Question I – Explain the strategic management process and how a corporation is likely to use this process to achieve strategic competitiveness to earn above average returns.
Strategic management is the counterpart of the scientific problem process in the field of science. It grossly involves the identification of a problem, the gathering of information, and formulation of a hypothesis and a solution, and it usually ends with implementation and evaluation. The typical problem solving process shares a lot of similarities with the strategic management process yet the two cannot be the same. In general, the strategic management process involves four key steps namely 1) Environmental Scanning (or situational analysis in some business and management literatures), 2) Strategy Formulation, 3) Strategy Implementation, and 4) Strategy Evaluation.
It is important to note that the strategic management process, when completed up to the fourth and last stage becomes an ongoing cycle. That is, the organization that was the subject of the entire process would most likely tackle another problem, probably a bigger one, and then start from the first component and so on. The fundamental goal is to solve as much problem as possible, in the most cost-efficient way. What makes the strategic management process important is the fact that when it comes to managing a business or any organization for that matter, it is not a question of if but when the management leaders would encounter problems.
Eventually they will encounter a significant problem and they would have to face and solve that problem. Fortunately, the strategic management process can be an effective tool to help the leaders of an organization simplify and then eventually solve their problem. It is worth noting, however, that every organization may have a problem that is unique to their industry or even to their own and so this organizational problem solving process should not be seen as a tool that offers a universal solution to even the highly specific issues. What the strategic management process actually does is that it enables the organization’s problem solvers to deduct the individual components of their problem into smaller ones and then start from their; it cuts the problems into chunk and in the process, this makes it clearer and easier for the members to understand what they have to do to overcome their hurdles whatever they may be.
The strategic management process can, for example, increase the likelihood of getting bigger earnings by means of competitive advantage. According to the author of a book entitled Strategic Management from Theory to Practice, competitive advantage relates directly to a firm’s value because it relates directly to earnings; firms with a strong competitive advantage are in a position to earn more than their competition and as a consequence to be more valuable . In this case, competitive advantage would appear to be the dependent variable that can be improved by means of the strategic management process and if everything will follow what the author just stated about the effects of a high level of competitive advantage that would eventually translate to the firm’s bottom line (i.e. higher earnings).
Question II – Compare and contrast the analysis that a company undertakes to analyze its internal versus external environments.
There are numerous ways how a firm can analyze its position in a market. In terms of the affinity of the factors, for example, analytic methods and models can be categorized as internal and external. Internal analysis basically target internal factors or those that are innate and native to the company itself; external analysis on the other hand target external factors or those that are outside the scope and reach of the organization (e.g. competitors, the political environment, among others). A typically used tool or instrument when it comes to internal and external factor analysis is the SWOT Analysis. SWOT in SWOT Analysis stands for strengths, weaknesses, opportunities, and threats. As the name implies, it is a tool that is used to qualitatively describe a corporation’s strengths, weaknesses, opportunities, and threats.
What enabled this simple tool to gain widespread acceptance is the fact that it is easy to use and it successfully deducts a corporation’s core characteristics. It may also be considered as the best and most efficient tool when conducting an internal and external analysis. Internal factors within the context of this analysis would center on the strengths and weaknesses; after all, a corporation’s strong and weak points are its unique qualities. External factors, on the other hand, would center on the opportunities and threats—these are variables that are outside the control of the corporation. It is relatively easy for corporation managers to fall prey to the idea that this internal and external analysis instrument is a fool proof tool that would make them invisible to the challenges of running a complex for profit organization. That is certainly not the case for the SWOT Analysis tool is only as good as the information that make it up . This means that for an internal and external analytic process to become effective, the managers who are using it must make sure that the information being analyzed and presented are accurate and organic—that is, they should not be manipulated in order to maliciously inflate the corporation’s value.
A perfect example that may also double as a warning, that can be used here would be Enron. Enron was one of the largest companies in the United States with significant interests in the energy, commodities, and services industry. Unfortunately, it filed for bankruptcy in 2001 after being involved in numerous accounting scandals . After numerous probes and investigations, it turns out that Enron cooked it books and manipulated the data that it presented to its investors and other stakeholders—in a malicious attempt to make it look as if the company was reaping huge profits even though in reality it was already sinking in bad debt.
Enron basically used its knowledge in accounting to manipulate the public’s impression of the company, to hide their problems. One important lesson that can be learned from Enron’s demise is that any tool, when used in a wrong way or in a malicious manner, would turn always lead to a disaster. Of course, Enron did not have to suffer overnight for cooking its books but this theory about internal and external analysis and how it must be used (and not used) basically ensured that it would not be able to get away with what it committed. So to summarize, a company that assesses its internal risks and other internal factors would tend to focus on its strengths and weaknesses (within the context of the SWOT Analysis); one that assesses the external risks and factors, on the other hand, would tend to focus on the opportunities and threats.
Question 3 – Your boss informs you that your company has just been acquired. He states that the acquiring company is going to completely relook at your company’s business-level strategy. Your boss is unsure what that means but knows that you have just learned all about strategies in class. How can you help your boss?
I can help my boss by explaining and discussing to him these five things 1) What a Business Level strategy is and how it is relevant to our current situation, 2) the different Business Level Strategies, B-L considerations and risks, 3) reasons why one or more B-L strategies may be considered, and lastly 4) what I think the best way to respond to the current scenario is. So, proceeding to the first part, it would be important to define to the members of the corporation, especially to the ones managing it what a business level strategy is.
According to Osmond (2016), business-level strategies represent plans or methods companies use to conduct various functions in their business operations; larger companies often use more business strategies since they often have several departments with several business functions; small businesses may adapt these strategies to their operations and assign them to different employees” . Basically, what the company that acquired the current corporation meant when they said that they were going to completely relook the company’s business-level strategy was that they are going to review and completely change the way how the company operates, including of course the products and services that it develops, manufactures, and sells in the market, among other important processes and operations.
Now, what they are going to replace those processes and operations with highly depends on the existing needs of the corporation. Suppose that the corporation acquired the current company because of its existing manufacturing infrastructures and the manufacturing expertise of its current roster of employees. In that case, the manager of the acquiring company would most likely set manufacturing as the focus of the newly-acquired corporation. Relooking and changing the existing business-level strategy of a newly-acquired corporation, however, is often associated with a lot of changes. There are departmental downsizings, layoffs, and in some cases, even complete slashes. This is not an uncommon scenario when two companies merge (or when one company gets bought and acquired by a bigger one).
Now, to answer point number two, there are, in general, five types of business-level strategies that an acquiring firm may base his decisions on as far as the concept of relooking is concerned. According to Osmond (2016), these are coordination of unit activities, utilization of human resources, identification of market niches, development of distinctive advantages, and monitoring of product strategies.
What is important to know here is that the business level strategy that acquiring firm would choose would most likely depend on a set of factors that may include the following: the reason why the firm had to be acquired, the reason why they acquired the firm, the expertise of the firm, the current financial and operational condition of the firm, and the internal and external factors that may be associated with the firm, among others.
The manager in the current scenario must be able to grasp the idea that larger corporations do not simply acquire smaller firms because they can; there is often a reason why they do so. It may be to try to control and take down a potential adversary while its size and market influence is still small and manageable; it may be to provide the necessary research and development, and manufacturing expertise to tap and venture into a new industry, or it may simply be to expand their current reach and share of the market (in cases where the acquired and the acquiring firm operate in the same industry).
Question 4 – Your company president informs you that she has just read an article in the Harvard Business Review that mentions the Five Forces Model of Competition. She is unfamiliar with what that means and asks you for a one-pager that gives her the salient points about the model.
What the person in this scenario must be referring to was Porter’s Five Forces Analysis. This is basically an analytical tool that helps business managers and owners determine where the power lies in a particular business situation. There are five important components under this tool and they are: supplier power, buyer power, threat of substitution, threat of new entry, and competitive rivalry. This basically means that there are five groups of entities that can present themselves as a competition or a threat to a corporation in general—suppliers, buyers, firms that can offer and provide substitute and alternative products, new entrants, and corporate rivals can all be considered as threats to the existence of the business. This leads to the next question on why knowing where the power lies in the competitive environment is important. Basically, what makes filling that knowledge gap important is the fact that it enables a corporation to have a competitive context of where it stands relative to the other entities participating in the same business environment where it operates.
Question 5 – Prepare a SWOT analysis of Under Armour using the 2x2 matrix format described in the attachment (Optional)
References
Amason, A. (2011). Strategic Management From Theory to Practice. Routledge, 15.
Jennings, M. (2002). rimer on Enron: Lessons from a Perfect Storm of Financial Reporting, Corporate Governance and Ethical Culture Failures. Cal. WL Rev, 163.
Olsen, E. (2010). Internal and External Analysis. On Strategy.
Osmond, V. (2016). Five Types of Business Level Strategies. Chron.
