Role of operation management in strategic management?

Answer 1

Strategic Formulation

Every company must have business level strategy and corporate level strategy. For the companies that run the international trade need to consider about international level strategy.

1) Business Level Strategy

The organizations must form the business strategy that means formulate the competitive strategy at the individual business unit. A strategic business unit is a distinct part of an organization focuses to serve the certain market with products and services.

There are three types' strategies of generic strategies that comprise differentiation, overall cost leadership and focus. Differentiation and overall cost leadership are serving the industry wide. The focus strategy is serving the particular segment only.

1.1) Overall Cost Leadership

This strategy is defined as organization being a lower cost producer and provides the lower price products for customers. Lower price can attract more potential customers. However, the organization need to implement well in cash flow because of capital equipment updated may be expensive.

In addition, a lower cost makes the stakeholders and shareholders have higher expectation from organization. Therefore, the growth of market share can increase the cost advantage.

This strategy can help organization to defense from rivalry in the marketplace because lower cost and price earn above-average profit for organization. Lastly lower price can help the company to defense from new entrants and substitute because the customers easily attracted by lower price products. By provide lower price products, Tesco can retain its sales and margin from rival such as Sunshine, Jusco and Giant.

1.2) Focus Strategy

The organization just serves a segment within the market. The organizations that uses focus strategy must meet the needs and want of customers exactly. If the organization cannot meet the customers' need exactly, they will become failing.

The organization can get competitive advantage through run as differentiation or lower cost focus. The organization can get competitive advantage within the specific segment or niche and not the whole industry. Tesco has run as focus cost leadership retailer. Its offer all products in lower cost and lower price.

1.2) Resource-based Approach

The internal resources and capabilities is form the direction for the organization and it is the primary source of profit for organization.

The organization must have the good resources and capabilities to run well the businesses. The capabilities are comprise knowledgeable of employees. The resources are including capital equipment and technology. The organization can run well with integration of resources and capabilities. Tesco has provided some machine for workers to make the work become easily.

2) Corporate Level Strategy

Corporate level strategy is defines the area of industries and markets which organization compete to achieve the organizational purpose. This purpose is to maximize the shareholder value. The corporate strategy is needed for all organization whether is run a single business or run many businesses in different market.

2.1)

To grow the organization, they can consider these four main corporate strategies:

2.1.1) Market Penetration

This is standing for increase the market share in existing market. The organization can provide the same existing products but try to increase the customers. Tesco has set lower price for its products and provide Tesco card to increase its customers and sales.

2.1.2) Market Development

This is means that provide the existing products to the new market. The organization can diverse the image of existing products to fit for other market. Tesco has successful go into student and hawker market, not only house wife market.

2.1.3) Product Development

This is developing the new products for the existing market. The needs and demands of customers always change. The organization can develop the new products to satisfy the needs of customers continually. Tesco produce its own brand products for customers.

2.1.4) Diversification

This is means that the organization develops new products for new market. This can help the organization to widen their businesses.

2.2)

Diversification has divided to two groups that comprise related diversification and unrelated diversification.

2.2.1)

Related diversification is entering to the related industry that has some link with organization's value chain. Related diversification is including vertical integration and horizontal integration. Vertical integration occurs when organization going upstream (move on its inputs) or downstream (move on its customers).

Horizontal integration occurs when an organization take over a competitor or offers complementary products at the same stage in supply chain. Horizontal integration is efficiency saving for organization through economies of scale. By horizontal integration, economies of scale easy to achieved far than through internal growth. Tesco has run as related diversification. Therefore, Tesco can efficiency saving its cost through economies of scale.

2.3)

Portfolio is the different business units that run by organization. Portfolio can help the organization to analyze the return of investment on different business units and allocated the resource for them. The organization also can form the suitable strategies for each SBU. Tesco has allocate for its manufacture to produce own brand products by referring portfolio.

2.4)

Parent company exist when an organization run many businesses. Corporate parenting is the process that parent company adds value to the business that make up the organization.

Corporate parent must create value for the organization's businesses. The sound corporate strategies will create value for organization through parenting advantage. Parenting advantage occurs when an organization create more value than their competitors if they involves in same businesses. Corporate parenting will help the organization to decide which new businesses they should acquire and managed. Parent company of Tesco has created value such as offer special promotion. The other company will be noticed to follow some activities.

3) International Level Strategy

International Level Strategy is an organization embrace business and competes internationally. Organization requires forming specific autonomy to restrain its position in marketplace.

3.1) Globalization and Localization

Globalization refers the linkage between market that across national borders. What happens in one country will bring impact to other country. For globalize strategy, technology is main driving force of globalization. In contrast, localization point out national differences must be concerned by organization in products offering, distribution and promotion.

3.2) Types of International Strategies

3.3.1) Multidomestic Strategy

Every national market is unique and independent in different country. Adapting the products for national market allow an organization easy to get effectively responding to changes in local demand condition. Organization required adapting the products that can fulfill the demands in national market. Tesco has offered the products that suitable for local customers.

3.3.2) Global Strategy

An organization adapting standardized products for its international market. By compare with multidomestic strategy, global strategy can get cost reduction because of manufacturing standardized products. Organizations that run global strategy has develop manufacturing, R&D department, marketing in certain location. Tesco has developed manufacture and marketing in some foreign country to produce its products for each other country.

3.3.3) International Strategy

Organizations that adopt international strategy will exploit core competencies and capabilities, the other decentralized. Organization will retain core competencies in home country, the other work or activities such as manufacturing, packaging will take place in other country. Tesco has produce its own brand products in foreign country, but packaging maybe decentralize to Malaysia and some other countries.