Strategic Marketing Research Paper
1. Discuss the differences between a mature and a dynamic firm. What steps might a mature firm take to achieve rejuvenation? Explain, using examples.
According to the literature a business experiences four main stages over the course of its development. These stages are as follows: start-up, growth, maturity, and decline. Start-up businesses have smaller revenues and require a large investment of time, effort, energy, and money. This stage is characterized by innovation, high risk, and low profit margins. In the growth phase the businesses function using their limited resources. During that stage the consumer demand is established and increased. The business is more independent, however the additional help is often needed in production, manufacturing, and general operations. (Gordon)
Mature firms are those who have achieved a certain amount of name recognition. Mature firms have well established contracts and partners, the sales require less effort, the business produces a reliable stream of cash. During this stage the market position should be increased and maintained. Being at the declining stage business experiences various troubles, as well as it has to deal with a problem of market reduction. During that period there is no product innovation, costs have to be cut to preserve profits, and the profits that remain are usually very poor. (Gordon)
There is also such a phase in the firm development that can be described as the dynamic phase. This stage is often compared and contrasted with the maturity stage. Looking at the examples of firms’ development process it can be seen that not all the firms go through the process of dynamism. The main difference between those two stages is that during the dynamic stage the firm tends to develop and innovate, while during the mature stage little product innovation occurs.
Even though in the business life cycle after the maturity stage comes the stage of decline the rejuvenation of the business is possible. There are several ways to rejuvenate the business still there are no strict rules or theories. The most successful way to “revive” the business is to make a detailed strategic analysis and then basing on it, make changes in the structure and strategy.
2. ‘Strategy formation is judgmental designing, intuitive visioning, and emergent learning.’ (Mintzberg, Ahlstrand and Lampel, 1998). Explain this statement, using examples to illustrate your answer.
The strategy the company decides to follow is the way in which it orients itself towards the market. It is also the way in which it chooses to act towards other companies that it competes with in the marketplace. It can be said that the main objective of every taken strategy is to achieve success and exceed the revenues of the competitor. (Ansoff) Nowadays, the strategy is more important than it has ever been, especially for organizations who want to distinguish themselves from the competitors and get higher profits.
As our modern world of high technologies is driven mainly by competition and the desire for winning, the typical “strategy” is nothing more than producing the highest quality products and services at the lowest cost. However this is not a strategy but instead, as Ansoff calls it, “an attempt to improve on best practices”. But in fact strategy formation and implementation is much more complicated that that. The formation of the strategy the firm chooses to follow is the combination of judgmental designing, intuitive visioning and emergent learning. Creating a strategy involves both transformation and continuation of the old traditions, as well individual cognition and social interaction. It has to be analyzed before the implementation and negotiated during the elaboration. It is impossible to leave out any of the links of this long chain of strategy development, as well as it is impossible to skip one of the needed criteria.
The strategy management can only be guaranteed if a mix of all different approaches is used. Therefore strategy formation is judgmental designing, intuitive visioning, and emergent learning and not only a set algorithm of what needs to be done. The above statement can be explained using such example as meeting and exceeding customer satisfaction that can be achieved only by following all of the stages the strategy is formed of.
3. How might corporate culture be understood as a control mechanism? Give examples. The importance of corporate culture started getting its recognition as early as at the beginning of the 20th century. Though it has reached its peak in the last couple of decades after more and more theories on the importance of corporate culture have emerged. Now the significance of a strong corporate culture for the development of the strong organization is no longer a theory but a fact. It has been proven that a corporate culture is one of the main determinants of either success or failure. As well as it is a control mechanism in the organization.
Every organization has its own particular culture or “value set” as it may be called. The culture of the organization is typically created unconsciously, based on the values of the top management or the founders of an organization. The corporate culture existing in the organization can be easily noted by just looking at the relationship between the boss and the staff, the working environment, the behavior in the cafeteria etc.
It can be definitely stated that corporate culture is a control mechanism because, as I have mentioned above, it is exactly what in the long run drives the company up to the mark or to failure. A very good example of a company with a strong corporate culture is the Hewlett-Packard. It has for long years been aware of its culture and has worked hard to maintain it. Its organizational culture is based on respect for others, a sense of community, and hard work (Fortune Magazine, May 15, 1995). The growth and success of this corporation has been and stays due in large part to its culture.
So as can be seen from the stated above, the culture in the organization can be and usually is a control mechanism. So it should not be ignored but rather, it should be addressed in the organization’s and goal statements. It should also be emphasized at all times in company training and corporate meetings. (Kunde)
4. Porter (1985) identified a number of generic strategies that are available to all firms within an industry. Using examples, explain the relationship between generic strategies and competitive advantage.
Having conducted several researches on analyzing competitive forces Michael Porter suggested four generic business strategies that an organization adapts to its needs in achieving success on the competitive market. The strategies relate “to the extent to which the scope of businesses’ activities are narrow versus broad and the extent to which a business seeks to differentiate its products.” (Porter) The three generic strategies he came up with are: cost leadership, differentiation, and focus strategies. These strategies are applied at the business unit level. They got its name “generic” because they do not depend in any way on a kind of a firm or industry they are tried to be implemented in.
Generic strategies were used in the early 1980s, and seem to be even more popular today. A good example of a use of the cost leadership generic strategy is the work of Nissan and Tesco and Dell companies. According to this strategy the low cost leader gains competitive advantage by producing at the lowest cost. In this strategy the cost advantage is the target. Still it must be remembered that the low cost does not always lead to low price of the product.
Mercedes Company or British Airlines, to my mind, can represent the differentiation strategy in a best way. The mentioned companies get the sustainable competitive advantage. They desensitize prices and focus on value that generates a higher price and a better margin. The benefits of differentiation are that the higher than average price is generated and bigger profits are gained. Differentiating organizations gain additional costs by creating their competitive advantage.
And the last but not least strategy is the segmentation or niche strategy. This strategy is usually taken up by small retailers or operators. These organizations can afford neither a cost leadership nor a differentiation strategy. Following this strategy the organization focuses efforts and resources on a narrow market segment. It must be noticed that the competitive advantage of these organization tends to be on a much smaller scale because it is generated specifically for the niche, however it still exists. (Generic Strategies)
So as we can see the three generic strategies are very useful and can bring the business to the success. However, the strategy must be selected carefully because only the right choice of a strategy can lead to the positive result.
5. Compare the differing views on the relationship between strategy and structure. What are the implications of the different views for strategy implementation? By organizational structure three distinct parts can be meant. In the first place, the administrative structure that is the division of labor in the organization. Secondly, the responsibility structure that is the distribution of authority within the organization. And thirdly, the control structure that is the system of measuring and evaluating performance in the company. (Drucker)
Changes in strategies also require the changes in the way the company is structured. The structure largely dictates how objectives and policies will be established. For example, objectives and polices established under the geographic organizational structure are implemented in geographical terms. Objectives and policies are stated in terms of production when the structure is based on product groups. The structural format for developing objectives can significantly impact all other strategy implementation activities. Importantly, the structure dictates how resources are allocated within the organization. If the organization’s structure is based on customer groups, then the resources will be allocated in that manner. Unless new or revised strategies place emphasis in the same areas as the old ones a structural reorientation becomes a part of a new strategy implementation. (David)
The structure should be designed to ease the strategic pursuit of a firm and therefore follows strategy. There is no one optional organizational design or structure for a given strategy or type of organization. For example, some consumer goods companies follow the divisional structure by product form of organization. Most small firms are functionally structured and medium sized firms are divisionally structured. Larger firms use SBU or matrix structure.
So as we can see that the strategy and structure in the organization alter over the course of development, they are closely related and are changed simultaneously.
6. In the light of recent events (such as Enron, Marconi and Worldcom), give a reasoned commentary on the view that «clean business is good business.»
Living in the 21st century we can see that the moral values and honesty are passing into dimness, while corruption and fraud are flourishing. Looking back at the last decade we can trace how many frauds have been perpetrated in business and that is upsetting indeed. As the situation with dishonesty and unethical behavior within CEOs is becoming frightening this issue should be addressed. And not only should it be addressed but the concept that a good business is only a clean one should be created.
Not that long ago the business world was shacked by the dishonest operations of such big companies as Enron, Marconi, WorldCom and others. The CEOS of all these firms made decisions that were wrong; they were trying to save their organizations by committing trickery, however ended up in debacle. These companies tried to make themselves more attractive to Wall Street investment analysts and credit rating agencies and manipulate with the financial statements. But as we can see such actions did not lead to success but to the opposite. From the example of such companies the lessons of business ethics should be learned.
I strongly consider that a clean business is a good business even though this statement may sound naïve. Our culture is moving in a new and dangerous direction, because becomes more tolerant to dishonesty and financial abuse. The fraud and the abuse of trust could have a widespread impact on the world economy and prosperity, unless taken care of now. (Frankel) So I think there is a vital need to oppose this alarming trend and repeal the drift of business dishonesty.
7."Without firm-specific knowledge, there can be no competitive advantage." Using concepts and examples from several parts of the module, comment on the truth of this statement.
The distinction between the general firm specific knowledge and skills is a keystone in human capital theory that was formulated in 1950s and 1960s. The concept of specialization came about because from early times the firms tended to develop competitive advantages in specific product areas. They performed it by building up experience and focusing on research and development that was relevant to the areas of concern. This experience resulted in system-specific areas that were not possessed by other companies in the industry. It has been proved that the firm-specific knowledge is a critically important concept for understanding the drifts of leadership that take place during periods of great technological change.
The knowledge base the firm possesses is the information inputs, knowledge, and capabilities that the members of the corporation “draw on when searching for innovative solutions” (Dosi, 1988). Therefore, firm-specific knowledge is often the result of firms searching and accumulating new knowledge in areas that allow them “to build upon their established knowledge base “(Nelson and Winter 1982). Such firm-specific knowledge usually include skills needed to complete specific tasks particular to a taken firm, skills to operate or maintain equipments, and information about specialized job practices for producing unique products.
Still as can be seen from the literature as well as the life examples, in order to maintain a position as a strong leader of one or another industry the one must combine both general specific capabilities with innovative firm-specific capacities. As a consequence, both system and firm specific knowledge and capabilities appear to be highly relevant for the development of the industry especially at the early stages. (Concluding Observations)
8."There is no such thing as a mature industry, only mature firms." To what extent do you agree with this statement? How might a firm overcome maturity? There is a statement that «there is no such thing as a mature industry, only mature firms». It is possible to both agree and disagree with that statement. I would like to start with agreeing and saying that industry does also have a maturity stage. To begin with, the development stages of the firm and then industry are rather similar, the only difference is that the industry is bigger in size so the time interval between the stages is greater than in the cycle of a firm development. We can identify five industry environments, each linked to a distinct stage of an industry’s evolution. They are as follows: an embryonic industry environment, a growth industry environment, a shakeout industry environment, a mature industry environment and a declining industry environment. (Baum, McGahan)
As we saw earlier in the module the development cycle of a firm is shorter but still consists of almost the same stages. Both industries and firms go through the phase of maturity when little innovation exists and when the situation is stable. So taking that approach it can be said that both firms and industries go through the phase of maturity.
From another point of view, only a firm can go through a maturity phase while the industry cannot. This opinion comes from the fact that even though the life cycles of both firms and industries are similar, their actual lives and developments ares different. Industries tend to be in constant development because they are influenced by external forces much more than the firms are. And as they are dependent on the rapid change of the external factors the industry does not usually find itself in the phase of maturity.
In order to overcome maturity and move on from it to the recovery the firm or industry should make changes in the strategies they are using. In order to make changes in the existing strategies a detailed strategic analysis should be made that will reveal the red flags as well as the optimal strengths.
9. «The structure of the innovative organization may seem unconventional, but its strategy making is even more so, upsetting virtually everything we have been taught to believe about that process.” (Mintzberg, 1999). Explain why adhocracies are better suited to innovative developments compared with other organizational forms. The evolution of the economy leads to changes in the environment and in companies. These changes require the need for adaptation by seeking new forms of organization. Knowing the trends, the problems and the economic environment as well as technologies is an vital need for business professionals nowadays. It used to be that most of the organizations were structured in a bureaucratic way, however the more the world developed the more this structure passed into dimness. Nowadays there is a need for flexibility, because the business should be ready to respond to accelerated change, outsourcing, and temporary labor relations. So the principles of adhocracy that was developed during the nineteen forties became popular with the organizations. (Buchanan)
Adhocracy is a structural system that breaks from the traditional ways of bureaucracy by not holding formal regulations and hierarchies. It has almost no unvarying procedures for dealing with routine problems, and formalization. Within today’s society, adhocracies can be found at work in high risk organizations, newly developing technological industries, as well as in groups that plan to exist for a limited period of time. If the organizations continue to develop, they more likely become bureaucratic in nature, because adhocracy’s ability to cope with large groups of individuals and the ongoing needs is limited. (Waterman)
In our era of constant change, organizations and economies are much more likely to succeed having the ability to adjust, adapt and innovate, in other word using the adhocracy structure.
10. You work as a strategic analyst in a plc and have been asked to conduct a strategic review of your company. Present a plan for the review indicating what strategic tools you would use and why. Use examples from the presentations to illustrate your answer.
The strategic management process results in decision that can have significant enduring consequences. So the incorrect strategic decisions can cause severe penalties and can be remarkably difficult if not impossible to resolve. Thus, most strategists agree that the strategy evaluation and the strategic review of the company are vital for the company’s well being. Timely evaluations can alert management to problems or potential problems before a situation may get critical. If I was to do the strategic review of my company I would first of all divide my review into three basic steps. I would first of all examine the underlying bases of a company’s strategies, then compare expected results with actual results and then, after the review is carried out, take curative actions to ensure that the necessary changes are made.
Carrying out the strategic review of my company as a strategic analyst I would address the following questions. At first I would like to see whether our competitors have reacted to our strategies or not. Then I would trace how the competitors’ strategies changed in response to the change in our strategies. I would also try to analyze how the competitors’ strengths and weaknesses have changed in the light of our undertaken strategies. I would make sure to review whether the strategy my firm has undertaken is internally consistent itself as well as if it is consistent with the environment. After that I would check if the current strategies are appropriate in view of available resources. And at the need I would, of course, try to see whether the staff is satisfied with the strategies the firm has undertaken. In order to make my review complete, I would check the firm’s balance of investment between high risk and low risk projects, as well as the balance of investment between slow growth and rapid growth markets. (David)
The final activity of my strategic review would be certainly to make changes and reposition a firm competitively for the future .I will draw the examples of changes that may be needed and are alerting for the structure and strategy. Maybe I would suggest to establish new policies, new points in the mission statement, to issue stock, to rise capital, add additional salespeople, or allocate resources differently, etc.
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