Category: Corporate Strategy

Abstract

Legal and regulatory regimes are often perceived as constraints to improved business performance. However, the article reviewed in this paper, reveals how firms capitalize on the law to develop effective diversification strategies. Five legal strategies are identified in the article, namely, avoidance, prevention, compliance, transformative, and value-creation. This paper summarises and reviews the article based on strategic management theories and concepts.

Summary

The article examines the legal strategies that firms can use to create value and stay ahead of the competition. A right legal strategy helps firms overcome regulation constraints, operate in multiple jurisdictions, protect intellectual property rights, avoid lawsuits, and improve performance. Increased recognition of the importance of internal legal capabilities has led to a rise in the number of directors with a legal background in U.S. companies. The article, based on the analysis of legal functions in firms like Nokia, Disney, and Microsoft, suggests a framework for developing the right legal strategy for a company. The framework entails factors like the counsel’s expertise, the top management attitudes, and the level of collaboration between the legal department and the top executives.

Based on this framework, the article establishes that the legal pathways used by firms fall into five categories. First, some firms use avoidance whereby they ignore legal counsel in their actions or use it to exploit lax policies. It is characteristic of firms where managers lack legal knowledge or awareness. It helps firms to capitalize on regulatory loopholes. Second, compliant firms perceive the law as a constraint to corporate decision-making. The managers have a limited background in law with the legal function providing central oversight. Such firms face fewer noncompliance-related cases.

Some firms use a preventive pathway to cushion themselves from future risks. In this approach, the executives understand corporate law and collaborate with the legal counsel to address business risks. This approach can give a firm a competitive advantage. The fourth pathway is value creation and it involves managers knowledgeable in patent law. The fifth pathway is transformation, whereby company strategies are aligned with the law with regard to R&D and patenting. It involves high-level partnerships in decision-making and the creation of core competencies. Firms can use this framework to evaluate their legal strategies.

The efficacy of any legal strategy depends on a firm’s organizational culture, workforce, and structure, and level of competition. In choosing a legal strategy from the five options, managers should understand the risks involved and not be driven by the opportunities presented. In general, internal legal functions can help create value and generate a strategic advantage for the firm.

Article Review/Critique

The article describes the diversification strategies used by different companies to gain a competitive advantage. The writer finds the article informative and insightful with regard to the use of law to develop an effective diversification strategy. Each firm described in the article uses a unique legal strategy. Walt Disney transferred its property to other firms as new trademarks to avoid losing its copyrights to rivals. Disney acquired a competitive advantage through related diversification, i.e., using industry linkages to enhance its market power. In the writer’s opinion, Disney, a global leader in media innovation, also enhanced its capabilities to exploit the economies of scale by licensing its trademarks to other firms. Diversified activities are better exploited externally because of increased efficiency and reduced costs.

Another example of a legal strategy in the article is that involving the acquisition of Nokia mobile by Microsoft. Firms use acquisitions and mergers to pursue a competitive strategy in their industry. An acquisition occurs when a large firm buys a small one or division from another. In Microsoft’s case, the acquisition strengthened its competitive capability against Google and helped it overcome legal hurdles.

In contrast, Nokia used a divestiture strategy to become less diversified and raise more capital. The article also explains how some companies utilize the law to gain a competitive advantage through joint ventures. In the article, Qualcomm, a wireless technology company, relies on its joint ventures with vendors to generate funds for research and development. A joint venture, as a competitive strategy, involves partnerships geared towards capitalizing on a particular opportunity, which is Qualcomm’s case was an exclusive patent for its wireless technology.

The article’s five legal strategies relate to the concept of management by objectives. In the writer’s opinion, ‘avoidant’ managers manage by extrapolation. The managers adhere to conservative actions as long as they are working. The article characterizes ‘avoidant’ managers as those who believe that legal counsel cannot create value and therefore, make no effort to change internal controls or policies.

On the other hand, noncompliant directors manage by crisis. According to the article, managers can become noncompliant if the benefits of their activities outweigh the risks or costs. In the writer’s view, managing by hope is evident in avoidant, preventive, and compliant legal strategies because they center on risk mitigation.

The article details how firms can develop a sustainable competitive advantage by capitalizing on various legal strategies. It offers a deep analysis with real-life examples of firms that have utilized legal counsel to improve their performance. Another major strength of the article is its use of research statistics on the managers’ attitudes and collaboration with the legal counsel as a basis for its framework. However, the methodology used to assess their attitudes is not provided. In addition, the article is more descriptive than analytical and does not provide a clear guideline for developing an effective legal strategy.

Introduction

Foodco Holding is one of the companies under the banner of UAE’s Abu Dhabi National Foodstuff Company (Foodco), a public shareholding company established in 1979. Food is involved in importing and distributing household items and foodstuff in the UAE, packing, repacking, importing, exporting, distribution, and sale of food products.

Purpose

The purpose of this report is to develop a comprehensive analysis of the company’s performance (based on ratio analysis) and business strategy based on the five forces analysis.

Business strategy analysis

A business strategy is an initial step in determining the profitability of a proposed venture. The Michel Porter model is a framework that examines some five forces that influence an industry.

Rivalry

Food faces strong competition from rival corporates in the food distribution industry in the UAE. The international and regional firms that are involved in the foodstuff business, including distribution, importation, exportation, packing, repacking, and processing activities, dominate the UAE foodstuff industry. Among other companies, Alma Foodstuff, the Gulf International, Jaleel General Trading, Belselah Foodstuff, and Food Center are the major rivals in the industry. Nevertheless, Foodco is able to fight rivalry through working with subsidiaries and providing them with the appropriate backing in order to achieve the core objectives.

Threats of Substitutes

Substitute products are the products and services in other industries that have the capacity to satisfy the same need (Kevin, 2007). In the UAE, the foodstuff industry does not have substitutes, which means that the company does not have concern for substitutes.

Buyer power

The presence of many suppliers and few buyers means that buyer power is strong (Triantis, 2009). In the case of Foodco, the number of foodstuff suppliers in Dubai is relatively large due to the presence of local, regional, and international competitors.

Supplier power

The power of suppliers in an industry is the impact that suppliers of goods and services or raw materials have in an industry (Porter, Argyres&McGahan, (2006). In the UAE foodstuff industry, the number of suppliers is relatively large.

Barriers to entry

In the UAE, the government regulates the foodstuff industry through laws and food safety regulations. In addition, the government has a strict tax policy that demands heavier taxes from foreign companies than local companies. However, the industry’s profitability is relatively high, which encourages foreign companies to enter the market.

Generic strategies to counter the five forces

Foodco has been using a strategy that involves working with subsidiaries in order to counter the competition and rivalry, expand the market, and increase sales. This means it has differentiated its business in order to counter these forces.

Food Introduction

Mission

The company’s mission is to provide all of its subsidiaries with the appropriate backing in order to achieve their core objectives and ensure that they are resourced and managed appropriately.

Ratio Analysis

Liquidity Ratios and Analysis: As of 31 December.

Working capital measures the amount of cash the firm has put into operations. Foodco working capital has decreased by AED 486270 from the previous financial period, which represents a 0.47% decrease. The indication is that the firm cannot be able to meet some of its current liabilities.

The current ratio measures the ability of the firm to offset its immediate debts. The current ratio of the Foodco has increased by 0.2 from the previous financial period indicating that the firm has a strong position in terms of its liquidity.

The current cash to debt coverage ratio measures the ability of the firm to generate enough cash to offset its immediate short-term loans. The ratio remains significant in solving the problems of the current ratio that utilizes the annual balances of current assets and current liabilities. The current cash to a debt coverage ratio of Foodco has increased significantly, 0.17 in the 2013 financial period compared with -0.05 in the 2012 financial year. The indication is that the firm can easily generate enough cash to offset its short-term loans.

The receivable turnover ratio measures the average times the receivables are collected during the financial period. The receivable turnover ratios of the firm indicate an improvement of 1.66 times in the current period compared with 1.64 times in the previous period. The improvement, though slight, indicates that the firm can easily convert some of its assets into liquid cash.

The average collection period indicates how the firm is effective in its credit collection and policies. The collection period of the firm during the 2013 period slightly improved from the previous period from 223 days to 219 days.

Solvency Ratios and Analysis

The debt to asset ratio measures the proportion of both firms’ assets they financed using long-term debts. The ratio also indicates the level of financial leveraging. The ratio of Foodco decreased in the last financial year indicating a decrease in debt financing in the last financial period.

The cash debt coverage ratio measures the ability of the firm to offset its liabilities from cash generated from operating activities without asset liquidation. The ratio increased from the last financial period to the current period indicating decreased liabilities.

Times interest coverage ratio measures the ability of the firm to meet its interest payments. The interest coverage ratio of Foodco increased in the 2013 financial period, which indicates its strong position in paying the interests.

Free cash flow indicates the ability of the firm o pays its dividends as well as the capability to expand its operations. The ratio also indicates the extra cash generated after investments to maintain its productive capacity and pay dividends. The ratio decreased in the current financial year indicating that the firm used a lot of cash in investments.

Profitability Ratios and Analysis

Earnings per share (EPS) measure the net income on each share. EPS of food increased in the 2013 period indicating the firm made a lot of profit. The ratio reduced considerably from 7.12 to 2.85 indicating the investors’ confidence in the firm.

The price-earnings ratio measures the market price of each share of common stocks to the earnings per share.

Gross profit ratio the profit margins generally indicate the profit quantity on sales that the company generates. In fact, profit margins indicate the return on sales at various points in the company balance sheet. Foodco gross profit increased in the 2013 financial year indicating increased sales.

The profit margin ratio measures the percentage of sales the result in net income. The profit margin increased significantly in 2013 indicating strong sales.

Return on assets shows the firm’s net income as a percentage of assets they hold. The companies use return-on-assets to evaluate their profitability by indicating the amount of profit they have generated from their assets. Return on assets of Foodco also improved in the current period.

Asset turnover indicates the efficiency of the firm in turning assets into sales. The ratio decreased in the last period indicating the firm is not efficient enough in turning its assets into sales.

The payment ratio indicates the amount of cash distributed in form of dividends. The payment period of the firm has decreased from the last period to the current period indicating that the firm has not effectively offered dividends.

Return on common stockholders’ equity ratio measures the net income earned from each owner’s equity. The ratio increased to 8% from 2% indicating increased net income from the owners’ equity.

Horizontal Analysis of Consolidated Balance Sheet of FODCO Company

The comparative analysis indicates of the consolidated balance sheet indicate several positive changes in Foodco from 2012 to 2013

Horizontal Analysis of Consolidated Income Statement

Similarly, the horizontal analysis indicate of the consolidated balance sheet indicate several positive changes in Foodco from 2012 to 2013

Cash Flow Statement

Vertical Analysis of FODCO Consolidated Balance Sheets

The base for the asset items is the total assets, and the base for the liability and stockholders equity items is the total of liabilities and stockholder equity.

Financial Statements

Vertical Analysis of Consolidated Income Statement

The base for the calculation is the net sales

Comparative analysis between Foodco and Al Marai Company (Saudi Arabia)

In terms of profitability, Al Marai indicates strong profitability ratios. This is indicated in the earnings per share of the two firms. In the 2013 financial period, Al Marai recorded 3.6 against 2.8 of Foodco. Similarly, the return on stockholders’ equity of Al Marai is 12% in the 2013 financial period compared with 10% of Foodco. The other profitability ratios indicate similar trends. However, Foodco is stronger in terms of liquidity and solvency ratios. In fact, all the liquidity and solvency ratios of the firm are higher compared to the Al Marai.

Conclusion

While Foodco is a well-developed firm in the industry with well-developed resources and market share, Al Marai is a relatively new firm in the industry. Depending on the firm’s history, Al Marai is comparatively doing well in terms of profits. However, Al Marai needs to improve in terms of its liquidity and solvency. On the other hand, Foodco is a well-established firm in terms of liquidity and solvency. Even though the firm’s profits could be seen to below, the firm’s cost of sales could have been higher. In fact, the firm needs to check its operating costs.

References

Kevin, P. (2007). Coyne and SomuSubramaniam, “Bringing Discipline To Strategy”, The Mckinsey Quarterly, 12(4), 14-25.

Porter, M., Argyres, N., &Mcgahan, A. M. (2006). An Interview With Michael Porter. The Academy Of Management Executive 16(2), 44-46.

Triantis, J. E. (2009). Navigating Strategic Decisions: The Power Of Sound Analysis And Forecasting. New York: CRC Press.

Company Background

Being a multinational conglomerate, GE has obtained impressive influence and secured its position at the top of the US economy quite firmly. GE was founded in 1892 and has expanded into a range of markets since, producing energy as its main commodity and having forayed into computing and other areas (GE, 2016). Despite keeping its traditional focus on energy and related products, GE has recently entered the healthcare industry, forming GE Healthcare in 1994 (GE, 2016). However, the company’s foray into the healthcare industry was started much earlier, when GE introduced its MRI scanner into the global market (GE, 2016).

The organization has been manufacturing equipment for medical purposes ever since along with the equipment for other industries. Although GE’s market success has been fluctuating lately, the success of GE Healthcare as one of GE’s affiliates has been steadily positive (GE, 2016). Due to the focus on diversification of its products and the use of a well-developed, vertically and horizontally integrated supply chain, the organization is likely to succeed in the global market.

Level of Diversification

The extent to which GE diversifies its healthcare products is quite sufficient for it to enjoy multiple opportunities in the healthcare market. Ge currently strives to pursue innovation in every domain possible, which reflects GE’s approach toward healthcare product diversification (Balakrishnan & Moonesar, 2015). GE has been making effective use of its multifaceted approach toward diversification for several years, which is an obvious strength since it allows integrating innovative solutions into end products.

However, the weakness of emphasizing the idea of diversification at GE overly zealously may cause the organization to lose its focus and suffer losses as a result (Balakrishnan & Moonesar, 2015). The promotion of intensive growth, which is presently observed at GE, indicates that the organization needs to gain a strategic advantage over its competitors and help GE to build an innovation-based corporate strategy; otherwise, GE will fail to stay in its target market. As a result, GE will have an opportunity to apply a focused approach toward developing its operational systems and management frameworks (Balakrishnan & Moonesar, 2015). Consequently, the firm will gain enough momentum to reach out to new customers and acquire even greater influence as a producer of healthcare equipment.

International Operations

While GE has been using its full potential in order to achieve success in the healthcare market, other organizations have been posing a threat to GE’s popularity. Due to the vast experience and brand name recognition of its rivals, GE needs to focus on the enhancement of its international operations. The present international strategy used by GE is quite similar to those of its competitors. For example, the companies such as Boston Scientific and Carestream Health have been exploiting the strategy of strategic acquisitions as the platform for improving their international operations and gaining greater influence in the industry (Boston Scientific, 2018).

The described model of international operations aligns with the course that GE has chosen for its development and the attempts at conquering the global healthcare equipment market (Martin, 2018). The identified approach seems legitimate since it gives Carestream Health, Boston Scientific, and GE the opportunities to gain access to new resources and reduce the barriers to entry into the designated marketspace (Blanchette, 2015). However, several distinctive characteristics are exclusive to GE’s rivals.

The differences in supply chain structures set Boston Scientific and Carestream Health apart from GE. Specifically, Carestream Health and Boston Scientific show the tendency to use the hybrid delivery technique, which helps to increase the efficiency of their supply chains and turn the transfer of resources into a more manageable process (Blanchette, 2015). Defined as the application of Internet services to the management of transportation processes across the supply chain, the use of the hybrid delivery approach is believed to be the link between the digital and physical markets (Garmehi, Analoui, Pathan, & Buyya, 2015).

Although GE has been seeking opportunities for the expansion into digital markets as well, the application of the hybrid system has not been the company’s priority so far, which restricts GE’s options concerning international trade (Blanchette, 2015). Therefore, the organization may need to follow suit and make an example of its rivals in order to enter the global market and build a strong supply chain.

Recent Events

With its expansion-targeted policy, GE has acquired and merged with quite a few organizations, increasing its reach and developing a greater grasp on the global healthcare market as its next target. Among the most successful acquisitions that GE has had so far, one should name Baker Hughes, which operated in the Oil and Gas industry, and the famous Alstom acquisition, which marked GE’s slowly transitioning to the digital environment (Lacal-Arántegui, 2019).

Both of the events detailed above are exemplary of successfully performed acquisitions since they opened a plethora of opportunities for GE. The acquisition archetypes that GE follows in each of the described cases can be identified as accelerating market access and exploiting the opportunities that the economies of scale provide (Bertrand, Betschinger, & Settles, 2016). Due to the cost advantages that GE receives in the domain of healthcare, the competitive advantage of the company increases as it receives a greater amount of flexibility in its financial options.

Moreover, the choice of market access acceleration as the expansion strategy has helped GE in diversifying its product and cementing its position in the healthcare equipment market. With lower entry barriers, the company gained a chance to focus on its R&D processes and the development of unique, high-quality technologies that could advance healthcare services greatly (Lacal-Arántegui, 2019). As a result, GE has acquired enough influence to develop an impressive competitive advantage over its rivals.

Alliance or Joint Venture

In addition to acquisitions and mergers, GE has also sought to build strategic alliances and joint ventures. The described step is critical for GE as the method of retaining its influence in the healthcare market and establishing itself as a legitimate provider of healthcare equipment. Furthermore, the support of business partners with which GE may merge will allow the organization to get accustomed to a comparatively new market context and receive the support that it will require to compete with the firms that have a much longer presence in it.

However, the approach that has been known in the business environment as the GE model seems to have worn out its welcome since GE has not been attempting at creating joint ventures in the past few years. According to Gomes-Casseres (2018), the GE model appears to be no longer profitable, hence the need to reshape it and to abstain from creating large conglomerates in the future. So far, the latest joint ventures that GE has made include the joint venture with Hyundai in China (Pomerantz, 2017). Nevertheless, the GE model of building business conglomerates seems to have become obsolete.

References

Balakrishnan, M. S., & Moonesar, I. A. (2015). General Electric: How GE worked to transform oncology healthcare in the Kingdom. Emerald Emerging Markets Case Studies, 5(3), 1-12. Web.

Bertrand, O., Betschinger, M. A., & Settles, A. (2016). The relevance of political affinity for the initial acquisition premium in cross‐border acquisitions. Strategic Management Journal, 37(10), 2071-2091. Web.

Blanchette, L. (2015). IAOP Governance chapter meeting: Governance for global business services and hybrid delivery. Web.

Boston Scientific. (2018). 2018 annual report. Web.

Garmehi, M., Analoui, M., Pathan, M., & Buyya, R. (2015). An economic mechanism for request routing and resource allocation in hybrid CDN–P2P networks. International Journal of Network Management, 25(6), 375-393. Web.

GE. (2016). Our strategy. Web.

Gomes-Casseres, B. (2018). Who killed the GE model?Harvard Business Review. Web.

Lacal-Arántegui, R. (2019). Globalization in the wind energy industry: contribution and economic impact of European companies. Renewable Energy, 134, 612-628. Web.

Martin, R. (2018). Learning from GE’s stumbles. Harvard Business Review. Web.

Pomerantz, D. (2017). GE and partners sign $3.5 billion in deals with China. GE Reports. Web.

Introduction

This report gives the history of the Swedish telecommunications company, Ericsson, entry into the mobile telephony market. It analyzes the attributes of strategic change that took place in the company during the 1980s and illustrates how the elements of strategic innovation may surface from the periphery of a company. This report illustrates how a small and insignificant unit in Ericsson transformed the company into its current state as the market leader in providing mobile telephone systems.

The situation of Åke Lundqvist/SRA and/or Ericsson/the corporate CEO in 1980

SWOT analysis is the internal review of an organization’s strengths, weaknesses, external threats, and opportunities, which ultimately influence its strategic decisions. One of the strengths of the SRA (Svenska Radioaktiebolaget) was that it was an autonomous and self-reliant company within Ericsson. Although its president, Ake Lundqvist, was under strong opposition from Ericson’s top management when he attempted to make any changes to the organization, he never gave up. Lundqvist had joined SRA in the mid-1960s and by 1970; he was in charge of the company’s land mobile radio division.

From then on, he had a positive assumption about business development and he was always on the lookout for opportunities for growth in the company. Ericsson’s weakness was that since the 1960s, it had consolidated its efforts mainly in the provision of communication and military radio equipment, without considering a venture into consumer products. However, SRA saw an opportunity in this. Its president saw that the growth of mobile telephony was possible. This was based on the vision he had to see the growth of radio technology to eliminate the wire from the regular telephony.

On the other hand, in contrast to Lundqvist, the Erickson corporate CEO had different assumptions about business development. Most managers at Ericson never cared about the advancement that SRA was making and they thwarted any efforts to have mobile telephony systems integrated. Their low expectations made them criticize SRA’s strategy as ‘completely absent’ with no clear direction to follow. This was a major threat to the existence of SRA.

In 1980, Ericson did not expect its mobile telephony business to thrive in the future. This threat made the company to consider the sector as insignificant in comparison to its other business ventures. Therefore, Erickson held the belief that its mobile telephony would continue to be of minor importance even in the future. The industry was perceived to be more exclusive and as a service reserved for the privileged in the society.

However, SRA regarded the mobile telephony market as a potential market that was liable for future exploitation. That is why the SRA president, Ake Lundqvist, made constant internal struggles to expand the market for mobile telephony systems. For example, in 1981, Ericsson, under the guidance of SRA, introduced the first mobile phones in the country of Saudi Arabia. This was after Ericsson had won a major contract to supply the Saudis with a fixed telecommunication infrastructure and Ake Lundqvist enthusiastically took the initiative on mobile phones.

In terms of strengths, SRA was insignificant compared to the abilities that Erickson had. However, SRA was more competent in business innovation. Despite the weakness it had of being limited in terms of both technology and products, SRA had spent the whole of its sixty-year history in a less protected and quite competitive business environment. This made it to develop competent skills than its counterpart, Ericsson.

In those times, SRA was seen as a minor, independent, and unglamorous business organization. Although SRA was small in size, had unrelated technology, and was not very much recognized in Ericsson, it eventually turned Ericsson into the world’s largest supplier of mobile telephone systems by capitalizing on the opportunity that was present in the development of mobile phones.

The history of the development of mobile phones

PESTLE is a strategic planning analysis tool, which involves political, economic, social, technological, legal, and environmental forces, which influence business operations and competitiveness.

Currently, the mobile phone industry has undergone major developments in contrast to how the situation was in the 1980s. Technologically, in the early days, Ericsson dealt exclusively with switching and transmission equipment. The telephone network consisted of a manual system where the operator was endowed with the responsibility of connecting individuals on a switchboard. At this time, major R&D was mainly focused on developing the company’s switching technology. When Ericsson introduced its digital technology, AXE, it became well known and well respected and by 1980, the company had delivered various consignments to various parts of the world. The AXE became the flagship product for the public telecommunications company.

During that time, the political environment of doing business was mainly determined by how much a company relates to the PTTs (Post, Telephone, and Telegraph). About a dozen telecommunications companies dominated the world market and they mainly competed for orders within the PTTs where markets were open. Some markets such as the U.S. and the British PTT were not easily accessible to other companies. For a company to win a contract within any PTT, it had to establish a lasting political relationship with the PTT. The relationship made the lucky companies have a monopoly within the particular PTTs as well as earn them continuous follow-up contracts.

Legal factors such as the enactment of laws, trading policies, and trading policies affected the development of mobile phones. One of these is the laws that existed within the Nordic mobile telephone (NMT) network, which was composed of the Swedish and other Nordic PTTS. These favorable laws played a significant role in the establishment and the development of mobile telephony in Sweden and other Nordic countries.

In 1997, the major telecommunication equipment manufactures placed their bids to supply the NMT network; however, Ericsson had little interest in mobile phone systems. Although the company lacked the enthusiasm to provide switches for mobile systems, it finally offered switches to preserve its long-term relationship with the Swedish PTT. Moreover, it is only after the insistence of the PTT did Ericsson agreed to offer it with its flagship product, the AXE.

Social factors, such as the attitude towards mobile phones fuelled Ericsson’s resistance to adopting mobile telephony. It was widely believed that the industry had an insignificant role as compared to other businesses, alleged lack of competency for mobile telephony since it mainly dealt with closed radio systems, and the industry was seen as something more exclusive, which was directed towards professional use.

The company saw the mobile telephony industry as something mainly reserved for the privileged in society. In addition, a major U.S. consultancy firm investigation authenticated their claims. The firm studied the potential of the mobile telephone market at that time and advised against any involvement in the industry since the results were insignificant. Even though the SRA had limited competencies for the mobile systems, it had a great entrepreneurial spirit and, maybe, insight to eliminate the wired telephony.

In the end, Ericsson won the contract to supply switches for the NMT network. Therefore, SRA became a sub-supplier of a base station unit for local Swedish radio technology and also supplied mobile telephones or stations for the system. Consequently, to increase its competency, SRA acquired a business rival, Sonab. Despite winning the NMT contract, however, Ericsson still lacked the enthusiasm in mobile telephony.

After all the spirited struggles by SRA, the first commercial telephony system in the world was delivered in 1981, not to the NMT in the Nordic countries, but to Saudi Arabia. Sometime during the late 1970s, Ericsson was awarded a major contract to supply the Saudis with a fixed telecommunication infrastructure and SRA passionately capitalized on the opportunity to sell mobile telephony system to the country. Even though SRA and Ericsson lacked a complete system at that time, Lundqvist managed to convince both the CEO and the Head of Ericsson’s Public Telecommunication Switching Division to provide the Saudis with mobile phones.

Environmentally, the changing climate affected the mode of operation of Ericsson, for example, its telephone keypads were easily being destroyed by the high temperatures that existed in Saudi Arabia. Therefore, it had to develop innovative ways of dealing with this problem. Moreover, the company had to deal with problems that accompanied the development of the first commercial cellular mobile system in the world. These included a lack of adequate production facilities, the threat of competitors, quality problems, and installation problems.

SRA and Ericsson input in the history of the development of mobile phones

Porter proposed five major influences on the firm’s ability to compete which include the threat of new entrants, bargaining power of suppliers, rivalry among the current competitors, the threat of substitute products, and bargaining power of consumers in an industry.

As much as Ericsson and SRA played a pivotal role in the development of mobile phones in the world, they could have done differently some things to stay competitive in the market. As more PTTs started to show increased interest in mobile phones in the late 1970s and the early 1980s, this constantly drew other companies into the business. However, SRA increased its market penetration to counteract this threat.

SRA attempted to provide the market with a more coordinated and integrated mobile telephony system of Ericsson’s switches and its radio equipment. However, Ericsson and SRA could have worked together in supplying the markets with mobile phones. Instead of submitting separate orders and holding different views on mobile system integration, the managers of the two companies could have worked together in developing a coherent arrangement system for mobile phone systems.

The winning of the contract to supply the Dutch PPT with mobile telephony enabled both the SRA and Ericsson to start venturing into a more integrated system and not just separate parts of mobile telephony. This success was spearheaded by the SRA, which fought dual battles to enable the introduction of a more complete system concept. SRA managed to convince the internal switching division and the corporate management division, in the market, of the benefits of the integrated system idea. Before they were awarded the contract, they offered two separate offers to the Dutch PPT: the Ericsson switching division offered switches while the SRA offered the radio technology.

Although the Dutch PPT was interested in Ericsson’s AXE because of its high capacity, it later supported the idea brought by Motorola, its main rival, of combining the AXE switches with its base stations. Ericsson initially supported the idea because it could make it fill more AXE orders jointly with Motorola. However, SRA strongly disagreed with this new development. SRA’s position was to have Ericsson supply integrated systems in mobile telephony by furnishing the whole package – switches and base stations – or nothing at all.

This position held by SRA caused considerable distress among managers in the switching division since they argued that the company risked losing the entire contract and eventually the opportunity of maximizing sales from its main product. Although SRA lacked the necessary competency to supply the integrated systems in mobile systems, it continued to push for the adoption of its position by talking to the parties involved.

When the Dutch PPT was prompted by Motorola to adopt the small-cell technology that was able to suit the topography and the people of The Netherlands, with SRA playing the leading role, Ericsson managed to win the contract of supplying a complete system of switches, base stations, and cell planning services. Therefore, this marked the onset of selling a more integrated mobile phone system by SRA and Ericsson.

However, despite this success in providing integrated mobile phone systems, SRA and Ericsson could have done some things differently. Instead of being pushed by the urge to preserve its long-term relationship with the Dutch PTT before making any major progress in technological advancement, they could have spent more resources in consumer research to investigate the behavior of the consumers in mobile phone usage.

This way they could be able to have a more competitive advantage in the market without relying on other forces to ignite their imagination (Coles, 1978). Moreover, since the mobile phone market was still untapped, Ericsson was a little bit sluggish in penetrating this market. The company relied so much on its principal product, the AXE, without making attempts of ‘experimenting’ on other consumer telephone products. Perhaps, the story would have been different; if the managers of the company would have decided to put everything, they had worked for on the line and fully supported the efforts of SRA in trying to sell integrated mobile telephony systems.

The events according to design, experience, and ideas strategic lenses

The entry of the Swedish telecommunications, Ericsson, into the mobile telephony market was made possible by the adoption of strategic principles related to design, experience, and appropriate ideas. SRA adopted aggressive and ambitious ways of doing business to increase its market share. To increase their experience in mobile telephony, SRA bought other firms or consultancy services. These consultancy firms brought better ideas that SRA could use to do business.

For example, the company recruited Chan Rypinski who was one of the best U.S. consultants in the Netherlands. Through interactions with this consultant, SRA hired another US-based consultant, Jan Jubon, who advised its management to venture into the potential U.S. market with its products. Although the U.S.A. PTT was still closed, the company welcomed the idea and decided to make a trial and error expedition into the new market. In this case, SRA used the “bottom up” approach (strategy as ideas) since the good working environment with the consultants enabled the free expression of innovative ideas.

Strategy as a design regards strategy development as a process of logical determination whereby the optimal strategy, as well as the most appropriate direction, is taken. This is accomplished through the careful assessment of an organization’s market, environment as well as all the readily available resources (Preedy, 2003). When an opportunity surfaced for ERA (originally SRA) to venture into the United Kingdom market, it had to follow an analysis-selection-implementation process to find the most appropriate direction to follow. Even though the U.S. venture required massive resources, the ERA management decided to venture into both the new markets. This design strategy was a bold move by ERA.

This is because it involved tremendous expansion from a small sales organization to a large manufacturing and R&D company within the United Kingdom. Moreover, the company adopted a better standard called the TACS (Total Access Communication System) to out-compete their competitors. As the company increased its market penetration around the world, it encountered increasingly complicated business environments. However, ERA countered these unpredictable situations by developing a business and action-oriented culture.

Some people may argue that the design lens of strategy is ineffective as the top managers of a company are most of the time not engaged with the daily activities of a company. Therefore, strategy as experience seeks to avoid this view by articulating that any strategic development must be as adaptive as possible. This ensures its division into intended, realized, as well as emergent strategies. According to this strategic lens, the aspect of strategic development involves constantly adapting previous strategies based on the experience of the organization. In this model, the strategy is greatly influenced by assumptions (culture). As much as the managers of Ericsson criticized ERA’s strategy as being ‘completely absent,’ the cellular phone industry was finally seen as a legitimate business entity.

In 1988, the independent ERA succeeded in its long-term internal battle to have the mobile phone to be fully integrated. This was partly due to the growth in the number of sales in the area as well as the steady rise in the market growth of the product. As much as Ericsson was too much ‘path dependant’ on past activity which to desist from mobile telephony business, the log-term persuasion of ERA had a tremendous impact on the mobile telephony market.

After ERA’s president, Ake Lundqvist, resigned from his position in 1988, he was replaced by Lars Ramqvist who continued with the tasks of his predecessor that were aimed at continuous adaptation of past strategies based on experience. When he assumed the presidency of the company, there was more freedom in the company and major reorganizations were undertaken. Two years later, Ramqvist was appointed the new Ericsson CEO and Kurt Hellstrom became the president of ERA.

After these major changes, there was immense and sustained growth of sales within the company. Consequently, in 1994, mobile telephone systems were recognized as an important aspect of the strategic development of Ericsson. Sales successes and expansion continued and by 1997, the total mobile phone sales had reached seventy percent of the corporate total. The number of employees had also grown by more than four times as compared to 1992. By 1998, the company had become the world leader in the supply of mobile phone systems. In the meantime, the public telecommunications business area underwent some restructuring and some of its sections were outsourced and sold to other companies.

Conclusion

Because of the efforts of ERA, Ericsson was completely dominated by the mobile telephony business by the turn of the century. The company became the largest supplier of mobile systems, digital mobile telephones, and public switches. This was possible because of the dynamics of strategic innovation that the company put in place from the early 1980s to the turn of the century.

References

Coles, J. V., 1978. The consumer-buyer and the market. New York: Arno Press.

Preedy, M., 2003. Strategic leadership and educational improvement. London: Open University in assoc. with P. Chapman Pub.

The World of Human Resource Management, 2008. SWOT analysis! A strategic planning tool. Web.

Vector Study, 2008. Porter’s five forces. Vector Study. Web.

Many directors and managers find their time completely occupied by fire-fighting’, dealing with the crises and problems that are occurring today, rather than considering what is necessary to ensure the survival and eventual success of the business. Corporate strategy is a flexible process which requires the time to think. The concept under analysis is a reality because business professionals have busy schedules and cannot afford the time to think about what can be and what should be.

Modern managers and leaders should not accept things as they are but to find effective solutions to improve performance and productivity. Before we can effectively respond to the future, we must anticipate it. For instance, environmental scanning is one of the principal ways to become alert to potential change, both external and internal. The mechanical part of this process is steps and methods used in the analysis, while analysis and evaluation steps require flexible thinking and reasoning. The scanning process involves identifying issues, trends, and events of possible importance through topical literature searches, internal staff meetings, panels of experts, consultants, and a variety of other sources (Clegg et al 2006). Once identified, the issues are classified and ranked in accordance with impact on the organization, timing, and probability of occurrence. Responses to issues range from implementing immediate action programs to simply monitoring the change for future developments. To manage strategically, it is crucial to find alternative state-of-the art solution to anticipate daily problems and business threats (Dobson and Starkey 2004).

The highly competitive nature of many markets and the likely future prospect of continued economic turbulence as national and global economic fortunes vary, requires that business managers continue to look for opportunities to improve performance (Dobson and Starkey 2004). This will primarily be achieved by improving effectiveness in the areas of winning/retaining customers, developing organizational competence and financial control. These success drivers are obvious but it is amazing how many businesses ignore their importance. This is particularly true in difficult markets or economic recession where short term financial constraints lead to cost cutting (Clegg et al 2006).

Time can be seen as a necessary luxury which helps managers to deal with complex problems and create a ‘strategic plans’. In general, strategy is the process of deciding how to best position the organization in its competitive environment in order to achieve and sustain competitive advantage, profitably. Strategy cannot be seen as a mechanical process because of social and economic complexity of the modern world. Strategy is formed at both corporate level (what industries/markets should we operate in) and business unit level (in what segments should we compete — and how) (Pittengrew et al 2006). The process of strategic analysis is one of focusing down layer by layer’ to develop a clear understanding of the factors which effect the corporate and the market in which it operates. Ironically managers often also reduce the ability of the business to respond to and satisfy customer needs and expectations.

In practical terms the business has reduced its capability to win and retain customers at a time when there are fewer customers in the market and it is even more important to win the sale. Strategic management requires time to think crucial for analysis of economic, political, technical, social, and competitive forces which could influence the attainment of desired strategies and objectives. It requires the continuous scanning and monitoring of external conditions to answer the following questions: What are the key environmental issues? Which of these issues are favorable? Which are unfavorable? Should we ignore the issue, adapt to it, or attempt to favorably influence the outcome? What impact will these issues have on our mission, strategy, goals, and objectives? There are no ready made answers for these questions, so a manager needs time to think and evaluate alternative solutions and find a unique strategy for a problem occurred (Thompson 2004).

Strategic management should be used flexibly to reflect the nature of the relevant country/market environment. In this case, flexibility can be achieved by thinking and analysis. This means that for a large corporate, with a significant spread of operations, it is appropriate to separately map the different environments in which the various parts of the organization operate. The facts are normally identified by the senior management of the business from their personal knowledge and experience. Naturally this assumes that they have sufficient background in the environment to generate accurate data. If this experience does not exist external information sources would need to be used to supplement the existing knowledge of the business. Even where knowledge is strong’ it is prudent to validate key facts/assumptions and to compare alternative views of the future (Drejer, 2002).

Ideally, strategic management must focus individually on each alternative solution to define clearly targeted goals and actions. Strategic management is visionary and futuristic thinking. Strategic thinking requires time to balance between what is desired and what is possible. Organizations need to be aware of what is happening in their environment that might affect them. In other words, they should continually survey and monitor the outside as well as the inside of the organization.

Bibliography

Clegg, s., Kornberger, M., Pitsis.T. 2005, Managing and Organisations: an introduction to theory and practice, Sage, London.

Dobson, P., Starkey, K. 2004, The Strategic Management: Issues and Cases. Blackwell Publishing.

Drejer, A. 2002, Strategic Management and Core Competencies: Theory and Application. Quorum Books.

Pittengrew, A. M., Thomas, H. Whittington, R. 2006, Handbook of Strategy and Management. Sage Publications.

Thompson, A.A., Strickland, A. J., Gamble, J E. 2004, Crafting & Executive Strategy. McGraw-Hill/Irwin; 14 edition.

Every organization needs an accurate analysis and assessment of the environment it operates in. The company can use environmental mapping as one of the techniques intended to capture the key characteristics of the environment in which the business operates. These factors, which may be supportive or constraining to the future development of the organization, provide the backcloth’ against which the future strategies and plans must be formulated. The model analyses the environment into four areas of focus. It should be used flexibly to reflect the nature of the relevant country/market environment.

This means that for a large corporate, with a significant spread of operations, it is appropriate to separately map the different environments in which the various parts of the organization operate (Ireland et al 123). A generic’ analysis may be too broad to be accurate and useful. The facts are normally identified by the senior management of the business from their personal knowledge and experience. Naturally, this assumes that they have sufficient background in the environment to generate accurate data. To ensure effective analysis and results, the company can use PEST and SWOT analysis.

Customers’ loyalty can be measured by Porter’s Five forces analysis and generic strategies. Even where knowledge is strong’ it is prudent to validate key facts/assumptions and to compare alternative views of the future. The analysis should be used to identify: This module introduces certain concepts for creating a map’ of the marketplace in which the firm operates. The purpose is to examine the relative position and strength of the business versus the competition. The analysis allows to compare current and past results and evaluates customers’ loyalty and preferences. This map’ identifies the degree to which market share is a driver of company growth.

Relative market share is the size of each firm’s share expressed as a proportion of the share held by the market leader. This map’ examines the correlation between the relative size of the business (defined as annual turnover) and company growth (Ireland et al 143). This reveals that in this market both large and small businesses are failing to grow whilst one medium-size player is bucking the trend and achieving high growth.

These two analyses help to build up a general picture of the market in which the business operates and the relative fortunes of the competitors. Different markets and products will have a different relationship between the key factors of market share, size, and growth. It is important to understand these relationships, and how they are changing over time, as part of the input to business development planning. Strategic planning must focus individually on each factor to define clearly targeted goals and actions. The approach to the development of each factor is likely to be different, reflecting the specific nature of the customer relationship, the competitive environment, and the key factors for successful development (Ireland et al 149).

Also, it is possible to use competitor profiling which provides for a direct ranking of the relative performance of the organization versus that of its competitors. It should be used to take a broad view of the relative competence of the firm and the analysis must deliberately be driven from a customer perspective. It is therefore important to take into account both facts and perceptions. Customers’ buying decisions are based on their perception of the relative advantages (price/cost, performance, quality, etc) of the firms offerings’ versus that of either direct competitors or substitute products/services. Successful businesses are those that effectively manage customer perceptions to ensure that their products/services are the preferred choices.

Works Cited

Ireland, R. D., Hoskisson, R. E., Hitt, M. A. Understanding Business Strategy. South-Western College Pub, 2005.

Introduction

A strategy is much more than a plan. It is a plan created from a reasoned analysis of the current market, competitors and the company plus an extrapolated vision of the future based upon current trends. This plan document will include a lot of alternatives based upon things that might change. Change is the reason strategy is so important today. Things change so fast now with instant transmission of data and fast transportation of goods that businesses must be flexible to make immediate adjustments to the changing environments. The accompanying reasoning and research are as important as the strategy itself, because knowing why can help when modifications must be made.

Main text

A good business strategy has been well thought out and the reasons for every decision are documented, so that nobody needs to remember them. When large sums of money are at stake, the business strategy provides a framework for making decisions in the future, because the strategy has already worked out all the possible scenarios and taken all the variables into consideration. When market forces change is not the time to begin researching possible alternative actions.

A strategy will already have considered every possible change in the market. If something happens which has not been foreseen as a possibility, the strategy is still useful as a guideline for considering alternatives and because it provides the reasoning for the other possibilities, and analysis of the market and future trends from which to work out a new addition to the strategy.

Locally, companies must compete and be good corporate citizens. With today’s communications networks, the news about whatever a company does at home may spread around the world via the very efficient electronic grapevine, so it isn’t just about making money in the local area, but about building the brand. A well-crafted business strategy will consider the two markets separately, and then consider how they will impact each other also. A good plan will also have worked out alternatives to consider for action should any part of the market change, including the supply chain, and it will map out changes in strategy and the alternatives presented by the change and the actions taken. A complete strategy plan will also include plans for implementation, because a plan is no good if it is not put into action.

One of the most important parts of creating a strategy is the analysis. There are a number of different tools easily available to use for analysis, depending upon the purpose of the analysis and factors such as company size, business model etc. Any of these will be useful, but some may provide more useful information than others.

• PEST Analysis – this analyzes a company in the context of the “environment” in which it operates
• Five Forces Analysis – this identifies the forces which impact the level of competition
• Market Segmentation – this singles out similarities and differences customers or users
• SWOT Analysis – this assesses the “internal” position and “external” environmental influences

There are more, but these are currently the most used.

A formalized business strategy may have several parts. The overall business strategy for the entire company may be expressed in a mission statement which encompasses the company’s goals and reason for being. However, there might be a business unit strategy for each segment of the business to create a framework for doing business. This strategy centers upon how each business segment competes in its market and adjusts to market changes. This strategy guides the unit managers to create new opportunities while maintaining current customers and adjusting to the competition. An operational strategy is concerned with how each part of the business operated to fulfill the overall business unit strategy. It focuses on how to make everything work together.

Why We Study Strategy as a Business Discipline

The previous two pages are just a very brief overview of what a strategy is and how it helps businesses succeed. There was not even enough space to include complete descriptions of the analysis tools mention and directions how to use them, and these are not the only tools available. Business today is a very complicated process and success does not happen because you’re a good guy. Even being very smart, while helpful, is not enough. Besides, learning all the lessons of strategic planning first-hand would require experiencing and surviving considerable failure. It is much better to learn from someone else’s mistakes. Many brilliant people with years of experience have contributed to the discipline of strategic planning. Guided use of these resources will make the student a better strategist and planner.

Business strategy as a discipline will help the student learn to create and implement business strategies and to make adjustments when necessary. It will help the student to learn to use the tools available and to manage the change that strategic planning may demand. Most important, disciplined study will make the student aware of all the available resources in order for him or her to continue learning.

This study is important when a manager moves up in the company, in order to help him acquire the skills needed for the upper management positions. It is also extremely important when any business contemplates change, such as mergers and acquisitions. Anyone who wants a career in business management needs to study strategy to help him create the strategy for the business and his own personal strategy as well.

Summary

Strategy is about learning to think creatively within the constraints of disciplined analysis and logic and then creating a plan for implementing that strategy. On-the-job learning can be very powerful, but it can also be quite costly to the business and to the learner. It is much better to learn from those who have gone before and then one does not have to reinvent the wheel.

References

Strategic Planning, 2008, Developing a Strategic Plan. Web.

Tutor2U, 2008, What is Business Strategy. Web.

Agility and Speed

Summary

The strategy refers to setting clear goals and objectives for particular periods. The company will be able to streamline its operations towards achieving these objectives thus not losing focus. The concept of product differentiation can be applied in terms of producing unique products as compared to those provided by the competitors. Through this, companies will be able to secure market for their products because no other competitors are providing the same services

The use of the proactive element by continuously reviewing and improving the standard of quality of services to customers surpasses the customers’ expectations.

Application

By applying the concept of reconfiguration to the British Airways company as an example, the company will improve its products; thus better quality products and services. Through the strategy of image differentiation, the company looks at ways of creating a unique image as compared to others. This can be best achieved through being sensitive to all the stakeholders, needs and through corporal responsibility.

In the case of co-operation, the company can look for ways of working together with the other companies. This will result in cutting costs unlike in the case where the company walks alone in carrying out all the operations.

Through the concept of replication, the company will be able to minimize the cost of production because little or no finance will be channeled towards research and development.

Living systems

Summary

The method that can be used to sustain competitive advantage is through diversification. The company provides different types of services thus ensuring continued income even when some particular lines of operations are not favorable.

Through the complex adaptive system, the ways are adopted that cannot be easily copied. This will prevent the competitors from copying ways of operation from the company thus securing the uniqueness of the company.

By maximizing efficiency with minimum excess capacity, the company can utilize all the available resources thus ensuring that there are no idle resources but all are utilized for the benefit of the company.

Through mergers and acquisitions, the company can expand its operations and also increase its financial capacity thus being in a position to enjoy economies of scale.

Application

By refreshing the corporate gene, the British Airways Company comes up with new ways of doing things, thus being in the capacity to remain relevant in the dynamic world.

Through extensive consultation and brainstorming by all the management staff, the company is in a position to generate new ideas for doing things, and out of these, they are in a position to choose the best strategies to implement which will thus most benefit the organization.

By coming up with a variety of options for carrying out its activities, the company will always have another plan or the other option if the first chosen failed to produce the desired results which can thus be implemented.

Storytelling

Summary

How the staff of an organization can learn to perform Dr. Dee Andrews, Storytelling as an Instructional Method their duties effectively include; scenario-based learning whereby they are given a scenario that resembles what they are expected to encounter. The other one is through problem-based learning where they get new ways of doing things as they encounter the various problems. The other one is through a narrative where they are narrated on what they will encounter and how to deal with each situation. Case-based learning involves giving the learners a case where they are expected to deduce the problem and the solution to it. All these ways are important to the organization as they will ensure maximum utilization of the staff thus maximum productivity.

The ways of letting the staff know what they are expected to do include:

Describing or demonstrating the strategy. The stakeholders are let know what the organization is putting into effect and how it operates. This will enable them to clearly understand what they are expected to do.

Application

Using the British Airways Company which recommends that its staff members should be provided with different occasions for practice using the strategy. As it said practice makes perfect, the staff through this will be able to perform their duties to perfection or rather to the required standards.

The stakeholders should also be provided with informative feedback as to the creativity or originality of the strategy or outcome. This will go a long way in giving the morale to the performers and where they can improve; they will be able to gauge themselves.

Establishing an expectancy of success enables individuals to always remain positive even at the moments when they are facing challenges.

Feedback for successful performance should also be given.

References

Amy Howlett, Tony Lawrence, Dayo Omolokun,Agility and speed-delivering sustainable Competitive Advantage.

Eric D. Beinhocker (2006). The origin of Wealth, Havard Business School Press Dr. Dee Andrews, Storytelling as an Instructional Method.

The main purpose of this report is to evaluate current E-business strategies employed by such companies as Watani and analyze their strengths and weaknesses. In addition to that, I would like to make some suggestions, which may possibly contribute to the effective functioning of this hypermarket. In order to assess the efficiency of the methods used by the management of this organization, it is necessary to pay extra attention to such criteria as the degree of customization, the accessibility of products, the convenience of interface and so forth.

It seems that Watani is quite able to increase the level of its popularity, yet some amendments should be adopted. Overall, while determining the appropriateness of any e-business strategy, we should first ascertain whether it corresponds to the capacity of the company and promotes its development (Chaffey, 2007, p 55). It is early to make any assumptions but in my opinion the policy, pursued by Watani does not fully live up to the objectives that this enterprise sets.

Prior to analyzing E-business techniques of this company, we should point out that Watani is arguably one of the largest supercenters in Saudi Arabia; it offers a wide variety of products such as food, clothing, toys, hardware, domestic appliances, etc. Thus, it would not be an exaggeration for us to say the services of this hypermarket enjoy considerable demand.

On the whole, Watani strives to strengthen its position in the market and for that purpose its management has decided to make use of information technologies. At this moment we can observe that this supercenter intends to change its image of a traditional brick and mortar shop to a more modern one. Nevertheless, there are certain drawbacks that should be rectified. Certainly, we may not presume that this transition can be accomplished in a relatively short amount of time, this is a gradual process, requiring time and significant investment. At present, there are certain stumbling blocks or obstacles, but they can be surmounted.

First and foremost, we may say that Watani uses its website only for advertisement however; one may suggest this organization can easily enhance its functionality, for example by offering the opportunity to purchase the goods directly on the Website. It should be taken into consideration that Watani has four stores in Jeddah and Makkah; these cities are regarded as the leading resort centers of the country. Consequently, we may infer that the number of buyers should be constantly increasing.

It might be prudent to sell some of the products on in electronic shop. The thing is that some of the clients do not have time to do shopping and therefore it might be more convenient for them to make orders online. One cannot deny that such a shift in policy entails considerable effort and the management may even claim that such change is not cost-effective yet we may argues that a great number of hypermarkets give preference to Internet-based commerce (Farhoomand, 2000, p 85).

At this point, it is of the crucial importance for us to discuss the approach, which the company has taken towards its clients. The strategy that Watani employs now can be classified as Infomediary. The essence of this technique lies in the following: the organization reduces costs of customer search and advertising by means of Internet. In point of fact, this supermarket only intends to provide information about the goods and services, it offers.

According to such scholar, as Peter Vervest, this strategy can be defined a passive infomediary (Vervest, 2000, p 76). In other words, the potential client cannot interact with the shop; consequently there is no possibility to make an order. He or she may only get links for further information. Naturally, we should not say that such a method is entirely inappropriate, its effectiveness (or ineffectiveness) greatly depends upon the circumstances. It is impermissible to evaluate the use of E-commerce strategy without considering the context and the situation.

To a certain degree, such an approach is quite effective on the condition that the enterprise is a new-comer and its main priority is to advertise its products or services. But we can hardly claim that Watani is a beginner in this field. This supercenter established its reputation several years ago, thus, it might switch over to some other tactics, such as active infomediary. The major difference is that buyers would be able to conduct transactions.

We have to admit that this policy will require considerable expenses, especially if we are speaking about delivery service, but in the long run this investment will break even and yield results. We must not forget the fact that some of the companys stores are located in Jeddah, one of the biggest and also busiest cities in the country, and it is not surprising that many people give preference to E-commerce. The major problem is that now they do not have such a chance.

At this moment the relations between Watani and the clients appear to be somewhat one-sided, which does not contribute to the effective functioning of this organization. The company has yet to fulfill its potential but some changes may improve the situation which has recently emerged. In whole, the first suggestion is that Watani should probably try some alternative approaches such as active infomediary.

Another aspect, which we may not overlook, is the convenience of the Web site. The interface is quite practical and the potential client can easily browse through it. The information is presented in a clear and concise fashion, yet there are some inconsistencies. As it has been noted before, Watani offers a wide range of products, and thus, the company has to divide them into categories. The customer can search for the necessary item but the main problem is that the price is not specified.

Moreover, the company provides special offers at discounts but they cannot be accessed. The client may only find email addresses of the management but he or she cannot call the commercial department in order to make the purchase. It is also impossible to find the description of the particular item; one can only look at its picture. According to distinguished experts, such inaccuracies often make would-be clients refuse the services of any company (Gottschalk, 2000, p 31).

Apart from that, while analyzing any E-business strategy, we should focus on such questions as the degree of customization. Judging from the information, released on the web-site of this company, one may say that the well-being of clients is one of the main priorities for the management. At least, it is declared to be so. But there are some details, indicating that this statement is not quite grounded.

First of all, it can be observed that regular clients do not have personal space, and there is no greeting when a potential client enters the site. At first glance, one can raise objection, claiming that that these are just unnecessary formalities, but the experience of leading E-commerce companies tells us that in the overwhelming majority of cases, any person feels more comfortable if the website is more interactive and there are some phrases, which serve to emulate natural conversation. The issues, which we have discussed, are sometimes treated as insignificant or they are even labeled as trifles, but the outcome or success of any enterprise is determined by such trifles.

Therefore, it is quite possible for us to arrive at the conclusion that at present Watani employs such a strategy as passive infomediary, which consists only in providing the information to the client. Given the position of this company in the market we may suggest the transition from passive infomediary to the active one. As regards the overall effectiveness of this model, we should point out that the website of this organization does not give comprehensive data about the goods and services; in particular we can speak about the prices.

Apart from that, the management should not overlook such question as customization, because any potential client will be willing to make his or her purchases in this supercenter if he or she knows that the management is involved with the needs and demands of the buyers. On the whole, Watani should assume a more active attitude toward electronic commerce and should not limit itself only with advertising. The Internet has excellent prospects for continuous growth, yet the company has not utilized all of them.

Bibliography

Ali Farhoomand, Peter Lovelock (2001). “Global E-commerce: Text and Cases”. Prentice Hall.

Dave Chaffey (2007). “E-business and e-commerce management: strategy, implementation and practice”. Pearson Education.

Erik Brynjolfsson, Glen L. Urban. “Strategies for E-business Success”. Jossey-Bass.

Petter Gottschalk (2005). “E-business strategy, sourcing, and governance”. Idea Group Inc.

Peter Vervest, Al Dunn (2000). “How to win customers in the digital world: total action or fatal inaction” Springer.

Introduction

Before we analyze the case in detail it is important to first take a look at a definition of corporate strategy so we know what we are analyzing.

‘Strategy is the direction and scope of an organization over the long term: which achieves advantages for the organizations through it configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholders’ expectations.’( Tutor2U, 2009)

The case analyzes how external pressures forced Merck to reevaluate its business strategy and how they managed to evolve and actually implement a strategy that would bring them long-term success and success and enable it to see through economic downturns like the one affecting the global economy at the moment. Basically, their focus was on implementing policies that would make their organization more flexible and also leaner (Johnson and Nisita, 2009). The example of a company from the pharmaceutical sector is extremely appropriate since that industry is struggling with problems beyond those attributable to the downturn. The following questions allow us to analyze the Merck strategy and discuss the main challenges faced by it in the implementation of a new strategy and also discuss the application of strategy development and implementation with respect to a Kuwaiti company.

What are the most important elements of Merck’s strategy?

One of the most important elements regarding Merck’s strategy was the creation of a Strategy Realization Office. This move created an entire department focused on the successful implementation of strategies. Line managers tend to get bogged down with daily work or get tied to traditions to reevaluate what they are doing and consider doing things in a different way. This makes it very advantageous to have a separate unit that is focused totally on strategy implementation and seeks to bring together the different departments such as sales, marketing, and finance amongst others on one page so that there is an asymmetry in what each of the departments is doing. This focus on unifying the goals of each department is also a key element of their strategy. Each department needs to work together and achieve synergy if the organization’s goals are to be successfully achieved. Another element to this unification is the centralization of the different units of Merck in different countries. Although there is a small compromise on flexibility in any effort of centralization, however a unified focus for all units can serve to work well in the sense that the units are focused on the entire organization’s well-being rather than their own unit. Also, it is important to make each department feel that there are keys to the organization but need to work together for success. For example, for Merck, the case indicates that the R&D department and marketing department have not always worked together. This lack of unity creates an environment where the R&D department is focusing on making products for which there is not a viable demand in the market. So an important and major element of their strategy was to create this unity amongst various departments and units. The strategy cycle of the Strategy office was key in bringing the goals of different departments into one line (Johnson and Nisita, 2009).

Strategy implementation encounters a major pitfall in terms of employee attitude. Very frequently employees do not understand the strategy and see it as bureaucratic nonsense which will not contribute positively to organizational efficacy and success (Business Balls, 2007). To cope with this problem Merck did two important things. One was that senior-level managers were involved with explaining strategies to employees. Research has repeatedly indicated that the involvement of senior managers is important for the implementation of any real change in the organization. This is simply because when serious managers are involved they are able to explain strategy better in the broader context of the organization and also it indicates to employees that the company is taking the new strategy seriously and their future in the organization is linked to the implementation of the strategy. Another tool used by Merck was to tie compensation to the successful achievement of strategic goals. This helps keep employees motivated and driven to achieve goals. It is the combined impact of both these elements that can help keep employees motivated and passionate about change. Another key element implemented by Merck was creating an environment in which it was acceptable to make some mistakes or to give negative feedback about projects. This kind of culture allowed bad decision’s to be identified immediately and for unsuccessful projects to be scrapped immediately before they grow bigger and become a major problem for the organization. Another strategy implemented by Merck was to differentiate between initiating new projects and measures and the success of various projects and measures. This allows the organization to pick out wrong measures which may have been’ installed’ but have failed to take off or provide any return to the organization (Johnson and Nisita, 2009).

What are the challenges that this strategy had faced during implementation?

A key problem faced when any change is coming to an organization is the opposition that comes from employees because of the increased uncertainty that change brings (Businessball.com, 2009). Merck faced this challenge as well, however dealt with this by keeping employees informed about the real goals of the strategy and also by tying employee compensation to success in strategy implementation. An example of attitude change provided by the case is that of changing perceptions regarding communication of failures. This attitude was gradually changed into one in which it was acceptable and in fact encouraged to criticize and identify failings of the organization. Another challenge is the temporary pain or struggles that an organization has to face to achieve success in implementation. For example providing investors detailed information about projects turned out to be a good move in the long term but was hard in the short term in the sense that more information was also shared with competitors and this practice also required more rigorous auditing and tighter budgets (Johnson and Nisita, 2009).

Give an example of a Kuwaiti company regarding this topic

An example of a Kuwaiti company trying to bring about a strategic change is that of the telecom operator Zain. This company was initially know as Mobile Telecommunication but in changed its brand name in order to capture more market and become a more significant player in the global telecom market. When a company is going for aggressive growth like Zain was planning to this requires planning and development and implementation of key strategic goals. While Zain changed its strategic direction to achieve growth and capture a more significant chunk of the global market Merck already a huge company was looking for more unification in its processes. Although the tools used for implementation and also its ultimate goals may have been different but each company’s transformation falls into the category of strategic development (Wireless Federation, 2007).

References

Business Balls. (2009). Strategy Implementation and Realization.

Johnson K. L, Nisita V. (2009). “Driving Transformational Change: Strategy Execution at Merck.” Balanced Score Card Report. 11(4), 1-6.

Tutor2you.com (2009). What is strategy.

Wireless Federation. (2007). Kuwait telecom giant MTC changes brand name to Zain (Kuwait).