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Unit 7 Assignment on Business Strategy TATA Steel
Diploma in Business
Unit Number and Title
Unit 7 Business Strategy TATA Steel
Business strategy is a long-term plan for action that has been designed to achieve the goals and objectives of organization considering the various factors. This is a management game plan for encouraging the performance, overcome the impact of issues and implement the new plan for growing the business (Acemoglu.et.al. 2010). Unit 7 business strategy TATA Steel report will assess how the mission, vision and objectives and core competencies are informed about the strategic planning as well explain the effectiveness of BCG matrix and GE McKinsey that would be used for developing the strategy.
In the next part, the report will analyse the strategic positioning of TATA steel Europe and assess the significance of the stakeholder analysis for formulating the strategy. TATA steel is a subsidiary of TATA groups that operating the business in the UK. Organization has headquartered in London and main operations have been performed at Netherland and another part of UK. Moreover, the report will present the new strategy for the organization to expand the business as well justify the selection of strategy. At the end, the report will assess the role and responsibilities of personnel who are charged with the implementation of the strategy and evaluate the contribution of SMART objectives.
AC 1.1 Assess how business missions, visions, objectives, goals and core competencies inform strategic planning
The strategy is the direction and scope of an organization over the long term, which achieves advantages in the changing business environment and competencies with the aim of fulfilling the expectations of its stakeholders. Thus, it is essential for Tesco and Tata steel Europe to be rational while taking the strategic decisions for an organization. The strategic decisions must always be taken for important and crucial goals and matters for sustainable growth of business visions.
Mission statement: The mission statement of a company provides the basic information about the organizational core values, core purposes and the visionary purpose that a company will pursue to fulfil its mission. The mission statement of Tesco and Tata steel Europe defines the clear picture about the purpose of its business and its goals to be achieved. For example, the mission of Tata steel Europe has been divided into following purposes that a company aims to achieve:
- To bring inspiration and innovation to every athlete in the world.
- To be the most powerful company and most admired for its people, partnership and performance (Ackermann and Eden, 2011).
- To achieve all the probability level of customers by fulfilling all their needs and to achieve greater customer satisfaction level.
Vision statement: The business vision statement includes certain core ideals of a business that relatively remains steady and also provides the guidance in the process of strategic decisions making. This statement provides a picture to a stakeholder to predict and analyze the way that how the company will meet its objectives. In the similar manner, Tesco and Tata steel Europe’s vision statement is specific about their potential growth in the organization. It has been noticed that the companies having a leading position in the international market.
Goals and objectives: An objective of an organization is a short-term and long-term goals that an organization seeks to accomplish. These objectives play an important role in developing organizational policies and determining the allocation of organizational resources (Álvarez-SanJaime.et.al. 2013). From the annual report of 2014 of both Tesco and Tata steel Europe, it is has been observed that their business objectives are not only limited to offer suitable products but also to provide better services to their regular potential customers. The goals of a business are used to describe their approaches in such a way that they are capable of accomplishing their desired task in a fundamental way.
Core competencies of the organization: The core competencies are a harmonised combination of multiple resources and skills that distinguish a firm in the marketplace. The core competency of Tata steel Europe is helpful in achieving its competitive advantages in the market. Better human resource planning, strength-weakening analysis, helping with outsourcing options, use of advanced analysis tools, etc are some major core competencies identified in Tesco.
Figure 1: strategic planning steps
AC 1.2 Analysis of the factors that have to be considered when formulating strategic plans
Strategic planning is an activity which is carried on by the management which used to set the priorities, focus energy and resources, strengthen operations, ensures that employees and all other stakeholders of an organization are working towards the common goal, etc. Following are some critical factors that will ensure that our strategic plans are successfully implemented:
- Communication: The strategic planning process is successful only when a bottom up and top down communication approach is used. It starts off with a communication to all the levels of employees informing them that a strategic planning process will be undertaken (Ausubel, 2012). In bottom-up communication, employees will provide input to the strategic planning process and through top-down communication; senior management shares the strategic plan with employees.
- Culture: If there is a failure to understand the culture of the organization then it will lead to failure to develop values and culture to support the plans. Organizational Culture is the commonly held attitudes, values, beliefs and behaviour of its employees.
- Environmental factors: The internal and external environmental factors should also be considered while formulating strategic plans. Managers should try to anticipate, recognise and deal with the change in the internal and external environment (Bamasak, 2011). Change in the certainty and for this reason, business managers must actively involve in the process that identifies change and modifies the business activity to take the best advantage of change. Such process is called strategic planning.
Figure 2: Environmental factors
AC 1.3 Evaluate the effectiveness of techniques used when developing strategic business plans
BCG matrix: The BCG model is also known as growth-share matrix. This model is based on the product life cycle theory which is used to determine what priorities should be given in the product portfolio of a business unit. The BCG matrix plays a crucial role in strategic planning and it has got a single grouping of lower and higher shares in the market by combining lower and higher development rate. The BCG matrix uses four cells.
The limitation or concern in regards to the BCG matrix is what should be plotted on the matrix? The BCG matrix was initially developed for large corporation organizations that had multiple, and often unrelated, business units in their overall portfolio. Another limitation of BCG matrix is the definition of the market (Boguslauskas and Kvedaraviciene, 2015). How the organization will decide to define the actual market that will change the outcomes.
Figure 3: BCG matrix
GE McKinsey matrix: The GE McKinsey matrix generalises the axes as “Industry Attractiveness” and “Business Unit Strength”. It uses nine cells instead of four cells of BCG. It considers many variables and does not lead to simplistic conclusions. The industry attractiveness and business unit strength are calculated by first identifying the criteria for each; determine the value of each parameter in the criteria and multiplying that value by a weighting factor. The result will be the quantitative measure industry attractiveness and business unit’s relative performance in that industry (Bouckaert.et.al. 2010). The drawbacks of GE McKinsey matrix is that it can get quite complicated and burdensome with the increase in businesses and it cannot effectively depict the position of new business units in developing industry.
Figure 4: The nine cells of GE McKinsey matrix
AC 2.1 Strategic positioning of TATA steel (SWOT)
In order to analyze the current position of TATA steel Europe, SWOT analysis is being used that will help to identify the key strength, weakness, opportunities and future threats. By considering the information, management of company would be able to frame the sustainable business strategy to achieve the goals and objectives.
Table 1: SWOT analysis
AC 2.2 Environmental audit of TATA steel
To understand the current situations of external environmental factors that have the significant impact on the business strategy of TATA steel Europe, PESTLE analysis is being used which is as follows:
- Political factors: By considering the current state of political conditions in the UK, it will be a hard time for the organization to sustain the business as UK has come out of the EU region and government is not stable which will affect the business planning of TATA steel. The changing environment will bring new policy and regulations for taxation and export (Clastres, 2011). However the growth of the organization is made through acquisition but now it will risk investing in EU region as political instability.
- Economical factors: The world economy is going not up to the desired standard due to certain changes in the economic activities, export and import regulations, tax and change in the currency exchange policy in the UK as well in the Europe. By considering these facts, it is been carried out that slow economy will create the barriers for the organization that working in partnership with the Corus in Europe.
- Social factors: This factor is not having the direct impact on the steel production and business, still, TATA still can encourage the brand by performing the CSR activities. This will help to promote the business in the remaining areas of UK and Europe as well helps to retain the staff members by offering respect to their social values.
- Technological factors: The organization is needed improvement in the utilization of technological tools for monitoring, production, training and communication with the suppliers, clients and other production units. In addition to this, to reduce the emersions of the co2 in the environment the Tata steel is on with the research of the ultra-low carbon steel. Use of technology will help to analyze the conditions more professional and reliable manners to meet the business objectives.
- Legal factors: For Tata steel, this would be the area of concern in Europe as the changes in the business policy, a partnership of counties and bond with EU could affect the existing business strategy of the organization as well create the issues for pricing and raw material (Cosgrove and Rijsberman, 2014). However organization is following all rules and regulations according to norms but changes in the legal process will affect the business of the organization.
- Environmental factor: According to the current scenario, global warming and changes in the climate are major issues for business organization especially for production units that produce high emission of co2 as well chemical waste. Tata steel has to look into this matter for developing the business as well requires taking initiative for protecting the environment.
The poster is presented in appendix 1
AC 2.3 Significance of stakeholder analysis for formulating the strategy
Stakeholder analysis is the process of identifying the effectiveness of key people that have a significant impact on the business planning of organizations as well take active participation in the decision making. For Tata steel Europe it is essential to know the strengths of stakeholders to develop or make changes in the strategy for increasing the business (Cummings and Worley, 2014). For starting the new project and implementing the changes in the existing business strategy, Tata steel management has to consider the analysis of stakeholder that will help to assess the attitude, potential, issues and interest of stakeholder.
Figure 5: Stakeholder analysis tool
By using the stakeholder analysis, Tata steel management will be able to identify the key player within the organization whom the management could assign the new role and responsibility in the changing business environment. For that purpose, the organization requires monitoring the approach of individual to analyze the effectiveness as well frame the new business strategy to sustain in the market of UK. In addition to this, by keeping the stakeholder informed about the required changes the management would gain the advantage in the planning of new business strategy for encouraging business in the UK.
AC 2.4 New strategy for organization
For developing the business and meeting the goals and objectives, Tata steel Europe could use the market entry strategy. In order to gain the competitive advantage and overcome the financial burden, organization could use the following market entry strategy:
Joint venture: This is an effective strategy for developing the business, by considering the factors that could affect the outcome of Tata steel. According to this strategy, Tata steel management would analyze the conditions and identify the steel organizations that performing well in their market to establish the joint-venture (Day and Tosey, 2011). This kind of business strategy will require the low funds for infrastructure development, hiring of skilled staff members as the organization should continue with the existing staff that has good knowledge of local market and production activities. In addition to this, the risk would also be low as both organization share the resources and contribute according to contract.
Following are the SMART target objectives for new business strategy:
- To increase the production 5% by the end of 2016 financial year.
- To enhance the profit up to 4% by January 2017.
- To increase areas of sales 6% by January 2017.
The poster is presented in appendix 2
AC 3.1 Alternative strategies for Tata steel
Following are the alternative strategies that could be used by Tata steel management for meeting the objective and goals.
- Substantive growth strategy: This strategy involves horizontal and vertical integration that could be used for encouraging the business. It provides the benefits of the inherent resources which are used by their competitors to pursue similar segments of business. The growth strategy of the business is about diversification of their activities. For fulfilling this aspect Tata steel has been selling their products in the different new marketplace. This will help to analyze the trends and activities to make changes in the production process and gain the competitive advantage. In addition to this, the unrelated diversification has nothing to do but the only utilise qualities and shortcomings of their current business (Dibb, 2010). Making changes in the products and services Tata steel can encourage the business which will be more beneficial as a level of competition is increasing. Several visionaries innocently apply this method by including various inconsequential within organizations.
- Growth strategy: In order to develop the business and achieve the objectives of business, Tata steel management could implement the market penetration strategy of growth. According to this strategy, the organization could promote the existing products and services into the new market with some additional benefits. This kind of process will require high amount of funds and human resources. In addition to this, another way to increase market share is by using this strategy is lowering prices (Eliasson, 2014). For example, in markets where Tata steel found little differentiation among products, a lower price may help the organization to increase its share of the market.
AC 3.2 Justification of strategy
By considering the facts that have been analyzed from internal and external market audit of Tata steel, market growth (Joint-venture) strategy is being proposed to management. In order to implement this strategy, organization do not have to make major changes in the functions as well in the policy for staff members as the organization has done this kind of partnership business in the past and had desired outcomes. So, it can be considered that organization will accept it. In addition to this, this strategy would suitable for the organization as Tata steel will have to invest less funds for developing the infrastructure as well the organization will retain the skilled staff members who can support to expand the business and maintain the low cost of production. Apart from that, market entry strategy of the joint venture will increase the capacity of production by sharing the risk and cost with the partner organization which make the implementation of strategy more feasible (Elmelund-Præstekær and Klitgaard, 2012). Additionally, by implementing this strategy organization will gain the greater access of resources, expert staff to perform the tasks and use of better technology.
AC 4.1 Role and responsibility of personnel
The role of following personnel would be important for implementation of market entry strategy proposed earlier:
- Research and development manager: To implement the new strategy role of research and development manager would be collect and communicate the information related to the use of strategy and major changes the Tata steel Europe will face. The manager will analyze the market and effectiveness of existing policy to merge with a new plan.
- Production manager: For the implementation of new strategy role of production manager would be critical as he has to provide the training and direction to new and existing staff for utilizing the resources as well allocation of resources considering the skills and capabilities of individual (Foss and Klein, 2012). Moreover, production manager will identify the issues by evaluating the strategy before implementation.
- Finance manager: In order to implement the strategy of the joint venture, the role of finance manager will be to estimate the additional cost in first three and four months and provide the essential guideline to senior management to implement the changes that may not hamper the financial conditions of Tata steel. In addition to this, he will evaluate the return on investment considering the efforts of partnership organization.
AC 4.2 Requirements of resources for implementation of strategy
Following resources would be required for implementing the strategy:
- Technology: There are various innovative techniques which are obtained by the competitors of the organization. Inventions could support Tata steel in the achievement of key business operational goals and objectives through implementing the joint venture strategy (Gault, 2010). The modern technology focuses on different business situations like management of innovative methods to market and the management of innovations and major abilities.
- Human resources: Organization will require expert’s human resources for implementing the strategy as it will change the whole perspective of working due to working in partnership. In addition to this, for managing the increased production as well activities like monitoring and training Tata steel will need the human resource.
- Financial resources: For the implementation of the new strategy and starting the joint venture, Tata steel will require the funds to integrate the communication, equipment and documentation for licensing activities which are essential for establishing the new business strategy (Giessner, 2011). Additionally, to pay the salary and wages organization also requires the funds.
AC 4.3 Evaluation of SMART target for achievement of strategy
This is important for Tata steel to work according to SMART objectives that have been slated for new business strategy. These targets will help the organization to maintain the focus on the tasks and operational activities as well follow the standard. The major strength of define targets is the improvement in the level of business encouraging the production and sales in the different areas. This kind of approach is required for Tata steel to sustain the position in European steel market that will face the major changes in the present time as a division of UK is going to affect the process of business as well the growth (Goetsch and Davis, 2014). Apart from that, the by considering the SMART target, Tata steel will able to maintain the flow of operations and functions to accordingly which will increase the effectiveness of activities.
Apart from that, the major weaknesses of SMART target are a lack of consideration of the technology and investment for implementing the strategy. In addition to this, management has framed the targets according to the capability of one unit of production which will not be beneficial for achieving the goals and objectives (Hamel and Prahalad, 2013). However, Tata steel management has good knowledge and resources for implementing the strategy but the lack of using technology for achieving the SMART target would affect the operations.
From the above study, it is been considered that business strategy of the organization plays a critical role in growth and sustainability in the market. The report has provided the information about the uses of the mission, vision and core competencies. The report has conducted the internal and external audit of Tata steel Europe and assessed the need for stakeholder analysis. Moreover, a report has proposed market entry strategy for Tata steel to sustain the business by having a joint venture with potential organizations. At the end, the report has discussed the role and responsibility of leading people and requirements of human, technological and financial resources for implementing the strategy.
Books and journals
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