Strategic Management Set Of Managerial Decisions Business Essay

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Strategic management is the set of managerial decisions and action that determines the way for the long-range performance of the company. A business strategy is basically a document indicating the direction a business will operate and the necessary steps to achieve its objectives and goals. A typical business strategy is developed in three steps: analysis, integration and implementation. It emphasizes the monitoring and evaluation of external opportunities and threats in light of corporation's strength and weakness. Andrews defined strategy as: "The pattern of objectives, purposes, goals and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of the company it is or it is to be".

If an organization understands the environment in which it operates, half of the problem is solved. This requires an analysis of what is happening outside the organization and an evaluation of current resources (strength and weaknesses) and an assessment of opportunities and threats present in the environment. In this paper, business strategy of an organization is studied and reviewed. This paper addresses four main points regarding business strategy which are: (1) Analysis of how the business environment is considered in strategy formulation, (2) understanding of the process of strategic planning, (3) an examination of approaches to strategy evaluation and selection, and (4) analysis of how strategy implementation is realized.

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The organization which is selected for study is the Murree Brewery Company Limited which is a Pakistan-based company. It was established in 1860 and incorporated a year later at Ghora Gali, located in the Pir Punjal range of the Western Himalayas at an elevation of 6000' above sea level, near the resort town of Murree in Pakistan. The Company is principally engaged in the manufacturing of Pakistan made foreign liquor (PMFL) including alcoholic beer, non-alcoholic beer (NAB), non-alcoholic products (NAP), which includes juices in tetra packs in Rawalpindi and food products, juices, glass bottles and jars in Hattar. Murree Brewery Company Limited operates in three divisions: Liquor Division, which includes Beer and NAB, PMFL, Alcohol and NAB; Tops Division which includes Tetra pack Juices and Malt Extract; and Glass Division-Hattar which includes Glass Containers of all shape & sizes up to one liter. The discussion of Murree Brewery business strategy contains three important sections which are: (1) Strategic planning and review, (2) Strategy evaluation, (3) Strategy implementation.

Business Strategy

The basic aim of having a business strategy for an organization is to establish the directions for future in which the business will operate. Murree Glass, a Division of Murree Brewery Co. Ltd., is dedicated to the manufacturing of quality glass containers since 1975. Murree Glass is the pioneer in lightweight, quality controlled glass bottles. It is ISO 9002 Certified and manufactures glass containers of all types for its company i.e. Murree Brewery Company Ltd and for other food and beverage consumers.

Task 1

Environmental Analysis

Like competitors businesses are also affected by an external environment. Global factors influencing business are legal, political, social, technological and economic. Pearce and Robinson (2002) discuss four external forces economic, political, social and technological. Each of these external factors influences corporate strategy. According to Pearce and Robinson (2002), the external environment of a business consists of two interrelated sets of variables that play a principal role in determining the opportunities, threats and constraints that a firm faces. Variables originating beyond and usually irrespective of any single firms operating situation (economic, political, social and technological forces) form the external environment. Variables influencing a firm's immediate competitive situation (competitive position, customer base, suppliers, creditors, and labor market) constitute the external operating environment. These two sets of forces provide many of the challenges faced by a particular firm in attempting to attract or acquire needed resources, and when striving to profitably market its goods and services. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change. To help analyze these factors managers can categorize them using the PESTEL model.

Political Factors

Government Stability: The government of Pakistan has shown instability for the past few years. Although affecting too many companies, the company has had almost negligible effect of this. Murree Glass has no interference by the government.

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Taxation policy: Murree Glass gives its respected taxes each year as reported in its annual reports. It benefits from no tax exempts and neither does it faces any penalties.

Environmental Factors

Environmental protection laws: No such laws govern this division of Murree Brewery.

Waste disposal: Defected bottles spotted earlier in the production process while the bottles are still hot are sent back to the start of furnace immediately and the ones that are recognized when the bottles are cold are broken and reheated. This ensures minimal waste. Therefore, no laws govern Murree Glass in this regard either.

Energy consumption: The factory is operational 24 hours a day and consumes a great amount of energy. When the factory was set up the energy crisis of today was foreseen and therefore a gas generation plant was set up to meet the plants power needs. The factory does not use energy provided by WAPDA.

Socio cultural Factors

Population demographics: These factors have encouraged Murree Glass to make wider distribution channels covering more geographical locations.

Income distribution: The unequal income distribution in Pakistan has persuaded many companies to decrease costs so as to make the products available to the low income earners at lower prices. Murree Glass has achieved this by making lower weight products to reduce raw material and transportation costs.

Lifestyle changes: People nowadays are more inclined towards take-away products. Restaurants have now introduced disposable cutlery so as to meet the customers' needs. Murree Glass in this regard introduced the NR bottles.

Technological Factors

New discoveries/developments: NR bottles were a new development in this area. However this development was also beaten by the invention of PET bottles which are in great demand today. Some of the company's greatest clients like Qarshi have now shifted to PET bottles.

Speed of technology transfer: The technology in this sector like all others is moving fast and Murree Glass has been able to cope up with it. It has the latest combination inspection and palletizing machines.

Rates of Obsolescence: The furnace has a life of 5 years with requires regular checks in between.

Economic Factors

Inflation: Inflation has affected this industry just as it has affected all the others. The price of raw materials have risen and resultantly the cost of the bottle. Although the company has tried to pass on some of the burden to their clients but has not been successful. The customers are not ready to pay more for the NR bottles.

Legal Factors

Health and Safety: The labor of this factory is well equipped with all the necessary safety equipment. They are given gloves, goggles and helmets to ensure that they are not injured or burnt while at work. Also in the summers there is a blower which helps reduce the high temperatures reached because of the furnace inside the factory. Also squashes and other lemon drinks from the other division are distributed free of cost to avoid dehydration. There are fire fighters present to assist the employees in minimizing the destruction caused by an accident.

Product safety: The product is ISO 9000 and ISO 14000 certified.

SWOT Analysis of Murree Brewery

Strengths

Technology

Supplier of Murree Brewery Co. Ltd

Weaknesses

Low Efficiency

Sometimes the company has to compromise on low quality raw materials.

Opportunities

More opportunities in food industry

Pharmaceutical Industry

Furnace life can be increased

Replace mechanical machines with electronic ones.

Threats

Pet bottle has replaced glass bottles.

Roohafza and Qarshi, biggest glass bottle consumer has shifted to pet bottles

New entrants.

Porter five forces

Prof. Michael Porter identified 5 forces that impact the profitability of an Industry in his classic book (1980) on Competitive Strategy.

Threat of entry

There is always the possibility that new firms may enter an industry. This is called the threat of entry in Porter's model.

In local market, Murree Brewery enjoys the monopoly in alcoholic drinks however, for non alcoholic drinks there is a lot of competition therefore, the threat of new entrants exists.

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To overcome the threat of new entrants Murree Brewery needs to increase its product line.

Substitute Products

In Porter's model, substitute products refer to products in other industries that meet the same/similar need. To an economist, a threat of substitutes exists when a product's demand is affected by the price change of a substitute product.

Murree Brewery faces the threat of substitute products imported from other countries particularly alcoholic products.

Power of Buyers

The power of buyers is the impact that customers have on a producing industry. In general, when buyer power is strong, the relationship to the producing industry is near to what an economist terms a monopsony - a market in which there are many suppliers and one buyer. Under such market conditions, the buyer sets the price.

For Murree Brewery the power of buyers is very weak in case of alcoholic products as far as local market is concerned, however in case of non alcoholic products since the competition is very strong therefore, the power of buyers is very strong.

Supplier Power

Suppliers can exert an influence on the producing industry, such as selling raw materials at a high price to capture some of the industry's profits. This describes supplier power. Suppliers of raw materials, components, labor, and services (such as expertise) to the company can be a source of power over the company, when there are few substitutes. Suppliers may refuse to work with the company, or, e.g., charge excessively high prices for unique resources.

Since Murree Brewery has become its own supplier by the establishment of Murree Glass therefore, pursuing backward integration strategy hence, the power of suppliers is very weak in this case.

Rivalry

If rivalry among firms in an industry is low, the industry is considered to be disciplined. This discipline may result from the industry's history of competition, the role of a leading firm, or informal compliance with a generally understood code of conduct.

Rivalry among the market players in case of Murree Brewery's non alcoholic products is very tough.

In order to out perform the competition Murree Brewery must focus on increasing the product line, increasing the distribution channel and creating brand image among general public.

BCG Matrix

The BCG Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's. It is a simple tool to assess a company's position in terms of its product range. The BCG model is based on classification of products into four categories based on combinations of market growth and market share relative to the largest competitor.

The BCG Matrix is show below:

Murree Brewery can be placed in the "question mark" quadrant of BCG matrix because it has high market growth but low market share. Over the last decade‚ business has boomed. Murree Brewery made a pretax profit of about Rs. 308 million in the financial year that ended on June 30‚ 2008. The following year‚ this improved by another Rs. 72 million. Understandably, making beer and whiskey in a Muslim country, where 97 per cent of the population is officially banned from enjoying the products, has never been an easy business. Non-Muslims are exempt from the ban, but even for them obtaining a drink can be complicated some five-star hotels require foreigners to affirm in writing that they are non-Muslims and will be responsible for anything that happens when they are under the influence before they can order a drink. But due to the prohibition forced by government on Murree Brewery it has diversified into glassmaking and nonalcoholic drinks.

Task 2

Strategic alternatives for Murree Brewery

The different strategic options available for Murree Brewery are as follow.

Market Development

In market development, Murree Brewery needs to serve more customers by increasing its distribution channels and sales force. It should ensure the availability of non alcoholic products in all the urban and rural areas of Pakistan.

Product Development

In product development, Murree Brewery should increase its product line of non alcoholic beverages. It is suggested that Murree Brewery should introduce mineral water under their brand name like Nestle, and Aquafina (Pepsi).

Task 3

Strategic implementation

For Murree Glass there is no difference between intended and realized strategy. Policies and strategies are calculatingly formulated or planned by managers. These are then reported to the Board of Directors. The management of the company sets targets each month which are communicated to the Board of Directors. After the decision is reached by the top management and the Board of Directors, the lower management is informed about it. The employees are then directed and motivated towards achieving them. This guarantees on time production and meeting customer demands. The management ensures that these are met by the employees in practice. The success of Murree Brewery is based on the following points.

Commitment to first understand the customer requirements than to meet and exceed their expectations, by performing the correct tasks on time and every time through

Continuous improvement

Alignment of missions and goals

Responsibility and respect of our jobs and each other

Educating one another

Primary focus is to satisfy its customer base. This is done through on time delivery even at peak seasons when the demand for beverage bottles increases.

Murree Glass had the strength of being its own customer.

Murree brewery had the resources to implement backward integration and used it efficiently. It overcame the threat of increasing its costs by avoiding outsourcing.

Strategic capability for Murree Glass is their ability to produce glass durable bottles at lower cost compared to their competitors. This is made possible with the help of the latest technology being used at the plant and training their human resource accordingly.

Conclusion

The business strategy must be maintained continually, in line with changes in the business and its environment. It should be reviewed on annual basis. Murree Brewery Co Ltd has continued to dominate as a monopoly due to restrictions on importing alcohol. The economies of scale it enjoyed over the review period and the restrictive regulatory and social environment for alcoholic drinks in Pakistan deterred other local start-ups. With widely recognized brands, a range of new products, a long history in the country, widespread availability and affordable pricing, Murree Brewery continued to have the largest share in beer and spirits. Wine, RTDs/high-strength premixes and cider/perry remained small in alcoholic drinks with only a low number of imports.

It is suggested that Murree Brewery should increase its product line of non alcoholic beverages in order to increase its market share. Also Murree Brewery needs to serve more customers by increasing its distribution channels and sales force. It should ensure the availability of non alcoholic products in all the urban and rural areas of Pakistan.