A for the past 5 years Sri Lanka’s
A mission statement presents the organization’s direction and how it aims to serve its main
stakeholders. There should be planning stage
in every year or at triggering events for setting out objectives and goals. How
these objectives or goal could be achieved is by setting up short term and long
term strategic plans. New CEO John make
decisions without having clear goal nor had any short term or long term plan to
achieve certain objectives planned beforehand.
blunder was CEO John has used old SWOT and PEST in planning stages when the
variables are changed. This stage is very important stage which reflects where
the company is now with help from macro analysis from PESTLE and Internal strengths,
weakness and external opportunities and threats from SWOT.
will identify the internal and external factors that will affect the company’s
present and future performance. Normally SWOT analysis is done in scanning
process as part of the overall corporate planning in which financial and
operational goals are set for the next financial year and short term and long
term strategies are created to achieve these goals. CEO John has not done this
periodically for past 10 years and relies on old SWOT results. Strengths of organisation could be easily be
weakness over time further a weakness could be a strength when you set plans to
improve it. Also organization don’t identify its competitors as treats and neglects
opportunities to diversify or expand your business will stagnate business without any growth.
PEST is a
strategic management tool used to analyse the impact or how Political,
Economic, Social, Technological, Legal and Environmental factors affect a
factors considered in PEST analysis are dynamic and they change at a very fast
pace especially in Sri Lanka. The general importance of the various PESTLE
factors will vary depending on the type of service business.
factors, for the past 5 years Sri Lanka’s main internal
tax VAT was changed many a time. It creates major impact on the Retail and
Health care industries where for Heath care VAT was introduce for first time
and for retail and entertainment sector this was an enhancement.
In retail sector if you
didn’t have a strategy of how to recover the tax enhancement from 11% to 15%
you might be definitely end up with negative results. Company need to have strategies for short term
or long term with retail suppliers on how you preserve your GP margins. Either by
reducing purchase price or by getting monthly or quarterly free issues or as
last step to increase selling prices of products or services. Many retail outlets in Sri Lanka have done
above practices to survive from steep tax increase.
Retail sector or Heath care
or the entrainment sector normally has large labour force thus minimum wage
laws and union influence is major factors to growth of business. You need to
have strategies overcome or mitigate these factors by identifying them early.
Legal factors will
directly influence the company’s profits in service business today. Example consumer
protection laws, where for retail sector it decides the maximum retail price
and for health care the public health and safety measures.
factors in Sri Lankan market where huge upward trend specially on information technology
(IT) front. Most of the service sector s has enhanced their information systems.
Health sector also has advanced quit a lot by introducing new scanning machines
to accurately identify most of the illnesses.
Further current trend in Sri Lanka to have everything on their mobile
phone would identify and marketing strategies should be placed.
If new CEO has use
a past old PESTL analysis data when taking decision without considering recent
changes on above mention factors it could have being the major factor for
showing negative results.
B. How competition would affect Lee and Sing relating to strategic
management? Best model to answer this is from by M. Porter’s five key
competitive forces. It explains how it could affect an industry.
This theory is
based on the concept that there are five forces that determine the competitive
intensity and attractiveness of a market. Porter’s five forces help to identify
where power lies in a business situation. This is useful both in understanding
the strength of an organisation’s current competitive position, and the
strength of a position that an organisation may look to move into. (Chartered Global Management Accountant,
CEO John would
have being un ware about the competition and he has not taken any policy
decision to combat it earlier.
The Porters five
forces apply to Lee and Sing ;
Threat of new entrants This force defines how easy it is to enter a
Retail, Entertainment, Health care and
Hospitality are industries which are profitable in Sri Lanka and have few
barriers to enter. When more companies compete for the same market share,
profits start will fall. Since the
industries attached to Lee and Sing attribute to low customer switching cost, low customer loyalty,
competitor products are identical and no
government regulations yields to treat of new entrances.
Power of suppliers. Strong bargaining power allows suppliers to sell
their goods or services at higher price to the buyers. This directly affects
the all sectors of Lee and Sing’s profits because it has to pay more.
Strong bargaining power results following cases
There are few suppliers but many buyers
Suppliers are larger and they are multi nationals (MNEs)
Suppliers hold rare or limited resources
Power of buyers.
Buyers demand lower price or higher product
quality from industry, when their bargaining power is strong. Lower price means
lower revenues for the industry results in lower profits. When buyers are price
sensitive similarly they look for lower prices for the goods or services.
Threat of substitutes. All the industries of Lee and Sing one can easily find substitute goods
When buyer could find goods or service with attractive prices or better quality
buyer will switch with little cost.
among competitors. This force is the major determinant on how competitive and profitable
an industry is. In competitive industry, firms have to compete aggressively for
a market share, which results in low profits. Higher competition can be seen when there are many
competitors, products are not differentiated and can be easily substituted and
when customer loyalty is low.
Every business must consider how it can
build and protect a strong competitive position. To do this, the economics of
the business must be carefully analysed. Service businesses often require
different competitive strategies from those of product oriented companies
itself is showing the management how the company should position itself against
competitors. The company could attack competitor weaknesses with its own strengths.
Company also could have its competitive advantages to stay ahead of competitors.
Specially, when a retail business if a competitor outlet is opening at close
distance one can relies on the it’s strengths by having special promotion
campaigns and giving special discounts to its loyalty customer base to attract
them to keep ahead of the competition.