Monday, April 22, 2013

Week 21

1. What are the benefits and drawbacks of taking an “emergent” approach to strategy making?


Emergent approach/strategies are majorly results from some cases whereby discrete decisions made by various mid-level employees un-intentionally move the whole organization in a new direction. This approach occurs inside an organization that are described by pattern of actions without any clear relation with the mission or stated goals of the business.


Source: Mintzberg, Quinn & Goshal, 1998


Benefits:

In an organization, emergent approaches/strategies arises mostly from persons in organization reacting directly to market forces. The shifts in practices of consumer businesses, order sizes and consumer tastes are reflected by their decisions. Effective emergent strategy does require that the organization maintain the flexibility, particularly at the executive or owner level, to embrace the new strategy. The main advantage of emergent approach in strategy making is that, rather than focusing on what the executives or the owner believes or thinks the market wants, it leads a business to provide what the market actually wants.




Drawbacks:

Emergent approach in strategy making arises as a part of ongoing organizational activities by nature. Although a business could sacrifice a deliberate strategy and depend on an emergent strategy to develop, the chances of such order establishing from unstructured, and pure business activities remains lean. Therefore, emergent strategy does not offer an honest substitute to more traditional deliberate strategy, specifically for new businesses operating on slim margins. At best, it assists/aids to serve and complement as a curative/remedial measure for deliberative strategy


Considerations:

The driving forces like rapid cycling of technical innovation and consumer interests which results in increasing change in the business landscape, tells us that the businesses should or may have to inherent the tolerance for emergent approach for strategy making. About reading emergent strategy into the patterns of behavior, the business executives and owners do need to remain cautious. The uninformed and poor decision-making at that level (executive and owner level) could result in shifts in the strategic positions of the business due to middle-level decisions.


2. Did Honda’s entry strategy demonstrate the characteristics of “logical incrementalism”? 



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Yes, I think that Honda has demonstrated all the characteristics of logical incrementalism in its entry strategy in US two-wheeler market. Here are the reasons to justify it:-

Ü  As of 1960, Export of Honda Motorcycles was only four percent.

Ü  After the Second World War, Motorcycles were used by very few people in the US other than Army personnel and Police. The attraction for motorcycles was diminishing. Most of the riders were decent people but the image of motorcycling was damaged by some group of rowdies who went around on motorcycles calling themselves by such names as “Satan’s Slaves” and “Hell’s Angels”. During this phase too, Honda established an American subsidiary – American Honda Motor Company in 1959 (also stated in their annual report 0f 1963).

Ü  It was in 196, with a regional advertising budget of $1, 50,000 and help of 125 distributors, Honda tried to promote their machines and also correct the bad image of motorcycling in US and focused on the young families in their advertising theme as “You meet the nicest people on a Honda”. It was a very good attempt made by Honda to promote their machines and create a good vibe for motorcycling.

Ü  Emergent strategy was followed by Honda in a case where it responded to the demand of its customers for light-weight motorcycles and supplied accordingly. Honda was able to create a phenomenal demand for lightweight motorcycles. This helped American Honda’s sales to rise from $500,000 in 1960 to $77 Million in 1965.

Ü  Market Share of Motorcycles in US (1966):-

Motorbike (Brand)
% Shares
1.      Honda
63%
2.      Suzuki
11%
3.      Yamaha
11%
4.      Harley Davidson
4%
5.      BSA/ Triumph and others
11%


Ü  Constant scanning of the US motorcycle market was done by the representatives of Honda from Japan. However during their research, Honda came to find that the US motorcycle risers were attracted towards more bigger and luxurious machines, that’s why they were very confident with their 250cc and 305cc machines. But, they did a side-bet of using the light-weight motorcycles for themselves to travel around the errands of Los Angeles. This helped it to garner a lot of attention and which resulted in a phenomenal demand for its lightweight motorcycles in the US market, this helped American Honda’s sales to rise from $500,000 in 1960 to $77 Million in 1965.

Ü  The first year was very poor for Honda motorbike in US. The US motorcycle business occurs during April-to-August season and they were there during the closing of 1959 season. They hard-learned the practices and techniques of business in United States and started to directly approach the retailers which helped them improve their sales. They also started giving advertisements for the wholesalers in different motorcycle magazines. The 305cc and 250cc motorcycles were selling steadily but a disaster occurred when reports of encountering clutch failure and oil leaks came in the first week of April 1960. This was because the motorcycles were driven much faster and farther in US than in Japan. Honda air freighted the motorcycles to Japan and started doing tests and research in their testing lab. Within a month and working for 24/7 a redesigned clutch spring and head gasket solved the problem.
This showed how Honda was able to adapt to rise above environmental uncertainties and coordinating emergent strategies.

In my opinion, they followed strategies for each and every elements of “Logical Incrementalism” from experimentation, environmental uncertainty, coordinating emergent strategies to general goals.


Reference:

About Emergent Strategy, Advantages and Disadvantages of Emergent Strategy, [Online] Accessed from http://yourbusiness.azcentral.com/advantage-disadvantage-emergent-strategy-15781.html accessed on 20th April, 2013
About Emergent Strategy, [Online] accessed from http://www.rapid-business-intelligence-success.com/emergent-strategy.html accessed on 20th April, 2013
About Emergent Strategy, Advantages and Disadvantages of Emergent Strategy, accessed from http://smallbusiness.chron.com/advantage-disadvantage-emergent-strategy-10070.html accessed on 21th April, 2013

Mintzberg, Ahlstrand and Lampel (2009) „Strategy Safari‟ Edition 2, FT Prentice Hall, Chapter 8
Lynch, R (2011) Strategic Management, 6th Edition, Pearson Education, Chapter 1
Johnson, Whittington and Scholes (2011) Exploring Strategy, 9th Edition, Pearson Education, Chapter 12 





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