Question 1: Producing Mc Kinsey’s 7 S framework of an organisation and explain.
Answer: Mc Kinsey’s 7S framework consists of 7 elements, and these are strategy, skills, structures, style, staff, and systems. This framework was developed by H. Waterman and Tom Peters in the 1980s to envision an organisation’s internal situation by analysing those elements. Organisations analyse this framework to monitor the changes that take place within the company. This theory suggests that an organisation’s success depends on the functioning of all the 7 elements properly. These 7 elements are also divided up into two categories. These are –
- Hard elements – Strategy, systems, structure.
- Soft elements – Skill, staff, Style.
In this competitive business world, to sustain themselves in the market, firms are analysing this strategy. We can take Starbucks as an example to explore McKinsey’s 7S framework.
- Hard elements:
Strategy: Strategy is known as a future plan drawn by an organisation regarding how it will have a competitive advantage over others and how it plans to sustain itself in the competitive market. As a famous coffee house, the primary strategy of this company is to provide quality products and high customer services that will, in turn, increase its popularity and profitability.
Systems: The system presents the process or procedures of how an organisation performs its daily activities. How the tasks are divided and assigned toward the employees to accomplish goals. Starbucks provides clear guidance about the particular responsibility of each of the employees, which reduces conflicts among their employees, managers and assistants.
Structure: Structure defines the division and subdivision that takes place within the organisation. It could be a tall structure, or it could be a flat structure. Starbucks adopted a flat organisational structure, enhancing a fluent informational and communication flow among all the employees and assistance.
2. Soft elements:
Skills: Skills is the individual’s ability to efficiently and effectively perform their job in the organisation. Starbucks trains their employees and assistance to make sure they can generate maximum customer satisfaction. They are also cautious about recruiting services with skills.
Style: Style presents the ways how the top management manages an organisation. Management style is an essential contributor to the organisation’s success. Different types of styles have different types of effects on the organisation. For example, Inspirational management may have a better effect than Laissez-Faire. The organisational structure of Starbucks is an Inspirational management style.
Staff: Positive impression about an organisation solely depends on the skills and capabilities of staff. Thus only capable staff are recruited in Starbucks who do have potential growth.
Question 2: How this approach to the organisation might assist in doing the organisation strategy?
Answer: Doing business is not enough to sustain in this competitive business world. Instead, the organisation needs to evaluate the business capability to perform tasks efficiently and effectively. In order to assess the capacity, it is required to monitor how the organisation’s internal elements are working. Such evaluations require Mc Kinsey’s 7s framework. Through this framework, organisations get to know about the performance of all the seven aspects of the organisation, which have a combined positive impact on the organisation’s performance.
The organisation’s strategy defines how the particular organisation is going to compete with their competitors. In order to have a competitive advantage over other competitors, the organisation should get to know about the inner capability, which sector the company is good at. Then the organisation will prioritise at which they are good at, and at the same time, they will try to reduce their weaknesses. Mc Kinsey’s 7s elements will give a clear idea about the future, like the potential sector for the company and which sector needs focus to improve. In addition to that, Mc Kinsey’s 7S elements help too –
- Improve the overall performance of the organisation.
- Identifying the effect of upcoming future changes.
- Determining how a strategy can be implemented in the best way.
1. Internal Environment Analysis Tools
For analysing the internal environment, a number of tools can be used. The researcher would use the value chain model and the SWOT framework of one of the world’s largest cellular phone distributors, Nokia. In the SWOT model, only the strengths and weaknesses would be discussed as the opportunities and threats provide an overview of the industry.
1.1 Value Chain
The value chain analysis is a conceptual tool that puts the organisational efforts into a chain of activities. This chain consists of primary and secondary activities. The value chain is portrayed in the following figure:
The major parts of the Value Chain Process are described below:
1.1.1 Primary Activities:
In the primary strategy field, the most crucial component is to develop the need. According to the customers’ needs, it needs to be evaluated to resolve the problems by meeting the customer needs according to their expectations. The company assesses the needs of the raw materials for carrying out the primary activities. Afterwards, the company procures these raw materials to generate the core products or services to serve the customers.
1.1.2 Supporting Activities:
The supporting activities can also be denoted as the secondary activities of the organisation. These activities create value for the core products and services. Functions like customer service, distribution, complaint, packaging generate value for the core and augmented products.
According to these processes, the fundamental value chain model is formed, but the ultimate level of evaluating the impact or assessing the value added to the customers can be assessed by the company so that it can dictate the relevant tasks to improve.
1.2 SWOT Analysis
SWOT is another conceptual tool for analysing the internal strengths and weaknesses and comparing them to the industry opportunities and threats. The strengths and weaknesses are components of the internal environment, and thus only these will be discussed here:
Nokia has been one of the oldest players in the telecom industry. It builds on its experience and offers the most innovative, reliable and user-friendly devices to the end-users. It has an exhaustive research and development wing that contributes to product innovation, unique designs and a more accessible user interface.
Nokia is losing its brand value, and this is the most critical of its weaknesses. Additionally, it is not catching up with the intense competition raging in the global smartphone industry. Nokia is falling behind in the unique designs that Apple and Samsung are offering. Moreover, Nokia phones are not based on the Android system, and it is also lagging behind them.
2. Penetration Strategy for Internal Expansion
A firm decides to cross the national boundaries when it aims at expanding its business operations. This allows a firm to diversify its business portfolio and fetch growth from different markets. The followings are the strategies for developing in international markets:
- Direct Exporting: The most common form of penetration into the international markets is exporting goods or services to a foreign country. However, this mode of internal expansion does not guarantee any frequency of business operations as long-term businesses can not be sustained by exporting only. The firm willing to enter international markets exports the products or services to the distributors or agents who resell the products for making profits out of those products. If Nokia wants to penetrate a new market as part of its international expansion strategy, it can not rely on direct exporting as this offers a very narrow market reach. The key to expansion is locked to the agents as well.
- Licensing: Licensing is a form of international business where a firm allows another firm to use its brand name, logo, trademark to produce and commercialise its products. The firm that grants such permission is known as the licensor, as the firm taking the license is known as the licensee. Licensing is beneficial for both parties if the licensee has a broad distribution reach in the licensed territory. This strategy will not be suitable for Nokia because the licensee can produce goods and bring changes into the products, which might raise technical devices’ complexities.
- Franchising: Originated in North America, franchising is a business model that allows another firm to use the parent firm’s name for conducting its own business. This model has similarity with the licensing system, but unlike licensing, the franchisor has direct command and control over the franchise.
- Joint Venturing: Joint venture can be a type of international operation where the two parent companies create another company under a mixed equity ratio. In the telecom industry, we have seen such joint ventures as Sony Ericsson. Nokia can adopt this strategy for becoming successful in some complex markets by partnering with strategically placed partners.
- Acquisitions: Acquisitions occur when one company buys out the ownership of another to build on the fame and brand values of the company that is being bought. In this business deal, all the privilege and managing power are transferred to the acquiring company. One recent example of acquisition is Verizon, the US telecom giant that has acquired Yahoo for $5 billion.