BUSINESS STRATEGY QUESTIONS
- How does SWOT analysis reflect the basic strategic management process?
The SWOT analysis reflects the basic strategic management process since it outlines the company’s strengths, weaknesses, opportunities, and threats in order for the company to plot its most effective moves or strategy in order to succeed. (Thompson, Strickland, & Gamble, 2010) The basic strategic management process enables the management of the company to select the best combinations of strategies which will make their organization to perform better. It is reflected by the SWOT analysis in the sense that the listing of the company’s strengths, weaknesses, opportunities, and threats, also makes the management determine the best strategy which will make the company compensate for its weaknesses and also prepare for its preconceived threats.
Strategic management process is a continuous process also evaluates the operations of the business and its external environment, especially its competitors. In SWOT analysis, the environment or externalities are evaluated in order to gather, scrutinize and provide information for strategic purposes. It aids in assessing both the internal and external factors affecting an organization. Just like the strategic management process, the SWOT analysis gives way to a more improved performance. It is always lined with a strategic approach. The formulation of specific strategies coincides with the intention of pursuing the objectives set by the organization. After a SWOT analysis, managers create or revise their corporate, business and functional strategies.
- What is the difference between the mission and the vision? What makes a good mission and a good vision?
A vision depicts a company’s future business scope (where the company is going) while a mission is usually the present time purpose of operations of a business. (2010, p. 28) The vision is far ahead but it is a strategic view of that future, where the company will lead to, what future products or services it will venture into and what technologies or resources it will utilize. On the other hand, the mission is set out to describe the company’s present venture, who it is, what it does, and why there exist. Hence, vision is forward looking while mission is the present goal/s of the company.
A good vision for a company involves a specific and a detailed conception of its existence in the present and in the future. It is not a generic goal like “being the best global company” but a reference point and a strategic path which guides the management and the staff as well as enlightens its stakeholders and customers. (2010, p. 25) A good vision is graphic, directional, focused, flexible, feasible or desirable, and easy to communicate. (2010, p. 26)
A good mission describes a business’ present business activities and why it exists. It is an ample description of the company’s products and/or services. It specifies the customers’ needs it aims to fulfill and the target market it aims to serve. A well prepared mission statement should also distinguish the organizational make up of the company in the language which is natural to its identity. (2010, p. 28)
- Define corporate social responsibility; describe the benefits and how company CSP performance can be measured.
Corporate social responsibility or CSR means that businesses, especially larger ones, should not only operate in the name of profit. They should also exercise ethical duties and responsibilities since they are part of the society where their business is located and where their staff works. (Thompson, Strickland, & Gamble, 2010) Their business operations are also asked to heed the imminent call of the ecological balance of nature and the conservation of the resources for the future generation.
Companies must actively participate in community development programs, charitable works and donations, etc. They must also be supporting other socially-relevant issues. To prove their social responsiveness, companies must also be transparent, open and they must carry their integrity (i.e. having the respect and trust of their investors, stockholders, management and staff) (Thompson, Strickland, & Gamble, 2010). As it is, corporate social responsibility aligns the overall image and strategy of a company. It is also considered as a competitive strategy of most companies. CSR bridges the company to its stakeholders, particularly its internal clients.
There are several ways of measuring a company’s CSR performance, either by internal and external means. Global organization such as the Global Reporting Initiative (GRI) advocates a sustainability report for companies and organizations to report their sustainability information just like a financial performance. (Global Reporting Initiatives Website, 2013, p. 1)
- Explain when and why it is important for any size company to globalize.
There are various reasons and means why it is now easier for companies, small or large ones, to globalize. It is a crucial step in making the business more competitive and to reach its extended markets abroad. A company can globalize if it has a market potential, ability to diversify geographically, excess production capacity, low cost position due to economies of scale, ample source of new products and ideas, and has foreign competition in its domestic market. (Saloner, Shepard, & Podolny, 2001)
Companies globalize in order to expand its market base. With a larger market base, companies are most likely to generate more profits since they will also have a larger customer base. These companies globalize to stay ahead of competition. They quickly secure a market base in developing or emerging markets with customized products or services for these markets. Going global also means more access to capital and other incentives. Other companies go global in order to avoid trade barriers, meet more customer demands, and keep up with various regulations and restrictions. They are also able to keep up with thier rivals, which are also globalizing their products and services.
- Describe the four main strategic orientations of global firms.
- Think-Local, Act-Local Approach – the company’s approaches and activities are designed to the tastes and preferences of each country where it is marketed. (Thompson, Strickland, & Gamble, 2010, p. 220). It is applied when there are differences in customer preferences and buying habits in each country.
- Think-Global, Act-Global Approach – the company’s products and services are very much the same in the countries where they are marketed. There are just very minor differences for countries where the market is highly differentiated. It has a central headquarter and employs the same capabilities, distribution channels, and marketing approaches throughout its markets. (2010, p. 221)
- Think-Local, Act-Global Approach – this approach utilizes both local and global strategies. The products and services are designed to suit the local markets but at the same time, its general approach is to customize the said features to a more, expanded, global market.
- Think-Global, Act-Local Approach – this approach employs the general, competitive strategy theme (low costs, differentiation, best cost, etc.). It develops the capability to customize products and services and sell its varied version in different countries. This approach gives the local manager to adapt global approaches as required to serve local customers and remain adoptive to the local market and competitive conditions.
- Offer two indicators within each area in the remote environment -- E-P-E-S-T -- that regardless of industry, we should take into consideration when strategizing.
Two major indicators which are useful in strategizing, regardless of any industry, are the political and the social factors. Political factors pertain to the changes in government regulations which can have a significant impact in one business operations. For instance, the national brand policy of one country may restrict the market expansion of an entering business and this must be taken seriously. Political factors are also closely related with legal reforms and laws affecting a business. Laws such as consumer protection, environmental regulations, health and safety of consumers, and employment laws will directly affect a business regardless of its industry. Other elements under this factor include: tax policy, trade restrictions and tariffs, and the general political stability of the country.
Social factors pertain to the behavior patterns, tastes, and lifestyles of consumers. A principal component of this external factor is a change in consumer behavior as an outcome of changing trends and fashion. The age structure of the population also changes over time. For instance, an ageing population has to be considered when designing products and services which will serve the market. A deeper understanding of this factor gives businesses a stronger grasp of the market potentials. Social factors include: the demographic and cultural elements, such as health consciousness, population growth rate, age distribution, career attitudes, and safety values, among others. (Saloner, Shepard, & Podolny, 2001)
- Define Ansoff's work related to industry turbulence and how we can use it while strategizing. 200
Igor Ansoff, a mathematician and an economist, developed a strategy that is important to systematically anticipate a company’s future environmental challenges (or industry turbulence) and prepare an appropriate strategic plan to meet these challenges. (Saloner, Shepard, & Podolny, 2001) Ansoff addressed the issue of turbulence on his seminal works on strategy. One of his major objectives in creating a better framework for strategy formulation was to improve the traditional planning processes of the postwar US economy. Ansoff anticipated a more complex environment in the future as compared to the more stable post war economy. He realized that the current strategic management and decision making processes would not be able to assail the rapid and discontinuous change that will occur in the near future.
Ansoff defined strategy decisions as flexible and adoptive since it can always be applied to new situations. Ansoff created a new classification of decision-making and these consist of the following:
- Strategic – which is focused on the products and markets
- Administrative – focused on organizational and resource allocation
- Operating – pertains to budgeting and direct management.
Ansoff's decision-making classification is popularly known as Strategy-Structure-Systems, or the 3S model. (Saloner, Shepard, & Podolny, 2001) He identified and enhanced the firm’s strategic performance potential by assessing industry turbulence/s in relation to the firm’s capability and strategy.
- How do VCA, RBV, SWOT, SOAR and Three Circle analysis differ as internal analysis techniques?
Value Chain Analysis or VCA basically describes the business’ activities and draw out the competitive strength of the business. It differs from the other analyses methods by selecting the primary activities which a business should focus on as compared to the other activities which it can outsource form others. RBV or resource based view is the process of selecting the best combination of resources which will make the company more advantageous or more competitive. It does not classify a certain resource simply as a resource but a certain capability which will improve all the other resources of the company. This is different in SWOT analysis where the main strengths of the company are identified and capitalized on in order to bring more advantage for the firm.
Meanwhile, SOAR is a strategic method and a planning framework which enables a firm to plan its most preferred future. As compared to the three techniques, this strategy is projected towards the future in terms of strategic approaches. The three other analyses are concentrated on present situations and capabilities while this one is focused on what will work out for the company in the future. Lastly, the three circle analysis draws out the internal and external capability of the company against the needs and preferences of its customers. The point of difference and polarity of these two main circles are the main focus in this type of analysis. The management scrutinizes the factors and values related to their differences and polarity. After this critical evaluation, they draw out the best strategic reforms which the company must undertake. It deletes those offerings which are not needed by the customers and work towards those which they have not yet addressed. (Saloner, Shepard, & Podolny, 2001)
- Jazz Apparel decides to pursue a customer intimacy strategy. What departments must be strong or strengthened?
If the company intends to apply a customer intimacy strategy, it needs to strengthen its research and development, customer service, sales channels/distribution and manufacturing departments. This is because the company needs to be attuned to all the customers’ needs and preferences, including their new values, subscription to trends and other fashion developments, etc. R& A will enable the company to draw out the different demands of their target market and how they can best serve them. This is crucial in delivering the right product and in what various marketing and sales channels they need to be delivered. Customer service, on the other hand, will enhance their relationship with their customers and attain important feedback in terms of their product and their service. Manufacturing and sales departments are also auxiliaries in completing the best and satisfying customer experience. Even when the product details are precise, its execution will be very crucial and this means a dedicated manufacturing department. Also, if the product is ready, strategic sales outlets are also crucial to its delivery to its customers.
- Suppose the competitor analysis reveals that the American subsidiary of your firm's German competitor is about to broaden its product mix in the American market by introducing a new line against which your company has not previously had to compete with in the home market. The environmental analysis shows that recent weakness in the dollar-Euro exchange rate is expected to continue, making American exports relatively less expensive in Germany. Do you recommend a defensive strategy, or do you attack your competitor in its home market? How will you implement your strategy?
It seems more logical to attack the competitor in the home market. The firm can block the entry of the American subsidiaries’ new product offerings by lowering its prices in substitute products or by making a bold product announcement that the firm will also produce the same product which the new entrant is offering. (Thompson, Strickland, & Gamble, 2010) Hence, it is highly recommended for the firm to apply a defensive strategy.
With the weak dollar-euro exchange, it is still best to produce the products locally. In the first place, the local market is your primary market and hence, it should be the one to be initially defended. If the new product proves to be highly demanded in the American market, the continuing exchange rate condition may make it more attractive for the firm to introduce the said product in the German market. This is still dependent on the local market conditions in Germany, which the firm needs to critically study.
References:
Global Reporting Initiatives Website, 2013. “About Sustainability Reporting.” Available through: https://www.globalreporting.org/information/sustainability-reporting/Pages/default.aspx. [Accessed on 29 January 2013].
Saloner, G., Shepard, A., & Podolny, J., 2001. Strategic Management. New York: Wiley.
Thompson, A., Strickland, A. J. & Gamble, J., 2010. Crafting and Executing Strategy: The Quest for Competitive Advantage. New York: McGraw Hill.
