Organizational Analysis: Success and Failure

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1.0 Introduction:In a world of truly limited resources, a company that tries to compete in every market with no

specific direction will soon squander its resources and fall behind its competitors. Sustainable

Strategys central role is to provide the focus essential to successful organizations. In this

paper, we will discuss in detail about why do some firms succeed and why do others have

failed. To answer this, the paper proceeds as follows. At the beginning of this essay, we will

discuss why companies are successful by looking from five different fortune 500 companies.

After that, we will explore another five well-known multinational companies that have failed

or to some extent un-successful over the last few years.

2.0 Successful Organizations

2.1 Dells Success

Major reason for Dells high performance is the way it manages its supply chain to minimize

its cost structure, in particular the costs of holding inventory, yet with the ability to built a

computer to individual customer specification with in three days, (see fig-1 supply

management and fig-2 for the final product handles and channel customization).

Fig-1 Supply Chain Management

Source: Yen, M (2003), Customize GIS Education with SCM Model Viewed at 10/7/2006, Available athttp://gis.esri.com/library/userconf/proc03/p0253.pdf.

Fig-2 Dells Web Browser interface

Source: Kraemer, K.L, Dedrick, J and Yamashiro, S, (2000), Re-ning and Extending the Business Model with InformationTechnology: Dell Computer Corporation, Viewed at 12/7/06 http://www.indiana.edu/~tisj/readers/full-text/16-kraemer.pdf

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Eliminating Middle Man
http://gis.esri.com/library/userconf/proc03/p0253.pdfhttp://gis.esri.com/library/userconf/proc03/p0253.pdf


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Such practice (see fig-3), eliminates inventories for both raw materials and finish goods. It

frees up capitals and improves products quality. It also resulted in greater customer

satisfaction. Furthermore, it allows Dell the flexibility to adapt new technologies (Yen 2003).

Fig-3 Refinement of the dell strategy model

Source: Kraemer, K.L, Dedrick, J and Yamashiro, S, (2000), Re-ning and Extending the Business Model with InformationTechnology: Dell Computer Corporation, Viewed at 12/7/06, http://www.indiana.edu/~tisj/readers/full-text/16.kraemer.pdf

Dell uses the internet to feed real-time information about order flow to its suppliers so they

have the minute information about demand trend, along with volume expectations for

upcoming months. Moreover, Dell suppliers use this information to adjust their own

production schedules, manufacturing just enough components and shipping it by most

appropriate so that they arrive just-in-time. Moreover, Dells use of the direct approach

reportedly provides it with nearly a 6% cost advantage compared to indirect sellers

(Kirkpatrick, 1997), Dell inventory turnover accounts for 55.5% compare to other rivalries

(see fig-4) (further, see Appendix-1 comparing Dell Vs Compaq).

F ig-4 Dell Inventory Turnover

Source: Kraemer, K.L, Dedrick, J and Yamashiro, S, (2000), Re-ning and Extending the Business Model with InformationTechnology: Dell Computer Corporation, Viewed at 12/7/06 http://www.indiana.edu/~tisj/readers/full-text/16-kraemer.pdf

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Strategies for reducing safety stocks Reduce spoilage in the supply chain

Methods for tagging and tracking metal parts

Share supply chain data securely with partners

Strategies for improving cold chain management wi th RFID sensors

Reduce shrinkage from theft and administrative error

Source: Supply chain management session, (2006), The worlds RFID Authority, Viewed at 09-07-06.

Dell launches a price war strategy. Bypassing middlemen to deliver PCs cheaper than any of

its rivals, with a far-flung supply chain knitted together so tightly that it's like one electrical

wire, humming 24/7, (Business week, 2003). Dell emphasizes on more personalize marketing

strategy to penetrate market with its competitive pricing strategy also where convenience and

value to time is an industry benchmarking. Further, employees are motivated with two

reasons mainly, first, marketing department arent looking for hypothetical targets, largelybecause customers place orders online, eventually Dells have less HR-issues, low turnover,

technology transfer to competitors through employees and other reason is that when customer

place an order it becomes almost zero human error when taking orders from customers online

than from telephonic conversation (effective delivery services).

2.2 Gillettes turnaround.

Recent years Gillettes manages to execute impressive turnaround. A central element of that

turnaround was the companys disciplined planning to sustainable strategy, which has

established powerful new levels of accountability and awareness. Furthermore Companys

new commitment to actionable strategy, Total Brand Value internally throughout the

company, and externally to Wall Street. It was a strategy designed to align Gillettes future

with its recognized history as an innovator and value creator. Gillette was able to manage

information and communication among all upstream parties in its value chain.

Suppliers, distributors and retailers are all been efficiently and effectively connected through

highly digitized RFID (Radio Frequency Identification) technology (see fig-1 and fig-2

product with RFID technology). Moreover, managers are responsible for contributing to an

annual operating plan and a three-year strategic growth plan that sets performance

expectations.

Fig-1 Supply Chain Management with RFID Radio Frequency Identification technology

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Fig-2 RFID Tag attach with Gillette product MACH 3

Source: Supply chain management session, (2006), The worlds RFID Authority, Viewed at 09-07-06http://www.rfidjournal.com/live2006/supply_chain_management.php.

Gillette quickly began moving in a new direction of the team members. Performance-based

compensation arrangements were introduced, rewarding results instead of effort.

Communication and collaboration became essential to groups striving to meet new

performance targets. As a result, cross-functional teams and groups were established,

Managers discuss the objectives and targets of their own groups, which cascade down to their

staffs which also used in individual performance appraisals. (High Performance Marketing,

2006)

Cost reduction strategy in every stage along the supply chain. With its low cost leadership

strategy through strong supplier and distribution network, a strong satellite system, advanced

electronic technology and warehousing, Wal-Mart is able to offer low prices to its customers,

thus, saving the customers money. And through this, Wal-Mart could build a strong

relationship with its customers based on trust and at the same time reduce its operation costs

by shortening the lead times (effective inventory management).

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RFID Tag


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2.3 Eastman Kodak secret to success

Kodak is not just selling their still image films, Kodak have quite number

of product lines and service to offer (Product diversification), such as

digital images, printer cartridges, paper kits and innovative big sign

boards, which Kodak sells globally. Further, Kodaks quality goal and

overall objective is to achieve Total Customer Satisfaction. This is

accomplished by utilizing appropriate process improvement techniques

(e.g. Zero Defects, Supplier Certification, Lean, Six Sigma, etc.) in a

manner that delivers improved productivity and the optimal deployment

of resources.

Kodak achieves their objective through the Supplier Quality Process (SQP).

Which utilizes a number of different elements to improve, measure,

monitor. The flexible design of SQP allows it to be applied to the specifics

of each Kodak / Supplier relationship. The improvements gained should

benefit all suppliers customers and eliminate unnecessary costs.

Furthermore, each supplier is expected to measure their performance in a

way that is consistent with Kodaks business needs, and they are

responsible for driving continuous improvement within their operations.

Effective quality improvement is hardly easy, but if SQP has beendeployed well, the following results should occur for both Kodak and

suppliers.

Defect trends will decrease and overall performance improve

Number of supplier corrective action requests will decrease

Productivity/Cost of Quality (COQ) savings will result

Number of certified suppliers will increase

Fig-1 Major Elements of the SQP Process

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Source: Eastman Kodak, (2006), Kodak Online: Revised, Viewed at 12/7/2006, Available athttp://www.kodak.com/US/plugins/acrobat/en/corp/purchasing/revised_2006.pdf

As more people are worry about environmental conditions vis--vis, Kodak also show

concerns over environment, Kodak begins its mass advertisement in 2005 and manifests

their philosophy as environment friendly relating with ISOs certification on their products,

which Kodak also sees their CSR (Corporate social responsibility) as environment friendly.

Kodak projected their societal marketing strategies, plays an important role towards their

products as safe to use.

Environmental delicacy and companys strategies towards it as waste management, to

becoming environmental friendly Kodak products are more appreciated among existing aswell as potential and target customers. Kodak Greenhouse Gas (GHG) emissions represent a

waste so Kodak have to take action to reduce GHG emissions, (see fig-2).

Fig-2 Kodak Safety Incident Rate

Source: Farris, D and Jim, C, (2006), Good to Great: Why Some Companies Makethe leap and others dont, Library Journal, Retrieved from proQuest.

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2.4 Exxon Mobile- Another Successful Company.

Horizontal merger between Exxon and Mobil, result in 23% increased in market share,according to Fortune 500, ExxonMobil, stands at No1 position in 2006, further mergers are

crucial components for the companys survival and growth in the long term.

ExxonMobil adopted a balanced scorecard strategy. In general, however ExxonMobil

adopted the differentiation strategy with their operational efficiency. ExxonMobil sought to

attract customers that are willing to pay additional premiums for their products and at the

same time improving efficiency in the supply chain in order to reduce cost. Moreover,

ExxonMobil has focused on its strengths on its core business research and development to e-

business and venture capital activities.

ExxonMobil, venture to a complete new strategy, apart from their core business such as

gasoline related products. ExxonMobil encourages its customers to purchase goods from its

convenience stores apart from filling gasoline in the ExxonMobil gas station. Second, with

its superior buying experience, the company has also able to provide convenient and fast

service, hygiene restrooms and friendly employees to its customers. This exceptional service

has made the relationships with its customers to become more bonded than ever before.

ExxonMobil focuses on operational efficiency, margin improvement initiatives, and prudent

capital management (Raymond 2004). To achieve this, the company continues to advance

its technologies, introducing marketing innovations, expanding the business lines and

established markets in overseas, for example, for the refining process ExxonMobil has

continuously improve health and safety procedures to reduce accidents. This focus strategyon controlling costs has helped the company to reduce costs, thus, becoming more efficient.

And finally fourth, the success of the company is also derived from the effort and

commitment of its employees. The ability and flexibility to continuously change in this

volatile industry is a competitive advantage over the other companies. (See fig-1,

ExxonMobil Market segmentation, on following page)

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Fig-1 ExxonMobil Market Segmentation

True Blues -16%: Usually men and women with moderate to high

incomes who are loyal to a brand and sometimes to a particular station...

frequently buy premium gasoline and pay in cash

Generation F3- 27% : Fuel, Food and Fast: Upwardly mobile men

and women-half under 25 years of age- who are constantly on the go... drive a lot and snack heavily from the convenience store

Price Shoppers-20%: Generally aren't loyal to either abrand or a particular station, and rarely buy the premium

line ... frequently on tight budgets.

Home bodies -27%: Usually housewives who shuttle their

children around during the day and use whatever gasoline

station is based in town or along their route of travel

Road Warr iors -16%: Generally higher-income, middle-aged men whodrive 25,000 to 50,000 miles a year ... buy premium gasoline with a credit

card ... purchase sandwiches and drinks from the convenience store ... will

sometimes wash their cars at the carwash

Source: Kaplan and Norton, The Strategy Focused Organization, page 33

ExxonMobil Strengths

ExxonMobil has delivered strong cash flows at the operating level, and has continued to do so. Operating profitis approximately three times that required for operational activity, further, approximately 30-40% of netearnings is normally paid out as dividend. Recently EMC heavy investment in recent years in enhancing theefficiency means that capital expenditure is likely to be modest over the years ahead.

EMC employees are self motivated, because as company grows, workers see their carrier building and theirgrowth, moreover EMC is given employees intrinsic motivated in terms of dividends as well as extrinsic

motivations, in terms of recognition, such as certificates and recognition like Loyal Employee of the yearaward.

ExxonMobil Weaknesses.

Since EMC is making huge investing in non-gasoline products, EMC has to keep companys core competenceintact, Further, ecological disaster, which spill thousands or gallon in Artic ocean, because of this EMC imagehampered in the market place, to built the image, EMC should help clean the disasters areas, which still effectedby EMC oil spill, consider as most worst ecological disaster in century. Furthermore compensatory programmust be introduced and try to resolve this issue and get the certification of oil barges and buy more two hull oiltankers rather than one hull oil tanker .

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2.5 Pfizer Success.

Pfizer offers an excellent example of how executives can recognize what their companies do

well and use that understanding to build superior strategies.

The key to success of Pfizer is their strong sales team and huge investment on R&D.

Moreover, Pfizer sales force uses leading edge information systems and technology to track

the perception histories of physicians and to respond with sales coverage that delivers the

biggest bang for the sales effort. The companys information system also allows top

management to plan the expansion of the sales force, to track its performance, and to link that

performance with compensation. Further, this strong sales capability is a major asset ofPfizer, won the company co-marketing rights for several major drugs produced by other

companies like Glaxo SmithKlein. Furthermore, an aggressive investment in R&D, Pfizer

hired many of industries most experienced and talented scientist by offering them attractive

compensation and un-beatable opportunity to conduct leading edge research.

Zoloft, Pfizers most lucrative mental drug in history. According to analyst Zoloft,

accounted for 40% of the market share in antidepressant bazaar compare to 18% Eli Lillys

Prozac. Despite the similarity between two products, Pfizer gained share from Eli Lilly in

the marketplace. The main reason for this success seems to have been Pfizers aggressive

marketing and sales strategy, which created an impression in the eyes of physicians that

Zoloft is a safer drug. Moreover Company creates a value chain through distribution strategy

to the customers because of easy availability of Zoloft. Moreover, Pfizer sales force also

logged more face time with psychiatrists than Eli Lilly.

The target market strategy was not just psychiatrists. Pfizer sales rep(s) also meet with

general physicians to recommend the basic primary care if the patient cites with nausea,

nervousness, anxiety, insomnia, and drowsiness. General Physicians are encouraged to

prescribe Zoloft as antidepressants drug.

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Pfizers weaknesses and threats cont............

Although it seems all promising to Pfizer. However. there is one important issue that Pfizer needs totake into account, and this is the ability of Pfizer to translate its competencies on brick-and mortars toan online environment. This is crucial because this B2C online business could be another strongsource of competitive advantage and a weapon to destroy its competitors through lowering the pricestrategies.

From our observations, it is found that up till now Pfizer still has a poor website and online shoppersperceive inconvenience to purchase products due to the complex Pfizer design. Pfizer has yet needs toprove to public its ability to transfer its specialized knowledge on traditional physical world intovirtual world in order to sustain its already strong competitive edge.

The major threat to Pfizer is that companies who counterfeit the product like Zoloft and sell it, as iftheir own products and taking profits. Therefore, Pfizer have to broaden their distribution channelsglobally, in order to gain the market and awareness to the customers.

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3.0 Un-successful Organizations

3.1 Sun Microsystems

Rank 211 loss $107.0 Million

The problems could be neatly summed up by saying, when the fish are jumping in the boat,

sun focused strategy on building the biggest boat. Sun ended up with $7.5 billion in cash,

(Corcoran, 2005). Pervasive quality problems and a real strategic disconnect with where the

market was quietly heading in part because Sun Microsystems were much more interested in

monetizing the high end customers than Sun is worrying about the adoption of the core

software assets on the low end.

Sun Microsystems focus strategy tends be product-oriented firm rather than customer-

oriented firm. The company has poor marketing practice and ignored the customers needs,

and also, the overall quality of its operations of marketing the products, and business

practices were relatively poor compared to the other firms such as Microsoft. Moreover the

biggest customers of Sun have today are the customers that subscribed to Suns core

hardware and software architectures a decade ago.

Sun's overall strategy suggests that company focuses on their UltraSparc stations (Hardware),

which eventually has no future. Companys main revenue generator is there Java and J2ME

(Java to micro edition, embedded software in 3rd and 4th generation mobile systems), and

company is swapping and pouring the large sums into UltraSparc development in the past

and is being forced to do so even now, but UltraSparc has been clinically dead for a long time

now. It lags benchmarks and likely costs the company more than 50 percent of its R&Dbudget taking from J2ME.

The prime reason that Sun Microsystems have not fully understood and embrace the TQM

concept, They were looking for quick fix, whereas implementing a quality improvement

program is a long-term commitment.

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Sun Microsystems Interoperability with x86 (Intel) Strategy.

Over the years Sun Microsystems has been extremely apprehensive of Linux operating

systems, and x86 based servers. Sun did recognize cheap x86 (Intel, compatible and non

Compatible hardware) as a threat long time ago, but the company didn't know what to do

about it. Sun was afraid of entering the x 86 markets as the margins in the x 86 markets were

not healthy, and such a move would have cannibalized its high-margin UltraSparc business.

After the dotcom bubble burst, Sun made a number of bizarre moves with regards to the x86

markets, but these days Sun looks firmly committed to a game plan. Solaris x86 which Sun

was once planning to discontinue has become central to the company's plans. Sun is cutting

back on UltraSparc development, and is readying itself to pursue life as a major x86 servervendor.

According to a report by The Register, Sun will be rolling-out a number of in-house

engineered Opteron based servers (www.sun.com) and storage solutions in 2005. Another

report by The Register claims that, Sun is planning to sell 414,000 Opteron based servers in

2007, and the company is aiming for a double-digit share of the x86 server market.

Some of Sun's x86 gains will surely come at the expense of its high margin Sparc business so

the company has to compensate for that loss. But, Sun can't expect to gain market share

quickly if it doesn't price its x86 hardware competitively. Sun is faced with two conflictinggoals in the x86 market, but the company has figured out a way to extract decent margins

while pricing its x86 hardware competitively.

Sun also intends to combat the Linux advantage by assuring that the money it puts in Solaris

yields a competitive advantage in the form of clear technical superiority over the

competition. Sun will also attempt to tightly integrate software and hardware development in

order to quickly bring advanced functionality to the market. But, the real key to Sun's success

will be volumes.

If Sun manages to sell millions of servers, Sun Solaris operating system development costswill get dispersed over the large number of units shipped and become irrelevant. Moreover,

Sun will be able to make money from add-on sales, and service/maintenance contracts. Also,

Solaris operating system will displace Linux operating system as the open source operating

system of choice, and this will allow Sun to steal IBM and HP's UNIX customers.

If Sun's Opteron sales takeoff, the company will become less reliant on UltraSparc revenue

and the incentive to keep wasting money on UltraSparc will diminish.

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Sun has placed a very bold bet on x86, and the company will emerge highly profitable and

competitive if it manages to execute its game plan effectively. The downside is that if the

game plan fails so will Sun. In that case, Sun will get swamped by hardware and software

development costs and quickly goes out of business.

3.2 Gateway falls short of their strategies.

Rank 495 (2005), Exit from Fortune 500 (2006), loss $3,649.7 Millions

Gateway has attempted to revive itself by becoming a producer of a wide variety of

consumer electronics products branded with the group's name. But PCs still make up the bulk

of its sales

Compare Dells and Apples highly disciplined innovation efforts to Gateways shoot-

anything-that-moves approach. Gateway started as a process innovator, becoming, with Dell,

a pioneer of direct distribution, but it also tried to be a product differentiator, maintaining

relatively high-cost manufacturing plants, investing more than Dell in R&D, and launching

expensive brand-advertising campaigns. It innovated aggressively on the retailing end as

well, pioneering the exclusive stores that Apple would later (and more successfully) copy. It

even tried to be a service innovator, pursuing a highly publicized beyond the box strategy

involving the provision of various consulting services to small businesses. By trying to

innovate everywhere, Gateway failed to build a strong competitive advantage.

Company fail to leverage their brand name, they were investing every where, in electronic

industry and missed their core competencies as PC maker, eventually they looses ground in

market place, by clearly not understanding the behavior of consumer market. Moreover,

Gateway complex website for selling Personal Computers is hard to understand and

customizing it, company website is poorly segmented where advance and simple features are

on the same HTML (hyper text machine language). Further, their value added advantages are

next to zero, including customer support solution, in addition, Gateways, AMD (Athelon,

Intel rival) 1.8Ghz notebook designs are exact imitation of exact Compaq V1000 Presario.

When Gateway, was the market leader in the US, the company was not aggressively

emphasized on competing with the other Japanese firms where at that time, the Japanese

products were starting to enter the US market with low-priced and high-quality personal

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computers. The ignorance and the poor response of Gateway had cost the company to lose

huge percentage of its market share in the US and worldwide. Gateway was unable to lower

its costs and improve its brand image.

3.3 Alcatel failure

Alcatel market share deteriorated, and this is partially due to the slow movement made by the

company to shift from a wireless phone industry to digital technology. Other words from

AMPS (Advanced Mobile Phone System), D-Amps (Digital-Advance Mobile phone

systems) to GSM (Global system mobile system) technology.

These problems were aggravated when analyst found that there is a high level of competition

within the mobile industry. There is a risk of supplier threats, the industry was mature and

growth was slow where in many cases manufacturers are consolidating. And at the same

time, Motorola does not have the capitalization or expertise to compete effectively with its

fierce rivals such as Nokia and Sony Ericsson.

The biggest setback of Alcatel was a fail M&A between lucent technology and Alcatel.

Company managers was having a high expectations, experiencing Sony and Ericsson M&A.

Moreover, the problems with the proposed merger was the duplication in the two companies'

product lines and both companies had a lot of traditional products in their portfolio that

overlapped significantly, and it would be a logistical nightmare to decide which ones they

would retain. Moreover, The megamerger could also have raised some antitrust issues.

This fail M&A between Alcatel cost $550 million liqudation. (Fyffe, 2001).

On the other hand, Nokia which has a competitive advantage over Alcatel, through being a

low cost company. Nokia achieved this through utilizing a small number of platforms to

produce a wide range of phones (creating economies of scales) and managing its inventories

more efficiently than its rivals like Alcatel. Furthermore, Alcatel Corporate strategy was

hierarchal, which means more paper work, consuming time on, making manager frustrated

on work, Alcatel starting to loosing their best talent headcounts in late 90s resulting failure

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in company, now Alcatel have to adapt their strategies to be more focused on 3G mobile and

4G mobile system, in todays customer needs in order to find a niche of the company.

3.4 Dec (Digital Equipment Corp)

The root of competitive failures can be found in what he termed the Icarux paradox. (Miller,

1994). Miller identifies four major categories among the rising and falling companies, which

he label

Craftsman

Builders

Pioneers

Salesman

Dec original success was founded on the minicomputer, a cheaper, more flexible version of

its mainframe. Company improved on their original mini computers until they could not be

beat for quality.

Company rank was 27th in fortune 500 and remains in for decade, until they turned a blind

eye, DEC turned into an engineer monoculture, its engineers became idols, Components

specification and design standards were all that senior managers understood. Furthermore,

technological fine tuning became such an obsession that the needs of customers for smaller,

more economical, user friendly computers were ignored. DECs personal computers, for

example, bombed because they were out of touch with the needs of customers, and the

company failed to respond to the threat to its core market presented by the rise of computer

workstations and client-server architecture.

Texas instrument was with the same icarux paradox, masterful engineers and turns those into

rigidly controlled operations, Texas instruments technocratic cultures alienate customers

with perfect but irrelevant offerings. Eventually, the demand of Texas instruments product

was falling.

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Bill Gates once said that, its not necessary that Microsoft Xp could be the best product,

available but Microsoft business strategy was to put this Xp as user friendly and cost

leadership, operating system as house hold of the world.

3.5 Enron failure

Enron is a company that operates in the energy sector. Later it expanded its operations to Gas

Bank, electricity sector, water, metal, broadband and newsprint. In 2002, the company used

to be the number 5 of the top 500 fortunes companies but later on after facing an accounting

scandal, the company started to collapse. Enron has transformed its company from being an

old economy company focusing on hard assets to a new economy firm focusing on a strategy

of creating new markets HFV (Hypothetical Future value). Enrons strategy to differentiate in

the market was through reducing physical assets, keeping key assets (peak demand

generators) and developing a core competence of risk arbitraging. With its core competency

on risk management, managing the risk of commodities through purchasing electricity at a

fixed price with suppliers and then sell electricity to customers with the new price, Enron was

able to increase its profits, some thing Enron called M2M (Marked to Market Accounting).

Now the question is how Enron has collapsed? The collapse of Enron was the largest

bankruptcy in the US history. The stocks price dramatically collapsed from $80 per share to

30 cent per share. The collapse was mainly due to the managements fraudulent practices.

Enron lied about its profits and when the deception was unfolded, investors and creditors pull

back their financial resources, which finally cause the company to face bankruptcy. Over

expansion and excessive borrowings have also

contributed to the companys eventual demise. The

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finances were a disaster, this happens because of poor management and due to intentional

deception and fraud. Poor management, we referred this as a systemic corporate governance

failure.

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Organizational Analysis: Success and Failure

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