Question

Answer any three (3) of the following questions.

Be sure to mark the number of the question you are answering.

1. Distinguish between global and multi-domestic strategies. Under what industry conditions will each be appropriate?

2. Why is strategic control important in the strategic management process?

3. What are the advantages and disadvantages of vertical integration for a firm?

4. Why are effective reward and incentive programs important for the modern corporation? Give reasons for your answer.

5. Describe three (3) possible ways in which a firm can diversify its operations.

6. In what ways do you think that diversification generates competitive advantage for a company?

7. What are the steps managers use to design a control system for their firm?

Answer 1

1. Distinguish between global and multi-domestic strategies. Under what industry conditions will each be appropriate?

Multidomestic and global companies are similar in that both involve operations in two or more countries. The central difference is strategic. Multidomestic companies change some aspect of what they do in each country, whereas global companies maintain the same basic business approach in each market.

Multidomestic Purpose and Strengths

A multidomestic company adapts to each market based on differences in resource availability, cultural values, product usage and marketing opportunities. Primary strengths of a multidomestic approach include:

• Customized offerings: A core strength is a company's ability to tailor its activities and products to the interests and needs of each market. A business may offer high-end goods in a more affluent market but scaled-down. lower-priced goods in a market with lower per-capita income.
• Concentrated efforts: Business activities are concentrated on success in a single market. This focus allows for optimized production, marketing and services.
• Quick response: A company's ability to react to the changing needs of the marketplace is greater with a multidomestic strategy. Each local headquarters or business unit is close to the action and can identify evolving trends sooner than a distant central headquarters.

Global Purpose and Strengths

A global company is more centralized. Its operations and primary decisions are made at a central headquarters in the home country. Its primary trait is that business-level strategies are constant across all markets. For instance, a luxury brand remains just that in all countries of operation. Relative strengths include:

• Cost advantages: It is much less expensive to operate as a global provider, according to the Planned Skills website. When a business doesn't have to customize its products, business systems and marketing to each market, it saves a lot of money.
• Brand consistency: It is easier to build a global brand image when the message is consistent. Some companies desire the synergy that results when customers in different markets interact about the same products.
• Economies of scale: Closely tied to cost advantages, economies of scale is achieved when a company gets the best costs on supplies and business activities. With a global strategy, a business can leverage a vast supplier and distributor network to optimize efficiency and secure the best price.

Multi-domestic strategy would be appropriate in the industry which products are dynamic which like FMCG industry. its prices kept changing.whle Global strategy would be best in the industry which products are not dynamic like automobile.

2. Why is strategic control important in the strategic management process

strategic control is important because by this managers monitor the ongoing activities of an organization and its members to evaluate whether activities are being performed efficiently and effectively and to take corrective action to improve performance if they are not”

Managers exercise strategic control when they work with the part of the organisation they have influence over to ensure that it achieves the strategic aims that have been set for it. To do this effectively, the managers need some decision making freedom: either to decide what needs to be achieved or how best to go about achieving the strategic aims. Such decision making freedom is one of the characteristics that differentiate strategic control from other forms of control exercised by managers (e.g. Operational control – the management of operational processes).

Strategic controls take into account the changing assumptions that determine a strategy, continually evaluate the strategy as it is being implemented, and take the necessary steps to adjust the strategy to the new requirements. In this manner, strategic controls are early warning systems and differ from post-action controls which evaluate only after the implementation has been completed.

3-What are the advantages and disadvantages of vertical integration for a firm?

ADVANTAGES-

. Investment in specialized assets.
Getting advantage over the competition is what businesses are always aiming to do. By applying this system to your organization, it is possible to develop and invest in products that you offer. It will allow you to increase share in the market that would lead to increase your business profits.

2. Lower transaction costs.
There is low cost of transaction because of the transactions done between subsidiary companies with central management and central communication systems. This will be possible if their system is somewhat inexpensive to use.

3. Certainty with quality.
Due to the quality control system of the subsidiary company, it will be possible to have products of high standards. Acquiring this strategy will allow each product to go be produced with strict compliance of their quality standards.

4. Advantage over competitors.
This option will increase the barriers for potential competitors to enter. This is so because the company or firm can gain the only access to a limited resource.

List Of Disadvantages Of Vertical Integration-

1. Balancing problems.
Take for instance, a business requires the establishment of extreme upstream capacity for the assurance of having enough supply from downstream operations under any condition. The previous suppliers of the business may think of retaliating which can potentially endanger the production.

2. Flexibility decreased.
Businesses that are previously involved with upstream or downstream investments will more likely result to the decrease in its flexibility. However, it will increase the flexibility in the coordination of vertically-related activities.

3. Market entry barriers.
Market entry barriers are often the case when manufacturers control the access to raw materials or crucial components with scarce origin. Through vertical integration, they are able to limit the competition and possibly establish strong market position and allow protection of the business’ consumer base. Nevertheless, this could lead to anti-trust when regulators think that mergers alter market concentration.

4. Inability to increase product variety.
If significant development within the company is needed, it will decrease the organization’s ability to increase its product variety.