Type:
Solution Manual
Resource:
Strategic Market Management
Edition:
European Edition
Author(s):
David A. Aaker Damien McLoughlin
1
Chapter 16 Organizational Issues 1. Strategy execution did not go according to plan in the DaimlerChrysler example at the beginning of this chapter. How could these problems have been avoided? While the merger of the two companies offered potential synergies and even economies of scale, it seems that Mercedes’ prior analysis did not take account of the different reasons for success in each company and consequently the core competencies and cultures of each. Similarly they underestimated the impact of the merger on Chrysler’s corporate culture and staff and actively encouraged separation fearing the impact of integration on the Mercedes brand. They also delayed in rectifying the brain-drain and by the time they had acted Mercedes Benz was suffering in its own markets. Mercedes could have avoided initial mistakes by engaging in impact analysis of their original strategy. Despite that, they could have acted more quickly and with greater commitment to the merger to demonstrate how much they valued the acquisition of the American car- maker. Such a policy could have led to a greater mutual understanding and sharing of expertise and technical knowhow which may have helped avoid problems that later transpired for Mercedes with its volume C and E class vehicles for example. 2. What are the advantages of decentralisation? Some people argue that more centralization is needed to develop and implement strategy in these dynamic times. Express your opinion, and illustrate it with examples. When would you recommend that the central team use a facilitative role, rather than impose its advice? Decentralisation affords an organization greater flexibility. Management in local markets has the autonomy and product knowledge to make and implement decisions pertinent to local dynamics, quickly. Performance of individual business units is more transparent than with centralized organizations. As such decentralization can infuse the company with certain vitality as autonomous business units navigate a course in their respective markets. Centralisation allows a company greater control over the business. For example, a standardized brand identity can be developed and implemented globally by one core team, allowing consistency in the implementation and the message. Additionally centralization can lead to efficiencies across a range of management functions such as administration, marketing and financial management. With firms facing globalised markets, fragmented into individual markets by region and cultural norms, it may be optimal to implement a Think Global, Act Local strategy: adopt a happy medium with Head Office acting either as a facilitator, consultant or simply service provider to local operations. HSBC Bank exemplifies this in its positioning as a world bank with local outlets. Embedded in its corporate advertising, HSBC achieves a fine balance in its positioning between being a world bank and one that understands local markets by highlighting different cultural interpretations of common concepts and symbols, for example certain colours and animals. A facilitator role would be advisable for firms entering culturally diverse and culturally distant markets to that of the company’s home culture. In short, a facilitator role is advisable when market dynamics at the local level are sufficiently different from those in the home market. 3. Evaluate Mintzberg’s easy steps to destroying value. Which is the most common step?
© 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/aaker
2 Planning and implementation of planning are probably the most common area where companies fall down. As indicated by Eisenhower’s famous quote, companies can make plans ad-infinitum but it is the ability to implement plans that fit with the organisation’s culture and values that is crucial. As such a focus on planning can lead to repetition and routine, killing learning and therefore the opportunity to improve through planning that accounts for a variety of strategic options. 4. GE’s Jack Welch believes that people are the most important ingredient to success. What are the implications of that belief? By understanding the fundamental importance of staff to the firm’s success Welch adapted his management style accordingly to take advantage of this by encouraging a range of communications initiatives to stimulate best practice within GE. In an increasingly service-oriented marketplace there are more moments of truth involving contact with company representatives. As such it makes strategic sense for a company to ensure its people are valued and aware of that. A company that places its human resources first will incorporate this value into all aspects of its strategic decisions in the marketplace – leveraging staff skills and competencies for the company’s benefit, protecting their interests and supporting their development personally and professionally where possible. 5. Assume that you are the CEO of a company, which sells entertaining, electronicbased learning devices for customers ranging from infants to secondary school students. Describe the culture you would like to develop and maintain. How would you do that? Student activity
© 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/aaker
1
Chapter 1 Business Strategy: The Concept and Trends in Management 1.
What is business strategy? Do you agree with the definition proposed in this chapter? Illustrate your answer with examples. A business strategy consists of four dimensions: the product-market investment strategy, the customer value proposition, assets and competencies, and functional strategies and programmes. The proposed definition is comprehensive because it addresses where a business should compete and how it should do so. In this way it outlines what markets will be served against what competition; what value will be offered to customers and finally what resources will be used achieve these goals.
Examples Nokia plans to capitalize on their leadership position by continuing to enter segments of the mobility industry that they believe will experience rapid growth faster than the industry as a whole; for example smart phones. They have the financial resources and technology to exploit their business opportunity. Their customer value proposition is to be the technology leader when it comes to mobile communications of all forms. They use their extensive R&D resources to support this customer value proposition.
2.
Consider one of the firms in the list below. Read the description in the text, then go to the firm’s website and use it to gain an understanding of the business strategy. Look at elements such as the products and services offered, the history of the firm, and its values. What is the business strategy? What product markets does the firm serve? What value propositions does it use? How are the value propositions delivered? What are the firm’s assets and competencies? What strategic options has it pursued? A. Ikea
A.
B. Aldi
C. Diesel
D. A firm of your choice
Ikea: The Ikea business strategy is to be a one-stop shop for people’s entire furniture needs – making it as easy as possible to purchase and later install furniture in the home. It does this by offering attractively and welldesigned furniture for home assembly to the mass market via sub-urban retail outlets. Ikea’s value proposition to the market is based on ease of
© 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/aaker
2 purchase, good value for money and combined with contemporary design leveraging the Swedish reputation for design excellence. Ikea’s assets are its core skills in furniture design (blending style and functionality); a distribution model that caters to its target market and facilitates the supply side of the business (using basic warehouse style shops on the outskirts of cities) and finally its brand, which is synonymous with quality at a good price point.
B.
Aldi Aldi operates in Europe, North America and Australia markets as a discount supermarket offering everything from food and drink to consumer goods like clothes and electronics. It sells many products via its own label and also delivers customer savings through frequent promotions and discounts. The company has over 5000 stores worldwide and uses its purchasing power to pass on savings to consumers in the form of generally lower prices across a broad spectrum of products. Aldi has successfully exploited this positioning to expand internationally and globally locating on sites near fronting onto main roads in areas with catchments of at least 10,000 people.
C.
Diesel The Diesel business strategy is about being a clothing and lifestyle brand central to globalised youth culture. Its value proposition is cutting edge trendy designs for savvy consumers seeking independence from mainstream fashion. Diesel’s network of 5000 retail outlets includes 300 own brand stores, of which the company partners with local distributors in 100 cases. Additionally it is renowned for a non-conventional work ethic that fosters creativity and encourages innovation in design. These two factors combined have allowed Diesel to position them at the cutting edge of the mainstream market for high street fashion. Diesel also operates a direct sales channel via their own website and have partnered with other global brands including Adidas to create jointly branded product lines to increase their penetration in the market.
© 2008 John Wiley & Sons Ltd. www.wileyeurope.com/college/aaker