Using an Organisation that has been in the News in the Past two years, apply and Critically Evaluate how each of the following theoretical Concepts Influences Strategic Management Practices in that Organisation. Provide Recommendations that would enhance Strategic Management in your Chosen Organisation.
The essay focuses on the problems faced by an Australian organization on the field of competitive advantage, industry attractiveness and competitive advantage. The theories regarding the three aspects of the above chosen aspects will describe the issues faced by the chosen organization.
The organization chosen for the essay is Wesfarmers. Wesfarmers is considered as one of the largest supermarkets in Australia that is facing issues in human resource. The theories of industry attractiveness that will be described is Porter’s five forces. On the other hand, VRIO model will be described in the perspective of Resource based view.
Industry attractiveness is defined as the external threats, influences and opportunities. The threats will be related not only to the company but also to the industry. The external factors of the industry are responsible for creating an impact on the organizational performance as well as the issues in the aspect of employee relations. The external opportunities for Wesfarmers will be described by using the theoretical frameworks of Porter’s Five force Analysis.
Bargaining power of buyers- The buyers in Australia have high bargaining power because there are many alternatives of supermarkets from where customers will buy their essential things. If Wesfarmers does not provide proper remuneration and training to the employees then they will not provide excellent customer service (E. Dobbs, 2014).
Bargaining power of suppliers- Bargaining power of the suppliers are low, as Wesfarmers have fair policies towards the suppliers. The suppliers’ codes of conduct are very good when compared to other retail giants and supermarkets of Australia.
Competitive rivalry- The competitive rivalry for Wesfarmers is high. There are number of companies in Australia which are giving tough competition in terms of strategic management, human resource policies, customer satisfaction, etc. Wesfarmers have to be careful in their HR issues and consult to the board for strategy implementation. The competitors of Wesfarmers in Australia are Coles and German retailers Asda, etc (Porter & Heppelmann, 2014).
Threats of substitutes- As the number of competitors in the Australian market are high, hence the threat of substitutes in many product ranges are moderate i.e. near to high. The number of substitute products available in other supermarkets can provide tough competition to the company. However, many internal policies that Wesfarmers has adopted are responsible for maintaining a unique position in the market.
Threats of new entrants- The threat of new entrants in the supermarket industry is high. Many global giant retail supermarkets are present in the world such as Tesco, Walmart, Sainsbury’s, Carrefour, etc. that has a dominant position in the global market in terms of reputation, policies of human resource management and customer satisfaction. If these retail giants enter into Australian market, then it can create a threat to Wesfarmers in terms of sales, employment as well as profitability (Jarzabkowski & Kaplan, 2015).
By analysing the macro environmental factors of industry attractiveness, it can be said that there are some HR policies and strategies that needs to be changed. It is seen that the junior HR managers of Wesfarmers do not consult with the executive boards in order to develop strategies for the employees of the company. It is the reason of mismatch with the organizational goals and the departmental goals of the company.
Wesfarmers must have to formulate strategies by checking the competitive policies of the rival companies in order to gain a competitive advantage over them in terms of improved employee relations (Wright, Paroutis & Blettner, 2013).
The resource-based view of Wesfarmers will encompass the value of the important tangible and intangible resources of the company. Wesfarmers in this case focus on the intangible resources as well as the tangible resources like finances more efficiently. In this context, VRIN the company will consider model.
Value: The strategy adopted by a company must focus on the creation of value to the organization as well as to the employees. The resource of the company can be used in order to formulate value-oriented strategy for the utilization of the resources in the company. The company will invest in building strategies related to importance and the priority of resources (Rothaermel, 2015).
Rare: The strategy formulated by the strategic department of the company must be rare. The rarity of the resources will help in maintaining competitiveness in the market with the rival companies. The price of the resources will be depended on the competitiveness of the market. The company must incorporate the perspective of competitive strategic development in order to maintain a rarity in the existing resources.
Immitability: The senior management of the firm controls the valuable resource of the company in order to maintain a competitive advantage in the market. The technologies used by the companies are used in a way so that they can create a unique business processes that cannot be imitated by the other companies (Liao, Rice & Lu, 2015).
Non-substitutability: The resource of the company is rare and they are potentially imperfectly and value creating imitable. The competitors of Wesfarmers in Australia are strong enough to counter the value creation strategy of the company that can result in the zero economic profits.
The VRIN model of Wesfarmers usually analyse the internal and external strategies of the company which will focus on the human resource issues of the company in terms of market reputation and employee satisfaction (Butler et al.,2016).
On analysing the VRIN model based on the different resources available in the company, Wesfarmers have to utilize its intangible resources i.e. skills of the employees in a way so that they can get a better output from them. It will lead to build a value creating strategy that will enhance the company to gain a competitive position in the market as well as maintaining good employee relations.
Apart from that, it can be said that the human resource managers of Wesfarmers must maintain a policy of sustainability in terms of the building long-term impact in the customer’s mind and in terms of organizational performance in long term (Hinterhuber, 2013).
Competitive advantage is the concept used by the organizations in order to study about the policies and strategies adopted by the company in terms of gaining reputation from the customers. Wesfarmers can adopt the generic strategies of Porters. It is a common strategy that is adopted by most of the firms in order to create a differentiation in terms of products as well as internal strategies of the company (D. Banker, Mashruwala & Tripathy, 2014). There are four types strategies that are defined by Porter such as differentiation strategy, focus strategy, cost leadership strategy, etc. In this context, along with cost leadership strategy in the manufacturing units of the company, Wesfarmers will be using the differentiation in the human resource strategies so that they can solve the issues of the employees while they can earn a substantial market share along with the improved and best practices within the organizational context (Brenes, Montoya & Ciravegna, 2014). The improvements in the employee relations along with the attractive compensation structure will help Wesfarmers in delivering high quality service to the consumers of Australia. A strong research on the competitive strategies used by the rival companies in the Australian market as well as global supermarket industry is essential for proper implementation of differentiation strategy in the company (Cattani, Dunbar & Shapira, 2017).
Due to extensive competition in the market, consumers have a wide choice of choosing alternatives from the number of stores in the market. Extreme competition nowadays does not consider profitability and sales of the company, but also to the different internal strategies such as employee relations, compensation and benefits, training and development.
The leadership abilities of the leaders of Wesfarmers are strong enough to emphasize the internal issues of the company in order to accomplish the different types of organizational goals. The lack of communication has also needs to be addressed along with the implementation of cost leadership strategy in the manufacturing unit of the country. The differentiation strategy of Porter’s generic strategies will help to maintain a competitive environment in the Australian retail industry (Alstete, 2014).
The essay clearly describes that Wesfarmers is facing problems in the training and development of the employees while providing customer satisfaction to the customers. However, it can be said that the company has issues in the supply chain management. The trolley collectors of Wesfarmers are not paid well by the company. The implications of the VRIO model along with cost leadership strategy and Porter’s five forces are described in the perspective of the problems of Wesfarmers. The recommendations are provided to Wesfarmers based on the different problems faced by the company. If Wesfarmers follow the recommendations in the organizational context, then it will mitigate the issues while gaining a competitive position in the market. The human resource issues are a great issue that cannot be ignored in terms of expecting a good amount of profit and market share. In order to create a good rapport in the market, Wesfarmers must focus on customer satisfaction.
Alstete, J. W. (2014). Strategy choices of potential entrepreneurs. Journal of Education for Business, 89(2), 77-83.
Brenes, E. R., Montoya, D., & Ciravegna, L. (2014). Differentiation strategies in emerging markets: The case of Latin American agribusinesses. Journal of Business Research, 67(5), 847-855.
Butler, T. D., Armstrong, C., Ellinger, A., & Franke, G. (2016). Employer trustworthiness, worker pride, and camaraderie as a source of competitive advantage: Evidence from great places to work. Journal of Strategy and Management, 9(3), 322-343.
Cattani, G., Dunbar, R. L., & Shapira, Z. (2017). How Commitment to Craftsmanship Leads to Unique Value: Steinway & Sons’ Differentiation Strategy. Strategy Science, 2(1), 13-38.
Banker, R., Mashruwala, R., & Tripathy, A. (2014). Does a differentiation strategy lead to more sustainable financial performance than a cost leadership strategy?. Management Decision, 52(5), 872-896.
Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1), 32-45.
Hinterhuber, A. (2013). Can competitive advantage be predicted? Towards a predictive definition of competitive advantage in the resource-based view of the firm. Management Decision, 51(4), 795-812.
Jarzabkowski, P., & Kaplan, S. (2015). Strategy tools?in?use: A framework for understanding “technologies of rationality” in practice. Strategic Management Journal, 36(4), 537-558.
Liao, T. S., Rice, J., & Lu, J. C. (2015). The vicissitudes of competitive advantage: Empirical evidence from Australian manufacturing SMEs. Journal of Small Business Management, 53(2), 469-481.
Porter, M. E., & Heppelmann, J. E. (2014). How smart, connected products are transforming competition. Harvard Business Review, 92(11), 64-88.
Rothaermel, F. T. (2015). Strategic management. New York, NY: McGraw-Hill.
Wright, R. P., Paroutis, S. E., & Blettner, D. P. (2013). How useful are the strategic tools we teach in business schools?. Journal of Management Studies, 50(1), 92-125.
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