BUILDING AN ORGANIZATION CAPABLE OF GOOD STRATEGY EXECUTION : PEOPLE, CAPABILITIES, AND STRUCTURE

BISMILLAHIRRAHMANIRRAHIM

Alhamdulillah, this is the second last chapter for this subject Strategic Management. This week Miss Ummi covered two topic, for the first topic, Miss Ummi describe about building an organization capable of good strategy execution. Before she started the lecture, she ask all the student to answer a few question that related to ourselves. The test called MBTI, it stand for Myers Briggs Type Indicator which test the people personality. The result from the test will show us which job scope that suitable for our personality.

After answer the question and we know which job scope that suitable for us, Miss Ummi started the lecture. Capability means a measure of the ability of an entity such as department, organization, person and system to achieve its objectives, specially in relation to its overall mission. Based on the definition we can see that building an organization capable of good strategy is really important so that every mission, vision, and objective of the company can be successfully achieve. 

The Action Agenda
for Executing Strategy

Building an organization capable consist in hiring a correct people for their job. The company also need to prepare a continuous training so that the employee understand the company objective. There are three types of action inn building an organization capable of proficient strategy execution which is :

1. Staffing the organization

• putting together a strong management team
• recruiting and retaining talented employees

     2.  Acquiring, developing, and strengthening key resources and capabilities

• developing a set of resources and capabilities suited to the current strategy
• updating resources and capabilities as external condition and the firm's strategy chance
• training and retaining company personnel to maintain knowledge-based and skill-based capabilities 

     3.  Structuring organization and work effort

• instituting organizational arrangements that facilitate good strategy execution
• establishing lines of authority and reporting relationship
• deciding how much decision-making authority to delegate 

After finish discuss this chapter, Miss Ummi continue with the last topic for this subject which is Managing Internal operations: Action that promote good strategy execution. In this chapter, we learn about why resource allocation should always be based on strategic management. Every organization in this world would like to have an improvement, not just only improvement but a continuous improvement. Firm objective is to avoid any failure so they can generate their business by their good strategy.

There are several tools firm can use for managing a continuous improvement, which is stated below:

• benchmarking
• best practice
• process reengineering 
• six-sigma quality programs
• total-quality management

Six-sigma quality programs is the business management strategy used in many different industries in an effort to improve the quality of products or services produced by the business through the removal of defects and errors. The strategy involves creating groups of people within the business or organization who have expert status in various methods, and then each project is carried out according to a set of steps in an effort to reach specific financial milestones. In six-sigma quality programs, they need to follow five step which is:

1. define
2. measure
3. analyze
4. improve
5. control

CORPORATE CULTURE AND LEADERSHIP : KEYS TO GOOD STRATEGY EXECUTION

BISMILLAHIRRAHMANIRRAHIM

For this week, there is no lecture and face to face tutorial. Miss Ummi post a task in facebook group. We need to answer the task through GOALS. The topic notes that Miss Ummi told us to read by ourselves is about corporate culture and leadership : keys to good strategy.

 After read the notes, I try my best to answer what Madam Huda ask. This is my answer :

CORPORATE STRATEGY : DIVERSIFICATION AND THE MULTIBUSINESS COMPANY

BISMILLAHIRRAHMANIRRAHIM

We always heard about diversified company, but what is exactly diversified is? Diversified means a business that operates in more than one industry or market, and uses different distribution channels as a matter of corporate strategy. In this chapter we learnt about corporate strategy : diversification and the multibusiness company. What does crafting a diversification strategy entail? There were four step in diversification strategy which is :

1. picking new industries to enter and deciding on the means of entry 
2. pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage
3. establishing investment priorities ant steering corporate resources into the most attractive business units
4. initiating actions to boost the combine performance of the cooperation's collection of business.

Diversification is good for business because it can broaden the company market and it will improve the performance of the business. But when should the firm consider diversifying? The company can start diversifying when :

• it can expand into business whose technologies and product complement its present business
• its resources and capabilities can be used as valuable competitive assets in other business
• cost can be reduced by cross-businesses sharing or transfer of resources and capabilities
• transferring a strong brand name to the products of other businesses help drive up sales and profits of those businesses

Diversification is also a strategy that include every element, values, department, and shareholder of the firm. Every strategy that the manager implement need to focus on the effect to shareholder, if the strategy will give more profit, then the shareholder will be happy and give their support but if different situation occur, it will effect he firm entirely. So, how the diversification adds value to the shareholder? To prove that the diversification strategy really adds value, the firm need to undergo a test which is :

1. the attractiveness test
2. the cost of entry test
3. the better-off test 

Miss Ummi also taught us about synergy. Synergy is the action that occur when the company show a better performance. Beside that, synergy is a state in which two or more things work together in a perticularly fruitful way that produces an effect greater the sum of their individual effects. Expressed also as "the whole is greater than the sum of its parts"

There are three options in diversifying a new business which is:

1. acquisitions of an existing business
2. internal new venture (start up)
3. joint venture

Acquisition can happen from taking custody of records. It also might happen when a firm taking possession of an asset by purchase. Sometimes it also occur when other firm taking control of a firm by purchasing 51 percent or more of its voting shares. On the other hand, joint venture define as a new firm formed to achieve specific objectives of a partnership like temporary arrangement between two or more firms. Joint venture are advantageous as a risk reducing mechanism in new-market penetration, and in pooling of resource for large projects. They, however, present unique problems in equity ownership, operational control and distribution of profits or losses. 

O-SHIMA JAPANESE RESTAURANT

BISMILLAHIRRAHMANIRRAHIM

This week is a special week because there is no lecture, Miss Ummi change the lecture to a sharing business talk and experience from the founder and owner of O-SHIMA JAPANESE RESTAURANT Madam Asnidar Hanim Yusuf. This business talk from Madam Asnidar really interesting and really enthusiastic because as a Malay women who own a japanese restaurant is a rarely thing to see, but she succeed to prove that there is nothing we cant do if we put our full effort on it. 

Madam Asidar who possessed a bachelor of engineering from university in Japan start her idea to open a japanese restaurant come from the interest of eating sushi. She told us that she and her husband really love to eat sushi when they stay in Japan. From the passion of eating sushi, they decided to open a Japanese Restaurant but based on Halal Ingredients. 

O-Shima Japanese Restaurant is a 100% Halal restaurant in Malaysia that served Japanese food. She said this is the other reason why she wanted to open a sushi, because it is really hard to find a Halal Japanese restaurant. So, this is her opportunity to served the Muslims by offering a Halal japanese food. Although there are many obstacle she need to overcome in becoming a successful businesswomen.

She share with us the problem she need to face in Japan which is a high cost to get halal certificate from the japan government. She also said that almost every japanese restaurant will served their sushi with liquor. That is why when customer come to her restaurant in Japan the customer ask for liquor, but she tell the customer that her restaurant is based on Halal food, so there is no liquor. 

What I get from this talk is that be positive all the time. A negative thinking will destroy your thinking and make your action meaningless. She said that there is no success without failure, she also have an experience in fail. Money is not everything, do not neglect Allah rule. Make every action as Ibadah because Allah will pay for every Ibadah that we do.  

STRATEGIES FOR COMPETING IN INTERNATIONAL MARKET

BISMILLAHIRRAHMANIRRAHIM

This topic is a very interesting topic, because it was something that playing around in my head. Sometimes I keep asking about how to make business in international market. It is not easy to start a new business in international market as a new entry or a new competitor against others older competitor because there are many differences in terms of currency, language, rules and regulation and others factor. 

When we talk about KFC, MCDONALDS, SUBWAY and other fast food company, all of the brand are well-known in international market. Almost every country we can see this company provide their product. What are the primary reason a companies choose to compete in international market? There are several reason why the companies enter the foreign market, which is:

• To gain access to new customer. 
• To achieve lower cost through economies of scales, experience and increased purchasing power
• To gain access to resources and capabilities located in foreign markets
• To spread business risk across a wider market base

International market is totally different from home country business market. In terms of risk, the risk companies face is in the political and economic risk. Although in the home country also the companies facing the political and economic problems, but the problem or risk in international market is far more complicated. The political risk in international market stem from instability or weaknesses in national government and hostility to foreign business. Beside that, the economic risks stem from the stability of a country's monetary system, economic and regulatory policies, the lack of property rights protections.

Beside that, as I mention before about the different currency from our country and the others foreign country, there will be effects of exchange rate shifts which is exporters experience a rising demand for their goods, whenever their currency grows weaker relative to the importing country's currency. On the other hand, companies usually use the greenfield venture when competing in international market. 

Greenfield venture is a type of venture where finances are employed to create a new physical facility for a business in a location where no existing facilities are currently present. A greenfield investment originally referred to locating new company buildings on a pasture that was literally a green field, but the term is often used generally in modern business communication. A greenfield venture also means a subsidiary business that is established by setting up the entire operation from the ground up. 

Miss Ummi also taught us the three strategy approaches in competing internationally which is multidomestic strategy, global strategy, transnational strategy. International strategy means strategy that company use in competing market between two or more countries. A multidomestic strategy means the companies offering their product from a different variety based upon the value in the country they wanted to market their product. A global strategy have a different meaning from multidomestic strategy because using global strategy, companies tend to offer a same product everywhere. On the other hand, the transnational strategy means an international business structure where a company's global business activities are coordinated via cooperation and interdependence between list head office, operational divisions and internationally located subsidiaries or retail outlets. A transnational strategy offers the centralization benefits provided by a global strategy along with the local responsiveness characteristic of domestic strategies.

Three approaches for competing internationally:

• Global Strategy : Think Global - Act Global
• Transnational Strategy : Think Global - Act Local
• Multidomestic Strategy : Think Local - Act Local

STRENGTHENING A COMPANY'S COMPETITIVE POSITION: STRATEGIC MOVES, TIMING, AND SCOPE OF OPERATIONS

Alhamdulillah, this is the sixth lecture for Strategic Management subject. This week Miss Ummi taught us about how to strengthening a company's competitive position. This chapter discussed about which strategy that good time to implement and also what scope that best to use. To maximizing the power of particular strategy, there are three choices that complement a competitive approach which is:

1. Offensive and defensive competitive actions
2. Competitive dynamics an the timing of strategic moves
3. Scope of operations along the industry's value chain

 Offensive competitive strategy is one of the corporate strategy consisting of attempting to pursue changes within its industry. The companies involved in offensive competitive strategies typically invest in technology and research & development R&D in hopes of staying head of their competition. Companies also use this type of strategy when acquire other companies. Strategic offensive principals focus on building a competitive advantage and later convert the advantage to form a sustainable advantage. Sometimes a company's best strategic is to seize the initiative, go on the attack, and launch a strategic offensive to improve its market position.

Before start the offensive competitive action, the company need to make sure that at the time of attack, the competitor is in their weak state. The company also need to attack the competitor weakness not their strength, because if they attack the strength, then it is a waste action, it will not effect anything.

There are several options to act in offensive strategy which is:

• offer a good or better product at a lower cost to attack competitor
• make use the research and development to make a new innovation on the company product
• observe others firm improvement and adopt or adapt the good improvement

A blue-ocean strategy also an offensive competitive action that offers growth in revenues and profits by discovering or inventing new industry segments that create altogether new demand. A term coined from the 2005 book, The Blue Ocean Strategy, by W. Chan Kim and Renee Mauborgne that describes the opportunities of vast untapped market spaces, or "Blue Oceans", that can be developed by expanding market boundaries or launching new industries.

Defensive competitive action define as a management approach designed to reduce the risk of loss. For example, even a relative aggressive business might employ a defensive strategy when it comes to investing its extra liquid funds in certificates of deposit or relatively stable bonds and stocks. The purpose of defensive competitive action is:

• lower the firm's risk of being attacked
• weaken the impact of an attack that does occur
• influence challengers to aim their efforts at other rivals

Horizontal scope define as growth of a company based on expanding existing methods of business including expansion into other locations, addition of more stores, building more outlets for distributions, or enlarging a territory geographically. On the other hand, vertical scope means a merge of companies at different stage of production and/or distribution in the same industry. When a company acquires its input supplier it is called backward integration. When it acquires companies in its distribution chain it is called forward integration. Fro example, a vertically integrated oil company may end up owning oilfields, refineries, tankers, trucks, and gas (petrol) filling stations. Also called vertical merger.

THE FIVE GENERIC COMPETITIVE STRATEGIES: WHICH ONE TO EMPLOY?

Miss Ummi started the lecture by asking the student who ever get on a plane or travel by plane before. She ask about which airlines that give an affordable ticket price. In my opinion and also my other members in the lecture hall agree that Air Asia provided the lowest airline ticket price. So, what does this airlines story related to our lecture? Actually it really related because Miss Ummi would like to introduce us with competitive strategies company use to compete with other rivals. 

Competitive strategy means an action plan that is devised to help a company gain a competitive advantage over its rival. This type of strategy is often use in advertising campaigns by somehow discrediting the competition's product or service. Competitive strategies are essential to companies competing in markets that are heavily saturated with alternatives for consumers.

There is five generic competitive strategies which is:

1. Low-cost provider
2. Broad differentiation
3. Best-cost provider
4. Focused low cost provider
5. Focused differentiation

Lower-cost provider means a pricing strategy in which a company offers a relatively low price to stimulate demand and gain market share. It is one of the high demand strategy used by many companies. It is usually employed where the product has few or no competitive advantage or where economies of scale are achievable with higher production volumes. Also called low price strategy. Example of company that use this strategy is Air Asia, Mydin, KFC, MCD.

Broad differentiation means a product that offer a unique product attributes that a wide range of buyers find appealing and worth paying for. A unique product will make the costumer happy to use it and they will repurchase it again. A unique product means that the product should have a value that there is no other rivals have. The value or element that only your company have. Example of company that use this strategy is Louis Vuitton, Apple, Sony, Rolex, Rado.

Best cos provider means a hybrid of low-cost provider and differentiation strategies that aim at providing desired quality/features/performance/services attributes while beating rivals on price. Best cost provider combine the low-cost provider which provided a product with a little or low cost and differentiation which provided a unique attributes product.

Focused low cost provider means a strategy that only focused fully to low cost operations or activities. This strategy did not put much effort on the rivals, it only pay full attention to the market niche or market segmentation. It just concentrating on a narrow buyer segment.

Focused differentiation means the strategy only concentrating on a narrow buyer segment and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rival's product.