Exploring Corporate Strategy - Research Paper Example

Introduction: A global company does not have to be one that is present in all geographies. Nor does it have to be large. Rather what defines a global company is its need to effectively scale across multiple languages, countries and technologies. Global companies need to work towards seamless operations between national and International offices leading to increased communication and productivity. These can only happen when they practice a strategic management in relevant to situation. Managing key relationships at all levels of business is essential for effective global strategy. The complexity of this task rises exponentially for larger and more diverse companies as the problems felt by all multinational players are remarkably similar at a basic level. As a result, this paper looks at the different strategies adopted by the companies in global environments on how they are addressing the business and technological issues they face. However, the rewards attained from globalization are not simply through spread of operations. There are a number of strategic and operational issues which need to be managed. Schools of thoughts on strategic management: The use of principles that simplify, reduce, and prescribe is an enduring feature of writings on business strategy. The writings of von Clausewitz and de Jomini outline a continuum between descriptive and prescriptive approaches to strategy. The Canadian management scholar Henry Mintzberg uses this distinction in Strategy Safari: A Guided Tour Through the Wilds of Strategic Management (1998), written with Bruce Ahlstrand and Joseph Lampel. The authors identify 10 approaches to the subject. These include: 1. The design school, which sees strategic management as a process of attaining a fit between the internal capabilities and external possibilities of an organisation. 2. The planning school, which extols the virtues of formal strategic planning and arms itself with SWOT analyses and checklists. 3. The positioning school, heavily influenced by the ideas of Michael Porter, which stresses that strategy depends on the positioning of the firm in the market and within its industry. 4. The entrepreneurial school, which emphasises the central role played by the leader. 5. The cognitive school, which looks inwards into the minds of strategists. 6. The learning school, which sees strategy as an emergent process -- strategies emerge as people come to learn about a situation as well as their organisation's capability of dealing with it. 7. The power school, which views strategy emerging out of power games within the organisation and outside it. 8. The cultural school, which views strategy formation as a process rooted in the social force of culture. 9. The environmental school, which believes that a firm's strategy depends on events in the environment and the company's reaction to them 10. The configuration school, which views strategy as a process of transforming the organisation -- it describes the relative stability of strategy, interrupted by occasional and dramatic leaps to new ones. "Mintzberg and his colleagues classify the voluminous writings on management strategy into 10 different "schools." The first three of these, in order of their emergence, include the design school (mainly associated with Professor Ken Andrews and the Harvard Business School), the planning school, and the position school (of which Harvard's Michael Porter is the best-known exponent). These schools are analytical and prescriptive. For example, H. Igor Ansoff's Corporate Strategy: An Analytic Approach to Business Policy for Growth and Expansion (1965), the classic planning text, is full of complex flow diagrams. For those with the planning mind-set, strategy is formulated through a controlled, conscious, explicit process conducted by the CEO (and a group of planners) in a top-down, formal fashion and emerges fully formed from this process ready for implementation. " (David K. Hurst) However, this classic planning approach to strategy suffered a deathblow in the 1970s when corporate icons like General Electric redeployed most of their specialist planning staffs. Ever since then, the rational, prescriptive views of the first three schools of strategy have been steadily augmented and supplanted by a number of descriptive approaches. Mintzberg sorts these into seven other schools, ranging from the entrepreneurial and the cognitive, to the learning, power, and cultural, to the environmental and configurational schools. The objective of these schools of strategy is not to instruct like de Jomini but to inspire the imagination like von Clausewitz. In relation to the 10 traditional approaches, today, strategy formulation should also be a combination of them - judgmental designing, intuitive visioning, and emergent learning; it should be about transformation as well as perpetuation; it has to involve individual cognition and social interaction, co-operative as well as conflictive; it must include analyzing before and programming after as well as negotiating during; and all of this must be in response to what can be a demanding environment Businesses that wish to survive and thrive in a global economy must respond to major social and environmental trends that are reshaping markets, says a report released today by the United Nations Environment Programme (UNEP), World Business Council for Sustainable Development (WBCSD), and the World Resources Institute (WRI). The report emphasizes global trends that will help business leaders better understand the inter-relationships between environment and development issues, and, in turn, respond more effectively to the enormous challenges before the industry. Hence the study further continues to observe the case studies of global companies and their strategies as given under: Case observations following different strategies: a). Competing with other global organizations, while maintaining partnerships to share certain resources: Swisscom uses a global alliance to provide complementary services in any world market. Members of the AT&T-Unisource alliance, deliver each others customer traffic to its final destination. The alliance also offers global solutions. for example, international intranets and Virtual Private Networks that no one company would be able to offer on its own. b). Leveraging opportunities in new markets, while containing risks: Itochu derives $120 billion in annual sales from over a thousand subsidiaries, employing more than 10,000 people who handle a cornucopia of different industrial and consumer products. Itochu has taken major positions in a diverse portfolio of strategic and technological assets, ranging from more than a score of industrial and distribution system set-ups stretching from East to West. c). Instilling a global organization culture while being aware of national cultures : ABB (Asea Brown Boveri) was founded in 1988 by merging and acquiring companies in many countries many of them more than 100 years old with proud national histories. While the national cultures are respected and promoted, ABB has developed a global culture, an umbrella culture. This is what holds the national companies together and makes the entire company stronger. ABB has summarized their visions, values and policies in a sort of ABB-Bible. d). Being globally efficient while being locally responsive In order to meet this complexity, PricewaterhouseCoopers evolved a global structure with superior responsiveness to client needs, and a more finely tuned service delivery of its knowledge resources from/to local bases. For example, a few years ago our supply-chain consultants were concentrated in our largest regions: US and European markets. Today, such geographically limited deployment is inconceivable. There is a need to maintain a dynamic network of supply chain experts from Zimbabwe to Singapore. e). Standardization of products while reflecting unique socio-cultural issues Carlsberg beers are currently sold in 120 countries, a high number considering that the top six global brands (Colgate, Lipton, Lux, Maggi, Nescaf. and Palmolive) are sold in no more than 67 countries. While Carlsberg headquarters impose the uniformity, consistency and continuity necessary to give brands their lasting identity and power, local operators are given considerable latitude to respond to local market conditions. With beer, the big variable is bitterness. The product formulation of a global beer has to adapt preferences on the bitterness scale at the local level, while still maintaining the brand's fingerprint. f). Communicate strategic information Visibility helps to create an efficient and seamless inflow and outflow of information between the external environment and the organization, thereby enabling the identification of opportunities and problems on a worldwide basis. Enhanced by new technologies, some organizations are taking advantage of the new communication tools to improve information flows within the organization. British Petroleums top 300 managers worldwide are connected via video conferencing technology in their offices. In other companies, computer-based technology known as Group Decision Support System (GDSS) facilitates group discussions, group brainstorming and team sessions by allowing participants to contribute their ideas simultaneously. g). Identify distinctive opportunities: The ability to track and monitor changes in the global environment is key. Volkswagen changes locations for products to take advantage of different country costs, for example they moved manufacturing the Polo from Wolfs-burg to Spain to free up higher wage labor for higher priced Golf cars. Alfred Zeilen, CEO of Gillette responded to the Asian crisis by slicing spending on marketing there. According to Alfred Zeilen, Why should the company spend a lot of time and money trying to sell our products in Malaysia right now, instead it will be more profitable to focus on eastern Europe. This would be difficult if operations in different regions were treated differently and viewed through separate lenses. h). Optimize strategic partnerships: Strategic alliances with other telecom operators have enabled Swisscom to deliver global solutions which no one company could achieve alone. Competitive advantages to consortium members include global reach, economies of scale and scope, common service offerings, single brand promotion, joint procurement, network standardisation and development collaboration. Another example includes Sun Microsystems. The company's growth has been greatly enhanced by the structuring of links with firms that conventionally would have been arch rivals: Sun built its empire using chips from Toshiba and NEC of Japan; outsourced microprocessor production to Fujitsu; bought chips made from several American firms in Scotland, Singapore, Japan and Philippines and equipment made in Germany, Great Britain, the Netherlands and Switzerland; and called on TEL of Japan to market its products in Asia. i). Implementation of HR practices: The business strategy should include string policies for HR management, as the people affect the organization as a whole as well as being able to assess the implications of local issues. Build global competencies To gain an international perspective, attention needs to be paid to the development of personnel. Identification of global talent is essential to Chubb & Son Inc.16 With more than 15% of the company's employees outside the US, and rapid overseas growth, global awareness is a must-have criteria for every new hire. To progress to senior manager level in SmithKline Beecham, individuals must have achieved 2 x 2 x 2 (worked in two companies, two countries, two functions). Define global values Merely sticking the word global into the company mission statement does NOT make for global values. At Canon, decisions are based upon a corporate philosophy of kyosei, or living and working together for the common good the world-wide common good. Some instances of putting kyosei into practice include: the Tshushin Corporate Plan, which emphasizes heart-to-heart and mind-to-mind communication to help breakdown cultural barriers. Don Argus of the National Australia Bank Group states that Managing globally means that the company's values must be relevant in the US, or the UK, or Asia, as well as Australia or New Zealand. This need has been met by carefully blending the core values with local requirements world wide. The values aren't different, but their application may be different in some areas. j). Management of Diversity To globalize effectively, there is a need to utilize and value the many different strengths inherent in employees world-wide. After decades of routinely appointing managers from its domestic operations to key positions in overseas subsidiaries, Proctor & Gamble came to understand that this practice not only was insensitive to local cultural needs but greatly underutilized its pool of non-American international managers who were often more appropriate for international positions. The core ability is to be able to execute global strategy, locally. The following capabilities help ensure this. K). Leverage resources Whirlpool integrates geographical businesses wherever possible, so that the most advanced expertise in any one given area (whether it is refrigeration technology or distribution strategy) is not confined to one location or division. Aiding the design process is a special Whirlpool internet website for fridge features, containing details of about 170 ways of specifying or arranging parts of the fridge. An engineer in Brazil could look up on the website and borrow an idea that was already invented for a product in US or Europe. Mazdas sports-car was designed in California and financed in Tokyo and New York; its prototype was created in Worthing, England; and it was assembled in Michigan and Mexico using advanced electronic components invented in New Jersey and fabricated in Japan. Centers of expertise are pivotal in leveraging resources. Philips has set up an international competence centre in Australia. It serves as the key clearing house for new ideas and the development of best practices for Philips digital broadband business world-wide. l). Integrate processes The ability to integrate processes is a key competitive edge, particularly if it accelerates product to market timescales. At Nike, the designs for the products are developed in the US and then transmitted by satellite to CAD/CAM systems of the contractors, who develop and test them and then fax the detail to manufacturing location for production. The processes do not necessarily have to be downstream. Allied Signal Inc European operation, based in Paris, has an information system that contains information on 12,000 employees in 30 facilities, running the payroll for eight countries (France, Italy, Germany, UK, Ireland, Spain, Belgium, Netherlands) allows them to eliminate duplicate tasks and standardise HR and payroll procedures. m). Development of cross-boundary teams As a part of the implementation of Ford's 1995 global organizational structure, in which 25,000 employees found themselves working with new colleagues, many of whom in different countries, Ford conducted a leadership preparation programme for its top 3000 managers. The benefits of cross-boundary teams become clear very quickly 180 Whirlpool product engineers brought together from across the US and Germany have realized that differences between them are fewer than they thought. Consequently, the six basic platforms used to support different dishwasher models will be cut to three by 2002. Conclusion: In today's turbulent world, globalization and technology are sweeping away the market and industry structures that have historically defined competition. Swept away with them are the classic approaches to corporate strategy, nearly all of which mistakenly assume that a predictable path to the future can be paved from the experience of the past. Today, the strategy cannot be taken as gospel. There are too many uncertain factors that nobody can resolve. Even the best strategy is only a hypothesis. Never is strategy implementation more important than when innovation is at the heart of a strategy. Innovation always involves treading into uncertain waters, and the importance of enterprise strategy decreases as uncertainty increases. Thus the solution is - Strategize and then revise the strategy continuously. References: 1. NEWS RELEASE: Global trends are reshaping business strategy and markets says new report by UNEP, WBCSD, and WRI, available from accessed on December 12, 2006. 2. Strategy Safari: A Guided Tour Trough the Wilds of Strategic Management", Henry Mintzberg, Bruce Ahlstrand, and Joseph Lampel, 1998 3. Chuck Lucier and Jan Dyer, Best Business Books 2004: Strategy, available from accessed on December 10, 2006 4. Strategic Management - Competitiveness and Globalization", M.A. Hint, R.D. Ireland, and R.E. Hoskisson, 2001 5. W Cha Kim , Peter Hwang, Global Strategy and Multinationals' Entry Mode Choice., Journal article by Peter Hwang, W Cha Kim; Journal of International Business Studies, Vol. 23, 1992 6. Johnson, G, & Scholes, K, (2005), Exploring Corporate Strategy: text and cases, (7th ed Prentice 7. Hall), ISBN 0 273 678344, Library Reference 658.16 J67 8. Mintzberg, H, & Quinn J B, & Ghoshal, S, (1998), The Strategy Process, (Revised European edition, Prentice Hall), ISBN 013-675984-X, Library Reference DOJ 658.40 MIN 9. Hill, M. R., McAulay, L., Wilkinson, A.J. (2005), "UK emissions trading from 2002-2004: corporate responses", Energy and Environment, Vol. 16, No. 6, pp. 993-1007. 10. Porter M (1998), The Competitive Advantage of Nations, (MacMillan), ISBN 0333-736427, Library Reference 338.018 5P 847 11. Besanko, D; Dranove, D; Shanley, M and Schefer S, Economics of Strategy, (3rd ed Wiley & Sons), ISBN 0471-21213X 12. Ten Major Strategic Management Schools, A Comparative Analysis , Available from < http://www.1000ventures.com/business_guide/mgmt_inex_stategy_10schools.html> accessed on December 12, 2006. Further readings: 13. Journal of General Management 14. British Journal of Management 15. Harvard Business Review 16. Business History 17. Journal of Management Studies 18. Human Resource Management Journal 19. International Journal of Human Resource Management Read More