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2859 : International Business Management : Strategic Management Proces

Question: 

1. Using a Strategic Management Process approach, discuss the strategies you will use to grow a small Family Business into a generational Company.
 
2. Using examples from the case study, discuss strategies you will use to grow your company or organization into an international company.

Answer: 

Strategies I Will Use To Grow a Small Family Business into a Generational Company Using a Strategic Management Process Approach

According to Chen and Huang (2009 p.107), strategic management process enables entrepreneurs to scan the environment, formulate strategies, implement strategies and evaluate the effectiveness of the implemented strategies. Various steps are critical in growing a typical family-owned business into a generational business. For example, the founders should ensure that they plan for succession at least 10 years before the retiring of the successor. The founder should avoid “handing over” the business to their children but rather “sell” the business to them so that they can make payments over a period of time. The aspect will assist the


successors in getting serious with the business and also minimizes the financial liability to the owner in case the successors are unable to run the business thus resulting in its failure.

In addition, the owner should ensure that there is a separation of the business from personal finances, whereby the business’ financial needs are prioritized as compared to personal financial needs of the family. Generally, the business should not be viewed as the family’s bank account as poor accounting sophistication may leave the company at a risk struggling with huge debts to support a lifestyle. While it is good to give the family members a good salary, they should have the responsibility of paying for their bills from their own personal accounts (Molly, Laveren & Deloof, 2010 p.138).

Celebrating the transition to the new owners with customers and staff is important for all parties to understand the “new” management which has come into place. Therefore, announcing publicly of the management transition is critical since customers and vendors will have awareness and opinion about the new owners resulting in the new management having opportunities for success. Furthermore, before handing over the business, the owner should ensure that there is a match between the new owners and the various appropriate positions in the company. To achieve success, the owner should assess the skill set of the children to understand the various positions in the business they can place them which suit their skills so as to maintain the business’ reputation to clients and suppliers.

After handing over the business, the owner should evaluate the progress of the business and encourage formal education for the new owners to improve their skillset. In addition, the owner should encourage the successors of being self-aware and encourage continuous self-development in order to continuously grow their skills and adapt to the dynamic business environment. Furthermore, following up will also enable the founder of the business to continuously advice and nurture the talent of the new owners to understand the business dynamics we, and for continuous innovation and sustainability (Cruz & Nordqvist, 2012 p.38).

Strategies I Will Use To Grow My Company or Organization into an International Company Using Examples from the Case Study

The strategies that I will use in growing my company include exporting, merging and diversifications.

Exporting Strategy

The export strategy involves exporting goods to overseas from the domestic markets without directly producing and marketing goods in that market (Andersson & Lööf, 2009 p.893). The strategy is divided into two categories of direct exporting and indirect exporting. In direct exporting, the services or products are sold directly to customers without intermediaries while in indirect exporting the company sells its products to a distributor or agent in the foreign market then repackages, markets and sells the products to customers. For example, Unitech engineers have considered implementing direct exportation of their product to diverse countries. The direct exporting of “high tensile fasteners” will ensure that the company has generated high revenue in the foreign country. Furthermore, the company has total control over distribution and pricing and reduced risks of producing overseas because of home base manufacturing. In addition, lack of intermediaries ensures high market growth. Therefore, despite agents being an entry barrier to foreign countries, I will consider growing my company using the strategy.

Joint Venture or Merging Strategy

Joint ventures or merging strategy will also enable the company to grow internationally. According to Beamish and Lupton (2009 p.75) a joint venture is a partnership that exists between two or more firms to achieve particular goals. The strategy involves Company’s separate entity where control of property rights and ownership is shared by the parent countries. For example, with the South African market being competitive, Unitech Engineers Private Company need to merge with other similar companies in the fasteners industry. Merging with foreign companies creates awareness of the products to diverse markets globally hence establishing brand trust and customer loyalty. The strategy ensures that the company has fewer risks in market expansion as all skills and risks are shared with knowledge of domestic markets of the local partner and process of technology know-how of the foreign country.

Diversification

Diversification strategy involves launching of new services or products on the previously unexplored market (Bausch & Pils, 2009 p.157). Despite the strategy being risked, the marketing of the company’s new products and services creates an awareness of the products and attracts new consumers. For example, Unitech Engineers Private Company upgrades have been upgrading its technology so that their consumers can enjoy their new upgraded products with new features. The strategy has seen the company being successful in diverse markets as many consumers are likely to upgrade their products with upgrades in technology.

References:

Andersson, M. and Lööf, H., 2009. Learning?by?exporting revisited the role of intensity and persistence. Scandinavian Journal of Economics. 4th ed. U.S.A: Wiley Online Library pp.893-916.

Bausch, A. and Pils, F., 2009. Product diversification strategy and financial performance: meta-analytic evidence on causality and construct multidimensionality. Review of Managerial Science.3rd ed. Germany: Springer pp.157-190.

Beamish, P.W. and Lupton, N.C., 2009. Managing joint ventures. The Academy of Management Perspectives. U.S.A: JSTO Publishers pp.75-94

Chen, C.J. and Huang, J.W., 2009. Strategic human resource practices and innovation performance—The mediating role of knowledge management capacity. Journal of business research. 1st ed. United States: Elsevier

Cruz, C. and Nordqvist, M., 2012. Entrepreneurial orientation in family firms: A generational perspective. Small Business Economics. 1st ed. pp.33-49. Germany: Springer

Molly, V., Laverne, E. and Deloof, M., 2010. Family business succession and its impact on financial structure and performance. Family Business Review. 2nd ed. United States: Sage Publications, pp.131-147

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