In the globalization era, we observed an increment of multinational corporations as well as small businesses that aim to internationalize. Those, in order to be successful in their internationalization process, try to find abroad a location that fits them the most institutionally, culturally and opportunities wise. To make this happen, MNCs uses home and host location strategies which reflect to international business theories through different models. Those models assess external environment analysis of a specific country and explain the concepts used behind the chosen location. Out of the many useful models explaining location strategies used by international companies, this article will focalize on the Diamond Model and discuss whether is a useful concept for international firms to pursue the best entry mode and furthermore argue the advantages and disadvantages through the examination of a real case example such as the multinational IKEA. The Diamond Model was introduced in the book Continue reading
Strategic Management Concepts
Business Turnaround Strategies
When a firm has experienced a serious decline in its market position, it is a candidate to mount an all-out effort to turn the firm around and improve its market position. Use of a turnaround strategy appears to be most appropriate when the firm’s decline is caused by internal actions such as improper strategy selection or poor implementation and execution of a workable. If the analysis indicates the firm’s present strategy is appropriate, then the problem is poor implementation. If the analysis indicates the firm’s present strategy is inappropriate, then the problem is improper strategy selection. Turnaround strategies attempt to revitalize businesses in a slump. They involve a combination of cost-cutting measures and revenue-enhancing strategies. Before a firm elects a turnaround strategy, two questions should be asked: Does the firm have the capabilities to earn an acceptable level of profits in the future? Will the firm’s value after a successful Continue reading
Contemporary Forms of Organizational Design
Organizational design is the overall configuration of structural components that defines jobs, groupings of jobs, the hierarchy, patterns of authority, approaches to co-ordination and line-staff differentiation into a single and unified organizational system. Consider, for example, the differences in organizational design that might exist between a computer manufacturer and university. Since the computer manufacturer has to respond to frequent technological breakthroughs and changes in its competitive environment, it is likely to have a relatively flat and decentralized design whereas the university has a more stable environment and is less affected by technology. Therefore, it has a more centralized structure with numerous rules and regulations. Every organization has its own unique design depending on its technology, limits and potentials of its environment and the life cycle stage it follows. Following are the various contemporary forms of organizational design: 1. The U-Form Organization In the U-form organization. U stands for Unity, It Continue reading
Factors that Motivate the Mergers and Acquisitions
There are several factors that motivate the mergers and acquisitions. These factors can be broadly summarized into two categories: 1. Exogenous Factors Affecting Mergers Accounting. The availability of pooling accounting for mergers has been a significant factor in the 1990s merger activity. Pooling avoids dilution of earnings brought about by the recognition and mandatory amortization of goodwill when a merger is accounted for as a purchase. As pooling came under increasing pressure from the SEC and the FASB, its impending demise, first at the end of 2000 and then in the first-half of 2001, undoubtedly acted as a stimulant for some mergers, but it is not possible to gauge accurately how many deals were undertaken in 1999 and 2000 to beat the deadline. Now, at the beginning of 2001, the FASB is proposing that purchase accounting replace pooling but that goodwill should not be automatically written down, but instead should Continue reading
Role of Luck in Strategic Management
While some firms hope to yield above expected normal returns from implementing business strategies, they must however be consistently conversant with the future value of those strategies than other firms playing in the same market. Other firms gain advantage in strategy implementation which is either a manifestation of these special insights into the future value of strategies, or a manifestation of a firm’s good fortune and luck, as sometimes, the price of the strategic resource acquired may be based on expectations on the return potential of that strategy However, unexpected greater organisational profits can simply be unexpected, a surprise, and a manifestation of a firm’s good luck and possibly not its ability to accurately anticipate the future value of a strategy. Even well-informed firms can be lucky in this manner. Some organizations’ actual returns on strategies could be greater than the expected returns; this resulting difference is often regarded to Continue reading
Radical Innovation vs Incremental Innovation
Innovation undoubtedly became the “engine” of the progress, competitive ability and economic growth. Innovation regards as a “life-and-death matter for a firm”. However, paradox is that still some difficulties remain in understanding what exactly the innovation is and how important it is in nowadays world. Despite the fact that there are many definitions of processes of innovation, generally all innovations contain three underlying elements: newness, improvement and the overcoming of uncertainty. Newness is probably one of the most important parts of innovation, although such newness could be understood as something novel to the form or industry as a whole. Improvement is related to the fact that firms need to find the superior quality to those products which currently exist in the market. Overcoming uncertainty means that such improvement is determined by the market and that market need have to be clarified. In addition, it is essential to remember that all Continue reading