The business Strategy of any company, like Able Corporation, determines how the goals of the company, be it be short term or long term, be achieved. Its formulation for any company brings upon four different important factors Product development, Market penetration, Market development, and diversification. All these four factors can be further segregated upon their implications to the long-term or short-term goals. (Jain, 224).
In Able Corporation, 2001, quest to foray into new business development in China, they engaged in Strategic Business Management. First, the company did a strategy formulation which would include developing a mission statement, operating principles, competitor analysis, internal-external environment analysis including macro and micro, SWOT analysis, other market threats like changes in technology, change in government outlook for environment pollution standards, set financial goals for six months to one year to five to ten-year long term plan. These plans are to be forwarded to the Strategic Officers Steering Committee (SOS-C) of Able Corporation. (Lamb, 67).
It needed to set its operating principles, like maximizing profit, timely delivery of goods and services, respect customers opinion and advice, Effective H.R. policies to retain employees in this world of high turnover rate of employees, constant quality and technology upgrade through able research and development. Profit Maximizing can be found out by Total Cost-Total Revenue (total revenue (T.R.) minus total cost (T.C.) Method) or Marginal Cost or Marginal Revenue method, which includes raw goods procurement policy, reduced lag time between production and delivery, thereby reducing storage costs. Introducing an effective H.R. policy will eventually reduce training and employment costs. In today’s world, where high turnover rates, high employment costs, selective outsourcing of services like after-sales service can reduce costs, keeping in mind not to affect customers perception of the company. The company has to look into competitor’s R&D efforts and match them with its own efforts. Also, device efforts to reduce lag time between goods received for production and production and delivery. Some companies have effectively reduced this lag time to up to 6 hrs, meaning the difference between production and delivery is just 6 hrs, so storage requirements are nearly negligible. (Roy, 2007).
Tangible and intangible asset management was also an important part of business strategy formulation. Tangible assets include raw materials and stocks, furniture, machines, lands, or money at the bank. Management of fixed assets can also add to company profits, like purchasing important land or property, visualizing future needs, effective management of depreciating assets adding to taxation benefits. Intangible Assets include intellectual property like patents, trademarks, copyrights, technological superiority, strategic business locations, and effective channel partners. It also includes goodwill and loyal brand customers. Recognizing and intangible assets can also be the most effective tool. Goodwill among loyal customers will directly or indirectly add to more customers, and of course, less advertising costs.
Opportunities and threats of the company are the external variables affecting the current status of the Able Corporation. Able Corporation needs to know the current growth patterns of the industry, current market trends, economic conditions, interest rates, customers, and customer group ratings. Take, for example, the current slumping of fiscal markets in U.S. and world wide due to fear of recession in U.S. economy. With GDP growth touching nearly double figures in Asian Giants like China and India, and South Asian markets touching new high everyday. It is wiser to set up factories in Special Economic Zones (SEZ) in China, where setup time and other requirements to start a new factory in far less, less employment costs, and easy access to neighborhood Asian markets. Mergers and joint ventures can also be thought of as an opportunity to enter into socio sensitive markets like that of Asian markets, with the regional knowledge of the markets, can give effective inroads in traditional markets. (Roy, 2007).
Threats included new competitor in the international market, targeting the same demographics and markets. Price wars with competitors can also be a huge threat so as to either leave the market or compromise with quality. Take, for example, airline industry, falling ticket prices and introduction of no-frill airlines, has made many airline gone bankrupt or closing down of operations.
In conclusion, it should be stated that the strategic management of the company included sales forecast is very important in all stages of business. It is the prediction of future sales based on past performance, current and future estimated economic scenarios, predicted inflationary trends, consumer buying patterns and changes in buying patterns, Cash Reserve Ratios affecting bank lending rates etc. Sales forecast is one of the single most important factors, on the basis of which product planning, entering new markets; new product development is depended on. Sort term forecasting, long term forecasting, sensitivity or accuracy of forecasts, ways devised to forecast is important factors when considering. Financial forecast is calculated by balance sheet, Profit Loss statement, and cash flow statement. Financial forecasts are instrumental in budgeting, allocating future expenses, reserve calculation, market investment projections, borrowing decisions etc. Similar examples of strategic business management techniques are found in the operational methods of Nike, McDonald, Coca-cola and others. Thus, it is clear that any multinational operating on along term basis would need the help of strategic business management techniques in order to survive and sustain.
Jain, Subhash C; Marketing Planning & Strategy; Wellington: National Book Trust; (2006).
Lamb; Robert; Competitive Strategic Management; Englewood Cliffs; NJ: Prentice-Hall; (2003).
Roy, D P; Birth of Thought: The Evolving Intelligence in Global Business Strategy; Part II; Auckland: HDT Ltd; (2007).