Strategic Management at Zhujiang Iron and Steel Company

strategical Management at Zhujiang Iron and Steel Company1.0 IntroductionThis material critic totallyy analyses the process of strategic management in the beas of nature of opposition, the scheme, the strategy process, method of entrepreneurship and resources ofZhujiang Iron Steel Company (ZISCo). The depth psychology has been through with(predicate) with(p) by using some major theories such as gap analysis, balance pit card, triple loop learning of ZISCo.Zhujiang Iron and Steel Company (ZISCo) is a Chinese state owned enterprise completed in 1997. ZISCo is a leaf blade manufacturer who produces wide range of steel sheets and plates that argon used as inputs of mingled other products. In early 2003, ZISCo set about many problems in the advert areas of production, procurement grocerying and this has resulted in poor financial operation. In the past ZISCo use niche marketing strategy from 2003onwards, ZISCo plotted to implement value creation strategy undertook m any functional reforms with active participation from all its employees improved its financial accomplishment during 2004 2006. However, in 2007 also ZISCo encountered various challenges, predominantly in the areas of cultural change, knowledge management, and ontogeny of organisational competence and learning capabilityThus, this material initially analyses the current problem strategies of ZISCo to understand the nature of their operations. Subsequently, conducts a PESTEL analysis, Porters five forces and value chain analysis to understand the env weighment of ZISCo, drivers of profit in the industry at present and the early. In summing up, gap and balance score card analysis also has been done to understand the gaps that are existing in the context of ZISCo and to evaluate its performance.Strategic options potentiometer be considered to address the gaps that lease been set by the organisation. Therefore, the report go out provide an exposure to the strategic options av ailable used by ZISCo and whether they amaze impressively implemented the strategies. This has been done by analysis of 7S framework triple loop learning alone with an action plan. Finally, the report will suggest the recommendations where its applicable by providing justifications. The analysis of this report was done with the assistance of the case information provided and through industry related information from academic books, journals, websites and other publicly available secondary data sources.2.0 Process of strategic management followed at ZISCoBusinesses vary in the processes they use to formulate and direct their strategic management activities. The model enhances the development of strategy prep skills by head the analyst systematic and comprehensive study of each employment situation2.1 Strategic factors and capabilities2. 1.0 External environmentFrom the PESTEL analysis Michael Porters five forces analysis it is clear that ZISCo is mathematical operation in a very complex volatile environment which will sham all the strategies adapted by the organisation. Hence, a good understanding of ZISCos international environment will facilitate the organisation to exploit opportunities and avoid threatsFrom the steel industry analysis we hatful conclude there are many good established key players in the Chinese market the industry has high potential to attract new players in future.Thus, the PESTEL variables in macro environment constitute major impact on the performance of ZISCo.2.1.1 Internal environmentAnalysis of internal environment is a crucial phase to an organisation as it helps to observe the chroma and weakness of the organisation. This would mean internal analysis will determine the required skills resources of ZISCo to cope up with competitors capabilities thus measures ZISCos effectiveness to prepare competitive expediencyAccording to the value chain analysis the main competitive advantage of ZISCo is technology leadership and implementation of value creation strategy in the steel and iron industry in china.However, through this analysis it is clear focus on character was very low this is mainly due to the fact that case department people were ignoring their responsibilities management did not place to a greater extent care in this department as it does for marketing.2.1.2Analysis of SWOTFrom the SWOT analysis key strength of ZISCo is that they have gained competitive advantage over technology leadership as they are the first troupe to introduce CSP technology in steel iron industry. In addition the other to the highest degree important strength is their value creation strategy ZISCo is the first company to implement value creation strategy and one stop shop services to their customers. Thus this will provide a first mover advantage to ZISCo as Chinese market pathetic toward planned economy to market economy.However, the primary weaknesses of ZISCo are poor shade products are being produced, h as liability to pay bank loan interest of US$ 40million annually, and lower bargain world-beater in purchasing raw materials as a result of signing a contract with a supplier. The quality issues identified would erode companys goodwill among major most important customers even company may lose its profitable customers for lack of focus in quality issues. that the non current liability seems to be a huge amount, if proper care is not taken to settle the debt the whole company would go into liquidation. In addition company also faces problems with supplier ZISCo will directly get affected if supplier does not provide raw materials on time in intend quality.Rapidly changing environment has influenced the performance of the organisation by creating opportunities and threats. The key Opportunities of ZISCo are Chinese economy is transforming towards market economy by creating an advantage for all the organisations in Chinese market and un quenched higher demand for container used ste el sheets is a big opportunity for ZISCO.The unfavourable key factors that affect ZISCo performance and barrier to growth are slow moving organisational culture (slow change from production orientation to value orientation) , competitors imitating CSP technology and marketing practice very quickly. hike up high raw material and electrical cost, the government restriction in steel industry such as limiting the number of employees been recruited and fixed harm ranges are also threats for ZISCo2.2 Strategies adapted by ZISCoOrganisation can formulate strategies in three different take aims known as corporate level, business level and functional level (Viljoen, J. and Dann, 2003, pg 235). As GISCo is the parent of ZISCo, they have adapted several comprehensive business strategies for their organisation.The business strategy of ZISCo is value creation for both customers and company.In ensnare to follow this business strategy Zhujiang has adapted following strategies. Such asChanging their niche marketing strategy to mass marketing strategyPre-emptive strategyDifferentiation strategyCost reduction strategyNew product development strategyInformal communication strategyOutsourcing strategyAdapting a new business model strategy2.3 The performance of ZISCoThe rapidly changing external environment has created some significant challenges for management of ZISCo. In order to analyse the overall performance balance score card approach has been usedA general conclusion that the overall performance of ZISCO is at o.k. level can be drawn from the balance score card analysis .However if we take each perspective in to consideration ZISCo has achieved maximum performance in financial and innovation learning perspectives whereas customer perspective and internal business perspectives are at moderate level.Therefore, ZISCo should clientele on accelerating order make pass process to make improvements in internal business perspective performance. In addition they should also create possible steps to retain attract more customers by means of customer satisfaction.2.4 Analysis of External, Internal and Stakeholders inconsistencyTo be successful, an organisations strategy must be consistent with the requirement of its current and expected future environment (external consistency), its capabilities must be consistent with the business strategy being pursued (internal consistency), and its performance from the existing business strategy must be agreeable to its key stake holders (Hubbard R.B, 2008, pg.167). Hence, an analysis has been done to identify the internal, external and stakeholder consistency of ZISCoAccording to the analysis of internal consistency of ZISCo it is evident that they have failed to adapt systems those extend to with their business strategies. This has ultimately created an internal inconsistency within the ZISCo.In addition, ZISCo also has external inconsistency as a result of government regulation on steel industry and changing ma rket in china.2.5 Gaps in Strategy formulationGap analysis of ZISCo has been done on the basis of current business strategies of the organisation. Therefore environmental business strategy, organizational performance and business strategy gaps have been identified for ZISCo (Refer appendix diagram8). By analyzing these gaps it can be identified that ZISCo is try to position its self uniquely in the market.2.6 Strategic options available to overcome gapsZISCo was not able to achieve their novelty among competitors due to gaps recognized in formulation of strategy. Thus, there are several strategic options available for ZISCo such as market strategy, generic strategy direction strategy. In order to sustain and gain competitive advantage all 3 options are equally important for ZISCo2.7 The effect of competitors and stakeholdersStake holders competitors have major role in the performance of ZISCo. The key stakeholders who are exerting more power on ZISCo are government Government has restricted the number of employees recruited by ZISCo thus have created a barrier for pull ahead business expansions also government is controlling the prices of the steel products thus ZISCo wont be able to use the cost based pricing strategies add their print profit margins.Secondly, the bargaining power of suppliers is also high in the context of ZISCo because ZISCo has entered in to contract with limited number of suppliers. Thus this enables ZISCo to solely depend on them gives high power to the supplier.The other most important stakeholders are employees. They also create an impact on the business strategy adapted by ZISCo by resisting for the required cultural change. As employees have product orientation values it would be very hard to change them towards customer orientations. This would have greater impact in developing overall strategy of ZISCo. ZISCo would have to invest more funds for a long time period in training development since cultural change cannot happen soon as company requires.Finally, like all other stake holder mentioned above Customers also exerts high power in ZISCo because there is an unsatisfied demand for steel products in Chinese industry many market players are there. If a customer is not satisfied with ZISCo, the chances of switching brand are high. Therefore to survive grow in the competitive environment as ZISCo planned it should provide value to its customers.CompetitorsZISCo is operating in a very competitive environment in which competitors are adapting to their opponents strategies very quickly. In the case of ZISCo also they have try to adapt to CSP technology and tried harder to copy ZISCos business model and marketing practices. Thus, there is a possibility competitors can attack ZISCo anytime by imitating their unique innovations soon after the patent rights expire. Thus, this compels ZISCo to continually invest huge amount of funds in research development and in marketing.In addition to the local players Z ISCo also faces high international competition in Chinese steel industry due to unfulfilled steel demand in China low costs of labour. These foreign players might have advanced technologies than ZISCo attack ZISCo simply in terms of quality.Thus, it is necessary for ZISCo to carefully understand nature of pressures exerted by both domestic international players and develop the most suitable strategy.2.8 Implementation of gapStrategic implementation is complex and time consuming but success of an organisation lies on this stage. However good the business or corporate strategy is, it is off little value unless implemented (Hubbard R.C, 2008, pg 349). Therefore, during this phase, strategy makers should consider the question of who implements that strategy, what must be done and how the strategy is implemented (Fletcher, 2001, p.2). Hence, 7S framework has been applied to ZISCo to identify gaps the issues that should be addressed during implementation phase2.9 Paradigm of operation ZISCo has shifted their paradigm from the conventional wisdom about how things have eternally been done and must be done to that of emergent strategiesFrom previous paradigm ZISCo achieved efficiency productivity but did not produce products in intended quality that will fit the utilization of customers. Therefore ZISCo has shifted the paradigm from production orientation to marketing orientation by providing more value to their customers. In order to break in new paradigm ZISCo has changed their market from niche to mass market, changed their organisational structure from functional structure to matrix structure and improved their financial performance through cost reduction2.10 Recipe issuesRecipe can be defined as a set of believes assumptions held commonly throughout the organisation, taken for granted in that organisation, but discernible to the outside observer in the stories of organisation history and explanations of events (Strategic management guide 3, 2004, pg 3). Th ere are several issues have been identified for ZISCo in current paradigmIn formulating strategy ZISCo did not define its goals objectives clearly which is critical for any organisation as it guides the employees towards mission vision of the organisation. Therefore, unstated purpose or goal of ZISCo makes the organisation unable to analyse the long term strategic purpose.Even though, ZISCo increased their financial performance by increasing lolly through new business strategy still they unable to over come their long term debt. Therefore, this imposes a huge hidden financial pretend on ZISCo.Another issue in relation to ZISCo is that cultivating a market oriented culture within the organisation while adding value to the organisation as well. In the past economy of china organisation strategies focused mainly on the production orientation, the value for production orientation already rooted powerfully in employees minds is hard to change.Finally, ZISCo is loosing competitive adva ntage of CSP technologies as a result of competitors are adapting to CSP technology over past 2-4 years. Therefore, loss of competitive advantage (technology leadership) is a critical recipe issue for ZISCo.2.11 Recommendation justification for ZISCoFrom the above analysis, I would recommend the following recommendationsZISCo should implement vision mission in more plain manner to their employees as it will help the employees to understand the long term strategic direction of the organisation. Thus, ZISCo should develop objectives that are Specific, Measurable, Achievable, Realistic and within the Time limit.ZISCo can transform their organisation as a learning organisation by allowing more innovations, continuous improvement in new product development by investing more in new technology, empowering employees and providing freedom to experiment.ZISCo should adapt to a TQM (total quality management) approach to attend real-time quality issues and invest more in compliance costs (Re fer appendix diagram 14)In order to add value for both organisation customers, ZISCo should focus on new management chronicle concepts such as extended value chain analysis target costing. These concepts will add value to organisation by reducing costs will add value to customers by providing them the intended benefits or quality(Refer appendix diagram 15 )The president should also consider changing his leadership style He should act both as charismatic a transactional leader because the president had performed well in strategy formation but he didnt concentrate some(prenominal) on communicating monitoring the developed strategy.ZISCo can also diversify their product to such as refining metals such as steel alloys. This can be done by merging with a recycling company or starting them self. This might reduce the cost of raw materials and reduce suppliers bargaining power in purchasing raw materials. Further, ZISCo can sell the raw materials to outsiders gain competitive edge .ZISCo can implement Just in time (JIT) system rather than having buffer stocks for raw materials, work in progress finished goods. JIT system would help ZISCo to deliver goods on time will reduce instrument holding costsFurther ZISCo should also focus more in managing its supply chain. It should reconsider the contract with suppliers because the present supplier seems to be not steady-going enough poor in quality. Thus, management should consider signing contracts with few reliable suppliers (Refer appendix diagram 16 )ZISCos communication system also should be developed because it seems there is communication gap between top people bottom people ZISCo. Even though, Middle managers are acting as effective communicators between two parties it is insufficient for an organisation that intends to create value.Organisation should extend their one stop shop services in many geographical areas. By doing this they can gain competitive advantage and increase customer satisfaction as it reduce the transportation cost and time of customers.Organisation also should concern on their employees by creating carrier opportunity and carrier development to provide a value to their employees by providing them future sustainability.2.12 Action plan of ZISCoACTION whole stepPerson ResponsibleTARGET (Period Ending)20072008200920102011Focus on growth strategiesMarket share, competitivenessPresident and Middle Management6%7.5%8.5%10%15% modify the CRM strategiesContribution to total revenue and net profitPresident and middle Management10%18%28%42%55%Improve the quality of the final outputQuality control measuresDepartment of product quality15%25%40%65%90%Create Learning Culture, unceasing Improvement and a flexible organizationInnovation efforts, ability to correct mistakes and progress, quick responsePresident and the middle Management2%4.5%7%10%15%New Product DevelopmentNew products developedR D1%2.5%5%9%12%4.0 ConclusionThis case analysis has focused on the strategic managem ent process of Zhujiang in the areas of nature of competition, the strategy, the strategy process, method of entrepreneurship resources of Zhujiang Iron Steel Company (ZISCo). The analysis has investigated apparent set up of the issues of ZISCo determined the causes of these consequences by use of appropriate theories. Based on this analysis, justifiable recommendations have been developed, which would redirect the organisation to its required respective strategic objectives.The recommendations for the organisations have been logically presented within a 5 year timeline which enables to generate the favourable outcomes while keeping the environmental changes in focus.At present ZISCo is operating in a very competitive market the competitive advantage of technology leadership is more short time oriented. Thus, in order to sustain in the market a key core competitive advantage is required for ZISCo as company planned the value creating strategy would be the most suitable. Furthe r, the quality levels of ZISCo are inadequate. This is furthering them from their objective of value creation.ZISCo is putting efforts to move from a paradigm of production efficiency to value orientations. However, it is a great challenge to ZISCo as there are many gaps at ZISCo. The analysis indicates though the strategic objectives are appropriate for the environment, implementation of strategy is ineffective.Thus in conclusion it is clear that only by formulating effective strategies an organisation could not achieve its strategic objectives, unless it has the systems, procedures and most importantly willingness to efficiently implement the formulated strategies.5.0 ReferencesFletcher J (2003) .Strategic management Study guide and plan Edith Cowan University Perth AustraliaHill,C and Jones G (1995) Strategic management an integrated approach (3rd)Houghton Miffin, Boston, TorontoHubbard, G. Rice, J. Beamish, P. 2008 Strategic management Thinking analysis action 3rd ed Pearson ed ucation AustraliaMiller A, (1998), Strategic Management, McGraw Hill, 3rd Edition. New York.Study Guide Strategic ManagementViljoen, J. Dann, S. 4th edition (2003). Strategic Management, Frenchs Forest, New South Wales Pearson Education Pty Ltd.