Future Goals Current Strategy
At all levels of management how the business is currently
And in multiple dimensionscompeting
Competitor’s Response Profile
Is the competitor satisfied with its current?
Position?
What likely moves or strategy shifts will?
The competitor makes?
Where is the competitor vulnerable?
What will provoke the greatest and most?
Effective retaliation by the competitor?
AssumptionsCapabilities
Held about itselfBoth strengths
And the industryand weakness
This planning model presents checklists of factors to consider in the external audit, often categorised as economic, social, political, and technological. The internal audit is once again deals with the strengths and weakness of the company. In the above figure, competitors are in the centre. While the other factors deals with the environment of the company. The improvement strategy of product is planned after evaluate the above mention factors. The method of increasing the productivity is normally design by the ‘value added method’. This process gives us the some numeric data in the shape of how many funds would be need adding the new value, and how much profit we could generate by adding this value. Some time, it may include the new process, automation, and new improved facilities. When we talk about Global business challenge, the improvement in product will become more important. I think in this next century, only that company can survive those could launch the innovative and modified product without waiting of competitor. Companies have to make such strategy and planning about the improvement of their productivity. But this improvement should be fare calculated on the bases of future demand and supply. The large number of companies had been failed or bankrupt, due to wrong calculation. Proper forecasting and the use of market mix in the presence of globalisation?, it is only when possible, then managers would be use the strategy of cognitive and learning school together. Therefore, Amway has already adopted the cognitive strategy by the standardisation of their products.
Knowledge of competition
It is very basic and broad term in the business world. The trend of globalisation has been broken the boundaries among the nations. First companies just have to face the internal competitor in their country. But this next century, every company has to face the global competition. Therefore the knowledge of competition will be biggest challenge for the next century. Now every company has to make global strategy. According to the arguments of Michael Porter about the competitive strategy, he argues, is achieved in one of three ways; through cost leadership, through differentiation or through focus based strategies. He argues that it is important that the organisation is not ’stuck in middle’ -that it is following the one of the strategies. Mcnamee and Mchugh’s attempt to test out porter’s concepts in the clothing industry refers to ‘low price’ strategies rather than cost leadership. Karnani infers that, for cost leadership to be attained, the firm must compete on price, and Govindarajan, citing Porter, maintains that’s a strategy of low cost signifies an attempt to sell an essentially undifferentiated product at lower-than-average market price. But according to Donald Schon suggests that it is a mistake to conceive of managerial thought and managerial action as separable: he suggests that management is characterised by ‘reflection in action’. In effect, managers develop over time and through experience an understanding and interpretation of the context in which they operate, which they apply to situations they face (The challenge of strategic Management by David Faulkner & Gerry Johnson p.181).
The view of Donald Schon about the thought of managers is true. But in this century managers have to follow the arguments of Michael Porter. Otherwise may be they lost their market share. If we take one argument of the Porter like ‘Cost leadership’. It means being the lowest cost to the customer (i.e. lowest price); others interpreted it as porter intended but felt that it would be difficult to purse such a strategy. Some companies are conducting by as ‘we aim to be lowest cost producer in our industry’; example likes supermarkets, chain stores. I think the porter model, only applicable in manufacturing industry. But we can not apply it in service industry. And Mintzberg is also linked this model only with the designing school of strategy. Global competition has increased the more importance of proper use of entrepreneur and cognitive strategy. I have banking background, in my country most of foreign banks took the 25% our customer, only due to their best internal branch atmosphere. My bank have high bureaucracy, I tried to point out the weakness of bank. But my management replayed much negatively. We are doing the business in the best way. We do not need any suggestions. They are very much orthodox in their policies. Therefore I agree on the statement of Donald Schon. In future, as manager, I would like to adopt the strategy of the ABB and Scandivea Bank of Sweden. They are getting strong edge our competitor by using the strategy decentralisation and ABC & ABB (activity base cost/budget).
Expand product line
It argues a product/service line by adding additional varieties in the base product line. The attention of this strategy is to provide a broader range of products or services for customers/clients to retain them with your company. The globalisation put a deep impact on the product line and its life. And introduction of new products by our competitors has increased the more choice and product standardisation towards the customers. It has created a complex atmosphere in the every market. According to the Mintzberg schools of strategy, it could be linked with ‘The positioning school’ & ‘The cultural School’. The positioning school has prescriptive like the design and planning school, but the position school places a greater emphasis on the external environment at the expense of the resources, competencies & capabilities of individual firms. The cultural school is concerned with the scope of an organisation’s activities by matching to its environment. It also deals with the major allocation and re-allocation of resources and its movement in long term. Some organisations have in culture to introduce the new and modified products after the specific time period. They are applying this strategy to hold their position in the business environment. If, we examine the most successful organisation of this century, like as Ford motors, McDonalds burger, Citizen Watch co., etc
The success of these companies is based on the life of products, the life of existing products is very small and they introduce a new product after the certain time period. The life of a Burger in McDonalds is only 48 weeks, the age of any citizen watch is only six months and Ford motor also exchange its models after the every six months. The introduction of new product and services in market has been changed the perception of the customer.
I think, In this century, every organisation has to emphasis on the short life of product, and they will also emphasis on the modification and invention in products and services as soon as possible. Otherwise, their competitor will launch the new product or service and it will put ultimate effects on their market share. The learning school of strategy will be worked here. The above ‘Global strategy framework’, in his 3rd part is also indicating such strategy. It will be very important for every organisation to adopt such strategy if he wants to compete in the global market. They have to make this strategy as the part of their cultural. Otherwise, they will be in very big trouble and they will face very difficulty to retain their customers by their historic products.
The change in business environment
The business environment of the any country is depended upon the following environmental factors. These factors are represented by the following figure.
These factors influencing any organisation, but when organisations are going to start the global operations. Then, the position will be totally opposite. They have to follow regulatory framework of the country and have to change the strategy and make the new strategy according to the demographic changes of that country. Many companies plan strategically on a five-year cycle. The top CEO’s uses the cognitive school of strategy to plan this long term planning. They have to consider and evaluate the all factors and give the some predict about the future. Normally they use the Michael Porter model in which he describes the five forces, which influence industry profitability. These are ‘competitive rivalry; barriers of entry; threat of substitutes; the power of buyers and the power of suppliers’
However it is not feasible to avoid making the accurate predictions in some cases. For example, the currency of the world aerospace industry is the US dollar; i.e. all aeroplanes are priced in US dollars. This industry makes their price strategy by the predictions of their domestic currencies by the future movement against in the US dollar.
The political changes affect the economic and social dimensions. The recent failure of the WTO at Seattle, It is a very big set back for freer trade/trade-liberalisation of the globe. This set back will put a big affect on the five years strategy cycle. The technology development is directly affected on social trends. The rapid use of technology may hasten the general drive to reduce working hours thus making it more difficult for organisations to attract employees with the appropriate skills. Last three daces, that ecological or ‘green’ factors are putting majors impact on manufacturing industry. In next century, this trend will also be more accelerated. The final area is social changes. The population rate is very much reasonable in the developed countries of the world. But in the third world countries have been crossed the red light. This rate of increase in their population may be the biggest challenge of the next century. The movement of this population towards the developed countries is also a major problem. In 2050, the population of the world will be double as compare to 1990.
The positive strategy making is an art in the presence of environmental forces. The most well known method of making strategy is ‘Implicitly or explicitly’, the view that one market is intrinsically more profitable than other another has gained wide acceptance in the business community. According to business specialist, those companies which implicitly or explicitly build on these assumptions will find themselves skating on very thin ice. In the survival global business, every industry has to adopt this formula. They should not try to move forward with same business or same product. Like the position the school, where industry find a new type of business and those business of gaining the market then should start that business and try to make your position strong. They are four stages in the product life cycle ‘Introduction; Growth; Maturity and Decline’. If your business have reached maturity stage than you should look for the any other business that’s at the growth stage. The environmental changes in business need the very appropriate strategy and long term planning. If any industry has not adopted the any fundamental rule and style of making strategy than it will be very difficult to compete in the global environment.
Price policy & terms/conditions of billing
The price strategy is put a deep impact in the sale of product. If any industry offer more favourable terms and conditions in order to stimulate market demand for specific services. Price policy is directly to the positioning school. The positioning school emphasises on the external environment at the expanse of the resources, competencies & capabilities of individual firms. Strategies are generic, identifiable positions in the market and based on analytical calculation. These strategies also based on ‘aim and fired’. The ability of moving position to position and after analysing, anticipated then hold the position is the basic rule of positioning school. The model of Michael Porter’s is used to make the position strategy of the any industry.
Potential Entrants
Threat of entrants
SuppliersBuyers
Bargaining power Bargaining power
Threat of substitutesSubstitutes
To describe this model we take the example of ‘Heineken’ world leader in brewing industry. The first force is threat of entrance of other competitors. Heineken is facing the 14 major competitors in market. It is open market, and there is no any specific law to stop the new entrance. But some people say that it is a monopoly industry of the Heineken firms. The next step is belonged to suppliers. Suppliers have a very big market and lot of their buyers in the market but the policy of Heineken is paying more intention on suppliers as compare to buyers. Because, they are responsible for supplying the raw material for their industry. Every year they change the terms and conditions with suppliers and try them make more flexible for their suppliers. Therefore they provide them low cost and high quality raw material. While the next step is belonged to buyer power, the buying power is the most important force in the market. Where buying power of the people is strong, every businessman tries to enter in this market. The price strategy of Heineken bear is always focused the middle class people. The Heineken is supplying his bear more than 170 countries of the globe. To reduce the cost and for control the price. They have started the partnership projects throughout the world. By applying this strategy, they not only increase the market share but also penetrated in the different region of the globe. Last step of the Poter’s model is threat of substitutes in the market. The soft drinks, energy drinks, juices and wine can effect this market. But, people who used to drink the bear, they can not survive with out drinking the bear.
In the example of Heineken, the more focus on only two things price and relation with suppliers. The reason of opening the different partnership project in throughout the world. They want to reduce the cost of product. If any industry is able to control on its cost and overheads, it can easily for it to penetrate in any market and hold its position strong. This strategy is defined in position school. Therefore, Heineken is world leader in bear market. In the global business, if organisation makes a flexible policy towards price and it’s billing. And introduction the reward system for selling the certain quantity with the grace pay back time period with the no interest rate. This kind of strategy will be helpful to increase the market share. If any company pay no attention towards than this element can create a big challenge for any industry. It can also be used sometimes to effect rationalisation strategies or reflect improved competitive position.
Strategic alliances
Strategic alliances, joint ventures, dynamic networks, constellations, co-operative agreements, collective strategies, all make an appearance and develop significance for the analyst of industry structure as well as for the industrial practitioner. The forms of strategic alliances are categorised by Dephillippi and Read as either unilateral or bilateral. Unilateral agreements are so called because they typically involve minimal amounts of partner interdependence. Examples would be technical training supplier contracts, franchising, patent licensing, or marketing consultancy. The agreements have quite specific tasks, and each partner could terminate the agreement without great cost. Strategic alliances are bilateral agreements and involve a larger amount of interdependence. They include non-equity co-operative agreements, equity joint ventures and consortia. (The challenge of strategic management by David Faulkner p.123). Johanson and Mattsson’s define the strategic alliance as A particular mode of inter-organisational relationship in which the partners make substantial investment in developing a long term collaborative effort, and common orientation.
Strategic alliances are now widely recognised and best way to meet the environment challenges and retain the internal business of firm in pace conditions. They have certain inherent characteristics like speed of creation, flexibility, opportunities for specialisation, access to additional resources and risk limitation-all of which make them attractive when compared with the alternatives of internal development, acquisition /market purchases. Alliances can be unstable for a number of internal and external factors. External factors like globalisation, technology, and economies of scale and scope, growing turbulence and declining trade barriers. Internal factors like as resource dependency (access to market, technology, special skills and raw material), transaction costs, risk limitation, speed and defence against predators. But most of alliances have broken in the half stage. The 60% reason of their failure in the third world country is interference and instability of their government. But in the developed countries, we have lot of examples of long-term alliances and they also produce the some incredible results. In November 1989 Cincinnati Bell information system of the USA set up an alliance with the Kingston Communication of Hull, England to sell its equipment of telecommunication throughout the Europe market. CBIS provides the equipment and Kingston the sales effort. This alliance is focused one with clear remits, and understandings of respective contributions and rewards.