Strategic Management Concepts
Table of Contents
The main business purpose of many companies is to maximize shareholder value and improve performance. This can be achieved by proper implementation of effective strategies in an organization. Strategic management is a function that involves the formulation, evaluation, and implementation of a comprehensive action plan by managers to improve the performance and increase the competitive advantage of an organization. Strategic management in organizations requires its managers to have sufficient knowledge and to conduct a thorough analysis of the general organizational competitive environment for implementation of the right strategies to attain sustainable competitive advantage. Therefore, the most effective strategic management function of an organization involves analyzing external and internal environments, evaluating competitive structure, and ensuring that the organization has the most suitable mission statement to gain competitive advantage in the industry.
Mission Statement Analysis
A mission statement provides a basis for formulation of a good strategy in an organization since it is used to define the purpose of the business venture. The mission statement of Woods Events Management is a fitting subject for analysis since the company has a wide range of clientele. The purpose of the organization is to strive to be a leader in the event management industry by yielding the proficiency required for managing the events of its clients, providing a unique experience that will exceed the expectations of the customers, maintaining consistent high quality services, and being fair, honest, and ethical when dealing with employees, clients, and suppliers (“About Us”). According to Jurevicius, a mission statement should include all the required elements for it to be effectual. It should indicate who the customers of the business are and how it benefits from them, the main functions of the organization and their uniqueness, the geographical market in which the organization operates, the basic technology, the strategic positioning in the industry, beliefs and values that guide the organization, the aspirations for employees that the organization has, and its corporate social responsibility.
The instrument created to critique mission statements involves using all the significant elements that must be included in a mission statement, which include the target customers of the organization, its function, target markets, technology, strategic positioning, financial objectives, beliefs and values, image and employees, in order to analyze it. According to Taiwo et al., a clear mission statement acts as a guide to the employees in achieving organizational objectives (130). It is essential for all organizations to have an appropriate mission statement since it gives a perspective on the direction which the organization is taking. Woods Event Management Inc. mission statement is not suitable for the organization since it only contains four out of the nine components that should be included in a mission statement. For instance, the statement indicates the functions of the organization, such as offering consistent high quality services and a unique experience to its clients when managing events. In addition, the beliefs and values of the organization are stated in the mission statement and include fairness, honesty, and ethics. Thus, the organization aims to treat its employees, suppliers, and customers well. Furthermore, the company shows concern for its employees by indicating that they will be treated fairly. The mission statement likewise indicates the strategic positioning of the organization, which is its commitment to growth and becoming a leader in the events management industry. the important components that are missing from the Woods Event Management Inc. mission statement are its target customers, target market, image, technology, and financial objectives. Changes should be made to the existing mission statement to incorporate all the missing components. Consequently, the Woods Events Management mission statement should be as follows: “To be the best events management company worldwide to clients of all social classes by using the latest technology to satisfy all customer needs, while remaining fair, honest, and ethical when dealing with employees, suppliers, and clients and engaging in social corporate responsibility while increasing financial returns.”
Evaluation of the Competitiveness of an Organization
A competitive strategy gives an organization an edge in the market. Clarion company, a start-up organization in the events management industry, was chosen for evaluation of its competitiveness using the Porter`s five forces model analysis tool to establish the intensity of competition and determine its profitability in the events management industry. The events management industry segment was chosen since it is the fastest growing industry with a wide range of products and services to offer, high financial returns, and target customers from all social classes. The state of competition in any industry relies on the threat of entry of new competitors, the intensity of competitive rivalry, the threat of substitutes, the bargaining power of customers, and the bargaining power of suppliers.
The first competitive force that a start-up company should analyze is the threat of new entrants. This force determines the extent to which barriers prevent start-up companies from joining a particular industry. It is critical for Clarion since it determines the level of competition in the industry. According to Porter, the threat of new entrants is high when little capital is required to enter a market, there is no government regulation regarding joining the industry, the existing organizations in the industry do not possess patents or trademarks, economies of scale can easily be attained, there is no product differentiation in the industry, there are low switching costs, and there is no brand loyalty. For instance, barriers to entry in the event management industry range from low to moderate. In addition, the capital requirement is relatively insignificant which attracts many start-up companies to the industry.
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Bargaining power of the buyers is an important force that should be considered since it will determine the competitiveness of Clarion Company. Bargaining power of buyers refers to the ability of customers to negotiate for reduction of prices or increase the quality of products and services in the industry. When customers have strong bargaining power, the revenues obtained by the organizations in the event management industry decline. The bargaining power of customers becomes strong when there are many substitutes in the market, the costs of switching to other suppliers are low, the demand for the products or services is low, the customers buy in large quantities, the customers are sensitive to prices, there is little differentiation in products and services, and the threat of backward integration is high.
The threat of substitutes is a competitive force that determines the competitiveness of the organization in the event management industry. It considers products or services from another market satisfying specific customer needs. For instance, organizations in the events management industry will most likely face the threat of substitutes from organizations in the hotel industry since hotels offer similar event management services, such as organizing conferences and other events. This force is more relevant when customers can easily find substitutes with attractive prices or better quality than what the industry offers. In addition, customers can organize and manage their own events at a fraction of the costs incurred when events management company services are sought.
Rivalry among existing companies is a major determinant of the competitiveness and profitability of the industry. Competitors engage in intense rivalry when there are a lot of participants in the industry, the level of customer loyalty is low, the growth rate of the industry is low, competitors have equal market shares, there is no product differentiation, and exit barriers are high. For instance, organizations try to retain their market shares and obtain greater shares in a competitive industry. Rivalry usually results in price wars in the market. The events management industry has many participants, thus creating a highly competitive market. The tactics organizations in the industry can use to overcome rivalry include product differentiation, improving the quality of their services, improving their relationships with suppliers, and altering their prices to increase their market share.
The bargaining power of suppliers is a force connected to instances when suppliers are able to supply their materials at high prices or at low quality. This will lower the revenues of an organization due to an increase in production costs. Suppliers can enjoy a strong bargaining power when they are few, raw material substitutes do not exist, there is scarcity of resources, and the cost of switching raw materials is high. The switching costs in the event management industry are low since there are many service providers. Thus, switching from one supplier to a substitute is extremely easy. The collective strengths of the above forces are good enough to give Clarion Company a sustainable competitive advantage if they are maximized by the company.
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The major external forces that influence the macro environment of an organization include political, economic, socio-cultural, technological, legal, and environmental factors. Political factors that affect organizations usually range from the regulations set by the government to political stability experienced in that country. For instance, curfews imposed when there is political instability can hinder successful events management. The European parliament regulations set to stop match fixing could result in organizations in the sports industry losing control of sports management to national or international authorities. Governments can increase or decrease trade barriers in the entertainment industry by either setting favorable and unfavorable regulations, such as laws on copyright, patents, and trademarks. Major opportunities found among political factors include favorable regulations, availability of government grants, funding, and initiatives, political stability, reduction in the rate of terrorism in a country, favorable taxation policy, and effective elections and political trends. However, the threats that affect the sports, entertainment, and events management industry include political instability, high terrorism rates in a country, strict government policies, insufficient support from government and local authorities, corruption, and internal political issues.
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Economic factors influence decision making and business operations in an industry. Economic factors that affect the sports, entertainment, and events management industry include economic growth rate, exchange rate, inflation rate, and interest rate. For instance, interest rates affect the cost of capital. Thus, when interest rates are high, the cost of capital will also be high and profit margins will decrease subsequently due to high costs incurred by organizations in the event management industry. The economic growth rate determines the amount of money people spend on entertainment, thus increasing or reducing the revenues generated by organizations in the entertainment industry. The sports industry is affected more by international trade policies and exchange rates since most of the players and customers are from different countries. Therefore, major opportunities presented by economic factors that affect organizations are reduction in taxation rates, low interest rates, high industry growth rate, favorable exchange rates, favorable international trade policies, and high economic seasons. The threats presented by the economic factors include high taxation rates, high interest rates, unfavorable exchange rates, low economic seasons, low industry growth rate, and unfavorable international trade policies.
Socio-cultural factors that affect the sports, entertainment, and events management industry include the average disposable income level, age, population growth rates, lifestyle, level of education, attitudes towards leisure, saving and investment, religion and beliefs, and the spending habits of the population. For instance, when a population has a high disposable income it is likely to increase the amount spent on leisure activities such as organizing weddings and parties. The lifestyle, beliefs, and religion of a population determine which entertainment activities they participate in. Age is also a major factor that affects the sports industry since the kinds of sports broadcasted and played must be interesting to the target audience. Thus, the opportunities presented by the socio-cultural factors are spending habits, high disposable income level, increase in population growth rate, high education level, decrease in saving and investment, and favorable attitudes towards leisure. The threats include modest spending habits, lower disposable income level, decline in the population growth rate, low education level, increase in savings and investment, and unfavorable attitudes towards leisure activities.
Technological factors refer to the impact of technology and innovation on an organization in an industry. Technological factors that affect organizations in the sports, entertainment, and events management industry include internet infrastructure, the rate of technological growth, communication infrastructure, technology incentives, access to new technology, and the level of technology development in the industry. For instance, technological changes in the events management industry have led to innovations, such as event management live streaming apps which enable the industry participants to increase their target audience. The sports coverage is also more extensive due to the technological developments in the sports industry. Moreover, marketing in the entertainment industry has become easier due to technological advancement. Opportunities presented by the technological factors include easy access to new technology, high level of technology development, good internet infrastructure, technology incentives, rapid changes in technology, and good communication infrastructure. The threats include poor communication infrastructure, fewer changes in technology, insufficient technology incentives, inaccessibility of new technology, low levels of technological development, and poor internet infrastructure.
Legal factors refer to the impact of legislation and regulation on business operations in an industry. Legal factors that affect the sports, entertainment, and events management industry include tax regulations, current and future policies, employment laws, health and safety regulations, regulatory bodies and processes, and regulation of competition in the industry. For instance, health and safety regulations are strict in the sports industry. Changes in policies can affect the events management industry since it is growing rapidly. There are many regulatory bodies, such as film regulatory bodies in the entertainment industry, due to its dynamic nature. Opportunities that legal factors present include favorable tax regulations, current and future policies, employment laws, health and safety regulations, competition regulations, and the availability of fair regulatory bodies and processes. The threats include unfavorable tax regulations, employment laws, health and safety regulations, current and future policies, competition regulations, and unfair regulatory bodies and processes.
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Environmental factors that affect the events management industry include the weather, environmental regulations, pollution, waste management, climate change, and attitudes towards ecological products. For instance, adverse weather conditions can affect the organization of outdoor events. Climate change can negatively impact the sports industry since athletes may find it difficult to adapt to the change. Waste management policies can affect the entertainment industry because people are unlikely to adhere to the set regulations on waste disposal. Opportunities presented by the environmental factors include good weather conditions, favorable environmental regulations, a decrease in pollution rates, effective waste management techniques, favorable climate change, and good attitude towards using ecological products. The threats include adverse weather conditions, unfavorable environmental regulations, an increase in pollution rates, ineffective waste management techniques, unfavorable climate, and bad attitudes towards using ecological products.
Internal assessment is a vital process in strategic management because it entails identification and evaluation of the strengths and weaknesses of an organization. According to Pedrosa, it involves an analysis of a company’s distinctive competencies to formulate better strategies that will give the organization a competitive advantage in the industry (8). The cross-functional areas that should be examined during an internal assessment of any organization include operations, marketing, research and development, finance and accounting, management, and information systems (Marino). The management can use an internal audit to set strategies that will increase the competitiveness of a company in its industry.
Delaware North is a privately owned catering service provider that has served during major events such as the Super Bowl, Olympic Games, FA Cup finals, and World Series. The organization supplies food and beverages to major events. The organizational strengths of Delaware North include highly qualified personnel in key functional areas (“Restaurants and Catering”). The organization uses customer data and latest technological innovations to conduct sales and market to achieve organizational objectives. In addition, the organization motivates its employees by offering them good compensation and benefits. Additionally, it recruits employees with talent and conducts training and development to obtain a competitive advantage in the industry. The organization expands its business by diversifying its portfolio through mergers and acquisitions. The organization has an advanced information technology portfolio which includes a mobile and an integrated system platform.
Nevertheless, Delaware North has several weaknesses. For instance, the organization is owned and led by the family that established. Thus, it does not fully maximize the potential of qualified personnel to achieve a competitive advantage. The organization`s diversification of its products and services does not allow it to specialize in supply chain management. In addition, its charges high for supplying food and beverages at events, which limits it market share in the industry.
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In conclusion, essential aspects of strategic management include analyzing the mission statement of an organization, evaluating the competitiveness of an organization, and performing internal and external assessments of the organization. The mission statement of an organization dictates its direction. The evaluation of the competitiveness enables the company to formulate effective strategies for creating a sustainable competitive advantage. The external audit enables an organization to maximize its opportunities while implementing strategies to deal with the threats in the industry. Moreover, internal assessment enables an organization to identify its strengths and weaknesses. Therefore, it is critical for every organization to implement effective organizational strategies to achieve sustainable competitive advantage.