Strategy Formation, Strategic Alliances, and International Strategy - Essay Example

Global Strategy Contents Contents 2 Strategy Formation 4 Introduction 4 Discussion 4 Conclusion 7 Strategic Alliances- Competition and Co-operation 8Introduction 8 Discussion 8 Conclusion 11 International Strategy- globalisation and localization 11 Introduction 11 Discussion 12 Conclusion 14 Knowledge - organisational knowledge creation and transfer 14 Introduction 14 Discussion 15 Conclusion 20 References 21 Strategy Formation Introduction For the strategy management of a particular company the formation of strategy is very important. The strategy formation basically has three phases which are diagnosis, formulation and implementation. Strategy management is an ongoing process which is done to continuously improve the business process to achieve its objectives keeping the capabilities, constraints and the internal and external environment in consideration. Strategy formation is related to creation of strategy, designing a new business involving various steps like exploration, searching for new business and the advantages and disadvantages that the company can have from the new business strategy. The formation of strategy has to be done very carefully keeping various factors in mind so that the strategy becomes successful and the company gets advantage from it in many ways. Discussion In 1980, market guru Michel Porter formulated the five forces focused on the formation of strategy based on the internal and external factors which influences a huge role in the business operation. These five forces are been set up based on the competitors that the company has in the market and these has limited the effectiveness of the strategic management to a great extent. Teece in 2007 defined the strategy formulation as the strategy being the essence of strategy which involves the selection and developing of technologies and the business models that are been built to provide the competitive advantage to the company through by removing the difficulties and thereby providing a competitive edge over the other competitors. For implementing an effective strategy the company needs to follow 6 major steps. These steps are been listed below. Define the organization- The company should know what the company is all about, who are its customers, how the company’s products can create value for the customers and also have a clear idea about the needs and wants of the customers. Define the strategic mission- Based on the knowledge about the company, the customers the company needs to define the mission for the strategy which will include the specific objectives and the goals that the company needs to achieve. Define the strategic objectives- Based on the mission statements the company needs to set up the clear objectives for the employees, these objectives will help them to focus and work towards a particular direction. Define the competitive strategy- The strategy made by the company must be made by keeping the competitive forces in mind. So that the company gets a lot of competitive edge in the global market. Implement strategies- After designing the competitive strategy the company needs to implement the strategy in a proper way so that the company can get the advantage in a better way. Evaluate progress- Have a continuous evaluation of the progress of the strategy so that the company can improve the defects that might arise in the process. The strategies implemented by the company are made either deliberately or by the emergence of a strategy from a particular situation. For a particular strategy to be perfectly deliberate that is for the strategy to be implement in the exact way as it was been designed mainly three conditions are to be seen (Marr and Gray, 2012, pp. 235-239). Firstly the organization must have a precise intension of implementing the strategy that has been designed in the exact way keeping the factors in mind so that they get the actual result what was been desired before the taking a particular action. Second is that as the organization includes all the actions so if any doubt arises than that must be common to all the actors in response to the sort of control the company implements. Third is that the collective intentions of all the departments are been realized, high means that the external factors don’t have any influence over the departments are been perfectly predicted. For a particular strategy to be perfectly emergence there must be consistency in order over time. It is very difficult for any action to be completed with total absence of the intention of doing it. The strategy been implemented in a particular company has to have a gradual increment in its overall process of implementation so that the strategy can help the organization achieve the exact goal for which the company has set the strategy. For example Toyota and Honda have implemented a strategy which has helped them to create a good cost-provider strategy and also allow the company’s finance to be stable in the global market, this strategy is been implemented over the years and the companies have kept on making the few changes in the strategy as and when required with the changing market condition (Sudi, 2003, pp. 118-124) Company like McDonalds which are which implements different strategies for different countries by changing their menu and food types based on the culture and religion of the company. The company sells hamburgers in other countries but not in India as they are it is not liked by Indians so the company decided not to launch it in India. There have been few limitations to the company’s faces while implementing an effective strategy in their business process. These limitations are like the external environment including the culture, behavioural and other aspects that influences a particular organization strategy might change very quickly with time, the new strategy might bring to a change in the working style which might face a lot of persistence for acceptance by the employees, it needs a lot of hard work, innovations and lot of expenditure which might even fail after implementation (Cunningham and Harney, 2012, pp. 143-147). Conclusion There are various approaches that are been taken to create a particular strategy based on various dimensions. The company without a particular strategy plan will not be able to provide a direction to focus for its employees and it will be very difficult for the organization to grow and excel. The company will not be able to become proactive and also won’t have a competitive advantage over the competitors and face a lot of problems for its existence in the market. It is found that generally the strategies are made out in between of deliberate and emergence. These two form the base of the strategy based on which the strategy is been designed and implement and the desired result is been obtained. Strategic Alliances- Competition and Co-operation Introduction Strategic alliance is the agreement between different parties to work towards a single objective while remaining independent. The alliances are obtained in the form of mergers and acquisitions that happen between two bodies. The partners might get in alliance with respect to various resources like products, manufacturing technique, project funding, knowledge expertise or with respect to any other intellectual property. The relationship in the strategic alliance is been done in two ways either cooperative or either cooperation. The relationship in the cooperative alliance is completely different when compare to the relation in the alliance of competition. Discussion Cooperative relationship in the strategic alliance is generally taken place between a small and a big company where the small company takes help from the big company to enhance it process and also grow in the global market. In this relation there is sharing of various resources by the partners in the same business network. On the other hand the competitive firms are made to interact with each other by force. This type of relationship is conflicting and results too many conflicts in the global business environment. The competitors avoid interaction with each other and are more informal and invisible than the cooperative alliance relationship among the partners. In 1972, Hunt analyzed the competitive rivalry at the intermediate level between the industry and company level which made it easy to understand the differences that exist in the particular industry (Abraham, 2012, pp. 78-84). In the competitive relationship the competitors interact with each other with a focal actor or through the middle man. Thus the interaction is simple and direct. In this case the action-reaction is been followed where once a particular company has launched a particular product than the competitor also launches a product soon of the same category (Hill and Jones, 2009, pp. 234-237). The power and dependence is equally distributed among all the competitors and based on their position in the market they have their own market share. The competitors set their goals independently. This type of alliance is a zero-sum game. Alliance with the competitors does strengthen the performance of one company while the performance of the other goes down from its competitor. For example the huge competition between Coke and Pepsi shows that the in this competitive relation both the companies look to capture the global market share and become the leader by bringing out their unique products and promotional activities to attract more and more of customers. Among both the companies the relation is a kind of action-reaction where one company launches a particular product or a promotional activity than the other company also brings another unique and creative product or promotional activity to be in the competition and attract most of the customers in the overall global market (Mazzucato and The Open University, 2002, pp. 113-117). Different companies come in alliance with each others like Samsung came in alliance with Google to use its OS-Android for its mobiles. Samsung made this alliance to make sure that they can have a good market share and also a good OS for their phones which is more user friendly than others. In a co-operative strategic alliance the companies come in together and work towards a common goal with their own independent margin of profit. Both the partners share their knowledge, their resources and technology to improve their process and grow up in the business process. This exchanges are frequent including the exchange of information, business related things and also social issues. Though the partners do share a lot of resources and information but it doesn’t mean that they don’t compete with each other. In this relation there is similarity with the value chain and they have a formal relationship among all the partners. These formal agreements and norms decide upon the power and the dependence of a particular company over the other. This implies that the rate of conflicts among the two or more partner’s in the strategic co-operation alliance is very less. The partners have a common goal to achieve and the proximity among them is based on the functional and psychological factors of the companies in the way they operate. Cooperative relationships are mainly based on the mutual interest of all the partners. This type of relation is generally seen among the suppliers and the company, wherein the supplier is in co-operative relation with the company but it also competes with the company to grow and provide products directly to the end consumers (Kozami, 2002, pp. 23-37). The companies do set their price based on the competitors like Nokia sets up its price for its mobile phones based on the price of the competitors; this helps them to get the competitive cost advantage over the competitors. Looking at this in 1996, Moore came up with the biological analysis explaining the shift in the business process. According to him the business process are of different ecosystems that keeps evolving in order to help the companies to survive in the market. The content in the relationship are influenced highly by the changes in vertical relationship and horizontal relationship. Thus the content of the relationships among the actors changes from time to time with the changing market environment. Some of the relations grow in a huge way and exist for a long time while others do end very soon. The life cycle of the relationship among the partners changes from time to time and ends after their common goal is been achieved after which the partners either renew their agreement or they don’t (OaShaughnessy, 1995, pp. 54-59). Conclusion The strategic alliance between different companies do happen indifferent ways either competitors or in the form of co-operation relationship. The competitor’s relation among the different competitors is very formal and simple as they don’t tend to interact with each other. The interaction takes place with the help of middle men. In the competitors relation the relation is based on the action-reaction factor and the competitors try and improve their business in every possible to have a competitive advantage over the other competitors present in the global market. On the other hand the cooperative relationship is the one where the companies come in together and work for a common cause, there is sharing of information and other resources to achieve the common objective. The partners in the cooperative relationship are also competitors of each other but in a very small way. The relationship does also depend on the ecosystem of the market. International Strategy- globalisation and localization Introduction International strategy implies the strategy that the company needs to implement while going in the global market and also growing expanding its market in the global market environment with more competitors. It refers to globalisation where the company stretches towards expanding its market share in the whole world. It is been done in the same time creating brand awareness in the global market across to various people of different countries and growing connections between the local and the distant market. According to Held, McGrew, Goldblatt, and Perraton in 1999 the present market condition is the one where globalisation has become a very good idea for the companies to expand their market share (Robertson, 1992, pp. 89-94). Discussion Various schools of thoughts have been given for the concept of globalisation. According to Held and McGrew’s analytical framework the theory behind the concept of globalisation is constructed by developing three part typology including the sceptic, transformation list and hyper- globalist categories. With the increasing importance of global market various multinational companies and also the inter-governmental organizations which regulate the activities and are very important factor. Globalization is process of desiring a strategy and developing it and implementing a plan that can function for multiple locations especially indifferent countries while localization is the concept of customizing company’s products and getting locale to the foreign market (Jones, 2010, pp. 78-84). Localization is the concept where the company tries to become locale to the foreign environment of the other country. The company needs to adapt itself to the changing environment and the global diversity. The diversity exists in many factors like the linguistic change, the change in taste or preference by the customers. The company needs to implement many policies to adapt to these changes and adapt them fast so that they can become local company even in the foreign market. Adapting to the changes is a very difficult task for any organization and they need to study both the internal and the external cultures of the organization. The internal factors are the internal culture that is been followed in the organization while the external factor is the culture followed in the foreign country. Both these cultures must come together and especially the internal culture must merge itself with the external couture so that company can become a part of the foreign market as well and has its impact in the foreign market as well (Scholte, 2005, pp. 67-73). Different automobile companies especially in the sedan section like BMW enters different market in different countries based on the culture, the lifestyle of the people of that country and the conditions present in that particular country. BMW launches low height cars in US, UK and European countries but while launching in India, Pakistan, Bangladesh etc. the company looks to launch cars which are not so low lined but that suit to the conditions and are more fuel efficient. Companies going in the global market and looking to explore a new market it needs to look out for many factors. The various factors that differ in the global market from place to place are like culture of people, the preference of people, their needs and wants, the political environment, the regulations and rules of the made by the government of that particular country and also their interest rates etc. These all factors play a very major role for a particular company to grow in the global market and also company needs to consider these factors based on which they can penetrate in the market. Globalization is the concept of a combination of internationalization and localization wherein the company enters the new market and also becomes a part of the foreign market by becoming a locale. The customer’s needs and wants differ from location to location. The culture also varies in a huge way and it impacts a lot on the way the company’s image is been created in the mind of the customer. For example McDonalds has is product of hamburger in different countries but before entering in India it chose to not launch this product in the market of India as it is considered to be ethically wrong in India. This strategy has helped McDonalds to build a good brand image even in India apart from other countries and have a good market share in the fast food industry in the global market. The wide range of technological development in different country does differ in a huge way and based on the technological development the companies can look to launch their [product or use various technologies for promotion process to create good brand awareness in the particular market of that country. The company needs to have a good look towards the rules and regulation for business of a particular country and the political condition of that country before penetrating the market and launching its products. Globalization can be achieved by the company only when the company has a good survey of the market condition of the particular market where it is planning to enter. This market survey will give a lot of information to the company about the market situation, likes and dislikes needs and wants of the customers. An example for globalization is like P&G had cut its price for the Crest toothpaste by over 50% in China and has done this by reducing the packaging cost, as for customers of China the packaging is not as important as the flavour of the product (Ritzer, 2009, pp. 87-96). Conclusion Thus it can be seen that globalization has become a trend for most of the companies as they are targeting to enter new markets to increase their market share and revenue. Globalization does open a lot of opportunities to the company to increase its revenue and much more chances to increase its market share and presence in the global market but has to be done with lot of market study of the foreign market based on various factors. This strengthens the company’s position and makes it highly competitive providing a good competitive advantage to the company over the other competitors. Thus the companies must have a good strategy to go global and increase its market share successfully. Knowledge - organisational knowledge creation and transfer Introduction The creation, sharing and transfer of knowledge within the organization are critical aspects of the company that help to create suitable global strategies in order to increase the future competitive sustainability of the organization. Knowledge is considered as the most valuable resource available within an organization. Intellectual capital is more valued than physical resources and financial resources because physical and financial resources can be accessed by every organization but the level of intellectual capital exiting and developed within an organization acts as a driver of competitiveness for the business. From an organizational perspective, knowledge is the intellectual capital encompassing the skills and cognition of the different levels of employees and is rooted in available information within the organization as well as in the external environment of the organization. . Discussion The creation, maintenance and transfer of knowledge have emerged as key components of sustainability in the current evolving and dynamic business environment. Different organizations across the globe are using their capabilities of creating and transferring knowledge with an aim to foster competitive advantage and maximize the performance of the organizations. The success of an organization in the present world is much dependant on the extent to which an organization is capable in developing the intellectual capabilities of its members and in promoting the uninhibited sharing of this knowledge among various employees, departments as well as business units. The managers understanding of intellectual capital and the importance of knowledge sharing for developing the intellectual capital resources is vital for the success of the knowledge management process in a company. The successful implementation of knowledge management involving knowledge creation, knowledge maintenance, and knowledge sharing can be done only when the organization plays a major role in supporting and facilitating these processes. A learning organization provides better environment and scopes to foster knowledge development and sharing among the employees. The learning organizations generally have integrated systems which enable them to create knowledge database and share these knowledge in various aspects of the organization. This in turn, helps the organization to develop and progress at a competitive scale. Before embarking on the concepts of knowledge sharing and knowledge management, it is critical for the companies to develop a clear idea of knowledge among its employees. Understanding of the basic concepts of knowledge would help the employees in obtaining new knowledge with ease and interest (Ribeiro and Collins, 2007, pp.1417-1433). The distinction between data, information and knowledge should be clearly understood. Data are the raw facts available in the business. These raw facts become information when they are processed. Knowledge on the other hand is meaningful information derived from these data and information. Knowledge has its roots in information whereas information has its roots in data. Information is much more descriptive in nature while knowledge is predictive in nature which may be used in different situations and scenarios combines with the intellect of the user. A comprehensive definition of knowledge includes that knowledge is a combination of skills and cognition that are implemented by a user in order to solve both theoretical and practical problems. Though knowledge stems from information, the perception and application of knowledge is dependent on the person who is applying or sharing the knowledge. Therefore, a major part of knowledge is constructed by the person who is using it and is reflective of individual beliefs. In an organisation, this individual knowledge’s are used collectively to create a robust knowledge based for the business. Knowledge can be distinguished into different types. Knowledge can be hard knowledge and soft knowledge, formal knowledge and informal knowledge, embodied knowledge, encoded knowledge and engrained knowledge, personal, proprietary, common sense and public knowledge, and tacit knowledge and explicit knowledge. From an organizational point of view, tacit and explicit knowledge are most widely considered (Tsoukas, 2003, p.114). There are much significance of knowledge development and knowledge transfer in the modern day organization. The factors like globalization, strategic unions, foreign market expansions and global economy have emphasized that knowledge transfer has a significant role to play in improving the performance levels, competitiveness and sustainability of an organization from the global perspective. According to the knowledge based theory, the developments, application and sharing of knowledge are the main drivers of increasing organizational performance and creating competitive advantage. Knowledge within an organization helps the organization to identify and expand their visions and objectives and develop suitable global corporate strategies in order to meet these objectives. Also, the organizations operating in the present global business world tend to maintain decentralized structures which make it necessary for the organization to manage their requirements through the creation, capture and transfer of new knowledge within the organization. Knowledge can be adequately created, devolved, managed and shared through individual cognitive skills and collaborative social processes. Many scholars have indicated that the inter conversion of tacit and explicit knowledge boosts the creation of organizational knowledge (Gourlay, 2006, pp.1415-1436). The four mode model of organizational knowledge creation and transfer include Socialization in which tacit knowledge is transferred through social interactions and communications like discussions, simulations, observations etc. Externalization in which tacit knowledge is converted into explicit knowledge through the use of hypothesis, metaphors, descriptions, concepts and models. Combination in which explicit knowledge is derived from explicit knowledge. The existing knowledge is synthesized, categorized and merged to develop new explicit knowledge. Internalization: in which explicit knowledge is converted into tacit knowledge by changing abstract ideas into concrete ideas containing integral value. Therefore, there are four modes of knowledge transfer and conversion between explicit and tacit knowledge. Organizations can focus on knowledge management by ensuring learning systems, creation of knowledge, supporting knowledge devolvement, applying the developed knowledge, manage the knowledge resources and ensure smooth sharing of knowledge within all levels of the organization (Gueldenberg and Helting, 2007, pp.101-122). The creation and sharing of knowledge is extremely important in industries like informational technology, automobile manufacturing, and consumer electronic goods and pharmaceutical. These industries have to compete on a global platform and are majorly driven by innovation. Since innovation is facilitated by knowledge creation and knowledge sharing, it is important for these industries to focus on knowledge as a valuable resource to develop their global corporate strategies in order to maintain competitive suitability advantages. Apple Computers Inc. is an organization which is a strong user of knowledge management practices and strategies in its business processes. The knowledge management practices are used in Apple to create, identify, represent and enable new experiences and possibilities and enhance the organizational performance driven by innovation. The key provisions of Apple Inc. including the principles of management, organizational activities and history of the company are built on aspects of knowledge management. Apple is one of the most active organizations and one of the early innovators and adaptors of knowledge management practices in its functionalities. The production, innovation, technical and output aspects of Apple Inc. are built on knowledge management (McInerney, 2002, pp.178-180). Knowledge is created, developed and nurtured to a high extent in the company which has led to high value creation and sustainability for Apple in the present and future as well. Toyota is a major company in the automobile sector which is renowned for effective knowledge management system. The company uses knowledge development and management processes to create a suitable work environment in both virtual and physical aspects. The company has established a new format of reporting in which the executives are expected to submit reports with suitable contents and recommendations to facilitate knowledge sharing and management. The company has established the commitment of the management towards knowledge management in the organization (Talisayon, 2007, p.34). Leadership and creation of good work culture is encouraged to facilitate knowledge creation from the human resources. Knowledge sharing programmes and brainstorming sessions are conducted to generate ideas and foster innovation in Toyota. Conclusion Organizational knowledge creation is a much complicated process than individual knowledge creation. All the four factors of knowledge creation i.e. socialization, externalization, combination and internalization should be combined effectively to ensure organizationally useful knowledge creation. The conversion between tacit knowledge and explicit knowledge remains a vital and sensitive area in organizational knowledge management. A learning organization can efficiently use the knowledge development factors to create a robust knowledge base in the organization. The processes like supporting new learning, applying the new knowledge, sharing knowledge, double loop learning and managing knowledge are effective parts of the knowledge management in organizations. References Abraham, S. C. 2012. Strategic Planning: A Practical Guide for Competitive Success. UK: Emerald Group Publishing. Cunningham, J. and Harney, B. 2012. Strategy and Strategists. UK: Oxford University Press. Gourlay, S. 2006. Conceptualizing Knowledge Creation: A Critique of Nonaka’s Theory. Journal of Management Studies. Vol.43 (7), pp. 1415-1436. Gueldenberg, S. & Helting, H. 2007. Bridging The Great Divide: Nonaka’s Synthesis of Western and Eastern Knowledge Concepts Reassessed. Organization. Vol.14 (1), pp.101-122. Hill, C. and Jones, G. R. 2009. Strategic Management Theory: An Integrated Approach. USA: Cengage Learning. Jones, A. 2010. Globalization: Key Thinkers. London: Polity. Kozami, A. 2002. Business Policy and Strategic Management, 2e. India: Tata McGraw-Hill Education Marr, B. and Gray, D. 2012. Strategic Performance Management. USA: Routledge. Mazzucato, M. and the Open University. 2002. Strategy for Business: A Reader. UK: SAGE. OaShaughnessy, J. 1995. Competitive Marketing: A Strategic Approach. New York: Routledge. Ribeiro. D.A. & Collins, L. 2007. The Bread-Making Machine: Tacit Knowledge and Two Types of Action. Organization Studies. Vol.28 (9), pp.1417-1433. Ritzer, G. 2009. Globalization: A Basic Text. London: John Wiley & Sons. Robertson, R. 1992. Globalization: Social Theory and Global Culture. London: SAGE. Scholte, J. 2005. Globalization: A Critical Introduction. London: Palgrave Macmillan. Sudi, S. 2003. Creating Value from Mergers and Acquisitions. India: Pearson Education. Tsoukas, H. 2003. Do we Really Understand Tacit Knowledge? Oxford: Blackwell Publishing. McInerney, C. 2002. Knowledge management and the dynamic nature of knowledge. Journal of the American Society for Information Science and technology. Vol. 24(1), pp.178-180. Talisayon, S. D. 2007. Knowledge management: From Brain to Business. [Pdf]. Available at http://www.apo-tokyo.org/publications/files/ind-25-km_bb.pdf. [Accessed on 3 April 2014]. Read More

 

Read More