Business Strategy - 1

1. The process of strategic planning

Strategic planning is important for any organization. A clear understanding of the process of strategic planning is crucial for successful implementation of the same. This chapter focuses on mission, vision, objectives, goals and core competencies of TNT, issues involved in strategic planning and also different planning techniques.

1.1            Strategic contexts and terminology

Johnson et al (2011) simply defines the strategy as “the long-term direction of an organisation”. According to this definition, the strategy has long-term direction of achieving organisational goals. For instance, the TNT has set its practical measures under three aims. Those aims can be identified as customer relationship management, operational excellence and innovation. These practical measures can be identified as the long-term directions of TNT.

The mission statement aims to provide employees and stakeholders with clarity about the overriding purpose of the organisation (Johnson et al, 2011). For instance, the mission statement of TNT can be identified as follows (http://businesscasestudies.co.uk/tnt/delivering-a-business-strategy/introduction.html, Accessed May 2012).

1.      Exceed customers’ expectations in the transfer of their goods and documents around the world

2.      Deliver value to our customers by providing the most reliable and efficient solutions through delivery networks

3.      Seek to lead the industry by instilling pride in our people, Creating value for our stakeholders and sharing responsibility around the world

The vision statement is concerned with the desired future state of the organisation Vision statement of the company should answer to the question of ‘What do we want to achieve?’ (Johnson et al, 2011).       

Objectives are the desired outcomes of the organisation. For instance, TNT’s top-level objective is “to achieve profitable growth” (http://businesscasestudies.co.uk/tnt/delivering-a-business-strategy/introduction.html, Accessed May 2012).

The goals explain the way in which the organization is going to achieve its mission. Organisational goals and aims can be identified as similar concepts.

Core competencies differentiate the organisation from its competitors. Skills, resources, and activities which cannot be imitated by other competitors can be identified as core competencies of the organisation. TNT has many core competencies and it has led to achieve the competitive advantage through available resources.          

1.2            The issues involved in strategic planning

Sadler (2003) defines strategic planning as the form of systematized, step-by-step, procedure to develop an organization’s strategy. This strategic planning involves with many issues and Sadler (2003) has identified five (5) major issues which involve with strategic planning namely, confusing strategy with the strategic plan, detachment from reality, paralysis by analysis, lack of ownership, and dampening of innovation. 

There can be confusion with the existing strategies at the stage of strategic planning. Managers may feel that the strategic planning is the planning of same strategies which they are practicing now. Also detachment from reality is also another issue. Sadler (2003) argues that strategic planning is an intellectual process and it damages to the reality of operation. This basically happens because of the lack of involvement for the strategic planning of employees. The next issue is paralysis by analysis. This argues that strategic planning can be over-detailed because of the extensive analysis. Lack of ownership is another problem. Most of strategies are planned by the corporate planning department or by the senior management. Thus, it can be argued that strategic planning does not have a wide spread of ownership within the organisation. The final argument is that strategic planning is dampening of innovation. This mainly happen since strategic planning introduces many strict controls to the organisation and it limits the flexibility of the organisation (Sadler, 2003).

1.3            Different planning techniques

As Wittmann and Reuter (2008) explain, strategic planning can be differed according to the context. Thus different strategic planning techniques are needed for different circumstances. Considering the above circumstances Wittmann and Reuter (2008) has introduced five strategic planning techniques, namely, command planning, directive planning, coordination planning, emergent strategy planning and devolved emergence planning.

Command planning can be applied if the organisational environment is stable. This model is more applicable for small organizations. Especially the owner of the organisation makes the strategic plan. The second technique is directive planning. This is applicable for large stable organizations but not too complex. The top management of the organisation is involved with these strategic planning. Under this method, the organizational environment is extensively analyzed. If the organisation is more turbulent and complex the coordination planning is applicable. For this kind of organization, the strategic planning is more important. The next technique is the emergent strategy planning. This technique is also more applicable to a large organization, which has more complex organizational environment. These kinds of strategic planning are done by the corporate strategic department or by team of experts (Bryson, 2011).

The TNT’s strategic planning technique is more close to the emergent strategy panning techniques. The TNT’s organizational environment is more complex and need more attention for the strategic planning to gain the competitive advantage. When closely examine the TNT’s strategic direction, it is clear that the organisation is planning to expand their business further to the global market. Thus, emergent strategy planning is more applicable to TNT.    

2. Formulating a new strategy

In order to formulate new strategies for an organization, a clear understanding of the micro and macro environment of the organization is necessary. In order to get an idea about these two environments, SWOT analysis and a PESTEL analysis can be used. Further, Michael Porter’s five-force analysis is another tool that can be used to analyze an organization’s macro environment.

2.1 The organizational audit for TNT

As mentioned above a SWOT analysis can be used to analyse an organization’s microenvironment. Further, it can be extended to   talk about macro environment as well (Thompson, 2001).

Strengths

The strengths of TNT can be listed out as follows

·         TNT was found in Australia in 1946 and today it is a global Company and serves customers in over 200 countries around the world

·         TNT is considered the fastest and most reliable provider of express delivery services and also the European market leader.

·         Uses sophisticated technology

·         Has a committed and a highly trained staff

·         Clearly stated policies, procedures, missions, visions, strategies, objectives, etc:

Above mentioned are some of the strengths that TNT has. Being a well-established organization in the delivery industry, TNT has many strengths, which are not possessed by other players in the industry.

Weaknesses

Being a well established organization and as an organization, which maintains a healthy organizational environment, well planned strategies, missions, visions and objectives, TNT can be considered as an organization with a minimum amount of weaknesses.

The inherent weakness of the industry such as engaging in a industry where security and transportation, punctuality, etc can be taken as weaknesses where these factors can be changed and affected quickly by environmental, security, etc factors.

Opportunities

·         TNT is an organization that operates globally. Hence, it has many opportunities to expand its operations

·         Development of transport and communication technology allows better and speedier service

Threats

Threats those are prevalent in the industry are applicable to the TNT as well. The strengths of the organization have been responsible for TNT to be immune to lots of threats from outside.

·         There is a fierce competition in the market

·         The inherent threats of the delivery industry such as competition, transportation related threats, security of goods, etc can be considered threats.

2.2 Environmental audit for TNT

An environmental audit gives an idea about the environment that one organization operates. TNT is an organization, which operates globally. Hence, the organization’s environment is a global environment. PESTEL factors include political, economical, social, technological, environmental and legal factors (Thompson, 2001).

When talking about political factors, the TNT operates within various political boundaries. Hence, sometimes certain political boundaries will facilitate organizations like TNT and sometimes some will not. 

Economical factors are crucial for an organization like TNT. Global economical situations such as recessions and economical situations peculiar to countries such as exchange rates are important when operate globally.

Social factors when an organization operates globally are most crucial of factors in the PESTEL factors. Society changes from country to country, region to region and town to town. Hence, TNT should take into various societal factors when it comes to its promotional, communication, and even delivery services. The workforce should be trained in ways to meet these different social factors. This makes it clear that social factors are important for any organization.

Technological factors are important for organizations like TNT, which depends on communication and transportation. Newest inventions and innovations in communication and transportation sectors can be exploited by TNT to deliver its services to the customers in the most effective way.

Environmental factors are important in today’s business world, since the focus is on sustainable development. Therefore, as a globally responsible organization, TNT should address various environmental factors that have an effect on its organizational survival.

Legal factors vary from country to country. This makes it clear that an organization has to face various legal systems that may affect the organization in different ways.

Hence, it is clear that a vivid understanding about the macro environment of the organization is important when it comes to all the aspects of the organization.

2.3 Significance of stakeholder analysis

Stakeholders are important for any organization. Stakeholder can be defined as a party that affects or can be affected by the actions of the business (Lynch, 1999). Stakeholders can be government, employees, customers, suppliers, creditors, community, trade unions, etc (Thompson, 2001).Stakeholder includes a whole array of parties, which are crucial for an organization. Hence, when new strategies are to be developed for an organization, a clear understanding of its stakeholders is necessary. In order to gain knowledge on an organization’s stakeholders, a stakeholder analysis can be done.

Stakeholder analysis can be defined as “a technique that can be used to identify and assess the importance of key people, groups of people, or institutions that may significantly influence the success of an organization” (Thompson, 2001). As Lynch (1999) points out there are various reasons as to why an organization should conduct a stakeholder analysis. As Lynch (1999) says, they are:

• To identify people, groups, and institutions that will influence the actions of the organization (either positively or negatively)
• To anticipate the kind of influence, positive or negative, these groups will have on the organization
• To develop strategies to get the most effective support possible for the organization and to reduce any obstacles for the successful operations of the organization

Many scholars have pointed out the importance of doing a stakeholder analysis. According to Wilson and Gilligan (2005) advantages of doing a stakeholder analysis can be shown as follows:

• The organization can use the opinions of the most powerful stakeholders to shape the organization and its initiatives at an early stage. This ensures support as well as quality the organization.
• Gaining support from powerful stakeholders can help the organization to win more resources
• One can anticipate what people's reaction to the organization’s actions 

This makes it clear that a stakeholder analysis is important for an organization to operate successfully.

3. Approaches to strategy evaluation and selection

An organization should expand its business whenever possible. Various ways and methods can be used to expand an organization. In this section of the assignment, possible methods for expansion of TNT are taken into discussion. Further, an appropriate future strategy for TNT is proposed.

3.1 Alternative strategies relating to substantive growth, limited growth or retrenchment

As Thompson (2010) describes, the substantive growth strategies are implemented through two main factors. Those are merger and acquisition. Merger is the combination of two previously separate organizations, typically as more or less equal partners (Johnson et al, 2011). The TNT has more potential to implement merger as a substantive growth strategy because of its market strength. The acquisition involves one firm taking over the ownership of another (Johnson et al, 2011). This substantive strategy also can be implemented by TNT since it has more market power in the industry.

Thompson (2010) introduces joint venture as limited growth. At the joint venture, two or more organizations are shared the ownership. In the joint venture, usually the competitive advantage is narrow. Since TNT has more market share in the industry, it is not advisable for limited growth strategy.

Retrenchment is always a remedial action. These remedial actions are taken at the stage of the inefficiency, economic recession, or strong competition. In case of inefficiency, the organisation has to take three retrenchment strategies namely assets reduction strategy, cost reduction strategy and revenue generation strategy.       

3.2 Appropriate future strategy for the TNT

The human resource of the TNT is one of the critical resources, which pave the way for achieving competitive advantage. However, TNT has identified that there is a need for further developing of needs of its employees to compete in the turbulent market place. These skill developments of employees will lead for quality service and finally it will hold to gain the competitive advantage thorough available resources (Wilson and Gilligan, 2005). The aim of the TNT is to make superior profit and performance. TNT has identified those areas as strategy gaps of the organisation.

Considering the above strategic situation, interactive strategies for the TNT is recommended. These interactive strategies will be the future strategic directions of the TNT. The rationale behind the interactive strategies is gaining the competitive advantage by looking at the competitors’ strategies. In this connection, the TNT will have to pay their attention to interactive price and quality strategies, cooperative strategy, interactive strategies in hyper-competition, and game theory. According to the interactive price and quality, strategies the TNT will have to provide best price and quality for their customers. The interactive strategies in hyperactive- competition will say how TNT can face to the hyper-completion and gain competitive advantage. Collaboration between some organizations in the same market will lead to achieve competitive advantage. Cooperative strategies will help this collaboration for TNT. Finally, game theory also involve with competitor movements. Particularly game theory is responses for the competitor movements of the market place.

Thus, TNT should follow interactive strategies as it future strategies.

4. Implementing a chosen strategy

Whatever the strategy that is planned, implementation of it is the most critical stage. Proper ways and methods should be exploited in order to match the plan and also the successful implementation of the plan. In this section of the assignment, the focus is the same. Thus, roles and responsibilities for strategy implementation is compared, resources requirements and also targets and timescales for achieving them is discussed. 

4.1 Roles and responsibilities for strategy implementation

Sadler (2003) introduces three main roles of strategy implementation. Those roles are envisioning future strategy, aligning the organisation to deliver that strategy and embodying change.   

The first role is envisioning future strategy. This role involve with clear communicating the strategy to internal and external party. The internal party includes the organisation and the external party is includes all stakeholders. The next role is aligning the organisation to deliver the strategy. Under this role, it is expected that all people in the organisation be committed to the strategy. These people should be motivated to follow the strategy and should be empowered to deliver the change. The final role is embodying change. The strategic implementation is highly involved with the organisational change. Thus, strategic leader has a major role of following strategic change process.

According to Sadler (2003) the responsibility of strategy implementation should be taken by two main parties. Thos two parties can be identified as middle managers and outsiders. Middle managers have been identified as the implementers of top management’s strategic plan. The responsibilities of the top-management have three main areas. Those main areas can be identified as sense making of strategy, reinterpretation and adjustment of strategic responses, and advisers to more senior management. Outsiders have more responsibilities for strategy implementation. Especially as outsiders, consultants and other stakeholders have more responsibilities. Consultant always helps to formulate the strategic for the change process. Stakeholders have responsibility as strategy implementation agents in the organisation.             

4.2 Resource requirements to implement a new strategy

At the implementation of the strategy, the resources allocation is vital. These resources requirements can be differed from one organisation to another and one strategy to another. It is clear that the organisational environment and nature of resources determines the resources requirements (Coulter, 2001).

As discussed above the TNT should implement interactive strategies to face to the future competition of the industry. Thus, TNT needs three main resources for implementing these strategies. Those are physical resources, people resources, and initial start-up cost.

The physical resources are consisted with production resources, finance resources and marketing resources which need for implementing interactive strategies at TNT. Since, these interactive strategies mainly focus on the quality improvements of the TNT product, it is advisable to allocate more physical resource for the quality improvement. People resources also a major requirement for strategy implementation. TNT should develop their human resources by implementing more learning and development activities. Finally these all these strategy implementation processes are involved with initial start-up cost and TNT should allocate appropriate finance for these implementation activities.      

4.3 monitoring strategies

Johnson et al (2011) introduces three main criteria and techniques which can be used to monitor a strategy namely suitability, acceptability and feasibility. Suitability is that assess whether proposed strategies address the key issues. Acceptability measures whether proposed strategies meet the expectations of stakeholders. Also feasibility is measured whether strategy could work with in practice.

As discussed above TNT’s future strategies will be interactive strategies. These interactive strategies can be monitored by the suitability criteria. Under this criterion it can be monitored that whether TNT’s interactive strategies address the key opportunities and constraints in the organisation face. Acceptability criterion can be used to monitor whether implemented strategy meet the expectations of stakeholders. Under this criterion the risk and return also monitored. Feasibility measures whether strategy work in practice. Further, feasibility can be used as to check the targets of the implemented strategies. For an instance, it can be used to measure the finical targets of TNT by implementing interactive strategies.     

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