Five Forces Model Automobile Industry

Five Forces Model Automobile Industry Case Study Analysis

Title: Five Forces Model Automobile Industry Case Study Analysis. Michael Porter’s Five Forces Model is a simple yet effective business analysis tool that is used to determine whether a strategy has the potential to be profitable in a company’s competitive environment. When carried out in the right way, with the right tools, the Five Forces Analysis can provide invaluable insight into your business’s competition and how much power you hold in the market, so you can adjust your strategy for success. As its name suggests, there are five forces which include the intensity of rivalry, power of buyers, power of suppliers, threat of substitutes and threat of potential new entrants (Porter. 1981).

Intensity of Competitive Rivalry

The key factors that influence the intensity of rivalry in the automobile industry include the number of competitors, the brand recognition of the competitors and the frequency with which new automobile products are introduced by competitors. According to Potter’s case study the global automobile industry is highly concentrated.

However, none of the companies in the industry has achieved donation of the market. The case study indicates that about seven firms have around 10 to 15 percent of the market share. The reason for this is the high acquisition levels and collaboration activities in the global automobile industry, which minimizes competition regardless the frequency of purchase or recognition of the different brands in the industry.

As a result, the intensity of competitive rivalry in the industry is moderate. The implication of the moderate competitive intensity is that automobile firms still manage to make significant profits especially since the level of competition is suppressed by the joint ventures and alliances among automobile firms in the industry.

Five Forces Model Porter
Porter’s Five Forces Model

Power of Buyers

The factors that shape the power of customers in the automobile industry include the number of buyers in the industry, frequency of purchase, and the size of purchases. According to Potter, the global demand for cars is associated to a nation’s economic performance.

The data on Worldwide Car sales in 2016 indicate that China, which is among the top best performing economies in the world had the largest had a percentage increase of 10.7 in car sales in 2016. This demand can be viewed in the context of the wider process of a country’s economic development which leads to selective ownership that causes mass market volumes of short time cycles that reduce within mass volume causing delays in purchases or consumer changing segments.

This means that buyers demand for automobiles is determined by eternal elements that they cannot control. In this regards, the intensity of the power of buyers is moderately weak, which means, firms are still able to make reasonable profits.

Power of Suppliers

The power of suppliers is influenced by the following factors, the number of suppliers, replaceability of the supplies and the exclusivity of the supplies (Porter, 1980). Potter indicates that suppliers of the global automobile industry have become solution provider and knowledge partners with the automobile firms. Moreover, technology is increasingly becoming more intelligent enabling the suppliers to gain larger economies of scale giving them the power to bargain.

However, in the global automobile industry 33% and 17% of all suppliers have their manufacturing facilities in Eastern Europe and China respectively which raises the issue of Intellectual property rights and theft of technology. These has caused a decline in the power of mot suppliers as this trend is expanding to other parts of the world. For this reasons, the intensity of the power of suppliers is moderately strong, which means that the firms are forced to collaborate and partner with suppliers to minimize most of raw material to maximize profits.

Threat of Substitutes

Threat of substitutes in the automobile industry is determined by technology advancement, affordability and availability of potential substitutes and customer’s acceptance (Porter, 1980). According to the case study, the global automobile industry threat of substitution is mainly due to environment issues and economic consideration, where people see alternatives that are cheaper and greener.

The automobile industry contributes about 70% of the emission of CO2, and consumers are ready to take up alternatives that are more environmentally friendly. However, such substitutes are mostly provided by the same automobile firms. In this case, the intensity of threat of substitutes in the industry is weak making the industry attractive and profitable.

Threat of New Entrants

The threat of new entrants is influenced by the strength of brands of existing competitors, technology and financial requirements and entry barriers (Porter 1980). Potter indicates that there are issues related to the outward and inward direct investment that firms seek to use to expand or grow into new markets affect entry strategies adopted by these companies. However, on a positive note most governments around the world are attracting investors by providing a range of grant aid and subsidised domestic rates, but the capital and cost of production and manufacturing is quite high. For this reason the intensity of treat of new entrant is weak, which makes the industry competitive ad highly profitable.

Five Forces Model Conclusion

From the case study, it is evident that competitive rivalry in the automobile industry is moderately strong, while the buyers bargaining power is moderately weak. It is also evident that the suppliers bargaining power is moderately strong, while the threat of substitutes is weak. The threat of new entrant is weak considering that the firms in the industry have gained strong market positioning that are hard to compete with and the high investment capital needed. Based on this analysis, is evident that the automobile industry is a feasible market especially for the companies that are already operating in the market.

References

Porter, M. E. (1980) Competitive Strategy. New York: Free Press

Potter, N.S. The Global Automotive Industry: The Turbulence Increases

Five Forces Model Relevant Links

Business Dissertation Topics

Management Practices Business Strategy

Did you find any useful knowledge relating to Porter’s Five Forces Model in this post? What are the key facts that grabbed your attention? Let us know in the comments. Thank you.

Organizational Ethics Program

Organizational Ethics Program

Organizational ethics refers to the principles and standards upon which businesses function according to the business’s references. The principles, as well as set standards, are mostly demonstrated over the deeds of objectivity, reliability, decency, compassion and obligation. The strategy for both business venders as well as the officials is to confirm that all the workers comprehend to the set standards as well as the principles. This can be done by initially communicating the organizational ethics to the employees through the act of training the employees on the standards of the company. Based on the basis of illustrating the goals of an organizational ethics program, essentials necessary in constructing and ensuring the function of the organizational ethics program together with the ways of implementing the procedure in favor of an organization’s future will be discussed.

The Goal of the Organizational Ethics Program

Based on the different sectors that the set organizational principles and standards function, such as on uniform treatment, considerations, financial ethics as well as dealing with the social responsibility of a particular business, the connection established is used to construct a uniform organizational goal to be attained on the course of operation. To start with, the set standards and principles ensures uniform treatment amongst all employees based on the same respect regardless of their culture, race, religion or even lifestyles. The ethics program in business through this role establishes the provision of equal promotion chances to the employees whereby the issues can be addressed during sensitive training, holding seminars as well as through inviting outside experts to disclose these issues unto the employees.

Secondly, on achieving an organization’s goal, financial stability has to be met that is protected by the compliance of the organizational ethics program in the business. This is for the purpose of business owners to establish clean business operations with respect to finances, expanding as well as investing for their companies. For example, the standards and principles may be set on prohibiting and taking action to those who bribe state legislators for either tax privileges or even credits (Johnson, 2018). On the consideration basis, a company’s ethics program ensures the provision of care to the employees who are mentally challenged, with substance abuse problems including alcohol and drug dependency. The ethics of the business through the set principles as well as standards helps the employees to overcome such problems if possible, such as putting them through employee advisor programs.

Ethics are also mandated to protect the community as well as establishing and maintaining safety standards to the nearby residents. They ensure the communication of chemical dangers by the organizations steered on ethical environmental practices. Through the joint functions established by the organizational ethics program, actions, as well as company decisions, are governed on ensuring welfare amongst the employees, customers and the community at large thus establishing the organization’s ethical philosophy hence defining its reputation on efficiency and effectiveness.

Essential Elements of an Organizational Ethics Program

For corporate compliance to organizational ethics, the standards, as well as principles, should be set to align with the company’s operations as well as objective strategies. In this approach, standards and control that includes both the code of conduct, procedures as well as standards and policies are based as the foundational elements of a functional organizational ethics program (Doppelt, 2017). Another pillar is the training feature that ensures the employees are well acknowledged on the relevant company corporate policies, laws, prohibited conduct as well as the set regulations to be applied in practice. After communicating all the critical information from the management, the questions on whether the employees of the particular company are answered through an oversight approach that includes monitoring, auditing and responding to the organizational issues.

Monitoring involves both reviewing and detecting the process of ethics compliance whereas the auditing process comprises of limited review that is based on targeting particular business components, region or even a sector of the market within a specific timeframe. Both efforts, therefore, require responding from the top management for the need of adopting any change if required in compliance with the organizational standards and principles.

Organizational Ethics Dissertation
Organizational Ethics Dissertation

Implementing the Changes based on Future Organization of a Project Management

During the process of practicing to initialize, plan, execute, control as well as close the activities of a particular team to achieve certain goals as well as meeting a specific criterion over a specified time, implementation of organizational ethics program counts to be of great significance. I work in project management that involves the planning, initializing, executing, controlling and closing different works from various teams, and observing activity operation under undefined standards and principles is a challenging issue. This is because most project management work fails as a result of unification in carrying out specific activities (Hornstein, 2015). On the other hand, you find that the initializing process of a task is simple amongst a particular team group, and the work collapses upon reaching the planning as well as the execution process. This fails due to the lack of ethical procedures to unify different plans as well as execution processes that establish the concept of how to control and finalize the work.

However, implementing the ethical changes will increasingly create a foundation for the achievement of future organizational effectiveness as well as efficiency in its operations. Further, the implementation process should be based on strategies to educate and acknowledge new as well as the existing employees on the changes that have occurred regarding compliance of the company’s standards and principles. For example, implementing these changes on my expertise area, project management, ensures mutual initializing, planning and execution of different tasks, that is closed under a unified system of control thus increasingly constructing a good reputation based on the concept of effectiveness and efficiency.

References

Doppelt, B. (2017). Leading change toward sustainability: A change-management guide for business, government and civil society. Routledge.

Hornstein, H. A. (2015). The integration of project management and organizational change management is now a necessity. International Journal of Project Management, 33(2), 291-298.

Johnson, C. E. (2018). Organizational ethics: A practical approach. Sage Publications.

Relevant Links

Marketing Ethics

Business Management Dissertations

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Reverse Logistics Supply Chain Management

Creating Competitive Advantage through the Application of Reverse Logistics in the Supply Chain Management

In every company, it is very important to attract new customers and retain the current customers on viable conditions. These actions cannot be accomplished in any single company without creating a competitive advantage. The main technique of creating a competitive advantage that a company can adopt is creating quality products or services than their competitors. They can also create products that the target customers would prefer than their alternatives. Many companies across the world have adopted reverse logistics as a strategy to increase competitive advantage. This is because this technique lowers supply cost in the supply chain.

Companies using reverse logistics can also reduce the opportunity cost of outdated products. Companies can also gain additional revenue and finally reduce the cost of operation. This is due to the fact that companies can be able to manage the flow of their products through the supply chain. Reverse logistics is also advantageous as it expands the global economy. Thus, reverse logistics can be defined as a process of controlling the flow of finished goods from their final destination back to the manufacturer for value addition so as to enable recycling or reuse or for proper disposal. Reverse logistics can be used to explain environmental externalities resulting from increased production and supply. The following essay will be on the theories that have been put in place in regard to creating competitive advantage through reverse logistics and evidence of the theories.

Theories in Reverse Logistics

The theory of reverse logistics has been gaining significant popularity for the organization across the world. This theory is essential for the cost-effective flow of the commodities that had been previously providing in the markets for the use by the consumers back to the organization. The theory of reverse logistics ensures that the organization can consider recycling and reuse of the previously supplied commodities as well as learn more about the market (Dowlatshahi, 2000: 1). This theory is used together with the theory of supply chain management. The theory of supply chain management ensures that the products flow from the point of production to the consumers is steady and maximized (Vural, 2015: 262). The theory of reverse logistics, therefore, can be used to ensure that the process of supply chain management is helpful to the organization. Supply Chain management theory helps the organization understand the methodologies that can be sued to maximize supply for the commodities through increase the demand and looking for new markets that have not be accessed before (Touboulic, and Walker, 2015: 3)

Reverse Logistics Concept in Supply Chain Management

The supply chain management deals with the flow of goods and services from the point of manufacturing to the point of consumers. The consumers are limited which make the organization selling a similar commodity to create a competitive advantage in order to outdo other fellow competitors (Mohamed and Omwenga, 2015: 45). The supply chain management requires an organization to apply various models in order to win the market. Some of the models that can embrace include the use of reverse logistics in the management of the supply chain and create a competitive advantage. The reverse logistics as defined in the introduction deals with the management of goods and services after they reach the market (Stănciulescu, 2011: 1). This idea means that the goods flow back to the organization for further management which ensures that the losses are minimized as well as optimizing the usages of the defective commodities (Menachof, et Al., 2009: 145).

In the market environment today, the consumers have a wide variety of goods and services providers. Therefore, the companies cannot sell all of their products at once. This means that the reverse logistics helps the company to manage the flow of goods from the flow of commodities from the manufactures to the consumers and managing those commodities that do not end up in the final consumers’ ownership. Reverse logistics can help the organization create a competitive advantage in that the commodities that are not sold will be managed for possible re-use (Stănciulescu, 2011: 2). On the other hand, the practices involved in the reverse logistics ensures that the organization minimizes the cost when some of the goods are recycled and reused in the organization’s activities (Vural, 2015: 265). This means that reverse logistics help the organization overcome the burden of surplus production wastage.

Moreover, management of the flow of goods and services enables the company to hire good and qualified staffs who are able to maintain the competitive advantages of the organization. Therefore, the reverse logistics practices can guide an organization to attract more consumers since the management of the flow of commodities from the manufacturer to the consumer is professional. Management of the surplus supply also requires professionalism hence the acquisition of qualified people in the supply chain management who can effectively apply reverse logistics can help an organization defeat the competitors in the markets.

Reverse logistics also refers to the process of ensuring the flow of raw materials is minimized. The low of these raw materials are from the consumers where they had maybe used the products of the organization and did not manage the waste properties. On the other hand, the management of the flow of goods from the consumers to the manufacturer can help the organization disposes of the waste properly hence helping the communities go green. Management of waste can be a good thing for the organization. This is because the environment which highly polluted with commodities and materials from a certain company, for example, the fast-food organization, can lead to discouragement from the potential consumers.

The efforts of keeping the environment clean can help the organization also minimize the cost wastage in dealing with problems associated with the dirty environments such as lack of clean water and raw materials due to global warming. In this regard, the consumers will not be happy with the company which is not managing the waste properly (Stănciulescu, 2011: 3). Therefore, the use of reverse logistics can help the organization acquire significant clean environment through recycling and reuse of the raw materials originating from the consumers.

Roles of Reverse Logistics

Through reverse logistic company can become efficient environmentally through recycling used products, reusing and minimization of the number of products used. Reduction of materials used in forwarding flow is one of the vital modes by which reverse logistics can work on. This reduces backflow of unused products and also reduces the damage of products as a result of over clumping when being transported (Mohamed, 2016:1). Recycling and reusing materials are very vital in the reduction of pollution it also allows products to move in reverse in the supply chain for the manufactures to reuse recycle and resells in subordinate markets. Many are the times when reverse logistic is confused with waste management but, there is a great difference between the two. In reverse logistic the materials that are recovered are revalued but waste management involves the collection of waste materials and treatment but these products are not assigned new roles. Reverse supply chain it entails all the activities that are involved in reusing, recycling, and final disposal of waste materials

Considering the entire word Europe has a waste management board which has directed all the firms to address their waste disposal in a manner that will cause little or no harm to the environment. The United States also has encouraged her firms to recover used products as this will minimize wastage and pollution in the country. In countries found in the Middle East which is an emerging market collection of waste products which is advised to be done by professionals sorting and transporting them is very much needed. In the third world countries which are also referred to as developing countries reverse logistic is known to add very low value to the recovered products this is as a result involvement of low reprocessing techniques. Reverse logistics if properly managed can lead to reduction of transport, disposal and procurement costs (Fleischmann et al, 2004:1). Due to increase in globalization and industrialization reverse logistic is expected to accelerate after some years especially in developing countries which in turn will lead to environment conservation and massive economic improvements.

Reverse Logistics and Competitive Advantage

We looked at the use of reverse logistics to ensure that the company management of the flow of goods is cost effective. This will help the company increase the wealth in the banks. As a result, the company will hence acquire an advantage over the struggling competitors. This is as a result of the reason that companies that do not use reverse logistics may be undergoing loses which could be easily avoided through the use of effective reverse logistics. The competition within the market and for the limited number of consumers is one of the determinants of how an organization functions within the market environment. Therefore, the use of reverse logistics ensures that the company is able to defeat the other companies in the same market and dealing with the same commodities and services. This can be achieved since the sue o reverse logistics enables an organization to acquire professional workers who will be able to manage the flow of commodities from the consumers as the origin and the company reuses the products or even disposes of them properly. On the other hand, reverse logistics ensures that the company is able to maintain a good relationship with the workers and the stakeholders.

 One way that the stakeholders who include the customers are satisfied is through the application of reverse logistics to maintain a clean environment. If the company is able to maintain a clean environment where the consumers live, this will attract more consumers who will be willing to be associated with the organization (Aserkar, Kumthekar, and Aserkar, 2014: 228). This can only be effective if the company is able to apply the reverse logistics practices. This helps the organization to create a competitive advantage. This occurs since the consumers will have a good relationship with the company and do not refer to it as a polluter of the environment. The bottling companies which collect the used bottles for recycling have created confidence to the users of the products. Coca-Cola Company has created a competitive advantage through the application of reverse logistics. This company ensures that the used bottles are collected from the consumers and taken back to the company for reuse. This practice of reverse logistics helps this company in several ways (Lowe, 2017: 1).

 To start with, the company reduces the cost of production. This is achieved since the bottles will be sued more than once hence the money which could have been used for the manufacture of other bottling equipment can be used elsewhere. Two, the company helps the environment to remain clean. This is an attraction to the end users who prefer a company that is promoting a green environment. Additionally, the company maintenance of the environment through the collection and recycling of bottling material helps to ensure that the raw material is always available. Coca-Cola Company uses a lot of water to manufacture the products (Lowe, 2017: 1). It is believed that the water to product value of 3:1. Therefore, reverse logistics enable the company to reduce environmental degradation (Mohamed and Omwenga, 2015: 45).

Another company that can apply the reverse logistics to have a competitive advantage is a fast-food company. This company can ensure that the leftovers are always collected and disposed of properly. The company in this industry can ensure that the tins and cans used to pack the fast foods are collected to ensure that the environment is not degraded. This can be achieved through the use of dustbins. The application of reverse logistics will ensure that the company installs dustbins in areas where the customers are likely to move when they purchase fast foods. Example, if a fast-food hotel is located near a beach or a people’s park, the dustbins can be distributed across the part or the beach.

Therefore, the consumers will not dispose of the packaging materials anyhow. However, they will put the materials in the dustbins which are labeled or branded to indicate which hotel has installed which dustbins. The collection of the debris in these dustbins can be of use to the organization in order to have a competitive advantage. To start with, the organization can screen the materials and see the waste products which can use again in the organization for the work they had been used for previously. That will ensure that there are cost management and minimization of production cost. As a result, the company or organization can be able to defeat the competitors through the accumulated funds which could otherwise be used for the production of new packaging materials.

On the other hand, the company can benefit through collecting the debris from the dustbin and disposing them properly. In many countries, there are set bodies that regulate pollution from the organization. Therefore, the collection of used materials and ensuring that they do of pollute the environment can be of help to help the organization adhere to the law and regulations concerning the management and maintenance of the environment (Aserkar, Kumthekar, and Aserkar, 2014: 228). Additionally, the members of the public who are the consumers will develop a close relationship with the organization that is managing the properties well. This will ensure that the company has less need to conduct intensive and aggressive advertisements in order to retain the consumers. On the other hand, the company will have a ready market for their products hence creating an advantage over the competitors (Vural, 2015: 265).

Reverse Logistics Supply Chain Management
Reverse Logistics in Supply Chain Management

The reverse logistics also helps to maintain an agile supply chain (Elmas and Erdoğmuş, 2011: 161). This is a good way to ensure that the supply chain management id helping the organization benefit over the competitors. If the competitors are doing well in the market, an organization can be forced to either improve the services and good or exit the market. However, through the application of reverse logistics, the organization can improve its position in the market without being outplayed by the competitors. This can be achieved if the organization applies reverse logistics to acquire enough information concerning the issue of supply chain management. The return of goods initially provided or the market can be a source of useful information. The information helped the organization to understand which goods are doing well in the market. At the same time, the organization can use reverse logistics to acquire information about the commodities or services that are performing poorly in the markets (Elmas and Erdoğmuş, 2011: 164). This information is very necessary for the organization that is planning to win the competition battle among other potential competitors.

If the company realizes that certain products or service is not doing well in the market, they can either change the products and services or even abolish it can concentrate on the commodities that the company is doing extremely well. Unilever Company is one of the European based companies that was selling fast foods products. However, the application of reverse logistics helped the company identify the weakness in the market which led to massive losses due to dominance from fellow competitors such as McDonald’s. Therefore, the company stopped dealing with the consumable products and concentrated on the production and supply of dealing with product as us downy and baby products. This shows how a company can use reverse logistics to have a competitive advantage. The collection of the materials from the end users back to the company gives an overview of the market situation. The company can apply reverse logistics to ensure that the products which are not performing well in the market are removed from the manufactured commodities. This will help the company reduce the cost of operation as well as improve the performance in the market through concentrating on the good and services which are more likely to win the consumers in the limited market environment.

As a result, the company will have a competitive advantage since the cost of producing commodities that are bringing little or no returns will be eliminated. The specification is also a good way to ensure that the company’s dominance. Coca-Cola Company has dominated the beverages industry since the company has been concentrating on the sales of the soft drinks such as Coke Soda, Sprite, Fanta, among others (Coca-Cola, 2018: 1). The Coca-Cola Company had ventured into other practices such as selling fast foods and other branded commodities such as key holders, wallets, among others. Additionally, the company through the application of reverse logistics discovered that the used bottles for the coke brand are more compared to other products. Therefore, the concentration of the company developed along this line and most of the advertisements in the commercials have been focused on the major brands under this company.

However, if the company does not use reverse logistics, they cannot acquire enough information concerning the performance of the commodities in the market. This can make the organization to put more emphasis on the products that are not doing well in the market. However, acquiring enough information on the market will ensure that the company adopts supply chain management strategies that are helping to ensure that the competition is reduced and the organization has the ability to venture in the new markets through expanded revenue accumulation.

Reverse Logistics Common Practice

In order to make reverse supply management and logistics more efficient, a company has to have a deep understanding of areas of the business that is affected by recycling and returns. Measures and efforts should be employed to ensure that the component contributes to a positive stride (Govindan, and Popiuc, 2014: 3). To make the profit and ensure that the consumer attain maximum satisfaction, there are areas that the company needs to consider, and they include;

• Repairs and warranties which is a crucial area for the customer as there is need to inform them on the safety of the returned good. A company should have a number of ways to communicate with their customers such as creating a website or have a help desk as this will relieve their concern.

• Measurement of performance of goods particularly related to reverse supply chain e.g., checking on the sale of the returned goods, the percentage of returns, the growth or decline of returns year after another, the rate of asset utilization among others.

• Reason for return. The company must also find the reason for return. This will help to prevent processing of dishonest or stolen goods delivered. The company should therefore carry out analysis of the root-cause of good returned for processing. This is a key area in understanding business based on reverse logistic implication and coming up with strategies to close loop-holes for such good.

• Tractability is another key area that trace the flow of return to prevent mixing with items that are forward flowing.

• Company’s finance is another area and in order for the company to add value and profit, it should manage its finance issues to avoid causing bad relationship with customers, distributors as well as retailers. The companies should also check on taxes paid on return goods

• Optimization of logistics such as partnering with other parties that differ from them like in transporting goods makes increase logistic efficient on reverse-flow items. This makes it capable of improving its profit.

Deposition Strategies

Returned goods may be disposed of through various ways and the option or choice of deposing used should not only focus the profit but should consider other factors such as the satisfaction of the consumer and the image of the brand (Prahinski, and Kocabasoglu, 2006:6 These options include

• Remanufacturing or repair. Damaged goods or items that have not lost their identity are repaired and taken back to the market. However, there are factors that should be considered such as the cost the company uses to repair the item, the cost of transporting the repaired item as well as the market price of the refurbished commodity (Blackburn, et Al., 2004: 2). However, the company should identify remanufactured items from brand image to avoid posing risk. This is because consumers consider this item inferior. To avoid this, the company can give such item an image that appear more positive.

• Recycling. Recycling helps in recovering materials that are used to produce another new product. In this part the original identity of the item is lost. Factors such as the value to be reclaimed, the cost of transportation among others are considered. Recycling of some items e.g. electronic products brings out economic sense as such product minimizes the cost of mining and extracting metals.

• Discount sale. Companies may sometime sell returned goods on heavy discount. However care should be taken to avoid poisoning the customer perception on the brand image of the item and some may feel disappointed for paying less for same item.

• Energy regeneration. There are items that are not advisable to recycle such as food products. The company may use organic waste to generate renew energy through anaerobic digestion.

Screening of Retuned Goods

As mentioned above, one of the practices involved in the management of supply chain through the application of reverse logistics is the screening of goods. This practice ensures that the company has acquired enough information concerning the defective goods which are returned to the organization although they were previously in the markets. Screening of goods also enables the organization to improve on the goods before supplying them to the markets (Menachof, et Al., 2009: 148). A good example is a company that is dealing with selling o fast foods but the application of return logistics has enabled the collection of waste foods from the customers for proper management and disposal. These products can be screened so that the organization will understand the type of foods which are being disposed of frequently.

In a mixture of different foods which are packaged and supplied as a single commodity, the screening enables the organization to have a clear and vivid image of the market consumers and their preferences (Menachof, et Al., 2009: 146). Therefore, the company will take remedies and ensure that the supply of the commodities which are highly wasted is minimized (Billington, 1998: 24). On the other hand, the company can increase the supply of the materials which are highly consumed by the customers.

That is one of the strategies that reverse logistics can help an organization develop a competitive advantage. Understanding the customer’s needs is vital if the company is looking forward to maintaining their customers and at the same time attract more consumers. If a company does not understand what consumers need and preferences, the other companies that are dealing with the same consumer might take that advantage to provide precise services and commodities preferred by the consumers (Bowersox, 1999, 553). Many organizations have lost their market dominance after the consumers are not satisfied with the products being supplied.

Other companies have incurred losses for manufacturing surplus commodities and keeping them in the warehouse after the supply chain becomes extremely slow due to lack of ready markets (Al-Mashari, and Zairi, 2000: 31). The effects of such activities have been fatal for many companies which have dropped in the ranking or even lost the consumers’ trust altogether. Reverse logistics can, therefore, aids the company to provide the commodities that are best for the particular markets. The demand and supply which defines the nature of the supply chain in the organization can be affected by diverse situations.

The company can ensure that demand for the products is maximized through the application of reverse logistics and strengthening the noted weaknesses which influenced the return of goods previously supplied to the consumers in the markets. If the company is able to learn the market and treat the diverse situations appropriately, its competitive ability will be improved.

Conclusion

In conclusion, each and every company needs to maintain its customers and attract new customers. This is because the customers are the main source of profit in every company. A company creates a competitive advantage which helps it to outdo their competitors. While creating a competitive advantage the company must make sure that it is customers prefer their goods more than alternative goods.

Reverse logistics is one of the strategies used by most of the companies worldwide nowadays. This involves the companies are much involved in reuse and recycling of their used products. In the collection and recycling procedures, this reduces the production cost of most of the companies as fewer resources are needed to revalue products compared to production of new products. Reverse logistics have different practices which involve remanufacturing of products retuning of defective goods recycling and reuse of products.

References

Shad Dowlatshahi, (2000) Developing a Theory of Reverse Logistics. Interfaces 30(3):143-155.

Touboulic, A. and Walker, H., 2015. Theories in sustainable supply chain management: a structured literature review. International Journal of Physical Distribution & Logistics Management45(1/2), pp.16-42.

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Liz Lowe, 2017, Sustainability and recycling: how the Coca-Cola system is fighting waste with sustainable packaging.

Coca-Cola Company, 2018, Sustainable Packaging.

Gabriela Cecilia Stănciulescu, 2011, Importance of Reverse Logistics for Retail Acts, The Bucharest Academy of Economic Studies Romani.

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Fleischmann, M., Bloemhof-Ruwaard, J. M., Beullens, P., & Dekker, R. (2004). Reverse logistics network design. In Reverse Logistics (pp. 65-94). Springer, Berlin, Heidelberg.

Govindan, K., & Popiuc, M. N. (2014). Reverse supply chain coordination by revenue sharing contract: A case for the personal computers industry. European Journal of Operational Research233(2), 3-5.

Blackburn, J. D., Guide Jr, V. D. R., Souza, G. C., & Van Wassenhove, L. N. (2004). Reverse supply chains for commercial returns. California management review46(2), 2.

Prahinski, C., & Kocabasoglu, C. (2006). Empirical research opportunities in reverse supply chains. Omega34(6), 5-7.

David A. Menachof, Brian J. Gibson, Joe B. Hanna, Anthony E. Whiteing, (2009) “An analysis of the value of supply chain management periodicals”, International Journal of Physical Distribution & Logistics Management, Vol. 39 Issue: 2, pp.145-165.

Dr. Rajiv Aserkar, Nihar Kumthekar and Shivani Aserkar, 2014, Investigating the Link between Supply Chain Performance and Brand Performance, International Journal of Humanities and Social Science.

Billington, C., Lee, H. L., & Tang, C. S. (1998). Successful strategies for product rollovers. Sloan Management Review, Sparing, 23-30.

Lee, H.L.(1996). Effective inventory and service management through product and process redesign. Operations Research 44 (1), 151-159.

Bowersox, D.J., Stank, T.P., Daugherty, P.J (1999). Lean launch: managing product introduction risk through response-based logistics. Journal of Product Innovation Management 16, 557-568.

Al-Mashari, M., Zairi, M. (2000). Supply chain re-engineering using enterprise resource planning (ERP) systems: an analysis of SAP R/3 implementation case. International Journal of Physical Distribution and Logistics Management 30 (3/4), 26-31.

Mohamed, K. S. & Omwenga, J. (2015). Supply chain risks mitigation strategies adopted by manufacturing firms in Kenya: A case of Coca Cola Company (K). International Academic Journal of Procurement and Supply Chain Management, 1 (4), 45-65

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Tesla Strategic Management

Strategic management

It is true to consider strategic management as an evolutionary and a destination because it plays a significant role in ensuring that a corporation such as Tesla is successive in its endeavors. The success of the firm largely depends on the management that has the key role in making key decisions that will dictate the way forward by facilitating the achievement of organizational mission, goals, and objectives. By definition, strategic management covers all the company’s stakeholders interest by relying on the management to make decisions that safeguard each stakeholder’s interest by considering the available resources, how well they can be utilized and at the same time keep in mind both internal and external forces acting on the firm (Sekhar, 2009).

Among key roles that the management of a corporation is required to play is ensuring that the company chooses the best strategies that will give the company an advantage over its competitors to ensure that maximum profitability is achieved and maintained. Therefore, it is important for a company to be competent by ensuring that products offered are able to meet the customer’s expectations and also balance the needs of other stakeholder’s such as suppliers, the government and employees among others.

Examples of Strategic Management

Recently, there has been rising concern about climate change and the negative impact that the situation has on the environment with regard to environmental pollution which poses a threat to all existing life forms. Among the cause of environmental pollution include emission of greenhouse gases such as carbon dioxide as a result of human activities and depletion of natural resources such as oil. Consequently, Tesla Inc. being a strategic company, Elon Musk who is the company’s CEO has opted for the company to explore alternative renewable energy to ensure that sustainable development is achieved.

One of the ways that the company is practicing strategic management is through environmental preservation by manufacturing electric powered automobiles to get rid of carbon emissions in the atmosphere (Doeden, 2015). The company employs a supply chain management strategy whereby unlike most automobile manufacturers, the company owns that whole supply chain from the points of manufacture to distribution. It also facilitates a growth strategy whereby the corporation invests significantly on Research and Development so that it can be able to come up with new inventions such as the Model X and Model 3. Autonomous cars are among the latest inventions whereby vehicles will not only be able to drive themselves, but also will be powered by electricity instead of gasoline (Bilbeisi & Kesse, 2017).

Tesla Goals and Objectives

Among the companies goals are to have as many electric-powered cars as possible on the road after it launched the first semi-autonomous autopilot system back in 2016. Musk had the objective of having 500,000 cars on the road by this year depending on governments’ efforts to pass laws that will allow consumers to possess and drive the cars. This kind of technology is referred to as “level 4 autonomy.”

Another goal is to put in place the necessary charging infrastructure that will be able to supercharge the vehicles in 30 minutes or so. This will ensure that drivers will be able to add a range of 200 miles in their cars in half an hour. This makes the corporation the only manufacturer to offer drivers such a range in the shortest recharging time. In addition, the company has partnered with Panasonic to provide customers with lithium batteries (Bilbeisi & Kesse, 2017). This will not only ensure that the company cuts back on battery cost but also ensure that the same are available to customers at a reasonable price. To facilitate battery production, the company opened a Gigafactory in Nevada. The batteries are not meant for use by cars only but also supply alternative energy to residences and factories.

Corporate Governance

Traditional Roles of Board of Governors

The success of every business organization relies on the competency of the management which is why the Board of governors plays a significant role in corporations such as Tesla Inc. One of the roles is corporate governance. The board is responsible for overseeing the governance practices and structures to ensure that work ethics are adhered by seeing to it that corporate responsibility is followed to the latter. The board facilitates evaluation by conducting annual assessments which are meant to identify areas that need change or modification so that the firm can be able to improve its performance (Magliacani, 2014). Compliance is another issue of concern especially to companies that deal with emissions such as Tesla Inc. it is the duty of the board to ensure that the company complies with the relevant laws as stipulated in the constitution of the relevant government where the business is located.

Organizations are required to have a compliance and risk framework whose activities are monitored by the Risk and Ethics Officer and the Chief Compliance. These managers are required to report to the CEO and the Board of Governors to ensure that the company does not incur unnecessary costs such as lawsuits. Another role played by the board is strategic oversight. The company’s management is charged with the responsibility of the firm’s strategic planning to ensure that proper planning is facilitated.

As a result of strategic planning, the company is able to come up with strategies that improve performance by maximizing output thus making the organization effective, efficient and profitable. After the management has formulated and proposed new strategies, it is the duty of the board of governors to assess and evaluate the proposal and determine whether it is a viable option or not. Therefore, it is the responsibility of the board to oversee the company’s strategy and ensure that the most effective measures are undertaken in the firm’s activities (Ferlie & Ongaro, 2015).

Major Philanthropic Initiative/Program

Companies have a responsibility of ensuring that the practice corporate responsibility by giving back to society and also ensuring that they promote the growth of their employers apart from making a profit. In the case of Tesla Inc., the American company is involved in designing, manufacturing and selling electric power train parts and electric cars. The company was founded by Elon Musk, Ian Wright, Martin Eberhard, JB Straubel and Marc Tarpenning in 2003. The company realizes that environmental pollution is a major concern accompanied by negative impacts such as the depletion of natural resources.

In its initiative to safeguard mankind from the devastating effects of climate change, the company manufactures electric cars to eliminate the emission of greenhouse gases by automobiles (Doeden, 2015). By so doing, the company will reduce overreliance on oil to provide electricity and offer alternative renewable energy sources. According to Musk, the global population will be able to access electricity through harnessing wind and solar power which can be stored in batteries for later use.

Not only is the use of renewable energy conserve the environment, but it will also be accompanied by increasing the standards of living since people can access luxurious electric cars at affordable prices. The firm adopts a corporate social responsibility strategy that protects the interests of its various stakeholders through the design and nature of its products which are concerned with the ecological benefits of the aforementioned. The corporation has a lot of opportunities that will enable it to contribute to the global community. Its products for generating electricity and storing energy are all environmentally friendly and therefore makes it possible to achieve sustainability and environmental preservation (Blue, 2016). The organization’s management practices and products are designed to integrate corporate citizenship and also boost their brand and corporate image. Consequently, the company manages to balance both profitability and also consider the welfare of the society.

Porter’s Five Forces

Tesla Competitive Advantage and Core Competency

Tesla Inc. stands a good chance of maintaining the leading position in the electric car market segment given that it has a comprehensive leadership headed by competent managers led by the visionary CEO Elon Musk. As a result, the firm has a competitive advantage over its rivals some of which include the battery supply chain (Kauerhof, 2017). The factory in Nevada manufactures lithium batteries thanks to its collaboration with the electronics giant Panasonic. Tesla has included in its processes a supercharge network that will enable electric car owners to charge their automobiles incredibly fast. Unlike its rivals that have slow charging stations that are scattered, Tesla had approximately 3000 stations and intended to increase the number significantly.

Due to the numerous stations, the company has managed to build its customized supercharger network (Grant, 2016). In addition, the company has a software and electronics culture that ensures it keeps up with technological advancement which takes place on a daily basis. The company employs software that outperforms its competitors and ensures enhanced customer service and therefore customer experience. Among the software used by Tesla include Mobile App, Traction and Stability Control, Motor Control, Battery Voltage Management, and Core focus and Tesla DNA. Another boosting factor is that all these software are updated over the air.

Five Forces Including the Sixth Force

Like all other firms, Tesla is not immune to Porter’s five forces which means that its performance is affected by both internal and external factors. These forces can be categorized into two groups namely that which is beneficial (opportunities) and the other which might have negative implications (threats). The company is affected by the bargaining power of customers and through its cheaper electric cars compared to its rival companies, the firm stands a chance of commanding market presence. Furthermore, customers prefer energy efficiency since it saves their money and also there has been increasing awareness in the global arena on the negative impact of environmental pollution.

Although the company has rivals, the threat of new entrants is not a major concern since entering into the disruptive technology is an expensive venture and therefore most companies lack the required capital (Krippendorff, 2011). On the other hand, there are negative forces such as the bargaining power of suppliers. Most parts required by the company are manufactured by a few specific suppliers who are in a position to determine the prices according to what is in their best interest. Tesla faces competition from rival firms that manufacture cheaper combustion engines that are also efficient. Also, the companies can innovatively produce hybrids and low-end electric cars and parts.

Diesel engines are also a threat to the company since they are cheaper while some are capable of using hydrogen which is environmentally friendly. Another factor that threatens the existence of the firm is rivalry whereby the company competes with large firms that have already established good relations with suppliers. In addition, competitors also produce brands that are internationally recognized. According to Wheelen and Hunger, there exists a sixth Porter’s force which they call complementary and it involves other companies that compete with a firm by producing products that are complementary to the one being offered by the firm in question. Considering this aspect, it may not be always necessary for Tesla customers to recharge their vehicles only at the company’s outlet. They have the option of going to other recharging stations to charge their cars although they may not necessarily provide fast charge.

Blue Ocean Metaphor

To make the company relevant and successful at the same time, the company incorporates four elements in its strategy to increase its value innovation potential. These elements are illustrated in the figure below.

Tesla's Blue Ocean Strategy
Figure 1: Tesla’s Blue Ocean Strategy (Source: Frontier Strategy LLC)

Value Chain

Tesla’s Business Model

Tesla has used creativity and innovation to ensure that it provides consumers with an alternative renewable energy source thus making its business model different from other companies. To begin with, the company has a comprehensive supply chain management whereby it has reduced the number of middlemen by owning the whole chain from manufacturing to distribution. This supply chain has enabled Tesla to reduce the costs of doing business significantly.

A reduction in product costs and manufacturing costs has ensured that the company is able to achieve sustainability. In addition, the company has digitized its supply chain by using the latest software to ensure that its products are up to date (O’Marah, 2016). Tesla’s vehicles are a hybrid of both digital and mechanical technologies which enables the firm to ensure that it has products that offer customer satisfaction. To expand its supply chain and add value, Tesla has put in place supercharger stations in different parts of America and intends to put more in other countries once the relevant governments enforce regulations that will allow the use of electric cars and also have the necessary technology compatible with the automobiles’ (Adam, 2016).

Supercharger Stations Tesla
Figure 2: 613 Supercharger Stations that are equipped with 3,628 Superchargers (Source: Tesla)

Tesla Inc.’s supply chain ensures that the company maximizes its profitability through cost reduction and eventually keep minimal inventory. In its production process, the company has an order-production strategy that enables customers to wait for their car to be produced and therefore it is possible to customize the automobiles according to their preferences. Furthermore, order-production avoids storage of excess inventory and therefore risk associated with inventory can be mitigated. Considering the growth, inventory and supply chain management strategies, Tesla’s business model can be said to be unconventional.

Areas That Need Improvement and the Profit Margin/Goal

When Tesla was venturing into the electric cars market segment, the company had anticipated producing 55,000 units in 2015 but was faced by challenges especially since the company had projected that it would stock sales worth $500 million but this was not so and the management had to adjust the value to $640 million. The reason for the necessity of the change was a decrease in cash reserve accompanied by increased feasibility costs (Crawford, 2016). The company had also opted to invest in assembly robots to reduce the overall production cost and the robots incurred additional costs exceeding the anticipated value. As a result, the robots required reprogramming and therefore the company was forced to delay the anticipated time to complete installation and setting up the production plant (Young, 2015).

The increased usage of assembly robots leads to a reduction in the number of human workers required since the option is perceived to be more economical. Consequently, job opportunities become less which means that the company hires fewer people than it would if it relied more on human labor. Therefore, the company needs to find ways of ensuring that it provides more job opportunities for the sake of corporate responsibility. According to a report released by Tesla, the company recorded an increase in production of Model 3 with the number of units reaching 2,270 on a weekly basis. In the first quarter, the gross margin for the Auto GAAP went up by 80 bp and also the non-GAAP rose by 500 bp. At the end of the first quarter, the cash balance was $2.7 billion and the amount was expected to rise in the following third and fourth quarter. The company’s financial position is indicated in the figure below.

Tesla Consolidated Statements
Figure 3: Unaudited Condensed Consolidated Statements of Operations in thousands except per share data (Source: Tesla Inc., 2018)

Central Pillars Of Elon Musk’s Corporate Theory And Tesla’s Unique Assets And Activities

The key to the success of Tesla is the company’s CEO and co-founder Elon Musk. Elon is known to be a person who makes decisions based on values. Often than not he disagrees with others but always has reasonable explanations as to why he does not concur with the ideas he disputes. He is also known to be respectful as he allows others to be themselves and values everybody to the extent of interacting personally with all workers regardless of their status. He has also offered employment opportunities to people who do not have a college education by simply looking at the individual’s interest in engineering and considering whether that person has built anything in their life. He is humane as he deems others as human beings and does not elevate himself to levels that he is unreachable to his junior workers. Elon is of service to others and does not leave others to do everything for him. Instead, he is always active and works long hours to achieve organizational goals and visions.

Elon practices justice as he treats all his followers equally. From the sentiments of his workers, working around Elon is very hard as all of them are expected to work equally hard due to the high expectations that he has not only from himself but also his workers (Northouse, 2013). Elon practices honesty with his workers and is not afraid to speak out his mind regarding organizational matters. Musk’s honestyenables him to win the trust of his fellow investors and even governments as he is predictable and also reliable. He has been known to fund Tesla ‘through financial difficulty with his own money by investing approximately $100 when the company was manufacturing the electronic car (Jacoby, 2011). The company’s unique assets are its management and employees that apply creativity and innovation to design and manufacture remarkable products such as its Sedan, Model X, Model 3, software and its supercharge network among others.

Tesla General Strategy

Current Business and Corporate Strategies

After the release of the first quarter report, the management adjusted its goals and among the corporate strategies is to increase production. The company intends to do this by reducing bottlenecks experienced across lines and the plan is to shut down production for approximately 10 days. However, the company did not change its 25% gross margin target for model 3. Tesla intends to increase Model 3 production to 5,000 units weekly. The corporation plans to advance sustainable energy by increasing its energy storage products up to three times. It intends to achieve this by enhancing its solar power harnessing (Tesla, 2018).

Strengths and Weaknesses of Current Strategies

The major strength of the current corporate strategy is the increased production of Model 3 and one of the reasons is that the model is very energy efficient which means that customers will be exposed to a unique organizational experience. Also, the model will enable the achievement of sustainable development goals while at the same time remaining profitable. The major weakness of the strategy is that the decision is based on a crucial assumption. The performance of Model 3 is assumed which may be affected by external factors such as competing models from rival firms (Tesla, 2018).

Tesla – The Most Urgent Decision Required

Tesla Inc. registered a decline in its solar deployment in the previous quarters which means that the firm had not reached its profit maximization potential. Therefore, the most urgent decision that the company ought to make is maximum tapping of solar power. The main area of concern is the Buffalo Solar Roof facility. As a result, the company should come up with a manufacturing and design process that will increase the quality of electricity and also reduce the cost of manufacturing. Consequently, it will lead to improved customer experience.

References

Adam, M. (2016). Accelerating E-mobility in Germany: A Case for Regulation. Springer.

Bilbeisi, K. M., & Kesse, M. (2017). Tesla: A Successful Entrepreneurship StrategyB> Quest.

Crawford, A. (2016). Tesla Lowers Production Forecast, Sells US$500m-plus in Stock.

Doeden, M. (2015). SpaceX and Tesla Motors engineer Elon Musk. Minneapolis: Lerner Publications.

Ferlie, E., & Ongaro, E. (2015). Strategic management in public services organizations: Concepts, schools and contemporary issues. Routledge.

Grant, R. M. (2016). Contemporary strategy analysis: Text and cases edition. John Wiley & Sons.

Jacoby, O. (Producer & Director), (2011). Bloomberg Risk Takers: Elon Musk [Television Broadcast]. United States: Bloomberg Television.

Kauerhof, A. (2017). Strategies for Autonomous, Connected and Smart Mobility in the Automotive Industry. A Comparative Analysis of BMW Group and Tesla Motors Inc. GRIN Verlag.

Kim, W. C., & Mauborgne, R. A. (2014). Blue ocean strategy, expanded edition: How to create uncontested market space and make the competition irrelevant. Harvard business review Press.

Krippendorff, K. (2011). Outthink the Competition: How a New Generation of Strategists Sees Options Others Ignore. John Wiley & Sons.

Magliacani, M. (2014). Managing Cultural Heritage: Ecomuseums, Community Governance, Social Accountability. Springer.

Northouse, P.G. (2013). Leadership: Theory and Practice. Los Angeles: Sage Publications.

O’Marah, K. (2016). Tesla and the 21st Century Supply Chain.

Sekhar, G. S. (2009). Business policy and strategic management. IK International Pvt Ltd.

Tesla. (2018). Tesla First Quarter 2018 Update.

Young, A. (2015). Tesla Motors Inc. (TSLA) Says Robots Are Holding Up Its 2015 Sales Growth.

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Management Practices Business Strategy

Management Practices and Business Strategy

Despite the fact that research findings are mixed, it is beyond a reasonable doubt that management practices are related to productivity, growth, decline, and failure in organizations. This report sets forth a multidisciplinary review and summary of evidence of such a relationship. The report presents a thorough and meticulous scrutiny of three peer-reviewed journal articles in terms of how management practices relate to growth, productivity, failure, and decline of companies. The articles include Bloom et al. (2012) study, Sadun et al. (2017) study and Teece (2007) study on management practices and explicating dynamic capabilities respectively. Taken as a whole the three research articles share similar sentiments. They both establish a solid positive relationship between management practices, growth, productivity, failure, and decline. Nonetheless, in extensive literature review, research findings seem equivocal.

Some researchers have established a positive relationship between management, growth, productivity, failure, and decline, some have found a negative correlation while others no correlation at all (Bender, Bloom, Card, Van Reenen & Wolter 2018). According to Bloom et al. (2019), it can be argued that the deficiency of a consensus might have been prompted by either issues related to the level of analysis or measurement. With this said, there is an urgent need for further research especially in terms of a multi-level approach to evaluate the impact that management practices have on productivity.

Management Practices, Productivity Growth, and Decline

There have been endless debates as to whether organizations are likely to succeed if they embrace good management practice. Scholars have been conducting studies for over a decade now to end these debates. The scholars have endeavored to reexamine the long-held assumptions to confirm whether they stand the test of time (Bloom et al. 2019). Since the time of Frederick Taylor’s work on principles of scientific management, organizations have traditionally followed a formalized set of best practices including three practices that are considered essential to good management such as targets, incentives, and monitoring. Most organizations around the world are poorly managed. The well-managed organizations establish achievable targets on productivity and growth as well as gauge the promotions and compensations they give on attaining the set targets (Bloom, Sadun & Van Reenen 2012). Unlike poor managed organizations, these companies continuously measure results.

Better management practices are strongly correlated with superior performance, increased return on capital, as well as increased productivity. It is clear that core management practices cannot be taken for granted. With this said, there are significant differences in terms of how organizations accomplish basic tasks such as grooming talent and setting targets. Those organizations with robust managerial processes perform significantly superior on metrics of high level like profitability, productivity, longevity, and growth (Ghoshal 2005). The differences in performance and quality of such processes persist with time signifying that core management practices cannot be replicated easily.

Operational excellence matter a lot but it should be viewed as a critical complement to strategy. In this regard, if an organization cannot put its operational fundamentals right then it does not matter how good the strategy is (Wong 2020). Again, if organizations maintain, for instance, sound management practices, these firms can leverage them to create dynamic capabilities like evidence-based decision making, data analytics, as well as cross-functional communication that is crucial to thrive in a volatile and uncertain industry. As much as it requires a sizable investment in processes as well as people throughout the bad and the good times, attaining managerial competence calls for ultimate effort and the investments bring along a key barrier to imitation (Yeow, Soh & Hansen 2018).

Productivity is a notable metric of economic progress and revolves around issues related to economic growth, incomes, as well as competitiveness. Productivity is molded by management practices, global market structures, competencies, and skills of people, as well as the adoption of new technologies (Yeow et al. 2018). A growing body of evidence posits that organizations that engage in target setting, performance-centered human resource management, as well as extensive use of data analysis are more productive and exhibit increased productivity growth levels as opposed to those with fewer formalized management practices.

This evidence has a particular focus for the manufacturing sector where most recent studies have been based; nonetheless, it is also becoming strong for the service sector as well (Bloom et al. 2019). Information on management has been lacking until recently. Small sample analyses and case studies can avail expedient anecdotes; however, they fail to generalize to the wider economy because of unrepresentative samples and a narrower focus.

In the contemporary turbulent competitive business landscape, organizational managers are striving to achieve competitive advantages to beat competition through the efficient as well as effective use of resources. Good management practices at all organizational levels has been proven and is increasingly being accepted as the sure way of improving productivity and growth (Bloom et al. 2012). With this said, improved levels of productivity allow organizations to fulfill all their obligations to suppliers, government, stakeholders, consumers, as well as employees while still staying competitive.

Research shows that organizations that apply the accepted management practices across the globe perform better that those that fail to do so. This assertion implies that the improved management practice is among the most effective approaches organizations can employ to outpace their rivals (Ghoshal 2005). Greater competition pushes for improved management practice, labor market flexibility, on the other hand, leads to better habits of people management and the well-managed organizations are those likely to have highly educated employees.

Dynamic Capabilities and Management Practices

Organizations that maintain sound management practices leverage them to create dynamic capabilities. Recent studies have put a particular focus on the significance of dynamic capabilities to organizational success and longevity (Teece, Peteraf & Leih 2016). With reference to organizational theory, the dynamic capabilities entail an organization’s ability to build, reconfigure, as well as integrate the external and internal competencies to address the fast-changing business environment (Fainshmidt, Wenger, Pezeshkan & Mallon 2019). The term dynamic capability was first coined by David Teece in the year 1997. Dynamic capabilities reconcile incongruous philosophies that an organization can be stable enough to deliver to its clients original and distinctive value while remaining adaptive enough to adjust when conditions suggest so.

According to Wong (2020), dynamic capabilities are tied to original management practices and business models making it hard to imitate them; they allow for extension, modification, as well as creation within a firm. The development of the iPod, for instance, is a good example of dynamic capabilities (Felin & Powell 2016). After realizing that the mp3 players were aesthetically unattractive and large, Apple grabbed the opportunity to design smaller and more appealing iPods. The company then switched its focus to consumer electronics as opposed to just sticking to computers.

The move has allowed Apple to dominate both the music and portable digital music player industries. This approach by Apple depicts the company as a creative and aesthetically focused firm. With this said, developing dynamic capabilities depend on three core organizational activities including sensing, seizing, and transforming (Sadun, Bloom & Van Reenen 2017). Sensing entails the evaluation of consumer needs as well as opportunities that are external to the firm; seizing which entails the reaction of a firm to the needs of the market to maximize the company value including securing access to resources as well as designing innovative business models.

Transforming, on the other hand, involves the renewing of organizational processes as well as maintaining the processes relevance to customers (Shao 2019). This calls for managers to continuously improve, iterate, as well as streamline processes.

The dynamic capability concept has been linked to a resource-based view of the organization as well as to the idea of ‘routines’ in the organizational evolutionary theories. The dynamic capabilities emphasize more on the concept of competitive survival to address the changing business conditions while the resource-based view stresses on sustainable competitive advantage (Felin & Powell 2016; Yeow et al. 2018). It is argued that dynamic capabilities serve as a bridge between evolutionary approaches to organization and economics-based strategy literature (Yeow et al. 2018). The dynamic capabilities theory entails the establishment of stratagems for managers of organizations to adapt to rapid intermittent change whereas sustaining the minimum capability levels to ensure competitive survival (Sadun et al. 2017).

Industries that rely on particular traditional manufacturing processes are not positioned to alter the process on short notice especially when tech arrives. However, when this transpires, organizational managers are required to adapt their routines to make the most out of their resources whereas concurrently planning for the future changes in processes as resources denigrate (Shao 2019). With this said, the type of change being emphasized by the theory of dynamic capabilities are the internal capabilities and not the external forces of business.

Although further research is required to measure dynamic capabilities as well as suitably apply the concept to practical management contexts, many scholars argue that the theory of dynamic capabilities is tautological and vague (Sadun et al. 2017; Teece et al. 2016). This assertion seems to hold true, as much as the theory is very helpful when it comes to addressing the rapid changing business conditions, it still fails to explain how to do so.

According to Teece et al. (2016), the theory’s capabilities are difficult to operationalize and identify as well and at other times, the very capabilities could prompt the core capabilities into turning the core rigidity (Felin & Powell 2016). In this regard, some studies have argued that it still hard to apply the theory in its present state without being in a position to develop, identify, as well as specify the capabilities. Nonetheless, recent studies have introduced a mechanism from the theory of dynamic capability for net enablement called the “Net-Enabled Business Innovation Cycle” to further an understanding as well as help predict how organizations transform the dynamic capabilities linked to net-enablement into consumer value using the theory (Shao 2019; Sadun et al. 2017).

The net-enabled organizations are able to constantly reconfigure their external as well as internal resources to apply digital networks in exploiting opportunities via routines, rules, analysis, and knowledge to create consumer value from the net-enablement capability (Sadun et al. 2017).

Businesses maintain portfolios of the hard to trade and idiosyncratic assets as well as competencies and competitive advantages can flow right from the sustenance of scarce but difficult to imitate resources such as expertise and novel ideas (Felin & Powell 2016; Teece 2007). Nonetheless, in the rapid changing business environment characterized by stiff competition, sustainable competitive advantages demand more than just the possession of hard to imitate assets; it demands the unique and hard to imitate dynamic capabilities (Teece 2007). Such dynamic capabilities can be leveraged to constantly help to extend, protect, create, as well as upgrade the unique organizational assets.

How the Findings Might Help Improve the Performance of the Firm

For the company that I operate in, the findings of this report are good news. These findings posit that the company has access to any performance improvements only by applying and implementing good management practices already used by other firms. Very few firms have management practices that are above average and the need to spread the word to thousands of underperforming organizations is urgent. A bigger part of the opportunity for improvement rests with local managers. To determine how far behind the company is, managers must rigorously assess their own management practices and contrast them with others. These managers can benchmark themselves by industry and country (Bender et al. 2018). Awareness is very low and should be the first initiative to be taken by the company managers.

After establishing where they need to improve, managers must start to embrace a slow but steady growth. Successful companies have reached greater heights by making good beginnings through the identification of processes that require immediate change and then afterwards developing the metrics to monitor advancement over long and short term. In this regard, goals must be visible to all employees and translated into group, individual, as well as company wide targets that are to be monitored meaningfully.

Of course, immediate results cannot be expected but by establishing powerful incentives, focused targets, as well as constantly monitoring performance could be effective in diving future greater shifts. Global organizational have be obliged to embrace a systematic management approach and only through maintaining robust as well as effective management practices have they managed to replicate similar performance standards across various cultures, markets, and regions (Ghoshal 2005). With this said, these organizations are realizing the benefits that come with good management practices including better capital returns, increased growth, as well as higher productivity. These benefits are readily accessible to other firms but very few have made efforts to obtain insights into the quality of their management practices. Nonetheless, those that do so enjoy the access to cost effective as well as sustainable competitive edge.

Management Practices Business Strategy
Management Practices Business Strategy

Lessons

The review of the three articles is fundamental to the credibility and rigor of research in social science. Obviously, the articles feature fundamental differences when it comes to format, length, and content but they both share similar sentiments. The articles are characterized by work built on management surveys across various companies. A critical lesson drawn from these studies is that it is a limitation to focus only on senior managers when providing feedback in research surveys because in sociological literature, there is varying opinions between senior managers and workers within the same company when it comes to evaluating management practice. With this said, workers might provide a valuable counterpart point of view to their managers’.

Another lesson drawn from review of articles is that unlike quantitative studies, qualitative research reports need a thick description of phenomena and context. This result from interpreting and describing observed behavior within a particular circumstance. Reports placed in this context must go beyond mere fact to present detail as well as webs of relationships that join dots to establish event sequence for the topic in question. Actions, meanings, feelings, as well as voices of persons are heard in thick description. Further, a thick description gives a balanced view of interpretation and analysis while showing that the research reflects thoroughness, appropriateness, and rigor. I have learned that this approaches supports transferability and trustworthiness of research to other contexts.

Further, another lesson drawn from the review of the articles is that it is paramount to establish a clear sense of urgency, small goals, and a clear research focus to be able to sort through immense data volumes as well as coalesce different data pieces towards building a remarkable interpretation of data with extrapolations on composite and dynamic literature. Additionally, tuning an empirical psychological science focus that is characterized by abstract reasoning and analysis helps to establish a contextual sensitivity that allows one to develop strong associations between the perspective of the author and the context in which research is founded.

Another lesson drawn from the review of articles is that to successfully scrutinize literature, a person must develop a well-structured workflow and a detailed oriented mindset to achieve a methodical review or else one might get overwhelmed and focus on mere data exploration. Further, a person needs to develop inspective reading and read ravenously to point out specifics as well as gaps in literature. However, for a successful review and summary of literature, a person needs to develop a data-driven mindset that will allow the individual to think outside the box to ensure his/her evaluation expertise serve the purpose.

References

Bender, S., Bloom, N., Card, D., Van Reenen, J., & Wolter, S. 2018. Management practices, workforce selection, and productivity. Journal of Labor Economics36(S1), S371-S409.

Bloom, N., Brynjolfsson, E., Foster, L., Jarmin, R., Patnaik, M., Saporta-Eksten, I., & Van Reenen, J. 2019. What drives differences in management practices? American Economic Review109(5), 1648-83.

Bloom, N., Sadun, R. & Van Reenen, J., 2012. Does management really work? Harvard business review, 90(11), pp.76-82.

Fainshmidt, S., Wenger, L., Pezeshkan, A., & Mallon, M. R. 2019. When do dynamic capabilities lead to competitive advantage? The importance of strategic fit. Journal of Management Studies56(4), 758-787.

Felin, T., & Powell, T. C. 2016. Designing organizations for dynamic capabilities. California Management Review58(4), 78-96.

Ghoshal, S. 2005. Bad management theories are destroying good management practices. Academy of Management learning & education4(1), 75-91.

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