Strategic Operation Management

This study material provides an in-depth understanding of strategic operation management, including strategic formulation, internal and external factors, strategic implementation, product design, quality management, Porter's five forces analysis, and value chain analysis. It covers various case studies and examples from companies like Commonwealth Bank, Nike, and Starbucks. Suitable for students studying strategic management or operations management.

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Strategic Operation Management
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Table of Contents
Question 1...................................................................................................................................................3
Strategic formulation..............................................................................................................................3
Internal factors and capabilities of Commonwealth bank.......................................................................3
External factors of commonwealth bank.................................................................................................3
Strategic implementation.......................................................................................................................5
Question 1b.................................................................................................................................................5
Product design........................................................................................................................................5
Quality management..............................................................................................................................6
Question 2a.................................................................................................................................................7
Question 2b.................................................................................................................................................7
Nike Porter’s five forces analysis............................................................................................................7
Question 2c.................................................................................................................................................8
Question 2d.................................................................................................................................................9
Starbuck value chain analysis.................................................................................................................9
Question 3.................................................................................................................................................10
References.................................................................................................................................................15

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Question 1
Strategic formulation
Strategy formulation involves developing a program or an initiative in an organization.
The purpose of strategy formulation in an organization is to evaluate the resources of the
organization, allocating appropriate budget and determining the most efficient way for the
organization to maximize the return of investment. The competitive strategy is among the key
issue of strategy formulation. It considers internal factors such as resources available in the
organization and external factors such as competitors. Commonwealth Bank of Australia is a
public financial institution, ranked fifth out of top 2000 companies in Australia (Brämer &
Gischer, 2013).
Internal factors and capabilities of Commonwealth bank
The banks has highly skilled workforce due to its constant employee training.
Additionally, commonwealth banks has integrated a number of technologies
companies in their operations through mergers and acquisition. For example,
commonwealth banks has developed the mobile banking app. Strong cash flow
enables the bank to be able to integrate programs.
External factors of commonwealth bank
PESTLE analysis of common wealth bank.
 Political factors
Political factors such as the trade regulation policies by the Australian
government, taxation, mandatory employee benefits and anti-trust laws
affect the operating environment of the bank.
 Economic factors

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Commonwealth bank is affected by foreign exchange rates, interest rates,
economic recession and inflation, and consumer saving. Commonwealth
can evaluate spending behavior to forecast demand for the banking
services in Australia.
 Social factors
Such factors as shared beliefs, entrepreneurial spirits, and attitudes of the
population can help the marketers of the bank design an effective
marketing message.
 Technological factors
The advent of the technology has introduced online banking services,
creating a marketing niche for the bank to tap on new markets.
 Environmental factors
The increase campaign on climate change facilitates commonwealth bank
to adopt sustainable business practices. Consumers are highly attracted to
organizations that manage waste, apply environmental regulating laws and
use recyclable energy.
 Legal factors
The bank is affected by such laws as anti-trust laws, employment laws,
data protection, consumer protection and health and safety laws. The
various stakeholders including the consumers expect the bank to follow
the laws.
By analyzing the capabilities and external environmental factors, commonwealth bank can
formulate strategies that maximize on the resources and address the macro-environmental issues.

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Strategic implementation
This is the action of executing plans and strategies that have been developed for the
achievement of the objectives of the organization. In developing strategic implementation, it is
important to consider key aspects of a strong strategy, effective employee training, availability of
resources, and organization communication. The strong strategy creates a milestone and
articulates the objectives that are needed to be achieved (Barrick, Thurgood, Smith & Courtright,
2015). There should be clear guidelines, distinct milestones and precise roles for each
department. A strong strategy can enable the Common Wealth bank to set a clear goal and
outline the process of achieving those goals. A new project cannot be attained without the
induction and training of the employees. For example, when implementing a new financial
system in the bank, The Commonwealth bank can employ the use of Challenge based
Development training to its employees to enable them to familiarize with the new system
(Schlagwein, Thorogood & Willcocks, 2014). Commonwealth bank can roll out a new strategy
in phases and choose the right platform that is scalable, accessible and ensures that the project is
cascaded throughout the organization. Communication is critical in the execution of any new
strategy a communication plan should be effected from the top downwards. Commonwealth
bank can use open and transparent communication to prevented disjointedness among the
employees.
Question 1b
Product design
Product design progresses through a number of processes that involves research, decision
making, and organization communication. Decision-making issues in product design can involve
coming up with new ideas or changing the whole concept of a product. Product design decision
making includes product development where there is extensive research to ensure the product

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meets the concept and desired specifications. General Motors is an American company with its
headquartered in Detroit. Idea development can enable general motors to carry out extensive
research into the market and come up with new and sustainable motor vehicles. The senior
management of an organization makes the decision as to whether to commit resources to new
products (Liu & Zhang, 2013). For example, General motors can review new car designs and
weigh whether the new designs can bring a return of investment (ROI). Interdepartmental
communication is also important in product design decision making as it creates awareness
within the organization concerning the new product. It facilitates the refining of prototypes and
effectively carrying out of research and development. Sales and marketing is the last phase
which involves key decision makers such as launching the new product designs and distribution
of the product to the target market. General motors management practice can be impacted by
setting new objectives and goals for the sales team to facilitate the sale of the product.
Quality management
Quality management is an approach that is systematic that involves constant
improvement of an organization. It involves identifying problems within the organization,
promoting decision making within the workforce and building loyalty and commitment. Some of
the key decision making steps in quality management includes commitment and understanding
from the employee. This can enable the employees in General Motors to know what is expected
of them. Another step is quality improvement culture whereby the feedback from employees is
encouraged. In the year 2001, General Motors faced a bad scandal whereby the negligence of the
company resulted in the production of Chevrolet Cobalt cars with ineffective steering system and
non-deployment of airbags during accidents (Goolsbee & Krueger, 2015). This ultimately
resulted in the company recalling over 3 million cars and compensating victims of the accident.
Such none consideration resulted in significant loss to General Motors (Helper & Henderson,

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2014). Quality management is a continuous process that requires a constant review of policies
and procedures. Quality management also requires good decision making to effect good control
over the employees. The negligence of some of the workers in the production process of the
Cobalt cars was the root cause of General Motors problems. For example, the CEO of general
motors, Mary Barra was not aware of the ignition issue until the issue had escalated past control
point.
Question 2a
Porter’s five forces is a strategy tool for analyzing the industry competitiveness within a
given sector. This model has been recently criticized as not taking account of time, and it is
difficult to determine the higher competition dynamic using this model due to their characteristic
of a quick change (Dobbs, 2014). However, this model is relevant in the contemporary
organization as it is able to give an insight into the profitability of an industry (Porter, 2014). For
example, Companies such as Apple use the model to analyze the competitiveness of an industry.
Another key focus of Porter's five forces is that it enables the management to focus more on the
external environment in comparison to the limiting SWOT analysis.
Question 2b
Nike Porter’s five forces analysis
Nike is the leading clothing and sport wear Company in the world. The following is the
industrial analyses of its porter’s five forces. There is a high competitive rivalry in the
sportswear wear industry. Nike experiences huge competition from companies such as Under
Armor, Adidas, and Reebok (Mahdi, Abbas, Mazar & George, 2015). Nike enjoys the economy
of scale and its wide customer base. Additionally, Nike counters competition through its product
differentiation, by selling multiple apparels such as clothing, footwear, sportswear, and sports

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equipment. There is a high potential threat posed by startups companies seeking a market share
in the sportswear industry. However, Nike has established itself by being in the business for a
long time and being innovative. For example, Nike zoom running shoes are light and have good
ground traction. This makes it hard for novice companies to compete against Nike. The athletic
and sportswear products have very little substitutes. There exist other footwear such as boots,
sandals and official shoes. However, it is difficult to establish substitutes that can perform the
same purpose as the athletic shoes in the footwear industry (Tanwar, 2013). A runner cannot opt
for boots while on the track. Nike, therefore, experiences the low threat of substitutes. Nike
enjoys low bargaining power of suppliers because there are many industries competing to
supply products to Nike. Since Nike has strong product differentiation and high demand from the
customers, the power of bargaining for the buyer is low and Nike has the ability to control its
prices.
Question 2c
Many organizations in the modern era utilize both virtual and physical value chains.
These approaches compare consumer experiences in utilizing different services such as the
traditional brick and mortar banking services and recent online banking. Some of the factors to
consider when adapting these value chains include customer experiences, technological needs,
the resources of the company and personnel training (Yu, Jacobs, Salisbury & Enns, 2013). The
emergence of global value chains has resulted in an organization undergoing immense change.
For example, marketing is widely shifted from traditional stores to a more global approach of e-
commerce with organizations such as Amazon groundbreaking online sales. Porter’s value chain
analysis is therefore highly considered albeit small modification due to the advent of technology.

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The 21st-century company adapts the value chain as a transformation rather than a destination
and value chain is very relevant for the attainment of competitive advantage.
Question 2d
Starbuck value chain analysis
Starbucks value-chain analyses identify the activities that can facilitate the creation of
value for competitive advantage.
Starbuck value chain analysis.
(Performance Analysis, 2019).
Howard Schultz, the CEO of Starbucks restructured the inbound logistics and supply
chain of the company in 2010. Starbucks acquires coffee beans from Africa, Asia, Latin
America, Europe, and Asia (Chua & Banerjee, 2013). These raw beans are transported by sea
transport to six regional distributional centers across the globe. The central distribution network
of Starbucks delivers over 71,000 trips per week to Starbucks cafes located in over 75 countries.

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Starbucks operates in around 75 countries using either company-owned stores or licensed stores.
In 2016, Starbucks had over 12,500 company stores, accounting for 51 percent of all stores. In
the same year, there were 12,374 licensed stores accounting for 49 percent of the total stores. In
outbound logistics, Starbucks distributes its products in company-owned stores, licensed stores
or online platforms such as Amazon (Aiello & Dickinson, 2014). Some of the roasted coffee is
also found in leading supermarkets such as Walmart, Waitrose, and Tesco. Traditionally,
Starbucks relied on word-of-mouth and customer referrals to market their brand. However, the
increase in competition has facilitated the company to embrace other marketing means. In 2016,
the cost of marketing strategy was 351. 5 million US dollars. Additionally, the company uses
mobile order and pay system for the sales of its product. Quality service is largely emphasized
by the management of Starbucks. The staffs of the company are generally polite and warm to the
customers. The company also offers regular bonuses to their customers. Starbucks takes
customer reviews seriously.
Question 3
Analysis and assessment is an important function of operational management. It is at this
stage that information is gathered together with appropriate data for understanding the needs of
the business. This phase analyses the vision and mission of the organization for the formulation
of initiatives that will enable the business to grow ("The Five Stages of the Strategic
Management Process", 2019). It analyses the external and internal environment of the business
as well as strength and weakness and opportunities and threats. Apple Inc. is an American
company based at Cupertino, California. Apple is popular for making innovative electronic
products. Strategic management at Apple begins with the executives analyzing the current
position of the company in relations to the mission, vision, and goals of the company. The

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executives scan the micro and macro-environment of the company and identify factors that may
need strategic change. For example, the strong performance exhibit by Apple during the 2008
global economic recession is largely attributed to the strong innovation capabilities of Apple
(Performance Analysis, 2019). Apple continually enhances and upgrades its products in relation
to market trends. The executives at Apple incorporates rewards, persuasion, change in
organization structure, and product upgrade to ensure the resources and employees realizes the
formulated strategy.
Strategy formulation follows analysis and assessment by creating long-term objectives.
Strategy formulation is usually applied in three levels. The business level strategy is for products
sold in one market by small and medium business enterprises. For example, the Royal Enfield
firm sell their Bullet motorcycle in the United Kingdom only ("The Five Stages of the Strategic
Management Process", 2019). Such a firm may use porter’s generic strategy to formulate their
product. The corporate level strategy is whereby the executives of a multinational corporation
choose the products to sell and the market to enter as well as formulating the pricing strategy it
also involves acquisition and mergers. Apple Inc. uses the corporate level strategy (Hofmann,
Busse, Bode & Henke, 2014). The immediate former CEO of the company, Steve Jobs,
developed a product mix including cloud services, iTunes, iPods, iPhones and computer
accessories. He also facilitated the acquisition of Next Corporation and beat electronics.
Additionally, Apple Inc. uses a premium pricing strategy to acquire high-profit margins. The
brand has established itself as a quality brand attracting consumers to pay premium prices for the
products. Global international formulation strategy involves aspects of market diversification,
differentiation, and the type of market to enter. Apple maintains a consistent brand across all its
markets. Its product’s design and advertisement campaigns use the same minimalistic approach

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across the globe. The website is also the same but it has been tuned to support the different
languages across the world. The market formulation of Apple is based on consistent customer
experience. For example, the iPhone design and features are the same all around the world.
Strategic implementation involves putting into actions the strategic plans developed. The
general steps involved in this process includes developing the potential of an organization to
affect the strategy, distribution of the necessary resources, creation of strategic policies,
employing policies for improvement and effecting good strategic management leadership (Vogel
& Güttel, 2013). The management of an organization must outline the responsibilities of
everyone within the organization. Apple implementation strategy follows the steps of cost
leadership, differentiation and integration strategy. In cost leadership, the company aimed at
lowering the input cost while producing a product of high quality. For example, Apple relies on
lean manufacturing by outsourcing labor to countries with cheap labor such as China
(Heracleous, 2013). Majority of Apple products such as iPhones are manufactured in China
where the labor cost is low. In the differentiation strategy, Apple provides unique products. Their
product design has been different from the competitors. For example, when the company
launched the iPhone, iTunes, and iPod, no other company was producing such products. Another
differentiation is in the price whereby Apple produces top-notch products and price them a
premium. For example, each year Apple launches new iPhones into the market and their phones
are among the most expensive. In the integration, Apple is vertically integrated meaning it
controls all the processes and value chains and does not rely on third-party companies
(Performance Analysis, 2019). The company builds its own hardware, software and controls its
distribution networks through Apple stores. Unlike company such as Samsung that relies on
Android from Google to produce software for Samsung phones.

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Strategic evaluation measures the performance of an organization based on the review of
internal and external issues and the outcome of the implemented strategies. It begins with the
parameters of the strategies to be measured (Jurevicius, 2019). It measures the actual results
against the analyzed and assessed plan. This helps the organization to respond to any change in
the business environment and if the outcome is not successful, it enables the business to
restructure the operation management process. The data acquired at this stage should also be
retained for future reference (Agrawal, Atasu & Van Ittersum, 2015). Apple evaluates its
products in order to come up with better ways of developing them to achieve market position.
The company uses a controlled ecosystem in its product mix right from product inception, price,
and distribution networks relying on its stores and limited third-party stores in the sale of their
products, Apple evaluates the product using the BCG matrix

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("Marketing Evaluation of Apple", 2019)
In the matrix the products are divided into four parts. The cash cow are products that are
starting and have not been completed. The stars include products that are inconstant competition.
The question mark are those product with potential growth in the market and the dog refers to the
product with high market share but its shares are decreasing. For example, the market share of
iPod is decreasing due to smartphones.

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