Article Review of When Growth Stalls
Review of: Olson, Matthew S., Van Bever, Derek ,Verry, Seth. 2008. When Growth Stalls. Harvard Business Review, 51-62.
The article raises the issue of revenue growth stalls that affect even the most successful companies. The article focuses on four major causes of the crisis. The first cause is the premium-position captivity that is”the inability of a firm to respond effectively to new, low-cost competitive challenge or to a significant shift in customer valuation of product features” (p.54). The second reason is the innovation management breakdown that is”some chronic problem in managing the internal business process for updating existing product and services and creating new one” (p.56). Third reason is the premature core abandonment that means “the failure to fully exploit growth opportunities in the existing core business” and “acquisitions of growth initiatives in areas relatively distant from existing customers, products, and channels”(p.56). Finally, the fourth cause is the talent bench shortfall that is “a lack of leaders and staff with the skills and capabilities required for strategy execution” (p.58). Authors emphasize that these causes are mainly within management control since they result from “a choice about strategy or organizational design” (p.54).
They point out that awareness and understanding of these causes assist companies in avoiding the growth stalls. In addition, the article demonstrates few practices that some companies use to predict and prevent the problem.
The article provides examples of companies that have faced the crisis. For instance, the premium position captivity reason was among the main factors causing Levi Strauss to lose its share of market. ...
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...when the company focused on further improvements of its pickups and SUVs instead of focusing on innovations required by the changing demand. If the management had not been ignorant and would have developed sound strategy as soon as it spotted the change, the company would have avoided the crisis. However the company just recently adjusted its production plan and plans to continue realigning its manufacturing capacity, product mix and cut costs to fix the situation (“Ford Adjusts Production”).
References:
Ford adjusts production plan but still loosing money in North America. Automotive Digest Weekly. Retrieved June 4, 2008 from http://www.automotivedigest.com/weekly.shtml#6
US auto sales slide in May as buyers spurn trucks. CNBC. Retrieved June 4, 2008 from http://www.cnbc.com/id/24949794/site/14081545?__source=aol%7Cheadline%7Cquote%7Ctext%7C&par=aol
The case study, `Will GM 's Strategic Plan Lead to Success,` is about how the company General Motors Co. Plans to overcome financial deficits, ensure growth within the company, and remain competitive in the automotive industry. To help with overcoming financial deficits, GM was apart of the bailout, which assisted GM in relieving themselves of almost $40 billion dollars of debt. This restructuring gave GM an advantage over other automakers. Most other automotive businesses, that did not participate in the bailout, still have billions of dollars of debt they must repay in addition to competing with its adversaries.(Kinicki & Williams, 2013). GM made many cutbacks to ensure growth within the company. The reduced the amount models that are in production. They have recognized that some changes need to be implemented with global production in order to remain ahead.
Stuart, Reginald. "ON THE RISE?" Crisis (15591573) 114.4 (2007): 16-20. Academic Search Elite. EBSCO. Web. 4 Oct. 2011.
In the observation of Sergio Marchionne and the Chrysler group there were many things that needed to change within the organization to make it survive not only the recession but the future in a competitive leading edge automobile industry. There were a couple of observable artifacts, and a Hieracicial framework that may have led Chrysler into bankruptcy. It is still not clear if Chrysler has changed the Vision statement for the organization, but after a review it is clear that it is customer focused. I found it interesting that Mr. Marchionne did not purchase Chrysler, it was a Government agreed merger with Fiat (“Fiat, Chrysler and Sergio Marchionne,” n.d.) Sergio Marchionne was able to change the culture and combine two companies in two countries and managed to boost sales and profit. (Clothier, n.d.)
Ford Motor Company current mission statement is “committed to provide personal mobility for people around the world”. With that in mind their vision is to become the world’s leading Consumer Company for automotive products and services. By improving everything they do, the company provide superior returns to their shareholders (Vision, Mission, Values).
Despite of these good things, Ford Motor faced a loss due to some wrong decisions taken by the management regarding their business strategy. The decision of centralizing the management made them think narrowly which results in too much Americanization and ignorance of local market in the rest of the world. This caused losing global market for them.
Weaknesses: As the results of the recession, Ford had faced so many financial difficulties during the past few years. Ford try to lay off employees, closed its plants, and cut its global workforce by more than a third. In addition, the company did loss billions of dollar when tried to expand the business in Europe and China.
Many economic factors exist that impact the development of Ford Motor Company's strategic plan and it’s no small task to project how some of these factors might change as the strategy is being realized. Consider the prospect of expansion into a new market like China or Mexico. Economic changes like currency devaluation will make Ford’s product more expensive to their target market potentially reducing overall sales revenue. Oil prices as we’ve seen in the U.S. economy can also play a big factor as large vehicles become less desirable and more fuel efficient compact cars gain market share.
Every successful company needs a competitive advantage. As part of our companies future they current successor team has researched various goals and strategies that will move Ford forward and allow them to be competitive in the changing market. “Ford must solve its nagging overseas problems and then "p...
As presented in the case study we know that Ford was losing the market to the cheap Japanese cars being produced. As a corporation that
...not just the financial issues for example equity shares, turnover and profitability. Before any growth entrepreneur need to have a plan to ensure that they know the risk and what problems will be appear and the solution to solve the problem. Although a growth plan is times consuming to be preparing but other company would like to look at the plan before doing anything. Also entrepreneurs always need to beware of the company vision is it similar to each other, culture and the communication also will affect the result and should be considered carefully. Those are the main reasons to make company businesses successful or failures in few years. Furthermore, this method cannot predict one thing is the timing, sometimes entrepreneurs miss the right time to growth their company because of the physical problem like earthquake or hurricane occurs which no one can predict it.
Sometimes people invest in businesses, but they are unable to thrive through financial crisis when they arise. The book has used several examples to helps business managers to see through their institutions during financial depression periods. When business management uses various innovative ideas, it can be able to defeat market inflations that affect the business. Investing in many innovative ideas helps business to ship in profit from different sources. The sources of income mutually benefit from each other. Therefore, should one source fail it can be supported by others. The book has given various concepts in business management. These concepts help managers in collective decision making that propel business towards goals achievement. The concepts in the book also help managers and entrepreneurs in managing the workforce in an organization. The book has also given the concepts that help business stakeholders in investing in innovative ideas that can be well integrated with modern business. It has also given case studies that help the readers to have a deeper understanding of the management
The distinction between the start-up and growth stages in not easily defined. The distinction lies in the revenues, profits are stronger and are consistent with an increase in customers, as well as, new and exciting opportunities for the employees to pursue. Managers can look forward to many managerial challenges, perspective policy issues and re-evaluating the business plan for revisions. A manager’s focus should be in the running of the business, with a greater emphasis on accounting and human resource management systems. New staff will have to be hired, trained and prepared for the influx of business.
...s Growth." US News. 11 Nov. 2011. U.S.News & World Report. 14 Jan. 2014 .
Growth strategy is the organisation formulating their plan to accomplish their objectives and goals to grow in revenue and size of the business. However according to (Bridge, O’Neill and Cromie 2003), she defines growth strategy as a “...the movement of the business into bigger premises, taking on more staff, significant increases of turnover, taking on a new product line or lines, buying another business, and so on” Growth Strategies are important for businesses as they allow the business to move in a formal direction. Businesses can easily be affected by the smallest of changes for example new customers or the arrival of new competitors which could have a negative impact, so planning is very important and takes care of additional effort and resource for faster growth. With these growth strategies, organisations try to achieve numerous things for example, obtaining economies of scale, attaining market leadership and retaining talented staff.
...(Boudette, and Dolan, 2010). Ford is about to launch its smaller vehicles; less than two years ago Ford motor’s plant in Mexico was building big pick-up trucks. But it has retooled to produce Ford’s small Fiesta car, due to go on sale in America for the first time in June. (Simon, 2010).Mulally is the architect of Ford’s remarkable recovery in its fortunes.