Ms 11, Sem Ii, 2012

[Garret]

Select an organization of your choice and analyze how focus strategy has been useful for the organization to build its competitive advantage

[ErcwIff]

4.Select an organization of your choice and analyze how focus strategy has been useful for the organization to build its competitive advantage. Strategic management can be used to determine mission, vision, values, goals, objectives, roles and responsibilities, timelines, etc.

WHAT  IS  THE  STRATEGIC   MANAGEMENT  CONCEPT

Strategic management is the art and science of formulating, implementing and evaluating cross-functional decisions that will enable an organization to achieve its objectives. It is the process of specifying the organization's objectives, developing policies and plans to achieve these objectives, and allocating resources to implement the policies and plans to achieve the organization's objectives. Strategic management, therefore, combines the activities of the various functional areas of a business to achieve organizational objectives. It is the highest level of managerial activity, usually formulated by the Board of Directors and performed by the organization's chief  executive  officer(CEO) and executive team. Strategic management provides overall direction` to the enterprise. “Strategic management is an ongoing process that assesses the business and the industries in which the company is involved; assesses its competitors and sets goals and strategies to meet all existing and potential competitors; and then reassesses each strategy annually or quarterly [i.e. regularly] to determine how it has been implemented and whether it has succeeded or needs replacement by a new strategy to meet changed circumstances, new technology, new competitors, a new economic environment., or a new social, financial, or political environment.” ============================================================== STRATEGIC MANAGEMENT  provides

1. Defining business, stating a mission, & forming a strategic vision

2. Setting measurable objectives

3. Crafting a strategy to achieve objectives

4. Implementing & executing strategy

5. Evaluating performance, reviewing new developments, & initiating corrective adjustments

•   Convert mission into performance targets •   Create yardsticks to track performance •   Establish performance goals requiring stretch •   Push firm to be inventive, intentional, focused

•   6.Setting CHALLENGING but ACHIEVABLE objectives guards against •   Complacency •   Drift •   Internal confusion •   Status quo performance

*Helps with  the  Outcomes that relate to improving firm’s financial performance

*Helps  with  the  Outcomes that will result in greater competitiveness & stronger long-term market position

What is strategic planning? Strategic planning is a management tool, period. As with any management tool, it is used for one purpose only: to help an organization do a better job - to focus its energy, to ensure that members of the organization are working toward the same goals, to assess and adjust the organization's direction in response to a changing environment. In short, strategic planning is a disciplined effort to produce fundamental decisions and actions that shape and guide what an organization is, what it does, and why it does it, with a focus on the future. A word by word dissection of this definition provides the key elements that underlie the meaning and success of a strategic planning process: The process is strategic because it involves preparing the best way to respond to the circumstances of the organization's environment, whether or not its circumstances are known in advance; nonprofits often must respond to dynamic and even hostile environments. Being strategic, then, means being clearr bout the organization's objectives, being aware of the organization's resources, and incorporating both into being consciously responsive to a dynamic environment. The process is about planning because it involves intentionally setting goals(i.e., choosing a desired future) and developing an approach to achieving those goals. The process is disciplined in that it calls for a certain order and pattern to keep it focused and productive. The process raises a sequence of questions that helps planners examine experience, test assumptions, gather and incorporate information about the present, and anticipate the environment in which the organization will be working in the future. Finally, the process is about fundamental decisions and actions because choices must be made in order to answer the sequence of questions mentioned above. The plan is ultimately no more, and no less, than a set of decisions about what to do, why to do it, and how to do it. Because it is impossible to do everything that needs to be done in this world, strategic planning implies that some organizational decisions and actions are more important than others - and that much of the strategy lies in making the tough decisions about what is most important to achieving organizational success. The strategic planning can be complex, challenging, and even messy, but it is always defined by the basic ideas outlined above - and you can always return to these basics for insight into your own strategic planning process. Competitive advantage is anything which gives one organisation an edge over its rivals in the products it sells or the services it offers. Firms have discovered many different approaches to this end, and the best strategy for a given firm is ultimately a distinctive creation reflecting its particular circumstances.

The Choice of Competitive Strategy There are three generic strategies for competitive advantage; cost leadership, differentiation and segmentation(or focus) strategy. Focus(or niche) Strategy In a focus strategy, a firm concentrates its attention on one or more particular segments or niches of the market, and avoids serving an entire market with a single product – or service. A cost-focus strategy aims to be a cost leader for a particular segment. This type of strategy is often found in the printing, clothes manufacture, food and drink production and car repair industries. A differentiation-focus strategy pursues differentiation for a chosen segment. Luxury goods are the prime example of such a strategy. Advantages of a focus strategy 1. A niche may be more secure and if so a business can insulate itself from competition. 2. The firm does not spread itself too thinly. Drawbacks of a focus strategy 1. The firm sacrifices economies of scale which would be gained by serving a wider market. 2. Competitors can move into the segment, with increased resources(e.g. the Japanese moved into the US luxury car market, to compete with Mercedes and BMW). 3. The segment's needs may eventually become less distinct from the main market. The strategic management process means defining the organization’s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises it’s competitors; and fixes goals to meet all the present and future competitor’s and then reassesses each strategy.

Strategic management process has following four steps:

1.   Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it.   

2.   Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies.   

3.   Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and managing human resources.   

4.   Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as it’s implementation meets the organizational objectives.

These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situation’s requirement, so as to make essential changes.

Components of Strategic Management Process

Strategic management is an ongoing process. Therefore, it must be realized that each component interacts with the other components and that this interaction often happens in chorus.

STRATEGIC  PLANNING  PROCESS

STEP  1  ---Assess  the  previous  period's  plans.

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STEP  2--Analyze / review  customers / constituents satisfactions.

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STEP  3

-Assess  the  internal  organization  situation [SWOT ]

[strengths-weaknesses-opportunities-threats]

-Assess  the  external   environment  [ PEST ]

[political - economic-social-teconology ]

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STEP  4 -set  strategic  directions  for  the  company

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STEP  5

-determine / identify  SWOT  for  each  units

*marketing *sales *manufacturing *supply  chain

*finance

etc  etc

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STEP  6 -determine  the  requirements  for  performance  levels.

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STEP  7 -identify   and  evaluate  objectives/   strategies

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STEP  8

-choose  strategies/objectives/goals   for  the  next  period.

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STEP  9 -create  corporate  STRATEGIC   plan

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STEP  10

-development  of  operating  plan/ for  units

*marketing *sales  *manufacturing *supply  chain *finance

etc  etc

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STEP  11

-development  of  budget / for  units

*marketing *sales  *manufacturing *supply  chain *finance

etc  etc

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STEP  12 -development  of  implementation plan.

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STEP  13 -monitoring  system   for  the  corporate  plan.

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STEP  14 -contingency  plans .

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STEP  15 -Rewards ./ incentives  for  achievements.

============================================== Step 16—budgeting-P/L .,BALANCE SHEET/cash flow Executive Summary

Board Authorization of Strategic Plan [in the case of a corporation!!]

Organizational Description

Mission, Vision and Values

Goals and Strategies

Appendices

A - Action Planning(objectives, responsibilities and time lines)

B - Description of Strategic Planning Process Used

C - Strategic Analysis Data(External Analysis, Internal Analysis& List of Issues)

D - Goals for Board Committees and Chief Executive Officer

E - Staffing Plans

F - Operating Budgets

G- Financial Reports(Budgets, Statements, etc.)

H - Monitoring and Evaluation of Plan(Criteria, Responsibilities and Findings)

I - Communicating the Plan

________________________________________ The  organisation I  am  referring to, was  facing

a  problem of  declining  sales/ market  share  for  2  

consecutive  year.

-a  large  manufacturer/ marketer of  safety products

-the products  are  used  as  [personal  protection safety] [ industrial  safety]

-the products  are  distributed through  the distributors as well as  sold directly

-the  products  are  sold  to various  industries like  mining/fireservices/defence/

as  well  as  to  various  manufacturing  companies.

-the  company employs  about  235  people.

-the  company  has  the following  functional   departments

*marketing

*manufacturing

*sales

*finance/ administration

*human resource

*customer  service

*distribution

*warehousing/  transportation

*TQM  

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THE  COMPANY  ANALYSES  THE  FOLLOWING   DATABASE

AND  APPLYS   THE  PROBELM  SOLVING/ DECISION MAKING   APPROACH   /   FINALIZES   THE  PLAN.

-apply  the  pestel  analysis with  respect  TO ITS BUSINESS

1.Political(incl. Legal)   

-Environmental regulations and protection ENFORCEMENT  OF  SAFETY /PROTECTION LAWS  

-Tax policies

TAX  INCENTIVES  FOR  THE  USE  OF  PERSONAL SAFETY

PRODUCTS.

-International trade regulations and restrictions

REDUCTION  IN TARIFFS  ON  IMPORTS  OF  

PERSONAL  SAFETY  PRODUCTS.

-Contract enforcement law/Consumer protection

The  government  enforcement   on  consumer  protection -Competition regulation

NO LIMITS  ON  COMPETITION -Safety regulations

the  government      adopted  some  of  the  

modern  safety regulations

================================================================= 2.Economic     

-Economic growth

SOUND ECONOMIC  GROWTH

-Interest rates & monetary policies

interest  rates    under control /  a  sound  monetary  policies]

-Government spending

government  spending  is  significant   and  is it   under control -Taxation

the  taxation  HAS    encouraged  the  industry .

-Exchange rates

there  well  managed   exchange  controls  and  is it  helping  the  industry.

-Inflation rates

[ THE  inflation  is well   under  control ]

================================================== 3.SOCIAL -Health consciousness & welfare, feelings on safety

the  people  are   becoming  safety  / health  consciousness.

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4.Technological  

Industry focus on technological effort

the   industries    focused  on  using  improved  technology.

New inventions and development

new  inventions  are    being   encouraged  for  developments.

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THE  NEWLY  ADOPTED  OBJECTIVES  

-to  increase  sales volume  by 20%  every  year

over  the  next 5  years.

THE  STRATEGIES   ADOPTED  BY  THIS  ORGANIZATION   TO

ACHIEVE   ITS  OBJECTIVES.   1. Basic question: How is organizational direction determined? Every organization takes on some direction, in terms of what customers/clients it serves and what functions it performs for these customers. This direction is often called its purpose, Mission or realized strategy. An organization's mission is a set of statements that define the exchange relationship between the organization and its stakeholders or claimants. More specifically a mission defines the population served and the function it fulfills or the need it satisfies for that claimant. This direction, or mission, may be the result of a deliberate planning process or it may emerge as the result of a set of incremental decisions. THIS  ORGANIZATION   Realized Strategies are the result of a combinations of Purely Deliberate and Purely Emergent Strategies. 1.THIS  ORGANIZATION'S  Deliberate Strategy- This process starts with an analysis of a company's current mission and strategies. The most popular tool used in this process is the SWOT(Strengths, weaknesses, opportunities, threats) model. The external environment in terms of opportunities and threats, is analyzed by examining threats to the company's current position and new opportunities(new customers, new applications, unfulfilled customers needs, etc.). The analysis proceeds by examining the company's internal environment in terms of its strengths and weakness. A mission and competitive strategy is formulated that matches opportunities with strengths and plans are made to strengthen areas of weakness. The next step is to develop functional strategies that support the overall business level competitive strategy. Marketing, Human Resource, Financial, Operations, Information Systems, and R & D strategies are developed that support the business unit strategy. Finally, a control system(organizational structure) is designed to insure that operational decisions are made consistent with the business and functional strategies. Focus or Niche Strategies

- A successful focus strategy depends upon an industry segment that is of sufficient size, has good growth potential, and it not crucial to the success of other major competitors. Focus strategies are pursued in limited markets in conjunction with cost leadership and/or differentiation strategies. Focus strategies are the most effective when consumers have distinctive preferences or requirements and when rival firs are not attempting to specialize in the same target segment. -------------------------------------

THE  FOCUS  STRATEGY   

-DIRECT  THE  BUSINESS  DEVELOPMENT  EFFORTS TOWARDS  TO  THE  DISTRIBUTORS [RESELLERS ]

-SEGMENTS  THE  RESELLERS  INTO

A] KEY   ACCOUNTS

B] MEDIUM  SIZED ACCOUNTS

C] SMALL  RETAILERS.

business development driven change

Business development potentially includes everything involved with the quality of the business or the organization. Business development planning first requires establishing the business development aims, and then formulating a business development strategy, which would comprise some or all of the following methods of development. •   sales development •   new product development •   new market development •   business organization, shape, structure and processes development(eg, outsourcing, e-business, etc) •   tools, equipment, plant, logistics and supply-chain development •   people, management and communications(capabilities and training) development •   strategic partnerships and distribution routes development •   international development •   acquisitions and disposals THIS  FOCUS  APPROACH   HAS  HELPED  THE  ORGANIZATION

-to  grow   at  the rate  of   20  %  annually  for  5  years

-to  achieve  a  significant  market  share.

-to  achieve   a very  good  bottom line.

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