Management Practices Business Strategy

Management Practices and Business Strategy

Despite the fact that research findings are mixed, it is beyond a reasonable doubt that management practices are related to productivity, growth, decline, and failure in organizations. This report sets forth a multidisciplinary review and summary of evidence of such a relationship. The report presents a thorough and meticulous scrutiny of three peer-reviewed journal articles in terms of how management practices relate to growth, productivity, failure, and decline of companies. The articles include Bloom et al. (2012) study, Sadun et al. (2017) study and Teece (2007) study on management practices and explicating dynamic capabilities respectively. Taken as a whole the three research articles share similar sentiments. They both establish a solid positive relationship between management practices, growth, productivity, failure, and decline. Nonetheless, in extensive literature review, research findings seem equivocal.

Some researchers have established a positive relationship between management, growth, productivity, failure, and decline, some have found a negative correlation while others no correlation at all (Bender, Bloom, Card, Van Reenen & Wolter 2018). According to Bloom et al. (2019), it can be argued that the deficiency of a consensus might have been prompted by either issues related to the level of analysis or measurement. With this said, there is an urgent need for further research especially in terms of a multi-level approach to evaluate the impact that management practices have on productivity.

Management Practices, Productivity Growth, and Decline

There have been endless debates as to whether organizations are likely to succeed if they embrace good management practice. Scholars have been conducting studies for over a decade now to end these debates. The scholars have endeavored to reexamine the long-held assumptions to confirm whether they stand the test of time (Bloom et al. 2019). Since the time of Frederick Taylor’s work on principles of scientific management, organizations have traditionally followed a formalized set of best practices including three practices that are considered essential to good management such as targets, incentives, and monitoring. Most organizations around the world are poorly managed. The well-managed organizations establish achievable targets on productivity and growth as well as gauge the promotions and compensations they give on attaining the set targets (Bloom, Sadun & Van Reenen 2012). Unlike poor managed organizations, these companies continuously measure results.

Better management practices are strongly correlated with superior performance, increased return on capital, as well as increased productivity. It is clear that core management practices cannot be taken for granted. With this said, there are significant differences in terms of how organizations accomplish basic tasks such as grooming talent and setting targets. Those organizations with robust managerial processes perform significantly superior on metrics of high level like profitability, productivity, longevity, and growth (Ghoshal 2005). The differences in performance and quality of such processes persist with time signifying that core management practices cannot be replicated easily.

Operational excellence matter a lot but it should be viewed as a critical complement to strategy. In this regard, if an organization cannot put its operational fundamentals right then it does not matter how good the strategy is (Wong 2020). Again, if organizations maintain, for instance, sound management practices, these firms can leverage them to create dynamic capabilities like evidence-based decision making, data analytics, as well as cross-functional communication that is crucial to thrive in a volatile and uncertain industry. As much as it requires a sizable investment in processes as well as people throughout the bad and the good times, attaining managerial competence calls for ultimate effort and the investments bring along a key barrier to imitation (Yeow, Soh & Hansen 2018).

Productivity is a notable metric of economic progress and revolves around issues related to economic growth, incomes, as well as competitiveness. Productivity is molded by management practices, global market structures, competencies, and skills of people, as well as the adoption of new technologies (Yeow et al. 2018). A growing body of evidence posits that organizations that engage in target setting, performance-centered human resource management, as well as extensive use of data analysis are more productive and exhibit increased productivity growth levels as opposed to those with fewer formalized management practices.

This evidence has a particular focus for the manufacturing sector where most recent studies have been based; nonetheless, it is also becoming strong for the service sector as well (Bloom et al. 2019). Information on management has been lacking until recently. Small sample analyses and case studies can avail expedient anecdotes; however, they fail to generalize to the wider economy because of unrepresentative samples and a narrower focus.

In the contemporary turbulent competitive business landscape, organizational managers are striving to achieve competitive advantages to beat competition through the efficient as well as effective use of resources. Good management practices at all organizational levels has been proven and is increasingly being accepted as the sure way of improving productivity and growth (Bloom et al. 2012). With this said, improved levels of productivity allow organizations to fulfill all their obligations to suppliers, government, stakeholders, consumers, as well as employees while still staying competitive.

Research shows that organizations that apply the accepted management practices across the globe perform better that those that fail to do so. This assertion implies that the improved management practice is among the most effective approaches organizations can employ to outpace their rivals (Ghoshal 2005). Greater competition pushes for improved management practice, labor market flexibility, on the other hand, leads to better habits of people management and the well-managed organizations are those likely to have highly educated employees.

Dynamic Capabilities and Management Practices

Organizations that maintain sound management practices leverage them to create dynamic capabilities. Recent studies have put a particular focus on the significance of dynamic capabilities to organizational success and longevity (Teece, Peteraf & Leih 2016). With reference to organizational theory, the dynamic capabilities entail an organization’s ability to build, reconfigure, as well as integrate the external and internal competencies to address the fast-changing business environment (Fainshmidt, Wenger, Pezeshkan & Mallon 2019). The term dynamic capability was first coined by David Teece in the year 1997. Dynamic capabilities reconcile incongruous philosophies that an organization can be stable enough to deliver to its clients original and distinctive value while remaining adaptive enough to adjust when conditions suggest so.

According to Wong (2020), dynamic capabilities are tied to original management practices and business models making it hard to imitate them; they allow for extension, modification, as well as creation within a firm. The development of the iPod, for instance, is a good example of dynamic capabilities (Felin & Powell 2016). After realizing that the mp3 players were aesthetically unattractive and large, Apple grabbed the opportunity to design smaller and more appealing iPods. The company then switched its focus to consumer electronics as opposed to just sticking to computers.

The move has allowed Apple to dominate both the music and portable digital music player industries. This approach by Apple depicts the company as a creative and aesthetically focused firm. With this said, developing dynamic capabilities depend on three core organizational activities including sensing, seizing, and transforming (Sadun, Bloom & Van Reenen 2017). Sensing entails the evaluation of consumer needs as well as opportunities that are external to the firm; seizing which entails the reaction of a firm to the needs of the market to maximize the company value including securing access to resources as well as designing innovative business models.

Transforming, on the other hand, involves the renewing of organizational processes as well as maintaining the processes relevance to customers (Shao 2019). This calls for managers to continuously improve, iterate, as well as streamline processes.

The dynamic capability concept has been linked to a resource-based view of the organization as well as to the idea of ‘routines’ in the organizational evolutionary theories. The dynamic capabilities emphasize more on the concept of competitive survival to address the changing business conditions while the resource-based view stresses on sustainable competitive advantage (Felin & Powell 2016; Yeow et al. 2018). It is argued that dynamic capabilities serve as a bridge between evolutionary approaches to organization and economics-based strategy literature (Yeow et al. 2018). The dynamic capabilities theory entails the establishment of stratagems for managers of organizations to adapt to rapid intermittent change whereas sustaining the minimum capability levels to ensure competitive survival (Sadun et al. 2017).

Industries that rely on particular traditional manufacturing processes are not positioned to alter the process on short notice especially when tech arrives. However, when this transpires, organizational managers are required to adapt their routines to make the most out of their resources whereas concurrently planning for the future changes in processes as resources denigrate (Shao 2019). With this said, the type of change being emphasized by the theory of dynamic capabilities are the internal capabilities and not the external forces of business.

Although further research is required to measure dynamic capabilities as well as suitably apply the concept to practical management contexts, many scholars argue that the theory of dynamic capabilities is tautological and vague (Sadun et al. 2017; Teece et al. 2016). This assertion seems to hold true, as much as the theory is very helpful when it comes to addressing the rapid changing business conditions, it still fails to explain how to do so.

According to Teece et al. (2016), the theory’s capabilities are difficult to operationalize and identify as well and at other times, the very capabilities could prompt the core capabilities into turning the core rigidity (Felin & Powell 2016). In this regard, some studies have argued that it still hard to apply the theory in its present state without being in a position to develop, identify, as well as specify the capabilities. Nonetheless, recent studies have introduced a mechanism from the theory of dynamic capability for net enablement called the “Net-Enabled Business Innovation Cycle” to further an understanding as well as help predict how organizations transform the dynamic capabilities linked to net-enablement into consumer value using the theory (Shao 2019; Sadun et al. 2017).

The net-enabled organizations are able to constantly reconfigure their external as well as internal resources to apply digital networks in exploiting opportunities via routines, rules, analysis, and knowledge to create consumer value from the net-enablement capability (Sadun et al. 2017).

Businesses maintain portfolios of the hard to trade and idiosyncratic assets as well as competencies and competitive advantages can flow right from the sustenance of scarce but difficult to imitate resources such as expertise and novel ideas (Felin & Powell 2016; Teece 2007). Nonetheless, in the rapid changing business environment characterized by stiff competition, sustainable competitive advantages demand more than just the possession of hard to imitate assets; it demands the unique and hard to imitate dynamic capabilities (Teece 2007). Such dynamic capabilities can be leveraged to constantly help to extend, protect, create, as well as upgrade the unique organizational assets.

How the Findings Might Help Improve the Performance of the Firm

For the company that I operate in, the findings of this report are good news. These findings posit that the company has access to any performance improvements only by applying and implementing good management practices already used by other firms. Very few firms have management practices that are above average and the need to spread the word to thousands of underperforming organizations is urgent. A bigger part of the opportunity for improvement rests with local managers. To determine how far behind the company is, managers must rigorously assess their own management practices and contrast them with others. These managers can benchmark themselves by industry and country (Bender et al. 2018). Awareness is very low and should be the first initiative to be taken by the company managers.

After establishing where they need to improve, managers must start to embrace a slow but steady growth. Successful companies have reached greater heights by making good beginnings through the identification of processes that require immediate change and then afterwards developing the metrics to monitor advancement over long and short term. In this regard, goals must be visible to all employees and translated into group, individual, as well as company wide targets that are to be monitored meaningfully.

Of course, immediate results cannot be expected but by establishing powerful incentives, focused targets, as well as constantly monitoring performance could be effective in diving future greater shifts. Global organizational have be obliged to embrace a systematic management approach and only through maintaining robust as well as effective management practices have they managed to replicate similar performance standards across various cultures, markets, and regions (Ghoshal 2005). With this said, these organizations are realizing the benefits that come with good management practices including better capital returns, increased growth, as well as higher productivity. These benefits are readily accessible to other firms but very few have made efforts to obtain insights into the quality of their management practices. Nonetheless, those that do so enjoy the access to cost effective as well as sustainable competitive edge.

Management Practices Business Strategy
Management Practices Business Strategy

Lessons

The review of the three articles is fundamental to the credibility and rigor of research in social science. Obviously, the articles feature fundamental differences when it comes to format, length, and content but they both share similar sentiments. The articles are characterized by work built on management surveys across various companies. A critical lesson drawn from these studies is that it is a limitation to focus only on senior managers when providing feedback in research surveys because in sociological literature, there is varying opinions between senior managers and workers within the same company when it comes to evaluating management practice. With this said, workers might provide a valuable counterpart point of view to their managers’.

Another lesson drawn from review of articles is that unlike quantitative studies, qualitative research reports need a thick description of phenomena and context. This result from interpreting and describing observed behavior within a particular circumstance. Reports placed in this context must go beyond mere fact to present detail as well as webs of relationships that join dots to establish event sequence for the topic in question. Actions, meanings, feelings, as well as voices of persons are heard in thick description. Further, a thick description gives a balanced view of interpretation and analysis while showing that the research reflects thoroughness, appropriateness, and rigor. I have learned that this approaches supports transferability and trustworthiness of research to other contexts.

Further, another lesson drawn from the review of the articles is that it is paramount to establish a clear sense of urgency, small goals, and a clear research focus to be able to sort through immense data volumes as well as coalesce different data pieces towards building a remarkable interpretation of data with extrapolations on composite and dynamic literature. Additionally, tuning an empirical psychological science focus that is characterized by abstract reasoning and analysis helps to establish a contextual sensitivity that allows one to develop strong associations between the perspective of the author and the context in which research is founded.

Another lesson drawn from the review of articles is that to successfully scrutinize literature, a person must develop a well-structured workflow and a detailed oriented mindset to achieve a methodical review or else one might get overwhelmed and focus on mere data exploration. Further, a person needs to develop inspective reading and read ravenously to point out specifics as well as gaps in literature. However, for a successful review and summary of literature, a person needs to develop a data-driven mindset that will allow the individual to think outside the box to ensure his/her evaluation expertise serve the purpose.

References

Bender, S., Bloom, N., Card, D., Van Reenen, J., & Wolter, S. 2018. Management practices, workforce selection, and productivity. Journal of Labor Economics36(S1), S371-S409.

Bloom, N., Brynjolfsson, E., Foster, L., Jarmin, R., Patnaik, M., Saporta-Eksten, I., & Van Reenen, J. 2019. What drives differences in management practices? American Economic Review109(5), 1648-83.

Bloom, N., Sadun, R. & Van Reenen, J., 2012. Does management really work? Harvard business review, 90(11), pp.76-82.

Fainshmidt, S., Wenger, L., Pezeshkan, A., & Mallon, M. R. 2019. When do dynamic capabilities lead to competitive advantage? The importance of strategic fit. Journal of Management Studies56(4), 758-787.

Felin, T., & Powell, T. C. 2016. Designing organizations for dynamic capabilities. California Management Review58(4), 78-96.

Ghoshal, S. 2005. Bad management theories are destroying good management practices. Academy of Management learning & education4(1), 75-91.

Sadun, R., Bloom, N., & Van Reenen, J. 2017. Why do we undervalue competent management? Harvard Business Review95(5), 120-127.

Shao, H. X. 2019. Developing Organizational Dynamic Capabilities in Project-Based integrated Solution: A Study of Servitization in Chinese Water treatment Industry.

Teece, D., Peteraf, M., & Leih, S. 2016. Dynamic capabilities and organizational agility: Risk, uncertainty, and strategy in the innovation economy. California Management Review58(4), 13-35.

Teece, D.J., 2007. Explicating dynamic capabilities: the nature and microfoundations of (sustainable) enterprise performance. Strategic management journal, 28(13), pp.1319-1350.

Wong, A. 2020. The Key to Keeping Up: Dynamic Capabilities. California Review Management.

Yeow, A., Soh, C., & Hansen, R. 2018. Aligning with new digital strategy: A dynamic capabilities approach. The Journal of Strategic Information Systems27(1), 43-58.

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Porter’s National Diamond Analysis

Porter’s National Diamond Analysis and Strategy – A Must Read For Business Management Students

Title: Porter’s National Diamond Analysis. Porter has undeniably enhanced understanding of competitive advantage with his published studies in The Competitive Advantage of Nations (1990) and On Competition (1998), among others. His analytical framework, called the ‘diamond’ captures the major determinates of competitive advantage of international business (Porter, 1990). Influencing the major determinates are chance and government.

Although Porter has focused his studies on developing or newly developed nations, the principles may be applied to developing nations, as demonstrated by Ainslie et al (2005). The core question was whether the principles would apply to lesser developed countries such as the island nations in the South Africa and particularly South African food retail industry. In this study we will discuss the Porter’s National Diamond analysis (PND), two key management issues and the market entry strategy in the selected county South African business environment to draw a clear conclusion and future recommendations to the top management of the food retail industry.

In this study Porter’s diamond analysis will discuss, which attempts to identify the sources of international competitive advantage, may be applied to lesser developed island nations of the South Africa. Porter (1990, 675) stated that the Porter’s National Diamond framework may be applied to lesser developed countries (LDC) where they tend to have a competitive advantage in industries. In these countries like South Africa, the basic advantage factors are cheap labour, abundant natural resources, and location advantages which increase their ability for export businesses.

Exports are sensitive to world market prices, leaving LDCs exposed to exchange rate and resource cost swings. This problem is intensified when an LDC faces the protectionist policies of the developed nations. Developed nations place trade restrictions on most of what an LDC does well: textiles and agriculture. By lifting tariff and non-tariff barriers on these sectors through the implementation of regional and multilateral trade agreements lesser developed countries may have the opportunity to develop competitive advantages in certain industries (Ezeala-Harrison 2005).

Porter (1990) has rendered a major service to the global community in identifying many of the explanatory variables of competitive advantage, which has shaped a new assumption to understand why a country’s success, but in some other industries. His analytical framework, known as the “diamond”, shoots the main determinant factors of competitive advantage. This framework includes demand conditions, factor conditions, support and related industries, corporate strategy, structure, and competition. Through a review of literature, the competitive advantage on production was evaluated by investigating the existence of clusters using Porter’s National Diamond theory.

Developing Porter’s National Diamond Framework

Porter (1990) found the answer to why a nation achieves achievement in a specific industry in the course of four broad characteristics a nation possesses. These attributes shape the home business setting by which domestic firms participate to support or obstruct the establishment of competitive advantage. The four broad attributes, or what Porter defined as the determinants of nation advantage, include: demand conditions, factor conditions, support and related industries, company strategy, firm structure, and industry rivalry.

The four determinants work both as a system and individually to create the environment in which a South Africa’s food retail firms are created and compete to gain and sustain competitive advantage. Besides the four attributes of nation advantage, Porter (1990) incorporated the functions performed by the state and probability as issues affecting the proper functioning of the nation attributes.

The complete framework developed by Porter was presented in Figure 1. Porter termed the framework the diamond due to the obvious shape of the four determinants that it is a vibrant arrangement in which all fundamentals interrelate and strengthen every other factor. These systemic surroundings make it difficult to imitate the precise arrangement of the business in a different country. In view of the fact that the diamond is a jointly strengthening scheme, the effect of single determinant is dependent on the condition of the other determinants.

Aiginger (2006) explained that having one favourable determinant in an industry it will not lead to a competitive advantage unless other determinants can be created to respond. Advantages in one determinant may create or have a positive effect on other determinants. Nations are most likely to succeed in an industry where the determinants or the diamond is the most positive. To gain a complete understanding of the functionality of the diamond, each determinant was examined, as well as the factors influencing the determinants and the functioning of the diamond as a system.

Porter’s Diamond Framework

Porter’s National Diamond
Porter’s National Diamond

Source: Wall et al (2008)

Factor conditions: Economists have termed the resources or inputs necessary to produce a product or service as factors of production, which include land, labour, capital, infrastructure, and natural resources. Porter (1990) divided factors of production into two basic distinctions, “the first involved basic and advance factors, where basic factors include natural resources, weather, position, skilled and semi-skilled labour, and capital of debt (p. 89). Porter (1990) examined that advance factors, including contemporary digital data communication infrastructure, such as a university graduate engineers and computer scientists with high academic qualifications, a complex subject and university research institutions (p. 77).

South African food retail is endowed with basic factors or they require very little investment to create. These factors tend to be insignificant to the African national competitive advantage or they prove to be unsustainable. Advanced and sophisticated features are more important for company’s economic benefits in that they are scarcer due to their creation demanding huge and continued investments in human and physical capital.

While advanced factors are often built upon basic factors, innovation requires advanced factors that are imperative to the design and creation of products and processes. The second distinction among factors of production is developed on specificity, which Porter broke down into generalized and specialized factors. Factors such as the thoroughfare system, the supply of debt capital, motivated employees with college education or pool are also included in generalized factors. These factors can be utilized in many different industries. Specialized factors occupy barely skilled workers, road and rail network with precise assets, and information basis in meticulous areas (Porter, 1990, p. 78).

Demand conditions. Porter (1990) asserted three significant characteristics of requirements, composition, the dimension and prototype of growth, and the internationalization of home demand, where the latter two are dependent upon composition of home demand. The composition of home demand dictates “how firms perceive, interpret, and respond to buyer needs” (Porter, p. 86). Home demand has important influence on economic benefit, more so than international demand as its proximity, both physical and cultural, makes it easier and quicker to monitor and recognize the buyer’s immediate needs and preferences.

The composition and quality of the domestic demand, relates to a certain extent than amount influential on competitive advantage. More complex and demanding buyers, the greater the pressure, product quality, features and services of local businesses, as well as enterprises able to anticipate the needs of the buyer, in order to meet the high standard terms and conditions. The scale and pattern of growth in domestic demand, with the ingredients, can strengthen its competitive advantage – outlined in Porter’s National Diamond.

Porter (1990) believes that several features of this property include: (a) the size of the domestic demand, it is able to take advantage of economies of scale, and (B) of the independent buyer “stimulus entry and speculation in the business reduce the apparent risk market enterprises will be shut down and limit the bargaining power of the dominant buyer, all profits (94), (c) the growth rate of domestic demand, which will lead to greater investment and technological growth, (d) anticipating buyers needs earlier than foreign rivals, and (e) saturation of the home market to create strong pressures to thrust along prices, bring in new description, develop merchandise presentation, and supply other inducements for buyers to reinstate new versions of old products.

This can happen when African domestic consumers are mobile and travel to other nations to demand the products from their home market, or when home consumers are multinational corporations with operations in other nations. Another mechanism of internationalization is “when domestic needs and desires get transmitted to or inculcated in foreign buyers” (Porter, p. 98). This can occur when foreign travellers use the domestic products or services and take the demand home.

Related and supporting industries

The presence of supplier industries and other related industries in a nation is an important determinant of creation and sustainability of competitive advantage. Porter (1998) stated that internationally competitive domestic suppliers create advantages in other industries in several ways. The competitive related and supporting industries can share common technologies, inputs, distribution channels, skills, customers, and even complementary products, to foster technological spillovers and exchange of information that can spur innovation and upgrading, and ultimately lead to competitive advantage.

According to Ketels (2006), the distribution of business knowledge would to spread between the business companies, human resources because they can be shared educational and research organisations. When internationally successful related industries are present in a nation, they can create demand for a complementary product. Porter referred to this as a “pull through effect” (1990, p. 106).

These complementary products provided by firms in the same nation may be more cost effective since the firms are used to dealing with their own rather than foreign firms. Lastly, firms from related industries may feel threatened by new firms wishing to enter the industry putting pressure on existing firms to improve their own competitive advantage.

Firm strategy, structure, and rivalry

Porter’s fourth determinant of competitive advantage included the strategies and structures in which organisations are created, planned and managed, in addition the environment of home rivalry (1990). Porter insisted that the objectives, planning, and methods of organising industries differ extensively between nations, but distinct patterns emerge within nations. The argument was made that a good fit should exist between an industry’s sources of competitive advantage and its structure, and the strategies, structures, and practices favoured by the national environment.

Government and chance

As shown in Figure 1, the government and chance are added to the diamond to complete the system. They are not determinants of national competitive advantage, but do play a vital role in influencing the four determinants. The government can influence and be influenced by each of the determinants, both positively and negatively, which is represented by the arrows pointing both ways (Porter, 1990). Each of the determinants is affected in different manners. The Government’s education policies and subsidies also affect factors conditions. Set of standards and regulations will affect demand conditions and related supporting industries.

A firm’s strategy, structure, and rivalry can be affected by the government’s involvement in capital market regulations, tax policies, and antitrust laws. Porter (1990) viewed the appropriate role of government as one of reinforcing the determinants of national advantage instead of attempting to create the advantage itself. The role of government is viewed differently as nation’s progress through successive stages of competitive development. During the early stages of development, especially relevant for developing nations, the government has the greatest direct influence on national advantage. Factor creation is a vital role for the government at this stage to encourage savings, accumulation of capital, and develop infrastructure and technology.

As a nation develops, the government must shift to an indirect role, always aware of its influence on the diamond. The tools used in the early stages of development now become counterproductive, so the government’s role is to create an environment where firms are the innovators, and the government is the “facilitator, signaller, and prodder” (Porter, p. 672).

Chance, also lying outside of Porter’s National Diamond, plays an important role in influencing competitive advantage. Some illustrations of chance events include development and innovation, oil shocks, major changes in world financial markets, and wars. Chance events may alter the diamond by creating forces that reshape an industry’s structure and allow for discontinuities that shift an industries competitive advantage.

Contemporary Management Issues

When we start talking about management issues within the South African food retail industry, there are some very basic internal as well as issues which are increasing the impacts of management at internal level. There are a large number of contemporary issues in South African food retail industry; however, here we will discuss the flowing two among them.

Crisis Management as an Internal Issue

Crisis process is a threat for the current situation and future of a business, it is very clear that administrative and organisational structure will require a significant change. During the crises, organisational stress reaches the top level. On the one hand try to find suitable solutions to resolve the crisis, on the other hand, the tension created by uncertainty and running time pressures negatively influence the management structure of enterprises.

Business managers have to try minimizing damages with precaution actions. To do this the first way is to make a series of organisational and administrative structure changes. Crisis requires rapid reactions, for this reason business structure is developed to provide quick decision. Standard decision-making methods are insufficient to resolve the crisis; these force managers for new decision-making methods. The important thing is to adapt personally to new environment (Basuroye t al 2003)

For this adoption instead of keeping current values South African food retail industry has to accept new values. Accurate collection of information, communication, which cannot be easily settled up well, and psycho-social status of employees are changing the organisations atmosphere. The atmosphere which is changed will effect significantly communication, motivation, organisational justice and moral, such as organisational trust and organisational citizenship (Stone & Ranchhod 2006).

Another issue which may increase the negative effects of crisis is an absence of proper plan for dealing with crisis, which has to include customers, competitors, vendors, partners, and credit agencies, various internal and external environmental factors. South African food retail industry must have crisis plan, in case they can face the reduction of mobility and flexibility.

Change in income of Company

There are also some external issues besides the internal issues. Biggest external issue is change in income of company and rapid price changes. The increase in costs will automatically come with preventions such as: reduce the number of employees, reduce the social benefits for employees and loading more work to the existing workers. New law and regulations can also increase effects of it. The new taxes, increasing social security contributions, to collapse of the credit facilities, the new customs legislation can also affect business dramatically (Boatwright et al 2007).

When Business managers or owners fail to follow international business changes and when they cannot keep pace with global developments or the country’s economic situation, it can increase negative impacts. If managers of South African food retail industry would not establish an early warning system by making the internal and external business environment analysis, they can face it as an another issue in their industry (Siggel 2006).

Market Entry Strategy using Porter’s National Diamond Strategy

A sound international market entry strategy is becoming gradually more important to the success of new products. The time interval between the launch of the two important issues of related to international market entry strategy are undeveloped international launch window of time (the focus of the country’s national launch of the product) and the sequence.

An important decision relating to international market entry strategy is the decision on the timing of entry into international markets. Two international entry timing strategies are commonly practiced (Chandrasekaran, Deepa, and Gerard, 2008). A waterfall or sequential release strategy is one in which the new product enters multiple countries sequentially. A sprinkler or simultaneous strategy, in contrast, involves almost simultaneous entry into multiple countries- Porter’s National Diamond.

Duan, Bin and Andrew (2008) use a competitive game theory framework to examine simultaneous and sequential strategies and show that sequential entry strategy is appropriate if (1) the product has a very long life cycle, (2) the foreign market is small, not innovative, and characterized by a slow growth rate, and (3) competitors in the foreign market are week.

However, empirical evidence for the success of each of these strategies is mixed. For example, Chandrasekaran, Deepa, and Gerard (2008) find that the takeoff of a new product category in one country increases the probability of takeoffs in other countries, suggesting a sequential release strategy is preferable to a simultaneous release strategy. Duan, Bin and Andrew, (2008) examine international market entry strategies in terms of market scope and the speed of rollout. They find that late mover brands that sequentially enter many large international markets show greater marketing spending efficacy through marketing spillover effect.

Foreign market entry is one of the most important strategic decisions for firms. Managers should consider cross-country spillover effect when they decide country sequence. Firms can increase overall performance in foreign countries, so enhance return on investment by taking advantage of these spillover effects. A firm should launch its products first into countries that are culturally closer to its home country and countries that are more open. Managers also need to consider factors such as potential adopters’ familiarity with the new product and cultural fit of the product with the country when deciding the order of country in the international launch sequence. They need to carefully consider the determinants of country sequence because they affect product performance in foreign countries (World Economic Forum, 2008).

Conclusion of Porter’s National Diamond

To conclude we can say that international business strategy is critical to the success of some products in several industries. Departing from Porter’s approach allowed focusing on the possible affects the regional trade agreement had on clustering. Porter’s (1990) viewing of international competitiveness of industries through the diamond framework seems to hold for the lesser developed nations like South African nations.

References

Aiginger, K. 2006. ‘Competitiveness: from a dangerous obsession to a welfare creating ability with positive externalities’, Journal of Industrial Trade and Competition, 6: 63–66.

Ainslie, A., Xavier D., and Fred Z., (2005), Modeling Movie Lifecycles and Market Share, Marketing Science, 24 (3), 508–517.

Basuroy, S., Chatterjee S., and S. Abraham R., (2003), How Critical Are Critical Reviews? The Box-Office Effects of Film Critics, Star Power, and Budgets, Journal of Marketing, 67 (4), 103–117.

Boatwright, P., Suman B., and Wagner K., (2007), Reviewing the Reviewers: The Impact of Individual Film Critics on Box-Office Performance, Quantitative Marketing and Economics 5 (4), 401–425.

Chandrasekaran, D., and Gerard J. T., (2008), Global Takeoff of New Products: Culture, Wealth or Vanishing Differences? Marketing Science, 27 (5), 844-860.

Duan, W., Bin Gu, and Andrew B. W., (2008), ―The Dynamics of Online Word-of-Mouth and Product Sales: An Empirical Investigation of the Movie Industry, “Journal of Retailing, 84 (2), 233-242.

Ezeala-Harrison, F. 2005. On the competing notions of international competitiveness’, Advances in Competitiveness Research, 13(1): 80.

Ketels, C.H.M. 2006. Michael Porter’s competitiveness framework: Porter’s National Diamond recent learnings and new research priorities, Journal of Industrial Trade and Competition, 6: 63–66.

Porter, M. E. (1992, June). The competitive advantage of European nations: The impact of national culture – A missing element in Porter’s analysis? A note on culture and competitive advantage: Response to van den Bosch and van Prooijen. European Management Journal, 10, 178.

Porter, M. E. (1998). Clusters and the new economics of competition. Harvard Business Review, 76, 77-90.

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Porter, M. E. (1990). The competitive advantage of nations. (Porter’s National Diamond) New York: The Free Press.

Porter, M. E. (1994). Comment on “Interaction between regional and industrial policies: Evidence from four countries,” by Markusen. The World Bank Research Observer, Cary, 303-308. Retrieved June 8, 2004, from ProQuest database.

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Siggel, E. (2006), International competitiveness and comparative advantage: a survey and a proposal for measurement, Journal of Industrial Trade and Competition, 6: 63–66

Stone, H.B.J. & Ranchhod, A. 2006. Competitive advantage of a nation in the global arena: a quantitative advancement to Porter’s diamond applied to the UK, USA and BRIC nations, Strategic Change, 15: 283–294.

R.S. Wall, M.J. Burger and G.A. van der Knaap, (2008), National Competitiveness as a Determinant of the Geography of Global Corporate Networks, GaWC Research Bulletin 285.

World Economic Forum, 2008. Global Competitiveness Report (2006–2007). Geneva: Switzerland.

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Globalisation Patterns of Consumption

Globalisation and Diversified International Patterns of Consumption

Title: With the evolution of human communication and transportation modes over decades and centuries, this world is squeezing smaller and smaller day by day in terms of interaction among people of different regions, ethnicity, races, and obviously different mind-sets. This changing characteristic of the world is perceived as the globalisation and the world is seemed to be a global village. The globalisation of this world has changed certain patterns of its villagers in terms of their thoughts, lifestyle, communication, buying and selling trends, and also their patterns of consuming the goods and commodities. The contemporary and recent researches on the cultural issues targeted the process of cultural change among migrants and minority people within the mainstream strata of a given culture; however, limited research is conducted on the behavioural transformation as a product of globalisation (Sobol, Cleveland, and Laroche, 2014).

This research essay is purposefully written to explore the underlying scenario related to this topic by including and referring to different literature and viewpoints of the scholars and experts. The theme of this essay will be to discuss and assess the aftermaths of globalisation on transforming the behavioural patterns of the people towards consumption of goods.

Globalisation Definition

The term ‘globalisation’ not only encompasses the economic and trading practices, but also the human agents or the practitioners whose behavioural attributes can impact the globalisation phenomenon itself. In this way, the globalisation curtails the influence of cultural or societal differences related to paradigm development and also widens its scope while including the economic and financial activities regarding consumption of services and products. Another understanding of the world globalisation can be established by considering it as the international transfer or exchange of public, money, commodities, knowledge and the cultural norms, which resulted in the boosting the awareness level of people in the two last decades of the last century (Jadoon, Butt, and Hayat, 2016).

In the context of social sciences including culture, sociology, political science, and also economics, the term globalisation is treated as comprising the international classification, electronic media, and the international treaty World Trade Organisation (Cornwell and Drennan, 2004).

It is explored through researches that the globalisation directly influences the patterns of consumptions and the society. The consuming trend and style a society adapts mostly rely on the development of thoughts and their needs. The significance of technological revolution in guiding the consuming patterns is pertinent for consideration. Moreover, the online shopping system has impacted the traditional trends and patterns enormously (Jadoon, Butt, and Hayat, 2016).

As per Ruediger John (2005), globalization process does not ensure the one’s freedom and security. It also lacks the definition of nations-wise social values along with the enforcement of global law pertaining to address human psychology and behaviours. Moreover, instead of politically addressing the cultural developments, the emphasis of globalisation is more on the spread and sharing of technology and economical boom (John, 2005).

Divid Howes (1996) in his book used the term homogenization which refers to the unity in the global village. The terminology depicts the paradigm of cultural and social influences in the international markets are due to the intrusion of commodities and products in the form of imports based on the knowledge gained through globalisation. This paradigm also emphasises the need to understand and accept the rise in the cultural and social differences occurred due to the export of domestic goods and the import of goods mostly produced in the western world. One contemporary contextualisation of the consumption patterns of people in the global village is the motivation of consumers or the people to choose the goods as per their own liking and disliking instead of being a blind victim of globalisation. This is because the people of the underdeveloped countries are often influenced to purchase those products which are not only new and alienated but most of the time also serves as damaging the local culture rather replacing it with the imported culture (Howes, 1996).

There is a need to go deeply to understand that the consumers’ attitude is influenced by both internal and external factors in the form of domestic culture and the consequences of globalisation respectively. Several types of research have been continuously conducted to examine the consumers with the help of examining their lifestyle. A consumer’s lifestyle is the agent of the tendency of adapting the change in behaviour for consuming items and products of a single or multiple manufacturers. It is again the globalisation which enforced manufacturers all around the world to be indulged in an extensive competition in order to win the consumer’s satisfaction. This ultimately helped the consumers in terms of having competitive quality in products (Dunn, 2015).

Globalisation MBA Project
Globalisation MBA Project

An argument in the work of Elena Kell (2012) supports that the globalisation forms and leads to a consumption based society in which consumption has become indispensible and along with its ethical practices. Consumers are generally unaware of the supply chain and operations management involved in the availability of products imported from foreign countries. Hence the ethical aspect of consumption addresses the consumer’s responsibility to be updated of the steps involved in the processes (Kell, 2012).

McCoid (2010) differentiate the consumption in its three shapes. According to that categorisation, the consumption of goods will not remain sustainable if the resources are used more than what exactly required, and this is called overconsumption. This mechanism often leads to the lower quality of life and damages the environment. On the contrary, the under-consumption is the utilisation of resources much less than the required, hence causing poor quality to health the lifestyle. It is observed that the main cause of under-consumption in the age of globalisation is the inequality in the social distribution of resources. Both forms of consumption do not contribute to sustainability. The sustainable consuming patterns, however, do not cause the environmental damage and the human health. In order to develop the consumption pattern in a sustainable way, there is a need to accept the relationship of over and under consumption with the globalisation, because in a global village, the under-consumption of most groups causes the over consumption of few groups (McCoid, 2010).

On a critical side, the contemporary consumption patterns have negatively impacted the development of human wellbeing on the individual as well as on societal levels. This change happens in a way that it spread the social inequalities among groups and even countries through globalisation. The inequalities are spread due to the differences in the quality of products and services for all different social classes within a certain society or the region. The global consumption pattern is also promoting and supporting the flow of resources to a limited class of people and groups who have much more wealth to spend on even luxurious items instead of just the basic needs, hence the poor class of people in the world continues to suffer the lacking of even basic needs due to the lack of resources. Similarly, the globalisation has intruded the consumption of food based items which are most of the times either not synchronised with the eating habits of the people of a particular country or are much expensive than their local alternatives. The adaption of foreign goods and items also often creates environmental problems in the form of waste disposal and discharge (Khor, 1998).

The increase in the free trade between countries has also enhanced the availability and quantity of goods and services for the end users. This scenario was for sure cannot be imagined the effectiveness of various global trade pacts, agreements, and the role of unions worldwide. With the increase in the quality as well as a variety of products through globalisation, the consumption pattern among people has drastically changed. People pay due importance in conducting a preliminary survey, physical or online, regarding the particular product they are going to buy. Moreover, unlike before, the brand has been given comparatively less importance by the consumers (Scriven, 2014).

The technological advancement, globalisation and the integration of countries around the world have significantly changed the consumption pattern of people all over. The internet facility got the users of around fifty million in only five years; hence it is pertinent to accept that through internet lives of thousands and millions of people in all countries evolved positively. The comparative survey has become much easier through the internet for everyone regarding any product before its purchase. Everyone in the global village can be informed of the patterns of the lifestyle of any other person or group in other parts of the world (Kónya and Ohashi, 2004).

Globalisation Conclusion

This research essay has explored different theoretical perspectives of various authors to explore the aftermaths of globalisation on transforming the behavioural patterns of the people towards consumption of goods. It can now be concluded after a comparative analysis of various viewpoints on the topic, that the globalisation has certainly opened the door of opportunities for not only sharing of knowledge, technology, and goods, but also played and has been playing a significant role in designing and changing the behavioural patterns of consumption among consumers and end users all around the world in this global village. Some paradigms consider it as positive while the other as the negative role of globalisation because, in some perspectives, it has also led towards social and financial inequalities among societies and classes of people.

References

Cornwell, T.B. and Drennan, J., 2004. Cross-cultural consumer/consumption research: dealing with issues emerging from globalization and fragmentation. Journal of Macro marketing24(2), pp.108-121.

Dunn, K., 2015. Globalization and consumer: What marketer needs to know. The Neumann Business Review, pp.16-30.

Howes, D., 1996. Cross-cultural consumption: global markets, local realities. Taylor & Francis US.

Jadoon, A.K., Butt, A.R. and Hayat, M.A., 2016. Development of Measurement Models for Globalization, Consumption Patterns and Culture: A Case Study of Three Big Cities of Punjab, Pakistan. Pakistan Economic and Social Review54(2), p.327.

John, R., 2005. Globalized Culture, Consumption and Identity. Translated by Gunilla Zedigh. Baden,

Kell, E., 2012. Ethical consumer in a globalized world: challenges for the individual’s identity. A study on ethical consumers in Lund and Malmö.

Khor, M., 1998. Globalisation, Income Distribution, Consumption Patterns and Effects on Human and Sustainable Development (no. Hdocpa-1998-06). Human Development Report Office (HDRO), United Nations Development Programme (UNDP).

Kónya, I. and Ohashi, H., 2004. Globalization and consumption patterns among the OECD countries.

McCoid, C.H., 2010. Globalization and the Consumer Society. Global Security and International Political Economy–Volume II, p.49.

Scriven, J., 2014. The Impact of Globalization on the Consumer. The Nouman Business Review, pp.13-23.

Sobol, K., Cleveland, M. and Laroche, M., 2014. Globalization, Culture and Consumption Behavior: An Empirical Study of Dutch Consumers.

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Cross-Border Mergers Business Strategy

Cross-Border Mergers – A Success or Not?

Title: Cross-Border Mergers – Mergers are business transactions that happen between two companies where one takes over entirely or part of the other business. Cross-border mergers are mergers that take part between companies from different countries or nationalities. Cross-border mergers can be classified as either inward or outward; the former occurs where a foreign company acquires a domestic company and the latter occurring when an international company is wholly or partly purchased. These cross-border mergers have been on the rise since the 1990s and are increasingly taking place in different industries. Typical industries that these cross-border mergers take place include the pharmaceutical, automotive as well as telecommunications sector.

Cross-border mergers are a strategy for companies to expand into markets that they think are profitable and are a vital key to the success of their products and services. But due to the international aspect of these mergers, various challenges face the companies involved for example the difference in economic, cultural and institutional aspects and these can be a major impediment to the success of these mergers.

An example of a failed cross-border merger is the merger between Daimler-Benz from Germany and Chrysler from the United States of America. This merger took place in 1998, and the result was the formation of Daimler-Chrysler Company. This merger was viewed as the union of two great automotive companies but sadly it was not a success (Rosenbloom, 2010). Looking into the reasons for the failure of this cross-border merger, several issues can be found to be the reason behind its failure. One of the key reasons behind the failure of the merger was the cultural difference between the two countries.

The German cultures were seen to be the most dominant in the company, and this led to the satisfaction of employees at Chrysler who were predominantly American to drop off. This cultural mismatch is seen to be the main reason behind the failure of this merger and nine years late Chrysler was sold off to Cerberus Capital Management after a string of losses and employee layoffs.

Another reason behind the failure of the cross-border merger between Daimler and Chrysler was the differences between the two companies’ operating styles. The organizational structure implemented at Daimler was a tiered organization that had a clear chain of command and respect for authority.  This structure was a direct contrast to the approach at Chrysler that implemented a team-oriented and open plan (Pervaiz, M., and F. Zafar, 2014).

The result was a lack of harmony as well as opposing work styles between the German and American managers at the company. It can be seen that since Daimler was the one that took over Chrysler, it tried running the American company’s operations just like it was doing in Germany (Appelbaum, Roberts, and Shapiro, 2013). If this issue was to be avoided, a focus on the different organizational culture should have been carried out so as to define the various management styles, the similarities as well as the differences and tried to come up with a common ground that could be implemented in the merger.

To summarize the key factors behind the failure of the merger between Daimler-Benz and Chrysler, it can be deduced that the following three issues were behind it all:

  • Corporate cultural differences and values
  • Lack of trust between employees
  • Different organizational structures leading to a lack of coordination between the employees.

According to Qiu (2010) the failure of the Daimler-Chrysler merger had far-reaching financial implications and was a disappointment to what would have been one of the most successful mergers of all time. If this merger had worked out, the company would have had a significant stronghold on the automotive market making it one of the largest automakers in the world and giving it super profits and access to a vast customer base. The competitive advantage that stood to be gained by this merger would be second to none, but this was never to be.

This benefit would have been achieved by the design and production of joint projects by the two companies instead of still competing in the market as separate entities, yet they were from one stable. The merger would have been handled better by focusing on the general issues facing the companies and not the cross-border problems that led to the discontent displayed by the two. Integration workshops would have also been held in a bid to ease the cultural integration between the two companies as well as orient the employees to the new corporation corporate strategy

The result of this failed merger was a lesson to other businesses that would be having the plan to take part in cross-border mergers.

Bibliography

Appelbaum, Steven H., Jessie Roberts, and Barabara T. Shapiro. “Cultural strategies in M&As: Investigating ten case studies.” Journal of Executive Education 8, no. 1 (2013): 3.

Rosenbloom, Arthur H., ed. Due diligence for global deal making: the definitive guide to cross-border mergers and acquisitions, joint ventures, financings, and strategic alliances. Vol. 8. John Wiley & Sons, 2010.

Qiu, Larry D. “Cross-border mergers and strategic alliances.” European Economic Review 54, no. 6 (2010): 818-831.

Pervaiz, M., and F. Zafar. “Strategic Management Approach to Deal with Mergers in the era of Globalization.” International Journal of Information, Business and Management 6, no. 3 (2014): 170.

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Insider Trading University Essay

Insider Trading Ethical or Not?

Insider trading is malpractice that involves buying and selling stocks using information that is not available to the public. The practice gives some traders an unfair advantage over others, and it is a punishable crime. Insider trading is commonly found among the corporate officers or people who receive the non-public information. Traders are always tempted to carry out this malpractice to make more profits than others or avoid losses. This act is illegal, and the Securities and Exchange Commission usually investigates and prosecutes it. However, insider trading can be legal if the trading is done based on information that is available for public use. This papers aim is to discuss why insider trading is considered unethical and finding out if allowing insider trading would hinder the operation of the stock market in raising capital for new and existing companies.

Is Insider Trading Ethical?

Insider trading is unethical because it involves exploiting the knowledge that is only known to a few people. The insiders are usually given an unfair advantage that allows them to benefit from information of the stock market before the general public. These people get to exploit the opportunity before the rest making accumulative profits and avoid risks. Generally, insiders ought to maintain a fiduciary relationship with their companies and shareholders so when they try to benefit from the inside information puts their interest above the people they serve. The practice is unethical since the insiders are supposed to protect the interests of the entities they serve rather than using it to their advantage.

There are other times the people on the inside divulge the information to the people on the outside (Alldredge, 2015). The process involves a tipper and a whistle-blower, with the tipper being the person who divulges the information to the outsider and the tepee the receiver of the data. The whistle-blower then utilizes the information obtained to seek profits or avoid financial losses in the stock market. As much as the tippler may not benefit directly, it is still unethical since it makes some people gain unfair advantages over others.

In most cases, insiders are after personal gains at the expense of the investors and the company at large which is unethical. On moral grounds such as actions are unjust and are termed as a fraud. The investors feel unsafe and insecure to invest since they lose trust that they hold to the insiders.

Any interests in a stock market must look after the interests of all shareholders and not just favoring a few (Skaife, 2013). Generally, insider trading betrays investors’ trust; insiders act on data that is not available to shareholders for monetary gains, officers of a company are acting to satisfy their interests. The insider trading is an unethical practice and should be checked on and brought to a stop.

However, there some people who argue that insider trading is not a bad practice. Such people insinuate that insider trading allows for all the relevant data to be reflected in the shares’ price. The process makes the security it easy for investors to understand the costs before purchasing the shares (Alldredge, 2015).

In such situations, potential investors and current shareholders are able to make informed decisions on purchase and sale respectively.  Another argument is that barring the practice delays something that will eventually take place. Blocking investors from accessing the information on the price changes can subject them to buying or selling shares at losses which could have been avoided if the information had been available.

Insider Trading University Essay
Insider Trading University Essay

Insider trading hinders the operation of the stock market in raising capital for the new and existing forms. Instances when a few people benefit from the stock’s information, investors lose trust in the company hindering them from participating in the activities of the stock market. The process leaves the stock markets with nowhere to gets funds consequently affecting the market’s ability to carry out its operations. Without the services then it becomes difficult for the stock markets to finance new or existing companies (Skaife, 2013).

Additionally, when insiders reveal security’s information to some people before the sales take place, the stock markets become integrated affecting the stocks prices. The stock market fails to exploit the pricing advantage since buyers already know what to expect. The process may cause the market to suffer losses making it difficult for the market to raise cash for other firms. Generally, insider trading is allowed to continue, and it can lead to many investors being driven away and avoiding the practice.

Insider trading affects general business management and decision making. Managers may make wrong on a particular situation using the inside information which is not reliable all the time. On top of that, insider information influences investor decisions impacting the stock’s market price or valuation. For example, when the investors are aware that the price of shares is going to drop they sell their shares in advance to avoid losses consequently impacting a firm’s stock valuation.

Conclusively, insider practice is an unethical practice since it favors some people over others. The people on the side get to exploit nonpublic information for their benefits at the expense of the investors. The investors lose trust in the whole process of stock exchange and with time they get driven away. The method may leave the stock exchange market with funds that are needed to finance upcoming and existing companies. Insider trading is unfair and unethical since it involves lying to the investors and should be stopped to avoid negatively affecting the economy.

References

Alldredge, D. M., & Cicero, D. C. (2015). Attentive insider trading. Journal of Financial Economics, 115(1), 84-101.

Skaife, H. A., Veenman, D., & Wangerin, D. (2013). Internal control over financial reporting and managerial rent extraction: Evidence from the profitability of insider trading. Journal of Accounting and Economics, 55(1), 91-110.

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