Benefits and Risks of Strategic Management
Contents
Relationship to current/other organizations. 6
In any business environment, strategic management is one of the core activities that top leadership undertakes in a bid to improve the performance of a company. In this case, the core objective of strategic management is to help business organizations to evaluate their performance to internal and external resources available, and this allows companies to thrive in a competitive environment (Harrington & Ottenbacher, 2011). Moreover, strategic management will enable managers at different levels to plan together and implement strategic plans.
Benefits of strategic management include easy project monitoring and implementation, better decision-making process, inclusion, and it helps set clear individual roles. For example, when managers in an organization plan strategy with their employees, it allows all stakeholders to monitor the progress of any project implementation. Besides, strategic management helps companies to forecast the responsibilities of all employees. Thus, it is worth noting that strategic management allows organizations to prevent operational problems. Also, strategic management allows all individuals in an organization to contribute to the decision-making process. The process enables all members to brainstorm various options before making a final decision, and this leads to making informed decisions. Moreover, Slavik et al. (2015) explain that when multiple stakeholders work together in strategy formulation, it becomes easier for them to understand the implementation process, and this motivates them in one way or the other.
Despite the benefits associated with strategic management, the process comes with a wide range of risks that cannot be ignored. For example, if strategic management is executed wrong, the process can negatively affect the whole operation activities of an organization. Besides, strategic management takes a lot of time, and this affects operational duties. In some cases, inexperienced strategic managers may cause unnecessary conflicts in the process, especially among their subordinates. Finally, the strategic management process makes some managers set unrealistic expectations, and once such goals are not achieved, this creates frustration in an organization.
Strategic management helps to ensure that an organization reaches its goals and as well utilizes its resources. Through the help of strategic management, an organization is able to put in place what it is prone to produce and to what extent it is likely to produce it. For instance, Toyota, an organization manufacturing cars, may decide to emphasize the reduction of costs and economies of scale by investing in a large plant to either realize higher outputs and grow financially or gain a significant market share. An effective strategy is achieved when the elasticity of demand is much lower in the target segment, as the customers can be willing to pay a higher price for a product that is differentiated. An organization such as Toyota may adopt a mission statement that emphasizes quality and customer’s wants by giving it a priority. Besides, high quality tends to make customers have trust in the Company’s products and services.
SWOT Analysis is a decision tool and a method that can be used by an organization to develop an understanding of a particular situation. Besides, SWOT analysis is an acronym that stands for Strengths, Weakness, Opportunities, and Threats. Also, SWOT Analysis is a commonly used tool in strategic management as it makes a striking image of the Company’s situation. Also, the results SWOT analysis, which includes strengths, weaknesses, opportunities, and threats, can be used to investigate positive and negative as well as internal and external issues in an organization. SWOT analysis adoption can be used to reduce costs that may be associated with strategic management as it does not require skills and specialized training. Besides, the strategic management of an organization begins with an objective, which mutually follows from the mission statement, which is the reason why it exists.
To achieve the speculated strategy, an organization, for instance, Toyota has to analyze its situation by adopting a SWOT analysis tool. For example, the Toyota Company can align its internal and external activities to be successful. A reputable organization, for instance, Toyota, is associated with strengths such as production style, expertise fields, machines, and reliable staff. The Company, at the same time, has weaknesses that relate to production style, expertise fields, tools, and staff. Toyota Company is also prone to opportunities such as a change in production style, future trends for the current market, new markets, and existing markets. Threats encountered include rivalry from competitors, change in prices from competitors, customer loyalty, customer satisfaction, and flow of orders. Besides, Toyota Company can consider changing the market position by imposing a reputable vision.
Relationship to current/other organizations
Joint Venture
Toyota Company has adopted hands with different brands to make its business bigger. To realize this, Toyota is planning to come up with an essential innovation for the production of electric vehicles through liaising with Denso and Mazda. Besides, the Company also intends to minimize expenses and show the way in the invention phase by developing a variety of car models, for instance, developing small cars for day to day use and trucks for business purposes. Similarly, Ford Company plans to join hands with countries such as Thailand, China, and Turkey. The Ford Company also plans to join hands with Anhui Zotye Automobile to develop an electric car. Moreover, this association will emphasize producing products with local brands as opposed to using the ford brand name to attract potential customers, particularly in China. Also, this association emphasizes to cut on paying enhanced importation duties on cars whenever ford manufactures vehicles in its country of origin.
Integrative Strategies
Toyota Company has adopted its means of leveraging vertical integration without outsourcing fully so as opposed to Ford, which has a whole supply sequence. Besides, Toyota controls every action its suppliers take towards the quality of materials for the designated products. As well it does not hesitate to spend much money and time to ensure survival and efficiency in the market. Ford Company adopts control of the supply chain to cut costs associated with inventory.
Manufacturing
Toyota does its ways uniquely by using manual human power, unlike Ford, which depends on robot power to enhance production lines performance. Besides, Toyota believes in the principle that human beings cannot deem separated from the production phase as all the six senses deem essential in identifying issues that can be faced in the production line and providing solutions to enhance Company’s performance best. At Ford Company, about ninety five percent of cars body construction is robotic. Besides, individuals working on the production are highly trained and specialized. Also, Ford Company is investing highly in robotic innovations so as to enhance production and quality efficiencies. For instance, the Company uses robotic vision through a new dirt detection structure to put in place a digital model of each car in the final assembly.
Marketing Mix
Toyota Company emphasizes the 4 Ps, which includes production, promotion, place, and distribution. In terms o product mix, Toyota has come up with Toyota series, which is very popular, Lexus series which is a luxury product and Welcab series for the elderly. Also, Toyota has based on accessories and spare parts, marine products, and engines. In terms of Place mix, Toyota has focused on retailers and dealerships. In terms of the Promotion mix, Toyota has dwelled in advertising, sales promotion, direct selling, public relations, and personal selling. In terms of the pricing mix, Toyota has based on value and market-oriented pricing.
Ford Company has as well adopted a marketing mix which enables it to its potential customers globally. For instance, Ford’s products mix includes, buses, tractors, automobiles, leasing of cars, offering financial services, and spare parts. Place mix includes dealerships, availability of elements in the website, auto parts store and ford motor credit company. Promotion mix includes direct selling, personal selling, sales promotion, public relations and advertising. Lastly, pricing mix include premium and market oriented pricing strategy.
Organization
Toyota Company has adopted a divisional structure so as to effectively respond on product and safety. Besides, divisional structure involves providing business and regional unit heads roles as verdict makers. Also, to increase market of regional markets, Toyota has formed eight regional divisions so as to develop goods according to the demand of market and improve services of consumers in designated regions. Ford Company has as well arranged its structure of organization by effectively adjusting its market needs in the regions. Besides, three core features are applied; global function team, hierarchy to companies and regional divisions.
Globalization Strategy
Toyota combines its strategy by keeping focus on product differentiation and cost of leadership. Besides, Toyota is effectively trying to cut costs associated with operation for products prices to be covered up. Adoption of just in time structure has helped Toyota to reduce costs, misuse and reaction time so as to effectively enhance efficiency. Ford on the other hand has adopted cost leadership strategy so as to face competition globally and hence offer low products and reduce prices that attracts potential customers. Besides, ford built an assembly scheme that kept focus on reduction of production costs and enhanced productivity. Also fords differentiation strategy towards operation tends target more segments in the market.
In summary, in an organization, strategic management not only helps to eliminate or avoid risks but as wells helps in identifying which risks should be exploited, which ones should be done with and which ones should be passed to investors. Besides, to tackle benefits and risks in strategic management, an organization needs to be at par over the designated competitors who might be facing the same situation. To do so, an organization should have reliable information whenever faced with a situation; consider the speed of responding to the situation and vast experience in tackling similar situation in the past. Besides, in a well designed strategic management, the interests of decision makers should be well aligned with the interests of the owners of the organization as corporate governance can seem a critical aspect of good risk taking.
References
Harrington, R., & Ottenbacher, M. (2011). Strategic management. International Journal of Contemporary Hospitality Management, 23(4), 439-462.
Slavik, J., Putnova, A., & Cebakova, A. (2015). Leadership as a tool of strategic management. Procedia Economics and Finance, 26, 1159-1163.