Strategic management is all about identification and description of the various strategies that managers can accomplish in order to achieve better performance and a competitive position in the organization. Strategic management involves a collection of decisions and acts which an organization undertakes and decides the outcomes of the firm’s performance. The management must possess a thorough and deep understanding and analysis of the general and competitive organizational environment so as to take appropriate decisions.
Strategic management is a way in which strategies sets the aims and objectives and proceed further to attain them. It mainly deals with making and enforcing decisions about future direction of a firm. It helps to analyze the way in which a firm is moving towards (Strategic management, 2009). Strategy is generally framed to provide clear and precise direction to all the business units in order to meet the expectations of shareholders and present value to customers and employees of the organization. Strategic management is a continuous process that assess and controls the business in which an organization is involved, evaluates competitors and frames strategies to face potential and existing competitors.
Importance of Strategic Fit
An organization’s competitive strategy clearly defines the set needs of consumers that it looks to satisfy with its goods and services having a defined set of attributes. Strategic fit concept mainly reflects that both competitive and supply chain strategies have associated goals. It refers to maintain consistency between the priorities of customers that the competitive strategy aims to fulfill and supply chain capabilities that the supply chain tries to build (Barnat, 2012).
The supply chain strategy must be in association with the competitive strategy and can be taken up only after the competitive strategy is finalized and it should be redesigned whenever there is a change in competitive strategy in the organization. In the present research report focus has been given to provide suitable information to a medium size business which is having its specialization in baby care products (Defining Strategic Management, n.d). According to Euro monitor international baby care market was one of the significant performers in beauty and personal care vertical in year 2009, posting around 7% growth all around the world. This sector has noticed continuous growth in 2010 and the development is majorly driven by adults using the baby specific products.
The baby care products continues to grow with movement towards “green” approach both environmentally and in terms of raw materials that is being used that are more natural and are perceived less harmful to the skin. The growth rate was highest in Latin America 20% and Eastern Europe 9%. Giving attention on the current scenario the organization needs to redesign its strategies to acquire a competitive position in the baby care market (Nijssen and Frambach, 2000).
Strategic management process
In order to achieve a competitive position the company should try to implement a suitable strategic management process through effective strategies could be enforced. The strategic management process is comprised up of four main elements i.e. situational analysis, strategy formulation, strategy implementation and strategy evaluation. These factors are basic steps that are accomplished in order to develop a novel effective strategic plan. In the present situation the organization should firstly set a strategic management process and in this process firstly situational analysis needs to be done which involves scanning and assessment of the organizational external environment (Supply Chain Performance: Achieving Strategic Fit and Scope, 2011). The external environment of baby care products includes analysis of external opportunities i.e. the company can target to adult as the product is mild and gentle for skin.
The external analysis also involves threats evaluation i.e. various competitors present in the market, in present situation for the company the leading competitor is Johnson and Johnson which is a leading company in manufacturing and producing baby care products. Further a strategy need to be formulated that includes designing and developing the firm’s strategies. In this case values, vision and mission statement plays a crucial role (The Structure-Conduct-Performance Paradigm, 2011). The mission defines the overall purpose of an organization and sets the boundaries of company’s current activities. The vision describes the ideal future for business and unites an organization in a common and consistent strategic direction.
The value statement reflects the main beliefs of a firm and the deeply held values that do not change over the period of time. These statements aids the firm to move towards a precise direction and the workforce could also work towards achievement of common goals. For baby care Products Company the mission should be target the new market segment i.e. adults and the vision should be to provide scientifically sound and high quality products to improve the quality of life.
The third step involves strategy implementation, in this step the formulated strategy are put into practice. It includes developing steps, methods and process to execute the formulated strategy (Elements of Strategic Management, 2011). During this step it need to be determined that which strategies should be implemented firstly and then proceed towards other issues. Finally, the process involves strategic evaluation under which it is being examined how the strategy has been implemented and as well as the results of the strategy.
The general and competitive environment
A general environment is important in an organization because the changes that take place in an external environment may point to trends that can considerably influence upon an organization’s competitive environment. Whereas, the competitive environment consists of the industry and markets in which a firm competes. The general and competitive environment of the baby care products includes various competitors (The General Environment, 2012). The global baby care product industry fulfills demand of around 4 million babies on a yearly basis that ultimately generates revenue of around $7 billion. The market includes various segments that can be divided into different parts.
The demand has grown due to an increasing number of babies and innovation and development of product has facilitated retailers to widen the market with the help of new technologies and advanced marketing approaches. The competition is considerably high due numerous competitors like Johnson & Johnson, Procter and Gamble, Novartis in baby care products. Several strategies need to be build in order to capture the market and reach ahead in competition (Baby Products Industry: Market Research Reports, Statistics and Analysis, 2013).
Structure Conduct Performance
The structure conduct performance (SCP) model is a strategy that assumes market structure would determine firm conduct that ultimately would determine the performance. The SCP model analyzes an industry in three steps i.e. firstly it focuses on appropriately segmenting an industry’s market structure according to the number of competitor present in the market, extent of goods standardization and barriers to entry and exit in the market. Secondly, this model conclude that certain pricing and output decisions that is firm conduct which predictably arises from market power (Menol, 2010). Finally the third step defines the performance that suggests the equilibrium price for any of the company.
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The structure conduct performance model for baby care products company reflects the three major stages as;
initially the firm need to analyze various competitors available in the market i.e. Johnson & Johnson, First cry etc, these are the companies which has started targeting adult as well hence strategies need to be build accordingly. The products need to be of standardized quality as targeting the kids section so the product should be mild and gentle for skin (Johnson and Johnson annual report, 2012). The barrier to entry is relatively high due to existence of range of competitors and standardized products involve lot of costs.
Further the firm need to analyze its conduct i.e. strategies should be designed to pursue and achieve a competitive position in the market. In this case strategies should be designed to target the children as well as adult section with high standard products.
Finally the performance needs to be measured with focus on several factors like progress of firm and level of employment with productive efficiency level.
Competitor analysis aids in to determine the strengths and weaknesses of the competitors within the market. This analysis helps in to identify and look at the market from customer’s point of view and group in competitors according to the various competitive strategies (Competitive Analysis, 2006). Competitive assessment could reveal in the broad trends in the market and provides the benefits of being able to assess the opportunities for differentiating the goods and services. In this context various competitor analysis of baby care Products Company is mentioned as below;
Porter’s five force Framework
The porter’s five force model helps in to analyze the industry and aids in business strategy development which was formed by Michael E. Porter in 1979. It draws upon industrial organization to derive the five different forces that evaluates the intensity of competition and attractiveness of market. It is basically comprised up of five different factors and the analysis for baby Care Company would be;
Threat of new entrants
The barriers to entry is relatively high in this industry because of high investment cost involved in setting up new firm and economies of scale that lowers the cost and makes it difficult for firms to break into the market and compete effectively. The legal restrictions can also act as a barrier to entry because of goods needs to be high standard quality especially for kids. Other than this existing products are having strong brand recognition with unique selling points hence to attain customer loyalty products need to be differentiated with increased market share .
Substitute products and services
A substitute good is something that fulfills similar needs, in this aspect it is more problematic than that of new entrants because of availability of range of competitors with strong customer loyalty. Many competitors are present in the market who offers similar goods with minimum price difference hence presence of substitutes could hinder the growth of the company.
Bargaining power of suppliers
The power of suppliers acts as a major barrier through which suppliers can sell their products at a higher price. In the baby care industry the bargaining power of suppliers is relatively less due to presence of several suppliers and this ultimately lowers down the price.
Bargaining power of customers
The power of customers could exert the pressure to drive down prices or raise the essential quality for similar price and hence can reduce the profit of industry. In baby care Products Company the power of customers is high due to availability of substitutes but few buyers are having strong brand loyalty with products like Johnson and Johnson etc.
Degree of Rivalry
The rate of competition in this industry is intense and numerous competitors remains fairly disjointed, mergers and acquisitions have raised the competition and the leading company’s areas of expertise have started overlapping. The degree of rivalry is relatively high in saturated markets and requires lot of product innovation to sustain in the market.
SWOT analysis is a structured planning method which is used to analyze the strengths, weaknesses, opportunities and threats of a business organization. It is a useful tool for comprehending and making decisions in every sort of situation in a business. The strengths and weaknesses represents the internal environment whereas, the opportunities and threats are present in the external environment of a firm.
The strengths which the company could make are that it can design a strong global presence with subsidiaries companies and a successful differentiation would be required to target the existing customers. Weaknesses are the factors which a firm inherits itself internally in respect to management or workforce. The weaknesses in present situation could be the pressure to reduce price and availability of efficient workforce. Opportunities are the factors that are present in external environment, the different opportunities available in the market are that the company can increase the market share through product development and innovation all around the world and expand its operations worldwide. The threats are the situations which acts as a barrier and issue for the company. Threats for the current organization could be presence of numerous competitors and strong brand image of the existing firms.
Game theory is a part of decision theory i.e. concerned with interdependent issues. The problems of interest include multiple participants each of which has individual functions related to a common system. It arises from competitive scenarios hence the problems are referred as games and participants as players (Levine, 2011). Game theory deals with any issue in which every player’s strategy depends on factors what the players do.
The above model depicts the four different situations in which the two players need to participate and make decisions accordingly. There are mainly two basic situations i.e. compromise and don’t compromise. In present situation the baby care company needs to compare and contrast its situations with its competitors, the first matrix depicts the compromise stage where both need to adjust and cooperate each other. The second matrix indicates compromise for one firm and does not for the other. The third matrix not to negotiate for first firm and compromise to the other. The final stage is the position where none of the organization should compromise and face the challenge and competition.
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Revolutionary approach to change
The revolutionary approach to organizational change reviews and modifies the management structure and processes. Business must adapt tools and techniques to survive against larger competitors and develop. In order to stay ahead in the competition firms need should look ways to accomplish things more efficiently and productively. Appropriate strategy need to be framed in order to achieve the organizational aims and objectives (Henry, 2008). Corporate strategy includes decisions that are made concerned with the direction of a firm as a whole and is concerned with those matters that influence the overall organization including the size and composition of various business portfolios.
Business strategy is the method through which a business competes in a specific business sector. The strategic decisions made in business level strategy are associated with different matters such as pricing, manufacturing and marketing of goods. Business strategy focuses on acquiring competitive advantage in a market. While implementing strategies it is important to give attention to ethical and regulatory standards in the financial assessment as the importance of ethical decision making have taken on rising validity and increase amount of pressure placed on business managers by shareholders, creditors and their parties influenced by financial performance. The conduct of financial professionals has a direct impact on the name of organization. An effective organizational reputation is earned on a consistent basis but performing one’s business with the help of competence, integrity, and appropriate confidentiality and by complying with suitable rules and regulations. Financial assessments have an obligation to their employees, stakeholders, consumers to maintain the highest standards of conduct and to motivate their peers to do likewise.
Generic Competitive Strategies
It was developed by Michael Porter in which an organization’s relative position within its industry is determined through a firm’s profit position i.e. it is above or below the industry average. The main fundamental basis of above average profit in long run is through sustainable competitive advantage (Lennard, 2011). This model depicts that there are two basic types of competitive advantage a firm can possess low cost or differentiation strategy. The three main attributes of generic competitive strategy are cost leadership, differentiation and focus.
The cost leadership strategy enables firm to set out to become a low cost producer in the industry. The focus strategy rests on the selection of a narrow competitive scope within the industry. The baby care firm could adopt the differentiation strategy through which it can seek to be unique in the industry by introducing some dimensions that are largely valued by customers. The goods should be uniquely positioned to meet the needs of consumers with a premium price.
Blue Ocean Strategy
The blue ocean strategy is a set of tools and techniques that guides thinking to enable to develop a strategy for an organization that could make competition irrelevant and develops high profit growth. The core idea behind this approach is to create a rise in value for the organization as well as for its buyers by breaking the low cost trade off or differentiation and to associate product value and propositions (Jones, 2012). The baby care firm needs to develop efficient strategies so that it can acquire competitive advantage in the market place.
Organizational strategy is the creation, enforcement and assessment of various decisions within a firm that helps in to achieve long term vision of the company. It specifies the company’s vision, mission and objectives and also develops plans and policies to achieve the same. In present situation the firm needs to frame strategy that is suitable and feasible enough to manage the competition (The Importance of Strategic Management, 2012). A suitable strategy will enable to achieve a competitive position in the market.
In order to review that the implemented strategy two of the approaches i.e. suitability and feasibility need to be practiced in the organization. Suitability acts as a reassurance that the proposed strategy is able to fulfill the business issue and strategies for the prevailing situations. On the other hand feasibility looks towards enforcing strategies and evaluation of likelihood of success provided in the current resources (Kim and Mauborgne, 2010). Product differentiation strategy is the way that would be suitable and feasible enough for the organization to manage the intense competition. The organizational strategy need to be feasible enough i.e. it should provide the maximum amount of benefit in proportion to the cost of investment.
Balance Score Card
The balance score card is a strategic tool for measuring performance and is a semi structured report i.e. supported by various design methods and automation tools that could be used by managers to keep in track the execution of activities by workforce and monitor the outcome arising from these actions. This model could also be utilized to evaluate the implemented strategy as its derivatives are the amalgamation of various mixtures of financial and non-financial measures which is compared to a target value.
Balance score card (BSC) aid in strategic evaluation as it is considered the most relevant information is determined and also gives significance towards organizations vision and mission. This method is more suitable for strategic evaluation as it considers all the four main variables of a business i.e. the financial perspective, learning and growth perspectives, business process and customer perspectives. The BSC takes strategy of a firm and isolates it into measurable goals and then evaluates whether the goals are being achieved or not.
Strategic drift is a situation where an organization response towards the changing environment is often within the parameters of the firm’s culture which over the time becomes more and more clear. In this aspect culture is traditionally considered as a preventative to change that focuses innovation and results into momentum of strategy that could ultimately lead into strategic drift (Suitability Feasibility Acceptability (SFA) analysis, 2012).
The organizations responses towards the business environment is internally constructed rather than objectively understood. This point of view supports the belief that strategic change must be accompanied by a proper cultural change (The Relationship between an Organization and Its Environment, 2010). The rising business competition forces firms to focus on the significance of dynamic activity to maintain a competitive advantage. In this respect the notion of association for effective organizational efficiency has drawn out maximum amount of attention. The organizational process association refers to arrangement of various parts of a company so that they can pursue work together cordially and move towards same direction.
The process of organization need to be innovative and creative in terms of goods and its service offerings. Organizations could be differentiated in terms of features, authority and complexity of tasks (Strategic drift and its implications on your business, 2011). The probability of innovation happening takes place at various stages of the innovation process and a function of diversity in an organization. Innovation and organizational process are associated with facts i.e. the larger the diversity in workforce the higher the potential that members will influence towards innovation. In this respect the organization needs to design a suitable strategic control system through which work could be managed (Ingram, 2012). The strategic control and reward system should be suitable, simple, selective, economical, flexible, sound, reasonable, forward looking, objective oriented and acceptable by each one of the organization.
Administrative management and Leadership Activity in implementing organizational strategy
Efficient execution of strategy majorly depends on good internal organizational and competent personnel. To develop a capable strategy implementation is always a top priority of the management. Developing an internal structure which is responsive enough and skills and competencies through which strategy could be grounded and has the managerial and technical expertise the firm need to select people as leaders for major positions (Characteristics of an effective strategic control system, 2012).
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Some of the major factors that should be given due attention in respect of the organizational effectiveness are as follows;
- Highlight the chief functions and tasks for successful execution of strategy.
- Reflect on how the critical functions and organizational units are related to those that are general and provide staff support.
- Make strategy critical business units and functions the main firms building blocks.
- Identify the degree of authority required to manage each unit of organization.
- Present for coordination among the different organizational units.
It could be concluded that capable management team is an apparent part of the organizational strategy implementation task. Efficient strategic management enables an organization to be more proactive than reactive in shaping its own culture and potential workforce. Strategies initiate and influence various activities and apply control over its own fortune.
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