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Delphi is a leading global supplier of electronics and technologies for automotive, commercial vehicle and other market segments. The company is structured in five divisions each one of them covering a group of product lines with development technical centers, manufacturing location and customers distributed worldwide. Another division is specialized in afterservice activities. Apart from the manufacturing activities the company is engaged in licensing agreements with other companies for its patented products.
Delphi originate from GM parts operation, which decided in 1991 to shift away from vertical integration under the cost pressure of its rivals Ford, Chrysler and Toyota, which already have made the same strategic move.
The new created company was not profitable for several years. In 1996 it decided to implement a Japanese-style lean manufacturing system and began to transform into a global supplier. The Asia-Pacific was seen as critical region for the company growth. China was going to double its car market and competitors such as Daewoo Group were also expanding capacity. Therefore Delphi invested in manufacturing plants in China and India, while acquiring new customers other than GM. Delphi would be hit hard by the currency devaluations that attended the 1998 Asian financial crisis. As part of the strategy to become less dependent by GM as a customer Delphi Europe was developing its manufacturing capabilities towards new customers.
The company went public in 1999 and by that time it was twice as large as its competitor which breaks off from Ford - Visteon Corporation, employing more than 200000 people. Believing that the separation from GM would lead to wage concessions, the United Auto Workers union had always apposed Delphi's separation from GM. Union workers protested through numerous strikes the loss of jobs and benefits coming from outsourcing and globalization.
Delphi sought to expand its core businesses via acquisition. Several companies were acquired in 1999 including Lucas Diesel, which had become the Powertrain System Division. The company has shifted towards capital intensive activities rather than labor intensive investments.
In 2005 Delphi disclosed irregular accounting practices which lead to company being delisted from the NY Stock exchange and moved into Chapter 11 for bankruptcy. This gave the opportunity to reorganize the business towards its main strategy direction. Majority of the US manufacturing plants were sold or closed and 75% of the product lines were dissolved. By 2007 the company decided to invest in a manufacturing plant in Romania, part of the Powertrain System Division and in 2008 escape Chapter 11, with a private equity fund injection.
Strategy managerial implication
In this work I will analyze how a number of selected strategy frameworks have or can influence the approach to strategy in the company, and more specific the strategy discourse.
The four pressures and strategy framework managerial implication are relevant through the way in which it can inform some of the key decision taken by the company.
Figure 1 The strategy framework
Along its last twenty years of history the company shaped its strategy in different directions. Over this period of time the influences of the four pressure of the strategy framework are clearly identifiable:
Industry dynamics: - shift from vertical integration to horizontal under the pressure of competitors; change from low value added product to capital intensive, high value offerings
Globalization: - mainly operating in US, the company reinforce its postion in Europe and expanded in Asia-Pacific; acquisitions of new companies
Degree of risk: - the global market brought with it additional financial risk
Ethics and CSR: - high level unethical misconduct moved the company under bankruptcy law protection; also reorganization in US was slow down by the unionized workforce
Porter's five forces framework is also a key concept that had managerial implication in the way company shaped its history. This is one key concept of the mainstream management teaching, highly adopted by the US schools of teaching which is transpiring through the majority of the key decisions. However this is not explicitly used by the European executive teams being replaced by a much softer tool - SWOT. In the analysis I will evaluate pros and cons of not having this as a main strategy tool.
Figure 2: Porter's five forces driving industry competition framework (Source: Porter, 1980, p. 4)
Another area of analysis is the exploration of managerial implication of stakeholder analysis. The company emphasizes the need of taken decisions with a strong sense of the mission and the vision. There is a strong orientation towards the use of stakeholder concept. The creation of mission and vision process is cascaded throughout the organization and I will explore its implication to the decided course of action.
In the end I will explore the managerial implication of making the strategy happen, especially in regards with how strategy workshops are valuable to the strategy implementation in the company. This is relevant for the study as this is one main instruments used to gain commitment around a strategy. However it is not always used effectively.
Company strategic discourse
The strategic discourse constitute of an overlapping series of decisions, compromises and adjustments between people at all levels of the organization.
The company is highly hierarchic in structure and therefore the strategy discourse follows in a similar manner. The strategy direction comes mainly from top-down. There are different level in the company were the strategy is crystalized;
Global strategies: were the main direction are established. The headquarters have identified three main megatrends that everyone has to follow: SAFE-GREEN-CONNECTED. Also at this level decision to explore new market are taken: for example, following the latest market trends the company decided to expand into the consumer market equipment and leverage this with the increase tendencies of use electronic devices in the cars.
Divisional strategies: these are more concrete and establish much more detailed the type of products and technologies that the division will invest in, operational footprint decision; growth rates, etc
Local strategies: these are plant specific and related to gaining operational success through leveraging the local opportunities - collaboration with suppliers; partnerships with universities and local high schools to ensure proper qualification for the workforce; relationship with local authorities;
All the strategies have a strong sense of direction toward customer orientation under a common motto: "Passion for Excellence". The term "excellence" is highly utilized in all kind of forums from the definition of company mission and vision to individual personal performance evaluation.
The concept of having or defining a formal strategy is used in a wider concept that includes the definition of mission and vision, principals, culture and strategy. This follows to some extent the model describe by Campbell and Yeung in their article 'Creating a sense of mission' (1991).
However the term "strategy" is widely misused by most of the middle manager to refer to short term course of action which have merely tactical and operational relevance.
The strategy development is not the responsibility of one designated department. The strategic directions are taken by the top management staff and the process is facilitated by outside consulting companies.
The final result is communicated in a package that is cascaded down in the company to all employees. The communication is emphasized by symbols like T-shirts distributed to all employees containing messages with key strategic directions that enable overall commitment. The message is supported by leadership messages sent with various occasions, coming from the CEOs of the company. The messages have stronger motivational reaction and contain the same key points presented in the strategy.
The strict hierarchical process is reflected by the fact that any strategic formulation is done under the umbrella of the superior level. The Division cannot supersede the Global team with an out of the box strategy, nor the Local strategy the divisional one. The formal strategy has the power of law. The only freedom as a business unit is to add details to the higher level strategy but not to deny, question or step out of the imposed boundaries.
On business unit the way to integrate the higher level strategy and generate a local one is through strategy workshops lead by a consultant. The results are shared with the employees and their feedback, as long as do not goes beyond established barriers is integrated in the final version.
Another way of communicating formally the strategy is through objectives and targets. This follows a standardized process of integration into each individual yearly personal business plan and becomes the bases of personal evaluation.
Managerial implication analysis
4.1 Porter's Five Forces
Porter's Five Forces, is a way of examining the attractiveness of an industry. It does so by looking at five forces which act on that industry. These forces are determinants of that industry's profitability.
While the analysis applies to all companies competing in one industry, the same, what differs is that those firms' profitability will vary between them. This is because of their own competitive advantages and varying business models. So just because all firms in one industry and market are subject to the same forces doesn't mean they perform equally.
A Porter analysis should always be done in conjunction with other assessments, and should not be regarded as being absolute. It should only serve as an indicator, not absolute fact. There are many critical assumptions that should be made and explained in one's five forces analysis. The market must be described, the competition must be explained, and the products must be defined.
For example, an analysis of the industry in the US would not necessarily apply in China. The markets are totally different, and the product life cycle is not even close to being the same.
The company is operating on multiple markets and multiple geographical locations. Applying the model for the entire company would not give a very relevant result. However as we reduce the scope of the analysis this would inform better the strategic choices.
The main tool used to analyze the business environment and internal resources is the SWOT analysis. The main objective of this tool is to analyze internal strategic factors, strengths and weaknesses attributed to the organization, and external factors beyond control of the organization such as opportunities and threats. The last two originate in the industry analysis but do not offer the same insights like the Porter's Five Forces.
For each managerial implication identify its strengths and limitations and demonstrate the relevance to the organisation. What are the similarities and differences between the existing discourse and the managerial implications?
Make a judgment about how translation of the managerial implication might impact upon the organisational strategic discourse. How it may change if the managerial implications you have identified are adopted. What challenges might this pose the organisation?
What could be the potential benefits and negative consequences of adopting the managerial implications?
Support the argument with a balanced commentary.
Â Â Impact:
make a reasoned judgement about how adoption of the managerial implications would change the current discourse.
consider how you will know that a change in strategic discourse has taken place.Â What would indicate this?
make a judgement concerning whether each managerial implication is equally important and whether their adoption may have unintended affects elsewhere in the organisation.
However the company lost in the past due to its inability to quickly adapt its structure to respond to the market changes. Knowledge was dissipated and only in the last couple of years the company moved toward collaboration and knowledge sharing. For that it invested in IT tools that allow now the sharing of files, video and audio meetings, and central servers to access remotely the information, etc.
Another critique that can be made to the approach is that the strategy is define in isolation, by a small group of executives. For an organization's vision and mission to be effective, they must become assimilated into the organization's culture. The strategy followed a top to bottom communication plan but no internal feedback loop was created to allow the organization to interpret the mission statement. More focus has been put into the external assessment, integrating mainly investors and customer feedback.
During the process it was very clear the tendency to focus more on the concrete touch of strategy formulation. The Values were defined but there were more presented like something that the company must possess not that it already has. The gap to reality was not identified, neither planned for further analysis.
The main tool used to analyze the business macro environment and internal resources is the SWOT analysis. The main objective of this tool is to analyze internal strategic factors, strengths and weaknesses attributed to the organization, and external factors beyond control of the organization such as opportunities and threats.
The disadvantage of the SWOT Tools such as STEPLE or Porter's Five forces or any other frameworks for