The Theoretical Perspectives On Strategy Business Essay
Plan put in place by company. Strategies are concerned with achieving the companies’ objectives and reducing the risk of threats which may arise from company operations and therefore may ensure long term survival of the company.
Formal rational approach
A formal rational approach to strategic development is a process based on rational behaviour whereby management are expected to behave in logical manner. Therefore management will base their decisions after taking into account external opportunities and threats and internal strengths and weaknesses.
Advantages: MT and ZF
Monitor the growth of their company in the software development industry.
Evaluate the company’s strength, weaknesses, opportunities and threats which may help them to maintain a competitive advantage in the software development industry.
Assist MT and ZF to assess the optimum way to allocate its resources more effectively. resulting in higher profits at the end of the day.
Internal benchmarks within the company can be documented and all activities can be measured and be controlled accordingly.
Disadvantages: MT and ZF
The Porter’s Five Forces Model would be suitable for S Software Development Company. Implementing this model MT and ZF can determine what the barriers to enter the industry are, they can determine the rivalry within the industry, what substitute products will affect them, the supplier power of the industry and they can determine the buying power of the consumers in the industry. By using this approach MT can design specific products, S Software Development Company can also expand at a vast rate.
The strategic problems encountered by small businesses are that the work force of small businesses might not be able to monitor strategic events such as ongoing processes, internal and external events and timely changes made to strategic plans and the execution of those strategic plans. Owners of small businesses are usually content with the success of the business if they receiving profits and does not want to expand the operations of the business. They might also see it as a waste of time to implement strategies within the business and it might be too expensive so they would rather not because they are afraid of the unknown as they do not know what to expect. Another problem is that the owners might have had or heard about companies that had a bad experience when implementing strategies and therefore they are afraid that it might fail as there is no guaranteed success for small businesses.
Corporate level of strategy:
Objectives and scope of F Company
This will cover F Company’s mission statement leading to its goals and objectives that provides the framework for the lower levels of strategy. Decisions will be made about the longer term direction of F Company.
The scope involves F Company’s activities and matching of these to its environment, its resource capabilities and values and the expectations of different stakeholders.
Business Level Strategy:
How each of F Company’s strategic business units attempts to achieve objective.
Within F Company the automobile engine, marine engine and aerospace engine operate as a separate business units.
The business level strategy of each strategic business units will relate to the strategic decisions such as being customer focused, the choice of products exploring new opportunities and gaining competitive advantage.
Functional Level Strategy:
How the various functions within the organisation contribute to the achievement of F Company’s overall objectives.
This strategy focuses on the issues such as resources, processes and people.
The activities of functions within F Company such as finance, marketing and human resources need to focus on assisting in the achievement of F Company’s overall strategies
Theoretical perspectives on strategy
The formation adopted by manager C and manager D is that after implementing a formal rational approach then the next step would be analysis. Analysis is made up of internal and external analysis which leads into corporate appraisal (SWOT) analysis. The swot analysis will provide critical appraisal of strengths weaknesses, opportunities and threats affecting the organisation. They can also be used to view the internal and external situation facing the company to assist in the determination of the current situation. They can assist in long-term strategic planning for the company and to help provide a review of the company as a whole. They can also be used to identify sources of competitive advantage.
This allows the management of F Company to make an assessment of the feasibility of required actions in order that the Company may capitalise upon opportunities whilst considering how best to cancel out or minimise the effect of any threats.
Elements which makes F Company stand out from its competitors.
It gives F Company competitive advantage. Over time competitors catch up and develop these competencies for themselves which reduces the original advantage. What was originally an innovative or superior feature becomes the norm. To maintain competitive advantage companies must continually strive to develop their core competencies.
In the case of F Company we can see this happening. They have been dominating the supply of engines for the luxury end of automobile market but because of exchange rate movements and increase in production costs their rivals has had a chance to catch up with them thus resulting in F Company becoming less competitive and is barely reaching break-even point.
The strategy which is currently being used in VRC Company can be viewed as developing out of patterns or behaviour that are realised in day to day running of company. The formal approach that is being recommend by the consultant will lead to a more organised approach to strategy development which would consist of analysis of competitors and markets and other contributing factors in the approach.
The way VRC Company operates allows for originality which allows F who was a former road racing cyclist the freedom to design new racing cycles the way he deems best. Increases in flexibility in a disordered environment, allowing the business to respond to pressure and create opportunities. Consistent with actual practice in the company therefore no adjustments will need to be made to unused strategies that was put into place but not used. Decentralisation of decision making and increase of independence for managers.
VRC Company may be restricted to adapt to major industry changes. After analysing the scenario it depicts that the owner is greatly interested in short term profits rather than long term growth of the company. Management controls become unclear as actions to be undertaken are not planned in advance.
The strategy that was recommend by consultant could yield advantages such as identifying strategic issues and encouraging management to consider the cycling industry in their plans and decisions. This actions will provide stakeholders with necessary assurance, which would help when company decides to expand.
SWOT analysis will focus management attention on current strengths and weaknesses of the company which will be of assistance in formulating the business strategy. It will also allow management to monitor trends and developments in the changing business environment. Each trend or development may be classified as an opportunity or a threat that will provide motivation for an appropriate management response.
A SWOT analysis is made up of two elements namely, internal analysis and external analysis.
Internal analysis is needed in order to determine the possible future strategic options by appraising the company’s internal resources and capabilities. This involves identifying those things that the company is particularly good at in comparison to that of its competitors. External analysis looks at the various factors within the company’s environment that may represent threats or opportunities and the competition it faces.
An external appraisal is to be undertaken by scanning the business external environment for factors relevant to the organisations current and future activities.
Two key techniques that can be used for internal analysis are, an audit of resources and competences and Porters value chain model. The two key techniques that can be used for external analysis are, PESTEL and Porters five forces.
A competence audit analyses how resources are being deployed to create competences and the processes through which these competences may be linked. Competences can also be identified as either threshold or core. Threshold competencies avoids competitive disadvantage. It represents those processes, procedures and product characteristics that are necessary to enter the hair and body care products market. Core competencies gives the basis for competitive advantage over others within the market, or to change the competitive forces in that market to the company’s advantage.
The second model used for internal analysis is the Porters value chain. This is a model of value activities, those activities that procure inputs, process the inputs, and add value to them in some way to generate outputs for customers, and the relationships between those activities. The value chain can be used to design a competitive strategy, by utilising the activities in a strategic manner, it helps identify areas to reduce cost and increase margin. By exploiting linkages in the value chain and improving activities the company can obtain a competitive advantage.
PESTEL analysis is an approach to analysing the company’s environment. The external environment consists of factors that cannot be directly influenced by the organisation itself. These include political, economic, social, technological, ecological and legal changes that the company must try to respond to, rather than control. An important aspect of strategy is the way the company adapts to industry. Once completed, the output from the PESTEL analysis will help to form the opportunities and threats part of the corporate appraisal.
The Porter’s five forces is one of the external analysis to understand the industry level or competitive, environment which are likely to be major competitive forces in the future. Porter’s five forces model identifies five competitive forces that help determine the level of profitability for the hair and body care product industry or for S Company with the industry. Just because the industry is growing, it does not follow that it is possible to make money in it. The five forces are: Threat of entry, new entrants into a market will bring extra capacity and intensify competition. Competition, existing competition of and its intensity. Substitutes, such as "own brands" products. Bargaining power of buyers, powerful buyers can force price cuts and/or quality improvements. Bargaining power of suppliers, to charge higher prices.
The Porter’s five forces model can be used to influence whether to invest more in the company and whether the investment costs will be recouped and to identify what competitive strategy is needed.