Corporate Strategy for Diversification Assignment | Online Assignment

Diversification strategies raise a wide range of strategic management issues. For this assignment, select a KSA company whose strategy includes or included diversification and explore its motives, competitive advantage, and strategic planning based on the topics from Chapter 12 and the assigned reading. 1. Identify and provide company strategic details and consider what circumstances existed that motivated this company to diversify. 2. What mode of diversification did the company adopt? How does this relate to their resources and capabilities? 3. What are the benefits of diversification in this industry and how significant are they in the shape and growth of the industry? 4. Discuss the implications of the strategy chosen for the:  Organizational structure,  Management systems, and  Allocation of decision making within the diversified firm.  Support your submission with course material concepts, principles, and theories from the textbook along with at least two scholarly, peer-reviewed journal articles.1
Strategy is the great work of the organization. In situations of life or death, it is the Tao
of survival or extinction. Its study cannot be neglected.
—SUN TZU, THE ART OF WAR
To shoot a great score you need a clever strategy.
—RORY MCILROY, GOLF MONTHLY, MAY 19, 2011
Everybody has a plan until they get punched in the mouth.
—MIKE TYSON, FORMER WORLD HEAVYWEIGHT BOXING CHAMPION
The Concept of Strategy
◆◆ Introduction and Objectives
◆◆ The Role of Strategy in Success
◆◆ The Basic Framework for Strategy Analysis
●● Strategic Fit
◆◆ A Brief History of Business Strategy
●● Origins and Military Antecedents
●● From Corporate Planning to Strategic Management
◆◆ Strategy Today
●● What Is Strategy?
●● Why Do Firms Need Strategy?
●● Where Do We Find Strategy?
●● Corporate and Business Strategy
●● Describing Strategy
◆◆ How Is Strategy Made? The Strategy Process
●● Design versus Emergence
●● Applying Strategy Analysis
◆◆ Strategic Management of Not-For-Profit
Organizations
◆◆ Summary
◆◆ Self-Study Questions
◆◆ Notes
O U T L I N E
4 PART I INTRODUCTION
The Role of Strategy in Success
Strategy Capsules 1.1 and 1.2 describe the careers of two individuals, Queen Elizabeth
II and Lady Gaga, who have been outstandingly successful in leading their organizations.
Although these two remarkable women operate within vastly different arenas,
can their success be attributed to any common factors?
For neither of them can success be attributed to overwhelmingly superior resources.
For all of Queen Elizabeth’s formal status as head of state, she has very little real power
and, in most respects, is a servant of the democratically elected British government.
Lady Gaga is clearly a creative and capable entertainer, but few would claim that
she entered the music business with outstanding talents as a vocalist, musician, or
songwriter.
Introduction and Objectives
Strategy is about achieving success. This chapter explains what strategy is and why it is important to
success, for both organizations and individuals. We will distinguish strategy from planning. Strategy is
not a detailed plan or program of instructions; it is a unifying theme that gives coherence and direction
to the actions and decisions of an individual or an organization.
The principal task of this chapter will be to introduce the basic framework for strategy analysis that
underlies this book. This framework comprises two components of strategy analysis: analysis of the
external environment of the firm (mainly industry analysis) and analysis of the internal environment
(primarily analysis of the firm’s resources and capabilities). We shall then examine what strategy is, how it
has developed over time, how to describe the strategy of a business enterprise, and how organizations
go about making strategy.
Since the purpose of strategy is to help us to win, we start by looking at the role of strategy in success.
By the time you have completed this chapter, you will be able to:
◆◆ Appreciate the contribution that strategy can make to successful performance and recognize
the essential components of an effective strategy.
◆◆ Comprehend the basic framework of strategy analysis that underlies this book.
◆◆ Recognize how strategic management has evolved over the past 60 years.
◆◆ Identify and describe the strategy of a business enterprise.
◆◆ Understand how strategy is made within organizations.
◆◆ Recognize the distinctive features of strategic management among not-for-profit organizations.
CHAPTER 1 The Concept of Strate gy 5
Nor can their success be attributed either exclusively or primarily to luck. Both have
experienced difficulties and setbacks at different stages of their careers. Central to their
success, however, has been their ability to respond to events—whether positive or negative—
with flexibility and clarity of direction.
My contention is that, common to both the 60-year successful reign of Queen Elizabeth
II and the short but stellar career of Lady Gaga, is the presence of a soundly formulated
and effectively implemented strategy. While these strategies did not exist as
explicit plans, for both Queen Elizabeth and Lady Gaga we can discern a consistency
of direction based upon clear goals and an ability to bend circumstances toward their
desired outcomes.
Elizabeth Windsor’s strategy as queen of the UK and the Commonwealth countries
is apparent in the relationship she has created between herself and her people. As
queen she is figurehead for the nation, an embodiment of its stability and continuity, a
symbol of British family and cultural life, and an exemplar of service and professional
dedication.
Lady Gaga’s remarkable success during 2008–18 reflects a career strategy that uses
music as a gateway to celebrity status, which she has built by combining the generic
tools of star creation—shock value, fashion leadership, and media presence—with a
uniquely differentiated image that has captured the attention and loyalty of teenagers
and young adults throughout the world.
What do these two examples tell us about the characteristics of a strategy that are
conducive to success? In both stories, four common factors stand out (Figure 1.1):
●● Goals that are consistent and long term: Both Queen Elizabeth and Lady
Gaga display a focused commitment to career goals that they have pursued
steadfastly.
●● Profound understanding of the competitive environment: The ways in
which both Elizabeth II and Lady Gaga define their roles and pursue their
careers reveal a deep and insightful appreciation of the external environments
in which they operate. Queen Elizabeth has been alert both to the
changing political environment in which the monarchy is situated and to the
mood and needs of the British people. Lady Gaga’s business model and strategic
positioning show a keen awareness of the changing economics of the
music business, the marketing potential of social networking, and the needs
of Generation Y.
●● Objective appraisal of resources: Both Queen Elizabeth and Lady Gaga have
been adept at recognizing and deploying the resources at their disposal, and
also building those resources—for the Queen, this has included her family, the
royal household, and the recipients of royal patronage; for Lady Gaga, it comprises
the creative talents of her Haus of Gaga.
●● Effective implementation: Without effective implementation, the best-laid strategies
are of little use. Critical to the success of Queen Elizabeth and Lady Gaga
has been their effectiveness coordinating and leading “ecosystems” of supportive
individuals and organizations.
These observations about the role of strategy in success can be made in relation
to most fields of human endeavor. Whether we look at warfare, chess, politics, sport,
or business, the success of individuals and organizations is seldom the outcome of a
6 PART I INTRODUCTION
purely random process. Nor is superiority in initial endowments of skills and resources
typically the determining factor. Strategies that build on these four elements almost
always play an influential role.
Look at the “high achievers” in any competitive area. Whether we review the
world’s political leaders, the CEOs of the Fortune 500, or our own circles of friends
and acquaintances, those who have achieved outstanding success in their careers
are seldom those who possessed the greatest innate abilities. Success has gone to
those who managed their careers most effectively, typically by combining these
four strategic factors. They are goal focused; their career goals have taken primacy
over the multitude of life’s other goals—friendship, love, leisure, knowledge,
spiritual fulfillment—which the majority of us spend most of our lives juggling and
reconciling. They know the environments within which they play and tend to be
fast learners in terms of recognizing the paths to advancement. They know themselves
well in terms of both strengths and weaknesses. Finally, they implement
STRATEGY CAPSULE 1.1
Queen Elizabeth II and the House of Windsor
By late 2018, Elizabeth Windsor had been queen for 66
years—longer than any of her predecessors.
At her birth on April 21, 1926, 45 other countries were
hereditary monarchies. By 2018, the forces of democracy,
modernity, and reform had reduced these to 26—mostly
small autocracies such as Bahrain, Qatar, Oman, Kuwait,
Bhutan, and Lesotho. Monarchies had also survived in
Denmark, Sweden, Norway, the Netherlands, and Belgium,
but these royal families had lost most of their
wealth and privileges.
By contrast, the British royal family retains considerable
wealth—the Queen’s personal net worth
is about $500 million—not including the $10 billion
worth of palaces and other real estate owned by the
nation but used by her and her family. Queen Elizabeth’s
formal status is head of state of the UK and 15
other Commonwealth countries (including Canada and
Australia), head of the Church of England, and head of
the British armed forces. Yet none of these positions
confers any decision-making power—her influence
comes from the informal role she has established for
herself. According to her website, she “has a less formal
role as Head of Nation” where she “acts as a focus for
national identity, unity and pride; gives a sense of stability
and continuity; officially recognises success and
excellence; and supports the ideal of voluntary service”
(www.royal.gov.uk).
How has Queen Elizabeth been able to retain not
just the formal position of the monarchy but also its
status, influence, and wealth despite so many challenges?
These include wrenching social and political
changes and the trials of leading such a famously
dysfunctional
family—including the failed marriages
of most of her children and the controversy that surrounded
the life and death of her daughter-in-law,
Diana, Princess of Wales.
At the heart of Elizabeth’s sustaining of the British
monarchy has been her single-minded devotion to what
she regards as her duties to the monarchy and to the
nation. In cultivating her role as leader of her nation, she
has preserved her political neutrality—even when she
has disagreed with her prime ministers (notably with
CHAPTER 1 The Concept of Strate gy 7
their career strategies with commitment, consistency, and determination. As the
management guru Peter Drucker observed: “we must learn how to be the CEO of
our own career.”1
There is a downside, however. Focusing on a single goal may lead to outstanding
success but may be matched by dismal failure in other areas of life. Many people who
have reached the pinnacles of their careers have led lives scarred by poor relationships
with friends and families and stunted personal development. These include Howard
Hughes and Jean Paul Getty in business, Richard Nixon and Joseph Stalin in politics,
Elvis Presley and Marilyn Monroe in entertainment, Tiger Woods and Boris Becker
in sport, and Bobby Fischer in chess. For most of us, personal fulfillment is likely to
require broad-based rather than narrowly focused goals.2
These same ingredients of successful strategies—clear goals, understanding the
competitive environment, resource appraisal, and effective implementation—form the
key components of our analysis of business strategy.
Margaret Thatcher’s “socially divisive” policies and Tony
Blair’s sending troops to Iraq and Afghanistan).
Through her outreach activities she promotes British
influence, British culture, and British values within the
wider world. She has made multiple visits to each of the
54 Commonwealth nations, including 27 to Canada and
16 to Australia.
The growing unacceptability of hereditary privilege
and the traditional British class system has required her
to reposition the royal family from being the leader of
the ruling class to embodying the nation as a whole. To
make her and her family more inclusive and less socially
stereotyped she has cultivated involvement with
popular culture, with ordinary people engaged in social
service and charitable work, and she has endorsed the
marriage of her grandsons William and Harry—the first
members of the royal family to marry outside the ranks
of the aristocracy.
Elizabeth has been adept at exploiting new media
for communicating both with her subjects and with a
wider global audience: initially through television, more
recently using the web, Twitter, and Facebook. Her press
and public relations staff comprises top professionals
who report to her private secretary.
While respecting tradition and protocol, she adapts
in the face of pressing circumstances. The death of her
daughter-in-law, Diana, created difficult tensions between
her responsibilities as mother and grandmother
and her need to show leadership to a grieving nation.
In responding to this crisis she recognized the need to
depart from established traditions.
Elizabeth has made effective use of the resources
available to her—especially the underlying desire of
the British people for continuity and their inherent
distrust of their political leaders. By positioning
herself
above the political fray and emphasizing her
lineage—including the prominent public roles of her
mother and her children and grandchildren—she
reinforces
the legitimacy of herself, her family, and the
institution they represent. She has also exploited her
powers of patronage, using her formal position to cultivate
informal relationships with both political and
cultural leaders.
The success of Elizabeth’s 66-year reign is indicated
by the popular support for her personally and for the
institution of the monarchy. Outside of Northern Ireland
and Quebec, republicanism is weak throughout the
British Commonwealth.
8 PART I INTRODUCTION
STRATEGY CAPSULE 1.2
Lady Gaga and the Haus of Gaga
Stefani Joanne Angelina Germanotta, better known as
Lady Gaga, is one of the most successful popular entertainers
of the 21st century. Since her first album, The
Fame, in 2008, all four of her albums have topped the Billboard
charts; she has also topped Forbes Celebrity 100 list,
and generated $560 million in ticket sales from her five
concert tours between 2009 and 2017.
Since dropping out of NYU’s Tisch School of the Arts
in 2005, Germanotta has shown total commitment to
advancing her musical career, first as a songwriter, and
then developing her Lady Gaga persona.
Gaga’s music is a catchy mix of pop and dance, well
suited to dance clubs and radio airplay. It features good
melodies, Gaga’s capable vocals, and her reflections on
society and life, but it is hardly exceptional or innovative:
music critic Simon Reynolds described it as: “ruthlessly
catchy, naughties pop glazed with Auto-Tune and undergirded
with R&B-ish beats.”
However, music is only one element in the Lady Gaga
phenomenon—her achievement is not so much as a
singer or songwriter as in establishing a persona which
transcends pop music. Like David Bowie and Madonna
before her, Lady Gaga is famous for being Lady Gaga.
To do this she has created a multimedia, multifaceted
offering that comprises multiple components including
music, visual appearance, newsworthy events, a distinctive
attitude and personality, and a set of values with
which fans can identify.
Key among these is visual impact and theatricality.
Her hit records are promoted by visually stunning music
videos that have won Grammy awards and broken
records for numbers of YouTube downloads. Most striking
of all has been Lady Gaga’s dress and overall appearance,
which have set new standards in eccentricity, innovation,
and impact. Individual outfits—her plastic bubble dress,
meat dress, and “decapitated-corpse dress”—together
with weird hair-dos, extravagant hats, and extreme footwear—
are as well-known as her hit songs. The range of
visual images she projects means that her every appearance
creates a buzz of anticipation.
Lady Gaga has developed a business model adapted
to the post-digital world of entertainment. Like Web 2.0
pioneers such as Facebook and Twitter, Gaga has followed
the model: first build market presence, and then
think about monetizing that presence. By 2012, her
YouTube views, Facebook likes, and Twitter followers
had made her the “most popular living musician online.”
Her networking with fans includes Gagaville, an interactive
game developed by Zynga, and The Backplane, a
music-
based social network.
Her emphasis on visual imagery takes account of the
means through which media popularity is converted
into revenues. While music royalties are important, concerts
are her primary revenue source. Other revenue
sources—endorsements, product placement in videos
and concerts, merchandizing deals, and media appearances—
also link closely with her visual presence.
A distinctive feature of Gaga’s market positioning
is her relationship with her fans. The devotion of her
fans—her “Little Monsters”—is based less on their desire
to emulate her look as upon empathy with her values
and attitudes: Gaga’s images are social statements of
non-conformity rather than fashion statements. In communicating
her experiences of alienation and bullying at
school and her values of individuality, sexual freedom,
and acceptance of differences, she has built a global fan
base of unusual loyalty and commitment. The sense of
belonging is reinforced by gestures and symbols such as
the “Monster Claw” greeting and the “Manifesto of Little
Monsters.” As “Mother Monster,” Gaga is spokesperson
and guru for this community.
Lady Gaga’s showmanship and theatricality are supported
by The Haus of Gaga, a creative workshop modeled
on Andy Warhol’s “Factory.” It comprises a creative director
who coordinates a team of choreographers, fashion
designers, hair stylists, photographers, set designers, songwriters,
musicians, and marketing professionals.
Sources: M. Sala, “The Strategy of Lady Gaga,” BSc thesis Bocconi
University, Milan, June 2011; http://www.biography.com/
people/lady-