Strategic management 001 Sayeed Elahi PDF

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Strategic Management

Table of Contents Introduction............................................................................................................................1 Task One:...............................................................................................................................1 Internal and External Environment Analysis......................................................................1 SWOT analysis (Internal Environment Analysis)............................................................1 PESTEL Analysis............................................................................................................2 McKinsey’s 7s Model..........................................................................................................3 Strategy Recommendation....................................................................................................4 Dimensions to be considered in Business Strategy..............................................................5 Strategic Capabilities..........................................................................................................5 Competitive Analysis..........................................................................................................5 Competitive advantage.......................................................................................................6 Culture and strategic position.............................................................................................6 Task Two:...............................................................................................................................6 Critically Evaluating Focused Low Cost Business Strategies...............................................6 Organisational Structure.....................................................................................................6 Leadership Approach.........................................................................................................7 Strategic Planning..............................................................................................................7 Success Criteria.................................................................................................................7 Marketing Planning.............................................................................................................7 Advantages of Low Cost Business Strategies.......................................................................7 Drawbacks of Low Cost Business Strategies........................................................................8 Demonstrate Relationship among Key Resource Areas: HR, Operations, Finance, Technology.............................................................................................................................8 HR Strategies.....................................................................................................................8 Operations..........................................................................................................................8 Finance...............................................................................................................................9 Technology.........................................................................................................................9 Task Three:............................................................................................................................9 Recommending and Justifying Change Management Programme for Sainsburys to Achieve Strategic Objectives.................................................................................................9 Factors Affecting Change Management Programme in Sainsburys....................................11 Conclusion............................................................................................................................11 References...........................................................................................................................12 Appendix..............................................................................................................................13

Introduction As a strategy consultant, I have been approached by the Board of Directors of Sainsburys to recommend the retailer regarding future strategic direction. The theme of the report is ‘Develop Strategy for Business Resilience and Sustainability’. The first part of the report has focused on internal and external environment analysis, strategy recommendation and building relationship between strategic capabilities, competitive analysis, competitive advantage and culture and strategy. The next part of the report has focused over critical evaluation of the recommended strategy along with building relationship with the resource areas of people, operations, finance and technology. The last but not the least part of the report has focused over change management programme in implementing future business strategy. The proposed business strategies will impact on future business movement by ensuring sustainable competitive environment for Sainsburys.

Task One: Internal and External Environment Analysis SWOT analysis (Internal Environment Analysis)

Strengths

Threats

SWOT

Opportunities

Figure 1: SWOT Analysis Source: Boyne and Meier, (2009) 1

Weaknesses

Strengths

Strong supply chain management, flat organisational structure, participative organisational culture, employee loyalty, loyal customer groups and advanced R&D are the main internal strengths of Sainsburys (J-sainsbury, 2015).

Weaknesses

Conflict of interest between owners and management, lack of employee training and development and lack of market research.

Opportunities

Take advantage of brand loyalty; expand business in rising economic countries like India, China, Bangladesh and other Asian countries etc.

Threats

Increase of low cost business leaders like Aldi, Lidl etc.; increasing input price etc.

PESTEL Analysis Political

Bilateral and multilateral agreements within EU zone and economic zones have ensured favourable political environment for Sainsburys.

Economic

Access to financial resources, economic recovery stage, increasing income level etc. indicate favourable economic environment for retailers.

Social

Increasing disposable income and positive attitude of the customers to the retail market is the positive social sign for the retailers. 2

Technology

Technological innovation has enabled Sainsburys to keep constant communication with the target customer groups and ensure optimum quality within the production process.

Environment

In the retail market, customers hold higher bargaining power and intense competition has reduced profitability.

Legal

Rules and regulations regarding environment, sustainability issues, mergers, acquisition etc. has made the legal environment complex one.

McKinsey’s 7s Model Strategy

Sainsburys has adopted ‘focused differentiation strategy’ to ensure sustainable business environment.

Structure

Sainsbury’s has developed ‘clan organisational culture’ and hierarchical organisational structure to ensure good corporate governance.

Systems

Sainsburys has focused on food and grocery products and has adopted JIT system to reduce inventory costs.

Shared Values

Sainsburys has ensured employee engagement and organisational commitment towards reducing gap between customer expectation and perception. 3

Skills

Sainsburys has focused on demonstrating leadership skills and has arranged employee work based knowledge development programmes.

Styles

Leadership and management styles have focused on task oriented and people oriented approach.

Staffs

Efficiency, effectiveness, work based knowledge, interpersonal skills etc. have been focused to develop employees.

Strategy Recommendation Sainsburys is the second largest retail chain in the UK in terms of market share and currently it is holding 16.5% market share (The Guardian, 2015). By considering ‘Development of Strategy for Business Resilience and Sustainability’, Porter’s Generic Business Strategy should be followed by the strategic decision makers of Sainsburys. Focused Differentiation Strategy This is the incremental business strategy which will benefit Sainsburys to ensure sustainable competitive advantage on the basis of the opportunities identified from the SWOT, PESTEL and 7s models. Here close relationship with the target customers can be ensured and trade-off between costs and quality can be made. Focused Low Cost Strategy: This is the new strategy that Sainsburys can adopt where lower cost structure at the same time optimum quality in the production process can be maintained. Low cost customised products can be produced according to the unique needs of different groups of customers.

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Figure 2: Porter’s Generic Strategy Source: Morrow, et al. (2007)

Dimensions to be considered in Business Strategy Strategic Capabilities Sainsburys has more than 1,200 outlets where around 161,000 employees are contributing towards the value creating activities of the retail chain (J-sainsbury, 2015). Trained workforce is the key organisational resource that is contributing towards the strategic advantage to the retail chain.

Competitive Analysis Competitive rivalry is very high in the UK retail market and low cost businesses are posing threats to differentiating business model followers like Sainsburys. Again changing customer buying behaviour is also affecting the retail market (Stacey, 2007) and retailers have to focus on offering customised products and services to the customers to gain competitive edge over the market.

Retailers

Market Share

Tesco

28.6%

Core Competencies 

Customer loyalty



Economies of scale in production



Strong supply chain network

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Asda

16.5%



Customised products



Positive brand image



Long term customer relationship

Morrisons

11%



Wide product lines



Strong supply chain network

Competitive advantage Sainsburys has designed its business objectives by focusing on customer satisfaction and loyal group of customers have contributed to the competitive advantage to the retail chain. In 2014, net income was £798m and revenue was £23,949 billion (J-sainsbury, 2015).

Culture and strategic position Sainsburys has designed its organisational culture by focusing on the elements of good corporate governance. Ethics committee has been established to deal with the ethical issues and all these efforts will contribute towards implementation of new business strategies as Sainsburys has focused on stakeholder engagement in designing its organisational culture (J-sainsbury, 2015).

Task Two: Critically Evaluating Focused Low Cost Business Strategies Organisational Structure In order to implement focused low cost business strategy, flat organisational structure is required (Favoro, et al. 2009). Sainsburys will be benefited by the flat organisational structure as this structure ensures close relationship between the management and the employees which will ensure optimum quality in the entire production process.

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Leadership Approach Situational leadership approach is required to implement focused low cost business strategy (Rouwette, 2011). The main advantage of such leadership approach is that here on the basis of the current skills and work based knowledge of the employees, decision making and authoritative power is delegated to the employees and higher employee productivity along with employee satisfaction is ensured (Bozarth and Handfield, 2008).

Strategic Planning In order to implement focused low cost business strategy, the strategic decision makers of Sainsburys have to conduct both internal and external business environment analysis where SWOT, PESTEL, Porter’s Five Forces Model, BCG Matrix etc should be used. By this way, competitive environment and existing market opportunities and threats can be identified.

Success Criteria Focused low cost business strategy requires SMART objectives to be determined and the strategic decision makers have to focus on stakeholder engagement to ensure success of this business strategy (Rouleau and Balgun, 2011). At first, the strategy decision makers of Sainsburys need to conduct feasibility study where cost-benefit analysis should be conducted to identify financial attractiveness of the business plan.

Marketing Planning In order to draw attention of the target customers, Sainsburys need to adopt both abovethe-line and below-the-line promotional activities so that cost efficiency and effectiveness in promotional activities can be achieved (Hill and Jones, 2012). Sainsburys need to focus on online mode of business activities so that overall operational production cost can be reduced.

Advantages of Low Cost Business Strategies The main advantage of focused low cost business strategies is that it enables an organisation to sustain in price war situation and at the same time, the organisation has the chance to adopt low cost or differentiation strategy on the basis of the on-going business environment (Hitt, et al. 2012). In focused low cost business strategy, Sainsburys has to design customised products or services for few customer groups. Long term 7

profitable customer relationship can be built in this type of business strategy which will help Sainsburys to survive in different phases of business cycle.

Drawbacks of Low Cost Business Strategies It becomes very difficult to maintain competitive edge over the market by going with focused low cost business strategy because of changing customer buying behaviour and competitive rivalry from both low cost and differentiation strategy followers (Hunger and Wheelen, 2010). For example, as Sainsburys will serve to a very little group of customer segment, their production volume will be lower and for this reason, Sainsburys will not be able to take advantage of economies of scale in its production process.

Demonstrate Relationship among Key Resource Areas: HR, Operations, Finance, Technology HR Strategies In order to implement focused low cost business strategy, HR department has to play the most crucial role (Johnson, et al. 2011). The HR department of Sainsburys has to identify the existing level of employee efficiency and the required level of efficiency to produce customised products for the target customer groups. Besides employee training and work based knowledge development, HR department has to design motivation and performance appraisal methods to enhance employee productivity.

Operations Achieving efficiency and effectiveness in the operations is the key goal of focused low cost business strategy and to achieve efficiency and effectiveness, the strategic decision makers of Sainsburys have to focus over strong supply chain management system in the entire value delivery process. For example, by establishing long term and profitable relationship with the suppliers, Sainsburys will be able to ensure quality input in the production process along with reducing production costs. Through extensive market research, changing nature of the customer buying behaviour can be identified which will help Sainsburys to design customised products/services for the customers. 

Just-In-Time (JIT): In order to ensure efficient inventory management, JIT system should be introduced.

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

Kaizen: It is a continuous improvement process where organisational waste management issues will be considered.

Finance In order to implement low cost business strategy, searching for appropriate sources of finance is one of the crucial stages for the strategic decision makers (Harrison and John, 2009). Being a public limited company, Sainsbury’s has lots of options such as bond issue, use of retained earnings, share issue etc. to collect required funds to carry on their core business functions. In this case, most of the financial resources should be invested in market search to identify changing customer buying behaviour and R&D and production activities to produce customised products for the target customer groups.

Technology Sainsburys should use social networking sites like facebook, twitter, instagram, vine etc to conduct promotional activities and to create rapport with the target customer groups. Again technology should be used to reduce overall production cost so that competitive price on be offered to the market to gain competitive edge over the market.

Task Three: Recommending and Justifying Change Management Programme for Sainsburys to Achieve Strategic Objectives Kurt Lewin Change Model will be appropriate for Sainsburys to realise the strategic objectives of the company. The main theme of this organisational change management strategy is that it considers both internal and external organisational environment and forces to reduce the negative impact of organisational forces and maximise organisational strengths to enhance organisational competitiveness (Patron, 2008). Again this organisational change model considers expectations of different stakeholder groups and redesign organisational efforts to reduce gap between stakeholder expectations and perception.

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Unfreeze

Change

Refreeze

Create right Support Reinforce to environment change to anchor change desired state Figure 3: Kurt Lewin Change Model Source: Wetherly and Otter, (2014) This organisational change model is appropriate for Sainsburys because in the first phase of this change model, internal and external organisational environment are analysed to identify organisational strengths and weaknesses. In this stage, SWOT, PESTEL, Porter’s Five Forces Model, Stakeholder Grid etc. models are applied to identify impact of current business environment over organisational objectives. In the next phase, leadership and management structure is adjusted to bring desired change in the entire organisational efforts so that coordination within the factors of productions. In the last phase, achieved results of the core organisational activities are compared with the predetermined strategic objectives. In this level, if any deficiencies are found then business strategies will be redesigned to achieve business objectives. Drivers of Organisational Change: Employee efficiency, technological innovation, business cycle, competitors’ move, changing customer buying needs etc. are the internal and external drivers of organisational change. Required Leadership, Culture and Structure: In order to bring desired organisational change, situational leadership style should be adopted and clan organisational culture should be developed.

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Factors Affecting Change Management Programme in Sainsburys Political Resistance: If any change within the management structure of the organisation is brought about and this changes current authoritative powers of the employees, then employees working in higher position may impose resistance to the organisational change management programme (Pearce and Robinson, 2014). To deal with this factor, Sainsburys should ensure employee engagement in business strategy formulation phases. Customer Expectation: As Sainsburys is going to adopt focused low cost business strategy, customer may think that ...