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.
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