Strategic Management Evaluation

strategical Management rating strategical Management EvaluationDraper ITStrategic EvaluationModuleBusiness Innovation Management1.IntroductionIn todays marketplace, agate linees atomic number 18 constantly under to maintain profitability and agonisticness and their success or failure commode depend on the quality of the strategic thinking and strategic management undertaken by the commerce (Campbell et al 2002). Thus in ar clip to participate any level of strategic thinking or strategic management and undertake a strategic evaluation it is essential to witness just what a dodging is. Mintzburg (1987 cited by Campbell et al 2002) redes the five Ps of strategyA planA ployA pattern of behaviourA military slope in respect to othersA sentiment.Adding that it is not possible to see any of these Ps in isolation. However, this is a very simplified mass of strategy and perhaps a such(prenominal) better definition from a telephone circuit perspective is given by Johnson and S choles (1999)the direction and sphere of an organisation everyplace the long term which achieves advantage for the organisation through its configuration of resources within a changing environment to meet the needs of markets and to fulfil stakeh fourth-year expectations.Thus in essence a strategy is deciding what way is best and what tactics will be employed to achieve the business goals.Naoum (2001) suggests that developing a business strategy can take seven stagesStage 1. Strategic AnalysisStage 2. Strategy FormulationStage 3. Evaluation Of Alternative StrategiesStage 4. Strategic ChoiceStage 5. Action PlanStage 6. Strategy ImplementationStage 7. Strategic Control And FeedbackThe aim of this assignment is to undertake the processes required for nigh of the stages for the Draper Engineering case consume, notably stages 1 to 4. This will be undertaken through the completion of the tasks shown in Figure 1. A copy of the complete case try out can be found in Appendix One.Figure 1 Assignment Tasks2.Task One Strategic AnalysisStrategic analysis is define by Morris (2001, p25) as the collection and analysis of information relevant to the long term prospects of an organisation, comprising of both external and internal analysis which is shown diagrammatic completely in ally in Figure 2ImplementationAnalysisChoiceExternalInternalFigure 2 External Internal Strategic Analysis. Morris(2001)External analysis looks outside the organisation at the competitive environment to determine future implications, whilst internal analysis looks inside the business to identify strengths and weaknesses that will affect its ability to compete in the long-run (Morris, 2001).One tool used in strategic analysis is SWOT or TOWS analysis, an acronym for Strengths Weaknesses Opportunities and Threats. It is a very powerful tool for understanding and decision-making for all sorts of business situation in order to nidus on the things you do well, whilst reducing weaknesses to make th e best possible advantage of opportunities available (De La Salle University, 2002).Further compendium information on SWOT analysis can be found in Appendix TwoA SWOT analysis was undertaken for Draper Engineering and the results argon presented in Figure 3.Figure 3 SWOT Analysis For Draper Engineering Ltd2.1Five Issues For Improvement By Draper Engineering Ltd.A Wargonhouse Management System (WMS) fully integrates warehouse management operations with the rest of the business, such as sales, purchase and accounts and subject to the installation the warehouse operations can be world class. However, this engineering is not cheap and suitability can be dependant upon the type of solution sought, such as to build or buy (Frazelle, 2002)Draper should not canvas implementing a WMS with no guarantees of the final contract as this would mean that although they would experience the benefits of the system, they would besides have to shoulder the full burden of the salutes with possibly n o contract from either of these companies. In order to improve this situation and produce the best business solution for Draper Engineering they need to have a attend Level Agreement (SLA) with each of the companies.An SLA is an explicit statement of the expectations and obligations that exist in a business relationship between two organisations the service provider and the client Verman (1999, p1). Were Draper to agree an SLA with the other parties this could ensure that not only would they be guaranteed the contract, but that they would also have a written document of the expectations of each of the parties involved in advance of implementing the WMS. Should these expectations be unrealistic, Draper could withdraw from the negotiations and reconsider their position with respect to the WMS without having incurred any expenses.The key issue identified here, is the ageing workforce of Draper, which can be explained by the work by Warr (2000 cited by Furnham, 2005) where he poses an d answers five questions on the ageing workforce and job performance. Figure 4 illustrates his findingsFigure 4 Warrs Five Questions on Job Performance and the Ageing Workforce. Warr (2000 cited by Furnham, 2005, p764-765)The implications of Warrs (2000 cited by Furnham, 2005) findings on Draper are profound, as many of the personnel issues experienced by Draper are explained in his work. The fact that the workforce is loyal is only to be expected and other benefits railway careful, reliable, knowledgeable and socially skilled, but unfortunately they are less willing to change, which whitethorn be why many of the spic-and-span initiatives have failed. Also, the high turnover rate in e-commerce could be linked to younger staff (though the case study does not specify this. However, to improve the personnel structure at Draper, they have a number of fillings available to themChange management.It is not enough to simple understand how change is going to be administered but it is imper ative that staff understand why change is happening so that they can engage with the solution and the change. As part of the change management employers need to provide support and training to encourage staff buy-in and deal with any resistance upfront (Hiatt and Creasey, 2003. Prosci, 2006)Andragogical Training enjoin at sure-enough(a) learners.Warr (2000 cited by Furnham, 2005, p764-765) states that older people are s lower and have to a greater extent difficulty remembering, withal, training can be adapted to an older persons limitations and expertise. One such method is referred to as andragogy, how adults learn. If Draper developed a training scheme that implemented an andragogical approach to training that targeted the older members of staff, they could experience very positive results from their staff, in the form of learning and motivation.Incentives for younger staff to reduce absenteeism and retain staff.Although Drapers need to look after their loyal aggroup of worker s it is essential that they can actively encourage younger members to the team and reduce the turnover in this area. One such method is to introduce incentives into saucy contracts which actively encourages longevity of service, such incentives could includeAnnual incrementing pay scalesFlexi-timeAnnual leave rewards for zero absenteeismTeam building exercisesGift vouchersPurchase schemes for personal IT equipment at incorporated reductionsThe fact that Draper Engineering have a large reaping development team is a strength of the business, however, spending the majority of their time improving existent crossroads and solving customer complaints is a fundamental weakness Drapers need to be looking to the future and their long term goals, which should involve new product development.To overcome this problem and move the business forward, a small working group should be striation up within the department, consisting of the most motivated and technically up-to-date members of staff to brainstorm and generate project ideas that can be developed into new products. This has an added benefit of staff participation and ownership which encourages the desire to bring home the bacon as the products are their own ideas.Generally speaking the term outsourcing means to transfer previously internal products or services to an outsider provider (Roeben, 2004), which is as it suggests is where a third party carries out functions which was previous undertaken within the business. However, in the case of Draper Engineering, a medium sized IT business, it appears that they have outsourced their burden competency, which is the means by which they should be able to separate themselves from their competition.The decision to outsource the IT division is a fundamental error to the business and weakens their internal and external strength, that they are particularly assailable from competition from Hardys to whom they originally outsourced. To overcome this problem and improve th e company position radical action is required such as broaden into new areas.InsourcingCollaboration with Hardys for key contracts.If Drapers is to survive in the long term they need to resolve this fundamental issue and redefine their core competencies in order to compete effectively in the market place.In addition to outsourcing a core competency, the IT division, being a fundamental error, it is also had a negative effect on Drapers reputation. Simply by virtue of the fact that Drapers originally undertook this work, previous customers are making their complaints to Drapers, which indicates that customers or strength customers still make the association and are dissatisfied with the service. It is essential that Drapers rectify this problem otherwise they are likely to experience a backlash in other areas of their business.To improve the situation Drapers have two pickaxsAct as consultants for Hardys on Draper productsInstead of letting the reputation of Drapers be damaged by H ardys lacklustre performance, Drapers could offer to act as consultants on the major products and services they previously provided. The benefit of this action to Drapers could be twofold, the reputation of their business would be saved and would also generate revenue for the value of the consultation work.Re-Establish IT DivisionIf Hardys were unwilling to agree to a consultant agreement, it would be possible for Drapers to re-establish the IT division once again and encourage previous customers ( be Hardys customers) back to them through promises of commitment to service and new product development.2.2Other Tools For Strategic Analysis.In recent years business practices have evolved in terms of thought, practice and analysis tools. Consequently there are a large put down of analytical tools which provide insight, identifying capabilities and strategic options (Khosrowpour, 1998).A SWOT analysis of Draper Engineering Ltd has already been undertaken however this does not scratch th e surface of the analysis tools available. Other fitted tools for analysing Draper Engineering would bepesterer or PESTEL AnalysisPEST is an acronym for Political, Environmental, Social and Technological factors whilst PESTEL is extended to include Economic and Legal factors. PEST analysis is a commonly used tool for analysing the external environmental influences on a business, Figure 5 illustrates the PEST grid and the areas that should be considered (Gregory, 2000)Figure 5 PEST Analysis Matrix. Gregory, 2000The benefit of undertaking a PEST analysis for Draper Engineering is that it would be undertaken in addition to the SWOT analysis and give a swell understanding of the global and external environment however it is essential that Draper follow the PEST analysis with how to respond to these issues and not simply see these points in isolation. unitedly PEST and SWOT analysis are able to look at the global interpret and then the specific detail of the businessPorters Five Forc esAnother tool for analysing the external environment of a business is Porters Five-Force Model, it is however one of the most influential copys for assessing the disposition of competition. As the name suggests opportunities and threats are assessed by analysing five forces Figure 6 illustrates the model.Porter (1980, cited by Campbell et al, 2002) suggests that the five competitive forces shown in Figure 6 determine the nature of competition within an industry. Thorough understanding of each force enables the production of a competitive strategy that embraces the forces, rather than working against them and enable the business to position themselves to take advantage of opportunities whilst minimising threats (Campbell et al, 2002)Draper Engineering would need to undertake this form of analysis in addition to SWOT and PEST to gain the most detailed picture for an effective strategy. The benefit of Porters Five Force Model is they would be able to identify who they are competing against in the marketplace, it currently appears that they are suffering threats from their customers who are ref employ harm increases and wanting price reductions and Hardys whom Draper outsourced their IT division to are a threat either from the provision of substitute products or directly competing as a new entrant in the same field. Whilst some of these issues were covered in the SWOT analysis, Porters five forces views the business solely from the competition perspective that it offers a very focussed approach.Intensity of rivalry in the industryThreat of substitute productsBargaining power of buyersBargaining power of suppliersThreat from new entrantsFigure 6 Porters Five-Forces Model. Porter (1980, cited by Campbell et al, 2002)3.Task Two Strategic ChoiceMacmillan and Tampoe (2001 p132) state choice is at the centre of strategy formulation, if there are no choices to be made there can be little value in thinking almost strategy at all. Adding that there are limitations to the range of choices such as small businesses are limited by their resources and large companies are unable to change quickly or are restricted by decisions made in their past. However, in good management the strategic choices have to be challenging enough to keep ahead of competition but also have to be achievable Macmillan and Tampoe (2001 p133)Akin to strategic analysis, strategic choice has a large number of tools available to help focus thinking and produce solid strategic decisions. Two such tools available to Draper Engineering Ltd areAnsoff MatrixPorters generic wine Strategy3.1Ansoff MatrixIgor Ansoff was the first to suggest the diagram shown in Figure 7, for structuring choices of which products or services to offer in which markets.PresentMarket NeedNewMarket Developmentvariegation (related or unrelated)Do NothingWithdrawConsolidateMarket perceptivity result DevelopmentPresentProduct NewNewMarket GeographyPresentFigure 7 Ansoff Matrix. Ansoff (1987 cited by Macmillan and Tampoe, 2001 p137)The axes of the diagram are Macmillan and Tampoe (2001, p135-137)Product including services and any form of offeringMarket Need any group of potential customers whether defined by their needs, inclinations or income bracketMarket Geography geographical locationFor the present market geography the model defines four cells, with the top left representing the present military position of the business. Movement within or away from this cell represents the possible future choices about products and markets. Macmillan and Tampoe (2001, p135-137). Figure 8 summarises the strategy for each quadrant.Market PenetrationProduct DevelopmentMarket penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets.Market penetration seeks to achieve four main objectivesMaintain or increase the market share of current products.Secure dominance of growth marketsRestructure a fledged market by driving out competi tors.Increase usage by existing customers A market penetration marketing strategy is very much about business as usual. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research.Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets.This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets.Market DevelopmentDiversificationMarket development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. at that place are many possible ways of approaching this strategy, includingNew geographical markets for example exporting the product to a new countryNew product dimensions or packaging for example New distribution channelsDifferent pricing policies to attract different customers or create new market segmentsDiversification is the name given to the growth strategy where a business markets new products in new markets.This is an inherently more risk strategy because the business is touching into markets in which it has little or no experience.For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risksFigure 8 Summary of The Ansoff Matrix. Tutor2u Limited (2006)Thomas and Egan (1998) identify that the Ansoff matrix is suitable for both situation analysis, Where are we now? and directional policy modelling, where do we want to be?, adding that it excels at profiling product/market alternatives whilst identifying the risks of different strategic options. Curtis (2006) however suggests that to use the model effectively needs the X factor, imagination, without w hich it is difficult to identify what new products your existing customers may want.This tool would be particularly useful at Draper Engineering as it would identify exactly what their current market position is in terms of products and customers. It appears from the case study that whilst they currently have four major European car manufacturers and two American truck manufacturers as customers, there is no clear description of the products and services that they provide. Ansoffs matrix would focus their attentions to what it is they produce and where they would like to go in the future, as it seems to date that although they are willing to try new strategies there is little coherence in their intensions or achievements. Additionally, whilst Draper have started developing enterprisingness Resource Planning (ERP) Systems and their associated software there is little suggestion of imagination in their approach, SAP and Oracle were marketing their ERP systems in the late 90s early 00 s and are now the principle vendors, that if Draper are to enter the market now almost 6 years later they are first appearance as underdogs. Such analysis using Ansoff would identify a need for greater imagination in identifying the next big trend, one in which Draper could be involved in from the outset rather than midway through the product lifecycle.3.2Porters Generic Strategy.Porter (1979 cited by Gilligan and Wilson, 2003, p2) states that a firms congenator position within its industry determines whether a firms profitability is above or below the industry average, the fundamental basis of above average performance in the long run is sustainable competitive advantage.Competitive advantage can be of two basic types low cost or differentiation, which combines with the scope of activities to produce three generic strategies for achieving above average performance (University of Cambridge, 2006), illustrated in Figure 9Cost leadership specialisationFocusCost focusDifferentiation focusCompetitive AdvantageLower CostDifferentiationCompetitive ScopeBroad Target1. Cost Leadership2 DifferentiationNarrow Target3a. Cost Focus3b.Differential FocusFigure 9 Porters Generic Strategy. University of Cambridge (2006)1. Cost Leadership2 DifferentiationIn cost leadership, a firm sets out to become the low cost producer in its industry. The sources of cost advantage are varied and depend on the structure of the industry. They may include the pursuit of economies of scale, proprietary technology, preferential access to raw materials and other factors. A low cost producer must find and exploit all sources of cost advantage. if a firm can achieve and sustain overall cost leadership, then it will be an above average performer in its industry, provided it can command prices at or near the industry averageIn a differentiation strategy a firm seeks to be unequaled in its industry along some dimensions that are widely valued by buyers. It selects one or more attributes that many b uyers in an industry cover as important, and uniquely positions itself to meet those needs. It is rewarded for its uniqueness with a premium price.3a. Cost Focus3b.Differential FocusThe generic strategy of focus rests on the choice of a narrow competitive scope within an industry. The focuser selects a segment or group of segments in the industry and tailors its strategy to serving them to the exclusion of others.In cost focus a firm seeks a cost advantage in its target segmentDifferentiation focus a firm seeks differentiation in its target segmentFigure 10 Summary of Porters Generic Strategy. University of Cambridge (2006)Following a cost leadership, differentiation or focus approach has advantages to the business however it is the strategic choice to decide which option to follow. The University of Salford (2006) identify some anticipated benefits of each of the strategic options (Figure 11)Cost LeadershipEarn high profits because its be are lower than competitors charging a simi lar price Charge a lower price than competitors so increasing sales and market share inject new markets charging a lower price than competitorsDifferentiationSell their products at a premium price Create a barrier to the entry of new competitors Earn above average profits by reducing elasticity of demand for the product.FocusDoes not require so many resources as a broad strategy Allows specialisation Lowers the cost of entering new markets for small firms.Figure 11 Benefits Of The Strategic Options Identified In Porters Generic Strategy. University of Salford (2006)However, when Porter developed the strategy he argued that an organisation that did not choose between a cost leadership or differentiation would be stuck in the middle and consequently he believed they would not achieve competitive advantage. Subsequently one of the criticisms of the model is that it is possible to have a hybrid strategy that combines low cost with differentiation. A further criticism is that low cost i tself does not sell products, customers have other reasoning such as quality that affects their decision.That verbalize in the case of Draper and many other businesses Porters generic strategy is a very useful tool for understanding how to achieve competitive advantage. 4.Task Three Strategy SelectionAs Macmillan and Tampoe (2001, p132) state choice is at the centre of strategy formulation, but selecting an appropriate strategy and direction from all the available strategic choice tools can be a difficult decision. To overcome this problem and ensure that each option is fairly and equally assessed a further evaluation tool or framework may be used, examples include RACES (Haberberg and Rieple, 2001 cited by Evans et al, 2003), SCARE and CARES standing for Resources, Acceptable, Consistent, Effective and Sustainable. However a more popular framework is the SFA framework (Evans et al, 2003 Little, 2006)Suitability does the proposal fit with the organisations strategic plan or organ isational values? It is essential to identify if a particular option would make full use of an organisations strengths, whilst avoiding its weaknesses or any external factors such as changes in legislation or government policy (Butler, 2001)Feasibility can it be carried out and will the desired results be available in the timescale? In many cases the feasibility of any option is limted by the firms capacity and resources (Butler, 2001)Acceptability whilst being more subjective, relating to organisational values, this is key to whether the strategy will cause any major crises with stakeholders. Some stakeholders may find one option appealing whilst it is decried by another, this is particularly the case in partnerships and small firms where one wants to grow the business whilst the other wants to consolidate the business (Butler, 2001).To which a fourth measuring has been addedAchieving competitive advantage this can be low cost or differentiation, as explained in Section 3.2. In order to implement this framework, it is essential to set an initial basis for comparison for Draper like any business this could be a baseline scenario of do nothing, absolute or relative positioning or finally comparison with industry norms. Once this initial phase of preliminary analysis is complete, it is necessary to develop scenarios within which to analyse various strategies, which are compared with the initial baseline scenario. The final stage of preliminary analysis is to narrow the range of options to a limited number of strategies in order to undertake a more detailed analysis, this can be achieved through ranking and decision trees. It only on completion of the preliminary analysis, that it is possible to undertake an in-depth assessment using the SFA framework.Based on the choice of strategies in Section 3, Ansoff Matrix and Porters Generic Strategy Draper would need to collate data on their position within the industry, though they would need to decide on the basis f or comparison for scenario examination. Finally, whilst there appears to