STRATEGIC MANAGEMENT REPORT
Executive Summary
This report discusses the process of strategic management. The process comprises of three significant processes that include strategy analysis, strategy formulation and strategy implementation. Strategic analysis refers to the process of researching on the business environment within which a company operates in order to formulate a strategy. Strategic analysis in the international industry involves competition that goes beyond international boundaries. Strategic formulation is the second stage in the process of strategic management. This phase produces a clear combination of recommendations, with supporting justification. The strategy formulation process deployed by Safestore essentially involves six primary phases. Strategy implementation process is the execution of the chosen strategy in a company. Once the strategy has been determined to fit best the organizational goal at the end of the formulation process, the chosen strategy is put to practice.
1.0 Introduction
Teaming up with the Safestore is the best thing for one to do when calling upon the services of Storage Company. According to Campbell, Edgar and Stonehouse (2011), Safestore has been ranked first among storage companies with over one hundred stores countrywide. In the entire European continent, Safestore has been ranked second largest storage company. The major operations of Safestore are situated in the United Kingdom, where the company has over one hundred stores. In addition, the store has 2 Business Centres, and 25 stores in other parts of Europe. The company has remarkable record of accomplishment in developing and managing its assets. With about 125 stores and with over 43 thousand customers, the company has an extremely strong acknowledgement of the dynamic demands of its customers. In addition, the company also has a strong operational platform from which it continues to deliver sustained growth. The strength of the company lies in its capability to unite the deep comprehension of the dynamically growing storage market with the operational and commercial skills in order to deliver supple self-storage solutions for the expanding European and UK customer base. According to Capon (2008), the company has the knowledge, skills and expertise that enables it to benefit from the changing self-storage market, and return values to its shareholders. In this regard, this paper provides a strategic management report for the company.
2.0 Strategic Analysis
According to Finlay (2000), strategic analysis refers to the process of researching on the business environment within which a company operates in order to formulate a strategy. It can also refer to a theoretically understanding of the environment with which a company is operating, together with a comprehension of the interaction of the organization with its environment in order to enhance organizational effectiveness and efficiency by increasing the capacity of the organization to intelligently redeploy its resources (Johnson and Whittington 2009). The explanations for strategic analysis frequently vary, thought they have three attributes associated with each definition. The first attribute is the identification and evaluation of data necessary to the formulation of strategy. The second attribute is the definition of the internal and external environment to be assessed. Third attribute is the range of the analytical methods that can be deployed in the analysis. Some of the analytical methods that Safestore can use include SWOT, PEST, and Porter’s five forces analysis (Lynch 2008).
According to McGee, Thomas and Wilson (2005), strategic analysis in the international industry involves competition that goes beyond international boundaries. There are four levels of strategic analysis in the storage market industry. The four levels include geographic scope of the storage industry, the competiveness of different locations, the geographic reach of the company, and the global integration versus the local focus of the specific activities. According to Mintzberg, Ahlstrand and Lampel (2009), this multilevel approach enables Safestore to narrow down to a certain strategic setting. Despite every level being complex, it is useful for Safestore to picture each of them geographically.
2.0.0 Geographic Scope of Industry
The analysis of the storage industry is a crucial aspect in almost each strategic question that Safestore attempts to answer. This level of strategy formulation comprises of the assessment of the evaluation of industry attractiveness, as well as the actual or potential strength of the company. The assessment of the attractiveness of the industry can be done using Porter’s five forces analysis. The concept of Porter’s five forces is based on the fact that there are five forces that determine the competitive attractiveness and intensity of the market. According to Thompson and Martin (2005), Porter’s five forces assist Safestore to identify where the strength lies in business situation. This is significant in understanding the strength of Safestore’s present competitive position. The forces include the power of the supplier, the power of the buyer, competitive rivalry, threat of substitution, and threat of new entry. On the other hand, the assessment of the actual and potential strength of Safestore can be achieved by using Strength, Weaknesses, Opportunities and Threats (SWOT) analysis. According to Campbell, Edgar and Stonehouse (2011), SWOT analysis defines the objectives of the company, and identifies the external and internal factors that are vital in the achievement of Safestore’s objectives. Strengths and weaknesses comprise of the internal factors to the organizations, whereas opportunities and threats are external factors to the organization.
According to Capon (2008), Safestore can use Political Economic Socio-cultural and Technological (PEST) analysis to scan the external macro-environment in which it operates. PEST analysis is an imperative tool for the company to understand the political, economic, socio-cultural and technological environment (Capon 2008). Safestore can use the PEST analysis in assessing the market growth or decline. Political factors refer to government regulations like environmental regulations, tax policy and labour laws. According to Johnson and Whittington (2009), economic factors have an impact on the cost of capital of Safestore. These factors include interest rates, economic growth, currency exchange rates and inflations. The social factors have an effect on the needs of consumers and the potential market. Technological factors have an effect on the barriers to entry, and investment and innovation, like investment incentives, automation and rate of change of technology. Safestore should analyse the political, economic, socio-cultural and technological factors before settling on a strategy.
Johnson and Whittington (2009), in their seminal analysis, the storage industry can be mapped into two dimensions, which are the local responsiveness and global integrations. This reflects the benefits of and pressures for integration, and responsiveness and capacities necessary in exploiting each other. Whereas both dimensions as significant in determining how Safestore can compete in this industry the global dimension is the most significant in defining the relevant geographic scope of the storage industry. According to Mintzberg, Ahlstrand and Lampel (2009), in the international scenario, it required to define the geographic scope of the storage industry. For instance, if the company is thinking of establishing a new store in Cambridge, it must restrict its industry scan to companies operating elsewhere in the Boston area. Evidently, the company might assess how companies operate in various cities (Lynch 2008). However, this benchmarking seems to go beyond the standard analysis of the industry. On the other hand, if Safestore is planning to establish a new store based on global positioning, then it must create a national or global image. As a result, the industry scan needs to comprise the actual or potential entrants on a global basis.
2.0.1 Competitiveness/Attractiveness of Regions or Countries
Porter categorised the competitive advantages afforded by a certain location into four different factors or dimension. These factors include industry structure and rivalry, factor conditions, related and supporting industries, and demand conditions. The diagram below shows the factors that are usually depicted as a diamond (Campbell, Edgar & Stonehouse 2011).
Whereas it is typically applied to countries, Porters diamond is also applicable to industrial regions that are smaller than nations, and to some extent to economic zones, which are larger than nations. Many authors have suggested improvements to Porter’s diamond. For instance, Johnson and Whittington (2009) pointed out that the presence of multinational corporations serves to extend the diamond. Mintzberg, Ahlstrand and Lampel (2009) and Thompson and Martin (2005) have also argued that most regions are nested within continental or national diamonds. Despite these suggestions, the analysis of the competitiveness or attractiveness of countries or regions remains to be the most popularly deployed framework by Safestore in dealing with the advantage of operating from a certain location.
2.0.2 Internationalization of the Company
The major question concerning strategy in international context is whether Safestore should internalize its activities along various dimensions, such as where it establishes a store, where it outsources important inputs, and where it obtains the expertise in offering storage services. In the literatures of 1970s that matched with a major expansion of multinationals from Europe and the US, the emphasis was on entry strategies (Mintzberg, Ahlstrand and Lampel 2009). These strategies concerned whether a company should join a market by exporting through foreign direct investment (FDI) and either through its own network or independent distributor. According to Thompson and Martin (2005), the motive for expanding was aimed at tapping additional markets in order to exploit capabilities that are specified to a firm. According to Lynch (2008), this emphasis is still relevant for firms expanding internationally, including Safestore. However, the key question is how Safestore should reconfigure its activities across the globe in order to maximize its competitive advantage.
Irrespective of the motive to tap new markets and gaining economies of scale, the central question is: Is sustainable competitive strategy represented by internationalization, and if so, how should Safestore internationalize. The answer to this question will rely on the storage industry, Safestore’s positioning within the industry, and its competitive position of the home base. In a quite global industry, such as storage, because of market similarities, internationalization can be imperative unless Safestore can create a business model that varies from the norm. On the contrary, in a domestic industry, internationalizations are unimportant.
3.0 Strategy Formulation
It is very important for Safestore to view strategy formulation as a component of the process of strategic management. Strategic formulation is the second stage in the process of strategic management. According to McGee, Thomas and Wilson (2005), this phase produces a clear combination of recommendations, with supporting justification. In the second phase of strategic management process, the company attempts to amend the present strategies and objectives in a manner that will make Safestore more successful in the dynamic storage industry. This phase involves creating sustainable competitive advantages, though most of these competitive advantages are eroded steadily competitors’ efforts. According to Capon (2008), an effective recommendation should efficient in addressing the stated problems. Recommendations should be implementable with the available resources. The feasibility of the recommendation is also important during strategy formulation. As such, Capon (2008) pointed out that the recommendation should be feasible with a sensible period, and not overtly disruptive. McGee, Thomas and Wilson (2005) pointed out that a good recommendation needs to be acceptable to major stakeholders in the organizations. As such, it is vital to take into consideration the competencies within resources.
The strategy formulation process deployed by Safestore essentially involves six primary phases. The first step is the setting of the objectives of the organizations. The major element of any strategy statement is establishing the long-term objectives. According to Capon (2008), Safestore’s management recognizes that strategy is usually a medium for realizing the organizational objectives. The objectives of any company, including Safestore, emphasizes on the state of the company in future, while the strategy emphasizes on the process of attaining the forecasted status in future. In this first phase, strategy comprises of both the fixation of the objectives and the ways to be used in realizing the objectives. As a result, the strategy used by Safestore is a wider term that strongly considers the manner in which resources are deployed in order to achieve the objectives.
The second step is the assessment of the organizational environment. This step involves evaluating the industrial and economic environment in which the Safestore operates. This comprises of a review of the company’s competitive position. It is necessary to perform quantitative and qualitative review of the existing services offered by Safestore. The reason for performing such review is to discover the important factors for competitive success in the storage industry.
The third step is the setting of quantitative targets. During this phase, Safestore must virtually fix the quantitative values of target for some of its organizational objectives. The purpose of this is to contrast the long-term clients in order to assess the contribution, which might be made by different operating departments.
The fourth step is aiming in the context with the divisional plans. During this phase, the contributions made by every division or department, or service category within the Safestore are identified. In addition, strategic planning is done accordingly for every sub unit. However, this needs a careful evaluation of the trends in macroeconomics.
The fifth step is performance analysis. This step comprises of identifying and analyzing the gap between desired or planned performance. A crucial analysis of the past performance, current condition, and the desired future condition needs to be done by Safestore. This crucial analysis discovers the extent of gap that continues between the long-term aspirations and actual reality of the company. The company attempts to approximate its probable future condition if present trends persist.
The sixth and the last step is the choice of strategy. According to McGee, Thomas and Wilson (2005), this is the ultimate phase in the process of formulating a strategy. In this step, the company chooses the best course action after taking into consideration the organizational strengths, goals, limitations and potential, and the external opportunities.
3.0.0 The Aspects of Strategy Formulation
There are three significant aspects or levels of strategy formulation. Each of these levels has a different focus. According to Capon (2008), each of these strategies need to addressed with the formulation step of strategic management. These aspects or levels include corporate level strategy, competitive strategy, and functional strategy.
3.0.0.0 Corporate Level Strategy
In this level of strategy, Safestore is concerned with broad decisions concerning its direction and scope. Generally, the company considers the changes that need to be made in its growth strategy and objective for achieving it. Safestore considers the business line it is in, and how these business lines fit together. The company considers three types of the corporate level strategy during strategy formulation process. These components include growth directional strategy, portfolio strategy and parenting strategy. With regard to growth or directional strategy, Safestore’s management attempts to identify what should be the company’s growth objective. Such objectives range from retrenchment to stability strategies. With regard to portfolio strategy, Safestore assesses what needs to be its portfolio lines of business. This unreservedly needs the reconsideration of how much diversification or concentration the company needs to have. In relation to parenting strategy, the company assesses how it allocates resources, and manages activities and capacities across the portfolio.
The formulation of strategy at this level involves four different initiatives. The first initiative is making the required moves in order to establish positions and achieve an appropriate amount and kind of diversification. An essential part of corporate strategy is making decisions concerning the number and types of lines of business the company should be in. This initiative might involve deciding to decease or increase the level of diversification. According to McGee, Thomas and Wilson (2005), it might involve closing or opening some lines of business.
The second initiative is commencing actions in order to improve the performance of the business. According to Capon (2008), this might involve pursuing strategies on rapid growth in the most promising lines of business; initiating turnaround efforts in LOB that perform poorly; keeping the other central businesses healthy; and dropping lines of businesses that are no longer attractive. In addition, McGee, Thomas and Wilson (2005) mentioned that it might also involve supplying managerial and financial resources.
The third initiative is pursuing the various ways to capture significant cross-business fits and transform them into competitive edges. Some of competitive advantages include transferring and sharing related technology, distribution channels, procurement advantage, customers and operating facilities.
The last initiative is the establishment of investment priorities and moving corporate resources into the most attractive lines of businesses. As such, it is vital to organize the corporate level strategy initiatives into a framework with three major strategy components: parenting, growth and portfolio.
3.0.0.1 Competitive or Business Level Strategy
This second aspect of Safestore’s strategy focus on how the company can successful competes in the storage industry. The key emphasis is building and improving the competitive position of the company for its line of business. According to McGee, Thomas and Wilson (2005), an organization enjoys a competitive advantage whenever it can attract clients and maintain the present ones. Companies, including Safestore, want to have competitive advantage, which have some sustainability. McGee, Thomas and Wilson (2005) mentioned that efficient competitive strategies normally integrate developing distinctive or uniquely competencies in various areas critical to the success of the company. Some of the competitive advantages of Safestore include better skills; superior technology; better customer and convenience. Competitive or business strategy is all about being different. In other words, it implies deliberately deciding to perform activities differently.
3.0. 1 Porter’s Four Generic Competitive Strategies
Companies need to make to vital decisions when establishing their competitive advantage. The first decision concerns whether to compete majorly on price. Prices are necessary in sustaining the competitive prices. Porter’s four generic competitive strategies include cost leadership, differentiation, price focus, and differentiation focus.
Overall, cost leadership strategy involves appealing to a broad cross-section of the industry by offering services at the lowest price possible. This requires Safestore to be low cost provider of storage services. The implementation of this strategy effectively requires, exceptional and continual efforts in order to reduce costs. According to McGee, Thomas and Wilson (2005), this strategy requires attaining cost advantages in ways that competitors cannot copy.
Differentiation strategy involves appealing to a wide range of customers via providing differentiating feature, which make customers willing to pay premium prices. Some of the differentiating features include prestige, quality, convenience and special features. In order to Safestore to succeed with this strategy, it will have to establish differentiation features in their services that are expensive or hard for rivals to copy. According to Capon (2008), sustainable differentiation normally originates from the advantages in central competencies, superior management of value chain activities, and unique resources of the company.
Price focus strategy is a market niche strategy that concentrates on a narrow customer segment. This structure also requires having lower price structure than the rivals. Because buyer segments differ widely in the rate of growth, size, intensity in the competitive five forces and profitability, price focus strategy is crucial for Safestore Company. In addition, few competitors seem to be attempting to focus on the same market segment, price focus strategy will be important. Differentiation focus strategy is another strategy for market niche. This strategy involves focusing on a narrow segment of customers via differentiating features.
Another strategy that Safestore attempts formulate is the best-cost provider. This strategy involves providing customers with the best combination of cost and value. Safestore provides this combination by integrating essential good service characteristics at an extremely lower cost than its rivals integrate. According to Capon (2008), this strategy is a hybrid of differentiation and low-price, and targets a certain buyer segment. Successful formulation of this strategy requires Safestore to have the skills, resources and competencies to integrate unique features at a lower cost than rivals.
4.0 Strategy Implementation
Once the strategy has been determined to fit best the organizational goal at the end of the formulation process, the chosen strategy is put to practice. As such, McGee, Thomas and Wilson (2005) defined strategy implementation process as the execution of the chosen strategy in a company. An effective formulated strategy is useless if it is not executed well. In fact, implementation of the strategy is a success of failure determinant, which is deeply linked to the process of formulation, and the structure and functioning of the company. Nevertheless, regardless of its relevance in management, strategy implementation process is the least documented and studied stage in the strategic management process.
Capon (2008) also defined strategy implementation as the way in which the company should develop, utilize and combine control systems, organizational structure, and culture to follow the strategies that result in competitive advantage and better performance. The structure of Safestore allocates unique value to developing roles and tasks to the employees and specifies the manner in which these roles and tasks can be correlated in order to maximize quality, customer satisfaction and quality, which are the pillars of competitive advantage. Nevertheless, the organizational structure is not adequate in itself to motivate the employees of Safestore. Safestore’s control system is necessary during the implementation of its corporate strategies. The control system equips the company’s managers with motivational incentives for employees.
There are six steps in the implementation of a corporate strategy. The first step is developing the organizational potential to execute the strategy successfully. Without organizational potential, the strategy will be unsuccessful. The organization should show the willingness to carry out the strategy. The second step is disbursing abundant resources to the essential activities of the strategy. Strategy implementation requires resource. It is obvious that labour is crucial in the implementation. Inadequacy of key resources might result in the failure or unsuccessful implementation of a strategy. The third step is the creation of policies that encourage the strategy. The fourth step is using the best programs and policies for regular improvement of the strategy being implemented. The fifth step is the linking of reward structure to the accomplishment of the outcomes. Lastly, the implementation process involves making use of the strategic leadership.
Successfully formulated strategies fail if they are executed improperly. In addition, it remarkable that the implementation of a strategy is impossible unless there is enough stability between organizational dimensions, like reward structure, organizational structure, and the process of resource allocation, and strategy.
4.0.0 Strategy Implementation and High Performance of Safestore
The implementation of a strategy can be a central determinant of the performance of Safestore. This is because, in the eventuality, two or more branches of Safestore implementing similar strategy are likely to have different performance. According to McGee, Thomas and Wilson (2005), the difference in performance of the two branches might result because of the differences in resources and capabilities of the business branches. Strategy can produce varying performance based on the characteristic structure and function of the Safestore. The characteristic functioning and structure of Safestore is determined by its unique capabilities and use of resources.
Capon (2008) argued that strategy implementation is not only a difficult and crucial process but also a sophisticated field of research. The research of implementation is miscellaneous, interdisciplinary, and specifically concerned with the incorporation of management disciplines. Strategy implementation at Safestore concentrates on the performance of the company. McGee, Thomas and Wilson (2005) identified the four critical factors that determine the performance of a company: direction, efficiency, adaptability, and focus. Among the four factors, it is only direction, which concerns the formulation of the strategy. The other three factors are concerned with the implementation of the formulated strategy. Capon (2008) mentioned that strategy implementation addresses organizational change in many companies. In this case, the concentration is on changes resulting from the intended strategy. This concerns the coordination and mobilization of the capabilities and resources within Safestore. The level of implementation relies on the degree of complexity of both Safestore and the chosen strategy.
5.0 Conclusion
Strategic management process at Safestore comprises of three steps that include strategy analysis, strategy formulation, and strategy implementation. Strategic analysis refers to the process of researching on the business environment within which a company operates in order to formulate a strategy. There are four levels of strategic analysis in the storage market industry. The four levels include geographic scope of the storage industry, the competiveness of different locations, the geographic reach of the company, and the global integration versus the local focus of the specific activities. Strategy formulation involves creating sustainable competitive advantages, though most of these competitive advantages are eroded steadily competitors’ efforts. The major element of any strategy statement is establishing the long-term objectives. Strategy implementation is the way in which the company should develop, utilize and combine control systems, organizational structure, and culture to follow the strategies that result in competitive advantage and better performance.
References List
Campbell, D, Edgar, D and Stonehouse, G 2011, Business strategy: an introduction, 3rd edn, Palgrave Macmillan , London.
Capon, C 2008, Understanding strategic management, 2nd edn, FT Prentice Hall, New York.
Finlay, P 2000, Strategic management: an introduction to business and corporate , 3rd edn, FT Prentice Hall, New York.
Johnson, GSK and Whittington, R 2009, Fundamentals of strategy, FT Prentice Hall, New York.
Lynch, R 2008, Strategic management , 6th edn, FT Prentice Hall, New York.
McGee, J, Thomas, H and Wilson, D 2005, Strategy: analysis and practice, McGraw-Hill , London.
Mintzberg, H, Ahlstrand, B and Lampel, J 2009, Strategy safari: the complete guide through the wilds of strategic management, FT Prentice Hall, New York.
Thompson, J and Martin, F 2005, Strategic management, 5th edn, Thomson Learning, London.
Appendices
Charles Giles Clarke founded the company in 1998. The company began trading by buying three freehold properties in the city of London. During the same year, the company floated on the Alternative Investment Market (AIM). In addition, it acquired Metrostore. In 1999, the Prestbury Group made a subscription of 10 million Euros. Steve Williams joined the company as the Chief Operating Officer in 2001. One year later, Williams was appointed as the Chief Executive of the company. Unfortunately, was company was de-listed from the Alternative Investment Market in 2003, after a 39.8 million management buyout by the CEO. In 2004, the company acquired Mentmore plc, which was a company trading under the brand of ‘’spaces, for 209 million Euros. This acquisition added 31 freehold and 16 leasehold stores, and seven sites in France. This acquisition resulted in a chain of 79 stores. The 2004 acquisition also made the company number one provider of storage in the UK, and the second largest storage provider in Europe.
In 2005, the company substantially invested capital into the Spaces stores in order to enhance the facilities provided, and rebrand in order to create a countrywide company. During the same year, the company also acquired the Storage World that had two stores in Manchester. The company purchased 17 stores from Access France. All these stores were rebranded Une Piece en Plus. The company continued with its property acquisition, and in 2006, it acquired Selfstore. This acquisition added 3 more stores to portfolio of the company. In 2007, the company listed on the popular market of London Stock Exchange. By 2009, the company had more than ninety stores in the United Kingdom. From the history of the company, it is obvious that the company has been using acquisition to rise to the first position as the largest provider of storage services to dynamic UK and European customer base.
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