MGT 578 Strategy Formulation and Implementation
February 14, 2006
According to the Thinking Strategically simulation, "Strategy, in business, is the combination of foresight, planning, and decision-making that prepares an enterprise to achieve long-term goals and manage the consequences of contemporary decisions." A lesson learned was that one needs to properly construct long-term objectives to be able to align to the company's strategic goals. This helped in some development of my strategic plan.
For example, if the CEO of a company wants to establish a strong competitive position and cares less about profits in the short-term, then a possible strategy would be to keep prices low in order to establish the company within the market. In order to arrive at an objective, one must analyze the internal and external environments. External analysis is done at a higher cost because information needs to be gathered and analyzed. Also, external data is not readily available and it may take time to obtain. Internal environmental analysis can be obtained at a fraction of the cost and is usually readily available. One of the most common techniques of internal environmental analysis is a SWOT analysis. Once both environments have been analyzed, one could select objectives that align with the firm's strategies.
The CEO of BJ's wanted to lead the industry in profitability, which would mean increasing profitability from the current 28% level to 38%. In addition, the CEO wants to reduce the manufacturing costs of bikes to under $100.00. The first decision is to decide how much internal and external information is needed to finalize the long-term objective. A good decision would be to get a mixture of consumer and industry research reports. The U.S. Specialty Bicycle Consumers Study is a good choice because it will give information about our customer. Another purchase was the National Specialty Bicycles Retailing Industry Report which will give the industry information as needed.
The next decision is the long-term objective for BJ. BJ's objective should be to become the industry leader in revenue over the next five years. This is a good choice because of the small number of retail chains within the industry. If BJ's can become the number one seller, they can establish themselves as the industry leader in bicycle production.
Next, a SWOT analysis was performed to analyze the external environment of BJ's. SWOT also helped with looking at strengths, weaknesses, opportunities, and threats in my strategic plan. The strengths identified within the company are their cash position, the AntiGravity bike brand, and their in-store advisory. Their weaknesses were their "male-oriented" retailer image, low brand recall, and their lack of retail stores in the high growth areas. Opportunities that are present in the industry include the extreme sports market, market for women consumers, and the increase in government spending on physical education programs. Finally, threats were the low-cost imports from overseas, lack of interests among the younger generation, and the maturity in the bicycle industry which would hamper large future profitability. Developing Grand Strategies
Grand strategies are often called master or business strategies and provide a basic direction for strategic action. More criteria of a grand strategy are that they provide a time period over which long-range objectives are to be completed and it is a comprehensive approach that guides a firm's major actions. It is also important to formulate strategies because this will allow for a more organized approach. Careful strategy formulation helped in developing my strategic plan.
In the simulation, the overall market for Oz's Toy Store was chosen. They were in the first quadrant because they held a strong competitive position and the market was rapidly...