Contemporary Issues In International Management Management Essay

The contemporary business environment is highly competitiveness thanks to the evolution of human resource quality. Perhaps personal development and technological advancement are major components to instigate this dynamic which invariantly incline companies into continuous improvement in order to achieve sustainability. The tough challenges in present time expect companies to devise an approach that not only solidifies organizational resources but also able to envisage potential possibilities then conducting preparation accordingly. Hence, strategic management can make an enormous contribution to companies’ success in present time given its insistence to intensify internal resource to settle in highly competitive environment.

Strategic management and its benefits

Strategic management is different to other management approaches especially in term of scope. An operational manager is responsible to supervise resource and capability in his department to ensure the process being smoothly deployed. Meanwhile, a duty of financial controller is to ensure transparency of balance sheet, cash flow, etc as well as benefiting company in term of financial advantage in some extent. Customer satisfaction is dominant duty that sales force must accommodate. Aspect of management based on these typical examples indicates it is deployed within predetermined resources and capability. On the other hand, strategic management expects greater influence on organization by initiating managerial approach which should be suitable to both internal resource and an able to capture opportunities resulted in externally dynamic changes. Hence strategic management aims to achieve sustainability’s achievement by structuring schemes exerted throughout all organizational departments rather than comes within purview of any division in current strategic complex.

Johnson, G. et al (2005) emphasized the overwhelming manipulation of strategic management: “Strategic management is concerned with complexity arising out of ambiguous and non routine situations within organization – wide rather than operation – specific implication.” This articulation postulates the comprehensive review should be undertaken throughout managerial levels. This implication could raise possible concern over the practical application of strategic management. Indeed, the business environment is dynamic thanks to promulgation of education and technological advancement. Obsolete is likely envisaged without examining the surrounding on a regular basis since company is unable to aware changes in industry, its impact to its own then delivering appropriate response. Consequently, it is essential to conduct management strategically in order to ultimately achieve sustainability.

Many scholars acknowledge strategic management should be elucidated in six steps model accordingly. The model comprises of mission, strategies, goals identification; external and internal analysis; strategy formulation, implement strategy and evaluating result.

External analysis

Opportunity

Threats

Identify the organization’s current mission, goals, and strategies

Formulate strategy

Evaluate results

Implement strategy

Internal analysis

Strength

Weaknesses SWOT analysis

The above typical graph depicted by Robbin,S and coulter, M. (2012)

Albeit Johnson, G. et al (2005) developed different framework regarding aspect of strategic management, contents between two versions was almost indifferent. The process is structured within three major elements which are strategic position, strategic choices and strategy into action. Highly interactive nature among some components in traditional model encourages authors to create a combined classification so a more general view can be established. This opinion has been unequivocally reflected to strategic position which is gathered by environment, strategic capability and expectation. These determinants are equivalent to the first three steps in the former model where mission, internal and external scanning is preliminary to proceed further. In addition, strategic choices and strategy into action are categorized into further details aims to discover completely the aspect of formulation, implementation and evaluation.

Johnson, G. et al (2005) defined: “strategic management includes understanding the strategic position of an organization, strategic choices for the future and turning strategy into action”. This process will be examined to discover how strategic management would deliver success for organization.

Strategic position

Johnson, G. et al (2005) insisted: “strategic position is concern with the impact on strategy of the external environment, an organization’s strategic capability (resources and competences) and the expectations and influence of stakeholders.”

The first three steps comprises of mission, strategies, goals identification; external and internal analysis respectively. Its dominant comprehensiveness in management aspect has been exposed since the very initial phases. Organization can assess feasibility of its mission and current strategy given the external factors’ impact and apposite level of internal competence. Therefore, the interactive nature among these stages is critical to judge whether current company’s management approach is practical within its circumstance.

Environment

Macro

Influence of external factors to business entities is indispensable since they exist in the context of industry and macro environment. Despite its impact to organizations is variable due to various characters among industries, areas, scanning environment is essential to ensure the current strategy is appropriately aligned to macro tendency, ongoing changes in market. Thereafter, consequent adjustment would also be undertaken on time to capture opportunities as well as curtailing threats.

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Firstly, organizations can identify general macro issues by conducting PESTAL analysis because this tool involves tracing ongoing trends in the complex context of political, economic, social, technology and environment. This awareness is desperately necessary at corporation level where any decision making is always assumed to response external transition. For instance: after Barrack Obama won his second presidential election in Dec 2012, Democracy party supported to extend tax relief for those whose income was under $250000 as well as amplify tax rate to wealthy class. Therefore, retailing sectors would be at least stable due to small to median business size can maintain their activities without being charged further on revenue.

Government in developed nations had imposed higher tax rate, barrier to tobacco and alcohol products. As a result, multinational companies began to shift their market to emerging countries where lenient regulation was applied to these commodities.

Consequently, without identifying major tendency in the context companies exist, they are likely susceptible to disadvantages or simply miss chances to exploit policy’s supporting structure to a particular sector.

Industry

“Industry is a group of firms producing the same principle products” (Johnson, G. et al 2005).

Constructing external analysis at industry level can assist company to estimate competitive level. Afterwards, suitable methods can be generated to prevent enemies’ penetration to company market share, threats of substitutes. Additionally, its position in supplier opinion could be evaluated in order to improving relationship of this component in value chain. Their loyalty no doubt supports organization to consolidate entry barrier by offering attractive input price. On the other hand, suitable interactive approach towards supplying chain is likely established once the typical influence of supplier in industry is examined. It is crucial in negotiation process for accepted material cost because appropriate approach is initiated accordingly based on whether supplier power is more substantial than its counterpart.

Beside that, quality issue is accommodated through indentifying critical success factors by regularly reviewing customers’ preferences (CSFs). “CSFs are those product features that are particularly valued by a group of customers therefore where the organization must excel to outperform competition” (Johnson, G. et al. 2005)

Strategic capability

This aspect is extremely correlated to external analysis because company sustainability could only be ensured when its internal capability is matched the expectancy after environmental scanning. Macro issues gathered during scanning process support organization at corporate level as a general guidance of how to distribute its capability. Meanwhile, the appropriate competence is enhanced promptly resulting from detecting dynamics within industry. This is especially critical towards market share expansion because understanding customer behavior is indispensable to formulate critical success factors which business entity may rely on this to stretching its capability accordingly. As a result, managing strategic capability effectively is core factor to determine organizational success since any cooperation decision should be practically based on its potential.

“Strategic capability is the adequacy and suitability of the resources and competences of an organization for it to survive and prosper.” (Johnson, G. et al. 2005)

Johnson, G (2005) believed capability should be classified into two levels. The primary criterion which is called threshold capabilities is vital to preserve survival of any entity. Whereas, enhancing resources and competence to a class that competitor would not reach is major spirit expected at superior level.

resource

competence

Threshold capabilities

Threshold resource

Threshold competence

Capabilities for competive advantage

Unique resource

Unique competence

In addition by altering company’s capability into unique resources and core competences, competitive advantage is achievable.

There are several benefits that continuous improvement on capability may contribute to corporation success. Firstly even company has successfully established a reputable label, possibility that all customers will pursue the product at any price is relatively modest. Indeed, price must be at acceptable level to intensify demand, otherwise it is only favorable by a small customer group (niche). Furthermore, this favorite is even a temporary interest if its features are surpassed by competitors’ upcoming merchandises. Therefore the cost efficiency is a critical issue should be accommodated to at least sustain in the industry. Cognitive ability could be gradually occupied by actively focusing on manufacturing process. Subsequently, there probably will be a progression in term of quality via constant cost supported by cumulative experience. Kachaner, N & Deimler, N.S (2008) insisted the importance of effective exploitation of resources: “Instead of feuding over how to increase resource, a typical budgetary debate, ask how to operate them with significantly fewer resource, or even without them”.

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On the other hand, substantial progression of technology via tense competition mean capability eligible for competitive advantage is becoming less durable. Consequently, evaluating company’s resource on a regular basis upon changes in external environment is vital part to ensure organizational survival. This practice notifies when company needs to adjust their resources in order to match preferential shift. Dynamic capability is sparked during this process in the dynamic context and it is fostered to overcome the erosion in resources’ competitive advantage.

“Dynamic capabilities are an organization’s abilities to develop and change competences to meet the needs of rapidly changing environments”. (Johnson, G. et al 2005).

Strategic formulation

“Strategic formulation involve understanding the underlying bases for future strategy at both the business and corporate levels and the options for developing strategy in terms of both the directions and methods of developments”

Notwithstanding it is inevitable to conduct researches on company’s position in the business context as a foundation to hypothesize possible alternative strategies, these schemes are unlikely able to carry its efficiency completely without an unambiguous construction. Therefore strategic formulation is believed a vital link in the process given its detailed explanation regarding various development choices.

At business level, bases of competition offers a clear guidance upon possible tactics to compete in a market. Overwhelming issue is the adoption among cost orientation, quality bias via constant perceived quality, niche emphasize. Beside that, improving competence aims to maintain advantage in its chosen tactic is also recommended

Additionally, organization is postulated how to progress at a more generous level by considering its scope on the basis of competence. Related and unrelated diversification, divestments are possible solution to either survive or amplify its potential ahead of competitors. Strategic implementation also provides similar benefit like formulation stage by delivering detailed structures and process respectively.

Case study

Ordnance Survey

Ordnance Survey company had successfully maintained its position of competitive advantage by promptly improving its capability in a prevalent dynamic context. This UK based agency has been established for more than 200 years in mapping industry. Its main activities are to provide maps, managing computer data and geographical information. Agency was privatized in 1999.

When virtual technology began to blossom, entity predicted customer was going to demand more than an offline product. Instead an extensively interactive and accuracy service would be expected given potential benefits offered by technical breakthrough. As a result, applying technology was undertaken promptly then able to deliver more exact service (navigation system) than traditional methods such as hand drawing, etc. Moreover, durable resources was warranted by registering license and copyright so any company wanted to incorporate its features must persuade the agency for permission. The protection was critical in legal battle against Automobile Association.

Additionally, combination of depth geographical insight and huge investment on technology encouraged company to do related diversification such as delivering detective service to police, property industry, etc. Dynamic resource was partly shown by the regular updating new features on their map to sustain its appropriateness.

Amazon

Case study

Amazon is contemporarily a leading company in online business. The organization is one of the first players to participate in e-commerce industry. Despite enormous benefits granted to a pioneer in any sector especially almost non entry barrier, its respectable position in web base trading means a strategic management has been properly deploying to obtain these enormous successes.

Vision

The company was established in 1995 by Jeff Bezos. Company’s vision would be classified into two periods. The initial period was durable for the first three years since its commencement in 1995. The mission was becoming the world’s biggest and best online bookstore. After achieving first objective through incredibly instant expansion within 3 year, rising ambition and external impact inclined company into extensive diversification which was reflected to the new vision as “a store that customer could buy anything”.

Evaluation of both external and internal factors obviously bestows a foundation to judge appropriateness of this very first step in positioning the company.

External analysis

Industry

The company was established in 1995 when e-commerce was begun to legitimate in US. Therefore, initiating online commercial trading was really advantageous because non major competitor has been established. Beside that, it was perspicacious when Jeff chose books as their first commodity in portfolio because typical factors ensure the virtual business on this good was durable via high market growth. Firstly, reading is main channel to optimize human insight or even an indispensable activity during studying period so the product life cycle is presumably perpetuity. Additionally, highly penetration rate of using internet in Northern America and non online presence of any bookstore at that time probably inspire this commercial formulation. For instance: “Barnes and Noble” accounted for 14% market share of traditional retail bookstore without utilizing online utilities.

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The list below provides figures upon world internet usage. The internet vehicle is most prevalent in North America and Europe where penetration rate are 78.6% and 63.2% respectively.

WORLD INTERNET USAGE AND POPULATION STATISTICS

30-Jun-12

World Regions

Population

Penetration

Growth

Users %

( 2012 Est.)

(% Population)

2000-2012

of Table

Africa

1,073,380,925

15.60%

3606.70%

7.00%

Asia

3,922,066,987

27.50%

841.90%

44.80%

Europe

820,918,446

63.20%

393.40%

21.50%

Middle East

223,608,203

40.20%

2639.90%

3.70%

North America

348,280,154

78.60%

153.30%

11.40%

Latin America / Caribbean

593,688,638

42.90%

1310.80%

10.60%

Oceania / Australia

35,903,569

67.60%

218.70%

1.00%

WORLD TOTAL

7,017,846,922

34.30%

566.40%

100.0 

Source: internetWorld Stats.com

Competitors

Apart from Amazon, there are several giants to conduct business activities based on web base technology. Ironically, their core business is either different or merely one of various category available in Amazon’s portfolio during first decade of e-commerce.

Ebay’s revenue was at second rank in e-commerce in 2002 with their pure auction unit, whereas Amazon underscored on becoming convenient store to customer when items was pursued online. Mechanism’s dichotomy in term of virtual access means both companies are competing in fairly separate themes.

Wal-mart is major threat of substitute when they developed their website to advertise merchandises in their physical retails.

Albeit participating in the same industry, yahoo is contemplated as a communication channel which is completely different to Jeff’s core business.

Fierce competitor in bookstore unit Barnes and Noble, however company diversification’s approach years later had mitigate this risk which was displayed in highly variance revenue between two companies. Revenue of this traditional book retailer was even less than 12% Amazon’s revenue in 2002.

Internal analysis

Resource

The first office of Amazon was set in Seattle where the largest book distributor at that time, Ingram books was located. This is obviously an advantage to save the delivery cost.

Beside that, intensive research on search facility is undertaken because factor of convenience is invariantly underscored in e-commerce. As a result, enormous amount of customers are attracted to this site due to sophisticated search engines. Personal notification service is a typical feature to notify customers their favorites when they are available, recommendation centre, etc. In addition, association approach further extends company’s presence to global customer. For instance: coordination with most visited website like yahoo, America online, etc.

Competence

Founder’s insight in technology is company’s primary competence because bachelor is electrical engineering and computer science means owner have an unequivocal understanding regarding the industry he is involved. Beside that, recruitment of talents has intensified scope of unique competence to sustain competitive advantage. For example: the recruitment of Richard Dalzell, former Walmart vice president in1996. Warren C. Jenson, former senior manager at Delta Airline joined company in 1999. Consequently, process is optimized since decisions issued at management level are able to utilize resource effectively.

Strategic formulation & implementation

In order to satisfy the vision that becoming the most favorite online store, an exceptional service is necessary to attract customer’s awareness. Overarching aim of company is to constantly improving customer innovation. As a result, organizational resource has been extensively expanded regarding computer science, technology development.

At corporation level, aggressive approach is adopted by extending range in its portfolio. One a custom of online purchasing is formulated, it is inevitable to diversify promptly aims to generate substantial market share at cheapest cost. Company has amplified its basket to four major classes which are international segment, services segment, electrical segment and book, music, videos, DVD segment. Business is also reached to highly internet’s penetration zones which are UK, France, Japan, Canada and Germany.

In addition, the combination of long time operation and economic of scale engenders company into a cost efficiency position. It is therefore a critical factor to support competitive base emphasized on price sensitive. Consistently elevated economic of scale and fixed investment amount on service quality finally generate first annual profit in 2002 which was $64m.

Conclusion

In conclusion, strategic management plays a vital role to organizational success. This aspect incorporates a comprehensive administration throughout company’s structure rather than merely addressing any particular division. Embracing this sophisticated managerial method allows company to initiate a clear path ahead based on overseeing external environment to capture opportunities, optimizing internal capability in accordance to external impact, enhancing anticipation skill upon retrospective dynamics and environmental scanning. Typical cases of successfully applying strategic management are Shell, Amazon, Ordance Survey.

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