The Company’s Current and Recent Performance in Its Competitive Markets
Herman Miller is a corporation with substantial businesses in the furniture production. The company invests mostly in designing, manufacturing, research and distribution of finished furnishings. In the current situation, the company is aiming at sustaining a competitive edge with the implementation of new designs fostered by innovative research to enhance furniture production over its competitors. However, its recent performance in the market has seen a spiral of downward movement in market sales due to the economic slump. Hence, the company is at par level performance as regards the competitive market situation.
Accurately Identify the Key Strategic Issue(s) Facing the Organization
Herman Miller is strategically confronting underlying issues like management change, market competitiveness, and employee capabilities. These questions are the driving force for the company to realize steady improvement in the production process and growth through strategic formulae (Burgelman, 2013).
Company’s Vision, Mission and Objectives and Their Appropriateness
Herman Miller is a Visionary organization that aims to become a world-class manufacturer of office and home furniture for the international market with a sole purpose of gaining customer and employee evaluation for the production. Herman Miller’s mission is to increase market profitability through the provision of quality assured furniture products to customers that uniquely meet consumer needs, and create a healthy working atmosphere for their employees.
The Functional Strategies Employed and Their Ability to Help Meet Corporate-Level Strategies
Employing a Marketing strategy helps Herman Miller study the current and previous trends in production which help the company to identify its corporate level stratification in an industry that requires quality. The company forecasting the future market productivity encourages employees to develop strategies that reduce the risk of loss when the Herman Miller launches a new product. Employee scenario planning fosters market predictions that enable the marketing department to assess the performance of different competitor products hence, creating designs that meet the social demands of the target market.
Research and design strategy
As one of the core values for creating personal, friendly products, Herman Miller invests in innovative eco-friendly products that ensure functionality. Designing helps create a corporate image worth of brand siding along with the company hence promoting the corporate identity of the business (Castellucci & Ertug, 2014).
Human resource management strategy
Herman Miller employs some people and it is the company’s responsibility to create a healthy working environment to foster better production. With better-working conditions labor can strive for better production hence ensuring the quality of the products.
Competitive Factors in the Firm’s Industry and its Overall Attractiveness
The company faces competition from new market entrants due to the growing need for furniture products and the abundance of resources. The threat of new entrants poses a risk to Herman Miller’s market profits since this means that there is bound to be sharing of the clientele. Moreover, with the uncertainty about the choices of the buyer, no one is reliable to know how the purchasing power may shift hence affecting the prices. With the current performance, the company strategy is respondent to changing market factors. Hence, this prevents the company from employing radical measures.
Competitive rivalry in the industry is threatening Herman Miller’s established market since the company has gained from the monopoly of furniture production. With more people developing strategies to enhance the class of furniture, new businesses are finding trending ideas for the industry. Therefore, with trudging competition in the industry, there is bound to be a downward slide in the prices since any rise will have an immediate undercut due to many market players.
The threat of resource substitutes on the market poses a competitive risk to Herman Miller since there are many players. Besides, this alleviates the strategy implemented for curtail losing their supplying base that may affect the production process in both short and long term production period. Due to the availability of more suppliers, many companies are joining the industry since there is a stable supply of materials for production. Hence, this serves as an attraction for Herman’s market rivals to encroach on the ready supply of products.
The “4 P’s” And the Key Marketing Strategies
The company has an outstanding line of office, and home furniture product ensemble and its marketing strategy includes ender user advertisement while also including retailers and individual stores along with the online company store that offers the same wide product range at relative costs.
The company product placement across the global market is evident in all retail stores acting as agents for Herman Miller. The strategy should highlight the goal of customer readily identifying the product line and being able to differentiate them from other commodities.
A Price determination is a core factor and concern for the client to forego any other product and choose the company’s line. Different markets offer new challenges, and a minimal decrease may alleviate to gaining a market share; hence, providing different product costs may be the best market projection.
Promotion targeting is important and requires effective research to predict when the target market can receive the message, and the appropriate methods to use (Gamble, Peteraf & Thompson, 2013). Marketing and advertising product distribution enhance product development that in returns fetches a good customer base hence creating a marketing strategy for the company.
Accurately analyze the firm’s finances using ratio analysis and industry comparisons to assess the company’s strength in its financial structure.
VRIO
Perform an accurate assessment of the firm’s competitive advantages using a VRIO analysis.
Competitive advantage | |||
Valuation | Rare | Cost of imitation | Readiness of company to exploit |
Yes | Yes | Yes | Yes |
Sustainable competitive advantage |
Herman Miller’s competence to create valuable products makes it resourceful for the production process to utilize all the available materials in making quality products. Hence, this makes the products have a high value on the market as compared to rival products (Burgelman, 2013).
The Key Strategic Factors Affecting the Firm
Herman Miller’s strengths include profits derived from its actual market position. The ailing company weaknesses include the excessive reliance on the U.S. market for revenue while Opportunities comprise improvement through its global expansion to other trading zones like Europe and Asia. However, there are threats to the company that includes rising labor costs in the United States economy.
Value Chain
Perform an Accurate Assessment of the Firm’s Competitive Advantages Using a Value Chain Analysis
Strength Measure | Importance weight | HM Inc | RIVAL 1 | RIVAL 2 | RIVAL 3 | RIVAL 4 | |||||
Strength Rating | Score | Strength Rating | Score | Strength Rating | Score | Strength Rating | Score | Strength Rating | Score | ||
Quality/product performance |
0.10 |
8 | 0.80 | 5 | 0.50 | 10 | 1.00 | 1 | 0.10 | 6 | 0.60 |
Reputation/image | 0.10 | 8 | 0.80 | 7 | 0.70 | 10 | 1.00 | 1 | 0.10 | 6 | 0.60 |
Manufacturing capability | 0.10 | 2 | 0.20 | 10 | 1.00 | 4 | 0.40 | 5 | 0.50 | 1 | 0.10 |
Technological skills | 0.05 | 10 | 0.50 | 1 | 0.05 | 7 | 0.35 | 3 | 0.15 | 8 | 0.40 |
Dealer network/distribution capability | 0.05 | 9 | 0.45 | 4 | 0.20 | 10 | 0.50 | 5 | 0.25 | 1 | 0.05 |
New-product innovation capability | 0.05 | 9 | 0.45 | 4 | 0.20 | 10 | 0.50 | 5 | 0.25 | 1 | 0.05 |
Financial resources | 0.10 | 5 | 0.50 | 10 | 1.00 | 7 | 0.70 | 3 | 0.30 | 1 | 0.10 |
Relative cost position | 0.30 | 5 | 1.50 | 10 | 3.00 | 3 | 0.95 | 1 | 0.30 | 4 | 1.20 |
Customer service capabilities | 0.15 | 5 | 0.75 | 7 | 1.05 | 10 | 1.50 | 1 | 0.15 | 4 | 0.60 |
Sum of importance weights | 1.00 | 5.95 | 7.70 | 6.85 | 2.10 | 3.70 |
Weighted overall strength ratings
(Rating Scale: Very Weak = 1, Very Strong = 10)
Production of a company depends largely on effective operational performance. The functional performance is a combination of people, process, and technology. For effective interaction of company employees with technology and process, the people in the organization have to be competent enough. They must have required knowledge, skill and abilities. In human resource management, an individual’s competence is a major factor that decides operational effectiveness. In providing quality products and services within a short time, these underlying intertwined factors cannot be ignored. Human resource management practices in the selection, training, work environment and performance appraisals usually enhance the competence of employees (Cattani & Ferriani, 2013).
The firm’s core competency in light of its strategy
The key fundamental issue is the linkage between the constructs in human resource and performance results. The mechanism through which human resource is practiced influences its effectiveness since there is no standard, accurate method to apply. The link between human resource and organizational performance enables the managers to design programs that sprout better operational results to obtain higher organizational performance
Management team, capable employee base, reward and incentive systems
The resource-based view suggests that human resource policies are likely to contribute to sustained advantages by facilitating extraordinary progress in the firm. The implication of human resource and success of a company cannot be distinctively separable. Companies invest a lot in new workers including offering scholarship and internship opportunities to archive competitive advantage.
The company’s ethical stance and efforts toward social responsibility
Human resources management plays a role in determining the strategic importance of workers. The company benefits from workers with knowledge, intelligence, enthusiasm, and ability to learn. With a dedicated human resource department, managing proper employee relation is seen as a less expensive necessity. As compared to other factors of production, human resources require more management since people are complex, emotional creatures, and it is challenging to ensure that we behave in the right way.
Strategic human resource management is the key role in archiving favorable employee results. The human resource management functions have consistently been under different argument to justify its position in organizations.
The firm’s culture and the fit of the culture with the company’s strategy
Having an organizational culture that is only strong might end up being too good for the company; however, the culture must be related to the company’s strategy (Gamble, Peteraf & Thompson, 2013). Herman Miller Inc is well known for the furniture business and the culture of the company lies within their exclusive brand. The company has developed a shared understanding over time with its human resource, distinct products and their clients; the three factors that align to their strategy of being unbeatable in the furniture industry. Further Herman Miller Inc, capitalizes on the culture of human resource motivation as depicted in value chain analysis that intern leads to productivity at that company hence achievement of company’s strategies.
Realistic Strategic Options to Improve the Firm’s Competitive Position
The decline in performance of Herman Miller Inc in recent years and the increasing competition threaten its survival in the future. The company is in need of an appropriate strategic approach to strengthening its performance and gain better competitive positioning in the market (Gamble, Peteraf & Thompson, 2013). Three strategic options, including focused differentiation, low-cost provider, and expansion can be adopted to this effect.
Focused Differentiation
In a focused differentiation strategy, an organization concentrates on producing products with unique features to satisfy a given market (Gamble, Peteraf & Thompson, 2013). The company narrows its production in the attempt to satisfy a narrow market instead of targeting a wider market. In implementing this option, Herman Miller, Inc can adopt customized production to satisfy the need of the specific target customers.
Two advantages are considered to compel an organization to adopt the focused differential. First, the use of this strategy will enable the Herman Miller, Inc to develop products that are deemed unique and better compared to those of competitors (Gamble, Peteraf & Thompson, 2013). The uniqueness of the products would assist in attracting and retaining an adequate number of target customers. Acquiring royal customers is an important competitive edge upon which revenue and profits can stabilize. Secondly, the uniqueness of the products and specialization under the focused differentiation enable the company to charge higher prices.
The first disadvantage is that the differentiation strategy is not sealed from imitation. After successfully implementing the strategy, Herman Miller Inc’s competitors can copy the business strategy and product design and take up a portion of its customers. Secondly, the strategy is subject to the threat of changing tastes and preferences of the customers. In this context, the changing tastes and preferences imply that the products designed and produced will have reduced demand, leading to declining in revenue.
Low-Cost Strategy
Low cost is a strategy where the company strives to reduce its cost of production and shift the benefits to the customer by charging lower prices compared to the competitors. The company using this strategy streamlines its production and efficiently manages its supply chain to reduce unnecessary cost. By reducing the prices, while maintaining the quality of the products would assist Herman Miller, Inc. to retain its current customers and attract others from its competitors.
The first advantage of the low-cost strategy is that Herman Miller, Inc. will overcome the threat of the strategies applied by the existing competitors. Providing products of the same quality or even better than the competitors at relatively low prices attract a portion of customers from the competitors irrespective of the strategies they apply (Gamble, Peteraf & Thompson, 2013). Secondly, the strategy assists in the formation of barriers to new entrants, which guarantees the future performance of the company.
However, the disadvantage of the low-cost strategy is that in the case of a change in external factors such inflation and increased cost of raw materials can deem the strategy not applicable in the long run. The changes, in this case, are beyond the control of the company, and hence, the organization may no longer be in a position to provide the products at reduced costs. Secondly, despite maintaining and attracting more customers with the increased sales volume, the profit of the company, can decline significantly due to lower profit margins.
Expansion
The expansion is a possible strategic option in which Herman Miller, Inc. can look for more customers, particularly in potential markets, which the company has not exploited. The strategy is compelled by the fact that its current market is saturated, but still important. The expansion, in this case, implies that the company should increase its production, expand its distribution chain, and promote its brand and products in the new markets (Gamble, Peteraf & Thompson, 2013). In expanding its market, Herman Miller, Inc. can maintain its current strategic production units and supply the products in the new markets. The approach, in this case, will reduce the amount of finances required in the expansion. The products offered by the company are of high quality and acceptable across the world and hence no need for product modification.
The first advantage of the strategy is that it enables Herman Miller to utilize its production capacity and at increased market coverage without a substantial increase in the fixed costs (Gamble, Peteraf & Thompson, 2013). In other words, the strategy assists in enhancing efficiency, increase the revenue, and eventually the profits of the company will grow. The second advantage is the improved diversification of the market. Bringing on board other new markets implies that the failure or hitches in some of the current markets will have a reduced impact on the company. The third advantage is that Herman Miller, Inc. will be in a position to maintain its brand and develop its equity in a wider coverage.
On the other hand, the disadvantage of this strategy is the company would be required to incur additional cost in the research. The identification of the new markets to exploit and the appropriate strategy would require proper research to avoid the long selection and entry strategy at the expense of the limited resources.
Recommended Strategies
Herman Miller, Inc. may not be in a position to adopt the three options largely because they may not be compatible. In addition, the required resources may also be limited. It is for this reason that it is recommended to undertake expansion as the most appropriate approach. The company should look at a market in the developing economies. For example, markets such as Brazil, India, and some countries in Africa are increasingly becoming viable due to the growing and developing economies. The consumer purchasing power and return on investment in such countries are favorable and potentially improving. To facilitate the realization of the expansion objectives, Herman Miller, Inc. should involve the relevant stakeholders (Gamble, Peteraf & Thompson, 2013). The first stakeholder is the research and development team. The team has the duty to inform the executives of the identified markets, their strengths, and weakness, as well as the most appropriate strategies. The second set of the stakeholders are the shareholders. The expansion approach is likely to involve the spending of a significant amount of money, which requires the approval of the shareholders. Convincing the shareholders about the importance and benefits of the expansion will assist in securing their approval.
The other stakeholders are the business partners, including the current and the potential ones. The expansion of the market would imply that the existing suppliers will have to be involved to ensure that they supply the raw materials in increased quantities to support the production. On the other hand, in case the existing suppliers do not have the relevant capacity, new suppliers will be involved. Lastly, Herman Miller, Inc. will involve business partners, including distributors and franchises, which will assist in enhancing market coverage. Finally, the marketing management should be responsible for the selection of the appropriate strategic partners.
Conclusion
As is evident from the strategic analysis, the Herman Miller, Inc. has successfully manufactured and marketed furniture in various markets across the world. The company has successfully expanded operations in the United States, and in some countries in Europe and Asia. The company has succeeded over the years with relatively high amounts of sales and profits due to its competitive advantages. The production, marketing, operations and HR management strategies have been appropriate. The declining in the sales growth and profits earned signifies the need for a new strategy to reinvest and renew its performance. It is possible that Herman Miller Inc’s brand and products are in the maturity stage in its traditional market and hence, may not have the opportunity for further expansion in the markets. The saturation of the currently exploited market compels Herman Miller, Inc. to look for new markets and expand its market size to renew its sales and profit levels. Therefore, involving the right stakeholders appropriately is an important step towards a successful implementation of the expansion strategy.
References
Burgelman, R.A. (2013). Corporate entrepreneurship and strategic management: Insights from a process study. Management Science, 29(12), 1349-1364.
Castellucci, F., & Ertug, G. (2014). What’s in it for Them? Advantages of Higher-Status Partners in Exchange Relationships. Academy of Management Journal, 53(1), 149-166.
Cattani, G., & Ferriani, S. (2013). A Core/Periphery Perspective on Individual Creative Performance: Social Networks and Cinematic Achievements in the Hollywood Film Industry. Organization Science, 19(6), 824-844.
Gamble, J., Peteraf, M., & Thompson, A., A. (2013). Strategy: Essential of Strategic Management. (4thed.). New York, New York: McGraw-Hill.