The Evolutionary process in strategic management
Over five decades, strategic management has grown into a unique and distinct discipline. It is a discipline which has evolved from budgetary planning and controls, corporate planning, positioning, competitive advantage, and the more recent strategic innovation. From the 1920s to 1950s, strategic management was in its embryonic stage where the top management was more focused budgetary planning and the key aspects of management revolved around the control of finances (McKiernan & Pugh, 2017). Controls on budgeting were realized through the implementation of accounting tools such as financial planning and capital budgeting. At this time, competitive advantage was achieved by companies through the control and coordination of budgetary systems. It was during this period that Drunker developed the Management by Objectives (MBO) concept with the aim of making organizations understand the need of setting strategic goals and the importance of realizing them (McKiernan & Pugh, 2017).
From the 1960s to the 1970s. Strategic management graduated to corporate planning where many companies established departments of corporate planning which focused on using forecasting as a way of planning and realizing growth. Companies which needed to visualize growth had to diversify their opportunities (McKiernan & Pugh, 2017). The basis of strategic management in this period focused on industrial organization and industrial economics. During the 1970s, strategic management had evolved beyond corporate planning or budgetary planning. Management included positioning of companies against their competitors. Strategic leadership positioning and market segmentation where used as jockeys for power among competitors. It is during this time that top management in companies used industry analysis to determine the risks and attractiveness of the industry (Daidj, 2015). This is regarding supplier availability, entry barriers, and potential buyers. Much of the strategic management dealt with growth, size and the portfolio theory. Companies shifted from planning to find new ways of increasing profitability and performance of employees.
The 70s-80s period saw companies attempt to break into the global arena by diversifying and expanding of the product market. Internationalization of companies was realized at this period as it had been necessitated by the advent of reduced political tensions between major economic blocks (Daidj, 2015). To align with strategy and structure, gradually started moving towards matrix and hybrid structures. All through the late 80s and the 90s, the development of strategic management started taking new shape. This is understood as a way of local and multinational companies trying to gain a competitive advantage over others. Most of these companies focused on understanding and exploiting the sources of competitive advantage such as ways of gaining more control of markets over their rivals (McKiernan & Pugh, 2017).
2(a). Merits of formulating strategy based on past success stories.
History has been one of the factors which have enabled humans to learn and use the lessons to restructure the future. Past events have been used as a standard for formulating strategies aimed at developing the future, assessing risks of an activity and the benefits which may come from it. Rarely, do people attempt something which has not been tried before, whether it succeeded or failed, it becomes a reference for the present activity (Teece, 2016). This aspect if using the past to formulate strategies is also employed in strategic management and has several merits. One of them is that it gives the management to gain overall direction of the organization or company. Lessons from past success aids in enhancing skills, experiences or increasing opportunities and resources. It would aid the management to gain an overall path which would be followed without choosing a narrow strategy(Teece, 2016). Learning from past success story would enable the management to initiate strategies which would explore new opportunities more precisely.
The management will be advantageous if they utilize past successes as a reference for spotting viable emerging opportunities and the right resources to implement them. it is the prerogative of the management to use a strategy or approach which is better than the last one and utilize current resources optimally (Hannagan, 2002). This can be understood regarding the management understanding the marketing culture, its weakness, and strong points. They are also in a better position to embrace new opportunities as the market or target community manifest them. Also, the management will have the knowledge and experience of responding to barriers and resistance effectively. Implementing a new strategy is bound to bring some resistance or divergent views, however, the management can rely on past success stories to create a formidable assessment of an approach and handle it effectively (Hannagan, 2002). The management will be able to rely on former willing partners to make the strategy a reality and realize its goals and objectives.
Past success helps the management to advance their mission by being able to utilize energy, time and resources more efficiently. The management is able to put allocate the necessary resources for the strategy, employ skilled employees who are appropriate for its implementation and evaluate the necessary ways of handling barriers (Hannagan, 2002). As a result, the management has an opportunity to constantly review their mission, vision, and objectives which will enable them to stay on the right path towards success. Diversification of the strategy will enhance profitability or the milestones the organization desires to achieve in the long run. The management can conduct an analysis of the market regarding the emerging structures in the industry, the forces facilitating the change, the price and cost economics within the industry(Teece, 2016). Reflecting on past successes will enable the management to understand the size of the markets, its growth rate, expected profitability, and whether the organization is providing a product which is unique or outstanding in the market. This enables the management to evaluate their strategies to optimally access the market or region they desire to expand to and develop.
2 (b). a firm which continuously uses past successes will inevitably fall victim to a competitor.
Many organizations today operate in a complex world which is dynamic, diverse and interconnected more than ever. The advent of technology and shifting social and political aspects has made operating of businesses more unpredictable than ever. It is in this cases that it can be understood that businesses which continuously rely on past success will eventually fall victim to other companies or organizations (Dionisio, 2017). One of the primary aspects of management is to constantly seek competitive advantage which will ensure that the organization will stand the test of time, be unique and edge over other competitors regarding products or services which they are providing. This is because when the organization follows the same trajectory of strategic management, they are usually affected by disruptive changes. These include product changes, competition changes, economic changes, customer changes, changes in delivery methods, changes in methods of supply and purchase.
It is dangerous for companies to live on past breakthroughs and fail to initiate programs which would create platforms for future success. The use of present knowledge, products and strategies would result in the company losing the ability to adapt to the changing environment (Dionisio, 2017). One example of a company which was trapped in this success trap is Kodak films, which basked in analog successes far too long until digital cameras overtook it. The reason is that Kodak fell into complacency and did not see the need for change. While other companies such as Fuji films adapted to the changing 21st technological explosion and exploited the millennial market. This made Fuji rise to be one of the most successful companies in the production of digital cameras, while Kodak woke up late to find that it was already overtaken.
The competencies in the company can make them blind to the dynamics of the market. This is when the company does not value progress in uncharted waters or an area which they are not good at (Teece, 2016). A good example is the blackberry phones which failed to adapt to the changing smartphone arena. While smartphones with larger touchscreens emerged, blackberry remained with what they knew best despite acknowledging the changing dynamics. Blackberry was once the most sophisticated, elegant and an item of luxury for several years, but sticking to their competencies made Apple, Inc. to become the leading smartphone company in the world. They expected the world to remain the same an aspect which made them feel safe. This continuous reference to past successes became the reason for their failures, and companies which explored new opportunities thrived. One aspect which is fundamental in the market is that there are generational changes and if a company does not transit with the generations, it will eventually lose relevance and competitive advantage.
3.(a) value chain analysis
The value chain analysis (VCA) is a strategic tool which analyzes the internal activities of a firm. Its primary objective is to determine activities and recognize aspects which are more valuable to the organization. This is regarding those which can be improved to provide the organization with a competitive advantage (Fearne, Garcia Martinez & Dent, 2012). In this case, internal evaluation enables the organization to determine the advantages and disadvantages of their competitive advantage. Using the differentiation advantage, a company would be striving to succeed against their competitors, for example, if it uses the cost advantage, it will try to have its internal activities be able to lower costs than what other competitors would.
3.(b) Response on a competitor using lower prices.
Some companies try to have a competitive advantage by selling their products and services at lower prices than those of their competitors. Therefore, to counter this approach would require several aspects of value chain analysis. The fundamental focus in which a company can exploit is to determine the company’s support and primary activities. This would involve from production, storing, marketing and after-sells feedback to clearly identify what separates the company from the others (Porter, 2008). Such an analysis would ensure that the organization readjusts its operational activities to give customers value. However, value chain activities operate differently and would, therefore, require adequate information about the operations of the company. This would ensure that the company gains an understanding of what makes the other company lower its costs against the others.
It would be prudent to understand the total cost of producing a service or product which has been assigned to each activity. Evaluating the cost of each activity would ensure the company gains insight on the reason why the rival company is cutting on production cost and adjust accordingly (Porter, 2014). An example of a company which cuts on the cost of production is Toyota, and any other company which needs to rival them would require to use similar or lower cost material to get a share of the Toyota corporation market. The after, a company would focus on cost drivers and how to improve on them. this involves the internal organization regarding working hours, speed, or the wage rate and determines how they can be adjusted to reduce the sell value of a product or service (Porter, 2014). Therefore, when a company understands its cost drivers and inefficient activities, it would be able to improve on them. this will enable the company to reduce on operational cost which would, in turn, reduce the cost of products or services. For example, where there is a high wage rate, the company can speed up production, or installing technology for automated production.
3. (b) improving the value chain of a hypermarket
One of the core aspects of management in hypermarkets is to increases customer attraction, and service satisfaction. There is a hypermarket saturation in the market today, and the necessary aspect which would be necessary for the improvement of value chain would be cost advantage and differentiation advantage (Presutti, Jr. & Mawhinney, 2009). A hypermarket can choose to give customer lower prices on their goods to attract customer loyalty while maintaining or increasing their value. One of the major ways for lowering cost is on cutting expenses, and this can be achieved by outsourcing products or goods, embracing technology to cut huge wage bills and reducing wastage. This would ensure that the hypermarket will gain an edge over the others regarding service delivery and customer satisfaction. The management can cut on one of the cost drivers such as human labor to improve on the others.
Such an aspect would require a differential advantage where the hypermarket can rely on technology to improve its value chain. Integrating automated checkout systems, cameras and sensors, Asset tracking devices (RFID) tags, Wi-Fi, beacons and analytic abilities. One of the fast-changing aspects in Hypermarkets in the introduction of e-commerce which connects customers with online stores. It would be prudent for the management of the hypermarket to consider deploying technological devices as a way of adding extra features in the store to maintain customer loyalty and improve service experience (Fearne, Garcia Martinez & Dent, 2012). Hustle free shopping is the current trend where customers need to know which products they need, and when a store post connects its online store with the social media, it can attract new customers who fancy excellent customer experiences.
Q 4(a) functions of a balance scorecard
The balanced scorecard is a metric of performance used in strategic management to locating and improve various internal activities of an organization or business about external outcomes (Asad, 2010). According to Asad, (2010) it has the following functions:
Help the management to identify better and prioritize decisions
Enable management to identify the necessary activities to meet the organizational objectives.
Includes reviews and feedback from clients, internal processes, growth, and development of the organization.
Q 4 (b) the four dimensions of balance scorecard
i. The financial perspective
It uses aspects if financial measures such as return on investment, net income due to their widespread use by the organization. The measures of financial performance provide a baseline for the comparison and analysis between companies. Stakeholders who provide financial assistance to the companies rely on measures of financial performance to decide whether to invest or lend funds to them (Asad, 2007). A well-designed financial measure provides the view of a company through an aggregated view.
ii. Customer perspective
Managers here attempt to identify market and customer segments with which the organizational units will be a concern and the measures of the business. This includes the measures for business unit performance in the targeted segments. The management assesses what they expect to deliver to their customers and the market about the financial objectives which they have initiated or expected. This perspective includes customer satisfaction and service, growth in market share, customer loyalty/retention, and initiate a more elaborate brand awareness (Asad, 2007).
iii. Internal-Business-Process Perspective
This is the perspective which the managers of an organization choose which area they should excel or be profitable. These processes ensure the management have a value proposition which will draw and retain customers in the market (Asad, 2010). It also ensures the organization. It also ensures that the company has good financial returns which would satisfy shareholders. The internal objectives of the organization are usually involved process improvements such as streamlining of approval processes (Asad, 2010). It also involves quality optimization such as reduction of production waste. There is also a need for capacity utilization such as deploying technology to optimize production.
iv. The Learning and Growth Perspective
In this perspective, the capabilities of the people are usually for the provision of incentives. Managers are liable for the development of employee capabilities. The key measures of evaluating the performance of the management are through employee retention, productivity, satisfaction (Asad, 2007). Employee satisfaction includes the need for increasing employee motivation to foster quality, productivity, and responsiveness. Employee retention includes the ability of the organization to retain the employee intellectual capital as a non-financial asset to the company. This is because the organization would incur costs in finding good employees for replacements. Employee productivity is an aspect which recognizes and values the output of the employees. They either provide financial or physical outputs in the company which would then result in the profitability of the company (Asad, 2010). An excellent incentive system for an organization would involve low employee turnover, high employee satisfaction, increased employee productivity.
Q 4. (c)
A food catering service is a delicate affair as it requires massive input regarding the product and the services offered. Customer feedback is a necessity for the development and growth of the company. Developing a suitable management strategy is essential to have customer loyalty which would, in turn, contribute to profitability. One of the most appropriate dimensions of the balanced scorecard would be customer perspective as each day; the company would require customer approval to retain its customers and expand. Providing exemplary services for the customer would secure a long-term partnership or obtain recommendations which would ensure the development and growth of the business. This would lead to growth in market share among other players in the catering service market within the region. Customer satisfaction is a priority and therefore customer perspective matter.
The other perspective which fits in food catering is learning and growth because such a business venture would require teamwork and excellent organizational skills to excel. Therefore, to ensure that all employees are goal oriented, the management should motivate employees to increase productivity, retain the best caterers or cooks and ensure that they can respond well to situations. For the business to grow, it would require the optimal employee productivity, where the physical output would be relative to the financialoutput. The critical success factor for the business would be to have a service-oriented attitude while dealing with the clients. Quality services offered by skilled and qualified employees would ensure that the business develops a market niche. As the purpose of the business is to create profitability, therefore investing in customer perspectives, learning, and growth and being customer oriented would guarantee profitability and growth.
References
Asad, M. (2007). Performance Management System- In Depth Analysis Using Balance Score Card Model. SSRN Electronic Journal. doi: 10.2139/ssrn.1990156
Asad, M. (2010). Performance Management System: In Depth Analysis Using Balance Score Card Model. SSRN Electronic Journal. doi: 10.2139/ssrn.2011632
Daidj, N. (2015). Developing strategic business models and competitive advantage in the digital sector. Hershey PA: IGI Global.
Dionisio, M. (2017). Strategic Thinking: The Role in Successful Management. Journal Of Management Research, 9(4), 44. doi: 10.5296/jmr.v9i4.11448
Fearne, A., Garcia Martinez, M., & Dent, B. (2012). Dimensions of sustainable value chains: implications for value chain analysis. Supply Chain Management: An International Journal, 17(6), 575-581. doi: 10.1108/13598541211269193
Hannagan, T. (2002). Mastering strategic management. Houndmills, Basingstoke, Hampshire: Palgrave.
McKiernan, P., & Pugh, P. (2017). Historical Evolution of Strategic Management, Volumes I and II. Florence: Taylor and Francis.
Porter, M. (2008). Competitive Advantage. Riverside: Free Press.
Porter, M. (2014). Competitive advantage of nations. [Place of publication not identified]: Free Press.
Presutti, W., Jr., N., & Mawhinney, J. (2009). The value chain revisited. International Journal Of Value Chain Management, 3(2), 146. doi: 10.1504/ijvcm.2009.026955
Teece, D. (2016). The Palgrave Encyclopedia of Strategic Management. New York: Palgrave Macmillan.
Comments