Strategic Management is a business process that business managers should put a lot of emphasis on since it is the one tool that dictates the future growth or failure of a company. In its application, it is imperative for every organizational manager to ensure that a given strategy meets the company’s long term goals. According to Alvarenga & Malmercia (p.9), a good strategy is one that follows a given set of principles herein described in a VRIO framework. In applying a VRIO framework, a manager should be able to conduct S.W.O.T analysis that will clearly highlight an organization’s Strengths, Weaknesses, Opportunities and Threats. The first two are purely internal factors while the last two are external factors that determine the future of a business.
Answer to Question 1
In the first case of the Fashion Company, the fact that it specializes in women’s fashion as well as household products is an advantage that it enjoys over many other businesses that have not specialized. It is further evident that basing on the fact that it has over 1,000 retail outlets means that the business enjoys some sort of monopoly in the areas where they conduct business. As a matter of fact, the resources of this company are by all means very valuable and this means that the company by and large enjoys competitive advantage. This is further supported by the fact that the business has been able to maintain all the 1,000 outlets for the period of time that they have been in existence. Although not rare and not costly to imitate, the fashion house has been able to further boost its competitive advantage through involving a third party in the development of state-of-the-art software for statistical forecasting of future business plans.
In this sense therefore, instead of investing too much in developing a unit to deal with statistical forecasting which is not their core competence, the business has put itself in a position where it will be able to utilize outsourcing to its advantage. As a result, the fashion house is going to spend less on developing the software and hiring personnel for the same while at the same time improving on its competitive advantage in order to have an above normal economic advantage for over a period of time.
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In the case of High-Tech Manufacturing, a careful SWOT analysis will indicate that this business lacks major infrastructure that may be vital in the development of the business. The fact that the spare parts project was somewhat over budgeted means that there is lack of a reliable accounting and planning department. It also lacks an enough human resources which are vital in the execution of the spare parts implementing system once installed. Since its core competency is not spare part making, it was a brilliant idea for them to outsource. The fact that the company spent a fortune in software installation which is the most important asset means that it does not stand a risk of investing much more in implementation of the system. This company was already facing an implementation failure and as such, outsourcing does not provide any more risk for failure...
It is evident that this company deals with a valuable resource that is costly to imitate as well as rare to find. In this regard, the fact that the company decided to outsource after conducting a thorough research on the pros and cons, the company is bound to have a sustained competitive advantage although dependent on their level of organization. Albeit with a higher risk of failure in future, the company went ahead and outsourced and 3 years down the line, the company enjoys a cordial business relationship with its partners and this has led to the expansion of the business into parts of Europe.
Answer to Question 2
Unlike in the first case where the investment was an idea of the business, in the second instance it is a third party idea in the sense that the business is dependent upon the mutual relationship with their partners. Since they entirely depend on outsourcing from the spare parts manufacturers, mistrust may contribute to losing its competitiveness. As a result, the latter may end up spending more on investing in an internal staff that will serve the purpose of the external staff. This will in turn affect its competitiveness in the spare parts business since their resource is not inimitable. Fashion House business also enjoys financial stability as well as a physical advantage as a result of establishing a state-of-the-art statistical forecasting which is not common for many other businesses in the same line. The High-Tech manufacturers on the other hand have failed to invest in effective strategic planning as a way of standing above its competitors.
Answer to Question 3
My VRIO findings are different basing on the fact that the two companies which form the basis of my case study possess different resources and strategic management plans. Both the former (Fashion House) and the latter (High-Tech Manufacturers) have very clear investment goals supported by enough resources and an effective strategic team. The only difference between these two companies is the fact that unlike the latter (High-Tech Manufacturers), the former have reliable human resources as well as financial backing which are important in measuring the success of an organization (Hunger & Wheelen, p.45).