Organizations carry out strategic management to position themselves at a competitive with the others. The strategy provides an overview of what the organization needs at the end and the process to follow in achieving the set goals. This project presents an outline of the stages in strategic management. It starts with the process of generating an alternative strategy using the Estee Lauder Companies. The process involves carrying out the needs analysis, and identification of strategies, which can work. The project also selects the best approach based on the priority of the organization. The next stage in strategic management is implementation. The strategic management team identifies the procedure for implementation through the assignment of duties to members of the company and allocation of resources. The last step is the evaluation of the plan to find out whether it meets the desired goals and development of an action plan to solve any identified problem.
Alternative Strategy Generation
Possible alternative strategies
One of the possible alternative global approaches is uniform brand names. Currently, the company is offering products under different brand names in different countries. According to the company CEO Fabrizio Freda, the company maintains different brand characteristics to keep it at the top (Estée Lauder Companies, n.d). From one of the external factor analysis, consumer practice is changing whereby they are searching the products online. Having a common brand name will enable the customers to locate the products because of the optimized search engine by the name which will appear many times. Common brand name increases recognition by the customers, and therefore, it will be easy to introduce a new product in the market (Mastering Strategic Management, 2016c, Competing for international market, p. 228). Also, there will be a competitive advantage from the competitors who might want to penetrate a market where the company has the brand already. Other than having distinct brand names, a uniform brand name will secure the company against losing any of the brands with arguments of low quality.
Another possible alternative corporate level strategy is backward integration. Currently, the company is producing products under different licenses like Kiton. Also, it is developing and selling other products like FKIRT brands under prescriptive. The strategy will help Estée build another long-term product from the emerging market like the anti-agers products in the US and later to the global market. Also, by having a complete chain of production and producing its products under its license, it will be able to protect the quality of its brand. With permits from other companies, it is easy for such companies to use negative public relation against Estée. Backward integration will create a barrier for other companies to join the market.
Estée can also employ the acquisition as a corporate strategy. The strategy will help them to focus on small markets (Mastering Strategic Management, 2016d, Selecting corporate level strategy, p. 246). Small markets have the potential to develop into a large market segment. Developing a market segment creates a barrier for other competitors to enter because of the foundation laid. The company can acquire other organizations, which have given it licenses to produce and sell their brands like Kiton. Diversification through acquisition also enables the company to enjoy large economics of scale thereby able to offer low prices while still maintaining high quality.
A potential business-level strategy for the company is an integrated low-cost/differentiated strategy. Currently, the company is using a differentiated strategy. However, integrating differentiation and low-cost approach will help the company to overcome the need of the customers who are insisting on environmentally friendly products as well as low cost (Mastering Strategic Management, 2016a, Supporting business level strategy, p. 140). It will be easy to implement the strategy since it is building on an existing mechanism of differentiation. This strategy will also enable the company to focus on small segments like the LGBT community.
Cultural and organizational to consider in analyzing alternative approach.
One of the organizational factors to consider in choosing alternative strategies is the horizontal and vertical linkages. The vertical linkage is an organization map, which shows the relationship between the subordinates and the supervisors (Mastering Strategic Management, 2016e, Executing strategy through organizational design, p. 279). There can be several relationships where one of them involves each employee reporting to one supervisor only. Also, there can be a case where each employee is reporting to, several supervisors. The strategy employed should fit the current map to avoid failure of the objective. Producing its products, for example, may not work properly where the employees are getting instructions from different supervisors because there will be confusion (Mastering Strategic Management, 2016f, Leading ethical organization, p. 320). The company may end up having low-quality products against the target.
Another organizational factor to consider is the boundary between units. Boundaries define the extent to which a company can integrate units to have similar products, which will serve under the same brand name. Also, the boundaries define the extent to which units can be merged to have efficiency in the production chain (Mastering Strategic Management, 2016f, Leading ethical organization, p. 320). Strategies that require creating efficiency in the production chain to lower product prices will not work well where the boundaries are tight. However, having clear division discourages management layers, which means that differentiation is possible. A company can assign different units of the task of coming up with differentiated items of one product. Differentiation strategy will, therefore, work in such an organization.
Social responsibility and language are some of the cultural factors the company should consider while choosing among the alternative strategies (Mastering Strategic Management, 2016c, Competing for international market, p. 228). Social responsibility is the commitment the company has in serving the customers. The company should consider whether it commits to offering low prices, health or quality products. Sometimes differentiating may lead to low-quality products, which will be against the culture. Also, the company should consider whether the strategy it settles on does not take away other privileges the customers were enjoying like packaging and gifts (Mastering Strategic Management, 2016f, Leading ethical organization, p. 324). In this case, the company will have to take the strategy which does not change the customer’s attitude towards the brand negatively. Another cultural factor to consider is the mission and artifacts of the company. Mission defines how work is done and what the company is all about. The strategy picked should be in line with the mission and mode of dressing and other personal behaviors of the company (Value Based Management.net, 2016, par. 2). Employing a strategy, which shifts the taste of the brand, will affect the market for the products.
Out of Integrated strategy, acquisition, backward integration, and consistent brand name strategy, acquisition gets the priority. The acquisition involves a company purchasing other companies at the same level although in most cases the acquired company is usually small. The strategy carries the other three in different ways. First, it focuses on strengthening the brand name by buying other companies with a valuable brand (Mastering Strategic Management, 2016d, Selecting corporate level strategy, p. 245). Reinforcing the brand name is different from developing the existing one. First, when a company acquires other companies’ title, they add on the general perception of the company from the audience once unlike a case where all products are given a similar name (Mastering Strategic Management, 2016d, Selecting corporate level strategy, p. 246). People will believe so much in the company because it can purchase other high-quality brands from the market and therefore, confirm that the original brand of the company was great.
Acquisition carries backward integration in that it increases the market of the company by acquiring the existing customers of the acquired organization. However, the size of the market, which the company will increase, will be larger than through backward integration strategy. It is not easy to penetrate the market through a new product and acquire sizeable customers or share (Mastering Strategic Management, 2016d, Selecting corporate level strategy, p. 246). Further, it is costly since there will be a long process of introducing the product and advertising it. Apart from getting the acquired company’s existing customers, the organization will entice more customers by showing that it can maintain an additional brand.
The effect of price and differentiation is high when using an acquisition strategy compared to when using an independent integrated strategy. First, acquiring other companies increase sales and therefore production. The price will automatically reduce through advantage obtained from large economics of scale. On the other hand, making changes in the chain of production will not have many variations in price because there is minimal alteration an organization can do on production process (Mastering Strategic Management, 2016b, Selecting business level strategy, p. 195). Also, there is an advantage of strategic production resources acquired which will further lower the cost of production. Through the acquired resources and market, a company can have a smooth transition to the differentiated product. The organization will assume that the acquired brand is a differentiated commodity, which will not make the customers shift to other alternatives. Coming with a new differentiated commodity will face resistance since it is hard to convince a potential customer that it maintains the quality of the other similar products. The acquisition, therefore, gets propriety because it has the potential to create a substantial barrier to competitors more than the other strategies.
Second in priority is backward integration. Backward integration involves doing what the supplier was doing like mining the raw materials. It means that the firm can get involved in a more significant percentage of the value chain followed by a product (Mastering Strategic Management, 2016d, Selecting corporate level strategy, p. 250). A company employing the backward approach also gets into the business of the buyer like retailing which it did not do initially. The reason why the strategy takes the second position is its ability to have differentiation and lowered cost together thus developing a brand name without necessarily giving a similar name for all the products.
The impact of going closer to the customer is high compared to even lowering cost or differentiating. There is assurance of quality since customers know that the company takes the whole responsibility of production. Suppliers sometimes may alter the product to increase their profit without knowing that the burden will be on the company other than the final consumers. Without a supplier, customers are sure of the quality and therefore, a stronger brand name (Mastering Strategic Management, 2016d, Selecting corporate level strategy, p. 253). Differentiation does not offer much quality assurance since the customers are not aware of what the company changed to have the new product. The reason why backward integration comes after the acquisition of other similar companies is that sometimes there might be other suppliers to related companies who are cheap. In such a case, the company, which engaged in the suppliers business, maybe getting the material at a higher price those other competitors. The situation makes the company unable to have low competitive prices. Acquiring other companies means that the leading company will gain from any supplier at a low price.
Branding is the second last option before the integration of low cost and differentiation. The reason why branding comes after the acquisition and backward integration is that the other two strategies can do it in depth while branding itself has low convincing power on quality (Mastering Strategic Management, 2016c, Competing for international market, p. 228). Potential customers do not want a name, but understanding strong the name or the product in terms of quality is essential. Quality and ability to offer the product without failing sustains the brand, and that is what acquisition and backward integration can do. However, the branding strategy is better than using low pricing and differentiation. Lowering price makes the customers doubt the quality of the product similar to a differentiated commodity. Also, it is easy to reduce the prices in the short run but convincing customers to buy it at a higher price, in the long term, is hard (Mastering Strategic Management, 2016c, Competing for international market, p. 228). Having a good brand where customers are sure of the quality will be ready to accept any price.
Low price and differentiation are the least in priority because the previous paragraph shows that they are not sustainable strategies. They will only work in the short run, but during the long run, the customers are likely to shift to the competitors. The integrated approach destroys the brand name and does not last for long. The situation occurs when customers start doubting the product quality because of either reduced or increased quality (Mastering Strategic Management, 2016b, Selecting business level strategy, p. 195). Also, not all customers will believe that the differentiated product is of the same quality as the previous items. However, an integrated strategy is a good strategy when other companies are using price competition (Mastering Strategic Management, 2016a, Supporting business level strategy, p. 144). Although the customers might doubt the quality of the product whose price is low, they will appreciate the differentiation and therefore, favor the company brand.
The process of Supporting the best strategy
The best strategy is dependent on two factors, which the company has to decide. They are the reason for the need for a strategy and the focus of growth. The first step is to identify why a company would need to have a particular approach (Pearce,1982, p. 28). All strategies have two main purposes; Overcome weakness or maximize the strengths. A company may, therefore, want to offset such weaknesses as an increased liability or high cost of production. On the other hand, strong companies may wish to maximize their strengths to have sustained market domination or increase barriers to competitors. Ones a company can identify why it needs a strategy, it will be easy to pick the strategy, which addresses such need satisfactorily.
The second step in identifying the best strategy is the identification of the kind of growth a company needs (Pearce,1982, p. 28). Organization growth can be internal or external. Internal growth can be for example increase varieties, quantity or quantity of production. In that case, a company will go for strategies, which direct resources towards the firm itself, and improvement of what already exists (Pearce,1982, p. 29). An example of a strategy that allows internal growth is liquidation. On the other hand, a company may want to have external growth. In that case, it will consider strategies, which direct resources outside the company in other activities. The external extension allows a company to extend its market share in an effort of creating more barriers to competitors. Examples of strategies that enable external growth include mergers and acquisitions.
Ones the company identifies the purpose and the area of emphasis, the next step is now settling on one or several strategies which will serve the two factors. A four-quadrant matrix makes it easy to have the best combination as shown in the table below.
|Areas of Emphasis|
|Purpose of strategy||Internal growth||External Growth|
Once the company identifies the purpose and the area of emphasis, it will be able to settle on the quadrant, which gives strategies to achieve the objective (Pearce,1982, p. 29). In the first quadrant, for example, a company wants to overcome weakness through internal growth. In such a case, it will settle on a strategy, which reduces risk associated with its product such as uncertainty of the supplier or being far from its customers (Zain books 2014, par. 2). The best strategy will be vertical integration.
Acquisition gets a recommendation as the best strategy. The goal of this strategy is to boost brand awareness. The acquisition is the best strategy to promote brand awareness because the company will have another new set of customers who will subscribe to the brand (Mastering Strategic Management, 2016d, Selecting corporate level strategy, p. 246). The acquiring company will have its name penetrating a new market segment, region or a country. For example, company A in North America which was making 5 percent of sales in South America can acquire company B located in South America and dominating that market. Ones A acquires B, it will be the new dominating brand in that region making the highest sales, which were hard before. On the other hand, Acquisition earnable a country to get an additional brand created by the company it is taking over. The company, therefore, possesses two brand names, which strengthens each other. The objectives of the acquisition include sharpening focus on a particular market or product and expanding the customer base. Such goals are best because they create a barrier on competitors to join the market giving the company the advantage of increasing prices for more profit.
The strategy for goal achievement is communication of the idea even before acquiring the company. It prepares the customers psychologically to ensure a smooth transition without losing them. Also, it helps the company to prepare its team for expansion and create strategies to incorporate the new brand (Mastering Strategic Management, 2016d, Selecting corporate level strategy, p. 246). The tactic to implement the goal is integration. The company, which is taking over, should have a team, which will start the integration process with the other company. The process involves making the chain of production merge between the two companies and learning about the customer profile, which includes buying patterns, tastes, preferences as well as the locations.
Another recommended strategy is backward integration. The goal of this strategy is to have a low cost of production and therefore the low price of the product that wins the market (Mastering Strategic Management, 2016b, Selecting business level strategy, p. 195). Backward integration is the best approach to lower prices because it does not affect the product quality and strengthens brand name. The process aims at cutting the processes, which do not add value to the process and therefore eliminates unnecessary costs. Also, customers believe more on the quality because the company is closer to them through reduced buyers in between. They can offer a specified price, which buyers would otherwise alter. Among the objectives of backward integration is to have more control over the value chain, and increase efficiency. The goals are the best because the control of the value chain will help to lower the production cost as well as increase quality effectively.
The strategy to achieve the goal involves bringing together all the persons, technology, resources, activities, and organizations, which make up the whole manufacturing process. Also, it involves acquiring the process of selling and marketing the product. The tactic employed includes mergers and acquisition of suppliers. The company brings the entire suppliers through buying the whole business, or they collaborate to supply. In that case, the company becomes the supplier of its inputs, which makes it possible to control the quality, price, and process.
Procedure for strategy implementation
The first step in strategy implementation should be evaluation and communication (Reeves, 2015b, par. 11). In this stage, the company should check the suitability of the plan in line with the mission and organization goals. Also, this is the stage where managers ensure that the budget is in line with the goals and objectives of the strategy. After assessing the suitability and budgetary, the management should communicate to every person in the organization, the strategy, goals, and targets involved in the whole plan.
The next step is the development of a plan, which the implementation team will use. The group outlines how the departments will relate with each other and the procedures to follow (Reeves, 2015b, par. 11). Also, the plan should describe the responsibilities of every department and the principal persons involved in the implementation. The organization members should have details and manuals to use in the process. The third step should be the development of policies to support the application. They involve monitoring and tracking strategies to evaluate whether the team is following the plan and at the right rate. The stage should have a system to manage performance and reward the parties involved. Also, the stage should establish a system of communication and giving feedback.
The fourth step should involve the allocation of resources to specific departments and individuals, which will enable them, carry out the allocated duties. Also, the team should at this stage document the resources allocated to help in making follow-up whether the parties are sticking to their budget (Reeves, 2015b, par. 11). The last stage is the actual implementation of the plan. In this stage, the teams should keep on reorienting the personnel on the plan and train them how to continue with the strategy in the best way possible. Also, there will be an evaluation of the performance to identify gaps and make the necessary adjustments.
Implementing the selected strategies
At the corporate level, the managers and the team, which formulated the strategy, will be in charge of implementation. They will come up with the plan to implement, budget and later communicate it to the other staff. Also, they will carry out negotiations with the company to acquire and make the necessary agreements. At the business level, the strategic team will plan and communicate the plan for obtaining another company. The team will also allocate the staff to use in implementation at the business level. At the functional level, each employee will play a part in ensuring that all the elements of the plan work at their levels.
The strategic team created by the management will be involved in planning all the stages of implementing the strategy. The management will approve, and later, the team appoints roles to the administration and the other employees (Reeves, 2015b, par. 11). At the corporate level, the managers will be involved to make significant decisions on the supply chain to acquire. The strategic team will help them to identify the areas, which will benefit the company. At the business level, the strategic team will play the major roles in planning for the acquisition with the help of a few junior staffs. They will assess the required stages in acquisition to help complete the implementation plan. At the functional level, the departments involved will take part in actual implementation with guidance from the strategic team.
Evaluation and review procedure
Strategy evaluation helps to check whether it is appropriate for the organization and that it will meet the required goals. A company can use the following process to evaluate a strategy.
Internal consistency checks whether the strategic goals and policies are in line with the organizational goals and policies (Aronowitz, De Smet & McGinty, 2015). A good strategy is the one, which integrates with the internal policies and aims to strengthen them other than creating another line of objectives. This stage helps to avoid conflicts in policies in the implementation stage. Also, it is at this stage where the management can identify areas which require strategic decisions.
The environment in the organization case means the customer who is affected by product, price and advertisement policy (Aronowitz, De Smet & McGinty, 2015). Also, there is the government, foreign investments as well as collective bargaining. The strategy set should not contradict the external environment. This stage should evaluate the consistency of the strategy in line with the current state of the external environment and the expected changes in the environment
Appropriate for Resources
At this stage, the company checks whether it will be possible to implement the strategy with the available resources. Strategies require different types of resources including facilities, money, and knowledge on how to apply it (Hsieh & Yik, 2005, par. 10; Reeves, 2015a par. 3)). A good strategy is the one which the company can implement with the available resources.
The management should be ready for the risk which the strategy and the resources put forward. Risk assessment is essential to find out whether the strategy is worth for the company. A plan will move on if the company feels that it will handle any risk which may come in the process.
At this stage, the company checks whether the time the strategy will take to implement fully is appropriate. Delays in implementation or achievement of set goals may make the strategy insignificant and lead to losses.
Workability of the strategy
The company checks whether the strategy drafted can work. Questioning of workability creates the need to review the criteria, which the strategy will follow to check how each stage is essential and fit in line with the company’s ability. At this stage, the strategic team reviews the parts of the strategy, which seems not to work.
The first evaluative measure is efficiency. It involves determining whether the result of a strategy is worth the cost (Mastering Strategic Management, 2016e, Executing strategy through organizational design, p. 280). The measure is done at the corporate level by the management together with the strategic team before enrolment of the strategy. The team and the management compare the outcomes, which are the advantages to the company and the resource input to ensure that the strategy will pay back. The other evaluate measure is outcomes. The measure determines whether the approach meets the goals set. The strategic team evaluates the business level. They go through all stages of the approach to see whether there is a deviation from the primary targets.
Another evaluative measure is quality. The test determines whether the expected outcomes are effective for the company (Mastering Strategic Management, 2016e, Executing strategy through organizational design, p. 270). The strategic team at the business level evaluates whether the goals set will help the organization in its various functions including accuracy, responsiveness, and reliability. The last measure the project that is done at the functional level. The measure intends to determine whether the changes seen are results of the project or are coming from other areas. The strategic team together with the workers carries out the measure. They check the results against the plan to see how they are associated. The group carries out the test when the project starts to show some results.
Collective action plan
A corrective action plan presents a problem, which acts as a barrier to achieving set objectives. Companies come up with a corrective action plan when they discover flaws in the strategy at the evaluation stage. The first step in a corrective action plan is to identify and clearly state the identified problem (Reeves, 2015b, par. 15). The managers and the strategic team identify the problem at the corporate level by going through the strategic plan to see whether it will meet the objectives or it meets the set goals. The strategic team is responsible for problem identification at the business level while at the fictional level, the workers carry out the function of identifying.
The next step is the development of the desired way of the strategy. The manager and the strategic team identify what the best way to adjust the plan at the corporate level is. At the business level, the strategic team comes up with a statement of how to best change several or one of the direction, which the plan is following to solve the problem. The workers at the functional levels identify a specific way to solve the problem. Lastly, the plan identifies concrete steps to address the identified issue (Reeves, 2015b, par. 15). Here, the management, strategic team, and the workers break down the statement of solving the problem into manageable steps.
Analysis of the company to come up with a strategy is important to identify the organization needs and how able it is to implement any project. There are so many strategies, which a company can take to increase its competitiveness in the market. However, the strategies depend on many factors such as the strengths and weaknesses of the organization together with other internal and external factors. It is through the analysis that the company can identify which strategy can work at any given time. Having a strategic plan ensures that the strategy meets the desired objectives. Also, it guides the management to evaluate whether there will be a conflict with the current policies of the organization. With the plan, it is easy to know whether the strategies will succeed or fail through review and evaluation and therefore make the necessary adjustments.