A Strategic Business Plan - Essay Example

Corporate Strategy Analysis: Part and Part 2 Part The strategic business plan for any organisation depends on its resource base as well as its capabilities. A strategic business plan is an integration of various elements that propel a business towards overall goal achievement. The strategic business plan depends on effective practice of sustainability theories as well as those of competitive advantage. This paper defines the areas that will be analysed in Part 2. The company that will be dealt with in this paper is the Anukul Group. This company basically manufactures exclusive designer furniture, stained glass and patchwork linen. It is a company owned by Dipti Mahapatra in India and has been in the business for close to two decades. Having started in the year 1988, this company started out as a small unit with four tailors and has now gone ahead to become one of the most prestigious names in interior decoration in the state of Orissa. Case Study: Following are the points pertaining to the company and its operations: The company began in 1988 as a linen manufacturing unit. This linen was designed and crafted by Dipti Mahapatra. Towards 1992, Dipti went ahead and launched a designer collection. The prices of these products were higher than her normal range. The products include bedspreads, cushion covers, linen accessories as well as curtains. The demand for Dipti’s products grew and there was a market for interior decoration. By 1993, Dipti was busy undertaking several turnkey projects for complete furnishing of guest houses, hotels, as well as the Governor’s residences in the state of Orissa. In 1995, Dipti decided to include custom made designer furniture as well as stained glass art in her product offerings list. By 2000, Dipti became a household name in the small state of Orissa with regular articles on her work in the newspapers and other magazines apart from televised interviews. In the 2006, Dipti decided to move to a bigger city. She moved to Bangalore, but has found that there is a certain amount of stagnation on the business front. Problem Areas: Orissa is a small state in the Eastern part of India. It is cut off from any major development that takes place elsewhere in the country. For this reasons, Dipti wanted to shift. Following are the problems that she has encountered: Lack of marketing initiative: she has had little need for intensive marketing activities as her products sold by word of mouth in Orissa. Difficulty in managing HR: Dipti does not know the local language and hence she has had a problem with finding employees. Bangalore is a big city and she still needs to cross a variety of learning curves in order to know the market and prospective clients. Part 2: Competitive Advantage and Sustainable Entrepreneurial Growth: Before laying down the formal plan of action, it is necessary to understand the elements that will be involved in the strategy that has been developed later in the paper, from the perspective of the company. This will help us understand the exact application of the theories through the length and breadth of the paper. A major part of Dipti’s plan of action must include following a strategy based on gaining competitive advantage as well as achieving sustainable entrepreneurial growth. Let us first examine competitive advantage to see how and where it will fit in with the overall growth and expansion of the Anukul group. Michael E Porter has paved the way for revolutionary strategising trends and a whole new perspective on competition through his competitive advantage theory. In the corporate world, Porters first book Competitive Strategy (1980), which he wrote in his thirties, became an international best seller, and is considered to be an authoritative piece of work on corporate strategy. The book, which has been published in nineteen languages and re-printed approaching sixty times, changed the way business leaders’ minds worked. Further, it remains a guide of choice for strategic managers on a global scale. Apart from being rich in lessons about why and how industries, regions, and nations succeed or fail, this book is of great value as the first serious attempt to develop a really original grand theory of national economic development processes since the early years of Postwar development economics, and one of the most original ways of thinking about development policy in years. Source: Alan Chapman 2005 These five competitive forces determine industry profitability and attractiveness apart from being responsible for shaping the prices that firms can charge, the costs they have to bear, and the required investments to engage in industry level competition. We are concerned with the fact that Porter’s essentially ahistorical approach cannot provide a full account of either a nation’s competitive advantage and corporate strategies or the growth and development of industrial clusters. For this, let us first understand competitive advantage. This has special relevance for the Anukul Group, owing to the following reasons: The company needs to launch a full fledged expansion policy. It needs to zero in on resources which can be procured on easy and regular terms. The company needs to study the market in Bangalore which is at least 10 times larger than that of Orissa. Bangalore is the Silicon Valley of India, which implies that people have greater disposable income and spending power. There needs to a study of the marketing options in order to gain competitive advantage as there are many players involved here. Competitive advantage is the response of a firm to the pressing need to organize and perform discrete activities. While these needs may not be perpetually spelt out, it is the responsibility of the planners and executers of policies to foresee such situations when catering for growth and development of the firm n various levels. So this implies that the Anukul Group needs to employ an individual perspective with an affiliation towards the basic industry type as the market in Bangalore is at least 10 times larger than that of Orissa. In the textile industry, which is the basic arena of operations for the Anukul Group, there is a large margin for profit and the products pass through a variety of middle men before reaching the final destination or end user. In this regard, it would be profitable for the Anukul Group to diversify and meet the composite needs of the furnishing and interior industry so as to cater to the middle men first. This will help the company gain a foothold as far as the export houses and other big stores are concerned. In this regard, all the activities of the Anukul Group must contribute to the creation and development of buyer value, which may be defined as the consumer base of a firm and its product in qualitative as well as quantitative terms. Therefore, in keeping with the theory developed by Porter, the buyer value of the Anukul Group must be viewed as directly proportionate to the effort put in by the firm when providing various customer and other services especially in terms of time and quality maintained. In this way, the firm can create value for its buyers where the ultimate value a firm created is measured by the amount buyers are willing to pay for the product or service offered in terms of the various activities it indulges in, as specified above. In the context of the Anukul Group, does Porter’s theory ask the relevant questions? What must the company do to ensure that the industry evolves in a way that is maximally advantageous for the organization in particular? What skills and capabilities must the company begin building now if it is to occupy the industry high ground in the future? How should the company organize for opportunities that may not fit neatly within the boundaries of current business units and divisions? New competitive realities have broken down various industry boundaries as far as the lifestyle segment in India is concerned. Also, a large chunk of the standard management practice has been discarded, while the conventional models of strategy and growth have been declared obsolete. These have been replaced by the powerful ideas and methodologies of Gary Hamel and C.K. Prahalad, whose much-revered thinking has already given birth to a new language of strategy. While it is true that their work paves the way for the development of a coherent model for how todays executives can identify and accomplish no less than heroic goals in tomorrows marketplace, one can also determine ways for executives to ease the tension between competing today and clearing a path toward leadership in the future on a more global level through the basic framework of the theory laid down by the authors. This will hold testament to the importance and relevance of competitive advantage that forms the backbone of so much of todays accepted wisdom. Each argument put forward by the authors is clear and is seen to be progressing through the reasons behind competitive strategy being believed to be less mechanical that the claims of Porter in his theory of competitive advantage. Therefore, Porter’s approach lacks the underlying belief that winning in business today is not about being number one - its about who "gets to the future first", thus making the "core competencies" approach the right one to strategic planning when it comes to providing a full account of either a nation’s competitive advantage and corporate strategies or the growth and development of industrial clusters. Implementation Plan In the case of the Anukul Group, the ten year strategic plan that has been put forward from the point of view of the CEO (i.e., the author of this paper), has tow basic dimensions that make use of competitive advantage as well as sustainable entrepreneurial development. These dimensions are: Entrepreneurial Control System Marketing Entrepreneurial Control System: A control system in organizations largely influences its ability to recognize the social and cultural modes of control within it so as to lay down in clear terms the role of the entrepreneur when it comes to deliberating social control over the employees concerned. A management control system essentially consists of various elements including the management accounting practices employed by a particular organization. In this regard, it is imperative to state that the control systems employed by the management are a result of evolution of various systems and beliefs over a period of many years. This is what formalizes and assists in the quantification of various information – financial and other. In doing so, the management identifies various elements of the control system that have to do with the external information relating to markets, consumers, competitors and their decision making mechanisms. This helps the management take decisions of its own. Even though the disciplinary separation between comparative policies and social relations within the organization has been regularly challenged, in the traditional theories it continues to persist as a result of institutional inertia and hiring practices. The traditional perspective describes control as a means of regulation and a means of setting certain standards for inspection. In this regard, the traditional perspective more often than not seeks to restrain rather than enable in order to manage and exercise control. Here, the Anukul Group will make use of the issue of democratization in an attempt to go beyond rhetoric and to develop a framework that integrates the role of transnational activism into the analysis of domestic regime change. This is where the systems based view of control fits in, as laid down by Otley et al and Simons. Even though management still pays a great deal of attention to the empowering role of networking and mobilization, the long-term effects of such interventions are still poorly understood where influencing behaviour under certain circumstances and in certain environments is concerned. Therefore, as Collier tries to imply, the systems based view of control is more often than not a means of measuring process outputs through concerted efforts at influencing the internal factors at play. This systems based view is a good approach for the Anukul Group in the first five years. The next five years may resort to a use of the interactive control system. With the use of interactive control systems by the top managers of the company, there will be a trend of regular and personal involvement in the decision activities of subordinates. This will be triggered by the recognition of a need that a diagnostic control system needs to follows an interactive model through a pattern of continuous and frequent top management attention and interest. Further, this process must be influenced by strategic uncertainties. In this case, the actions taken by newly-appointed top managers attempting revolutionary and evolutionary strategic change, irrespective of the fact that they used to exercise control systems interactively to overcome inertia. Therefore, there is a greater need for communication of the substance of their agenda, structure implementation timetables; ensure continuing attention through incentives, with a shift of focus towards awareness regarding organizational and strategic uncertainties. In this way, the traditional theories have put the management control systems in the perspective of information flows and the organizational and environmental dynamics through key performance measures at group and organizational levels. (Ferreira et al, 2005) This kind of perspective supports the flow of feedback and suggestions at every level. From a systems theory perspective, the management control will comes across as an important tool in financial control where accounting has been described as a “pre-eminent technology by which to integrate diverse activities” (Collier, 2005). Owing to the existence of calls for a broader perspective of management control than accounting-based controls, the limitations of financial measures will find an outlet in the requirement for a return to the operations-based measures. This will mark the origin of management accounting systems and coupled with the requirement to devise a methodology that will rise beyond the limitations posed by financial measures, one will find the basis for the formulation of a wholesome economic perspective. This can explain the subsequent development of the Balanced Scorecard (Kaplan and Norton, 1992) and similar models. There will be a close amalgamation of the traditional perspective with that of the economic perspective in all arenas of the management system in the Anukul Group. This will lead to uniformity of operations and an easy progression of the scale of activities over ten years. From the economic perspective, management control systems seems more like a process that consists of strategic plans, long-range plans, annual operating budgets, periodic statistical reports, performance appraisal, apart from policies and procedures (Daft and Macintosh, 1984). This spectrum also includes personnel controls that coordinate personal objectives with those of the organization so as to influence higher ranks in the organization as well as the action controls that influence various levels of organizational actors by prescribing actions to be taken which is true to the prescriptive nature of the economic perspective. Furthermore, these results control the influence over organizational actors so as to measure the results of their actions (Merchant, 1998); as well as objectives, strategies and plans, target-setting, incentive and reward structures, and information feedback loops. Thus it has been concluded that performance management can provide an important integrating framework for the economic perspective unlike the traditional perspective. The Anukul Group never had formal, systems-based controls as a significant feature as it is a goal-oriented organization. While these goals may lean more towards short term profits than long term sales growth and market share it has been noted that the twin objectives of sales growth and continual R&D were clearly understood throughout the organization. Further, the Anukul Group demonstrated that the means of measuring achievement is via cash flow, monitoring actual sales levels apart from a concerted effort towards achieving sustained progress through R&D and patent registration in the technological department. Therefore, the economic perspective has shown the structuring of a relevant accounting which has ensured a discourse of future-oriented market share, sales growth and cash flow. In the terms used by Miller (1998), traditional accounting had been pushed to the margins, while the spreadsheet models developed by Taylor can become central to the success of the Anukul Group. Marketing: Lifestyle products have seen many takers from a variety of income and social backgrounds in the recent past. This has triggered various empirical studies into the nature of the market forces that determine the operational realities of these products in terms of brand identities and knowledge. The branding and positioning of a high end lifestyle products like linen and artefacts is of utmost importance to give its market value a lift. (Bennett et al, 2002) Therefore, for a lifestyle product range like Dipti’s, what better than a country where lifestyle solutions are becoming a rage and the norm of the day - India. Entry Point Strategy In terms of the suitable model to be used for the development of a relevant marketing plan and strategy, we have made use of the International Market Entry Mode Strategy for this company. This strategy is ideal for those companies that wish to diversify geographically. (Walter et al, 1988) This strategy along with others that have to do with market segmentation and brand positioning for maximum customer satisfaction will be used in order to evolve a strategy that is best suited for the purpose of an entry level product in a market as diverse as that of India. The first element when entering a new market is the risk factor. For the Anukul Group there has been a strategic management of risk through a change of location. This needs to be followed up by the launch of personalised and online services. There is a need to now focus on changing passive international sales into hardcore business. It is important to capitalise on the opportunities by undertaking risks so as to achieve organisational growth. Therefore, once the entry level mode is applied to this situation, there will be a concerted effort towards arriving at decisions that have to do with control, risk and commitment as demonstrated in the diagram below: To deal with the risk factor at an entry level, this diagram shows that the commitment level needs to be high so as to start by catering to consumer satisfaction. With effective segmentation, it will be easy to find out the areas of investment so as to find an appropriate positioning on the scale where exports start. (Walter et al, 1988) Therefore, a good entry level strategy would involve introducing the fact that the Anukul Group is capable of presenting an international face as far as its products go and can be modified to cater to any kind of culture or country. In this regard, there will be long term growth through the management of the immediate and other short term risks. In this case, the main risk comes from losing its exclusivity which can be tackled through the direct investment strategy. As an entry point mode, a company dealing with high end products needs to make a more individualistic statement. This calls for a mix of passive as well as consumer centric activities at the location as well as around it. For this, it is important to touch the pulse of the target consumers by being accessible to them distance wise. Therefore, it will be found that for an entry level product in an international market, exploring the retail market is the best option. The direct investment strategy is the best one for the entry mode strategy. In this regard, the entry level mode can be applied to find the areas where there is competitive advantage so as to find variations in the large consumer base that this product can enjoy in India. This will assist the company in finding an appropriate contractual or intermediate strategy that may be customised to fit into the Indian market in terms of segmentation. With franchising, licensing and other activities that will promote an environment of direct exports will also be a definite draw for most retailers. (Walter et al, 1988) According to the entry level mode strategy, it is important for the product to take the characteristics of its target market into account apart from the investment plan it will follow in the course of going international. This will serve the purpose of revealing the share holders ready to invest within India apart from the niche market that must be targeted. This brand must retain a more or less similar price in order to retain exclusivity. For this, it is also important to determine the dominance as far as risk and returns are concerned so as to command a fitting price accordingly. The level and degree of this dominance can be studied through an application of the entry level mode strategy. Financial Projections: The financial projection for the Anukul Group is as follows: Capital Requirement: Marketing Cost of Marketing (Year One to year Two): $250,000 Cost of Marketing (Year Two to Year Five): $250,000 Cost of Marketing (Year Five to Year Eight): $300,000 Cost of Marketing (Year Eight to Year Ten): $350,000 The costs laid down above depend on factors like scale of operations. In the first two to five years, the scale of operations will be low, which will lead to less intensive marketing. Also, in a bid to retain exclusivity, there will be a focus on only certain areas for the promotional activities. The marketing activities will intensify during the fifth and tenth years, where there will be an all time high during the last two years so as to maintain and achieve a certain quality of marketing activities. The total budget for marketing is $1,150,000 Capital Requirement: Entrepreneurial Control Year One to Three: Reorganisation of Departments: $550,000 Weekly Performance Studies: $400,000 Year Three to Seven: Control of Economy of departmental operations – This will be done through recruitment of new staff: $200,000 Reorganisation on basis of new staff: $250,000 Creation of Knowledge Management System: $100,000 New Planning Department for better goal actualisation process: $100,000 Year Eight to Ten: Planning through research and performance reports: $450,000 Expansion in terms of more outlets: $150,000 The entrepreneurial control system reflects a movement towards better HR practices in order to gain more knowledge and carry out better planning. The total budget for this process is $2,200,000 Projections for returns on Investment: Years One to Five: With an inclination towards marketing research and basic reorganisation of the HR base, with regular performance appraisal programs, the returns for the first five years are slated to be $ 5,000,000. Years Six to Ten: With a focus on expansion and growth policies, as well as reaching economy of operations, there will be a return of $15,000,000 during the last five years of the implementation of the strategic plan. Conclusion According to the analysis done above, it is important for the company to employ a direct investment strategy with licensing and export so as to convert passive pastures for sales into active and more action oriented strategies for marketing. In all of this, there needs to be a focus on exclusivity. In this regard, the direct investment strategy is the best one for the entry mode strategy as far as maintaining exclusivity is concerned. In closing, it would be imperative for the Anukul Group to follow exclusivity as a strategic plan of action for a country like where there is now a large amount of disposable income available even with the most average person due to the advent of the BPO industry. In this regard, there is a focus on how India is in dire need of a brand like the Anukul Group to fulfil its urban and modern population’s basic desires as far as lifestyle statements are concerned through an entrepreneurial control system based on the traditional and systems approach. References: Trump University “Entrepreneurship 101: How to Turn Your Idea into a Money Machine,” by Michael E. Gordon, Wiley & Sons, 2007. Thomas Friedman, Farrar Straus and Giroux. The World is Flat. New York, 2005 Gary Hamel, C.K. Prahalad. Competing for the Future. Harvard Business School Press (1 Mar 1996) Henry Mintzberg. The Rise and Fall of Strategic Planning. Financial Times Prentice Hall (24 Feb 2000) Michael E Porter. The Competitive Advantage of Nations. Free Press (1998) Ansari, S.L., 1977. An integrated approach to control system design. Acc. Organizations Society 2, 101–112. Daft, R.L., Macintosh, N.B., 1984. The nature and use of formal control systems for management control and strategy implementation.J. Manage. 10, 43–66. Ditillo, A., 2004. Dealing with uncertainty in knowledge-intensive firms: the role of management control systems as knowledge integration mechanisms. Acc. Organizations Society 29, 401–421. Euske, K.J., Lebas, M.J., McNair, C.J., 1993. Performance management in an international setting. Manage. Acc. Res. 4, 275–299. Ferreira, A, Otley, D., 2005. The Design and Use of Management Control Systems: An Extended Framework for Analysis, Social Science Research Network. http://papers.ssrn.com/sol3/papers.cfm?abstract id=682984. Kaplan, R.S., Norton, D.P., 1992. The balanced scorecard—measures that drive performance. Harvard Bus. Rev.(January–February). Merchant, K.A., 1998. Modern Management Control Systems: Text and Cases. Prentice-Hall, Upper Saddle River, NJ. Miller, P., 1998. The margins of accounting. Europ. Acc. Rev. 7, 605–621. Neimark, M., Tinker, T., 1986. The social construction of management control systems. Acc. Organizations Society 11, 369–395. Simons, R., 1995. Levers of Control: How Managers Use Innovative Control Systems to Drive Strategic Renewal. Harvard Business School Press, Boston, MA. Bennett, R; Blythe, J (2002) International Marketing: Strategy Planning, Market Entry and Implementation. Kogan Page. Fernandes, Leela (2000) Nationalizing `the global: media images, cultural politics and the middle class in India. Media, Culture and Society, Vol 22. Walter, I; Murray, T (1988). Handbook of International Management. John Wiley and Sons. Read More