Questions and Answers on Strategic Management

a. Define synergy. According to Goold and Campbell, what are the six forms it can take?

Good and Campbell defines synergy as links between the business that leads to additional value creation. They also refer synergy to a holy grail for big multinational business organizations (Tallman, 2017). Synergy is said to exist for divisional corporations if the returns on of each are division is higher than what the returns would be if each of the divisions operated as an independent business. Thus, synergy seems to create extra value will less or no resource consumption.

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The business gains from synergy seem to be similar to the benefits that come from combining two or more businesses with an objective of creating value. Synergy happens when two firms or business units combine regardless of their activities or operations, hence synergy is said to be passive (Baas, 2012). For instance, if a business organization buys one of its major suppliers, it creates synergy. However, Goold and Campbell argue that sometimes it is difficult to fulfill the promises of synergy (Goold & Campbell, 20000. They give an example of an institution of consultants where the strategy specialists were merged with IT specialists to gain synergy. The IT specialists later discovered that was completely on a different scale of perks and pay (Ding, Ostergaard, & Wu, 2011). As a result, all the synergy gains were instantly lost.

The synergy drivers can be classified into two parts namely cost reduction and revenue enhancement. Revenue enhancement implies that the new company may succeed in making a large volume of sales than what the existing companies would have made if they operated independently. Synergy improves the market power of the company (Nielsen, Frykman, & Dalhoff, 2013). It also increases the market shares in the competitive sector. Cost reduction means the transfer of know-how or technology from one company to another; closing the target's headquarters, improvement in logistics and distribution; economies of scale from a higher capacity utilization of existing profits and earnings; elimination of intermediaries in as supply chain; and greater purchasing power.

Synergy may fail to materialize due to in mergers and acquisitions due to the following reasons: The first reason is that managers concentrate too much on strategic and financial aspects as they negotiate the deal this implies that much attention is given to striking the right price rather than extracting the full value (Calkins, 2014). The second reason is that managers underestimate or underrate the cultural diversity between firm. An example of this is the Anglo-French merger than involved packaging firms Carnaud and Metal Box. The managers of these firms refused to work with each other due to cultural differences (NOORI, 2015).

The following are the six forms that synergy can take:

Shared Tangible Resources

When the combined units share resources, they can benefit a lot by saving money.

Share Know How

Sharing knowledge and skills can be very beneficial to combined units. It improves their operational efficiency.

New business creation

The exchange of skills and business knowledge can facilitate the creation of new products and services. It enhances the extraction of discrete activities from different units and combining them in a newly created unit or creating joint ventures among the business' internal units.

Pooled negotiating power

When the combined units combine their purchasing, they benefit by gaining the bargaining power over common suppliers. This enhances cost reduction and helps them to improve quality.

Economies of scale or scope

The coordination of the flow of one unit's products or services with that of another unit can lead to the reduction of inventory, improve market access, and increase capacity utilization.

Coordinated strategies

When the business strategies of two or more business units are aligned, they may lead to a corporation significant advantage due to the reduced inter-unit competition. This also enhances the development of a coordinated response to common business rivals.

b. In conducting a strategic alternative, if there is little fit with the company's culture, what must management decide?

Business environments are characterized uncertainties and the management need to be flexible and innovative to survive (Cumming, Helge Hass, & Schweizer, 2012). The management achieves this through strategic alternatives. Strategic alternatives play an important role in maintaining a competitive edge over the company's rivals. For example, the management can adapt through risky and costly or small investment. Harvard Business Review outlines some of the alternative strategies such as diversification, differentiation, the adjacent business, and price focus. However, strategic alternatives need to fit with the company's culture to ensure effective operations of the company. Every business organization has a set of ways, values, and norms of conducting its operations (Schaveling & Bryan, 2017). These set of values in combination with the norms form the company's culture. With regards to organizational culture, every company looks forward to establishing strategies that will include capitals on the firm's internal resources to enable the firm take on the opportunities in its immediate environment as well as reduce the risk of business threats. Thus, the decisions that the firm makes have to conform to its cultural values (Irby-Butler, 2017). This implies that the company's culture has a significant influence on the on the strategic decisions made by the firm.

In companies, strategies are one of the most vital and planned decisions that largely influence the operational activities of the business. Strategic planning is the center of the executive or management of any company and helps the company to achieve its set objectives (Reisyan, 2016). Taking an effective decision indicates that the firm can harmonize its endowed abilities and the available resources to succeed in the ever-changing operational environment. Alvesson (2016) argue that strategic management entails the actual formulation and implementation of business strategies that fit with the organization's culture. It is worth noting that the strategic management process constitutes of three major phases. The first phase is the strategic analysis, and it includes the vision, mission, and goal analysis. The organizational internal resources and abilities are analyzed together with the external environmental factors (Talpos & Dan, 2017). The second face strategy selection. This constitutes the generations of different strategic options before evaluating and choosing the best fitting alternative. Notably, strategic options refer to different alternative responses of a company to different environmental situations. The third phase involves the implantation of the chosen alternative (Konopaske, Ivancevich, & Matteson, 2018).

Regarding the three phases of strategic planning, the management must ensure that there is cultural alignment in conducting a strategic alternative if there is little fit with the company's culture. When strategy implementation aligns culture, a firm can operate more efficiently in the global marketplace and the competitive industry (Sinha & Sheorey, 2016). Organizational culture allows the firm's management to work effectively in developing strategic initiatives within the firm. This may include re-establishing old partnerships and building new ones to continue providing quality products and services (Fu & Tang, 2015). The management must, therefore, decide on building a culture that supports the implementation of strategic alternatives.

c. Describe Jay B. Barney's VRIO framework

The Valuable, Rare, Costly to Imitate, and Organized to Capture Value strategy define the Jay B. Barney's VRIO framework (Bresser & Powalla, 2012. The systematic systems, resources, processes, capabilities and other internal factors are of vital importance for a successful implementation of a company (Powalla & Bresser, 2010). For instance, Accenture has been one of the firms that have demonstrated these features over the past decades. This makes this firm to be one of the most prominent firms in the industry. Accenture has been one of the most reputable organizations due to its efficient and effective strategy and planning. The company knows the appropriate time to enter and leave the market niche.

Taking the case of Accenture firm, the organization's core values are the backbone of its success. These core values are used to access the organization's capabilities and resources and find out if they can facilitate in achieving a sustained competitive advantage. (Kessler, 2013)

Value

The first core value of Barney's VRIO framework is value. It is the ability to have value is the ability to have valuable commodities within the company that makes it stand out compared to its business rivals. Resources add value by enabling an organization to defend against threats or exploit opportunities (Lin, Tsai, Wu, & Kiang, 2012).

Rarity

The second area of Barney's VRIO framework is the ability to have a resource of capability in which the company possesses. The capability is considered rare if it is not widely possessed by the firm's competitors (Knott, 2015).

Imitability

The third area of Barney's VRIO framework is the ability to provide clients products or services that are costly to imitate. The commodities that these firms provide to their clients are unique and something that is of rarity that clients will tend to frequently use them rather than going for the competitors; commodities (Simao, 2013).

Organization

The fourth part of Barney's VRIO framework is the ability of a firm to get organized to capture resources. With this ability, the business organization is able to exploit the capability or resource. An organization has to organize its management processes, policies, systems, organizational culture, and structure so that it can realize the potential of its valuable, rare, and costly to imitate capabilities and resources (Seo, Park, & Choi, 2016). Achieving this ability, the company can then achieve sustained competitive advantage. For example, Accenture being a prominent firm as it is must also organize its various entities within its organization such as LLP and AFS and capture the true value behind all the resource, the rarity of product/service, and determine the valuable assets within those entities. This will allow the organization as a whole to view holistically how the organization is best utilizing all its key assets to ensure it is constantly maintaining a competitive advantage in the marketplace as well as its competitors (Parniangtong, 2017). The value of the resources changes from time to time, and they must constantly be reviewed to determine if they are as valuable as they once were. Business rivals are also keen to achieve the same competitive advantages so they will be keen to replicate the resources, which means that they will no longer be rare. Often, new VRIO resources or capabilities are developed inside an organization, and by identifying them, you can protect your sources of competitive advantage more easily (Cardeal, 2012).

d. Describe the four categories of BCG Growth share matrix

The Boston Consulting Group (BCG) created the Growth-Share Matrix as a framework to examine the potential and strategic position and of the business brand portfolio (Davis, 2016). The BCG matrix is a business planning tool, which uses the firm's "relative market shares and industry growth rate factors to evaluate the potential of the business brand portfolio and suggest further investment strategies." The BCG Growth-share M...