Strategic Management Essay
Thompson, Peteraf, Gamble, and Strickland (2012) say that a weakness, or competitive disadvantage, is something that a company lacks or does poorly, or a condition that puts it at a competitive disadvantage in the market place. There are three resource weaknesses that can exist. The three weaknesses are inferior or unproven skills, expertise, or intellectual capital in competitively important areas of business, deficiencies in competitively important physical, organizational, or intangible assets, or missing or competitively inferior capabilities in key areas.
H Company experienced resource weaknesses during the first four years of operations. The largest resource weakness found in the first four years of H Company’s operations are weaknesses of inferior skills, expertise, or intellectual capital. H Company put much resource into the private label brand, which did not sell due to low demand. In addition to low demand, the resource allocation for the brand was too high. The blame for allocating too much resources stems from inexperienced management. Looking through the simulation results, it is apparent that after year one, the private label brand should have been discontinued. However, due to lack of experience, H Company continued to pump more money and resources attempting to create market share and sales for the private label brand.
H Company was not successful in strengthening, or compensating for, the weakness of inexperienced decision making in the first four years. You will see that H Company was not successful in correcting the weakness, or making up for the weakness in another area, by looking at the first four years Net Revenue, Return on Equity, and Stock Price, which all steadily declined in the first four years, below investor expectations.
Thompson, Peteraf, Gamble, and Strickland (2012) define a resource strength as something a company is good at doing or an attribute that enhances it’s competitiveness in the marketplace. There is a four-question test that reveals the resources competitive power. The four questions are, is the resource competitively valuable? Is the resource rare and something that rivals lack? Is the resource hard to copy? Can different types of resources and capabilities trump the resource?
H Company, during the last four years of operations, gained significant resource strength through managing operation cost, specifically lowering production cost. Due to poor decisions through years 1-4, H Company was losing money every year, stock prices were declining, and earnings per share were dwindling. Seeing that the decline in performance was due to high operation cost and low sales, I made cutting cost my goal. In attempt to build the resource strength I began by lowering my expected demand, lowering salaries, marketing budget, and other administrative costs, which ultimately resulted in a lower cost-per-unit in my production numbers.
When examining overall results of the 8-year simulation, I would have to say my strength of lowering operation cost, to minimize losses, failed the four-question resource test. H Company’s resource of lowering operational cost was competitively valuable. Simulation results are based primarily on financial performance, lowering operational cost, to post better financial performance number, makes the resource valuable. However, with the absence of higher sales, lowering the operational costs did very little to the final standings of the simulations. The resource did not pass the remaining three questions in the test. The resource strength was not rare or hard to copy and other resources easily trumped it.
Managing Organizational Culture
Thompson, Peteraf, Gamble, and Strickland (2012) define organizational culture as set of shared and implicit assumptions that a group holds and that determines how it perceives, thinks about, and reacts to its various environments. Organizational cultures are often passed on to new employees through the process of socialization. Typically, organizational culture will influence an employee’s behavior while they are at work. Organizational culture will operate at different levels throughout the organization. Organizational cultures are important to executing an organization’s strategic plans. Cameron (2013) states that the competition value framework consists of two axis that represent a companies desire to be either internally focused or externally focused, and the companies desire to be flexible versus the company desire for stability and control. Cameron (2013) lists four culture types that make up the competing value framework.
Clan, which is internally focused but wants to be flexible, Hierarchy, which desires to be internally focused with lots of control, Market, which wants to be externally focused with lots of control, and Adhocracy, which is outwardly focused with a lot of flexibility. Organizational culture will fall into one of these four culture types. H Company falls under the competing value of Market. H Company is customer focused, externally driven, and desires an extreme amount of control. H Company needs a lot of control, especially regarding production, because the end user desires a contestant, quality product. The competing value of Market drives H Company’s corporate culture because there is a huge industry importance on quality and customer service. The drive for customer service makes H Company externally focuses on the customers’ desires and wants. The corporate culture of H Company is all about perfection for the customer.
When creating the organizational culture at H Company, I followed the 10 basic tasks of the strategy execution process. Staff the organization with the right people for executing the strategy, build the organizational capacities required to execute the strategy, establish a strategy-supportive organizational structure, allocate sufficient resources to strategy execution, create policies and procedures that support strategy execution, adopt best practices and business processes that drive continued improvement, install information and operating systems that support strategy execution, tie rewards and incentives to achieving strategic and financial targets, install a corporate culture that promotes strategy execution, and exercise strong leadership to propel strategy execution forward, are the ten basic tasks to strategy execution. H Company implemented the majority of the ten basic tasks to attempt to reach strategic goals.
H Company utilized strong leadership to propel strategy execution by having upper management live the corporate culture of bringing the best possible product to the customers who want desire the product. Upper management motivated employees to adopt the same culture, which helped create more effective production employees who valued the work they completed. H Company tied bonuses and incentive to meeting corporate strategy targets seen in bonuses paid to production staff for completing orders on time within a quarterly period. H Company created policies around the number of errors allowable by production employees in a given time period, which supports H Company’s corporate culture of providing quality products to the customers who desire them.
Creativity and Innovation
Thompson, Peteraf, Gamble, and Strickland (2012) define corporate innovation as something new that used by consumers. It is important for organizations; especially those whose goals are to appeal to consumers, to continually foster creativity and innovation. Collins (2014) suggests that most companies cannot have sustained, longevity, and success, without fostering a culture of innovation and creativity. Innovation is key to manufacturing products that will captivate the market place. Collins (2014) states that manufacturers with a corporate framework of Market, such as H Company, have a more difficult time fostering a culture of innovation. Collins (2014) lists three steps that Market cultures can take to improve innovations.
Collins (2014) suggests Market Cultures in an organization are less likely to foster innovation because they strive for very controlled outcomes. This is typical with manufacturing companies. However, to gain free-flowing innovation from each department, Market Cultures will need to “loosen” up. The first step Collins (2014) suggests an organization take to improve innovation is to become more flexible and adaptable. This will happen from the management level down, and be a part of the culture, showing all employees that change is a positive thing. Collins (2014) list the second step to creating a culture of innovation, is to create open lines of communications for creativity and ideas. The open communication will be physical, easy to use programs, such as email and inter-office messaging systems. In addition to just creating open communication, the organization must give employees time for innovation and ideas. Lastly, Collins (2014) suggests rewarding innovation will create a culture of innovation.
H Company developed a culture of innovation by following the suggestions by Collins. H Company conducted manager-training programs to help breed an acceptance to ever changing ideas. Having upper management embrace the idea of accepting new ideas helped to foster a culture of innovation and creativity. Training management, and creating a culture of innovation lead to more flexibility and adaptability to changing ideas and innovations. H Company also gave employees time and tools to be create. H Company have employees 30-minutes per shift to dedicate to innovation, H Company named this block of time “Think Tank”. Lastly, H Company has a policy of rewarding innovation by conducting monthly contest for the “best innovation”. The winner of the monthly contest gets a monetary bonus. If the innovation is brought to production the winning employee gains a percentage of the profit form the line, or brand they created, in the form of stock.
Olson (2009) defines a balanced scorecard as a way to look at organizational performance holistically, by examining at a financial, customer, internal, and people, level. Prior to looking at a balanced scorecard, companies would look at departments separately, with the primary emphasis being on the financial performance. Financial performance measurements are legging measurements, meaning that they reflect the results of decisions that have already been made. Leading measurements are measurements that indicate competitiveness and market share. Thompson, Peteraf, Gamble, and Strickland (2012) suggest a balanced score card to have both legging and leading measurements.
During the 8-year simulation, the balance scorecard was helpful as decisions were being made from year-to-year. The balanced scorecard gave indication that things were going bad for H Company after year two. Legging measurements of financial performance told me that changes had to be made because the company was making decisions that were leading to negative results. The Legging measurements were helpful, as they prompted me to make decisions differently. Leading measurements, such as cost of production, and market share, encouraged me to try to cut cost, so I could lower my pricing to gain market share.
The balanced scorecard can be improved by making it more simplistic and user friendly. H Company will create a balance scorecard that looks at two legging and two leading measurements, which will show how the decisions impacted the period and what decisions will need to be made next. H Company’s balanced scorecard will include Cost of Production and Market Share, as the leading measurements. Cost of productions will show H Company’s ability to drive costs down. Market Share will show if the cost is in line with what the market is willing to pay. Legging measurements that H Company will examine are Net Profit and Asset Growth. Net profit will show if the decisions H Company made were in line with the company’s strategic goals and profitable. Increasing Asset Growth will show that H Company has made positive decisions for their strategic goals.
Thompson, A., Peteraf, M., Gamble, J., Strickland, A., (2012). Crafting and Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases. Retrieved from https://online.vitalsource.com/#/books/0077771680/pages/53063243
Cameron, K., (2013). An Introduction to Competing Value Frameworks. Retrieved from http://eu.haworth.com/docs/default-source/white-papers/an_introduction_to_the_competing_values_framework_white_paper-pdf-28512.pdf?sfvrsn=6
Collins, M., (2014). The Creativity Paradox. Retrieved from http://www.industryweek.com/corporate-culture/creativity-paradox?page=2
University/College: University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Date: 26 September 2016
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