IIBM DMS CASE STUDY SOLUTIONS PAPERS - Formal systems are adopted to bring ________ & amalgamation of decentralized units into product groups. a. Manpower b. Co-ordination c. Production d. All of the above
IIBM DMS CASE STUDY SOLUTIONS PAPERS - Formal systems are adopted to bring ________ & amalgamation of decentralized units into product groups. a. Manpower b. Co-ordination c. Production d. All of the above
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Strategic
Management
Multiple choice:
I. Horizontal integration is concerned with
a) Production
b) Quality
c) Product planning
d) All of the above
II. It refers to formal and informal rules, regulations and procedures that complement the company structure (1)
a) Strategy
b) Systems
c) Environment
d) All of the above
III. Strategic management is mainly the responsibility of (1)
a. Lower management
b. Middle management
c. Top management
d. All of the above
IV. Formal systems are adopted to bring ________ & amalgamation of decentralized units into product groups.
a. Manpower
b. Co-ordination
c. Production
d. All of the above
IV. Like roots of a tree, ________of organization is hidden from direct view. (1)
a. Performance
b. Strategy
c. Core competence
d. All of the above
V. The actual performance deviates positively over the budgeted performance. This is an indication of ……….. Performance.
a.
Superior
b. Inferior
c. Constant
d. Any of the above
VI. Criteria for making an evaluation is (are)
a. Consistency with goals
b. Consistency with environment
c. Money
d. All of the above
VII. Changes in company ………. also necessitates changes in the systems in various degrees (1)
a. structure
b. system
c. strategy
d. Turnover
VIII. Micro environment is the ………. environment of a company. (1)
a. Working
b. Human
c. External
d. Internal
X Techniques used in environmental appraisal are (1)
a.Single-variable extrapolation/multivariable interaction analysis
b.Structured/ unstructured expert/inexpert opinion
c.Dynamic modes and mapping
d.All of the above
Part Two:
1. Distinguish between a strategy and tactics. (5)
2. Give an outline of relation between ‘Strategy and Customer’ in brief? (5)
3. Explain in brief the concept of strategic thinking? (5)
4. What are the basic elements of planning? (5)
 |
| IIBM DMS CASE STUDY SOLUTIONS PAPERS - Formal systems are adopted to bring ________ & amalgamation of decentralized units into product groups. a. Manpower b. Co-ordination c. Production d. All of the above |
Section B: Caselets (40 marks)
Caselet 1
Apple’s profitable but risky strategy
When Apple’s Chief Executive – Steven Jobs – launched the Apple iPod in 2001
and the iPhone in 2007, he made a significant shift in the company’s strategy
from the relatively safe market of innovative, premium-priced computers into
the highly competitive markets of consumer electronics. This case explores this
profitable but risky strategy.
Early beginnings
To understand any company’s strategy, it is helpful to begin by looking back at
its roots. Founded in 1976, Apple built its early reputation on innovative
personal computers that were particularly easy for customers to use and as a
result was priced higher than those of competitors. The inspiration for this
strategy came from a visit by the founders of the company – Steven Jobs and
Steven Wozniack – to the Palo Alto research laboratories of the Xerox Company
in 1979. They observed that Xerox had developed an early version of a computer
interface screen with the drop-down menus that are widely used today on all
personal computers. Most computers in the late 1970s still used complicated
technical interfaces for even simple tasks like typing – still called
‘word-processing’ at the time.
Jobs and Wozniack took the concept back to Apple and developed their own
computer – the Apple Macintosh (Mac) – that used this consumer-friendly
interface. The Macintosh was launched in 1984. However, Apple did not sell to,
or share the software with, rival companies. Over the next few years, this
non-co-operation strategy turned out to be a major weakness for Apple.
Battle with Microsoft
Although the Mac had some initial success, its software was threatened by the
introduction of Windows 1.0 from the rival company Microsoft, whose chief
executive was the well-known Bill Gates. Microsoft’s strategy was to make this
software widely available to other computer manufacturers for a license fee –
quite unlike Apple. A legal dispute arose between Apple and Microsoft because
Windows had many on-screen similarities to the Apple product. Eventually,
Microsoft signed an agreement with Apple saying that it would not use Mac
technology in Windows 1.0. Microsoft retained the right to develop its own
interface software similar to the original Xerox concept.
Coupled with Microsoft’s willingness to distribute Windows freely to computer
manufacturers, the legal agreement allowed Microsoft to develop alternative
technology that had the same on-screen result. The result is history. By 1990,
Microsoft had developed and distributed a version of Windows that would run on
virtually all IBM-compatible personal computers – see Case 1.2. Apple’s
strategy of keeping its software exclusive was a major strategic mistake. The
company was determined to avoid the same error when it came to the launch of
the iPod and, in a more subtle way, with the later introduction of the iPhone.
Apple’s innovative products
Unlike Microsoft with its focus on a software-only strategy, Apple remained a
full-line computer manufacturer from that time, supplying both the hardware and
the software. Apple continued to develop various innovative computers and
related products. Early successes included the Mac2 and PowerBooks along with
the world’s first desktop publishing program – PageMaker. This latter remains
today the leading program of its kind. It is widely used around the world in
publishing and fashion houses. It remains exclusive to Apple and means that the
company has a specialist market where it has real competitive advantage and can
charge higher prices.
Not all Apple’s new products were successful – the Newton personal digital
assistant did not sell well. Apple’s high price policy for its products and
difficulties in manufacturing also meant that innovative products like the
iBook had trouble competing in the personal computer market place.
Apple’s
move into consumer electronics
Around
the year 2000, Apple identified a new strategic management opportunity to
exploit the growing worldwide market in personal electronic devices – CD
players, MP3 music players, digital cameras, etc. It would launch its own Apple
versions of these products to add high-value, user-friendly software. Resulting
products included iMovie for digital cameras and I DVD for DVD-players. But the
product that really took off was the iPod – the personal music player that
stored hundreds of CDs. And unlike the launch of its first personal computer,
Apple sought industry co-operation rather than keeping the product to itself.
Launched in late 2001, the iPod was followed by the iTunes Music Store in 2003
in the USA and 2004 in Europe – the Music Store being a most important and
innovatory development. iTune was essentially an agreement with the world’s
five leading record companies to allow legal downloading of music tracks using
the internet for 99 cents each. This was a major coup for Apple – it had
persuaded the record companies to adopt a different approach to the problem of
music piracy. At the time, this revolutionary agreement was unique to Apple and
was due to the negotiating skills of Steve Jobs, the Apple Chief Executive, and
his network of contacts in the industry. Apple’s new strategy was beginning to
pay off. The iPod was the biggest single sales contributor in the Apple
portfolio of products.
In 2007, Apple followed up the launch of the iPod with the iPhone, a mobile
telephone that had the same user-friendly design characteristics as its music
machine. To make the iPhone widely available and, at the same time, to keep
control, Apple entered into an exclusive contract with only one national mobile
telephone carrier in each major country – for example, AT&T in the USA and
O2 in the UK. Its mobile phone was premium priced – for example, US$599 in
North America. However, in order to hit its volume targets, Apple later reduced
its phone prices, though they still remained at the high end of the market.
This was consistent with Apple’s long-term, high-price, high-quality strategy.
But the company was moving into the massive and still-expanding global mobile
telephone market where competition had been fierce for many years.
And the leader in mobile telephones – Finland’s Nokia – was about to hit back
at Apple, though with mixed results. But other companies, notably the Korean
company Samsung and the Taiwanese company, HTC, were to have more success
later.
So, why was the Apple strategy risky?
By 2007, Apple’s music player – the iPod – was the premium-priced, stylish
market leader with around 60 per cent of world sales and the largest single
contributor to Apple’s turnover. Its iTune download software had been
re-developed to allow it to work with all Windows-compatible computers (about
90 percent of all PCs) and it had around 75 percent of the world music download
market, the market being worth around US$1000 million per annum. Although this
was only some 6 percent of the total recorded music market, it was growing
fast. The rest of the market consisted of sales of CDs and DVDs direct from the
leading recording companies.
In 2007, Apple’s mobile telephone – the iPhone – had only just been launched.
The sales objective was to sell 10 million phones in the first year: this
needed to be compared with the annual mobile sales of the global market leader,
Nokia, of around 350 million handsets. However, Apple had achieved what some
commentators regarded as a significant technical breakthrough: the touch
screen. This made the iPhone different in that its screen was no longer limited
by the fixed buttons and small screens that applied to competitive handsets. As
readers will be aware, the iPhone went on to beat these earlier sales estimates
and was followed by a new design, the iPhone 4 in 2010.
The world market leader responded by launching its own phones with touch
screens. In addition, Nokia also launched a complete download music service.
Referring to the new download service, Rob Wells, senior Vice President for
digital music at Universal commented: ‘This is a giant leap toward where we believe
the industry will end up in three or four years’ time, where the consumer will
have access to the celestial jukebox through any number of devices.’ Equally,
an industry commentator explained: ‘[For Nokia] it could be short-term pain for
long-term gain. It will steal some of the thunder from the iPhone and tie users
into the Nokia service.’ Readers will read this comment with some amazement
given the subsequent history of Nokia’s smart phones that is described in Case
9.2.
‘Nokia is going to be an internet company. It is definitely a mobile company
and it is making good progress to becoming an internet company as well,’
explained Olli PekkaKollasvuo, Chief Executive of Nokia. There also were hints
from commentators that Nokia was likely to make a loss on its new download
music service. But the company was determined to ensure that Apple was given
real competition in this new and unpredictable market.
Here lay the strategic risk for Apple. Apart from the classy, iconic styles of
the iPod and the iPhone, there is nothing that rivals cannot match over time.
By 2007, all the major consumer electronics companies – like Sony, Philips and
Panasonic – and the mobile phone manufacturers – like Nokia, Samsung and
Motorola – were catching up fast with new launches that were just as stylish,
cheaper and with more capacity. In addition, Apple’s competitors were reaching
agreements with the record companies to provide legal downloads of music from
websites.
Apple’s
competitive reaction
As a short term measure, Apple hit back by negotiating supply contracts for
flash memory for its iPod that were cheaper than its rivals. Moreover, it
launched a new model, the iPhone 4 that made further technology advances. Apple
was still the market leader and was able to demonstrate major increases in
sales and profits from the development of the iPod and iTunes. To follow up
this development, Apple launched the Apple Tablet in 2010 – again an element of
risk because no one really knew how well such a product would be received or what
its function really was. The second generation Apple tablet was then launched
in 2011 after the success of the initial model. But there was no denying that
the first Apple tablet carried some initial risks for the company.
All during this period, Apple’s strategic difficulty was that other powerful
companies had also recognized the importance of innovation and flexibility in
the response to the new markets that Apple itself had developed. For example,
Nokia itself was arguing that the markets for mobile telephones and recorded
music would converge over the next five years. Nokia’s Chief Executive
explained that much greater strategic flexibility was needed as a result: ‘Five
or ten years ago, you would set your strategy and then start following it. That
does not work anymore. Now you have to be alert every day, week and month to
renew your strategy.’
If
the Nokia view was correct, then the problem for Apple was that it could find
its market-leading position in recorded music being overtaken by a more flexible
rival – perhaps leading to a repeat of the Apple failure 20 years earlier to
win against Microsoft. But at the time of updating this case, that looked
unlikely. Apple had at last found the best, if risky, strategy.
Questions
1. Using the concepts in this chapter undertake a competitive analysis of both
Apple and Nokia – who is stronger? (10)
2. What are the problems with predicting how the market and the competition
will change over the next few years? What are the implications for strategy
development? (10)
Caselet 2
Mr. Ashwin is the marketing manager of the cosmetics. division of the Medwin
Drug Company. The company was well known as a leader in new proprietary drug
and toiletry products and had a good record of profitability. The cosmetics
division had been especially successful in women’s toiletries and
.1/4.-o..,unctitk.:s and in the introduction of new products, It always based
its new-product development on market research respect to what Would appeal to
women and, after almost invariably test marketing a new product in a few almost
invarariably test marketing a new product in selected cities, launched it with
a heavy advertising and sales promotion program. It had hoped in this way not
only to get a large initial share of the markets but also to become so well
entrenched that competitors. who soon copy a successful product would not
dislodge it from its market share.
After being cautioned by the president of Medwin Drug about the necessity for
watching costs more carefully, the division manager became increasingly
concerned with two opposing factors in his marketing strategy: ( 1) test
marketing of new products (offering them for sale first in a few test cities
with area advertising and sales programs) tended increasingly to give
competitors advance information on new products, and certain competitors had
been able to copy a product almost as soon as Medwin could offer it nationally
and profited thereby from Medwin’s advertising; and (2) national advertising
and sales promotion expenses were rising so fast that a single major product
failure would have an important impact on division profits, on which his annual
bonus was primarily determined. On the one hand, he recognized the wisdom of
test marketing, but he disliked the costs and dangers involved. On the other
hand, he hardly wished to take an unknown risk of embarking on a national
program until a test showed that the product did in fact have a good market
demand. Yet, he wondered whether all products should be test marketed.
Mr.
Ashwin was asked to put this problem to his marketing department subordinates
and ask them what should be done. To give the strategy some meaning, he used as
a case at point the company’s new hair conditioner which had been developed on
the basis of promising, although preliminary, market research. He asked his
sales manager whether he thought the product would succeed and what he thought
his “best estimate” of sales would be. He also asked his advertising manager to
give some cost estimates on launching the product.
Mr.
Kiran, division sales manager, thought a while, then said he was convinced that
the product was a winner and that his best estimate would be sales of Rs. 5
crores per year for at least five years. Mr. Desai, the advertising manager,
said that the company could launch the product for a cost of Rs. 1 crore the
first year and some Rs. 25 lakhs per year thereafter. He also pointed out that
the test-marketing program would cost Rs. 15 lakhs, of which half would be
saved if these test cities were merely a part of a national program, and that
the testing program would delay the national program for six months. But he
warned Mr. Ashwin that test marketing would save the gamble of so much money on
the national promotion program. At this point, Mr. Sachdev, the new marketing
research manager, suggested that the group might come to a better decision if
they used a proper decision-making technique.
Question:
1. Which decision-making technique can be used in this situation? Why? (20)
1. What are the main characteristics of strategic decisions? (15)
2. What specific entrepreneurial aspects include the strategy formation
process? (15)
For answersheets contact
info.answersheets@gmail.com
+91 95030-94040
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