1) Strategy applied by Fiat Auto Argentina SA
Taking as a study reference the organization of Fiat Auto Argentina SA selected in the first practical work; It is worth clarifying that this is an Italian company dedicated to the manufacture and marketing of vehicles, which, due to the innovation and technological advances of its competitors, is currently doing everything possible to recover the market lost in the year. 2000.
I consider that Fiat Auto Argentina SA is applying the functional strategy since it stands out for its tendency to improve the effectiveness of internal area operations and the organizational structure such as manufacturing, marketing, stock management, marketing, human resources, etc.
To justify the strategy used by Fiat, it is necessary to name the functional-level strategies carried out in each sector within its organization.
To begin, we know that achieving efficiency is an optimal point in an organization, which guarantees us, for example, in production, that the more efficient an industrial plant is, the lower the cost necessary to manufacture a product. This sense of efficiency is extensible to the other areas such as marketing, inventory management, research, technological development, infrastructure, and personnel management; and if it is fulfilled in all areas, it will be able to achieve superior efficiency.
Fiat Auto Argentina SA has proven to be efficient in production, as a result of having two techniques that are as follows:
- Economics of Scale, since from a large scale of production you benefit by reducing your unit costs. Learning effects, which means learning by doing, are the savings or minimization of losses that occur through learning.
As a total effect of this, it benefits from its Experience Curve that combines the two aforementioned techniques and consequently reduces its unit costs with increases in accumulated production.
In turn, it carries out an advertising campaign with great success, accompanied by a price structure for its products that is much lower than the competition; with these commercial and marketing actions you try to achieve marketing efficiency.
Along with the above, it seeks efficiency in inventory control, saving on maintenance costs. Regarding infrastructure and development, it should be noted that it works with the most prestigious engineers and designers for its products, and in turn with excellent professionals in the area of communications so that the interaction between the factory and the dealers is more direct every day.
Currently, all the plants of the automotive industry in the country are suspending personnel due to the low demand for vehicles; Fiat was the last to do so, and produced almost twice as many vehicles as its closest competitor, this means good handling with employees, and a slight improvement in its HR department, where it has had major failures.
All these actions together, aim to reduce costs, to achieve the desired efficiency.
The quality of its products is very good, in such a way that it has exported vehicles to Europe and America, to achieve this quality it is necessary for the organization to work for it, that the people who work in each position leave the best possible, like Fiat Auto that reflects all this in its vehicles and services provided.
The permanent innovation and even more in the automotive market in which cars are presented every month, is very important since it is the letter of introduction with the client, the first thing the future buyer sees, the new Fiat models are made under these slogans, they break with the traditional, they become expected by people and they are liked for their quality and design.
In turn, it strengthens the after-sales service with its new 0800 numbers from Fiat Responde (for administrative and commercial inquiries) and Pronto Fiat (for maintenance and mechanical services).
Although, there is a bump as in any organization; I sincerely believe that the functional strategy is the one promoted by Fiat today, despite having lost part of the market, the company is optimistic, bets on the country and its people, continues to train vendors, administrative employees and next month begins with its training direct to dealership managers. He has realized how costly it is to lose a client and seeks by all means to satisfy him in this new stage, with training for employees and dealers, everything is brought to the practical plane in talks and classes taught by professionals.
The satisfaction of the clients plays a preponderant role to achieve the success of the strategy, it is the main objective of the organization since it will be based on the prices and therefore the future profitability, it is the point in which the whole company must set your goal. This efficiency must be accompanied by all the aforementioned areas, it will be useless if it is not.
Today, the buyer has all the power of decision, 10 years ago there was a car for 10 buyers and the dealers took advantage of this by charging excessive prices, today it is the other way around, the customer decides everything, with the aggravating circumstance that after having suffered experiences in the past with the purchase of a car when a person decides to enter a dealership, is very cautious, one could almost say "on guard", that is why it is necessary to demonstrate transparency and seriousness, all the necessary information, to see, touch and test the vehicle, etc. All this to capture a place in your mind, you have to provide everything you want when you need it.
Fiat has understood the lesson, and is in a privileged place since the brand has been imposed on the Argentine market for several decades; With its commercial and dealer training plan, it strives for the satisfaction of its customers, and without a doubt, the soul of the leader will take it to the top again.
2) ”CASE BLUM”
Blum case
As we have already seen, the previous graph represents the analysis matrix of the Boston Consulting Group, the main contribution that said matrix proposes is to identify the financing or cash flow needs of the different businesses in its portfolio.
The horizontal axis represents the relative market share, and the vertical axis represents the industrial growth rate.
The previous graph has been made from the data obtained from the Blum case. Each one of the circles (A, B, C, D, and E) constitute the different business units, for which I will now explain them in particular according to the composition of the different sectors of the matrix.
- The UEN identified with the letter A, are called Stars, are the leaders of the firm, have a high relative market share in a high growth market. They have many competitive strengths as well as opportunities for expansion given the high level of market development in which they operate. Although they are investing heavily in order to increase their share, the benefits obtained from their experience curve will allow them to reduce their costs in a much shorter time than the competition. As a final conclusion, the ESUs that are developing within this type are doing really well, although they are not market leaders since there are two stronger competitors, there is no doubt that increasing long-term returns and new opportunities are expected. development and growth within the industry.Carrying out a differentiation-oriented strategy based on good negotiation with customers and suppliers may also have good effects and establish a strong competitive position by serving the needs of a market segment.
The UEN identified with the letter B, are called Question Marks, this is so because they generate a great question to the company since they are immersed in high growth industries, they are relatively weak in competitive terms since the market is in the hands of many companies, in our case exactly twenty-two and none of them has the Market control is not large enough to generate a price war. As a result of being in a high growth market, they can offer opportunities for generating profits and long-term development; if they develop correctly they will become stars; but to achieve this and future leadership, the question marks require the contribution of capital since otherwise they will not be able to support the cash flow. Consequently, the company must finance these business units to gain leadership,Likewise, her position is excellent since her sales amount to the same volume as two of her competitors, with which the leadership shares it with two other business units of other companies; As a parameter to take into account the market grows at a very high rate, so the development of the company at this point will be of utmost importance.
- The UEN identified with the letter C, constitute a midpoint, the growth rate of the market is medium and the market share is diversified by a respectable number of competitors, it may be industries that are about to be classified within question marks to short term if the market reactivates and develops further. The particular situation of the company in healthy because it is the market leader in conjunction with another competitor that generates sales for the same volume, in order for it to develop even more, the capital contribution is necessary. In the event that the competitor becomes more dangerous, making a join venture or some strategic alliance with him will allow him to gain market and position himself in it. And in this way, once leading the market, relaunch a global strategy.With respect to the UEN boxed in letter D, these are calledDogs; They have a low market share and are in low growth industries. This is the worst possible combination as they are competitively weak and the industry is growing at a very low rate, making them unattractive given their low returns. They generally waste resources, absorb funds, waste time, and offer little chance of development. In our particular case, all of the above occurs and in turn the company's situation in the market is very unhealthy, it sells very little and the general development of the industry is very low, so it does not offer many outlets. In theory, the company should immediately abandon this market, but this action can backfire if the products marketed have relative power within the organization.On the other hand, it is worth noting that they may have a profit in the global portfolio, by completing a range of products and providing a solid image in the market. There are also different types of dogs (faithful, prey, etc.) and their functions vary around the strategy. In such a way that before carrying out any strategic action, the aforementioned assumptions must be taken into account. Finally we find the UEN identified with the letter E, these are calledIn such a way that before carrying out any strategic action, the aforementioned assumptions must be taken into account. Finally, we find the UEN identified with the letter E, these are calledIn such a way that before carrying out any strategic action, the aforementioned assumptions must be taken into account. Finally we find the UEN identified with the letter E, these are calledMilky cows; They are those that have a high market share of low growth industries, that is, mature industries. They are in a competitive leadership situation, this position is given by generating the greatest decrease in their experience curve and as a result they are very profitable. However, low growth implies lack of opportunities for future expansion. As a consequence, the capital investment requirements of dairy cows are not substantial and can be used to finance the UEN belonging to the question mark quadrant. Analyzing our case, we can affirm that the conditions of the company are really healthy,the absolute leader in the market and its sales are far superior to its main competitor, so its commercial actions are on a very good course and are correct. The high yields of these are consistent with the theory and may be used to finance the UEN formed within the question marks. Although these should be dealt with strategically since the managers of the dairy cows may lose motivation by having to allocate their income to finance the question marks. Therefore, the strategy to be implemented should be based on a good analysis of the value chain, and in turn a great interaction between dairy cows and question marks.Setting goals to carry out a joint task between these two business units may be a good alternative, in order not to enter into internal rivalries and in turn provide the financing to develop the question marks.
Some considerations
Once the managers of the organization have at their disposal the business portfolio matrix, they can take it into account to define the corporate strategy that maximizes growth and future profitability.
A business portfolio must necessarily have enough stars and question marks to ensure a projection of growth and profitability of its businesses.
In turn, it seems too simplified to evaluate a UEN based on two variables, that is, market share and growth rate; Other extremely important factors must be taken into account.
The connection between relative market share and cost savings is not as direct as the BCG matrix suggests; high market share does not always provide a company with a cost advantage. A high market share in a low-growth industry does not necessarily generate a large positive cash flow, characteristic of the businesses generated by dairy cows, since they can be industries with high technological innovation that require sufficient investment to maintain competitiveness.
In general, portfolio analysis techniques do not pay attention to the sources of value creation from diversification. They treat the UEN as independent, although they may be related to the need to transfer capacities and skills or realize economies of scale. They suggest that success stems from creating the best combination of business portfolios, while new trends suggest managing a diversified portfolio to create value, by strengthening distinctive skills and sharing resources to generate economies of scale and thus lower their levels..
In many organizations, it is planned based on the capacity for innovation or creativity of managers, and not on financial availability.
In conclusion, we are in a position to affirm that the situation of the company is healthy, from the analysis developed in each of the UENs that make up its organization, although it is necessary to take into account other important parameters when setting strategies, The BCG matrix is a very useful tool when it comes to obtaining a first approximation of the balance necessary in the organization for its good performance.
3) A Canadian company that has developed a set of valuable and new medical products using its own unique biotechnological know-how is trying to decide how to best serve the European Union market.
Their alternatives are as follows:
- Manufacture the product domestically and allow foreign sales agents to handle marketing. It is not advisable from the point of view that it does not give the company a strict command over marketing. At the same time, it seems unheard of to manufacture a product at the domestic level when you have a technological domain to manufacture a line of products with exclusive biotechnology know-how. If this option is chosen, technological control will be lost, existing resources will be poorly managed, and since this is the basis of its competitive advantage, the company will prefer and it will be convenient to maintain control over the use for which it was established. strategic with a large European pharmaceutical company.The product would be manufactured in Europe through a 50/50 joint venture then marketed by the company. This alternative has in favor that the foreign company can benefit from the knowledge that the local partner has about market conditions, etc. In turn, they share development costs and the risk of opening. But it is inadvisable given that a company that enters a joint venture with the contribution of its technology runs the risk of losing control of it to its partner. This risk can only be minimized with a majority participation of shares, in this way you can exercise control over your know-how. Also, this type of alliance does not provide the company with strict command and knowledge of the commercial development of the product,action that will need to be taken into account when achieving greater cost efficiency to keep the competitive advantage latent under pressure from its European rivals. And copying a phrase from Miles's work to further support my answer, in which he refers to the fact that an alliance is like “a dog that cannot listen to two owners.” Produce products locally but establish a subsidiary of their own in Europe to handle marketing. This alternative is the most advisable, an own subsidiary can be established abroad constituting a completely new company or acquiring a pre-existing company in the country and using it as a platform for its new venture in the receiving market, for this the parent company must provide the 100% of the constituent capital.It would then be the most advisable option given that an own subsidiary constitutes the most widely used mode of income, when the competitive advantage of a company is based on the mastery of its technological ability, in our case an exclusive and valuable biotechnological know-how, since this eliminates the risk of the company losing control. So, with a subsidiary in the European Union, you have full control in the manufacture and marketing of your products, also in the event that you want to achieve localization economies and obtain cost efficiency effects based on your experience curve.in our case, an exclusive and valuable biotechnological know-how, since in this way it eliminates the risk of the company losing control. So, with a subsidiary in the European Union, you have full control in the manufacture and marketing of your products, also in the event that you want to make localization economies and obtain cost efficiency effects from your experience curve.in our case, an exclusive and valuable biotechnological know-how, since in this way it eliminates the risk of the company losing control. So, with a subsidiary in the European Union, you have full control in the manufacture and marketing of your products, also in the event that you want to achieve localization economies and obtain cost efficiency effects based on your experience curve.
An own subsidiary provides the company with the most appropriate platform, in the case of deciding to carry out a global strategic coordination in several countries, and in our case in particular it will be even simpler because in the European Economic Union there are no borders of commercialization, it is a great economic nucleus that is unified in what refers to the commercial law legislation and monetarily from the implementation of the EURO.-
4) The Balanced Scorecard
The type of strategic control system used by the organization is the Balanced Scorecard.
The concept of scorecard, as an instrument of information and control of business management, has existed for decades and its use is quite widespread in many organizations. The Kaplan and Norton WCC proposal is a truly innovative approach that can enrich management control for any type of organization.
The CMI is made up of the following elements:
- An instrument that measures an object on which management must decide. A generic goal, defined by the best practice in the market. A graphic demonstration of the evolution of the object. A series of analyzes regarding the associated problems.
The CMI relates strategy and organization with control and management, constituting a system that allows visualizing the capacity and ability to create and maintain a competitive advantage from the organization's creation of value.
This includes four perspectives:
- The financial perspective. The customer perspective. The internal perspective. The Innovation and Training perspective.
The CMI allows to translate the vision and the organizational strategy into specific and measurable strategic objectives, in all the perspectives of its structure. It also allows transmitting and relating objectives and indicators, communication mobilizes the members of the organization towards a shared objective. The planning of the strategies and the subsequent adherence of the members of the organization to their compliance are necessary to achieve the competitive advantage and sustain it over time.
From its conception, the WCC favors the formulation of the strategy, that is, based on the information obtained from the strategy implemented and executed, which functions as a tool for adjusting the implementation of the current strategy or the reformulation future.
To establish this feedback process, it is necessary to review the management monthly and quarterly, evaluating the objectives achieved in relation to customers, internal processes, training, profitability, technological innovation, etc. In this sense, the controls carried out should not only be oriented to the revision of the goals or objectives established in the past, but in turn should be used as a feed-back to be taken into account in future actions.
Feedback allows the formulation of quantitative and qualitative, specific and realistic objectives. evaluates deviations and supports them when their orientation is correct.
The feedback process questions the fundamental assumptions on which the strategy is developed. The CMI, having Cause-Effect relationships as a study parameter, articulates the business strategy. By starting from errors or deviations in the results, you can reformulate the theory on which the strategy was built.
Once the control system is in place, it should focus on the development of the market, the supply of goods, the internal capacities for its elaboration, and as a result of the analysis, redefine a new strategy.
In conclusion, I have opted for this control system because it is the most appropriate since it provides the following factors, necessary for the good course of the organization:
- Its cause-effect design optimally provides the organization with the information necessary to achieve the planned objectives.It is very useful for communicating the mission and goals of the organization to all members, so that they carry out their work efficiently. It is a good parameter for I set objectives, at an organizational and private level. It is part of a control, information, motivation and training system at the same time; It collaborates with a wide range of cause and effect related functions. It is essential for management control. It favors design and continuous improvement. Finally, the WCC constantly reviews the strategy. Collect feedback, review hypotheses, make adjustments, and redefine strategy.
5) Type of structure presented by the organization
I have taken as a study base the work carried out by Henry Mintzberg in which he develops the five basic parts of the organization:
- Strategic apex (where the leaders are located) Intermediate Line (managers) Operations Core (Operators) Technostructure (Analysts, outside the structure) Support Staff (External services) Ideology (Traditions and beliefs of the organization) Although it is a part, it is not within these five since it acts internally.
The five basic parts of the organization
Based on this and the different types of structure presented during the course, I have chosen the type of Innovative Organization.
Innovative organization structure
This type of organizational structure responds to industries that constantly need to innovate in a very complex way; That is precisely why I propose it, and because it is a company in the medical field that constantly studies new forms and products for the benefit of people.
In turn, it requires a high rate of creativity among its members for the proper functioning of the work teams.
This type of organization is usually called "Adhocracy", it is an organic structure that bases its operation on mutual adaptation between its most trained experts and integration managers; that by working incentivized they provide efficiency to the parent structure.
For internal operation reasons, experts are generally grouped into functional units and derivatives in work teams, based on the different markets in which the organization operates.
Power is decentralized, and is distributed based on the experience and needs of each case. Generally this type of structure is found in high-tech industries.
Although all types of structure cannot be verified in reality, it is an approach created to force reasoning and somehow categorize its morphology, or to provide some realism. For example, it would be almost impossible to think of an organization without a leader / s who had / n power instead of its total decentralization; this is the most questionable to the type of innovative organization.
That is why it is valid to clarify that all serious organizations experience in themselves the seven internal forces that will allow us to know and understand what is happening within them and thus make the relevant changes. Below, in order to achieve greater agreement between the chosen structure and the components necessary for its operation, I list the seven forces:
- The direction or direction the organization must take to achieve success. Also called strategic vision. Efficiency in the mechanical form, guarantees that the confinement between costs and income is adequate. Skill in the professional form is one of the most important since every organization needs a source of information for the realization of a highly qualified task. Concentration in a diversified way, since each unit of the organization must outline its objectives with total concentration based on the market in which it operates. Learning, the most important in the type of innovative structure, since it must have the ability to learn to continue researching and designing new things to nurture itself and supply its customers. Cooperation, to be able to unite ties in the company,create an ideology and guarantee the good performance of its members. Competition, represented by politics.
Effective organizations never have a pure form. What makes the configuration effective is not only the domain of a single force but also the limitations imposed by other forces.
6) Predominant Power Sources
Among the predominant sources of power in the organization, we can mention the following:
- Centralism; This source refers to the fact that if a more important activity is carried out within the organization, it will itself have relative power over the others due to its quality. In our analyzed case, this centralism will be interpreted or assumed by the work team that is in charge of the development and investigation of the valuable biotechnology know-how, because this is the advantage that the company presents. We clearly know that from this new product the company is going to enter new markets, that is why it is the backbone of the organization, which is going to drive the company to develop in another business sphere. In turn, the constant research and development of new products, or improvement of existing ones, will be in the hands of the same team.Without detracting from the other parties that we know are essential for the proper course of business and strategic actions. Ability to face uncertainty. At the same time, executives and managers are required to possess the necessary political waist in difficult moments, without being carried away by first impressions and transmitting this to the rest of the members. The uncertainty factor always exists, and even more so in companies that decide to develop in new markets, where customer habits and habits are different from current ones. Thorough market research and strategic planning must be done to achieve success. The entire organization and all its members depend on the results, the control systems to ensure and redefine strategies play a leading role,with the sole purpose of beating the much-feared uncertainty. Control over information. Through the aforementioned model of the seven forces we see how the organization behaves internally. The CMI proposed as a control mechanism is now an indispensable tool to guarantee the internal information flow. The control must be periodic and in each sector of the structure, since future strategies will be based on the information collected, and not only this, but also different internal operating points such as customer service. Once the company manages to occupy a place in the customer's mind, it must provide the customer with everything necessary at the right time to continue growing. Information about new technologies, and changes in habits;it must be directly presented in the corresponding sectors. Control of information is essential, if an organization is misinformed, it will probably obtain negative results. Irreplaceability; This occurs when a person or team is irreplaceable, either because of their knowledge or abilities. In accordance with the above, I am inclined to the person in charge who has developed the so valuable new biotechnology products, and to those in charge of the basic guidelines that define the strategy for success. Both of them are irreplaceable; Although they can be replaced, they will not be in the sense that the organization will perform worse if they do.Here is the good performance of the HR department, which is responsible for making the necessary work improvements so that the competition does not absorb them. Control of eventualities. It is based on the exhaustive control of opportunities and threats. We recall that the SWOT matrix is the strategic tool that can best be used in these cases. As opportunities I can cite the following:
- Development and growth in a new market. Large capacity for research and development. Good predisposition for investment given a solvent financial situation. Complete control as a result of being a subsidiary in charge of marketing. Recognition of the firm in the UEE. Possibility of Entry into other markets. Technological superiority. The possibility of acting in a market rich in resources and with a large number of inhabitants. Economic and political recognition from generating job sources.
As threats I can cite the following:
- Risk from entering the market of potential competitors. Acting in a different market; Lack of knowledge (uncertainty). Rivalry between established and recognized companies. Power of negotiation with buyers and suppliers. Proximity of substitutes in the industry. Control over resources. It is based on the control of the company's resources, be they productive factors, trained personnel, time, etc. The WCC is also responsible for controlling resources, whether the functions are carried out correctly from manufacturing, the production line works to its operational capacity, the HR sector collaborates with its recruitment and permanent training tasks. Good training and goal setting based on results is a fundamental parameter for a good course.The waste of resources may perhaps occur in the least-thought sector, it is about controlling through managers and updated information systems, that the company is located in such a way as a result of losing in one sector or winning in another. The input-output matrix used in macroeconomics is a precious object in production lines; As well as an exhaustive cost analysis, by economic condition we know that we must produce above average costs, if we are at a lower point we must leave the industry. Finally closing my idea I quote the so-called FPP (Production Probability Frontier) serves as a parameter to check whether resources are well used. The economy plays a main role in this type of source,Paradoxically, it is in charge of distributing resources in such a way that there is no unemployment and the economy is in equilibrium.
Finally, and according to the stipulated instructions, I have developed the topic of functional strategy and its aspects in the case of Fiat Auto Arg., Also a practical planning of the different business units of an industrial producer and its analysis based on the BCG parent company and finally the topic of the initial situation of a company that decides to promote business in other markets has been developed, with a control mechanism that allows the organization to lead a new challenge, a predetermined organization structure having as base the work of Mintzberg, and the predominant sources of power that the company has.
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