Implementing Strategy in Companies that Compete Across Industries and Countries

LEARNING OBJECTIVES

After reading this chapter, you should be able to:

-	Discuss the reasons why companies pursuing different corporate strategies need to implement these strategies using different combinations of organizational structure, control, and culture
-	Describe the advantages and disadvantages of a multidivisional structure • Explain why companies that pursue different kinds of global expansion strategies choose different kinds of global structures and control systems to implement these strategies
-	Discuss the strategy implementation problems associated with the three primary methods used to enter new industries: internal new venturing, joint ventures, and mergers
-	Identify the ways in which advanced Information Technology (IT) may reduce bureaucratic costs and allow a company to more effectively implement its business model

Implementing Strategy in Companies that Compete in a Single Industry

After reading this chapter, you should be able to :

-	Understand how organizational design requires strategic managers to select the right combination  of organizational structure, control, and culture
-	Discuss how effective organizational design enables a company to increase product differentiation, reduce its cost structure, and build competitive advantage
-	Explain why it is so important that strategic managers keep the organizational hierarchy as flat as possible and what factors determine the way they decide to centralize or decentralize authority
-	Explain the many advantages of a functional structure and why and when it becomes necessary to utilize a more complex form of organizational structure
-	Differentiate between the more complex forms of organizational structure managers adopt to implement specific kinds of business-level strategies

Corporate Performance, Governance, and Business Ethics

 After reading this chapter you should be able to:

-	Understand the relationship between stakeholder management and corporate performance
-	Explain why maximizing returns to stockholders is often viewed as the preeminent goal in many corporations
-	Describe the various governance mechanisms that are used to align the interest of stockholders and managers
-	Explain why these governance mechanisms do not always work as intended
-	Identify the main ethical issues that arise in business and the causes of unethical behavior
-	Identify what managers can do to improve the ethical climate of their organization, and to make sure that business decisions do not

 

Corporate Level Strategy : Related and Unrelated Diversification

 Learning Objectives  

After reading this chapter, you should be able to :

-	Differentiate between multibusiness models based on related and unrelated diversification
-	Explain the five primary ways in which diversification can increase company profitability
-	Discuss the conditions that lead managers to pursue related diversification versus unrelated diversification and explain why some companies pursue both strategies
-	Describe the three methods companies use to enter new industries: internal new venturing, acquisitions, and joint ventures
-	Discuss the advantages and disadvantages associated with each of these methods

Corporate Level Strategy : Horizontal Integration, Vertical Integration, and Strategic Outsourcing

 Leraning Objectives

After reading this chapter, you should be able to :

Discuss how corporate level strategy can be used to strengthen a company’s business model and businesslevel strategies.

1.	Discuss how corporate-level strategy can be used to strengthen a company’s business model and businesslevel strategies.
2.	Define horizontal integration and discuss the primary advantages and disadvantages associated with this corporate level strategy
3.	Explain the difference between a company’s internal value chain and the industry value chain
4.	Define horizontal integration and describe the primary advantages and disadvantages associated with this corporate-level strategy
5.	Describe why, and under what conditions, cooperative relationships such as strategic alliances and outsourcing may become a substitute for vertical integration

Strategy in the global Environment

Leraning Objectives

After this chapter, you should be able to : 

1.	Understand the process of globalization and how that impacts a company’s strategy.
2.	Discuss the motives for expanding internationally.
3.	Review the different strategies that companies use to compete in the global market place.
4.	Explain the pros and cons of different modes for entering foreign markets.

Strategy and Technology

The Rise of Cloud Computing

There is a paradigm shift beginning in the world of computing. Over the next decade, increasing numbers of businesses will stop purchasing their own computer servers and mainframes, and instead move their applications and data to “the cloud.” The cloud is a metaphor for large data centers or “server farms” collections of hundreds of thousands of co located and interlinked computer servers. Corporations will be able to “host” their data and applications on cloud computing providers’ servers. To run an application hosted on the cloud, all a person will need is a computing device with a Web browser and an Internet connection.

There are significant cost advantages associated with shifting data and applications to the cloud. Business will no longer need to invest in information technology hardware that rapidly becomes obsolete. Cloud providers will instead be responsible for maintenance costs of servers and hardware. Moreover, businesses will no longer need to purchase many software applications. Instead, businesses will utilize a pay as you go pricing model for any applications that they use, which also holds out the promise of reducing costs. (Some studies have concluded that 70% of software purchased by corporations is either underutilized, or, not used at all.) The Brookings Institute estimates that companies could reduce their information technology costs by as much as 50% by moving to the cloud.

Early adopters of cloud computing services have included Inter  Continental Hotel Group (IHG), which has 650,000 rooms in 4,400 hotels around the world. Rather than upgrade its own information technology hardware, IHG has decided to move its central reservation system onto server farms owned by Amazon. com, the online retail store that is also emerging as an early leader in the cloud computing market. Similarly, Netflix has decided to utilize Amazon’s cloud services for distributing its movies digitally, rather than investing in its own server farms. Another early user of cloud services is Starbucks, which has moved its entire corporate e mail system off its servers and onto Microsoft’s cloud computing system.

Amazon and Microsoft are two of the early leaders in the embryonic cloud computing market. The other significant player is Google. All three companies had to build large server farms to run parts of their own businesses (online retail in the case of Amazon, and Web searching capabilities in the case of Google and Microsoft). When these corporations soon realized that they could rent out capacity on these server farms to other businesses, the concept of cloud computing was born. Other companies that have announced their intentions to enter the cloud computing market as providers of hosting services include IBM and Hewlett Packard.

Right now the cloud is small estimates suggest that it accounts for just 5% of the $1.5 trillion in corporate information technology spending in 2010. But many analysts believe that this share will grow very rapidly. Amazon, with an estimated $750 million in revenue from cloud services, is currently the leading company. Both Microsoft and Google, recognizing how crucial the cloud will become, are investing heavily in this technology.

Microsoft has developed an operating system, known as Windows Azure, which is designed to run software applications very efficiently on server farms, allocating workloads and balancing capacity across hundreds of thousands of servers. Microsoft is rewriting many of its own applications, such as Office and SQL server, to run on Azure. The belief is that this will help the company retain existing clients as they transition their data and applications from their own servers onto the cloud. Microsoft has also developed tools to help clients write their own custom applications for the cloud; they have recognized that the shift to the cloud threatens its existing Windows monopoly, and that its best strategy is to try and become the dominant company on the cloud.

Microsoft’s rivals are not idly standing by Google, for example, has developed a cloudbased operating system, Google App Engine, which will allow clients to efficiently run their custom software applications on the cloud. Amazon, too, has its own cloud-based operating system, known as “EC2.” Other companies, including IBM and VM Ware, are developing similar software. Software applications that are written for one cloud based system operating system will not run on another cloud operating system without a complete rewrite meaning that there will be significant switching costs involved in moving an application from one cloud provider to another. This strongly suggests that we are witnessing the beginnings of a format war in cloud computing, much like the format war during the early-1990s between Microsoft, IBM, and Apple to dominate the desktop computer a war that Microsoft won with its Windows Operating System. If business history is any guild, at most only 2–3 formats will survive, with most other formats falling by the wayside.