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SM0377 Understanding
Strategy
BA (Hons) Leadership and Management
January 2012
Contents
Contents
Part 1 ....................................................................................................................................2
1.0 Introduction .................................................................................................................................. 2
1.1 Defining Strategy .................................................................................................................... 2
2.0 External Environment .................................................................................................................. 2
2.1 Macro and Micro Environment ............................................................................................... 2
2.2 PESTEL Analysis ................................................................................................................... 2
2.3 Five Forces Analysis .............................................................................................................. 2
2.4 Summary of the External Analysis ......................................................................................... 2
3.0 Internal Analysis .......................................................................................................................... 2
3.1 SWOT Analysis ...................................................................................................................... 2
3.2 Ansoffs Matrix ........................................................................................................................ 2
3.3 Summary of the Internal Analysis .......................................................................................... 2
4.0 The Authors Role in Contributing to Strategy ............................................................................. 2
4.1 Role and Mission .................................................................................................................... 2
4.2 Strategic Decision Making ...................................................................................................... 2
4.3 Contribution to Strategy ......................................................................................................... 2
Part 2 ....................................................................................................................................2
Reflective Statement & Learning Log ................................................................................................ 2
Reference List ........................................................................................................................................ 2
Bibliography ............................................................................................................................................ 2
Appendices ............................................................................................................................................. 2
Page 2
Page 3
Part 1
1.0 Introduction
The context of this report is to provide the reader with a strategic analysis and appraisal of the
authors organisation. XXX is a private-sector training provider whose core business is to deliver
work-placed learning to adults in the North West of England (see appendix 1.1 for organisation
background). Relevant strategic frameworks will be applied to both the organisations external
and internal environment in order for a critical strategic evaluation to be sought.
Page 4
However, in providing a more competitive approach to strategy, Porter (1996, p.64) argues that
corporate strategy is about being different and intentionally choosing a different set of activities
to that of competitors:
The essence of strategy is in the activities choosing to perform activities
differently or to perform different activities than rivals.
It is argued that if strategy is not applied in such a way it is merely nothing more than a
marketing slogan that will not withstand competition (Porter, 1996).
Although strategists may fail to adopt a universal approach to defining strategy, strategy is
arguably an essential tool required by organisations in the private-sector. In a recent study on
private-sector organisations, Quinn, Patton & Patrizi (2010) describe how strategy is an
important focus of management and organisational development, as it gives the organisation
the opportunity to analyse, adapt and implement change in order to achieve its goals. Strategy
is also described as being essential to organisations nowadays due to the increasingly global,
postindustrial, information based and competitive environment, compared with that of only a few
decades ago (Fleisher, & Benoussan, 2003).
Page 5
Research (Capon, 2008) has shown that a careful and accurate analysis of both external
environments can benefit an organisation and enable them to implement an effective strategy.
Capon (2008) has outlined the key benefits attributed to the analysis of the external
environment:
The principle external environmental influences which generate change are highlighted.
Anticipation of threats and opportunities occurs within a time scale of long duration to
allow responses to be considered.
Page 6
Page 7
Influence on Strategy
The Government
95% of XXXs income is provided through the Skills Funding Agency (SFA), who
is an agency for the UK government. Ultimately, this reliance on government
resources means political factors are significant to the organisations strategy.
XXX have no control over the changes the Government implement but are likely
to be heavily affected by them. These could have both a positive or negative
affect of the organisation but will almost certainly need to be incorporated into its
strategy. For example:
However, a potential threat to the organisation is that the overall budget for
the Department for Business Innovation & Skills is to be cut by 3 billion by
2014/15. This could see other training providers in the region focus their
business strategy on the delivery of apprenticeships, which ultimately would
increase competition for funding.
Finally, the Governments plans to reform the upper limit on tuition fees could
see a possible decline in students entering into full time higher education.
Therefore, there could be a possible increase in demand for work based
learning in the region.
Page 8
Key Factor
Unemployment
Rates
Influence on Strategy
As XXXs primary service is to deliver workplace learning, economic factors in
the region surrounding unemployment will have a significant impact on the
organisations strategy. Less people in employment will mean less learners to
engage in workplace learning.
Given the current economic climate, the unemployed market could potentially be
a large market for XXX to enter. There is the opportunity to up-skill these
individuals and, through training delivered by the organisation, support them into
employment.
For learners who the organisation support into the labour market, they then have
the opportunity to deliver Apprenticeship training.
As a result of a Government initiative to target unemployment, the SFA have
recently provided flexibilities to their funding. This will allow XXX to access
funding to provide training to the unemployed. XXX are currently implementing
strategic changes to be able to deliver such training. However, this will need
urgent attention as the organisation will be reviewed by the SFA in 3 months time
at the end of their next funding quarter. Unsuccessful implementation of these
changes would likely see these flexibilities withdrawn from the organisation.
Ofsted
Ofsted play a significant role in shaping XXXs strategy through a legal factor, as
they inspect and regulate those who provide education and skills for learners of
all ages.
The core business of XXX is to provide a good and consistently high quality
learning experience for all of its learners. Ofsted will monitor the level of service
quality that XXX provide against their standards. XXX therefore need to
implement strategies which will allow them to deliver their training to promote
quality and satisfy Ofsted standards.
A outstanding Ofsted grade will not only make the provider more attractive to its
customers, but it will also make them more attractive to funders, such as the
SFA, and allow them to gain a competitive advantage in the industry.
Page 9
Page 10
Influence on Strategy
Porter (2008) describes how the Government are best understood as a sixth
force as their involvement is neither inherently good nor bad for industry
profitability. However, in this analysis, the Government can arguably be
described as a direct force as they are the main supplier of funding in the
private sector training industry. They directly control the industry through
funders and regulators, such as the SFA and Ofsted.
This leaves training providers with very little bargaining power over its
suppliers in terms of any changes they wish to make. However, the best way
for a training provider to increase its bargaining power and attract funding is to
satisfy its funders and regulators. For example:
(bargaining power
of buyers and
competitive rivalry)
Page 11
Page 12
Page 13
Influence on Strategy
Achieving
Each financial year providers, who have been awarded a contract by the SFA,
contract value
profile
are given contract value profile which they must achieve. Providers who fail to
achieve their contract value profile will not only lose out on funding available to
them, but risk having future contract values reduced as a penalty.
In the financial period of August 2010 - July 2011, XXX were unable to achieve
their contracts value profile. Not only is this a weakness to the organisation, but
it is arguably a threat due to the potential of the loss of future funding. The
organisation claim that the key factors affecting this were the high levels of
unemployment in the region, change in Government, and the changes in
regulations to Apprenticeship frameworks.
The organisation have also just released figures which show that the
organisation were unable to achieve their value profile for the first quarter of the
2011/12 financial funding period. However, the organisation have been
presented with the following key opportunity to overcome this weakness and
achieve their financial targets:
SFA funding flexibilities - following the closure of the first financial quarter,
XXX have now been awarded flexibilities to their funding contract. The
organisation are now in a position to deliver training to unemployed
individuals who seek to gain employment. This not only means that the
organisation have the opportunity to tap into a new market and grow the
organisation, but they have a greater opportunity to achieve their value
profile.
Through addressing these economical and political factors, the organisation now
has the opportunity to achieve their financial target for the contract year. If
strategic changes are effectively implemented and managed correctly the
organisation have an excellent chance of achieving two of their strategic
objectives of growing the organisation and improving profitability.
Page 14
Key Factor
Influence on Strategy
Ofsted
Page 15
However, from a cautious viewpoint, Mazzucato (2002) argues that there can often be a limit to
the growth of an organisation. Mazzucato (2002) states that strategic plans for growth will
depend on the experience of the management leading the process and many actions,
especially diversification, are done at a high risk to the organisation. Joyce & Woods (2001)
support this cautious approach and provide further argument that any rapid growth can often
mean organisations fail to effectively manage its new capacity, meaning the quality of products
are affected.
Using its growth objective, and considering the analysis of its external environment, XXX have
put in place various strategies to help them to achieve this. However, the organisation must be
not allow quality to suffer (Joyce & Woods, 2008) as a result of any growth. The author has
used Ansoffs Matrix in order to identify these key strategies (table 3.2).
Page 16
Refer a Friend Scheme - this scheme asks current customers and employees
to refer a friend to enroll onto a XXX learning programme. Those who refer
new customers will be awarded a bonus between 50-100 for each new
customer. It is hoped this recruitment drive will increase the organisations
customer base, as well as helping the organisation achieve its contract value
profile and become more profitable.
Through the use of MIS, the organisation have developed reporting tools
which will allow them to identify further opportunities amongst its current
customers. For example, this report can be used to identify those who have
recently completed an Apprenticeship and would be eligible to enroll onto an
Advanced Apprenticeship. Not only will this aid the organisation in its growth
but retaining customers is cheaper than attracting new ones.
Princes Trust Millionaire Makers - throughout 2011 XXX has been engaging
with the Princes Trust to raise money for the charity. Not only will this
address corporate social responsibility but it will allow XXX to promote their
services to young potential learners through the charity through various
networking events and advertising.
XXX has set up a working party that will look at the creation/development of
Facebook and Twitter sites. It is hoped this will allow the organisation to
growth through the interaction of younger potential customers.
Page 17
Growth Type
Market
Development
Product
Development
As well as ensuring its range of products competes with that of its competitors,
the organisation also ensures quality and innovation are at the forefront of its
delivery.
As identified in the Five Forces analysis, the industry regulations often make it
hard for providers to differentiate their products, indeed creating strong rivalry
between competitors. Therefore, XXX adopt strategies which will allow them to
deliver quality and innovative services.
At the end of 2009, the organisation introduced e-portfolio software called
Learning Help. This is an innovative system which helps to enhance the learners
experience by providing them with a personalised learning journey. This also
means that learning materials can be accessed via the internet.
This use of technology has allowed XXX to reach more learners in rural areas,
thus helping to grow in these geographical areas, and aids the learners in
completing their programmes in a timely manner.
Learners who progress well through their programme are more likely to achieve.
In the past it has been poor achievement rates, as identified in the SWOT
analysis, which have prevented XXX from gaining outstanding by Ofsted
inspectorate.
XXX have heavily incorporated technological advances to allow them to improve
the quality of their service. The organisation continues to watch the market for
the latest technological advances to remain ahead of the competition.
Page 18
Growth Type
Diversification
This is an area where the organisation have recently withdrawn from. The
organisation offered a free recruitment service to organisations and learners, to
place individuals into employment and then deliver Apprenticeship training.
In July 2010, the organisation announced that it would no longer be operating
this service as it was not financially feasible. It was also a distraction from their
core business.
XXX, at present, have no strategic plans for any further type of diversification.
Page 19
Indeed, it can be argued that XXX have comprehensively assessed their external environment
and effectively identified strategic areas which need addressed to allow them to meet their
objectives. It is hoped over the remaining financial year the organisation can meet their financial
targets through the implementation of these strategies, and compete with larger organisations
in its long term future.
Page 20
Description
Corporate Level
Strategy
Strategy at this level is concerned with the overall scope and direction of
an organisation, including how value will be added to the different parts
of an organisation. These can include decisions relating to ownership,
objectives, products, marketing, finance, etc.
Page 21
Level
Description
Business Level
Strategy
Functional Level
Strategy
Within my organisation both corporate and business level strategies are made by the board of
directors, as shown in appendix 4.1. Within this board, there are no non-executive members
and more than half of the board is made up of family members. According to recent research
(Solomon, 2010), it could be argued that this board does allow for enough corporate
transparency and not enough disclosure to stakeholders, as well as arguably making selfserving decisions. Beasley (1996), as cited by Solomon, 2010, also found that organisations
without non-executives on their board increased the incidence of fraudulent financial activity.
Besides these criticisms, it could also be argued that by failing to include middle management
in decision making is detrimental to the organisations overall strategic management. Although
the conventional view is that strategy is the business of top management, research (Johnson,
Scholes & Whittington, 2008) has shown middle managers are often overlooked yet they can
provide benefits to strategy making. This is because middle managers generally have more
involvement in procedures. They are better at interpreting strategic intentions into action, have
a strong commitment to strategic goals and are in a position to communicate the strategy more
effectively (Johnson, Scholes & Whittington, 2008).
In support of this research (Johnson, Scholes & Whittington, 2008), I agree that strategic
decisions are not always communicated effectively to my department by the board. An example
of this surrounds the recent funding flexibilities that have been made available to my
organisation by the SFA. My department was informed of this information secondhand by a
member of the Sales Department. It took over two weeks for this information to be
communicated to the organisation through the Business Update from the board. Formisano
(2004) states that all levels of the organisations should be engaged in decision making and
poor vertical communication is one of the main reasons why strategies fail.
Page 22
Page 23
Part 2
Reflective Statement & Learning Log
Research in the field of leadership and management has placed an emphasis on the
importance of reflective learning. For the best results, it is argued that individuals should reflect
on their learning and newly developed skills, as well as identifying how this can be applied to
their daily roles in their organisations and how this can develop their future career path (Watson
& Reissner, 2010). It is within this context that I aim to reflect on the knowledge gained and
developed throughout module SM0377: Understanding Strategy.
Page 24
As I progressed through the weeks, I also began to analyse my organisations macro and micro
environments. Through this I was able to understand how stakeholders such as the SFA, the
Government and Ofsted strongly shape and effect my organisations strategy. This also further
highlighted my organisations need for quality and the need to be reflective to changes in their
macro-environment; particularly political, legal and economical factors.
Reflection on my learning
As previously mentioned, I believe the Learning Log had a positive effect on my learning. By
completing this I was encouraged to participate in further activities outside of lectures, as well
as reflecting on learning I had gained in lectures. Indeed, I was also encouraged to apply my
learning to the workplace and understand how this could be applied in my assignment.
Page 25
In a previous module I completed a Learning Style questionnaire, based on Honey & Mumfords
Learning Cycles, which identified that I had a strong preference to the learning style of a
pragmatist. Table 1.0 provides a description of this learning style and the preferred learning
activities.
Table 1.0 Learning Style of a Pragmatist
Pragmatist
Activities
Description
(Information adapted from: Mumford, 1997 and Honey & Mumford, 1986)
The preferred learning activities suggest that a pragmatist is all about things working in practice
and being relative. I believe the Learning Log encouraged me to learn in a way which suited my
learning style, as it made the learning relative and practical to my organisation and current
position. Without this I feel that I may have struggled to understand some of the more complex
theories of Strategy.
Page 26
Page 27
Reference List
Brooks, I., Weatherston, J. & Wilkinson, G. (2011) The International Business Environment:
Challenges and Changes. 2nd edn. Essex: Pearson Education Limited.
Campbell, D., Edgar, D. & Stonehouse, G. (2011) Business Strategy: An Introduction.
Hampshire: Palgrave MacMillan.
Campbell, D., Stonehouse, G. & Houston, B. (2002) Business Strategy: An Introduction. Oxford:
Butterworth-Heinemann.
Capon, C. (2008) Understanding Strategic Management. Essex: Pearson Education Limited.
Conservatives (2011) Available at: http://www.conservatives.com/ (Accessed: 10 November
2011).
Department for Business Innovation & Skills (2011) Available at: http://www.bis.gov.uk/
(Accessed: 8 November 2011).
Faulkner, D.O. & Campbell, A. (2003) The Oxford Handbook of Strategy. Oxford: Oxford
University Press.
Fleisher, C.S. & Benoussan, B.E. (2003) Strategic and Competitive Analysis. New Jersey:
Pearson Education Ltd.
Formisano, R.A. (2004) Mangers Guide to Strategy. USA: The McGraw-Hill Companies.
Haberberg, A. & Rieple, A. (2008) Strategic Management: Theory and Application. Oxford:
Oxford University Press. Oxford: Oxford University Press.
Honey, P. & Mumford, A. (1986) Using Your Learning Styles. 2nd edn. New Jersey: Pearson
Education Inc.
Grimm, C.M., Lee, H. & Smith, K.G. (2006) Strategy as Action. Oxford: Oxford University Press.
Jay (2003) How to Build a Great Team. Gosport: Pearson Education Limited.
Page 28
Sanchez, H. & Benoit, R. (2010) Measuring Portfolio Strategic Performance using Key
Performance Indicators Project Management Journal, 41 (5), pp.64-73 360 Link [Online].
Available: http://www.serialssolutions.com/discovery/360-link/ (Accessed: 18 December 2011).
Schroeder, R.G. (2003) Operations Management. 2nd edn. New York: McGraw Hill.
Sinickas, A. (2006) Evaluating your cascade process, Strategic Communication Management,
10 (4), pp.12-13 360 Link [Online]. Available: http://www.serialssolutions.com/discovery/360link/ (Accessed: 18 December 2011).
Slack, N., Chambers, S & Johnson, R. (2010) Operations Management. 6th edn. Essex:
Pearson Education.
Solomon, J. (2010) Corporate Governance and Accountability. 3rd edn. West Sussex: John
Wiley & Sons Ltd.
Thompson, J. & Martin, F. (2010) Strategic Management Awareness & Change. 6th edn.
Singapore: Seng Lee Press.
UK National Statistics (2011) Available at: http://www.statistics.gov.uk/ (Accessed: 8 November
2011).
Watson, G. & Reissner, S.C. (2010) Developing Skills for Business Leadership. London:
Chartered Institute of Personnel and Development.
Page 30
Bibliography
De Wit, B. & Meyer, R. (2010) Strategy Process, Content, Context. 4th edn. Hampshire:
Cenage Learning EMEA.
Galavan, R., Murray, J. & Markides, C. (2008) Strategy, Innovation and Change: Challenges for
Management. Oxford: Oxford University Press.
Kay, J. (1993) Foundations of Corporate Success. Oxford: Oxford University Press.
Thompson, J. & Martin, F. (2010) Strategic Management Awareness & Change. 6th edn.
Singapore: Seng Lee Press.
Mintzberg, H. (1994) The Fall and Rise of Strategic Planning, Harvard Business Review, 72
(1), pp.107-115 360 Link [Online]. Available: http://www.serialssolutions.com/discovery/360-link/
(Accessed: 21 November 2011).
Monks, R.A.G. & Minow, N. (2011) Corporate Governance. 5th edn. West Sussex: John Wiley
& Sons.
National Apprenticeship Service (2011) Available at: http://www.apprenticeships.org.uk/
(Accessed: 12 November 2011).
Ofsted (2011) Available at: http://www.ofsted.gov.uk/ (Accessed: 12 November 2011).
Skills Funding Agency (2011) Available at: http://skillsfundingagency.bis.gov.uk/ (Accessed: 8
November 2011).
Swaim, R. (2010) The Strategic Drucker. San Francisco: John Wiley & Sons Ltd.
The Information Authority (2011) Available at: www.theia.org.uk/ (Accessed: 31 October 2011).
Thomson, N. & Baden-Fuller, C. (2010) Basic Strategy in Context. West Sussex: John Wiley &
Sons Ltd.
Page 31
Van Deusen, C., Williamson, S. & Babson, H.C. (2007) Business Policy and Strategy. 7th edn.
USA: Taylor & Francis Group.
Appendices
Appendix 1.1 - Organisation Background
XXX
Page 32
Factor
Political
Influence
Publication of the National Skills Strategy, whereby the Government have set
out measures to improve skills, training and apprenticeship. These include
providing funding for an additional 75,000 Adult Apprenticeships and investing
in skill sectors on which future growth and jobs depend.
Government reforms to higher education were the upper limit on tuition fees
will be raised to 9,000 in 2012.
Economical
The North West has a much lower number of businesses per 10,000
population than the national average.
There is a smaller proportion of highly qualified people in the North West than
nationally, but there are also fewer skills shortages.
Page 33
Factor
Influence
Social
However, the ethnic diversity of the North West has changed significantly
since the 2001 Census. In particular, the regions non-white population has
grown dramatically; there have been increases in the Black African, Black
Caribbean, Chinese and Mixed heritage.
With employment and ethnicity, there are notable trends. In particular, white
and mixed raced people are the most likely to be employed, whilst
Pakistani/Bangladeshi people have the lowest employment rates in the
region.
Women in the North West earn less than their male counterparts, are
underrepresented at professional and managerial levels, and are more likely
to be concentrated at the lower skilled end of the market.
Disabled people have lower overall levels of qualifications than non disabled
counterparts.
Technological
Sustainability Agenda.
Pressure to reduce Carbon Footprint.
The need for recycling.
Page 34
Factor
Legal
Influence
Ofsted Inspections
Apprenticeships, Skills, Children and Learning Act (2009) - this act outlines
the changes to be implemented regarding the new SASE compliant
frameworks.
Government review of the Skills Funding Agency (SFA) and its structure - the
SFA are a partner organisation of the Department for Business Innovation &
Skills and fund and regulate adult further education and skills training in
England.
Sources of information: Conservatives (2011), Department for Business Innovation & Skills
(2011), UK National Statistics (2011).
Page 35
Force
Threat
Threat of entry
Switching costs from one provider to another is nil, however if the other
provider has claimed SFA funding this would not be able to be claimed again.
An existing provider may have a quality advantage over new entrants - such a
Ofsted grading, which a new entrant would not have.
Government and Ofsted regulations may make it difficult for a new entrant.
Bargaining
power of
suppliers
As the government are serving many industries, they are likely to choose to
fund the industry which needs protecting.
There are low switching cost if the Government chose to withdraw funding
from one provider and award to another.
Learners may choose not to opt for work-based training and in stead opt for
Higher Education.
Learners may choose not to opt for any sort of training at all.
Page 36
Force
Competitive
rivalry
Threat
Page 37
SWOT
Strengths
Factors Identified
Good use of ICT for communications and delivery of training following the
implementation of Learning Help (E-Portfolio software) in November 2009.
Weaknesses
Page 38
SWOT
Opportunities
Factors Identified
Use feedback from Ofsted to implement plans for change to enable the
organisation to be awarded an outstanding grade.
Government reforms to higher education were the upper limit on tuition fees
will be raised in 2012 - this could see an increase in demand for work-based
learning.
Threats
Change in Government has caused delay on some new contracts and have
been put on hold until after the spending review.
XXX may lose out on funding due to failing to achieve profiles set out by the
SFA.
Rate of unemployment in the North West is above the national average - this
means less people are able to engage in work-based learning.
Use of new E-Portfolio software could make both staff and learners feel
threatened by technology.
Source of information: Strategic Business Plan (2010) & Marketing Strategy (2011).
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