Analysis of the Strategic Management Cases - Assignment Example

A growth strategy involves a business achieving yearly growth in revenues for a prolonged period of time. The growth achieved by such a firm is higher than the industry standard. A growth strategy can be achieved based on operational skills, privileged assets, growth skills and special relationships (Tutor2u, 2008). In the pharmaceutical industry many companies have been able to implement a growth strategy based on owning key patent protection for a drug which gives the company a monopoly over the treatment for a certain disease for 17 years. A US food chain that was able to achieve tremendous growth over the last decade is Starbucks Cafe. Starbucks achieved incredible levels of growth in part due to a corporate expansion rollout that increased the amount of establishments of Starbucks around the world. The company also utilized a special relationship with its suppliers of coffee called fair trade coffee. Under the fair trade coffee arrangement Starbucks ensured the quality of its raw material to be able to provide premium coffee drinks in exchange for a guarantee of paying a higher price per pound per coffee that the market value. Fair trade coffee growers are guaranteed a minimum of $1.26 per pound, which is significantly higher than the wholesale price of $0.60-$0.70 per pound for regular coffee (Coffeeresearch, 2006). A stability strategy involves continuing to do what an organization has been doing in the past while seeking improvements to its current strategic approach |(Gilbertson, 2008). Such a strategy is suitable for small businesses that do not have the access to capital to expand beyond its current capabilities. If the business is profitable the owner will pursue a stability strategy while looking for improvements in its cost structure. Lowering costs is the best way for such a business to increase profitability along with finding ways to improve the efficiency of the operation. For larger businesses a stability strategy is feasible for companies that are in the maturing stage of their life-cycle in an industry that is not characterized by constant change. An example of stable industry that does not have much innovation is the insurance industry. Business renewal is a business strategy that creates value by identifying, developing and implementing new business opportunities (Manyworlds, 2008). This business strategy is suitable for companies in industries with fast changing environments. The computer industry and other high tech industries fit the profile for implementation of business renewal. Moores law states that computing speed doubles every two years. Microsoft Corporation is firm that has effectively utilized a business renewal strategy. The company is the world leader in software solution and dominates the operating system marketplace. The company has released a new operation system every two or three years with new features to keep its customer buying. It also diversified its business model into other segments such as the video game industry when it released the Xbox game console in 2005. Case 2: Time for Bread 1. The companys executive team had a vision of turning their small bakery business into nationally recognize business entity. One of the steps the company took to achieve its goal was scouting the best locations that fit the profile of its target customer. The best locations for their stores are suburban areas packed with middle class citizens. In order to beat out the competition the company has focus on implement a product differentiation strategy. Panera Bread food product exceeds the quality standards of any fast food chain restaurant in the United States. The functional strategy that was utilized to achieve great levels of expansion to was selling franchises. As of October 6, 2008 there were 1230 franchises across 40 states and Canada (Panerabread, 2008). 2. Shaich and his management team can determine if the company is accomplishing its corporate strategy by utilizing performance metrics to evaluate its customer satisfaction levels, operating and financial performance. The number of stores is a good indicator of the company’s ability to penetrate the marketplace. This metric has to be compared with other leading food chain stores such as Subway, Starbucks, and Quiznos. Total revenues, net margin and return on equity are three performance metrics that can help management determine if the company’s financial results meet the expectations of its stakeholders. Customer surveys can be administered at the company’s stores to collect primary data to access the satisfaction of the customers. 3. The rapid growth strategy of opening 100 stores per year has impressed many investors and industry experts. If the company continues too grow at such a torrent pace it may experience different types of problems. First of all early growth can cap the company’s capacity for future growth by saturation of the marketplace. If the company becomes too nationally recognized it will be targeted by other food chains and more competition will come their way. One of the formulas for success for the company has been their location selection criteria. Greater expansion may force the executives to become more lax in their location criteria and the new franchise may lose their niche placement in the marketplace. 4. Franchising is a popular business model that allows company to expand its operation rapidly without injecting their own capital. A franchise in essence is a sale of corporate intellectual property to an individual which provides the person with a brand name and an operation system to run business. It is beneficial for a company to have a franchise model because the firm sells obtain large lump sum of money from the sale of each franchise. The company is also entitled to monthly residual income which is calculated as percentage of total sales which fluctuates between 5% and 15% depending on the agreement. Some drawbacks for the host company is that it is responsible for all the marketing expenses to promote the brand. Another drawback is the loss of operating control. 5. Panara Bread top quality bread is marketed as trading up strategy in which the middle class decides to move up in class status in certain aspect of their purchasing behavior in order to obtain a higher quality product or service. Another company that has been effective with the trading up strategy is Starbucks Café. The company’s top quality coffee drinks are sold at premium prices to the middle class who decided to trade up to acquire better tasting coffee drinks. The risk of such a trend is allowing the strategy to become a fad. A fad is short term market trend that fades away with time. The best way to ensure the strategy is effective in the long term is to build up the brand value of the company. Case #4: Tata’s Time 1. An international company gains global recognition which increases the size of its customer population. Going international allowed Tata to become a diversified conglomerate that participates in various industries. A company’s opportunities are limited in its domestic marketplace. A major drawback of becoming an international player is the competition becomes more intense. The bidding war for the acquisition of Corus Group PLC is an example of how things can blow out of proportion in the international scene. 2. Tata has grown significantly in size to become India’s biggest company. To achieve this benchmark Ratan Tata had to overpay to acquire Corus Group PLC. Along the way he lost the confidence of his shareholders who felt a 22% premium was too steep a price. Increasing the company’s shareholder value is good way to get win back the shareholders. New innovative products are serviced can be introduced to penetrate the company into new marketplaces. Another potential problem the company may face is high labor costs and bureaucracy slowing down the decision making process and reaction to new trends in the marketplace. 3. India has the world 2nd largest population with 1.1 billion inhabitants. The real gross domestic product per capita in India is $3452 (Culturegrams, 2008). The people suffer from malnutrition, poverty and poor sanitation. The weak economy of India and the inability of the people to pay for basic necessities pose a business threat to companies in the consumer markets. It is in the best of Tara to expand outside of India to develop its consumer products division. India is the world top exporter of IT services. There is a lot talented professionals in this field in India who whose wages are lower than in developed nations. This is an excellent opportunity for Tara to expand its Communication and IT divisions. The underdevelopment of India infrastructure presents an opportunity to land governmental contracts to improve its energy capabilities and become its main supplier for construction projects. 4. The purpose of the Tata Group is to improve the quality of life of the communities they serve which is accomplish by becoming leaders in sectors of economic significance and by implementing aggressive growth strategies (Tata, 2008). Tata Group believes in values such as integrity, unity, understanding, excellence and responsibility. The company globalization strategy helped the firm achieved over $62 billion in sales in 2007, of which 61% were attained from its international operations. The company’s global expansion was achieved utilized different strategies such as wholly owned subsidiaries, joint ventures and acquisitions. Tata Group has over 350,000 worldwide across all seven continental regions (Tata, 2008). References Coffeeresearch.org (2006). Fair Trade Coffee. Retrieved November 21, 2008 from http://www.coffeeresearch.org/politics/fairtrade.htm CultureGrams. (2008). Country Profile: India. Retrieved November 22, 2008 from CultureGrams database. Gilbertson, J. (2008). Stay the same or stability strategy. Retrieved November 22, 2008 from http://www.mondaymorningminutes.com/organization-strategy-stay-the-same-or-stability-strategy/ Manyworlds.com (2008). Renewal Strategy. Retrieved November 21, 2008 from http://about.manyworlds.com/309/business_renewal.htm Panerabread.com (2008). Company Overview. Retrieved November 22, 2008 from http://www.panerabread.com/about/company/ Tata.com (2008). Retrieved November 22, 2008 from http://www.tata.com Tutor2u.com (2008). Mckinsey growth pyramid. Retrieved November 22, 2008 from http://tutor2u.net/business/strategy/mckinsey_pyramid.htm Read More