Assignment-2

Strategy Development and

Initiatives
(MGMT 20112)
SmartMart -2
"Biofuels and Organic 2.0"

Submitted To
 Submitted

By
James Callan Sahil Gupta
(Course Coordinator) (s0247641)
Robyn Neeson Manish Sharma
(Lecturer, Tutor) (s0247146)

CQ University, Melbourne Campus

 Australia
Executive Summary
Strategic planning and implementation for the businesses are quite important. This
report has been prepared on SmartMart and the strategic relevance to the performance
of the company. The ethical practices related to the business performance have to be
analysed as this will help in making the right decision. In addition, SmartMart
Simulation round 2 and round 3 based on biofuels and Organic 2.0 has also discussed.
In this report, VRIO framework, PESTEL analysis and Porter's five forces based on
biofuels and organic 2.0 is discussed. The challenges that are faced by the company
have to be analyzed as this will help in developing and implementing the strategies
through which the changes can be implemented. In recommendation, the changes
have to be analyzed and it has to be implemented for the sake of making changes.
Technology can be introduced for making the changes.

ii
 List of Tables

Page No.

Table1: The industry analysis based on Biofuels and Organic 2.0 6

for SmartMart

Table 2: VRIO framework for SmartMart 8

iii
 Table of Contents
Page No.
Executive Summary ii
List of Tables iii
Table of Contents iv
1. Introduction 1
1.1 Background 1
2. Simulation Analysis 2
2.1 Scenario 2: Biofuel 2
2.1.1 PESTEL analysis based on Biofuels 3
2.1.1.1 Political 3
2.1.1.2 Economical 3
2.1.1.3 Social 4
2.1.1.4 Technology 4
2.1.1.5 Environmental 4
2.1.1.6 Legal 4
2.2 Scenario 3: Organic 2.0 5
2.3 Porter’s 5 forces model 6
2.4 VRIO framework 8
2.5 Challenges 8
3. Conclusion 10
4. Recommendations 10
References 11

iv
1. Introduction
Strategic management and organized business are quite important for developing the
organization (Grant 2012). The strategic management includes the steps that need to
be followed for planning the future of the business (Bettis, Mitchell & Zajac 2012).
Through this method, the management of the company plans an effective manner
through which the challenges that exists in the industry can be overpowered (Sarkar
2012). This report has been prepared on SmartMart. Through this report, the
relevance of strategies and the process that can be adopted for implementing the same
has been developed (Sarin, Challagalla & Kohli 2012).

With the change in existing market trends, SmartMart needs to customaries its
existing model of business as to become a successful and maintain its success in the
fore coming future (Yang et al. 2010).

SmartMart should become a good organic store and should be in accordance with the
local conditions. All the organic products should be made available at SmartMart. The
customers must be provided excellent service and the brand value should have an
upper hand than the existing competition as well as newly introduced organic retail
chains (Gottschalk & Leistner 2013).

To have an upper hand over the other retail chains, SmartMart should introduce
biofuel and organic 2.0. The approval of FOA and other government agencies to the
organic products at SmartMart will further increase its credibility By doing this, not
only the existing customers but also the community members like environmentalist
will provide support to SmartMart (Matthews 2010).

1.1 Background
SmartMart is one of the biggest retail grocery stores that basically concentrate on the
organic and healthy product lines. The customers of the company seek reliable
products that are available to the customers at a reliable price. Loyalty brand of the
company helped the company to gain the customers and retain them for a longer time
with the management (Sodhi 2014).

1
The sustainable plans were prepared to ensure that the production activities were
carried out in the right manner and the customers are approached. Through strategic
planning the ethical factors related to the business activities are handled in an
effective manner (Amit & Zott 2001). The management of the Smart-mart co
companies adopts an effective strategy through which the required changes can be
implemented by the authorities. Strategic plans are developed and implemented for
the purpose of overpowering the level of competition that exists in the industry.
Through this process, the offers and the price variations of the rival companies are
analyzed. This has been done to prepare an effective strategy through which the
company can achieve the set target, without increasing the operational expenses
(Amit & Zott 2001).

2. Simulation Analysis

2.1 Scenario 2: Biofuel

In second scenario, SmartMart should manufacture the biofuel by them (Hoovers

2015). Although forming an alliance seems easy at the moment but choosing this way
may lead to decrease in value of SmartMart in future. The value maximised for the
short time often lead to destroying of the value (Sodhi 2014).

If SmartMart has less control in production process, they will not know whether the
process is environmental friendly or not and also if the manufactured biofuel is good
or harmful for the environment (Amaro, Macedo & Malcata 2012). This may lead to
loss of future of customer, stakeholder environment and community members and
ultimately there will be value loss in the market. In this process, customers will have
to pay more and might lead to fall in the revenue. So, this is not beneficial either for
stakeholders or for shareholders (Bringezu, O’Brien & Schütz 2012).

Both the process of in-house and manufacturing and acquiring of two biofuel
manufacturers may require large primary investment but in process of acquisition, the
risk of money loss is more. So SmartMart has option not to continue this business of
biofuel. This decision was a most difficult one to take as continuing in-house biofuel
production requires large investment of both money and time (Sodhi 2014). There
were no significant benefits from this option.

2
Also focusing just on adequate short-term performance will increase risk of
overlooking essential unfulfilled needs in the market. Keeping in mind this theory by
Porter, option of acquisition was eliminated. So stakeholders and company has their
best interest in manufacture of biofuel (Porter & Heppelmann 2014). Though, now
this process does not seem much beneficial to shareholders, but viewing in long term
and taking into account the aim and business purpose of the company, in-house
manufacture of biofuel seems much more subtle and profit generating (Johansson et
al. 2014).

For manufacture of biofuel, SmartMart will obtain skill and knowledge in

manufacture process, hence increased value of organisation. Then it can use its brand
value and environmental friendly reputation for marketing of the produce and acquire
value by selling of biofuel to consumer. On the other side, by opting for alliance, the
value of other biofuel manufactures would have been increased rather than SmartMart
itself (Pandey et al. 2012).

Also manufacturing of biofuel will help SmartMart to achieve enlightened value

maximisation approach. Jensen (2010) states that the enlightened stakeholders theory
accepts maximisation in the long run value of the firm as criterion for making
requisition trade-off among stakeholders. This ultimately maximise value for
everyone in the value chain as well as for company too (Victoria et al. 2012).

2.1.1 PESTEL analysis based on Biofuels

2.1.1.1 Political
The government concern is important for production of biofuel. In order to increase
the production for the bio-diesel products, the company has proposed to get the
required registration from the corporate government that is quite essential. This will
help in increasing the sales for the products and services that is related to the biodiesel
products (Olteanu 2005).

2.1.1.2 Economical
The products, which are proposed by the company for manufacturing as, expected to
be economically priced however products obtained from biofuels become costly. For

3
example, the products such as glycerin yield from biofuels, which further processed
into pharmaceutical glycerin. So, costs of financing and products become more and
less profitability. For this the management intends to introduce the technological
factors that will reduce the price of the produces sold by the company (Olteanu 2005).

2.1.1.3 Social
The social factors are important for ongoing trend as people more conscious about
health and their well being. Through the introduction of such products the company
attempts to increase the productivity and profit that is being sold to the clients. In this
process, the benefits of the products will be communicated with the members
(Goktolga, Bal & Karkacier 2006).

2.1.1.4 Technology
In order to improve upon the quality of the products and services related to the bio-
diesel products, the time frame required for producing new and better products can be
reduced. Apart from this, the quality of the services is also expected to be improved.
The advanced biofuels are more sustainable as large amount reduction of carbon
emission. These are based on biomass and land not only use of farming and food
production (Smeets 2007).

2.1.1.5 Environmental
The impact of biofuels is potential to mitigate the climate change. The importance of
biofuel reduces greenhouse gases when substitute as fossil fuels because carbon is
sequestered through feedstock cultivation. The research shows most of the countries
case study as well as requirement of consumer markets is to reduce carbon emission
which is possible through biofuels (Gohin 2014).

2.1.1.6 Legal

The influence of legal factors on biofuel production encompasses the biofuel blending
rates.The company intends to follow the legal procedure for getting the rights and
licenses that are required for carrying out the business in the bio-diesel products and
services (Olteanu 2005).

4
2.2 Scenario 3: Organic 2.0

For third scenario, SmartMart has to follow organic 2.0 and increase quality level for
its competitors. This process will also help to create shared values and business and
society thus will become closer (Boyle 2007).

Porter states generating economic value in a way that produces value for society by
addressing its challenges. Introducing of Organics 2.0 by SmartMart will lead to
production of even more environmental friendly products and so community as well
as customers will get benefitted (Porter 2004).

There new organic labels will further knowledge to SmartMart customers about the
ingredients of organic products and hence it will get easier to them to buy the
products. So SmartMart will have an advantage over its competitors and more
revenue will be generated (Tsakiridou et al. 2008). This will ultimately lead in
enforcing the competitors for manufacturing best quality organic products, ultimately
beneficial to the society, environment and customer. This decision is completely in
accordance with SmartMart’s aims and goals and also beneficial for SmartMart and
its stakeholders (Voon 2009).

Use of high yielding and high nutrition value seeds by growers does not ensure that
end customers also get a standard product as per organics 2.0. Thus to secure organic
2.0 label SmartMart should work in collaboration with FDA and other government
agencies. FDA approval ensures that products are standardised. Also the products
coming under government label will be more trustable by consumers as well as
community (Mullin 2002).

By opting this strategy will help SmartMart to achieve sustainable growth and value.
This will help SmartMart to create shared value for each of its stakeholders in whole
value chain, for some in short term and for other in long run. This strategy will also
help SmartMart to achieve its business goals and remain in accordance with its
mission statement of creation of a healthy environment, providing best service to
consumers and stakeholders achieving best revenue returns (Kanimozhi & Perinbam
2011).

5
2.3 Porter’s 5 forces model
Through this method the challenges that exists within the industry is analyzed
(Grant 2012). This will help in analyzing the issues and drafting the better policies
that will cater the needs of the SmartMart (Paiz et al. 2011).

Some of the factors that are analyzed are –

a. Threats of new entrants - the company specializes in the production of organic

products and bio-diesel products. For this, it is quite important to analyze the
expectations of the clients. In this method, the new entrants in the market have
to be analyzed. This will help in implementing the changes that will help to
sustain the market (Amit & Zott 2001). The industry analysis based on
biofuels for SmartMart, threat of new entrant is neutral because entrant in
industry is easily if they have money and drive (Paiz et al. 2011).

b. Threats of the substitute products and services – In this case, the new product
that has been introduced in the market has to be analyzed. This will help the
management to analyze the changes that needs to be introduced for the
successful business operational activities (Grant 2012). The industry analysis
based on biofuels for SmartMart, threat of substitutes is unfavorable (Amit &
Zott 2001; Paiz et al. 2011).

Table1: The industry analysis based on Biofuels and Organic 2.0 for SmartMart

Source: Paiz et al. (2011)

c. Bargaining power of the customers – The success of the products and services
i.e. being sold by the company depends upon the preferences of the customs
(Grant 2012). It is necessary to analyze the expectations of the customers in

6
 terms of the price and the quality of the services. This is one of the reasons;
the company aims to work towards reducing the price and offer better services
that will cater the needs of the clients. The industry analysis based on biofuels
for SmartMart, buyer power is unfavorable (Amit & Zott 2001; Paiz et al.
2011).

d. Bargaining power of the suppliers – The Company believes in maintaining

long-term positive relationship with the suppliers. This is quite important for
the successful business operational activities. For this, it is essential to
implement the changes that will help in the product development and
introducing better methods through which the changes can be introduced for
attracting the clients. The industry analysis based on biofuels for SmartMart,
supplier power is neutral (Amit & Zott 2001; Paiz et al. 2011).

e. Intensity of the rival company - It is quite important to analyze the rival

market. For this, the information is collected from different resources. The
details are analyzed, as this will help the management in making the right
decision about the products that needs to be introduced for the customers
(Amit & Zott 2001). In this process, the promotional activities and the steps
that have been followed by the rival company have to be analyzed. This will
help in developing and implementing the right step through which the changes
can be introduced. The industry analysis based on biofuels for SmartMart,
threat of rival is moderately unfavorable (Paiz et al. 2011).

7
2.4 VRIO framework
Based on the competitive advantage for present case of SmartMart strategy,
biofuels and organic 2.0 are valuable and also rare. Biofuels and Organic 2.0 are
also difficult to imitate on the behalf of marketing-based resources. So, they
become firm specific which means competitive implications provide sustained
advantages and economic implications provide above normal (Kozlenkova,
Samaha & Palmatier 2014).

Table 2: VRIO framework for SmartMart SmartMart for biofuels

and organic 2.0
 Valuable
Source: Cardeal & Antonio (2012)  Rare
 Imitate
 Firm
2.5 Challenges organized

The management of SmartMart might face lots of challenges at the time of

implementing the strategy plan. However the same can be mitigated if the tasks are
planned. In this case, the plan needs to be evaluated and implemented in an effective
manner. The price of the product is one of the most important factors that will help in
sustaining the tough competition. At the time of regulation of price for the company,
it is essential to check on the sales price, services offered and the distribution
expenses that are related to the expectations of the customers. Prices and the quality
of the products are some of the important factors through which the company can

8
easily attract the attention of the clients (Chesbrough & Richard 2002). The clients
can be attracted towards the purchases of the product that is being sold by the
company. The challenge exists with finding the information about the changes and the
areas where the necessary changes has to be implemented by the company. Once the
area has been analyzed, it is necessary to draft an effective policy through which the
changes can be implemented by the management. The steps needs and the process
needs to be evaluated, as this will help in determining the factors that would help the
company in attracting the clients (Chesbrough & Richard 2002).

Uncertain condition for the business is always a threatening situation for the business.
It is necessary to analyze the factors that can impact the performance of the business
either directly or indirectly. Uncertainty is related to the changes in the political
condition, fluctuations in the economic condition, and changes in the preferences of
the customers. The management in this case has to be prepared and needs to have
enough resources through which the unexpected challenges can be easily handled. For
this, it is necessary to prepare a back-up plan through which the changes can be
implemented by the management in the right manner (IBM Global Business Services
2008). Also the management of the company can prepare a forecast for the sales and
production activities. This will help in analyzing the challenges that can affect the
performance of the business. Decision needs to be made after analyzing the
expectations of the company and its impact on the business performance (IBM Global
Business Services 2008).

The company intends to adopt and implement the right steps through which the
required changes can be implemented for attracting the customers. For this, the offers
of the quality and price by the rival company have to be analyzed (Johnson et al.
2008). This will help in drafting and implementing an effective step through which
the challenges can be overpowered. The choice for the strategic plan has to be after
analyzing the future expectations of the company and the clients, and other factors
that can affect the business performance (Johnson, Christensen & Kagermann 2008).

9
3. Conclusion

The business strategy has been prepared to analyze the challenges that can affect the
future plans of the company. In this process, it is necessary to implement steps
through which the necessary changes can be made for business development. It is also
concluded that long term competitive advantages based on VRIO framework. The
overall effect on biofuels and organic 2.0 is moderately unfavorable based on Porter's
five forces. The overall performance based on PESTEL analysis based on biofuel is
satisfactory. In this case, the challenges have to be analyzed from the management
and client point of view. This will help the management in selecting the better option
through which the company can implement the necessary changes.

4. Recommendations
The challenges that are faced by the company have to be analyzed as this will help in
developing and implementing the strategies through which the changes can be
implemented. In this process, the pricing method and other factors have to be
analyzed. This will help in determining the steps that needs to be followed for the
purpose of execution of the task that is related to the business performance. For this,
the change that needs to be implemented by the company has to be drafted and
implemented in an effective manner. The problem is with the process of technology
that has been adopted for improving the changes. In this case, the changes have to be
analyzed and it has to be implemented for the sake of making changes. Technology
can be introduced for making the changes.

10
References

Amaro, H, Macedo, Â & Malcata, F 2012, 'Microalgae: an alternative as sustainable

source of biofuels?', Energy, vol. 44, no. 1, pp. 158-166.

Amit, R & Zott, C, 'Value creation in e-Business', Strategic Management Journal,

vol. 22, no. 2001, pp. 493-520.

Bettis, R, Mitchell, W & Zajac, E 2012, 'Prospectives section of strategic

management journal', Strategic Management Journal, vol. 33, no. 1, p. 107.

Boyle, M 2007, 'Organic Moguls 2.0', Fortune, vol. 156, no. 8, p. 42.

Bringezu, S, O’Brien, M & Schütz, H 2012, 'Beyond biofuels: assessing global land
use for domestic consumption of biomass: a conceptual and empirical contribution to
sustainable management of global resources', Land Use Policy, vol. 29, no. 1, p. 224.

Cardeal, N & Antonio, N 2012, 'Valuable, rare, inimitable resources and organization
(VRIO) resources or valuable, rare, inimitable resources (VRI) capabilities: what
leads to competitive advantage?', African Journal of Business Management, vol. 6,
pp. 10159-10170.

Chesbrough, H & Ricahrd, SR 2002, 'The role of business models in capturing value
from innovation: evidence from Xerox corporation’s technology spin-off companies',
Industrial and Corporate Change, vol. 11, no. 3, pp. 529-555.

Gohin, A 2014, 'Assessing the land Use changes and greenhouse gas emissions of biofuels: elucidating
the crop yield effects', Land Economics, vol. 90, no. 4, pp. 575-586.

Goktolga, ZG, Bal, SG & Karkacier, O 2006, 'Factors effecting primary choice of
consumers in food purchasing: the Turkey case', Food Control, vol. 17, no. 11, pp.
884-889.

11
Gottschalk, I & Leistner, T 2013, 'Consumer reactions to the availability of organic
food in discount supermarkets', International Journal of Consumer Studies, vol. 37,
no. 2, pp. 136-142.

Grant, RM 2012, Contemporary strategy analysis: text and cases, 8th edn, John
Wiley & Sons, New York, USA.

Hoovers 2015, Biofuel manufacturing report summary, viewed 7 January 2015,

http://www.hoovers.com/industry-facts.biofuel-manufacturing.1822.html

IBM Global Business Services 2008, The Global CEO Study, viewed 2 January 2015,
http://www-07.ibm.com/sg/pdf/global_ceo_study.pdf

Jensen, MC 2010, 'Value maximization, stakeholder theory, and the corporate

objective function', Journal of Applied Corporate Finance, vol. 22, no. 1, pp. 32-42.

Johansson, S, Ohlander, L, Belfrage, K, Sundberg, C & Hansson, P 2014, 'How the

choice of biofuel system in a small-scale Swedish organic farm affects food
production and NPK balance', Acta Agriculturae Scandinavica: Section B, Soil &
Plant Science, vol. 64, no. 2, pp. 109-120.

Johnson, MW, Christensen, CM & Kagermann, H 2008, 'Reinventing your business

model', Harvard Business Review, vol. 86, no. 12, pp. 50-59.

Kanimozhi, S & Perinbam, K 2011, 'Siderophore production by Pseudomonas

fluorescens Lp1 and its application as bio control agent', Journal of Pharmacy
Research, vol. 4, no. 9, pp. 3175-3179.

Kozlenkova, I, Samaha, S & Palmatier, R 2014, 'Resource-based theory in marketing',

Journal of the Academy Marketing Science, vol. 42, no.1, pp. 1-21.

Matthews, TL 2010, 'Review of small towns and big business: challenging Wal-Mart
superstores', American Journal of Sociology, vol. 115, no. 4, pp. 1315-1317.

12
Mullin, R 2002, 'FDA steps up enforcement of electronic documentation rule',
Chemical Week, vol. 164, no. 17, p. 27.

Olteanu, AP 2005, ' Analysis of the Romanian biofuels industry under the current
economic conditions using PESTEL', Investments and Economic Recovery, vol. 12,
no. 1, pp. 159-167.

Paiz, E, D, Barone, R, Bollinger, B, Calderon, K, Lin, F & Toguchi, M 2011, Analysis

of strategic move by Chipotle, GRIN Publishing GmbH, Munich.

Pandey, V, Singh, K, Singh, J, Kumar, A, Singh, B & Singh, R 2012, 'Jatropha

curcas: A potential biofuel plant for sustainable environmental development',
Renewable And Sustainable Energy Reviews, vol. 16, pp. 2870-2883.

Porter, ME & Heppelmann, JE 2014, 'How smart, connected products are

transforming competition', Harvard Business Review, vol. 92, no. 11, pp. 64-88.

Porter, ME 2004, Competitive advantage: creating and sustaining superior

performance, Free Press, New York.

Sarin, S, Challagalla, G & Kohli, AK 2012, 'Implementing changes in marketing

strategy: the role of perceived outcome- and process-oriented supervisory actions',
Journal of Marketing Research (JMR), vol. 49, no. 4, pp. 564-580.

Sarkar, A 2012, 'Impact of total cost management on financial performance: an

empirical study of selected public sector oil and gas companies in India', Journal of
Institute of Public Enterprise, vol. 35, no. 3/4, pp. 28-39.

Smeets 2007, 'A bottom-up assessment and review of global bioenergy potentials to
2050', Energy and Combustion Science, vol. 33, pp. 56-106.

Sodhi, J 2014, 'Managing for value creation-5260 smartmart simulation', Academia,

viewed 2 January 2015,

13
https://www.academia.edu/5056350/Managing_for_Value_Creation-
5260_SmartMart_Simulation_Section_I_Professor-Theodore_Tolias
Tsakiridou, E, Boutsouki, C, Zotos, Y & Mattas, K 2008, 'Attitudes and behaviour
towards organic products: an exploratory study', International Journal Of Retail &
Distribution Management, vol. 36, no. 2, pp. 158-175.

Victoria Villeda, J, Dahmen, M, Hechinger, M, Voll, A & Marquardt, W 2012,

'Towards model-based design of biofuel value chains towards model-based design of
biofuel value chains', Current Opinion In Chemical Engineering, vol. 1, pp. 465-471.

Voon, BH 2009, 'Customer-expected quality in organic products: evidence from

Sarawak', Pertanika Journal of Social Sciences & Humanities, vol. 17, no. 2, pp. 133-
140.

Yang, CW, Kim, PY, Ponsford, BJ & Garland, BC 2010, 'Impact of Wal-Mart on
market share in a rural grocery market: an application of the Markov chain model',
Journal of Food Products Marketing, vol. 16, no. 2, pp. 232-245.

14