What Is Strategic Management?
Essay by 24 • July 16, 2011 • 6,795 Words (28 Pages) • 2,374 Views
Introduction
There is no single, universally accepted definition for strategy. Some understand it as a deliberate plan, drawn up to achieve set goals, others see it more as a process, whereby a company’s decision and actions are made in alignment with opportunities or threats in the industry. Even others define it as a pattern of consistent actions in decision-making and lastly there are those with a military view of strategy, who consider it a manoeuvre to beat and outsmart the competition (Parthasarthy, 2006). By drawing from each of the definitions, one could say that strategy and by extension, strategic management, is constituted of short-term strategies involving managing and planning for the present and long-term decisions and actions, made, taken and implemented by managers to achieve superior competitive advantage, compared to their competitors.
This coursework will highlight the key elements of organisational strategy by means of the POSIES model. The elements relevant for this analysis are POSI (purpose вЂ" objectives вЂ" strategy - implementation). Parthasarthy (2006) integrates another element into what he calls the strategic management process, namely, the situational analysis, wherein the external and the internal environment are taken into consideration. This assessment of competitive opportunities and threats is set at the same stage than the objectives in the POSIES. Apart from discussing the relevant theory for the different stages of the strategic management process, this coursework will also analyse and relate strategic management theory to the working examples of two companies.
IKEA is one of the world’s top low-cost furniture retailers. IKEA was founded in Sweden by Ingvar Kamprad in 1943, when he was just 17 years old and is now owned by a Dutch-registered foundation, controlled by the Kamprad family. Inter IKEA Systems B.V. is the owner/franchiser of the IKEA trademark and Concept. The company name is a composite of the first letters in his name in addition to the first letters of the names of the property and the village in which he grew up: Ingvar Kamprad Elmtaryd Agunnaryd. Originally, IKEA sold pens, wallets, picture frames, anything that was needed and could be sold at a reduced price. Furniture was first added to the IKEA product range in 1947 and, in-house design in 1955. Nowadays, IKEA owns around 250 stores in over 34 countries (Yahoo, 2006).
Nike, Inc. is the largest sports manufacturer in the world and sells athletic footwear, apparel, and sports equipment. The company takes its name from Nike, the Greek Goddess of Victory. It was founded by Bill Bowerman and Philip H. Knight in 1964. Knight had the idea of introducing low-price, high-tech athletic footwear to the American market. Both agreed to kick in $500 and started importing. As of May 31, 2006, it operated 212 retail stores in the United States and 206 retail stores internationally (Yahoo, 2006 & Nike, 2006).
Purpose
Purpose at its most theoretical is “the reason for which something exists, is done or made”. Everyone looks for a reason to exist and an organisation is no different. Organisations are accountable for their actions, to stakeholders, customers, the government, employees. In order to be considered responsible, legal, effective, worthy of trust and financial backing and to consolidate organisational efforts, companies should define what their purpose is, to clarify exactly what it is doing, where it is going and how it wants to get there.
The starting point of such an endeavour is usually a mission statement. A mission statement should communicate what task a company is engaged in at present time - that is, what it does, which markets it is in, who its main stakeholders are. A mission statement should furthermore clarify where it sees itself in the future. This part of the mission statement is generally called the vision, or if drawn up separately the vision statement, and constitutes the second most important part of clarifying a company’s purpose. The vision of an organisation is concerned with a future the company wants to move towards, “the ideal a firm is committed to” (Parthasarthy, 2006) and the long-term goals and aspirations it hopes to achieve. The third part in defining purpose is concerned with a company’s values and beliefs. It has to be decided which values and beliefs are important for the company, which concern issues such as quality standards, treatment of workforce, awareness of the environment etc. The final part of the mission or purpose statement is goals and objectives. By elucidating exactly what the company is aiming for it can measure performance and progress towards its vision as well as make employees pull on one string by explaining what exactly is expected of them.
“The IKEA vision is "To create a better everyday life for the many people."
Our business idea is "To offer a wide range of well designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them." Our market positioning statement is "Your partner in better living. We do our part, you do yours. Together we save money."” (IKEA, 2007)
IKEA’s mission statement is quite clear, it tells you what the company’s purpose is, who its stakeholders are (everyone, or anyone with a tighter budget) and what it does. The statement also clarifies that the customer is supposed to do its part in the value adding process, more precisely transporting the items home and assembling the furniture for a better price.
Kamprad says so himself: “I see my task as serving the majority of people. The question is, how do you find out what they want, how best to serve them? My answer is to stay close to ordinary people, because at heart I am one of them.” (Business Heroes, 2004). In their case study of IKEA four years prior, Edvardsson and Enquist (2006) demonstrated that “economic logic of value-creation should be supported by ethical logic of values if corporate strategy and competitive advantage are to be established and maintained”, which fits well with what a former CEO of IKEA said “IKEA is a commercial company, but there is a social side to our vision and our business idea” (Edvardsson & Enquist, 2002). IKEA has values and beliefs about four things, price, quality, the environment and people. It keeps prices low, quality high, uses only wood from sustainable sources, contributes to forestry projects and prints its catalogues on chlorine-free paper (Arnold, 2002, IKEA, 2007). IKEA is involved in charities
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