Topic: Real time examples where strategic

management fails.

GROUP MEMBERS:

• Maha riaz.• Samia ahmad.• Fatima arshad.• Farah nasir.• Noshiza nazir.

Strategic management??

Strategic management

• Formulation.• Implementation.• Evaluation.

Why strategic management fails??

1)Formulation versus implementation.

2)People versus paper process.

3)Communication barriers.

4)Management and employees conflicts.

5)Doing a formal planning that rigid flexibility and creativity.

6)Over confidence of employees

7)Culture orientation.

8)Lack of commitment and focus.

9) External factors and lack of resources.

Maha RiazRoll no.04

Why did Subhiksha fail?

• One of the pioneers of discounted retail format in food and grocery retail Industry.

Started by R. Subramanian

Subhiksha

• In 1996 ,a discounted organized retail format.• Cost leadership strategy focusing on indian

middle class segment.• Began operations in 1997 from its first store in

chennai through food, grocery and pharmacy retailing, mobile phones.

Research of three months

• Grocery was one of the largest categories of spending

• Price sensitive on groceries.• Prefer to buy grocery as fresh and to buy it

from close by.

Strategic decisions

• Sanskrit word Subhiksha (prosperity) was chosen.• Setup of multiple small stores across the city

rather than one big store centrally within the city. • To differentiate , decided to sell the branded

products at discounted prices.• Acheiving economies from scale.• Tracking their customers through loyalty cards.

Cost strategy

• Their retail stores should operate from low cost properties to keep the cost structures down.

• Using IT to efficiently run operations. Each store would be updating the central database about the stocking requests by end of day.

Financial strategy

• ICICI bought 10% stake by investing Rs. 15 Crores in the business

• Azim Premji’s Zash Investments in Subhiksha.

Expansion strategy

• Strategy to grow by over 600 stores in 6 every 6 months

• Opening of around 500 stores in 6 months during their later years.

• Economies of scale

Then ......things started to change

• In the year 2004 FDI started in india, subhiksha decided to expand their operations on national level.

• Raised 160 crores of equity, 220 crores of debt and loan on 125 crores to fund their plans of going national.

• The growth of economy had put pressure on the people and property costs.

Where they went wong ?

• Financed most of their operations and expansion plans debt from banks

• Reduced working capital. • Ignored the need to strengthen supply chain,

distribution and logistics.• Economic environment in 2008-2009 also

contributed to the downfall of Subhiksha.

Where they went wong ?

• Unpaid employees and cash losing investors lost their trust which led no support from them.

• Closed operations in 2009.

What they should have done differently ?

• Had opportunity to raise money by offering an IPO in 2007 and early 2008.

• Only one store at one time.• Planned supply chain management for

expansion plans nationally.

Samia AhmadRollno:06

Why did Kodak fail? Kodak’s Strategy

Company Overview

Company Overview…. Cont…Kodak, is an American technology company

Founded by George Eastman in 1888

1888: Introduced paper roll film

1935: Introduced color film• Kodak was the Google of its days. Highly

inventive, highly innovative • It was known for its pioneering technology

and innovative marketing.

“You press the button, we do the rest,”

was its slogan in 1888.

Company Overview…. Cont…

• By 1976 Kodak accounted for 90% of film and 85% of camera sales in America.

• 1990′s, Kodak was rated as one of the world’s most valuable brands

Then Digital hits…

2001: Kodak is pushing aggressively into China, an important growth market

2004: Kodak announced that it would stop selling traditional film cameras in Europe and North America, and cut up to 15,000 jobs

Company Overview…. Cont…

2005: The Kodak EasyShare-One Digital Camera, the world’s first Wi-Fi consumer digital camera capable of sending pictures by email, was unveiled

January 19, 2012: Kodak filed for Chapter 11 Bankruptcy Protection

Brand Logo Evolution

Kodak Product• Four distinct sub-product

– Digital cameras – Home printing– Online services– Retail kiosks and mini-labs

Strategic Group mapping

Leica Sony

Samsung

Olympus Nikon

Kodak Cannon

High Price

Low Price

Market share

Firm % Market Share Average Price

Canon 40% $220.00

Sony 15% $300.00

Samsung 10% $260.00

Nikon 10% $250.00

High Market Share

Low Market Share

Price

Then Things started to change

• Rapid decline in demand for traditional photography equipment

• Rapid growth in demand for digital cameras in developed economies

• Steady decline in demand for film and photo processing

• Development of new imaging technology such as photo-enabled wireless telephones and high-megapixel digital cameras

Value chain pre digital age

Image Capture Processing

Projection

Printing

Storage

- Film Camera- Video Camera

- Retailer Processing

- All Retail Stores- Reprints

Value Chain post digital age

-Digital Camera -Digital Cameras Software -Hard Disk

- Video Camera -Scanner at home -Floppy Disk/CD -Online (email)

-Digital mini-labs -Removable

Storage

- Kiosks at retailers

-Online Services

Image Capture

Projection

Digitalization Storage

Transmission

Printing

Manipulation

Retrieval

Kodak Strategy

In 2003, CEO Daniel carp revealed 4 pillars Strategy:

1. Managing the traditional film business

2. Leading in distributed output

3. Growing the digital capture business; and

4. Expanding digital imaging services

Kodak Strategy….Cont..

1. Managing the Traditional Film Business:

• Slow exit strategy from film business• Looking forward to digital technology

Kodak Strategy….Cont..

2. Leading The Distributed Output

• Now a day digital photography is much easer to view & share photo(i.e. integrated display on camera & sharing through electronic mail or kiosks etc.) and its affecting the photography industries.

• Then Kodak is able to bring fewer profit through digital technology (i.e. digital print) instead of traditional printing.

Kodak Strategy….Cont..

3. Growing the digital capture business

• Profit much lower in digital photography than traditional photography

• Success in this part of the business is dramatically opposed to the traditional photography business .

Kodak Strategy….Cont..

4.Expanding digital imaging service

• Strategy take place by expanding product & services. For example Kiosks that could print image directly from mobile phone.

• In case of expanding service/online service Kodak acquires companies like Ofodo to boost Kodak Easy Share Gallery.

Low Cost Provider Strategy

• Introduced cheapest Inkjet printers Cost $150-$300;Almost 50% less then competitor, i.e. HP, Lexmark.

• Ink Cartridges sold $9.99 Black & $14.99 color. Competitor avg. price $ 30.

• Encourage more people to print at home. Photo value pack will allows to print at home for 10 cent, 60% cheaper then HP system

Current Strategy

Current CEO Antonio Perez adopt new strategy, such as_

1. Outsourcing Manufacturing

2. Huge invest in digital technology;

3. Spent hundreds of millions of dollars to build up a high-margin printer ink business to replace film sales

4. Aggressive patent litigation in order to generate revenue;

5. Expand current brand licensing program

Flaw

• But there was a fatal flaw in Kodak's strategy. Its executives didn't anticipate how fast these digital cameras would become commodities, with low profit margins, as every competitor raced into the market. 

• Kodak was late to recognize the problem, slow to react, and then went down the wrong innovation path

Reason For Failure

1.Core competency became core rigidities

2.Lack of market research

3.Late mover of digital photography

4. Innovation and transformation Failure

5.Unwillingness to change

• In 1975, Steve Sasson, the Kodak engineer who invented the first digital camera, but the initial corporate response to his invention was:

• As it was filmless photography, so management’s reaction was, ‘that’s cute—but don’t tell anyone about it.’

• At that point of time promotion of digital photography would be the direct competition of photo film business.

Why Kodak failed to exploit its digital photography

• But the top manages decided not to promote digital photography

• By the time Kodak realized the importance of digital photography, others like Canon had already jumped in.

• Kodak was too strongly associated with the photo film that it never caught the imagination of digital camera consumer.

What they should have done differently ?

• Discontinue unprofitable products• Launch new and innovative product • Move to another business segment such as movie

and entertainment • Focus on high potential products

– Kiosks and mini-lab– Online services such as photo printing and sharing

• Emphasize on niche market i.e. medical market and professional

Conclusion

• Great example of strategic failure. • Lessons we can learn:

• External environment can be deceiving • Change happens• Greatest strength can be weakness • Innovation is not the perfect solution • Its not all over till its over

Farah NasirRoll no# 13

WHEN GLOBAL STRATEGIES GO WRONG?

Globalization• Globalization:

– The process of doing business worldwide

• Global strategy includes considering global needs during– Design– Production– Marketing

Potential Advantages of International Operations

• Gain new customers• Absorb excess capacity, reduce unit costs, and spread economic risks• Allow firms to establish low-cost production facilities• Competition may be less intense• Reduced tariffs, lower taxes, and favorable political treatment• Joint ventures can enable firms to learn new technology, culture, and

business practices• Economies of scale• Power and prestige in domestic markets may be significantly enhanced

Potential Disadvantages of International Operations

• Foreign operations could be seized• Different and often little-understood social, cultural, demographic,

environmental, political, governmental, legal, technological, economic, and competitive forces

• Weakness of competitors overestimated• Different language, culture, and value systems• Understanding of regional organizations needed• Dealing with two or money systems

Global Issues

• Global considerations impact virtually all strategic decisions.

• A world market has emerged.• It is difficult for a firm to survive relying solely

on domestic markets.

The Global Challenge

• How to gain and maintain exports to other nations.

• How to defend domestic markets against imported goods.

Multinational Organizations

Social Cultural

Demographic

Environmental

International firms or multinational corporations face many complex variables:

Politics and Economics

• Political factors, such as government stability, trade regulations, tax policies and other laws, impact an organization's ability to achieve strategic goals in some countries.

• Economic factors likes low credit accessibility, high unemployment rates and rising interest rates can also make it difficult for a company to conduct business in some locations.

Social Trends

• Global strategic management activities may not produce the desired results if company leaders fail to assess local social factors accurately.

• Businesses also need to take into account lifestyle changes, such as a reliance on social networking websites, when planning marketing and advertising campaigns.

Technology

• Innovation occurs at a rapid pace. Companies need to bring products to market faster than their competitors in order to achieve their strategic goals and maintain a competitive edge.

• Unless they adapt to these changes, companies risk being left behind and becoming obsolete and unprofitable.

Environment and Law

• Environmental factors can impact how a company does business. To overcome some of these obstacles, effective managers recognize popular attitudes and adjust a company's promotional campaigns to promote and pursue "green" strategies for preserving the environment and saving precious resources.

• Additionally, global strategic management initiatives may be difficult to implement because of local rules, including health and safety regulations. By adhering to laws that govern employment and business conduct, companies can avoid costly lawsuits.

Cultural Differences

• Language• Time• Space• Family roles• Religious factors• Family time• Values• Eating• Rules of etiquette• Importance of relationships

FATIMA ARSHAD

ROLL NO# 10

Examples of Failures of Multinationals

Failure of Wal-Mart in Germany

• Wal-Mart’s German adventure ends which began in 1997 with the acquisition of Wertkauf chain (24 stores) and unprofitable Interspar chain (74 stores).

• The two chains made up only less than 3% of the market. • Wal-Mart started talks to buy the German retailing giant

Metro, but Metro board rejected the idea.

Initial Strategy of Wal-Mart in Germany

• To refurbish the stores to improve appearance• High quality customer service• To maintain price leadership through cost

leadership• They would overhaul the supply chain systems• Incorporate new scanning systems• Centralized distribution

In Short….

Wal-Mart could be trusted to implement its US strategy and fully owned distribution network, gain efficiency, low prices, and inventory control and thus propel the

underdeveloped German market into the future.

Biggest Factors of Wal-Mart Failure in

Germany

Zoning In 1977, Germany had enacted strict planning and zoning

regulations designed to protect traditional retailers and thus prohibited construction of stores with more than 800m2 sales area in locations not designated for retailing. This resulted in large-store development being restricted to town/city centers.

Yet, even within cities, where retail restrictions were less onerous, the approval process for a new store still could require from 1 to 4 years.

Labor Union Relations Germany service sector union Ver.di, the largest union in the

world, filed a lawsuit against Wal-Mart for not releasing year-end figures that could be used to negotiate wages. This ultimately led brought Wal-Mart to the negotiating table with Ver.di and increase salaries up to 0.5%.

Store Hours• Wal-Mart stores are designed for customers who are

willing to spend lot of time shopping. • But in Germany, the shopping hours are shorter: Shops

close by 5 PM on weekdays, and no shopping on Sundays. This meant that customers don’t have the habit of spending lots of time in a store – wandering around for the things they need.

Customers

What German Customers Want

• German customers do not like to be assisted by Wal-Mart’s friendly store assistants

• Germans like to see the advertised discount products upfront without having to ask the store assistant.

• German retailers stock more of food products. For example for Metro,

What Wal-Mart did• But Wal-Mart hire warm &

welcoming employees who greet customers, and standardized ERP systems.

• Wal-Mart chose to use its US style merchandise display strategy – where discount products are kept at higher shelf

• Wal-Mart also got its store inventory wrong, Wal-Mart stocked its store with clothes, hardware, electronics and other non-food products were given much bigger floor space than food products, he bottom racks.

What German Customers Want

• German customers were not accustomed to friendly greetings, they focused more on how much more is Wal-Mart charging customers for these additional services.

What Wal-Mart Did

• Wal-Mart offered credit card payment and free bags for goods purchased, improved store interiors, etc

Suppliers and Competitors

• Wal-Mart experienced great difficulties in dealing with suppliers. The retailer did not have the bargaining power to buy goods from suppliers at low cost

• In 2001, a consumer study showed that Wal-Mart’s prices were 11-25% higher than Metro, Aldi and its other German rivals.

Inefficient Top Management

• Mal-Mart appointed CEO Rob Tiarks for German operations ,an expat from the USA – who did not understand Germany or its culture.

• He also ignores the complexities and the legal framework of the German retail market, ignoring any strategic advice presented to him by former Wertkauf executives .

• English was the official company language at the management level

HEINEKEN BEER

During the 1994 World Cup, bottles of Heineken beer displayed the flags of all the participants in soccer's biggest tournament, including Saudi Arabia.

The country's flag shows a verse from the Quran, Islam's holy book. The Quran forbids the use of alcohol, so thousands of Muslims registered complaints with the brewer

for displaying the verse.

TIZ RAZOR

• An Iranian razor manufacturer used the brand name "Tiz," the Persian word for "sharp," to illustrate the quality of its product. When the company began exporting the razors to nearby Qatar, they learned that "tiz" was the Arabic slang word for "buttocks," which the Arabic-speaking residents of Qatar found highly offensive.

PEPSI Slogan• Original:"Come alive with

Pepsi!"• Translation: "Pepsi bring your ancestors back from the dead!“ in Chinese

KFC’s Slogan• Original: "Finger-lickin' good"• Translation: "We'll eat your fingers off" in China

FORD

• Original: "Every car has a high quality body"• Translation: "Every car has a high quality

corpse" in Belgium

Conclusion

Formulation and implementation of right strategy may also the biggest challenge even for the large companies.

If you want to avoid strategic failure do consider all the factors which directly or indirectly influence your

organization operationsAnd if you are going global and want to expand your

business in an other country Companies have to be sensitive to the local cultures and tailor their offerings

to local market and should hire local staff to know more about country’s culture, values, traditions, etc