Businesses
have of necessity to be aware of their environments in order to remain
competitive. They must always strive to maintain their strategic advantage in
order to survive. This calls for the development of core competencies that
would enable ensure their sustained advantage over other market players. These
core competencies must be designed in a manner that they are not easily
imitated and must contribute significantly to customer satisfaction. Businesses
can also decide to create new markets or pursue the blue ocean strategy where
they avoid the existing rivalry and create opportunities for superior
performance by creating demand among a new clientele. Businesses can also opt
to boost their internal capabilities in technology or even access to markets by
entering into strategic alliances with selected partners. Where such alliances
are carefully formed, they tend to result in tangible benefits for the partners
involved. In order to ensure that the strategies adopted remain effective, it
is important that such strategies and mission to broken down to actionable
steps or objectives. These objectives form the basis for daily operations in
the businesses. They therefore must be specific, measurable, achievable,
realistic, and time specific.
Core
competencies can be described as the capabilities that an organisation possesses
that enable them to achieve a competitive advantage over other market players
(Prahalad and Hamel, 1990). The rationale for focusing on core competencies is
based on the presumption that the competition in the market today not only
focuses on firm’s market share, but also the ability of the firm to master its
competence. Core competencies need to bear the following three characteristics
in order to enable achieve a competitive advantage for the organisation: it
must not be easy to imitate by competitors; it should have the potential to be
leveraged to a variety of products and markets; and it must significantly
contribute to the benefits experienced by the end consumer (Prahalad and Hamel,
1990). Core competencies evolve from time to time as the businesses adapt to
the changing external environments.
The
Airline industry is among the industries where stiff competition exists between
the market players. However, Virgin Atlantic Airways has proven to be tough and
continues to maintain its strategic position despite the prevailing upheavals
(Manning, Salter and James, 2005). Virgin Atlantic Airways is part of the
Virgin business empire and is owned by tycoon Richard Brandson and is hailed as
one of the most successful ventures in the group (Virgin Atlantic, 2011). It is
known to provide plausible levels of customer care to its customers and have
distinguished itself in that regard. In fact, its policy of offering superior
service has seen it survive some of the darkest periods for the global airline
industry. Some of the services that have set the airline apart from their
competitors include first class category’s state of the art reclining seats;
motor cycle and limo pickup services; provision of aromatherapists on board;
hairstylists and even on-board massage services (Virgin Atlantic, 2011).
However these services are increasingly being replicated by their competitors
and can therefore not constitute core competence for the airline. The ability
of Virgin Atlantic Airways to create massive publicity coupled with its strong
marketing communications quality may be described as one of its most
instrumental tools for competing in the industry (Manning, Salter and James,
2005). However, the main source of core competence for Virgin Atlantic Airways
is its management team’s vision and approach to decision making processes
(Manning, Salter and James, 2005).
Although
the airline has had many services on offer that could be imitated by their
competitors, their approach to management has proven unique and has enabled them
to maintain their strategic position through the continuous introduction of
services that clients find most gratifying.
The management team is devoid of bureaucracy and is a semblance of a
family where hierarchy is almost disregarded (Virgin Atlantic, 2011). The top
management is uniquely intimately involved in the airline’s endeavour to
continuously align their operations with the emerging expectations of their
clientele. Planning and decision making are considered as extensive processes
that involve extensive research into the market trends and the changing social
preferences among the target markets and making the choices on the appropriate
approaches to satisfy the emerging needs (Manning, Salter and James, 2005). Their
general approach to planning is the forward planning technique which involves a
thorough analysis of the organisation’s current standing in relation to where
they intend to be in a given period of time (Manning, Salter and James, 2005). This
results in the establishment of functional objectives that reflect on the
organisation’s vision and mission statement as well as the emerging needs in
the market helping them to maintain their strategic position in the industry.
Generic
strategies can be described as approaches to strategic planning aimed at
improving the competitive advantage of an organisation. Common approaches to
generic strategies include cost leadership, focus strategy and differentiation
strategy and are mainly applied to markets that are already in existence. Organisations
may also choose to venture in untraditional markets or adopt a strategy aimed
at creating new markets that have previously not been in existence. This
approach is called the blue ocean strategy. The already existing industries are
termed as red oceans while non-existent industries or the unknown markets are
the blue oceans (Fast Company, 2011). Blue oceans differ from red oceans in a
number of ways. Firstly, the number of market players in red oceans is much
larger hence stiffer competition which strains profitability as well as the
establishment of certain common practices across the industries (Fast Company,
2011). On the other hand, blue oceans present opportunities for demand creation
and facilitate the creation of new markets where the participating firm has a
free hand in determining its practices. The growth opportunities and potential
for profits is also very high. The search for blue oceans is a necessary
endeavour for firms operating in continuously contracting markets where
performance is under increasing pressure and where their sustained survival is
uncertain (Fast Company, 2011). However, investors tend to avoid blue oceans
due to lack of understanding of the concepts; a fact which is buoyed by the
lack of theoretical frameworks offering guidance on how such markets can be
created.
Cirque
du Soleil is one of the few firms that have pursued the blue ocean strategy and
have reaped great benefits from the practice. Cirque du Soleil is currently one
of the largest exporters of cultural exports in Canada (Fast Company, 2011).
This organisation was founded by a group of dancers in 1984 and is known to
have entertained at least 40 million people around the world (Kim and
Mauborgne, 2011). The organisation is reputed to have attained one of the
highest growth rates in the industry despite the seeming unattractiveness in
the circus industry. At the time of its founding, the circus industry was
characterised by stiff rivalry with both the buyer power and supplier power
(performers) being very high hence limiting the profit potential for circus
companies. The industry was rapidly losing its market share to alternative
sources of entertainment such as play stations, home entertainment, sporting
events and others (Kim and Mauborgne, 2011). The pressure from animal rights
groups was also affecting the liberty to use animals in circus performances.
Cirque du Soleil opted to avoid the existing market, which was mainly made up
of children and therefore avoided competition completely with the other
industry players. They instead decided to create demand among an entirely
different clientele which composed of corporate organisations and adult
customers. With its approach to reinvent the circus to make it entertaining for
the new set of clients, they were able to attract higher revenues from these
customers who were willing to pay a sizeable premium on the unique experience
provided by the group (Murray, 2011). The group modified its performances by
eliminating the use of the animals which was a source of great controversy at
the time. It also toned down on the significance of individual stars and
instead concentrated on providing an entertainment that made use of music,
dance and athletic skill. This new face of circus proved to be more attractive
to the adult customers than the traditional circus, which they had already
abandoned (Murray, 2011).
The
term objectives can be used interchangeably with the term ‘goals’ and refers to
the end result that an organisation needs to achieve in order to fulfil its
mission. The objectives are created with the mission in mind and become the
focus for the organisation’s activities. Objectives are basically the
translation of the organisational mission into actionable steps (The Times 100,
2011). They are also crucial in guiding strategy formation as strategies are
aligned with the objectives at any particular time. The most common areas that
organisations highlight when formulating objectives include profitability,
competitive management, social responsibility, productivity, and management
performance (The Times 100, 2011). Objectives need to be SMART: Specific (clear
enough to ensure understanding on what an objective is about); Measurable (ease
of determination on whether an objective has been met and to what extent is the
diversion if any); Achievable (should be high enough to challenge the
organisation but within reach so as not to de-motivate employees); Realistic
(within the scope of the organisation in terms of capabilities and resources);
and Time specific (it must give an indication of the length of time an
objective is expected to have been met) (The Times 100, 2011). Without
objectives, the organisations’ activities may lack direction since the mission
statements are very broad and cannot form a decisive guide for guiding the
organisation. Organisational objectives are therefore crucial to any
organisation as it is central to its proper functioning.
Tesco
plc is the leading food retailer in the UK and has a strong global presence
with over 150 stores in France and Hungary alone (Tesco, 2011b). Tesco has
generated various objectives that focus on the various components of their
overall strategies. They therefore have objectives relating to financial
performance, customer satisfaction, learning and growth, corporate social
responsibility, and others. In relation to their customer satisfaction focus,
Tesco has the following objectives: to offer their customers the best value for
their money and at the most competitive rates; and to constantly monitor the
changing preferences of the customers by consistently involving them to
establish their tastes and preferences (Tesco, 2011b). Their financial
objectives have been outlined as: to provide shareholders with returns on their
investment by ensuring that the organisation remains consistently profitable
(Tesco, 2011a). This profitability would be enhanced by ensuring the adoption
of various technologies and improvement in productivity levels. Tesco also
focuses on its internal capabilities and seeks to promote learning and growth
internally as envisioned in their objective to implement sound management and
training practices that develop the talent of their employees while maintaining
their motivation levels through the application of fair reward schemes and
equal opportunities for all the employees (Tesco, 2011a). Corporate social
responsibility has also been accorded significant attention with Tesco’s key
objectives in that area being: to be a good neighbour, and to be
environmentally responsible (EAB Group, 2011). Being environmentally
responsible entails the reviewing of the business processes to minimise any
adverse effects to the environment while participating in initiatives aimed at
conserving the environment for the good of the larger society. Being a good
neighbour entails participating in welfare programs that benefit the society.
The organisation has also set the objective to use its expertise to contribute
to policy formation at the national level on issues relating food security,
hygiene and other important aspects of the society. As can be seen from the
Tesco’s objectives, these objectives are a reflection of the wider mission of
the organisation and are expressed in a manner that can guide the day to day
activities of the organisation.
Businesses
use various means to enhance their strategic position in markets. One of these
ways is the formation of strategic alliances with other businesses. Strategic
alliances enable the partnering businesses to gain access to a foreign market
with relative ease due to the connection with the local company (Mowery, Oxley
and Silverman, 1996). This provides a base for interaction and the creation of
relationships with the local players. Strategic alliances also help the
businesses involved to tap into the economies of scale activated by the
alliance where the same equipment and resources such as the marketing channels
can be used to market the products of both partner firms (Mowery, Oxley and
Silverman, 1996). Perhaps one of the most obvious motivations for pursuing this
method is the chance for the firms to gain technological knowhow from each
other. Many alliances are formed to cater for the technical deficiency of one
or both of the partners. They can also pool their resources with more ease and
therefore be able to penetrate the markets with more ease than when individual
firms have to make the effort on their own (Mowery, Oxley and Silverman, 1996).
The alliances enable the partnering firms to take a common approach in shaking
off their rivals, an approach which proves to e quite effective (Mowery, Oxley
and Silverman, 1996). However, strategic alliances pose a number of dangers to
organisations. The process of bringing together persons from different
corporate cultures often results in serious misunderstandings and a lot of time
may be wasted in trying to reconcile these cultures (Mowery, Oxley and
Silverman, 1996). There is also the danger of the partners becoming too
dependent on each other in the long run hence losing their individual
identities.
Rolls-Royce
is a global business which specialises in the provision of power systems and
services for use at sea, land and air. It has a strong market base in over 150
countries with its manufacturing processes being conducted in around twenty
countries (Al Taif Technical Services, 2011). Its client base includes about 70
navies across the world and it powers about 42 of the leading airlines, among
other strategic clients (Al Taif Technical Services, 2011). One of the reasons
behind the success of Rolls-Royce in capturing these strategic businesses has
been their aptitude for entering into meaningful alliances. These alliances
have often given the company an edge in capturing the businesses which in many
cases would be due to the stable relationships between the local company and
the strategic clients. Some of the strategic alliances have been formed in
order to enable Rolls Royce to access technology that it may need to access a
certain clientele. For instance, the alliance between Rolls-Royce and UTC
Coatings Inc enabled the two companies to combine their technologies to come up
with the combination needed by the US navy enabling them to win a $7m contract
(Rolls-Royce, 2011). Rolls-Royce would through the alliance access the
UltraCema nickel boron coating technology which had been patented by its
strategic partner. Another alliance by the company was entered into with AREVA.
This deal was entered into to make use of the existing trust that the UK
government had in AREVA and it enabled Rolls Royce to access the lucrative
nuclear project (Rolls-Royce, 2011). Another strategic alliance in which Rolls
Royce was involved was one with Al Taif Technical Services. This alliance is
aimed at combining technologies for the maintenance, repair and overhaul of
equipment as well as providing the advantage of combining resources for
research and development (Al Taif Technical Services, 2011).
For
sustained growth, business entities are of necessity forced to adapt to their
changing external environments. These changes affect their cost structure,
pricing, choice of products to offer and even provide the impetus for business
entities to participate in activities which may be seen to be outside the scope
of their businesses (Coriolis Research, 2010). Supermarkets are known to be
among the largest retail chains internationally and are easily affected by the
changing factors around the globe. The global economic turmoil that recently
nearly paralysed the world economy has shifted focus to the impact of global
factors on supermarkets and the steps that such supermarkets take to survive in
such harsh environments (Coriolis Research, 2010). The increasingly restricted
availability of capital forces retailers to choose their target markets with
more caution than before where the retail chains are opting to venture in
markets where success is more likely (Coriolis Research, 2010). However, the
economic downturn came with crucial lessons for supermarkets who had found
themselves in an increasingly competitive environment. The supermarkets now
find it necessary to pay close attention to changing consumer behaviour and
their preferences and lifestyles in a bid to gain a competitive advantage in
the market (International Markets Bureau, 2010). The knowledge of such trends
enables the chains to adapt their product mix to the consumer demands. This
trend has overtaken the traditional model where supermarkets would stock a
general consignment of products without considering the consumer preferences
(International Markets Bureau, 2010).
The
strategies embraced by supermarkets in different regions vary marginally as
they are informed by the tastes and preferences of the subject countries or
regions (Trail, 2006). The focus on price as opposed to quality and convenience
related premiums has been triggered by the economic downturn and has forced
supermarkets to revisit their pricing strategies in order to compete in the
market (International Markets Bureau, 2010). Pricing is therefore in line with
the market average in most cases, and the supermarkets are continuously
avoiding charging premium amounts that the customers may want to avoid. There
is also a general trend among leading supermarkets to expand into emerging
markets (Coriolis Research, 2010). This is due to the fact that the developed
markets are largely saturated and offer little opportunity for growth. Emerging
markets are however still unexplored and offer these chains the much sought
after growth opportunities. The global trend points towards the elimination of
middle level supermarkets which are being replaced by hypermarkets and small
convenient stores. Supermarkets have also been heavily discounting their
products in order to cope with the shrinking incomes of the average consumers
(International Markets Bureau, 2010). However, this is state is temporary and
the focus on convenience and quality is expected to return hence allowing the
chains to adjust their prices upwards. General trends show that consumers are
increasingly demanding more convenience and quality and it follows that they
would soon be willing to pay a premium for such conveniences (International
Markets Bureau, 2010). The global focus on sustainable environment management
also features heavily on how leading supermarkets conduct their business. Most
supermarkets are refining their processes to reduce the amount of waste that
could adversely affect the environment and where such wastes exist, efforts are
made to dispose of them in a manner that does not degrade the environment as is
evident with J Sainsbury, Safeway and Supervalue Inc and Metro Inc
(International Markets Bureau, 2010). The provision of environmentally-friendly
outlets is fast becoming a common practice among leading supermarkets thereby
conforming to the expectations of the wider society.
The
various aspects of strategic management covered in this paper underscore the
importance of carefully evaluated strategic management which not only focuses
on the organisations’ position in the external environment but also on its core
competencies. Organisations must approach their strategic planning process with
utmost care and precision and should always ensure that the resultant
strategies not only fit their internal capabilities but that they are also
sufficient to propel the organisations to a position of strategic advantage in
the market.
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