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CMSE10002 Strategic Management

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Course Code: CMSE10002
University: The University Of Edinburgh

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Country: United Kingdom

Question:
Assignment Questions Scenario You have been hired by a local British retail company (Either Morrisons, Card Factory or Ocado) as a consultant in order to develop a market entry and business level strategy plan into the Chinese market. You are expected to write a report to summarize your research findings on the given tasks below.
Tasks(1.) Analyse and demonstrate an understanding of the external environment and industry competition in the Chinese market. (2.) Identify the company’s resources and competencies; and determine the potential of the company’s competencies in terms of a competitive advantage in the Chinese market.(3.) Critically evaluate if the company can continue with the current vision and mission statements in the new market. Reframe the vision statement and the mission statement of the company for the new strategic business unit in China If needed.
Answer:

Introduction
Strategic management can be referred to a weapon that different organizations use to prove their competitiveness in the market. It may vary in their approach towards the particular kind of approaches; however, they all head towards the issue with the same intention of acquiring the competitive advantage. The strategies are influenced by both the external and the internal factors as they compel the organizations to consider the factors for the betterment of operation (Hitt, Ireland and Hoskisson 2012).
Morrisons is one of the most impressive supermarket chains in UK, which comes at the fourth most trustable brands behind only to Tesco, Sainsbury’s and Asda. William Morrison laid the foundation of the Company in the year 1899. The Company started their journey as a small size shop in Bradford UK. It went through several changes during its entire operation; however, one of the major changes that the Company had witnessed was the acquisition of Safeway. This acquisition allowed the Company in enlarging its market reach as the Safeway has already 479 stores in UK (Morrisons-corporate.com, 2017).
This assignment tries to find out the possible threats and opportunities that the Company has in Chins once it decide on expanding its business exploration into the Chinese market. It does so with the help of PESTLE and Porter’s Five Forces analysis on the Chinese market.
Task 1
1. PESTLE Analysis of China
Political – The reliance on one party is such a key aspect of China, which has allowed a sustainable economy to it. Post 1978, the economy management had no centralized controlling power that has also hampered the economy of China. Now, the central government of China has taken some initiative in this regard, which has improved the scenario for some extent. However, it is still more in favour of the local companies than the one at the National level. On a same note, it is also not favourable to the international companies as well as more of the international brands are closing their few shops in China (Eden and Ackermann 2013).
Economy – China is a one of the most developing countries in terms of economic development. The transition of its economy from just 362.4 billion RMB to 30 trillion RMB within a span of 30 years only can very well explain the growth of its economy. The country was held as the second largest economy in the world in the year 2010. Nevertheless, it is also the second largest market for the retail industry. However, some issues such as minimum wage standard are clear threats to the sustainability of the economy of China. The labour cost is high, which puts immense pressure on the companies to acquire a significant profit margin. This is one of such reasons, which have hampered the success of most of the international companies in China (Barney and Hesterly 2015).
Social – Making relationships with different stakeholders is a key asset for the different international companies in proving their position in the market. However, this is very time consuming as well as expensive. Another issue is the corruption, which is a threat to the entire national and the international companies in the Chinese market. China is one of the most favourable countries in the World when it comes to the corruption. It has created an enormous limit of barrier in the ways of business (Rothaermel 2015).
Technological – China is technologically advanced, which is very much evident in its ignorance and boycott to the Google usage. It has its own search engine that makes this survive without the usage of Google. The enhancement of technological advancement has enabled the country in producing lower rates for the manufacturing of all kinds of materials. However, it lacks in the quality part but still has dominion effect in some potential markets in the World such as India, Singapore and many more (Lasserre 2012).
Environmental – Plantation of several trees and plants such as Timber trees in China do represent the environmental cares of the country. The National Forest Protection Program (NFPP) in the year 1998 was a good move by the government as it targeted the reduction of exploitation of the forest asset of the country (Stead and Stead 2013).
Legal – For a business terms, the legal rules and regulations of the country is not very favourable to the retail companies especially to the international brands. The government is more inclined towards the local companies to foster it in the retail industry. In doing so, they even tends to ignore some of the most potential brands sin the world such as Walmart, Asda and many more. The government provides suitable & attractive places to the local companies to give them a chance to explore their credentials at the most probable place for business. On a same note, the anti-American feeling of the Nation has produces a resisting force to the growth of the American companies. However, Walmart is an exception to this truth as it is successful in the Chinese market with its strategic planning (Morschett, Schramm-Klein and Zentes 2015).
2. PORTER’S Five Forces Analysis
New Entrants Threats – Threat of entrants is low in China because of the government policies on the exploration of foreign companies in the Chinese market. The growing potential of the retail industry in the China do encourage a bulk participation of most foreign companies but only few of them have clues for the survival strategies here in China. The changing trend of shopping is another threat for the companies as the people are now more inclining towards the small sized companies (Harrison and John 2013).
Substitutes Threats – The substitution threats in China is high as people in China are now inclining towards smaller companies rather than the multinational companies. The changing trend for the shopping is a serious concern for the retail companies especially to the international companies (Hubbard, Rice and Galvin 2014).
Supplier Power – The supplier power in China is low as it has a large number of supplier options in the country. The large number of small and big suppliers provides ample of opportunities to the buyer to choose (Frynas and Mellahi 2015).
Buyer Power – Buyer power is also low in China as suppliers have ample of options from the numbers of companies in the retail industry. Apart from all the local companies, China has become one of the most favourite destinations for the international companies. The growth of the retail industry in this part of World has attracted bulk participation from most of the international companies. However, it has not provided a favourable place to all of the international companies except to the Walmart (Morden 2016).
3. SWOT analysis of Morrisons
Strengths – Multi-channel diversification and acquisition are one of the key features of the Morrisons, which they have used in past to expand their market reach. The acquisition of the Safeway in the year 2004 is one of such examples of its strategies, which also allowed the company in expanding its market presence by enlarging its number of stores. At the time of acquisition, Safeway had 479 stores, which came under the operation of Morrisons. To form a partnership relationship with the Ocado Company is another example of its strategies that allowed the Company in having its own online service facility for the shoppers (FitzRoy et al. 2012).
Weaknesses – Limited geographical expansion of the Company is one of their weaknesses, which has contributed in a big loss. This is one of such reasons, which have prevented the Company from becoming the top brand in UK (Parnell 2013).
Opportunities – Opportunities are ample for the Company in some other parts of World especially in China. China is the second largest retail market in the world, which has attracted bulk participations from international companies. Walmart is one of such companies that have garnered a significant success in China (Galliers and Leidner 2014).
Threats – The political and legal environment in China is the biggest threat for any foreign companies. The legal rules and the high labour cost is a challenge for the foreign companies.
If the Morrisons wish to expand its business to the Chinese market, it would have ample of opportunities because of several reasons such as follows (Ungson and Wong 2014):

Growing market for retail industry
Large population of China
Geographical inclination of the people towards the shopping
Success of some of the foreign companies in China such as Walmart America

Apart from all of the opportunities that the Morrisons might have in China, it may also come across some of the potential threats, which are as follows (David and David 2012):

Competition from the local companies
Local government rules and regulations for the international companies
High costs of labour
Anti-American image of the state run union
Inclination of shoppers towards the small stores format

China is the second largest retail market in the world. The high number of population and the increasing number of shopping habits are drowning the attractions of foreign brands into the Chinese market. Reasons can be many such as enhancing the success to the broader aspect and improving the performance of the local country. Walmart represents a best example of such concept as it is experiencing a slow growth in the American market. The increasing capability of the Chinese market has attracted Walmart for the enhancement of profit margin. The high number of population and the increasing ration of shopping habits have all created ample of opportunities for the Morrisons in the Chinese market (Hill and Jones 2012).
China has not proved a favourable venture to some of the foreign companies as few foreign companies are struggling to find their place in China. News of closing down of shops is very common. The government rules and regulations is the most threatening aspect in the way of expansion into the Chinese market. The local government willingly allocate the most suitable and attractive places to the local companies to foster their growth. This is hampering the foreign companies in having good locations for their stores. Nevertheless, location and infrastructure are one of the most effective aspects of a business (Joyce 2015).
Task 2
1. Resources analysis of Morrisons

Infrastructure
Machinery plants
Technological advancements
Security
Insurance

Financial Resources

Sale of shares such as in case of acquisition of the Safeway
Borrowing power, which is very high because of the fact that its Debt to Equityis the best in the supermarket industries

Human Resources

Leading the Morrisons Wayis one of such programmes of the HRM of Morrisons that has ensured the preparation of leadership qualities in its employees
Inclusion of skills development course modules such as Diploma in Retail Skills
Introduction of “Gimme 5” in the year 2008
Climate Surveys Program
Profit Share Scheme

2. Competencies analysis of Morrisons

Owns a distribution centre for delivering fresh foods in quick time
Low cost production
High customer service

Threshold Competencies

Efficient management of supply chain
Solid financial position in the market
Significant manufacturing credentials

3. Its competiveness in China
Based on the analysis conducted on the different resources of Morrisons and its core and threshold competencies, it can be concluded that the entry of Morrisons into the Chinese market is possible (Joyce 2015). The core competencies of the Company are its low cost production of the fresh foods, which is supported by a high class of customer service. However, this indeed is not sufficient to enter into the Chinese market and win the desired success. The Company has realized the urgency of incepting some convenience stores in UK (Morrisons-corporate.com, 2017). Leading supermarket of UK such as Tesco, Asda, Sainsbury’s are very much equipped with convenience stores. Another problem, which can harm Morrisons in China, is their poor online presence for shopping. It did a partnership relation with Ocado to enhance its online presence; however, it is yet to match up to the level of Tesco, Asda and many others. The low price deal with some of the customers in UK has given a good business to the Company (Morrisons-corporate.com, 2017). However, it might not click in the Chinese market, as low price tagging to a product would be perceived as low in quality product. China is well reach in such trends and has a global presence with such products especially in the Asian countries. The low price deal is a handy option in UK to have competitive advantage but not the same in China because of its market image (Dess, McNamara and Eisner 2016).
Task 3
1. Mission and vision statement of Morrisons

Vision statement – The vision statement of the Morrisons is to become “best in food by meeting with everyone’s requirement”. To fulfil their vision, Morrisons has its own manufacturing and distribution centres. Moreover, it has comparative bigger number of workers in stores for preparing the food products.
Mission statement – The mission statement of Morrisons is “To provide expected needs of the people by caring for their money with the valuable food products”.

2. Recommendation for Mode of Entry

To enter into the Chinese market, Morrisons need to follow the footsteps of Walmart America, as this is extremely helpful for the strategy making of the Company. Nonetheless, Walmart has successfully outplayed the anti-American feelings of state run unions. Apart from the acquisition, Walmart did also rely on the offshore business, which is a very effective process as cost of manufacturing in China is lesser that other parts of world. Walmart has one of the largest exports of its manufactured goods from China.
Relationshipswith the ‘All-China Federation of Trade Unions’ is another good move that has already benefitted the Walmart. It is advisable to have local faiths, as it would help in propagating the business into the Chinese market. The relationship would also encourage the local government to cooperate with the Morrisons in China.
Convenience storesare one of such concepts that is now dominating the shopping habits of the people in China. People are more susceptive towards small format of stores rather than the supermarket stores. This would also produce an appealing quality of the Company in the Chinese market.
Online platform for shoppingis the one most important aspect of the present day shopping that has dominated the style of shopping to a good extent. Numbers are increasing for such people who mostly prefer going online for shopping their required items and goods. It is comparatively convenient than the physical style of shopping. The busy schedules of majority of people have forced them to go for such kinds of shopping. It has not outplayed the basic style of shopping completely but has affected its popularity to a noticeable extent.

Conclusion
Strategic management is such an important process, which helps in attaining a competitive advantage in the market. Morrisons is one of the largest supermarket chains in UK that comes only after Tesco, Asda, and Sainsbury. It has successfully gained success in UK with its existing strategies; however, it would not be advisable to go with the same strategies into the Chinese market. The high rate of volatility of foreign companies in China has created a challenging environment. Local companies are safe to a good extent because of the supports from the local governments. However, foreign brands are not safe because of the local government policies and the changing trend of shopping in China. Shopping at the convenience stores and on the online platform is increasing, which has already posed a no to the basic style of shopping.
References
Barney, J.B. and Hesterly, W., 2015. Strategic management and competitive advantage concepts and cases. Pearson.
David, F.R. and David, F.R., 2012. Strategic management: A competitive advantage approach, concepts and cases.
Dess, G.G., McNamara, G. and Eisner, A.B., 2016. Strategic management: Creating competitive advantages. McGraw-Hill Education.
Eden, C. and Ackermann, F., 2013. Making strategy: The journey of strategic management. Sage.
FitzRoy, P., Hulbert, J., Ghobadian, A. and O’Shannassy, T., 2012. Strategic management: The challenge of creating value. Routledge.
Frynas, J.G. and Mellahi, K., 2015. Global strategic management. Oxford University Press, USA.
Galliers, R.D. and Leidner, D.E., 2014. Strategic information management: challenges and strategies in managing information systems. Routledge.
Harrison, J.S. and John, C.H.S., 2013. Foundations in strategic management. Cengage Learning.
Hill, C.W. and Jones, G.R., 2012. Strategic management cases: an integrated approach. Cengage Learning.
Hitt, M.A., Ireland, R.D. and Hoskisson, R.E., 2012. Strategic management cases: competitiveness and globalization. Cengage Learning.
Hubbard, G., Rice, J. and Galvin, P., 2014. Strategic management. Pearson Australia.
Joyce, P., 2015. Strategic management in the public sector. Routledge.
Lasserre, P., 2012. Global strategic management. Palgrave Macmillan.
Morden, T., 2016. Principles of strategic management. Routledge.
Morrisons-corporate.com. 2017. About Us – Morrisons. [online] Available at: https://www.morrisons-corporate.com/About-us/ [Accessed 28 Mar. 2017].
Morschett, D., Schramm-Klein, H. and Zentes, J., 2015. Strategic international management. Springer.
Parnell, J.A., 2013. Strategic management: Theory and practice. Sage Publications.
Rothaermel, F.T., 2015. Strategic management. New York, NY: McGraw-Hill.
Stead, J.G. and Stead, W.E., 2013. Sustainable strategic management. ME Sharpe.
Ungson, G.R. and Wong, Y.Y., 2014. Global strategic management. Routledge.

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