You are required to answer the following questions based on the case study of Chateau Margaux. Make and state any reasonable assumptions. Use academic models to support your analysis.
Drawing on strategic capabilities models, conduct an internal analysis on Chateau Margaux. In your view, are any of the core resources and core capabilities under threat? Justify your answer
Using relevant models, critically discuss the impact of external forces on the company.
Critically evaluate the structure of the wine industry and discuss the implications for the company.
(a) In the light of your analysis, discuss the possible strategic options open to the company. Evaluate these options within the frameworks of qualitative and quantitative models, and recommend a suitable strategy option to the company .
(b) Prepare a strategy statement that the Board of Chateau Margaux may find useful.
Strategic Management deals with identification, formulation and implementation of strategies which allow the management to understand the current business scenario, and accordingly set goals, and devise strategies so as to achieve profitability and gain a competitive advantage. Strategic Management has been recently considered as an important managerial practice field (Levy et al., 2001). Wheelen and Hunger (2002) describe strategic management as a particular set of important decisions taken by managers and the actions that will lead to better performance of the organization in long-run. (Chaneta, 2011). Strategic Management involves environmental scanning so as to formulate and implement better organizational and business strategies and evaluate them. Strategic management process is the process which enables the organization to formulate and evaluates business strategies. For efficient strategic management process, the managers collect information using different social science disciplines so as to take informed decisions. The paper critically analyzes the different social science disciplines perspectives that inform strategic management. Social science discipline include demographics, economics, psychology, environmental planning, anthropology, politics, sociology, developmental studies, business studies and international relations. The paper will analyze the social science perspectives in general, and compares strategic management models and provides business cases to support the argument that, it is not possible to scrutinize each and every aspect and predict exact future.
Strategy is among the most important assets required by the organization to improve its performance and gain competitive advantage. Strategy is the set of approaches which the management makes to succeed, and hence, strategy is very famously known as the game-plan of the organization (Chaneta, 2011). It is believed that good-strategy making will ultimately lead to better strategy execution. Strategic management is an important part of a manager’s job. Basically strategic management is about taking appropriate action so as to gets benefits in future, but the future is uncertain, and hence, it is important to take strategic management decisions using information from various sources. However, the information is often incomplete and hence, managers face various issues while developing strategies.
Michael Porter suggests that today organizations today, are continuously under pressure to improve the profitability, quality, productivity and speed. Managers use various tools like Total Quality Management, re-engineering, and benchmarking which have certainly improved operations but these tools have no effect on sustainable profitability (Porter, 1996). Today, organizations have got involved into mutually destructive wars to achieve competitive advantage. Porter states that operational excellence is alone not enough because they can be easily imitated by the competitors. Hence, it is important to explore the actual essence of strategy in identifying a unique as well as valuable position with the help of activities and efforts that are not easy to match (Porter, 1996).
Strategic Management Process
Strategic management can therefore be defined as management process which examines the present as well as future environments, and formulating strategies to achieve unique positions in the competitive world, and implementing these strategies so as to achieve the objectives of a profitable organization and a sustainable future (Teece et al., 1997). Effective strategic management involves identifying the purpose of the organization, and redefining its mission and vision to formulate objectives to achieve a unique and enviable competitive position. Strategic Management involves devising new strategies so as to achieve future objectives. Strategy is a pathway which guides the organization to achieve its objectives (Chaneta, 2011).
Strategic management process requires strategic thinking, which conceives and predicts the future of the organization and how the future will be secured. Almost all the organizations devise strategies, however, it is important to devise new strategies and execute them so as to secure the future of the organization. The conceptual framework of strategic management includes four elements-, strategy formulation process, strategy content and strategic context and strategy implementation.
The strategic context is an important element of strategic management process and it forms the background of the overall process. Every enterprise has a unique context and they exist in that particular context (Macmilan & Tampoe, 2001). The context of the organization has various characteristics related to the organization itself and its external environment. The context presents the issues important for strategic management and thus determines the scope of strategic management of the organization in picture (Smiricich & Stubbart, 1985).
Strategy formulation process is the process by which strategy are actually thought, conceived, and then compared so that a particular strategy is chosen within the organization over time. It refers to strategic thinking process. Mcmilan and Tampoe (2001) suggest that no universal process of strategic thinking is prescribed, nor any means are proven which will lead to effective strategic thinking (Macmilan & Tampoe, 2001). The strategy formulation process can be simple and informal involving fewer number of individuals while some strategy formulation process are large and formal which involve greater number of people coming from different disciplines of the organization (Haycock et al., 2010). Strategy formulation process aims at arriving upon an agreed view about the future success of the organization.
Strategy Formulation Process comprises of three logical elements, namely strategic intent, along with strategic Assessment, and Strategic Choice. Strategic intent is regarded as the highest level purpose of any organization, and is therefore termed as the driver of the strategy formulation process as the most meaningful action is supposed to develop in the purpose of the organization (Macmilan & Tampoe, 2001).
Strategic assessment can be considered as the overall assessment of the context during a specific time and the assessment of effects of the tentative future actions. Strategic assessment involves assessment of the day-to-day activities of the enterprise and business units. Strategic assessment must get consideration in broad terms including capabilities of the organization and the environment in which the organization operates. Strategic assessment examines whether the enterprise will be able to realize the strategic intent with the changing business environments (Thompson & Stricland III, 2012). A strategic assessment includes analysis and also judgement. It analyses the current performance, and the predicted future trends, the objectives developed by the organization and also the success of the previously applied strategies (Macmilan & Tampoe, 2001).
Strategic Choice is all about deciding a particular action and the determining how to take the action so as to secure the future of the organization. Strategic choice most importantly involves faith in the actions that the strategies will lead to future success. Regardless of the high degree of uncertainty in case of strategic choice, but there is no value unless there is a choice (Levy et al., 2001). The strategic choice must more importantly focus on addressing the strategic issues or dilemmas raised by the context, using a method which aligns with the strategic intent.
The content of the strategy can be considered as the ideas aimed at securing the future of the organization in its specific context and at a specific time. As per Mahoney and McCue (1999), content of a strategy must include the five guidelines (Mahoney & McCue, 1999). Firstly select the right business which the organization must continue with and should get rid of all the other businesses. Secondly, the strategists must understand which important elements drive the business. The strategists must try to innovate, and redefine the business. Also, the organizations should try and maintain financial flexibility so that they can tap the opportunities. Lastly, the organization must measure the success by continuously increasing the shareholder value over time and even now (Macmilan & Tampoe, 2001). Strategy content is divided into corporate strategy, along with business strategy and functional strategy. The corporate strategy will provide a description about the scope of the organization as a whole, and specifically its intent about its future. It would include the general purposes and the core values to express the broad strategy. The organizations with two or more business interest must craft business strategy for each if to business. The business strategy will include the strategy used by the company to operate in its industry and how to achieve a competitive position in its particular context. The functional strategies deal with specific functional units of the enterprise. The functional strategy aims at improving the performance of a particular function and aligns the functional strategies so that they contribute towards achieving the goals of the business and corporate strategy.
Strategy Formulation Process
Implementation is considered as an integral part of the strategic management process as, the process as well as the content of strategy effectively take into consideration the needs and also the capabilities for implementation. It is found that many strategic change processes fail and do not achieve the desired objectives, and the failure can be attributed to underestimation of the challenges in implementation of changes and also to the poor execution (Macmilan & Tampoe, 2001).
Implementation of new strategy will involve change in the business processes, the culture of the organization and also in the structure of the organization. Effective program and project management is important for bringing about effective change (Freeman, 2010). Moreover, changes in leadership will also occur for successful implementation of strategies. The process changes will involve business process reengineering and the cultural changes and structural changes will be conducted so as to achieve the objectives of implementing the strategy so formulated.
Different strategic management models have been designed by the researchers which provide different normative approaches in determining appropriate strategy. However, most of the strategic management models comprise of the five elements and these elements comprise the basic strategic management model. The basic strategic management model involves following five stages: 1. Environmental scanning, Organizational Direction, and Formulating Strategy, Implementation of strategy and finally Evaluation and control of strategy.
Three important Strategic Management Models are identified and compared so as to gain an insight in the Strategic management process.
Fred David’s Model involves three important stages namely: Strategy Formulation, Implementation and Evaluation. All the three stages are characterized by different stages. The strategy Formulation stage includes these following steps:
Developing Mission statements: the mission and the vision statements define the purpose of the organization and gives a short description about the sustainable objectives of the organization.
External Analysis: External analysis, involves analyzing the external environment scenario using a PESTEL analysis and other models so as to scan the environment and identify the possible strategic issues and dilemmas.
Internal environmental Analysis: internal analysis includes conducting a SWOT analysis, and identifying the internal weaknesses and strategic issues.
Establishing Long-Term Objectives: the organization must try to postulate a unique and valuable sustainable position which it would like to achieve in the near future
Generate Evaluate and Choose Strategies: the strategies are generated to address the strategic issues and to achieve the long-term objectives. The strategies are evaluated, and the best possible strategies are chosen (David, 2009).
Implement Strategies: the strategy so selected is implemented with a view of achieving its desired objectives.
Measure and Evaluate Performance: the effective implementation of the strategy is monitored and the performance of the strategy is measured and evaluated.
The AFI Framework involves three important stages namely the Analysis, Formulation and Implementation. The analysis stage includes external environment analysis and internal environment analysis, which includes scanning of the external and internal environment so as to identify the strategic issues. The formulation stage involves formulation of corporate strategy and business strategy (Rothaermel, 2012). A corporate strategy is the organizations broadest strategy which covers its sustainable future objectives, and if the company has more than one business interest a business strategy is also formulated for every business. Lastly, the framework suggests that the formulated strategy should be effectively implemented. All the stages of the framework emphasize a major objective of gaining a competitive advantage.
Thompson’s and Martin’s strategic management framework, suggests that the organization must ask few questions during the strategic management process. These questions have been seen as the stages of the framework. The first stage answers the question ‘where are we?’ it includes assessment of the organization including scanning of internal and external environments using SWOT and PESTEL analysis (Thompson & Martin, 2010). After assessment it is important to identify the objectives and the second stage answers the question ‘where are we going?’ hence, a corporate strategy is defined, which identifies the purpose of the organization and sustainable future objectives (Pearce, 2011). The most important objective of an organization is to achieve competitive advantage and accordingly, the organization must devise competitive strategies (Thompson & Martin, 2010). The next stage answers the question ‘how are we getting there?’, and involves formulating strategies so as to achieve competitive advantage and fulfill the long term objectives. The corporate strategies are developed and implemented in this stage. The final stage answers the question ‘How are we doing?’, and involves the monitoring process. The implemented strategy is monitored and evaluated to judge its impact and viability (Thompson & Martin, 2010).
The three models described in the paper are Fred David’s model, Rothermael’s AFI framework, and Thompson’s and Martin’s framework, a comparative analysis of all the three models, suggest that the three models include the five most important elements of strategic management described previously (Hayedeh, 2017). The second most important aspect of all the three models is that, the models are a continuous process. The biggest advantage of the models is that after monitoring and evaluation the strategic management process restarts so as to identify the other issues and address them.
The comparative analysis suggests that Fred David’s model is optimum of all the three models (Pearce & Robinson, 2009). In David’s model the stages are interrelated and the organizations need not start from the core step, if they find that the strategy is not viable (Amritham et al., 2016). The AFI framework and strategic management framework indicate only one-way arrow, and thus, if the organization wants to make any changes, it will have to restart the whole process, which will consume more time. Comparatively, the AFI framework and strategic management framework are big and confusing, whereas, David; s model is simple and easy to apply. The strategic framework model is difficult to apply, because it is a lengthy process and by the time it is completed, the external and internal environment may change which may lead to redesigning of strategy and the process remains incomplete. The three models can be applied in different business scenarios, and will enable the organization to develop and implement corporate level strategies so as to achieve the defined long term and short term objectives.
Apple Inc. is a very good example of strategy change. Apple positioned itself as a brand that produced the easiest, best and innovative computers. However, in 2001, Apple changed its strategy and entered the extremely competitive market of consumer electronics. Apple produced, ipods, iphones, and has been now engaged into continuous efforts to produce new and innovative high priced products (Hitt et al., 2008). The strategy was risky, but it was aligned with the business objectives of Apple to enter and achieve a competitive position in the consumer electronics market. From the innovation of iPod, and iTunes, the innovative music repository, in 2004, there was no looking back for apple (Hitt et al., 2008). With the introduction of iPhone Apple transformed the mobile industry with its high end, easy, innovative and high priced phones. The risk involved in the Apple’s strategy was to compete with the world’s leading mobile phone manufacturer, Nokia. However, innovation was the key to Apple’s success (Hitt et al., 2008). Apple has successfully applied and included innovation in its strategic objectives and mission and vision statements so that the strategies are formulated so as to create innovative products and gain competitive advantage in the market, and sustains its position as a leading brand in consumer electronics.
Adobe has initially positioned itself as a technology company which has effectively identified the changing needs of the consumers in the rapidly changing environment. And as a solution to the needs of the customers, Adobe created the Adobe Postscript, Illustrator and Photoshop which changed the design industry to a large extent and improved the quality of images to be printed or used on computers. Adobe has used innovation not only to gain competitive advantage but for technological advancements. Adobe has successfully scanned the environment and tapped the needs of the customers and have introduced some of the most popular and useful technologies, Adobe Flash and Adobe PDF. Mission statement of Adobe is ‘Revolutionizing the way in which the world considers the ideas as well as the information.’ (Hitt et al., 2008)
Adobe faced high competition from different software companies like Microsoft, IBM, Apple and Quark, however, Adobe has achieved its objectives and sustained a competitive position through, applying the strategic management process, and including environmental scanning and innovation as the core concepts in their strategy formulation process (Hitt et al., 2008). The key to Adobe’s success is its strategy of meeting consumer needs and delivering high quality innovative products and services (Hitt et al., 2008).
The paper provides an overview of strategic management, and takes a content and process approach, by describing the content of strategy, and describing the strategic management process. The strategic management models, and process suggest that organizations operate in different environments and every organization has a particular context. Thus, the strategy formulation process must align with the objectives formulated by analysis of the external and internal environment. It is important to ensure that strategy formulation is in alignment with the strategic intent which is defined as the purpose of the organization. However, with globalization and technological advancements change rapidly, and the organizations are required to change their strategies so as to compete in the highly competitive industries. The business examples help us to understand that no single strategic management process can be achieved, the strategic management process is dynamic and must change in different contexts to achieve the intent. Hence, it can be reiterated that it is not possible to scrutinize each and every aspect and predict exact future, and hence, organizations must strive towards achieving sustainable future objectives.
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