other's shoes create a better and broader view of the business. For a successful business, always prepare for dramatic changes and have a strong ability to understand what precisely right for the company and well as its stakeholders.
The purpose of the paper to understand; they mainly discusses why forecasts are essential in the business field. Also, it talks about what all are the critical inputs for forecasting, which includes environmental scanning, monitoring the environment and also collecting competitive intelligence. The chapter two also discuss about the facts how important to have SWOT analysis as part of strategic environment.
The importance of developing forecasts and its critical inputs for the business environment.
The CEO of the company should have the ability to analyze the external environment as a sixth sense about the changes that could represent threats and opportunities. The best way to identify forecasts is through proper scanning, monitoring the situation also having competitive intelligence will make better forecasts for the organization.
Environmental Scanning: Scanning means an examination of a firm’s external environment changes. The scanning can be done mainly through a combination of understanding the business and critical trends happening around their environment, and the customers are also keeping an eye on the market for changes. The external scanning will give alert to the companies about the trends and events that could happen in future so that the managers can make necessary changes before the competitors recognize them (Dess et al.,2014).
Environmental Monitoring: From the word itself, it means carefully tracing down the external environmental trends, the series of events or current activities. For successful monitoring, the managers or CEO maybe create developments that the company came across by coincidence or ones that introduced to its attention from outside the business enterprise.
Competitive Intelligence: The main motive behind competitive intelligence is that it helps the business to understand their industry and also helps to identify the competitor’s strength and weakness. The other aim behind to have a competitive intelligence in the firm is to avoid surprises by anticipating competitor’s move. Based on the current technology, keeping track on to gather the information of competitors is much easy these days(Dess et al.,2014).
Environmental Forecasting: the primary purpose behind developing forecasting is to predict changes in the business. It also involves the development of credible projection about the management, range, pace and integrity of environmental variation. The fundamental questions that arise while analyzing the forecast are about how the improvised technology will introduce in the marketplace, whether the current lifestyle trends will continue in the market and so on (Dess et at.,2014).
Scenario Analysis: is a more in-depth method to forecasting in the area of the economic side, psychology, demographics ad other external environmental factors. It starts with analyzing the current situation with the economic factors, political issues and other possible future technological factors which could affect the firm. It also has a projection about future events; the success cannot only depend on the historical facts.
One of the primary ways of analysis of an industry done through SWOT, which means identifying as the strengths, weaknesses, opportunity and threats of the business. To understand a firm's environment of a particular company, need to analyze the general nature of the market, need to get to know more about the competitive environment of the industry. As an industry, there will be a high chance of production of similar products and services even the same customers, for a key to successful strategy the firm have to gather all possible information regarding the competitive dynamics of their competitors (Dess et al.,2014). The SWOT can divide into two; the strength and weakness can consider as the internal factors and the opportunities and threats are consider as the external factors of the firm. If the firm has powerful relations and firm excels, which viewed as the part of the power of the firm and when lacking some comparable factors to rivals are consider as weakness of the organization. the general strategic idea of a firm through SWOT analysisn is to bulid more strength to the organization, solve the problems which shows the weakness of the business, taking avdvantages on the opportunities with are available in the external environment and also protect the firm from threats which affect the successful operation of the firm (Dess et al.,2014).
The impact of general environment on a firm’s strategies and performance.
They mainly have six elements, which are demographic, sociocultural, political or legal, technological, economic and global.
The demographic segment: it considered as quantifiable elements of the global environment, and also they viewed as the root of many things in society. Since, it found measurable factors such as the age of the population, ethnicity, geographic distribution of the community, disparities in the income statement, sex, race, education and income. Different industries have a disparate impact on the demographic trend in all segment of the global environment (Dess et al.,2014). The Sociocultural Segment: This segment influence the values, beliefs, and lifestyle of a society. For instance, there is an increasing percentage in women workforces in the community which, help the clothing business merchandise but also there is a decrease in demand for baking products means people have less time for the cook from scratch (Dess et al.,2014). The political or Legal segment: this segment is significant for every industry to comply. Some of the necessary processes and legislation that the industry must follow based on the sector are tort reform, American with Disabilities Act (ADA), increases in minimum wages, taxation. The Technology Segment: external markets are challenging, and the customers and the competitors of the companies are looking forward to more innovative product and services. The success of business in these days can say to be how innovatively they produced and whether the product distributed to their end customers in just in time. Some of the technological developmental trends include genetic engineering, three-dimensional printing, computer-aided design (CAD), pollution, global warming, and nanotechnology (Dess et al.,2014). The economic segment: In this segment, the characteristics of the economy will affect the industries from suppliers of raw materials to producers of finished goods and services. All type of organization in services, wholesale, retail, government and nonprofit organization will be affected if the economy is not in favour. The key economic indicators are the interest rate, unemployment rates, gross domestic product (GDP) and net disposable income and changes in stock market valuation (Dess et al., 2014). The Global Segment: In this segment, it influences the foreign countries and their market opportunities, and the competition is based on international competition and also developed spatial markets. Globalization has provided many opportunities in a sizeable potential market. It does not mean that only finished goods and services are traded among international markets; it also includes raw materials, labour, skilled managers, and IT professionals. Also, it strives other factors like political, social and economic risks (Dess et al.,2014). According to my understanding, the relationship between the elements of the global environment will be different across industries and in different countries.
The Competitive Environment
To have developed a competitive environment, the managers or the leaders have to know about the industry clearly and considering the profitability of the firm will influence directly to achieve competitive environment. A successful firm's strategy, the competitive environment plays a crucial role, and also they have many factors like competitors, customers, suppliers which will be appropriate for the business. The business should able to contribute the essential ideas and analytical techniques that a manager should use to evaluate their competitive environment. First, a crucial factor is Porter's Five Force Model of Industry Competition. Michael E.Porter develops Porter's Five Force; this is a tool mainly used in the field of analyses for examining the competitive environment. It explains the competitive environment have five forces which are (a) there is a threat for new marketers; this refers that there is a higher chance of rejection of getting into the well-established market because of higher competitors with higher profits. Unfavourable circumstance can discourage new competitors (Dess et al.,2014). Some factors depend on existing barriers to entry are economies of scale, product differentiation, switching cost, access to distribution channels. (b) The bargaining power of buyers refers to the threat that the buyers face through reducing the prices, bargaining for higher quality and even for more services and playing competitors against each other and these actions can erode the industries profitability. It mainly depends on the attributes of the market situation and the importance of purchase is considered when compared to the whole business; the power of large buyers depend on these factors. The buyers become dominant when the profits are low, and few switch cost and purchasing standards product is in large volumes. (c) The bargaining power of suppliers, the main threat caused by the suppliers is when the price is high, and the quality of product and services have reduced. The suppliers are said to be dominant when there are only a few dominants in the industry. When there is no competition from the substitute products and also when the quality of the buyers have affected the industry product. Moreover, even when the products are differentiated and having switching cost of buyers by cutting their options to one supplier against another. (d) The threat of substitute product and services refers to when there is high competition in the industry they tend to substitute their product and services; the more the attractive price of substitute product will help to maintain the profit level of the organization. For instance, the digital technology industry has improved to the wireless technology industry, and it becomes more efficient and convenient for the customers as well as all business industries (Dess et al.,2014). The manager has to analyze the market with all factors so that it will keep the strategic goals of the industry. (e) The Intensity of competitive rivalry the threat here is when the customers switch their business to their competitors within the industry. The customers can choose between the competitors, maybe because of the pricing factor or some other factors like better quality. Some of the interacting factors that lead to extreme rivalry are higher or equally balanced competitors, or high fixed cost or low costs and slow industry growth can affect.
Using Industry Analysis
For a successful life of the company, they have to develop a valuable industry analysis through collecting data and evaluating a variety of information about the external environment. The critical factors are understanding the trends, customers, suppliers, new marketers and competitors. By the using of porter's five forces method will help the business to maintain the potential profitability and also help to identify various preserve the strengthen its position in the market. Do not judge a low-profit industry; it can earn higher returns with an appropriate method of strategies (Dess et al.,2014). For a better inventory and respond to a quick demand in the market can be done through having a good relationship with the suppliers, which may lead to advance the capacity to fulfill just-in-time service. Based on the structure of industries, the strategic objectives will be different for each firm. Complements typically are services or products that have a capacity impact on the cost of a company's services or products. Groups who produce complements are generally known as complementors. Michael Porter's five forces of analysis help a firm to maintain the profitability of their business; which can tackle two critical issues in conducting the right industry to increase its profitability (a) determining the relevant time frame, (b) an accurate quantification of the five forces (Dess et al., 2014).
ANALYZE AND EVALUATION
One of the typical incidents came into my mind regarding the strategic analysis; recently, I had a conversation with my friend who is working in the banking sector. As an outsider, I have wondered banks are old and how they make so many profits. Also, my friend quoted that executives of the bank faced by the time when PayPal came into the market. The executives where gather together for a meeting and discuss the SWOT analysis regarding PayPal. When to compare to banking technology PayPal spends less money on their technique; the customers even trust Paypal but not as much as their bank but still in a small period they were able to gain trust among the customers. Another unique feature PayPal is the bank will have no idea whether their customer will have an account in PayPal, which means they have better analysis in data collecting. Paypal is much quicker and is more innovative to all type of payment method. Well, the banks have tried to make direct links with PayPal, but they refuse to be a partner with the banks. Instead of being a partner with a bank, PayPal has chosen a unique way; they opt partnership with the retailers. In my view, the company have deeply analyzed all the external environment, even about their competitors. In the chapter(Dess et al.,2014) mention how important to analyse each and ever segment of the environment.
Another instance, in the case of PPG industries, Pittsburgh., have developed paint, coating, chemicals, glasses and fibreglass since 1899. PPG has developed four opportunity futures based on differing assumptions about two key variables: the price of strength (due to the fact its production operations are energy-in depth) Moreover, the extent of opportunity for an increase in rising markets. In the maximum favourable state of affairs, the value of energy will stay both mild and constant, and opportunities for growth and differentiation will be fast and robust. On this scenario, PPG determined that its fulfillment will depend on having the assets to pursue new possibilities. Then again, in the worst-case situation, the cost of energy will be high, and opportunities for increase will be vulnerable and slow. Any such state of affairs would call for a complete change in strategic direction. Between those two extremes lies the possibility of two blended scenarios. First, the opportunity For the boom in rising markets may be excessive, but the cost of energy may be volatile. In this scenario, the corporation’s fulfillment will depend upon coming up with more efficient tactics. Second, the price of energy may additionally stay moderate and robust. However, possibilities for the boom in emerging markets may also remain weak and slow. In this case, the possible approach may additionally be one of capturing market percentage with new merchandise. Developing strategies based totally on possible destiny scenarios seems to be paying off for PPG Industries. For the five years ending in 2016, PPG’s inventory has enjoyed a compounded growth fee exceeding 17 percent (Dess et al., 2014).
- Gregory G. Dees, G. M.-h. (2016). Strategic 9e Management. New York: Published by McGraw- Hill Education.
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