Contemporary Business Strategies and Models E-Book

Joseph Ezenwa

• Herausgeber: WS
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 389

Veröffentlichungsjahr: 2024

Beschreibung

The title of the book – Contemporary Business Strategies and Models is informed by the concern of the author about inability of corporate organisations to effectively execute business strategies. Other factors that necessitated the writing of this book are inability of corporate organisations to effectively adapt to ever changing Nigeria business environment, not being able to present clear strategy statements by some organisations, resistance to change, abuse of principles of corporate governance and business ethics codes, bad leadership amongst others resulting to business failures in Nigeria. Accordingly, we have tried to provide solutions to the aforementioned problems in this book.

However, the assumptions of the book is that formulating good business strategies, effectively executing and evaluating them are relevant to all managers and leaders especially those leading from the middle of the organisation and above all the chief executive officers.

The extant literature in management and other related disciplines were reviewed to enable the author develop the concepts of strategy, strategy systems, strategy and structure, strategy and styles, strategy execution, strategic thinking, Benchmarking, change management and innovation, new managerial paradigms, Leadership, Ethics, Corporate governance and Corporate social responsibility (CSR) amongst others.

Essentially, the contents of the book are distilled and presented for consumption of Chief Executive Officers, Managers/Leaders in Corporate organisations, owners managers operating Small and Medium Scale Enterprises (SMEs), workers, students especially those pursuing B.Sc Business Administration and Management, MBA and MPA degrees and individuals who want to gain knowledge on business management.

Leseprobe

CONTEMPORARY BUSINESS STRATEGIES AND MODELS

JOSEPH EZENWA

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Rockfields Nigeria Limited

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Copyright Joseph Ezenwa © May 2012

08023211676,08105764941,09153829418

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ISBN:9798356904295

All rights reserved. No part of this book may be reproduced or transmitted in any form or any means; electronic or mechanical, including photocopies,recording or by any information storage and retrieval system,without permission in written form of the publisher.

ABOUT THE AUTHOR

Joseph Ezenwa is the Managing Consultant of ResourceHouse Ltd. He holds B.Sc (Hons) degree in Soil Science from the University of Nigeria Nsukka (UNN). He also obtained MBA Finance PGDFinancial Management from the Abubakar Tafawa Balewa University (ATBU) Bauchi.

He is a stock/investment analyst, a research fellow and author. He worked with Commercial Bank of Africa (CBA) where he rose to the position of Branch Manager. He was the Managing Consultant of Africo Consult and Ltd. Mr. Ezenwa is a reputable speaker/lecturer in finance, Management, Accounting and Marketing. He has facilitated Courses for several organisations both locally and internationally.Specifically,he was formerlecturer/Consultant with Business Examination Education Council(BEEC),Topmark Associates LTD andpresently speaks for Braveworld Consulting LTD and Material Academy LTD and De Emeth Concept Ltd . He currently speaks on structured finance topics like securitization and credit derivatives,Derivatives;Properties andPricing,Portfolio Imunization and Cashflow Matching .

He has conducted various studies in finance, management, marketing and agriculture. Some of his scholarly works include Impact of Financial Distress on Deposit Liabilities of the Banking System. Financial Distress; The Effect on Depositors; The Economy and possible solutions, Total Quality Management as a tool for Management of Distress in Financial Institutions. He is the author of the best seller Strategies for Business Success. Other books authored by him are Workplace Strategies for Promotion, Stock Trading and Investment Made Easy.

ABOUT THE BOOK

The title of the book – Contemporary Business Strategies and Models is informed by the concern of the author about inability of corporate organisations to effectively execute business strategies. Other factors that necessitated the writing of this book are inability of corporate organisations to effectively adapt to ever changing Nigeria business environment, not being able to present clear strategy statements by some organisations, resistance to change, abuse of principles of corporate governance and business ethics codes, bad leadership amongst others resulting to business failures in Nigeria. Accordingly, we have tried to provide solutions to the aforementioned problems in this book.

However, the assumptions of the book is that formulating good business strategies, effectively executing and evaluating them are relevant to all managers and leaders especially those leading from the middle of the organisation and above all the chief executive officers.

The extant literature in management and other related disciplines were reviewed to enable the author develop the concepts of strategy, strategy systems, strategy and structure, strategy and styles, strategy execution, strategic thinking, Benchmarking, change management and innovation, new managerial paradigms, Leadership, Ethics, Corporate governance and Corporate social responsibility (CSR) amongst others.

Essentially, the contents of the book are distilled and presented for consumption of Chief Executive Officers, Managers/Leaders in Corporate organisations, owners managers operating Small and Medium Scale Enterprises (SMEs), workers, students especially those pursuing B.Sc Business Administration and Management, MBA and MPA degrees and individuals who want to gain knowledge on business management.

DEDICATION

To Almighty God for His Inspiration and Guidance.

To my dear parents(late Mr.Samuel&Mrs Florence Ezenwa) who set the standards and legacies I strive to reach and uphold.

To late Pharm.(Sir) Ikechukwu Vincent Onyido(a bosom Friend) for his intellectual capacity and contributions to knowledge and Humanity

ACKNOWLEDGEMENTS

Interdependence is a higher value than independence. This work is a synergistic product of many minds. It began in 2002 when I started gathering my data. I am grateful for the inspiration and wisdom of many thinkers and for the trans-generational sources and roots of this wisdom.

However, the contributions, advices and co-operation of various persons to whom I wish to express my gratitudes here made this book possible. My intellectual debt is owed to Prof. Linus Osuagwu, Prof. S. Owualah, Prof. Adepoju, Prof. J. E. Ezike, Prof. Ogundele and Prof. Ogunjimi.

I am also indebted to the following , Barr.Uche Obi (who facilitated the typing of the manuscript),Sir(Mr.)&Mrs ArinzeObasi , Engr (Sir) G. C. and Lady T. U. Jimbey-Okafor, Mr. A. Enilolobo, Prince A. Onokwai, Barr. (Lady) G. O. Ikegwuonu, Mr. and Mrs. Austin Ezenwa and Mr. & Mrs. Tony Orji,Mr & Barr.(Mrs) Tony Oghenovo,Mr&Mrs Godwin Obasi,Mr.&Mrs Joe Lawrence Mr&Mrs Richie Ugoala,Mr.&Mrs Chris Ihekoronye ,Mr&Mrs Chidozie Ezeafulukwe,Sir(Mr)&Mrs Moses Ekwueme,Mbadiwe Ukaegbu Esq,Mr&Mrs Funsho Adekanye,Mr&Mrs Ifeanyi Iloka,Mr&Mrs Francis Oterifor their interest in this piece.

Hajia Hadizat Sulaiman,Hon. And Mrs. Anselem Dunu, Mrs. Rosemary Onwukaike,Mr and Mrs. Nnaemeka Amaefuna,Sir and Lady Anthony Ezeani(Jnr),Mr.and Mrs.Maxwell Udeze,Mr. and Mrs. Okey Moka,Mr. and Mrs Temidayo Oluwayeye, Pharm(Barr.) and Mrs. Arinze Oyi, Barr. and Mrs. Greg Ezekafor for their interest in this piece.Finally,I have to appreciate His Royal Highness ,the Igwe of Ichida;Sir Charles Ezudogu for his support and others including Chief and Mrs. Cornelius Okoli,Chief and Mrs. John Ezenwa(Uchie Agbakanogu),Chief and Mrs. Elias Nwosu(Dim the 4th ,Okemmili).I also express my gratitude to the following: Dr. &Mrs. Jude Orji,Mr &Dr. (Mrs.) EmmaIgwilo,Chief & Mrs.Keneth Okafor(Dofas),Mr.&Mrs. Gab.Okoye(Gabosky).Mr.& Mrs.Sunday Osuagwu, Mr.&Mrs.Fidie Ezewulu,Pharm & Mrs.Charles Izuogu,Mr.&Mrs. Cammy Okafor,Mr.&Mrs. Pius Orji,Barr.&Mrs. Cele Ezeanochukwa,Chief & Mrs. Ray Okoye(Odu),Barr.( Sir) & Lady Sam Obue,Mr.&MrS. Uzodinma Orakwe,Mr. &Mrs, Dan Nwokedi,Mr.& Mrs. Emeka Nwosu,Mr. & Mrs. Gozie Nwosu,Sir (Chief) & Lady Hycinth Uba,Sir(Chief) Lady Oforma(Ceasar),Sir(Chief)&Lady Joe Akwali,Mr.&Mrs.Ifeanyi Nzoiwu,etc.

For the development and production of the book itself i feel a deep sense of gratitude,

-to Chinyere Umezulike who first received the manuscript for typing

-to Uwem Frank and Christiana Etim of Alliance Law Firm who formatted and typed the manuscript.

to Kwentor Akwali who helped in proof reading the first draft of the manuscript.

To My Wife(Brenda) who provided some materials that facilitated the work.

To some members of University of Nigeria Nsukka(UNN) Alumni Association,amongst whom are Prof. Pat Utomi,Prof. Charles Chukwuma Soludo,Prof. Akunyili,,Mr Solo Nwokedi,Mr Jimmy An’sionwu,Dr.Emeka Arinze,Mr. Vin Ezeonwu,Engr. Emeka Orakwe Pharm.(Sir) &Lady Ibe,Mr. Lloyd Ofili Udoh,Mr. Tagbo Nwagbufo,Mr.&Mrs. Jude Ekwerekwu.

&

To members of Alumni Association, Abubakar Tafawa Balewa University(ATBU) Bauchi,who include Mr. Charles Chijide,Mr. Tony Ofili, Mrs Vero Ofuani,Mrs. Ngozi Chukwudi,Mr.Emetu Ify Moghalu,Ms Amaka Kanu,Mr. Mike Ikwuogwu,all of whom I owe a great sense of obligation,Mrs Ngozi Ofili Udoh.

PREFACE

This book came into existence as a result of several years of continuous research on business strategies and models as well as the experience of author as speaker in Management in such topics as Strategic Planning, Total Quality Management, Benchmarking, Work Ethics and Compliance, Change Management and Innovation, performance appraisal and Target setting, Corporate Image and Attitude Improvement, Mergers and Acquisition amongst others at different Seminars/Workshops and/or Conferences.

Accordingly, we have presented different business strategies/models which corporate organisations can use to enable them achieve enhanced corporate performance.

However, in the course of our research, we discovered that most organisations failed because of their inability to effectively execute strategies they formulated. In trying to solve this problem, we have in this book highlighted tools and models for effective strategy execution. There is also problem of inability of some organisations to give clear definitions of their strategy statements. We have tried to find solution to this problem by presenting elements of a good strategy statement and how it can be effectively developed.

Furthermore, we have discussed and highlighted different strategy systems and relate structure to strategy which could be examined and applied.

In the past, strategic thinking was the responsibility of the top management but today, it is an all employees affair. We have accordingly presented the concept, meaning and who should do strategic thinking in this book.

It is a known fact that management of change is always a problem to organisations because majority of the employees usually resist change. In this book, we have accordingly highlighted how resistance to change can be diagnosed and dealt with effectively. We have also presented how management system can be effectively managed through linking it to strategy and operations.

The concept of benchmarking was also treated in the book which is a fallout of a Total Quality Management (TQM) concept that is based on best practices and doing it right first time with view to avoiding cost of rework.

The book also dwells on change management and innovation and highlights the inner and outer context concept by professor Pettigrew, environmental Sensitivity: SWOT and PESTEL and how change can be managed using new managerial paradigms like Culture Excellence approach, Japanese approach and organizational learning approach which have currently dominated western thinking. The ten commandments for executing change were also presented.

The 7- s model which comprises of strategy system and structure (Hard Assets) and staff, style, skills and shared value (Soft Assets) was discussed. This model is being used by Japanese as business model to dominate the world unlike U.S. which uses 3-s model of strategy, system and structure.

However, apart from our discussion on strategy and its execution, we have also dwelt on other salient issues in business which affect organisations like Leadership, Business Ethics, Time Management, Corporate governance, Corporate Social Responsibilities, Employee Motivation amongst others.

On leadership, we have presented and discussed characteristics of good leader, what leaders do, 5-Levels and 3-Ls of leadership by Johnmaxwell as well as 360o Leadership Model. Leadership is important because if there is problem with leadership in an organisation, it will not make a headway. Good leaders listen, learn and lead and do so continuously because it is lonely at the top.

On business Ethics, we present the framework for Ethical decision making, the concept of Ethical climate, and cases. Globally, organisations failed because of ethical misconduct disasters committed by top management.

On corporate governance, we gave various definitions of the concept and its benefits. There is no gainsaying the fact that organisation that upholds good corporate governance principles can achieve success in all ramifications.

On Corporate Social Responsibility (CSR) we dwell extensively on its concept/definitions and benefits. Organisation should try to be socially responsible by giving out to society, community or environment from where it obtains its resources.

On issue of motivation which is a well known concept in management, we have presented four drivers that underlie motivation. No organisation achieves enhanced performance without motivating its staff.

On time management, we outlined the principles of time management and its important for every staff in an organisation to manage his /her time very well.

You can see that the book is actually a compendium of business strategies and models and is written for consumption of Chief Executive Officers and Managers/Leaders of all cadre in private/public organisations, owner Managers operating Small and Medium Enterprises, students especially those pursing B.Sc in Management and Business Administration, MBA & MPA degrees and individuals who want to gain knowledge on business management amongst others.

TABLE OF CONTENTS

About Author

About The Book

Dedication

Acknowledgements

Preface

Table of Contents

CHAPTER 1: DEFINING CORPORATE STRATEGY

CHAPTER 2: STRATEGIES

CHAPTER 3: STRATEGY SYSTEM

CHAPTER 4: STRATEGY AND STRUCTURE

…

CHAPTER 5: STRATEGY EXECUTION

CHAPTER 6: STRATEGIC THINKING

CHAPTER 7: BENCHMARKING AS BUSINESS STRATEGY

CHAPTER 8: CHANGE MANAGEMENT AND INNOVATION

CHAPTER 9: LEADERSHIP VS STRATEGY

CHAPTER10: EFFECTIVE LEADERSHIP

CHAPTER11:BUSINESS ETHICS AND COMPLIANCE

.

CHAPTER 12: TIME MANAGEMENT

CHAPTER 13: BUSINESS DIAGNOSIS

CHAPTER 14: EMPLOYEE MOTIVATION AS STRATEGY

CHAPTER 15: CORPORATE GOVERNANCE

CHAPTER 16: CORPORATE SOCIAL RESPONSIBILITY

CHAPTER 17: BUILDING A LEARNING ORGANIZATION

CHAPTER 18: MAKING BETTER DECISION USING IT TOOLS

CHAPTER 19: BUDGETING AND BUDGETARY CONTROL

CHAPTER20: CORPORATE IMAGE MANAGEMENT AND IDENTITY

References

CHAPTER 1

Defining Corporate Strategy

Companies that do not have a simple and clear statement of strategy are likely to fall into the sorry category of those that have failed to execute their strategy or worse, those that never even had one.

In an astonishing number of organisations, executives, frontline employees and those in between are frustrated because no clear strategy exists for the Company or its lines of business.

However, leaders of firms are mystified when what they thought was a beautifully crafted strategy is never implemented. They assume that the initiatives described in the voluminous documentation that emerges from an annual budget or a strategy planning process will ensure competitive success. They fail to appreciate the necessity of having a simple, clear succinct strategy statement that everyone can internalize and use as a guiding light for making difficult choices.

The Concept of Strategy – Definitions

The Concept of strategy is ancient. The word strategy itself comes from Greek word, strategia which means the art and science of being a general. Effective Generals are needed to lead an army, win and hold territories, protect cities from invasion and wipe out the enemy.

Strategy is defined differently by management writers. Henry Miritzberg summarizes the definition of strategy in what is commonly referred to as 5Ps of strategy as plan, ploy, position, pattern and perspective. Strategy as a plan is a means of attaining, making and implementing decisions. Strategy as a ploy is a specific maneuver intended to outwit opponents or competitors. Strategy as a position is to locate an organization in an environment. Strategy as a pattern is consistency in actions and decisions i.e. consistency in behavior whether intended or not. Strategy as perspective is the personality of an organization.

Chandler defined strategy as the determination of the basic long-term goals and the adoptionof courses of action and the allocation of resources necessary for carryingut these goals.

Anao (1979), defined strategies as schemes, methods, maneuvers which management hopes to deploy in order to move the organisation from its present position to arrive at its target goal by the end of a specified period, recognizing that during the intervening period a host of changes are going to take place in the environment. Osaze (1998) sees strategies as a means of operationalizing a policy and for achieving some predetermined objectives.

The Elements of a Strategy Statement

The late Mike Rukstad (2007) identified three critical components of a good strategy statement whichare objective, scope and advantage. He rightly believed that executives should be forced to be crystal clear about them.

These elements are a simple yet sufficient list for any strategy (whether business or military) that addresses competitive interaction over unbounded terrain.

Any strategy statement must begin with a definition of the ends that the strategy is designed to achieve. If you do not know where you are going, any road will get you there, is the appropriate maxim here. If a nation has an unclear sense of what it seeks to achieve from a military campaign, how can it have a hope of attaining its goal? The definition of the objective should include not only an end point but also a time frame for reaching it. A strategy to get U.S. troops out of Iraq at some distant point in future would be very different from a strategy to bring them home within two years.

Since most firms compete in a more or less unbounded landscape, it is also crucial to define the scope or domain of the business; the part of the landscape in which the firm will operate. What are the boundaries beyond which it will not venture? If you are planning to enter the restaurant business will you provide sit-down or quick service? A casual or an upscale atmosphere? What type of food will you offer, African or Mexican. What geographic area will you serve ,North or the South?

Alone, these two aspects of strategy are insufficient. You could go into business tomorrow with the goal of becoming the world’s largest hambauger chain within 10 years. But will anyone invest in your Company if you have not explained how you are going to reach your objective? Your competitive advantage is the essence of your strategy. What your business will do differently from or better than others defines the all important means by which you will achieve your stated objectives. That advantage has complementary, external and internal components: a value proposition that explains why the targeted customer should buy your product above all the alternatives and a description of how internal activities must be aligned so that only your firm can deliver that value proposition.

Defining the objective, scope and advantage requires trade-offs, which porter identified as fundamental to strategy. If a firm chooses to pursue growth or size, it must accept that profitability will take a back seat. If the value proposition is lower prices, the company will not be able to compete on, for example fashion or fit. Finally, if the advantage comes from scale economies, the firm will not be able to accommodate idiosyncratic customer needs. Such trade-offs are what distinguish individual companies strategically.

Defining The Objective

The first element of strategy statement is the one that most Companies have in some form or other. Unfortunately, the firm is usually wrong. Companies tend to confuse their statement. A strategic objective is not, for example, the platitude of maximizing shareholder wealth by exceeding customer for product/service and providing opportunities for employees to lead fulfilling lives while respecting the environment and the communities in which we operate.Rather, it is the single precise objective that will drive the business over the next five years or so. Many companies do have and all firms should have statements of their ultimate purpose and the ethical values under which they will operate, but neither of these is the strategic objective.

The mission statement spells out the underlying motivation for being in business in the first place – the contribution to society that the firm aspires to make. (An insurance Company for example, might define its mission as providing financial security to consumers). Such statements, however, are not useful as strategic goals to drive today’s business decisions. Similarly, it is good and proper that firms be clear with employees about ethical values. But principles such as respecting individual differences and sustaining the environment are not strategic. They may also have the same mission (Don’t all insurance Companies aspire to provide financial security to their customers?). They may also have the same values. They might even share a vision, an indeterminate future goals such as being the recognized leader in the insurance field.

However, it is unlikely that even two Companies in the same business will have the same strategic objective. Indeed, if your firm’s strategy can be applied to any other firm, you don’t have a very good one.

It is always easy to claim that maximizing shareholder value is the Company’s objective. In some sense all strategies are designed to do this. However, the question to ask when creating an achievable strategic statement is, which objective is most likely to maximize shareholder value over the next several years? (Growth? Achieving a certain share? Bearing the market leader? The strategic objective should be specific, measurable, realistic and time bound. It should also be a single goal.

It is not sufficient to say, we seek to grow profitably.Which matters more – growth or profitability? A salesperson needs to know the answer when she is deciding how aggressive to be on price. There could well be a host of subordinate goals that follow from the strategic objective and these might serve as metrics on a balanced scorecard that monitors progress for which individuals will be held accountable. Yet, the ultimate objective that will drive the operation of the business over the next several years should always be clear.

The choice of objective has a profound impact on a firm. When Boeing shifted its primary goal from being the largest player in the aircraft industry to being the most profitable, it had to restructure the entire organisation, from sales to manufacturing. For example, the Company dropped its policy of competing with Airbus to the last cent on every deal and abandoned its commitment to maintain a manufacturing capacity that could deliver them half a peak year’s demand for planes.

Another Company, after years of seeking to maximize profits at the expense of growth issued a corporate mandate to generate at least 10% organic growth per year. The change in strategy forced the firm to switch its focus from shrinking to serve only its profitable core customers and competing.On the basis of cost or efficiency to differentiating its products, which led to a host of new product features and services that appealed to a wider set of customers.

At Alliance Law Firm, discussion among the partners about the firm’s objective ignited a passionate exchange. One said, our ultimate objective has to be maximizing profit per partner. Another responded, not all lawyers are partners – so if we maximize revenue per partner, we are ignoring the other 30,000 – plus people who make the business world. Another added, our ultimate customer is the client. We cannot just worry about partner profit. In fact, we should start by maximizing value for the customer and let the profits flow to us from there ,and so on. This intense debate not only drive alignment with the objective of healthy growth in the number of lawyers but also ensured that every implication of that choice was fully explored.

Defining The Scope

A firm’s scope encompasses three dimensions: customer or offering, geographic location and vertical integration. Clearly defined boundaries in those areas should make it obvious to managers which activities they should concentrate on and more importantly, which they should not do.

The three dimensions may vary in relevance. The scope of an enterprise does not prescribe exactly what should be done within the specified boundaries. In fact, it encourages experimentation and initiative. But to ensure that the borders are clear to all employees, the scope should specify where the firm or business will not go. That will prevent managers from spending long hours on projects that get turned down by higher-ups because they do not fit the strategy.

For example, clarity about who the customer is and who it is not has kept Edward Jones a U.S. based Company from pursing day traders. Even at the height of the internet bubble, the Company chose not to introduce only trading (it is still not available to Jones customers). Unlike the many brokerages that committed hundreds of millions at dollars and endless executive hours to debate over whether to introduce online trading (and if so, how to price and position it in a way that did not cannibalize or conflict with traditional offerings). Jones wasted no money or time on that decision because it had set clear boundaries.

Similarly, Jones is not vertically integrated into proprietary mutual funds, so as not to violate the independence of its financial advisers and undermine clients trust. Nor will the Company offer penny stocks, shares from IPOs commodities or options – investment products that it believes are too risky for the conservative clients it chooses to serve. And it does not have metropolitan offices in business districts because they would not allow for the convenient, face-to-face interactions in casual settings that the firm seeks to provide. Knowing not to extend its scope in these directions has allowed the firm to focus on doing what it does well and reap the benefits of simplicity, standardization and deep experience.

Defining The Advantage

Given that a sustainable competitive advantage is the essence of strategy, it should be no surprise that advantage is the most critical aspect of a strategy statement. Charity about what makes the firm distinctive is what most helps employees understand how they can contribute to successful execution of its strategy.

As mentioned above, the complete definitions of a firm’s competitive advantage consists of two parts. The first is a statement of the customer value proposition. Any strategy statement that cannot explain why customers should buy your product or service is doomed to failure. A simple graphic that maps your value proposition against those of rivals can be an extremely easy and useful way of identifying what makes you distinctive.

The second part of the statement of advantage captures the unique activities or the complex combination of activities allowing that firm alone to deliver the customer value proposition. This is where the strategy statement draws from the porter’s definition of strategy as making consistent choices about the configuration of the firm’s activities. It is also where the activity system map that Porter describes in what is strategy?comes into play.

Edward Jones’ activity map shows the brokerage’s value proposition is to provide convenient, trusted, personal service and advice. What is most distinctive about Jones is that it has only one financial adviser in an office (10,000 nationally) than competitors do.

Merrill Lynch has about 15,000 brokers but only 1000 offices,to make it easy for its targeted customers to visit at their convenience – and to provide a relaxed, personal, non-threatening environment. Jones puts its offices in strip malls and the retail districts of rural areas and suburbs rather than high-rise buildings in the central business districts of big cities. These choices alone require Jones to differ radically from other brokerages in the configuration of its activities. With no branch office, management providing direction or support, each financial adviser must be an entrepreneur who delights in running his or her own operation. Since such people are an exceptionin the industry, Jones has to bring all its own financial advisers in from other industries or backgrounds and train them at great expense. Until 2007, when it switched to an internet based service, the firm had to have its own satellite network to provide its widely dispersed offices with real-time quotes and allow them to execute trades.

Because, the Company has 10,000 separate offices, its real estate and communication costs are about 50% higher than industry average. However, all those developed an effective strategy that it called Total Merrill. The Company’s value proposition to provide for all the financial needs of its high-networth customers – those with liquid assets of more than $250,000 through retirement. While a lot of brokerages cater to people with a high net worth; they focus on asset accumulation before retirement. Merrill’s view is that as baby boomers age and move from relatively simple phase of accumulating assets to the much more complex, higher-risk phase of drawing cash from their retirement accounts, their needs change. During this stage, they will want to consolidate their financial assets with a single trusted partner that can help them figure out how to optimize income over their remaining years by making the best decisions on everything from annuities to payout ratios to long-term care insurance.

Merrill offers coherent financial plans for such customers and provides access to a very wide range of sophisticated products based on a Monte Carlo simulation of the probabilities of running out of money according to different annual rates of return on different categories of assets.

How does Merrill intend to deliver this value to its chosen customers in a way that is unique among large firms? First, it is pushing brokers – especially new ones to become certified financial planners and has raised internal training requirements to put them on the road. The certified financial planner license is more difficult for brokers to obtain than the standard series 7 license, because it requires candidates to have a university degree and to master nearly 100 integrated financial-planning topics. Second, Merrill offers all forms of insurance, annuities, covered calls, hedge funds, banking services and so on. (Unlike Edward Jones, which offers a much more limited menu of investment products).

Since several of these products are technically complex, Merrill needs products specialists to support the client – facing broker.

This Team Merrill organization poses very different HR and compensation issues from those posed by Edward Jone’s single adviser offices. Merrill’s compensation system has to share income among the team members and reward referrals.

Developing A Strategy Statement

How, then, should a firm go about crafting its strategy statement? Obviously, the first step is to create a great strategy, which requires careful evaluation of the industry landscape. This includes developing a detailed understanding of customer needs, segmenting customers and then identifying unique ways of creating value for the ones the firm chooses to serve. It also calls for an analysis of competitors’ current strategies and a prediction of how they might change in the future.

The process must involve a rigorous, objective assessment of the firm’s capabilities and resources and those of competitors, as described in

competing on Resources Strategy in the 1990s by David J. Collins and Cynthia A. Montgomery (HBR July – Aug 1995) – not just a feel-good exercise of identifying core competences. The creative part of developing strategy is finding the sweet spot, that aligns the Firm’s capabilities with customer needs in a way that competitors cannot match, given the changing external factors such as technology, industry, demographics and regulation.

However, the process of developing the strategy and then crafting the statement that captures its essence in a reachly communicable manner should involve employees in all parts of the Company and at all levels of the hierarchy. The wording of the strategy statement should be worked through in painstaking detail. In fact, that can be the most powerful part of the most powerful part of the strategy development process. It is usually in heated discussions over the choice of a single word that a strategy is crystallized and executives truly understand what it will involve.

The end result should be a brief statement that reflects the three elements of an effective strategy. It should be accompanied by detailed annotations that elucidate the strategy’s nuances (to preempt any possible misreading and spell out its implications).

When the strategy statement is circulated throughout the Company, the value proposition chart and activity-system map should be attached. They serve as simple reminders of the twin aspects of competitive advantage that underpin the strategy cascading the statement throughout the organization, so that each level below becomes the starting point for incorporating strategy into everyone’s behavior. The strategy will really have traction only when executives can be confident that the actions of empowered frontline employees will be guided by the same principles that they themselves follow.

The value of rhetoric should not be underestimated. A 35-word statement can have a substantial impact on a company’s success. Words do lead to actions. Spending the time to develop the few words that truly capture your strategy and that will energize and empower your people will raise the long-term financial performance of your organization.

A Hierarchy of Company Statements

Organizational directors comes in several forms. The mission statement is your loftiest guiding light and your least specific. As you work your way down the Hierarchy, the statements become more concrete, practical and ultimately unique. No other Company will have the same strategy statement, which defines your competitive advantage, or balanced score card which tracks how you implement your particular strategy.

MISSION

Why we exist

VALUES

What we believe in and how we will behave

VISION

What we want to be

STRATEGY

What our competitive game plan will be

BALANCED SCORE CARD

How we will monitor and implement that plan

THE BASIC ELEMENTS of a statement

OBJECTIVE – Ends

SCOPE – Domain

ADVANTAGE – Means

The Strategic Sweet Spot

The strategic sweet spot of a Company is where it meets customer’s needs in a way that rivals can’t, given the context in which it competes.

Fig. I

Source: Harvard Business Review (2008)

Corporate Vision

Corporate vision is otherwise known as the statement of strategic intent that expresses the aspiration of an organisation.It will indicate what the business intends to be in future.Usually, vision is a component of mission statement.

In exceptional cases, organisations may separate the vision from the mission statement.

Vision is essentially regarded as a dream.

Corporate Mission

Mission is a unique broad and enduring statement of organizational goals, aspirations, and values.Ezenwa (2005) opines that mission refers to a statement that highlights the perceived need of the society or community and the specific segment of the society or community to be served.It is usually defined by an organisation in order to differentiate it from other business organisations.

Mission Statement (Main Features)

It is derived from the purpose. It is a unique statement.The mission is defined by the organization.

Mission Statement (Key Elements)

Definition of the business of the organization

Statement of major corporate goals

Statement of corporate philosophy

In summary, a statement of mission will usually highlight the following:

Target customers

Products/services rendered

Geographical area covered

Conversion technology

Economics goals

Social goals

Management philosophy

Self concept

Examples of Mission and Vision Statement

May & Baker

Our vision is to provide products and services that support your health for life.Our mission is to be the best in providing world class health care products and services for present and future generations through innovation and appropriate technology whilst ensuring adequate returns to stakeholders.

The Concept of Purpose

Purpose is the fundamental reason for the existence of an organization.It provides information relating to the primary role of the business as expected by the society.Purpose is usually a general statement and applies to all organization operating within small industry.For example, the purpose of a manufacturing firm is to earn profit by providing required goods to the society.

Goals

The term goals refers to ends sought by organisations.Generally, there are different interpretations of goals.One method of defining goal is to consider the concept as short-term objectives.The other view considers goal as long as term objectives.The most important characteristics of goal is the fact that the concept provides direction to organization.Goals are usually expressed in terms of purpose, mission and objectives.

Objectives

Objectives are concrete and specific goals that must be achieved in order to implement the mission.The mission statement is usually translated into more concrete and specific objective for implementation and control.

Management Philosophy

The third main component of mission statement is the management philosophy.This is a statement f values, beliefs, attributes and philosophical priorities.It expresses the implied and expressed attitude of an organization to a number of interest group.

CHAPTER2

Strategies

Introduction

The outputs of the strategic system are strategies. Johnson and Scholes (2002) strategy posit that strategy is the direction and scope of an organization over the long termwhich achieves advantage for the organization through its configuration of resources within a changing environment, to meet needs of markets and to fulfill stakeholder expectations.

The stated direction and scope of an organization’s activities represent its intended strategies while the actual direction and scope of its activities are its realized strategies.

Ohmae (1983) points out that nothing is more self-contradictory than to talk about creative strategic thinking and, in the next breath, to give codified recipes for developing strategies of various sorts.

However, research and experience suggest that strategies can be classified into generic groups, where generic means ‘well defined, or belonging to a class’ .Very few writers on strategic management have been able to resist the temptation to produce their own list of generic strategies; indeed Ohmae himself produces a generic list. We shall concentrate on four groups of generic strategies as a representative sample of this approach:

Growth vestor strategies

Diversification strategies

competitive advantage strategies

The strategic triangle

Criticism of the artificial separation of formulation and implementation of strategy leads to a consideration in this chapter of the strategic mode or method of implementation following the review of generic strategies.

Growth vector strategies

Ansoff (1965) original product/market matrix generates four growth vectors of market penetration, market development, product or service development and diversification.

Market penetration focuses on existing strategies which may be pursued by the more efficient operation of the firm, thus reducing operating and overhead cost, or by more effective penetration of the firm’s existing markets through improved tenders, success ratios or better marketing to clients.

Only when the potential to achieve the organization’s objective or targets through existing strategies has been exhausted will firms normally consider expansion into related markets for their products or services, or the development of new products or services for their existing clients or markets.

Only when expansion has failed to meet the organization’s strategic objectives will diversification into unrelated markets with new products and services be considered.

The sequence of existing to expansion to diversification strategies is typical because of the risk and uncertainty when a firm moves out of it existing and familiar markets.

Although not considered by Ansoff, withdrawal from offering certain products or services and/or withdrawal from selected markets/clients is also an option, particularly during periods of recession. It is clear from the study by Hillebrandt, Cannon and Lansley (1995) that large construction contractors in the UK retreated to core businesses during the mid-1990s recession, withdrawing from peripheral activities.

Ansoff’s matrix is adapted by Grinyer to the construction industry and shown in figure 2

Figure 2 construction growth vector model

Existing services, type of construction or product

New, but related services, type of construction, or product

New and largely unrelated products.

Existing clients in same geographic area

Existing strategy

Expansion

Expansion

Existing clients in new geographic area

Expansion

Expansion

Diversification

New clients in same geographic area

Expansion

Diversification

Conglomerate diversification

New clients in new geographic area

Expansion

Diversification

Conglomerate diversification

Source: The University of Reading, The College of Estate Management (2003) Strategic Management Preview

Diversification strategies

The concept of expansion and diversification strategies was developed by the Strategy structure school. These strategies are a development of Ansoff’s Growth Vector approach.

Chandler’s (1966) pioneering work was refined by Channon (1978) and applied to the service industries in the UK. The sample included seven construction corporations: Richard Costain, Talyor Woodrow, John Laing, George Wimpey, Trafalgar House. Wood Hall Trust, and London and Northern Securities. The classification of generic strategies developed by Channon suggest that an organization’s strategy has three major dimensions: diversification, international activity and acquisition.

Diversification

Most firms start in the single business category, eg housebuilding. Constain, Taylor Woodrow, Laing and Wimpey started in this way. Many construction firms choose to remain in this category if they can obtain enough work for the chosen type. This would then become the existing strategy of the firm as defined by Ansoff.

Expansion strategies can be of two types. In the first, the dominant business involves staying within a single market but adding peripheral activities. For example, a general contractor whose workload is dominated by competitive tendering may build a small number of speculative houses for sale if the opportunity arises. The alternative strategy is to move into related business. There is now no dominant type of work but rather a number of related activities which represent a balanced portfolio of interest. Typically a construction firm might have interests in building, civil engineering, housebuilding, building products, site investigation, property and so on. The related business strategy spreads the risk over a range of activities; if a single or dominant business strategy fails, the company could be in jeopardy . Contractors who specialized in public sector work ran into difficulties during the 1970s with the political climate favouring private rather than public spending.

Diversification strategies into unrelated businesses are equally risky. Firms adopting this strategy are into the unknown territory at the bottom right-hand corner of Ansoff’s and Grinyer’s matrix. Specifically, we have conglomerate diversification and concentric diversification.When a company diversify its business into related business, it is described as concentric diversification.In this case ,the risk is low.When a company diversifies its business into unrelated unrelated busineses , it is call conglomerate diversification.In this case the risk is always high.

Acquisition

The type and rate of acquisition are largely determined by the rate of growth to which the firm aspires. Channon’s (1978) study showed that the more recently formed construction corporations, Tafalgar House, Wood Hall Trust, and London and Northern, had achieved their impressive size by a strategy of aggressive acquisition. The longer established companies in the sample had generally elected to adopt a strategy of internal development as the vehicle for expansion and diversification.

Competitive advantage strategies

Porter (1982) states that the primary objective of the business firm is to obtain and sustain competitive advantage over other firms in the industry. That is, the firm exhibits some form of distinctive competence by which customers or clients can distinguish its products or services.

Porter asserts that there are three generic strategies which businesses can pursue in order to achieve competitive advantage. The three generic strategies are cost leadership, differentiation and focus.

Cost leadership

Adoption of this strategy means that the company seeks to offer consistently lower prices than its competitors to a broad range of clients as a means of attracting sales from customers/ clients.

This strategy is particularly relevant in both manufacturing and service oriented organizations. The source of cost leadership derives mainly from synergy in operations or marketing. For example, backward integration by a manufacturing company will enable the company achieve cust leadership status in the industry.Again, a contractor who purchases a ready-mix concrete company may enable the firm to quote lower prices for concrete work due to its access to low cost resources of raw materials. Equally a contractor who has computer-based systems for heading repetitive construction work, e.g speculative housing, may be more competitive in public sector housing where similar control systems can be used.

Differentiation

The second type of generic strategy suggested by Porter(1982) is that of differentiation of the organization’s strategies from that of its major competitors. This means that the organization must offer a product or service which is seen by clients/customers to be distinctive.Differentiation is essentially producing differentiated products that are unique and aimed at customers that are relatively price sensitive. This will also enable an organization to achieve above average returns.

Differentiation enables firm to provide a perceived unique and superior value to the client or buyer, thus allowing them to charge higher prices.

Focus

This has to do with producing products/services that are targeted at fulfilling the needs/wants of group of consumers.

The two previous generic strategies are for industry-wide application, but an organization may decide to focus on a particular segment of the market-for example, cost leadership within the first time buyers’ housing work or differentiation within the hotels market by focusing on the development of the resort hotels. These are so-called ‘niche’ strategies.

The Strategic Triangle

Ohmae suggest that in any strategic situation there are three main players: the corporation itself, the customer, and the competition. These form what he calls the ‘strategic triangle’ as shown in figure 3.

Figure 3. The strategic triangle

(After Ohmae, 1982)

Source: Source: The University of Reading, The College of Estate Management (2003) Strategic Management Preview

He asserts further that this leads to three generic strategies: Company-based strategies, customer-based strategies and competition-based strategies.

Company-based strategies

Company-based strategies are designed to exploit the strengths of the company vis a vis the competition. This approach requires that any strategic thinking encompasses all functions in the organization from procurement, design, engineering, site production and prefabrication, to marketing and facilities management. Some of these functions will be critical to particular clients and can also differentiate the company from the competition. For example, if the company has developed a knowledge-based design system this may be used to convince clients of the firm’s abilities and also to differentiate the firm from it’s less advanced rivals.

Customer-based strategies

A company cannot address every need of every customer or client; it is essential to segment the market within particular client groups and to match the target segments to the firm’s strengths.

Competitor-based strategies

Ohmae(1983) stresses the need to be aware of what competitors have to offer to client and the need to develop strategies which differentiate the organization from its rivals. Alternatively, if there is no perceived difference between organizations, then cost is likely to be a key factor.

Fuller information and examples of the application of these strategies in winning business formulas by Japanese and other companies are discussed in detail in Ohmae’s book. He also stresses that successful strategic thinkers often operate with a combination of all three strategies which are integrated into a winning formula.

Whilst generic strategies provide a useful framework for considering strategies, there is ample scope for creative strategies within these categories. Equally, many successful businesses have created strategies which do not fit easily into any generic classification system.

Strategic modes

In parallel with the commitment to particular strategies will be further strategic decisions about whether it is possible to achieve these strategies by internal growth or through acquisition of appropriate businesses. The study by Channon (1978) revealed that the longer established companies in the sample (Laing, Wimpey, Taylor Woodrow, and Costain) had mainly grown through internal development, a ‘home grown’ policy. The newer companies (Trafalgar House, London and Northern) had used acquisition as the main vehicle for achieving spectacular growth.

The overriding factor appears to be the rate of growth the company wants to attain, but other aspects are the desire of owners to retain control of the business, the financial strength of the business, the problems of entry into new markets (buying in may be easier than developing from scratch), the availability of suitable candidates for take-over or merger, spare capacity that the firm has, synergistic opportunities, etc.

Two other methods which are popular in the construction/property industries are joint ventures and agencies. The first has the advantage of pooling experience and risk whilst reducing capital requirement; the second approach avoids the often substantial costs of research and development of a product or service and offers the ability to offer quickly a tried and tested product or facility to clients.

Joint ventures are common in the construction/property industries, particularly for overseas projects where the other partner is frequently an indigenous company; indeed, this is often a mandatory requirement. This eases entry into the market.

Agencies and licences are frequently used for prefabricated systems or specialized services such as drain clearance.

Strategies For Project-Based Industries

In project-based industries such as construction and property, the project itself assumes strategic significance. This is because the organization is essentialy has an aggregation of the projects which it is involved with at any one time. This is property firms with a large property portfolio, each project represents a significant investment and consequent risk.