Sample Strategic Management Essay: Boiled Frog Phenomenon
Boiled Frog Phenomenon
The boiled frog syndrome is actually a business metaphor. It is said that when a frog is dropped in boiling water, the frog immediately jumps out; however, if the frog is placed in water and its temperature is turned up slowly, the frog will not jump but boil to death. In strategic management, this metaphor is usually used to describe the behavior of most business operators. Specifically, it is used to describe the tendency of managers to refrain from doing the necessary changes so as to address the slowly growing business risks and challenges around them (Harper, 1998). Similar to the frog, people remain within their comfort zones unless they have a strong reason not to; in business, reacting too slowly to minor issues may lead to its downfall.
A good example of this phenomenon was the collapse of Enron, a major American energy company. During the 1990s, the company’s CEO had several product plans that required major financial support; the company was also going through major international business issues at that time; moreover, it was not until the company was financially unstable did the company started doing something. In order to resolve problematic matters and support business plans, the company implemented various strategies. However, the company’s strategies only went from one major loss to the next. Due to wrong investments and partnerships, the company’s growth slowed down considerably. As a result more of its weaknesses had grown more apparent (Zellner et al., 2001). Bankruptcy and various cases against the company had resulted to a scandalous fall. Furthermore, several employees of the company had lost their life savings, college funds and pensions along with Enron’s collapse.
The boiled frog phenomenon encourages business operators not to be complacent with their existing status and strategies. Enron was then a major energy company; nonetheless, this example confirms that no small or large businesses are exempted from the effect of the boiled frog syndrome. Clearly, this phenomenon stresses that in strategic management, blind compliance to predetermined plans and strategies is not enough to respond to unexpected events within the highly competitive and ever-changing business environment.
Global Operations and Able Corporation
Able Corporation is a company based in the United States and locally manufactures various tools and gadgets such as lawn mowers, microwaves and ranges. While the company is already operating successfully within the American and Canadian market, the company intends to expand its business more to other foreign markets. This discussion will then be centered on the identification of essential factors the company must take into account in order to expand globally.
In order to develop the appropriate strategies for its global plans, Able Corporation must first define its identity as well as develop its mission statement. In order to develop the company’s identity, a situational analysis must first be conducted. The aim of this step is to define the key successful factors of the company as well as its problem areas that would support or hinder its global business plans. Through situational analysis, the company will also be able to recognize its available sources that can be used for its planned strategies. For this purpose, the company can make use of different analytical tools. The most common of which is the SWOT analysis, where the company’s strengths, weaknesses, opportunities and threats are considered. The company can also make use of PEST analysis in strategic planning and implementation. This tool evaluates the political, economic, socio-cultural and technological factors that affect the company. This is mainly used in order to analyze the businesses’ macro environment. The use of these tools will then help the company to develop its direction or mission statement. The information for the analysis can be obtained from a number of resources including company records, financial reports, sales reports and employee performance records. Gathering information about the company can also be done through researchers and analysts. This step stresses the necessity of developing well-defined strategic goals based on the company’s identity before pursuing set business plans; in this way, failure and losses due to ineffective strategies can be avoided.
Based from the developed identity of the company, information on the different resources of Able Corporation will be identified. These resources should be considered in order for the company to make the most of its strengths and avoid costly strategic developments. For instance, the production of the company’s products is done locally; should the company pursue its goals of operating internationally, it should then consider how it plans to produce products for a greater number of consumers. One of the important resources of the company is its contacts with large retailers for its product distribution; the strategic plan of the company should then identify how it will distribute its products abroad. Will the company contact foreign retailers or will it use the online marketing and product distribution features offered by American retailers? In order to make an effective global strategic plan, Able Corporation should not only identify what resources are available but also how these resources will be utilized or modified.
In terms of strategic implementation, Able Corporation should consider using the principle of balanced standardization and adaptation strategy. This strategy has been debated over in relation to foreign market entry and strategic implementation. One side of the argument claims that keeping with the standard operations of the global company is the most efficient for entering other foreign markets; this means that the conventional practices of the company will be applied to all its foreign branches. However, it has been noted that the differences in political, cultural and economic features of countries abroad limits the efficacy of the standardization theory; thus, adapting to the traditions of the targeted foreign market was stressed to be the most effective solution (Subramaniam & Hewett, 2004). The debate was resolved by emphasizing that a balance between standardization and adaptation strategies should be observed among multinational companies. Through this implementation principle, the company will be able to combine the most effective strategies that would suit differing foreign business environment.
The process of strategic management does not stop from the implementation process; thus, it is also necessary that Able Corporation develops a system that would evaluate its strategic progress. Assessing the outcome of the implemented strategy is essential as this would determine whether the objective of the company to operate globally has been achieved successfully. This step is also important in enhancing the existing strategy and addressing identified problem areas (Kaplan & Norton, 1996). In order to carry out this procedure, Able Corporation should consider using both financial and non-financial indicators. While the sales, product volume and market growth are important indicators of progress, the company should also take note of non-financial indicators of good business performance such as customer satisfaction and employee performance.
In order to strategically succeed in the global business environment, a company must consider multiple factors. For one thing, a company planning to enter foreign markets must have a clear business objective and sufficient resources to support its achievement. It is also essential that the company is aware how these resources will be utilized. Appropriate approaches in strategic implementation should also be used. Finally, an implemented strategy should be assessed to ensure that intended business outcomes and continuous progress are achieved.