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Unit 32 Issues in Business Strategy Assignment
Strategic planning in any of the organization helps in judging the strategies, directing and making decisions with respect to the best allocation of resources for the strategy. The Unit 32 Issues in Business Strategy Assignment has been carried out to analyze the strategies and its appropriate selection in an organization. The report would also identify various tools and techniques to understand the process of strategic planning more clearly. Further, the implementation and the evaluation of the strategies in an organization would be discussed.
Task 1- Understand the process of strategic planning
1.1 Strategic planning process
Strategic planning is defined as a process which is being undertaken by the organization to implement a plan for the achievement of its long-term business goals. Strategic planning process is a methodical procedure of predicting the potential environment of business and deciding the appropriate aims, positions and objectives for best utilization of the environment (Steiner, 2010). The five steps of strategic planning process are as follows.
- Increasing a strategic vision
- Set objectives
- Create the strategy to accomplish vision and objectives
- Execution of the strategy
- Observing improvement, calculating performance and creating counteractive adjustments
- Vision: The vision of Natural Skincare Company is attaining the future prospective to fulfill their aims and objectives. By strictly focusing on financial, tax, legal and operational issues, the usual due consideration fails to carry the critical data for testing whether the strategic vision for the deal is suitable or not.
- Mission: The mission of Natural Skincare Company basically concentrates on the impacts of the business operation. Specially, the company strives to aid their customers to make long-term, distinctive and substantial developments in performance and to produce a huge firm which develops, improves, retains and stimulates the exceptional peoples.
The objectives of the company:
- To develop its market positioning and brand value among the customers.
- To improve its market share approximately up to 3%.
- To achieve the maximum customer base and introduce new herbal products till the end of the year 2018.
- The organization had aimed to attain the knowledgeable and skilled management teams.
- Natural Skincare Company aims to achieve its goal within the next coming 5 years.
- Strategy: Natural Skincare Company is following different strategy for managing the tasks and operations to meet the sales standard and use of resources that helps in the development of business. In order to develop the strategy and analyze the factors that could affect and influencing the performance of business, operations management is using tools like SWOT, PESTLE and BCG analysis. By using these analysis outcome, management is making changes in the products and services as well as adopt changes in the positioning and marketing of products to gain the competitive advantage. This kind of strategic planning and evaluation has significant impact on the business planning and outcome of Natural Skincare Company.
- Implementation: To meet the organizational objectives and maintain the growth in business functions the management of Natural Skincare is offering training to staff members. The kind of training and information organization providing to staff members is helping to meet the performance objectives as well supporting to complete the task in given time limit. In addition to this, organization is offering incentives and rewards to employees that encouraging them as well promoting healthy competition. Organization is following global policies for human resources management and defining the process for individual and department. The manager of organization is responsible for drafting decision and offering the guideline for allocating and managing resources according to market trends and demand of customers.
- Monitoring and process: In order to measure the process and effectiveness of tasks, the organization has appointed supervisors who analyzing the performance of staff members. The monitoring process that has been followed by Natural Skincare is effective in terms of review of performance which supporting to anticipating the needs of staff members and offers the knowledge to uplift the performance as well approach of company towards customers. The major focus of organization is on quality of products and services that is important to meet the satisfaction level of customers. However organization is spending time and funds on monitoring of work but it supporting to make changes and improve the involvement of staff members.
- Core competencies: Core competencies are defined as the special capabilities which a company obtains from its developers and founders and that cannot be simply emulated. These are the resources which serve as the source of competitive advantage for an organization particularly (Wheelen and Hunger, 2011). On the other hand, the competitive advantage is been identified as the unique quality which could not be copied by any one and could be maintained for a longer period to attain the success. A competitive advantage is been generated through various factors like the customer loyalty, reputed brand value among the customers, systematic distribution channels, Uniqueness in the products and services, etc.
1.2 Role of strategy and issues in Strategic Planning
Strategy is been defined as the scope and direction of an enterprise for the long term which helps in achieving the organizational advantage through the optimum utilization of resources in the business operations to fulfill the requirements of the market and the expectations of the stakeholders. Strategic plan includes simple but influential statements which carry out the objectives and the goals of an organization with respect long term success of the enterprise.
A systematic process being followed while formulating a strategic plan for the business operation is been termed as the strategic planning (Swayne.et.al, 2012). It also involves the decisions related to the products and services to be offered in the market particularly. There are certain issues being faced during the planning of strategies such as lack of leadership skills, Lack of consent, Lack of thrust for the short term, unwillingness to bring change, vague aims and objectives etc. According to Mintzberg, there are 5Ps for Strategy in strategic planning.
The 5P’s indicates plan, Ploy, Pattern, Position and Perspective. Plan must be formed in advance with an appropriate purpose. The strategy being framed for overcoming the competition is strategy of Ploy. Strategy of pattern is a set of standards of the past to the future. The strategy of position is related to the competitive environment and attempt to make the product unique (Spee and Jarzabkowski, 2011).
The strategy of perspectives lays an emphasis on the organizational culture and the thinking of the decision making in the company. The major problems being faced in the strategic planning are the accountability of the staff members and the management towards the strategy and the organization and the lack of control from the other parties.
1.3 Strategic positioning technique
The techniques are being used in planning like BCG matrix and Space matrix as a strategic positioning technique. The technique used by Natural Skincare Company for making the strategic plan is the SPACE matrix technique which helps in analyzing the positioning for the mangers. The SPACE matrix is a management tool of strategy which mainly focuses on the formation of strategy and the positioning of the company. SPACE is also known as strategic position and action evaluation. It is specifically concerned with the competitive position of the company. The matrix is been divided into four dimensions which justifies the nature of the strategy (Wheelen and Hunger, 2011).
Figure 1: SPACE matrix
(Source: SPACE analysis- strategic position and action evaluation matrix, 2011)
The dimensions of SPACE matrix are Aggressive, Conservative, Defensive and Competitive. With the help of the analysis of this matrix the top level management or the managers of the Natural Skincare would be able to select the suitable strategy through which the organization would be focusing for the achievement of the strategic objective and goal. The analyses of the matrix help out in identifying the loop holes or the drawbacks of the organization and making the best suitable strategic plan. The matrix supports the organization with proper planning and directs as what strategy should be pursued by it. The analysis of Space matrix includes four basic factors that also affect the dimension of the strategy. The factors are been discussed below:
- Industry Strength: The industrial strength is been concerned with the external forces related to the organization. It mainly includes the possible growth, profit probability, financial stability, flexibility, adaptability, etc. of the organization.
- Environmental stability:The environmental stability is referred as how the market is stable where the particular company is carrying out its business operations. It includes the inflation rates, variability in the demands, products range and the prices, the technological changes in the operations, etc. (Pižorn.et.al, 2014).
- Financial strength:The financial strength refers to all those activities with respect to the financial conditions of the company. It mainly includes the flow of cash, available capital, return on investment, liquidity and the business risk being evolved.
- Competitive advantage:This factor is being considered as the internal strategic dimension and comprises the factors like the customer loyalty, product life cycle, the market share, technology, capacity of the competitors, etc.
Task 2 - Be able to formulate a new strategy
2.1 Organizational audit in the company
The Natural Skincare Company deals with the large products and services all over the country and it is important to carry out an organization audit. An organizational audit is been performed to evaluate the factors related to the day to day operations of the business and the consequences being related to it. It is also identified as an activity being performed to support an organization to enhance its functionalities and operations through identifying the different aspect like strength, weakness, opportunities and threats within an organization to attain the desired objectives and profitability (Helms and Nixon, 2010).
To conduct such audit SWOT analysis of natural skincare company had been described briefly below:
Table 1: SWOT analysis of Natural Skincare Products
1.The products being offered by the company are of herbal and natural contents and thus are the major strength.
1.The major weakness being identified is that the products of premium range are not much preferred in the rural areas.
2.These acquire a large base of market and the activities related to market expansion.
2. Another weakness of the company that some of the products like scrubs, sun screens are also not much developed as per the expectation of the customers
3.The company adopts a strong and systematic distribution channel from which the proper delivery of products are be n ensured.
3. The skincare manufacture the major range of products focusing on the women and are limited to them (Quynh Trang Nguyen, 2013).
1. Natural Skincare Company had a widespread opportunity as organization could introduce new improved products brought in the range of varieties.
1. There is a relevant growth in cosmetics and skincare products and a large number of competitors in the market with the similar products and services.
2. A new range of products for men would provide a market expansion and also had a high growth potential in the market area.
2. There are certain consumer protection constraints with respect to the health issues of them.
3.The company should have the opportunity to develop its business in international market.
3.There are some other organizations which provide additional products to the customers in affordable price.
2.2 Environmental audit
Environmental audit is been referred as the evaluation of various external factors of the skin care organization with respect to its operations or function and determining the policies to identify the consistency of the company. It is been ensured that the policies being implemented are whether followed by the company or not. With the help of PESTLE analysis the external factors would be clearly described.
- Political:Natural Skincare Company consists of various political regulations, lawful policies and other political factors which are been implied within the framework of the skincare company and affects the operations of the company. The policies and laws of government are been levied upon the connections of the company that restricts the products to the limit of boundaries (Eglese, 2014). There are many types of corporate taxes and excise duties which lay down an influence on the operation of the company. For example, company should follow all laws and policies which are implemented by the government. The taxes of government are also affects the business of the company.
- Economical:Presently, the company had achieved remarkable growth in the sale of its products and services. There were numerous constraints being identified in the company from its other competitors. The factors such as interest rates, deflation and inflation rates, economic growth and development of the country, etc. are been recognized as the economic factors. The company follows particular policies to enhance its economic conditions and attain a sustainable growth. For example, the interest rates influence the sales and growth of business. This economic factors and conditions affect the development of products of Natural Skincare Company.
- Social: The social factors are mainly concerned with the cultural and social aspect of the customers. The natural skincare company had adopted the herbal and Ayurvedic products at low costs for the lower class customers who could also afford the same. This had made the company grow with much faster pace as the rural markets are also covered through this (Cadle.et.al, 2010). For example, some of the products that sell on high price could not afford by all peoples which could not develop their business in the market.
- Technological:The skincare company had initiated to promote its products online through various social media sources, website, emails, etc. and had been successful to make a large number of customers aware about it. For example, the website of the company promotes the products and also attracts a lot of peoples to purchase their products.
- Environmental:The environmental factors also make serious influences on the manufacturing of the products. The production of the products are been performed with great concerns keeping in mind that it do not affect the external environment or surroundings. For example, the company had made an initiative to reduce the use of any harmful chemical and also performed many activities to deplete the pollution causes.
- Legal:legal factors in any of the company play a vital role and are very much essential to be followed. Certain legal rules and regulations are been made by the government which have to be followed like the pricing policies, the minimum wage rate policy for the sake of the workers, the consumer protection act, etc. (Assenmacher, 2011).Natural skincare follows all the legislations and operates its functionalities in a proper manner. For example, company follows all legal policies of government that includes following of appropriate marketing and advertising aspects. These legal policies are essential to be followed for improving their business and it also helps in undergoing proper rules.
2.3 The significance of stakeholder analysis
A stakeholder in an organization is the one who acquires a level of interest from the business operations and production particularly. There are several stakeholders in a single company who affects the business operation in one or the other way and participate in all types of profits and losses by the company. Through stakeholder analysis the stakeholders of Natural Skincare Company had been recognized. The stakeholders include employees, shareholders, partners, competitors, customers, government, etc. of the skincare (Leszczynska, 2012).
Stakeholder analysis helps in forming the new strategies and conducted to achieve the perceptions and proper judgments about the strategies from the stakeholders. For achieving a productive stakeholder mapping and analysis the Mendelow Matrix is been implemented. It is a business analytical tool being utilized for mapping the different stakeholders as per the interest in the company and the influences on the decisions of the company. It directs the management as what kind of reaction should be made against these stakeholders as to make them satisfied.
The most powerful stakeholders who could make effects on the productivity and profitability of the skincare being identified are the suppliers, shareholders, customers, employees, etc. (Carey.et.al, 2010). The implication of Mendelow matrix in Natural skincare company is been discussed below:
Figure 2: Mendelow Matrix
(Source: Mendelow Matrix, 2015)
The matrix is been divided into four segments which identifies different factors of the stakeholders and their effects on the business operations of the Natural skincare company.
The first segment A identifies the minimum power and interest of the stakeholders and thus needs minimal efforts.
The next segment includes the stakeholders who do not have much power to influence the strategies of the company but attains high interest level in the functions of the company and could make influences on the powerful stakeholders. It is very important that the stakeholders are made aware about the strategies being implemented in the skincare for example, information about the charity if performed by the company (Horn and Johnson, 2012). Section C includes the stakeholders who are not much interested in the operations of the company but makes effects in the greater way and thus they must be treated with great care so that to make them delighted.
The final criterion which lies in D section involves the key players and acquires a larger number of interest and high influencing power in the organization. The best example of these types of stakeholders is the customers of Natural Skincare Company as the total profitability and success depends on the sales only.
Task 3: understand approaches to strategy evaluation and selection
3.1 Differences between Vertical Integration AND Horizontal integration when used by managers as a substantive growth strategies.
Substantive growth: This kind of strategy involves vertical and horizontal integration of organization to develop the standard in services and products to meet the level of satisfaction among customers. This strategy useful to makes sure the integration and diversification of operations which have an essential impact on growth and profitability. Furthermore, this strategy recommends that firm has to produce the raw material and another supporting devices rather than buying it from others which will enhance the profit amount and help to meet the preferred objectives including the stakeholders (Casson, 2012). If the company performs every achievable operation at single place will helps to overcome the expenditures of carrying and logistics that increase the profit margin.
Vertical integration: Vertical integration (VI) is a strategy which is used by many companies to increase control over their value chain. This strategy is one of the main considerations when developing level strategies of business for natural skin company. VI is define as the strategy which is used by the organization to obtain control over its distributors and suppliers to enlarge the power of firm in the marketplace, decrease costs of transaction and protects distribution channels or supplies. For example, the organization of Natural Skin Care Company has to determine its products or would engage in retailing and after sales services as well. Two issues have to be considered before integration:
- Costs: Organization of skin care product should vertically integrate when prices of product making inside the firm are lesser then the costs of purchasing that product in the market (Atun.et.al, 2010).
- Scope of the firm: The organization of natural Skin Care Company has adopted new activities in the company to reduce its existing competencies. New activities in the firm are not easy to control and manage.
Horizontal integration: It is another type of integration strategy which is pursued by the company of Natural Skin Care Company to strengthen its market position. Business that applies this type of strategy generally acquires or mergers other company which is in the stage of same products. The main purpose of horizontal integration (HI) is to develop the business in size, improve differentiation of products, decrease competition, and achieve scale of economies or to access new markets. When various companies follow this type of strategy in similar business, it guides to industry consolidation. It should occur in a structure of mergers, hostile takeovers or acquisition in which merger is defined as the joining of two similar organizations behaviour to create one combined entity (Bowonder.et.al, 2010). Acquisition is the buying of other company and hostile takeovers is considered as the acquisition of company, which does not need to be obtained. Strategy of HI is effectual when:
- Firm competes in a developing business
- Rivals have lack of some abilities, skills, resources and competencies which the organization previously holds
- HI strategy would guide to a control which is permitted by the government
- Scale of economy would have an essential effect on organization
- The company has enough resources to handle M&A
Table 2: Difference between vertical and horizontal integration
The basic objective is to strengthen the supply chain of the industry.
The objective of this strategy is to enhance the size of the business activities.
The strategy has a control over the industry
This is used to attain control over the market
The capital requirement is comparatively lower.
In this strategy high capital is been required.
The major effect of this strategy is laid on the cost and wastage reduction (Khraim, 2011).
While it eliminates the competition and acquires maximum share in the market.
3.2 Market entry strategy for the organization
Mergers and acquisitions: Merger is mutual efforts of two or more organizations that looking to expand the business by pooling the resources. In other words, merger refers to combining two of more companies by offering the stockholder of one company securities in the acquiring organization in exchange for the surrender of stock.
Advantages of mergers?
- This technique helps in combining different operations from multiple units in a single operation. At the time of mergers, two companies come together with a mutual consent and agree to mix their operation and create a new single enterprise.
- The major advantage of merger is development of business and discovery of new opportunities that helping to expand the business.
- By merging the resources as well sense the duplication, organizations try to develop trust by maintain the quality. For example, a small skincare organization operating business and offering same amount of products in lower quality, Natural Skincare have the opportunity to merge the small organization and avoid the duplication as well improve the customer base.
Disadvangtages of mergers
- From the analysis it is being considered that, merger reduce the level of competition which improve the probability of monopoly. The less competition in market has greater impact on the price of products and services. For example, Natural Skincare is only brand in market for particular products will quote the higher prices as no other firm is to challenge the prices.
- Merger process could lead to losses of job in particular industry as senior staff and policies of organization to gain the profit cut the number of job. An aggressive approach for merger is also major region for appointing the experts to perform the functions.
- The key disadvantage of merger is that, it hinder the choice of alternative products as a company takeover another. The less choice and competition in market lead organization to monopoly conditions.
Example of merger
Natural Skin Care Company is also suggested that after analyzing the market growth and the productivity it could move towards the acquisition process. By conducting market analysis the company could obtain an idea over the acquisition of any other small company having good products and services and could be a profitable deal after acquiring.
For obtaining a product specifically the company could go for this attempt as it would be less expensive to acquire a company and sell the product rather than developing the products itself. It would also expand its operations and enhance its market size as the larger company attains more identification in the market and also have better access towards the resources and other credit facilities (O'Brien, 2015).
The company could acquire another company to attain a control over the specific products in the market.
For example, natural skincare could acquire a herbal lotion company to enhance its product range and improvement in it.
Task 4: understand how to implement a chosen strategy
4.1 Strategy implementation
For implementing the strategies in Natural skincare it is very important that the proper roles and responsibilities are been assigned to the correct individual and are been followed properly in different departments. It is very important to analyze that how the task must be assigned and would be accomplished in an effective manner. The managers, employees and the senior authorities are responsible to implement the strategy effectively in the company (?ater and Pu?ko, 2010).The roles and responsibilities within the organization for executing the strategy could be identified as following:
- CEO:The CEO of natural skincare company is responsible to get verified for the standard of departments according to the market entry strategy. It must evaluate the cost and time for executing the new strategy and must allocate the resources accordingly.
- Managers:The responsibility of manager in implementing the strategy is very critical as manager is the major key who would be communicating the instructions and would observe the initiatives being taken by the employees to build a new product. In addition to this, the manager is also liable to manage the optimum utilization of the resources so that to cut the extra charges over it.
- Staff members:The role of the employees or staff members of natural skincare Company is to execute the new strategy and follows the instructions of the manager and then converse the issues with the manager. It is the responsibility of each and every individual to make proper use of the resources and comprehend the changes being required to be implemented and acquire the desired objectives and goals (Wei.et.al, 2011). The gap between what is needed and what is been performed must be bridged by the employees.
- During the implementation of the merger and acquisition strategy the basic business activities being performed are identifying the financial condition, analyzing the market value and examining the product quality of the other company.
- Human resources:This is an important resource that required for managing all tasks and make improvement in products and services. The skilled human resource is power of any organization that looking to expand the business as trying to offer quality products. Natural skincare organization requires skilled staff members who have knowledge of buying behavior of customers, good communication and planning quality to achieve the objectives.
- Financials: For establishment and development of business every organization requires high amount of funds. Natural skin care organization would approach the leading banking organization and creditors who are offering money on optimum interest rate.
- Materials: For business startup or encouragement organization needs quality raw material that would be gained through local and national suppliers. The organization could find list of leading suppliers on internet and order the raw material according to requirements.
4.2 A Gantt charts a proposed timeline for the selected strategy
There are several tools and techniques which could be utilized to manage the project and make the schedule for the day to day activities for the implementation of the strategy. For the present scenario a Gantt chat is been drafted to identify the exact tasks to be performed and needs to be followed (Kaur.et.al, 2010). It would help in exploring the activities and the time scale for the project. The effect of the project could also be evaluated and the requirements of the resources according to the plan could be set.
Table 3: Gantt chart
4.3 Steps in the implementation of the strategy
For implementing the merger and acquisition technique in the organization some of the basic steps are been followed so that to attain a profitable deal. The process to be adopted while carrying out the merger and acquisition would enhance the reliability and profitability of the project (Lamberti and Noci, 2010).The steps are following:
- Recognizing the growth market
- Identifying the potential contenders of mergers and acquisition
- Assessing the strategic financial position
- Carrying out an evaluation
- Performing the negotiation
- Implementing and monitoring the strategy
- Post evaluation of the strategy
As a CEO of Disney I would follow the below listed approach for implementation of strategy:
- Identification of key emerging trends of market.
- Analysis of resources available in market.
- Evaluation of capabilities of staff members.
- Allocation of resources as per the quality of individual.
- Offering training and guideline to staff members.
- Monitoring of task and motivation of staff.
Strategic planning in an organization assist in making judgments about the strategies, directions and making decisions regarding the best allocation of resources for the strategy. The report concludes that the strategies and its appropriate selection in an organization are the major factors which could influence the operations and the success. The report had also revealed that various tools and techniques could be used to measure the effectiveness of an organization and the strategies being implemented in it. The skincare company had been suggested to adopt the mergers and acquisition technique to expand its market growth and attain more profitability out of it. Further, the Gantt chart had been utilized to attain more clear understanding about the implementation of the strategy in the company and its operation.
Books and journals:
Assenmacher, K., 2011. The Bodyshop-An Analysis of the Company´ s Actions towards Sustainability.
Atun, R., de Jongh, T., Secci, F., Ohiri, K. and Adeyi, O., 2010. Integration of targeted health interventions into health systems: a conceptual framework for analysis. Health policy and planning, 25(2), pp.104-111.
Bowonder, B., Dambal, A., Kumar, S. and Shirodkar, A., 2010.Innovation strategies for creating competitive advantage. Research-technology management, 53(3), pp.19-32.
Cadle, J., Paul, D. and Turner, P., 2010. Business analysis techniques: 72 essential tools for success. BCS, The Chartered Institute.
Carey, N., Stenner, K. and Courtenay, M., 2010. Stakeholder views on the impact of nurse prescribing on dermatology services. Journal of Clinical Nursing. 19(3?4).pp.498-506.
Casson, M., 2012. Multinationals and world trade: Vertical integration and the division of labour in world industries. Routledge.