Strategic management Essay
The strategic management paper which is presented here comprises of a number of parts. In the first part of the paper, there will be a discussion of the concept of strategic analysis. There will then be a discussion of the processes of strategy formulation, evaluation and choice. The paper then talks about the process of strategy evaluation. In essence, the process of strategic management analyzes various initiatives that are carried out by the members of a company’s management on behalf of their shareholders, involving resources present within the external environments. This process comprises of making a specification of the mission, vision and objectives of the organization as well as the development of plans and policies that are focused on achieve these objectives and then there would be an allocation of resources in order to implement the policies and plans. The company selected for this analysis would be Qatar Airways (Please refer to Appendix for company profile). 2.0 Strategic Analysis
2.1 The Strategic Management Process
The process of strategic management analyzes various initiatives that are carried out by the members of a company’s management on behalf of their shareholders, involving resources present within the external environments. This process comprises of making a specification of the mission, vision and objectives of the organization as well as the development of plans and policies that are focused on achieve these objectives and then there would be an allocation of resources in order to implement the policies and plans (Nag et al, 2007). 2.2 Stages of the Strategic Management Process and Contribution to Strategic Management Process The first step in the strategic management process comprises of strategy formulation. It contributes to the process of strategic management through help wit the development of a vision and mission statement, making an identification of external opportunities and threats, determining the internal strengths and weaknesses of the company, establishing of long term objective, producing of alternative strategies as well as the selecting of particular strategies to adhere to (Nag et al, 2007).
The next step comprises strategy implementation and this is the action stage of strategic management. The contributions to the process of strategic management is that it helps to establishing annual objectives, it creates a very efficient organizational structure, it helps with the devising of policies, it also serves to motivate employees and facilitates the process of allocating resources (Nag et al, 2007). The 3rd step in the process of strategic management would be strategy evaluation. The contribution of this step includes the fact that it helps in making a review of external and internal factors which make the foundation of the current strategies, it helps with the measurement of performance and also when it comes to taking corrective actions (Nag et al, 2007). 2.3 Definition of Strategic Analysis and Component
Strategic analysis can be defined as being the process of carrying out research on the business environment in which an organization operates and of the organization in order to formulate strategy. The first component of strategic analysis is to define a problem or goal which would necessitate the analysis. It is here that business leaders would seek to analyze the entire company and to place focus on a specific department that would be affected the problems and that would bring about the most feasible solutions (Nag et al, 2007). The next component is the collection of information required to evaluate strengths and weaknesses of the company in relation to the problem. The 3rd step involves making a definition of the potential opportunities and threats which might be within the scope of the problem which is to be solved. It is here that there will be an identification of opportunities and threats to efforts of a firm that would be present within the firm and the competitive environment. The next step comprises of making a review of the results of analysis in order to determine how best to utilize the strengths in order to address weaknesses, and to optimize opportunities and to counter perceived threats (Johnson et al, 2008).
2.4 Techniques for Analyzing the External Environment
A number of techniques can be used in order to analyze the external environment of the company and these include the following: •PESTLE tool – Analyzes the political, economic, social, technological, legal and environment factors affecting the environment of the company (Johnson et al, 2008) •Porters 5 Forces – Analyzes the level of competition, buyer bargaining power and supplier bargaining power, threat of substitutes as well as threat of new entrants within the industry which the company is competing in (Johnson et al, 2008) 2.5 Techniques for Analyzing the Internal Environment
The internal environment analysis is carried out using various tools and the most important of these include: •SWOT Analysis – Analyzes the strengths, weaknesses, opportunities and threats facing the company (Johnson et al, 2008) •Value Chain Analysis – Analyzes the value chain of the company to identify weaknesses and opportunities for improvement (Johnson et al, 2008) 2.6 Roles of SWOT Analysis in Strategic Analysis
The SWOT tool can be defined as being a framework that is widely utilized in order to helps in understanding of strengths, weaknesses, opportunities and threats that are involved in a business organization. The role of SWOT would be to make an identification of internal and external factors would be important in order to achieve the objectives of the organization (Nag et al, 2007).
3.0 Strategy Formulation, Evaluation and Choice
3.1 Strategy Formulation stage and Contribution to Three-stage Strategic Management Process The process of strategy formulation can be outlined as being a strategic management process that comprises of 3 phases and these are diagnosis, formulation, and implementation. The phase of diagnosis would include the carrying out a situation analysis as well as an identification and evaluation of the present mission, strategic objectives, strategies, results and strengths and weaknesses. There would also be an analysis of the external environment of the organization that includes setting out the opportunities and threats as well as identifying critical issues requiring high priority attention by management (Blaxill and Eckardt, 2008). The second phase is formulation and this is where there will be a production of a very precise set of recommendations together with justifications to revise the mission and objectives of the organization together with supplying the strategies for accomplishing them.
It is at this phase that steps are taken to modify the present objectives and strategies to make the organization achieve more success. This would include taking into account the creation of a sustainable competitive advantage. This phase would normally comprise of a number of steps which include reviewing the present key objectives and strategies of the organization, making an identification of a wide range of strategic alternatives to address matters relating to levels of strategy formulation, carrying out a balanced evaluation of advantages and disadvantages of the alternatives in relation to their feasibility, deciding on alternatives which should be implemented (Johnson et al, 2008). The next stage is implementation and it is very important that strategies be implemented correctly in order to achieve the desired results.
The process here would lead to development of an implementation plan and making sure that the new strategy would be operational and effective when it comes to achieving the objectives of the organization (Nag et al, 2007). 3.2 Key Differences between Business Strategy and Corporate Strategy Corporate level strategy is more concerned with broad decisions relating to the overall scope and direction of the organization. It is here that an organization would consider the changes which must be made to its growth objective and strategy to achieve it. The business level strategy would comprise of making a decision on how the company would compete in each line of business or strategic business unit. The most significant difference between corporate and business strategy would be the scope of the strategy. In essence, corporate strategy is observed to be widely focused on issues affecting the entire company. On the other hand, business strategy is very narrowly focused on a specific business unit and would mostly be is concerned with tangible problems.
In generally terms, corporate strategy would be developed at a senior level by members of the board of directors. However, the business strategy would be a strategy that is formed by individual line managers (Blaxill and Eckardt, 2008). 3.3 Implications of Differences for Strategy Formulation
The fact here is that corporate and business strategies are very important to a company and hence must be implemented by any organization. However, the differences inherent in both these strategies mean that they should be utilized differently. The corporate strategy must be utilized when taking into consideration the wider issues while business strategies must be used to address very specific kinds of problems. The fact here is that corporate strategies would be very stable and must not be changed very frequently. However business strategies can be changed regularly so as to respond to changes which are taking place in the markets (Nag et al, 2007). 3.4 Key Differences between the Market Positioning and Resource-Based Strategy There are a number of differences between market positioning and resource based strategy.
In essence, resource- based view of a firm helps to determine the strategic resources which are accessible within a firm. However, market positioning would suggest differentiating of company offerings to create value for the market in which the company is competing within (Hamel and Prahalad, 1989). When a company has newly launched themselves or a new brand, it is market positioning which would be very suitable and this is because they do not have protectable resources. Hence, the resource-based view would not apply. Also, the present day businesses involve trading and retailing and where question of resource –holding would not arise, the resource based view would not apply and it is only market positioning that is useful to companies. 3.5 Strengths and Weaknesses of Porter’s Generic Strategies One of the strengths of Porter’s generic strategies is that it can help a company to defend against competitive forces within the industry.
His framework is described as being efficient as it outlines a category scheme that consists of 3strategies used by businesses in order to achieve and maintain a competitive advantage. These generic strategies are in terms of 2 dimensions which are strategic scope and strategic strength. In essence, strategic scope would be the demand-side dimension and analyzes the size and composition of the market which is company wants to target. In relation to strategic strength, this is the supply-side dimension and would analyze the strengths of the organizations (Blaxill and Eckardt, 2008). However, there are a number of commentators that have criticisms the use of generic strategies. They claimed that it was lacking in specificity, lack flexibility, and are limiting. Critics have outlined that Porter’s generic strategies do not have a precise distinction between differentiation and cost. It would be very difficult for companies to ignore cost and this is no matter how different their product offering. Also, most companies would not admit that their product is the same as the products of their competitors (Nag et al, 2007).
Another weakness is that analysts have to utilize generic strategies analysis as being a facet of a broader strategic analysis. In essence, generic strategies would only provide a very good starting point for exploration of concepts of cost leadership and differentiation. The framework is that it might not provide relevant strategic routes when it comes to fast growing markets. Hence, Porter’s framework has to be used together with other strategic models and tools like PESTEL and SWOT in order to acquire a more comprehensive analysis (Blaxill and Eckardt, 2008). 3.6 Resource-Based Approach Implications for Business strategy Resource based theories focus on internal strengths and weakness when it comes to organizational resources and shows how processes would be managed and how resources are allocated and deployed and all of this in order to obtain a sustainable competitive advantage. In essence, the resource-based view deals with the competitive environment which is facing an organization but it would take an ‘inside-out’ approach (Hamel and Prahalad, 1990).
The resource-based view places emphasizes on the internal capabilities of the organization when it comes to formulation of business strategy in order to achieve a sustainable competitive advantage in its markets as well as within its industries. When the organization starts to be viewed as being comprised of resources and capabilities that can be configured and reconfigured so as to provide it with competitive advantage, it is then that its perspective becomes inside-out. This means that its internal capabilities would determine the strategic choices it would make when it comes to competing in the external environment of the company (Johnson et al, 2008).
3.7 Industry Lifecycle and Market Turbulence Implications for Business Strategy
The concept of industry life cycle makes reference to various stages of introduction, growth, maturity, and decline which take place over the life of an industry. In essence, industry life cycle curves can be noted as being very useful devices for making an explanation of the relationships that are present among sales and profit attributes of an industry. The industry life cycle analysis could be observed as being a basis for selecting appropriate business strategy characteristics at all levels. In essence, the industry life cycle can be looked at as being a guide for the purpose of business-level strategy implementation as it helps in the selection of functional-level strategies (Blaxill and Eckardt, 2008).
Market turbulence has a number of components and all of which have implications on business strategy. These include customer turbulence, channel turbulence, competitor turbulence and microenvironment turbulence. Looking at all these factors would give a well considered judgment of market conditions in order to draw out the threats and opportunities. When business leaders have an understanding of the nature of the market, this puts them in a good position to choose the right tools in order to carry out the correct analysis that leads to a well drafted business strategy (Johnson et al, 2008). 3.8 Corporate Level Strategy Decisions
The fact is that at the corporate-level, the most general decisions are made. These include the sort of product and services that a firm provide, the way that a company should be organized, the structure of the company in terms of being autonomous, strict hierarchy, centralization etc. These decisions are very important to ensure the success of the company (Gronroos, 1994).
3.9 Relevant Growth Strategies to Qatar Airways
Qatar Airways are known to adhere to a number of strategies that include focusing on niche and second tier markets, international market expansion to new regions and acquisitions. In essence, Qatar Airways growth strategy has always been their focus on niche and second-tier destinations. When it comes to Europe, Qatar Airways flies to around 30 destinations which includes Eastern European cities like Budapest, Sofia, Bucharest and Scandinavian capitals like Oslo, Copenhagen, and Stockholm. It is apparent that second-tier destinations have limited direct long-haul flights which mean that passengers must make at least one stop-over in order to arrive at their final destination (Airline Trends.com – Qatar Airways, 2013). Qatar Airways also takes part in extensive international expansion and they are now taking steps in order to expand in China. The airliner plans to increase their flights to China from the present 35 to 70 a week. Qatar Airways are taking steps to develop their network in China and planning to have more emphasis on inland Chinese cities where the demand for air travel very high.
The company is also planning to continue their expansion worldwide in order to capitalize on opportunities within new regions (Airline Trends.com – Qatar Airways, 2013). Qatar Airways also takes part in acquisitions in order to grow their company and most recently, the company acquired a number of European carriers. The company is also connected as a strategic investor in companies like Olympic Airways, TAP and SAS. It is noted here that Qatar Airways is showing an interest in investing in India when present foreign ownership limitations are being removed by the government (Airline Trends.com – Qatar Airways, 2013). 3.10 Advantages and Disadvantages of Related and Unrelated Diversification In terms of advantages of related diversification, these include the following: •Spreading risk through producing the same or related goods, through offering the same or complementing services or penetrating the same markets •Companies use existing resources and experience
•In the event that the company starts producing part of the raw materials for their main production line, it would bring about greater quality and lower price •There can be a combination of strategic goals and this produces opportunities that rise throughout the “production chain” which can be shared and used fully •Enhanced use of opportunities in order to share technologies, various skills and expertise, distribution channels, together with the same management techniques •There can be an achievement of economies of scale via the elimination or reduction of certain expenses when there is a development of more than one business activity in a common company and due to the opportunities to utilize internal connections that rise along the business chain (Teece et al, 1997)
The disadvantage of this related diversification is that in the event of a seasonal downturn within the industry, the company might feel a decline in the business. The consequence of this would be severe and there can be matters with integrating of two businesses and there being an over-estimation of financial returns (Blaxill and Eckardt, 2008). Advantages of unrelated diversification include the following: •Unrelated diversification that is properly developed and undertaken after thorough analysis of the environment and the resources of the company would bring about good financial results •There are cases of company acquisition when diversification would secure funds during at times of a slowdown, it can help add cash flow for business activity •Helps to spread risk through different sectors and it is very important to identify industries where the business activity slowdown would not coincide with slowdowns within the primary business of the company (Teece et al, 1997)
Disadvantages of related diversification:
•The achievement of a successful unrelated diversification would need very efficient management skills which closely adhere to each of the business activities and efficient identification and solving of problems. The fact here is that the greater the number of business activities, it follows that the more difficult the total management task •There are instances when the overall performance of unrelated business activities of the company would not exceed individual ones. There are times when this is even worse unless company managers are very talented and highly focused. •Implementation unrelated diversification would need allocation of significant financial and human resources and this means that there is a risk of the making business of the company being harmed (Teece et al, 1997)
3.11 Important Strategies to Qatar Airways
In relation to important strategies of this company, it is observed that Qatar Airways takes part in extensive market development where it seeks to explore new markets to offer its services. The company is always seeking to expand into new markets that have a very high potential like China. The next strategy they regularly use is that of acquisitions as Qatar Airways are looking at acquire other carriers from Europe in order to widen its presence and strength in the industry. The company also adheres to continuous product and service development and strives to improve their offerings so as to bring about a greater amount of satisfaction with its customers (Johnson et al, 2008). 3.12 Portfolio Analysis
Portfolio analysis can be described as being a systematic method to make an analysis of products and services which make up a company’s business portfolio (Hamel and Prahalad, 1994). In essence, it is noted here that portfolio analysis would helps a company to make a decision as to which of these products and services must be emphasized and which must be removed, premised on the objective criteria. When it comes to Qatar Airways, it is apparent that portfolio analysis would be carried out in order to determine the destinations that Qatar should scrap from their flight schedule and which they should continue to fly to and add on to. Typically, destinations that should be scrapped would be the unprofitable ones and ones with many restrictions.
The destinations that should be maintained would be the ones that are profitable and the destinations that should be added on to are those which are lucrative and have a high potential (Blaxill and Eckardt, 2008). 3.13 Aspects of International Strategy that are Relevant to Qatar Airways Among the aspects of international strategy that are relevant to Qatar include strategy include creating a global marketing mix that takes into account regional and national differences when it comes to air travel. The next includes the company expanding to new international markets and creating a global production and distribution system that covers major areas of the world. The other strategy would to be to develop their existing international markets in order to provide consumers within these markets with highly diversified and affordable air travel services 3.14 International Strategies that are Appropriate
The first international strategy that is appropriate is to create a global marketing mix in order to cater for consumers from all over the world. This means that Qatar Airways has to ensure that their international marketing mix is implemented in a way that ensures that the correct product/service, price, promotion and distribution and promotion strategies attract customers from different parts of the world to fly Qatar Airways. The next appropriate strategy is for Qatar to have a presence in regions that it currently does not operate and that would be very lucrative. These could include markets like China and India where there are a large number of potential customers of their air travel services. The company should also develop their products and services for existing and new markets by providing more targeted and diversified services to its consumers in order to differentiate themselves from competition (Johnson et al, 2008). 3.15 Market Penetration Strategies that are Appropriate
Market penetration is when Qatar Airways penetrates into a market where competitors are already doing business. Since most of competitors are providing air travel services like Qatar Airways, it is important that the company diversify their air travel services to feature a new concept of air travel not offered by competitors in the region. It is only through diversifying their air travel services that Qatar Airways would have a chance of attracting customers from their competitors (Mulcaster, 2009).
3.16 Evaluation Technique of Best Strategy to Adopt
In order to make an evaluation of Qatar’s Airways strategy, there must be an evaluation of internal and external forces that influence the strategy execution, measurement of company performance and determining appropriate corrective measures. In essence, strategy evaluation commences with analysis of internal forces influencing Qatar Airway’s capability to adhere to the strategic plan (Hamel and Prahalad, 1994). The next strategy is to consider the external forces influencing the capability of Qatar Airways to complete its mission. The next is the evaluation process and this helps to determine if the strategy being developed is leading Qatar Airways to achieve their mission and goals. The next step is to determine the corrective measures that must be taken in order to ensure that company operations are properly aligned with the strategic plan (Johnson et al, 2008). 4.0 Strategy Implementation
4.1 Resourcing of Strategy
In relation to the strategy that has been developed, the next step is to determine how the strategy is to be resourced (Mulcaster, 2009). There has to be a systematic assessment of all resource inputs in relation to the strategy and these include the organizations human resource, their intellectual resources etc. It will be determined whether these resources are enough and available in order to ensure that the strategy can be implemented properly and that works to bring advantage to the organization. It is very important that Qatar Airways have enough human resources, financial resources, intellectual resources etc in order to support the strategy. This is important to ensure that the strategy is usable and has the desired effect (Johnson et al, 2008). 4.2 Suitability of Current Organizational Culture
The culture at this organization might have to be changed to accommodation the implementation of the new strategy. This is because implementation of a new strategy required teamwork and cooperation from all members of Qatar Airways and if the culture of teamwork and cooperation is not present, then steps must be taken in order to instill this culture in Qatar Airways in order to ensure efficient implementation of the strategy. Managers in the company could implement culture seminars or workshops about promoting the required culture within the organization (Mulcaster, 2009). 4.3 Suitability of Current Organizational Structure
In essence, the structure of an organization would determine how it would perform and it is the structure that would contributes to achievement of a common aim. Qatar has a matrix structure and this structure would group employees by function and product. The structure would utilize group employees for the strengths and to compensate for their weaknesses. It is the matrix structure which is a very efficient structure for an organization like this. It is very important that organizational structure align with Qatar Airways strategy and it is very important that there be an integration of strategy formulation and implementation. Qatar Airways can utilize the strategy implementation model in order to bring about effective implementation of strategy all through the organization structure of the company (Johnson et al, 2008). 4.4 Organizational Processes
Organizing must be worked out and applied properly in an organization and this process comprises of making a determination of work which is required to accomplish a goal, assigning of tasks to individuals, and also arranging individuals in a sort of decision-making framework. This process might require changes in the event that the strategy require a different approach by the company towards achieving the mission and vision of the organization. An international strategy that requires Qatar to expand to China would require additional tasks being added to the processes at the organization, such as handing out expatriate assignments to employees sent out to China to work in Qatar Airway’s office in China (Hamel, 2002). 4.5 Requirement of Strategic Control Systems to Implement new Strategy In order to implement the new strategy at Qatar Airways, it is important that strategic controls be used so as to track, monitor and evaluate the effectiveness of the strategy and to make necessary adjustments and improvements as required. Qatar Airways must observe the workplace, their employees, outputs etc when a new strategy has been implemented.
There must be a determination of whether the implementation process would be very effective when it comes to reaching what the strategies are set out to achieve. There needs to be a review of progress periodically in order to determine whether changes are required. Corrective action must be taken to ensure that the strategy is efficient and achieves the goals that are set (Mintzberg et al, 1998). The strategic control system permits managers to evaluate whether Qatar Airways is achieving high efficiency, innovation, quality and customer responsiveness and implementing the strategy very successfully. Managers at Qatar Airways have the choice of implementing various control systems in order to monitor strategy implementation. Also, managers could implement formal monitoring or periodic reviews in order to determine the performance of the organization. There are incentives that could be used in order to motivate employees to work towards achieving the goals and objectives (Markides, 1999).
In this strategy management report, there were a number of matters pertaining to the domain of strategic management that were addressed. These included analyzing the process of strategy analysis, strategy formulation evaluation and choice and strategy implementation. A number of frameworks and models were used to support the discussion and to help with the analysis. These included SWOT, PESTLE, Porters Generic Strategies, Hofstede’s National Culture framework etc. Findings of analysis were documented and implications drawn where appropriate. 6.0 References
Airline Trends.com – Qatar Airways, 2013: available at:
http://www.airlinetrends.com/2012/05/25/innovative-airlines-2012-qatar-airways/ accessed on 21-4-2013
Businessweek.com – Qatar Airways Company Profile, 2013: available at: http://investing.businessweek.com/research/stocks/private/snapshot.asp?privcapId=7828461 accessed on 21-4-2013
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