Research Topics: Strategy Conceptual Frameworks

Sample Strategy Conceptual Frameworks

Q: In the past few decades, the majority of Hong Kong’s manufacturing companies have grown from traditional small factories with fewer than 100 employees in Hong Kong to large manufacturing operations in China with more than 1000 employees. Select a company in Hong Kong that has expanded in the manner described above; and use the conceptual frameworks presented to analyse in detail the company respect to (a) what strategic direction it has taken(horizontal, vertical, diversification) and; (b) what competitive strategy the company has pursued (cost-based, diversification or focus) In your answer, please be specific with respect to strategic direction, market structure, conduct-performance analysis and strategies to be recommended.   Introduction             Hong Kong manufacturing companies have always been keen on finding ways to lower production costs in order to achieve competitive advantage not just in the domestic but also the world market. These Hong Kong companies direct operations based on the core objective of every business organization to achieve competitive advantage or gain an edge over its competitors in the industry. Competitive advantage exists “when a firm successfully formulates and implements a value-creating strategy” (Hitt, Ireland & Hoskisson 2003, p. 6).  Two forms of competitive advantage exist, which are cost advantage and differentiation advantage. Cost advantage exists when the business firm is able to sell its products at a lower price relative to firms selling the same product (Porter 1998). In terms of business strategy, Porter (1980) identifies three generic strategies, which business firms may apply to establish a strong position for the firm by leveraging on its strengths. In optimizing the strengths of the firm, it is able to achieve any of these strategies: cost leadership, differentiation and focus. Cost leadership refers to being the producer with the lowest cost in the industry for a certain level of quality.  Differentiation pertains to the development and production of unique products and services valued by customers. Focus refers to focusing on a narrow segment of the market and implementing either cost leadership or differentiation. Company Background             WKK Industries, Ltd. with main office on Kowloon, Hong Kong has been in operation for more than ten years. The company provides both original equipment manufacturing and original design manufacturing services. WKK serves as the manufacturing division for customers, producing a wide array of high quality products in both small and large volumes and providing all component needs and subassembly services including packaging and shipping. Around 20 percent of the company sales are attributed to original design manufacturing. Customers communicate their conceptual designs and specifications and WKK finalizes the design and printed circuit board assembly. (Kelly & Boulton 1997)               WKK has long-term business relations with Japanese clients. The company finalized the design and manufactured Sega colour LCD games, Universal remote controllers, Casio calculators, NEC colour printer boards, and 486 motherboards, Yamaha hi-fis, cable television decoder, Seiko and Kenwood cordless telephones, Sharp’s PDA parts and CD-ROM cards, 16-bit Sega Genesis, among others. The company has been continuously ISO 9001 certified. (Kelly & Boulton 1997)              WKK has operations in Hong Kong and China, with the China factory moved to a bigger site in 1997. In China, there are five operating groups, which are digital/game, audio, and SMT as well as personnel and administration, and engineering. China operations handle production while Hong Kong takes care of research and development, quality assurance and marketing. When the Shajin factory in China was opened, WKK sent 31 managers, engineers and supervisors from Hong Kong and hired 6 managers, 58 engineers, 41 staff, and 1,679 labourers and 135 quality inspectors. The assembly operations run in one shift while the surface mount technology runs 24 hours everyday. At the time that production was moved to China in 1994, the average monthly salary of engineers in China is 5 relative to ,055 in Hong Kong while the average monthly wage of labourers in China is relative to 5 in Hong Kong. There is also a 50 percent turnover rate in China implying a huge labour pool that lowers the cost of labour. (Kelly & Boulton 1997)         Strategic Analysis of the Company Strategic Direction of the Company             WKK strategic decision to move its manufacturing operations to China and retain the Hong Kong operations to cover R&D, quality assurance and marketing is described as horizontal integration. This type of strategic direction refers to the expansion of the business at the same level of the value chain particularly covering internal expansion (Clemente & Greenwood 1998). By moving its production operations to China, WKK was able to expand its manufacturing capacity so that it is able to meet more demand at less cost. The internal expansion to China has benefited the company in different ways. First is through economies of scale. Through its horizontal strategic direction, the company is now able to produce more products at the same cost relative to its previous production in Hong Kong. Second is through economies of scope. WKK is able to optimize its resources not only in terms of labour but also in relation to raw materials and other resources needed in production. Third is through increased market power due to the heightened capacity of the company to meet greater demand even if the services demanded may be original equipment or original design making it an attractive firm for suppliers due to potential increase in raw material needs and customers requiring greater amounts of production for their equipment and designs. Fourth is through cost minimization since the lower cost of skilled and unskilled labour, land and raw materials in China enables the company to reduce production cost by as much as 30 to 50 percent. The savings enables the company to increase its concentration on research and development and marketing. The effectiveness of its chosen strategy is reflected in its performance after it moved production to China and boosted its R&D capability. The SMT production unit was able to manufacture eight Yamaha products with an assembly time of .03 to .04 seconds for every component, five Kyushu Matsushita Electric product lines at the rate of .15 seconds for every component for a daily run of more than 1,500 units a day. The lesser cost of labour enabled the company to equip the factory with ten stand-alone machines to do batch production. The factory has Genrad, Tescon Point and Test Research machines for information and communications technology requirements. The Shajin factory in China also manufactures 9,000 Casio calculators everyday. WKK’s manufacturing processes adopts the management methods as well as the innovative assembly practices pervasive in Japan.        The production performance of the Shajin factory in China implies that the company can simultaneously manufacture different products for different customers, which entails the high level of innovativeness and efficiency of the company in terms of management, production processes and production resources.   Competitive Strategy of the Company             WKK applies the cost-based competitive strategy. This industry leadership strategy involves a business firm’s goal of becoming a low cost producer relative to competitors. Ideally, a business firm either can sell its products at the average industry price to gain a higher profit compared to the other high-cost producing firms or it can sell its products at lower than the average price to draw a larger market share. In the event of a price war, the business firm still gains the price advantage of the other firms cannot match its price without incurring losses so that in the long run the company still holds cost leadership. (Porter 1980)             WKK has gained cost advantage in several ways. First is through the enhancement of process efficiencies through strong management leadership and innovative organization of its factory supply chain processes. The company has both managers and engineers from Hong Kong and China to ensure continuity with improvement in the strategic management objectives of the company and the sharing of expertise. This lowers cost by minimizing mistakes that increases cost in terms of raw material wastage and manufacturing delays. Second is through access to large sources of resources or avoiding unnecessary costs. The company was able lower its cost at a significant level by incurring lower costs for the land and factory structure, labour, and other operating costs.                  Through its strategies, WKK was able to maintain Japanese customers, who are leaders in their industries, as its biggest market resulting to the company’s access to technology and other innovations.  The company is seeking to expand to other markets such as North America and Europe.           Recommendations             Cost-based strategy also has pitfalls. One is the possibility that through technological innovations a competing firm may be able to lower its production cost to either match the price of the company or offer a lower price levelling down the competitive advantage of the company. This risk is a challenge to all Hong Kong businesses that opted to apply cost-based strategy through outsourcing because their competitors in other regions commonly focus on technological advantage. Thus, although WKK is channelling some of its saved resources from the lowered production cost to research and development and quality assurance, it should become aggressive in attaining a technological advantage. In the long run, this would increase its capability and further increase cost. The company should also capitalize on technology sharing with its customers in terms of product development and manufacturing techniques to enhance its operations. Another risk of cost-based strategy is the possibility that competing firms applying the focus strategy would gain a hold over a specified segment of the market and maintain their market share through lower cost by operating in a narrow scope allowing them to gain expertise in the area. WKK offers production services to its customers, regardless of the original equipment or design ordered. On one hand, this is an advantage for the company because customers with specific demands can rely upon the company to deliver its particular order in bulk. On other hand, this prevents the company from honing its expertise for a particular product line, an advantage that focus-based companies have. WKK may divide its production into the manufacturing of particular products and custom-made products to boost the capability of the company to meet focused and specialized demand. References Clemente, MN & Greenwood, DS 1998, Winning at Mergers and Acquisitions: The           Guide to Market-Focused Planning and Integration, John Wiley & Sons, New  York.   Hitt, MA, Ireland, RD & Hoskisson, RE 2003, Strategic Management: Competitiveness    and Development, 5th edn, Thompson South-Western, Australia   Kelly, M & Boulton, W 1997, WTEC Panel Report on the Electronics Manufacturing in    the Pacific Rim, International Technology Research Institute, Baltimore, \     Maryland.    Porter, ME 1980, Competitive Strategy: Techniques for Analyzing Strategies and Competitors, Free Press, New York.   Porter, ME 1998, Competitive Advantage: Creating and Sustaining Superior           Performance, Free Press, New York.     src=”http://pagead2.googlesyndication.com/pagead/show_ads.js”> Credit:ivythesis.typepad.com

Sample Strategy Conceptual Frameworks

Q: In the past few decades, the majority of Hong Kong’s manufacturing companies have grown from traditional small factories with fewer tha...

Conceptual Framework

Conceptual Framework Today most companies find that it impossible to create any kind of sustainable competitive advantage based on product alone. It is common knowledge that every one of the successful companies sought and found a precise understanding of how it could create a customer-centered competitive advantage. Business firms invest on researches that will define their target customer groups that they believed they could serve best. Every business person is determined to know what kind of work they would and would not do for their customers and, in turn, they carefully learn how to fulfill the needs of each kind of customer in their target markets.  (1996) emphasized the idea to take advantage of the competitive situation not just by being better in how that product gets sold, serviced, and marketed at the customer interface. It requires that companies create breakthroughs in how they interact with customers, and design a way of interacting that makes an indelible impression on customers, one that so utterly distinguishes them from others that it becomes a brand in itself (1996). Understanding the dynamics of the competitors in the industry helps assess the potential opportunities of every business venture by differentiating the similar products or services offered by the company against other business organizations. As such, it is necessary to realistically assess potential levels of profitability, opportunity and risk based on five key factors within an industry so as to determine the long-term profitability of a market or market segment (1998).   This conceptual framework directly targets to answer research question numbers 1 and 3. The organizational factors are deemed to be the resources and capabilities that drive the organization towards competitive advantage. Meanwhile, the external conditions are the factors that affect the utilization of resources and capabilities of private hospitals. In relation to research question numbers 2 and 4, the identified drivers of competitive advantage are applied using the identified findings as well as recommendations as product of the researcher’s analysis.   Organizational Factors and Competitive Advantage             The internal factors present within the firm is considered as it main instruments in gaining competitive advantage. This is where people make the most of their skills. Describing the internal environment that includes the whole organizational setup, people and related factors is a requirement as it is the means to identify the strengths as well as weaknesses, opportunities and threats. The environment where an industry is situated plays a major role in the conduct of business organizations. It constantly shapes and reshapes the fate of organizations in relation to the presence of competition. Today, the changing environment of business has prompted various organizations to devise competitive strategies very different from the conventional ones. They now perceive that conventional strategies are not suitable anymore in contemporary business. Meanwhile, the changing global business environment signals the need to adopt new strategies. Thus, the industry environment significantly shapes the competition of organizations. H1. The industry environment significantly shapes the competition of organizations.   Similarly, these organizational factors are the source of core competencies of the whole firm. The strategic competencies of organizations are commonly known as its core competencies. Core competencies are a combination of technological expertise and organizational capabilities (1996). They provide protection for the company against present and future competitors. They serve as a barrier to competitors trying to penetrate the company market ( 1999). For instance, the management and leadership style used within the firm, human resources, or technology and innovations are considered as core competencies of the organization. These can play a significant role in developing a competitive advantage against competitors or its overall function and performance. H2. A firm’s strategic competencies significantly affect its performance.   The success of a company can be measured on the level of its competencies, so the company should define their competencies in such a way that they will be able to take advantage of greater opportunities. The core competencies of the company will provide opportunities for future competition (2006). Core competencies can be considered a source of competitive advantage. The competitive power of an organization often lies in its core competencies. These become the basis for competition and also provide the foundation for sustainable competitive advantage (2002). The organizational factors present within the bounds of the whole firm are believed to be the source of organizational strategic core competencies. The manner in which the management utilizes it is the key to its eventual materialization towards progression, thus, turning them into competitive edge. H3. The success of the private hospital industry lies in the utilization of strategic competencies.   Competing for resources, customer and competencies are the key aspects of competition among private hospital organizations as well as public ones. By maintaining a competitive advantage, private hospitals can manage future competition. In the same way, the competitive advantage of organizations is integral to their success. Organizations have adopted different strategic management tools as a framework for creating and sustaining competitive advantage. As stated, the manner in which the organization uses its identified core competencies and strategic management tools directly affects the organizational performance. H4. The strategic management tools adopted by an organization directly influences the development of its competitive advantage.   In the resource-based strategy, it is assumed that there are significant differences among firms to the extent to which they control their resources. Also, the differences in the resource endowment of firms cause differences in their performance (1997). The resource-based view is generally seemed to be appropriate in organizations like the private hospital industry (1999). The nature of this model makes it indispensable for the private hospital industry to utilize its core competencies. Primarily, the model concentrates on developing the internal resources and capabilities of organizations. The nature of the private hospital industry requires the use of a resource-based view. In this kind of industry, organizations compete for the same resources, competencies and customers. Because of this, there is a need to utilize the unique characteristics of organizations. It is through the resource-based view that the private hospital organizations can tap their internal resources and capabilities. This can reveal unique characteristics which in turn will allow into gain a competitive edge. Considering the external conditions that directly affects the overall condition of organizations, the inherent factors present within the organization that serves as its advantage will also serve as its barrier against the potential hazards brought about these external factors. In connection, the implementation of the resource-based view as a management tool yields to higher productivity. H5. The implementation of the resource-based view as a strategic management tool in private hospital industry yields significantly higher productivity.                    Credit:ivythesis.typepad.com

Conceptual Framework

Conceptual Framework Today most companies find that it impossible to create any kind of sustainable competitive advantage based on produc...

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