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Strategic management refers to the art of planning your business at the highest possible level. It is the duty of the company's leader. Strategic management focuses on building a solid underlying structure to your business that will subsequently be fleshed out through the combined efforts of every individual you employ. Straegic management solves three major questions an organization may ask before embarking on a new business venture, which are:
What are my business's objectives?
What are the best ways to achieve those objectives?
What resources are required to make that happen?
Strategic management is an important step needed for an organization to achieve their goals.It allows organization to move quickly when facing new challenges and apart from that replace outdated ideas and practices with processes that can help meet new needs as they present themselves.
What is a manager?
Accoding to the American Heritage Dictionary, a manager is one who handles, controls, or directs, especially:
One who directs a business or other enterprise.
One who controls resources and expenditures, as of a household.
In order for someone to be a manager they need to know what is their main reason in an organization and what is their task at hand. The duty of a manager is straight forward, in essence it is to direct and manage a business or task given. A manager controls their subordinates and plans their every step in order to achieve their target and makes decisions in for an organization. Though they are not the leaders or heads of an organization, managers have certain rights and powers in terms of decision making. They have the right to make decisions in their line of work or in their sector. It can be said that the style of manager in a way is a type of transactional leadership, they belive that people aremotivated by reward and punishment and that the prime purpose of a subordinate is to do what their managers tell them to do. They believe that social systems work best when there is a chain of command.
Managers are exist in order to keep things in line and running smoothly, they are not inovators and usually uses methods of conduct which are already existing. They are more concern about actions or task being caried out by their subordinates then striving to find new ways to do things. They try to minimise risk and make rules for their subordinates to follow. Apart from that a manager, usually takes credit for successful projects and sometimes blames their subordinates for failing to achieve the goal set.
A manager needs to have time management and has sufficient communication skills. Its a a fact, that every task as a certain time period or deadline and if it is not met, there can be consquences to the organization as well as to the manager. Though for a leader, they may not need a deadline, because they are there to lead and motivate their followers and there is not a specific job or task that they hold. That is why a manager needs to have time management, in order to get to their goals accoding to plan. As for communication, in order for a someone to be a manager, they need to know how to communicate with other people. It would be an impossible task if someone were not able to communicate with their subordinates properly. It would cause major problems when carrying out task when there is miscommunication in the mix. That is why good communication skills is neeeded in a manager.
Another difference between a leader and a manager, is that a manager avoids conflict as for leaders sometimes cause conflicts. Though a manager will see conflict occur just about everyday in their personal and career based environments. Managers need to be able to listen, identify an issue, agree on the issue, discuss solutions, agree on the solution, and follow up. Conflict between employees may cause awkward tension within the office which can result in slacking or bitterness. Employees should feel comfortable approaching managers regarding conflict and confident that a resolution will be found. Managers will also need to be able to resolve conflict with customers when the time arises. Often clients will become frustrated if something goes wrong and managers need to be able to handle the situation appropriately. It's also important for a follow up check to ensure there are no further problems. In other words, managers need to be able to handle stress and deal with other peoples problems as well.
A manager also has to make sure that obsticles are overcome and that roadblocks or problems are dealt with quickly and efficiently in order to get to the target goal. A manager has to come up with strategies and ways to deal with problems at hand. This is a clear example of the diffference between a manager and leader, a leader leads their followers to their ideas and such but does not have to face the problems of their ideas. As for a manager, dealing with problems when trying to achieve their target is part of their everyday job. Managers will face many different problems everyday, from their subordinates to their customers. That is why in order for someone to become a manager, they need to be level headed when faced with problems and have a strategic mind set so they can use strategies when faced with problems.
Apart from that managers need to have a substantial amount of experience. That is why in some theories, they state that managers can be made through experience and the right type of training, whereas leaders are born to be, because of their netural characteristics and traits which not everyone has. Not every manager has previous supervisory experience. Generally each manager was never immediately promoted to their position and had to climb their way up the food chain. Many companies overlook potential managers because they don't have previous managerial experience. Experience should be based off their knowledge of their job title, how many years they have worked in their field, and performance appraisals. Experience is something every employer looks at regardless of what position and it's important for people to realize sometimes they have to start lower than expected in order to earn their position.
A manager has to also be responsible for their actions and decisions made. If a person cannot be responsible for what they have carried out and take the blame for the mistake, then they will not be able to be good manager or even become an example for their subordinates. Being responsible in the workplace is very important. Managers need to ensure assignments, tasks, and deadlines are met. It's also the responsibility of a manager to hire appropriate people for specific positions. Managers are expected to be able to handle a lot and being responsible about every situation will be beneficial in the end.
What is a leader?
According to the American Heritage Dictionary, a leader is one that leads or guides:
One who is in charge or in command of others.
One who heads a political party or organization.
One who has influence or power, especially of a political nature
At the most basic level, a leader is someone who leads other. The real question is what makes someone a leader? What is it about being a leader that some people understand and use to their advantage? What can a person do to be a leader?. A leader is a person who has a vision, a drive and a commitment to achieve that vision, and the skills to make it happen.
Leaders usually use the transfromational leadership style, which is assumes that people will follow those who inspire them and that a person with great vission and passion can achieve great heights. Some even believe that the way things get done properly and smoothly is by injecting enthusiasm and energy.
From that point of view alone, it can be said that, a leader believes that they are the reason things get done. It is the inner force of their will power that moves things into motion. They love the fact that things are achieved and that they can always improve themselves. They are self motivated and passionate at heart, a leader does not need anyone else to motivate him or to move him forward. Leaders are continously trying to find ways to innovate and make people see their point of view through their charismatic ways or through their nature.
Leaders shape the way things work, they change the norms of how things are and make something new. They are more satisfied to get achievements then to earn money. They value their work than the money they earn and are willing to take risk for the sake of their ideas. A leader needs integrity,people have to believe that they are pursuing the dreams of their leader because it's the right thing to do, not just because their leader is ego driven.
Apart from that a leader needs to be a people person and understands the differences that make people unique and is able to use those individual skills to achieve the goals set. They always need to be positive. A leader encourages and rewards people and makes you want to do it and do it right. A leader is not a negative person and doesn't waste time and effort tellng everyone what they're doing wrong. It may sound simple to be a leader, but if analyzed closely, the common traits and characteristics of a leader is something not everyone can mould themselves to be.
A leader needs to be confidant and have values which can be respected. It is a hard task to be admired or to inspire people to follow in their footsteps. Therefore, they need to always be sure of themselves to the point whereby people truly believe in what they are doing and that, that is the right way of things and that is the goal needs to be achieved. Further more, when a person does not have their own set of values and are wayward when making a decision, then no one will trust in them or believe what they are doing is right. Priciples and ethics play a role when it comes to being a leader that people can look up to.
Leaders need to also be flexible in order to adapt with the different situations of the work environment. If they are unable to adapt to crisis or working with a new collegue, thus it will prove hard for a leader to lead.They must be able to work with others to meet organizational goals, and shift focus as necessary.
Another reason why not anyone can be a manager and why not everyone can be a leader is because a good leader needs to be creative.Leaders demonstrating creativity skills are able to develop innovative solutions to old problems.Â The diversity they build in their organizations helps them to develop more comprehensive answers to routine questions.Â Creative leaders are able to translate technical information into solutions that are understood by everyone.
The last leadership characteristic we're going to discuss is achieving results.Â Leaders just don't set the example for others to follow, they also play a big role in achieving the goals of the organization.Â Through their leadership skills, they maintain a high level of performance in their organizations, and they are able to help keep their workforce motivated even when faced with a seemingly impossible situation.Since they have a deep understanding of what an organization needs to accomplish, they are able to quickly identify and solve the important objectives of an organization.
How does one become both a manager and a leader?
It is not uncommon for a manager to have to take the role of a leader but it is however unlikely that all managers can also be leaders. Some would say that management is a career and that leadership is somewhat of a calling to an individual. Though, its a very thin line between the two and often times a mannager takes the role of a leader in their department or sector.
Having the traits and characteristics of a leader is an edge for any manager. Some leaders choose not to lead a whole organization but are contented on leading their own little group of subordinates. Though it is important for them to have the responsibility and skills of a manager in order to embody both possitions in one. Firstly, a manager must start to realize what are their purpose, ethics, values and what is important to them. Can the organization support and follow in their beliefs and do they cross any boundaries which they do not believe in. From there, a manager has to lead by example, there is no point of analyzing their thoughts, if they are not put in motion. In order to be a great leader, they need to show their subordinates what it takes to be a respectable leader. A manager needs to learn that their duties do not always have to be solely on achieve the organizations target but they also need to care for their subordinates. Find out what the they need in order to ensure that they get everything they need and more to create personal and organizational success.
Though the manager needs to start small because nothing can change over-night, they need to realize that in order to be a manager and a leader, it takes time for the organization to notice that they are trying to change the way things are running for the better. At this point the manager need to be self motivated in order to carry on with their ideas.
As the managers identify their convictions and begin aligning their behaviors with those convictions, they are going to need to take steps to build a collaborative culture based on where they are going.To do so, they need to seek input from their employees about what they need and what their dreams are for their jobs and the larger organization. Talk to internal and external customers and suppliers about their needs. Find out what more and what else the organization can be and do to create success.Enroll and engage in conversation and communication. Managers need to learn how to sit back and listenm take in as much as they can. Look for trends and themes. Find out where the possibilities are . The managers need to be more than just the average manager, they need to see the bigger picture. Be all those things they always believed about themselves .Leaders are not made or born. Leadership is a choice a belief in and commitment to everything that is good and noble within a person. The ideaology that leaders are born can be broken, as the saying goes, "when there is a will, there is a way".
Identify two very different organizations that compete on a cost leadership strategy and explain how they do this, i.e. find out what they do that enables them to keep their prices low.
Cost Leadership is a strategy to have the lowest costs in a market, this means that you should be best placed should a price war occur and make the highest margins if a cost war does not occur. Though in his book "competitive strategy" Michael Porter argues that there are only two generic strategies available to business, one being cost leadership and the other differentiation. If a business operated in a commodity market then cost leadership would be the obvious choice.Cost leadership strategies are business tools that give companies a competitive advantage in the economic marketplace. Industry leading companies usually have the best plan for obtaining business inputs at the lowest cost and transforming those inputs to consumer goods or services the cheapest way possible. These two elements are important factors when developing a leading cost strategy. Understanding the needs and wants of consumers is another important factor in cost strategies.
The two international companies that uses cost leadership as an edge in the market are McDonalds and Wall-mart. Both being from utterly different markets but yet both using the same cost leadership concept to their own added advantage.
McDonalds as everyone knows is one of the top fast food chains in the world. Having roughly 32 737 outlets around the world accoding to "The Wall Street Journal" a little behind Subway which has 33749 outlets worldwide, in their recent survey. McDonald's however, is still the leader when it comes to sales with $24 billion in revenue last year, reports The Wall Street Journal. McDonald's spokeswoman, Heidi Barker has fobbed off the news and is quoted in media reports as saying, "We remain focused on listening to and serving our customers, and are committed to being better, not just bigger."
It may sound odd or even crazy to say that, majority of developing countries have now come to accept McDonalds on their shores and that the new generation of children eat at McDonalds at least once in their life. No one can seem to run away from the fast food monguls and their company grows bigger by the minute.
A leading cost strategy for McDonalds is the ability to purchase the land and buildings of its restaurants. McDonalds also developed a strong division of labor for its production processes, tight management control and product development strategy. Creating a strong top-down style of management is another leading cost strategy for McDonalds. Using fewer in-store managers allows the company to hire lower-wage workers to complete tasks. Limiting autonomy is also central to avoiding costly and unnecessary restaurant expenditures like improvements or altering business processes.
Michael Porter had come up with the five competitive forces which are:
The threat of the entry of new competitors
The intensity of competitive rivalry
The threat of substitute products or services
The bargaining power of customers (buyers)
The bargaining power of suppliers
all of which McDonalds and Wal-Mart had thoroughly analyzed and had strategicly used to their advantage against their competitors.
The threat of a new competitor.
From this point McDonalds and Wal-Mart had choosen to price their goods at lower price so that competitors would find it hard to compete with. The theory to putting prices at a lower price is because when there is a price war among companies, regardless of how good a product is, when the competitor which offers a substitute product of some quality at a lower price, it is certain the the volume of sales of the company with the lower price will undoubtedly increase due to the low price. The low cost company will continue to earn their profits after their competitors compete away their profits.
On July 2, 1962, Samuel Moore Walton, a merchant with over 15 years of experience in retailing, set up his first discount store called "Wal-Mart" in Rogers, a small town in the state of Arkansas, US. The store offered a wide variety of branded merchandise at a competitive price.Wal-Mart's products were usually priced 20% lower than those of its competitors. Its pricing strategy led to increased loyalty from price-conscious rural customers. It helped the company to generate more profits due to larger volumes. Explaining his pricing strategy, Walton said, "By cutting your price, you can boost your sales to a point where you earn far more at the cheaper retail price than you would have by selling the item at the higher price. In retailer language, you can lower your markup but earn more because of the increased volume." Until today, Wal-Mart has been beating companies such as Sears Roebuck & Company and K-Mart.
The intensity of competitive rivalry
when it comes to new competitors or potential entrants, it is highly unlikely for them to compete with such major companies such as McDonalds and Wal-Mart because a new company would need a bigger capital in order to keep competitive prices. When this proves to be a major problem for them, it then creates a barrier. This proves that companies that companies focusing on reducing cost but maintaining high efficiency or in other words low cost leadership companies, will create barriers to entry. This scrapes of the competition scale drastically because no average company can compete with multi-billion dollar companies. That is why most low cost companies do not mind that there profits per-unit may be low but undoubtly their profits are high due to the volume.
The threat of substitute products or services
The low cost leader is a more attractive state whereby, they are most likely to have substitute products. Though it may prove to be a major problem, this is when quality and product reputation comes into play. Though to retain customers, the low-cost leader can reduce their prices even more in order to retain their price-value relationship with their customers.
For example from the success of McDonalds, there have been millions of other fast food outlets around the globe trying their very best to compete with them. Though some are successful but they never make it into the global market because they are unable to sustain the cost of exporting their service and products to other countries apart from their own.
McDonalds had gone a step further in keeping their cost low by buying produce from the country they built their outlets and making it suitable for the majority of those living there. In the United States, a burger at McDonald can cost anywhere from $1USD to $5USD which converted to Malaysian Ringgit is RM3.50 to RM17.5. Though in Malaysia, the highest price products served is usually a maximum of RM9.80. From this we can see that McDonalds had made the price affordable for the masses in Malaysia in order to achieve economies of scale.
The bargaining power of customers (buyers)
when a company achieves a low cost possition it provides some protection against powerful customers who attempt to drive the prices even lower. This is because, when a they demand lower cost due to a rival company which have even lower prices, it may drive the company to drop out of the business because they are performing less than average. When this occurs, the rival company will whole sole power and monopolise the market thus making the customer loose their bargaining power and this will allow the rival company to put their prices at any price they want due to the fact that monopolise the market.
For example, Wal-Mart has to compete with stores like Target and such. Eventhough their prices are low, not everything they sell are at their lowest, if it were to go any lower, Wal-Mart would run less efficiently and make less profits. That is why, they retain their customers by lowering everyday goods instead of luxury goods like target, so that when it comes to the middle class population, they will still go to Wal-Mart due to to cheaper prices.
The bargaining power of suppliers.
Lastly is the bargaining power of the suppliers. It is a fact that when the suppliers give a high price for raw materials that the cost of the end product will increase. That is why the suppliers do have some power over the company due to the cost of raw materials. Though because companies such as McDonalds and Wal-Mart has achieved the low cost possition this allows them to absorb a greater amount of cost increase if it were to occur before they raise the cost of the product itself. In addition, when a low cost leader has a dominant market share they have the power to lower prices or hold down the level of price increase, thus lowering the power of the supplier.
For example, McDonalds uses tons of beef every year,if their major suppliers were to try and increase the cost, so much so that they pull away from buying from them, it will affect their profits due to the sheer mass of reduced demand. This can have the power to even make a supplier go out of business. With this kind of market power McDonalds has a secure grasp of the low cost market position and not giving a chance to competitors, customers, substitutes or even suppliers.
As for Wal-Mart, in the beginning it was not an established retail player and it was quite difficult to enter the market for them. The company aggressively followed a cost leadership strategy that involved developing economies of scale and making consistent efforts to reduce costs.The surplus generated was reinvested in building facilities of an efficient scale, purchasing modern business-related equipment and employing the latest technology. The reinvestments made by the company helped it to maintain its cost leadership position. From the start, Wal-Mart imposed a strict control on its overhead costs. The stores were set up in large buildings, while ensuring that the rent paid was minimal.