1. Today’s environmental scanning is not limited to domestic industry landscape--rather it has been already a global competition. Please provide your definition of global economic world. Discuss the strategic reasons for globalization of a business and value chain activities. And do you agree with the argument, “The World isn’t Flat.”? Why? Answer: For me, the definition of global economic world is the It is the increased dependency between national economy due to the flow of goods and services, capital, technology between the borders(import and export) in the world. This shows the interdependence between countries in the trade and flow of services, goods etc. Also, it gives more wealth to the nation by globalization. The strategic reason for globalization of a business is to increased revenue as the sales shoot up which results in meeting the strategic annual targets and to obtain better publicity and wider reach of the brand. It also results in utilizing the technical competence and technical knowledge of many counties and this synchronization of technologies in turn build better products. The strategic reasons for globalization value chain activities is to reduce operating cost. In which, retailers rely upon supply chains to rapidly convey expensive products to abstain from carrying costly inventories in stores any more extended than would normally be appropriate. In addition, manufacturers rely upon supply chains to dependably convey materials to assembly plants to stay away from material deficiencies that would shutdown production. I would agree with the statement that " The World isn’t Flat". Sine, everyone on this earth are thinking in the same way about their requirements. They are interested at smart work, earn more revenues, get more knowledge, and spend it towards national benefit. 2. There are three types of global competitive strategy: Global, Multi-domestic, and Transnational strategy. Discuss advantages and disadvantages associated with multidomestic strategy. Provide your suggestions on the managerial considerations (e.g., organizational structure, control systems, coordinating mechanisms, etc.) for successful implementation of the multi-domestic strategy. Answer: When it comes to multi domestic strategy, the firm is responsive towards the local needs of the customers and customizes their products as per the needs of the local customers in each international market it operates. The advantage of this strategy is that it makes the offerings of the companies responsive towards the needs of the customers and helps in establishing the firm strongly into the market. It helps the companies to connect with the customers in a better way. The selection of each strategy depends upon the nature of the products and the overall strategy of the firms. This strategy is suitable where the companies attempt to gain efficiency and economies of scale. The multi domestic strategy is suitable for the products like food items in which there are significant differences in the tastes of the people in different countries. The disadvantage of this strategy is that, there is limited local responsiveness leads to the risk of loss in the local markets and the firm can do only minor modifications to the product to suit the market. Another disadvantage is that as the products are standardized, considerable degree of coordination is required among the worldwide operations. I would suggest a global strategy for the business to expand overseas. The advantages of global strategy is that it would allow the firm to make cost advantage by transferring the manufacturing operations to low cost locations and helps to achieve economies of scale. When standardized products are manufactured ensuring low price and high quality, it helps to create good reputation and competitive advantage in the global market and the firm can become a leader in the global market. 3. Discuss how the need for control over foreign operations varies with the strategy (e.g., global standardization vs. localization) and distinctive competencies of a company. What are the implications of this relationship for the choice of entry mode? Answer: The need for control over foreign operations definitely varies with firms' strategies and core competencies. At one end of the spectrum, we have product companies that only want to exploit foreign markets. They take a handoff approach and form an alliance with a local partner who controls all of the operations - the firm only provides the products. This strategy assumes a degree of sophistication of the domestic market and also of the superiority of the product. The arms-length approach discussed earlier basically keeps them away from their target markets and becomes a barrier to their effectiveness. For strategies of global sourcing too, greater control over foreign operations is desired. The need for control as a function of its core competencies is also multi-dimensional. Even if it is primarily a product manufacturing company, there may be economies of scale in moving manufacturing overseas. The implications of the choice of organization structure and entry mode are; determines the success in the market, defines the core competencies and strategies, and the cost incurred also depends on structure and entry mode. Determines the success in the market-structuring and the entry mode adopted would be key to the success that the company is likely to obtain from the market on the basis of the approach it employs in the operations. defines the core competencies and strategies-the core competencies and strategies would ultimately be derived on the operation structure and how the firm enters the market. The cost incurred also depends on structure and entry mode-the organization structure which is based on many employees and hierarchy would result in more costs. 4. Why was it profitable for GM and Ford to integrate backward into component-parts manufacturing in the past, and why are both companies now buying more of their parts from outside suppliers?What value creation activities should a company outsource to independent suppliers? What are the risks involved in outsourcing these activities? Answer: Companies can increase overall value of their business when ownership of processes at different stages of supply chain is under control. To achieve this backward integration is the only option. Backward integration decreases the risk of increase in cost, quality problems and disruption of critical material supplies. Ford Motors and General Motors are famous examples of backward integration in the automobile industry. They have been manufacturing key components themselves. Henry Ford believed that the cost of manufacturing began from the moment the raw materials were purchased. As a result, he wanted to control all stages of manufacturing and entered into backward integration. But today both the companies prefer to buy many components from outside which they have been manufacturing themselves. Many factors are responsible for it. Intense competitive pricing along with high labor costs has rendered this business less attractive for them. There are many suppliers of parts who can supply at a much lower price per unit these companies have been incurring by manufacturing on their own. Moreover, these companies need not have any sort of labor agreements with UAW if they outsource supply of materials. Companies usually outsource value creation activities such as non-core and nonstrategic to their suppliers. Non-core activities such as Business Process Outsourcing and Knowledge Management, which gives company time to concentrate on future development of business instead of focusing on day to day routine. But risks involve are as follows: Company becoming too dependent on the outsourcing activity, though such risks can be eliminated by using parallel sourcing policy; Loss in control of scheduling in the supply chain, which can be managed by outsourcing to more than one competing company. 5. What steps would you recommend that a company take to build mutually beneficial, long-term, cooperative relationships with its suppliers? Answer: Supplier relationship management is the strategic planning and managing the interactions with the suppliers in order to have long-term relationship and mutual benefits. The steps taken that can be taken by a company to build long term cooperative relationship with its suppliers are as follow:• Understanding the working style of the suppliers - This includes learning about their business, how they work and respecting their working styles. • Turning the supplier rivalry into opportunity - The components can be taken from two or three vendors. This can help in creating compatible production philosophies and systems. Sharing the knowledge about the same with the vendor will be helpful in building good relationship and setting up of joint venture. • Supervise your suppliers - This includes providing performance report card and immediate and constant feedback to the suppliers. Problem solving can be done by the involvement of the senior management. • Developing supplier' technical capabilities - this can be done by building the problemsolving skills of the supplier and innovation capabilities. • Sharing information intensively but selectively - Formal meetings should be conducted on a regular basis. The information can be shared in a rigid and structured way. Suppliers should be insisted on collecting accurate data for future business opportunities and growth. • Conducting joint improvement activities - This can be done by sharing views, ideas and best practices with the supplier and setting up suppliers study groups. 6. When is a company likely to choose (a) related diversification and (b) unrelated diversification? Answer: Related diversification is the type of diversification where it is so much related to the current industry of the job that the organization is performing. This type of diversification is very close to the existing line of business. 7. How can related diversification create a competitive advantage for the firm? What challenges might firms confront in achieving competitive advantages through related diversification strategy? Related Diversification can create a competitive advantage because it obtains revenues from other lines of businesses linked to the primary business. A company that owns similar but different businesses that are within the core competency, related diversification and can be beneficial and create a competitive advantage. For example, ExxonMobile deals with petroleum, but due to the environmental impact, Exxon bought a natural gas firm. By so doing, Exxon can now profit off two business models that fall under the same core competency. Related Diversification can also be a competitive advantage because it sets a firm up for success and failure. Rather than relying on one business, there are two. If one fails, and the other one thrives, you are doing far better than the other firm. The marriage between Delta and Virgin Airlines has a positive impact on the company as a whole. Delta bought 49% of the Virgin Atlantic Airlines for $360 million. Delta wanted a larger share of the flight routes that flew from New York to London. The passenger demand was up so Delta bought its way into the market. The agreement included 108 routes with 66 connections across the U.K. and North America. Other perks in the merger include sharing Clubhouse access and reciprocal loyalty programs as well as priority check-in, boarding and baggage handling. This was a very well played strategic investment on the part of Delta that would greatly help the airline gain market share. Delta was struggling to provide travelers with reasonable flight rates due to the continued increase in the cost of jet fuel. To achieve low-cost leadership and combat rising fuel prices Delta announced its purchase of Monroe Energy in Trainer, Pa. to help better control fuel prices. Delta also used the concentric diversification strategy when it bought out Monroe Energy. 8. What factors make it most likely that (a) acquisitions or (b) internal new venturing will be the preferred method to enter a new industry? Acquisitions will be the preferred method to enter a new industry when barriers to entry are high, or the company is pursuing unrelated diversification, or in a circumstance when the opposite company is not ready to accept the time commitment, development costs, and the risks which comes with internal venturing. Acquisitions tends to make most sense when barriers to enty are high and cost internal venturing are high. Another case acquisition is adapting the company when company is pursuing unrelated diversification because acquisition provide instant access to an experienced management team that reducing the learning cost. Whereas internal new venturing will be the preferred method to enter a new industry when barriers to entry are low, or company is pursuing to enter in an industry which is very much related to the company’s existing operations, and in a scenario if the company does not need to move very fast. Internal new venturing makes the sense in opposite circumstances and when barriers to entry low and when the industry to be entered is closely related to the company existing operations. When a company possesses a set of valuable competencies in its existing businesses that can be leveraged or recombined to enter the new business area. Science-based companies that use their technology to create market opportunities in related areas tend to favor internal new internal venturing. Even if it lacks the competencies required to compete in a new business area, a company may use internal new venturing to enter a newly emerging or embryonic industry where there are no established players that possess the competencies required to compete in that industry. 9. Imagine that Amazon has decided to diversify into the food delivery services. What method would you recommend that Amazon pursue to enter this industry? Why? If Amazon had to capitalize on its present brand value, then it would have to diversify into related businesses and make good use of the brand it has already built. What do you as a consumer think of when you think Amazon? 6/10 customers would connect Amazon with electronics. a) Apparel: Fashion is a big chunk of Amazon's business, and there is huge potential and huge margins in the apparel business. Amazon's brand is only going to augment the products in the market should it decide to go for it, as Amazon is generally related with trust and customer friendliness c) Transportation Services: Amazon should also think of offering its logistics services to other e-tailing companies as a service. Amazon has a very well established logistics service, till the last mile. It can definitely foray into the B2B segment by offering this as a service to other competitors in the market. Amazon has already built a great brand in terms of customer trust and quality. By diversifying into the right areas, it can capitalize on these markets riding on the strength of its brand. As for the last question, Both diversification methods have their own strengths and weaknesses. Related diversification has a major strength as the company is diversifying into related fields, it clearly knows how to get to a strong position from day 1. Also, diversifying into related fields will further augment the company's overall position Unrelated diversification might require more investments as it is a market which the company does not know much about. However, a key advantage here is that if the core industry goes down due to market forces, then the company will still make revenues through the unrelated diversification it made (as it is a completely different industry). 10. What kind of companies stand to gain the most from entering into strategic alliances? Discuss ways to increase the success rate with the strategic alliances. In strategic alliances, when two or more business come together for a certain time, the alliances help in reducing the overall cost of any Project as the resources will be shared between both the Organizations. Moreover the burden of managerial control could also be shared between the two entities that are entering into such an alliance, in order to oversee the performance of the tasks so assigned and thereby contributing towards various areas of strategy or maybe even to one in particular such as technology, Product development, etc. In terms of accountability also, both the parties shall be equally accountable and hence the burden of the same shall not rest upon any entity solely. All these advantages could be sought by the businesses against the uncertainty. There are various companies that can stand to gain the most from entering into strategic alliances with potential competitors who may be even indirect competitors, if not direct ones. Strategic alliances can combine with itself various other strategies for survival such as that of the Growth strategy in the business, by entering into alliances with other businesses. For example, the globalization strategy of Tata Group starts with its growth strategy where Tata Group got into a strategic alliance with the Telecom major NTT Docomo in November 2008, to render competitive telecom services in the home country, India. Further, it received the license to operate in the GSM Telecom services space when the market for GSM was yet developing in the country. This gave a significant boost to Tata in the telecom industry. In addition to this, Tata group had various foreign acquisitions from taking over 100% shares of the companies such as UK-Based steel firm, Corus or the British salt of UK or even UK’s BT group’s Mosaic business. It has also taken over significant share of the Companies such as EPM Mining ventures of Canada, Neotel of South Africa, etc. 11. How might a company configure its corporate governance systems and its strategymaking processes to reduce the probability that managers will pursue their own selfinterest (agency behavior) at the expense of stockholders? For an organization to lessen any agency issues, it need to exercise suitable and satisfactory control and checking. For a company regulate the activities of top managers, the directorate needs to be take part in strategy-making at high stages, and must be charged with guaranteeing that the policies selected are in the lasting benefits of the company. Similarly, the board of directors need to offer accountability for supervising the activities of top directors to make sure that they are actually executing the selected plan. The panel must be made up of typically external associates representing any big stockholder teams. Additional control tool is to utilize strategic controls to make sure that lower-level directors perform in accordance to the desires of top directors. This procedure necessitates top managers to create principles, establish a system for intervallic measurement, associate real act to the principles, and assess the outcome. For this system to be implemented, there need to be some centralization; much devolved organizations don’t offer satisfactory chances for oversight, and the subsequent material asymmetry may result in the agency difficult. According to the exemplary Carrot and Stick hypothesis there could be two ways to deal with location this. The association could build up a solid investor portrayal in procedure making process just as survey systems. Along these lines the investor portrayal will dependably make right inquiries to guarantee that advancement is being made right way. This instrument could succeed to a degree however this does not bring total commitment from administrators. Achievement of this methodology likewise depends on right determination of investor portrayal and their power over the whole procedure. A superior arrangement is to adjust rewards for administrators dependent on same parameters which the investors car 12. In a public corporation, should the CEO of the company also be allowed to be the chairman of the board (as allowed for by the current law)? What problems might this present? This is a real point of conflict and it further become adverse when we look that this is at the senior position in the organization. Human beings have highest soft corner for their personal interests. Upon arrival of favorable circumstances, the human beings have the inbuilt habit to explore for their personal benefits. So based on this principle, the rule of conflicts are made, so that a person at one position should not explore for his personal use. CEO is the person who is selected by the team of board of directors. The role fo board of director is to select the right CEO for the organization, so that he can take the organization on the growth path and they can achieve the success for their business. The team of board of directors decides the salary/packages/benefits for the CEO for the work he does during the CEO role for the organization. So a person who is CEO, he himself cannot be the member of board of director, because he cannot make instructions for him only and a person cannot be involved in making salary/package/benefits for himself. Thus this is a strong point of conflict of interest for this scenario. The CEO can make the misuse of his role as board of director as well as the role of CEO and he can finds the best suitable activities which makes best profit for him or is of best interest for him. Thus it will not have major benefits for the organization, but high personal benefit for the CEO. 13. What is the relationship among organizational structure, control systems, incentives, and culture? Give some examples of when and under what conditions a mismatch among these components might arise? The way a company allocates power and authority determines how employees behave. These choices manifest in a company's organizational structure and organizational culture. Organizational structure is the the way a company arranges its management and lines of authority. It determines roles, responsibilities and the flow of information within the company. Work culture results from those decisions. Most companies use a hierarchical structure that looks like a pyramid on paper. The chief executive or president sits at the very top of the pyramid. His direct reports, usually the vice-presidents, are on a line under him. Their direct reports are on a line under them. The pyramid stretches outward and downward based on the number of levels of management the company needs to operate according to its objectives. This effectively means that the vice-president of operations is the only executive with a direct line to the president, and everyone else reports to him. In this scenario, the vice-president of operations has a great deal of power. Conversely, the president could allow many of his executives with direct access to him. This is a decentralized approach to organizational structure, allowing more people to have input into the decision-making process. Decentralized power gives more autonomy to individual departments and managers. In this way, organizational structure and organizational culture are interrelated. A decentralized power structure means there is more room for employee input into decisions. Employees are more accountable, because they have more responsibility. They work more independently, because they do not always need approvals from upper management to proceed. The organizational culture reflects these 14. How would you design structure, controls, incentives, processes, and culture to encourage entrepreneurship in a large, established corporation? How might the desire to encourage entrepreneurship influence your hiring and management strategy? Likewise, organizational structure and organizational culture can have a negative impact on one another if power and authority are highly centralized at the top of the pyramid. In this instance, employees have little control over decisions and must merely do their jobs. The type of culture this structure can breed is one of no accountability at the lower levels, hostility and an environment where employees do not feel vested in the company or their jobs. I would go for decentralized form of organizational design in order to encourage entrepreneurship as I do not believe in controlling employee behavior using written rules, so that employees have little autonomy to decide on a case-by-case basis. A formalized structure is associated with reduced motivation and job satisfaction as well as a slower pace of decision making. Decentralized companies give more authority to lower-level employees, resulting in a sense of empowerment. Decisions can be made more quickly, and employees often believe that decentralized companies provide greater levels of procedural fairness to employees. Job candidates are more likely to be attracted to decentralized organizations. Because centralized organizations assign decision making responsibility to higher-level managers, they place greater demands on the judgment capabilities of CEOs and other high-level managers. The methods can be as follows: 1. New employees should be provided with hand outs and documents related to workplace ergonomics . 2. New employees should be invited to volunteer to assist in streamlining the ergonomic processes 3. Workplace ergonomic process should be mandatorily included as part of orientation schedule
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