Paper Example on Strategic Change Management: Vital Role for Org Success & Realizing Goals

Introduction

Strategic change management is one of the most critical tasks that contemporary business managers must undertake to help their organizations realize their desired goals and objectives in the long run (Hakala et al., 2019). Effective management of strategic change plays a vital role in the success of an organization by ensuring that its strategic direction aligns with its goals, objectives, mission, and vision statements. However, a plethora of organizations across the world undergoes significant challenges that may render the entire process of strategic change management a failed endeavour. Therefore, having effective leadership offered by managers with adequate competence in terms of professional knowledge, work-based experience, and technical skills is crucial in addressing such challenges and remaining committed to attaining operational sustainability (Jalagat, 2016). This paper aims to provide a comprehensive description of the process that Zhujiang Iron and Steel Company (ZISCo), a Chinese state-owned enterprise (SOE), used to achieve its strategic objectives. The discussion also aims to draw from various relevant models to discuss the assertion made by the management of ZISCo that one of its challenges is to continuously discover, understand, and exploit insights about value creation to create further competitive advantages.

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Analyzing the Process that ZISCo used to achieve Its Strategic Objectives

According to Aljohani (2016), many companies worldwide use various strategies to achieve their strategic objectives. A detailed analysis of the case study indicates that ZISCo successfully executed a “value creation strategy” and undertaken a wide range of significant functional reforms to meet its strategic objectives. This decision entailed the continuous participation of the company’s employees across its production lines and culminated in substantial improvement in its financial performance. The first step implemented by the management of ZISCo entailed carrying out a comprehensive review of its business structure. This review sought to identify and develop a thorough understanding of the company's causes of poor performance. The company’s management, alongside its employees, took part in a detailed discussion and analysis process that lasted for five months and established that its problems existed in five areas, including production, business strategy, sales, procurement, and human resources. Having critical issues in these five areas can prevent an organization from realizing its strategic objectives in the long run (Tummers et al., 2015). ZISCo's business strategy before 2003 entailed using a differentiation strategy to reach its strategic goals.

The company’s differentiation approach entailed targeting domestic niche markets by developing products that its rivals were not willing to produce because of the difficulties incurred in making them or the fact that they attracted small orders in the target market. However, this niche differentiation strategy tends to have a wide range of challenges despite its benefit in offering companies competitive advantages by charging premium prices alongside creating significant barriers to product and service imitation (Hakala et al., 2019). For instance, ZISCo’s niche differentiation strategy had five critical disadvantages. First, this business strategy made it difficult for the company to achieve economies of scale due to having small orders from its targeted niche markets. Second, the process of developing new products was not only lengthy but also costly, and its justification could only take place when the company produced in large quantities.

Third, this approach to differentiation required an outstanding production coordination level, which, in turn, increased the company’s operational costs (Jalagat, 2016). There was a lack of coordination between the first and the second line, making it difficult for the company to meet its strategic objectives. ZISCo’s challenges increased due to the SARS crisis in China that led to the evacuation of various professionals, including German engineers, tasked with conducting the operational trial process in the company’s second production line. As a result, it eventually became evident that the benefits associated with the decision of the company to pursue a niche differentiation strategy became impossible due to having high costs of production, small orders, sales and distribution, and procurement (Liu & Pellissery, 2011). Fourth, ZISCo faced a significant challenge in its procurement side because it had to place limited orders to gain access to a wide range of raw materials with small third party suppliers as opposed to targeting manufacturers directly. This procurement approach led to higher costs of inventory and reduced ZISCo’s bargaining power with potential suppliers. Lastly, the company’s staff morale was also remarkably low.

The second step undertaken by ZISCo was crucial in bringing about significant strategic changes that, in turn, contributed to value creation and achievement of its strategic objectives. The company’s management appointed Ruosheng Zhang as its president alongside a new party secretary and chairman of the board. ZISCo’s administration underscored the need to have effective leadership championed by individuals with adequate competence in terms of skills, knowledge, and experience needed in directing firms towards attaining operational sustainability (Huang, & Zhang, 2007). Zhang’s challenge entailed taking appropriate steps to develop and implement a new strategy to improve its sustainable competitive advantage. As a result, Zhang led ZISCo in undertaking the third step towards creating value and attaining its strategic objectives by developing and executing a new business strategy. The outstanding ZISCo’s president redefined the company’s strategic management process in March 2003 (Long et al., 2016) and divided the entire process into three comprehensive stages.

Zhang’s team named the primary stage as the pre-launch period and lasted from March 2003 to June 2004 (Huang, & Zhang, 2007). The company’s management had two crucial goals to achieve in this stage, setting and prioritizing short-term functional objectives and enhancing its performance in other critical areas. Prioritization of short-term functional objectives entailed seeking to increase the company’s production volume and improve its overall quality. Zhang partnered with Zhiru Xu, who became ZISCo’s vice president in 2004 to increase its production volume to 140,000 tons monthly, representing a significant improvement of 80% of production capacity by the end of 2003 (Huang, & Zhang, 2007). The company further achieved remarkable progress in the coordination between its units, including production, equipment and maintenance departments, and technology. There was also a significant enhancement in the coordination between the steel making and rolling plants of ZISCo (Huang, & Zhang, 2007). These outstanding production improvements occurred alongside various changes in the company’s organizational structure, control and incentive schemes, and other factors.

The change experienced in the company’s organizational structure entailed establishing a new functional department in 2003 to help the organization improve its quality and focus on customer coordination (Huang, & Zhang, 2007). The dissolution of the automation department in 2003 and the strategic transfer of its duties to the IT and equipment departments were crucial for improving product quality (Liu & Pellissery, 2011). The company also launched a wide range of performance appraisal and incentive schemes in 2003 in various areas, including production, sales and profit (Jansson, 2019). The company linked the salaries of its managers to its monthly financial performance alongside launching a plethora of incentive schemes for its employees to improve production and quality. Additional improvements in production entailed improvement in the company’s output, enhanced management of the company’s procurement process, and a change in its marketing strategies. Such integrated enhancements in the company’s critical operational areas are often essential in achieving its desired strategic objectives (Nickels et al., 2019). Lastly, ZISCo also managed to record significant improvements in other critical functions, such as procurement and marketing. Zhang considered these two areas to be vital in creating and improving its value chain, cost structure, and financial performance.

According to Aljohani (2016), a company must develop a strategic plan on how to launch its target improvements in predetermined areas as a move towards gaining success. Similarly, ZISCo’s second stage entailed coming up with a new strategy launch and implementation approach. This process sought remarkable improvements in the company’s cross-functional coordination and integration and lasted from July 2004 to February 2006 (Huang & Zhang, 2007). This stage had a wide range of activities that played a vital role in ensuring that the company creates its value chain and moves towards attaining its strategic objectives. First, ZISCo conducted an annual retreat for its managers in 2004 to form and launch its strategy (Huang, & Zhang, 2007). Various activities occurred about this critical area, including strategic analysis, identification of the strategy and its selection, and conducting the actual launch exercise. Coordination and continuous engagement of the company’s stakeholders, including managers and employees, were crucial in attaining the desired success (Hakala et al., 2019). The company’s strategic analysis targeted four critical areas, including its mission, the forces that drove its performance, internal value chain activities, and its competitive environment.

The process of selecting the company’s desired strategy entailed examining the benefits and setbacks of cost leadership and differentiation strategies (Huang, & Zhang, 2007). Zhang identified the value creation approach as the best strategic approach for ZISCo. The actual strategy launch took place in July 2004 and played a vital role in improving its performance. Second, implementation of the company’s identified strategy, directing more focus on cross-functional coordination and integration, also became crucial to the success of ZISCo (Song & Liu, 2012). As a result, Zhang led his team to establish a new decision-making process to achieve cross-functional integration, develop new human resource management mechanisms through effective control and incentives, and set up a new organizational structure. Third, Zhang focused on improving the company’s communication and leadership approaches through informal strategies to enhance the sharing of information in the company, along with empowering other stakeholders, such as middle managers and employees (Jansson, 2019). Lastly, Zhang changed the company’s organizational culture and focused on continuous consolidation of functional improvement to attain ZISCO’s strategic objectives.

Conclusion

The final step that ZISCo undertook to achieve its strategic objectives entailed focusing on attaining continuous improvement alongside consolidation in implementing its new business strategy. This process began in January 2006 and ended in May 2007 (Huang, & Zhang, 2007). However, a wide range of changes took place in February 2006 in ZISCo’s senior management team, following Zhang's appointment as the new president of Guangzhou Iron and Steel Enterprises Holding Limited (GISE) (Huang, & Zhang, 2007). For instance, the company’s former vice president of production became its president as its previous chief engineer replaced him. Critical transformative activities that occurred following Zhang's...