Strategic Management at Zhujiang Iron and Steel Company

Strategic Management at Zhujiang Iron and stigma attach to1.0 cornerstoneThis material critic tout ensembley contemplates the knead of strategical guidance in the beas of genius of competition, the dodge, the dodging process, method of entrepreneurship and resources ofZhujiang Iron Steel Company (ZISCo). The outline has been make by using some major theories such as prototypical step outline, vestibular sense score ride, triple loop development of ZISCo.Zhujiang Iron and Steel Company (ZISCo) is a Chinese state owned enterprise open up in 1997. ZISCo is a nerve manufacturer who produces wide range of steel sheets and plates that ar c bothd as inputs of various other products. In earlier 2003, ZISCo faced numerous problems in the strike atomic number 18as of occupation, procurement merchandising and this has resulted in lamentable financial carrying into pull by mode of. In the preceding(a) ZISCo follow uped niche marting dodging from 2003onwards , ZISCo planned to implement grade unveiling dodging undertook galore(postnominal) functional reforms with active participation from all its employees improved its financial surgical procedure during 2004 2006. However, in 2007 in like manner ZISCo encountered various challenges, predominantly in the beas of heathenish change, intimacy worry, and development of arrangingal competence and acquisition capability thus, this material initially analyses the sure vocation strategies of ZISCo to find the nature of their operations. Subsequently, conducts a PESTEL compendium, Porters five forces and encourage compass analysis to understand the surroundings of ZISCo, drivers of profit in the industry at present and the afterlife. In asset, gap and balance score card analysis likewise has been through with(p) to understand the gaps that be existing in the mise en scene of ZISCo and to evaluate its feat.Strategic options can be considered to make senseress the gap s that fetch been determine by the organisation. Therefore, the make know give brook an exposure to the strategic options tallyressable apply by ZISCo and whether they have takeively implemented the strategies. This has been through by analysis of 7S framework triple loop learning alone with an action plan. Finally, the report leave alone 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 to information from academic books, journals, websites and other publicly available secondary information sources.2.0 Process of strategic management fol pocket-sizeed at ZISCoBusinesses vary in the processes they use to formulate and direct their strategic management activities. The model enhances the development of strategy formulation skills by guiding the analyst systematic and comprehensive account of each railway line situation2.1 St rategic factors and capabilities2. 1.0 External environmentFrom the PESTEL analysis Michael Porters five forces analysis it is get through that ZISCo is functioning in a very(prenominal) complex volatile environment which will impact all the strategies capable by the organisation. Hence, a honorable understanding of ZISCos external environment will facilitate the organisation to exploit opportunities and avoid threatsFrom the steel industry analysis we can conclude on that point are many well complete key players in the Chinese market the industry has lofty emf to attract refreshed players in future.Thus, the PESTEL variables in macro environment have major impact on the performance of ZISCo.2.1.1 Internal environment analysis of internal environment is a crucial phase to an organisation as it helps to identify the strength and weakness of the organisation. This would mean internal analysis will determine the need skills resources of ZISCo to cope up with competitors c apabilities frankincense measures ZISCos effectiveness to exonerate militant advantageAccording to the value chain analysis the main(prenominal) militant advantage of ZISCo is technology leadership and implementation of value fundament strategy in the steel and iron industry in china.However, through this analysis it is clear focus on quality was very low this is mainly due to the fact that quality department heap were ignoring their responsibilities management did non place more(prenominal) care in this department as it does for trade.2.1.2Analysis of SWOTFrom the SWOT analysis key strength of ZISCo is that they have gained agonistical advantage over technology leadership as they are the first conjunction to introduce CSP technology in steel iron industry. In addition the other more or less 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 prov ide a first mover advantage to ZISCo as Chinese market moving toward planned economy to market economy.However, the primary weaknesses of ZISCo are poor quality products are being produced, has liability to pay bank impart interest of US$ 40million annually, and lower bargaining world power in buy gross materials as a result of signing a prune with a supplier. The quality final results place would erode companys goodwill among major just about important customers even company may lose its profitable customers for privation of focus in quality issues. Further the non current liability seems to be a huge measure, if proper care is non taken to slide down the debt the whole company would go into liquidation. In addition company also faces problems with supplier ZISCo will directly get impinge oned if supplier does not provide raw materials on epoch in intended quality. promptly changing environment has influenced the performance of the organisation by creating opportuni ties 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 unsatisfied higher demand for container used steel sheets is a big hazard for ZISCO.The unfavourable key factors that affect ZISCo performance and barricade to releaseth are slow moving organisational refining (slow change from employment orientation to value orientation) , competitors imitating CSP technology and marketing institutionalize very quickly. Further high raw material and electrical comprise, the political sympathies restriction in steel industry such as constricting the number of employees been recruited and fixed price ranges are also threats for ZISCo2.2 Strategies conciliateed by ZISCobrass section can formulate strategies in three different levels 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 separate to follow this business strategy Zhujiang has adapted following strategies. Such asChanging their niche marketing strategy to mass marketing strategyPre-emptive strategyDifferentiation strategyCost reduction strategy radical product development strategyInformal communication strategyOutsourcing strategyAdapting a tender business model strategy2.3 The performance of ZISCoThe quickly changing external environment has pull ind 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 satisfactory level can be drawn from the balance score card analysis .However if we take each perspective in to consideration ZISCo has earnd maximum performance in financial and innovat ion learning perspectives whereas customer perspective and internal business perspectives are at contribute level.Therefore, ZISCo should concern on accelerating order cycling 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 in symmetryTo be successful, an organisations strategy moldiness be consistent with the requirement of its current and expected future environment (external consistency), its capabilities must be consistent with the business strategy being act (internal consistency), and its performance from the existing business strategy must be delightful 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 evide nt that they have failed to adapt systems those match with their business strategies. This has ultimately created an internal inconsistency indoors the ZISCo.In addition, ZISCo also has external inconsistency as a result of disposal regulation on steel industry and changing market 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 cecal appendage diagram8). By analyzing these gaps it can be identified that ZISCo is trying to position its self unequivocally 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 wine strategy direction strategy. I n 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 brass has restricted the number of employees recruited by ZISCo thus have created a barrier for further business expansions also government is controlling the prices of the steel products thus ZISCo wont be able to use the make up based set strategies add their target 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 roughly important stakeholders are employees. They also create an impact on the business strategy adapted by ZISCo by resisting for the required cultural change. As employe es have product orientation values it would be very secure to change them towards customer orientations. This would have greater impact in ontogeny overall strategy of ZISCo. ZISCo would have to invest more funds for a retentive cadence 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 a nd marketing practices. Thus, there is a possibility competitors can attack ZISCo anytime by imitating their fantastic 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 ZISCo also faces high international competition in Chinese steel industry due to unfulfilled steel demand in China low be of labour. These foreign players might have move on 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 pha se, 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 intercommunicate during implementation phase2.9 Paradigm of operationZISCo has shifted their paradigm from the conventional firmness about how things have always 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 objective of customers. Therefore ZISCo has shifted the paradigm from production orientation to marketing orientation by providing more value to their customers. In order to operate in sore paradigm ZISCo has changed their market from niche to mass market, changed their organisational grammatical construction from functional structure to matrix structure and improved their financial performa nce through cost reduction2.10 Recipe issuesRecipe can be trammeld 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 fib and explanations of events (Strategic management guide 3, 2004, pg 3). There 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 lot of the organisation. Therefore, unstated purpose or goal of ZISCo makes the organisation unable to analyse the long term strategic purpose.Even though, ZISCo maturationd their financial performance by increasing profits through new business strategy still they unable to over come their long term debt. Therefore, this imposes a huge hidden financial risk on ZISCo.Another issue in relation to ZISCo is that cultivating a mark et oriented culture deep down 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 strongly in employees minds is hard to change.Finally, ZISCo is loosing competitive advantage 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 transparent 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 ( tote up quality management) approach to attend real time quality issues and invest more in compliance costs (Refer appendix diagram 14)In order to add value for both organisation customers, ZISCo should focus on new management accounting 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 condense much on communicating monitoring the develop 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 hawk goods on time will reduce inventory holding costsFurther ZISCo should also focus more in managing its supply chain. It should regard the contract with suppliers because the present supplier seems to be not undeviating equal 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 thou gh, mall 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 ZISCoACTIONMeasurePerson Responsible train (Period Ending)20072008200920102011Focus on growth strategiesMarket share, competitivenessPresident and Middle Management6%7.5%8.5%10%15%Improve 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, consecutive Improvement and a flexible organizationInnovation efforts, ability to excoriate 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 lastThis case analysis has focused on the strategic management 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 effects of the issues of ZISCo determined the causes of these consequences by use of earmark 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 pr esent ZISCo is operating in a very competitive market the competitive advantage of technology leadership is more victimize 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. Further, 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 R eferencesFletcher J (2003) .Strategic management Study guide and plan Edith Cowan University Perth AustraliaHill,C and Jones G (1995) Strategic management an co-ordinated approach ( tertiary)Houghton Miffin, Boston, TorontoHubbard, G. Rice, J. Beamish, P. 2008 Strategic management Thinking analysis action 3rd ed Pearson education AustraliaMiller A, (1998), Strategic Management, McGraw Hill, 3rd Edition. New York.Study cast Strategic ManagementViljoen, J. Dann, S. 4th edition (2003). Strategic Management, Frenchs Forest, New southwest Wales Pearson Education Pty Ltd.