Strategic Management Term Paper
1. Basically, the recent decision of Mark and Spencer to introduce a new range of fair-trade ethically sourced clothing products made from organic cotton may be motivated by different reasons. At the same time, it is obvious that, to a significant extent, this decision is the result of the recent changes in the market and customers’ preferences. To put it more precisely, the decision to switch to focus the production on the organic material is the result of the growing negative attitude of the customers to the artificial materials. In fact, from the point of view of the Contingency theory, this decision may be explained by an attempt of the company to adapt to the current situation and recent trends since, using organic cotton would make its products more attractive to customers. Obviously, as the products are made of organic cotton, customers will be totally convinced in its safety while artificial material that could be used instead of organic cotton could evoke certain fears and apprehension from the part of customers.
Furthermore, the development of a new range will inevitably attract customers to the new products since nowadays, the market is changing rapidly. Consequently, companies have to constantly renew the products they offer to customers in order to keep their interest and remain among the leaders of the industry. In such a way, it is possible to view the recent decision of Mark and Spencer as an attempt to carefully analyze the situation and benefit from it that basically matches the Contingency theory.
2. Speaking about Porter’s generic strategies and Faulkner and Bauman strategy clock, it should be pointed out that, in actuality, both positions are based on the idea of the analysis of the company position and perspectives from the point of view of gaining competitive advantages. However, it is necessary to underline that Michael Porter has developed three types of generic strategies: segmentation strategy, differentiation strategy, and cost leadership strategy. He views these strategies in two dimensions. On the one hand, there is a strategic scope, which is a demand-side dimension and looks at the size and composition of the market a company intends to target. On the other hand, there is strategic strength that may be identified with two competencies such as product differentiation and product force. Practically, his theories imply that the analysis of a company should be based on the analysis of five major forces, including supplier power, barriers to entry, threat of substitutes, buyer power, and degree of rivalry.
As for Faulkner and Bauman strategy clock, it should be said that another way to analyze a company’s competitive power but, unlike Porter’s generic strategies, in comparison to the offerings of competitors. Basically, Faulkner and Bauman analyze competitive advantage in relation to cost advantage or differentiation advantage. Practically, it means that there may be several options. For instance, there may be low price/low value that is typical for segment specific, or another option is hybrid with low cost based and reinvestment in low price and differentiation.
3. The problem of Ford is actually not new and it is possible to observe similar in many other companies, including the leading ones. Obviously, the company lacks the experience of the successful and repetitive implementation of their once developed and perfectly working schemes. In actuality, this problem is quite serious since the company cannot function normally and its further development and progress is under a question. At the same time, the essence of the problem, in all probability, may be found in the interrelationships between the units within the company. In fact, it seems as if the company succeeded occasionally but it is possible to presuppose that such a success is predetermined by the success of a certain unit of Ford that contributed to the general success of the company at large. Naturally, as the company failed to progress further, it should be said that this managerial experience, being developed by a particular unit, was not shared with other unit and not implemented within the company at larger scale. Instead, as the unit realizes its potential and slows down its competitiveness under the influence of different factors, such as the implementation of innovative schemes or technologies by competitors, and gradually, its success becomes a history, while other units remain ignorant of the causes of such a success. This is why it is possible to say that, according to the Systems theory the company simply fails to develop effective relationship within its structure and, as the system grew more and more complicated, the gaps grow wider and successes of certain units remain unused by other units and the company at large
4. In actuality, alliances seem to be quite an effective tool to overcome a company’s weakness. At the same time, it is hardly possible to estimate that this is the most or the only effective tool to overcome the weakness of a company. On the other hand, it is also necessary to remember that, potentially, alliances may cause serious problems or, at least, may have substantial drawbacks. In this respect, it should be said that often alliances imply the integration of two or more companies into a single body that is supposed to work more effectively than each company taken separately. However, it is obvious that, in the result of such unification, each member of the alliance should give something in to its partners. For instance, it is not a secret that often the formation of alliances lead to the redundancy but it is quite probable that in the result of such redundancy potentially perspective or gifted employees will be lost for the new company. Furthermore, the creation of an alliance implies the reorganization that, as a rule, weaken the position of a company in the market, while time may be crucial for the company success, especially if this company operates in the sphere of innovative technologies. This is why, regardless nominal enforcement of a company in the result of an alliance, the latter has potential threats that can weaken the company even more.
5. On analyzing the statement “successful business strategy is a mixture of luck and judgment, opportunism and design”, it is possible to think about the Chaos theory which actually implies that there are no universal, permanent, and unchangeable rules and it is practically impossible to fully predict the functioning of a system or organization. This is why it should be said that the Chaos theory admits the opportunity to the intrusion of some unpredictable factors that cannot be forecasted beforehand. Consequently, the supporters of this theory stand on the ground that the successful management should based not only on a pure logic and rational analysis of the possible development of events or progress of an organization but it is also necessary to take into consideration the role of luck, a chance, or event that can change the situation dramatically and which could not be predicted. At the same time, it does not necessarily mean that it is necessary totally rely on a piece of luck. In actuality, I strongly believe that the careful planning and analysis of the development of a company, the creation of the strategic plan of its development are essential. Moreover, I would not make luck and opportunism, on the one hand, and judgment, the ability to analyze, and thoroughly planned design, on the other hand, equal notions. In my opinion, the share of luck in the general success of a business strategy is not the most significant, though I admit that sometimes its role may be defining. Nevertheless, I am convinced that without a properly developed strategic plan, ability to make logic and reasonable judgment and develop effective design are crucial and basic for the eventual success of a company and its management.
6. The disaster in South Eastern Asia resulted from the Asian Tsunami was really terrible and it is true that many states, companies and ordinary citizens attempted to help those in need who had suffered from this natural catastrophe. At the same time, the arguments concerning the financial aid to the states and people who was struck by the natural disaster should be viewed in two dimensions: ethical and purely commercial or economical. However, it is still possible to play different approaches to this problem that are typical for management. In this respect, it should be said that, according to the Contingency theory, the actions of the companies that spend money, even if this is the money of shareholders, on the aid to Asian countries may be justified because these companies and their administrations acted in accordance to the situation. In other words, as the Contingency theory admits, the companies could and should help to Asian states since the situation needs it and, consequently, the companies could act depending on a situation. Similarly, according to the Chaos theory, it is possible to support the financial aid to Asian states because the natural disaster is an excellent, if this word can be applied here, example of the unexpected intrusion of factors that do not directly depend on the strategy or work of companies or states. However, form the utilitarian point of view, for instance, the claim to stop the financial aid may seem to be quite persuasive and justified.
7. In fact, the modern world is characterized by rapid changes and there is no wonder that certain industries are susceptible to very fast changes that affect the functioning of companies dramatically. This is particularly true for the high street retailer industry. This is why it is obvious that the changes are essential if a company has been demonstrating a steady trend to the decline within the last five years. At the same time, it is important to realize that some radical changes cannot be implemented within a very short period of time since it could effect negatively the performance of the company. In actuality, the rapid implementation of structural and strategic changes could even deteriorate the position of a company compared to its performance before the changes. Consequently, it is possible to recommend primarily thoroughly analyze the situation and find out the basic causes of the decline of the company’s performance. After that it is necessary to focus on the elimination of these causes. However, as the market is constantly changing, it is quite natural that the company could hardly catch up the changes within the market or industry only correcting its past mistakes. Instead, it is also necessary to clearly identify the recent trends and the advantages of major competitors and possibly implement the essential changes in order to change the strategy of the functioning of a company. In such a way, it is possible to speak about two stages of changes: firstly, it is necessary to solve currently existing problems; and, secondly, it is necessary to implement innovations in accordance with recent trends in the industry and adapt the experience of competitors.
8. Obviously, nowadays, such notions as architecture, reputation, and innovation are of a paramount importance and can be not only a source of competitive advantage but increase the market value of a company. In fact ‘architecture’ implies the structure of a company, its network, and interrelationships between the units of the company as well as between all people working at this company. In this respect, it is possible to draw an example of McDonald’s, the company that has the worldwide network and is recognized and popular practically in all countries of the world where it operates. At the same time, the ‘architecture’ of the company is quite clear and, what is more, each unit of the company in different parts of the world has the same structure. As for reputation, it is also important and implies the popularity and loyalty of customers to certain brand. For instance, GM, being in quite a poor position, its products are still popular in the US basically not due to their better quality or more attractive prices compared to major competitors, but basically due to its reputation, recognition, and popularity in the US. Finally, ‘innovation’ is also extremely important because the implementation of new technologies as well as new methods of management may be crucial in the modern world. For instance, Microsoft, due to the successful implementation of new technologies, has become the leader, if not to say monopolist, of its industry and its segment of the market.
9. Speaking about the value chain, it should be said that it basically characterizes value adding activities within an organization. Among the examples of such activities may be named inbound logistics, operations, operations, production, marketing and sales. In general the value chain is quite important since it can provide a company with competitive advantages. In this respect it should be said that a company with a well-developed chain value can function more effectively since there exists an effective system of interaction between its units and it actually binds the entire functioning of a company into a solid mechanism. As for the value system, it should be said that it is equally important, though unlike chain value it rather refers to the ethical sphere but not to business directly. However, the value system inevitably effects the functioning of a company and its financial results because it implies the effective implementation of certain ethic and moral principles that increase the effectiveness and performance of a company due to the creation of positive organizational culture and atmosphere. It should be said that the value system may be coded and exist in the form of an ethical code that can define the basic norms of behavior and principles of work of a company.
10. Nowadays, knowledge are extremely important to the effective functioning of a company. There are types of knowledge. Among them it is possible to single out the empirical knowledge acquired through practical experience of people in the result of their work and cooperation and, as a rule, it is perceived through senses. Also there is logical knowledge that is the result of understanding of relationship of ideas to one another and which is subordinated to the rules and norms of logic. Finally, it is possible to name semantic knowledge which is the result of learning and understanding the meaning of words. Obviously, each of this type of knowledge could be acquired effectively in different ways. In this respect, it should be said that the empirical knowledge, for instance, may be effectively perceived and shared by means of face to face or video conferences. In such a situation, people sharing the empirical knowledge can perceive the information with the use of different senses, notably, their visual and hearing abilities are involved, while the personal contact, either direct, or by means of video conferencing, contribute to better understanding of the knowledge shared by the receivers, while sender can realize the effectiveness of his work in sharing the knowledge with other members of an organization. In such a way, through interaction and communication people acquire empirical knowledge.
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