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Arab Academy for Science and Technology

Comprehensive Exam

Case Analysis: XYZ Company

Azza Ahmed Abdel Wahab

HR Track

May 2005

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Current Situation

Evolution of the business


Individual ---- Family ----- Partnership?
Growth?

Stages of Evolution Changes should have happened (happened or not?)


Dimension of changes:
1. Values, Mission, Vision
2. Structure
3. Style of management
4. Performance management (HR strategies)

Mission – Objectives / Matching or not? /:

Mission review
Should the mission be reviewed to match the new phase that the business going
into?

Stakeholders and meaningfulness of the mission statement:


1- Owners and shareholders:
Mission statement defines the type and objectives of the business which helps the
both owners and shareholders to stick with the basic concepts of the business and
focus on what deliverables should the business result in.
2- Customers and suppliers:
Learning experts in developing customer satisfaction look to a mission statement
to define customer satisfaction goals. Developing customer care programs
depends on spreading the idea and importance within a company
3- Employees:
Some mission statements also define internal goals, such as maintaining a creative
work environment and building respect for diversity. Experts in employee relation
look immediately to a mission statement for a definition of a company’s stand on
some of theses fundamental issues.
4- Society, environment and government:
Developing the value-based marketing framework to help companies and society
to understand the business expected output better. This framework states what
benefits the business offers, to whom, and the level of the impact on the society,
community and the people specifically.

Corporate Governance

1- Board of Directors

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 Board members actively participate in strategic management
 Board has ? members: ? insiders and ? outsiders
 Board appear: Diversified? Controlled by whom?

2- Top Management
 Responsible for current success of the company
 Appears competent to take company forward
 Set the tone for the company and its culture

3- Shareholders
Structure of the ownership and the owners influence over the business

Corporate governance principles can:


 The rights of shareholders.
 The equitable treatment of shareholders.
 The role of stakeholders in corporate governance.
 Disclosure and transparency.
 The responsibilities of the board

Board of Directors Role and Responsibilities


1- Reviewing and guiding corporate strategy,
2- Evaluating, influencing, initiating and Determining
3- Selecting, compensating, monitoring and, when necessary, replacing key
executives
4- Ensuring the integrity of the corporation’s accounting and financial
reporting systems, and their compliance with the law.
5- Overseeing the process of disclosure and communications.

Analysis of the important internal and external factors that strongly affect the
corporation's present and future performance

Environmental Analysis
I- External Factors
Using the External Factors Analysis System (EFAS), the following external factors
can be found:
1. Key Political, governmental, and legal variables
 Good foreign countries-Egyptian relationships that can create a
beneficial environment to facilitate growth of the business. (O)
 Instability of political status (T)
 Foreign countries policies (T)
2. Key economic variables
 Propensity of people to spend (O)
 Level of disposable income (T)
 Dropping prices encourage customers to spend (O)
 Purchasing Power (O)

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 Exchange rate
 Consumption patterns (O)
3. Key social, cultural, Demographic, and environmental variables
 New emerged lifestyle requires the need for faster communication (O)
 People preferences change very quickly (T)
4. Technological Environment Trends
Importance of technology in the business
 Electronic communication that change the way people communicate (O)
 More advanced IT systems (O)
 Fastest growing digital technology industry providing high return (O)
 Constant R&D is required (T)
 Technology complexity(T)
 Rapid technological change (T)

II- Market Analysis:


1- Markets: Local – Global

2- Market Share

3- Marketing Strategy

III- Competition Analysis:


Using Porter Industry analysis approach the following factors affecting the
industry attractiveness can be found:
1- Rivalry among existing industry
 Number of competitors
 Relative size of competitors
 Industry profitability (O)
 Stage in industry lifecycle (O)
There are other large and niche players in the telecom industry. Fore example,
Vodafone. They are both domestic and international competitors.
2- Threat of new entrants
 Barriers of entry to industry (O).
Barriers to entry are high for small companies that need to acquire the
technology and low for large companies that are partially in the industry and
want to expand to this particular business.
3- Bargaining power of buyers / customers
 Importance of products to buyers (uniqueness) (O)
Low risks as the emerging need for the most advanced technological
telecommunications is still in the growing phase. Markets are not saturated
yet. Also, the distribution of the services and products is accomplished
through the company itself and no customer accounts for more than 10% of its
revenue.
4- Bargaining power of suppliers
 Importance of suppliers as major sources (T)

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A high risk, as this industry depends on one main supplier which is the
governmental authority of the telecommunications in the country. Obtaining a
consistent good business relationship with the sole provider of the centrals and
systems operating essentials is indispensable and switching to another supplier
is not feasible.
5- Threat of Substitute Products / Services
 Relative prices of traditional ways of communications as substitutes (T)

Organizational Factors:
Using the Internal Factors Analysis System (IFAS), the following factors can be
found:

I- Structure
Organizational structure shows functional organization. Structure appears more
mechanistic rather than organic as it encompasses high degree of
formalization, centralization, and specialization. Functional structure is
appropriate for medium- sized firms with several related lines in one industry.
Employees tend to be specialists in the functions important to the business.

II- Culture
1. Basic values appear to be widely held and strongly held
2. Culture emphasizes rapid ongoing innovation and a high level of customers’
satisfaction.
3. High commitments to maintaining open relationship with customers
4. XYZ is employee oriented
5. Aggressive marketing, featuring telecommunication
6. Environment where talented people do brilliant work
7. Growth of the market share
8. Expertise in high –performance system design which enabled the company to
bring advanced technologies down in price.

II- Management Style


Leadership approach

Decision making models

IV- Organizational Performance Management

Dimensions Year 1 Year 2 Year 3


Increase in net income
Increase in revenues
Increase in R&D expenditure
Net income per common share
Position in the market
Customer base expansion
Adopted quality control system

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Increase in Market Share

V- Corporate Resources Operations


1- Finance
The main objective is to maintain the phenomenal growth rate in revenue and
profit.
Financial ratios:
- Profitability
- Activity
- Liquidity
- Leverage

2- Marketing
Using aggressive marketing strategies, the main objectives are:
 Pay close attention to customer request
 Provide wide range of options

3- Operations
The main objectives are
 Operate at low cost and high customer satisfaction
 Improve efficiency
 Improve quality and speed

Human Resources:
The main objective is to maintain an open communication environment with more
focus on learning and career development in which employees can be
effectively and efficiently productive, creative and innovative.

Strategic Factors
The most important internal and external factors that strongly affect the corporation’s
present and future performance:

Going Transnational

The Transnational Challenge is instead of demanding efficiency, responsiveness, or


learning as the key capability for success, worldwide businesses now require
participating firms to achieve the three capabilities simultaneously to remain
competitive.

Local and international expansions

Recommendation:

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I- Vision - Mission – Core values

Mission:
Mission Statement is used to define the business concept. A company mission
statement defines the underlying goals (such as making profits) and objectives in
broad strategic terms, including what market is served and what benefits are
offered.

Corporate Mission should:


1. Represent the broadest perspective of the corporate mission.
2. Be supported by a set of values that set the performance standards and
direct the mission’s implementation.
3. Be clear and succinct
4. Incorporate meaningful and measurable criteria.

When creating a mission statement, the following concepts have to be considered:


 The moral and ethical position of the enterprise
 The desired public image
 The key strategic influence for the business
 A description of the target market
 A description of the products or services
 The geographic domain
 Expectations of growth and profitability

Mission Review
 A reexamination of an organization’s current mission and objectives must be
made before alternative strategies can be generated and evaluated.
 When formulating strategy, decision makers tend to concentrate on the alternative
rather than on a mission to be fulfilled and objectives to be achieved.
 The end result is that we often choose strategies that set our objectives for us,
rather than having our choices incorporates clear objectives and a mission
statement.

Recommended Mission: Extra examples in page 279


To rapidly and continuously design, introduce and deliver new mobile systems and
service products using our distinctive competencies and leadership capabilities in
expanding the markets transnationally to seize the opportunity of the emerging high
tech advancements. Through maintaining a creative work environment and building
respect for diversity we aim to offer our regional and transnational customers
improved telecommunications performance at competitive prices that lead to gain
their satisfaction and consequently increasing revenues and net income by 10%
yearly.

Objectives:
 To produce high quality services at low prices

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 To be a major innovative force in future generations of telecommunication
services through increasing expenditure on R&D.
 To leverage electronic communication network and cultivate interactive
relationship with business partners like suppliers, customers, and employee.
 Satisfy consumers with continuous improvement and innovation.
 To become an online business.
 To improve productivity and set new standards of efficiency with business
relationship.
 To reduce time to market
 To increase revenue and lower expenses
 Increase the competitive capabilities and obtain competitive advantage over
rivals.

Core values:
A good core value should be:
 Shared
 Constant
 Expressed clearly
 Matching with other values
 Can be implemented

Company’s Proposed Core Values:


 Customer Focus
 Employee Empowerment
 Teamwork environment
 Space for innovation
 Continuous quality improvement
 Reduced costs and prices

II- Culture

Dimensions for sustainable healthy culture that can live on beyond the tenure of the
present leader:

1- Continuous Improvements
2- Team Work
3- Supportive Management philosophy
4- Creativity and Innovation
5- Maximizing stakeholders -including owners’- wealth
6- Adaptability to change
7- Creating value to the society
8- Shared values
9- Continuous learning
10- Reducing Uncertainty
11- Decentralized decision making
12- Informal structure where interconnectedness is available

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13- System openness
14- Leadership concepts
15- Employees empowerment

III- Going transnational recommendations

The Characteristics & Strategies for Transnational Organization competing in


foreign markets:
 Builds and legitimizes multiple diverse international perspectives able to sense the
complex environmental demands and opportunities
 Its physical assets and management capabilities are distributed internationally but
are interdependent
 It develops a robust and flexible internal integrative process
 Tailoring products for the big, emerging markets often involves
1. Making more than minor product changes and
2. Becoming more familiar with the local cultures
 Companies have to attract buyers with bargain prices as well as better products
 Specially designed and/or specially packaged products may be needed to accommodate
local market circumstances
 Management team must usually consist of a mix of expatriate and local managers
 Building distributed and interdependent capabilities.
 Company taps into important technological advances and market developments
wherever they occur with empowerment.
 Development of an integrated network model of organization.
 Management considers each of the worldwide units as a source of ideas, skills,
capabilities and knowledge for the company.
 Transferring valuable competencies to build a global competitive advantage.
 Development of broader competencies and capabilities.
 Coordinating cross-border activities to build a global competitive advantage
like Shifting production from one location to another to take advantage of most
favorable cost or trade conditions or exchange rates.
 Enhance brand reputation by incorporating same differentiating attributes in its
products in all markets where it competes
 Operation systems should work in alignment with the new strategies under the
umbrella of the reviewed mission and objectives.

IV- Strategies:

Strategies as an outcome of the SWOT analysis.

Providing Competitive Advantage in a growing industry:


1- Through developing the core and distinctive competencies
2- Through extending the learning curve and educating the market, market share can
go hand in hand with profitability.
3- Through following first-mover functional strategy of technological leadership, this
translates into market dominance and profitability.

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4- Through thorough environmental scanning and industry analysis as a crucial part of
strategy formulation in which new entrants and entry barriers are even more
important to understand.

Grand: Growth
Stability
Retrenchment
Generic

V- Products – Markets Matrix

Products
Old New
Market
Old

New

VI-Structure

Also large corporations that want to encourage innovation and creativity within the its
firm must choose a structure that allows the appropriate amount of freedom while
maintaining some degree of control at headquarters. So, structure should be
responsive to industry growth, technological change and to the competition.

Proposed structure should have some features which help the organization to achieve
the competitive advantage efficiently and effectively. Some of these features are
as the following:
 Organic structure rather than mechanistic structure
 Less degree of formalization and few SPOs or rules
 Decentralized operations
 Less specialization
 More teamwork

Models can be recommended:

1. Divisional Structure
Appropriate for a large corporation with many product lines in several related
industry. Employees tend to be functional specialists organized according to
products or market distinctions.
2. Matrix Structure
Appropriate for organizations that conclude a combination of horizontal linking
mechanisms like Strategic Business Units. In this type of structure, both
functional and divisional forms are combined simultaneously at the same level

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of the organization. Employees have two superiors, a project or division
manager and a functional manager. The home department is usually functional
while people from these functional units are often assigned to one or more of
the projects or divisions.

Matrix structure is recommended when the external environment especially the


technological and market aspects are very complex and changeable.

Matrix structure works better when:


 Ideas can be cross-fertilized across projects.
 Resources are scarce
 High level of process information and decision making.

Drawback of the Matrix Structure:


 Conflict of authority, duties and resources allocation.
 Vague goals
 Likely continuous battle between functional and divisional manager

TopManagement
Top Management

Manufacturing
Manufacturing Sales
Sales Finance
Finance Personnel
Personnel

Manager:
Manager: Manufacturing
Manufacturing Sales
Sales Finance
Finance Personnel
Personnel
ProjectAA
Project Unit
Unit Unit
Unit Unit
Unit Unit
Unit

Manager:
Manager: Manufacturing
Manufacturing Sales
Sales Finance
Finance Personnel
Personnel
ProjectBB
Project Unit
Unit Unit
Unit Unit
Unit Unit
Unit

Manager:
Manager: Manufacturing
Manufacturing Sales
Sales Finance
Finance Personnel
Personnel
ProjectCC
Project Unit
Unit Unit
Unit Unit
Unit Unit
Unit

Manager:
Manager: Manufacturing
Manufacturing Sales
Sales Finance
Finance Personnel
Personnel
ProjectDD
Project Unit
Unit Unit
Unit Unit
Unit Unit
Unit

VII- Style

Leadership approaches:
1. Directive Leadership
 Letting subordinates to know what is expected
 Giving directions on what to do and how
 Scheduling work to be done
 Maintaining definite standards of performance

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 Clarifying the leaders’ role in the group.

2. Supportive Leadership
 Doing things to make work more pleasant
 Treating group members as equals
 Being friendly and approachable
 Showing concern for the wellbeing of subordinates.

3. Achievement oriented Leadership


 Setting challenging goals
 Expecting the highest level of performance
 Emphasizing continuous improvements in performance
 Displaying confidence in meeting high standards.

4. Participative Leadership
 Involving subordinates in decision making
 Consulting with subordinates
 Asking for suggestions from subordinates
 Using these suggestions when making a decision.

Decision Making Models:

1- Classical Model
Describes how managers should ideally make decisions using complete information
Happens when:
- Clearly defined problem
- Knowledge of all possible alternatives and their consequences
- Choice of the optimum decision

2- Administrative Model
Describes how managers act in situations of limited information.
Happens when:
- Problem not clearly defined
- Knowledge is limited on possible alternatives and their consequences
- Choice of satisfactory alternative.

VIII- HR Development

The traditional sources of success are smaller now than they once were and will probably
be even smaller in the future; Human resources should be our major source of
competitive advantage.

Many concepts and programs should be adopted:

 Enhance learning opportunities:

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Based on the concept that the human capital could do what financial capital
couldn’t, the marginal value of investing in human capital is about three times
greater than investing in machinery.
Investing in people is the way to a growing valuable and precious capital in the
organization. Investing happens through:
1. Technical training (on the job and off the job)
2. Academic educations (scholarships)
3. Orientation sessions about, change management, going international
and diversified workforce synergy

Low value added High value added


Low value addedHigh value added
Difficult to replace Difficult to replace Difficult to replace
Low value added Easy toHigh value added Easy
Easy to replace replace to replace

 Knowledge management – Knowledge workers


The success of an organization depends increasingly on the quality of its people in
terms of knowledge, information, and know-how at their disposal.

Knowledge workers are self-managed teams that are a blend of skills and talents;
all members contribute to the organization’s knowledge creation and conversion
process.

Benefits of Knowledge Management

1. This is a strategic view of Knowledge Management caters to the critical


issues of organizational adaptation, survival and competence in face of
increasingly discontinuous environmental change.
2. Knowledge Management considers the synergy between technological and
behavioral issues as necessary for survival in 'wicked environments.'
3. The need for synergy of technological and human capabilities is based on
the distinction between the 'old world of business' and the 'new world of
business.'
4. Knowledge management is necessary for companies because what worked
yesterday may or may not work tomorrow
5. The most important issue for companies is to ensure that they focus on the
synergy of data and information processing capacity of information
technologies, and the creative and innovative capacity of their human
members
6. Given the need for autonomy in learning and decision making, such
knowledge workers would need to be comfortable with self-control and self-
learning. In other words, they would need to act in an entrepreneurial mode
that involves a higher degree of responsibility and authority as well as
capability and intelligence for handling both.

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 Attracting and retaining the intellectual capital
 Performance management which lead to innovation and creativity
 Flexible pay system which corresponds with the continuous global changes.

HR Objectives – activities

Human Resources department is becoming one of the most important departments in


multinationals because skilled human resources are the most valuable assets for the
organization that wants to gain a competitive advantage.

Therefore, HR manager should balance between individuals’ goals and the company
goals. This balance can be done through doing surveys to measure the employees’
satisfaction by their jobs, updating job description to improve recruitment, promotion
and annual increases processes.

The main strategic HR activities involve:


1. Attracting quality workforce
2. Recruiting and selecting Skilled Staff
3. Motivating and retaining the quality workforce through:
 Career development programs
 Performance Management programs which browses the innovative and
creative elements
 Flexible Reward System
 Self-managing and autonomy
 Quality of work life which helps to produce more efficiently and
comfortably at the same time.

IX- Information Communication System and e-business

Enterprises with large data resources have volumes of untapped intelligence just
waiting to be put to use. With a growing mobile workforce, it is essential to make this
business intelligence available to them at their point of need and equip them to make
profitable decisions. Mobile employees must also be able to access the business
processes critical to their job function.
Information communication is recommended to be used in:

1. Conveying formal policies


2. Providing constructive feedback
3. Opening communication channels
4. Employee group meetings
5. Employee advisory council
6. Suggestion boxes
7. 360 degree feedback (multi-rater assessment)
8. Use of communication consultants

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9. Technology utilization
10. Valuing culture and diversity

E-Business Requirements and steps


The enterprise-level solution for meeting all the requirements for managing e-Business
development is as follows:
 Maximize business value by aligning IT implementations with business goals.
 Increase IT effectiveness by better integrating development and operations.
 Control complexity with end-to-end life cycle management

X- R&D

Firms that emphasize growth through acquisitions over internal development tend to be
less innovative in the long run. However, companies should enjoy at least a minimal
R&D capability if they correctly assess the value of technology developed by others.
R&D creates a capacity in the firm to assimilate and exploit new knowledge which
results in a company that has a technological competence.

Spending on R & D as a percentage of sales revenue helps the firm to gain more market
share through doing research in developing the products/services (technological
competence) and making use of that innovative technology in day-to-day operations.
Moreover, R & D is responsible for technology transfer which is process of taking new
technology from the laboratory to the market place. If the company didn’t take
advantage for that technology transfer, it will lose its competitive advantage

The following are some practices to improve R&D:


1. Well defined and clearly communicated strategies.
2. Core technologies are defined and communicated to R&D
3. Funding for both basic research and development
4. Formal and cross functional teams
5. Ongoing evaluation
6. Effective measures for career development.
7. Diversified recruited people for specific skills and experiences.

Implementation

1- Look for global alliance partners to obtain foreign economies and market share
2- Maintain top of the line technology
3- Expand technological support and services
4- Adopt a quality system like continuous improvements or total quality management.

Evaluation & Control

1- Monitor market share in target markets and analyze trends

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2- Measure quality of products & services as viewed by customers especially new
users.
3- Monitor growth of mobile usage.

Limitations:

Constraints would face implementation of the recommendations


Examples of the limitations like:
Budget limits
Skilled labor availability
Culture changes feasibility

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