At this present time, the business environment is highly competitive. Every day, business organisations have to deal with various business risks posed by the competitors. In order to survive and succeed, these business organisations should implement strategic management and strategic planning in running its business operations. According to David, 2007, strategic management is defined as the art and science of formulating, implementing, and evaluating cross functional decisions that enable an organisation to achieve its objectives. In other words, it means that strategic management is a process of incorporating the management and several other departments such as marketing, human resource, finance, production, etc to attain organisational goals. On the other hand, strategic planning involves the process of defining company objectives, assessing the internal and external factors to create business strategy, execute the plan, monitor the progress, and adjust the plan accordingly.
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STRATEGIC PLANNING PROCESS
Environmental scanning is the first step in the strategic management process. According to Wheelen, Hunger, 2000, environmental scanning is defined as the monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the corporation. In other words, it means that environmental scanning is the process of observing, assessing, and spreading information from within and outside the company to the top level management and important people in the organisation. Environmental scanning includes performing internal audit and performing external audit.
a) PERFORMING INTERNAL AUDIT
In this process, the organisation, Toyota USA has to monitor the internal environment of the company. The internal environment of the organisation includes variables that are within the organisation and not within the short run control of top management of the company. It includes the strengths and weaknesses of the organisation. For instance, the interaction between the management with its employees and vice versa. Toyota US can conduct internal audit by including structure such as chain of command, culture, beliefs, expectations and values and resources such as assets, skills, competencies and knowledge in the audit process. In performing internal audit, Toyota US has identified its strength, which is financial stability. In the year 1997, the sales turnover for Toyota is £131,511 million while the sales growth is 29.3%. According to reuters.com, the sales for Toyota in March 2010 increased to nearly 41% after the company made a recall for its cars due to the faulty brakes. On the other hand, Toyota has to overcome its weaknesses such as the bad brand image due to the large scale recall of its cars in February 2010 as a result of faulty brakes. This has caused Toyota’s image to drop in the mind of its stakeholders.
b) PERFORMING EXTERNAL AUDIT
Toyota USA also has to consider the company’s external environment. External environment include factors that are outside the organisation. It includes the opportunities and threats of the organisation. Therefore, Toyota USA should analyse its external environment which consists of customers, suppliers, creditors and competitors. Toyota has to consider its societal environment which includes general forces and also task environment that consists of industry analysis. In performing external audit, Toyota USA should work on its opportunity which is to invent cars that are efficient in using less fuel, excellent performance, and also more environmentally friendly in term of reducing the pollution. Besides that, Toyota USA has to identify its threats and find ways to overcome the threats. An example of the threat faced by Toyota is the rise of fuel price. Due to the hike in oil price, many users decided not to purchase cars and use the public transportation instead.
According to Wheelen, Hunger, 2000, strategy formulation is defined as the development of long range plans for the effective management of environmental opportunities and threats, in light of corporate strengths and weaknesses. It means that strategy formulation involves the formulation of long term plans in order to manage the organisation efficiently, after taking into account the opportunities, threats, strengths, and weaknesses of the business firm. It includes defining the corporate mission, stating attainable objectives, developing strategies, and setting policy guidelines. Strategy formulation includes establishing long term objectives and generate, evaluate, and select strategies.
a) DEVELOP MISSION STATEMENT
According to Wheelen, Hunger, 2000, mission is defined as the purpose or reason for an organisation’s existence. In other words, it means that mission is the principle on why a company subsist. A mission statement usually states what the company does, and the products or services that it offer to the public. The firm’s philosophy that states how the company conduct its business operations is also included in the mission statement. It explains on what the company wants to achieve in the long run. For instance, Toyota is a company that manufactures cars, trucks, and SUV’s. Therefore, Toyota US has applied Kaizen philosophy to ensure continuous improvement. Besides that, the company also implemented Total Quality Management (TQM) and Just In Time (JIT) method in ensuring that the products manufactured by the company is of high quality.
b) ESTABLISH LONG TERM OBJECTIVES
According to Wheelen, Hunger, 2000, an objective is defined as the end results of planned activity. In other words, it means that objective is referred to as the outcomes that a company wish to achieve from the activities planned. An objective should state on the activities that are needed to be completed and the timeline on when it should be accomplished. Some of the focus areas for a company when setting their objectives include profitability, efficiency, growth, shareholder wealth, utilisation of company resources, reputation, market share, etc. An organisation is considered to be successful in achieving its corporate objectives when the company manage to fulfill its missions. For instance, Toyota US has set a definite objective to improve the quality of its products, enhance efficiency, minimise the cost of production, and increase its productivity to cater to the different customer needs in its market. Toyota US has invested on research and development activities to produce high quality cars. Besides that, the company also emphasis on the importance of human resource as the company believes that satisfied employees will produce high quality products.
c) GENERATE, EVALUATE, AND SELECT STRATEGIES
According to usda.gov, strategy is defined as the general plan or direction selected to accomplish incident objectives. In other words, it means that strategy is an action plan which is designed to attain a company’s objectives. Toyota US has applied its own strategy that include a complete detailed master plan explaining how the company will achieve its missions and objectives. The strategy also include plan on how Toyota can maximise its competitive advantage and minimise its weaknesses and threats faced by the company. Often, business organisations will incorporate the three types of strategies which are corporate strategy, business strategy and functional strategy in its business.
According to Wheelen, Hunger, 2000, corporate strategy describes company’s direction in terms of its general attitude towards growth and the management of its various businesses and product lines. From the definition, we can say that corporate strategy is the company mission and objectives that must be accomplish such as profit maximisation from the product or service. Corporate strategies typically fit within the three main categories of stability, growth and retrenchment. According to Wheelen, Hunger 2000, business strategy usually occurs at the business unit or product level, and it emphasis in improvement of the competitive position of a corporation’s products or services in the specific industry or market segment served by that business unit. It means that, business strategy is usually involved in business unit or product level which stress in improvement of the products. Business strategy may fit within two overall categories of competitive and cooperative strategies. According to Wheelen, Hunger, 2000, functional strategy is the approach taken by a functional area to achieve corporate and business unit objectives and strategies by maximising resource productivity. It means that, functional strategy is a method used to obtain corporate or business unit objective and strategy by maximise the use of resources in the company. It is concerned with developing and nurturing a distinctive competence to give a company the high competitive advantage.
As Toyota USA is a large firm that operates business that focus on selling cars, trucks, and SUVs, the business organisation have set the corporate, business and functional strategy that is necessary to be implement to gain profit maximisation.
According to Wheelen, Hunger, 2000, strategy implementation is defined as the process by which strategies and policies are put into action through the development of programs, budgets, and procedures. In other words, it means that strategy implementation is the process of carrying out the strategy which has been formulated. Management issues are included in the strategy implementation and it also involves the company using its resources to carry out the strategy. Strategy implementation has to be executed by the middle and lower level management with supervision by the top management. This process involves the changes of culture, structure or management system within the organisation.
Based on the diagram, strategy implementation also includes management issue. Hence, the Toyota USA must be able to consider the management issue to ensure the strategy selected can be accomplished. Some of the issue involve are programs, budgets as well as procedure.
Program refers to details information on step of the project plan that should be followed by the employees in order to achieve the plan objectives. A program is necessary for any plan because it provides the strategy action to be smooth and precise. Programs can be execute when the business organisation consider changing the company’s internal culture and or beginning a new research effort
To relate with the Toyota USA programs, the company have implementing programs; as the company follow each steps to implement activities when doing the research and development for creating the Hybrid car technology that can save the environment and environmentally cars.
Budget also becomes one of the management issue in implementing strategies. Budget is the company financial ability which is money that refers to the cost of implementing a strategy planned. By analysing budget, the company may obtain information about the cost to do the programs. According to nature.com, Toyota USA company has use $ 7 billion to make the research and development of its Hybrid cars that require a preparation of budget respectively.
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Usually procedures involve the system called as Standard Operating Procedures (SOP) which means the system is used to provide sequential stages that clarify how the job must be done. In order to complete the company program, SOP will explain in details on the activities that must be executed. Therefore, Toyota USA has the unique standards procedures to implement its programs such as by cutting cost of raw materials. It can be done when has a good relationship with its supplier to get lower price for the raw materials.
Secondly, it is important for the workforce in the organisation to cooperate with other departments to implement strategies selected. This can be seen in Toyota USA company as all the subordinates in the business organisation give full cooperation to each other in implementing strategies such as department of finance account, department of marketing, research and development.
EVALUATION AND CONTROL
According to Wheelen, Hunger, 2000, evaluation and control is defined as the process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance. In other words, evaluation and control is the evaluation made to compare the strategy that a company applied is success or not to determine the company performance levels. Even though evaluation and control is the last step in strategic management process, it is important as it can provide a weakness point of the company. The corrective action is taken by the managers of the organisation to resolve the problems occurred based on the result information after implementing strategy.
To relate with the case, evaluation and control has also being implemented by the Toyota. As a proof, the company is succeeded in inventing the new Hybrid cars. To make such event is success, evaluation and control must be executed. To evaluate their performance, the managers of Toyota US definitely seek to his subordinates to obtain clear and true information. By using the information, the managers can recognise whether the company succeed in the strategy planned by evaluating the current situation with what originally planned in the previous strategy formulation. As a result, the company is succeeded in the strategy plan as the sales of Hybrid cars are high and the demand for the cars is very well. It shows the company success in implementing the strategic management process to ensure their performance is high. For that, the company has followed the requirements to audit its internal and external review and implementing performance metrics to identify the company performance level.
Business organisations can achieve their desired objectives through strategic planning. Strategic planning provides a clear view to Toyota USA of the firm’s core competencies and its main resources in order to develop the firm’s competitive advantage. In addition to that, the implementation of strategic planning can assist Toyota to adjust to the changes in its environment by continuously improving the products and services offered. Strategic planning assists an organisation in creating its action plan and strategy. Besides that, strategic planning also gives direction to the company’s functional areas such as marketing, finance, human resource, information technology, etc to develop strategies which can aid Toyota in achieving its objectives.
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