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An effective strategic management while linked to the way the business is run should create an absolute competitive advantage. Research has shown that there are many approaches to strategic planning. The underlying 4 principles characterize the best practices that a company should employ. We should start with the customer, the capital available should also be in line with the set strategy, there should be also a basis for the sharing of ideas and finally, the process should be kept ever green.
Looking at the customer issue, the management needs not only to be keen with the inside issues but should also cultivate a thorough understanding of the customers and also their changing priorities. Most market research undertaking has been useful in traditional marketing strategies, however today these are termed as inappropriate and misleading for strategic development. Solutions that are usually sought are actually the write answers to the wrong questions. The traditional market research usually targets the current customers who have questions about marketing and other statistical issues. This research is usually aimed for incremental improvements.
The strategic customer research goes beyond the prevailing customers needs which could be useful for incremental improvement. It focuses more on the unstated priorities which the customers remotely have but could not be fully articulated. In so doing there are questions raised about the market structures and the future customers who may be found in obscure places.
As there are well developed methods of market research, the strategic research has also a discipline to anticipate the shifts in customer priorities without guessing or depending on sheer luck. The customer science technique assists the executive to understand how the customers make their decisions even for the products that are revolutionary.
The set strategies is not necessarily what you say, it is what you fund and what you do. Lou Gerstener a former CEO of IBM said that making sure the resources are applied to their most important element of the strategy is perhaps the hardest thing for the companies to do.
One effective way of clearing such a mess is the combination of strategy development and capital allocation. The companies which do employ best practices have developed strategies to ensure that strategies are converted into strategic campaigns. The campaigns do keep everyone focused to the most important goals do encourage every employee to participate in the success of the set strategies. This also builds institutions to help the people to learn from their mistakes.
It is also to the best interest of the companies to table their questions, complains, grievances or even assumptions before the companies committee meeting. It is to the best interest of the business entities to allow employees to have the feeling of safety even when they table tough issues, seek out the bad news and also in the skeptical assessment of the strategic plans. Creating such a culture that embraces positive debates and tolerates mistakes will not happen all over sudden. There are companies which have executive directors that are quite resistant to change. Such a group would not allow a public challenge since they may deem it as disrespectful. This means that the cultural change requires a lot of commitment especially from the top management and would even call for change in personnel.
The need to have continuity in the setting up of strategies and their implementation without taking the whole issue as something seasonal creates a center to be carefully addressed. There has been the notion or the common idea amongst the working personnel that this process of strategic planning is a seasonal issue that fades immediately after workers go back to their normal duties. Successful companies such as GE and IBM have been successful in management of strategies. They have however realized that the need to encourage thought contribution rather than implementing a static structure, the whole process should be made simple and also an annual undertaking for everyone.
At given points in time during the year, there should be a review of the strategies that have been developed with an aim of making minor mid course corrections. For the long-term strategic plan there should be breakups done to deliberately update the strategies with new information. The other set of companies which have realized their set goals for the period of time should reinvent themselves to set up new strategies for future growth. This life cycle distinctions are usually realized by the management teams which carryout research, set goals and initiate conversations so as to get the appropriate dimension with time. This is quite useful for companies that operate across multiple products, in value chains and also geographies.
Lessons from the Ford Company
The value drawn from strategic planning will not bear fruits if the process of execution will not be given priority. If we look at the history of ford, there was a time when Jacques Nasser was its CEO. During his leadership, he together with his management got into a three year spiral process after their ignorance. They ignored the principles of strategic management leading to shakeups that were disastrous for the company.
During the year 1990 the profits of ford were growing exponentially, the F-150 was the best selling truck and also the explorer the best selling SUV. Despite this clean record the same company was struggling with its finances by 2001. This made Nasser to be fired after his devastating performance.
The poorly conceived Taurus design caused a 5% drop in the car market share from the year 1993 to 2002. At this time also, the Japanese automotive, industry through their established economy begun to manufacture market winning light trucks. Their uninformed decision to lend individuals with credit balances damaged their credit balance sheet.
This long can be widely accredited to the poor strategies that were put forth during the time of Nasser as the CEO as well as the strategic planning process that did not put into consideration some of the fundamental processes. There was sufficient customer research done by Ford; however the company failed to uncover the customers' unstated priorities leading to the string of poor designs.
Before doing their redesign, they listened to the focus groups' desires for more features and comfort. They however failed to ascertain what new design options that the customers would pay for. Despite the urgency of the need to get closer to the customers ford instead funded investments on the remaking of their brand and diversifying channels. There was a conflict of interest between the senior management of ford and the customers. The management was out for growth and expansion while customers were looking for further quality and design improvement. Ford went out to partner with Microsoft and yahoo. This to them was a good initiative to participate in e-commerce which was aimed at reaching more and more customers through the web. What ford forgot was that most American customers preferred to buy their cars from dealers.
Ford went ahead and conducted a research aimed at reducing emissions and also to build a stock pile of metals which were highly valued. The metals were used for the scrubbing exhausts. Another technology came up to solve this same problem. The expensive metals hence lost usability. The price of the metals dropped in the year 2001, this lead to a $1 billion worth of loses. The company acquired the Volvo and jaguar in an effort to remake the ford image. However this only served to further the company from a core customer base of the f-series owners. To worsen their situation, ford went ahead to invest in a different business such as junkyards and the European auto repair. These investments served only to draw them further from the primary role.
If only ford encouraged the culture of an open and honest debate, the managers would have managed to challenge these initiatives and to regain their focus on quality and better productivity. The Ford CEO (Nasser) lost focus on the short-term, middle term and long-term strategies that would have shaped the resource allocation. He also did not consider retrying the designs and core products that had brought the company success. He chose to lay his focus in the rear not researching well on the underlying facts.
The Ford customers wanted quality improvement and new quality designs. However there was no outstanding competition which would have perhaps lead Nasser to making more informed decisions. He however was ignorant of what the future held for him. He made uninformed decisions with no reasonable basis to invest in unrelated businesses. This action could be viewed as an undertaking to reframe the business rather than to reform it.
Since these occurrences occurred, ford has since embarked on the efforts to reform itself from this mess. Some of the things that ford did was to withdraw the Kwik-Fit service and at the same time adopt the back to basics strategy focused on quality. The aftermath of the three years of strain left most of the customers with the doubt of ford's ability to deliver quality. Since then Ford has not been able to reconstitute itself in its operations or even the operations from other companies like Toyota and Honda. The prevailing costs to the company in the market share, customer goodwill and resources serves as a lesson of how the poor strategic planning can ruin a good performing firm.
The Honda Company is one big company that will remain at the race of development. The car engines still have a long way to go. Improvements will be needed to the engines to make sure they remain as a competitive entity. The founder of this company Soichiro Honda began with the making of bicycles, he then went to motorcycles, then to lawn mowers. He eventually began to manufacture generators and cars. Today Honda is the world's top engine maker. It produces more than 20 million Engines in a year.
There has been increasing pressure from all over for the motor companies to reduce emissions. The civic motor from Honda was the world's first car to meet the emissions standards which were mandated by the US Air Act. They were able to achieve this goal without the use of the expensive adds-on plumbing and the air pumps which were widely used by the rivals. Experts say that a competitive engine is one of the prerequisites for the development of best motor systems. A good vehicle requires a delicate balance of the engine, the electric system, battery and power splitters and the other parts of the vehicle. The whole idea that is in the limelight for continued success in Honda is outsourcing the production of transmissions. This will be one of the favorable strengths that will assist in hybrid evolution.
A major problem that Honda faces is that their customers are not well educated or even informed on the benefits of the hybrid technology. This means that the customers have not been well acquainted with the positive features of the company. The company has not been able to convince their customers to look beyond the price premiums and pay attention to the quality being offered by the company. The top three factors to look for while buying a car according to current research are reliability, money value and the quality requirements. Such factors as gas mileage, technical innovation and environmentally friendly makes were ranked as important but way below the top five most important.
An internal analysis on Honda Company reveals the following:
SWOT analysis on Honda Company:
Honda has a worldwide reputation for making quality
The Honda motors are known for producing quality, reliable and performance oriented automobiles, motorcycles and other power equipments. Honda has traditionally been heavily looking into R&D capabilities and it also tends to invest more on automotive technology.
Honda makes outstanding products which are well differentiated
To enjoy a competitive edge in the present day market, there is need to keep abreast the facts on the table. Honda automotives know that customers want differentiated products in quality, branding and models.
Honda is an internationally renowned company that enjoys a lot of customer support. The best of the strengths a company can enjoy is popularity.
The revolutionary engine technology.
The revolutionary engine has helped Honda to make substantiated progress in their pursuit of success.
Powerful research and development into the future
Strategic planning is a fundamental undertaking by any company that has need for growth and development. One sure way of paving way for development is investing in research. Honda Company knows this and is determined.
Honda has been on the run to come up with new inventions that will improve the quality of their service.
The cost of operation of Honda is high compared to other automobile manufacturers. This may cause shakeups especially where recalls and economic recessions are involved.
Apart from the Nissan and Toyota purchases that are favorable, the Honda purchases require a more privileged purchaser.
Hondas' focus is more on the international market. They have in a way failed to consider the local markets.
The civic model has been considered as one major weakness for the Honda Company. This make actually makes their products to be questioned by the customers.
The non-luxury vehicles from Honda are more expensive as compared to other companies.
Honda fails to offer strong products in the truck lines. This makes customers who are interested in commercial motors to go for other manufacturers.
Due to the high technology employed by the Honda Company they have had to recall their products and this has lead to a weakened brand image.
The heavy expenditure on research and development has made the operation margin of Honda to decline. This has become a threat to their market share especially having other firms like Toyota and Nissan on the rise.
Honda is better placed to employ the R&D strategy in improving their cars in accordance to the needs and demands of the customers. This is much possible since there is an increased demand for less pollution models.
The newly emerging market is a new opportunity for the Company to prosper.
They usually produce models that do cater for the lower segment model of customers who may not afford the expensive luxury cars.
The opportunity to produce more fuel efficient vehicles is one good way which can result into productivity for the company.
Forming alliances could probably work for the good of the company.
Through laying more focus on research and development, the company will gain popularity.
There is increased need to observe the environmental requirements by producing environmentally friendly vehicles. Honda is best placed to capitalize in this industry. This is practical especially because Honda is experienced in the emerging market.
There is an economic slowdown that is threatening the motor industry
The external changes such as the taxes, politics and the government structures are major threats to the Honda Company.
The price wars among motor companies are also a threat not to be ignored.
The fluctuating oil markets are causing a pull down to the efforts that Honda is making.
The existence of substitute products is the major threat for Honda.
The rising price of the raw materials all over the world is a major threat that cannot be ignored. This in addition to the decrease in customer spending there has been an upsurge of competitive rivalry in this industry.
Analysis of the External Conditions
Politics: All over there is increased pressure on lobby groups and the government to issue tax incentives and subsidies to customers so as to encourage them to purchase products that are environmentally friendly. The Kyoto Accord has in addition lead to the renewed focus on the need to reduce pollutants. Honda has been forced to be on the look out to maintain its standards while at the same time promoting environmentally friendly initiatives through improved products.
Economy: The rising gas prices and the increased cost of cleaning pollutants have diminished the financial strength of the customers.
Social factor: The customers do have an increased awareness on the need to support environmental care efforts. They are also quite sensitive on the market prices. There are therefore customers who are willing to pay an extra amount so as to promote technology and products that will sustain the environment.
Technology: The recent research and development undertaking has increased the gains in the efficiency and cost reduction in production.
SWOT Analysis for the Ford
Ford has a strong base in Asia, Africa and the Ford Mazda operations
In the year 2005 Ford Mazda itself reached the $8,245 million mark in the year 2005, this was an 18.5% increase from 2004. This alone may prove the ford to be a large profit and income driver in the coming years.
There is growth in the Ford Europe and PAG
The ford European and premier Automotive Group (PAG) recorded a strong growth in the year 2005. The PAG vehicles include Aston Martin, Volvo, Jaguar and Land rover. This ford Europe and PAG has heat nearly $60,258 million in 2005. This is a growth of 11.3% from 2005. This was the sale in Europe and Turkey alone.
Ford has had a profitable financial services division
In the year 2005 ford recorded a profit of $ 2,204 million in the year 2005. In recent times, the financial service division continues to be profitable.
The company has enjoyed diversity in many countries
It is the largest auto manufacturer in over 30 countries and selling its vehicles in over 200 countries. It has also formed alliances with Suzuki and Isuzu motor companies.
The company produces many models of motors making their market ground more stable and certain.
There are weakening north American automotive operations
There has been a weakening financial operation of this company in North America. Some of the reasons for the weakening automotive operation in America have been the existence of competition from Toyota and the Honda from the Japanese Company, there has been a shift from fuel-guzzling trucks towards more efficient vehicles, there has also been high fuel prices which have hurt Ford more than the other firms.
There has also been a tarnished brand image
There has been motor recalls by the company for a number of times. This has made the image of the Ford to be highly tarnished. This has lead to great financial losses and also tarnished brand.
The Ford has had a largely unfunded pension, health care and life insurance obligations. This has only served to diminish the market reputation of the company.
The ford motor recalls caused the company to suffer $ 14.70 of stock prices.
The cash reserve sunk to $4.1 billion. The reasons have been acquisitions and also to cover tire recalls.
The plan for the way forward: in the year 2006 ford launched the plan to improve the performance of automotives business in North America. The plan is aimed at making the business more productive, customer focused and also efficient.
The objective of Ford motors is to switch to hybrid electric engines due to the limited petrol resource. The high fuel prices and the growing environmental conscious will make the Hybrid vehicle a good sale.
The high population index in India and China has made ford to launch the ford fiesta in India and the light vehicle in China. The high demand for light vehicles will make an opportunity for the company to reach out to more customers.
The ford has an opportunity to take part in the promotion of environmental sanity. This will be achieved through clean Engine emissions, working with the environmental groups to help in the cleaning of the environment and also adoption of solar power.
The ford may also engage in charity and also other support programs.
There is a rising material price situation: despite that the unstable prices for steel and hot rolled steel coil prices being a problem to all motor companies, it is also pausing great threat to these company. The ongoing consolidation of the motor industry could cause an increased price level due to the high demand. This will in turn affect the company's profit margins.
There has been increased competition. This factor has split the market share for ford. The reason for this competition has been the rise of the Japanese products and others from Europe. The growth of Honda, Nissan and Toyota has paused great threat to this company.
The capital spending for ford has also been lower than its competitors. The low capital expenditure has also been seen in research and development. This could as well affect the performance of the company.
There is reported internal strife in ford since the time Nasser was CEO in the Company. This will only mean hiccups as a lasting solution is being sort.
There is need to identify success factors in both Ford and Honda. We can then embark on the comparison of these factors. The key thing that customers all over have been looking for is reliability, value for money and well manufactured vehicles. Honda can achieve this though there is doubt to the first. The following alternatives could be considered.
Launching a full hybrid of the civic Honda.
One advantage of launching the civic is the fact that it would be easily incorporated into the current vehicle model than the full hybrid technology. It would also allow Honda to offer comparable prices to the other hybrid motor producers. On the contrary if they decide to manufacture a full hybrid, the prices may shoot up too high making potential customers to go for alternative models of lower prices. A mild hybrid will seem to be a step backwards in terms of technological progress. The fact that Honda invested a lot in making the full hybrid model means that embarking on the mild hybrid would only be a step backward seeming to be counterintuitive. Launching a mild hybrid could also make Honda to lose the opportunity to distinguish its products from the products of its competitors. This may kill its competitive advantage also. The company would also seem to be rubbishing efforts to uphold environmental conservation.
The other option is to avoid the launch of the civic hybrid
This step could make them avoid any of the risks associated with its process of manufacture. Honda is today's market leader in hybrid car segment and most of its investments are in its research and development. Such a decision may appear to be going against the organizational strategy which is witnessed to today. It may also deny the company an opportunity to enjoy the competitive advantage in their race to increase.
In light of the above analysis, I recommend that the first option would be the best for Honda. The firm has an opportunity to improve its competitive advantage and to maintain its distinguished products. Honda can also lobby from the government for subsidies and tax setoffs in order to reduce the price premiums of the vehicle.