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Strategic management is very important to all companies and firms. It has long been viewed as the concept and process that link an organization and its environment together(Leibold, Probst and Gibbert, 2002). It is composed of the analysis, decisions and actions, an organization undertakes in order to create and sustain competitive advantages. (Dess, Lumpkin and Taylor, 2005).
1.2 Why creativity is important in Strategic Management
When comes to creativity which pays a very important role in business industry, without any creativity no companies could survive and grow in this world. By the large numbers of psychologists seem to agree that creativity involves the ability to produce original ideas and to perceive new relationships among unrelated things.(Sarsani 2005, p.2). In other words, creativity is activity that can bring something new by assimilating existing principles or things (Barron 1969).
1.3 Case : McDonald's
Let's take McDonald's for example; McDonald's almost hit its bottom line during the year of 2003, it was still the King of fast food provider in the world however its stock decreased dramatically after first-ever quarterly loss has been reported by the company.
(New World City 2010, p.1)
Why McDonald's fell in sales in 2003, the reasons as below:
Firstly, McDonald's was under attack for contributing to obesity. Its low price and high fat foods were dangerous. The company's image and reputation was tarnished by the best-selling book and fast food Nation. For instance, its super-size me, which led to a journalist rapidly gained 25 pounds weight by only having this Super-size meal for a month. By 2002, sale of this world largest fast food company was stagnated and profit was falling.
(Charles 2008, p.73)
Other reasons, it was battered by nutritionists, environmentalists, human rights activists and also nibbled by new competitors (such as Subway, Burger King.), criticism from public by overbuilding, a failure to adapt to changes in customers' tastes and habit.
(New World City 2010)
It was time for McDonald's to rethink the business after recording its first losing in 2003. The chain devised a recovery strategy through a program title "Plan to Win". ¼ˆEnz 2010¼‰McDonald's strategic leaders decided to change its corporate-level strategy and to take different actions to implement its business-level strategy. (Hitt, Ireland and Hoskisson 2011, p.3)
How McDonald's used its strategies to achieve its success.
3.1 Business-level strategy
Change and innovation was been considered as a part of McDonald's business plan. With public concern about the healthfulness of fast food and the increasing demand for fast paced meals.( Ferrell 2007, p.126). McDonald's business-level strategy focuses on product innovation and upgrades its existing properties instead of continuingly expansion of its units. ( Adamy 2009, Wall Street Journal)
Let take new menu as an example, McDonald's gave up large-size meal and introduced a "healthy option" to the Happy Meal in December 2003. Happy Meal is a specific meal targeted to children. In US, Happy Meal includes small fries, sliced apples with a side caramel dip, drinks like milk, the chain added fruit juice(such as orange juice, apply juice) instead of soft drink. Some locations the choices expanded such as grilled cheese sandwich ¼ˆ known as a " Fry Kid"¼‰or more healthy food like bags of dried fruit or a whole piece of fruit like apple or carrot sticks taken a place of fries.
(A McDonald's timeline p.203)
3.2 Corporate-level strategy
From the corporate-level strategy, the decision is to become less diversified, Starting listening and paying more attention to its customers. Jim Skinner CEO, McDonald's pointed out that they will pay more attention to their guests, offering their customers what they expect most.-menu variety increased convenience and daily value. Focusing and executing on the "Plan to Win" which will lead the sustained momentum of their global business
Too meet customers' needs, facing competition like Starbucks which is specialized in relaxing environment. McDonald's developed a McCafe coffee shop concept in Chicago, latter McCafe plan rolled out all over the world. 500 McCafes are running pretty good outside the United States, particularly in New Zealand and Australia. In 2009, McDonald's coffee drinks create value for customers by giving high-quality drinks at a lower price that those competitors.
(Ferrell 2007, p.124)
4.1 Foreign countries delivery service
Observers approve of the innovation; the management is seeking beyond ok but inspiring customers. According to an industry expert said that it will become better since share the best ideas around the world. To stimulate profit growth in a slow market, McDonald's encourages owners to run franchises everywhere of the world and tries to do something different. The most profitable and widely idea is delivery service. The Delivery service started from Egypt where the owner was suggested to offer a delivery service to complete with other chain restaurants. Delivery service makes up 27% of McDonald's revenue in Egypt and growing 20% and 30% each year. Delivery proves so profitable that today nearly all McDonald's in the world provided delivery service in big cities. It charges a small amount of money. In different countries the charges are different, some countries it is only charge one dollar for the delivery service.
(Boone and Kurtz 2010, p. 133)
4.2 Localization Strategy
Localization strategy is an extension of the home replication strategy and focuses on a number of foreign countries and regions. The strategy becomes effective when there are clear differences among national and regional markers and low pressures for cost reduction.( Peng 2009, p.298). 66% of McDonald's are frankfranchises in foreign countries the development licenses are almost like franchises, but the only difference is that they do not require McDonald's investment. Restaurants outside countries are allowed to experiment with their menu. The advertisement of McDonald's in foreign countries are based on the local theme, for instance, McDonald's in Japan where burgers are served as a snack, so the size burgers is smaller than it in other countries. Some McDonald's Restaurant in Germany they serve beer due to meet the local customer needs. In France, It serves wine, however in Far Eastern McDonald's offers noodles in the menu.(Koontz and Weihrich 2008, p.23)
To adapt the local market, McDonald's has developed vegetarian menus to suit Indian tastes and preference. For instance, McDonald's serves Vegetable McNuggets to vegetarian in India (Ritzer and Atalay 2010).In addition, it does not offer pork or beef in India due to respect local Indian culture.( Heide 2006). In China, for example, McDonald's is status symbol, perceived as an upmarket restaurant and targets middle to upper middle class families with higher income for a family celebration at the restaurant.(Hendrikse, Tuunanen and Windsperger 2008)
4.3 A Cultural Geography of McDonald's
The official company history mentioned that McDonald's does not change its way of running its business to adapt to foreign cultures, but transform local cultures to meet its own needs. We can see an example how successful has this approach been in Britain. Americanization, as a symbol of McDonald's, has been seen as an impact on British national identity.( Ameli 2002) McDonald's has promoted the diet and the landscape, economy, workforce, and popular culture of the United States. (Eric Schlosser 2009)
(Journal of Cultural Geography, DeBres, Karen 2005)
4.4 McDonald's annual revenue report from 2006 to 2011
Company-operated sales (Dollars in millions)
Franchised revenues (Dollars in millions )
Total revenues (Dollars in millions)
Source: Data provided by McDonald's Corporation United States Securities and Exchange Commission Washington, DC.
We can see from the table above how fast McDonald's business increased by changing and innovating their various business strategies. From the example of McDonald's business we can understand how important Strategic management is in business industry.
5. Strategic management: Strategic thinking
Since Strategic management is so important, the strategic planning process and strategic thinking, both are considered as a part of effective strategic management. (Enz 2010¼‰The strategic planning process typically pertains to competitive actions in the marketplace. Strategic thinking, however, is to take the long-term view and see the big picture, included the organization and the competitive environment, leads to creative solutions and new ideas. Research has shown that both strategic thinking and planning positively impact on a firm's performance and financial success.(Daft and Marcic 2011, p.160)
5.1 Strategic thinking-- Starwood Hotel
When comes to strategic thinking, Starwood Hotel may be the best example. To meet customers' needs Starwood Hotels created the "Heavenly Bed", a feature bed in every guest room, into a luxurious objective desire, increasing the revenues of organization. Many hotel operators follow the fashion with copycat linens and custom bedding of their own. (Enz 2010¼‰
There was a case for the Westin, how to concentrate on the majority of its customers getting a best rest at the hotel. To do this they wanted to figure it out who can offer the best bed. Due to unable to find a supplier who is able to deliver what they required. Finally Starwood Hotels decided to create bespoke bed themselves. " Heavenly Beds" were created by the in-house team. (Jones, McCormick and Dewing 2012, p.125)
The strategic process at Starwood began with customer analysis and product testing. For instance, the testing involved 600 business executives for the frequent travelers. The results shows that 84% of customers mentioned that the luxurious bed make a hotel room more attractive to them. In addition, 63 percent pointed out a good night' s sleep is the most important service a hotel can provide. After 50 beds of 35 different accommentation chains was tested, Westin updated its prototype that all Heavenly Bed come with a custom - designed pillows, to mattress, goose down comforters 5 pillows, and 3 crisp sheets ranging in thread count from 180 to 250. In the first week of launching Heavenly Bed, 32 guests called to buy for it. An idea came out, Westin executives put order card with a toll-free number in every guest room then they began placing catalogs by bedsides and desks and set up a website in June 2004. Once the website has been set it had sold 20,000 pillows price at $75for king -sized version and 3,500 beds price at $ 2,965 within very short period. From that moment the " Heavenly Bed" business speeded out the world. The company introduced the bed with a careful and planned marketing strategy. Nowadays in America there is a story on the front page of the business section. The same day,20 pure and white Heavenly Beds appear Wall Street to the New York Stock Exchange in NewYork City. (Enz 2010, pp.5,9¼‰
It become so successful that Starwood Hotels not just took the concept to their other brands, but also brought to popular demand. Such a big change allowed Starwood Hotels almost accidently became one of the biggest bed retailers in the Unite States and now it has inspired a host of imitators such as the Marriott Bed. (Jones, McCormick and Dewing 2012, p.12) As illustrated in the Heavenly Bed example, a firm that injects strategic thinking into the strategic planning process has the best of both worlds.
5.2 Strategic thinking-Southwest Airlines introduced a point -to -point system
Clearly, firms and companies can learn things from their competitors that are able to lead improvements in performance .Industry leaders have to continually create new ideas and strategies. As a consequence, industry leaders break out of traditional business strategies and defy widely acceptable
industry practices. These are called firms Industry Revolutionaries according to Gary Hamel, a very famous author and consultant in strategic management, he mentioned Industry Revolutionaries is not tinkering at the margins, but giving away the old business models for new ones. (Enz 2010, p,22¼‰
For recent years, we can see a great number of organizations change and innovate their business model to adapt the present market. For instance, Southwest Airlines gave up the standard hub-and spoke system for air travel and introduced a local point-to-point system which has less cost.(Robert, Johnston and Douglas Bate 2003,p.147). An airlines company has created a better long-term competitive strategy as compared with its industry peers. Southwest Airlines management focused on the point-to-point system in order to deliver value to customers who want to get from one to another with no hassle of entering in a hub. With the fast-paced living path there is a constantly increased demand from people who prefer direct flights with a lower price and high operational efficiency. After the company used the new system, profits of Southwest Airline overwhelmingly increased exceed all its competitors in US.
(Madden 2010, p.150)
Strategic management------ the resource-based view
Strategic management has increased its importance in the past two decades, thus some most effective and efficient perspectives and process on strategic management have emerged. For instance, the resource-based view which has already obtained widely acceptance. The resource-based view focuses on internal capabilities of the company in formulating strategy that can achieve a sustainable competitive advantage in the market. In another word, the strategic choices depend on the company's internal capability that can make the company become more adequate in its external environment.(Henry 2008, p.126).
The resource-based view generally can be categorized into several parts included Financial resources, Physical resources and Human resources. Why many companies become more successful than others by acquainting and developing the superior resources? Most of the resources that an organization can develop are related to the stakeholders.
6.1 Financial resources of Marriott
For instance, financial resources are closed to building up an outstanding working relationships with its financial intermediaries. A story of Marriott's success can be the best example. The resource that Marriot Hotel created can be very difficult for other organizations to duplicate in hotel industry. When comes to financial controls, the company could determine and calculate construction and operating costs almost precisely. Such strong financial controls strategy lead to many scholars believed that this is one of the most important reason that some companies is so successful .it can support the idea that organizations have valuable and rare resources which are hard for competitors to duplicate having high performance in finance.
(Harrison and John 2010, pp.11-12)
6.2 Human Resources of Marriott
Besides, developing effective Human Resources make companies becomes more competitive. Human resource has already received more attention, the human capital of staff considered as the main source for sustainable competitive advantage for all organizations in business industry. Human capital keeps increasingly important role in business linking to develop in information and communication technologies which has been described as knowledge-based economies.( Kok Jan de 2003, p.1)
People wonder what makes Marriott so special. Marriott's strategies go directly towards to its customers with offering consistently excellent service. Off course, Marriott is very good at location selections for building a proper hotel size. However what its customers remember is its core skills--- its high quality service. The service edge began with its haring process according to Ron zemke reported. When the Marriott Marquis Hotel first opened in New York, the firm interviewed 40,000 employees for 1,200 positions it is service quality tirelessly on the top. For example, Maids in Marriott follow a 66 guiding points to making up bedrooms in every hotel operation. Marriott pays such attention to details developing a set of boundaries to empower its staff personally aimed to providing excellent service to its customers, do what they can do for customers through its sophisticated meeting planning to returning its lost galoshes, as a return, Marriott consistently hits the top in customer feedbacks and surveys. A study shows that its occupancy always 10% higher than the industry average. Human Resource department is an integral part of the organization, developing a effective human resource can help the company become more competitive. Marroitt is one of good example which created a third capability of the company. Outperformance employees will be very hard to attract these days, also a good employee is especially important in hospitality industry, they are the people directly interact with guests.
( Show, Schneier, Beatty and Baird 1995, p.23)
From what has been discussed above, now we can draw a conclusion. For many big companies, they are engaged in creativity and innovation in order to enhance their business model. Strategic Management process a combination of managerial decisions and actions to determine long-term performance of a corporate organization. it included environment observation, strategic thinking, formulation , implementation ,evaluation and control that the majority of the companies used. Strategic alternatives are important tools for increasing the profitability of the company.
However select a best strategy from alternatives for the company is not very easy which have to depend on the company's capability McDonald's succeed by changing and innovating its business strategies to " Plan to Win" a new one to adapt the modern market, which lead McDonald's become the top No one fast food restaurant in the world. Strategic thinking which led to Starwood Hotel and resort become the most popular bed retailer in US. The decision making by Southwest Airlines giving up the standard hub-and spoke system and introduced a local point-to-point system has totally changed its destiny. A success story of Marriott of financial control and human resource let us understand how important the resource-based view is in hospitality industry. However it takes time, hard work and commitment at all level of the organization.
Based on examples provided above can prove that strategic management in a creative and innovative process which can lead companies to become more successful. In this fast changing business world, there is an increasing demand to understand how strategies work in an organization how strategies can be changed and updated over time to adapt the dynamic external environment, it is necessary to understand various of strategies to create new ideas by doing this, access to a successful future.