Table of Contents
Large companies that are either in the manufacturing or the service industries continually face an uphill task in the decision making processes. Usually, the managing units of these companies are obliged to follow certain rules and regulations as set by the company in the execution of their duties. These are referred to as the company’s norms and the management sometimes faces the daunting tasks of either going with or against the industry norms, and these decisions made might be just the crucial points that would propel the companies to greater heights or slow down the developmental efforts as targeted by the companies. In this paper, the two companies that will be in focus are Samsung, a synergy involved group and Procter and Gamble, an innovative related company. Basically, these companies have the sole target of maximizing on the profits made and also minimizing on the production costs. This is because a business is not a standalone but occurs within other happenings both internal and external all, which influence the profitability of the business.
Different businesses face different hurdles in the course of their business. As a result, they need to develop strategies to suit their situations (Chesbrough 2003, p. 35-36). The internal and external environments in any business form part of the industry norms which the business to abide by or reject to abide by rationally in-order to survive in the market. Some of the strategies businesses use to meet the industry norms are by setting mission and vision. The vision is statement conveying what the business would wish to be if all its plans went as proposed. Mission is the way to achieve that vision through action and proper execution. Compliance or non-compliance to industry norms by any business influences the performance of the business either positively or negatively depending on the strategy in place by the business.
Business growth is one of the main aims of any rational managerial unit. Different approaches to growth require the management acknowledge basic business skills such as legal matters in the environment in which the business operates both internal and external, a process involving a lot of every day monitoring of the progress of the business. These are referred to as industrial norms, Boone& Kurtz (1992, p.7). Growth is one important factor most companies desire. Growth will include expansion of the capital base, human resources and diversification. The advantage of business growth is more associated with economies of scale and spread of risk for instance Samsung Company started as an electronic company manufacturing TV’s. Over time, Samsung has grown to include the telecommunication gadgets especially mobile phones. Samsung has been driven by the vision to develop new technologies. Procter and gamble also followed a similar path initially as a soap shop which has grown to cover more than 180 countries.
Strategy is the one most important weapon to win the business war of competition. A strategy refers to the direction and extends of an organization in the long run. It involves mobilization of resources within the external environment upon which the business operates with an aim to meet market needs and to fulfill shareholder expectations of making money. Business strategies should be accommodating with the business being viewed from an open systems approach to enable it to adjust to the ever-changing external environment for example change in market demand.
Samsung Corporation, started by Mr. Byung-Chull Lee, a Korean entrepreneur, and he began on a low note, he started small but with the will to develop. He did what many thought to be absurd. In spite of all these, the company went on to invest in areas which were neglected. And with the development in technology, the company went into the production of electronic products and home appliances. The system of operation of Samsung could be mainly synergy-related type, with the company partnering with others to develop market oriented products. Also, Samsung is involved in the production of newer products in the market, hence leading to innovation. Originally, Samsung dealt in electronic products only like television sets, radio appliances. But with time, they went into the production of home appliances like microwaves, mobile phones, electric home appliances among others. This enabled them to expand their business scope and increase the returns to the company. This strategy has worked very well for them as their products have become popular worldwide.
For the case of Samsung, the management believes in technological innovation as its drive towards Competitive Advantage. By developing new products that it obvious has advantage over the rest in the market and mostly ends up being the market leader in that particular field. Through its vision of leading the digital convergence movement, it believes that today’s technological innovation finds the solution needed and address the challenges. From technology, the opportunity comes for the growth of business in the emerging markets for the prosperity to digital economy and individuals to invent new things. The vision targets at developing innovative technologies and processes that creates new markets, as stated by (Boone & Kurtz 1992, p. 124) to be the best digital company mission aims at the creation of technology products and industry leading service. It also enables them to put in place the management and production processes that are most efficient, and lastly maintains the steadfast concentration on organization, strengthening and continue being a global technology leader and responsible and trusted company hence making up its strategic intent.
As for Procter and Gamble, the company deals mainly deals in consumer products. They are among other products like soap detergents, electric products like shavers, dry cells, food materials like Pringles and others. Initially, the company started with manufacturing of few products, but with time, they went into the diversification of these products. Basically, their innovation was solely innovation, where they come up with new products for the consumers. In this way, they provide the consumer with a wide variety of choice from their own company. Thus in this way, the company reaps high returns from the many products that they offer, instead of getting competition from without.
Procter and Gamble thus believes in growth through diversification of its product line. It also notes that innovation may lead to competitive advantage if the right strategies are employed. The company deals with three major global business unit which form its structure and operation matrix, these include; beauty, health and well-being, and household care. It also deals with seven segments in the products line, they are; beauty healthcare, fabric and home care, coffee snacks and pet care, baby and family care, razors and blades, and Duracell and Braun. The fabric and home care segment proves to be the most profitable for the business and contributes to most of its earnings. Diversification reduces the risk of doing business. One of the important strategies is competitive strategy, which refers to being different. It is an intentional effort to produce a product from what is commonly found in the market. Competitive strategies have two aims. One to draw attention of target consumers from a previously established product and two attract new consumers into the market. For instance with Samsung, many other companies manufacturing TV’s flooded the market but by introducing telecommunication electronics, the company stayed ahead of the others. For competitive strategy to be effective there is need for strategic position which refers to an organization occupying a totally new market niche for example. The competitors for example have overlooked inventing a new project or occupying an existing market niche but that. Procter and Gamble can utilize the men fashion niche that has been neglected by most of other competitors in the sector going for women and children fashion (Porter 1980, p. 24). Any business always faces the challenge of new entrants. Consumers have the characteristic of being curious and wanting to try new things. A new entrant can always prosper by occupying a niche once occupied but left through expansion and exploration of new niches. New entrants more often than not have new ideas, which can easily counter the existing business strategies.
Organizations face a variety of contradictory and competing approaches when deciding whether to comply with industry norms or not. These scenarios are referred to as the “Paradox of Compliance and choice.” De Wit and Meyer (2004, p.429) further stated that where firms cannot influence the structure of their industry, compliance to the rules of the game is the strategic imperative. In such cases, the strategic demand is for managers to adapt the firm to the industry context. The organization has to obey the industry norms. Where firms do have the ability to manipulate the industry structure, they should exercise their freedom of choice to break the industry rules. In such circumstances, the strategic demand is for managers to introduce their own ideas in the market and become market leaders. One of the most practical solutions to the compliance and choice paradox is strategy research. Strategy research should actually be done in consultations and business executives in research settings, in order to help them think well though this does not often happen (Pettigrew 2002, p.29).
The firm’s management team must choose the strategic direction the organization wants to move (Rumelt et al 1994, p. 55). Decision-making means getting solutions to various strategy problems and difficulties. The process of forming strategy is by its very nature subject to multiple kinds of uncertainty, ambiguity and complexity for it largely based uncertainties. Managers increasingly face poorly defined problems that are interdependent and changing and this makes it even more difficult to reach decisions. Top managers are often required to anticipate, define, and solve these complexproblems for it is through taking such risks that the best managers propel their businesses to greater heights (Schweiger et al. 1986, p. 60).
For effective decision making, a manager will have to act sometimes even when the situation is not very clear, interpret conflicting issues and one of the ways of handling this ambiguity is by the managers simplifying their information environment. By doing so, and understanding the complexity surrounding them, the managers can have a clear picture of the business environment and this will enable them to communicate effectively about very complex business challenges.
There are three main ways of dealing with strategy tensions; strategy tension can be handled as a puzzle, a dilemma or as a paradox (Casper van der Veen 2003, p. 8). A puzzle is a problem with a best solution possible, so there is a best way of solving it. Although it seems complex and hard to analyze and solve a critical, such of a solution will yield results. Such are cases of typically simple organizational aspects. Therefore, concerning opposing strategy perspectives as a puzzle actually means denying there is a fundamental embedded tension at all. A dilemma is a problem with two possible solutions and choosing the best solution becomes the greatest challenge (Hampden- Turner 1990, p. 90). Managers have an either/or choice where they can adopt one or the other of the available solutions, assuming the incompatibility of the two opposites. According to Porter (1996, p. 25) the generic strategy framework introduced the need to choose, in order to avoid becoming caught between the inherent contradictions in strategies. However, there are indeed dangers, getting trapped in conflict or compromise, but not noticing the opportunities arising from the tensions (Hampden-Turner 1990, p. 94). A paradox has three characteristics Lewis (2000, p.17).
Using the SWOT analysis, we find that these two companies have exploited it to their advantage. Samsung and Procter & Gamble have endeavored to create a competitive market edge and sustained it for their benefit. For their strength, creating a good reputation for their products in the market place has been the exploit of both Samsung and Procter & Gamble. With products such as TV sets, entertainment electronics, home appliances among other electric and electronic appliances and consumer goods like washing soaps and detergents, food materials like pringles, electric products like shavers, dry cells among others as produced by Procter and Gamble have gone a long way in sustaining their customer base in the market place.
As for the weaknesses, they have realized that production of one type of product can be costly to the company with very minimal returns. Thus specialization of product manufacturing has been replaced with the diversification option where the company presents more than one type of product to the consumers in the market, and give them a chance to make a choice for themselves rather than seek alternatives form their competitors. Like for Samsung, the production of TV sets, mobile phone handsets, radio receivers, DVD and VCD machines and microwave ovens among others are the products presented to the consumers. Procter & Gamble on the other hand manufacture consumer home products like Ariel soap, sanitary towels for the ladies, Duracell dry cells, shavers, pringles among many other products. In this way, they maximize on the returns to the company.
For the opportunities, these two companies have decided to venture into new markets for their products. They have diversified their market base to cover many countries in the different continents thereby making their products available worldwide. This boosts their sales both regionally and globally. Though this may pose a challenge, it is a risk worth taking.
Their main threats are their competitors who manufacture like products. The idea is that if these rival companies present their products at a cheaper price than they do, then it poses a challenge for them to either lower their prices too and make marginal profits or maintain the prices and make the same profits but at reduced rates. However, these decision will depend on the board and management bodies who are vested with production and marketing areas.
The SWOT analysis can also be compared to Porter's five forces of analysis. They are among others the threat of the entry of new competitors. These rival companies who produce similar products may differ in quality, quantity and price as well. The rival of Samsung include Sony, LG Electronics, Sanyo among others. Hence this poses a challenge to the company either to conform or reform. The intensity of competitive rivalry may also affect the company's output. The more intense the competition, the harder it is for the company to maintain its profits without the necessary precautions. The threat of substitute products or services may also impact on the returns to the company. If the substitutes are more 'affordable' than the original, then the consumer will prefer the substitute to the original. The bargaining power of the consumers or buyers also determines the rate at which the sales run. With low bargaining or purchasing power come low profit returns and vice versa. On the other hand, the bargaining power of suppliers will determine how much of the product will be available to the market. The lower their bargaining power, the fewer the products in the market and this eventually translates to a lower profit return to the company. The suppliers are the dealers of the company products.
Specialization could be termed as variety-based positioningbecause it is based on the choice of product or service varieties rather than customer segments. Variety-based positioning would make economic sense if a company could best produce specific products or services using distinct sets of activities. Specialization enhances productivity in that knowledge is accumulated over through repetitive production of the same goods and services. The configuration approach (Josef 2006, p. 7) displaced contingency theory as the dominant perspective in the literature on change in the 1980s. This perspective is characterized by its holistic view of organizations it borrows a lot from the open systems approach. According to configuration theorists, while in theory an infinite number of possible combinations exist due to the number of relevant attributes, in reality only a few coherent patterns are viable. Theory is a more wide and open way of looking at things but only few of the many options are practical. The reason for this is because theories always incorporate assumptions making them operate in ideal circumstances. In real life, those assumptions do not hold and hence most of those theories fail to hold water. This new school of thought evolves in two directions. It first revives a long tradition in organization theory dating back to 1947, is concerned with classifying organizations into types, both conceptually derived ideal types and empirically induced taxonomies (Stephen 2008, p. 1). The second axis is the development of a model of organizational dynamics based on the idea of organizations as archetypes. Organizations are getting more open, interacting with the environment and there is need to move away from the ancient way doing things.
In conclusion, different businesses experience different challenges and should develop strategies to address the specific challenges the business faces. If the industrial norms are in the favour of the business strategies, then business management should adhere to them. If the norms are a bottleneck to the performance of the business, then the business should defy them and go by what works for its circumstances. Therefore, it is the duty of the management that is entrusted with making decisions for and on behalf of the company to take the option that is best suited for them. These may be in line with strategic alignment. The choices that are made may be based upon the company’s portfolio and ability either to expand on their own or to partner with other related allies in the production of goods and services.
For Samsung Corporation, it seems that their strategy is innovation but they also have a synergy tactic where they partner with other companies for the production of goods. On the other hand, Procter & Gamble employ the diversification tactic where they manufacture consumer goods that are very diverse and thus give the consumer a choice. This way, they make a name for themselves and their brands to be trusted.
It can also e said that these two companies have adapted to Porter's principle of Innovation as the driving force of the company. This can be attested by the production of diverse products to suit the market, and also to counter competition from rival organizations who produce similar products. The resource based theory does not apply much to these companies as the internal growth is determined by the external growth. As the companies diversify their market scope. So does the management and support staff grow. But this is not the driving force of the companies.
Finally, it can be said that these companies have thrived by creating and sustaining competitive advantage over their rival is the manufacture and presentation of goods to the consumer. Their diversification of the manufactured goods has increased competition to their rivals but has given them an advantage because of the wide variety of consumer products available in the market. This therefore increases the probability that one or more of their products will be purchased by the consumer.