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Question
1.Explain in what sense the top management takes strategic decisions in an organization? Illustrate with suitable examples.

2. Identify two organizations of your choice from the automobile sector. One that is a single business unit (SBU) and the other which has several related businesses. Read the published information about these organizations and analyze the corporate profile of each company.

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2. Identify two organizations of your choice from the automobile sector. One that is a single business unit (SBU) and the other which has several related businesses. Read the published information about these organizations and analyze the corporate profile of each company.

One that is a single business unit (SBU)

BMW
Founded in 1917, the BMW Group is now one of the ten
largest car manufacturers in the world and, with its BMW,
MINI and Rolls-Royce brands, possesses three of the
strongest premium brands in the car industry. The group
also has a strong market position in the motorcycle sector
and operates a successful financial services business. The
company aims to generate profitable growth and aboveaverage
returns by focusing on the premium segments of
the international automobile markets. With this in mind, a
wide-ranging product and market offensive was initiated
in 2001, which has resulted in the BMW Group expanding
its product range considerably and strengthening its
worldwide market position. The company’s brand is
extremely strong and is associated with high performance,
engineering excellence and innovation. Indeed, the BMW
brand is often cited as one of the ‘best’ in the world, and
the company continues to launch a stream of innovative
products as part of its battle with German peer Mercedes
to be the world’s largest luxury car maker.
Driving change in a highly
competitive marketplace
through continually
enhancing the aspirational
driving experience
BMW Key Data 2007
Total Revenue ¤56.0bn
Revenue Growth 14.3%
Profit Before Tax ¤3.9bn
Worlwide Unit Sales 1.5m
Unit Sales Growth 9.2%
Profit / Unit ¤2,580
Total Employees 107,539
Revenue / Employee ¤521k
Innovation Scorecard
Innovation Culture 8
Strategic Innovation Focus 9
New Products 8
Managed Growth 9
Product Margin 8
Investment in Innovation 9
Innovation Brand Impact 9
Innovation Peer Review 9
BMW’s focus on engineering excellence allied to leading-edge design
continues to drive successful, profitable expansion. In 2007 BMW sales
increased by 8%, Mini by 18% and Rolls-Royce by 26% with, for the
first time ever, over 1000 of the super luxury cars being produced in
one year. To further this growth, a host of new models is being
launched, including the Mini Clubman and the new sport utility vehicle,
the BMW X6 - the world’s first SUV coupe. While the Clubman
reinvents views on vehicle access, the X6 is an excellent example of
BMW innovation at work. It combines the safety and convenience of a
four-wheel-drive with the on-road performance of a sports car and is
designed to appeal to the driver who enjoys a commanding driving
position, but also savours the characteristics of a sports car. With its
stretched coupé silhouette and pronounced performance design,
underpinned by hybrid engine options, as previously achieved with the
X5 and the X3 in allied markets, the X6 is the latest instance of BMW
changing perceptions of what a car should provide – for its passengers
and its driver alike. At its heart, it restates an aspiration for driving that is
both exclusive and yet also available to the mass market.
BMW has also been at the forefront of introducing new IT options to
enhance the driving experience. Starting with the iDrive first introduced
in the 7-series, BMW ConnectedDrive is now available across most
models and is adding greater functionaility. After being one of the first to
offer the capability for MP3 connectivity and incorporate RSS feeds
including weather information, in 2007 BMW teamed up with Google
to offer a PC driven route planning service. Of course this level of
innovation does not come cheaply and a key challenge going forward
will be to keep research and development costs under control. During
the last five years, BMW’s average annual R&D investment has been
around €2,300 per car, compared with €1,700 spent by arch-rival
Mercedes. Alongside the examples above, much of the money has gone
into the car maker's Efficient Dynamics programme aimed at making
engines more efficient, improving aerodynamics, reducing weight and
capturing energy during braking. As the numbers clearly show, BMW is
a mass market player but one that successfully uses focused innovation
to build and maintain the aspirational driving experience for many.
Through a constant stream of consumer informed innovations, the
company has moved ahead of its peers and future sustained and
profitable growth is widely predicted.
Following a century of non-stop growth there is large scale overcapacity
in much of the motor industry. Widespread incentives and
longer-term warranty programmes have been applying pressure,
and financial strains are increasing due to closer partnerships
between vehicle manufacturers and suppliers, higher commodity
prices and sub-sector consolidation. With little recent significant
M&A activity, growth in vehicle production has largely been organic
. As the US big three struggle to be profitable, other established
players such as Honda and Toyota have focused on steady growth
by developing, producing and distributing new models with
increasing efficiency. Unlike their counterparts, they have avoided
price reductions, choosing instead to introduce an evolving range of
high-quality vehicles and new design-led sub-brands such as Lexus
and Infiniti. This may seem like incremental rather than radical
change, but underneath continuous technological and consumer-led
innovation is taking place.
The main development of note at the moment is in emerging
markets where both China and India are fast moving from follower
to leader status. Having been traditional markets for established
manufacturers to offload old designs, the tables are turning as
Chinese and Indian brands emerge into the world market with an
ambition to pioneer new innovation. For example, it is forecast that
China will produce 130 million vehicles in the next 20 years – by
contrast Ford has only produced 90 million in the past century. Such
volumes hitting already crowded streets demand advanced
innovation to simultaneously satisy the growing middle class whilst
avoiding gridlock. Although intelligent vehicles and hydrogen fuel
cells have been pushed by US and European manufacturers over the
past few years, many commentators now see that it will be in China
and India that such developments occur first on a mass scale and, in
so doing, allow domestic manufacturers to leapfrog the established
multinationals.
SECTOR OVERVIEW
The most visible driver for innovation of 2007 was the need for greater
efficiency and the move to a greener form of automobile. All the main
auto shows were dominated by the large automakers showing their
plans for cars with alternative energy sources or for improved traditional
systems. Many analysts see that the car makers are pushing to develop
environmentally friendly cars because they fear that their link with gasguzzling
vehicles is not helping their image. Whilst this is true, the main
reason for this innovation is the statutory requirements within which
automakers must work with regards to CO2 emissions. With the EU
imposing a 130g/km average limit for new passenger cars by 2012 and
California looking to move to a 30% reduction in emissions by 2016,
regulation is now just as much a driver of change as is consumer demand.
In terms of design the impact of these measures will not only be felt in
the engine design area, but also inside the cabin where the physical
space of the car is being reconfigured to account for different shapes of
batteries and fuel cells. Alongside developments in hybrid engines led by
Honda and Toyota, most of the major automakers are experimenting
with new hydrogen fuel-cell-based platforms. At the same time, firms
such as Renault and Ford-owned Volvo have been introducing a stream
of design innovations to improve passenger and now pedestrian safety.
In addition, the full exploitation of multiple-variant opportunities for each
platform, which meet niche consumer requirements with a host of
space, performance and comfort improvements, has also been a major
recent area of innovation activity to support competitive positioning.
Finally there are also shifting trends in fuel-type usage in the key
geographies that will drive innovation in the whole supply chain: the US
moving towards more hybrid use, Europe going more for bio diesel and
South America embracing the bio ethanol option. Although many are
now questioning the sustainability of the accelerating move to first
generation bio fuels, the long-term trend to a broader mix of fuels is
clear. As second generation bio fuels, which do not clash in the food vs.
fuel debate come on line, they will be joined by more advanced electric
power options that take advantage of new battery technologies.










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the other which has several related businesses.
In a 1996 address to stockholders and friends of Daimler-Benz, CEO Jurgen Schrempp reviewed the position of the diversified company. He started by saying "1995 was a dramatic year in the history of Daimler-Benz." It was also a year that the board of management made a major break with the past.

Daimler-Benz, with more than 300,000 employees worldwide, consisted of four major groups: The first, by far the biggest and most successful group, was Mercedes-Benz with about 200,000 employees. It is best known for its passenger cars and commercial vehicles. The second was the AEG Daimler-Benz industries in the business of rail systems, microelectronics, heavy diesel engines, energy systems technology, and automation. The third was the Aerospace Group in the business of aircraft (the company has a more than one-third interest in the Airbus consortium), space systems, defense and civil systems, and propulsion systems. Finally, there was the Inter Services Group consisting of systemshaus, financial services, insurance brokerage, trading, marketing services, mobile communications services, and real
estate management.

Daimler-Benz went through various development phases. From 1985 to 1990, it diversified into aerospace and electrical engineering. The aim was to become an integrated high-tech group. This diversification was further consolidated in the next phase that extended from 1990 to 1995. Under the leadership of Schrempp, the core business was redefined and the strategy refocused.

A 1995-96 portfolio review showed the need for refocusing on what the company could do best. Top management reevaluated its strategies and its core businesses based on economic criteria and the strategic fit of the various activities. It became clear that the company's strengths were in car manufacturing, the truck business, and the railroad sector. Mercedes Benz, for example, had a strong competitive position with its cars and trucks in Europe, North America, and Latin America. Vans were also relatively strong in Europe, and buses had a good competitive position in Latin America. Based on this analysis, the strategies for potential growth were through globalization and the development of new product segments.

In 1996, top management reassessed the company's position and its 1995 unsatisfactory results from its operations. It was discovered that the company was exposed to currency fluctuations that affected profitability. The company's image was also blurred because of the ventures into many different kinds of industries. The management board decided to cut its losses and chart a new direction for the company, with greater emphasis on profitability. The organization structure was tightened and certain businesses were divested. In fact, policy decision from an earlier period were reversed.  The unprofitable AEG Group and the Dutch aircraft manufacturer Fokker did not receive financial support. Since both the Dutch government and Daimler-Benz withdrew support, Fokker filed for bankruptcy. Although these and other drastic decisions helped reduce the 1995 financial losses, the company's goal was not to emphasize maximizing short-term profitability but to work toward medium- and long-term profitability.

A number of other managerial decisions were made to achieve the ambitious goals of reducing costs and improving profitability. Employees close to the operations were empowered to make decisions necessary to carry out their tasks. The organization structure was simplified and decentralized so that organizational units could respond faster to environmental changes. Moreover, the new organization structure was designed to promote an entrepreneurial spirit. Control was exercised through a goal-driven, performance-based reward system. At the same time, the new structure was designed to promote cooperation. In 1997, the board of management restructured and integrated the Mercedes-Benz Group into    Daimler-Benz. Consequently, Mercedes-Benz's chief, Helmut Werner, who had been given credit for a successful model policy, resigned from the company.





Questions:
1)  What is your assessment of Daimler-Benz's operations in many different fields?


Daimler-Benz, with more than 300,000 employees worldwide, consisted of four major groups: The first, by far the biggest and most successful group, was Mercedes-Benz with about 200,000 employees. It is best known for its passenger cars and commercial vehicles.
[THIS  BUSINESS  UNIT  HAS  THE  CORE  COMPETENCE  AND   HENCE  VERY   SUCCESSFUL.
--------------------------------------------------------------
The second was the AEG Daimler-Benz industries in the business of rail systems, microelectronics, heavy diesel engines, energy systems technology, and automation.
[THIS  BUSINESS  UNIT  HAS  TOO MANY SUB-UNITS  AND  WIDE  DIVERSIFICATION  AND  LACKS  CORE  COMPETENCY  IN   SOME  WHICH  AFFECTS  THE  OVERALL  PERFORMANCE.
----------------------------------------------------------------------------

The third was the Aerospace Group in the business of aircraft (the company has a more than one-third interest in the Airbus consortium), space systems, defense and civil systems, and propulsion systems.

[THIS  BUSINESS  UNIT  HAS   MANY SUB-UNITS  AND  ARE  INTEGRATED AND  HAS  THE   CORE  COMPETENCY  /  HENCE  IS   SUCCESSFUL..
----------------------------------------------------------------------------
Finally, there was the Inter Services Group consisting of systemshaus, financial services, insurance brokerage, trading, marketing services, mobile communications services, and real
estate management.

[THIS  BUSINESS  UNIT  HAS  TOO MANY SUB-UNITS  AND  WIDE  DIVERSIFICATION  AND  LACKS  CORE  COMPETENCY  IN   SOME  WHICH  AFFECTS  THE  OVERALL  PERFORMANCE.
=============================================================
2) Should the various groups operate autonomously? What kinds of activities should be centralized?

[THE  BUSINESS  UNITS  SHOULD  OPERATE  AUTONOMOUSLY  . THE   KINDS   OF  ACTIVITIES  THAT  COULD CENTRALIZED   ARE
-IT  SYSTEMS
-HR  SYSTEMS

-FINANCE
============================================
3) Daimler-Benz is best known for its Mercedes-Benz cars. Why do you think Daimler bought AEG in the first place and why did it venture into the Aerospace and Inter Services businesses?

[ BETTER  USE  OF  TECHNOLOGY  AND  COMPETENCE
PLUS  SALES   OPPORTUNITIES.
===========================================
4)  Given the apparent mistakes in acquiring non-automotive businesses, what should Jurgen Schrempp do now?

[ RE-ORGANIZE / RESTRUCTURE  THE  BUSINESS   UNIT  AND  HIRE  COMPETENT   TALENTS  TO  RUN  THE  SHOW]

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Leo Lingham

Expertise

management consulting process, management consulting career, management development, human resource planning and development, strategic planning in human resources, marketing, careers in management, product management etc

Experience

18 years working managerial experience covering business planning, strategic planning, corporate planning, management service, organization development, marketing, sales management etc

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24 years in management consulting which includes business planning, strategic planning, marketing , product management,
human resource management, management training, business coaching,
counseling etc

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PRINCIPAL -- BESTBUSICON Pty Ltd

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MASTERS IN SCIENCE

MASTERS IN BUSINESS ADMINSTRATION

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