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What is Strategic Management?


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Date: Tue, 16 Feb 2010 Time: 2:37 AM

Introduction

Strategic management can de defined as those policies/plans which are set by an organization in order to achieve its set goals and objectives. In order for an organization to achieve its objectives, it needs to combine various strategies say functional strategies and business strategies which include marketing, accounting finance, personnel, global strategies and production strategies among others. It is also the highest level of an organization which is established by the organizations board of directors. Each functional department in this case helps in meeting the organizations objectives and their strategies can be derived from a broader organizational strategy. (Canales, Kibble, and Terk, 2000 Vol. 41).

Strategies which are used by the Caterpillar Inc.

The caterpillar Inc. is one of the United States companies which is situated in Peoria, Illions.It is a known company in the united states and the worlds manufacturer of mining and construction, natural gas engines and industrial gas turbines among other equipments which are manufactured by this company. Caterpillar company can be distinguished from the other companies by its caterpillar tracks and yellow paints since they are usually painted in a yellow colour.It is among the thirty companies whose stock is usually tracked in the Dow Jones Industrial Average Hence Caterpillar is a fortune company and its ranked first in this industry. The company uses marketing strategies to ensure that it has remained the number one manufacturer of earthmoving equipments. Its goals of marketing communications campaign are to introduce Cat H-series Wheel equipment loaders and then successfully position its machines as empowering contractors/quarries to move more. (Canales, Kibble, and Terk, 2000, Vol. 41).

Marketing strategies

Marketing strategies are quite important in strategic management. Proper marketing policies ensures that the business is well run hence leading to huge profits. Marketing strategies are decisions made by the company in order to properly allocate its resources so that it can realize its set goals and objectives. When these policies are properly set, then you find that the organization can achieve its goals effectively. It is seen as a tool used to provide direction in a firm. Proper marketing should be properly analyzed to make sure that the organization is effective when doing its activities. A proper strategy is power. This is because the more you know about your customers, competitors and then the better you can tailor your goods and services in order to attract new customers in the business, encourage them to spent more hence increasing your profits in that sector. As a result, you also realize that you are at the same time lucrating long lasting relationships which enable these customers to always shop in your company hence increasing your profitability. In the marketing strategies, one also considers the location of the business where there are no many competitors. Caterpillar Inc. offers the best values in the market. It does not mean a top of the line products for every customer but in this case its mission is to provide its customers with the right product. In most of the markets this company trades its products, the customer gets not only the high quality product, but also the customer can get a comprehensive solution to his many problems. It has a customer oriented approach whereby it provides quality products to its customers and this has led to its great success. It also offers training of its customer’s employee gives after sale services, maintenance services, after sale repairs and also supplies of spare parts. In this case, more customers are attracted to this company since their services are up to standard. (Linda, 2000, pp 26).

Differentiation strategy

Differentiation strategy can be defined as a set of integrated actions and are designed in a way which lead to improved deliverance and production of these equipments and customers are supposed to perceive the products as quite different in ways that are important for these customers. For Caterpillar Company to be more productive, they are supposed to be unique in their services far beyond many years ago when the products were provided. It is also argued that the key to successful and competitive advantage is differentiation. Differentiation can well be explained in the case of global marketing products. What used to be local competing organizations or businesses has now turned to be global marketing. Differentiation in this case can be seen when improved products are provided different from the old system of providing these products. In order to keep a successful customer base, it’s important to consider positioning and differentiation strategies. In launching of its new E-series Backhoes, in this case, caterpillar needed to differentiate itself from the rest of the competing companies. In this case, its smaller audience is the smaller sized contractors, including operators/owners who are involved in the residential construction and water work. This company wants to differentiate itself from the other companies since the backhoe loader market is actually competitive. So in order to achieve its goals and objectives, the company differentiates itself from the rest of its competitors. The company wants to create a best in class message for the new E-series machines that will entice the audience to want to see it for themselves. In the new E-series, it focuses on operator comfort, productivity, power, fuel economy and versatility. (Becker, and mark, 2000, pp 89).

Production strategies

Production is important in strategic management. Production refers to the total output a given organization can realize in a certain period of time. A good strategic management, in an organization is supposed to consider its total output. It considers the total output which it can realize in a given time period say one year. If the organization fails to achieve this output, then it has to revise its management strategies since they are seen to be quite ineffective. But incase the production is achieved at the given time period, then your management strategies are good and needs to be adapted.Caperpillar sales most of its equipments to the oversea countries hence making it to have a ready market for these products. Its products are sold nearly to 200 countries. It has also a world network of 220 dealers in most of the industrialized countries. Also when considering production, the management strategies should also consider the cost of production. The cost of production should be less than the total output. The caterpillar company does not employ high costs since when the costs of production is higher than the total output itself, then the organization will eventually have losses. So, proper management strategies should consider the cost of production to ensure that the organization is in a position to get high profits. Distribution is also another area of concern during production. A good management strategy requires distribution process. This is because many products say perishable products need to be distributed so easily before they get destroyed. But for this case, Caterpillar Company has many distribution channels for its products. Earlier we saw that this company is one of the leading companies in the manufacture of these equipments. As a result, you find that it has 200 countries whereby it distributes its equipments. This means that it has a ready market for these products. It also distributes these equipments to the oversea countries. These countries are usually industrialized hence making a ready market for its products. As a result, it has been in a position to grow since it has good distribution channels for its products. So a good management strategy should consider production so that it can get higher profits. (Lazear, 2000, Vol 21).

Finance strategies

Finance is another area of concern in the management process of the caterpillar company. A good course in finance helps in properly allocating the organizations funds. In any organization, financing department is very important since it plans the organizational funds well. It will also help in proper planning of the organizations profits hence leading to increased performance of this organization. Also the records of the caterpillar company are properly kept and the management of this organization can know when making profits or losses. It’s due to proper financing skills that this company knows when it’s running deficits or losses. Financing skills are then important during strategic management process since it can know when it’s making profits or losses. Caterpillar has also a financing corporation which helps to manage this organization. The financial services business unit within caterpillar Inc. was incorporated in 1981. This service was provided to help finance the companies lift tracks. As a result, this company has applied this strategy to help remove the constraints which are associated with the lack of finances. Most organizations usually fail because they lack enough finances which help the organization to run well. Finance is seen as the blood to any organization. So without this power, you find that this organization can not function well. The company uses this strategy to manage risks which are involved when running this company. You find that in any organization, there are risks and uncertainties which are faced by an organization. So in this case, caterpillar Inc. manages its risks by knowledge of financing. It has a good track of financing records so it can manage its risks when they occur. Some of these risks are environmental risks which are usually uncertain. Another risk is employee’s strike which might lead to the closure of this company. (Ashenfelter, and Timothy, 1986, pp 91).

Global strategies

Globalization is one of the strategies which are used by the caterpillar company. It has a large geographical coverage and product variety. It is a global leader in the heavy construction industry. It is also a global leader in other sectors say agricultural equipments, financing equipment and diesel engines. Globalization can be defined as the sale of goods and services to other countries without any restriction. This is a kind of free trade whereby countries trade outside their borders without any trade restriction. In this case, the caterpillar company trades globally and this has enabled this company to sale most of its products overseas. With the global trade, caterpillar is in a position to even trade with the most remote areas. This is because most of the remote countries especially the developing countries are usually ignored but it’s due to the issue of globalization that this company is in a position to trade its products. This provides a ready market for its products hence can sale its products easily. (Ashenfelter, and Timothy, 1986, pp 91).

Conclusion

Management strategies can be seen as policies and laws which are established by a certain company so that it can achieve its goals and objectives. The management strategies act like a direction to nay organization. If a company has these plans, you find that it helps minimize the constraints which are faced by these companies. You find that most of the constraints say financial problems, closure of the business usually occur when the company does not have proper management strategies. As a result, a company should have these strategies in order to overcome the difficulties which might happen when carrying its activities.

Reference

Canales, J., Kibble, B., and Terk, N. (2000): One step beyond strategic planning. Foundational news and Commentary, Vol.41.

Hay, R. (1990): Strategic management in non-profit organizations. Westport. Greenwood Press.

Lazear, E. (2000): Performance and Productivity. Journal of Human Resource

 Management, Vol. 21(4): 23-45

Kim, C. (1999): Management Strategies; Journal of Business Strategy, Vol. 5(9): 89-100

Legal Information. Retrieved from, http://www.pocruises.com/pocruising/booking-conditions.aspx on 2nd February 2008.

Ashenfelter, O. and Timothy, H. (1986). Market product competition. The case of the

 Banking industry, Quarterly journal of economics’. pp 91.

Becker, B. and mark, A. (2000): Competitive strategies and firm performance.

Presentation on proper management annual meeting.pp 89.

Linda, D. (2000). Braking for Growth; Retrieved from,

 http://www.echoinggreen.org/resource/orgdev/carr1.htm on 2nd February 2008

P & O Cruises. Retrieved from, http://www.pocruises.com/pocruising/Home.aspx on 2nd February 2008. pp 26.

March 11 11:24           March 11 19:24           The essay I received did not answer the essay question I sent. The main point in the essay should be about the corporate restructuring as a response to the constraints of a mature market. This did not appear to be addressed and discussed witin the essay.

 

 

 

 

 

 

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