Strategic Management is the process of managing or implementing strategies for a company for achieving the long-term goals and objectives.
There are many change management theories which can help to drive the company for success. Some are McKinsey's 7-S Model, Lewin's Change Management Model and Kotter's Eight Step Change Model. There are many models and theories, and each one has potential benefits or weaknesses for each organization.
John Kotter. A professor at Harvard Business School and world-renowned change expert, Kotter introduced his eight-step change process in his 1995 book, "Leading Change."
Role played by Sales
The process of organizational change can include a variety of key roles. These roles can be filled by various individuals or groups at various times during the change process. Sometimes, individuals or groups can fill more than one role. One way companies learn to cope with rapid changes is by increasing their abilities to learn and change. In a learning organization, each employee is charged with identifying and solving problems. This allows the organization to continuously experiment, improve, and increase its capabilities.
Sales department has to provide operating sales executives and managers with the best tools, techniques, and concepts for improving the total effectiveness of the sales force.
A company can have a great mission, great people, great leadership, etc. and still not perform well because of poor organizational design. Sales team is rewarded for customer retention instead: Again, company performance is compromised as a result.
How work is done, business processes, information sharing and how people are incentivized; all of these directly affects how well the organization performs. All of these factors are facets of the organization's design and each facet is important to organization's success.
The organizational design process provides a clear definition of goals and responsibilities for each unit within the organization
Types of organizations
The following are the type of organizations
- Business Units
- Service Centers
- Corporate Functions
Value - measured by the amount that buyers are willing to pay for a product or service
Michael Porter's Value Chain model
- Marketing and Sales
- Company Infrastructure
- Information systems
- Human Resources
- Research and Development
- Materials Management
M.Porter's five forces model
Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.
Drivers of Organization Growth
It is a change in an organizational performance which will affect the other aspects of the business(leader ship roles). A change is realized when a severe attempt is made to improve the performance of an organization. A constant strive is made to be in touch with customer markets and their employees, when they are clear about their priorities and guidelines.
The focus is exclusively on technology (new tools, equipments, processes etc....) when it comes to change in most of the high tech organizations like IBM. But every one ignores the need for medication in culture and behavior. It is important to recognize that cultural and behavioral factors are the core of organizational change.
Drivers of Organization growth along with the questions which can help organizations assess their readiness for a change initiative:
- Leadership -Is there adequate leadership at every level in an organization?
- Vision and Planning -Does every one understand the aims and objectives of an organization that has formulated a flexible plan?
- Reasonable Alternatives - Does an organization considered and analyzed any alternative paths?
- Culture and Behavior - Is the organization think to build a bridge between "what it is and what it wants to be?"
- Skills, Resources, and Personnel - What new talents, tools, and experiences will be required to drive and uphold this change?
- Technology - What new technologies (tools, process, equipment, etc.) does the business need and who will use them?
Market Segmentation as Drivers of Growth
It is a Process of dividing a market into segments having similar requirements, demands and characteristics. It is a strategy which is used to gain more number of sales in a subgroup rather concentrating on a limited purchase by all divisions.
IBM (Global Technology Company) is now concentrating on the Indian steel market as a growth driver. Solutions and services are offered to steel major companies like Ispat, Bokaro, Jindal and Tata Steel. As the activities are growing in integrated power plants, infrastructure department ; the power utility sector is rising and IBM is finding this segment enthusiastic.
Product development as Drivers of Growth
Introducing goods and services that fit customer requirements is the first priority for a product development. Lower introduction costs and first-to-market strategies pale in evaluation to bring innovative products to market that meet customer wants and requirements. High-performing companies -that generated annual total investor return in excess of 37 percent and have also seen a steady revenue growth over the last five years - average 61 percent of their sales from successful launches of new products and services.
These positive results, will continue to be realized, when traditional leadership and cultural styles are replaced by new leaders who encourage a culture of network professionals. All with the objective of realizing combined and individual positive approach contributing to the product launch (IBM).
Core strategic factor in growth
Productivity Growth is Core Strategy. Reliance Industries Ltd (RIL), that clocked an annual turnover of Rs 13,509 crore for the first quarter of 2003-04 with 20 per cent net profit growth, focus on productivity growth as a core strategy even as the momentum of asset building continues. "A rupee is one factor among a host of others that disturbs export growth. RIL's export competitiveness did not spoil, despite the rising rupee." Exports were at Rs 3,466 crore in the first quarter as against Rs 2,535 crore in the first quarter of 2002-03, a 37 per cent jump.
(Mr. Ambani said):"My father (Dhirubhai) used to say, "Give the shareholder an opportunity to make money and he will come back to you with more money". He told,"This was at the heart of Reliance's strategy".
Reasons for corporate failure
Below are some causes for corporate failure:
- Cash flow
- Poor business plan
- Decrease in the demand for the product
- Rise in cost or a lack of control of costs.
Cash flow problems: For many small scale and recently organized businesses, this is one of the most important reason for business failure. The problems arise when the money coming into the company from sales is not enough to cover the costs of the production.
Poor business planning: Most of the upcoming businesses have to put together a business plan to present to the bank before it receives loan of financial help. Industry leads to face difficulties due to a bad planning or poor information on which a plan is based.
For example, Industry plans to sell 2,000 units per month in the first year but ends up only selling 500 per month; it will soon be in a serious danger of a fall down.
Fall in demand for the product: There are a lot of reasons why demand falls. Some of the reasons are- not paying enough amount of attention to their customer requirements, product is not up to the mark, poor quality, cost.
Rise in cost (or) lack of control of costs: Cost of production can be for many reasons. Some reasons are- salary rises; increase in the price of raw material like the price of oil or gas. In such cases, industry can plan for such changes and is able to take them into account. If the costs rise suddenly, this can hold industry off guard and tie them into insolvency.
Joint ventures strategic alliance and collaborations
Joint ventures facilitate in formation of a third-party legal entity, whereas strategic alliances do not. In addition, rather than concentrating on joint ventures strategic alliances focus on projects that are smaller in scope. Just as acquisition is extremely popular during the early and mid-1980s, international and domestic joint ventures have been formed extensively since the mid-1980s.
A report by David Ernst and Joel Bleeke of McKinsey & Company indicated that ventures between U.S. and international companies have been growing by 27 percent annually since 1985 (Sherman 1992). Others believe that alliances are inherently bad, and that they result in reduced competition and ultimately higher prices for consumers.
Why form Strategic Alliance
Strategic alliances are formed for many reasons, which consist- entering into new markets, decreasing the manufacturing costs, development and diffusion of new technologies rapidly. Industries frequently enter into alliances based on opportunity rather than linkage with their overall goals. When a company has surplus of cash then the risk is more. In recent years, Mercedes-Benz and Toyota Motor Corporation started investing surplus funds into seemingly unrelated businesses, with Benz already facing difficulties as a result.
Some examples of joint venture strategic alliance and collaboration:
- Joint ventures created to serve a domestic market after the partnership between Time-Warner, Inc. and three black-owned cable companies in New York City. Time Warner won the acceptance of the cable customers and assistance from an improved image in the black community by joining with some local companies
- In September 2005, we (Edwards Angell Palmer & Dodge licensing collaborations joint ventures) represented Genzyme in connection with a strategic collaboration agreement with RenaMed Biologics, Inc. for the joint development and commercialization of a renal assist device for the treatment of acute renal failure. The agreement provides for a sharing of costs and profits, with Genzyme contributing research and development funds and making payments upon the completion of certain milestones.
Overview on car industry and their activities
In earlier days, cars available in Indian Market were Ambassador and the Premier Padmini. Ambassador is a replica of the Morris Oxford - an old British car, while the Premier Padmini was a Fiat 1100 assembled in India.
Earlier in 1983, manufacture of Maruti Suzuki 800 hatchback car- a joint venture between Government of India and Suzuki Motors of Japan covered the way for a new start in the Indian automobile sector.
At present, India is the second largest two-wheeler market and the fourth largest commercial vehicle market in the world. It is the eleventh biggest passenger car market globally, it is also projected to be the seventh largest by 2016.
Few car manufacturers who set up their base in India are- Audi, BMW, Chevrolet Fiat, Ford, Honda, Hyundai, Mahindra, Maruti, Mercedes, Mitsubishi, Skoda, Suzuki, Tata, Toyota, Volkswagen, and Volvo. These manufacturers framed manufacturing facilities in India and import cars and spares to meet the requirements of this growing market.
For example, Ford is planning to make India a provincial hub for exports of both small cars as well as engines. According to (Mr. Michael Boneham), President Designate for Ford India, the company's strategy is to export small cars and the engines for market in abroad.
Clarion Company Ltd, in cooperation with Microsoft Corp, developed the Clarion AutoPC car computer. A device, which combine Microsoft's AutoPC platform with Clarion's audio/visual technologies, permits functions such as wireless communication, data transfer and travel-distance measurements. The Clarion AutoPC, which features verbal command recognition, is expected to have a major impact in the future design of automobile multimedia systems.
Areas of Risk
"Business risk" can be measured as the risk of a critical change in assumptions and targets that supports a company initiative. Strategic risk is similar thing at a diverse level: it involves many questions such as-should a company remain within the industry or under a complete different set of assumptions whether it should come within reach of its marketplace?
Business Risk - a trouble in two parts
From the view of a financial organization, the problem of business risk management cascade into two parts.
The most difficult of these is how a financial organization approaches its business risks, as clearly reverse in our Business Risk field. Particularly, as an official risk does it add up for a bank and its stakeholders to handle some business risks?
The answer lies more in the severe point of the risk than in the nature of the risk. So if the critical ability of business or strategic risks increases, organizations find themselves under lots of pressure to clarify, how their approach to organizations risk "fits" with their management of few risks such as credit, market and operational risk.
Another part of the problem is wide. Company should use any type of use risk as transport and finance tools to handle a business risks which stretch outside the conventional insurance, market and credit risk management markets? It is the most important questions because, if answer is yes, it will open many new risk management markets and expose some organization to new kinds of risk portfolios.
Let us take an example, take a look first that has transferred a risky enduring liability rooted within a company's marketing policy.
One of the world's most successful aerospace manufacturers is Rolls-Royce. As part of its business policy, the company has offered guarantees to certain prospects for some years covering a segment of the future significance of aircraft powered by its engines, which has helped the customers to arrange cheaper economy for buying Rolls-Royce powered goods.
As time went on, the risks associated with these guarantees accumulated into a considerable financial exposure.
Rolls-Royce realized that if it wanted to continue the practice, it would have to manage that risk. In one of the larger transactions of its kind, in February 2001, Rolls-Royce entered into an insurance agreement with XL Capital Ltd, that limited the aerospace company's exposure to Boeing and Airbus aircraft values. It was an innovative deal, but not unique. The technical risk advisors, Boston based RISC, said at the time they'd also acted as lead technical advisor to BAE Systems in 1998 in a $3.77 billion financial risk insurance program, and to SAAB on its November 2000 $1.3 billion financial risk insurance program.
These deals are a segment of a much wider and larger risk management market for managing the residual values of assets that businesses either own, or are financially exposed to by some part of their strategy. All of a sudden, risks that had for decades seemed an unavoidable part of doing business have become "manageable" - at a price. Areas of risk for medium sized businesses in the UK
A recent survey done for 7,200 entrepreneurs across 32 countries, asked whether the companies have official documentation for dealing with critical risk areas as- suppliers/customers loss, key workers loss, recovery of the failure and protection of electronic information.
Organizations in UK appear doing well in finding solutions for risk originating from recent and elevated profile pressure. 77% organizations consists documentation in order to deal with adverse revival, also for a main IT collapse, considering UK in fourth and fifth position correspondingly and comparing positively with global averages of 57% (57%) and 61% (63%).
After scoring well on these current issues UK organizations are not well prepared in the areas of risks. Formal procedures are made by only 26% of UK organizations to deal with latent reputation or madia catastrophe comparing with an average of 35%. Taiwan topped the table with 61%, followed by Turkey with 57%.
UK businesses appear to overlook the fundamental risks areas which are very disturbing. Not as a very high profile or remarkable as few measures, the unexpected defeat of key personnel or a trader could have destructive impact on a business.
Strategies for Risk Minimizing
The important decisions an entrepreneur should make from years of cautious or careful planning is exit from an organization. Business Owners, who does not identify importance for the preparation of risk, put the continuous success of the business in threat. Business owners of UK are prepared well, comparing to their global counterparts; in terms of planning than many of their global counterparts when it comes to preparation key risk of businesses.
- identify, characterize, and assess threats
- assess the vulnerability of critical assets to specific threats
- determine the risk (i.e. the expected consequences of specific types of attacks on specific assets)
- identify ways to reduce those risks
- prioritize risk reduction measures based on a strategy.
At the time, strategic risks are predicted most of them will not easily deal in terms of the standard areas of Risk Management when the strategic risks are predicted. It makes the risk management fatal business and strategy risks a critical problem for risk managers. It suggests any solution should be found for tying business and strategic risk management firmly into enterprise-wide approaches to risk management and corporate governance.
Handling Risk in Organization
According to the United Nations' Brundtland Commission, sustainable development is a process of change in which the exploitation of resources, direction of investments, orientation of technological development, and institutional change are in harmony, and enhance both current and future potential to meet human needs and aspirations. Sustainable development seeks to find the balance between economic, environmental, and social performance. Organizations following the Global Reporting Initiative's (GRI) reporting guidelines use specific performance indicators to identify reportable sustainability achievements and challenges.
Management is responsible for implementing the sustainability management system, and internal audit should perform an assessment of its adequacy and effectiveness like as follows
- Policy and strategy
- Planning risk management
- Implementation and operation
- Checking and corrective action
- Management review and continual improvement and
- Adding value.
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