The Strategic Management Process

Published Date: 02 Nov 2017

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Strategic Management

Applegreen Case Study

Joseph O Donovan X00073230

Sean Hancock X00074986

Marcus Naylor X00087841

Luke Bradley X00077526

Thomas Franklin X00063207

Table of Contents

1. Executive Summary

At the time of this project Ireland was and continued to be engulfed in one of the worst recessions ever witnessed by the global economy to date. We (the group) were tasked with the project of selecting and procuring a large company and critically evaluating the theory of the strategic management process.

Our group of five consists of Joseph O’Donovan, Sean Hancock, Marcus Naylor, Luke Bradley and Thomas Franklin. After a group meeting to discuss strategy we each submitted our ideas and business contacts to establish what options we had at our disposal. We discussed the benefits of each different company and after a consensus determined Applegreen as the donor for the project. After careful consideration and discussion we established and formulated the questions asked of CFO Mr Paul Pardy in relation to the strategic management process of Applegreen.

Applegreen’s strategic plan is formed by a "meeting of the minds" rather than set by one individual. Applegreen’s goal is to be the "preferred" market share leader, in low cost fuels and high end retail goods. They continue to expand in Ireland and the UK and while the recession has been tough on Applegreen the company considers itself a market leader in innovation.

The literature review explores strategic management process theory and how they are attained in practice using tools such as S.W.O.T. & P.E.S.T. analysis and internal communication. This allows management to plan strategically and assures that they can maximise their full potential and secure their competitive advantage. Applegreen uses similar tools and approaches.

Overall Applegreen has an effective strategic plan that is working and has enabled them to retain their competitive advantage through the launch of their loyalty card, tighter internal controls and their in-house system "Dashboard" to govern their strategic plan, but is lacking in frontline communications.

We would recommend that going forward Applegreen employ a mission statement as part of their strategy as this is not only beneficial to mid management, but also to frontline staff and will only benefit the company as it matures due to the complicated nature of large organisations as they become larger. We would also encourage Applegreen to encompass their frontline staff in their scanning procedures.

2. Literature Review

The strategic management process is the characterization of organisational strategies by which management make selections based on a set of strategies for their organisations that will enable better performance, but also is a continuous process that appraises the business and industries they are connected with, appraises competitors both current and future and establishes goals to meet these challenges. The process itself consists of the following four steps [1]:

Environmental Scanning

Strategy Formulation

Strategy Implementation

Strategy Evaluation

2.1 Environmental scanning

Environmental scanning in an organisation refers to the ownership and utilisation of information gathered about possibilities, patterns, trends and relationships within an organisations internal and external environment. This analysis usually is compiled using S.W.O.T. analysis where internal factors are regarded as Weakness or Strengths while external factors are regarded as Opportunities or Threats. P.E.S.T. analysis is the preferred method by most managers for continuous scanning and enables quick actions to be taken. It is used for external analysis when conducting strategic analysis or market research. The P.E.S.T. acronym means Political, Economic, Social-cultural and Technological analysis [2].

According to Kasmi (2008) the management strategy entails three processes Analysis, decisions and actions [3] and using this approach to environmental scanning allows the managers to ask themselves a series of questions in order to establish where they need to take action as it uncovers their strengths and weaknesses both internally and externally from competitors. One such question might be how do we outperform our competitors?

There are three types of scanning

Ad-hoc Scanning – short term and usually used by organisation in a crises to determine if the problem is internal or external

Regular Scanning – done frequently e.g. twice yearly or more, done by cautious organisations

Continuous Scanning – continuous collection and processing of a broad range of environmental factors [2]

The more frequent the scanning process the healthier the strategic management process and management plan of the organisation. The two methods of environmental scanning are:

Secondary data – books, magazines, etc readymade sources

Primary data – questionnaires, surveys, interviews, etc conducted by the organisation

The more focused on the strategic plan and continuous scanning of their environment the more successful the strategic plan and the market share that is captured by an organisation. Successful organisations adopt this approach to their strategic management process and apply it in their strategy formulation.

2.2 Strategy Formulation

Having completed environmental scanning managers follow the second step of this process, which entails deciding the best action to achieve the organisations objectives and organisational purpose and then formulate corporate, business and functional strategies. Research efforts are increasingly focused on this complex topic and examine variables including organizational structure, goal ambiguity and

Networking (Boyne 2003; Boyne et al. 2006) [4].

Corporate strategy formulation is where organisations make a decision of which business sector(s) they want to be engaged in and how they want to cultivate, be it organically or through acquisitions whereas business / functional strategy formulation is when an organisation sets a framework of generic competitive strategies for achieving business success. One strategy that successful organisations adopt is that of a mission statement which summarises the vision, goals and objectives of the organisation and is on display to all and sundry for viewing, motivation and understanding.

Generally business strategy acquires more precedence than corporate strategy, but both require market / industry analysis (step 1), planning, goal setting, commitment of resources / assets and monitoring.

R. Andrews, G. A. Boyne, J. Law and R. M. Walker (2009) Rational planning is characterized by analytical, formal and logical processes through which organizations scan the internal and external environment, and develop policy options which differ from the status quo [5].

At the planning stage the analysis discloses details of the paths that an organisation can take advantage of to increase its market share, improve their product / service offering through innovation, enter a new market etc, but once the organisation has selected which path(s) it will pursue in its strategy then it must set realistic and if required long term goals with the committed resources /assets accounted for to achieve this plan.

A good management strategy will focus equal if not more attention on internal performance to achieve its objectives and will monitor it closely as well as its competitors. Strategy formulation can be seen as akin to that of a game of chess in which the master carefully manoeuvres his chess pieces to achieve check mate sacrificing pawns in order to draw his competitor out.

Such strategies according to Porters Generic Strategies [6] are differentiation, cost leadership and focus and summarised below.

Differentiation – Organisation sets about distinguishing its product / service from those of its competitor

Cost Leadership – Organisation aggressively cuts costs, employs tighter controls than competitors etc

Focus – Concentrates on a specific region, market or segment group

2.3 Strategy Implementation

Strategy Implementation is how an organisation should go about putting their Strategic Plan into action to achieve their goals and without implementation of their plan the organisations goals would be soon forgotten about and fade into an afterthought. This in itself is a change, which encourages resistance and resistance to change occurs whenever an organisational change occurs that provokes a discontinuation from historical and current behaviour, culture, and power structure (Ansoff & McDonnell, 1990). [7]

The implementation stage is crucial in order for an organisation to succeed, arranging the process of who, what, when, where and how in the correct order to achieve maximum potential to secure their goals. The implementation stage happens after certain tests have been carried out like environmental scanning using S.W.O.T. and or P.E.S.T. Analysis. Hopefully these tests will uncover critical strategic issues and goals and then the organisation should rectify these problems. [8]

In order to be very successful at this stage in the plan, an organisation would need a noticeable leader, who can convey the whole organisations vision and goals and what they want the Strategic Plan to achieve. Everyone involved with the organisation should know about the plan and contribute their ideas if they consider something should be done differently. Performance appraisal should be put in place in order for the staff to be motivated, which in turn will benefit the business with happy and lucrative staff members [9]. Another step that is very beneficial in the implementation stage is a map, that the organisation can plot and mange their goals, achievements and requirements on (e.g. finances, market, work environment, operations, people and partners).

Faults in the Implementation stage are as follow:

Not developing/encouraging ownership in the process.

Lack of communication, but too much is equally as bad.

Not a lot of plans include measurement tools so people lose track of what they’ve done and what they have left to do.

Implementation usually just valued annually which affects managers and employees by having them caught up in day-to-day operations forgetting about the long-term goals

Not giving employees the accountability they should have and/or not giving them the power to change anything or request change while involved in the plan

In order for an organisation to successfully execute their Strategic Plan a few things need to be in place first.

You must have the right people behind you with the skills and abilities required to execute the plan.

Plenty of resources such as time and money.

Free flowing communication between the organisation and the team with regular meetings to measure and confirm how the Plan is coming together.

Have Management and Technology systems in place in order to monitor the implementation.

Ensure everyone involved in the Implementation continue to be enthusiastic and comfortable with the plan.

2.4 Strategy Evaluation

The evaluation stage of any Strategic Plan is about critically looking back at the Strategic Plan, assessing the methods chosen and bearing in mind if there is a better alternative to implementing the organisations plan and the necessary changes. This can all be accomplished within a few steps: [10]

Ascertain the goals of the organisation. A useful tool is SMART (Specific, Measureable, Achievable, Realistic and Timely). These goals should be written down and marked off as they have been completed so that the organisation knows when it has accomplished them.

Re-read the organisations Strategic Plan to recall what the organisation set itself up to complete and verify that against what has actually been completed to date.

An organisation should review prepared financial statements for the period it is evaluating and compare against the last periods results to distinguish how it fared and if the applied alterations worked or not. The organisation should also calculate the financial output spent on implementing those alterations to ascertain if it was money well spent or squandered resources such as time and effort.

The organisation could also complete a questionnaire amongst staff and management to help them evaluate the strategic plan and by allowing staff to submit anonymous replies could possibly demonstrate if the changes that were made were a success or a not because of human nature a number of people are anxious to furnish their opinion openly.

Often organisations will seek external advice on their strategic plan to ascertain if it is working or not and focuses across the business portfolio evaluating the actual and potential performance of the strategic plan. [11]

3. Who is Applegreen

Applegreen is a retail company established in 1992 as Petrogas and then created the Applegreen brand in 2005 [12], which sell convenience goods and discount fuel to the consumer market. Fuel sales make up for 80% of its core product offering, while fuel may account for the majority of their turnover in relation to sales they attribute their profit margins to the sale of convenience goods as there is little margin if any on fuel.

Their company motto "Applegreen now that’s better" [12] applies to how they run their business by adopting a green approach to their business ranging from offering paper bags instead of plastic ones to not selling matches as they consume trees etc.

At the time of writing Applegreen had approximately 1400 group employees and 70 head office employees with a one billion euro turnover annually. They have 71 service stations in Ireland and 31 in the United Kingdom.

3.1 What is Applegreen’s strategic plan / mission statement?

Applegreen does not conform to the conventional wisdom of creating a mission statement that summarises their strategic plan that many successful companies adopt. They have currently adopted the strategic plan of growth by organic means as they perceive it to be the cleaner way to expand their business and have had great success with this approach.

Applegreen’s focus is on being the biggest discounter of fuel in their market, with a low cost promise to be the lowest priced fuel in the geographical area, hence driving customers into their retail business. Whilst the main driver of the business is fuel, Applegreen’s biggest profit margin comes from their additional retail services and their strategic plan is to focus on high end retail goods and in turn be regarded as a good clean crisp brand.

3.2 How is the Strategic plan formulated and in turn relayed to staff?

Applegreen formulates their strategic plan through a "meeting of the minds". No one person or body creates the strategic plan and through a much broader scope puts an intense reliance on their strong mid management team and welcomes input from all avenues of the business.

The chairman and C.E.O perform a "stewardship" role in this activity and will explore all relevant ideas and suggestions put forward from every department. Applegreen believes input from all avenues of the business gives balanced ideas and encourages staff participation, which allows them to conduct a strategic plan staff can relate and inspire to.

Applegreen’s strategic plan is to motivate their staff through numbers and recently introduced a "dashboard system" in which stores can measure themselves against other comparable stores. Each store is given an individual budget and is viewed as its own "profit centre". Each store maintains Applegreen’s high standards in customer service, cleanliness and conforms to all standards set by Applegreen’s hierarchy.

Monthly mystery shoppers are placed in stores as a means of ensuring this. Whilst Applegreen doesn’t relay its strategic plan through words, it chooses to put the emphasis on facts and figures for stores to measure themselves against one another and in turn plan on how to motivate their staff to achieve the companies’ ultimate goal of market leadership.

3.3 Applegreen – V - Competitors: Differentiation on Strategic Planning

Applegreen, like many other companies strive to have a unique strategic plan to gain competitive advantage, despite this their plan doesn’t differ dramatically from that of their competitors. They concentrate on creating "excellence in retail" and maintaining strong bottom line figures. Applegreen believes they are unique as they offer the lowest costing fuel in the locality, which they believe is the key driver to attracting customer loyalty especially now in recessionary times.

With today’s customers shopping around and looking for the best value for money, Applegreen invested in R&D into a loyalty card scheme and considers the introduction of same attracts repeat business while offering a personal service which creates a connection for customers to each individual store.

In terms of corporate formation, Applegreen is comparable to Maxol and Texaco, but firmly believes they are not akin to Esso who maintain a very bureaucratic and hierarchical business model, which may be attributable to their geographical scale and large business brand.

3.4 The recession an how it has impacted Applegreen’s strategic plan:

Whilst the recession has forced Applegreen to reign in their expenditure, they perceive their business plan to be strong enough to weather any potential storm forthcoming. Over the past three years they have taken a proactive view on sales, which they believe benefited the company in total.

Applegreen like many others adjusted their budgets, but maintained strong bottom line figures by a method of cost control, generating new sales and controlling overheads. Applegreen believe in many cases they reacted quicker than the competition by the introduction of the loyalty card system which encourages repeat business through a steady stream of revenue once implemented properly.

Applegreen has even continued to grow as a business and with intense management this year alone has added twelve new sites (five in Ireland and seven in the United Kingdom) and is even looking into a third geographic location possibly in the U.S, which demonstrates that they sense a strong position even with the current economic outlook.

With most strategic plans focusing on the long term and the current economic climate appearing pessimistic, Applegreen have resisted the necessity of changing their plan. They still strive to be the market leader by offering the lowest costing fuel in the locality and also introduced their own product range, which they have full central distribution of, which can only add to their potential of growing the business structure, once high standards in customer service and convenience is maintained and their low cost promise is adhered to.

3.5 Applegreen: A Leader or A Follower

Applegreen would definitely consider itself a market leader. In fact, Applegreen believe many of its competitors look to them for ideas and innovation. In 2010 its Mount Merrion store won the NACS award for International Convenience Retailer of the Year. The reason for this award was not only for excellence in customer service, but for an entire retail experience.

From the design of the forecourt to the Acafé, which "seduces customers into spending some quality time at the site" [13]. Other business organisations from outside Applegreen’s direct market have met with them to discuss their ideas around innovation in an effort to extrapolate them to fit their own businesses.

Applegreen is also currently considering expanding into the financial services industry as a way of diversifying from their traditional business model. They have already sampled and tested this through a joint venture with chill.ie insurance and were pleased with the outcome.

Their website’s expansion and new motorway service stations once again show that Applegreen believe they are innovating faster than their competition and in turn assisting them by increasing market share while recognising they are not immune to the challenges facing every retail business, the recessionary environment and domestic confidence, but are well position to maintain and grow their market share in existing markets as well as venturing into new and alternative existing markets.

3.6 Applegreen: Strategic Success or Failure

Overall, Applegreen’s strategic plan can be viewed as a success. Notwithstanding the fact that they don’t have a mission statement in words, they have a clear ethos, which is embedded into all elements of the organisation. Not only has elements of Applegreen’s strategic plan been implemented by others, it has also been rewarded by its peer groups such as the NACS award in 2010. Applegreen’s strategic plan does face challenges in the future, but there has been nothing to suggest that Applegreen cannot continue to grow under their current strategic plan.

4. Gap between literature review and Applegreen approach

With the current economic plight and reduced consumer confidence, it’s now more important than ever to have a strategic plan in place to gain a sustainable competitive advantage.

Whilst Applegreen have a strategic plan there are certain drawbacks to their approach. It’s key to note that top and middle managers have a lucid mindset as to how the company will develop, but the filtering of that information to front line staff still remains poor and management need to remember it’s not what staff heard, but how they have interpreted what was said.

There is no apparent, tangible mission statement that staff can relate to, which describes the vision and goals of the company. The "dashboard" system implemented to allow stores to measure themselves against comparable stores is a key tool for managers in the company’s overall strategic plan, front line have no access to this information unless it comes from their manager, which could in turn create a distance between front line staff and the overall strategic plan of the company going forward if the manager himself misunderstands or is biased of Applegreen’s strategic plan.

5. Conclusions

The theory of various management tools and approaches are outlined in the literature review, many of which are utilised by Applegreen in the development of their strategic plan. Applegreen can be witnessed focusing on their low price guarantee by employing tighter internal controls and through cutting out the middleman in their business processes and joint ventures with BurgerKing and possibly subway in the near future.

Through employment of Environmental scanning they have been able to adapt to the challenges of the recession and maintain their competitive advantage over rivals, by the introduction of their loyalty card scheme and own brand products for sale in-store.

Their strategic planning has been aided by the use of "think tank" meetings with several multinational companies in alternative markets and one such market that Applegreen is considering as a business venture into a new, but existing market going forward.

Applegreen employ a low cost leadership strategy and a very effective one and while Applegreen’s preferred growth model is that of an organic nature the company is versatile in its approach to consider growth by acquisition and even suggest that such a strategy may be used for the next geographic area they intend on perpetrating and conquering.

6. Recommendations

We (the group) would recommend Applegreen’s strategy to any business with similar goals and objectives which are also similar in size and/or nature. We would however also recommend that they perform more frequent internal scanning to address areas of the business where efficiencies can be created.

Applegreen is heavily reliant on their site managers to filter the company’s strategic plan to frontline staff, which will need addressing as the strategic plan may be falling fowl of interpretation and should be remedied such as a front line anonymous survey to gain insight of their interpretation or other such methods of data collection.

The final thing to note is that Applegreen’s mission statement does not currently tie into their strategic plan as they do not employ such a strategy at this point in time. This should be addressed to do so ultimately giving one clear vision for the company at all levels and as the company continues to mature and expand this will aid the company in the management and evaluation of their strategic management process and planning and help maintain their competitive advantage.

7. Bibliography

Andrews

[5] Rhys Andrews, George A. Boyne, (2009). STRATEGY FORMULATION, STRATEGY CONTENT AND PERFORMANCE An empirical analysis. Available at: http://0-web.ebscohost.com.millennium.it-tallaght.ie/ehost/pdfviewer/pdfviewer?sid=ae3b2497-8d80-4e4e-90f8-8cc6dae2ca84%40sessionmgr11&vid=1&hid=15. (Accessed 1 November 2012)

Ansoff

[9] Ansoff, H Igor & McDonnell, Edward J. (1990). Implanting Strategic Management. Prentice Hall Europe

Applegreen

[12] Applegreen, (2012) Press Centre, Available at: http://applegreen.ie/press , (Accessed 25th October 2012)

Balle

[10] Louise Balle (2012). How to Evaluate the Success of the Business Strategic Process. Available at: http://smallbusiness.chron.com/evaluate-success-business-strategic-process-5113.html. (Accessed 02 November 2012)

Bayode

[2] Bayode O. Babatunde, Adebola O. Adebisi, (2012). Strategic Environmental Scanning and Organization Performance in a Competitive Business Environment. Economic Insights – Trends and Challenges. LXIV (P24-34), pp.11 [online]. Available at: http://0-web.ebscohost.com.millennium.it-tallaght.ie/ehost/resultsadvanced?sid=d6884fee-cace-4102-bd45-95929606528e%40sessionmgr15&vid=3&hid=24&bquery=environmental+scanning&bdata=JmRiPW5sZWJrJmRiPWE5aCZkYj1idGgmZGI9aGV2JmRiPThnaCZkYj1seGgmZGI9YndoJmRiPXMzaCZkYj10cmgmZGI9dWtoJnR5cGU9MSZzaXRlPWVob3N0LWxpdmU%3d (Accessed 31 October 2012)

Boyne

[4] Boyne, G. A. and Gould-Williams, J. S. (2003) Strategic Planning and the Performance of Public Organizations: An Empirical Analysis, Public Management Review. 5: 1 pp115–32

Insight

[13] Insight (2011). Global Convenience Store Focus. Available at: http://www.globalcstorefocus.com/cgi-bin/newsletter.pl?edition=201102&this_page=1. (Accessed 1 November 2012)

Kazmi

[3] K a z mi , A. (2008) Strategic Management and Business Policy 3rd ed, New Delhi, Tata McGraw- Hill Publishing Company Limited.

Lorette

[8] Kristie Lorette (2012). What Is Strategic Implementation?, Available at: http://smallbusiness.chron.com/strategic-implementation-5044.html. (Accessed 02 November 2012)

Management Study Guide

[1] Management Study Guide (2012). Strategic Management Process - Meaning, Steps and Components, Available at: http://www.managementstudyguide.com/strategic-management-process.htm. (Accessed 31 October 2012)

Quick MBA

[6] Quick MBA (2010). Porter's Generic Strategies, Available at: http://www.quickmba.com/strategy/generic.shtml, Accessed 1 November 2012)

Rabate

[11] Paul-André Rabate, (2010). Strategy audits. Governance. (Issue 195), pp.8-9

Waweru

[7] Maina A. S. Waweru, (2011). Comparative Analysis of Competitive Strategy Implementation. Journal of Management and Strategy. Vol. 2 (Issue 3), pp.49-61

8. Interview questions and answers

What is Applegreen’s mission statement?

Applegreen doesn’t formally have a mission statement, but clearly we are retailers providing discount fuels. We are a good clear crisp brand who provides convenience. Our growth strategy is organic and we currently have 71 sites in Ireland and 31 in the UK. We have not had any corporate acquisitions as each site has been bought separately. 80% of our €1 billion turnover a year comes from fuel. We currently have 1400 group employees and 70 head office employees.

Does Applegreen model their strategic plan from this mission statement?

How is the strategic plan formulated i.e. top level directors only or broader scope?

How does Applegreen translate their strategic plan to staff and management?

It is translated through regular reviews, at an operational level the plan is passed down as each station operates as its own profit centre. There is no difference between corporate management and site management. Applegreen relays its strategic plan to staff at store level through its monthly figures and this is related in a "dashboard" system which allows managers to review a sites performance against comparative stores. Managers can relay this information to front line staff. As a company we focus on customer care, cleanliness of stores, and morale of employees amongst other factors to maintain our high standards.

How does Applegreen’s strategic plan distinguish itself from direct competitors?

Maxol and Topaz are similar to Applegreen in that we provide an excellent service, however we can distinguish ourselves through our low price guarantee. Applegreen will always be the lowest price fuel in the geographical area, we have benefited from this in the recession due to customers shopping around more and availing of our loyalty card scheme.

Has the recession had any drastic impact on Applegreen’s strategic plan or did Applegreen have a contingency plan in place for something like this happening?

Yes we had a proactive view on where sales were going over the last 3 years. We have maintained our bottom line from generating sales, cost control and the introduction of our loyalty card scheme, which has helped to increase repeating business. We believe we have acted quicker than our competitors through intense management and control of overheads and we have added 5 new sites in Ireland and 7 in the UK.

How successful has Applegreen’s strategic plan been to date and as most strategic plans are long term has the recession changed how Applegreen plan?

No we still want to be the market leader and have kept consistent to our plan of low cost fuel. We have introduced our own product range which we have central distribution of and we are continuously working to provide the lowest price, best value and convenience for all of our customers.

Does Applegreen see itself as a market leader or follower?

Definitely a leader, we have had an active role in seeking planning permission for potential motorway sites, we are proactive in learning what others are doing in geographical areas. Others have met with us for innovation. Our alliances have helped us gather information on how to keep ourselves fresh and alive. Although we have never had a corporate acquisition it is not something that scares us, we believe that this could help us grow to the next level and is on the cards. We hope to open a third geographical market in the next two years, most probably in the U.S. due to the language and research we have undertaken into the U.S. market, we believe our business model would be a success there. However we are facing big challenges such as the recessionary environment and domestic confidence.

9. Task sheet

Joseph O Donovan

Interview question creation and carried out interview process

Literature review Strategy Implementation and Strategy Evaluation sections

Table of contents

Signed: ______________________________ Date: ____________

Sean Hancock

Interview question creation and carried out interview process

Evaluation and editorial of Applegreen interview