Structural Equation Modeling in Strategic Management

This assignment is a literature review exploring the use of least squares structural equation modeling (SEM) in strategic management research. It examines past applications of SEM in this field, analyzes its effectiveness, and provides recommendations for future research using SEM in strategic management.

SRATEGIC
MANAGEMENT

Table of Contents
INTRODUCTION...........................................................................................................................3
1........................................................................................................................................................3
Purpose of strategies...............................................................................................................3
2........................................................................................................................................................4
Stakeholders analysis..............................................................................................................4
3........................................................................................................................................................6
The strategic analysis of Tesco life cycle...............................................................................6
4........................................................................................................................................................7
Strategic analysis of external environmental factors..............................................................7
5........................................................................................................................................................8
Strategic analysis: resources and capabilities.........................................................................8
6........................................................................................................................................................9
Strategic analysis: Value chain Creation................................................................................9
7......................................................................................................................................................10
Strategic formulation: business strategies............................................................................10
8......................................................................................................................................................12
Strategic formulation: corporate strategy.............................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13
Books and Journal................................................................................................................13

INTRODUCTION
Strategic Management is the creation and application of strategies by the managers to
attain performance goals and competitive advantage for the company. Strategic management if
defining the strategies for the achievement of goals efficiently and effectively. The manager
should have appropriate knowledge about the environmental factors affecting the organisational
performance (Freeman, 2010). The manager should have knowledge about the strength,
weakness , opportunities and threats for the organisation and develop proper strategies to attain
competitive advantage in the market.
Strategic management is the on going process that controls the operations of business. In
this report the effect of external and internal environment is studied. The different strategies
related to value chain, cost leadership, diversification are defined in these strategies to develop a
successful business plan.
With the implementation of well defined strategies in the organisation. Proper
communication of strategies to the employees by the managers creates trust and motivation to
doing tasks in well defined quality and performance measures.
1.
Purpose of strategies
Strategic Management is the tasks involved in management of resources to achieve
organisational goals following the company's missions and visions. Strategic management
involves the analysis of external factors affecting the performance and developing the strategies
for the attainment of defined performance indexes (Hitt, Ireland and Hoskisson, 2012.). Strategic
management involves the finding out future opportunities and analyse the threats incurred and
implementation strategies by the managers. Strategic management involves the proper analysis
of customers and competitors and the organisational internal environment to attain the optimum
performance of the firm.
Vision of the organisation is defined as that is the reflection of the destination of the
company. It is an bis picture of the company which the organisation wants to achieve in their
journey. Vision of the Tesco company are to be modern and innovative. The company vision is
to introduce the strategies with full of ideas to grab future opportunities in the organisation. The
vision of the Tesco organisation is to develop customer loyalty and colleagues loyalty and

earning trust from the communities and development of inspiration in the employees to do work
efficiently.
Mission is the statement of the company which reflects the strategies to achieve the
organisation goals. It defines the statements of how the organisation vision are achieved. The
mission statement of the Tesco is to earn lifetime loyalty from customers, employees,
stakeholders and from the communities (Hill, Jones and Schilling, 2014).
Core values of the firm defines the behaviour and nature of the organisation during the
process of achievement of organisation goals and mission. The core values of Tesco company
involve the characteristics of an commitment towards a responsible retailer by providing efficient
services to the customers. The Tesco company is the pioneer in starting zero carbon retail stores
in cambridgeshire achieved Green Retailer Of the year. The Core values of the Tesco is to
developing customer loyalty in the market (Wheelen and Hunger, 2011.).
Strategies are defined as the development of various methods and defined tasks with the
use of mission statement results in the attainment of vision statement of the organisation. The
strategies develop to fulfil the mission statement of creating brand value is to development of
own brand and providing competitive strategies to manage these stakeholders are as follows:
 Stakeholders with high power and high interest should be managed with the utmost care.
 Stakeholders with high power and low interest should be kept satisfied.
 Stakeholders with low power and high interest should be kept informed.
 Stakeholders with low power and low interest require less effort than the rest. They
should only be monitored. Prices to the customers.
2.
Stakeholders analysis
Stakeholders are the person who is directly and inversely affected by the actions and the
strategies developed the organisation. Some of the stakeholders for the company are owners,
employees, partners, vendors, suppliers, competitors, government regulators and NGOs.
The types of stakeholders are defines as:
 Primary stakeholders: The ultimate individual affected the actions of organisation. Ex.
Employees, shareholders etc.

 Secondary stakeholders: These are the person who are the intermediator and indirectly
affected by strategies of company. EX. Competitor, suppliers and government regulators.
 Key stakeholders: These person have some significant and specific effect in the
organisation.
Some of the stakeholders classification models are Like power and interest; power and
influence; power, urgency and legitimacy models (Swayne, Duncan and Ginter, 2012). Power
and interest model was given by Gardner et. al. In 1986. The classification and the strategies
developed on the basis of the power and interest model is followed in below defined manner:
Level of interest
Power
low High
low A
Minimal effort
B
Keep
Informed
High C
Keep satisfied
D
Key players
 The minimal effort stakeholders require less efforts on the monitoring by the
managers.
 The Keep informed stakeholders should be continuously informed about the new
strategic development and advancement.
 The Keep satisfied stakeholders have low interest but is powerful in their work.
Theses stakeholders are passive in nature (Eden and Ackermann, 2013.).
 The Key players are the major stakeholders that contribute to the strategies
involved in the organisation. These are both powerful and the interested the
working of the organisation. These stakeholders are managed with the ultimate
care by the strategies developed by the company.
The stakeholders analysis helps in classification of stakeholders according to their needs
and expectations. The stakeholders management involves the strategies to develop satisfied
stakeholders according to their requirements. The strategies ensures that the achievement of

organisation goals and mission are cooperated from all the stakeholders and ensures the
minimum resistance from the stakeholders of the company.
3.
The strategic analysis of Tesco life cycle
Tesco established in 1919 is the largest retailers of food all over the world. The revenue
generated by the Tesco is about 54 billion euros in 2009 and provided employment to 470,000
persons. The Tesco has 4,331 company outlets spread in about 114 countries of the world. The
head office of the Tesco is located in the Hertfordshire, UK. The Tesco is market leader over the
decades in the UK food retail segment (Moutinho, 2011.).
The PESTEL analysis of Tesco include the various factors which affects the strategic
management of the company and the performance of the organisation. The effect of political,
economic, social, technological, environmental and the legal factors affecting the tesco working
are defined below:
China,s political strategies of involvement of free trading in overseas between the
different countries magnifies the globalisation to the large extent. To capture the most revenue
generating market of china Tesco signed joint ventures for establishment of shopping malls in
the china. The corporation of different countries in the European Union (EU) enhanced the trade
including Western and Eastern European countries provides the Tesco to magnifies its network
in the EU (Thompson and Martin, 2010).
Economic conditions of the country affects directly to the buying behaviour of the
customers. UK economy face recession in 2008 that resulted in the decrease in the spending
power of the consumers. But there is positive effort on the recession the consumer eat outside
less over the home food. This increase the sales of grocery retailers of Tesco.
Social factors influence the industry life cycle. Consumer habits are changing with time,
they are becoming more and more health conscious. Increased demand of organic food leads to
the increase in sales of the Tesco. Tesco developed modes of payment in the retail account of
payment by cash and cheques.
Technological affects supply chain management and the inventory management in the
super markets of food and grocery retailers. Loyalty programs are implemented in the Tesco
food retailers shop with the help of advancement in technology. Tesco wine distributors use the

mobile technology To enables the customer direct availability of selected wines by their mobiles
app.
Environmental affects the industry life cycle by influencing various activities of industry.
Tesco Prefer eco-friendly packaging methods in their retail outlet which decreased the cost of
Tesco and helps in the enhancement of corporate social responsibility activities (Slack, 2015.).
The legal factors like Vat and taxes affects Tesco non food sectors like clothing to huge
extent.
4.
Strategic analysis of external environmental factors
Porter's five forces of analysis defines the industries sources and strategies to built
competitive advantages in the market over other competitors. The five factors are defined as
follows:
 Threat of substitutes products are the major factor which creates the difference within the
two business. The threats for substitutes of food items in tesco are low because the
organisation is providing quality product as compared to the non food retailers like
clothing sector of Tesco.
 New entry in the competitive market can be a big problem for any company. The
company like Tesco are big brands in their sector that have less threat over the new
established competitors in the market because of brand name and their quality services.
 Intensity of competitive rivalry is the another factor of porter five forces model that
affects the industry growth in the market. Asda and Sainsbury are the major competitor
rivalry of the Tesco competing with quality, price and promotional schemes constraints.
 Bargaining power of the buyer affects the profit margin of the company. The bargaining
power of the consumers of Tesco is high. The standardisation and small difference in the
product results the buyer switch from one brand to another (Evans, Stonehouse and
Campbell, 2012).
 Bargaining power of suppliers affects the cost of product manufacturing and operation
carried out by the organisation. The bargaining power of suppliers if Tesco company are
relatively low.
Segmentation is the process of dividing the market on the basis of its need and
preferences and developing product according to a group with homogeneous need and want.

Segmentation in the Tesco is implemented in the company on the basis of different geographical
area, age differences in consumers, occupation, education family size etc.
5.
Strategic analysis: resources and capabilities
The internal factors of an organisation also affects the performance and strategic
implementation in the organisation. Difference in internal resources and their capability creates
an differentiation between two firms to the large extent (Hodgkinson and Healey, 2011).
Edith (1950) developed models that relates the bundle of resources available and the
affect on organisation performance. The integration of resources with the capabilities of the
company makes the difference in forming the competitive advantage of the firm. The things
which are available for the organisation is the resources for the organisation. Like financial
resources, equipment, technology employees available in the Tesco retailer shop are the
resources for the company. The potential of the Tesco to make the effective and optimum use of
available resources like technology, employee motivation is the capabilities of the firm.
VRIO Analysis helps the affective analysis of the organisational resources and
capabilities leading to the competitive advantage. VIRO includes the value, rare, imitability and
organisation.
 The resources available to the company is valuable or not for the firm helps in building
the competitive advantage in the market. If one of the resources available is able to
exploit the expectation of the market then, it is considered valuable resource for the
company. The human resource of the Tesco company is valuable for the firm in building
competitive advantage over the others (Hair, Sarstedt, Pieper, et. al., 2012.)
 Rarity is the another characteristics of available resources of the organisation which
defines the advantage of firm over others. Rarity clears two specification criteria i.e. the
resource should be hard to find and other one is the resource should be demanded more in
market.
 Imitability is present everywhere in all business. The factor which differentiate to
business is that how harder the company product is imitable and to what cost. The hard
imitable companies are very much advanced in the technology and the creative ideas
(Ackermann and Eden, 2011.).

 Organization factor of the company covers all the factors above discussed. The
organization of the resources leads to carry out the sequences of action to be valuable,
rare and provides a structure to ability to exploit the capabilities of available resources.
6.
Strategic analysis: Value chain Creation
Value chain analysis is the group of activities carried out to enhance the performance and
the reduce the cost of final product with help of primary activities and the support activities.
Value chain is the chain of internal operation carried out in the conversion of raw material to the
final product.
Primary activities in value chain analysis in the process of strategic management includes
the activities that are directly involved in the production of products. These activities include:
 Inbound activities: These includes the series of tasks from receiving of raw material,
storing of inventory and making available them at the time production whenever it is
required by the internal distribution system.
 Operations: This is the major activities which are involved the production of products
from the raw material and semi-finished goods (Poister, 2010).
 Outbound logistics: These are the group of activities carried out deliver of final product
and service to the customers, retailers and to the ultimate consumers. Theses activities
include storage, distribution of goods and services from internal environment to the
external markets.
 Marketing and sales: These process include the selling out of your product and services
with the help of advertisement, online portals etc. Ex. The Tesco uses the word of mouth
strategies to communicate their promotional offers and their products to the customers.
 Services: The activities related with the maintaining loyalty and the product value to the
consumers after the purchasing of the products. It includes the developing post customer
satisfaction centres for ensuring the solution of the consumer query.
Support activities are the activities which contribute indirectly to the operations of the
manufacturing and providing the products to the customers. Some of these activities are listed
below:

 Procurement: This include the making purchase for the raw material required in during
the manufacturing at best price from suppliers.
 Human resource management: This include the hiring and selection of employees for the
organisation and providing them training for efficient wo0rk in the organisation.
 Technological development: Making well upgraded technology availability in the
company to enhance the working efficiency and quality of product and services provided
by the company (Noland and Phillips, 2010).
 Infrastructure: providing proper infrastructure and tools to the employees to carrying out
their tasks related to the operations involved in the conversion of raw material to the final
product.
Support activities
Infrastructure
Margin
Technological development
Human resource management
Procurement
Primary activities Inbound
Activities
Operations Outbound
Logistics
Marketing
and sales
Services
7.
Strategic formulation: business strategies
Strategic formulation is defining the process of actions carried our sequences for
attainment of business goals and missions (Keupp, Palmié and Gassmann, 2012). These strategic
formulation for business development include 6 step process
1. Defining the organisation: This is the first step involved in the strategy formulation for
business development is to defining the customers for the company and the defining the
target market and the end benefit provided by the organisation. Because customers are
paying for the final product not for the process involved and defining the technological
constraints within the organisation.

2. Defining the strategic missions: Strategic Missions are the future prospective and goals
which have to be achieved in the journey of business. So, defining the strategic missions
for the proper implementation of strategies is necessary (Priem and Carr, 2012.).
3. Defining the strategic objective: this defines the main o0bjective of the strategies
implemented in the organisation and to identify the performance measures to be
achieved. This steps define the why we are needing the strategic implementation in the
organisation. The objectives may be like market positions to be attained in future and
improvement in customer satisfaction.
4. Define the competitive strategies: The competitive strategies of the company is depended
on the market competitors, company internal strength and weakness and the uniqueness
of the industry.
5. Implementation strategy: This involves the development and implementation of strategies
from the analysis of the competitive advantages and the performance of resources to fulfil
the developed mission statements and objectives by capturing organized target customers.
6. Evaluate process: this is the last step involved in the strategic formulation (Poister, Pitts
and Hamilton Edwards, 2010). This step involve the evaluation of strategies implemented
within the process and its effect on the performance of organisation. Strategic evaluation
is carried out continuously on the basis of regular feedback system implemented in the
organisation.
Some of the strategies leads to the development of the business are as follows:
 Cost leadership: The cost leadership strategies are implemented in the organisation with
providing the products and the services with the lowest cost and at its best price to the
customer and the target market. Ex. The Tesco is providing quality food at possible best
price in the market of UK.
 Differentiation: The strategies involved in the uniqueness and the innovative product to
conquer the target market. This strategy involves providing differentiated product in the
market for whom the consumers are willing to pay premium charges also. The extra
charges incurred by the Tesco in making online purchase and online payment for door to
door services .
 Integration: The strategies followed by the organisation that integrates the cost leadership
and the differentiated product services to the customers (Bryson, Berry and Yang, 2010).

It refers to the implementation of strategies that provides a differentiated product at best
price to the customers in the competitive market.
8.
Strategic formulation: corporate strategy
The development of balanced portfolio and the development of missions and goals to
carry out the processes involved in the multi business organisation or corporation. The various
methods involved in the corporate strategies are:
 Diversification: This involves the entry of firm into a new manufacturing line to diversify
the services provided by the firm. The two types of diversification are the related services
which means to development in new line related to existing products. Other one is
unrelated diversification which defines the entry of business in new product line with no
relation with existing product line of company (Molina-Azorin, 2012.).
 Vertical integration: This involves the strategies to develop the business growth which
extends its services in same existing product line and owners the suppliers and distributor
services also and extends product line from the suppliers business to the distributors
operations also. This integration reduces the firm cost and the efficiency in performance
standards achieved by the organisation.
CONCLUSION
The study of strategic management enables to about the concept of strategies carried out
to enhance the performance of the business and the development of mission objectives in the
organisation. Strategic implementation is the regulation of services manufacturing and making
available to them to organisation. The different strategies involved in the market captures helps
in grabs the future opportunities and the competitive advantages within the market. The different
corporate strategies and business development strategies helps the organisation to capture more
target customers.
REFERENCES
Books and Journal

Ackermann, F. and Eden, C., 2011. Strategic management of stakeholders: Theory and
practice. Long range planning. 44(3). pp.179-196.
Bryson, J.M., Berry, F.S. and Yang, K., 2010. The state of public strategic management research:
A selective literature review and set of future directions. The American Review of Public
Administration. 40(5). pp.495-521.
Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management.
Sage.
Evans, N., Stonehouse, G. and Campbell, D., 2012. Strategic management for travel and
tourism. Taylor & Francis.
Freeman, R.E., 2010. Strategic management: A stakeholder approach. Cambridge University
Press.
Hair, J.F., Sarstedt, M., Pieper, T.M. et. al., 2012. The use of partial least squares structural
equation modeling in strategic management research: a review of past practices and
recommendations for future applications. Long range planning. 45(5). pp.320-340.
Hill, C.W., Jones, G.R. and Schilling, M.A., 2014. Strategic management: theory: an integrated
approach. Cengage Learning.
Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2012. Strategic management cases:
competitiveness and globalization. Cengage Learning.
Hodgkinson, G.P. and Healey, M.P., 2011. Psychological foundations of dynamic capabilities:
reflexion and reflection in strategic management. Strategic Management Journal.
32(13). pp.1500-1516.
Keupp, M.M., Palmié, M. and Gassmann, O., 2012. The strategic management of innovation: A
systematic review and paths for future research. International Journal of Management
Reviews. 14(4). pp.367-390.
Molina-Azorin, J.F., 2012. Mixed methods research in strategic management: Impact and
applications. Organizational Research Methods. 15(1). pp.33-56.
Moutinho, L. ed., 2011. Strategic management in tourism. Cabi.
Noland, J. and Phillips, R., 2010. Stakeholder engagement, discourse ethics and strategic
management. International Journal of Management Reviews. 12(1). pp.39-49.
Poister, T.H., 2010. The future of strategic planning in the public sector: Linking strategic
management and performance. Public Administration Review. 70(s1).

Poister, T.H., Pitts, D.W. and Hamilton Edwards, L., 2010. Strategic management research in the
public sector: A review, synthesis, and future directions. The American Review of
Public Administration. 40(5). pp.522-545.
Priem, R.L., Li, S. and Carr, J.C., 2012. Insights and new directions from demand-side
approaches to technology innovation, entrepreneurship, and strategic management
research. Journal of management. 38(1). pp.346-374.
Slack, N., 2015. Operations strategy. John Wiley & Sons, Ltd.
Swayne, L.E., Duncan, W.J. and Ginter, P.M., 2012. Strategic management of health care
organizations. John Wiley & Sons.
Thompson, J.L. and Martin, F., 2010. Strategic management: awareness & change. Cengage
Learning EMEA.
Wheelen, T.L. and Hunger, J.D., 2011. Concepts in strategic management and business policy.
Pearson Education India.