Explain the strategic option that takes the organization away from its existing products and

markets showing its main advantages and disadvantages and the appropriate methods for
its implementation? (10 Marks)
1. Diversification allows spreading the risk over various markets and products, reducing the
organization’s dependence on one source of income. For example, if an instance of a market
happens to be a downfall, then the organization can find surety to keep running towards stability
by using another instance of another market. Here, the application is more suited for volatile
industry.
2. Revenue Growth: The company can reach further revenue growth by expanding into new
markets or new industries. In addition to increasing profitability, it opens doors for the scaling of
operations and serves as a means of achieving long term growth.
3. Related Diversification: The organization carries the existing skills, technologies or brand
reputation and leverage its core competence to achieve a competitive advantage in new markets.
For instance, a tech company that is adding new business lines (like software services) may be
able to rely on its skills in hardware.
4. Diversification provides the firm with a competitive advantage by making it difficult for
competitors to enter various markets where the firm has a strong presence. Consequently, it helps
the organization’s market position and increases its bargaining power on suppliers and
customers.
5. Exploring new markets provides innovation opportunities as it makes an organization forced
to develop new products, services or processes to satisfy such diverse customer segments. This
creates an environment which is creative and pushes the organization ahead as compared to
others.
Disadvantages of Diversification
1. The diversification involves high costs in researching, developing, marketing and
infrastructure. These costs can prove to be very costly for the valuable resources of organization
if the new ventures don’t start earning upfront.
2. Particularly, and what can make it complex: operating multiple products and markets. It can
distract management attention and cause waste in that the organisation is so intent on its core
business and would like to think about new business that it has trouble getting them to balance.
3. Specifically, new markets are markets at which the demand of such markets is uncertain, or
the regulatory environment poses difficulties, or the markets differ in culture. These uncertainties
can cause the failures, when the organization does not have any background experience of the
new industry.
4. Those who diversify into different, irrelevant areas confuse customers and dilute the ‘brand
identity.’ For example, a luxury fashion brand, previously stepping into fast food industry may
not be in a situation where it can afford to lose its experience.
5. Lower allocation of resources for new ventures would lead to lower investment in the core
business and it has a negative impact on the overall business performance. In other words, it is an
internal conflict source and retards the organization’s growth in all ways.
Methods for Implementing Diversification
1. Conduct Extensive Market Research Work in terms of locating new markets and knowing the
need of the consumers, competition, and regulatory requirements. And it helps an organization
not to take the risk of committing wrong decisions and make decisions more abet.
2. The methods of pursing a diversification strategy include Acquisitions which refer to the
acquisition of existing companies operating in the target market; it provides immediate access to
the company’s customer base, its expertise and infrastructure. It reduces the topic of how fast and
how many resources will be needed to be present in the new market.
3. Carrying out the risky, resources and knowledge sharing by working with local firms or
industry experts. Partnerships can deliver great insights and enable the organization to get into
markets of which it has no knowledge, even though the organization may want to.
4. Investment in R and D: Create innovative product for the new market through research and
development. The organization’s products and services are not out of date or not able to meet the
customer expectations.
5. Pilot Testing: Innovate on new products or new markets through small scale pilot projects
before scale implementation. This allows the organization to diagnose caused by problems and
stop them before it is too late.
With a suitable illustration of Porters Model, describe how it is utilized in structural
analysis of the environment? (5 Marks)
Actually the Five Forces Model of Michael E. Porter is practically a framework to analyze the
structural dynamics of competitive environment of an industry. This identifies and enables an
organization to assess and evaluate its strategic position in terms of five critical forces that shape
industry competition and profitability, which, in turn, can help in making actionable strategic
plans. These forces (competitive rivalry, threat of new entrants, threat of substitutes, bargaining
power of suppliers, and bargaining power of buyers) help businesses to understand the
attractiveness of the market, the potential risks and the opportunities. The following is an
illustration of how the model is used, using the smartphone industry as a case study.
1. Competitive Rivalry
This force measures the degree of competition among current firms. The smartphone industry
houses very high rivalry as Apple, Samsung, and Huawei try to be number one in innovation,
pricing, and brand loyalty among others. Competition is further intensified due to the high fixed
costs (e.g. R&D expenditures), slow market growth and the low product differentiation. For
instance, companies need to continuously innovate to preserve market share in the face of
ongoing price wars in the emergent markets as well as frequent product launches (e.g., yearly
iPhone releases). High rivalry may result in reduced profitability, so firms may differentiate
using unique features (e.g. foldable screen) or ecosystem integration (e.g. Apple’s iOS services).
2. Threat of New Entrants
This force measures how accessible to the market new competitors can penetrate. There are high
barriers to entry in the smartphone industry, as economies of scale (that established players
produce at lower cost), brand loyalty (loyalty of consumers for trusted brands), and capital
opportunities, are required (significant investment in technology and distribution networks).
However, niche players like Xiaomi or OnePlus have come in through the underlines of cost
effective strategies like online only sales models or ridiculously low price points. Furthermore,
more enforcement action is taken against potential new entrants by regulatory patents (e.g.,
Apple’s proprietary technology). However, incumbents hold a strong position, and therefore the
threat remains moderate.
3. Threat of Substitutes
Products or services that allow consumers to get the equivalent value generated by the same need
but in another way, are substitutes. Substitutes in smartphones include tablets, laptops or even
feature phones as per earlier times. Fortunately, the threat level is quite low as smartphones
provide you to do it all (communication, entertainment, productivity). For example, tablets are
unlikely to replace smartphones for media consumption, because tablets are not portable and
don’t have cell service. Wearable tech (e.g smart watches) are a mild threat but can complement
(for example) a smartphone, replacing it in only certain occasions. In order to mitigate this risk,
companies combine complementary technologies (for example, Apple makes your experience
with your iPhone as seamless as it is with your Apple Watch because they own both devices).
4. Bargaining Power of Suppliers
The level of profitability is determined by input costs and quality, that is, suppliers. Many key
suppliers in the smartphone industry are semiconductor chip manufacturers such as Qualcomm,
labs operating Snapdragon chipsets and component supplier such as Samsung Display. These
have high power because, inter alia, suppliers are concentrated (a few firms control key inputs)
and the inputs they receive may be specialized (e.g. 5G chips) – think of the way Qualcomm’s
monopoly of modem chips gives it the power to dictate prices at the expense of manufacturers’
margins. Companies such as Apple therefore spend money on vertical integration (for example,
developing M1’s own chip inside) or create strategic alliances to reduce the risk of dependency.
5. Bargaining Power of Buyers
In order to affect its profitability, the buyers can also demand lower prices or better quality.
Buyers of the smartphones in the market include individual consumers to telecom carriers (e.g.
Verizon, AT&T). The power of buyers is moderate to high since there are low switching costs
(transfer data from Android to iOS) and as they are price sensitive (there are many affordable
alternatives). All of these devices put constant pressure on the manufacturers to offer them bulk
discounts, which is why you see prices with the 'for 13 items' clause. Companies try to install
their brand loyalty on their customers: be that with a closed ecosystem lock in (e.g. Apple’s
closed ecosystem has been one) or a unique value proposition (e.g. Samsung’s camera
technology).
In today’s changing and challenging business environment, change is an inevitable and critical
aspect of an organization’s growth and survival. Because I am a student of strategic management,
it is very crucial to know the factors that influence change values of the business within the
organization to be able to drive success in the transformations. These factors can be broadly
divided into internal and external factors which considerably affect the manner in which
organizations adapt to new realities. As an example, we are going to explore the main factors
influencing the values of the changes implemented in an organization, one is below.
As a strategic management student, describe the main factors that affect the change values
in the organization? (5 Marks)
1. Leadership and Management Style
Organizational change is the pillar of leadership. Leaders set their values and vision for such
change and this has great impact on its perception and implementation. Thus, it is more likely
that a culture of adaptability and innovation will be evolved in an organization under the
conditions of transformational leaders providing inspiration and motivation to workers. For
instance, Satya Nadella changed the approach of Microsoft from being on the forefront of
traditional software to cloud computing, integrated collaboration and continuous learning in his
leadership. On the contrary, autocratic or resistant leadership may prevent change by generating
fear or distrust of employees. They lead according to the change values and these are these are
embedded through and through by the leader making sure that all the levels of the organization
buy into the same change values.
2. Organizational Culture
Shared beliefs, values, and norms are often referred to as the organizational culture, it is often
one of the major drivers of attitudes towards change. A change seeking process is more likely to
be adopted positively in a culture that encourages innovation, collaboration and learning. Take
the case of companies such as Google and Amazon, which are dependent on experimentation and
flexibility and change is the essence of their very existence. Oppositely, rigid or hierarchical
cultures may not welcome change because of its risk or aversion to an unknown. In order to help
employees imbibe change values, the organizations need to promote an environment of open
communication, trust and empowerment to give employees a sense of accountability to the
transformation process.
3. Employee Engagement and Resistance
Any change initiative will be driven by the employees. Engagement level and willingness to
change of the stakeholders affects how change will succeed. Many times, resistance to change is
based on the fear that you will lose your job, you do not understand, or you perceive that your
job will be threatened. For example, workers at Ford protested as they feared automation would
replace them when Ford brought it to the factories. In order to do away with this, the
organizations have to bring in the employees to the change process, convey clear communication
and provide training so that the employees are able to be confident and competent. Of course,
employees who are engaged and feel that they are valued and supported are more likely to take
on values of change and implement them successfully.
4. External Environmental Factors
External factors such as technological advancements, market competition, regulatory changes,
and an economic condition require organizational change. With the day of digital transformation,
so have the existing retailers like Walmart transformed e commerce strategies in order to survive.
New regulatory changes also force organizations to modify their operations accordingly to
follow revised standards (e.g. data privacy laws (e.g. GDPR)). This is an on a day to day basis
and will never stop activity for the organizations unless they are keen to scan the external
environment to anticipate for the trends and stay actualize with the emerging opportunities as
well as threats as the change changes.
5. Resource Availability
Although there may be availability of human and financial and technology resources for factories
to change. Of course, put an initiative into effect the organizations are not able to put an initiative
into effect and they do not commit enough resources to the initiative without skilled employees
and advanced technologies. Part here is the claim that Tesla has R&D and teased ahead of time in
cutting edge technology (Tesla doesn’t sell anything on the market (like ice cube tray) at the time
of writing) such that the behaviour of an electric vehicle would have been taken on later if the
electric vehicle became the part of its greater market share. Instead, constraints on resources such
as people and machines can be a bottleneck or limit to change efforts which in turn affect the
achievement time or outcome. Next, organisations should think about whether resource
allocation should be on the agenda so that change initiatives are funded and supported
adequately.
6. Communication and Transparency
The communication is very effective in developing the change values. Employers will be able to
let employees understand the reason for change, benefits of it and their contribution in this
process. So when Starbucks, for instance, closed down all two thousand nine hundred seventeen
of its stores in the United States and Canada for racial bias training, it was considered clear in
terms of outward communication as it had assisted its managers and employees in associating
with the values of the company including inclusivity and respect. However, the problems start
when communication is poor, there is confusion, rumors and resistance. Organizations to build
trust and commitment, need to maintain open channels of communication to let employee update
from time to time and not to deviate from employee concern.