Business Studies
Strategic Management- Benchmark Executive Summary
The purpose of this assignment is to summarize two strategic alternatives for your selected corporation based on individual research and team analyses.
Assume that you work as an analyst team lead at the company you have been studying throughout this course, and you are issuing a high-level communication to company CEO that summarizes your analysis. Based on what you have discovered regarding environmental scan issues, financial analysis issues, industry trends, etc., communicate a plan for implementing two strategic alternatives in an executive summary of 750-1,000 words.
Include the following in your response:
Based on your work this semester, synthesize and present key analytical findings about where the company is exceling and how or where it can improve. Refer to both your CLC and individual analysis in your summary.
Propose two creative yet viable corporate-level strategic alternatives. Critique the pros and cons of each alternative utilizing your analytical findings.
Select and defend the pursuit of one of your two viable alternatives. How does this alternative align with the firm’s mission, vision, and values? How can management employ this alternative to create competitive advantage for the firm? Suggest next steps.
Based on your analysis, identify a business unit or activity within the corporation that you would suggest defunding in order to finance your strategic alternative, or provide an alternate funding source. Defend your selection.
Given your overall proposal, how do you suggest the company promote its culture, vision, and mission to maximize its chances for success in the industry? How might the company develop its servant leaders to endorse and exemplify tenets of the Christian worldview (CWV) in the workplace? Propose and defend at least one significant leadership initiative.
Prepare this assignment according to the guidelines found in the APA Style Guide, located in the Student Success Center. An abstract is not required.
This assignment uses a rubric. Please review the rubric prior to beginning the assignment to become familiar with the expectations for successful completion.
ANSWER
Strategic Management- Benchmark Executive Summary
Southwest Airlines has excelled in its low-cost business model, where it has reduced its cost of operation. They have improved their operational efficiency by lowering headcount and boosting the efficiency of employees required to control functions. Before the pandemic, Southwest Airlines has maintained a strong balance sheet with a high net cash position and increasing operating lease liabilities and debts. Their reliability and consistency have made it easy for them to excel in their business. They have a very flexible schedule and allow customers to book flights until a day before choosing the flight (Harvey and Turnbull, 2020). Southwest is affordable for everyone, so people from all economic levels can afford their services which have even helped them with fuel costs and employees being paid decent salaries instead of low wages, thus increasing their commitment and
Strategic Alliance
A strategic alliance refers to a cooperative arrangement between two or more firms through which each firm contributes resources to make the coalition functional (Schmid, 2018). It is also an agreement between two (or more) organizations that agree to work together toward a common goal or set of goals, either directly or through intermediate objectives. The purpose of this collaboration usually involves one or more business functions such as research and development, manufacturing, marketing, purchasing, but may also affect shared costs, shared profits (joint ventures) and other efforts intended to produce benefits more remarkable than what would be achieved if the companies were to act independently.
Pros
A strategic alliance would be effective for Southwest Airlines, where they can gain competitive advantages. By having effective alliances, Southwest Airlines will be able to compete more effectively with other airline companies. This is because partnership helps them to increase their service offer and provide efficient services that consumers need. Strategic Alliance would help Southwest Airlines to gain a competitive advantage and meet consumer needs. Strategic alliances can help airlines respond more quickly to changing business conditions (Lohmann and Spasojevic, 2018). These types of relationships also serve to reduce costs, leverage resources and provide access to new markets.
Cons
One of the greatest limitations of strategic alliance is sharing of profits and resources, knowledge and skills. Sharing skills and knowledge can be problematic, especially due to trade secrets and intellectual property, resulting in conflicts and disagreements in ownership claims. Clash of cultures, organizational structure and communication processes can influence the success of strategic alliances. When clashes occur, blame shifts from one party to another, which adds tension to the relationship. A strategic alliance can result in goal displacement due to loss of autonomy since the business losses its independence in handling outcomes (Tjemkes, Vos and Burgers, 2017). Ideally, all the parties in the strategic alliance have control over performance and operations. For instance, a business may fail to rely on a certain technology and invention since the alliance partners have failed to subscribe to it. Therefore, the strategic alliance may be challenging when differences exist within the partners due to the organizations’ structure, culture, and goals.
Diversification
Diversification is defined as diversifying the resources, capabilities and industry segments that influence a business’s overall success. Ideally, many industries are exposed to economic cycles, which can be classified as expansionary or contractionary. Expansionary cycles are usually associated with periods of high growth and increased consumer spending. On the other hand, there is less money available for consumers to spend on travel during contractionary economic cycles. During these times, airlines that are highly exposed to one market segment go bankrupt; however, diversification protects some of the risks inherent in exposed markets. Diversification also allows companies to develop new business lines by identifying different needs and meeting them through existing capabilities at a lower cost than starting from scratch (Gyan, Brahmana and Bakri, 2017). For example, Southwest Airlines can expand its product line to include other airlines and railroads and hotel brands. As a result, even though the airline industry is highly exposed to economic cycles, Southwest can maintain profitability during expansionary and contractionary periods.
Pros
Diversification allows businesses to hedge against economic downturns in one segment by expanding into unaffected areas. Diversification in the air travel industry has allowed many airlines to not only survive but thrive. Diversification allows moving from a single business to a diverse set of businesses. Instead of investing in a single project or idea, running after a diversification strategy helps reduce risks and manage better potential opportunities while helping avoid possible losses (Ansoff et al., 2019). This strategy helps businesses reach more customers and bring them the best business ideas or services. As they spread across multiple industries or groups, they increase their chances of success in every section they operate in. A successful company with a diversified portfolio can earn substantial money through the high demand for each service, plus huge savings in costs and expenses related to running a single business project alone.
Cons
Diversification will require new skill assets and investment, along with a lot of time and effort. It can make a business a little slow compared to other competitors who focus on a single idea or product. Another challenge of diversification is the risks of entering into new markets. There are times that a company becomes unfocused or diluted, leading to additional costs and problems in the future. It is easy to lose focus on what you should be doing after getting involved with numerous activities at once.
Most Suitable Strategic Alternative
Southwest Airlines should focus on diversification to be prepared for the future. Diversification is a key risk-reduction strategy (Ansoff et al., 2019). Without diversification, it is difficult to achieve gains without significant losses. In the airline industry, airlines are majorly diversified into other businesses to reduce volatility. The mission of Southwest Airlines is to unite people to what is essential in their lives by low cost, consistent and friendly air travel. Therefore, through diversification, they will offer more services efficiently, thus connecting people to what is important to their lives.
Diversification will also boost their aim to be one of the world’s most efficient, loved and most profitable airlines since they can invest in other activities to gain profit and offer efficient services. The management can rely on diversification to create a competitive advantage by relying on their expertise to penetrate new markets and industries, thus increasing profitability and brand reach. The company can rely on venture capital funding to facilitate its diversification. Venture capital funding is the collective term for the support offered by venture capitalists to new or growing companies. Investors, who are often professionals with experience in businesses, provide funds with the expectation of some type of financial return on their investment. The importance of venture capital is that it’s not long term money but an investment in the company’s balance sheet until it succeeds in the new ventures.
Servant Leadership
Servant leadership aims to empower the employees and bring them together, which results in more enthusiasm and commitment to the company goals. The company can develop servant leaders that exemplify tenets of the Christian worldview through advocating for a management style that puts the needs of others first and listens to the team members. To develop servant leaders, it’s important to emphasize caring for the team personally through empathy and humility. The management should also advocate for feedbacks from the team members and commitment to the development of team members. Servant leadership will develop a workplace where the employees feel appreciated, respected, and valued, which strengthens the work culture through high engagement and morale.
References
Ansoff, H. I., Kipley, D., Lewis, A. O., Helm-Stevens, R., & Ansoff, R. (2019). Strategic dimensions of internationalization. In Implanting strategic management (pp. 311-336). Palgrave Macmillan, Cham.
Gyan, A. K., Brahmana, R., & Bakri, A. K. (2017). Diversification strategy, efficiency, and firm performance: Insight from emerging market. Research in International Business and Finance, 42, 1103-1114.
Harvey, G., & Turnbull, P. (2020). SOUTHWEST AIRLINES. Case Studies in Work, Employment and Human Resource Management, 80.
Hitt, M., Ireland, R., Hoskisson, R. (2018). Strategic Management: Competitiveness & Globalization: Concepts and Cases 12e. Cengage Learning.
Lohmann, G., & Spasojevic, B. (2018). Airline business strategy. In The Routledge companion to air transport management (pp. 139-153). Routledge.
Lohmann, G., & Spasojevic, B. (2018). Airline business strategy. In The Routledge companion to air transport management (pp. 139-153). Routledge.
Schmid, S. (2018). Strategies of internationalization: An overview. Internationalization of Business, 1-25.
Tjemkes, B., Vos, P., & Burgers, K. (2017). Strategic alliance management. Routledge.
