Business Strategy Assignment
Assignment on Business Strategy in Edexcel HND Business and Human Resource Management...
Business Strategy Vimukthi Adithya
Acknowledgment I would like to thank Ms.Inoka Gunarathne for sharing her valuable ideas with us regarding Business strategy. Her lecture gave me some valuable points and the hand-outs that were given came in handy while doing the report. My friends at ICBT who helped at various situations and the books at the library helped me to gain a good knowledge.
Executive summary Strategy refers to the direction and scope of an organization over the long – term. Strategic planning is the process of managing the organizational resources to meet its objectives, with also taking the changing market opportunities into account. Creamy Yoghurts is one of the leading Yoghurt manufacturers in the country. Its vision is ‘Offer the customers with the best product in a more innovative way than the rivals and have more value towards customers, while empowering the employees’ and the vision of the company is ‘To become the leader in the market, with innovation and added creativity and together with empowerment’. The main objectives of Creamy Yoghurts are Profitability and productivity, Employee relation and retention, Growth, Marketing and customer relations and CSR. Almost all the organizations face certain issues when planning strategic direction; this is mainly due to the changing market conditions. Few issues would be Economic condition, use of resources, Time duration, Customers taste and preferences, Decisions of the rivals. Organizations use a number of planning techniques, which would help them to plan their strategic decisions. Few methods that Creamy Yoghurts uses are SWOT analysis, Gap analysis, Boston (BCG) matrix, Value chain and Porter’s five forces. It is always advisable for any organization to carry out an environmental audit / scanning, this will help the organization to identify certain important factors that are essential to them in future. Usually in here PESTEL analysis is done, which briefs the organization on Political, Environmental, Social, Technological, Economical and Legal factors. Next the stakeholders of an organization play a key role in helping the organization to achieve its goals. Stakeholders could be identified as the group of people who are interested or affected by the decisions taken by the organization. Creamy Yoghurts have identified a certain number of stakeholders and their concerns and then these stakeholders are prioritized and are mainly divided in to four groups as Latents, Promoters, Defenders and Apathetics. The main aim of an organization would be to grow and expand with the time. There are a number of growth strategies that Creamy Yoghurts could use to grow. They are: Ansoff growth vector, Porter’s generic strategies, Mergers, Acquisitions and take over’s, Scenario building. Creamy Yoghurts are deciding to move into a new market, which is to go into International trade as their growth strategy. Each division has certain roles and responsibilities; they might also face problems when trying to obtain the necessary resources but with careful and effective planning these objectives could be achieved.
Table of Contents
2. Strategic Terminology
2.1 Mission of Creamy Yoghurts 2 2.2 Vision of Creamy Yoghurts
2.3 Objectives of Creamy Yoghurts
2.4 Core competencies of Creamy Yoghurts
3. Issues involved in planning strategic direction for the organization under the current business conditions 5-6 4. Different planning techniques that could be adopted by the organization 6 4.1 SWOT Analysis
4.2 Gap Analysis 8- 9 4.3 Boston(BCG) Matrix 10-11 4.4 Value chain 11-12 4.5 Porters 5 forces 13 5. Organizational and Environmental audit
14 – 16
6. Significance of stakeholders and stakeholder analysis
7. Alternative strategies that the organization can adopt to grow the business 19 7.1 Ansoff growth vector / matrix 19-20 7.2 Porter’s generic strategies
7.3 Mergers, acquisitions and takeovers 7.4 Scenario building
8. Appropriate future strategy of Creamy Yoghurts
8.1 Creamy Yoghurts decision on moving to a new market – The roles and responsibilities 25-26 9. Evaluation of the resource requirements
10. Targets and timescales of achievements of the strategy 11. Conclusion and recommendations 12. References
List of illustrations and diagrams
Characteristics of the segments of BCG Matrix
Porters value chain
Porters five forces
Table 1 – Stakeholder concerns
Prioritization of stakeholders
10 Ansoff growth matrix
11 Porters generic strategies
12 Scenario building
13 Table 2 – estimated timescales
1. Introduction Creamy Yoghurts is one of the leading Yoghurt manufactures in the country. The organization currently holds the 2nd position in regard to the market share and the main aim of the company is to become the leading Yoghurt manufacture within the next 2 years or so. It is clearly understood that the main objective of any organization would be to grow and expand after few years of operations. Cream Yoghurts have identified some core competencies which has helped them to stand out from its competitors. This report explain the mission, vision, objectives and the core competencies of Creamy Yoghurts, the problems they might face while planning strategic direction due to the changing economic condition. The reports also clearly shows the number of different planning techniques that an organization could use and it shows how Creamy Yoghurts have effectively got the use of SWOT analysis, gap analysis, BCG matrix, value chain and the porters 5 forces. The importance of carrying out a PESTEL analysis is given and also the value of shareholders and the importance of shareholder analysis are given out effectively. This report also shows that Creamy Yoghurts could use a number of methods as growth strategies and they have decided to move into a new market, which is called market development according to the Ansoff growth matrix. It is also understood that all the divisions has certain roles and responsibilities in helping out Creamy Chocolates to achieve this objective. In conclusion this report shows the problems faced in obtaining necessary resources and the time taken to achieve the targets.
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2. Strategic Terminology In simpler terms strategy refers to the direction and scope of an organization over the long – term. It is also a plan or a method of achieving a goal or a solution to a problem with the available resources. Strategic planning is the process of managing the organizational resources to meet its objectives, with also taking the changing market opportunities into account. 2.1 Mission of Creamy Yoghurts A mission is very important to an organization and it is used in almost all the organizations. A mission will define the present state or the purpose of an organization. This will explain the reason of existence of the company and what it does, who it does for and how it does. The mission statement will also help the stakeholders to have an idea on what the company hopes to do and its overall intension. The mission of Creamy Yoghurts is given below. ‘Offer the customers with the best product in a more innovative way than the rivals and have more value towards customers, while empowering the employees’. 2.2 Vision of Creamy Yoghurts Unlike mission, the vision of an organization depicts what an organization want or hope to achieve in future. This mainly explains about what an organization want to achieve in the long run, it may be the next five, ten or fifteen years ahead. The vision of Creamy chocolates is given below. ‘To become the leader in the market, with innovation and added creativity and together with empowerment’ 2.3 Objectives and goals of Creamy Yoghurts It’s common that any organization that exists is having its own goals and objectives. Before setting up an organization, it is essential to identify its own goals and objectives and the purpose of why they are going to carry out operations. Few of the objectives of Creamy Yoghurts are given below.
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Profitability and productivity – the ultimate objective of any business is to obtain profits and to increase its productivity over time. Profit maximizing becomes one of the most important objectives for Creamy Yoghurts and they hope to obtain a 25% increment of profits within the next 2 years. The management has to take necessary actions to increase the labour productivity by providing them with more and better training, a better and happy environment to work and all the necessary resources to achieve their targets.
Employee relation and retention – one theory adopted at Creamy Yoghurts is that more the employees are kept happy and motivated, the easier for the organization to achieve its objectives. Both the mission and the vision states about empowerment, and the company have been empowering its employees. What creamy Yoghurts really needs is to build up a good relationship between the management and the employees and to retain them, because employee turnovers costs money and the productivity will go down and in the other hand more money will have to be spent on recruitment and training process. So one main objective is to retain its employees.
Growth – This is one of the most important objectives of the organization. The company is planning to expand its operation in the coming two years. Few plans have been laid down and the decision needs to be implemented properly. The management is planning to set up new branches and also is planning to introduce new products. So the main goal is to make the name ‘Creamy Yoghurts’ more familiarize with the people and strengthen the brand name.
Marketing and customer relations – One main objective of creamy Yoghurts is to market their products by a giving an important message to its customers. Marketing is more than creating advertising and getting customer input on product changes. It is about understanding consumer buying trends, being able to anticipate product distribution needs and developing business partnerships that help your organization to improve market share. (George N. Root, Demand media). Keeping the customers happy and satisfied always is one of the main objectives of the organization.
CSR – Creamy Yoghurts is an organization which engages heavily in CSR. One main objective in doing this is to help to make a better and health country and also in the
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other hand to improve their band image and promote the company within the society by doing good things.
2.4 Core competencies of Creamy Yoghurts Core competencies simply refer to the strengths of an organization over its competitors. It is about what the company does better than its rivals. Creamy Yoghurts too have some advantages over its competitors.
Very experienced staff. Almost all the people have been in the company from
beginning and they are very well adapted to the business environment. Creamy Yoghurt is regarded as an organization which gives more opportunities for young, creative and innovative people. So giving more job opportunities has helped
the company to obtain a good name in the society. As mentioned above Creamy Yoghurts is heavily engaged in CSR, mainly helping out children in rural areas. This is an added advantage for the company over its
rivals, and also it has benefited them by improving their brand image. Good strong marketing strategies used to advertise the products. Currently having the 2nd largest market share, and is hoping to get to the top within
the next two years. A good customer satisfaction. The customers tend to leave their Yoghurt outlets very happily each time they visit it.
3. Issues involved in planning strategic direction for the organization under the current business conditions It’s true that organizations set up goals and objectives, but they should bear in mind that the roads towards achieving these objectives are full of barriers and it is not an easy ride. It is easy to discuss, plan and set up objectives but it is not easy when implementing and achieving them. Everything that is planned might go horribly wrong for the organization, this 4 Batch 53
is mainly due to the business conditions, and I would rather call it due to ‘changing business conditions’. Few issues that are involved are listed down.
Time – Time is considered to be one of the major factors to be considered in planning strategic direction. More time will be needed to adapt to the market and also to identify the potential customers and competitors.
Resources – what can an organization do without resources? It is a challenge to an organization to find the most suitable man power, get the required machinery, equipments and also the new technology. Organizations might face certain issues when getting these resources; it is not an easy task to get all the necessary resources perfectly all the time.
Economic condition – One must also understand that the economy is not stable always. It is common that there are economic downturns, so during this time nothing will work in favor of you. Things will not go according to the plans and the goals and objectives that are set will be unachievable. So the Economic condition of the country will play a huge role and will create a lot of issues to an organization.
Customers taste and preferences – Customers are the key to success of any organization and it is the responsibility of the organization to identify, understand and cope up with the changing customer tastes and preferences. A small change in customer taste can create huge issues to the organization and this will affect their strategic direction.
Decisions of the rivals might also be an issue involved in planning strategic decision.
Sometimes the top management might not be aware of certain decision and might not be willing to help or to approve it any further, so this might create issues within the organization.
It is also understood that the organization is not able to predict the external environment.
4. Different planning techniques that could be adopted by the organization
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‘Planning before doing’, is one important rule that all the business should follow. It is better to plan things, identify the gaols and targets and then work according to those plans to achieve the desired objectives. Any business functioning without a proper plan is likely to fall down than succeeding. Using proper planning techniques are likely to provide a large number of benefits to the organization. Few would be; better time management, have more control over staff and use of resource, better and effective coordination with the employees, helps to become more focus and more flexible. There are a number of different techniques that could be used by the organization. Following are a few techniques.
SWOT analysis Gap analysis Boston (BCG) matrix Value chain Porter’s five forces
4.1 SWOT analysis SWOT, Strengths, Weaknesses, Opportunities and Threats these are common things that is there in any organization. It is always advisable to do a good SWOT analysis before starting operations. SWOT is a strategic planning tool that helps a business owner to identify his or her own strengths and weaknesses, as well as any opportunities and threats that may exist in a specific business situation.
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Diagram 1 – Analysis
The following is a brief SWOT analysis which has been done for Creamy Yoghurts.
A good unique and strong name “CREAMY YOGHURTS” which has the ability to
attract customers. Well experienced staff. Innovative ideas. Decision taken to give free gifts for the kids and also monthly
competitions are held, which helps to attract more customers. Attractive and eye catching packaging which helps to attract kids and a wider variety of products with the availability of more Yoghurt flavours.
WEEKNESSES Higher costs. Need to find ways to obtain funds. Need to invest more in new technology to compete effectively with the competitors.
OPPORTUNITIES Possibility to expand into other areas of the county. Collaboration with a small snack/juice bar. 7 Batch 53
Technological advancements in machinery, which makes the production faster and efficient. Possibility of having arrangements with snack and juice bars to supply their Yoghurts only Ability to capture higher market share and to get a high customer base since all the high income, middle income and the low income people are targeted. Possibility of a merger or a takeover of a small company, which would help them to achieve their main objective of becoming the organization with the highest market share.
THREATS High competition. Changes in customer taste and preferences Various government policies and legislations
4.2 Gap analysis Gap analysis is a technique used to determine what steps need to be taken in order to move from its current state to its desired future state. (BusinessDictionary). Under the gap analysis the organization will compare its actual performance with the expected performance, this will help the management to have a clear view whether the resources are being used effectively and whether they are heading towards the correct path and meeting expectations.
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Diagram 2 – Gap analysis (simply strategic planning)
Well, it is true that Gap analysis is a great project management tool, but it is clearly in the hands of the management to provide necessary arrangements and resources to help to reduce the gap. Two key words used under gap analysis are ‘What is’ and ‘what should be’. The organization should list down factors such as attributes, competencies and performance levels of the current situation and then should identify the factors that need to be implemented in future to achieve the desired objectives.
4.3 Boston (BCG) matrix
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An organization is most likely to engage in the production of large number of products and it is the duty and the responsibility of the organization to identify and decide which products you should focus more on investment. Simply this means that the business needs to allocate its investment on each and every product, so in order to make things easier for the organization a BCG matrix could be prepared. It is a simple, visual way to examine the likely financial performance of your product or business portfolio. (MindTools).
Diagram 3 – BCG Matrix As shown in the above diagram, two key terms used in BCG matrix is ‘Market Growth’ and ‘Market Share’. And the products can be categorized as stars, question marks, cash cows or dogs. When taking Creamy Yoghurts into consideration they too have a number of products and they could be categorized into these four segments.
Stars – Normal milky Yoghurts, honey Yoghurts Problem child – Fruity Yoghurts, Curd, Chocolate Yoghurt Cash Cow – Yoghurt drink, Non – fat Yoghurts Dog – Yoghurt Iced packets
The Following diagram clearly shows the characteristics of Stars, Problem child, Cash Cow and Dogs.
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Diagram 4 – Characteristics of the segments of BCG Matrix (tutor2u) So finally this analysis is very beneficial to Creamy Yoghurts and helps them to identify and understand which brands the firm should invest in and which ones should be divested 4.4 Value chain It is a true and a common fact that the businesses add value to their products at each stage of production. The production or the manufacturing process is divided into various segments and at each stage a certain value should be added to the product. For example when the raw materials are transported for manufacturing a value is added, when package is done a certain value is added and also when the final product is transported another amount is added. It is the responsibility of the organization to identify and add value effectively. This is where the value chain developed by Michael Porter comes into play. 11 Batch 53
A value chain is a set of activities that an organization carries out to create value for its customers. Porter proposed a general-purpose value chain that companies can use to examine all of their activities, and see how they're connected. The way in which value chain activities are performed determines costs and affects profits, so this tool can help you understand the sources of value for your organization. (Mind Tools)
The following diagram clearly explains how a value chain would look like.
Diagram 5 – Porter’s value chain (fac.ksu.edu.sa) As mentioned in the example above Creamy Yoghurts also adds value for their products. This value chain has come in handy for them and they tend to follow the following steps.
Activity Analysis: First, you identify the activities you undertake to deliver your product or service. Value Analysis: Second, for each activity, you think through what you would do to add the greatest value for your customer.
Evaluation and Planning: Thirdly, you evaluate whether it is worth making changes, and then plan for action. (Mind Tools)
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4.5 Porters 5 forces
The Porter's Five Forces tool is a simple but powerful tool for understanding where power lies in a business situation. This is useful, because it helps you understand both the strength of your current competitive position, and the strength of a position you're considering moving into. With a clear understanding of where power lies, you can take fair advantage of a situation of strength, improve a situation of weakness, and avoid taking wrong steps. This makes it an important part of your planning toolkit. Conventionally, the tool is used to identify whether new products, services or businesses have the potential to be profitable. (Mind Tools). The following diagram clearly explains Porters 5 forces.
Diagram Porters forces Tools)
6– five (Mind 13
5. Organizational and Environmental audit It is a common fact that almost all the organizations carry out an organizational or an Environmental audit. It has now become a necessity for the organizations to identify their strengths and capabilities within the organization and also to have an understanding about what is happening in the outside world. These both internal and external factors can have a huge impact and the organizations decisions, plans, goals and objectives. It is always advisable for an organization to consider and take into account all these internal and external factors before setting up plans or starting operations. When talking about an organizational audit usually a SWOT analysis could be done, like the one which has been done above. According to Environmental audit or scanning a PESTEL analysis could be carried out. Environmental scanning could be defined as Careful monitoring of an organization's internal and external
early signs of opportunities
may influence its current and future plans. In comparison, surveillance is confined to a specific objective or a narrow sector. (BusinessDictionary) PESTEL stands for Political, Economical, Social, Technological, Environmental and Legal factors. The following diagram shows the PESTEL factors very clearly.
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Diagram 7 – PESTEL Analysis. (professionalacademy)
Political – Political factors play a huge role for an organization and will have a huge influence on its decisions. They might place obligations and duties on an organization. Some other factors under this would be tax policies, safety regulations issued by the government, international laws, etc. Creamy Yoghurts will have to produce products according to given standards. There will also be several market regulations. Company will also have to adhere to trade agreements, tariffs or restrictions.
Economical – The market condition or the economy of the country is bound to change from time to time. The economy might be in a boom, in a recession or in a growing inflation problem, these can influence an organization and it will change the future plans set up by an organization. Creamy Yoghurts will have to cope up anything because depending on the economic condition they might not get to market their products well and the sales will not increase. It is clearly understood that if an economy is in a recession, then it will have high unemployment levels, low spending power and lower stakeholder confidence. Vice versa will happen if the economy is in a boom. The successfulness of the business will depend on how they react and respond to economic conditions. If Creamy Yoghurts have the power and confidence then they will be successful in the long run.
Social – This mainly looks into or considers people’s lifestyles and behavior. Different people have different choices and their tastes and preferences differ. A company should always try to produce a product and market it effectively which can capture a wider customer range. Factors such as mood and demographics should be taken into account. The company should always consider the population changes in the country. Changes in the structure of a population will affect the demand and supply of goods and services. Creamy Yoghurts will have to produce products that will suit different segments in the market.
Technological – Almost all the organizations around use modern technology to manufacture products and also they use them to market their products. Moving on technology has created a society which expects instant results. Due to modern 15
technology the exchange of information is faster and this can help the business as they can react quickly to changes. In order to be more competitive in the market Creamy Yoghurts should use modern technology to produce goods and use modern techniques to market the goods. Internet shopping is widely used and Super Taste Biscuits could open up their own site which helps customers to shop from home, and mobile apps could be created as part of technological methods to market a product.
Environmental – Organizations should always concern about the environment. Products should be produced, that will not harm the environment. This is a major factor that Super Taste Biscuits consider; they should keep the environment clean. And also other factors such as natural disasters should be considered here; natural disaster could disrupt production and supply operations.
Legal – Company will have to adhere to certain rules and regulations which are set up by the government. Labor laws will have to be taken into account and also other laws such as sale of goods act should be considered here. Creamy Yoghurts will have to produce products according to a certain standard, should advertise legally,
6. Significance of stakeholders and stakeholder analysis Stakeholders could be identified as the group of people who are interested or affected by the decisions taken by the organization. Stakeholder analysis is the review and consideration of the impact stakeholders have on your business. This is becoming increasingly important, as non-shareholder entities, including customers, employees, communities and business partners, have become more key to business success. Companies need to understand the interests of each stakeholder and strategize on how to address them in business practices. (Neil Kokemuller, demand media) Few benefits stakeholder analysis would be:
Get to know stakeholders better. Relative importance, power and interest Better managed relationships Risks identified Make better strategies and decisions Greater acceptance of organization actions by stakeholders (Santosh Karkhanis)
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Organizations should understand that it is not all about generating sales and obtaining higher profits, they should also operate or take actions in way that could or should satisfy a large number of people. Organizations should also understand that it is not an easy task to keep all the stakeholders satisfied at once and full fill the needs of all the stakeholders. Creamy Yoghurts have identified a large number of stakeholders who are interested or are affected by their decisions. The following table shows possible stakeholders and their concerns.
Return on investments, income, future plans
Wages / Salaries, Job security, Compensation, Respect, Truthful communication, Job role
Value, Quality, Customer care, Ethical products, Information about the company, Type of promotion done
Equitable business opportunities, Credit period,
Credit score, New contracts, Liquidity
communication, Trade unions
Quality, Worker protections, jobs
Taxation, VAT, Legislation, Employment, Truthful Reporting, Diversity, Legalities, Externalities Table 1 – Stakeholder concerns.
After Creamy Yoghurts have identified their Stakeholders, then they should prioritize the stakeholders. Usually this prioritization will be divided into four parts as high influence low interest, High influence low interest, Low influence low interest and Low influence high interest.
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The following diagram clearly shows how an organization should prioritize its stakeholders.
Diagram 8 – Prioritization of stakeholders
Latent’s (Keep satisfied) – High influence, low interest Promoters (Manage closely) – High influence, high interest Apathetics (Monitor) – Low influence, low interest Defenders (Keep informed) – Low influence, high interest
Next, it is in the hands of the management to categorize these identified stakeholders into the 4 groups mentioned. This needs to be done carefully and effectively and should identify the ones who should get more priority and ones who should get less. Creamy Yoghurts have divided some of their stakeholders into the four groups as follows.
Latents Promoters Apathetics Defenders
Government, major customers, media Shareholders, Existing and potential investors Small customers, small shareholders Employees, local community, environmental groups, suppliers.
7. Alternative strategies that the organization can adopt to grow the business
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One main objective of any organization would be to grow over time. Organizations start in small scale and gradually they grow. Growth is a one main goal to be considered but achieving this is not a walk in the park. This takes time, need more resources and the organization should use several strategies which would help them to grow. Given below are few growth strategies that an organization could adopt to achieve growth in future.
Ansoff growth vector Porter’s generic strategies Mergers, Acquisitions and take over’s Scenario building
7.1 Ansoff growth vector / matrix Ansoff growth matrix is a strategic marketing planning tool that links a firm’s marketing strategy with its general strategy direction and presents four alternative growth strategies. These strategies are seeking growth. (BusinessDictionary)
Diagram 9 – Ansoff Growth matrix (innovatoolbox)
After studying the growth matrix we can understand the following.
Market development – developing new markets for the existing products Market penetration – Pushing existing products in their current market segments 19
Diversification – developing new products for new markets Product development – developing new products for the existing markets
In the context on Creamy Yoghurts, they too have been adopting this strategy and have been successful; one likely area that they would like to move into would be diversification. This is the mostly risky method, but it is said that a business should be willing to take risks and it is also known that more risks you take the more rewards you get. A totally new range of products could be introduced into new markets. When taking product development into consideration, Creamy Yoghurts could produce other dairy products such as milk packets with various flavours and also when talking about market development they could move into a new market such as targeting a different segment or maybe move into international trade. 7.2 Porter’s generic strategies Any organizations aim would be to gain a competitive advantage over its competitors. With hard work, effective planning and usage of knowledge and resources this would be achievable. To make it easier for the organizations Michael Porter introduced some generic strategies, which were called “Cost Leadership" (no frills), "Differentiation" (creating uniquely desirable products and services) and "Focus" (offering a specialized service in a niche market). He then subdivided the Focus strategy into two parts: "Cost Focus" and "Differentiation Focus". (mindtools).
The following clearly shows Porter’s generic strategies.
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Diagram 10 – Porter’s generic strategies
Cost leadership strategy – This strategy is about reducing or minimizing the costs of the organization of delivering products and services. Under this strategy an organization will aim to become the leader in terms of cost. The motive of Porter’s generic strategies is about gaining a competitive advantage. Creamy Yoghurts could use the following two methods to achieve competitive advantage within a cost leadership strategy Increasing profits by reducing costs, while charging industry- average prices Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you have reduced costs. (mindtools)
There are three main ways that Creamy Yoghurts could use to become the cost leader in the market. Achieving high asset turnover Achieving low direct and in direct costs Control over value chain encompassing all functional groups to ensure low costs
Differentiation strategy – As the name suggests ‘differentiation’ would mean being different from the rest, it is more about developing or producing products that are different from its competitors and this is also about being innovative and creative.
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Any organization trying to be different from its competitors will give them an added value, more recognition and more attractiveness. If Creamy Yoghurts is planning to get the most of differentiation strategy, then they would need to; Good research, development and innovation. The ability to deliver high-quality products or services. Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings. (mindtools)
Focus strategies – There are two main types of focus strategies that are being cost focus and differentiation focus. Focus strategy is all about targeting a particular segment of the market and concentrating more on that market. In the meantime we can identify four main market positions as ‘Market leaders, Market challengers, Market followers and Market niche. Generally focusing means concentrating, so in here Creamy Yoghurts should decide on what should they concentrate more on, either to focus more on being differentiated or being more cost effective. Few more decisions that should be taken would be to identify the target markets and then ways that should be implemented to achieve them.
7.3 Mergers, acquisitions and take over’s One of the best methods that an organization could adopt to expand or grow would be to merge with a similar company or takeover a company. Going for merger with another company or buying another company is not icing on cake, it needs careful planning, effective research, innovativeness, risk bearing ability and more finance and larger share in the market. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. A merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. (investopedia) When we take Creamy Yoghurts into consideration they are currently raked 2nd and one of their main objectives is to become the Yoghurt manufacturer with the highest market share. 22 Batch 53
So if they want to make their dream a reality then they could go for a merger with another small company, which would give them edge over the current leader. There are three major types of mergers which Creamy Yoghurts would like to consider. They are Horizontal merger, Vertical merger and Conglomeration. Few benefits that Creamy Yoghurts would gain due to a merger would be:
Economies of scale Greater investment in research and development Acquiring new technology Greater efficiency and productivity Diversification Reduction of costs due to reduction of staff More protection from multinationals and more ability to compete on an international scale
7.4 Scenario building Scenario building can be described as a story which is based on the analysis and understanding of current and historic tends and events. It includes a consistent description of possible future situations. The development of sets of narrative scenarios helps to identify possible pathways towards a vision of the future. Scenario building can be done by an individual or by a stakeholder group and should focus on the main issues covered by the vision. (Silvan Widler). The main steps used in Scenario building are as follows.
Identifying crucial issues or decisions Identifying forceful factors Rank importance and uncertainty Select scenario logics Flesh – out scenarios Select indicators for monitoring Assess impacts for different scenarios Evaluate alternative strategies
The following diagram would give a clear idea on scenario building
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Diagram 11 – Scenario building (sswm) Scenario building would be one growth strategy Creamy Yoghurts would be interested in. This will help them to identify their current position and will help them to plan for future and will give the organization ideas on how to expand in future. The advantages for Creamy Yoghurts of using Scenario building are given below.
Improves strategy development by making stakeholders more aware of risks and
constraints. Helps to think about number of possible alternative developments Raises awareness for possible future situations and helps people to be prepared for those situations. (Silvan Widler)
Few other methods that Creamy Yoghurts could use as growth strategies would be; Joint – ventures, organic growth, Franchising, Licensing
8. Appropriate future strategy of Creamy Yoghurts It was identified that the company needs growth to achieve its future objectives and Creamy Yoghurts have a few strategies that should be implemented. What needs to be done is to
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select the best and the most effective strategy out of the list and then find effective ways of implementing them and achieving the desired objectives. Introducing a new range of products, moving in to a new market, merger with a small company are some of the decisions that are listed down and out of it ‘Moving into a new market’ is selected. 8.1 Creamy Yoghurts decision on moving to a new market –The roles and responsibilities According to the Ansoff growth matrix this decision could be identified as Market development, which is pushing the existing products to new markets. This is a bit risky one but this is likely to succeed if done effectively and carefully. The decision will be to move into international market, which they can mainly export their Yoghurts with honey into international market. When implementing a growth strategy few important factors should be considered. The organization will have to be more concerned on HR, finance, marketing, production / operations, structure and systems
Human Resource – This will mainly concern about finding the perfect people to be employed to the organization. Since the decision is to move into a international market, then there no requirement of recruiting new employees into the business only an agent would be sufficient. It would be great if the organization could first send someone from Creamy Yoghurts to the foreign country and then carry out an effective market research to identify what is happening in the economy and what are the tastes and preferences of the people living there. It would be better to use an existing employee as the agent rather than hiring one from the foreign country.
Finance – the most important element would be finance and in here Creamy Yoghurts will have to consider about the exchange rates since they are exporting products. The legal constraints have to be considered here and also should have a brief idea on tariffs and exchange rate controls. The agent will have to be given a financial commitment for his services and charges on sales will have to be identified and also the rate of sales commissions should be considered.
Marketing – In here Creamy Yoghurts should decide the marketing strategies that they are going to use in their new market to market their products to the customers. First 25
Creamy Yoghurts should have an understanding on the laws that are imposed by the foreign government on advertisements, because the same advertisements might new different meanings in different countries so the same advertisements that are used back in here could not be used there. The agent could help to carry out the marketing activities. Creamy Yoghurts could advertise their products mainly over the internet. The use of Social media could be helpful in marketing their products.
Production / operations – In here a decision should be taken whether to do production in the local country or in the foreign country. The days taken for production, the days taken for exporting should be considered and is very important on deciding on whose going to do the production.
9. Evaluation of the resource requirements Resources could be identified as the main elements required in completing a particular given task. Good and effective use of resources will help the organization to achieve their targets, but the problem is how the organization is going to get the necessary resources effectively. As mentioned above Creamy Yoghurts is going for a new market, where they will be moving into International trade. In here the organization might face few problems when trying to obtain theses necessary resources It is in the hands of Creamy Yoghurts to get the necessary resources effectively. Resources need to be prioritised with the best opportunities in the most effective way. The best opportunities can be ranked by an organisation using appropriate criteria and weighing up risk and reward. When a strategy choice has been made it is also necessary to closely monitor the results of that strategy in order to consider future resource allocation. (ukessays) The
. Creamy Yoghurts will have to consider the.
Types of labor required Roles and key responsibilities of each labor type Items of equipment to be used Identifying the required amount of raw materials The amount of time taken to complete each task 26
The required amount of finance needed to complete the tasks
10. Targets and timescales for achievements of the strategy It is a common fact that the organizations set targets and they wish to achieve them within a certain period of time, but this is not easy as it seems. Creamy Yoghurts have decided to move into a new market that is to engage in international trade as their growth strategy. According to the Ansoff growth matrix this is called Market Development. When trying to implement this strategy, Creamy Yoghurts might face typical implementation problems such as
Implementation takes longer than expected. Major unexpected problems arise. Implementation activities are inadequately coordinated. Employees do not have the necessary capabilities or training. Managers fail to give a sense of direction. Implementation tasks are not defined properly. Information systems are not adequate. (Business strategy handouts)
It is important to have monitoring procedures when implementing a strategy as information can then be used to –
Assess resource allocation choices.
Monitor implementation progress.
Evaluate performance of managers in achieving implementation tasks.
Monitor any environmental changes from those that were projected.
Provide a feedback mechanism. (ukessays)
Next what Creamy Yoghurts should do is to build up a timescale for the selected Growth strategy. This will enable them to have a estimated and a rough idea on the amount of time 27 Batch 53
taken to complete each task and then the time taken to implement the strategy. The following table is an example showing the estimated time scales for Creamy Yoghurts.
Finding a suitable person(Agent) to be involved in overseas 2 weeks operations Market research Necessary documentation work Finding a proper premises for operation Initial advertising and promotions Market development
2 months 1 month 2 weeks 1 month 1 month
Table 2 – estimated timescales
11. Conclusion and recommendations It is true that the main motive of any organization is to achieve the goals and objectives which are set up before operations and also to grow over time, but the question is whether this is always possible. Do all the organizations end up in their desired places? Well for some it 28 Batch 53
might work out but some might decline. This is where strategic planning comes into play. A good, effective planning will give more chance for an organization to succeed than to fail in future. How many organizations successfully act according to their mission and vision? Creamy Yoghurts have done all the planning techniques before taking up decisions and this will come in handy for them in future. One should also understand that achieving objectives is not straight forward; they have to travel in a road with lots of obstacles. Organizations might use different planning techniques just like Creamy Yoghurts have used, but still this might not work out due to few issues that may arise due to the changing market conditions, so because of this the organizations might have to cope with it or adjust themselves. Moving on the organizations can use several methods to grow, but selecting the best option is risky and involves proper and effective planning. A decision taken by the organization will largely affect a number of people, the so called, ‘Stakeholders’ of the organization. The company will always have to meet the expectations of the stakeholders and the interests and expectations of the stakeholders will differ from one another. The organization will always have to find certain ways to keep all the stakeholders happy and satisfied. In conclusion the decision taken by Creamy Yoghurts to move into a new market after considering all the growth strategies available is a bit tricky and a risky one, because according to the planning, they will move into international trade and export their products so in doing this they might face a number of problems. Creamy Yoghurts will have to carry out an effective market research to find details about what is happening in the foreign market. Should identify the customer tastes and preferences, the standards of the country, legality, the political structure and the restrictions on exports will all have to be studied carefully and should consider all these factors. It takes time, more money will be needed, but if it’s done properly even though it is risky it is likely to bring the organization more success in future.
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BusinessDictionary. (n.d.). Retrieved 07 13, 2014, from http://www.businessdictionary.com/definition/environmental-scanning.html BusinessDictionary. (n.d.). Retrieved 07 14, 2014, from http://www.businessdictionary.com/definition/Ansoff-matrix.html BusinessDictionary. (n.d.). BusinessDictionary. Retrieved 07 11, 2014, from http://www.businessdictionary.com/definition/gap-analysis.html fac.ksu.edu.sa. (n.d.). Retrieved 07 12, 2014, from http://fac.ksu.edu.sa/halankari/announcement/26641 George N. Root, Demand media. (n.d.). smallbusiness. Retrieved 07 10, 2014, from http://smallbusiness.chron.com/10-important-business-objectives-23686.html http://mobile-cuisine.com/business/developing-a-swot-analysis-for-your-mobile-foodbusiness. (n.d.). Retrieved 07 10, 2014, from http://mobile-cuisine.com/business/developinga-swot-analysis-for-your-mobile-food-business innovatoolbox. (n.d.). Retrieved 07 13, 2014, from http://innovatoolbox.blogspot.com/2013/03/the-ansoff-matrix-when-innovation-mets.html investopedia. (n.d.). Retrieved 07 14, 2014, from http://www.investopedia.com/university/mergers/mergers1.asp Mind Tools. (n.d.). Retrieved 07 12, 2014, from http://www.mindtools.com/pages/article/newSTR_66.htm Mind Tools. (n.d.). Retrieved 07 12, 2014, from http://www.mindtools.com/pages/article/newTMC_10.htm Mind Tools. (n.d.). Retrieved 07 12, 2014, from http://www.mindtools.com/pages/article/newTMC_08.htm Mind Tools. (n.d.). Retrieved 07 12, 2014, from http://www.mindtools.com/pages/article/newTMC_08.htm mindtools. (n.d.). Retrieved 07 14, 2014, from http://www.mindtools.com/pages/article/newSTR_82.htm mindtools. (n.d.). Retrieved 07 14, 2014, from http://www.mindtools.com/pages/article/newSTR_82.htm mindtools. (n.d.). Retrieved 07 14, 2014, from http://www.mindtools.com/pages/article/newSTR_82.htm MindTools. (n.d.). mindtools.com. Retrieved 07 12, 2014, from http://www.mindtools.com/pages/article/newTED_97.htm Neil Kokemuller, demand media. (n.d.). Retrieved 07 13, 2014, from http://smallbusiness.chron.com/importance-stakeholder-analysis-management-plans30 Batch 53
61850.html Santosh Karkhanis. (n.d.). Retrieved 07 13, 2014, from http://www.karkhanisgroup.com/consulting/management/project-management/stakeholdermanagement/163-advantages-and-disadvantages-of-stakeholder-analysis.html silvan widler. (n.d.). Retrieved 07 14, 2014, from http://www.sswm.info/category/planningprocess-tools/decision-making/decision-making-tools/situation-and-problem-analys-3 Silvan Widler. (n.d.). Retrieved 07 14, 2014, from http://www.sswm.info/category/planningprocess-tools/decision-making/decision-making-tools/situation-and-problem-analys-3 Silvan Widler. (n.d.). Retrieved 07 14, 2014, from http://www.sswm.info/category/planningprocess-tools/decision-making/decision-making-tools/situation-and-problem-analys-3 simply srategic planning. (n.d.). Retrieved 07 11, 2014, from http://www.simply-strategicplanning.com/gap-analysis.html simply strategic planning. (n.d.). Retrieved 07 11, 2014, from http://www.simply-strategicplanning.com/gap-analysis.html sswm. (n.d.). Retrieved 07 14, 2014, from http://www.sswm.info/category/planning-processtools/decision-making/decision-making-tools/situation-and-problem-analys-3 tutor2u. (n.d.). Retrieved 07 12, 2014, from http://tutor2u.net/business/strategy/bcg_box.htm ukessays. (n.d.). Retrieved 07 18, 2014, from http://www.ukessays.com/essays/commerce/the-roles-and-responsibilities-for-strategicimplementation-commerce-essay.php ukessays. (n.d.). Retrieved 07 18, 2014, from http://www.ukessays.com/essays/commerce/the-roles-and-responsibilities-for-strategicimplementation-commerce-essay.php Business strategy handouts
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