Introduction
Business strategy refers to the “direction and scope of an organization in the long-term which enables it to achieve competitive advantage through configuring its resources within a challenging environment in order to meet the needs of the market and expectations of the shareholders” (Dess. 2010, pp. 67). It describes the desired future position of the business in the industry. It also acts as a reference which helps the management to achieve the desired future position by defining the markets in which the enterprise should compete in and how it should compete in such markets. Besides, it helps the management to identify the resources needed to compete effectively.
Business strategy is developed at three levels namely, corporate, business and functional levels. This paper focuses on the various aspects of business strategy such as its formulation, planning, evaluation, and implementation. These concepts will be discussed by analyzing the strategy adopted by Goodmark Ltd. Goodmark is a manufacturing company based in China. Its core activities include “plastic molding, plastic injection, in mold decoration and assembling electronic components” (Goodmark, 2011).
Strategy Formulation
Formulating a strategy begins with identifying the vision, mission and core competencies of the business. The strategy is usually reflected in the firm’s vision and mission statements. A mission statement is simply a statement which defines the purpose of the enterprise (Joyce, Woods, 2001, p. 90). It acts as a framework within which the desired strategies are formulated by the management. A typical mission statement is characterized by the following elements. First, it states the aims of the business. Second, it describes the main stakeholders of the business such as shareholders and customers. Finally, it describes how the business creates value for its stakeholders. Goodmark’s mission is “to unceasingly strive for betterment” (Goodmark, 2011).
A vision statement is a written description of what the firm strives for and what it intends to achieve in the long term (Bryson, 2004, p. 89). It is thus a description of what a company will look like in the future. Goodmark’s vision is “to create a better tomorrow” (Goodmark, 2011).
A core competence refers to “a well performed internal activity that is central to a company’s competitiveness and profitability” (Bondrea and Adrian, 2010, pp. 53-60). Core competencies are particular strengths that are unique to a company and enable such a company to provide added value. Goodmark’s core competencies include a positive working attitude among employees, a customer oriented culture, good relationships with the society and a culture of improving performance through innovation.
Goodmark’s Stakeholders
Goodmark’s stakeholders include, its employees, shareholders, customers, suppliers, competitors and government departments (regulators). It is important to gain stakeholder buy-in to a selected strategy due to the following reasons. Winning the support of employees will enhance efficiency in the implementation of the strategy (Petrescue, 2010, pp. 476-482). Employees are likely to be more efficient in implementing a strategy that they support. Shareholders are likely to finance the strategy if they support it. Customers will maintain their loyalty to the firm if they are convinced that the strategy used to produce goods and services will create more value for them. Finally, the government as a regulator will only allow the firm to operate if it supports its strategies (Boyes and Melvin, 2007, p 101).
Environmental and Internal Audit
Strategic audits are normally conducted to enable the management to establish a match between internal operations of the firm and the business environment it operates in (Porter, 1996, pp. 61-78). Environmental and internal audits can be conducted through a SWOT analysis. The SWOT analysis can be illustrated by the table 1 below.
Internal Audit
The internal audit focuses on the internal strengths and weaknesses of the firm. Goodmark’s strengths can be described as follows. First, it has been able to achieve manufacturing efficiency through the use of modern technology and precision equipment. This translates into cost reduction and on time delivery (Hollensen, 2010, p. 56). Second, Goodmark has a highly skilled workforce especially in its engineering and design department. Consequently, it is able to produce goods that satisfy the specific needs of the customers. Third, it has a superior reputation in the industry (Goodmark, 2011). Its products are always praised by customers for their superior qualities. Besides, it has a quality assurance policy and has since received several quality certifications in the industry. Finally, it has a huge market share. Currently it serves both domestic and international customers in Japan and Thailand.
The weaknesses of the firm are as follows. First, Goodmark is still new in China and thus it has limited knowledge about the market. Second, its market base (80%) is mainly composed of foreign owned firms and the export market (Goodmark, 2011). This means that it is losing money by failing to serve the Chinese owned companies. Finally, it has complex hierarchical management system. This leads to inefficiency by slowing the process of making decisions.
Environmental Audit
This focuses on how external factors affect the performance of the business. The threats facing Goodmark include the following. There is high regulation in the industry since manufacturing plastic products involves a significant pollution to the environment. Thus, Goodmark has to spend more of its resources in complying with environmental regulations (Boyes and Melvin, 2007, p 101). Besides, failure to observe the regulations can cost it its license (Zheng, 2011, p. 15). The threat of substitute products is also very high. For example, the plastic chairs made by the company are facing intense competition from those made of wood. Finally, the threat of new entrants is high. Consequently, Goodmark is likely to lose part of its market share as more firms join the industry.
The opportunities available to Goodmark include the following. The robust economic growth being experienced in most Asian countries means that the company can easily find new markets for its products (Li, 2011, p. 10). As it joins new markets, its profits are likely to increase (Porter, 2000, pp. 1-8). The strong economic growth in China, Japan, Thailand and Malaysia (Goodmark’s main markets) translates into a high demand for the company’s products. Due to the integration of Asian economies, the emerging technologies in countries such as Japan are readily available to Goodmark. Thus it can adopt the new technologies and increase its production.
Strategy Adopted by Goodmark
According to Porter’s generic strategies, Goodmark is following a differentiation strategy. This is a strategy in which the firm focuses on producing goods and services with unique attributes (Rohrbeck, 2011, pp. 420-430). Consequently, the goods are valued by buyers and considered to be superior or different from those produced by competitors. The differentiation strategy has been adopted by Goodmark due to the following reasons. First, it is able to benefit from reliable scientific research. The firm not only benefits from its own research and development initiatives but also access the findings of research works conducted in other countries such as Japan. By utilizing the advanced production technology resulting from research and development, the firm has been able to produce high quality products.
Second, Goodmark has highly skilled and talented professionals who are able to design and produce high quality products. Third, the firm’s customer-oriented culture has enabled it to develop a strong sales team which is capable of convincing customers about the high quality of the products. Finally, Goodmark has “a corporate reputation for quality and innovation” (Goodmark, 2011). In order to maintain its image, the firm has to continue focusing on producing goods that are superior in the industry through both product and process innovation.
Strategic Planning
Goodmark’s Approach to Strategy
Currently, Goodmark is using the strategic fit approach to formulate and implement its strategy. The approach involves aligning customers’ needs with the strengths of the company (Skrt and Antorcic, 2004, pp. 107-122). Consequently, Goodmark’s management usually conducts research on customers’ needs alongside the company’s internal strengths. This enables the firm to develop products that meet the needs of the customers. The merits of this approach are as follows. It has proved to be very profitable since it enables the firm to satisfy the needs of the market using the available recourses. Since it emphasizes the importance of making decisions based on research, it can help a firm to avoid entering a market that it cannot serve (Sadler and Craig, 2008, p. 145). The main demerit of this approach is that it is more focused on the present than the future. Thus the firm may not be able to respond to sudden changes in market needs.
Alternative Approach
The weakness of the strategic fit approach can be eliminated by adopting a strategic foresight approach. It involves envisioning what customers will need in future and how such needs can be satisfied. Its main strength is that it helps the firm to identify new markets and new products (Sadler and Craig, 2008, p. 147). The main problem with the strategic foresight approach is that the firm might not be able to correctly predict customers’ future needs. However, Goodmark can address this problem through research on customers’ needs and industry dynamics.
Strategic Plan for Goodmark
The process of preparing a strategy for a firm can be illustrated by figure 1 below.
Drawing from the environmental and internal analysis as well as a review of the company’s vision and mission statements the following strategic plan can be considered as an improvement.
Vision Statement
The vision statement can be revised as follows. ‘Our vision is to create a better tomorrow for our customers, communities and shareholders through safe manufacturing technologies, high quality products and focusing on profitability’.
Mission Statement
The mission statement can be revised as follows. ‘To strive for betterment by serving the Asian plastic mold customer with high quality products, priced reasonably and delivered on time’. Unlike the former mission statement, the current one identifies the firm’s main market, its contribution and distinction in that market.
Goals to be achieved
- To reduce environmental pollution
- To expand our operations in the region
- To introduce new and better products
- To increase our profitability
Objectives to be achieved
- To reduce our greenhouse gas emission by 30% in the next three years
- To increase our market share by 25% in the next four years
- To increase our product portfolio by 15% in the next two years
- To increase our profitability by 20% in the next three years
Strategy for Achieving the Goals and Objectives
At the corporate level, Goodmark should follow a strategy of related diversification. This means that the firm should invest in related businesses such as research and development companies and production of raw materials. Diversification not only generates more revenue for the firm but also enables its various business segments to support each other.
At the business level, Goodmark should purse a cost leadership strategy due to the threat of new entrants and substitutes. The strategy will enable the firm to reduce its operating costs. Consequently, it will be able to increase its market share and profits by charging lower prices.
At the functional level, the research and development initiatives should focus on identifying efficient technologies that will enhance cost reduction. The marketing initiatives should promote market penetration and customer loyalty. Human resources management should focus on creating a culture of maintaining cost efficiency without compromising quality.
Strategy Evaluation and Selection
Apart from the differentiation strategy, Goodmark is also pursuing global strategies. It particularly focuses on multi-domestic and transnational strategies. Regarding the multi-domestic strategy, Goodmark concentrates in customizing its products and marketing strategies to match various conditions in the local market (Goodmark, 2011). It has thus established its production, marketing and research activities in three main cities namely, Sha Jing, Guan Lan and Shanghai. Concerning the transnational strategy, Goodmark concentrates in combining the “benefits of global-scale efficiency with the benefits of local responsiveness” (Micheli and Manzoni, 2010, pp. 477-497). It has established subsidiaries in Hong Kong, Malaysia and Japan to facilitate its sales activities. Thus interchange occurs between its local base in China and the foreign subsidiaries.
Justification for the Selected Strategy: Cost Leadership
The cost leadership strategy will enable the company to achieve growth due to the following reasons. First, the firm will be able to charge lower prices while maintaining the same level of profitability. Second, Goodmark will be in a position to win any price war that may arise in the industry (Micheli and Manzoni, 2010, pp. 477-497). This is attributed to the fact that it can set its prices below the industry level and still make profits. Third, maintaining a low cost will act as an entry barrier to those firms that can not do the same. Thus Goodmark will be able to maintain or even increase its market share. The strategy will allow the firm to adjust its prices accordingly in order to compete with substitute goods. Finally, the firm will be less affected by the high bargaining power of buyers and suppliers if it can maintain low costs in production.
Strategy Implementation
Roles and Responsibilities: Goodmark Verse Poleeko Plastic mould
Both Goodmark and Poleeko Plastic Mold are manufacturing companies in Chinese plastic mold industry. The roles and responsibilities associated with the implementation of their strategies can be compared as follows. The top management of both companies is responsible for the supervision of the implementation process. The junior employees are mainly responsible for obtaining feedback from the market concerning customers’ response to the new strategy. The junior employees are also responsible for currying out all tasks associated with the implementation process such as meeting sales targets and designing new products (Goodmark, 2011). The shareholders are responsible for financing the implementation process. They also give directions on how the strategy can be best implemented in order to achieve the vision of the company.
Resources Needed to Implement a New Strategy
Implementation of a new strategy requires the following resources. First, financial resources are needed to fund the implementation process. The financial resources must be allocated wisely to the business units that are involved in the implementation process. This can be achieved through effective budgeting initiatives that prevent misallocation of funds. Second, human resources are very important in the implementation process. The human resources refer to the employees and their ability to implement the new strategy. Adequate human resources can be obtained through planning. The management should be able to predict its future staff requirements and how to hire additional employees. Besides, the management should be in position to equip the employees with the skills needed during the implementation stage (Linnenluecke and Griffiths, 2010, pp. 357-366).
For example, regular staff training can help in improving employees’ skills. Third, materials are needed in order to implement a new strategy (Lichtenthaler, 2011, pp. 317-330). Materials are the inputs needed to manufacture goods. A consistent supply of materials can be achieved by improving the efficiency of the inbound logistics activities. Effective stock holding policies should also be formulated to avoid shortage of materials during the implementation process. Time is the fourth resource needed by a firm that is implementing a new strategy. The available time must be allocated appropriately so that the goals and objectives of the strategic plan are achieved within the set deadlines. Finally, appropriate technology is needed to enhance efficiency in operation and coordination when implanting a new strategy.
The use of Targets and Time Scales to Assess the Effectiveness of Strategy
Strategic plans are based on objectives which act as benchmarks for assessing the effectiveness of the strategy (Huang, 2011, pp. 641-653). The objectives to be achieved through the new strategy must be time bound and measurable. In order to measure an objective, it must be linked to a specific target. For example, Goodmark can set a target of increasing its market share by 15%. Thus the percentage of the market share gained by Goodmark after implementing the new strategy will be the parameter used to measure the effectiveness of the strategy (Gimbert, Bisbe and Mendoza, 2010, pp. 477-497). Best practice in strategic planning requires all objectives and targets to be achieved within a specific time. For example, Goodmark’s target of increasing its market share by 15% can be achieved within 3 years. Thus the timeline (3 years) will be the parameter used to measure the effectiveness of the strategy. In conclusion, a strategy is effective if the targets associated with it are achieved within the set timeline.
Conclusion
As discussed above, a business strategy is a guide that helps the firm to move towards the desired direction. This means that a business is likely to fail if it does not have a proper strategy to guide its operations. The process of strategic planning involves strategy formulation, strategy planning, strategy evaluation and strategy implementation. The implemented strategy must be monitored and evaluated over time to ensure that its objectives are achieved (Cirnu and Boncea, 2010, pp. 81-90). Goodmark for instance focuses on differentiation strategy to gain competitive advantage in its industry (Goodmark, 2011). Due to the high competition posed by substitutes and the threat of new entrants, the firm can consider adopting a cost leadership strategy.
References
Bondrea, A. and Adrian, D. 2010. The Role of Strategy in Relationship Marketing. Annals of Spiru Haret University: Economic Series, 1(4), pp. 53-60. Web.
Boyes, W., and Melvin, M. 2007. Microeconomics. New York: Cengage Learning. Web.
Bryson, J. 2004. Strategic Planning for Public and Nonprofit Organizations. New York: John Willey. Web.
Cirnu, D. and Boncea, A. 2010. Enterprise and Organizational Culture. Economy Series, 4(2), 81-90. Web.
Dess, G. 2010. Strategic Management. New York: McGraw-Hill. Web.
Gimbert, X., Bisbe, J. and Mendoza, X. 2010. The Role of Performance Management Systems in Strategy Formulation. Long Range Planning, 43(4), pp. 477-497. Web.
Goodmark, 2011. About Goodmark. Web.
Hollensen, S. 2010. Marketing management. New York: McGraw-Hill. Web.
Huang, C. 2011. Corporate Governance, Corporate Social Responsibility and Corporate Performance. Journal of Management and Organization. 16(5), pp. 641-653. Web.
Joyce, P. and Woods, A. 2001. Strategic Management. New York: Kogan Page. Web.
Li, Z. 2011. China’s Wen Pledges to Step up Inflation Fight. Sino Daily, 10b. Web.
Lichtenthaler, U. 2011. Outbound Open Innovation and its Effects on Firm Performance. R&D Management Journal. 39(4), pp. 317-330. Web.
Linnenluecke, M. and Griffiths, A. 2010. Corporate Sustainability and Organizational Culture. Journal of World Business, 45(4), pp. 357-366. Web.
Micheli, P. and Manzoni, J. 2010. Strategic Performance Measures. Long Range Planning, 43(4), pp. 477-497. Web.
Petrescue, N. 2010. The Strategic Planning within the Producing Road Vehicles. Annals of University of Craiova: Economic Series, 3(38), pp. 476-482. Web.
Porter, M. 2000. The Five Competitive Forces that Shape Strategy. Harvard Business Review, 1(1), pp. 1-8. Web.
Porter, M. 1996. What is Strategy? Harvard Business Review, 1(1), pp.61-78. Web.
Rohrbeck, R. 2011. Opening up for competitive advantage. R&D Management Journal. 39(4), 420-430. Web.
Sadler, P. and Craig, J. 2008. Strategic Management. New York: Kogan Page. Web.
Skrt, B. and Antorcic, B. 2004. Strategic Planning and Small Firm Growth. Managing Global Transition, 2(2), pp. 107-122. Web.
Zheng, L. 2011. Eco-Cities are the Key to Conservation. China Daily, 15b. Web.