Information Technology Assignment: Inspection of Superstar Firms
A. Prepare a business strategy assignment answering each of the 8 questions
1. Assess the significance of the principal-agency relationships in the business environment. Present the issues that it addresses by providing real-life examples of three effective ways to deal with agency problems, as implied or stated by agency theory.
A principal agency relationship is a relationship, in which one is the principal and the other one is the agent. Now the agent is to be acted on the behalf of the appointment of the principal legally (Abdullah and Abdul Kadir, 2020).
Principal Agency relationship Flowchart
Source: (Alshammari, 2020).
The relation between them should be strong enough to carry out the task given to the agent; there should be no conflict between the tasks which is to be carried out by the agent. This relation between the principal and the agent is usually termed as agency and the guidelines for the relationship are established by the law made by the agency (Alshammari, 2020). This principal agency relationship is very important when it comes in use as for example, in contracts the people acting as an agent on the behalf of the principal, the agent should not be legally involved in any kind of disruption, if it arises due to any kind of problems. A good understanding should be established at the time of contract between the agent and the principal. Also the thing that should remain clear between them is the language. If one is not interested or wants to avoid any personal accountability then it becomes necessary for one’s to be an agent at the time of contract and let others be the principal. As in this case the agent should be able to clarify that it acts only on the behalf of the principle and by doing so the principle becomes responsible if any kind of dispute arises in the contract (Alshammari, 2020). The principal is also not responsible for the agent if the act is criminal in nature. Above mentioned are the ways to prevent the issues occurring in real life between the agent principal relations.
2. Examine (closely consider) the basic directional strategies in the context of a hypercompetitive market. Judge the usefulness of each of them. Support your answer by giving real-life examples for all three basic directional strategies.
The directional strategy is used by the business for directing the processes and the decisions of their operations. Starting with its first type, which is formulating a directional strategy, it is necessary for a company to have a look by their managers on the things like the position of the company and where they are willing to go and the resources which are available moreover the goal of the company (Fupping Media, 2020). They also must have the complete details about the company’s financial situation. If everything is good enough then they can choose this strategy. Many stable companies use this strategy like GoDaddy.
Developed by learner
If a company is not enough stable and have not much resources also a poor experience of credit than the second type of directional strategy is best for this type of companies which is growth strategy, the company following the growth strategy usually seeks for new markets also manufactures their own new products which becomes a way for the new source of income, now this consists of two types, one is the vertical growth which involves the strategy of getting sold their new products to the customers eagerly waiting for that and the second type is horizontal growth which involves seeking for a some new markets for their potential customers. For example soft drinks companies use this type of strategy.
The third type of strategy is stability strategy, this strategy involves the operations and all the works which are done to maintain the stability and also the fame of the company and its status as well this type of strategies is used by big companies like COCA-COLA as they are stable and do not want to being new changes to their system.
3. Assess the advantages and disadvantages of being a first mover or a follower in a high-tech industry. Recommend a strategy that you think is preferable.
There are many advantages of being a first mover or a follower in a high tech industry but disadvantages are also there as well. Starting with advantages, being a first mover in developing a new product comes with great advantages like the raise in strength of a company’s position from developing a relationship between them and the retailers (Battaglia et al., 2017). Some other advantages include the identification of the brand’s name. This is one of the main advantages of a first mover as it not only maintains the loyalty between the company and the customers but also attracts new customers as well. Other advantages include Economies of scale, as this is mostly for the industries; the manufacturers of the company take a massive advantage by moving first as they have good skills in efficiency of producing and delivering the products. The other advantage includes the switching costs; it usually lets the first mover to establish a strong business (Schwertner, 2017). The costumers after being purchased the products they become unable to switch to the other products if other companies as it becomes cost prohibitive for them (Drobyazko et al., 2019).
Now discussing the disadvantages of being the first mover is that the other companies can also copy the strategies and can improve their work which can reduce the share markets of the first mover. Also if the products if the products of the first mover is failed display the features or it does not get the positive response from the market than the other companies will have the advantage to check on the issues and just by fixing the issues they will become profitable in the market which can be a huge damage to the first mover’s position as well as for their customers.
Using digitalised approach with an intensive growth strategy is best suitable for fast moving companies in the high tech industries. Also, a cost leadership with product differentiation can also prove to be beneficial as well.
4. Business ethics is the study of generally accepted rules and guidelines that help businesspeople differentiate between practices regarding what is morally right or wrong when doing business. Reflect on why ethical dilemmas occur and why unethical decisions are sometimes made. Present and critique three real-life examples of unethical decisions that businesspeople have made and evaluate these examples by applying a framework or theory that you learned in the course or from your own research.
As the decisions are made by the workers of the company but the unethical decisions made by them ends up having a huge impact on the company’s position, its progress, its status and sometimes they are being charged for making such unethical decisions. But the question why unethical decisions are made by them can have many answers. Starting with the first one is the fear of speaking up or the feeling of psychologically unsafe about speaking up (Drobyazko et al., 2019). This occurs in two ways as in first way the people feels not freely enough to speak up by having the pressure or the employees are being forced to not put their opinions and the other way is in which the employees or the peoples feels futility in speaking up as this is natural, some people do not want to put their opinions because of the fear of failure of their opinions.
The other reason for unethical decisions is the extra pressure to reach their targets. Unsettled goals can have a huge impact on a company as well as the people in making the choices for their targets. In this case the leaders cheat in two ways, first they cheat in reaching the goals and secondly they cheat in how they achieved that many goals they’ve made. For example the Veterans administration suffered from this (Drobyazko et al., 2019).
The third reason why unethical decisions are made is when approaching to compete the rival companies the company tries to do something very quick to retain their market level like the coca-cola company did when producing its new product COKE which failed in the market and also made a huge loss to the company as the customers disliked it. The fault was in the unethical decisions made by the company while producing the new product.
5. Assess the difference between joint venture and acquisition as a method to enter new industries. Evaluate at least three advantages and disadvantages associated with each. Provide a conclusion on when companies should use which of the two market entry strategies.
A joint venture consists of two groups or individuals undertaking a business or a company together and sharing the control, profit, and loss. The venture is taken care of as a single entity which is separate from the rest of business interest of other parties. Acquisition on the other hand is the method by which one business entity takes over another, usually with the goal of including the acquisition as a subsidiary to the portfolio of business (Durand et al., 2017).
The advantages of a joint venture are that it is a shared venture where the costs, expenses, risk and benefits are shared, it gives a start-up push, it gives profit at a minimal and low cost. The disadvantages of a joint venture are that equal involvement of the parties is not possible, there is restriction regarding flexibility, and there might be issues regarding assets.
The advantages of acquisition are that there is access to the capital, fresh ideas and perspective becomes a new addition, and the market power increases. The disadvantages of a joint venture is that there is a chance of fallout regarding Fallout issues, it might tamper with the strength of the brand, and it can end up being a distraction more than anything else (Durand et al., 2017).
After checking the advantages and disadvantages of joint venture and acquisition, joint venture is recommended over acquisition for a new market entry. This is because joint venture has a sense of support between the partners whereas acquisition has no such thing. The risk and profits can be shared but not in acquisition.
6. Critically assess the two general types of diversification. Compare and contrast them and recommend using one type over the other.
There are two general types of diversification which are concentric diversification and horizontal diversification. In concentric diversification similar products and services are added to the existing business. It is like a computer company which used to produce desktops starts manufacturing laptops. It has followed concentric diversification (Gajšek et al., 2018). Horizontal diversification, on the other hand, introduces new unreal services and products to the present consumers. It is like a book manufacturer starting to produce pencils and pens, therefore, using a horizontal diversification strategy.
In concentric diversification there are certain advantages like supply and demand is assured, it has the enhanced power to understand the differences, the supplies and distribution can be controlled. Whereas, the disadvantages are that if the company wants to exit the industry it won't be easy, a big sum of capital investment is required, and different requirements of managers.
The advantages of horizontal diversification include a rise in market share, devising economies of a particular scale, and less competition in the market. The disadvantages of horizontal diversification is that the flexibility tanks down, there is regular scrutiny, the capability of destroying the value increases rather than creating it (Gajšek et al., 2018).
Contrast diversification is preferred over horizontal diversification. This is because the impact of cyclical fluctuation can be reduced. If there is a decrease in sale of one product, the other product sales can be increased. This in turn, increases the flow of cash and the profits. As the company makes an entry into a new area, it increases its efficiency and managerial expertise.
7. When a new entrant is applying an aggressive marketing strategy in order to rapidly increase its market share, assess how the incumbent can respond with different generic business-level strategies. Provide real-life examples of how businesses used each generic business-level strategy.
Aggressive marketing is an offensive marketing strategy that implements provocative methods to gather response from the audience. It uses different tactics to draw attention to itself, increase the market sales, create warfare amongst businesses and attack them creating a buzz. When a new entrant applies aggressive marketing strategy, the incumbent can assess and respond with generic business level strategies such as cost leadership strategy, differentiation strategy, differentiation focus, and cost focus (Islami et al., 2020). In each of these strategies each aspect of the company is measured and controlled. For cost production strategy the company would try its best to reach the lowest production cost with least amount of distribution cost which would lead to cheaper price of the product in the market. Wal-Mart has used this strategy and therefore, they have the broad base of consumers with internal processes operating at a low cost. A differentiation strategy wants the company to offer unique characteristics to the product which will make the consumers believe that there is a certain value and paying more for it is worth it. For cost focus, the company aims to get leverage with low-cost products but it will be within a small market. Redbox, which is a major DVD rental company, has applied a cost focus strategy by renting movies at retail outlets for $1 only. In the differentiation focus strategy, the company wants to develop different products but within a small segment of a market.
8. Give recommendations on how a company can improve its core competences when discovering that the critical success factors (CSFs) of its industry have changed. Support your answer by providing real-life examples of how companies reacted in such situations.
There are different ways by which a company can improve its core competencies while discovering that there has been a change in the critical success factors of the industries (Soundararajan et al. 2018). The core competences of the company refers to the interpersonal skills, leadership skills, flexibility, communication skill, problem solving skills, organisational skills, and many more. It can separate the top skills of the organisation and hone them as an overall strength of the organisation. It can compare with other organisations in the market so that it gets an understanding if the unique abilities are improving with time or not (Soundararajan et al., 2018). Then it can check which skills and capabilities do the consumers truly value, then invest on it and sustain the strength. It can seek alliances with other companies to build the core area of the organisation's strength. Apart from all these, the company must learn how to communicate freely and involve everyone which builds up the strength of the company. Major companies and brands like Amazon and Wal-Mart have adapted and changed its core competencies while facing a change in critical success factors in the industry. They did not waste any time but strengthened their core area. They worked on the communication and marketing strategy swiftly so that they do not get lag behind in the market.
B. Complex Problem Set
Answer the question (20 points).
Mr. Jones owns and operates a sport equipment shop in Munich. The business has been doing very well over the last five years and, thus, Mr. Jones now decided to open some more shops in other locations. Assess the changes that are likely to take place in this business's organizational structure, geographic dispersion, and complexity. Compare and contrast these changes in depth and conclude which changes are beneficial and which ones have potential shortfalls, or disadvantages for the business.
1: Impact of business expansion on organizational structure
To grow the business empire, expansion is needed. While preparing for more growth of an organization, the preparations will have impacts on the organizational structure. For business expansion, strategic approaches and proper management skills will be needed. To expand the sports equipment store of Mr. Jones', few locations will be chosen at first. Then the demands of the customers in local markets will be evaluated and analysed. To expand his sports equipment business, new changes should be incorporated in the organizational structure to handle the expansion procedure (Haseeb et al., 2019). Mr. Jones should hire a management team who will look after the expansion process following the strategies for expansion.
2: Impact of business expansion on geographic dispersion and complexity
Mr. Jones owns a sports equipment shop in Munich, Germany. To expand his business he has to think of a few expansion and managerial strategies which will be helpful for the expansion project of his sports equipment business. To expand the business, primarily a few locations should be chosen for the expansion purpose. Then the markets of the chosen locations should be examined. The demands of the customers of those locations, the potential nearby suppliers, the efficient logistics department, should be analysed before expanding the business (Holck, 2018). For a sports equipment business, Mr. Jones should look for the demands of the customers of the chosen locations, the nearby suppliers of the sports equipment, and the logistics who will help in the supply and delivery processes, before establishing a new shop in that location. The demographics should be analysed before building a sports equipment shop. The average age of the residents of those particular places, the maximum wage rate per hour, and the interests of the residents should be analysed. While expanding the business, will help the residents of that particular place, more job openings will be created in Mr. Jones' sports equipment shop. People will be encouraged to play sports and maintain a healthy lifestyle.
3: Comparison and contrasting of changes
While trying to expand the businesses, the strategies and the management approaches will be changed. When the first shop was opened, the approach of the business was to create a brand name. On the contrary, while establishing the new business in the various localities, the main approach of the business expansion will be to maintain the brand image. Maintaining the brand name requires a lot of effort and strategies. Mr. Jones' shop has to market itself as a brand in the new location to attract more customers. While establishing new businesses in a locality various changes can hinder the success of the business (Kuzubov et al., 2018). The nearby shops of sports equipment will start a competition in the market to attract the customers. Hiring new employees will be a challenge which the sports equipment shop has to face. Communication problems can be another challenge in the new location while Mr. Jones will try to expand his business. Lack of communication will hinder the success of his expansion process. It will create a communication gap in the management team and the work process. Lack of proper planning before the expansion process can create problems for the expansion project of Mr. Jones' sports equipment shop.
4: Benefits of expansion to the business
Mr. Jones has a sports equipment shop which he plans to expand in various locations. While he will be expanding his business in various locations, the residents of those particular locations will be benefited very much. As a new shop will be opened, it will create many job openings and it will give the residents the opportunities to apply in those positions. Shopkeeper, manager, marketer related various roles will be given to the local population which will make them financially independent. The expansion of a sports equipment shop will help the residents to stay fit and healthy (Morakanyane et al., 2017). Various items from the shop will encourage the locals to buy them and to play with the equipment. It will increase the sports-related knowledge of the locals. It will also encourage the children of that particular area to have a keen interest in the various kinds of sports. On the other hand, the rise of the sports equipment business in the locality will create a space for business to the local logistics companies, advertising companies and suppliers. The local logistics will help the business to supply the products and deliver the products to the customers. The local suppliers will be able to supply their products to a shop which is located in their location. The local advertising group will have the opportunity to work with the expansion project of Mr. Jones' sports equipment business will help the small business to grow also.
5: Potential shortfalls of business expansion
There may be various potential reasons for the shortfall of the business expansion project of Mr. Jones. The increased expenses can be one of the most obvious reasons for the shortfall (Rhee et al., 2017). While there are fewer customers and more employees, the expenses will be increased in a significant way. On the other hand, the operational costs of the shop can be another reason for the shortfall. The products and the services which are not up to the dates and the uninterested population can be the other reasons for the shortfall of Mr. Jones' sports equipment shop. Competition with the other sports equipment shops can be an important factor for the shortfall of Mr. Jones' Shop.
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