Strategic Management of Aero Footwear Company
Introduction
Strategic management involves taking long term decisions for a company. These decisions are made on behalf of the company owners and other stakeholders and they involve the use of resources so as to improve on the company performance both in the external and internal environments. Various decisions are made which involve the vision, mission, values and goals. Further, policies are set and plans made which help in achieving the company goals. In making the strategic decisions of the Aero footwear company the forecast was made for the future years.
This report is an analysis of the decisions taken and the degree of achieved success. Success can be measured by increase in company productivity and the market position held in comparison with the competitors. Since footwear is globally used, there is need for regular improvement of the product and the services offered so as to maintain business. This can only be achieved if the right decisions are made and actions taken as well. Decision making for the Aero footwear company was done by use of the cognitive model and the six tools of strategic analysis which included SWOT analysis, the porter’s 5 forces model, pareto analysis, BCG matrix, McKinsey 7-S and the VOC (voice of the customer).
Decision making in year 11
In decision making, an organization should ensure that all its employees are involved. This helps to minimize cases of conflicts and further, the implementations of the made decisions will be easier since people will participate more in the implementation of decisions that there were part of making. According to Rasmussen, Brehmer & leplat (1990) making of decisions is a continuous process and it usually involves many people. this was thus considered when making decisions for the company.
In this year, the decision made was on improvement of the quality of the shoe products as well as the services that the company offered. This also encompassed the after sale service and the customer service management. The market segment considered was that of the Latin America, north America, European-African and the Asia pacific. The north America and European-African valued quality more. Quality in decision making here was considered from two different perspectives. These are quality as perceived by the customer and quality as perceived by the producer. From the perspective of the customer, quality was taken as that which satisfies the customer while from the perspective of the consumer; quality was taken as that which meets the set standards.
This was done by the pareto analysis also referred to as the 80:20 rule. As a statistical tool for measuring quality, this helped in the reduction of defects. The Aero company makes shoes that are fit for people of all generation, both the young and old population. According to Christopher, Jutter & Peck (2004) the customers are increasingly becoming aware of footwear quality and thus they consider this when choosing the kind of shoe to buy. With such knowledge, the company improved on the quality of the shoes that they offered to the market. For instance attractiveness of the footwear was enhanced, the user comfort ability and the inclusion of different models so as to fit the different demands as well as needs of the customers.
Quality improvement improved on the overall productivity of the company. The success that the company achieved was customer satisfaction leading to customer loyalty, repeat purchases and thus increased sales and revenue. It was possible to stick to this decision since it had been made with the involvement of the employees and thus its implementation had been made easier. This involved team work and leadership. This then proved that quality is very important and that today customers are becoming sophisticated. Thus, they do not want just to buy something but involvement in their buying and that is why their preferences have to be taken into consideration when manufacturing the different shoe models.
Decision making in year 12
This included the segmentation of the market. This involved carrying out an analysis and this was the market analysis. In this year, a SWOT analysis was carried out to analyze how the market changed. The SWOT analysis meant that the company considered its strengths, weaknesses, opportunities and threats. The focus here was to maximize on the company strengths, take hold of the available opportunities, minimize the weaknesses and then use the market threats as a challenge to help in improvement. These were all dependent on the market needs.
Opportunities
- The market is developing and thus the manufacture of quality products and offering of quality services as decided in the previous years provides an opportunity for competitive advantage.
- The vulnerability of the other market competitors.
- As far as footwear manufacture is concerned, Aero footwear company was in a better position to seek for better deals from raw material suppliers.
- The company can support the economies of core business. For instance, it can by extending the market from the current to other overseas areas.
- Aero Footwear Company could develop other products in the market. This was also inline with the preceding year strategy that involved making of varied models.
- The development in terms of technology places the company in a better position. This is because of the adaptation of new technological methods which increase the efficiency of production.
Threats
- Legislation and other political influences could have impacts on the business and its performance.
- Though footwear is widely used, the demand of the products in the market could sometimes be seasonal.
- One of the critical issues is the need to maintain key members of the staff. Following the company performance, they can be sourced by the competitors in their bid to beat the Aero Company in the market.
Success factor
For the gaining of the company benefits, SWOT analysis should be focused on the customer and the competitors (Menon et al., 1999). For the Aero footwear company, SWOT analysis was an essential step towards the planning process. This year, the revenue earned by the company increased from the previous year and thus increasing the earning per share of the shareholders. Therefore, the company was further able to increase the shareholder’s wealth. The SWOT analysis further helped the company in taking hold of the potential conditions that were favorable for its productive growth. This also increased its market competition. Businesses today exist in a dynamic world and thus analysis of the demands in the market enabled the company to survive in the changing environment. This was maintained by considering the external and internal business environments and thus maximizing on the business opportunities and taking the challenges posed by the market threats.
Decision making in year 13
Here, the pricing strategy was employed. Market analysis was first done to determine the prices that the competitors offered. The company also carried out benchmarking which was essential in the determination of the company’s competitive strategy. The strategy of pricing that was employed was lowering the prices by 1% as compared to the amount that the competitors offered. Though this may appear to be an insignificant reduction, customers are very careful of their spending and thus slight decrement serves as an attracting factor.
The decision was made with the support of the management and considering the values, the staff, management style of implementation and the skills. Here, the McKinsey 7-S (Structure, Systems, Style, Staff, Skills, Strategy and Shared Values) strategy was employed. The decision was made because of the need to achieve both the hardware and software of success. The strategy employed the definition of the organization structure, and the roles of each staff. This works towards achieving competitive advantage since it leads to increased responsibility in performance (Jordan, 1994). Team work was considered here and this was meant to ensure shared value which leads to shared goals.
Other than the quality of the goods, the company realized that customers and especially the Latin America and Asia pacific markets were more concerned on the price of the footwear. Thus, a pricing strategy that met this market needs had to be developed. A clear strategy was developed and communicated to all the people in the company. In this year, just as is in the McKinsey 7-S strategy, decision was made on system improvement. This included the integration of modern technology and IT power (Jordan, 1994). The reason for making this decision was to increase the effectiveness of the processes. This would be achieved in terms of having fewer defects, improving the speed of production and enhanced accountability.
In the session of putting it into practice, this turned out well. Therefore, plans are that it will be employed even in the coming years. For instance, technology is gradually changing and thus new developments are being made as time goes by. Therefore, the Aero footwear company will continue to make improvements to cope with the advancing technology in the production industry. Other than the Aero company, there were six other companies that offered market competition. These other companies were also striving to be competitive in the market. However, Aero footwear company competitiveness was enhanced because the integration of modern technology led to higher production. Further, like had been in the previous years, the quality was also improved.
Reduction in prices attracted many customers and thus the company revenue went higher when compared to that of the previous year, year 12. this was achieved because high sales were made following the attraction of many customers. Furthermore, price reduction did not compromise product as well as service quality.
Challenges in this strategy
The challenges that were encountered here in dealing with the teams were mainly because of fear. For instance, the employees were afraid that by lowering the prices, their remunerations would also be lowered. Further, there was the fear of being layed off from work. The misconception held was that price lowering would result to less work and thus the company would have to lay off some of the employees. Further, with the integration of modern technology the employees feared that this would replace them since less manpower would be required once more sophisticated system automation had been employed.
Decision making in year 14
Aero footwear company makes various decisions ranging from decisions concerning the product, the market segment to be pursued, the price and strategies of promotion. According to Grant (1991) strategies that can be employed include the low cost strategy which involves having an action plan that focuses on making the procedure efficient and at the same time reducing the costs.
The strategic decision that was made in this year was the need for promotion. Promotion here included several aspects for instance the media. Marketing and advertisements which formed part of the promotion strategy of the company are very important aspects in business. In competition, a positive and enhanced corporate image is very important. This is what was aimed at when deciding on product promotion. The promotion strategy of the company involved making of advertisements in the media. Another important mode that was used in the Aero footwear company was the use of bill boards. This then ensured that knowledge about the products offered by the company reached a wider market.
During this year, the company also made the decision of cost reduction. Cost reduction ensured competition because the company reduced their spending. Cost reduction was achieved by removing the unnecessary processes. This further involved budgeting. In making the budget, all the company’s spending was included. thus, reduced the possibilities of making emergency orders for example ordering for raw material and other material required for production.
By reducing the spending of the company, costs were reduced thus implying that increased profits were made. One way of cost reduction was by considering the power of the supplier. By outsourcing, the company was able to determine the suppliers of the competing organizations. These different suppliers were compared and thus giving an insight on the power of suppliers within the footwear manufacturing industry. Therefore, as had been justified in the previous years, there was the reduction in buyer/customer management this time basing the argument on the supplier and the company being the customer.
In year 14, revenues were increased as compared to the preceding years. This then implied that the decisions that had been made were effective and thus worked well towards the increase in the company’s production. By increase in revenue, this can be interpreted that the company’s competitiveness had increased and more purchases had been made. Further, comparing the stock price of the 7 companies in that year, Aero footwear manufacturing company had higher stock prices than four of the other competing companies. This was also an improvement from the previous year in which despite making higher revenues, the company had the lowest stock prices.
the decision that was reached after this continued improvement for the four years was that the strategies employed would be maintained and improved further. In this year, it was also possible to maintain the decisions made. For instance, cost reduction was a way of reducing operation and process bottlenecks and thus a very effective method of maintaining company standards. Further, the company realized that competitiveness was as well earned by the corporate social responsibility. The company realized that it was part of a greater society and thus had a responsibility in the society. This then improved its reputation and thus competitiveness. Reputation was earned since, need to reduce costs meant that wastes would also be reduced. Released wastes affect the environment and thus waste reduction meant a conservation of the environment by reduction of surface waste releases as well as pollution of the air.
Decision making in year 15
As a means of improving the company’s competitive strategy, the decision was made to focus on innovation and creativity. Competitiveness in an organization can not be achieved without the efforts of the employees. Therefore, employees have to be motivated so as to increase their productivity and consequently that of the company (Hoskisson, Hitt & Ireland, 2007). Therefore, the company focused on employee motivation as well. One of the ways of employee motivation is by rewarding them. A decision was reached that employees who showed exemplary performance would be rewarded. The rewards offered were in various form including gifts, holiday, recognition in company meetings, and money.
By rewarding the employees, they were encouraged to further bring forth their innovate ideas. The company decided that the innovative ideas brought forth would be developed on and integrated into its operations and processes. Rewards were also offered to those employees who demonstrated innovation and creativity. Building on these ideas helped the company much towards it growth. A good working environment can be described as one in which the needs of the employees as well as those of the company are met. Therefore, the company improved the working environment of the employees. Such moves always make the employees want to associate with the organization that they work for and thus it is the organization that benefits in the long run.
Reward management, better employee working environment and building on the employees’ innovative and creative ideas enabled the company to get the best staff even from the competitors. Because of these benefits that the Aero footwear company offered, employees moved from the competing companies and thus enabling the company to get the best workforce. These employees from the competing companies further brought in other ideas and ways in which the company would be able to perform better than the competitors.
This brought in various benefits to the company. However, the total revenue decreased as compared to that which had been earned during the previous year. The reasons for this decline in total revenue were because of the great changes that the company went through in this year. However, since the company had incorporated various improvement measures, it was expected that in the future years, revenue increases would be observed.
Conclusion
Strategic decision making in an organization is very important. This is because the benefits of the made decisions run even into the future of the company. In the five years period at Aero footwear company, the decisions that were made included quality improvement, market segmentation, reduction in prices, cost reduction, integration of modern technology, promotion, innovation and creativity, better employee working conditions and employee reward management.
References
Christopher, L.M., Jutter, U. & Peck, H. (2004). Creating agile supply chains in the fashion industry. International journal of retail & distribution management. 32 (8), p. 367-276.
Grant, R.M. (1991). Porter’s competitive advantage of nations: an assessment. Strategic management journal. 12 (7), p. 535-548.
Hoskisson, R.E., Hitt, M.A. & Ireland, R.D. (2007). Competing for advantage. 2nd Ed. Cengage Learning publishers.
Jordan, E. (1994). Information strategy and organization structure. Information systems journal. 4 (4), p. 253-270.
Menon, A. et al. (1999). “Antecedents and Consequences of Marketing Strategy Making”. Journal of Marketing (American Marketing Association) 63 (2), p. 18–40.
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