Strategic Management in Dynamic Environments

Posted: September 27, 2016

Introduction

Sometimes the performance of a business goes down despite the actions and resources invested in it to ensure its success all the time. In such a situation, the owners of the company have to decide on the course of actions to adopt to rescue the business from collapsing. Sometimes the fall in the sales of a company could be due to decline in the quality of the product it is offering or emergency of another company (a strong competitor),  that offers similar products but at a subsidized price. In this case, the managers of the failing company can decide to benchmark the two companies to find out where their company is missing the mark.

Benchmarking

Benchmarking is one of the methods adopted by businesses to evaluate their performance. Benchmarking helps companies determines their success by comparing metrics with other companies in the same industries. Additionally, benchmarking helps businesses to a have a clear outlook of how they are performing in the market and identify ways and techniques that can make them perform even better and become more competitive (Zairi & Leonard, 1994). Comparing two similar businesses will yield different results in terms of their strength and weakness. As far Deborah’s company is concerned, benchmarking is the solution to finding the problem(s) that has started to crop in their Company that once enjoyed success and earned a good profit margin. Although the company still has customers and their brands rated among the best, it is evident that the Company has started trading negatively compared to the earlier times. To find the solution for the company, a benchmark company that sells the same product as Deborah’s company will help to solve the problem. Since they are similar, the analysis will be made bit by bit and see if the decision to go global will save the situation. A company that started like that of John and Deborah, and had the same challenges and now has succeeded after expanding its market to the global scale would help. To answer these questions well, will compare company strategies of operation of Deborah’s company and XYZ Furniture. By looking at how this benchmark company is doing and how it did overcome the challenges will help to bring the company of John and Deborah back on the track (Crayn, 2012).

Benefits of Globalization to the Benchmark Company

The Company, XYZ Furniture, sells the same brands as the company of John and Deborah. After suffering the same problem John and Deborah are facing at the moment, XYZ Furniture decided to expand its markets to the global level. After going global, XYZ Furniture did improve its failing profit margin. Extending the business to the global markets means increasing the numbers of customers in need of your brands.  When the XYZ Furniture expanded its market to include oversea markets, it did benefit in some ways. Fast, the company enjoyed high revenues from the overseas markets. Since their brands were superior, they grabbed a place in the international markets (Zairi & Leonard, 1994) .  The increase in revenue necessitated the company to increase their investment both at the local and the global markets.

Effects of Globalization On the local share of the Benchmark Company

However, by taking its product to the global scale, XYZ Furniture suffered blow in the quality of its products.  Before expanding its market to the global scale, XYZ Furniture was renowned for high-quality furniture that met the need of every customer (Kokemuller, 2016). Due to increase the demand, the quality of the products was compromised. Its local markets started fading as it lost significant numbers of customers that led to a decline in returns and overall revenues collected from the local markets. Its competitors on the local markets gained ground and became more influential than XYZ Furniture.

Risks Associated with Globalization

Expanding the market to the global markets means exposing your company to unforeseen risks (Cryan, 2012). For instance, political instability in the new market, brand in-acceptance, too many expenses on customizing products and fluctuation in the foreign exchange rates among other potential risks would hinder the success of the business for a while. Again going global meant that the chances of losing on the local markets were high since the company gave attention o the global markets as opposed o the local markets (Mellahi, n.d). Also, the XYZ Furniture faced financial problems. Note that there was increase in production cost so as to meet the global market demand. Another potential risk was the reluctant by the new customers to accept the product at the rate of production.

Risk Mitigations

The Company had a direct control on checking the quality of the goods. First, they ensured that their furniture were of high quality compared to other similar brand on the market. They also subsidized prices to win the trust of potential customers. Also, they reduced the travel costs so as to increase production and boost quality and invest much on marketing. 

Conclusion

Benchmarking is an important tool for comparing the performance of two companies. After a thorough comparison, this tool yields quality results that the failing company can embark on to restore its future. It helps the company make informed decision based on the results of comparison.