Strategic Management and Business Policy
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1.) Discuss the role of the Board of Directors in the strategic management process
Strategic management is the process by which managers formulate strategies that help to improve organization’s performance in order to ensure that it has a competitive advantage in addition to enhancing its profitability. Before managers formulate organizational strategies, they need to conduct a SWOT analysis in order to select the most effective strategy that will yield the most benefits. The Board of Directors has several roles in the strategic management process. It ensures that the strategic management process maintains accountability. This is mainly achieved by ensuring that all the money that they allocate is spent wisely. Accountability is created in an attempt of minimizing errors and frauds during the process of strategic management. It also has the responsibility of deciding the amount of money that is paid to shareholders as dividend and the amount that is retained by the company for growth and expansion. This is in an attempt of minimizing agency conflicts and ensuring that a going concern of the company is certain.
The board of directors also has the responsibility of studying the risks that a firm that they are managing may face and taking all the necessary steps to mitigate these risks. They have the responsibility of studying the market to see potential threats of new products that may affect the profitability of their firm and encouraging innovation in their firms in order to minimize these risks.
In case the Board of Directors manages a company that deals with investments in financial instruments, they have the responsibility of selecting a portfolio that will bring about maximum returns with minimum risks. A Board of Directors also has the responsibility of formulating a corporate strategy, reviewing it for its validity, and ensuring that they formulate all their decisions based on this strategy. This will help the organization achieve goals that are consistent with its mission, thus ensuring organization’s growth. It also has the responsibility of ensuring that the company complies with all the legal requirements when formulating a strategy. This helps in minimizing civil and criminal liability suits that the company may face. Examples of ways how it can ensure legal compliance include filing all the legal documents required and complying with the company’s laws.
2.) Discuss the main intensive strategies available to an organization
Three main intensive strategies are available to an organization. These strategies include market penetration strategy, market development strategy, and product development strategy. In market penetration strategy, the company increases its market share for its current products through excessive advertising. This is in an attempt of increasing its product awareness in order to improve its market share. A company may also consider increasing the number of its salespersons or expanding its sales department.
Some companies also opt to increase their advertising expenditure by hiring companies experienced in the marketing field to design their advertisements. A company should consider adopting this strategy if it needs to increase a usage rate for its customers. Moreover, companies can consider adopting this strategy when the market is not saturated or the competitors’ sales are reducing.
A company adopts product development strategy when it improves or modifies its current products. Current products can be improved by changing their tastes or shapes. Furthermore, a company can also consider changing the fragrance of its previous products as consumers will associate this change with an improved product. This will increase its sales. A company may also consider blending its old product with additional ingredients in order to improve it. This strategy is effective when a company competes in a market that is affected by rapid technological advancements. The company should also consider this strategy if its competitors offer similar products but at lower prices. If the company has invested many funds in research and development, it should consider adopting this strategy in order to become a market leader.
In market development strategy, a company opts to find a new market in order to target new customers. A company can develop new markets by investing in foreign operations or by targeting other age groups. It may opt to produce products for teens if it previously concentrated on producing baby or adult products.
This strategy is effective if a company identifies a new market that is not saturated but potential. Furthermore, if the management of a company has all the resources to manage expanded operations, it can opt to tap into new markets since these operations will not strain its existing resources. This strategy can also be applied by an organization if all its competitors are going global, thus raising the need to expand into new markets in order to deal with the competition.
3.) Discuss how culture can affect the choice of strategy and how resistance to change can be overcome.
Organization culture is the beliefs and shared values in a particular organization. It defines the way people do things in an organization. Culture can affect the choice of strategy in several ways. If the company has a culture of only following routines and not encouraging a change in the normal routines, it would be hard for a company to implement a strategy that does not match the routine of the organization. Furthermore, there are cultures where an organization only follows bureaucracy, and thus, it has to follow strict chain of commands. An organization in this culture will only implement strategies that match the bureaucratic organization structure.
How power is delegated in an organization also determines the strategy that a company can adopt. Some organizations have a culture of delegating work to their employees through participatory management; thus, the strategy chosen will ensure employee involvement. In other organizations, power is only granted to the top management; thus, they will choose a strategy that concentrates on the top management.
There are several ways in which resistance to change can be overcome in an organization. The management implementing a change could consider involving the employees during the planning process of the change. This will help in ensuring that their views are considered in the implementation of the new change, thus reducing resistance. The management could also consider introducing training programs where the employees will acquire skills that they will apply in the proposed change. This is because some employees fear change since they are afraid that the new change might expose their inefficiencies since they may not possess the required skills to implement it. The management could also consider communicating to the employees why the organization needs the proposed change. Through communication, the employees will see the benefits that their organization will reap due to the change. This will reduce resistance to the proposed change.
The management could also consider introducing the proposed change in phases. This is because introducing the change in phases will give the employees time to adapt to a particular section of the change before another section is introduced. This will help them adjust to the change, thus reducing resistance to change. The managers should also try to motivate the employees to enforce teamwork during the process of change so that the weak employees who cannot transit through the change process are encouraged and advised by the other employees on how to adapt easily.
4.) Explain how you would evaluate the strategy of an organization and explain the financial and non-financial benefits of stratefic planning.
An organization should do several things in order to evaluate whether the strategy that it adopted is strong and if it would contribute to organization’s growth. The first step is determining whether the management conducted an internal analysis before formulating the strategy. This will ensure that the strategy was in line with the mission and objectives of the organization. After this, it is important to consider whether all the strategic goals were prioritized in an attempt of determining whether the most effective goal was selected. The next step is determining what the strategy aims to achieve within a period of one financial year, which is twelve months in most companies. This step aims at distinguishing the short-term goals from the long term ones.
After this step, I would analyze whether the strategy relates to measurable and achievable objectives. In most cases, only measurable objectives yield success of a strategy. I would then consider whether the employees of the organization know about the strategy and all the stakeholders were informed about the plan in an attempt of knowing whether their efforts would be incorporated. After this, I would investigate whether the strategy ensures that the employees are accountable for all their new actions. This will help in ensuring that the employees dedicate all their efforts to implementing the strategy. I would then evaluate whether organizational culture was put into consideration while developing a plan. If the culture was put into consideration, it is likely that the employees will not resist the changes that might be brought about by the plan. After carrying out this analysis, I would then consider whether goals of the strategy aim at creating value by increasing satisfaction. Strategies that increase consumer satisfaction help an organization to increase its market share.
5a.) Explain the financial and non-financial benefits of strategic planning.
A firm achieves several financial benefits due to strategic planning. It helps in increasing the sales of a company. It enables a company to formulate plans that will enable it boost its sales, and this improves its overall profitability. It also helps a company to invest in portfolios that are not risky. This will help in ensuring that the company’s portfolio is viable and that it is not affected by numerous risks that may threaten the certainty of a going concern of the company.
Strategic planning also enables a company to incorporate fluctuations in the external markets in its strategy. This helps it to deal with market fluctuations, and thus, a company is able to maintain its long-term profitability. Strategic planning also enables a company to reduce its operating costs by looking for cheaper sources of raw materials or taking advantage of quantity discounts. Moreover, it helps a firm to improve its overall productivity.
If to speak about non-financial benefits of strategic planning, it helps a firm to understand all its competitors’ strategies. This enables it to deal with high levels of competition in the market. It also helps a firm to anticipate threats it may face. Some of these threats include industrial unrests, which may occur after a company formulates policies that do not address the needs of the employees. A company is able to deal with any resistance to change that may occur through strategic planning. Managers who formulate strategic plans always carry analysis of their plans in an attempt of identifying any weaknesses in the plan that may contribute to resistance to change. After they have identified the weaknesses, they always address them so that they can reduce resistance to change. It helps in unifying strategic decisions in an organization. Organizations contain many employees who have different strategies and goals. Strategic planning helps to unify the strategies of different employees to ensure that they are in line with the organizational goals. This also helps in ensuring that conflicts among employees are minimized, thus ensuring organizational growth.
5b.) Discuss the importance of vision and mission statements to an organization.
A mission statement describes the reason for the existence of an organization. In most cases, it reflects the values and beliefs of the top managers. It is important to organization in several ways. It helps to inspire employees and make them focus on organizational goals. This helps in minimizing goal divergence. It also aids the employees in making decisions that correspond to the goals of the organization. It also helps an organization to define its target market accurately and formulate strategies that will help it satisfy the needs of this market. This statement also sets boundaries on how the resources of an organization will be utilized. Due to this, an organization is able to utilize its resources efficiently, thus preventing shortages or strain in resources. It also defines the values of an organization. This helps in ensuring that the employees maintain the values of the organization while dealing with its clients in an attempt of building its organizational brand.
A vision statement is the picture of an organization in the future, and it inspires the managers in the strategic planning process. A vision statement serves several purposes. It defines actions and goals that will help to achieve an organization’s aim. This will serve as a guide to employees when they are not certain of which action to undertake in order to assist in the attainment of the organizational goals.
It serves as an inspiration to the employees when the organization is faced with difficulties. This is because it provides the employees with a picture of the organization’s future, and they are, therefore, motivated to do anything that will help in the attainment of the bright organizational future. This statement assists management in decision making. If managers are faced with difficulty in making a certain important organizational decision, they may refer to the vision statement that will guide them in the decision that they undertake.