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Strategic Management And Its Significance

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INTRODUCTION

The management concept of building an organization around the profitable satisfaction of customer needs has helped firms to achieve success in high-growth, moderately competitive markets (Bracker, J., 1980). However, to be successful in markets where the economic growth seems to be matured and in which competition appears to be high, it is key to follow the marketing concept and a well-developed management strategy. Such a strategy considers a portfolio of products and takes in to account the anticipated moves of competitors in the market.

Management is strategically concerned with the direction and scope of the long-term activities performed by the organization to obtain a competitive advantage. The idea is to have your organisation customer focused whilst simultaneously satisfying your stakeholders’ expectations. The scope of my study restricts itself to the analysis of Management strategy of Nokia and Samsung.

What is strategic management?

According to Chen, Hambrick and Nag “strategic management is the continuous planning, monitoring, analysis and assessment of all that is necessary for an organization to meet its goals and objectives” (2007, p. 935-955). Fast-paced innovation, emerging technologies and customer expectations force organizations to think and make decisions strategically to remain successful (Völckner, F. and Sattler, H., 2006). The strategic management process helps company leaders assess their company’s present situation, chalk out strategies, deploy them and analyse the effectiveness of the implemented strategies (Welch, D.E. and Welch, L.S., 1996). The strategic management process involves analysing cross-functional business decisions prior to implementing them.

Importance of Strategic management

Strategic management drives the necessity to form a commitment toward strategic planning which in-turn signifies the company’s ability to set both, short- and long-term goals, then determining the decisions and actions to be taken in achieving these goals.

Strategic Management on a corporate level normally incorporates preparation for future opportunities, risks and market trends. This makes way for the firms to analyse, examine and execute administration in a manner that is most likely to achieve the set aims (Covin, J.G. and Slevin, D.P., 1989). As such, strategizing or planning must be covered as the deciding administration factor. Apart from faster and effective decision making, pursuing opportunities and directing work, strategic management assists with cutting back costs, employee motivation and gratification, counteracting threats or better, converting these threats into opportunities, predicting probable market trends, and improving overall performance Covin and Slevin, 1989, p. 75-87).

Strategic management process

(Poister, T.H. and Streib, G.D., 1999)

Strategic Intent

Strategic intent gives an idea of what the organization desires to attain in future. It answers the question what the organization strives or stands for? It indicates the long-term market position, which the organization desires to create or occupy and the opportunity for exploring new possibilities.

Strategic Formulation

Strategy Formulation is an analytical process of selection of the best suitable course of action to meet the organizational objectives and vision. It is one of the steps of the strategic management process. The strategic plan allows an organization to examine its resources, provides a financial plan and establishes the most appropriate action plan for increasing profits.

Strategy Implementation

Strategy implementation is the technique through which the firm develops, utilises and integrates its structure, culture, resources, people and control system to follow the strategies to have the edge over other competitors in the market.

Strategic Evaluation

Strategic evaluation is the assessment process that provide executives and managers performance information about program, projects, activities designed to meet business goals and objectives.

Introduction to the company profiles

Company 1 – SAMSUNG

Samsung is a South Korean multinational company headquartered in Samsung Town, Seoul. It was founded by Lee Byung-chul in 1938 as a trading company. Samsung entered the electronics industry in the late 1960s and the construction and shipbuilding industries in the mid-1970s; these areas would drive its subsequent growth. Following Lee’s death in 1987, Samsung was separated into four business groups – Samsung Group, Shinseki Group, CJ Group and Hansol Group. Since 1990s, Samsung has increasingly globalized its activities and electronics, particularly mobile phones, have become its most important source of income .

As stated in its new motto, Samsung electronics ‘vision for the new decade is ’Inspire the world, Create the future’

This new vision reflects Samsung electronics ‘commitment to inspiring its communities by leveraging Samsung’s three key strengths New Technology, Innovative Products, and Creative Solutions. And to promoting new value for Samsung’s core networks, Industry partners and employees. Through these efforts , Samsung hopes to contribute to a better world and richer experience for all.To this end, Samsung has also three strategic approaches in management. ‘Creativity, Partnership and Talent.’

Strategies used by Samsung

1. Globalization – With more than 285 overseas operations in 67 countries. Samsung is truly global in scope and nature. Samsung’s strategy is two-pronged:

  • To prudently expand outside its home market
  • To equip overseas units with the skills and resources to be self-sufficient.

This strategy brings Samsung, and the countries where it operates, Globalization provides access to new suppliers and customers, and allows Samsung to learn and benefit from new cultures and new ideas.

2. Human Resource Strategy – One of Samsung’s human resource strategy is to recruit the highest quality personnel around the world, regardless of nationality, by focusing on those who have masters and Doctorate degrees in all areas of management.

3. SWOT analysis of Samsung

4. Value chain analysis

‘electronics and computing’ industry reveals that ‘manufacturing’ is the maximum value adding activity (approx. 50% of total), and a key area for companies to reduce costs and control product quality. Samsung is ‘contract manufacturer’ in DS business, and ‘vertically integrated’ in CE and IM businesses.

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PESTEL analysis

Political: Mallard (2015) has highlighted the role of governments using political influence to attract foreign direct investment. Reuters have reported that Samsung is under pressure from the US government to set up a production base in USA (2017a). The recent arrest of Samsung’s Vice Chairman, Lee Jae-Young (McCurry, J., 2017), in a corruption scandal shows that politics plays a significant role in how businesses are run.

Economic: Consumer electronic products have shorter life-cycles due to the speed of technological obsolescence (Torresen,J. and Lovland, T.A., 2007), and companies have to price new products at a high price to be able to breakeven quickly. The consumers in developed countries have the buying power to afford new electronic products.

Socio-Economic: The changes in the life-style of consumers, due to the fast pace of modern life, has seen increase in ‘impulse’ buying of products, In addition, Park, Jun and Lee have concluded in their study that mobile phone shoppers are impulse buyers, and have a high consideration for the product price, since they perceive effort and time spent in buying as a cost (2015, p. 157).

Technological: Wang and Ahmed mention that “a firm’s dynamic capabilities depend upon market dynamism, and this drives the firm to develop core capabilities over a period of time” (2007, p. 31-51).

Environmental: Chopra and Wu (2016) mention that the directives like 2003 RoHS (Restriction in use Of Hazardous Substances) in the EU, and increased emphasis on Climate Change, has seen an increase in eco-announcements from companies in the computing and electronics, who are beginning to view the use of eco-friendly materials and systems in their products as a competitive advantage.

Legal: The ‘electronics and computing industry’ is dependent on technological innovation, which means that protecting IP (intellectual property) is a key issue, and companies have to ensure that competitors do not take advantage by copying or imitation. In addition, product safety issues can affect the company’s reputation and impact product sales (Chen, 2004). Bloomberg (2016) reported that Samsung China have been ordered to pay CNY80 million (US$ 12 million) to Huawei for a patent infringement.

Key success factors

These are the key factors which contribute to success in an industry, and can either be resources (investment, talent) or competencies (technology, process) which an organisation must possess to become successful in the marketplace (Lynch, 2015).

Analysis of the factors influencing the ‘electronics and computing’ industry shows that product affordability, product features, and product quality are the main requirements, and to achieve these, the key success factors are:

  • i) Low cost of production (for contract manufacturing only)
  • ii) Investment in production facilities
  • iii) High investment in R&D
  • iv) Availability of talent (scientists and designers)

Company 2 – NOKIA

Nokia is a Finnish international communications corporation. It is mainly involved in the production of mobile devices and in joining Internet and communications businesses. They create a widespread variety of mobile devices with amenities and software that allow people to practice music, navigation, business mobility and more. Nokia is the vendor of Symbian operating system. Nokia has implied such strategies that help it to maintain its hold in the market of being a leading manufacturer in mobile devices.

The organizational mission of Nokia is “Connecting People”. Their mission statement is “In a world where everyone can be connected, we take very human approach to technology”. The organization is involved in the business of manufacturing mobile devices and is in a race to become the world’s leading manufacturer of mobile devices. As the mission states that it wants to connect people, it is aimed at making such devices that they are easy to use for humans and also remain up-to-date with technology.

Strategies used by Nokia

  • SWOT analysis
  • Corporate culture

Nokia corporate culture is one of the corporation’s planned and cutthroat benefits. Even the corporation’s slogan, `Connecting People’, is representative of the culture, and aids in describing the reason of its corporal amenities. The corporation’s structures highlight masses of natural wood, huge windows, welcoming colours and fabrics, exposed floor strategies, pedestrian overpasses, game/leisure parts, fitness places and saunas.

  • Value chain

To get an improved comprehension of Nokia’s stance in the mobile telephony business, it is significant to observe the business value chain. Handset end-consumers do not buy straight from Nokia, as an alternative, they generally register in cellular calling strategies from amenity sources. Nokia trades its phones to the mobile service contributor and/or supplier after creating every handset using several factors created by other sellers.

  • PESTEL analysis

Political-The outer political environment has the ability to influence Nokia considerably, particularly owing to the detail that Nokia is functioning on a universal level and should stand to a complete presenter of country precise podiums in which the political and legal techniques can vary considerably.

Economic –Economic factors such as development rates, interest rates, trade rates and inflation rates are vitally imperative to Nokia equally in the temporary and enduring term. The influence of these issues can have main inferences, comprising how they function and make verdicts such as what must be manufactured, how it must be created and what demographic of consumer the end result must be directed to.

Social – Nokia’s inventions have comparatively small product lifespans; this indicates Nokia has to pay careful concentration to styles and social choices. Growths in how mobile phones and smart devices are consumed have altered over the years, for instance, the development of camera phones, touch screens and 3G. Disaster to execute qualities when they initially occur can direct to meaningful market share destruction. Nokia functions in a vast amount of markets mostly owing to its robust allocation system, all of these markets have certain tastes, cultures and anticipations.

Technological –In the telephones business, particularly OEMs, the rapidity of alteration and acceptance of new technology influences officials knowingly; the achievement of Nokia is built on endless invention. Nokia examines research and development improvements by rivals, obvious from their speedy acceptance of touch screen technologies and more lately throughout their research plans into gadgets such as Tablets that are comparable to the iPad.

Legal –Nokia has above 132,000 employees in 120 countries and therefore distinguishes the significance of concerns that associate to service adjustment in addition to employee wellbeing and protection. For instance, Nokia lately authorized a contract linking to the reimbursement parcels to be obtained by the personnel of Nokia employed at the Jucu plant with the Romanian trade alliances. Product protection and well-being is added legal concern that is of extreme significance to Nokia.

Environmental –Altering public approach to environmental sustainability in addition to invention removal and reprocessing have altered extensively over the previous era. Nokia have been active with respect to environmental accountability and sustainability, they set further that it is “integrated into everything we do. From the devices we build and the suppliers we choose, to our mobile solutions that enhance people’s education, livelihoods and health”.

Key failure factors

Ultimately though this lack of innovation management and understand is a failure right at the top of the Nokia organization. For over a century Nokia had exemplified transformational leadership, evolving itself from a manufacturer of rubber products (Wellington boots and cables) to technology hardware to ultimately to the global market leader in mobile telephony. These transitions must have taken transformational leadership in the form of visionary thinking, risk taking, long-term planning and the careful management of

business transformation and organizational culture. However the leadership team present during the last 5 years (or maybe longer) of Nokia’s demise clearly exerted the traits of transactional management – focused on the short-term and managing the maintenance and improvement of performance. This coupled with often conceited nature of a market leader who think they know their market best due to past performance is ultimately the reason why Nokia exists no more.

Conclusion and Recommendation

According to the strong competition in the mobile phone market, Nokia should improve their mobile phone’s abilities such as function of internet using on mobile, and also produce new application to satisfy customers ‘needs. They should not be too dependent on Microsoft, because it would be hazard for the company. On the other hand, Nokia should keep developing the mobile phone technology at the same time Microsoft focus on software and another application that relates to mobile phone using. It might be true that is difficult for Nokia to recover from the problems while the competition of mobile phone is very strong due to the trend of smart phones for Apple and Google’s android operating system, But cooperation between Nokia which produces numerous portfolios and has a very large distributed channel around the world and Microsoft that is the worldwide leader in software, would create new efficiently technology to offer customers and be successful again.

References

  1. Bloomberg (2016) Company Overview of Samsung Display Co., Ltd [online]. Available at: https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapId=22399354
  2. Bracker, J. (1980). The Historical Development of the Strategic Management Concept. Academy of Management Review, 5(2), pp.219-224.
  3. Covin, J. and Slevin, D. (1989). Strategic management of small firms in hostile and benign environments. Strategic Management Journal, 10(1), pp.75-87.
  4. David, F. D. (2011) Strategic Management – concept and cases. 13th ed. New Jersey: Pearson Education
  5. McCurry, J. (2017). Samsung head arrested over South Korean Choi-gate corruption scandal. [online] The Guardian. Available at: https://www.theguardian.com/technology/2017/feb/17/choi-gate-samsung-heir-lee-jae-yong-formally-arrested-for-corruption [Accessed 1 Jul. 2019].
  6. Nag, R., Hambrick, D. and Chen, M. (2007). What is strategic management, really? Inductive derivation of a consensus definition of the field. Strategic Management Journal, 28(9), pp.935-955.
  7. Park, C., Jun, J. and Lee, T. (2015). Do mobile shoppers feel smart in the smartphone age?. International Journal of Mobile Communications, 13(2), p.157.
  8. Poister, T. and Streib, G. (1999). Strategic Management in the Public Sector: Concepts, Models, and Processes. Public Productivity & Management Review, 22(3), p.308.
  9. Torresen, J. and Lovland, T. (2007). Parts Obsolescence Challenges for the Electronics Industry. 2007 IEEE Design and Diagnostics of Electronic Circuits and Systems.
  10. Völckner, F. and Sattler, H. (2006). Drivers of Brand Extension Success. Journal of Marketing, 70(2), pp.18-34.
  11. Wang, C. and Ahmed, P. (2007). Dynamic capabilities: A review and research agenda. International Journal of Management Reviews, 9(1), pp.31-51.
  12. Welch, D. and Welch, L. (1996). The Internationalization Process and Networks: A Strategic Management Perspective. Journal of International Marketing, 4(3), pp.11-28.

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Strategic Management And Its Significance. (2022, Jun 09). Edubirdie. Retrieved August 16, 2022, from https://edubirdie.com/examples/strategic-management-and-its-significance/
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Strategic Management And Its Significance. [online]. Available at: <https://edubirdie.com/examples/strategic-management-and-its-significance/> [Accessed 16 Aug. 2022].
Strategic Management And Its Significance [Internet]. Edubirdie. 2022 Jun 09 [cited 2022 Aug 16]. Available from: https://edubirdie.com/examples/strategic-management-and-its-significance/
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