(A) The main aspiration, I think that is every stockholder wants his company to “grow” and return ever-greater dividends and/or capital appreciation, which usually results in higher stock prices. This aspiration is not unreasonable and I wouldn’t deny this hope to any shareholder in the world. Because this is so much fun when it happens, and gives the individuals thus fortuitously situated so much pleasure, this phenomenon too seems to support the notion that growth is good and the lack of it is bad.
(B) The typical stockholder expectations they might conflict as following are:
1. In order to grow, short-term profitability, cash flow and pay levels may need to be sacrificed.
2. “Short-term” may suit managerial career aspirations but preclude investment in long-term projects.
3. When family business grows, the owners may lose control if they need to appoint professional managers.
4. New developments may require additional funding through share issue or loans. In either case, financial independence may be sacrificed.
5. Cost efficiency through capital investment can mean job losses.
6. Extending into mass markets may require a decline in quality standards.
7. In public services, savings in one area (like social security benefits) may result in increase elsewhere (school meals, medical care).
(C) By the end of the 1990s IKEA was turning its attention to new opportunities for growth. It had opened stores in Eastern Europe and the one-time Soviet republics. In the 1997 it announced its plan to open twelve new stores a year internationally in cities. However, the company was also facing problems. When IKEA was experiencing growing competition on an international front. It has decided to implement a program of cost saving, rationalizing its supply chain and product range in order to increase profits for aspiring stockholders.
6.2 write a discussion paper explaining how privatization of public services will or will not change the delivery of such services to the benefit of taxpayer who finance the services and the user of such services.
Privatisation: we think and agree privatization of public services will brings poorer quality for taxpayer and user. For example, we refer Sasha Strike, staff nurse at Newcastle General Hospital; she said that patients it doesn’t have been gave a patient a good service. She’s seen the private sector brought in for domestic staff and she’s seen the quality dramatically reduce. She thinks it’s cheaper for them to have one member of staff doing the job of three people. Also in their catering services they’ve seen the quality of food reduced after closing their kitchens down and bringing in private firms that offer cooked chilled food. The quality of that has also dramatically reduced, and they’re forever getting complaints from their patients about the poor quality of food that’s provided for them. It does matter who provides the service and shouldn’t be about profit. So we think privatization of public services will change the delivery of services and it shouldn’t be about making money, and it’s about caring for people.
6.3 choose a company with a wide geographical scope in its products or services. Using exhibit 6.3 as a guideline identify the benefits and drawbacks of such scope.
The Wal-Mart is the best example for this. We know Wal-Mart deals with a wide geographical scope in its products or services.
1. Cost reduction: Wal-Mart is working smarter in anywhere. It uses information to change the nature of retailing. It’s a networked operation where sales information generates wholesale orders that are electronically communicated to its suppliers. The products arrive just in time, rather than sitting in expensive warehouses. This does reduce costs, but it does more. It makes Wal-Mart’s inventory intelligently sensitive to the needs and preferences of its customers.
2. Improved quality: The basic theory is that strong brands have the power to increase sales and quality. Wal-Mart believed in listening to employees and challenging them to come up with ideas and suggestions to make the company better. Wal-Mart has a very sophisticated procurement system that allows it to manage inventory and get that inventory to the right stores before the shelves empty. As of November, Wal-Mart had 1,722 of its flagship stores in 50 states, plus 868 ‘superstores’ and 472 discount Sam’s Clubs. That’s 3,062 stores in the U.S. alone – plus another 1,065 internationally. The 3,062 U.S. stores encompass about 378 million square feet of space – about 13.6 square miles. Wal-Mart sold $193.3 billion of goods last year Wal-Mart has to keep track of all that inventory in all those stores, anticipate runs on items and slow sellers so they can steer the right things to the right stores, and physically get the things from warehouses to the right stores quickly and efficiently.
3. Enhanced customer preference: Wal-Mart focused on delivering the products that customers want in the manner that they want to shop, and Wal-Mart uses its frame relay data network and the most expansive, powerful teradata storage facility in the industry to keep its figure on the pulse of customers’ buying preference.
4. Competitive leverage: Sam Walton, his “Buy America” policy. Through this plan, Wal-Mart encourages its buyers and merchandise managers to stock stores with American-made products. In a 1993 annual report management stated the “program demonstrates a long-standing Wal-Mart commitment to our customers that we will buy American-made products whenever we can if those products deliver the same quality and affordability as their foreign-made counterparts”
Between 1994 and 1998, Wal-Mart imported 7.3 million pounds of clothing made in Saipan, with a retail value of at least $88 million.
Saipan is part of the Northern Mariana Islands, a U.S. Commonwealth in the South Pacific. This allowed Wal-Mart and the other retailers to say their clothing were “Made in the USA.”
Though Saipan is a U.S. Commonwealth and considered U.S. soil, it is not covered by U.S. minimum wage or immigration laws. This is how Wal-Mart got away with paying $3-an-hour wages to contract workers brought in from China.
Wal-Mart Says: Buy American Policy ,Wal-Mart has a strong commitment to buy as much merchandise made in the United States as feasible. Vendor Partners are encouraged to buy as many materials and components from the United States as possible. Further, Vendor Partners are encouraged to establish U.S. manufacturing operations.”
“Made Right Here, Wal-Mart’s unprecedented commitment to purchase from American vendor-partners whenever pricing . . . is comparable to goods made offshore . . .
But the Reality is: Fifteen thousand, mostly young women, were brought from China as contract workers to Saipan, where they were employed in sweatshops which are 70 percent foreign-owned, using foreign machinery, foreign textiles, and overseen by foreign managers, sewing clothing for export to the U.S.
Of all Wal-Mart’s private label apparel, only 17% is made in the U.S.! 83% is made offshore.
6.4 Using exhibits 6.4, the strategy clock, identify examples of organizations following strategic route 1 to 5. If you find it difficult to be clear about which route is being followed, note down the reasons for this, and consider if the organizations have a clear competitive strategy.
Toyota, which builds vehicles in 26 countries, is the fourth-largest automobile manufacturer in the United States, where it employs more than 23,000 workers in manufacturing, design, research, sales and finance. The strategy clock help to explain how the strategies followed by Toyota corp. have developed in Europe since the 1960s.
Route 1. (Price-based strategies) During the 1960s and early 1970s, the Toyota manufacturers entered the European market by targeting the low-cost/low-added-value sector, which they believed would not be defended by European manufacturers. There “no frills’ products were seen as cheap, and bought with few added value expectations. The sales volume that this produced and the experience gained from this market entry strategy allowed them to from a bridgehead into Europe and develop other, more profitable, strategies.
Route 2. (Price-based strategies) By the 1970s and early 1980s, the improved quality and reliability of their products changed the perception of their cars to that of being as good as there European competitors. However, the Toyota cars continued to be sold at a cheaper price than their rivals, which allowed them to increase sales volume further.
Route 3. (The hybrid strategy) Following their earlier success, the late 1980s saw the Toyota further advance their position by producing competitively priced cars that were more reliable and of better quality than their rivals. Competitors followed the Toyota and attempted to maintain their position by improving the quality and reducing the relative prices of their own cars.
Route 4. (Add value) by the mid 1990s, the Toyota manufacturer, in common with other car firms, were seeking ways to differentiate their produces on the basis of providing extra features such as air-bags, air conditioning and long-term warranties. However, the Toyota lead times for such innovations were less than most of their competitors.
Route 5. (Focused differentiation) Toyota’s Lexus model which stands alone from the rest of its range and does not use the Toyota name is competing against manufacturers such as Jaguar and Mercedes in the luxury market segment. Because it is a new entrant, it does not have the pedigree of its competitors; advertising campaigns aim to persuade buyers that they should be buyers that they should be buying cars not no name, but on features.
6.5 Michael porter argues that a business must have a clear competitive strategy. Assess the extent to which any, or all, of the following have a clear competitive strategy.
Why is Wal-Mart so Successful? Is it Good Clear competitive Strategy Implementation? — In 1962, when Sam Walton opened the first Wal-Mart store in Rogers, Arkansas, no one could have ever predicted the enormous success this small-town merchant would have. Sam Walton’s talent for discount retailing not only made Wal-Mart the world’s largest retailer, but also the world’s number one retailer in sales. He believed in three guiding principles: 1. Customer value and service; 2. Partnership with its associates; 3. Community involvement
Wal-Mart stores operate according to their “Everyday Low Price” philosophy. Wal-Mart has emerged as the industry leader because it has been better at containing its costs, which has allowed it to pass on the savings to its customers. Wal-Mart has become a capabilities competitor. It continues to improve upon its key business processes, managing them centrally and investing in them heavily for the long-term payback.