Bs6100 Strategic Management | Resource Assessment Answers

Answer the following three questions using examples to support and illustrate your discussion.

Define critical success factors, resources and competences. Using examples to illustrate your answer, discuss how understanding and managing these different elements can create sustainable competitive advantage.     

Why might organic (or internal) development be recommended as an appropriate method for strategic development? With examples highlight the risks and benefits associated with this strategic method of development.

Discuss the contrasting characteristics and objectives of a cost leadership strategy and a differentiation strategy. How do Porter (1980) and Bowman (1995) differ in their view on combining these approaches to competitive strategy?

1. Defining critical success factors, resource and competencies

Critical Success Factors are strongly related to the mission and strategic objectives of the business. The mission as well as goals focuses on the aims and what is to be accomplished. As put forward by Müller and Jugdev (2012), critical success factors focus on the most significant areas and get to the core of both what is to be accomplished and how will it achieved. To identify the possible critical successful factors, the organization needs to examine the mission and objectives and observe which areas of the business require attention; thereby, they can be achieved. Chittithaworn et al. (2011) had discussed the problem of inadequate management information for developing the objective, shaping strategies, making decision as well as measuring results against the goals. Hence, Cheraghi, Dadashzadeh and Subramanian, (2011) also asserted that organizational planning information is required to focus on the success factors. Particularly, when an organization identifies CSF, it has to align the factors with the objectives it sets for the purpose. For example, in the case of Coca Cola, the CFS are measured in the following manner.

According to Ram, Corkindale and Wu (2013), the success factor are considered at the broad industry level as well as they are shared across organizations in the sector. However, in this context, Gomes et al. (2013) commented that critical success factors could differ from organizations to organization as well as from manager to manager. Hence, Bhuasiri et al. (2012) introduced a two-phased, interview-based method that started with a discussion of an executive’s goals and underlying critical success factors. On the other side, Islam et al. (2011) developed a five step method of CSFs-define scope, collect data, analyze data, derive CSFs, analyze CSFs. This technique provides a significant way of deriving critical success factors through a review of document as well as the analysis of the goals of key management personnel.

Defining the resources and competencies

In order to implement the activities and process, the organizations are in the need of the certain aspects, which are its resources. The resources can also be created within the organization. As put forward by Laureani and Antony (2012), the resource can be both tangible and intangible such as physical resource, financial resources, human resources and intellectual capital. Hence, Laghzaoui (2011) also commented that resource can be threshold resource in two ways- one which are required to meet customers’ least requirements and the unique resource that helps to gain the competitive advantage appearing difficult for the rivals to imitate. When it comes to competencies, organizations should possess some particular characteristics to have the ability to compete with the organizations in the market place. These characteristics develop the competencies of the organization. Hence, Lozano et al.  (2012) commented that time competencies cannot be useful or beneficial to an organization when they stand-alone. It is thereby critical to assess and evaluate just to remain in a business. It is also necessary to understand that could be a requirement for trade-offs.

Thereby, the organizations might have to make some difficult decisions to meet the demand of customers. On the other side, an existing and older organization have another potential problem, as over the time, the business could build up redundant capabilities like the things are no longer required to stay in a business. The organizations require the best ways of disposing such resources. For example, the fast food organization KFC launched a new product called “Chicken Chizza”; at the initial stage of launch, the product gained an enormous popularity, the audiences knew KFC by its unique product (Kaplan and Langdon 2012). This certainly increased the brand image of the organization. However, after a few months, KFC observed a poor return on the product it had launched. Eventually, the organization had to withdraw “Chicken Chizza” from its list of food items. This example certainly demonstrates that an existing business could suffer from the redundant capabilities.

Discussing how understanding and managing these elements could create sustainable competitive advantage

As the market is changing rapidly, the organizations face the challenge of sustainability and to become sustainable or to gain sustainable competitive advantages, it is necessary for the organizations to apply unique strategies to gain competitive advantage. For example, FMCG firm Unilever developed an objective global brand presence and with their strategies, Unilever developed a brand LUX decades ago. It has been doing the business as well as earned a huge among of revenue. Presently, LUX is the market leader with humongous market share compared to all other soap brands (Unilever.com 2014). LUX is one such proof of competences and resources. With Unilever having gained a grip of the best resources as well as a high level of expertise, it was easily able to keep LUX competitive and of superior quality. In addition to this, the organizations hire top model and celebrities to make them ambassadors as the promotional approaches. These strategies enabled the firm to have a larger market share. Moreover, while focusing on the competencies, it has also been observed that LUX has always been innovative in comparison with competitors, which certainly facilitates the brands to hold its superior position among all other soap brands (Unilever.com 2014). For example, in the recent time, LUX has come up with an innovative concept, in which the soap demonstrates a different design of flower on its surface claiming to have a best fragrance than ever. This initiative successfully made splash in the minds of the buyers.

2. Why organic development can be treated as an appropriate method for strategic development

Presently, organization development seems to be languishing. The internal organizational development is related to the strategic development because whenever an organization is supposed to implement a new strategy such as launch of a new product, it has to consider the internal strategic back up (Langley et al. 2013). In order to implement a marketing strategy, the organizations require expertise, skilled employees, healthy and supportive organizational culture, etc. Hence, the organizational culture development can be an aspect of internal environment. Thereby, while making a strategic change, the board members and executives might have to deal with the resistance that come from lower level of management and this issue is certainly related to the culture (Rai 2011). On the other side, to maintain this growth, the organizations also need to focus on the external environment. The development in the external environment is referred to the expansion of business. To expand the business, the organization should apply new and innovative strategy such as launch of a new product or entering into a new market to increase the customer base.  Thus, the organic growth of an organization is depended on both internal and external strategic practices.

When an organization decides to implement the strategy of launching a new product for increasing market penetration or customer base, the employees at each level should be aware of the initiative. As the consequence, the organization as a whole could overcome the market barriers and gain success. For example, Ford Motor Company insists on the excellence in its organizational culture to bring in and support innovation (Hoffman 2012). The organization identifies the significance of excellence to push its performance higher. Ford has developed the training programs to support this characteristic of its organizational culture. The employees were motivated to learn, enhance and contribute to the ideas for organizational development.

The internal organizational development could also include internal structural change in the firm. Hence, the changes are made to the organization that could stem from internal and external factors and it could typically affect how the organization operates (Green et al. 2012). The internal development could involve the changes to the overall goals, mission and strategies. It certainly determines how an organization is supposed to run its operation. Thereby, it can be added that internal development could be one of the method of strategic development (Keller, Parameswaran and Jacob 2011).  

With example highlighting the risks and benefits related to the strategic technique of development

When a strategic method is applied to the internal organizational development, the organization might have to deal with certain barriers or issues. As put forward by Christopher et al. (2011), the organizations are exposed to a variety of risks associated with the development and implementation of the business strategy. Even though, the organizations have the control over the internal factors but when the organization is internally incapable, it might have to face the challenges. More specifically, internal structural change is a crucial strategy in which inappropriate implementation could lead to unexpected circumstances (McLaren et al. 2011). For example, cell phone giant Nokia merged with Microsoft implementing large internal structural change in the organization (Nosrati, Karimi and Hasanvand 2012). This initiative of internal strategic change led to the lay-off of many employees. Due to this internal structural change in the organization, many employees resisted to change but eventually ended-up quitting the positions. As the result, Nokia’s Windows phone turned out to be a big failure in the competitive market.  Nokia had extensive expertise that once helped the company to dominate the market. However, the company took the risk of internal change and merging with a company, which was completely out of the sector. This example certainly proves that risks can be associated with the internal organizational development.

When an organizations organic growth potential appears constrained, high-level of executives often start to neglect their role in supervise organic growth strategies. In this context, Rusko (2012) In this context, Rusko (2012) commented that without organic growth strategy a business could become risky and sub-optimal. Executives leaders are in the position to develop the growth appetite for their organization. Thus, without having such engagement of top-level executives, the individual business units could more likely to follow the business cycle to reach the organic growth. In this context, Gotts and Sher (2012) commented that leadership is a significant aspect, which has a strong role in the internal organizational development. Leadership style creates a strong impact on the employees.

Benefits associated with the internal development

Strategic development to the internal environment helps the organizations to gain certain benefits as well. When the strategies are implemented properly, the organizations observe the positive consequences. For example, Unilever made certain cultural changes within its organization that was ultimately beneficial to it. In order to retain its employees and build a large workforce, the company arranged training and development programs for employees (Aktas, de Bodt and Roll 2013). After the selection and recruitment process, each employee is sent to training sessions, which takes almost a year. In order to encourage the employees the organizations provides medical coverage of employee and their family members. Moreover, the organizations provide the growth opportunities to employees. The organization developed such culture because its goals and objectives are aligned with the external influences. This means understanding future growth of the company, Unilever implemented such internal management practices.  

3. Discussing the contrasting characteristics and objectives of a cost leadership strategy and a differentiation strategy

Porter’s generic strategy, especially cost leadership, is a significant way of gaining competitive advantage. This strategy also helps to develop the edge that helps the organizations to increase the sales and push the competitors behind. As put forward by Banker,Mashruwala and Tripathy (2014), cost leadership theory provides one response; it describes how the organizations go forward by minimizing their operating cost compared to others in the same industry.

Objectives

• The objective of the cost leadership strategy is to maximize the profits by decreasing the cost of operation but setting the price that is affective in the industry
• To maximize the market share with low price strategy but still gaining a reasonable profits on each purchase as the firm reduces the cost
• The objective is to gain high turnover asset turnover.  Especially in the service industry, for example, a fast food firm turns the table quickly and an airline service provider runs the runs the flight very fast. Nevertheless, in manufacturing, the strategy might involve production of high margin of output. Here, the practices are referred to fixed costs that exist in a large number of units of the products and services, which finally produce the result of lower cost (Banker, Mashruwala and Tripathy 2014).  The organizations wish to gain advantage of economies of scale.

Characteristics of the cost leadership

One of the major characteristics of cost leadership is to minimize the operation cost of the product and services. This strategy helps to develop a tight control of production and overhead cost.  To describe the characteristics of cost leadership strategy Mashruwala and Tripathy (2014) mentioned that in cost leadership, it is necessary for the firms to maintain constant efforts aiming at lowering the cost and creating value for customers. The company needs to minimize the costs of sales, product research and development and service. In order to be successful in achieving the cost leadership, the organizations should access to the capital required to make the investment in technology that could lower the cost. The organizations need to have a very efficient logistics. The companies should build a low-cost based as well as a process of cutting the cost of operation, which is lower than the competitors in the industry. .

As put forward by Valipour, Birjandi and Honarbakhsh (2012), the major goal of cost leadership strategy is to produce the products at the lowest cost in the sector. However, the organizations might face the challenge of earning an expected profits for the operation rather than operating the business at a loss and gaining profits from other players in the market. For example, the super market giant Wal-Mart has been observed to be succeeding with the strategy of setting low price on major items. Hence, the customers become price-aware. Likewise, another crucial objective of cost leadership strategy is to gain low direct and indirect operational cost. This is often achieved by bulk buying to win quantity discounts and putting pressure on suppliers. In this particular context, Wal-Mart has become popular, as it squeezes its supplier to ensue low price for its products and services. Similarly, Dell Computer at the initial stage achieved the market share by keeping inventors low. Moreover, other procurement advantage could come from special access to raw materials.

Characteristics and Objective of differentiation strategy  

It is observed that product differential strategy might require the evolution of products and other significant services by relying on customer-loyalty to the brand. As stated by Green et al. (2012) the companies can deliver high quality, performance and unique features that certainly sustain the high price. As put forward by Banker, Mashruwala and Tripathy (2014) differentiation approaches could involve a different process of manufacturing products and services that are unique. The organizations make the products unique and attractive compared to competitors’ products. However, to make a success of differentiation strategy, the companies require intensive research, ability to produce standard quality of products and services. . According to Qi, Zhao and Sheu (2011), big firms following a differentiation strategy should remain agile with the new product development method; otherwise, the organizations take the risk on several fronts that rivals pursue. The rivals in the sector could follow focus differentiation approach. As put forward by Tanwar (2013), before implementing differentiation strategy, the organizations must make a large investment in research and development to increase their innovative ability and the capability to cope up with the competitors.  An important assumption against a differentiation approach is that the customers become interested to pay high price if the products that they buy are different and unique. ForFor example, the Fast Food restaurant KFC launched “Chicken Chizza”, which was a unique item of the organization and it gained a huge popularity within a short period.

Porter (1980) and Bowman (1995) differ in the view on combining the approaches to competitive strategy

The cost leadership approach is treated as the set of an action that is considered to produce goods with increasing features but they are affordable to customers. According to Porter (1980), the relative position of the company in the sector determines whether the profitability of the organization would remain high or low in comparison with other players in the sector. In this context Qi, Zhao, and Sheu (2011) commented that the major basis of large average profitability in the long operation is sustainable competitive advantages. However, in the case of competitive advantage, Porter insists on low cost or differentiation. These two type of competitive advantage are conventionally combined with the opportunity of activities that organizations attempt to achieve.

On the contrary, Bowman’s designed the customer value map demonstrates that expensive products  should deliver more customer perceived value to compensate for the higher price of products. According to Valipour, Birjandi and Honarbakhsh (2012), markets are supposed to create a fair value for money line with competitors spreading around the line from low value-low price to high-value high price. As put forward by Tanwar (2013), Bowman’s Strategy Clock and all his work on Customer Matrix and Product Matrix due to the clarity that strategy brings to competitive strategy. Bowman is certainly challenging Porter’s idea on generic strategies and recommends that a differentiated, low cost hybrid positions could be achievable position.  Hence, Qi, Zhao, and Sheu (2011) mentioned that Porter also agrees that this case can be considered under some certain conditions; however, Bowman’ strategy Clock does not make these conditions clear. Compared to Porter’s competitive advantage, Bowman’ strategy clock could lead to negative thinking; the major strength of this strategy is to consider competitive advantage reactions to possible shifts in the clock; however, all of the moves could damage the profits.

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