Week 17

Can you think of an organization that has implemented a ‘high risk strategy’ that has resulted in success (why was it high risk at the time and why was it a success- was it good luck or good judgment)?

As the term itself suggests, “High risk strategy” can be very fruitful as well as dangerous for any organization. Many organizations have implemented the “high risk strategy”, and wall-mart is also one of them. ”High-risk strategy” resulted to be a fruitful strategy for them.

Image source: http://graphics8.nytimes.com/images/2007/04/20/timestopics/walmart.topic.395/walmart.topic.395-sfSpan.jpg

In 1962, Sam Walton opened the very first store of wall-mart in Arkansas. It raised to a total of 25 stores in five years’ time and garnering a total revenue of USD 12.6 million. Under the CEO H Lee Scott Jr., wall-mart started to integrate its business internationally too. As a result, Bharti wall-mart private limited was announced by Bharti enterprises and wall-mart as their joint collaboration in August 2007. Currently it is serving a market clients of 176 million every year and has its stores quantity to 1800 with employees and associates more than 2 million and club setting in 15 markets.

It was a high risk strategy at that moment because no one have had tried to serve products to the consumers like wall-mart was willing to do. But, wall-mart rise as a perfect example of “high-risk strategy” being a success. It was a case of good judgment too. Why was “high-risk strategy” by wall-mark a success? And why it was a case of good judgment can be found out with the help of below points:-

Wall-Mart strategy (Which is Successful):

·         Bargaining power over suppliers.

·         Predicting demand for optimization of cost.

·         Information Technology usage in all business areas.

·         Getting new market opportunities through world-wide expansion.

·         Supply-chain management and logistics successful utilization.

·         In USA market, it is the largest importer of Chinese consumer goods.

·         Very high operational efficiency.

·         Making same profits like other competitors even by providing goods in 2-3 percent lower prices than others.

Partnership:

· Strategic partnership with various Chinese firms and P & G for consultancies regarding sustainable business.
· Partnership with Environmental defense fund and CRM to implement sustainability in International business. 
·  Partnership with hospitals to earn goodwill that they can provide and speedily expand its stores.

Vision and Mission:

·    Profit earning (huge) but also satisfying and maintaining customers.

·   To help the customers to maintain quality of life and live better by saving the customers money.
·  Providing goods and services from top quality groceries, school supplies to household items which are of low prices but best quality.

Price is not the only attribute that wall-mart excels on, but also selections, availability, quality and on time delivery that their competitors cannot compete. Wall-mart Company is now bigger than 160 nations with the revenue of USD 404.16 billion. This tells us how successful this company is, and how well it implemented “high-risk strategy”.

Now, do the same for an organization who embarked in a high risk strategy that resulted in some sort of failure (why was it high risk and why did it fail – bad luck or poor judgment)?

As the term itself suggests, “High risk strategy” can be very fruitful as well as dangerous for any organization. Many organizations have implemented the “high risk strategy”, and British Broadcasting Corporation is also one of them. ”High-risk strategy” resulted to be a failure for them.

Image source: http://24.media.tumblr.com/tumblr_m34e7smp1l1qhrkl4o1_500.jpg

British Broadcasting Corporation is a British public service broadcasting corporation. Providing impartial public service broadcasting in the United Kingdom, Isle of Man, and the Channel Islands is its main responsibility. Funds are generated through its profit-making activities and from the levy of TV license fees. BBC Trust supervises BBC and its management is not intervened by government.

Why was it high risk and why did it fail?

Coming out as inflexible and bureaucratic became the main risk factors for the company. BBCs choice of adapting as a commissioning model showed that BBC is less of the programmer and more of the designer of programs made by independent production house, which has been seen in recent years. Though, these two differs in terms of skills and structural culture.

“Inbuilt Creativity” is one of the many advantages that BBC possessed, but the essential element started to reduce and became marginalized. Characterized by strong values surrounding the public service ethos, BBC has always been traditionally run under a hierarchical and bureaucratic structure. Also, the carry outs were also been changed regularly. Eventually, BBC was revealing to be lacking of customer focus, elitist and more importantly expensive. The criticism forced BBC to perform an Organizational reorganization comprising the authorization of a commissioning form. This move resulted in loss of key talents from many useful functional areas of the firm.

There occurred the situations where the commissioning model were in dilemma on broadcasting the types of programs that the viewers would like. There was a clear threat for the firm from other competitor 200+ channels for their survival. It was a really big task for BBC to even survive in the competition but the increasing prices of broadcasting costs and for new talents made it even worse.

Therefore, BBC can be considered to be an example of an organization who embarked in a high risk strategy that resulted in some sort of failure. It is a pure case of poor judgment, and it couldn’t adapt itself with the changing demand and taste of its viewers and couldn’t make proper strategies.

Reference:

About Wall-mart, [Online],  www.usanfranonline.com › Online Education Resources accessed on 25^th March 2013

About Wall-mart, [Online],  www.nytimes.com/packages/pdf/business/26walmart.pdf accessed on 25^th March 2013

About Wall-mart, [Online], www.perishablepundit.com/index.php?date=09/20/07&pundit=1‎ accessed on 25^th March 2013

About Wall-mart strategy, [Online], zenith-consulting.com/research/walMart/Wal-Mart-Strategy.pdf‎ accessed on 26^th March 2013

About British Broadcasting Corporation, [Online], http://ivythesis.typepad.com/term_paper_topics/2009/09/case-study-british-broadcasting-corporation.html#ixzz2AuIDRkjN accessed on 26^th March 2013

Week 16

1) In your own words and using referenced quotes describe the difference between organic growth, merger and acquisition and strategic alliance.

Organic Growth

The strategy that the company uses to expand its business through the use of its own assets and resources is known as Organic growth strategy. “Do It Yourself” is the strategy that is followed by Organic growth. It allows the companies to set and achieve corporate goals in which ever manner they choose to. Quality, PR, headcount and revenue are the four main pillars upon which Organic growth strategies are built.
Organic growth strategies are used by many well-known public companies. Tiffany and company, Outback Steak House and Best Buy are some of them.

The key advantages of organic growth are as follows:-
·         Strategic independence.
·         No availability constraints.
·         Spreading investment over time.
·         Knowledge and learning can be enhanced.

Mergers and Acquisitions:

Mergers and Acquisitions (M&A) is a process of selling, buying, combining & driving of similar entities and different companies so that rapid growth can be achieved in new location or new field, or in the location of its origin or in its sector, without the need of using a joint venture or creating other child entity or subsidiary.

Merger: Integration of stock management, operation and everything else between two companies.

Acquisition: One company buys another company & become one.

The companies to follow this strategy are driven by three strategic motives. They are;

·         Strategic motive (extension, consolidation and capabilities)
·         Managerial motive (Personal ambition, Bandwagon effects)
·         Financial motive (financial efficiency, tax efficiency and assets stripping or unbundling )

Strategic Alliance

Strategic alliance is an agreement made by two companies deciding to share resources for undertaking a specific agreement for the mutual benefits. Strategic alliance lies between organic growth and merger and acquisition (M&A). Equity and non-equity alliance are the two main kinds of ownerships found in strategic alliance. Equity alliances involves the creation of a new entity that is owned separately by the partners involved. Example, Microsoft and Nokia. And, non-equity alliances are typically looser, without the commitment implied by ownership. Examples can be Renault as being a strategic investor in Nissan.

Purposes for Strategic alliances:

·         A complementary alliance is another motive for strategic alliances. It brings together matching strengths to counteract the other partner’s weaknesses.
·         The need for critical mass is the major motives for strategic alliance. It can be achieved by forming partnerships either with the competitors or suppliers of the raw materials. This may drive towards cost reduction, sharing risks and improved customer offering.
·         Co-specialization allows each partner to work and activities that best suit their capabilities. For instance, alliance is widely used when an organization enters into a new market with different geographical characteristics. Now, the company needs local knowledge and knowledge about distribution, marketing, advertising and customer support.

The differences between organic growth, merger and acquisition and strategic alliance are:

1)      Organic growth will be the best strategy if an organization is willing to develop in new venture units. Strategic alliance will be best if the organization has the ability to alliance with relevant partner unit. But in acquisition organization might feel difficulties in buying the whole organization.
2)      Organic growth strategy makes the internal development of organization very slow. Development of capabilities might be outdated because of lack of experience and marketing skills.
Where as in alliance, the development process is better than organic growth, on the contrary,                              acquisition is the quickest method of strategy development.
3)      Organic growth best work with soft resources rather than hard resources. There will be a cultural consistency because the capabilities are developed with an organization. Acquisition best work with hard resources and cultural and valuation problems may arise. Strategic alliance may face difficulties like culture and control problems.

2) Give an example of a company that has grown through a) organic growth, b) merger or acquisition and c) strategic alliance.

Organic Growth

Bibby Line Group is a company which has got the growth through Organic growth. This group is characterized by organic growth. At the beginning of its start in the nineteenth century, it started with just seven ships and over the next 20 years it expanded to acquire another 18 vessels. Originally, Mediterranean ports were its focused routes but as the expansion came it began to support trade with China, India and later in South America. The Bibby Line Group Ships carried variety of cargos from animal hides, sugar, cotton and many other commodities.

          
Image Source: http://www.charitiestrust.org.uk/wp-content/uploads/2012/10/27dc-bibby-img-png.png

Strategic Alliance

Nokia and Microsoft are the two companies that have gone through the strategic alliance. On 11th February 2011, they declared their plans to form a broad strategic partnership that would use their expertise and complementary strengths to create a new global mobile ecosystem. They intend to mutually create market-leading mobile products and services designed to offer developers, operators and customer’s unrivaled opportunity and choice. The partnership would create the opportunity for rapid time to market execution because each company would be focusing on its core competencies.

 Image Source: http://www.digitaltrends.com/wp-content/uploads/2011/02/nokia-plan-to-move-forward-stephen-elop-steve-ballmer.jpg

 

Merger and Acquisition

The best example for Merger & Acquisition (M&A) of Sony Corporation and Ericsson.
Merging of Sony Corporation and Ericsson and becoming Sony Ericsson in October 1, 2001.

Image source: http://cdn.ausdroid.net/wp-content/uploads/2011/10/Sony-Ericsson-Buyout.jpg

The Acquisition of Ericsson’s share by Sony Corporation becoming Sony Mobile Communication in February 16, 2012 can be the best example of Acquisition.

Images source: http://www.houseofjapan.com/electronics/sony-finalizes-divorce-with-ericsson-renames-itself-sony-mobile-communications

3. Briefly discuss the merger between Britvic and AG Barr. What advice would you give to the new board?

The new company “Barr Britvic Soft Drinks PLC” was founded after two separate companies “AG Barr” and “Britvic” merged together to be one. Britvic shareholders hold 63% of shares and AG Barr shareholders holds the remaining 37% shares.

The merger strategies have brings many positive aspects to the company and some of them are:
·         Loyal customers of both the company will be buying the products of the newly merged company. There is a high chance of shift from some other brand to the company’s brand.
·         With the combination, there will be better chance for the company to compete with Coke by entering in some new market and thus gaining market shares.
·         The newly combine company will be benefited from the economy of the scale.
·         The cost reduction is very effective especially in difficult or strong markets because AG Barr is strong in certain market which now will help for Britvic to go in that market and vice versa.


The potential risk of merger between Britvic and Barr are:

·         Britvic’s half of the turnover comes from a low margin bottling hence, merger with Barr may not have helped Britvic to resolve their problems.
·         The customer dissatisfaction for one product has negative impact on another product. For instance, if a loyal customer of Barr has a bad experience with the service or products of Britvic, then the customer may shift from Barr to other brand as Barr and Britvic are combined. Hence, there is a high chance of customers shifting to another brand because of their customers’ dissatisfaction.
·         Britvic’s half of the turnover comes from a low margin bottling hence, merger with Barr may not have helped Britvic to resolve their problems.



Advice and suggestion to the new board:

·         The investment should be increase in order to gain the quick market share and unnecessary expenses should be cutoff.
·         There should be equal support and coordination among the staffs and board members for the new brand.
·         The flow of communication must be effective and the whole company should have common vision and strategy.

References

·         Online available from http://www.business-sale.com/expanding-your-business-through-m-and-a.html  [Accessed March 21, 2013]
·         Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 10
·         Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 6
·         Online available from http://executiveeducation.wharton.upenn.edu/ . [Accessed March 21, 2013]








·

 

Week 15

1.      Why has this artist been so successful? What are her key sources of sustainable competitive advantage?

·         Think about her unique resources and core competencies, think about how she has responded to changes in the external environment, why is she difficult to imitate?

Madonna is a very famous American singer, writer, actress, dancer and entrepreneur. She is one of the biggest and most successful artist and literally no one can be compared with her. She has been ruling the music industry for more than 30 years, and it’s not an easy thing to do. The only reason she has been able to do so is simply because of her strategy. She has been changing her strategy with the change in time, this has helped her to survive and sustain successfully in the industry.

    Image Source: http://shaunproulxmedia.com/himbo/wp-content/uploads/2012/01/madonna-20photo-202009-small.jpg

Madonna’s early image:

·         Punk-Pop image

·         Highly featured on MTV

·         A very remarkable performance at the MTV VMAs of 1984

Strategy of high fashion look is what Madonna was following in the 90s. Gay club scene and emancipated women were the main target groups of Madonna during that time. And, she was also awarded for her critically acclaimed role in the movie “Evita”.

Madonna’s key sources of sustainable competitive advantage are as follows:-

·         Good Vision

She has always been considered as an artist with good vision. She was always in the spotlight for her music, acting, and fashion. She knew what kind of music people loves to hear and accordingly makes them.

·         Better understanding of customers and industry

Madonna knew about “what it takes to become successful in the industry and with customers”. Madonna knew about the taste and preference of music lovers and made her music accordingly. Glamour, fashion and nudity were an important element of her music and particularly in her music videos and concerts, and she was very famous for all of this.

·         Continuous renewal

As the time changes, she also changed her strategy in order to sustain in the industry. This tendency of her continuous renewal is also a key source of her sustainable competitive advantage.

·         Leveraging competencies and addressing weaknesses

Leveraging her competencies and addressing her weakness were a very major factors of Madonna’s sustainable competitive advantage.

·         Consistent implementation

Consistent implementation of her strategies, vision, and goals made her the greatest and most successful music artist as she is now.

Other:

·         Ability to be a step ahead of others

·         Ability to take chances

·         Self-confident

·         Independence

·         Ability to create fabulous shows on scene and in life

·         Performer talent

·         Recklessness

 Image Source: http://kevinestrada.files.wordpress.com/2008/11/madonna_then_now.jpg

Competences for competitive advantages

Resources/Capabilities:

·         Singing capabilities (Voice) and her looks.

·         Sex appeal and glamour (appearances, music video and concerts)

·         Style (fashion) and dancing.

Strategies from 1893-2010 by which Madonna has responded to change

·         No Frills (1983 A.D.)

Low added value/Low Price:

Being a new entrant in the industry, having something more innovative and unique was very much important for Madonna to establish in the industry. It was her voice, singing and dancing style, her looks, style and glamour which became the unique resources for her.

·         Differentiation (1984 A.D.)

The product/services which Madonna was offering to the audiences were providing the audiences with benefits which were very widely valued by the audiences and were different from those of her competitors.

“Blue Ocean strategy” – “Creating or searching for wide open spaces, free from existing competition, and fill strategic gaps in the market, opportunities that are not being fully exploited by competitors”

•      Focused differentiation (1985-2013 A.D.)

Madonna as an image and a brand herself was very difficult to imitate. Her songs are regarded as a premium products and are very heavily branded. Her high perceived benefits justifying a sustained price premium usually to a selected market segment helped her to be sustainable in the market.

What strategy directions could the artist pursue over the next ten years to continue her commercial success?

·         Consider each of the four boxes from the Ansoff matrix. What new products or markets could she enter? How might she diversify or continue to penetrate her existing market? Try to think logically but also creatively and innovatively

 Following could be the strategic direction that the artist could pursue over the next ten years to continue her commercial success which I have tried to show through Ansoff Matrix:-

Market Penetration Target different groups of people: ·         Different age groups and genders ·         Different demographic profiles from normal customers. ·         Do musical tours in foreign countries so that the audience can increase for her music.

New products and services ·         Encourage and help other people to come to music industry, this can help in building goodwill and public trust. ·         Involve in charity and other social activities. ·         She can become music producer for other established and upcoming artist.

Market Development ·         Promotions. ·         Advertise, to encourage more people introduce a loyalty scheme. ·         Buy a competitor company (reputed music company or production house) ·         Encourage and develop new talents. ·         Collaborate her music with all sorts of artists from Rap and Hip-Hop to RNB, Rock, Metal, etc. It can help her expand her audience reach and extend her career too.

Conglomerate Diversification ·         Launch music in foreign language for foreign audience. ·         Expand concerts and stage shows in foreign countries. ·         Collaborate with foreign artists, music directors, producers so that she can reach to world-wide music audiences.

Reference:

MADONNA - THE SPICY DESSERT (11 February, 2010)  [Online] Available from: http://flavor-of-success.com/success-stories-madonna-the-spicy-dessert/   [Accessed on 2 March, 2013]

MADONNA - AN UNLIKELY SUCCESS STORY (2010/2011) [Online] Available from: http://bornpowerful.com/2010/11/madonna-an-unlikely-success-story/  [Accessed on 2 March, 2013]

MADONNA'S REAL LIFE (28 April, 2003)  [Online] Available from: http://www.people.com/people/archive/article/0,,20139887,00.html  [Accessed on 3 March, 2013]

MADONNA BIOGRAPHY [Online] Available from: http://www.biography.com/people/madonna-9394994   [Accessed on 3 March, 2013]

Week 14

1. In your own words and using referenced quotes describe the difference between ‘business unit level’ strategy and ‘corporate level’ strategy

However, it could be a difficult task to understand if there is a difference between Business unit level strategy and corporate level strategy, but as a matter of fact there is a difference. For the accomplishment of best strategy implementation and avoiding communication problems, it is really very important for the strategy makers and managers to clearly understand the difference between business unit level strategy and corporate strategy.

Business Unit Level Strategy

The way a business competes in a particular business sector is business strategy. Marketing and manufacturing efficiency, pricing etc. are the matters that concerns the business unit level strategy during strategic decision making. Gaining a competitive advantage in the market is the primary objective that the business strategy is concerned about.

Corporate Strategy

The decisions that are made regarding the direction of an organization as a whole is what the corporate strategy is involved in. The matters that affect the overall firm such as deciding the size and composition of its business portfolio are the concerns of corporate strategy.

And,

The Difference

“Scope of Strategy” is the main difference between business unit level strategy and corporate strategy. Business unit level strategy is concerned with tangible problems and is narrowly focused on specific business unit. While, corporate strategy is broadly focused on issues that will affect the entire company. Generally, business unit level strategy are and can be formed by individual line managers, while corporate strategy is developed at a senior level by board of directors.

Reference:

EHOW ARTICLE (2013) Wendel Clark [Online] Available from: http://www.ehow.com/info_7904252_difference-corporate-strategy-business-strategy.html  [Accessed on 1 March, 2013]

2. Discuss the corporate parenting style of Virgin group.

Image source: http://blogs.ubc.ca/cindywenyicui/files/2010/11/virgin-logos-1.jpg

By practicing the corporate parenting style, Virgin Group has been able to add value to its business. Any advantages that accrue to the brand as a whole are equally enjoyed and benefited by each and every business that are operating under the Virgin company’s umbrella. Virgin company as a parent company has been able to win the confidence of more consumers and investors, because as a group it doesn’t have to depend on just one industry or area for its economic health and profitability. Each company shares in those benefits in more than one way.

Economies of scale in another area where the Virgin companies that are similar in nature benefits from. Purchasing of the resources such as raw materials can be done in large quantities that helps in reducing the marginal cost and hence allows each company to increase revenue. The corporate parenting style of Virgin group has benefitted them in many ways.

Use of the “VIRGIN” brand name is another area in which a company could benefit from being affiliated with the Virgin group. The consumers and investors that already have a trust and confidence in the brand are likely to have the same confidence and trust in a new company that have the Virgin name. This helps the company to reduce the time and money it could have taken the new companies to establish their brands and names with the consumers. Hence, the new Virgin-affiliated company starts out with a name that is already known to and trusted by the consumers.

Virgin brand and reputation has become a synonym to Richard Branson, its founder. Realizing public image and views of the organization and Branson became the most important company’s advertising and promotion force. The success of Virgin group is based on the corporate parenting strategy, i.e. every new business units inherits company’s brand name, support, management style, values and access to resources not expending resources to create them. 

Reference:

Virgin Group. (2012). “Virgin Corporate History.” London: Virgin Management, Ltd. Online]  Available

from http://www.virgin.com [Accessed on 1 March, 2013]

Mightystudents (2013) "Does the Virgin Group, as a corporate parent add value to its business? If so how" [Online] Available from: http://www.mightystudents.com/essay/Virgin.Group.corporate.18924 [Accessed on 1 March, 2013]

Mariah Bond (2012) "A Company Profile: Virgin" [Online] Available from:http://www.examiner.com/article/a-company-profile-virgin [Accessed on 1 March, 2013]