Business Strategy. (Tesla Motors, Kellogg's Efficiency) - Assignment Example

?Business Strategy Part Question Key elements of Kellogg's business strategy Key terms Kellogg’s Mission ment Achieve growth Visions Kellogg's as the food provider of choice for consumers Objectives Brand marketing Goals Best safety performance in the industry Core Competence Worldwide demand for ready to eat cereals and other baked products Question 2: Problems with strategic planning 1. Unclear aims, goals and objectives 2. Lack of a plan to achieve the vision and fulfil company mission 3. Use of generic or academic structure in formulating company policy Analysis of Kellogg's Efficiency The Kellogg's management was aware that the company needs to be clear on what it intends to achieve in the long term. Therefore, the firm established SMART aims, goals and objectives, and then formulated a strategic plan to enable it to achieve its vision of being the food provider of choice. The mission statement focused on achievement of growth by offering better services to customers and actively catering for the needs of its stakeholders. In order to formulate its strategy properly, the firm had to identify the expectations of stakeholders like customers, employees and shareholders. Afterwards, it had to analyse its current performance in regards to service delivery, corporate social responsibility, and profitability. Finally, a company strategy was defined on what the firm needed to have achieved in order to close the performance gap (Ketokivi and Castaner, 2004: 360). In order to achieve its objectives, the company needed a plan, most of which involved strengthening the core competencies and correcting the mistakes the firm had been making in regards to quality service delivery. For instance, Kellogg's is excellent at keeping injury levels among its employees at their lowest levels; therefore, all the firm did was to establish targets to act as benchmarks for its facilities. The facilities used this benchmark in order to be recognized as the safest, and the firm benefitted in the form of increased employee satisfaction, low turnover, higher productivity, revenue and profits, and a competitive edge for the firm over the years (Ketokivi and Castaner, 2004: 360). Kellogg's had to differentiate itself from other firms in the market; which it did by establishing working relationships with firms like Tesco, and using corporate social responsibility (CSR) to improve its brand reputation. For instance, Kellogg's worked with the supermarket chain in order to capture the market share of customers that seek to obtain all their shopping from one location. Moreover, the firm had responsible corporate social responsibility in its strategic plan to ensure that all its activities are geared towards achieving long-term and short-term goals. For instance, it sponsored community-based events that promote physical activities among customers and members of the public. In addition, all its product packaging has information on the products and the recommended daily intake for various nutrients. By doing so, Kellogg's showed its customers that their welfare comes first, even if it means having them to reduce the amount of products they would otherwise have bought without using the guidelines on the labels (Oliveira-Castro et al., 2008: 454). Analysis of Tesla Motors The firm aims at producing fully electric motor vehicles for use by low and middle-income earners. However, due to the high costs of production, and lack of large-scale production infrastructure to enable large scale production the firm may not achieve its objective. Production of cars is a costly venture, and considering the lack of resources at Tesla, the dream of a fully electric vehicle for family, government and other clients may never be achieved. Contrary to expectation, the management of the firm has a strategic plan in place that aims at achieving this vision by, primarily by driving the firm into mass production to enable it to enjoy the economies of scale of doing business in bulk (Schroder, 2009). Tesla’s strategy is to attract public interest, especially from environment conservation enthusiasts by presenting itself as the solution to problems plaguing the planet like global warming and environmental degradation. The aim is to enable these people to participate in saving the planet by investing in a project whose fuel leaves as little carbon footprint as possible. Though Tesla’s vehicles are powered by the national grid that uses diesel as one of the fuels, the firm has incorporated advanced technology to ensure that as little energy as possible is wasted during power transmission. The plan is to produce high power sports cars for the high-end market, reinvest the profits and produce cheaper vehicles, and continue the cycle until the firm can produce vehicles for general use. On the implementation front, Tesla has already produced and sold its first and second generation Tesla Roadster, and the firm’s scientists have gone back to work on the next stage. The firm forecasts that though the next cars will be cheaper than the Roadster, they will be beyond the reach of the common family setting. If Tesla’s strategic plan goes as intended, then there is a high likelihood of cheap fully electric vehicles in the near future (Schroder, 2009). Question 3: Growth Share Matrix The planning strategy shown in the figure is a growth share matrix, which enables a firm to make investment decisions depending on its ability to bring in profits, and ability to capture and retain a market share. The two variables under consideration are market growth and market share, and by these investments are divided into four classes: Cash cows are the investments that have a large market share in a mature market, whereby the business brings in sizeable profits, but because the market is not growing, the firm invests remarkably little into the business. This means that the investment is a cash cow that the firm milks with little or no intention of reinvesting. Dogs are the investments that have a low market share in mature markets, and, therefore, do not bring in as many profits as the cash cows. These investments have little room for growth in the stagnant or slow markets, but they manage to earn enough profits to keep running. Question marks are the investments with a low market share in a rapidly growing market, but they do not bring in profits because the firm is busy investing to maximize market share. The outcome of these investments in the long run is unknown, but it is the wish of every investor to convert them to stars and cash cows at best or dogs at worst. Stars are the investments that have a large market share in a fast growing market, which means that they bring in a high market share for the firm and have the capacity to grow further. The aim of every firm is to convert its stars into cash cows when the market slows down (Stonehouse and Campbell, 2004: 92). When Kellogg's launched the fruit winders, the investment fell in the question mark quadrant. This is because the United Kingdom market for the fruit based snacks in 2002 was not well established, and the winders were some of the first snacks of their kind in the country. In addition, the firm invested a lot in the project by taking unconventional approaches like online advertising with animated advertisements and animated characters. In order to achieve the target for set up goals for making the winders the children’s snack of choice, generate revenue of over ? 15 million in 2 years, and profitability within the first two years (Dranove and Marciano, 2005). Organizational and Environmental Audit Organisational Audit Kellogg’s Strengths The firm has been in the industry for long and has an unmatched expertise and experience Weaknesses Rapid expansion is causing a strain in the firm’s management approach Opportunities Emerging markets in Africa and Asia that the firm should grab before its competition does Threats The campaign to end excessive consumption of processed foods is bound to take a toll on the firm’s revenue Environmental Audit Kellogg’s Political Changes in these aspects of the macro economy could have a negative or positive effect on the ability of Kellogg’s to remain competitive. The firm must work to sustain its competitive edge in the face of these rapid changes. Economically Socio-Environmental Technological Environmental Legal An alternative organizational audit for Kellogg's would be the Porter’s five forces. This is the best approach to use if a firm intends to use only one organisational audit, mainly because it combines the organizational and the environmental aspect. However, any of the audits is as useful as the management has the capacity to use it; in addition, no audit should be used in its textbook form but should be modified to suit the unique needs of the organization (Qin, 2009: 470). Question 5: Stakeholders are people or organisations that directly affect or are affected by the firm’s activities, and they can be internal stakeholders or external stakeholders. Kellogg’s stakeholders include customers, shareholders, the management, and employees. Business Strategy Part 1 The firm intends to achieve growth by a strategic alliance, whereby it will start a joint venture with another firm or individual, and then use the proceeds from the investment to improve its core business. The aim is to acquire 60 percent stake in the new venture such that the firm will have a better command at the happenings of the venture. The strategic partner should be able to inject the required amount, and have the capacity to keep working on its end of the production chain (Hitt, Ireland and Hoskisson, 2010). Presentation Strategic partnership is essential for the firm because of two main reasons: Financial: the firm would want to expand into other regions and capture new markets, and invest in recent technologies that would be instrumental in cutting costs and increasing the quality of service delivery. However, the firm does not have enough money to fulfil these aspirations; investing in a partnership would enable the firm to acquire money for its own use in future projects. Technical: the firm needs to keep the skills in the possession of employees and management up to date with market requirement; the partnership will enable transfer of skills between the two firms. Moreover, the partner may have technical, management, and investment skills that can increase the survival chances of the firm in the global market. A strategic partnership is better than other approaches since it enables partners to work closely together by combining strengths to achieve a competitive edge. Moreover, it enables firms to retain their businesses, which may be instrumental in supporting the new venture before it becomes profitable (Hitt, Ireland and Hoskisson, 2010). Alternative Strategy In case the firm cannot convince investors to work in the strategic partnership, it may be forced to adopt some radical measures aimed at cutting costs. Some of the steps the firm could take include: Cutting down on labour force to only the core employees; in case the company needs seasonal services, it will outsource expertise from specialist consultancies. Employing a flexible workforce made up of part time employees, retirees, and other employees who may be laid off without unnecessary burdens on the firm would be an excellent idea. This would make the firm flexible, adapt to market changes, and save on the costs that may have been incurred due to high rates of employee turnover. The firm would cut back on spending on its projects that have little or no profitability; this will enable the firm to work on what it can do best, and improve service delivery through specialisation. The firm will commit resources to research and development to identify the most effective and efficient approach to structure and functional components of its businesses (Hitt, Ireland and Hoskisson, 2010). Question 2: Alternative Approach Advertising and Brand Marketing As the economy improves, people start earning more, and they can afford to spend more even on luxury products. The aim of advertising and brand marketing is to keep brand names and products in people’s minds such that whenever they need a basic or luxury product, then the company name would always come to mind. Moreover, brand marketing would also include corporate social responsibility whereby the firm will invest in the communities around its businesses, such that the locals would always associate the firm with positive things like environmental conservation and other aspects of CSR that benefit the community and the environment (Hitt, Ireland and Hoskisson, 2010). Roles of Presentation Teams Business owners or the stakeholders will avail capital when the implementation starts; however, the implementers will consult these fundamental stakeholders for their suggestions and approval of the venture. Strategic managers will anticipate, plan and implement measures that will give the business a competitive edge against competitors, and ensure the survival of the business despite changes in the business environment. These stakeholders are the primary tools by which the business changes its internal environment in line with changes in the external environment, with the alignment of the two increasing the chances of survival (Hitt, Ireland and Hoskisson, 2010). Question 4: The Business Offer The firm will offer a 40 percent stake to its partner, in exchange, the firm will contribute ?32 million as the financial requirement. However, this is subject to negotiations, especially considering the state of the world economy and the drop in value of the sterling. Moreover, the partner should hire 5 employees; all these employees must be at least university graduates, with at least 2 being professionals of a related field with not less than 5 years experience (Hitt, Ireland and Hoskisson, 2010). Question 5: Schedule of Implementation Step Timeframe Activities Strategy development 2 months Analysis of project feasibility including the requirements, and financial, technical and human factors The overall effect is alignment of venture objectives with the firm’s objectives Assessment of partner 3 months Analysis of the strengths and weaknesses of a potential partner in an attempt to establish the possibility of incompatibility in terms of corporate culture, management styles and other factors This enables the alignment of the strategic objectives of the partner with those of the firm and the joint venture Negotiation of contract 2 months Defining the input and rewards for each partner and comparing to expectations Establishing a common ground in terms of objectives and other aspects of the venture Stating the termination clauses and defining terms, conditions and consequences for performance Alliance operation 5- 15 years Putting resources together and working towards achievement of venture objectives Implementing plan, monitoring and improvement After a specified period partners should measure the success and /or failures of the venture Termination The project will be terminated under any prevailing circumstances; however, both parties must be in agreement on the termination The strategic team will monitor all the time aspects of the step to ensure that all deadlines are met. The venture should be profitable one year after the investment to ensure that money does not stagnate whereas it could be used in ventures that are more profitable. At each step, the firm, with the agreement of the partner, will outsource to ensure that experts handle the project, in order to maintain the highest possible degree of professionalism. Moreover, stakeholders in both firms will collaborate to monitor the process and in order to identify weaknesses and make improvements as well as maximize effectiveness and efficiency (Hitt, Ireland and Hoskisson, 2010). References Dranove, D. & Marciano, S. (2005) Kellogg on strategy: concepts, tools, and frameworks for practitioners, John Wiley & Sons. Hitt, M.A., Ireland, R.D. & Hoskisson, R.E. (2010) Strategic management: competitiveness & globalization, concepts, Cengage Learning. Ketokivi, M. & Castaner, X. (2004) ‘Strategic planning as an integrative device’, Administrative Science Quarterly, vol. 49, pp. 337–365. Oliveira-Castro, J.M., Foxall, G.R., James, V.K., Pohl, R.B., Dias, M.B. & Chang, S,W. (2008) ‘Consumer-based brand equity and brand performance’, The Service Industries Journal, vol. 28, no. 4, pp. 445-461. Qin, Z. (2009) Introduction to e-commerce, Springer. Schroder, D. (2009) Entering the electric car market in Germany: strategic management, GRIN Verlag. Stonehouse, G. & Campbell, D. (2004) Global and transnational business: strategy and management, John Wiley & Sons. Read More