Thursday, December 20, 2012

Shirt Master Group ( Q&A's )

.....Insert Your Encoded Adsense Code here.....


Q1: The Shirt Master Group is performing poorly by any standards and this reflects the poor strategic position of a major part of the group which is Shirt Master Division.
Using a 5-forces and value chain analysis we can see that the chosen strategy
Of being an integrated shirt manufacturer carrying out all the activities needed to design, manufacture and distribute its shirts is now seriously open to question.


 Most of its UK competitors have recognized the need to source shirts from low cost manufacturing countries. But Tony Masters seems to be alone in thinking that by maintaining a UK manufacturing capability this will give it some competitive advantage. The economics of the industry have changed dramatically with foreign shirt makers able to supply both the quality of shirt required in the premium shirt market and at prices that would enable Shirt Master to radically improve its profit margins. The division seems to be in the classic ‘stuck in the middle’ position having neither the volumes to achieve cost leadership or the skills to differentiate itself in the market as it has in the past. Its strategic choice has been to concentrate on the premium end of the shirt market but this focus strategy is now under considerable challenge.


 
The two key forces at work seem to be the intensity of rivalry between the shirt makers and the increased buying power of their customers – the retail outlets for their shirts. The Shirt Master division has remained heavily dependent on its small independent retailers, who themselves are under threat from the specialist clothing retailers and the supermarkets. There is a pressing need to analyze the changes taking place in the value chain underlying the shirt business. There is no evidence to suggest that Shirt Master is willing to make shirts under the own label brands of the dominant retailers. The Shirt Master division’s reliance on small independent clothing retailers is having significant cost effects on its value chain. In terms of in-bound logistics Tony’s expensive trips to buy cloth from foreign suppliers is resulting in large stocks of expensive cloth.  Meeting the individual demands of its many small customers must have a real impact on its manufacturing and distribution costs. Marketing expenses supporting the Shirt Master brand are both significant and yielding decreasing returns. In terms of the support activities, questions need to be asked at the infrastructure and HR levels in terms of Tony’s influence over strategy and operations, at the technology level in terms of their apparent lack of investment in CAD/CAM systems compared with the Corporate Clothing division and the procurement strategy has already been questioned. The measures below reflect a balanced scorecard approach to overall performance and clearly the Corporate Clothing division’s results bring the problems of the Shirt Master division into even more focus – comparisons are horrible!


Q2:Johnson, Scholes and Whittington define a strategic alliance as ‘where two or more organizations share resources and activities to pursue a strategy’.

There are a number of types of alliance ranging from a formal joint venture through to network where there is collaboration but no formal agreement. The type of strategic alliance will be affected by how quickly market conditions are changing – swift rates of change may require flexible less formal types of alliance and determine whether specific dedicated resources are required or whether the partners can use existing resources. It is important for alliance to be successful there needs to be a clear strategic purpose and senior management support; compatibility between the partners at all levels The advantages that may be gained by a successful strategic alliance include creating a joint operation that has a ‘critical mass’ that may lead to lower costs or an improved offer to the customer. It may also allow each partner to specialize in areas where they have a particular advantage or competence. Interestingly, alliances are often entered into where a company is seeking to enter new geographical markets, as is the case with both divisions. The partner brings local knowledge and expertise in distribution, marketing and customer support. A good strategic alliance will also enable the partners to learn from one another and develop competences that may be used in other markets. Clearly there is a real danger of the partner eventually becoming a competitor. In assessing the suitability for each division in using a strategic alliance to enter European markets one clearly has to analyze the very different positions of the divisions in terms of what they can offer a potential partner. The earlier analysis suggests that the ShirtMaster division may have the greater difficulty in attracting a partner. One may seriously question the feasibility of using the ShirtMaster brand in Europe and the competences the division has in terms of manufacturing and selling to large numbers of small independent UK clothing retailers would seem inappropriate to potential European partners. Ironically, if the management consultant recommends that the ShirtMaster division sources some or all of its shirts from low cost manufacturers in Europe this may provide a reason for setting up an alliance with such a manufacturer. The prospects of developing a strategic alliance in the Corporate Clothing division are much more favorable. The division has developed a value added service for its corporate customers, indeed its relationship with its customers can be seen as a relatively informal network or alliance and there seems every chance this could be replicated with large corporate customers in Europe. Equally, there may be European work wear companies looking to grow and develop who would welcome sharing the Corporate Clothing division’s expertise.

Q3:the Shirt Master Group has decided to structure itself using two divisions who are dealing with very different markets, customers and buying behaviors. In so doing the intention is to provide more value to the customer through a better understanding of their needs. The existence of the two divisions also reflects the origins of the two family businesses. Mint berg in his work on organization design and structure sees divisional configurations as being appropriate in relatively simple and static environments where significant strategic power is delegated from the ‘strategic apex’ to the ‘middle line‘ general managers with responsibility for the performance of the division. Indeed one of the benefits cited for divisionalised companies is their ability to provide a good training ground in strategic decision making for general managers who can then progress to senior positions at company headquarters. Tony Master’s unwillingness to delegate real strategic decision making power to the senior managers in the ShirtMaster division may be preventing those managers developing key managerial skills. Using the BCG matrix one could classify the ShirtMaster division as a ‘dog’ with low market share in a market exhibiting change but little growth. The Corporate Clothing division, by contrast, can be regarded as a “star” having a small share but of a growing market.




More easily developed within a divisionalised structure. Performance can be clearly identified and controlled and resources channeled to those areas showing potential. However, this may be at the expense of costly duplication of resources and an inability to get the necessary scale to compete in either of their separate markets. Certainly, the lack of co-operation between the divisions in areas such as information systems may lead to higher costs and poorer performance.

Q4:Much has been written on the links between leadership and culture and in particular the influence of the founder on the culture of the organization. Schein actually argues that leadership and culture are two sides of the same coin. Tony’s father had a particular vision of the type of company he wanted and importance of product innovation to the success of the business.
Tony is clearly influenced by that cultural legacy and has maintained a dominant role in the business though there is little evidence of continuing innovation.
Using the McKinsey 7-S model the founder or leader is the main influence on the development of the shared values in the firm that shapes the culture. However, it is clear from the scenario that Tony through his ‘hands-on’ style of leadership is affecting the other elements in the model strategy, structure and systems which are the ‘hard’ factors and senior staff and their skills which are the ‘soft’ factors in making strategic decisions. Delegation has been highlighted as one of the problems Tony has to face and it is a familiar one in family firms.

 Certainly there could be need for him to give his senior management team the responsibility for the functional areas they nominally control. Tony’s style is very much a ‘hands-on’ style but this may be inappropriate for handling the problems that the company faces. Equally, he seems too responsible for the strategic decisions the company is taking and not effectively involving his team in the strategy process. Style is seen as a key factor in influencing the culture of an organization and getting the right balance between being seen as a paternalistic owner-manager and a chairman and chief executive looking to develop his senior management team is difficult. The positive side of Tony’s style of leadership is that he is both known and well regarded by the staff on the factory floor. Unfortunately, if the decision is taken to source shirts from abroad this may mean that the manufacturing capability disappears.


Tony should be aware that changing the culture of an organization is not an easy task and that as well as his leadership style influencing; his leadership can also be constrained by the existing culture that exists in the ShirtMaster Group. Lewis’s three-stage model of change and force field analysis.



No comments:

Post a Comment