The Riordan Company’s Competitive Strategy

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Abstract

Riordan’s strategic plan targets to enhance the strength of its competitive advantage. The manufacture of plastics is its core business. The firm needs to attract, recruit, and retain the most valuable person in the industry for its critical functional units. Riordan’s strategic plan will be based on three levels of output. Three critical areas have been identified in its strategic plan.

They include supervision, R&D, and financial risk management at the sales level. It will attract highly skilled personnel in the three critical areas using wage rates that are above the industry average. It will use a reward system and other non-financial motivation factors to retain targeted employees. The supervisors will be critical in promoting an organizational culture that eliminates goal displacement and sub-optimization. They will also encourage the forwarding of suggestions for improvement.

The financial risk management employees at the sales level will assess the potential for loan repayment. The loan has been used by competitors to increase sales. It is a form of benchmarking approach to increase market share in new segments. R&D will be responsible for the technical development of new products. Assessment of the effectiveness of the strategic plan will be conducted on a quarterly basis. The strategic plan has set realistic goals that are most likely to be achieved.

Introduction

Riordan’s main objective is to enlarge its market share by expanding its customer base in existing market segments and capturing new market areas. Ethical and social responsibility has a strong influence on the firm’s choice of strategic plans. The firm’s main competitive advantage is its production of plastics. The firm’s plastics products are highly demanded. The firm should use the benchmarking approach to adopt the best practices that are used by competitors and industry leaders.

The first process in the measurement of strategy effectiveness is to determine the variables that need to be measured. Some of the most important factors to be captured in the assessment process include employee retention in critical areas, the number of suggestions for improvement, and the number of viable suggestions. Quarterly periods are used because they allow a considerable time for improvements to take place.

Corrective action will be taken when the implementation process fails to meet the set standards. Riordan needs to use both short-term and long-term measures in its control. Riordan should be able to carry out control and evaluation without distracting employees from their routine work. Goal displacement and sub-optimization will be eliminated through an organizational culture that recognizes teamwork and encourages coaching. If the short-term standards are achieved, then the long-term goals will also be achievable.

Riordan’s need for a strategic plan

Riordan’s main objective is to enlarge its market share by expanding its customer base in existing market segments and capturing new market areas. Riordan’s long-term strategic plan is to attract and retain highly skilled personnel. It will also seek to find ways to produce biodegradable plastics through its R&D section. Its short-term strategic plan is to improve stakeholder value. Riordan needs a strategic plan to keep and expand its market share. Riordan’s strategy focuses on plastic production, which provides its competitive advantage.

One of the strategies it can use is to target highly skilled personnel strategically. The workers will be responsible for assessing customers who are creditworthy in the new loan-to-customers program. The strategic workers will also be responsible for the innovation of new products. Innovation related to efficiency will be conducted at separate units and work stations.

Ethical and social responsibility considerations in Riordan’s strategic plan

Ethical and social responsibility has a strong influence on the firm’s choice of strategic plans. The major customers would like to be associated with a firm that cares for the environment. Its major customers are large corporations. They include automotive parts manufacturers, aircraft manufacturers, healthcare centers, beverage makers and bottlers, and appliance manufacturers.

Riordan is a firm targeting the global market. However, its major customer base is in the U.S. Environmental sustainability concerns have a stronger influence in the U.S. than in the global market. Companies’ operations in the global market have to indicate their effort towards a sustainable environment. It may be necessary to have a few CSR programs targeting environmental concerns. The U.S. customer base makes it essential for the firm to take care of environmental concerns.

A firm that cares about the environment may purchase products from a firm that shows little effort to reduce pollution. The purchasing firm may appear to support environmental degradation. The opportunities for growth are greater for a firm that incorporates environmental conservation in its strategic plan (Wheelen & Hunger, 2010). A CSR program that reduces potential pollution is likely to increase revenues.

Firms have been seeking new ways of innovating plastics that can easily be degraded into the organic matter when disposed of. The decrease in demand for plastic bottling may be caused by environmental concerns. Bottling companies may be using substitutes that can be easily recycled, such as glass bottles. If the firm targets the innovation of bio-degradable plastic materials, it can enlarge its market share.

Competitive advantage and strategies to improve innovation and sustainability

The firm’s main competitive advantage is its production of plastics. The firm has a high demand for its plastics products. Toyota and General Motors can be its major customers if the firm produces the best plastic products in terms of quality and price. Riordan can use plastic production to lower costs in its vehicle manufacturing division. The competitive advantage is sustainable only if Riordan carries out control to continuously improve cost and quality.

The right procedure is to develop new plastic technology, then reduce its cost continuously. The R&D section can be responsible for the development of new products. The corporate leadership will be responsible for evaluating its viability. The individual work stations will be responsible for continuous product improvement.

The firm should use the benchmarking approach to adopt the best practices that are used by competitors and industry leaders (Triantis, 2013). The best practices must be those that are not protected under intellectual property rights. The automotive division can imitate the best practices used by Toyota and General Motors. Wheelen & Hunger (2010) suggest that there is no need to reinvent what is already in use. Toyota and General are recognized as industry leaders. They are likely to have a wide range of practices that may improve Riordan operations through imitation.

Riordan can imitate from firms that are in other industries. Imitation of best practices does not need to be taken directly from competitors (Wheelen & Hunger, 2010). It can select elements of similar operations from other firms in different industries. Riordan can imitate Walmart’s automatic re-ordering system. The system is based on reporting sales in a timely manner. Riordan can also imitate Toyota’s Just-in-Time (JIT) system. It can use the Radio Frequency Identification (RFID) system for tracking its products. It can help prevent counterfeit products from becoming part of its supply chain.

Innovation and sustainability require a firm to attract and retain the most valuable talents in the industry. The firm has to use HRM metrics to evaluate and control employee satisfaction for the retention of critical talent.

Wheelen & Hunger (2010) explain that employee retention is a long-term goal that can be targeted if the firm has a system that evaluates and rewards units/ divisions for targeting long-term goals. One of the methods they suggest is to separate long-term goals’ expenses from short-term goals’ expenses. Individual units can indicate that their profitability has been affected by their investment in long-term goals (Wheelen & Hunger, 2010).

Measurement guidelines to verify strategy effectiveness

The managers need to determine measurable factors that affect the firm’s strategy. The first process in the measurement of strategy effectiveness is to determine the variables that need to be measured (Wheelen & Hunger, 2010). The first item that Riordan needs to measure is the retention of employees that support its critical sections. The firm will also need to measure employee satisfaction. Employee satisfaction is essential to attract highly skilled employees in the labor market.

The firm will need to attract highly skilled financial managers at lower levels of the sales and marketing department. They will be responsible for determining the creditworthiness of customers that require loans to make purchases. The firm also needs to retain highly skilled employees in the R&D department. The control system that forms part of the continuous improvement process will need the firm to retain highly skilled employees as supervisors. They can be the main role model in building an organizational culture that values suggestions for improvement.

Performance is another item that the firm will need to measure. The performance will examine whether the firm’s strategy to focus on critical employee retention has improved its competitive advantage. The performance will measure the retention rate and other HRM metrics, such as HR value-added and HR ROI (Jackson, Schuler & Werner, 2012). It will also involve forecasting the future personnel needs of the firm.

Riordan will follow Toyota’s method of using the number of improvement suggestions brought forward (Horaguchi, 2014). Riordan’s assessment will be done on a quarterly basis. It will consider the percentage of viable suggestions brought forward as a ratio of the total number of suggestions for improvement. It will look at the number of suggestions that were implemented and their ROI. It will look at the level of improvement made to make plastics more sustainable for the environment.

The second step is to set standards to measure the items that have been selected. There is a need to measure the actual performance against a standard.

The first standard is to retain at least 525 (95.5%) employees out of the 550 employees in the quarterly periods. It should retain more than 450 (81%) annually. However, the firm recognizes that retention should be strategically used to accumulate certain skills and abilities (Jackson, Schuler & Werner, 2012). As a result, the level of retention should increase as the firm accumulates the critical skills needed. In the short run, the firm will need to attract highly skilled personnel in R&D, supervision, and financial risk management.

The firm will target to have at least 25 improvement suggestions from the units and work stations. The firm will require that out of the 25 suggestions, at least 5 should be viable. When the suggestions are more than the minimum requirement, at least 20 percent should be viable. The performance of the R&D section will be measured by the number of new products they suggest for development, the percentage of viable products, and improvements made to existing products towards environmental sustainability.

Quarterly periods are used because they allow a considerable time for improvements to take place. They also allow for steps for corrective action to be taken before the end of year performance appraisals. Some attributes may be difficult to measure in periods that are shorter than the quarter of a year. Retention and R&D may require more time to reach quantities that are measurable or to have a trend.

Corrective action will be taken when the activities taken by the management to complete the strategic plan does not meet the above standards. Corrective action will seek to identify the cause of variation from the set standard. The first step will be to identify the levels through which the strategic plan is implemented. The second step is to categorize effective levels and ineffective levels. The next step is to find the cause of ineffectiveness in the levels identified as sources of unwanted variation (Wheelen & Hunger, 2010).

Riordan’s strategic plan involves the accumulation of workers with the right skills in critical areas. It will still need to ensure that failure to meet standards is not brought about by having the wrong people carrying out the plan.

The measures of performance will try to utilize three concepts. They include the economic value addition (EVA), balanced scorecard, and environmental sustainability. The EVA is the difference between after-tax operating income and the cost of investment (Wheelen & Hunger, 2010).

In Riordan’s case, the EVA has used caution to ensure that the investments in the strategic plan do not lead to recurring losses. The firm will invest in what it can afford. Wheelen & Hunger (2010) explain that EVA represents the difference in business value as a result of undertaking the plan. It is difficult to quantify the benefits of long-term strategies on a quarterly basis. However, the future flow of benefits can be estimated for the sake of making decisions.

The balanced scorecard approach is applicable to Riordan’s strategic plan because it considers non-financial measures. The balanced scorecard approach considers four areas for evaluation. They include financial performance, customer satisfaction, internal business perspective, innovation, and learning (Wheelen & Hunger, 2010). The four areas can be aligned appropriately with Riordan’s strategic plan.

Financial performance will involve estimating and evaluating the increase in income attributed to the strategic plan. Customer satisfaction will evaluate whether customers have experienced an improvement in product quality as a result of the strategic plan. An internal business perspective evaluates the effectiveness of the strategy in enhancing the competitive advantage. Riordan must excel in making quality plastic products as its core business.

The quality improvement is measured by their impact on the sustainability of the environment. One of the major concerns of plastic products is their inability to degenerate when disposed of in the environment. Riordan should seek to reduce the period that plastics take to degenerate in the environment. The internal business perspective is intertwined with innovation and learning.

The best way to survive in a very competitive market is to accumulate the most qualified personnel in the industry. It is costly to attract the best workers in the industry. Riordan has to select critical areas essential to its strategic plan. Employees in critical areas can be remunerated above the industry average wage rate when employees in other sections are paid using the industry average wage rate.

Non-financial factors can also cause the problem of employee retention. The impact of financial factors can be easily evaluated. Competitors should not be able to attract targeted employees using higher salaries. Riordan will need to use financial as well as non-financial factors of motivation to retain employees in critical areas.

Internal dynamics, cultural and structural leadership considerations

Unit/ divisional evaluation and control will be the most appropriate method for Riordan. The appropriateness is derived from the closeness of the unit/ division to the problems and opportunities they encounter in their daily operations.

Goal displacement and sub-optimization are the main challenges in unit control and evaluation. Goal displacement is when monitoring and evaluation become goals themselves (Wheelen & Hunger, 2010). When they strongly influence employee behavior, the real behavior cannot be effectively assessed. Riordan should be able to carry out control and evaluation without distracting employees from their routine work.

Sub-optimization occurs when the output maximization actions of one functional unit limit the overall returns of the organization (Wheelen & Hunger, 2010).

It also occurs when the apparent good results of one unit undermines the performance of another unit. It results in competition between units of the same firm. It limits overall performance. Firms, such as Toyota, have used smaller units to make improvements (Marksberry, 2013). The effects of sub-optimization and goal displacement have been eliminated through organizational culture. Toyota has a culture of teamwork.

The report of good performance should be shared by every employee. Riordan should develop an organizational culture where managers give credit to supervisors for good performance. In return, supervisors give credit to workers under their teams. Individual praise is most likely to be the cause of sub-optimization. Units should learn to report real performance improvement.

Recognizing the effort of others and seeking real improvement should be incorporated into organizational culture (Triantis, 2013). It is necessary to train employees on the risk involved when functional units manipulate results to obtain rewards.

Another reason for using smaller units to make improvements is that improvements made in small areas can jointly have a larger impact on the organization. If Riordan chooses to seek large improvements, it will need to have a larger R&D workforce. It will be more costly than using workstations to suggest areas for improvement. The R&D will be overstretched if it makes all improvements.

Riordan’s R&D will focus on the technical part of product development. The teams in the workstations will focus on improving quality and efficiency. Scenario analysis will also become part of the organizational culture when considering suggestions for improvement.

The structure of leadership will be more horizontal in the organization. A more horizontal leadership structure will ensure that the numbers of steps on the hierarchy are reduced between workers and supervisors, and between supervisors and divisional managers.

Daft (2009) discusses that the horizontal structure is “more appropriate when the organization has a high need for coordination among functions to achieve innovation and learning” (p. 125). However, a firm has to create some form of balance between vertical and horizontal organizational structures. The main advantage of integrating the horizontal organizational structure is that there is increased flow of information between managers and workers. Suggestions for improvement can be assessed for viability in a timely manner.

Assessment and feedback control that will be used to determine Riordan’s course of action

Responsibility centers can be used to assess the effectiveness of the strategic plan. Responsibility centers are functional units that isolate teams that are responsible for completing different tasks (Wheelen & Hunger, 2010). Riordan will need to use expense and investment centers to determine the cost of implementing the strategic plan and the expected benefits.

Wheelen & Hunger (2010) explain that most firms use a combination of different centers of responsibility. The profitability of the plan cannot be quantified in the short run. As a result, the firm will consider whether assessment areas have reached the set standards. A strategic audit of the entire organization will be conducted semi-annually to assess functional units that portray weakness to the organization (Wheelen & Hunger, 2010).

In Riordan’s strategic plan, information on the number of employees that were targeted for retention is one of the most important information. Control should involve collecting the minimum information that can be used to make reliable assessments (Wheelen & Hunger, 2010).

The percentage of retention in the R&D section, the financial risk management personnel at lower levels, and supervisors are the critical areas in Riordan’s strategic plan. Other important data include the percentage and number of viable improvement suggestions that come from employees in their functional units. The number of improvements and new products suggested by the R&D section is also crucial to assess the effectiveness of the strategic plan.

Some of the benefits of Riordan’s strategic will be difficult to quantify. However, Wheelen & Hunger (2010) suggest that firms must be willing to find estimates of meaningful activities despite the difficulty in quantifying the information. One of the reasons of targeting supervisors is that they are a critical resource in employee motivation. Supervisors can be used to incorporate employee involvement in making plans (Jackson, Schuler & Werner, 2012).

They can promote the use of non-financial motivation factors to increase employee satisfaction. Employee satisfaction is correlated with retention rates. When the rate of retention is high, the number of suggestions may also increase as employees understand their functional units better.

Riordan needs to use both short-term and long-term measures in its control (Wheelen & Hunger, 2010). Short-term measures are usually easy to assess because they are visible. Long-term measures are difficult to quantify because there is a lag in time between the cause of an event and the effect of the event to other areas (Triantis, 2010). In Riordan strategic plan, the short-term measures include items such as the number of suggestions for improvement and employee retention rate in critical areas.

The long-term measures will include the increase in revenues, size of market share, reputation, efficiency, and profitability in the entire organization. The effect of the strategic plan cannot be directly quantified because of the gap between cause and effect. However, there is a need to provide estimates of the strategic plan contribution to the success of the firm.

Wheelen & Hunger (2010) suggest that controls should be effective in highlighting activities that fall below the tolerance rate. When an activity falls far much below the set standard, it could be that the goal is unrealistic. It can also happen that the activities or the personnel used are not appropriate to achieve the goal (Wheelen & Hunger, 2010).

The last step in control and assessment is rewarding acceptable behavior and functional units for meeting the set standards (Wheelen & Hunger, 2010). The use of punishment in each assessment criteria is likely to result in goal displacement. The situation occurs when employees have no other business than finding ways of passing the assessment. Other activities and behaviors that might have benefitted Riordan will be abandoned because they are not recognized by the firm.

There are several levels of consideration when the strategic plan does not give expected results. The first step is to consider the area that causes the failure in implementing the strategic plan effectively. Communication of the plan to subordinates is usually the first area to assess (Triantis, 2013).

For example, the problem could be that Riordan failed to retain the right skills in the supervision levels and the R&D section. Riordan’s strategic plan is based on recruiting people with the right skill in critical areas. Riordan will consider whether the HRM section was aware of the organizational needs to attract, recruit and retain highly skilled employees in the mentioned critical areas. If the information was well undertaken, then the steps used to recruit and retain will be assessed for effectiveness.

If the recruitment followed the right steps, then it could be that the HRM was assessing the wrong qualities in the recruitment process. If the problem is the recruitment process, then Riordan will formulate new measures to be used to test the right level of competence during future recruitment exercises.

There are multiple levels that can cause failure. Inadequate financial resources committed to the strategic plan can be a cause of failure. In case of failure, Riordan needs to examine the level of commitment of managers to the strategic plan (Wheelen & Hunger, 2010).

It also needs to check whether the strategic plan is inconsistent with existing functional operations. The existence of an untimely feedback mechanism can also cause failure (Wheelen & Hunger, 2010). The strategic plan should only be altered if all requirements are met and the plan has failed to give expected returns.

Conclusion

Riordan’s strategic plan is realistic. Its failure can only occur as a result of poor implementation. If the short-term standards are achieved, then the long-term goals will also be achievable. Short-term goals will be measured by the firm ability to meet the set standards, such as the number of viable suggestions.

Long-term effectiveness will be measured by their contribution to the increase in revenues, size of market share, reputation, efficiency, and profitability in the entire organization. Functional units are the best areas for initiating improvement. Goal displacement and sub-optimization will be eliminated through an organizational culture that recognizes teamwork and encourages coaching.

References

Daft, R. (2009). Organizational theory and design (10^th ed.). Mason, OH: South-Western Cengage Learning. Web.

Horaguchi, H. (2014). Collective knowledge management: foundations of international business in the age of intellectual capitalism. Cheltenham, UK: Edward Elgar. Web.

Jackson, S., Schuler, R., & Werner, S. (2012). Managing human resources (11^th ed.). Mason, OH: South-Western Cengage Learning. Web.

Marksberry, P. (2013). A systems inquiry of the world’s most emulated and profitable management system. Boca Raton, FL: CRC Press. Web.

Triantis, J. (2013). Navigating strategic decisions: the power of sound analysis and forecasting. Boca Raton, FL: CRC Press. Web.

Wheelen, T., & Hunger, D. (2010). Strategic management and business policy: achieving sustainability (12^th ed.). Upper Saddle River, NJ: Prentice Hall. Web.

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