Corporate Strategic Management

Corporate Strategic Management

Business is all about being able to make profits and overcoming the challenges that come along with the industry. Business seeking to be well-established companies, they must take a lot of effort and skillset to ensure that the management and the development teams in the firm are on their toes with their eyes on the marked price of nothing but success. This requires a business to have a high level of corporate strategic management, for this is the core section that empowers a business to grow and develop over time.

Thus, this study will be looking at the various aspects of corporate strategic management and how they are conducted in such a manner that ensures a business can succeed at all costs. This study will be breaking down a number of the techniques that are applied under corporate strategic management and relating them to the primary theories that support the actions and structure of this management strategy. The study will also look into Starbucks and use it as a learning case study on the various applications of corporate strategy analysis techniques. From this, a clear reflection of the class will be developed on the overall findings and developments.

Techniques Used for EnvironmentalBased Analysis

In the current time and setting, it has become rather paramount for an organization to keep up with the evaluation and analysis of its external environment concerning its business activities. This is so since it takes a significant role in the development of the organization as a whole. Over time, the techniques and means of conducting these analyses have changed gradually and have also managed to attain a high number of beneficial changes within them too. Some of these techniques are (SHTAL, BURIAK, AMIRBEKULY, UKUBASSOVA, KASKIN &TOIBOLDINOVA, 2018):

• The SWOT Analysis

This happens to be one of the well-known analyses of all time since it happens to entail some of the most used techniques in evaluating many companies as well as determining the efficiency ad progress of a company. This technique happens to be conducted under the break down of a company in terms of its strengths. This is the first evaluation that is done on the business, and it is usually more of an internal evaluation o how the company is relating to external factors and how it is fairing on. By looking at the strength, it becomes possible to determine the abilities of the business. This then dives into the weaknesses of the company..

The flaws make it possible to understand why a business is taking place in a particular manner. From this, the management can work hard on eradicating and mitigating the weaknesses of the firm. Opportunities are usually assumed many times since many business managers and boards overlook this aspect. However, SWOT analysis brings this in check by opening up room for evaluating the opportunities a business can easily accomplish. Lastly, the threats that might be facing a company are usually the last to be evaluated.

• PEST/PESTLE Analysis

            This evaluation technique is one that takes a more diverse look into a business and its environmental base. The analysis is broken down into:

• The Grid Matrix

            This is an evaluation technique that is tied to the PEST evaluation strategy but looks into empowering the procedure by reducing the broad masses of data that have to be evaluated in the PEST analysis and instead guides the evaluation in a more fitting and filling direction. This methodology brings the market mix to the table where the PEST evaluation technique now focuses on products, price, distribution, and confirmation.

Techniques Used for a Resource-Based Analysis

A resource-based view is a strategy where the management looks into breaking down the strategic resources that can end up being exploited by the firm with a critical mission in attaining a competitive advantage overall. Thus, this requires an in-depth evaluation of some of the resources that can further make a business more competitive as compared to its competition. This is more of an internal analysis that is conducted by the managerial team. Having a competitive advantage makes it possible for a business to have an overall step ahead of its competition. This is a very sort out after ability since it makes it possible for a company to compete and still be able to maintain its consumer base and market share. Thus, it ends up being vital to understanding these dormant assets that are of tremendous opportunity. To be able to identify these assets, one of the most applicable techniques used is (Richardson, 2008):

• The VRIO Framework

This is a technique that was developed by Barney to determine if the identified resources are of any value and if they can offer the business to play any form of competitive advantage. The technique uses a kind of a questionnaire that is in the way of a guided flow chart that can be used to evaluate an asset. The flow chart is as shown below;

In the chart, four crucial questions must be answered to attain a definitive answer as to whether the asset is valuable. These questions are evaluated below:

Importance of Formulating and Implementing Corporate Strategy

A corporate strategy happens to have the ability to point out the outcomes a company is aiming at attaining over a given period, not only this, but it also entails the means that these activities, objectives, and ideologies will end up being attained in the long run. By having these things mentioned and having them well detailed, they end up acting as the guidelines on how the business will interact with both internal and external factors. Some of the critical importance’s of having and formulating and the implementation of a corporate strategy are (Billie Nordmeyer MBA, 2019, February 11):

• Allocates company resources

Resources are allocations that can end at any given point in time if they are not well regulated and used. Thus, by allocating and creating guidelines on how these resources are to be used over a given duration makes it possible to preserve unwanted costs. This also ensures that a business is capable of replenishing itself over time.

• Establishment of expectations

By having targets, an organization has no choice but to push itself to attain the set goals since these goals happen to be the leading vectors that are used by the business to counter any form of misdirections in terms of investments or destructions. The expectations also determine the profitability of the organization in general.

• Working on the competitive position

By having a corporate strategy, it becomes possible to look into the internal aspects of the organization and pointing out the possible assumed resources that can end up making the business attain a high level of competitive advantages as compared to its counterparts in the market/industry.

• Adding shareholder value

Investors and those willing to fund a business end up looking at how organized an organization functions. Thus, by having a well-developed corporation strategy ensures that the rate of investor attraction is on the rise. By sticking to such an approach, it is highly probable that a business will end up improving over time and having a very high-end company value. This is going to enhance the shareholder value and also motivate the shareholder number to rise, which will improve the capital funding of the business in general.

Problems Inherent in Formulating and Implementing Corporate Strategy

Being able to see and identify the importance of a corporate strategy is very easy to do; however, when it comes to the identification of the challenges/problems, it can be rather challenging. This is so since corporate strategies are usually related and deemed to the success of an organization. However, there are several problems inherent in the formulation and implementation of corporate strategies such as (Dalum, 2019, October 21):

• Ineffective training

A strategy is nothing but a set of plans, ideas, and objectives that happen o be jotted down and made to be part of the new vision of an organization. If the employees of the firm are not well trained and equipped to meet the needs of the original set strategies, then it is pointless to expect any developments or changes to occur in the organization even if the procedures are implemented.

• Weak strategy placement

Having a corporate strategy does not mean that the business will end up being a success. A company needs to have a strategic approach that is per the nature of the organization. Also, an organization should have attainable goals that are practical to the state of the business.

• Inadequate resources

A new corporate strategy cannot be fully achieved with minimal resources since this is usually a costly change and implementation that needs the total funding and support for the original objectives and changes to be effective.

• Poor communication

Communication is essential in the implementation and the execution of a new corporate strategy. If this is not mastered, then the right channels of communication will end up failing, and this can affect the procedure.

Theories of Business and Corporate Strategy

Corporate strategy is hierarchically the highest strategic plan of the organization, which defines the overall organizational goals and directions and how it will be achieved within the strategic management activities. It often encompasses a clearly defined vision of the course of a company or organization, thus helping in the determination of the overall value of the organization, setting of strategic goals, and motivation of workers to achieve them (Andrews & David, 1987).

Corporate strategy is a continuous process that must respond appropriately to changing conditions and surroundings. It should include a named mission and vision, which should not only define the product and business direction but also what the firm has to do to achieve these goals.

Some theories of the corporate strategy include the Ansoff’s Matrix, Porter’s strategic Matrix, The Boston Matrix, and the Distinctive Capabilities Model.

• The Ansoff’s Matrix

This is a marketing planning tool that helps a business determine its product and market growth strategy. Each with a varying level of risk and reward. It looks at four key components and how they affect growth. The first is the Market Penetration, where a business sells more of the existing products to existing customers in the current markets. The main aim being maintenance or an increase in market share. The second strategy is market development, whose primary focus is on attracting new customers to buy existing products. In such a strategy, there is a need to carry out comprehensive market research before entering the new market, especially when entering a different geographical range or distribution channel (Loredana, 2016).

The third is diversification, which focuses on selling new products to new customers in a new market. This is mainly used to achieve substantial growth and an increase in profits. It is associated with high risk as it allows the business to spread the risk across markets whereby if one market fails, they can still rely on another market. The final Strategy under Ansoff’s Matrix is product development that occurs when a business introduces new products to existing markets. It is less risky as it exploits the current “loyal” customer base when there is competition.

• Porter’s Matrix

It is another corporate business strategy in which is a business tool that is used to find a sustainable competitive advantage. Under this theory, there are four major strategies, two for mass markets and two for niche markets. Mass markets are markets for goods produced in large quantities, while niche markets are those for specific products (Yu, 2019).

This first strategy dealing with mass markets is cost leadership, where the business aims to be the lowest cost operator in the market. This could be done by charging lower prices, thus increasing sales or increasing the profit margins resulting in an increased amount of profit. Another strategy is differentiation leadership, where the business makes products or services more attractive and distinctive from competing products. To be able to achieve this, there is a need for a particular type of feedback from their customers that allows the business to acquire knowledge on what is more valued in terms of quality, branding, and prices or after-sale services.

To be able to target niche markets, there is Differentiation focus, which deals with the business focusing on differentiating their products from competitors in a smaller market. Because of the small market, there is the ability to develop a close relationship with the customers. Finally, it is the cost focus where the business seeks to lower-cost advantage in the smaller market. The product will be necessary but acceptable to the customers (Yu, 2019).

• The Boston Matrix

This is a portfolio analysis tool developed by the Boston Consulting Group to categorize products based on their market growth rate and relative market share. It classifies a business’s products or services into four categories, the first being Stars. Here the product has high market share, and market growth, therefore, should continue being invested in, as it is most likely to be the primary source of profit for the business. Secondly is the Question mark, which is a product that has low market share but high market growth. Investing in such products allows for the market share to increase, and they may turn into stars (Mohajan, 2017).

The third category is Dogs, where the products have a low market share and low market growth. These are products that should be terminated by the business. Lastly are the cash cows, which have a high market share but low market growth. A company will need to use the cash generated by such products to make a profit.

The Boston Matrix is beneficial as it examines all the business products together, offers a quick and easy way to make general decisions, and helps with market planning. Its advantages include that it tells the business minimal about prospects, and specific strategies suggested may not suit all companies.

• Distinctive Capability Model

The final corporate strategy is the Distinctive capability model, whose primary focus is characteristics, resources, experience, and skills of a business that distinguish it from its rivals and cannot be easily copied. Three main ideas help a business gain a competitive advantage. These are Architecture that deals with the managerial skills that help build good relations with the staff, customers, and suppliers. This increases coordination within and around the business allowing it to respond quickly to changes in the market (Kay, 2019).

The second idea is a reputation that looks at the product quality, customer experience, reliability, and value for money. With this, there is the creation of loyal customers, thereby giving an added advantage over existing or new businesses. The final distinctive capability is Innovation, which is the ability to create and provide new goods and products for their customers. It may, however, be short term as other businesses release similar products (Kay, 2019).

Starbucks Corporation Strategic Analysis

Starbucks Corporation is an American based company that was founded in 1971. The company happens to be specialized in several things, such as its being a premier roaster, marketer, and retailer for high premium coffee on a global scale. The company has employed an estimated 187,000 employees across 62 different nations under 19,767 operational stores (White & Moraschinelli, 2009). This brief review will be looking into the strategic position and strategic choices of the company and develop a conclusive understanding of the business as a whole.

The Strategic Position and Choices of Starbucks Corporation

1. External Environment of the Retail market for the Coffee Industry

• Industrial Overview and Analysis

Starbucks is a company that has managed to find a premium setting of coffee that most people are not willing to make on there own and offer it in a number off varieties. The business has been around for a very long time. Still, the industry, along with Starbucks, did experience a slow down in 2009 as a result of the then present economic crisis, and consumer behavior shifts to a less lash lifestyle. However, the industry has grown since then to a whopping $29 billion valuation, and Starbucks is eyeing an annual growth rate of 3.9%. Starbucks happens to dominate the industry with a market share of 36.7%, which is followed by its highest competitor, Dunkin Brands, with a total of 24.6% of market share. The market is at a rather mature stage in the industrial cycle. Thus, this places Starbucks as a significant dominating market shareholding company in the industry.

• Starbucks Porters Five Analysis

            Below is a look into some of the strengths that Starbucks has over the competition. The SWOT analysis will also look at how the company is influencing the market in general and what this means for the business (Makos, 2014, October 15):

The threat of New Entrants in the industry: (Moderate)

• The barriers of entry into the market are not high such that they would limit new entrants into the business.
• The market industry happens to have a monopolistic competition structure where Starbucks happens to be on the lead role—making it its stronghold.
• The number of new entrants is minimal and tends to be of stores that offer a rather minimal start-up.
• Even though it is a new industry, the possibility of having new entrants that might end up becoming as successful is minimal.
• The already present major market shareholders such as Starbucks are making it difficult for new entities to compete with them as a result of the tremendous popularity, mass, loyal consumer bases, and wealth they have attained over time.

Threats of Substitutes: (High)

• Coffee is merely a beverage, and this does have a wide array of substitutes that are equally offered by other companies and stores.
• Consumers, too, can make their coffee at the comfort of there homes at a much more affordable and equal capacity as Starbucks does. This wipes out for many consumers seeing the need to visit a Starbucks.
• There are no evident switching costs.

Bargaining Power of Buyers: (Moderate to Low Pressure)

• The industry has a vast array of buyers, and this can make it somewhat tricky for buyers to demand a certain level of pricing.
• There is the presence of vertically differentiated products that are all under a large consumer base.
• I am considering that the brand is already grouped and rated as premium coffee. The pricing is well in the range of consumers who opt to pay more for better products and services.

Bargaining Power of Suppliers: (Low to Moderate Pressure)

• The suppliers will face a difficult time trying to compete against Starbucks as a result of vertical integration, which ends up lowering the power of the businesses at large.
• Starbucks also happens to be one of the best and most essential buyers to the suppliers. Thus, the suppliers need Starbucks as much as Starbucks needs the suppliers.
• Starbucks is a company that has vast resources and accessibility that makes it possible for the business to take advantage of the suppliers easily. This limits the bargaining power suppliers have over the firm.

The Intensity of Competitive Rivalry: (High to Moderate)

• The competition in the industry has Starbucks seating at the top level with a monopolistic control and mastery over the industry.
• Starbucks, however, stays a step ahead of its consumers by making sure that it maintains its high level of premium feel and products in general.
• The industry has ended up reaching a rather moderate level of growth, which is where the Starbucks business has reached too. However, Starbucks still can expand into more global fronts and establish its dominance.

By using Porter’s five forces analysis, it is evident that Starbucks is at the top of the competition game and also has an incredible advantage over the rest of the competition in the industry. By asserting its position at the top of the food chain in the industry, the business has made it possible to ensure that the rate of business flow, adaptability as well as effectiveness all starts and ends with Starbucks.

1. Internal Analysis of the Starbucks Corporation

• Starbucks SWOT Analysis

• VRIO Analysis of Starbucks Corporation

From the information attained from the VRIO table above, it is evident that Starbucks is a company that has an impressive competitive position over its competition. The company is at a state of market control and dominance, and it is not expected to incur too many costs in several regions such as marketing and product promotion. If anything, the business is only tasked with the mission of expansion and increasing the number of products in its menus. This is a company that has a substantial competitive advantage in an industry that has many other businesses running alongside it (White & Moraschinelli, 2009).

Conclusion

From the critical analysis over the Starbucks Corporation, several things are apparent that the company has mastered in such as the ability of differentiation. Starbucks is highly differentiated from its competitors in a very engaging manner that makes it seem as if it is in a market of its own. This ability has made it possible for the firm to hold its value and appreciate its revenues and consumer base. However, the business has taken too much time and consideration in focusing in the united states and has been slow into expanding in an equal manner to other global regions. This would offer the business an opportunity to tap into the emerging markets that are across Africa, the Middle East, and Asia. Starbucks has turned itself into a ‘must-have’ brand that is quickly becoming more of an attraction and is making a tidal wave of attraction head its direction.

References

Andrews, K. R., & David, D. K. (1987). The concept of corporate strategy (Vol. 101). Homewood, IL: Irwin.

Billie Nordmeyer MBA, M. A. (2019, February 11). Why Is Corporate Strategy Important? Retrieved February 21, 2020, from https://bizfluent.com/info-7959300-corporate-strategy-important.html

Dalum, M. (2019, October 21). The 5 Biggest Challenges to Strategy Implementation – Acadal. Retrieved February 21, 2020, from https://acadal.com/the-5-biggest-challenges-to-strategy-implementation/

Kay, J. (2019). The concept of the corporation. Business History, 61(7).

Loredana, E. M. (2016). The Use Of Ansoff Matrix In The Field Of Business. In MATEC Web of Conferences (Vol. 44).

Makos, J. (2014, October 15). SWOT Analysis & Strategic Planning – What’s the Difference? Retrieved from Pestle Analysis: http://pestleanalysis.com/swot-analysis-strategic-planning/

Mohajan, H. (2017). An analysis of the BCG Growth sharing matrix.

Richardson, J. (2008). The business model: an integrative framework for strategy execution. Strategic change, 17(5‐6), 133-144.

SHTAL, T. V., BURIAK, M. M., AMIRBEKULY, Y., UKUBASSOVA, G. S., KASKIN, T. T., & TOIBOLDINOVA, Z. G. (2018). Methods of analysis of the external environment of business activities. Revista ESPACIOS, 39(12).

White, B., & Moraschinelli, E. (2009). The Pursuit of Sustainable Competitive Advantage: A Profile of the Starbucks Corporation.

Yu, V. D. (2019). The analysis of methods for developing marketing strategies