Firm Resources and Sustainable Competitive Advantage - Research Paper Example

Firm Resources and Sustainable Competitive Advantage It is extremely important to state what strategic management is all about because this basic understanding provides the breeding ground for the further explanations in this paper. Strategic management could be defined as the central processing unit of a firm because it takes into account all the decisions taken at each and every level and also generates its own decisions; the strategic management framework also provides policies to implement these decisions and also a framework to evaluate these decisions so that they can be bettered off. Strategic management states the company’s goals and objectives, both for the short as well as the long run, and it also draws and implements policies that will enable the company to achieve the goals and objectives that have been stated or defined earlier. Since strategic management influences each and every department of the company it therefore takes each and every department into consideration while developing the hard core organizational goals and policies. Thus from this we can gather that strategic management is basically used to give a sense of direction to the organization, it provides each and every department the goals that it needs to achieve and a policy to work towards these goals, such is the importance of strategic management for an organization and hence this is handled directly by the board of directors or the CEO and rightly so. Many a companies have failed to make it right to the top because they have placed lesser emphasis on strategic management and they have also over looked the fact, most conveniently, that for different situations there needs to be different strategy altogether and since each and every firm is different, much like individuals, the difference in cost structures and other factors should be taken in to consideration while developing a strategy. Strategies should never be just copied out from some one else’s books because they were successful, in fact they should always be formulated keeping in mind the vision, needs and environment of the company because with out this the strategy and hence the company is bound to fail. Strategies are formed as a combination of these three ingredients: 1. Strategy Formulation For any strategy to be generated the most important thing is to know in what kind of an environment the company is in and what the current situation is. For this to be done the company must keep a keen eye on the competitor i.e. a competitor analysis should be done when ever the need arises this is extremely important because in certain market structures there exists a high level of interdependency and hence the decisions ones competitor makes is of great importance to the company it self. The company needs to indulge in self evaluation as well because to ascertain where the company is heading and what the current situation within the company is, a self evaluation is of great importance. Self evaluation also pin points the choke points or the points where the company needs to focus and remove the hindrances in order to move forward. The third player in any market is the government or the economy of that particular area and hence to have a successful strategy it is extremely important that company evaluates the economy on the macro as well as the micro economic scale. As far as the iron ore and steel industry are concerned it is extremely important that the carry out the macro and micro economic studies because this industry is the provider of raw material to a number of other industries and hence if the macro economic situation is good enough then the company would do better and it should also be able to predict what is going to happen in the next 6-12 months and hence plan accordingly because a steep fall in demand can cause huge losses to an industry that is as large as this. The iron ore and steel industries in many countries are nationalized because of their importance to the country but even at the nationalized level the corporate strategy should not go out of the window, the company should look to be as profitable as it can be so that it is an asset worth having for the country. 2. Strategic Implementation Strategic implementation involves the decision to allocate resources to different programs and departments and new innovations are judged on the basis of return on investment and cost benefit analysis. Implementation also involves the process of implementing all the policies that had been decided in the strategic implementation and also monitoring the results of the policies that have been already implemented thus this process is not a terminal one at any point in time because all these processes are looked over very keenly. This process also involves the assigning of roles for programs that are of special importance to the company. With regards to the strategic implementation in the steel industry the recent$8.1 billion take over by the TATA steel of the OCRUN steels in the UK shows how important strategic management is, the merger has been a very successful one because the two companies were made for each other, low raw material costs and low labor costs all showed what a successful strategic management policy can do to improve business 3. Strategic Evaluation Strategic evaluation is the process where by the company evaluates the effectiveness of the companies policies and the role that the policies have played in this progress or decline of the company. Evaluation is one of the most neglected portion of the strategic management process because people deem it to be unnecessary but it is in fact the most important part because it stops the process from terminating and guarantees the evolution of the company with time. These are the core business processes which form the strategic management process as a whole and it is important as states above that each of the three processes should be given equal importance because they are links to a chain and even if one link goes missing then the chain would be incomplete and the strategy would never be able to achieve the goals that it was set out to achieve. Business Strategies There are certain strategies and they are divided in different categories: a) Functional Strategies: Functional strategies are strategies related to the functional areas of the organization, areas such as human resource and new product development. These strategies are aimed at designing the corporate strategy which is aimed at giving the organization an over all direction. b) Strategic Business Unit: some companies feel that the functional system is now obsolete and hence they have innovated the strategic business unit which is basically an unit which that is responsible to devise different strategies for different sections of the company. c) Operational level Strategy: This is the operational level strategy which defines how the company would operate, it needs to follow a given budget and it does not have the liberty to exceed that budget. The operational level strategy deals with the day to day running of the business and they have to report perform exceptional reporting i.e. exceptional circumstances. The information that is generated in this type of work is only generated within the organization. It is the bridge between the lowest level management to the tactical level. d) Corporate Strategy: corporate strategy is the strategy which defines the fine points of the company such as what business would the firm be in and the whole direction that the business should attain in a given time frame. This strategy has to also draw the performance indicators for the different level of employees and this is a cause of some concern for some employees because they are judged against performance indicators which they cannot help change. Literature Review There have been programs initiated in the UK steel industry that have been aimed at instilling the corporate strategy or the strategic management policies into the workers as well as making the management aware of how important this type of learning is for the betterment of the industry on the whole. Metal skills and performance also known as MetSkill is the leader of these programs. These programs have benefited the industry on the whole in a large way and the equipment efficiency has gone up by 10% (UK Steel Association-annual review 2001 http://www.uksteel.org.uk/ar01/ar01pg4.htm). The role of technology has been very important in the implementation of these systems because to implement policies you need to have the correct information and should be able to process this information on time because time is money, if information is not processed on time then there might be huge financial losses, there should also be processes to ensure that top-down, bottom-up and horizontal flow of information flows smoothly because if this is not the case then there will be huge problems for the company and the whole corporate strategy would fall down flat. Decision making tools such as ERP systems SAP systems are important also because they expedite the process of decision making and also cut down on costs very efficiently, an added advantage of these systems is that they can be customized so that each company’s needs are met thoroughly (Mrkides, Constantinos “A dynamic view of strategy” Sloan Management Review, vol 40, spring 1999, pp55–63). The Japanese example stands out when one talk about management, in the late 70’s Japan was able to shock the world with their superior management skills and when the world started to comprehend what the Japanese were doing, every one wanted to adopt these values because they were the ultimate values for management purposes. The same holds true for the Japanese steel industry because they played a major role in the development of Japan after the world war (Richard Pascal “The Art Of Japanese Management” 1981). Research Methodology Question No.1. How important is the strategic management framework to the steel industry? As defined above the strategic management framework has been really important to the steel industry because it has lead to phenomenal increases machine handling efficiency and also the costs have gone down quite a bit as the use of technology has increased in recent times as pointed out by the annual report of the United Kingdom Steel industry. The time needed for setting up has gone down phenomenally due to the strategic management which has paved way for better employment training and as strategic management has played a vital role in the human resource area as well there has been a much more concrete workforce in terms of productivity. Question No.2. How important a role has technology played in terms of strategic management? It would be incorrect and inappropriate to say that technology has not been the driving force behind the changes in the field of strategic management because it is technology that has pushed these strategical values right at the front because of enhanced competition companies need to be pro active rather than being reactive to a situation and this is where strategy comes to the fore because if the strategy is not a concrete one then it will not work, a strategy should have no loopholes. The technological programs and initiatives should be conveyed to the staff and the workers well before the implementation and training programs shall be held for the employees because if this is not done then the productivity might even fall rather than increasing because employees will be reluctant to use the software because they might feel threatened. Any technological changes on a large scale should be employed only if appropriate for the company a corner book shop does not need an ERP system and hence it should not be looking to employ one because it would be inappropriate to say the least. The steel industry it self has admitted to having made these changes and it has benefited them immensely in productivity as well as cost terms. Question No.3. What are the core processes? The core processes as defined previously are the processes of formulation, implementation and evaluation. References 1. David, F (1989) Strategic Management. Columbus: Merrill Publishing Company. 2. Lamb, Robert, Boyden (1984) Competitive Strategic Management. Englewood Cliffs, NJ: Prentice-Hall. 3. Chandler, Alfred (1962) Strategy and Structure: Chapters in the History of Industrial Enterprise. Doubleday, New York. 4. Selznick, Philip (1957) Leadership in Administration: A Sociological Interpretation, Row, Peterson, Evanston II. 5. 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