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Strategic Planning and Management – Analysis and Strategy

The organisation I chose for this study is Hangzhou Greentown Yuhua School, purportedly a non profit organisation (NPO) subsidiary of Greentown Holdings, located in Hangzhou City, Zhejiang Province, China. Because of the lack of reliable data or data sources in China, this report is based on my own participation in board meetings. The primary source of information is from the 2010 Report to Directors and Shareholders, specifically the section devoted to the school. Government figures do not offer any substantiation as to reliability.

In these board meetings, I was privy to previously confidential information about the running of the Junior High School, specifically the International Cooperation Program, of which I was the Curriculum Coordinator. The school claimed its aim was to produce the international political and industry leaders of the future. This was particularly with reference to The Ruling Class Program, a group of the top 50 students from wealthy families in Zhejiang Province.

It became very clear at the beginning that, despite this claim, the school had no clear strategy or objectives to achieve this. It’s primary motivation, despite being an NPO, is to make large profits in a short time, without any long term plans. In this report, I will make observations of the shortcomings I noticed, and make suggestions, based on current theory, as to how this could be improved.

This organisation operates within two major industries. Firstly, as a school, it operates within the education industry. Secondly, it is a wholly owned not-for-profit organisation administered by Greentown Holdings, China’s second largest property holding company.

Analysing The External Environment

Industry’s Dominant Economic Characteristics

The Annual Report (Greentown 2011) was unclear and many figures did not sound reasonable, or were non-existant. It was clear that student numbers had deliberately been reduced to 2500, and teaching staff reduced by 19, based on failure to perform to schools standards. Other figures, however, were non-existent or unclear, and the auditors admitted there may be “unidentifiable mistakes.”

Greentown had not clearly identified the factors which would define the industry’s dominant economic features (Thompson et al 2009).  The factors which would probably be most relevant would: overall size and market growth rate; the market’s geographic boundaries; market demographics; customer needs; differentiation of the products available; affect on costs by scale of economies; predicted technological changes.

Competitive Forces Faced By Industry

Again, Greentown School management were unsure of these forces, and did not see the need to find out. It is suggested that Greentown adopt the five forces model of competition as a way of analysing the competitive environment (Thompson et al 2009).

The five areas of the market that are composite of competitive pressures are: Competitive pressures and market manoeuvring for buyers between rival sellers in the industry; threats of new entrants into the market; attempts from other industries to lure buyers to their products; supplier bargaining power and supplier-seller collaboration; buyer bargaining power and seller-buyer collaboration (Thompson et al 2009) (Porter 1980).

Factors Driving Industry Change and Impacts of These Factors

While aware of the forces that will change the industry, Greentown choose to ignore them, and hope it won’t have an effect. Greentown should formally identify what the driving forces are, and assess the impact on the industry (Thompson et al 2009). Examples affecting English language training are: 400 million Chinese can communicate in English now; new legislation increasing taxation for unqualified teachers and the employers of those teachers; higher qualifications needed for Government approved work permit (Greentown 2011).

The Market Position of Rivals

Greentown don’t see the need to consider rivals, as the management feel secure in their belief that a big company will always dominate a smaller company. It is essential that any organisation considers it’s rivals market position (Thompson et al 2009). A review of the job notice boards reveals that many rival schools are offering superior educational packages and higher wages for more highly qualified teachers. The information needed for Greentown to consider is on the industry oriented web sites, but Greentown do not see a need to consider the information.

Strategic Moves Rivals Are Likely to Make Next

All organisations should consider what their rivals will do next (Thompson et al 2009). Greentown take the attitude that other companies will not have strategies, and in this regard, they may well be right. The dynamics of the industry in China seems to preclude almost all domestic companies from having long term strategies. Instead, it is how to make money quickly, with little regard to illegalities.

Key Factors for Future Competitive Success

Greentown only consider what they must do in order to make more money. Instead, this factor should be expanded to include what the competitors must do to succeed (Thompson et al 2009).

Industry Outlook and Attractive Opportunities

The first point to consider is that analysing competitive dynamics and predictable future changes will allow an organisation to aim for attractive opportunities (Thompson et al 2009). The second point is to determine the likelihood of financial success in the future industry (Thompson et al 2009).

There are many attractive opportunities for Greentown, not currently being considered, which this report will look at in the third section, on Strategic Vision.

Analysing the Resource and Competitive Position of the Company

Success of the Company’s Present Strategy

Here are several components to an organisation’s business strategy (Thompson et al 2009). First is to identify the company’s competitive approach. In Greentown’s case, they are not concerned with competition. As such, it does little to improve its competitive position, and performance is not really an issue, except on the surface. As example, even though they removed two complete classes of students, this was more a strategy to increase student fees, and decrease teacher wages (Greentown 2011).

A qualitative and a quantitative view of results can determine an organisations success with its strategy (Thompson et al 2009). From a qualitative view, the company does not achieve its stated objectives of quality education, past the point of the programs being accepted by the Government regulatory bodies. From a quantitative view, students results are often fabricated to give parents and all stakeholders, as well as unrecognised competitors, a false view of the school’s success.

The two best empirical indicators are: achieving the stated financial and strategic objectives; and being an above average industry performer (Thompson et al 2009). Because industry standards are so low, these cannot really be used to gauge Greentown’s success or otherwise.

SWOT Analysis

Strengths

Huge financial resources Parent company is well known Modern, attractive and spacious Strict behavioural code

Weaknesses

Programs offered are illusions No long term strategic plan Emphasis is on large profits quickly Poor treatment of staff

Opportunities

Lack of real competition New laws attract highly qualified teachers New laws deter unqualified teachers Most competitors are resisting new laws

Threats

School is resisting new laws Huge fines and penalties under new laws Education reforms rejected by school Risk of losing foreign teacher’s licence

Competitiveness of Company’s Prices and Costs

Under normal circumstances, the higher a company’s costs are above those of close rivals, the more competitively vulnerable it becomes (Thompson et al 2009). However, Greentown’ marketing strategy is that it aims for the first generation rich parents (Greentown 2011). These parents appear to firmly believe that the educations at Greentown school must be the best, because it is the most expensive in Hangzhou City.

The value chain recognises the primary activities that generate customer value and the associated support activities (Thompson et al 2009). The core concept of this is that primary activities: are most important in creating value for customers, and support activities enhance the performance of primary activities (Thompson et al 2009). Greentown have stated that their primary activity is to generate profit, and customer satisfaction is considered relatively unimportant. Foster & Bradach (2005) discussed the concepts of non-profit organisations making profits. It appears Greentown have seen this as the overriding purpose of their existence.

Stronger or Weaker Competitiveness than Key Rivals?

Two key factors to checking the strength of a company’s competiveness are: the company’s ranking relative to competitors on each of the important factors that determine market success; and the company’s net competitive advantage or disadvantage in comparison with major competitors (Thompson et al 2009). Greentown stated they had achieved this by winning more awards and and conducting the largest international education exchange carnival in Zhejiang Province (Greentown 2011). Education seemed to be of secondary importance.

Strategic Issues and Problems Requiring Most Managerial Attention

Finally, a company needs to focus on the strategic issues it faces, and compile a list of problems and barriers it faces, to create a strategic agenda of these barriers and problems, and ensure prompt attention by management (Thompson et al 2009). One of the key areas Greentown are always looking at is how to reduce high costs, but without the price reductions (Greentown 2011). Greentown also wants to expand into foreign markets, but is finding it difficult to get accredited partners in western countries, due to lack of long term planning (Greentown 2011)

Strategy Being Used by the Organisation

From the research, it at first seems that Greentown is not employing strategic management theory in the true sense, and thus does not have a true strategy in place for market competitiveness. At best, it could be said to be Grass-roots Strategy (Mintzberg 1987).

As example, the major project at the school is “The Ruling Class Project” (Greentown 2011). This is a group of Year 7 students of very high academic standards. All have good English languages skills, and all have lived in Western countries, some having been born abroad.

The Ruling Class Project has an aim: to produce the future leaders in politics and business, and to establish with Greentown playing a leading role in helping them to achieve this. However, apart from the aim, there is no long term strategy in place (Greentown 2011).

As a first step, the school decided to teach Maths and Science in English language, and immediately began recruiting students. After recruiting the students, the school then advertised for two teachers. However, they struck their first obstacle by stating to applicants that they had a curriculum to teach, when in fact they did not have one.  The result was that, at the beginning of semester, they had 50 students, no curriculum and no teachers (Greentown 2011). Eventually, after several weeks of using an illegal unqualified teacher, they recruited a single curriculum writer and teacher.

Mintzberg (1987) refers to Grass-roots Strategy as setting out broad guidelines, and leaving the specifics to others lower down the organisation. This is exactly what Greentown are doing. So in fact, there is a strategy. It is deliberate, in that Greentown have set out an aim, and it is emergent, in that they have stated how that aim will work.

Mintzberg (1994) went on to say that sometimes strategies must be left as broad visions to adapt to a changing environment. However, the lack of resources appears to be the major stumbling block Greentown have. Once again, through non-compliance with contracts and Government Regulations, they have lost both teachers after just a few months. They are again illegally employing a single unqualified teacher, in defiance of Government orders not to do so.

Strategic Vision and Strategy

Objective: To commence preparing students for study in Western universities at a younger age than is currently being done by competitors.

After investigation, it is clear that the organisation has the financial assets, from the parent company, to initiate and maintain this program. The program can become self-sustaining in it’s first year of operation, given that the parent company does not require repayment of establishment capital. The organisation has tentative approval to regain Government licences once suitably qualified western staff have been employed.

Therefore, the organisation has the capability to run this program (Chatterjee 2005)

Outcome: After six years of study in a simulated western classroom environment, the students will be better prepared to assimilate into a western university or college. This seems much preferable to the current 1-3 year “crash courses” that students do in the final year(s) of high school studies,

For this to be successful, Greentown needs to focus on the student’s requirements, rather than just then fact of having the product (Chatterjee 2005).

Core Objective: To develop a product superior to what can be supplied by competitors in Hangzhou City or Zhejiang Province. This will be done by hiring a foreign expert to develop a curriculum that will encompass educational and cultural awareness essential for the students to be accepted in the different cultural environment of the west. The foreign expert will be solely responsible for developing the curriculum, which must also be ratified by the Hangzhou Education Bureau, and Beijing Ministry of Education.

The core objective has been designed and simplified using the Core Objectives Model (Chatterjee 2005).

Strategy for Implementation: A Grass-roots strategy will continue, and the strategy will evolve naturally over the six years. We have obtained a curriculum form a secondary school in Maryland, USA, and the Maths and Science Components will be delivered in the first year,

The school must recruit two qualified teachers, one in Science, and one in Maths. Both should have qualifications in the subjects to be taught, as well as experience teaching these subjects in a western education institute.

Reference List

Chatterjee, S. 2005, ‘Core objectives: Clarity in designing strategy’, California Management Review, vol. 47, no. 2, pp. 33–49

Dyllick, T. and Hockerts, K. 2002, ‘Beyond the Business Case for Corporate Sustainability’, Business Strategy and the Environment, vol. 11, no. 2, pp. 130-141

Figge, F., Hahn. T., Schaltegger, S. and Wagner, M. 2002, ‘The Sustainability Balanced Scorecard – Linking Sustainability Management to Business Strategy’, Business Strategy and the Environment, vol. 11, no. 5, pp. 269-284

Foster, W. & Bradach, J. 2005, ‘Should nonprofits seek profits?’, Harvard Business Review, February, pp. 92–100

Greentown Holdings. 2011 ‘Hangzhou Greentown Yuhua School Annual Report’ Greentown Holdings Annual Report to Shareholders

Johnson, H.H. 2003, ‘Does it pay to be good? Social responsibility and financial performance’ Business Horizons, November-December, pp. 34–40

Marren, P. 2004, ‘In search of mediocrity’, Journal of Business Strategy, vol. 25, no.1, pp. 4–6

Miller, D., Eisenstat, R. & Foote, N. 2002, ‘Strategy from the inside out: Building capability creating organizations’, California Management Review, vol. 44, no. 3, pp. 37–54

Mintzberg, H. 1987, ‘Crafting strategy’, Harvard Business Review, July-August, pp. 66–75

Mintzberg, H. 1994, ‘The fall and rise of strategic planning’, Harvard Business Review, January-February, pp. 107–114

Porter, M.E. 1980, ‘Note on the structural analysis of industries’, Harvard Business School, reprint no. 376–054, pp. 1–16

Porter, M.E. 1996, ‘What is strategy?’, Harvard Business Review, November-December, pp.61–78

Skrabec, Q.R. 2003, ‘Playing by the rules: Why ethics are profitable’, Business Horizons, September-October, pp. 15–18

Sawhill, J. & Williamson, D. 2001, ‘Measuring what matters in nonprofits’, The McKinsey Quarterly, no. 2, pp. 99–107

Thompson, A., Strickland, A. & Gamble, J. (2009). Crafting and Executing Strategy: Concepts and Cases, 17th ed., McGraw-Hill.,

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