Strategy - real life examples
1 Introduction
Before we start looking at the theories of strategic planning, it might be worthwhile looking at some well-known companies and how they have fared in the past.
2 IBM
In the 1970s, IBM was a very powerful and profitable computer manufacturer. However, by the mid-1980s it had registered one of the largest corporate losses ever made. In the space of about five years there was a complete turnaround. How did this happen? With benefit of hindsight many commentators suggests that IBM hit hard times because it misread the impact of a change of technology, namely the impact of personal computers. For a company which had made a success of manufacturing and selling mainframe computers to large businesses and governments, personal computers might have seemed to be little more than playthings. A senior executive at the time was rumoured to have commented that he couldn’t see why anyone would want a computer in their home. IBM had also enjoyed very high rates of corporate growth for several decades, and once that happens to an organisation it might begin to believe that those rates of corporate growth are there for the asking. The organisation can become inward-looking and believe that it is invincible. IBM only managed to survive. It did make personal computers and laptops for some years, but those products quickly became commodities subject to very strong competition from manufacturers established in countries with cheap labour. There was little profit margin left and now IBM has almost forsaken computer manufacturing. It has become primarily a supplier of consultancy services. Consultancy services are harder to treat as commodities and have a better chance of retaining high mark-ups. They are also more difficult to source from cheap operations overseas.
3 Nokia
Until about 2008, Nokia was one of the most successful mobile phone manufacturers in the world. However, it was tied to an old operating system (Symbian) and when Apple launched its iPhone, Nokia rapidly lost market share. Nokia was sold to Microsoft in 2014 and Nokia is no longer used as a brand name for phones, having been replaced by Microsoft’s Lumia brand.
Nokia moved too slowly to stay up to date with popular developments
4 Kodak
Kodak is an organisation with almost unrivalled photochemistry. It had a reputation for excellent colour films. Obviously, digital photography has had a huge impact on the profitability of Kodak. The decline in Kodak’s profits does not necessarily mean that Kodak did anything wrong. It might simply mean that its unique, excellent technology has had its day. If you are very good at something, but then no-one wants what you are good at any more, then success will be damaged. Kodak is trying to change to other areas of the market such as cameras. However, having had a uniquely strong position in colour chemistry it could be difficult to transfer the reputation and replicate your success even in related industries. For example, camera manufacturing there are powerful, long-established companies such as Canon, Pentax, Nikon, and Leica. Even though Kodak can make excellent digital cameras, it is hard to compete against those companies. Kodak might never make again the same high profits it once did.
5 Uber
Massive growth rate but problems about:
Management
Treatment of staff
Qualifications of staff, standard of cars and associated passenger safety
Resistance from vested interests.