Week 18

WEEK 18 – LEARNING JOURNAL

Can you think of an organization that has implemented a ‘high risk strategy’ that has resulted in success (why was it high risk at the time and why was it a success – was it good luck or good judgment)?

I think Samsung is an organization that has implemented a ‘high risk strategy’ that has resulted in success. Earlier Samsung was fully involved in producing electronic home appliance and their business was a super successful one. From 2000 AD onwards they entered into cell phone business. During that time Nokia was market leader and there were other competitors as well so it was very tough time for Samsung but as the smart phone came into existence then turning point came for Samsung came. After that their sales increased and became one of the top smart phone producers.   

Decision of entering the market was a very difficult decision for Samsung as they had many successful competitors and the risk involved was very high. If they could not succeed then it would affect their brand image and their entire other products in spite of this risk instead of backing off the investment they stuck to it patiently and started developing their upcoming products. They were far sighted and implemented correct high risk strategy which made them successful in the market. Partly it was a good luck but collectively we can say that it was their good judgment.

Now, do the same for an organization who embarked on a high risk strategy that resulted in some sort of failure (why was it high risk and why did it fail – bad luck or poor judgment?)

I think Sony is an organization that has implemented a ‘high risk strategy’ that resulted in some sort of failure. During late 90’s and early 2000 Sony was the top leader of gaming market. First they launched Playstation1 and after its success they came up with Playstation2. Both these games were very successful and generated profit beyond Sony’s expectation.

After the success of Playstation1 and 2 they thought that Playstation1 and 2 did not have best technology and graphics so they introduced playstation3 featuring all the new technologies in it. The price of Playstation3 was $600 without tax which was very high. They re-designed their product and launched it but they didn’t consider the customer’s expectation so it was an unsuccessful strategy which involved high risk.    

 

References:

  1. Raminder Pal Singh. (2013). Samsung Case Study. Available: t/raminder90/samsung033. Last accessed 27/11/013.

 2. Surabhi Agrawal. (2010). Sony Case Study. Available: http://www.slideshare.net/surabhi786/case-study-analysis-sony. Last accessed 27/11/13.

3. Crapgamer. (2013). Why Sony and the PS3 have failed this generation.. Available: http://n4g.com/user/blogpost/crapgamer/515209. Last accessed 27/11/13.

 4. Forbes. (2013). Samsung’s high end market. Available: http://www.forbes.com/sites/greatspeculations. Last accessed 27/11/013.

Week 17

WEEK 17 – LEARNING JOURNAL

In your own words and using referenced quotes describe the difference between organic growth, merger & acquisition and strategic alliance.

Organizations have different growth strategy depending on their capability, strengths, time and situations. Hence, we cannot say that particular growth strategy is the best one. It depends on which type of growth strategy is best to particular organization. Here we are going to discuss some of the popular and widely used growth strategies.

ORGANIC GROWTH	MERGER & ACQUISITION	STRATEGIC ALLIANCE
Organic growth is the growth of the company obtained by enhancing sales and increasing output. It does not include the profits generated from takeover, acquisitions and mergers as they do not bring profits generated within the company. (Margaret Rouse, 2013).	Merger means merging of two or more firms and working efficiently and effectively by combining their strengths to overcome their weaknesses. Merger helps the company to share their resources, operations, decision making authority, etc. Acquisition means purchasing a firm or most of the shares of the firm to run a mutual benefit project in order to meet specific goal. The investment might be friendly or unfriendly in nature as well as national or international. (Robert Morello, Demand Media , 2013)	Strategic alliance means combining the resources of two or more resources to run a mutual benefit project. In this the organizations will have their own entity hence it is not a merger and acquisition. The two types of strategic analysis are: equity based alliance and non-equity based alliance.

Give an example of a company that has grown through a) organic growth, b) merger or acquisition and c) strategic alliance

An example of a company that has gone through organic growth, merger or acquisition and strategic alliance are as follows:

1.   Key factors like creativity, innovation, customer loyalty, employee-employer relationship, etc are the factors that have contributed to the organic growth of the Toyota motors. It has also helped to increase efficiency and work effectively. Along with it Toyota keeps on updating themselves with changing technologies which also helps them in process of growth.

2. Exxon and Mobil merged and formed Exxon Mobil in 1999 and is a leader in the international oil market. They explore, produce, transport, manufacture and sale crude oil and natural gas worldwide. 

3. Strategic Alliance has been famous with many mobile companies. One of the famous examples is the strategic alliance of Samsung and Google to created android operating system.

Briefly discuss the merger between Britvic and AG Barr. What advice would you give to the new Board?

Two beverages firm, Britvic and Barr went through the process of merger. This merger will be very profitable to both the companies as they can save 35million pound yearly and generates 23% of combined operating profit. Merger is an opportunity for both Britvic and Barr to increase the shareholder’s worth. They can grab new opportunities and use their strengths to overcome their weaknesses and threats. There are advantages as well as disadvantages of this merger.

Here are few of the advices to newly formed Board from this merger:

1.   They should form new strategies and mission

2.  They should come up with new product innovation as well as stick with their existing product and even should promote their product creatively

3. Each business unit should communicate properly to the board in order conduct production process smoothly.

4. They should focus on R&D

5.  Should maintain employee-employer relationship so that business operation is not hampered due to lack of communication.

                                    
    BRITVIC AND BAR CASE STUDY

Evaluate the case for the merger

1.     What are the positives and benefits? What should work well?

Britvic and Barr planned to work together as mergers in order to maintain top position in Europe as a beverage firm. The positive and benefits of this merger are as follows:

•       Cost saving of 35million pounds annually as well as operating profit of 23 percent. 
•     Their relationship with Pepsi can help them to compete with Coca Cola. Competing with a popular brand like Coca Cola is very tough so together they can compete with Coca Cola. 
•      They both can benefit from each other’s loyal customer. For instance, Britvic can attract Barr’s customers and Barr can attract Britvic’s customers.  
•      They can share their resources, knowledge and technology. 
•        Together they can combine their ideas and creativity and come up with good flavored unique product.

2.     What are the negatives and potential risks? What problems might occur?

Some of the potential risks and negatives are as follows:

  1.  Barr and Britvic have their own management styles and corporate culture that have been in practice for years. Merging these firms also means merging their cultures, values and way or working which may result to some sort of conflicts in the future. In addition to this, Britvic having the debt of £600 million may not be preferred by the executives and top management of Barr to take any kind of the strategic decision on their own without the evaluation and approval of Barr. This too may cause some sort of management problem and conflicts regarding the decision making authority.

  2. The shareholders of Barr who were earning high return on investments may not be earning the same amount after merging which may lead to their dissatisfaction. 

  3. The downsizing of the companies in terms of employees is another negative aspect of the merge of these companies because though having lesser number of employees may be beneficial to the company, settling down the issues related to the employees who will be fired can be very costly in terms of both monetary aspects and the company image.

3.      What advice would you give the newly formed Board?

Two beverages firm, Britvic and Barr went through the process of merger. This merger will be very profitable to both the companies as they can save 35million pound yearly and generates 23% of combined operating profit. Merger is an opportunity for both Britvic and Barr to increase the shareholder’s worth. They can grab new opportunities and use their strengths to overcome their weaknesses and threats. There are advantages as well as disadvantages of this merger.

Here are few of the advices to newly formed Board from this merger:

       They should form new strategies and mission

   They should come up with new product innovation as well as stick with their existing product and even should promote their product creatively

    Each business unit should communicate properly to the board in order conduct production process smoothly.

    They should focus on R&D

  Should maintain employee-employer relationship so that business operation is not hampered due to lack of communication.

References:
1. Margaret Rouse. (2013). mergers and acquisitions (M&A). Available: http://whatis.techtarget.com/definition/mergers-and-acquisitions-MA. Last accessed 15/11/2013.

2. Robert Morello, Demand Media . (2013). What Is Organic Growth in Business?. Available: http://smallbusiness.chron.com/organic-growth-business-56960.html. Last accessed 15/11/2013.

3. theguardian. (2013). Soft drinks merger of AG Barr and Britvic gets green light. Available: http://www.theguardian.com/business/2013/jun/11/ag-barr-britvic-drinks-merger. Last accessed 15/11/2013.

 4. agbarr. (2013). Possible merger of A.G. BARR p.l.c. and Britvic plc. Available: http://www.agbarr.co.uk/ces_general.nsf/wpg/investors-potential_merger_with_britvic.html. Last accessed 15/11/2013.

 

Week 16

PRESENTATION ON SAARC

BHUTAN- Land of Thunder Dragon

The SAARC Perspective:

• South Asian Association for Regional Cooperation (SAARC) was established in 1985.
• Formed as non-political forum to create cooperation among Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.
• Platform for the people of South Asia to strive towards socio-economic progress in a spirit of friendship, trust and understanding.
• Afghanistan joined the organization in 2005.
• South Asian Free Trade Area (SAFTA) was introduced in 2004 at the 12^th SAARC summit in Islamabad.

Bhutan’s SAARC Perspective:

• Joining SAARC was politically significant for a small nation-state like Bhutan.
• Bhutan was compelled to extend its relations with countries other than India to consolidate its status as the sovereign nation that it has been historically.
• His Majesty said at the first SAARC summit in 1985: “We have to bear in mind that in spite of all our heterogeneity, we are geographically one homogeneous unit, that our peoples have lived together in peace and friendship for countless centuries, and that they share many values rooted in our common past.”
• As a member of SAARC Bhutan has been able to diversify its trade link with South Asian countries while enhancing its status as an independent nation-state.

About Bhutan:

•      Location: Southern Asia, between China and India, Landlocked

•      Area: 38, 394 sq. km

•      Nationality: Bhutanese

•      Population: 716,896

•      Ethnic Groups: Bhote 50%, Nepalese 35%, Indigenous or migrant tribes 15%

•      Religions:  Lamistic Buddhist 75%, Indian and Nepalese- influenced Hinduism 25%

•      Language: Dzongkha (Official)

National Flag of Bhutan

National Emblem of Bhutan

            H.M. Jigme K.N. Wangchuck

            H.E. Jigmi Y. Thinley

Economic Review:

Other SAARC Nations and Relations:

India

•      It is the largest country among the SAARC nations.

•      Economically very strong

•      Acts like father figure among SAARC nations.

Relationship with Bhutan:

• Bilateral cooperation in the hydropower sector has been carried forward with the formal inauguration of the 60 MW Kurichhu Hydroelectric project in April 2006, and commissioning of the 170 MW first unit of 1020 TALA Hydroelectric Project in July 2006.
• In Joint Session of the Bhutanese Parliament in May 2008, Prime Minister Dr. Manmohan Singh informed that the total bilateral economic engagement with Bhutan over the next five years to be of the order of Rs./ Nu. 100 billion.
• India is not only Bhutan's main development partner but also its leading trade partner.
• A free Trade regime exists between India and Bhutan. The India-Bhutan Trade and Commerce Agreement which expired in March 2005, has been renewed for a period of 10 years. Currently, the major items  of exports from Bhutan to India are electricity (from Tala, Chukha and Kurichhu Hydroelectric Project), base metals and articles, minerals, vegetable fat and oils, alcoholic beverages, chemicals, cement, timber and wood products, cardamom, fruit products, potatoes, oranges and apples, raw silk, plastic and rubber products.

Nepal

•      Like Bhutan it is also landlocked and known as “Country of Himalayas”

•      Known for Birth Place of Buddha

Relationship with Bhutan:

• The growth of trade between Nepal and Bhutan has been affected due to the refugee crisis.
• In 2008-09, Bhutan's exports to Nepal stood at Rs. 300 million, while Nepal's exports to Bhutan amounted to Rs. 200 million.
• Bhutan and Nepal are landlocked Himalayan countries with close social and cultural linkages.
• Bhutan and Nepal both are predominantly agricultural countries. However, there exists scope for increasing bilateral trade, cultural exchanges and cooperation in the field of tourism.

Bangladesh

•      It is second most populous country in SAARC

•      Second largest exporter to third countries among SAARC countries

•      It is the world’s largest contributor to United Nations peacekeeping operations.

Relationship with Bhutan:

• Bhutan and Bangladesh signed a treaty and bilateral trade agreement in 1980, granting each other the "most favored nation" preferential status for development of trade. 
• In the renewed agreement, Bangladesh gave free access to 18 major categories of import items from Bhutan.
• The Bangladeshi Prime Minister also promoted the importing of electricity generated in Bhutan, and proposed a Bhutan-Bangladesh bus service across the territories of India.

Pakistan

•      It is the only sovereign country in South Asia.

•      It is the second largest country among SAARC nations.

Relationship with Bhutan:

• Non- resident diplomatic relation was established in 1988.
• There is not a high degree of bilateral cooperation between the two countries.
• Bhutanese nationals have attended various programs , trainings and courses in Pakistan under the funding schemes of UNDP, World Bank, UNESCO , UNICEF and so on.
• Over the years, various levels of official visits have taken place in relation to SAARC agendas as well as meetings arranged by UN agencies.

Sri Lanka

•      Best known for Democratic Socialist Republic country.

•      It is an island situated in northern Indian Ocean.

•      Attractive destination for tourists.

Relationship with Bhutan:

• Both countries are rich in Buddhist tradition and non-resident diplomatic relation established in 1987.
• Thimpu served as the venue for talks between representatives of the Sri Lankan Government and six Tamil groups including the Tamil United Liberation Front.
• Under SAPTA, Sri Lanka has agreed to grant Bhutan a special tariff import rate for apples, concessions for oranges, processed fruits, and wood products.
• Likewise, Bhutan has agreed to grant concessions on the import of tyres, chocolates and semi-precious stones from Sri-Lanka.
• Government of Sri Lanka also sponsor for various courses, training and programs in Bhutan.

Maldives

•      It is also an island country in Indian Ocean.

•      It is the smallest country among SAARC Nations.

•      Attractive destination for luxurious tourists.

Relationship with Bhutan:

• Formal diplomatic relation between Bhutan and the republic of Maldives is established on 20^th July, 1984.
• Cultural cooperation was signed in during president Gayoom ‘s visit to Bhutan in 1987.
• Maldivian government has made technical cooperation by sponsoring nurses at Royal Institute of Health Sciences in Bhutan and trained Bhutanese in hotel and catering services.
• There has been a steady stream of visits made by Bhutanese and Maldivian officials.
• In 1987, his Majesty presented a contribution of Nu. 1 million towards relief operations in the aftermath of a tidal wave disaster in Maldives.

Afghanistan

•      Became SAARC member in 2005.

•      Largely affected by terrorism.

•      Countries security is under supervision of NATO force.

Relationship with Bhutan:

• The Islamic Republic of Afghanistan established diplomatic and consular relations with the Royal Government of Bhutan on April 20, 2010.
• They are not involved in any kind of trade.

Problem Areas:

• For two decades, Bhutan has failed to live up to its assurances that it will resolve its refugee problem. 
• There are a number of environmental issues in Bhutan. Among Bhutan's most pressing issues are traditional firewood collection, crop and flock protection, and waste disposal, as well as modern concerns such as industrial pollution, wildlife conservation, and climate change that threaten Bhutan's population and biodiversity.
• Although Bhutan and India share an extraordinary friendship, there are some issues that are of concern to both countries. These are mainly centered on the illegal presence of militants in Bhutan rebelling against the Indian government, the state of relations with China, and (more exclusively for Bhutan) the liberalization policies in India.
• Rural areas, where at least 90 percent of the poor are concentrated, lag behind cities in infrastructure, health, education and other social services, and urban problems are growing worse as well.

Strategic Perspective & understanding about other nations:

• Although Bhutan has excess hydro power energy to distribute other SAARC nations, they are still backward in modern technology infrastructure so they need to cooperate with other SAARC nations to develop technological infrastructure.
• Bhutan must emphasize on industrialization to create more job opportunities for youth of nation.
• One of the major GDP contributors of Bhutan is exporting herbal products; if they can establish their own herbal pharmaceutical companies it will help in economic growth of nation.
• In order to attract more tourists, Bhutan must make flexible policies relating tourism industry.
• As it is an agricultural country it must adapt to modern methodology of agriculture.

PEST Analysis:

Political: 

• Bhutan has a hereditary monarchy.
• Major reforms and innovations started from 1990 through the successful leadership of Wangchuck dynasty.
• Bhutan has diplomatic relation with 21 countries and with the European Union.
• Bhutan is member of various international and regional organizations such as United Nations, SAARC, IBRD, IMF and ABD.
• India is single largest trading and development partner of Bhutan.
• Bhutan does not have diplomatic relation with china.

Economic:

• Historically, Bhutanese economic activity was confined to subsistence farming and animal husbandry.
• Total land under cultivation is around 8% of the total geographical area and it contributes around 21% share to GDP.
• Bhutan has done significant progress in national economy through the development on hydro electricity. Some of the major hydro projects are:

•      Chukha Hydropower Project  - 336 mw

•      Tala Hydropower Project- 1020 mw

•      Kurichhu Hydropower Project-60 mw

•      Basochhu Hydropower Project- 64 mw

• Due to good development of hydropower projects many of the rural areas of Bhutan are gaining significant growth on infrastructure.

Social:

• Population of Bhutan is 716,896
• Ethnic groups: Bhote 50%, ethnic Nepalese 35%, indigenous or migrant tribes 15%
• Religion: Lamastic Buddhist 75%, Indian and Nepalese influenced Hinduism 25%
• GDP-Per Capita(PPP) : $6200
• Population below :poverty line: 23.2%
• Literacy Rate: 47%

Technology:

• Bhutan is still behind in modern technological facilities.
• Telephone - Main line in use :26,300
• Telephone - mobile cellular : 394,300
• Internet User : 40,000
• Broadcast and Telecast Stations: Radio- AM 0, FM 9, Shortwave 1
• Television broadcast stations 1

Strategic Grouping:

As most of the SAARC nation's economy is based on agriculture and agriculture has been a major GDP contributor for countries like Nepal, Bhutan, Afghanistan, and Pakistan. Therefore, strategic grouping has been done on the basis of contribution of agriculture on GDP.

SWOT Analysis of Bhutan:

STRENGTH

• Agricultural Market-organic farming
• Rural labor force
• Cultural and religious importance

WEAKNESS 

• Low economic growth rate
• Low trade of various goods and services

OPPORTUNITIES

• Huge possibilities of job opportunities
• Increase in per capita income
• FDI

THREAT

• Loss of small cottage industries
• Decline in environment and quality of labor
• Threat of financial crisis

Solution and Reboot:

• Bhutan should show some flexibility to solve the refugee problem with the help of good mediator.
• Use of clean energy should be encouraged for domestic purpose. As it’s the initial stage for the development of industrialization and construction work, it is very important to make far sighted plan to control pollution and environmental degradation.
• In this globalized scenario, Bhutan should be more open to other nations beside India also. It will make Bhutan more competitive and there will not be question and risk on national sovereignty.
• Bhutan should not only think about the development of Gross Domestic Product but it is very important to take some serious major to develop Gross Domestic Happiness.

Strategic Leadership Aspect:

• Bhutan has huge Hydropower potential.
• Hydropower is the largest renewable energy sources in Bhutan.
• Hydropower potential is estimated at 60,000 MW.
• Total estimated Renewable energy resources of Bhutan are given

Possibility of Success:

• Hydroelectricity
• Tourism
• Herbal Products – Pharmaceuticals Cosmetics
• Processed Food – Petty Consumer Items, beverages
• Textiles, organic products and tea

References

•      Anon., n.d. trading economics. [Online]
Available at: www.tradingeconomics.com
[Accessed 20 10 2013].

•      Anon., n.d. [Online]
Available at: globalenergyobservatory.org
[Accessed 20 10 2013].

•      Anon., n.d. [Online]
Available at: http://www.gfmag.com/gdp-data-country-reports/212-nepal-gdp-country-report.html#axzz2guyeh1uT
[Accessed 19 10 2013].

•      Anon., n.d. [Online]
Available at: http://www.bhutan2008.bt/en/image/tid/4
[Accessed 21 10 2013].

•      Anon., n.d. [Online]
Available at: http://www.ide.go.jp/English/Publish/Download/Jrp/pdf/132_3.pdf
[Accessed 21 10 2013].