Chapter 2
Literature Review
This review of related literature initially considers key areas of broadly acknowledged theoretical material covering supply chain management and strategic management. The influence of these aspects of management with respect to the Strategic Competitive Advantage may well prove significant in both application and effectiveness.
Basically, Hammer (1992) looks at ‘Outsourcing and the value Chain’. He states:
“One method of reducing costs is to outsource non-core activities. Outsourcing can bring a number of benefits.”
Actually, the topic of outsourcing may help to understand the competitive advantage of the organisation.
On the other hand, competitive analysis “Porter’s five forces”; Porter’s (1998) competitive analysis identifies five fundamental competitive forces that determine the relative attractiveness of an industry: new entrants, bargaining power of buyers, bargaining power of suppliers, substitute products or services, and rivalry among existing competitors. Competitive analysis leads to insight in relationships and dynamics in an industry, and allows a company or business unit to make strategic decisions regarding the best defendable and most economically attractive position.
Apparently, (1990) wrote an award-winning HBR article on the core competence for the future based on the concept of the core competence. They encourage managers to ask themselves such fundamental questions as:
Ø What value will we deliver to our customers in, say, 10 years from now?
Ø What new ‘competencies’ (a combination of skills and technologies) will we need to develop or obtain to offer that value?
Ø What are the implications with regard to how we interact with our customers?
With regards to these management practices issues, the SWOT analysis of any company is all about strategic planning concerning company’s strengths and weaknesses. When combined with an inventory of opportunities and threats in (or even beyond) the company’s external environment, the company is effectively making what is called a SWOT analysis: establishing its current position in the light of its strengths, weaknesses, opportunities and threats.
Moreover, Angel Garment Ltd also considers the value chain as part of its competitive advantage. Michael Porter (1998) believes that it can be understood only by looking at a firm as a whole. Cost advantages and successful differentiation are found in the chain of activities that a firm performs to deliver value to its customers. Further work by Porter on ‘Value chain analysis’ may also help understand the competitive advantage of the organisation. He described the value chain as:
“Desegregating a firm into it’s strategically relevant activities in order to understand the behavior of costs and the existing and potential sources of differentiation. A firm can gain competitive advantage by performing these strategically important activities more cheaply or better it’s competitors.”
Moreover, Syson (1992) examined the barriers to be found in supply chains. He spoke of:
“The interface Model of the traditional supply chain and the Integrated Model of the ideal supply chain, and identifies forces for change which make it important for organisations to move from the former to the latter.”
He goes on to describe the features of his integrated model including:
“The supply chain as a single entity, integrated at different levels of management – strategic, planning and operational”
From this discussion, this part of the dissertation divided the categories in several parts. The said parts assess the Vision Statement, external and internal business process, SWOT analysis will be also described, strategic choices, implementation analysis and evaluation process are also described.
2.1 Vision Statement Assessment
In Angel Garments Limited, the main vision of the company is to be competitive with respect to the quality of products they are distributing. The company is actually engaged in different business practices that may increase the standard of the quality of products. Angel Garments Limited operates in a turbulent and dynamic business environment. The current business environment of Angel Garments Limited is undergoing a metamorphosis as rapid technological innovations, competitive markets, diverse customer preferences, and extensive global operations prevail in it. To ensure continuous operation and survival in today’s rigid business environment, a business firm has to be open to change and improvement. Their business processes, services, products and operations should be consistently subject to evaluation and refinement. The norm is to deliver quality products and services while maintaining flexible and effective operations.
2.2 External Assessment
With regards to the external assessment of Angel Garment Limited, the researcher will consider the PEST analysis. A marketing model for analysis that can be utilized in order to analyse the corporate strategy of Angel Garments Limited is the PEST analysis. PEST Stands for Political, Economic, Sociocultural and technological factors that influence of Angel Garments Limited’s overall performance in the market place.
In addition, PEST analysis is a part of the external analysis when doing market research and gives a certain overview of the different macro environmental factors that the company has to take into consideration. Actually, political factors include areas such as tax policy, employment laws, environmental regulations, trade restrictions and tariffs and political stability. The economic factors are the economic growth, interest rates, exchange rates and inflation rate. Social factors often look at the cultural aspects and include health consciousness, population growth rate, age distribution, career attitudes and emphasis on safety. The technological factors also include ecological and environmental aspects and can determine the barriers to entry, minimum efficient production level and influence outsourcing decisions. It looks at elements such as R&D activity, automation, technology incentives and the rate of technological change.
PEST analysis is very important that an organisation considers its environment before beginning the marketing process (Crainer, S 2002). In fact, environmental analysis should be continuous and feed all aspects of planning. The organization's marketing environment is made up from the following:
Ø The internal environment like staff or internal customers, office technology, wages and finance.
Ø The micro-environment such as external customers, agents and distributors, suppliers and competitors.
Ø The macro-environment such as political including legal forces, economic forces, socio-cultural forces and technological forces.
The acronym PEST or sometimes rearranged as STEP is used to describe a framework for the analysis of these macro-environmental factors (Crainer, 2002). A PEST analysis fits into an overall environmental scan as shown in the following diagram (see Figure 3):
Figure 3. Overall Environmental Scan
Figure 4 the graphical explanation of PEST analysis
The number of macro-environment factors is virtually unlimited. In practice, the firm must priorities and monitor those factors that influence its industry (Mark ides, 1999). Even so, it may be difficult to forecast future trends with an acceptable level of accuracy. In this regard, the firm may turn to scenario planning techniques to deal with high levels of uncertainty in important macro-environmental variables.
PEST is a nonlinear parameter estimation package with a difference. (Mark ides, 1996:58) The difference is that PEST can be used to estimate parameters for just about any existing computer model, whether or not a user has access to the model's source code. PEST is able to "take control" of a model, running it as many times as it needs to while adjusting its parameters until the discrepancies between selected model outputs and a complementary set of field or laboratory measurements is reduced to a minimum in the weighted least squares sense.
Most parameter estimation packages suffer from two serious drawbacks that inhibit their ability to optimize parameters for the plethora of computer simulation models that are used today in all fields of study (Moncrieff, 1999) The first of these difficulties is that a model normally needs to be partially recoded in order to communicate with an estimation program; this usually involves recasting the model as a subroutine which is then called by the estimator each time it needs to run the model. The second disadvantage is that the performance of many commercial and public-domain estimators is seriously degraded when optimizing parameters for large numerical models or for the sometimes complex models used for simulating "messy" environmental processes.
PEST overcomes the first of these difficulties by communicating with a model through the model's own input and output files (Mischief, 1999). Thus PEST adapts to the model; the model does not need to be adapted to PEST. It overcomes the second problem by implementing a particularly robust variant of the Gauss-Marquardt-Liebenberg method of nonlinear parameter estimation. Furthermore, through adjustment of a number of control variables, a user is able to "tune" PEST's implementation of the method to suit the model for which parameters are sought.
Because PEST is model-independent, the "model" can, in fact, be a series of models which PEST runs in succession through a batch file; PEST can estimate parameters for one or all of the models simultaneously (Moncrieff, 1999). Thus, a first model can provide input data for a second model; a single model can be calibrated against a number of different historical datasets all at once; a preprocessor can be run, followed by the model, followed by a postprocessor; the possibilities are endless.
2.3 Internal Assessment
2.4 SWOT analysis (Long-term Objective)
2.5 Strategic Choices
Strategy is now a common business word, and is probably the most used and abused term in the business world, but it was not originally used in a business sense. It was first used in popular English literature sometime before 1050. The Greek origin of the word `strategy' is `strategies', which means ‘general’, and in the Byzantine Empire the term was also used in the to describe a military governor (Dai, 1996, p. 54). It is argued by many authors in strategic studies that the concept of strategy is an analogy of or originated from the classical as well as modern military art (James, Mintzberg & Quinn, 1991). Although strategies have been used throughout the history of commerce and industry, the study of strategy as an academic subject did not receive serious attention until the 1960’s (Dai, 1996, p. 14). Nowadays, it is used in the business field with unsurprising familiarity, from the more specific areas of management, finance and, in the context of this paper, marketing. The strategy literature is diverse. Scholars and practitioners have different frameworks for the concept and some do not even agree on a single definition. It is therefore only proper to present as much meaning as possible to acquaint oneself with the various interpretations of strategy.
If the concept is boiled down to its essence, businessmen and entrepreneurs can gain the clearest insight on how thinking strategically can benefit the business venture. There are quite a number of traditional views regarding strategy. According to Porter (1986), strategy is ‘about being different’ and ‘it means deliberately choosing a different set of activities to deliver a unique mix of value’. Porter argues that strategy is about competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors. Sidorowicz (2000) gave several definitions, and the following is one of them: ‘Strategy as a definition of the economic and non-economic contribution the organisation intends to make to its stakeholders, where sustained profitability is the legitimate and deserved reward of a job well done’. briefly defined strategy as the framework which guides those choices that determine the nature and direction of an organisation. Kenneth Andrews (1980), meanwhile, presents a lengthy definition of the word:
‘Corporate strategy is the pattern [italics added] of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organisation it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities (pp.18-19).’
(2000) succinctly gave this meaning of the word: Strategy is all these—it is perspective, position, plan, and pattern. Strategy is the bridge between policy or high-order goals on the one hand and tactics or concrete actions on the other. Strategy and tactics together straddle the gap between ends and means. In short, strategy is a term that refers to a complex web of thoughts, ideas, insights, experiences, goals, expertise, memories, perceptions, and expectations that provides general guidance for specific actions in pursuit of particular ends. Strategy is at once the course we chart, the journey we imagine and, at the same time, it is the course we steer, the trip we actually make. Even when we are embarking on a voyage of discovery, with no particular destination in mind, the voyage has a purpose, an outcome, an end to be kept in view. Given the wealth of literature on the concept, it is hard to come up with a final, unambiguous definition of strategy. Simply, there is no one absolutely correct meaning of the word, that strategy is a broad, ambiguous topic. Each individual, depending on the need, must come to one’s own understanding, definition, and meaning of this diverse term.
If studies on strategy are in profusion, one would be surprised at the doubly large number of studies done on strategic planning. The reason behind this is that there has been acceptance in the business circle that strategic planning, indeed, is the place to start if one wants to go from one point of origin to somewhere. The term has become a catchy buzzword with obvious benefits, less obvious pitfalls, and a variety of meanings. The aura of complexity, importance, and expense it has assumed through popularization might have confused or discourage business people from adopting it into practice but it is now apparent that this is not the case.
Goodstein, Nolan & Pfeiffer (1993) defined the term as ‘the process by which the guiding members of an organisation envision its future and develop the necessary procedures and operations necessary to achieve that future’ (p. 3). Steiner summarized his meaning of the word in one sentence: ‘Strategic planning is a backbone to support the strategic management’ (p. 4). Bryson (as cited in Alston & Bryson, 2005), defined strategic planning as ‘a disciplined effort to produce fundamental decisions and actions that an organisation (or other entity) is, what it does, and why it does it (p. 3). Cook (2000) gave this meaning of the word: ‘is the technique by which all variables are synthesized and the means by which all energies are dedicated to one real intent. Understanding and commitment are set forth in a plan that is, in effect, both stimulus and expedient’ (p. 4). In the words of Andreas Raps, ‘a well-formulated strategy can only generate a sustainable added value for the company if it is implemented successfully, so regardless of the intrinsic merit of a particular strategy, it can't succeed if an effective implementation procedure is missing’ (2004). Alignment of strategic plan throughout the business could also contribute to the success.
Mercer (1991) said that the main purpose of strategic planning is to provide management with a framework in which decisions can be made which will have an impact on the organisation. A conscious effort to systematize the effort and to manage its evolution is preferable to an unmanaged and haphazard evolution. Goodstein, Nolan & Pfeiffer defined the word as ‘the process by which the guiding members of an organisation envision its future and develop the necessary procedures and operations to achieve that future’ (p. 1). Mercer claimed that strategic thinking entails operational (tactical) planning - the planning of those actions to be taken to put strategies into effect. This type of planning answers the question of how to get the job done. It often consists of specific objectives accompanied by short narrative action plans.
Below is an illustration of the evolution of strategic planning in the private sector (Mercer, 1991, p. 19):
1950's
Early 1960's
Late 1960's
U+0026 1970's
1980's
GENERAL
MANAGEMENT
PROFIT
PLANNING
BUSINESS
PLANNING
STRATEGIC
MANAGEMENT
Business
Survey
Business
Assessment
Business
Assessment
Business
Assessment
Management
Audit
Company
Performance
Company
performance
Environmental
Intelligence
Organizational Studies
Future
environment
Corporate
Strategic Plan
Profit Plan
Objectives
Stake holder’s
expectations
Forecasts
Plans
Strategic
Plan
Division
Strategic Plans
Mission Objectives
Organisation
Effectiveness
Product/Market
Strategy
Resource
allocation
Operational
Plans
Operational
Plans
Performance
Standards
Annual Plans
& Controls
Budgeting
& Control
Annual Plans
& Controls
Budgetary
Control
Budgets
MOB
Control Systems
(2006) asserted that the word is focused on reaching specific, well-defined goals designed to benefit the organisation as a whole. He said that it is possible to have a number of long-range goals and plans that are quite independent of one another and in fact lead in different directions. Strategic planning is a means of making some very fundamental decisions and charting a course so that short- and long-range planning is more efficiently focused and integrated. The organisation, in the course of strategic planning, must: (1) identify and/or clarify organisational values; (2) develop CEO of vision statement; (3) conduct internal assessment by examining the mission and values statement and composing a list of strengths and weaknesses of organisation; (4) conduct external assessment by composing a list of challenges, obstacles, opportunities and niches; (5) determine what business organisation is in or wants to be in; (6) determine key result areas in which goals will be set; (7) set goals in key result area by developing a consensus on goals and relating it to vision and values; (8) set strategies regarding goals; (9) determine tactics as to how to achieve strategies; and finally; (10) assign accountabilities (O’Neil, 2001). Mercer (1991) said that effective strategic plans include six key elements: (1) an environmental scan (situation analysis, strengths, weaknesses, opportunities, threats--SWOT--analysis, or size-up) including an examination of both external and internal factors; (2) a mission statement which defines the fundamental purpose of the organisation and its boundaries; (3) a set of strategies indicating what will be done to carry out the mission; (4) objectives for each strategy; (5) tactics or short-term operating plans for meeting objectives; and (6) controls, measures, and evaluation steps to determine how well the strategic plan is progressing.
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