Example Exam Answers For Strategic Management
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Q1: (A) Describe some of the Strategies that fit the markets of emerging countries. Give some brief examples. Identify what are the BRIC countries?
If a company wants to succeed in emerging markets they usually follow the following strategies which enable them to compete in these markets:
1-Be prepared to compete on the basis of lower price: consumers in emerging markets are more often focused on price, which can give local (low cost) competitors some advantage over their rivals. The company has to be able to find ways to attract the buyers by bargain prices in addition to better products. For example, when Unilever decided to enter the laundry detergent market in India, it discovered that a majority (80%) cannot afford their products, so they went back to the drawing board and decided to launch a new brand (called WHEEL), by using a low cost formula and new production facilities and packaged it in single-use amounts, so it can be sold cheaply compare to its other products. The product had quickly captured 100 million dollar in sales, and was named the no 1 detergent in India in 2008.
2- Modify aspects of the company's business model or strategy to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding): To succeed, multinationals must modify their business models for each nation. They may have to adapt to the voids in a country's product markets, its input markets, or both. But companies must retain their core business propositions even as they adapt their business models, if they make shifts that are too radical, these firms will lose their advantages of global scale and global branding. For eexample: In the U.S., McDonald's outsources supply chain operations. But when it tried to enter Russia, it couldn't find local suppliers. So, with help from its joint venture partner, it identified farmers it could work with and advanced them money so they could invest in seeds and equipment. And it sent Russian managers to Canada for training. By establishing its own supply chain and management systems, it now controls 80% of the Russian fast-food market.
3- Try to change the local market to better match the way the company does business elsewhere: Many multinationals are powerful enough to alter the contexts in which they operate. The products or services these companies offer can force dramatic changes in markets, which can have far-reaching consequences. The firms must help countries fully develop their potential. That creates a win-win situation for the country and the company. For instance, Metro Cash & Carry, a division of German trading company Metro Group, invested in a cold chain in China so that it could deliver goods like fish and meats from rural regions to urban locations. That changed local conditions in several important ways. First, Metro's investment induced fanners in China to invest more in their agricultural operations. Metro also lobbied with governments for quality standards to prevent companies from selling shoddy produce to hapless consumers.
4- Stay away from those emerging markets where it is impractical or uneconomic to modify the company's business model to accommodate local circumstances:
Profitability in emerging markets rarely comes quickly or easily-new entrants have to adapt their business models and strategies to local conditions and be patient in earning a profit. The Home Depot has expanded to Mexico in 2001 and Russia in 2006, but it has avoided entering other emerging markets, because its value proposition of good quality, low prices and attentive customer service, to pull that off, it relies on a variety of U.S- specific institutions. It depends on the U.S. highways and logistical management systems to minimize the amount of inventory it has to carry in its large, warehouse-style stores. It relies on employee stock ownership to motivate shop-level workers to render top-notch service. And its value proposition takes advantage of the fact that high labor costs in the United States encourage home owners to engage in do-it-yourself projects.
The BRIC countries:
Brazil, Russia, India, and China are group in together under the acronym "BRIC", this is an acronym usually referring to these countries base on the notion these emerging markets are going to be a major force in the future. The BRIC thesis posits that China and India will become the world's dominant suppliers of manufactured goods and services, respectively, while Brazil and Russia will become similarly dominant as suppliers of raw materials. It's important to note that this thesis isn't that these countries are a political alliance (like the European Union) or a formal trading association - but they have the potential to form a powerful economic bloc. BRIC is now also used as a more generic marketing term to refer to these four emerging economies. Due to lower labor and production costs, many companies also cite BRIC as a source of foreign expansion opportunity.
(B) Is it a good idea to link Social performance targets to executive compensation? Why? Why not?
In my opinion linking Social performance with executive compensation is not such a good idea good Idea. Many have blamed incentive schemes as the sole culprit for undesired corporate behaviors such as fraudulent financial reporting, corruption, tax evasion, exploitation of underage workers and other forms of opportunism, malfeasance and white-collar crime. The proponent for this notion think that one of the main benefits of rewarding social performance at the top is that it would stimulate managers to deploy efforts and resources towards social initiatives, which are expected to increase the firm's value. But there are at least three issues that cast doubt on the accuracy of this statement. First, it is not clear whether social initiatives have a salutary impact on the firm's economic performance. While some studies have shown a positive association between social performance and financial results, many scholars have professed a negative association. The latter claim is that if investors cared enough about the pollution performance information required under the enactment to punish poor performers, firms would have a market-based incentive to embark on social initiatives, and thus no social ills would exist. In a recent review of research papers regarding the association between social initiatives and firm performance, Margolis and Walsh (2003) found that less than half of the reviewed studies exhibited a positive relationship, and that the majority showed a neutral or negative link. This review, together with other research, suggests that the link between social performance and financial results is ambiguous at best. That is, while socially irresponsible businesses can be punished by society (consumers, employees, local communities, NGOs) in terms of their image, reputation, and legitimacy for not fulfilling their public responsibilities, it is unclear how a good social performance can cause their market share to increase. The second aspect that casts doubt on the benefit of rewarding managers for undertaking social initiatives (which presumably considers the need of a broader array of constituencies) is that all stakeholders are assumed to favor responsible actions and thus are treated in an indiscriminate way. But the truth is that while some constituencies may have a general preference for social initiatives, one cannot assume that social-friendly policies don't conflict with the interests of other stakeholders or that they are oblivious to trade-offs. For instance, workers and their families have been documented not to favor environmental policies on the part of governments or firms if implementing them would put their jobs at risk. Therefore, rewarding certain actions believed to be beneficial for a certain group can cause discontent among other stakeholders. A third aspect to consider is that social initiatives are mainly driven by intrinsic motivations. Indeed, many people and firms invest their time and money in improving the environment and supporting charities without economic returns. It could be that some people are altruistic, that is, they seek to improve the welfare of others without receiving any personal benefit. Another intrinsic motivation is "impure altruism," that is to say, people (or firms) may get a "warm glow", and improved self image from carrying out social works. A related intrinsic motivation is concern for fairness. Regardless of its motives for altruism, self image or fairness, it can be safely assumed that in many cases underlying motivations for social initiatives are intrinsic. According to enthusiasts of the link between social initiatives and executive pay, to provide an economic (and explicit) incentive can reinforce the natural tendency of managers to undertake social responsible actions. But theoretical and empirical evidence from psychology and economics suggests that such extrinsic incentives can crowd out the intrinsic motivations which motivate voluntary contributions. The underlying idea of this stream of research is that motivations are not additive, and monetary rewards may reduce the sense of control a person has over her actions, reducing her willingness to allocate resources (time, money and the like) towards social endeavors. As a consequence, including social criteria in compensation packages could lead toward the opposite of the intended goal. In other words, recognizing and supporting social efforts monetarily can undermine the "built-in" incentives and thus have the potential for negative effects and unintended consequences.
Another often mentioned benefit of linking pay to social performance is that it would shield managers from uncertain results of social strategies. As argued above, results from social endeavor are ambiguous and, as a consequence, if managers are not compensated for the increased risk associated with social investments, they will presumably allocate capital into less uncertain alternatives. Several aspects deserve to be mentioned regarding this issue. First, linking pay and social performance could lead managers to consider social criteria opportunistically. Since social performance may be easier to obtain than financial results, mangers may be tempted to favor the latter in order to maximize their income. Moreover, given that including social criteria alleviates the drawbacks from potential losses of social actions, managers have little incentive to make the most out of them, and overlook the potential financial outcomes that may derive from them.
Another related aspect refers to how to measure social performance. While financial measures are well developed, social performance measures are still an open field to be explored. Even with a precise measure of social performance, these measures may also be open to manipulation. As a consequence, control policies and information systems are needed, which in turn would increase the costs of rewarding social performance effectively.
Also, it has been argued that an advantage of social criteria in executives pay packages would make managers explicitly accountable for the social behavior of the firm. While this may be true, it is important to consider the context in which the firm operates. It is often said that stakeholders like consumers want companies to promote the public good by providing healthier and safer products, retirement and health care benefits for its employees, and much else besides. However, stakeholders' expectations vary by industry and geography. For instance, environmental concern is an ongoing risk for many companies, especially those in the energy and chemical industries. Too often, however, companies in polluting industries ignore environmental demands and invest in other social initiatives with the mistaken belief that any social action will suffice to signal appropriate corporate behavior to the market.
Q2: (A) Companies have used centralized structures. However the current organizational trends are to change them in to lean, flatter, decentralized structures. Describe briefly some of the changes taking place in the organization?
Major changes that have emerged from Organization Changing their centralized structures to decentralized structures:
(1) Managers and workers empowered to act on their own judgments.
(2) Work process (redesign) in order to achieve greater streamlining and tighter cohesion.
(3) Self directed work teams.
(4) Rapid incorporation of internet technology applications.
(5) Networking with outsiders to improve existing organization capabilities and create new ones.
Some other organizational characteristics that are emerging include:
- Extensive use of Internet Technology and E-commerce business practices, real time data and information systems, greater reliance on online systems for transacting business with suppliers and customers, and Internet based communication and collaborations with suppliers, customers, and strategic partners.
- Fewer barriers between different vertical ranks, between functions and disciplines, between units in different geographical locations, and between the company and its suppliers, distributors/dealers, strategic allies, and customer- an outcome partly due to pervasive use of online systems.
- Rapid dissemination of information, rapid learning and rapid response times- also an outcome partly due to pervasive use of online systems.
- Collaborative efforts among people in different functional specialties and geographical locations, essential to create organization competencies and capabilities.
- Assembling work teams that include more members and have a greater geographic dispersion of team members. During the 1990s, most formal team arrangements contained 20 or fewer members. Today, teams at many multinational corporations include 100 or members that might be scattered across 10 or more countries.
(B) Why do you think the strategies (or strategic planning) fail to deliver desired results? Be brief and precise.
The strategists think that there are two main reasons why a strategic plan fails. First, the idea that the strategic plan itself is not wrong with it, but because the implementation of this plan is not been done correctly it fails. Secondly, the company's senior management has not taking it seriously enough, that there is a failure to get management involved right from the start, and the failure to obtain sufficient company resources to accomplish the task. There are other reasons that may cause a strategic plan to fail, which include:
Failure to understand the customer: the strategic plan that instead of understanding a customer needs and wants fail to deliver. It fails to answer the question "Why do they buy?" It is also caused by them doing inadequate or incorrect marketing research.
Over-estimation of resource competence: Failure to assess whether the staff, equipment, and processes can handle the new strategy. In addition to Failing in developing new employee and management skills.
Failure to coordinate: Reporting and control relationships not adequate, with Organizational structure not flexible enough.
Failure to obtain employee commitment: the new strategy that is gone to be applied is not well explained to employees. Also, there are no incentives given to workers to embrace the new strategy.
Under-estimation of time requirements: No critical path analysis is been done.
Failure to follow the plan: No follow through after initial planning, and no tracking of progress against plan.
Failure to manage change: Inadequate understanding of the internal resistance to change. In addition to, lack of vision on the relationships between processes, technology and organization.
Poor communications: Insufficient information sharing among stakeholders. Exclusion of stakeholders and delegates
Failure to focus: Inability or unwillingness to make choices which are true to the strategic mission (i.e. to do fewer things, better), leads to mediocrity, and inability to compete.
Q3: (A) Describe briefly what is (1) business process Reengineering (2) Total quality management. What are the differences?
Business Process Reengineering:
Business process can be defined as "a set of logically related tasks performed to achieve a defined business outcome." It is "a structured, measured set of activities designed to produce a specified output for a particular customer or market." Improving business processes is important for businesses to stay ahead of competition in today's marketplace. Over the last 10 to 15 years, companies have been forced to improve their business processes because customers are demanding better products and services. Many companies begin business process improvement with a continuous improvement model. The BPR methodology comprises of developing business processes are simplified rather than being made more complex. Job descriptions expand and become multi-dimensional -- people perform a broader range of tasks. People within the organization become empowered as opposed to being controlled. The emphasis moves away from the individual and towards the team's achievements. The organizational structure is transformed from a hierarchy to a flatter arrangement. Professionals become the key focus points for the organization, not the managers. The organization becomes aligned with the end-to-end process rather than departments. The basis for measurement of performance moves away from activity towards results. The role and purpose of the manager changes from of a supervisor to coach. People no longer worry about pleasing the boss -- they focus instead on pleasing the customer. The organization's value system transforms from being protective to being productive. In this context it can be mentioned that, some of the biggest obstacles faced by reengineering are lack of sustained management commitment and leadership, unrealistic scope and expectations, and resistance to change.
Total Quality Management (TQM):
TQM is not just an academic concept; it is a way of controlling your business. TQM is concerned with increased customer satisfaction, along with improved business processes. It uses the goal of customer satisfaction to generate the organization's strategies. During the harsh economic climate of the 1980s, many western organizations began to look seriously at improving activities in their service and product delivery. Different initiatives were put in place within the operations of an organization to try to improve these activities but, disappointingly, the benefits of such measures, when used in isolation, were limited and difficult to evaluate in strategic terms. Some organizations continue to use this method of activity improvement, but often the results end up being partial or short term. In fact, some of these efforts may create a localized impression of providing solutions, when what they are really achieving is shifting the problem elsewhere.
A TQM system may actually make use of any or all of these initiatives as its component parts. However, it differs most importantly from any one of them in its scale. In TQM, all the improvement activities are tied together, so that the 'knock-on' effects produced are recognized and used to initiate further improvements. It is a continuous improvement process. This is the key difference between TQM systems and other quality improvement systems. TQM integrates all activities within an organization, guarantees that the activities of one area support changes made in another, and ensures that the results can be evaluated at strategic level. Under TQM, quality is applied in all business functions, not just manufacturing.
To achieve total quality assurance, an organization needs to undertake integrated quality improvement that improves all departments, not just a willing few.
The Difference between Business Process Reengineering (BPR) and Total Quality Management (TQM):
Total Quality Management and BPR share a cross-functional relationship. Quality specialists tend to focus on incremental change and gradual improvement of processes, while proponents of reengineering often seek radical redesign and drastic improvement of processes. Quality management often referred to as TQM or continuous improvement, means programs and initiatives, which emphasize incremental improvement in work processes, and outputs over an open-ended period of time. In contrast, reengineering, also known as business process redesign or process innovation, refers to prudent initiatives intended to achieve radically redesigned and improved work processes in a specific time frame. In contrast to continuous improvement, BPR relies on a different school of thought. The extreme difference between TQM and business process reengineering lies in where you start from, and also the magnitude and rate of resulting changes. In course of time, many derivatives of radical, breakthrough improvement and continuous improvement have emerged to address the difficulties of implementing major changes in corporations. Leadership is really important for effective BPR deployment, and successful leaders use leadership styles to suit the particular situation and perform their tasks, giving due importance to both people and work. Business process is essentially value engineering applied to the system to bring forth, and sustain the product with an emphasis on information flow. By mapping the functions of the business process, low value functions can be identified and eliminated, thus reducing cost. Alternatively, a new and less costly process, which implements the function of the current process, can be developed to replace the present one.
(B) Define empowered employee. How does management exercise adequate controls over empowered employees?
Employee Empowerment if we elaborate the term giving powers to employee. Empower the employee for various tasks and activities of their job. To empower means to enable, to allow or to permit, and can be conceived as both self-initiated and initiated by others. Empowerment is the process of enabling employees to set their own work-related goals, make decisions and solve problems within their spheres of responsibility and authority. An important part of empowerment is the definition of spheres of responsibility and authority by management.
Empowerment allows people, individually and in groups, to use their talents and knowledge to make decisions that affect their work. People are held accountable for the results produced by others, whose formal role gives them the right to command but who lack informal influence, access to resources, outside status, sponsorship, or mobility prospects, are rendered powerless in the organization.
Empowerment is nor a program. It is a culture change. Empowerment is the process of enabling or authorizing an individual to think, behave, and take action, and control work and decision-making in autonomous ways. It is the state of feeling self-empowered to take control of one's own destiny.
How does Management exercise control over empowered Employee?
This is achieved by one of two methods, the first being by scrutinizing daily and weekly operating Statistics, which is one of the most important way in which managers can monitor the results that flow from the actions of the empowered employee look good, then it is reasonable to assume that the empowerment is working. The second method is used specially in a company that rely on empowered employees, especially in those that use self managed work groups or other such teams, is peer-based control. Most of the team members feel responsible for the success of the whole team and tend to be relatively intolerant of any team members behavior that weakens team performance or puts team accomplishments at risk, especially when team performance has a big impact on each team member's compensation. Because Peer is such a powerful control device, companies organized into teams can remove some layers of management Hierarchy and rely on strong peer pressure to keep the members operating between the white lines.
Q4: (A) Identify the characteristics of high performance culture.
A high performance culture is a culture where the standout culture traits are can do spirit, pride in doing things right, no-excuses accountability, and a pervasive result oriented work climate where people go to the extra mile to meet or beat stretch objectives. In a high performance culture there is strong sense of involvement from the part of the company employees and emphasis on individual initiative and creativity. Performance expectations are clearly delineated for the company as a whole, for each organizational unit, and for each individual. Issues are promptly addressed- a strong bias for being proactive instead of reactive exists. Focus on what needs to be done, the culture is permeated with a spirit of achievement and has a good track in meeting or beating performance targets.
- A clear line of sight exists between the strategic aims of the authority and those of its departments and its staff at all levels.
- Management defines what it requires in the shape of performance improvements, sets goals for success and monitors performance to ensure that the goals are achieved.
- Leadership from the top which engenders a shared belief in the importance of continuing improvement.
- Focus on promoting positive attitudes that result in a committed and motivated workforce.
- Performance management process aligned to the authority's objectives to ensure that people are engaged in achieving agreed goals and standards.
- Capacities of people developed through learning at all levels to support performance improvement
- People provided with opportunities to make full use of their skills and abilities.
(B) Compare and contrast the corporate cultures at Google and Alberto-Culver (refer to illustration capsule 13.1 page 417 of textbook).
The corporate culture in Google is an open relationship culture, whether it is between the workforce and the administration, or between the employees themselves. Google has managed to create an environment that make the employees engage not only in the activities of the company, but also some leisure free time activities. The company makes sure that the employees are happy and there is a small family like feeling in the company, as all of them gather and sit in the same café where they sit together, all of them from various departments. Organizationally, Google maintains a casual and democratic atmosphere, resulting in its distinction as a "Flat" company. The company does not boast a large middle management, and upper management is so hands on, it's hard to qualify them in a separate category. Teams are made up of members with equal authority and a certain level of autonomy is maintained, and the employees are encouraged to propose wild, ambitious ideas often. The employees consist of various nationalities, with people from all around the world working in their offices around world. The transparency policy practiced by the management is something that encourages people to do a better job, with the hiring process been done in a non-discriminatory way, which ensures the rights of all the employees.
The culture in Alberto- Culver corporate culture focuses on the employee being the main component in them being successful in their business. A happy and satisfied worker is a priority for the company, they are focusing their culture on improving their employees, making a profit is as important to them as making their employees happy, with the idea that an happy employee culture spread in the company will distinguish it from others and bring customers to it, either it be by their reputation of being a good company, or the fact that the employees who they have kept happy and help improve are doing a good job as a result of that.
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