Discuss about the Strategic Management for Sustaining Competitive Advantage.
The strategic management process is the determination and processing of any organisation’s strategies. Managers make choices and set plans and implement policies based on strategies sought for different functions of the company. This ensures better performance, improved progress and focused achievement of targets. The strategic management is the constantly evolving process that assesses the business prospects and its various strengths, weaknesses, threats, opportunities as well as the political, economic, socio-cultural, technical, legal and environmental factors that influence the business operations. (Hill, et al 2014).
In this assignment the Woolworths will be taken as a case study to examine two key strategic options it can take to tackle two challenges it is facing in its strategic management.
Woolworths Supermarkets is the Australian supermarket grocery store founded in 1924 and currently accounting for 80percent of Australian market. The company essentially focuses on sales of grocery products and also manages sales of magazines, health and beauty products, household utilities, all kinds of necessary supplies for babies and pets, stationery objects and several others. At present, the company operates 1000 stores across the country.
Presently the company is facing two strategic challenges in form of ineffective product mix which needs to be updated and the incorrect application of key performance indicators.
Strategic Issue 1-Product mix or the product assortment is the number of product lines offered to customers within the product range. Companies use four dimensions to product mix- width, length, depth and consistency. Width refers to number of product lines, length refers to the total products, depth refers to variations in product and consistency is the relationship between the product lines. (Kotler, et al 2016)Getting the right product mix is extremely crucial for Woolworths. The challenge that the company faces at the moment is the lack of optimal product mix. The company has to implement the appropriate product mix with respect to the location and the demands of the local market. The optimal product mix is utilised by determining the offering of proportionate amount and extent of products to the customers. The company needs to update the product mix and develop a strategic technique of improving and maintaining the optimal product mix. (Barney, 2014).
Strategic Option 1 – Designing an entire new system
Resources:
Woolworths can hire experts in the software field who will help to design a new system which will help the company in tracking which items are in demand in the local market. A reliable software company can be paid for this purpose.
Acceptability:
The new system will be accepted by the stakeholders as they will dwell on the beneficiary aspects and will not object to the changes made as they will be related to the IT field. The changes will be experienced by those dealing with the IT systems of the company.
Coherence:
The new system will help in increasing the efficiency of the operations carried out by the company. It will also assist in improving the customer experience.
Effectiveness:
The designing of the new system will be according to the requirements of the company. There can be bugs to fix within the new system but those will be short term issues not long term issues.
Sustainability:
The new system will be only accessible by the company and not by its competitors. This will help in maintaining its sustainability in the global market.
Strategic Option 2 – Implementing the existing system
Resources:
No additional costs will be incurred.
Acceptability:
The existing system is not able to track the relevant information needed to implement the correct product mix. Thus it may not be acceptable by the stakeholders.
Coherence:
The existing system is considered as the present benchmark by Woolworths.
Effectiveness:
The existing cannot be as effective as the new system. The existing one can be less expensive and easy to be implemented in comparison to the new one. But the existing system will not have the specifications that will be present in the new system.
With the existing system the company will not be able ensure its sustainability in the global market. The competition is very high and more advanced strategies are being implemented by the competitors.
Best Strategy Option – Making the correct decisions regarding the best strategy option needs to be flexible and open ended. Market demands and trends get evolved and changed every day. It is difficult to assess and reach a final option. Several internal and external factors influence this decision.
It will be preferable for Woolworths to take a combination of both the options. The existing system is custom made for the sake of the company. An addition of a new module and updating the system is more appropriate than either choosing an entire new system or staying with the existing system. This strategy will also prove to cost effective as it will provide the benefits of a new system without going for undertaking of the same (Madsen, & Walker, 2015). By this way the company will be able to track the demands of the products in the local markets and apply the proper product mix in this respect.
Strategic Issue 2-Ineffective key performance indictors are showing some problems in the various functions of the company. The people key performance indictor is showing some incompetence and the company needs better strategies of handling the people metrics.
Key Performance Indicators or KPIs are intended to show adequate measurement of success and progress in achievement of goals and objectives. The company assesses, evaluates, analyses and understands its position and whether it has managed to achieve set targets. The indicators test the performance of the company’s various strategies, techniques and operations. (Rothaermel, 2015).
There are several types of KPIs, and the major ones are finance, customer and process indicators. The process indicators show the success rate and the feasibility progress of the various business processes and functions. The financial indicators show the financial progress of the company. The company assesses whether it has to cut costs and make further financial changes, such as budget control. The people indicators are the human resources indicators. Woolworths is having troubles in handling its people metrics or KPI. (Meyeret al 2017)
Strategic Option 1– Compensation KPI
Resources:
The company can compare the costs of the workforce to other costs related to the workplace. The compensation amount is then determined and the company understands the level of issues that the workplace has and needs compensation.
Acceptability:
Salary competitiveness can be evaluated and accordingly the employees get raise in their salary pay. Incentives are further measured and modified by applying measurements of health care expenses, benefits satisfaction, employee productivity rates and so on (Hambrick, et al 2015). Thus the strategy will be accepted by the stakeholders due to the increment in the profitability and salaries.
Coherence:
The issues will be evaluated along with the provision of compensation. This will impact the efficiency of the business operations in the positive way.
Effectiveness:
It will help in measuring the workforce efficiency.
Sustainability:
With proper efficiency in the business operations the company will be able to maintain its sustainability in the global market.
Strategic Option 2 – Culture KPI
The employee satisfaction index is measured to understand the extent of issues and the related dissatisfaction. Companies can then examine the causes and effects of the employee unhappiness. Surveys among the employees are conducted to get their honest feedback. Based on that, the needs and demands of the staff are measured and examined. Other factors like number of holiday periods taken, extent of training conducted and net promotion scores are all evaluated as well. (Stacey, , &Mowles, 2016).
The strategy will be accepted by the stakeholders as the performance of the workforce will be improved this in turn will enhance the productivity and profitability of the company. The stakeholders’ interests are associated with the profitability of the company.
Resolving of the issues associated with employee satisfaction and interests has great impact on workforce performance thereby affecting the overall performance of the company.
The strategy will be effective in understanding the interests of the employees which will help in improving their efficiencies.
Improving the satisfaction level of the employees will support the sustainability of the business operations of the company.
Best Strategy Option–It is difficult to choose the best strategy option here as well due to several factors that can affect the company’s decision making process. All strategies are the best for different situations. No one option is better than the other. For instance the culture KPI strategy will not suit the needs of employment KPI. Culture KPI is generally used when there is tension among the employees. Cultural clashes in form of differences in opinion for instance do not require employment KPI which is basically used for understanding the utilisation of the employees.
It is safer to assume that the best strategy option would be a mixture of both the approaches that the company can take. The company can mix up relevant KPIs according to the situation. The options which have common objectives can be applied together, so that according to the situation the human capital performance indicators can be accurately understood and examined.
Conclusion
The strategic management process basically has four basic steps. First, an organisation environmentally scans. This is the technique of assimilating, analysing and collating information and data for making strategic decisions. Second, strategy formulation is then implemented. This process helps the company decide on the best course of action for reaching the organisational goal. Third, strategy implementation is then applied. It helps the company apply the strategies it has decided upon. The execution of the planned decisions is designed and created for effective maintenance.Fourth, strategy evaluation is continuously made to keep the track of the strategic process. The strategic management is a continuous cycle. (Bettis, et al 2016)
References
Barney, J. B. (2014). Gaining and sustaining competitive advantage. Pearson higher ed.
Bettis, R.A., Ethiraj, S., Gambardella, A., Helfat, C. and Mitchell, W., 2016. Creating repeatable cumulative knowledge in strategic management. Strategic Management Journal, 37(2), pp.257-261.
Hambrick, D. C., Humphrey, S. E., & Gupta, A. (2015). Structural interdependence within top management teams: A key moderator of upper echelons predictions. Strategic Management Journal, 36(3), 449-461.
Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: theory: an integrated approach. Cengage Learning.
Kotler, P., Berger, R., &Bickhoff, N. (2016). Strategy and strategic management: A first basic understanding. In The quintessence of strategic management (pp. 5-22). Springer, Berlin, Heidelberg.
Madsen, T. L., & Walker, G. (2015). Modern competitive strategy. McGraw Hill.
Meyer, G. D., Neck, H. M., & Meeks, M. D. (2017). The entrepreneurship?strategic management interface. Strategic entrepreneurship: Creating a new mindset, 17-44.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill Education.
Stacey, R., &Mowles, C. (2016). Strategic management and organisational dynamics: The challenge of complexity to ways of thinking about organisations.
Wheelen, T. L., Hunger, J. D., Hoffman, A. N., & Bamford, C. E. (2017). Strategic management and business policy. pearson.
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