Assignment on Business Strategy (sample- 2)

Introduction:

1. Yogi Berra once said that “If you don’t know where you are going, you will likely end up somewhere else.” It is true for business as well. If any company doesn’t have well defined business strategy it is flying blind. Former U.S. President and military commander, Dwight
   1. Eisenhower, stated that “A finished plan is generally worthless, but careful planning is absolutely essential.” Business plan may change according to the current trend of business, before making any kind of decision firm will examine the present and future market condition. It creates context for operating decisions.
      It provide the playing field and gives instruction for decision-making, how to structure the company, the priority of initiatives, position of advertising and marketing, the skills and experience needed by employees, and many other issues. It is required to define direction, set goals, channel resources and decision- making. Business strategy finds out the present and future opportunities and challenges. It is often misunderstood and overused concept. It defines the value, nature and direction of an organization. Everyone in the organization needs to know the business strategy [1].
      
      

2. Understand the process of strategic planning

   1. Explain strategic contexts and terminology missions, visions, objectives, goals, core competencies

      
      
      Strategic planning is the way to set organizations goals. Few analysis like SWOT, PEST help to process strategic planning and there are some terminology related to the strategic planning like mission, vision, objectives, goals and core competencies.
      
      
      

      Strategic Planning process [2]

      Vision:

      Vision is the common mental image and a set of mutually supported aspirations that serve to unite everyone’s efforts in an organization. In an organization everyone must share a common inspirational image which is called vision. Every member must concern about vision statement and they give their full effort to fulfill those vision. Vision statement must be injected into the veins of the organization.
      
      

      Mission:

      A mission is its reason for being. Mission statement is very important and it contains the employee’s purpose and shows a company image to clients. In business strategic planning, the mission statement depicts where the company will go in future.
      
      

      Objectives: those are concrete goals which the organization wants to reach or want to gain or achieve like an earnings growth rate. Objectives may be challenging but attainable. It should be measurable and company is able to monitor the progress and make the necessary correction.

      Goals:

      Goals are the desired results we want to achieve to accomplish the mission, expressed in general terms. They are generally long-term, open-ended, and sometimes never totally achieved, because, as has been stated, the Strategic Plan is a living document. Goals can change, especially if they are not written well enough to achieve the Mission or provide appropriate parameters for the Objectives. Working toward our Goals takes us toward our vision and mission.
      
      

      Core Competence: it is the underpinning of an organization’s skills and foundation of successful strategic execution. They represent the expertise, abilities and fundamental knowledge and what make organizations unique and an individual effective and efficient. It is very important for an organization to measure and understand core organizational competencies to attain strategic goals.

      
      

   2. Review the issues involved in strategic planning

      
      
      Strategic issues are very critical and those have a great influence in strategic planning process. A strategic planning normally focus on three or five key issues which will shape the
      strategic plan. The main issues of strategic planning are level of participation and timing. Management board will determine the organization goals and then allow management to attain those goals. Management board helps to set strategic goals, long-term vision, core values and mission. Management is accountable to take necessary steps to make turn their vision into a reality. The board also monitor management activities to implement those strategies. Board leaders will decide how and when board will be involved in ceremonial strategic planning efforts. There is no strict rules and regulation. The board and CEO will decide the suitable role for the board.
      
      

   3. Explain different planning techniques

      
      
      There are different strategic planning techniques and those are:

      Model One - Vision-Based or Goals-Based Strategic Planning

      Normally extremely busy and small and not have that much experience in making strategic planning before, follow this basic process. Normally it is conducted in the first year of an organization to know how to prepare strategic planning and later years they add more activities and phases in strategic planning. Normally top managements make the strategic planning.

      Model Two - Issues-Based Planning

      Normally those organizations have little transaction and profit, little success or limited resources to achieve goals, they follow issues based planning instead of goals bases strategic planning.

      Model Three -- Alignment Model

      The main objective of this model is to ensure strong alignment between organizational missions and organizational resources to run the organization effectively and efficiently. This model is very effective for those organizations that need to fine-tune strategies or find out why they are not working. Organizations may choose this model if they have a lot of issues around internal efficiencies.

      Model Four - Scenario Planning

      This model being used with other models to make sure planners really have taken strategic thinking. It is really helpful in recognizing strategic goals and issues.

      Model Five - “Organic” (or Self-Organizing) Planning

      It is the self-organizing process which is similar to development of an organism. It contains culture like Native American Indians prefer naturalistic and unfolding organic planning
      instead of linear and traditional processes. It requires continual reference to common dialogues and values around these values and continued shared reflection around the systems current processes.

      Model Six -- Real-Time Planning

      Most of the expert prefers to use real time planning rather than conventional strategic planning because today’s world is changing very quickly and rapidly, so conventional strategic planning become obsolete very quickly. Real time planning is very effective and adjustable with the present circumstance [3].
      
      

3. Be able to formulate a new strategy

   1. Produce an organizational audit for a given organization Organizational audit of Nike:

      Nike had some problems is past and they are able to identified those problems but they didn’t take that much actions to solve those problems. The learning stages of Nike lie between managerial stages and the compliance. Last 5 years they tried to increase their learning stages and they learned few things which are very important to understand customers demand and needs. They changed their production according to the present market demand. They are regularly doing market research and developing their products. But they are not taking seriously the present changing and they learned that they need to change with social expectations of the organization. They are following defensive strategy which is not that much appropriate for the current competitive market.
      
      
      The environmental report shows that Nike is a profitable company but they are unreliable. The Corporate Responsibility Department conducts the audit within the organization. This department checks and examines the current systems and justify whether they need to amend the systems. This department also revaluates company goals and working and operation processes. Along with all this, Nike started to shift the issues focus away from them to other companies having the same issue [4].
      
      

   2. Carry out an environmental audit for a given organization

      
      
      Nike is currently operating in six continents. More than 1 million people are working in Nike including service providers, retailers, shippers and suppliers. It is a global company and achieves vast economies already. It is providing sound labour practices all around the globe.
      Nike has built its empire by hugely expanding its pools of loyal customers, design of its high performance sports gear and technology into high fashion. There profit is increasing every year. The present sports market is driven by customer’s appropriation of sports footwear and clothing as normal casual wear and major sports brand like Reebok, Adidas and Nike.
      
      

      Market penetration – The market penetration of Nike is not that much satisfactory but they are able to attract non-user of their goods or tempting present customers to buy more products through promoting and advertising.

      Product Development – Nike is developing their product at regular basis to attract more customers and getting competitive market share.

      Market Development – Nike is less participating in market development because if they want to change their market they have to change their existing products and to develop new strategy.

      Diversification – Nike has limited diversification activities like they are producing Nike MP3 players, Nike Laptops, Nike television and so on [5].

      
      

   3. Explain the significance of stakeholder analysis

      
      
      A “stakeholder” can be defined as:
      “Any individual, group, or institution who has a vested interest in the natural resources of the project area and/or who potentially will be affected by project activities and have something to gain or lose if conditions change or stay the same”.
      Normally all projects select some stakeholders with whom they can work jointly to reach the destination and to reduce threats.
      Stakeholder analysis is very helpful for a programme or a project. It is essential because:
      • All stakeholders will be affected by the project or programme
      • Potential risks and conflicts are reduced and distributed
      • During the implementation relationships and opportunities can be built
      • In different stages groups are participated
      • For engaging stakeholder various suitable approaches and strategies being used
      • It reduce negative impact on disadvantaged or vulnerable groups
      • The participation of stakeholders in project design and implementation is the key to success.
        Stakeholder participation:
      • Enhance responsibility and build capacity
      • Provide learning opportunity to stakeholders and project team
      • Gives sustainability
      • Affects participant’s life [6]
      
      

4. Understand approaches to strategy evaluation and selection 4.1Analyse possible alternative strategies relating to substantive growth, limited growth or retrenchment

   
   

   Product market mix

   Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets
   
   Market Penetration
   It means market existing products to the existing customers. It increases revenue by repositioning the brand, promoting the products and so on. Here company doesn’t change its product and doesn’t seek new customers.
   Market Development
   It means marketing existing product in a new market. Here products remain the same but attracting new customers. The ways of market development are marketing in a new areas or region or exporting the product in overseas countries.
   Product Development
   It means marketing new products to existing customers. Here companies innovate and develop new products to take place the existing ones and then the new products are marketed to existing customers.
   Diversification
   It means marketing new products to new customers. There are two kinds of diversification: unrelated diversification and related diversification. Related diversification means organization remain in an industry or market with which it is familiar. Unrelated diversification means companies have neither market experience nor previous industry.
   Diversification and Synergy
   Synergy happens when the combined effort generate a better output than individual efforts but using the same resources. In an organization there are marketing synergy, investment synergy, operation synergy and marketing synergy.
   Divestment strategy
   It is the pulling out of certain product or selling off part of a firm’s operation in market areas. Direct export – it means manufacturing products at home and export to overseas customers. Indirect export-organization sells its products to third parties and third parties sell their products to foreign market.
   There are some other ways like licensing, franchising, contracting, manufacturing abroad and joint-venture and so on.[7]
   
   

   1. Select an appropriate future strategy for a given organization

      
      
      Long-Term Corporate Objectives
      
      
      The following are Nike Inc.'s 5-Year long-term corporate objectives:
      
      
      • Continue our improvement in stockholders' return on equity to achieve a 20.0% return in 2014. This would be an increase of almost 6.5% from 2011.
        
        
      • Increase earnings per share to $2.70 per diluted share by 2014 in an overall effort to bolster the long-term resilience of our stock's value. This would surpass our 2007 record high.
        Short-Term Corporate Objectives
        
        
        The following are Nike Inc.'s short-term corporate objectives for fiscal year 2012:
        
        
        • Increase net income to $800 million by the end of fiscal year 2012 in order to reach our long-term goals of improved return on equity and higher EPS. This 22% increase from 2011 is realistic in light of combined 1st & 2nd Quarter income already 32% higher compared to the same time last year.
          
          
        • Recover the market price of our stock from its 52-week low of $26.50 per share on February 8, 2000, to a value that approximates its 52-week average of
   $50 per share.
   
   

   Competitive Strategy

   
   
   Nike used product differentiation is past as their competitive strategy. Their reputation was increased for product differentiation and they give importance this area very much. Nike has built its business on providing products that rise above all others; it has made us the success that they are today. Nike is very much famous for its technologically advanced products. They are the leader in this area. They effectively capture customer needs and wants. It also gives strong effort in price leadership. Previously the price of their products was relatively high but now they are producing both high and low price products with good quality. This strategy attracts more customers to its business [8].
   
   

5. Understand how to implement a chosen strategy

   1. Compare the roles and responsibilities for strategy implementation The strategy implementation of Nike and Adidas

      
      

      Nike	Adidas
      They focus on domestic market	They focus on European market
      For gaining international recognition, they focus on soccer	Adidas is dominating the world soccer market
      They started to sponsor athletic events frenzy	They sponsor professional athletes and athletic teams
      They created many new look shoes to excite “bored customers”	They are trying to cut cost and production time to become more efficient
      Nike team sports	To cut production costs it uses low wage labor
      It changes its design frequently to stay ahead of competitions	Has enhanced advertising and marketing budgets

      Customized product with Nike ID	It expands its market to sports apparel and equipments
      For reducing production cost uses overseas manufacturing factories
      Build its internet site with custom footwear options
      Leading the industry in marketing strategies and advertising
      It is not a production company; almost all shoes are outsourced, develop and markets the goods in Beaverton	It outsourced its production but development and design process is based in Germany
      It has subcontract factories in Korea and Taiwan	Adidas moved in Asia in 1993
      They have shoes assembly factories in Vietnam, Indonesia, Korea, Taiwan and China
      Nike’s trading company is the Nissho Iwai Corporation

      
      
      From the above discussion it is clear that Adidas has competitive market over Nike. [9]
      
      

   2. Evaluate resource requirements to implement a new strategy for a given organization

      
      
      Product: need to design, develop and manufacture products according to the customer needs and wants
      
      
      • Satisfy traditional demand and aspiration
      • Develop and consolidate sectors as dresses and shoes
      Stores – all stores will be extended to around two-third of our space to attract more customers
      • Nurture brand names
      • Improve the distribution channel
      • More intensive to use space
        People- recruit talented people to increase team strength
      • Companies trust will be increased by improving innovation, services, values and quality
      • Increase the values that the founder installed into the company.
        Leaders– Leadership and management synergy
      • Leaders will prepare vision and manager will execute the vision
      • Leaders will concentrate on the end and manager will concentrate on the mean.
        Capital – distribution should be effective and efficient
      • Should be wisely invested and monitored.[7]

   3. Discuss targets and timescales for achievement in a given organization to monitor a given strategy

      Operational (Functional) Strategies Marketing Objectives

      
      
      Long-Term: Increase our market share in the Asia Pacific region from 26% to 30% by 2014.
      
      
      Short-Term: Increase our market share in the Asia Pacific region from 26% to 27% by fiscal year end 2012
      
      
      Exhibit 10 Short-Term Strategy
      
      

      	Start Date	Completion Date*	Budget	Savings
      Market Research Pricing 1. Determine price points for our Asian product offerings that are properly adjusted for regional buying power, competition, and currency valuation. Advertising and Promotion 1. Sponsor regional sporting events for professional, amateur, and collegiate teams.	3/1 3/1 3/1	5/1 5/1 4/1	$400,000 $80,000

      1. Hire a market research firm familiar with Asia, specifically the booming market of Japan, to study the buying habits of Asian consumers. Determine what factors motivate their athletic footwear and apparel purchases.
      2. Conduct focus groups in Asia to get feedback on our existing products, as well as our prototypes.

      Include sponsorship of the 2012 Olympic in London.

      3/1 3/1 3/1 3/1

      5/31 5/31 5/31 5/1

      $5,000,000 $10,000,000 $1,000,000 $100,000

      1. Run advertisements in the most popular forms of regional media: television, newspaper, magazines, billboards, and/or radio.
      2. Offer rebates and discounts for certain late- model shoes to encourage sales and inventory turnover.
      3. Conduct fashion shows at top retail venues to display our latest merchandise offerings to consumers and the media.
      Total 3 months $16,580,000
      
      
      * completion date based on a 5/31 fiscal year end.
      
      

      Production Objectives

      
      
      Long-Term: Decrease our cost of sales from 62.59% of sales to 59% of sales by fiscal year end 2014.
      
      
      Short-Term: Decrease our cost of sales from 62.59% to 62% in fiscal year 2012.
      
      
      Exhibit 11 Short-Term Strategy
      
      

      Start Date

      Completion Date*

      Budget

      Savings

      Location, Newness, and Layout of Facilities 1. Hire independent industrial engineers and analysts to work with manufacturing facilities in order to maximize efficiency of operations: shop layout, processes, etc. Inventory

      3/1 3/1 3/1 3/1

      5/1 5/31 5/31 5/31

      $10,000,000 $10,000,000

      $30,000,000 $40,000,000 $1,000,000 $20,000,000

      1. Reduce inventory at all levels of production: raw materials, work-in- process, and finished goods.
      2. Work with 3rd party shipping agents to manage the flow of orders from factories to distribution centers.
      3. Work with suppliers to implement the next generation of electronic data interchange (EDI) technology in an attempt to achieve just-in-time inventory.
      Total 3 months $20,000,000 $91,000,000
      
      
      • completion date based on a 5/31 fiscal year end.
        
        

        Research & Development Objectives

        
        
        Long-Term: Maintain a range of R&D expenditures that does not fluctuate more than 1.5% or less than .75% of projected sales in the next 5 years.
        
        
        Short-Term: Increase spending on R&D to 1.2% of projected revenues in fiscal year 2000 to achieve increased market share.
        
        
        Exhibit 12 Short-Term Strategy
        
        

        Start Date

        Completion Date*

        Budget

        Savings

        Focus 1. Shift funding to applied research in "up-and-coming" sports. Experiment with cutting-edge fashion. Budget 1. Infuse new funding, in addition to shifting current budgetary allocations, for researching sports that could be popular in the future.	3/1 3/1	5/31 4/1	$15,000,000
        Total	3 months		$15,000,000

      • completion date based on a 5/31 fiscal year end.
      
      

      Human Resource Objectives

      
      
      Long-Term: Increase availability of educational assistance programs for world-wide manufacturing employees from 50% of factories to 100% by 2014.
      
      
      Short-Term: Increase availability of educational assistance programs for world-wide manufacturing employees from 50% of factories to 70% by 2012.
      
      
      Exhibit 13 Short-Term Strategy
      
      

      	Start Date	Completion Date*	Budget	Savings
      Recruitment and Selection 1. Hire factory workers who express an interest in educational programs. These employees would achieve the maximum benefit from educational assistance programs by being more loyal and productive.	3/1	5/31

      Training and Development Compensation 1. Increase salaries of factory workers who are promoted as a result of completing our educational assistance programs.

      3/1 3/1 3/1

      5/31 5/31 5/31

      $5,000,000 $3,000,000 $5,000,000

      1. Offer general education classes for factory workers who want to learn how to read, write, or fill any gaps in their childhood education.
      2. Conduct seminars and workshops for supervisors in factories so that they may improve their production and management skills.
      Total 3 months $13,000,000
      
      
      * completion date based on a 5/31 fiscal year end.
      
      

      Finance Objectives

      
      
      Long-Term: Increase net income 70% to $767 million by fiscal year end 2014. Short-Term: Increase net income 22% to $550 million in fiscal year 2012.
      Exhibit 14 Short-Term Strategy
      
      

      	Start Date	Completion Date*	Budget	Savings
      Management of Accounts Receivable 1. Implement stricter credit terms with retailers to minimize bad debt expense.	3/1	5/31 4/1		$20,000,000 $25,000,000

      2. Hire 10 additional employees in the corporate Accounts Receivable Department to maintain and collect aging accounts. Management of Total Assets 1. Sell non-productive equipment or buildings to reduce depreciation and maintenance expenses.	3/1 3/1	5/31	$400,000 $300,000	$50,000,000
      Total	3 months		$700,000	$95,000,000

      [8]

      
      

6. Conclusion

Nike is the present most dominant athletic footwear company in the world. It sales is increasing every year. In 1972 its sales was $2 million and $270 million and $3 billion in 1980 and 1991 respectively. In 1997, it sold $3.8 billion footwear in the US. Before mid-80s Adidas was the global leader in athletic footwear. Adidas is very famous in tennis and soccer shoes production. In 1987, Nike owned 18.2% and Reebok owned 30.1% of the footwear market. Reebok is very good in women’s athletics shoes and sports cloths. At the moment, Nike sells around 50% of branded athletic footwear. They are able to reach such a pick state only for their real time business strategy. Unique design, low price with good quality and regular development activities give them high competitiveness in the market. So business strategy is very important for an organization to success and it is the basis of profitable business. Every company should give extra effort to produce good business strategy for future prospers [9].

Reference:

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   http://assets.panda.org/downloads/1_1_stakeholder_analysis_11_01_05.pdf
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8. Almaney A. J., Strategic Analysis of Nike, (March 14, 2000), Retrieve on: 13/05/12, Available at: http://condor.depaul.edu/aalmaney/StrategicAnalysisofNike.htm
9. Comparison between Nike and Adidas, Retrieve on: 13/05/12, Available at: http://www.soc.duke.edu/~s142tm17/compare.htm