Question

Refer to the text to answer the following question(s). Casey Brickly opened ​The Landing​, a convenience store on the North Shore of Witmer Lake, in 1962. With a sandwich counter on one side and a bait shop and grocery on the other, ​The Landing​ was an immediate hit with weekend lake visitors and local residents alike. In the summer, boaters parked at the piers and bought all their fishing needs, such as rods and reels, bait, snacks, and soft drinks at ​The Landing​. Even during the winter months, snowmobilers and ice fishermen were attracted to ​The Landing​ for snacks and hot coffee or hot chocolate. As time passed, the business changed and grew tremendously. What was formerly a weekend tourist area gradually became a full-fledged residential area. Many of the houses, which were built as chalets in the 1950s and 1960s, were remodeled into residential homes. By the end of the 1970s, the days of small motorboats and 10 mile-per-hour speed limits were gone; skiing and fast speedboats became the rage. Through it all, The ​Landing​ continued to attract customers. In the 1980s, however, Casey started to realize that the grocery area in ​The Landing​ could not compete with larger local retailers. He eventually enlarged the sandwich counter, transforming the bait shop and grocery into a restaurant with a full menu typical of any diner. "Getting rid of the bait shop was hard to do," Casey admitted. "I still had a summer crowd that relied on us for their fishing needs, but we couldn't survive a whole year on four months of profit." In the early 2000s, the atmosphere of Witmer Lake and the neighboring lakes became upscale. "I could see that people were spending more on their speed boats than what they had originally paid for their chalets!" Casey exclaimed. Many of the chalets were inherited by children and grandchildren of the original owners. Once again, the scene started to change as many of the lake houses were used only as weekend lake homes. Unlike the previous generation, a vast number of the current owners could afford to live closer to their jobs while maintaining lake homes. "At this point, business wasn't growing," Casey said. As local competition continued to increase, Casey converted the diner of ​The Landing​ into a bar with a lounge area. "The change might have been too drastic," Casey said, "but it was the only way we could maintain a strong, year-round business in spite of the population shifts and competitive forces."

Questions:

1. Which theory of organizational adaptation is applied in the case of ​The Landing​? Discuss (Population ecology, institution theory..).

2. Which Mintzberg’s mode of strategic decision making is adopted in the case of ​The Landing​? Elaborate (Adaptive, planning, logical..)

3. Using STEEP analysis, what could be the outcomes of the Societal Environment scanning of ​The Landing?​ Discuss.

4. Using Porter’s Approach, analyze the task environment (industry analysis) of ​The Landing​.

Answer 1

Question no 1 –

Ans no 1 –

Population ecology in organizational adaptation is applied in the case of the Landing .

Population ecology is the study of dynamic changes within a given set of organizations. Using the population as their level of analysis, population ecologists statistically examine the birth and mortality of organizations and organizational forms within the population over long periods.

The first explicit formulation of a theory of population ecology, by Michael T. Hannan and the late John H.

Hannan & Freeman believe that long-term change in the diversity of organizational forms within a population occurs through selection rather than adaptation. Most organizations have structural inertia that hinders adaptation when the environment changes. Those organizations that become incompatible with the environment are eventually replaced through competition with new organizations better suited to external demands .

Analysis in population ecology has three levels:

- explaining birth and death rates within a population

- explaining vital-rate interaction between populations

- examining "communities of populations" sharing similar environments

In general, population ecologists ascribe to an evolutionary view of organizational change. Organizations descend from previous or existing organizations, and population-level change in organizational forms is usually slow and continual. Unlike evolution in animals, natural selection in organizations does not necessarily lead to optimization. Optimized change often depends on the "coupling" between intent and outcome.

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Question no 2 –

Ans no 2 –

Mintzberg’s mode ( Planning mode ) of strategic decision making is adopted in the case of The Landing.

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Planning Mode :

This is an approach to strategy formulation that involves systematic, comprehension analysis along with the integration of various decisions and strategies. The aim of the planning mode is to understand the environment well enough to influence it. It is most commonly used in large organizations that have enough resources to conduct detailed analysis, have an internal situation where agreement can be reached on major goals, and operate in an environment that has enough stability to enable the formulation and implementation of carefully conceived strategies.

Ultimately to achieve success, each mode needs to be tailored to actual situations in an appropriate way. To this end a top level manager may adopt an entrepreneurial mode for a new business that is just starting and utilize the planning mode of strategic management to the rest of the organization. Each of these approaches can either promote organizational innovation or stifle it, depending on how the mode is employed.

Elements of strategic management :

The above definitions clearly reveal four important elements of strategic management: (1) Strategic analysis, (2) Strategic choice, (3) Strategy implementation (4) Strategy evaluation

Strategic Analysis: This is concerned with the strategic situation of the organization. Here the organizations looks into issues such as change in the organizational environment and its likely impact on the organization assessment of its resources and strengths and weakness in the light of changes in environment. A vigilant and proactive organization always tries to get ahead of competition through a constant reexamination of its positions in the marketplace in terms of its products, services strategies etc.

Strategic choice: Strategic analysis provides a basis for strategic choice. This is basically concerned with the formulation of suitable courses of action, their evaluation and the choices between them. The relevant issues include deciding what new businesses to enter what businesses to abandon, how to allocate resources, whether to expand operations or diversify whether to enter international markets whether to merge or form joint ventures and how to avoid a hostile takeover etc. since an organization has to utilize its resources judiciously it must decide which alternative strategies will benefit the firm the most.

Strategy Implementation: This is the action stage of strategic management.

Implementing mean mobilizing employees to translate formulated strategies into concrete action:

This step requires a form a ) establish annual objectives , b) devise policies c) motivate employees d) allocate resources e) develop a strategy of supportive culture f) create an effective organizations structure g) channel marketing efforts h) prepare budgets i) develop and utilize information systems and j) link employees rewards to organizational performance. Often successful strategy implementation hinges upon a manager’s ability to motivate people.

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Question no 3 –

Ans 3 – What is STEEP Analysis?

A STEEP analysis is a tool commonly used in marketing to evaluate different external factors which impact an organization. It is essential for every business to consider some external forces before they can take decisions.

Many people have limited imagination as it is shaped by their own experience and beliefs. This tendency often leads an individual to neglect the reality or to refuse to recognize the critical changes around them. In the world of business, there is immense pressure to take quick decisions and to act on the judgment and instinct instead of careful analysis of the situation.

The STEEP analysis is often conducted by firms to get a detailed overview on what external factors determine the trends. It also helps to predict what might happen in the future. STEEP is basically an acronym which stands for Social, Technological, Economical, Environmental, and Political. It is also known around the world as PEST, PESTEL, PESTLE, STEPJE, STEP, STEEPLED, and LEPEST.

Social: The social developments include factors like consumer behavior demographics, religion, lifestyles, values, and advertising.

Technological: The technology aspect of STEEP analysis focuses highly on technological advancements. It includes factors like innovation, communication, energy, transport, research and development, patent regulations and life-cycle of products.

Economic: The economic condition is strongly associated with the consumers’ buying position. In this step, factors such as interest rates, international trade, taxes, savings, inflation, subsidies, availability of jobs and entrepreneurship are considered.

Environmental: Environmental developments involve ecosystem factors such as water, wind, food, soil, energy, pollution and environmental regulations.

Political: The Political developments can highly influence individuals and organizations. It is important to be aware of likely upcoming shifts in power. Political developments can affect environmental, antitrust, financial markets, trade, and other kinds of laws. Factors to be considered include political stability, regulation of monopolies, tax policies, price regulations consumer protection, jurisdiction and trade unions.

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Environmental Scanning

The purpose of the scan is the identification of opportunities and threats affecting the business for making strategic business decisions. As a part of the environmental scanning process, the organization collects information regarding its environment and analyzes it to forecast the impact of changes in the environment. This eventually helps the management team to make informed decisions.

As seen from the figure above, environmental scanning should primarily identify opportunities and threats in the organization’s environment. Once these are identified, the organization can create a strategy which helps in maximizing the opportunities and minimizing the threats. Before looking at the important factors for environmental scanning, let’s take a quick peek at the components of an organization’s environment.

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Important factors for Environmental scanning are –

Events – These are specific occurrences which take place in different environmental sectors of a business. These are important for the functioning and/or success of the business. Events can occur either in the internal or the external environment. Organizations can observe and track them.

Trends – As the name suggests, trends are general courses of action or tendencies along which the events occur. They are groups of similar or related events which tend to move in a specific direction. Further, trends can be positive or negative. By observing trends, an organization can identify any change in the strength or frequency of the events suggesting a change in the respective area.

Issues – In wake of the events and trends, some concerns can arise. These are Issues. Organizations try to identify emerging issues so that they can take corrective measures to nip them in the bud. However, identifying emerging issues is a difficult task. Usually, emerging issues start with a shift in values or change in which the concern is viewed.

Expectations – Some interested groups have demands based on

their concern for issues. These demands are Expectations.

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Question no 4 –

Ans 4 –

Porter’s five forces model is an analysis tool that uses five industry forces to determine the intensity of competition in an industry and its profitability level.

Five forces model was created by M. Porter in 1979 to understand how five key competitive forces are affecting an industry. The five forces identified are:

1) Threat of new entrants. This force determines how easy (or not) it is to enter a particular industry. If an industry is profitable and there are few barriers to enter, rivalry soon intensifies. When more organizations compete for the same market share, profits start to fall. It is essential for existing organizations to create high barriers to enter to deter new entrants. Threat of new entrants is high when:

Low amount of capital is required to enter a market;

Existing companies can do little to retaliate;

Existing firms do not possess patents, trademarks or do not have established brand reputation;

There is no government regulation;

Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to other industries);

There is low customer loyalty;

Products are nearly identical;

Economies of scale can be easily achieved.

2) Bargaining power of suppliers. Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to their buyers. This directly affects the buying firms’ profits because it has to pay more for materials. Suppliers have strong bargaining power when:

There are few suppliers but many buyers;

Suppliers are large and threaten to forward integrate;

Few substitute raw materials exist;

Suppliers hold scarce resources;

Cost of switching raw materials is especially high.

3) Bargaining power of buyers. Buyers have the power to demand lower price or higher product quality from industry producers when their bargaining power is strong. Lower price means lower revenues for the producer, while higher quality products usually raise production costs. Both scenarios result in lower profits for producers. Buyers exert strong bargaining power when:

Buying in large quantities or control many access points to the final customer;

Only few buyers exist;

Switching costs to other supplier are low;

They threaten to backward integrate;

There are many substitutes;

Buyers are price sensitive.

4) Threat of substitutes. This force is especially threatening when buyers can easily find substitute products with attractive prices or better quality and when buyers can switch from one product or service to another with little cost. For example, to switch from coffee to tea doesn’t cost anything, unlike switching from car to bicycle.

5) Rivalry among existing competitors. This force is the major determinant on how competitive and profitable an industry is. In competitive industry, firms have to compete aggressively for a market share, which results in low profits. Rivalry among competitors is intense when:

There are many competitors;

Exit barriers are high;

Industry of growth is slow or negative;

Products are not differentiated and can be easily substituted;

Competitors are of equal size; Low customer loyalty.

Although, Porter originally introduced five forces affecting an industry, scholars have suggested including the sixth force: complements. Complements increase the demand of the primary product with which they are used, thus, increasing firm’s and industry’s profit potential. For example, iTunes was created to complement iPod and added value for both products. As a result, both iTunes and iPod sales increased, increasing Apple’s profits.

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Using the tool

We now understand that Porter’s five forces framework is used to analyze industry’s competitive forces and to shape organization’s strategy according to the results of the analysis. But how to use this tool? We have identified the following steps:

Step 1. Gather the information on each of the five forces

Step 2. Analyze the results and display them on a diagram

Step 3. Formulate strategies based on the conclusions