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S.I.D. #1517846/1

PATCH 1

Strategy Development Processes – Case – Boardroom battles at Hewlett Packard?

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S.I.D. #1517846/1 ELEMENT 1 (1,000 words): Strategy Development Processes – Case – Boardroom battles at Hewlett Packard? INTRODUCTION Founded in 1939 by William Redington Hewlett and Dave Packard, Hewlett Packard (HP) is an American multinational information technology organization. The company provides hardware and software services and has an extensive range of IT products to offer (Success story, 2017). This first patch would be based on the strategy development processes at Hewlett Packard (HP). Strategic development processes are necessary to create and run a business be it a deliberate strategy or emergent strategy. The deliberate strategy involves intentional formulation and planning by managers, whereas an emergent strategy derives from a series of decisions in which a pattern becomes clear overtime. In 2012 HP’s turnover exceeded $120 billion, however profits were declining and they were losing market shares. For over a decade the company had difficulties at arriving at a coherent strategy that was worsening by infighting within the board. HP suffered hard times from 2002 to 2011, from then CEO Carly Fiorina up to Meg Whitman. For this patch, the student would look at the strategic issues that affected HP’s development, with the use of relevant theories and concepts to support such. Also, the political processes that influenced the development of this strategy would be analysed. Additionally, the purpose of this essay is to comment on the strategic development processes that HP should undertake in order to remove the company from that hard times stage.

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S.I.D. #1517846/1 DISCUSSION Figure 1.1 – Deliberate and Emergent strategy development 

Strategic leadership, vision and command



Strategic planning



Externally imposed strategies

Deliberate Strategy Realised strategy Emergent Strategy 

Logical incrementalism



Political processes



Continuity



Organizational systems

Source: Johnson, et.al., 2014, p.403 In figure 1.1 above, it shows the deliberate and emergent strategy processes. Deliberate strategy involves intentional formulation or planning. At HP, the intentionality were of the various C.E.Os.’ at the various points in time, who would have been strategic leaders and manifest strategic leadership as command, vision and decision-making.

Strategic planning are

procedures to develop an organization’s strategy. The stages of this planning include initial guidelines, business level planning, corporate level planning and financial and strategic targets. An externally imposed strategy is the strategy imposition by powerful external stakeholders. Emergent strategy, on the other hand, is strategies that emerge on the basis of a series of decisions, which a pattern becomes clear overtime. The processes under this strategy include logical incrementalism, political processes, continuity and organizational systems. Logical incrementalism is the development of strategy by experimentation and learning. The political process is strategies that develop as the outcome of bargaining and negotiation among powerful interest groups. Political processes in an organization can influence the development of the strategy. Continuity is a feature of strategy because of emergent strategy as managed continuity, path-dependant strategy development and organization culture and strategy development. Lastly, for organizational systems, strategy development is influenced by the systems and routines with which managers are familiar in their particular context; the resource

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S.I.D. #1517846/1 allocation process (RAP) and the attention based view (ABV), are explanations of this (Johnson, et.al., 2014) At HP, arriving at a coherent strategy was becoming more difficult. It was speculated that the board was leaking confidential information to the media, accusing each other of lying and refusing to be in the same room with each other. This occurred from 2002 when Carly Fiorina was CEO. From 2005 when Mark Hurd was appointed CEO, his emphasis was on cost-cutting. Although he was successful at this, the workforce was demoralised and lacked innovation because of his autocratic leadership style. In 2010 when he left, the company turned to external imposed strategies by hiring Leo Apotheker, an outsider, as CEO to manage the company. He was able to improve employee morale, undo salary cuts and made way for innovation. He also decided to reshuffle the board to change the old strategies they were accustomed too. Apotheker believed that HP should focus on business to business sales, move into highermargin areas, spin off its PC division and invest significantly in its software business. Apotheker thought he had the boards’ support, but then he heard of his dismissal. It was argued that the board did not select him and the company’s failures were his fault and thereby he had no support (Johnson, et.al., 2014). Then, when Meg Whitman became CEO in 2011, she came up with a new strategy to better execute while the long term plan is still being figured out. However, the company may never come close to reclaiming its former glory unless Whitman and the board can find a way to function together. Revenues, margins and cash position continues to decline, therefore the company has little money to make new moves and thousands of employees’ would eventually be laid off. Through all of this, Whitman faces a tough challenge of coming up with a new strategy to recover and or reinvent HP and getting support from the boardroom. CONCLUSION To conclude, as mentioned in the discussion, politics is a major influence in the HP’s development strategy. Hewlett Packard also lacked effectual strategic development processes, as well as lack of support from the board who could not seem to agree with any of C.E.Os.’ efforts. From 2002 to 2011, the C.E.Os.’ were constantly making efforts to try to rebuild HP, however with the lack of support and poor development strategies in different areas and aspects, the company would continue to fail. Income, profit margins and cash position continued to decline and the company showed little to no signs of improving any time soon. HP has an

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S.I.D. #1517846/1 extensive amount of strategic issues that needs to be fixed, therefore some forms and methods to fix such issues are mentioned in the recommendations below. RECOMMENDATIONS It is recommended that HP use strategic planning systems in order to come up with step-by-step procedures to develop an effective strategy for the company to follow. By doing this it can provide employee opportunities for involvement, provide a sense of security to managers and reassures managers that the strategy is logical. However, it must be ensured that the strategy is not confused with the plan. Also, the development of strategic plans with adequate consideration to changing customer behaviours is necessary for the company. Additionally the implementation of focused strategy development helps companies to achieve organizational goals and progressing gains.

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S.I.D. #1517846/1 REFERENCE LIST Fortune,

2017.

How

Hewlett-Packard

lost

its

way.

[online]

(2012)

Available

at:

th

http://fortune.com/2012/05/08/how-hewlett-packard-lost-its-way/ (Accessed 05 May, 2017) iStudyHub,

n.d.

Strategic

Management

in

Action.

[online]

Available

at:

http://istudyhub.net/home/acces_doc/5971 (Accessed 05th May, 2017) Johnson, G., et. Al., 2014. Exploring Strategy text and cases. 10th edition. Harlow: Pearson. Success

Story,

2017.

HP:

Making

it

matter.

[online]

Available

at:

https://successstory.com/companies/hewlett-packard (Accessed 05th May, 2017)

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PATCH 2

Organising for Success – Organising for Success – Case – One Sony?

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S.I.D. #1517846/1 ELEMENT 2 (1,000 words): Organising for Success – Organising for Success – Case – One Sony? INTRODUCTION Sony Corporation is a Japanese multinational conglomerate corporation, headquartered in Tokyo. The company spanned professional electronics such as semiconductors and medical devices, consumers’ electronics from televisions and mobile phones to computers and the play station. In 2012, when Kazuo Hirai was appointed CEO, Sony was in deep trouble. In 2012 Sony’s stock price was less than half it had five years before. Sony’s downfall began in 2003 when the company suffered the “Sony shock,” where both earnings and stock price had dropped simultaneously. They had to cut their work force by 20% in order to reduce costs. Financial results for the year 2011-2012 were nearly down to 10%, while profits were negative. By being appointed CEO, Hirai’s first move was to change Sony’s organizational structure and aimed to create a more integrated business named ‘One Sony.’ For this patch, the student intends to solve the issues at One Sony with the use of theories and concepts. The student would assess the pros and cons of Hirai’s structural changes, as well as other initiatives that would be necessary to create ‘One Sony.’ In addition, the company’s organizational configurations; strategy, structure and systems would be assessed. “Strategy is the direction and scope of an organization over the long term,” according to Cole and Kelly (2011). Cited in Johnson, et.al., 2014, “structure gives people formally defined roles, responsibilities and lines of reporting,” whereas, “systems support and control people as they carry out structurally defined roles and responsibilities.” DISCUSSION In 2005, when Howard Stringer was appointed CEO of Sony, he planned to break down the company’s vertical management system, but he failed. He was neither an engineer nor could he have spoken Japanese, and all his orders were ignored. In 2012 when Kazuo Hirai was appointed CEO, he realized that the company’s structure needed to change and Sony Corporation rebranded in order for the company to succeed. Hirai believed that the new Sony should be focused on five key strategic initiatives which includes the strengthening of the core business, commitment to returning the business to profitability, extending the company into emerging markets, innovating by integrating product areas and finally realigning its business portfolio.

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S.I.D. #1517846/1 Hirai’s new concept of ‘One Sony’ was supported by these five key strategic initiatives with a new organizational structure. He set up a functional type structure where divisions were split up according to functional departments as seen in the example labelled figure 2.1 below. Figure 2.1 – Example of One Sony’s functional type structure

CEO Kazou Hirai Sales & Human Legal, csr & Research & Engineering Strategy Manufacturing Finance Marketing Resources Security Development Source: Adapted from Johnson et.al., 2014, p.436 and Panmore Institute, 2017 Inside of the structure there are three main core businesses and they are digital, imaging, gaming and mobile. Each aspect would have a different manager to manage the progress. By implementing this structure, it would allow for senior managers to have direct hands-on involvement in operations and allow for greater operational control from the top. A disadvantage of this however, is that senior managers may become over burdened with routine matters. Sony’s old structure was based on two big groups predominantly in hardware. This new structure broke up the big groups creating stand-alone businesses. Hirai completed the structural changes by “reinforcing headquarters resources and oversight with new senior management.” (Johnson, et.al., 2014). Cited in Sony (2017) the company has also provided “horizontal control and managers and employees share the same authority.” The structure however could only work if it is supported by formal and informal organizational systems. Systems help to ensure control over the strategy implementation. In figure 2.2 below, it shows McKinsey’s 7-S framework that highlights the importance of strategy, structure, systems, staff, style, skills and superordinate goals. 9

S.I.D. #1517846/1 Figure 2.2 – McKinsey’s 7-S framework

Structure (Functional)

Strategy (Corporate)

Skills (Innovative, creative, initiative)

Superordinate Goals (Leading Global Provider)

Staf (engineers, directors, CEO, executives)

Systems (Direct & Indirect

Style (Transform tional)

Source: Adapted from Johnson et.al., 2014, p.455 McKinsey’s framework above was adapted to incorporate One Sony. From research it was clear that Sony adopted a new functional type structure with the use of both direct and indirect systems under Hirai’s transformational leadership style. By having a corporate strategy, it would help to grow the business’s units by entering new markets. By hiring engineers, directors, a CEO and executive staff members, all with the skills of innovation, creativity and initiative, the

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S.I.D. #1517846/1 company would be able to achieve its superordinate goal of becoming the leading global provider of networked consumer electronics, entertainment and services. CONCLUSION In order for Sony to succeed, Kazuo Hirai changed is organizational structure to a decentralized, functional type structure. He came up with a new strategy which he called ‘One Sony’ that would begin the transformation process to allow the company to grow and succeed. With the use of McKinsey’s 7-S framework it would help to support the intended strategy. Along with the five key initiatives, the strategy is to strengthen Sony’s core business segments. With the help of an innovative staff and team, Sony hopes to overcome the challenges and issues faced and expand into emerging markets. By emerging into new markets, Hirai expects profits to increase. By changing, subdividing, combing and reorganising the organizational elements, One Sony would be able to achieve its overall superordinate goal. RECOMMENDATIONS It is recommended that Sony enhance their research and development for new and innovative product development. They should put focus on interface design and product design to incorporate voice recognition, for example, into their products, so that users can have the choice to operate their technology by easy spoken commands. The company should also change its strategy to a more profit oriented one and focus more on the market share in Japan where it is shrinking. Also by entering into emerging markets the company would be able to improve profit margins by cutting down on their costs. The cut costs would come from the developing countries, such as Indonesia, India and Philippines, where labour is cheap and products are refined so that the set up cost would be less. This can be perceived as a long term strategy.

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REFERENCE LIST Cole, G.A., and Kelly, P., 2011. Management and Theory Practice. 7th edition. Hampshire: Brendan George. Insead Knowledge, 2017. Strategy and Organization in Sony. [online] Available at: http://knowledge.insead.edu/blog/insead-blog/strategy-and-organization-in-sony-2815 [Accessed 03rd May, 2017] Johnson, G., et. Al., 2014. Exploring Strategy text and cases. 10th edition. Harlow: Pearson. Panmore Institute, 2017. Sony Corporation’s Organizational Structure Pros & Cons. [online] Available at: http://panmore.com/sony-corporation-organizational-structure-pros-cons [Accessed 05th May, 2017] Sony, 2017. History. [online] Available at: https://www.sony.net/SonyInfo/CorporateInfo/History/ [Accessed 04th May, 2017] Sony,

n.d.

Organizational

Structure.

[online]

Available

at:

https://sony1020.wordpress.com/oraganizational-structure/ [Accessed 03rd May, 2017]

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PATCH 3

Leadership & Strategic Change – Case – Sergio Marchionne: Leading Change in Fiat and Chrysler

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ELEMENT 3 (1,000 words): Leadership & Strategic Change – Case – Sergio Marchionne: Leading Change in Fiat and Chrysler INTRODUCTION ‘Leadership is the process of influencing an organization in its efforts towards achieving an aim or goal.’ By contrast, leadership is about coping with change, therefore strategic change is central to leadership (Johnson, et.al., 2014). For this element, the student would look at leadership and strategic change in relation to the case of ‘Sergio Machionne: Leading Change in Fiat and Chrysler,’ along with the use of academic literature and theories. Fiat, founded in 1899 and Chrysler in 1925, formerly two different companies, now under one alliance and presently known as Fiat Chrysler Automobiles. These two companies were brought together in 2014 with the help and support of the US and Canadian Governments and trade unions. CEO, Sergio Marchionne, worked tirelessly to get the organization to where they are today. By taking over as CEO at Fiat in 2004, by 2006 he was able to make a company that was unprofitable and had poor quality products profitable. However, in order for him to achieve such, he had to let go of some employees and over 2,000 employees retired early. He changed the management system and created a ‘Group Executive Council.’ In 2009, Chrysler was near bankruptcy, had no market value, investment slashed and over 300,000 jobs were on the line and Marchionne was appointed CEO of the company. Just like with Fiat, he had to change management and improve product quality, and by 2011 was able to achieve an operating profit of $2 billion as compared to the net loss of $652 million in 2010. In the discussion below, the student would discuss the types of levers for change Sergio Marchionne adopted and how and why he was able to lead these two companies that were in such turmoil to profitability. DISCUSSION

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S.I.D. #1517846/1 In order for Sergio Marchionne to rebuild Fiat and Chrysler into a top selling brand, he had to go through the elements of leading strategic change, which can be seen in figure 1 below.

Figure 3.1: Key elements in leading strategic change

Leadership and Change

Source: Johnson, et.al., 2014, p.466 By being appointed CEO, Marchionne had to undertake three key roles of envisioning future strategies, aligning the organization to deliver such strategies and finally embo

hange.

was able to bring the two companies to profitability, ed accordingly. For fifty days Sergio toured

Diagnosis

d analyzed the situation. During his tour how

Levers for change

pted an autocratic style of management. Senio ke decisions and everything was left up to the former CE dominated the company and it was Marchionne saw fault in Fiat's and 2,000 managers and s

ngineers

who held senior management positions.

Managing types of strategic change

to let go of many senior managers new management. He appointed 15

S.I.D. #1517846/1 20 new young leaders from areas such as marketing and other geographical locations, taking away from the traditional routes to the top management level. He also moved the CEO office from the top floor to the ground floor in order to be closely connected to his staff and thereby adapting a democratic style of leadership. By doing this managers and staff are now able to learn different aspects and areas of t...