STRATEGIC MANAGEMENT, the flow process

Strategic Management is a simple two grand words to mention but a complex practice to adopt. In many companies, the CEO or the key management has always says that “we have to think strategically”. Despite of saying, preaching the whole organization in adopting Strategic Management practice, in reality they are not having one.

Strategic Management is not only a mind thinking process, imagine and implement. It has to start with awareness of the need and importance of Strategic Management. Without awareness, the intended process of Strategic Management that they wish to implement will be a short life span dreams and later wash off in a short period off time.

The second main steps are developing the vision and followed by mission statement. These are two different schools of thought but having a similar focal point to organization. It is proposed to those organization wish to adopt Strategic Management and strategic implementation would first produce a good vision and mission statement.

Having moved from there, the analysis would come in i.e. the external and internal analysis. Internal analysis is the evaluation of the internal resources such as manpower, equipments and financial capabilities. The core competencies, present strategy, also need to be evaluated and what is the value contributed to the company in terms of tangible and intangible rewards.

The external analysis is another crucial factor to be analyzed since the firms or organizations are very much linked with the external environment. Tools such as Porters 5 forces, Strategic Group mapping and KSF are important to assist any strategic planner or managers to adopt the Strategic Management.

After evaluating the external and internal factors, the competitive analysis on the macro environment and the market share analysis is the important sequence to be followed in ensuring the process is intact. Many scholars proposed BCG Matrix, GE Business Screen Matrix, Mc Kinsey 7S framework are good tools for this section of the process. Other scholars would not make the competitive analysis by not using Ansoff matrix but all this depend on the practitioner.

In many cases organization need to go beyond the competitive strategy at business level only. In this modern business world, they would proceed to corporate level strategy in being competitive that is merger, acquisition, strategic alliances or even outsourcing.

Being a practitioner of strategic management, the organization should not only ensure all the required analysis done but they need to build their resources strength and organizational capabilities. This will enhance the organization in meeting their challenges as what found in their earlier analysis. Besides having a good preparation for the execution of the plan or strategic implementation later the organization need to develop the monitoring and control for correction purpose.

According to Arthur A. Thomson Jr, A.J Strickland III and John E. Gamble, there are 10 commandments for crafting successful business strategies.

1. Always put top priority on crafting and executing strategic moves that enhance a firm’s competitive position for long-term and that serve to establish it as an industry leader.

2. Be prompt in adapting and responding to changing market condition, unmet customer needs and buyer wishes.

3. Invest in creating sustainable competitive advantages.

4. Avoid strategies capable of succeeding only in best circumstances.

5. Don’t underestimate the reaction and commitment of rival firms.

6. Consider that attacking competitive weakness is usually profitable than attacking competitive strength.

7. Be judicious in cutting prices without an established cost advantage.

8. Employ bold strategic moves in pursuing differentiation strategies

9. Do not get “stuck back in the pack”.

10. Be aware that aggressive strategies moves to wrest crucial market share away from rivals often provoke aggressive retaliation.

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A Satisfied Customer – Will they remain?

Questions has been asked to many people who are involved in business either who owns the business or the person who runs for someone.

The question is “Will a satisfied customer remains?” or “Will a satisfied customer be a loyal customer?” The answer is MIGHT NOT. But why this might happen?

Actually there is a difference between a satisfied customer on your product and your loyal customer. A customer might be satisfied with your product but if we have no good relationship develop between the seller and the customer, the seller one day shall loose the customer who might be in relation to the competitors.

This involves 2 factors:
1. The relationship between the seller and the customer.
2. The seller’s business model – are they adopting the latest business model that is customer oriented instead of product oriented.

A clear case study below would make is very clear and if the attached question is answered, then you would be clear on the issues.

In a small town of Eumundi, Queensland, there is a small Jewelry Shop called Eumundi Jewel. The owner has been traditionally selling the hand made jewelry and the customers have been telling they are happy with the product and services. However in 2007 jewelry shops, Hejja Jewels opens at a few shop lots distance from Eumundi Jewel. The customers are satisfied with the product too and the price seems to be at time slightly cheaper then Eumundi Jewel.

In 2008 early, a survey being made and data found that those customers whose has been to Eumundi Town would visit both Jewelry shops but tend to be loyal to the Eumundi Jewel instead of Hejja Jewels.

It is found that despite both shops had produce a satisfactory product to their entire customer but 2 factors had made Eumundi customers to be loyal to Eumundi Jewel.

Eumundi Jewel collect data from all their customer and send gift on customer’s important dates such as birthday, anniversary and visits to the hospitals if any of the customer is admitted.
Eumundi Jewel also from time to time advice on any drop of gold price which leads to price discounts at their shop. This helps the customer to purchase product at lower price then in certain days of the year or months.
Eumundi Jewel also draws or designs the jewelry sets, ring, and bracelets, in meeting the customer request. Advices are given to customers not only design but also other cost consultancy and this is FOC.

Hejja Jewel fails to do this and hence their customer is not loyal.

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YIELD VALUE – the indicator

In most studies people has been made to understand that yield value is used for yield value per share, the bonus and dividend and yet this is all for the financial accounting purposes.

A friend of mine came and require an assistance to advice ‘why is his company making profits but it is too slow on the development’. On other word it is not expanding despite good business turnovers.

I then start asking questions and I realize that he is only looking at Profit and Loss account. Despite of seriously calculating and monitoring his P&L I told him to add a tool that is ‘Yield Value per kg’, since his business is Tuna Fishing Business.

I start guiding him how to use the “Kg Yield Value’ and it has been running good for the past months. It seems that most business are only using financial accounting to manage the company and forgotten the financial management section.

Hence the yield value, if we use it in the perspective of sales, marketing and operation even, we are able to determine the profitability of the business at the most sensitive level. This is very important and business owners or entrepreneur would be able to use it as an important indicator. As an example of my friend, he is selling his Tuna fish at USD 3.15 per kg and he says he had a profit of 18%. When I calculated with yield value per kg., he is actually incurring a loss of USD 2.8 per kg. Can you just imagine how much is the variance from his calculation and yield value per kg calculation?

This yield value/n is very important as a tool and it could be used for any business but we have to understand the concept of it before using this particular tool.

Selling Principles - Assignment

Joe’s Waterhole Pte. Ltd is a medium size kitchenware stores in Eumundi, Queensland. It was established by Joe Waterhole in 1819 and now his grand son with his wife is the owner and the shareholder of this company. Having a turnover of USD359, 000 a month and a profit margin between 15% - 20%, depending on the products. While the servicing Joe’s Waterhole also does servicing but all are referring to Kitchenware. The products ranging from kitchen basin, dinner tables, pipes, kitchen curtains, knife sets refrigerators and even the stoves. While the services provided are kitchen maintenance, renovation, upgrading and even plumbing for kitchen areas.

Since 2006 the sales has drop tremendously for almost 20% - 35% respectively. Both Joe Jr. and his wife decided to engage a new Sales Manager to handle the 10 staff of which 6 are sales person and 4 is the maintenance person. Julia, a fresh graduate in Sales and Marketing has been engaged and being entrusts to resolve the sales decline of 2006 and 2007 phenomena.

Soon after she had her position, she then started by understanding the sales, operation and the culture of the organizations. Soon she found that the company fails in most of the tender bid or even quotations bid in supply all kitchen wares to restaurants, university hostel nearby and resorts kitchen. It seems that the sales people did not understand the decision making process of the business market.

She had also distributed VOC forms (Voice of Customer) and found out the response that 55% complaints the sales person forgotten who is their customers. To Julia it is only a transactional selling which all stores do. 97.5% the customer are satisfied with the products but it seems that are also buying randomly at other 2 stores which is Joe’s Waterhole competitors.

The lists of customers are not available but randomly Julia is able to capture that there are at least the 50,000 family in this town who are modern farmers, government servant and business people at least drop in at least once in 2 months. She was thinking to resolve this issue too for business improvements.

If you are being appointed as the New Sales & Marketing Manager instead of Julia, what are the main 3 problems Joe’s Waterhole is facing with regards to selling principles? Describe each of them and what is the theory that you have learned with regards to the problems of Joe’s Waterhole? Put up a proposal in resolving these issues.

Selling Principles

Joe’s Waterhole Pte. Ltd is a medium size kitchenware stores in Eumundi, Queensland. It was established by Joe Waterhole in 1819 and now his grand son with his wife is the owner and the shareholder of this company. Having a turnover of USD359, 000 a month and a profit margin between 15% - 20%, depending on the products. While the servicing Joe’s Waterhole also does servicing but all are referring to Kitchenware. The products ranging from kitchen basin, dinner tables, pipes, kitchen curtains, knife sets refrigerators and even the stoves. While the services provided are kitchen maintenance, renovation, upgrading and even plumbing for kitchen areas.

Since 2006 the sales has drop tremendously for almost 20% - 35% respectively. Both Joe Jr. and his wife decided to engage a new Sales Manager to handle the 10 staff of which 6 are sales person and 4 is the maintenance person. Julia, a fresh graduate in Sales and Marketing has been engaged and being entrusts to resolve the sales decline of 2006 and 2007 phenomena.

Soon after she had her position, she then started by understanding the sales, operation and the culture of the organizations. Soon she found that the company fails in most of the tender bid or even quotations bid in supply all kitchen wares to restaurants, university hostel nearby and resorts kitchen. It seems that the sales people did not understand the decision making process of the business market.

She had also distributed VOC forms (Voice of Customer) and found out the response that 55% complaints the sales person forgotten who is their customers. To Julia it is only a transactional selling which all stores do. 97.5% the customer are satisfied with the products but it seems that are also buying randomly at other 2 stores which is Joe’s Waterhole competitors.

The lists of customers are not available but randomly Julia is able to capture that there are at least the 50,000 family in this town who are modern farmers, government servant and business people at least drop in at least once in 2 months. She was thinking to resolve this issue too for business improvements.

If you are being appointed as the New Sales & Marketing Manager instead of Julia, what are the main 3 problems Joe’s Waterhole is facing with regards to selling principles? Describe each of them and what is the theory that you have learned with regards to the problems of Joe’s Waterhole? Put up a proposal in resolving these issues.

Buying Assets – why it fails?

I have been purchasing several appreciative and depreciative assets for my company and I have never let my partner to undertake it. Until now it has been very successful and most of the time we do not have to pay the 10% or 20% deposits prior to the approval of our financial facility from the bank. This includes the vessels that we have had, the stocks that we own, and a few others.

It has been quite sometimes for me to undertake these tasks of asset purchase until last week I then decided to have a trial; by requesting my friend/partner to undertake the final negotiation with the land owne. It is about the price of the land and payments methods that I had requested him to do. This particular land is in Terengganu.

The land is RM1.1 million; 9 acres of Palm Oil Plantation and it is along the road side. There is an income contributed by the Palm Oil Plant and I personally realize this is a golden opportunity and I always believe in leveraging theory (the bank).There is only one single approval left from the owner owner; discounts; between RM700 – RM900 thousand.

In my early discussion with  the owner, he has agreed for discounts and payment is only after the banking approval/drawdown. At this end satge, I hand over to my partner for further negotiations since I have done almost 85% of the jo. After all I am busy with banking negotiations too.

I reminded him that  "this is an asset buying,  BUT remember this involve selloing and hence 'Principles of Selling' MUST not being forgotten.

My friend called the owner end of last week and surprisingly the answers trun to be negative. The owner refuse to sell the land and of course no discounts if he still wants to dispose. I was surprised and asked my friend why? What had gone wrong? Despite of looking in buying the land, my friend has forgotten on the principle of selling. He told me that; he had told the land owner; the price that we could purchase is only RM700 thousand and the payment must be after the drawdown from the bank.

What is actually happened, is he had probably misses the principle of selling during the discussions. The owner indeed knew that we are buying his land for investment – to make an income. He  agreed with me for on the buying and selling methodology I had proposed. But why does it fail with my friend?

I strongly believe that my friend doesn’t know the 'selling part' – selling of IDEAS. He only approach the owner as a land buyer and the scenario is totally different. That is why he fails and I need to renegotiate again myself.

What do you think about this in your perspective with regards to selling principles?

What type of selling that he has to do? Is it the 'new' consultative selling or just relationship selling?

ASSETS – is it right asset that you have invested from your saving?

In most studies people has been made to understand that asset is important to us. In accounting assets are classified under fixed assets and current assets. Below are listed some sample of assets as in principles of accounting:

Fixed assets
- Buildings
- Land
- Cars
- Equipments

Current Assets
- Fixed Deposits
- Shares
- Bonds

In business, debtors are also included under current assets. However for fixed assets such as equipments and cars undergoes depreciations. After certain years the net book value of the assets is much lower than the purchased price.

This is different from assets such as fixed deposits, bonds, and the lucrative assets that is land. The price shows some appreciation from time to time and for the land the appreciations is much higher than the day of purchased. The house even would shows some immediate appreciation if it is an auction house. That goes to the land too.

So where to invest

In many of my lectures, a have advice the students that if investment are to be made, a careful understanding on the type of assets to be invested is very crucial. I have met friends, clients and people who has been asking me what assets to invest and would immediately put up an opinion to invest in appreciative assets.

Some people ask me, if they have money, what business they should be in. I told them, “If you have money, don’t do business. Only if you don’t have money, you start doing business.” All of them were stunt.

I have always advice that if we have money then invest, divest then invest. But the investment must be in appreciative assets. After a certain calculated appreciation or after meeting the target return (ROI) that we want we can divest the assets and prepare for another investment. In between enjoy your profits.

All of them thank me until now.