CORPORATE CULTURE AND STRATEGY Case Study Solution
The case illustrates the strategic management decision situation in the company HIL headed by Baily, who was appointed after the two consecutive losses the water plant SBU made, which made the investors appoint Baily to rectify the situation. The company operates through four divisions, namely software technology, online marketing, educational publishing and Water pump manufacturing. The project manager Vera, has led the water pump project successfully till 1990’s, but the position of Vera along with his team is in jeopardy due to two consecutive project failures. Since the shareholders and investors have appointed Baily to take down the Water pump division, he also has to see if the new project which Vera has designed can bring back the profitability and thus has to decide between the shareholder's demand and the business proposal by NakulVera.
The deadlock presented in making the decision in favor of one party which may have to be defended through strong evidence depicted on the balance sheet.
Keywords: Corporate strategy, Culture, Leadership, Strategic Management
CORPORATE CULTURE AND STRATEGY
Head start Industries limited (HIL) started its operations back in 1990’s, with the initial vision of catering different markets with different products by inculcating technology and Innovation.The company operated in three divisions namely software development, online marketing and water pump manufacturing/designing. For the few last years, the company performed outstandingly with the tremendous growth of market share and sales.
The project water pump was initiated by Vera, the project head, along with his team. The team worked tirelessly to bring the SBU to the top star product list of the company, when all of the sudden, the project faced two setbacks in 2000.The incident made the board directors appoint a new CEO, Baily, who could rectify the wrong decision and bring back the profitability to the company. In doing so, it has been expected from the CEO to cut off the WATER PUMP SBU from company’s portfolio as being regarded as the dog product.
Baily knew the undisturbed, consistent hard work of Vera and his team, and his belief in the new project, yet he also understood the stance of the board of directors who have appointed Bailey with the vision of closing the SBU.So a deadlock has been developed for daily to choose one option while supporting it with strong evidence acceptability from both parties, and also fulfilling the responsibility and demand of his Role as a CEO of the company.
External Environment Analysis
Background of the Company
Head start Industries Ltd, is a top multi-business corporation that operates under eight SBUS.The company was founded by Ravi Gavin, while the project manager of water pump businesses was headed by Mukul Vera.
Among those eight Sbu’s, the company performed tremendously in Educational publication, software development, online marketing and Water pump businesses. These Four s bus contributed immensely in making the company profitable.
The company incorporated latest innovation and technology to cater he markets and changing paradigm of the market forces. The company drew its focus to online marketing due to tremendous rise ecommerce and online buying in Indian Market. The company stated its operation in Madhya Pradesh-the second largest state of India to cater the market through innovative means.
Industry Over-view
The company operates in Indian Market, in the second largest state Madhya Pradesh. Since the economy of the India is ranked under developing Economies, the issues of clean water supply is an issue, which is no catered by the government.
The trend gives rise to the employment of water pump to extract clean water from the earth. And since the population of India is continuously rising, the market has potential to support the business and offer sustainability in the long run.In addition, the company also operates in online marketing segment, where it sells good and services through an online portal. The trend was raised due to the evolution of technology into the business paradigm. A tremendous shift in consumer behavior to purchase online and the ease to set up online portal transformed the market. Under the following circumstances, HIL operated its business starting by inculcating innovation and technology into the business strategy.The approach offered great sales and profits and took the company to 70 billion INR in 2000.
Competition
China and India are both emerging market, with economic status nearly equal to each other. China has the competitive advantage of producing cheap products with an innovative strike in it.Hence, the Chinese companies invaded the MADHYA Pradesh market which affected the profitability and also caused the company shrinking the market share. The Chinese companies offer the water pump at cheap rates with technological innovation in it.The product reputation out ruled the popularity and market share of HIL water pump.
These Chinese companies’ offers the same product as of HIL, at alow price compared to HIL pricing in the market.
Major Challenges Firm Face
The firm faces immense challenges in maintaining the pricing strategy with the Chinese firm. Since the other firms in the industry utilize cost leadership strategy, which the company cannot adopt in current years due to immense pressure to maintain the profitability of the SBUin company’s portfolio.
In addition, the firm cannot put its product in luxury items, because the major customer base has the low disposable income to spend on a dispensable item. Also, the company faces immense pressure from the investors and committee members to divest the unit, because of non-profitable operation, while in such situation, getting the aid of 8 million INR, to finance the new project to save the SBU from diluting is also a challenge.
Porter 5 forces Model
Bargaining Power of Buyer- High
The bargaining power of the buyer is high due to the presence of alternative products which are offered at low prices compared to HIL.In Addition, since the switching cost is almost zero, and the alternative product is available easily which makes the customers opt for other product. In addition, since the product is dispensable the loyalty to the product is also low, which poises a great threat to the company to control and sustain its positioning and pricing strategy in the market.
Bargaining Power of Supplier- High
The bargaining power of the suppliers is also very high, because since the company shifted its pricing strategy and positioning in the market as the high-end product, many suppliers are reluctant to place and distribute the product, due to nature and buying behavior of the customer. In addition, several suppliers are present in the market that works with the company, hence creates a shortage in supply and thus high pressure on the company to work in best interest of these suppliers. Also, the Chinese companies are offering far low prices and high commission to the suppliers which on the one hand matches the consumer behavior while on the other hand keeps the suppliers happy and satisfied.
Extent of Rivalry-High
The extent of rivalry is great, because of many Chinese firms entering into the Indian markets. And since the China has strong technological back and can produce product at low cost, it is driving the market share away from HIL which has made the market even more competitive and intensive.
CORPORATE CULTURE AND STRATEGY Harvard Case Solution & Analysis
Threat of Substitution- Low
The threat of substitution is low, because India is a developing economy that has water supply issues. And since the government does not support in providing clean water, the people employs
these water pumps to get the clean water, also, these pumps have no replacement in the market, and thus the threat is low..................
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