Course Code : MS-11
Course Title : Strategic Management
Assignment No. : 11/TMA/SEM-1/2012
Coverage : All Blocks
1. Discuss different types of strategic alternatives. Explain their importance in the present context citing examples.
Solution: In strategy the firm concentrates on a select few target markets. It is also called a focus strategy or niche strategy. It is hoped that by focusing your marketing efforts on one or two narrow market segments and tailoring your marketing mix to these specialized markets, you can better meet the needs of that target market. The firm typically looks to gain a competitive advantage through effectiveness rather than efficiency. It is most suitable for relatively small firms but can be used by any company. As a focus strategy it may be used to select targets that are less vulnerable to substitutes or where a competition is weakest to earn above-average return on investments.
HP today announced that its board of directors has authorized the evaluation of strategic alternatives for its Personal Systems Group (PSG), including the exploration of the separation of its PC business into a separate company through a spin-off or other transaction. We believe exploring alternatives for PSG could enhance its performance, allow it to more effectively compete and provide greater value for HP shareholders,” said Apotheker. “PSG is a world-class scale business with a leading market share position and a highly effective supply chain and broad reach and go-to-market capabilities. We believe there are alternatives that could afford PSG more autonomy and flexibility to make strategic investment decisions to better position the business for its customers, partners and employees.”
HP management, together with its financial and legal advisers, will explore strategic alternatives, including the exploration of the separation of its PC business into a separate company through a spin-off or other transaction that would likely be tax free to U.S. shareholders. HP expects that the process could be completed within approximately 12-18 months. There can be no assurance that any transaction regarding PSG will be pursued or completed. The company does not intend to disclose developments with respect to the progress of its strategic alternatives review process until such time as the HP board of directors approves or completes a transaction or otherwise determines that further disclosure is appropriate. As we explore alternatives for PSG, we will be focused on a path that not only enhances value for HP shareholders but also provides greater opportunities for our people, businesses, partners and customers. While this process is underway, we will remain focused on operating our businesses. The strength of PSG is a testament to our world-class team of employees and reflects their commitment to innovation and customers and partners.”
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2. What is cost leadership? Do you think that cost leadership is an important criterion to have competitive advantage for an organization? Discuss.
Solution: Cost leadership is a concept developed by Michael Porter, used in business strategy. It describes a way to establish the competitive advantage. Cost leadership, in basic words, means the lowest cost of operation in the industry .The cost leadership is often driven by company efficiency, size, scale, scope and cumulative experience (learning curve). A cost leadership strategy aims to exploit scale of production, well defined scope and other economies (e.g. a good purchasing approach), producing highly standardized products, using high technology. In the last years more and more companies choose a strategic mix to achieve market leadership. These patterns consist in simultaneous cost leadership, superior customer service and product leadership. Cost leadership is different from price leadership. A company could be the lowest cost producer, yet not offer the lowest-priced products or services. If so, that company would have a higher than average profitability. However, cost leader companies do compete on price and are very effective at such a form of competition, having a low cost structure and management. Sometimes, a company can improve its net profits by making a product different rather than becoming a cost leader -- selling items for the lowest price on the market. Even if a company attains cost leadership, it may not hold onto that lead for long. In general, smaller firms try to compete with larger firms on differentiation rather than cost leadership. Any company that tries to beat competitors by offering a product for a lower price employs the cost leadership strategy. For example, Sears was once a cost leader with a powerful mail-order business, then stores like Kmart took the lead with the big-box model, and Wal-Mart has since become one of the most successful cost leaders of all time. In 2010, for instance, Wal-Mart racked up over $400 billion in sales. Instead of offering just selected items at a low price to bring in customers, Wal-Mart uses its massive buying power to force supplier companies to become more efficient and sell products at a low price all the time. Charging a lower price but selling a larger volume of a good allows a company to maintain its profits and expand its market share. Some consumers shop only at stores that offer the lowest price, which means industries like groceries and gasoline often have price wars. The winner in a price war enjoys protection from rivals because competitors whittle away their profits attempting to offer the new lowest price. The cost leadership strategy also makes it difficult for new companies to enter the market because of thin profit margins
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3. ‘Performance measures are said to be the indicators of success and form a major part of any organization’. Critically comment on the statement.
Solution: These performance measures were chosen as exemplary because they are meaningful in the context of the program and capture the most important aspects of a program’s mission and priorities. Most are drawn from PART assessments completed in 2002 and 2003. Some were developed for inclusion in agencies' performance budgets and will be included in future PART assessments. Performance measures quantitatively tell us something important about our products, services, and the processes that produce them. They are a tool to help us understand, manage, and improve what our organizations do. A performance measure is composed of a number and a unit of measure. The number gives us a magnitude (how much) and the unit gives the number a meaning (what). Performance measures are always tied to a goal or an objective (the target). Performance measures can be represented by single dimensional units like hours, meters, nanoseconds, dollars, number of reports. number of errors, number of CPR-certified employees, length of time to design hardware, etc. They can show the variation in a process or deviation from design specifications. Single-dimensional units of measure usually represent very basic and fundamental measures of some process or product.
More often, multidimensional units of measure are used. These are performance measures expressed as ratios or two or more fundamental units. These may be units like miles per gallon (a performance measure of fuel economy), number of accidents per million hours worked (a performance measure or the companies safety program), or number of on-time vendor deliveries per total number of vendor deliveries. Performance measures expressed this way almost always convey more information than the single-dimensional or single-unit performance measures. Ideally, performance measures should be expressed in units of measure that are the most meaningful to those who must use or make decisions based on those measures.
Most performance measures can be grouped into one of the following six general categories. However, certain organizations may develop their own categories as appropriate depending on the organization's mission:
Effectiveness: A process characteristic indicating the degree to which the process output (work product) conforms to requirements. (Are we doing the right things?)
Efficiency: A process characteristic indicating the degree to which the process produces the required output at minimum resource cost. (Are we doing things right?)
Quality: The degree to which a product or service meets customer requirements and expectations.
Timeliness: Measures whether a unit of work was done correctly and on time. Criteria must be established to define what constitutes timeliness for a given unit of work. The criterion is usually based on customer requirements.
Productivity: The value added by the process divided by the value of the labor and capital consumed.
Safety: Measures the overall health of the organization and the working environment of its employees.
The following reflect the attributes of an ideal unit of measure:
Performance data must support the mission assignment(s) from the highest organizational level downward to the performance level. Therefore, the measurements that are used must reflect the assigned work at that level.
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4. Chose an organization and perform a SWOT analysis of that organization. After performing the SWOT analysis, write the inferences drawn from the analysis.
Solution: AMT is a computer store in a medium-sized market in the United States. Lately it has suffered through a steady business decline, caused mainly by increasing competition from larger office products stores with national brand names. The following is the SWOT analysis included in its marketing plan.
Strengths
Knowledge. Our competitors are retailers, pushing boxes. We know systems, networks, connectivity, programming, all the Value Added Resellers (VARs), and data management.
Relationship selling. We get to know our customers, one by one. Our direct sales force maintains a relationship.
History. We’ve been in our town forever. We have the loyalty of customers and vendors. We are local.
Weaknesses
Costs. The chain stores have better economics. Their per-unit costs of selling are quite low. They aren’t offering what we offer in terms of knowledgeable selling, but their cost per square foot and per dollar of sales are much lower.
Price and volume. The major stores pushing boxes can afford to sell for less. Their component costs are less and they benefit from volume buying with the main vendors.
Brand power. Take one look at their full-page advertising, in color, in the Sunday paper. We can’t match that. We don’t have the national name that flows into national advertising.
Opportunities
Local area networks. LANs are becoming commonplace in small businesses, and even in home offices. Businesses today assume LANs are part of normal office work. This is an opportunity for us because LANs are much more knowledge and service intensive than the standard off-the-shelf PC.
The Internet. The increasing opportunities of the Internet offer us another area of strength in comparison to the box-on-the-shelf major chain stores. Our customers want more help with the Internet and we are in a better position to give it to them.
Training. The major stores don’t provide training, but as systems become more complicated with LAN and Internet usage, training is more in demand. This is particularly true of our main target markets.
Service. As our target market needs more service, our competitors are less likely than ever to provide it. Their business model doesn’t include service, just selling the boxes.
Threats
The computer as appliance. Volume buying and selling of computers as products in boxes, supposedly not needing support, training, connectivity services, etc. As people think of the computer in those terms, they think they need our service orientation less.
The larger price-oriented store. When they have huge advertisements of low prices in the newspaper, our customers think we are not giving them good value.
Leveraging the insight the SWOT analysis can bring is time well invested.
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