MGT603 GDB Solution 30-11-2012
Total Marks20
Starting DateWednesday, November 28,
2012
Closing DateFriday, November 30, 2012
StatusOpen
Question/Description
Topic: External Assessment
Learning
Objectives:
·
To highlight the external factors that can have
an impact on company’s operations
·
To enlighten the impact of External Factors on
company’s strategies
Learning Outcomes:
After
completing this activity, the student will understand:
·
Significance of external assessment of company.
·
How company incorporates change of external
factors in its own strategies?
The
Case
GOURMET
started its operations as a bakery and confectioner shop
in 1987 in Lahore .
With focus on customer’s need and serving quality products,
it has diversified into a versatile food company and
has spread its network all over the city of Lahore . The products include bakery items,
mithai, dairy products, beverages, traditional halwas and premium bakery
items/beverages etc. It has also extended the operations by introducing restaurants and providing catering for all occasion.
It
is the largest Lahore-based food retail chain of Pakistan having competitors like
Shezan, Doce’, Cakes n Bakes and the Premium bakery brands (Kitchen Cuisine,
Masooms, Moods). Shezan restaurant inauguration
prompted Gourmet to come and deal in restaurants as well. Similarly the recent
trend of premium bakery brands resulted in the launching of premium sub-brand
of gourmet bakers i.e. Bon Vivant.
Point
to Ponder
Taking
into consideration the above-stated developments, identify and enlist the major
External Factors which might have contributed in Gourmet’s business diversification.
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SOLUTION IDEA
The term "diversification" is usually associated
with a change in the characteristics of the
company's product line and/or market, in contrast to market penetration, market development,
and product development, which represent other types of change in product-market structure.
company's product line and/or market, in contrast to market penetration, market development,
and product development, which represent other types of change in product-market structure.
External factors are those factors which are external to
the environment of the GOURMET.
Now discussion is open for u people.. Everybody can
contribute to this discussion, in the end we can conclude a solution
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Return expectations
in my point of view:
the
external factors may include
·
rivalry challenges
·
competitors
·
customers' demands and
needs
·
related market
environment
baqi
ap log btayen mere zehan main to yhi aye
Why diversification?
Often companies diversify for a host of good reasons. In other cases, it becomes a survival strategy when single product or service strategy reaches the limits of revenue generation. To achieve genuine success from planned diversification firms must reinforce internal development; pursue value-chain acquisitions, form strategic alliances and joint ventures. Often you will find that each route has its own set of issues like benefits and limitations.
Often companies diversify for a host of good reasons. In other cases, it becomes a survival strategy when single product or service strategy reaches the limits of revenue generation. To achieve genuine success from planned diversification firms must reinforce internal development; pursue value-chain acquisitions, form strategic alliances and joint ventures. Often you will find that each route has its own set of issues like benefits and limitations.
However,
diversification must be driven by (1) opportunities afforded in the business
environment, (2) in possession of right resources and (3) own the right skills
sets to make structural adjustments to extend the range of goods or services to
your exising customers or new markets. By extending your portfolio of products
or services, you can ensure new regular revenue streams to boost growth
prospects.
In
theory, the two principal objectives governing diversification are (a) to
improve core process execution and (b) enhance a business unit's structural
position by creating additional value through synergetic integration of new
businesses into the existing ones. These approaches grant a firm to improve its
competitive advantage and thereby, increasing the value for owners.
Diversification typically takes one of three forms:
Vertical Integration – integrating business along the value chain, both upstream and downstream, so that one efficiently feeds the other,
Vertical Integration – integrating business along the value chain, both upstream and downstream, so that one efficiently feeds the other,
Horizontal
Diversification – moving into more than one industry or new industry relates to
the existing ones or pursue a strategy of unrelated diversification,
Geographical
Diversification – open up new markets, moving into new geographical area to
overcome limited growth opportunities in the local market.
When to diversify
When to diversify has significance in business decision-making. It is about timing - until the core business is stable enough and the right business environment omnipresent for profit making. The catalyst is the knack for visioning and grasping the opportunity when presented to move away from unprofitable businesses and has limited scope in particular market.
When to diversify has significance in business decision-making. It is about timing - until the core business is stable enough and the right business environment omnipresent for profit making. The catalyst is the knack for visioning and grasping the opportunity when presented to move away from unprofitable businesses and has limited scope in particular market.
Diversification strategy
Diversification strategies are used to expand firms' operations by adding markets, products, services, or stages of production to the existing business.
Diversification strategies are used to expand firms' operations by adding markets, products, services, or stages of production to the existing business.
The
purpose of diversification is to allow the company to enter lines of business
that are different from current operations. When the new venture is
strategically related to the existing lines of business, it is called
concentric diversification. Conglomerate diversification occurs when there is
no common thread of strategic fit or relationship between the new and old lines
of business; the new and old businesses are unrelated.
Some
believe that diversification is by natural progression, i.e. extending the
brand by offering a much wider range of products that will appeal to the same
customer base. An accurate description of diversification is capitalizing on a
firm’s core competence and the strength of a successful brand to move into new
markets.
A company's core competencies are the prized possession that give the competitive advantage – for example, process knowledge and the acquisition of raw material that you turn out better than ones’ competitors do. Those extensions represent excellent opportunities for diversification.
To
strengthen diversification, a new strategic business unit must be capable of
transforming and benefiting from the existing core competence to make it
difficult for competition to replicate.
Another
popular business diversification strategy is called forward and backwards
integration acquisition of operations in the supply chain for opportunities to
strengthen a firms grip on the market.
Pros and cons of diversification
It is naïve to think that diversification can put a firm on the fast track to growth but if the strategy fails, it can also burn up money simply because the management failed to understand the teething problems of a new venture. When expanding a brand into new markets there is a real danger that it will have no resonance with the newly targeted customers. Thus, it is vital to conduct extensive research on new markets to determine the sustainability before diversifying.
It is naïve to think that diversification can put a firm on the fast track to growth but if the strategy fails, it can also burn up money simply because the management failed to understand the teething problems of a new venture. When expanding a brand into new markets there is a real danger that it will have no resonance with the newly targeted customers. Thus, it is vital to conduct extensive research on new markets to determine the sustainability before diversifying.
More
often, firms in a rush to jump ahead of the competition fail to look in the
mirror ask if they are really ready and if the existing business is healthy
enough to support the diversification. Do they have the right managers to guide
and cope with a diverging strategy? Should they integrate the diversified
business into one company or branch off as a new business operation? Once those
decisions are made to plunge to diversify, they need to remain for the
duration. If not, what will be exposed is their poor decision-making skills and
also raises serious questions about their judgments on all matters. Here is the
axiom that corporate big wigs ought to follow - think hard before you jump!
Diversification in the context of growth strategies
Diversification is solely a growth strategy and it should not be driven by egoistic compulsion to match what your competitors are engaged in. Growth strategies should be based on right vision and the capacity to mobilize resources to overcome all adversities venturing into the unknown. Ordinarily a strong view held by corporateSri
Lanka ’s executives is that "bigger is
better." Growth in sales is often used as a measure of performance. Even
if profits remain stable or decline, an increase in sales satisfies many people
even though the profits are down. The assumption is often made that if sales
increase, profits will eventually follow – not so.
Diversification is solely a growth strategy and it should not be driven by egoistic compulsion to match what your competitors are engaged in. Growth strategies should be based on right vision and the capacity to mobilize resources to overcome all adversities venturing into the unknown. Ordinarily a strong view held by corporate
The
golden rule for timed-diversification is when a firm has acquired lower
production know-how; labour efficiency; redesign of products or production
processes e lower costs and with the right mix of what they are capable of and
meeting consumer satisfaction.
Strategy and management teams
Rewards for managers are usually greater when a firm is pursuing a growth strategy since it is profit-driven. The higher the sales level, the larger the compensation received. As a result, managers tend to pursue risks that would bring the highest rewards for them, but may not necessarily be the right strategies for companies.
Rewards for managers are usually greater when a firm is pursuing a growth strategy since it is profit-driven. The higher the sales level, the larger the compensation received. As a result, managers tend to pursue risks that would bring the highest rewards for them, but may not necessarily be the right strategies for companies.
Often
it is hard to say whether a firm's diversification strategy is well matched by
the strengths of its top management factoring their past successes. For
example, the success of a diversification will depend not only on how well
integrated are the key factors, but also on how well suited are top executives
are to manage that effort and guide through rough times. Studies also suggest
that different diversification strategies require different sets of skills
within a firm, not relying on the same company managers.
To
be successful, a firm must invest in acquiring the right skills, if not at
least provide the opportunities to enhance those critical skills to within. The
days of jack-of-all-trades are gone, specialization have become that
significant today to insure that corporate goals are achieved with minimum
losses.
In Sri Lanka ,
there are many solid reasons for pursuing a diversification strategy, the war
has ended and new opportunities are abundant. They could expand by developing
new business or by buying ongoing businesses. Without a question, most will be
drive by management's desire for profit making, yet that must be preceded by an
internal assessment to determine their fitness to diversify. If the answers to
all the questions posed here are positive, then corporate Sri Lanka 's
strategic business diversification is in the right direction and Sri Lankan
business enterprising is destined to prosper.
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the external factors which might have contributed in Gourmet
business. Please, reconsider and focus on the right requirement
- Return expectations
- market line
- low risk rate
- feasibility of gain
- previous experiences will be helpful
Reply
me I m waiting.
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