An assignment on

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Strategy Implementation of Morgan Motor Company

Course Name: Strategic Management Course No.: BA-403

Prepared forMehedi Hasan Md. Hefjur Rahman Head & Associate Professor Business Administration Discipline Khulna University

Prepared byGroup Name: Explorer Name ID Abdur Rakib Akon 070305 Reza Al Saad 070312 Md. Masrul Mollah 070314 Md. Nazmul Huda 070323 th st 4 Year, 1 Semester BBA Program Business Administration Discipline Khulna University

Date of Submission: August 31, 2010

Strategy Formulation on-

Morgan Motor Car Company: The Last of Great Independents
Prepared byAbdur Rakib Akon; ID- 070305 Reza Al Saad; ID- 070312 Md. Masrul Mollah; ID- 070314 Md. Nazmul Huda; ID- 070323 th st Students of BBA Program (4 Year, 1 Semester), Business Administration Discipline, Khulna University

Abstract Henry Royce, W. O. Bently and Henry Frederick Stanley Morgan (H.F.S.), these three talented young men started business of automobile manufacturing in early 1900s after leaving school. W.O. Bently was forced to sell his company to his competitor Henry Royce in the worldwide depression of 1930. These two RollsRoyce and the Bently were international symbols of sophistication and wealth. But unfortunately RollsRoyce got bankrupt in 1960 and was divided up at government force. H.F.S. Morgan is the only company still surviving and operates with same plant facilities, it has occupied since 1919. In 1992, there was a ten year waiting list of prospective purchasers awaiting delivery of a mog as Morgan had high brand image to the buyers as real sports car. Though it has some weaknesses and threats of itself, it has some strength and opportunities created by its own and others. With its efficient strategy management and decision, from then to today, it competed with some strong competitors profitably and efficiently in the global market.

Strategy Formulation Corporate Strategy: Corporate strategy is primarily choosing the direction for the firm as a whole. Corporate strategy deals with three key issues facing the corporation as a whole. 1. 2. 3. Directional Strategy: The firms overall orientations toward growth, stability or retrenchment Portfolio Strategy: The industries or markets in which the firm competes through its products and business unit Parenting Strategy: The manner in which management co-ordinates activities, transfers resources and cultivates capabilities among product lines and business units

After analyzing the SWOT and TWOS with all of Morgan s strengths, weakness, opportunity and threat we found that it should follow the growth strategy that is expand the company s strategy as a directional strategy. Growth Strategy: In the Morgan s corporate directional strategies those must be designed to achieve growth sales, assets, profit or any combination of these. From the two basic growth strategies concentration and diversification for Morgan motor are as follows.

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Concentration: Concentration based on the current product lines those have real growth potential. Then make concentration of resources on those product lines make sense as strategy for growing. Two basic concentration strategiesare vertical growth and horizontal growth. Vertical Growth: Vertical growth can be achieved by taking over a function previously provided by a supplier or by distributor. Here Morgan can grow by making its own supplies or by distributing its own products. Basically Morgan should ensure the first one. As it does not have any own supplier. These all may be done in order to reduce cost, gain control over scare resources, guarantee quality of a key input. This growth can be achieved either internally by expanding current operations or externally through acquisition. Vertical Integration Continual: There are fourtypes of vertical integration. Those are Full integration, Taper integration, Quasi integration and Long term contract. Among those Morgan should prefer the Taper integration strategy and the range can be 40 to 60. Horizontal Growth: Horizontal growth can be achieved by expanding the firms products into other geographic locations or by increasing the range of product and services offered to current market. In case of Morgan it should ensure both two strategies. I t can grow horizontally through internal development or external acquisition or strategic alliance with another firm in the same industry. Diversification Strategy: As Morgan has become mature it needs to ensure some of diversification strategies. Two basic diversification strategies are- Concentric and Conglomerate. Concentric Diversification: As Morgan has distinctive competence it should use its strengths for diversification. These strategies must fit with product knowledge, manufacturing capabilities to be effective in original industry. Conglomerate Diversification: Morgan should not follow the conglomerate strategy. Portfolio Strategy: In portfolio strategy Morgan should decide how much time and money it should spend on its best products and business units to ensure that continue to be successful? Also it should decide how much time and money should spend developing new costly products. Most of which will never be successful. Morgan follow BCG growth share matrix, GE business skill and international portfolio analysis to find products competitive strengths, countries attractiveness can rate the industry, can select the key factors needed for success, can identify business units current positions, can identify performance gap, identify product that need lot of investment, can identify product which generates enough cash to maintain higher share of market, also can identify very low attractive product. Parenting Strategy: In the parenting strategy Morgan should decide what business should it own and why, also what organizational structure management process and philosophies will foster superior performance from the

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company s business unit.to generate corporate parenting strategy Morgan must focus on its core competencies and the value that can be created from the relationship between parent and its business. Developing a corporate parenting strategy there are three stages to follow to develop a corporate parenting strategy. First, Morgan needs to examine each business unit in terms of strategic factors. Second, the Morgan needs to examine each business unit in terms of areas in which performance can be involved, which refers to parenting opportunities. Third, Morgan needs to analyze how well it fits with the business unit. Morgan s strengths and weaknesses in terms of resources, skills and capabilities must be in concern to fit with opportunities. Functional Strategy: Functional strategy is the approach that a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage. For Morgan the core competency or core capabilities are its unique niche that is served with handmade traditional old fashioned car. As its core competency is superior in the competition, it is also distinctive competencies. So the functional strategy should be based on these distinctive competencies. The Sourcing Decision: Here the Morgan should decide, when a function should be housed; should it be integrated within the organization or purchased from and outside contractor. That is outsourcing means purchasing from someone else a product or service that previously provided internally. An outsourcing decision depends on the fraction of total value added that the activity under consideration represents and by the amount of potential competitive advantage in that activity for the company or business unit. For the outsourcing decision of Morgan it can use the following outsourcing matrixActivity s total value Low Activity s potential for competitive advantage High Low Taper Vertical Integration: Produce some internally Outsource Completely: Buy on open market added to firm s products and services High Full Vertical Integration: Produce all internally Outsource Completely: Purchase with long term contact

From the earlier discussion it was decided that Morgan should use taper vertical integration ; that is providing some internally. Because this activity s total value added to firm s products and services is low but the activity s potential for competitive advantage is high. But here the outsourcing range can be 40%60%. Marketing Strategy: Marketing strategy deals with pricing, selling, and distributing a product. In market development strategy there are two different strategyone, capture a longer share of existing market and two, develop a new

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market for current products. For Morgan it should follow the second one because it has already captured larger share of traditional car market, so it can develop a new market for current products. Product Development Strategy: It means first, develop new products for existing markets and second, develop new products for new markets as Morgan should follow. In terms of pricing strategy Morgan should follow skim pricing strategy, because it has high demand in the market. Financial Strategy: Financial strategy examines the financial implications of corporate and business level strategic options and identities to best financial course of action. For this, Morgan should follow leveraged buyout strategy. Research and Development Strategy: R&D deals with product and process innovation and improvement; it can also be the mix of both two. For Morgan,the mix of these two strategies should be followed. This R&D strategy can give competitive advantage to Morgan as differentiation by technological leadership. Operations Strategy: Operations strategy determines how and where a product or service is to be manufactured, the level of vertical integration in the production process and development of physical resources. For Morgan, it should follow job shop , because its production volume range is low and it uses skilled labor for production.

Purchasing Strategy:
Purchasing strategy deals with obtaining the new materials, parts and supplies needed to perform the operations function. For Morgan, to avoid pressure from suppliers it should use multiple purchasing strategies that is purchasing particular part from several vendors.

Human Resource Management Strategy:
HRM Strategy addresses the issue of whether a company or business unit should hire a large number of lower skilled employees or high skilled employees or cross trained employees. Morgan should hire high skilled employees then give them training to learn about Morgan s products and processes. It should also maintain proper management of employees. Strategy Implementation Strategy implementation is the sum total of the activities and choices required for the execution of a strategic plan.Not only in case of Morgan but also for every company they need to put their strategies into actions through different procedures. As Morgan has a labor based production process and that s why everyone will be implementer. All the managers who are in line should work with their fellow managers. To implement, managers would have to focus mainly on following areas:

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1.

2. 3. 4. 5.

Organization Structure: Every company has an organization structure which is the combination of both management & production structure. In case of Morgan, the emphasis is given to production structure rather than management structure. Resource Allocation:Morgan s main resource is their labor. As everything is handmade their whole production process depends on their labor force. Compensation Program:Morgan does have a smoother compensation program. They do not have any problem regarding this. They do much of their spending on their labor. Information System: Morgan doesn t need to use any kind of framework as they have only one factory. Corporate Culture: Morgan has a strong internal culture. They have strong bondage among the top level & low level or labor or labor unions.

Implementation Table: Strategy implementation s main objective is the synergy among the functions and business units. According to Tgor Ansoff, there are four synergies. After studying Morgan s profile, the following are the synergies which often affect the success of strategy implementation: 1. 2. 3. 4. Marketing Synergy:Common distribution channels, sales force, common advertising and promotions can have multiple returns for the same amount of spending. Operating Synergy: The efficient use of facilities, personnel, resource allocation, rules & control in production process. Investment Synergy:The joint use of plant, inventories, compensation and resource allocation. Management Synergy:Business can be more efficient if management can successfully overcome the earlier problems.

Organizing for Action Here comes the organization of facts and areas to go for an action. Purpose of this organization is to make the action programs coordinated with some defined objectives by the management and the operations department. Morgan is now in a much matured stage and it s creating life cycle development through offering several programs and services to its consumers and customers. Here we are going to suggest Morgan as Dialectical Inquiry to schedule the strategic formulated decisions and stage planning. First, we have defined our factors and usage level of Morgan from several sectors. As in the first assignment we have discussed these options in Strategic Factors Analysis Table , we are not going to discuss this much. Sequence of new Organizational Structure: Now, we are getting closer to define our implementation programs. For this, we have taken help from theory named Sequence of new Organizational Structure from Chandler . Here are the steps defined 1. New strategy creation: We have taken the Concentric Diversification as the new strategic go way. We have defined two problems discussing here-

2.

y acquire a company in a related industry like commercial appliances. y product synergy will be created Administrative Problems: We have found one administration problem. That is the labor management and bottlenecks problem.

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3.

4.

5.

Economic Performance Alternatives: When we were reviewing the economic performance, we saw it has well equipped resource and the alternatives we see from the SFAS model, we will be discussing in the stages of corporate development. New Structural Alternatives: We have two major alternatives to improve and another intermediate alternative to get a boost with production. Major problems are to ensure engine/motor supply and factory expansion . Another one is lifting technology introduction . Profit Return: After completing all the stages Morgan should enjoy the profit return and maintain with market to continue the market life cycle.

The Matrix of Change:

Importance

Factory Expansion + + +1

Supply Chain

Waiting List Hand Made High Labor Cost Niche Marketing Sports

-2 +1 +1 +1

+

+2

+2

Here we have tried to showcase the changes (shown in right columns) we are making whether it making conflicts with the existing practices (shown in left side). Here we have given some importance factors in the chart and + signs shows the complementary practices and - signs shows the interfering practices. Blank boxes represent weak/no interactions . Stages of Corporate Development and Action Plans Here we are now going to show the stage improvement model for the Morgan motor cars we have designed. This table is designed as which work we are going to develop in which stage, we here discussed with only three major key areas we need to look up with. Stages of Corporate Development: Functions 1. Sizing up major problems 2. Objectives Stage I Engine Making 1. Backup supply 2. Smooth production 3. Faster Production Acquire a firm/Building own factory Engine and equipment material supply Stage II Lifting Technology 1. Faster Production 2. Waiting list reduction Technology Up gradation Faster and smoother production Stage III Factory Expansion 1. More Production 2. Waiting list reduction Land, building and equipment occupancy More production and sales

3. 4.

Strategy Organization: Major characteristics of

Lifting + + +

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structure 5(a). Measurement and Control 5(b). Key Performance Indicators 6. Reward and Punishment

Bottom level management Self-supply Supply on demand

Bottom level management Faster production Maintenance

Mid and Top level management More production Sales and Promotion

Strategic Business Units network: Now we are suggesting a new network strategic structure for Morgan Motor cars. We have made it a simple look, but we believe by modification of this model and application Morgan will be largely benefitted.
Top Management

Human Resource Management

Sales and Marketing

Advertising and Promotion

Production

Finance

Motor Plant

Body Plant

Assembling Plant

Outsourcing

This is the SBU Structure we are suggesting for Morgan Motors. Business Process Reengineering: Reengineering is necessary when a business is going to modify its organizational structure and processing system in a whole. As we have defined our TOWS analysis, we have found four following BPR options to follow-

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y y y y

Organize with own materials Technology Integration Geographic promotion Cost competition with Japanese cars

Action Plan: Now, the final stage of implementation has come. Here we identified nine identical solution activities for Morgan motors to resolve its market situation and production process. 1. 2. 3. 4. 5. 6. 7. 8. 9. Niche marketing Cost maintenance Consumer preference Plant modification Diversification Labor problem solving Dealer increase Faster and more production Cost competition

Now, we have tried to developed the action plan table hereAction Plans for activities a. Program Throw b. Sports Marketing a. Decrease labor dependency b. Lifting a. Dedicated design a. Lifting b. Factory expansion c. Engine production a. Individual designs b. Colors c. Sports car d. Sports gear a. Reward b. Commission a. Geographic promotion b. Care solutions a. Vertical Integration b. Lifting c. Expansion a. Low costing promotion b. Status Promotion Dept. Adv. & Prom. Adv. & Prom. HR Production Sales + Production Production Production Production Production Sales Production Production HR HR + Finance Adv. & Prom. Sales Production Production Production Adv. & Prom. Adv. & Prom. Duration Short Intermediate Intermediate Intermediate Short Intermediate Long Short Short Short Short Short Short Short Intermediate Long Short Intermediate Long Intermediate Long

1. 2. 3. 4.

5.

6. 7. 8.

9.

This is all about our solutions. We have made this suggestion out for Morgan with reviewing the case and the market effects of Morgan motors. We hope, this will work for the best. [Every organization has its own policy and procedures to cope up with different situations and it need to be solved with strategic and analytical decisions. We have tried from our limited perspective, but in actual, this is a big deal with the firm. Within this short time we have tried our best to define these terms and make out a solution. We believe, any mistake will be considered by screening our time and knowledge limitation.]
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