Strategic Management ---- Analysis about Wa-Haha Group

Transcription

1 Strategic Management ---- Analysis about Wa-Haha Group Shen Lin (Guiyang, Guizhou, ) Abstract :In 2000, Wa-Haha Group announced, that they planed to unite Hong Kong Dali Group to turn into costume industry. This news did convulsed the beverage, children- costume and multiple shop field in China. What caused Wa-Haha Group entered into costume industry? The author of this article will analyze the strategic changes according to the theory of strategic management. And let us understand how strategic management can affect an organization and then evaluate the importance of strategic management. Keywords: Strategy, Strategic Management, Strategic Choice, Strategic Evaluation, Strategic Control 1. Introduction Wa-Haha Group announced in Beijing, they would change their plan to unite Hong Kong Dali Group to turn into costume industry. Their target is to form 2000 multiple shops within 3 months, and they planed the year saleroom would be more than 10 billion yuan. This news did convulsed the beverage, children-costume and multiple shop field in China. Wa-Haha Group is a beverage enterprise before they announced this news. In fact, there was about 800 Wa-Haha costume shops when its peak time. And the cooperation with Hong Kong Dali just lasted less than half a year, but now, Wa-Haha still stalwartly put their new costume productions to the market. Wa-Haha Group carved out in 1987, till 2003, the accumulative total selling income up to RMB 45.6 billion Yuan. It gained the champion for continuous six years for its produce and sale amount, profit, selling income in China. Now Wa-Haha Group has been the fifth largest beverage manufacture enterprise of the world, just following Coca-Cola, PEPSI, Cabdury, Macat Group. There are more than 60 filiales around 23 provinces of China. The present employees are 18 thousand, and the HQ, which is located in Hangzhou, with 2641 employees with one third are universities graduates, 63 are master-degree graduates and 12 are PhDs. In 2002, they decided to enter into children costume industry. Can Wa- Haha create a miracle again in China? Let s view this from the point of - 1 -

2 view of strategy. Strategy is the direction and scope of an organization over the long term, ideally which matches its resources to its changing environment. Johnson & Scholes, 1999 (Management Principles, Study Guide, P 70 ). Because strategy has these kinds of characteristics, strategy decision will be a complexity process. And there are different strategic levels in an organization. Corporate-level strategy Corporate-level strategy Business unit strategy Business unit strategy Operational strategies Operational strategies We can see from these three frames, there are corporate-level strategy, business unit strategy and operational strategies in an organization. Corporate-level strategy cares about the whole goals of a company. Business unit strategy cares about how to operate competition successfully in a special market. Operational strategies care about how does each part of an organization use resources and employees to achieve the goals of the first two levels. Like Wa-Haha, one of their employees has sent a report about analysis its strategies of enter into costume industry and some suggestions for this action, but the president of Wa-Haha didn t pay attention to this report so that this result in the how-do-you-do situation which now occurs in Wa-Haha Group. 2. From strategic view to analyze it Internal and External According to the development strategies It is quite limited of beverage industry s development and size, so Wa-Haha has to seek a new increasing point. In 2001, the year-output of Wa-Haha was more than 2 million tons beverage, and it owned the 20% market-share in Chinese beverage market. It is quite hard for it to develop upwards. So, enter into the children-costume industry becomes their first strategic choice of diversification. The following 15 years, Wa-Haha Group takes concentrative development strategies to gain the champion both in selling size and profit in beverage industry field. Now, Wa-Haha s productions Brand name contain core productions 9 categories in all 54 main productions. These productions span into foodstuff beverage, medical health care and costume three main fields. Children Foodstuff/beverage Medical and health care Toys, childrencostumes, etc Drinking water, aerated water, diaries, juice, teabeverage, etc Children nutrient liquid, orally take Vitamine C, etc

3 From 1994 to 2003, Wa-Haha gained the champion both in selling size and profit in beverage industry field so that they gained abundant money for them to take diversificative strategies. From the point of view of enterpriser s individual motivation As we all know, Wa-Haha is an enterprise with high centralization of state power, they do not have a vice-president for the whole enterprise. But after they import DANONE principles, there was a big problem about the structure of their stocks. Because after the import of DANONE principles, DANONE wanted to dispatch managers of financial affairs and marketing into Wa-Haha s management, but Wa- Haha ignored this arrangement. Now, Chinese beverage industries have been in an age of dispute. International companies like Coca-Cola, Kang Shifu, and national companies like Wa-Haha, Le Baishi, they are sitting in a situation of competition with each other. Different enterprises always gain one market-share through their different and unique strategies. So, in 2003, president of Wa-Haha decided to take a project of Reforging Enterprise Flow. They cooperate with scientists and experts from Zhejiang University, Jiangnan University, and they cooperate with scientific research center of IIF and DANONE. The only purpose of doing so will be kept ahead in beverage industry with innovating productions, management, marketing and implement differentiation strategy. 3. Using SWOT to do Strategic Analysis Identify the current target and stratagem Analyze environment Analyze the resource ability of their group SWOT Analysis Identify opportunities and threats Identify strengths and weaknesses Construct a strategy Actualize the strategy Evaluate the result

4 Strategic Management Process Here, Wa-Haha does need to use SWOT to do strategic analysis before they really enter into costume industry. Use SWOT to analyze the environmental problem and identify opportunities and threats, which can bring them problems from the external, then analyze their own ability and strengths and weakness from the internal, so that they can make themselves a suitable strategy which can let them be successful. During they were in the beverage industry, general manager of Wa-Haha, Mr. Zong Qinghou once talked about their own corporation s idea in a speech. From his point of view, Wa-Haha, considered to be the best beverage enterprise in China, the history of recent 11 years, has been seen as a history of continuous respect employees, respect persons with abilities, and improve agglomeration. He illustrated some examples such as hold many activities like Thousands Vocal Concert, Employee Sports Meeting to let people who work in Wa-Haha gain a feeling of family. The real idea of its corporation is to produce things that have real value. From these years development of Wa-Haha, we can clearly achieve that their corporation s idea is to make cultural ideas into a facility (skill) for competition, and consider it as a carrot that has the same function as bonus instead of supporting the corporation s development and the headstream of its continuous development. It is quite normal in China s companies. Why do that world excellent enterprises regard strategic idea as their survival principles? The reason is quite simple. Obey the value idea root the recognization of single one s ability localization. 4. Strategic changes of Wa-Haha Wa-Haha Successful Pattern can be summed up as 3 ONE, One - 4 -

5 Point, One Net, One Ability. One Point equals the advertisement, One Net equals the selling net that Wa-Haha carefully created, and One Ability equals the ability of sale agencies. The success of Wa-Haha is a legend. The beginning of Wa-Haha was a school-factory, which just had two woks, and three cans to produce the Wa-Haha oral liquids for children to solve their problems of dislike eat. And because of their advertisement after you drank Wa-Haha, eating will be a joyful thing, is the classical one which let Wa-Haha be famous all over China, and after one year, the selling incomes reached 400 million. We can get some information from the process diagram below about its 3 ONE First Step One Point, using advertisements to present new productions, open the market and form a pre-sell period. Second Step One Net, according to the strict principle price difference let sale agencies gain the first level profit. Third Step One Ability, through years selling policies let sale agencies can gain the second level, the third level and even the fourth level profit according to their hard working. Wa-Haha s Success Model The most important part of this process is the first one Advertisement. Through advertisements to set up the market of preselling, and then the price difference principle can exist, the last step those sale agencies can motivate themselves with hard working. Then the last step can indirectly affect a goal of new production. If the first step cannot be finished quite well, then the following steps will be shaked. Another important issue of this process will be the confidence that from the sale agencies, this is a base for enterprise s positive cycle. General speaking, this process will make an enterprise play a game with high costs and high price. The problem of this process will be when advertisements become more and more ascensive, productions will change into a functional one with no culture, instead of change into cultural production. The result will lead stiff cycle between advertisements and productions the quantity of advertisements will be - 5 -

6 more, or fresh ideas of one production should be designed so that can assure the selling. Now, Wa-Haha has decided to enter into children-costume industry because they think first, Wa-Haha is quite suitable for children, ten years work let children ratified their productions. Second, they found in China, there is no chieftain in this industry, so it is a good opportunity for them to choose to do children-costume and they announced they wanted to be the head of this industry within 3 or 5 years. So they have to do a good plan when they decide to enter into another kind of field. Corporate-level plan Business-level plan Functional-level plan Target confirm Frame strategy Implement Strategy Levels and Kinds of Plan From this table we can see if the plans has been changed, followed the strategies will be changed. It is a very complicated process. We can see from Wa-Haha, their strategies had to be changed because of their plans changed. The materials are quite different between beverage and costume industry. So Wa-Haha should confirm a target according to a new business and function, then following with these targets, they have to frame different strategies according to costume s requirement from corporate-level, business-level and functional-level. If there is some trouble happens in any part of this process, the implement of these new strategies will be extremely hard. Of course, the result of enter into a new industry will be failed. 5. Importance of Strategic Management Strategic management is the responsibility of all managers and, what is more, a responsibility that is becoming more and more important

7 It is not sufficient for managers to think of management in some operational or functional context, simply to know their piece of the jigsaw well and trust that others know theirs equally as well. Modern organizations exist in a complex environment with an increasing demand for fast and effective strategic responses Johnson & Scholes (1999). Strategic management involves the analysis of the strategic situation faced by an organization and an assessment of the options available to the organization. Strategic management is regarded as complex because of the amount of uncertainty involved in it, the need to integrate its management across the entire organization and to achieve a level of consensus, and finally the major change involved in implementing strategic decisions. In combination these create significant complexity. To Wa-Haha, since they decided to enter into a new industry that they never engaged before, there is a key problem they have to concentrate on, that is how to do effective strategic management. We can see from the Strategic Management Factor Model. Vision and Goal Environment Resources abilities and Corporate-level Strategy Strategic Strategic position position Organization Business-level Strategy Strategic Strategic choices choices Strategic into Strategic into action action Abilities Development and Way direction Control changes Strategic Management Factor Model From this table, we can see the core part will be strategic management control loop, and there are many external reasons can affect each step of this loop. So, like Wa-Haha, they has to re-design their strategies of entering into costume industry according to special strategic position and then do an appropriate strategic choice, at last, take this - 7 -

8 strategy in to action then control the strategy, so that Wa-Haha Group can gain another resplendence in costume field in China. 6. Conclusion From the analysis above, we can draw a conclusion that there are many problems about Wa-Haha decided to enter into costume industry, they have to re-design the strategic management, do strategic analysis according to different situations, and maybe, it will not bring Wa-Haha success. The largest three challenges for Wa-Haha will be Management, Organizational form and Advertising. And these challenges are caused by the development of both external environment changes and internal motivation changes. According to the theories of strategic management, we can see the successful implementation of a strategy is the result of matching all the foregoing aspects to the needs of the strategic plan. All are complex in their own right and intricately interconnected with each other, consequently strategic implementation is highly unlikely to occur in a single stroke, more likely it will be a process of initial implementation followed by a number of adjustments and reiterations. How painful or painless the implementation of strategy is to an organization is mostly dependent on the extent of the change required and the time available in which to make it. There are no simple solutions to strategy or strategic management, it relies upon the abilities and judgments of the people responsible for strategic management. In all, Wa-Haha s expansion of its productions will be an intractable problem, which need the manger to handle with. And it is a strategic bottleneck which occurs in most Chinese enterprises. In short, according to the mid long-term strategies, the probability of Wa-Haha succeed in children-costume industry will be quite low, and Wa-Haha has to conquer many problems such as enterprise s operate management, strategic position and so on. Maybe they have a right strategic position about Children Healthy Industry, but it may be limited because of enterprise s resources and abilities, and the level of enterprise s management, so, Wa-Haha will have a long way to explore: do deeply and carefully in their original field, or they have enough financial principles and human principles to do strategic choices then can support them to enter into another brand new field. 参考文献 References 1. Management Principles, Course Guide, School of Architecture and Construction, The University of Greenwich - 8 -

9 2. Stephen P. Robbins, Mary Coulter, Management (Seventh Edition). Pearson Education Press 3. Gerry Johnson, Kevan Scholes, Exploring Corporate Strategy (Sixth Edition). Posts & Telecom Press 4. Gareth R. Jones, Jennifer M. George, Essentials Contemporary of Management. Posts & Telecom Press 5. Wu Jingrong, Chen Zhengqiu, New Age Chinese-English Dictionary. The Commercial Press 6. Website, 7. Website, 8. Website, 9. Website, Website, 娃哈哈集团战略管理分析 沈麟 ( 在读博士, 贵州省, 贵阳市,550025) - 9 -

10 摘要 :2000 年娃哈哈集团宣布将与香港大力集团联合进军服装行业 消息一出立刻引起中国饮料, 童装以及链锁销售行业的极大关注 是什么使得娃哈哈集团进军服装行业? 本文作者通过战略管理理论分析娃哈哈集团的战略转变, 从而使我们认识到战略管理在整个企业管理中的重要性 关键词 : 战略 ; 战略管理 ; 战略选择 ; 战略评估 ; 战略监控 作者简介 : 沈麟, 贵州省贵阳市人 贵州大学英语语言文学学士, 英国格林威治大学项目管理硕士, 研究方向 : 项目质量管理 现在泰国苏南拉里理工大学修博士学位, 研究方向为多媒体辅助外语教学 henryslin@yahoo.cn