GITAM INSTITUTE OF MANAGEMENT BUSINESS POLICY AND STRATEGIC MANAGEMENT

ASSIGNMENT-3 [ARTICLE SUMMARY]

SUBMITTED BY P.NAGENDRA PRASAD I MBA SEC-A [1225111127].

Article-1 Managing Risk in the business :

It is said in the article that risk-driven innovation is much more advantages rather than innovation of new product or technology which is more expensive. Many examples of different companies are there such as MyFab, Zara, dell, timbuk2 are given which are successful not because of their innovation of new product or technologies but due to their efficiency in managing the value and supply chain.

Reducing Risks :
Every business activities is surrounded by many types of risk and often companies that have lowered their business model risk have done so by delaying production commitments, transferring risk to other parties, or improving the quality of their information the business should look into the above issues to reduce their risk and gain huge profitability.

Delaying production commitments:

This focus on keeping a pace with the customer demand and production of the products. There should be no delay in reaching the products to the customer. The company may achieve the above objective by organizing their sourcing, production, and distribution as efficiently as possible. The product must be with the customer when demanded.

Rewriting your contracts :

Another way to manage riskespecially asset-related riskis to pass the exposure on to someone else. This usually involves altering your contracts with the other stakeholders in your value chain: employees, suppliers, and customers. The call centers for customer services should established so that the company is well acquainted with the customer needs and want and also the call centre must be established in a low cost location. The company may all go for outsourcing for various other activities of their which is not a core activities.

Gathering better data:

Sometimes it isnt possible to shorten the production process or alter relationship with other stakeholders in value chain. In that case the company improves the quality of the information on which they base their commitments. That is precisely what MyFabs customer voting system does. The actual process of making and delivering furniture quickly has been greatly refined, so relocating doesnt make as much competitive difference as it used to. The data MyFab gets through customer polling enable it to predict customer taste and demand levels more accurately than its competitors can, reducing its exposure to stock-outs and excess inventory.

Adding Risk :
Many company regard risk only as something to eliminatean undesirable concomitant of managing the resources and capabilities needed to deliver a product or service. But as the economist Robert Merton has often pointed out, one can also argue that companies create value by being better at managing risk than their competitors are. The implication is that if the company is better than others at managing a particular risk, the company should take on more of that risk.

ADVANTAGES AND CHALLENGES:

The risk-driven innovation has one important advantage over other forms of innovation. Its much cheaper. Innovating products and technologies often involves generating a lot of ideas and then trimming the list down through discussion, voting. Multiple iterations of customer feedback and experimentation are necessary. Significant R&D expenditures are often involved.

Risk-driven innovation, however, can be approached in a systematic way and with little expenditure, and relatively clear and credible estimates can be made of the potential benefits and costs.

Article-2: How GE Teaches Teams to Lead Change:

Management development programs that focus on teaching and inspiring individuals to apply new approaches have a fundamental flaw: If other members of an individuals team have not taken the course, they may resist efforts to change. The antidote to this problem is training intact management teams. When managers go through a program together, they emerge with a consensus view of the opportunities and problems and how best to attack them. The result: faster and more effective change. Five Main Reasons: Team training accelerated the pace of change. Participants were encouraged to consider both the hard barriers to change and the soft. The eternal management challenge of balancing the short term and the long term. Beyond providing new concepts that would make people look at their businesses and themselves differently. The program was not an academic exercise; it was structured so that a team would emerge with the first draft of an action plan for instituting change in its business.

Leadership, Innovation, and Growth:

After becoming CEO, Jeff Immelt had launched an all-out effort to make GE as renowned for innovation and organic growth as it was for operational excellence. The company seemed to be making superb progress GEs revenues, exclusive of acquisitions, increase by 9% in 2007. Initiatives such as ecomagination and imagination breakthroughs had lived up to their catchy names. The successes had resulted from fundamental changes in GEs internal machinery.

 Substantially higher and much more focused R&D . The purpose of LIG was to make innovation and growth as much of a religion at GE as Six Sigma.

Structure:
Altogether 2,500 people in 260 teams went through the program. GE Power Generation, one of the worlds largest manufacturers of equipment for producing electricity. GE Healthcares diagnostic imaging unit. GE Moneys Nordic and Baltic operation. GE Capital solutions Europe. GE Corporate Financial Services Europe.

ADVANTAGES AND FUTURE PLANS:

Before attending the Leadership, Innovation, and Growth program, the senior managers of a GE business would assess their teams success in creating a climate supportive of creativity. Challenge/Involvement. Risk taking. Freedom. Debate. Trust/Openness. Idea support Conflict Playfulness/Humor Idea time The final LIG session involved the reports to Immelt. Power Gen was the first up of the six business teams. LIG has made a big difference at GE. The beauty of LIG is that it helped GEs business leaders to see for themselves what they needed to do and to create initial action plans continuing a handful of priorities.

Article-3: Five competitive Forces That Shape Strategy:

Porters five forces that shape competition in a companys external environment. He discussed techniques for identifying strategic opportunities and threat at the industry environment. In this article he updates, reaffirmed and extended his classic work of strategy formulation, the Porters Five Competitive Forces. The classic five forces are: Threat of Entry: the risk of new entry by potential competitors. The Power of Supplies: the bargaining power of suppliers. The Power of Buyers: the bargaining power of buyers. The Threat of Substitute: the competitive force of substitute products. Rivalry among existing competitors: the degree of rivalry among established companies.

The updates include how to put the five forces analysis into practice, addresses common misunderstandings, provides practical guidance for users of the framework, and a deeper view of its implications for strategy today.

Develop a strategy for enhancing companys long-term profits:

Position your company where the forces are weakest. Exploit changes in the forces. Reshape the forces in your favor. Five Forces Govern The Profit Structure Of An Industry: Determining how the economic value it creates is apportioned. The stronger each of these forces is, the more established companies are limited in their ability to raise prices and earn greater profits. A strong competitive force is a threat because it depresses profits. A weak competitive force is an opportunity because it allows the company to earn greater returns. Changes in the strength of the forces signal changes in the competitive landscape critical to ongoing strategy formulation. Forces That Shape Competition: The strongest competitive force determines the profitability of an industry and become the most important to strategy formulation.

 Industry structure grows out of a set of economic and technical characteristics that determine the strength of each competitive force.

Barriers to entry:
There are seven major sources: Supply-side economies of scale. Demand-side benefits of scale. Customer switching costs. Capital requirements. Incumbency advantages independent of size. Unequal access to distribution channels. Restrictive government policy.

Differences in Industry Profitability: Expected retaliation Industry growth is slow so newcomers can gain volume only by taking it from incumbents. The power of suppliers. Industry structure drives competition and profitability, not whether an industry is emerging or matures, high tech or low tech, regulated or unregulated. Rivalry is especially destructive to profitability if it gravitates solely to price because price competition transfers profits directly from an industry to its customers.

Implications for Strategy:

Creative strategists may be able to spot an industry with a good future before this good future is reflected in the prices of acquisition candidates. Positioning the company. Exploiting industry change. Shaping industry structure. Expanding the profit pool.