morgan motor company -2

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An assignment on-

Strategy Implementation of Morgan Motor Company

Course Name: Strategic Management

Course No.: BA-403

Prepared for-

Mehedi Hasan Md. Hefjur Rahman

Head & Associate Professor

Business Administration DisciplineKhulna University

Prepared by-

Group Name: Explorer

Name ID

Abdur Rakib Akon 070305

Reza Al Saad 070312

Md. Masrul Mollah 070314

Md. Nazmul Huda 070323

4th

Year, 1st

Semester

BBA Program

Business Administration Discipline

Khulna University

Date of Submission: August 31, 2010


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Strategy Formulation on-

Morgan Motor Car Company: The Last of Great Independents

Prepared by-

Abdur Rakib Akon; ID- 070305

Reza Al Saad; ID- 070312

Md. Masrul Mollah; ID- 070314

Md. Nazmul Huda; ID- 070323

Students of BBA Program (4th

Year, 1st

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 Rolls-

Royce and the Bently were international symbols of sophistication and wealth. But unfortunately Rolls-

Royce got bankrupt in 1960 and was divided up at government force. H.F.S. Morgan is the only companystill 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. Directional Strategy: The firms overall orientations toward growth, stability or retrenchment2. Portfolio Strategy: The industries or markets in which the firm competes through its products

and business unit

3. Parenting Strategy: The manner in which management co-ordinates activities, transfersresources and cultivates capabilities among product lines and business units

After analyzing the SWOT and TWOS with all of Morgans strengths, weakness, opportunity and threat we

found that it should follow the growth strategy that is expand the companys strategy as a directional

strategy.

Growth Strategy:

In the Morgans 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 fordiversification. 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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companys 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. Morgans 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 handmadetraditional 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 matrix-

Activitys total value added to firms products and services

Low High

Activitys

potential for

competitive

advantage

HighTaper Vertical Integration:

Produce some internally

Full Vertical Integration: Produce

all internally

LowOutsource Completely: Buy on

open market

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 activitys total value added to firms products and services is low

but the activitys 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 competitiveadvantage 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 Morgans 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 thats 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. Organization Structure: Every company has an organization structure which is the combination ofboth management & production structure. In case of Morgan, the emphasis is given to

production structure rather than management structure.

2. Resource Allocation:Morgans main resource is their labor. As everything is handmade theirwhole production process depends on their labor force.

3. Compensation Program:Morgan does have a smoother compensation program. They do nothave any problem regarding this. They do much of their spending on their labor.

4. Information System: Morgan doesnt need to use any kind of framework as they have only onefactory.

5. Corporate Culture: Morgan has a strong internal culture. They have strong bondage among thetop level & low level or labor or labor unions.

Implementation Table:

Strategy implementations main objective is the synergy among the functions and business units.

According to Tgor Ansoff, there are four synergies. After studying Morgans profile, the following are the

synergies which often affect the success of strategy implementation:

1.

Marketing Synergy:Common distribution channels, sales force, common advertising andpromotions can have multiple returns for the same amount of spending.

2. Operating Synergy: The efficient use of facilities, personnel, resource allocation, rules & controlin production process.

3. Investment Synergy:The joint use of plant, inventories, compensation and resource allocation.4. 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 its creating life cycle development throughoffering 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 goway. We have defined two problems discussing here-

y acquire a company in a related industry like commercial appliances.y product synergy will be created

2. Administrative Problems: We have found one administration problem. That is the labormanagement and bottlenecks problem.


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3. Economic Performance Alternatives: When we were reviewing the economic performance, wesaw it has well equipped resource and the alternatives we see from the SFAS model, we will be

discussing in the stages of corporate development.

4. New Structural Alternatives: We have two major alternatives to improve and anotherintermediate alternative to get a boost with production. Major problems are to ensure

engine/motor supply and factory expansion. Another one is lifting technology introduction.

5. Profit Return: After completing all the stages Morgan should enjoy the profit return and maintainwith market to continue the market life cycle.

The Matrix of Change:

Importance

SupplyC

hain

Factory

Expansion

Lifting

Waiting List -2 + +

Hand Made +1 + +

High Labor Cost + +

Niche Marketing +1 -

Sports +1

+2 +1 +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 Stage I Stage II Stage III

1. Sizing up majorproblems

Engine Making Lifting Technology Factory Expansion

2. Objectives 1.Backup supply2.Smooth production3.Faster Production

1.Faster Production2.Waiting list reduction 1. More Production2. Waiting list

reduction

3. Strategy Acquire a firm/Buildingown factory

Technology Up

gradation

Land, building and

equipment occupancy

4. Organization:Major

characteristics of

Engine and equipment

material supply

Faster and smoother

production

More production and

sales


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structure

5(a). Measurement and

Control

Bottom level

management

Bottom level

management

Mid and Top level

management

5(b). Key Performance

Indicators

Self-supply Faster production More production

6. Reward andPunishment

Supply on demand Maintenance 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.

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-

Top

Management

Production

Motor Plant

Body Plant

Assembling Plant

Outsourcing

Finance

Human Resource

Management

Sales and

Marketing

Advertising and

Promotion


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y Organize with own materialsy Technology Integrationy Geographic promotiony 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. Niche marketing2. Cost maintenance3. Consumer preference4. Plant modification5. Diversification6. Labor problem solving7. Dealer increase8. Faster and more production9. Cost competition

Now, we have tried to developed the action plan table here-

Action Plans for activities Dept. Duration

1. a. Program Throw Adv. & Prom. Short

b. Sports Marketing Adv. & Prom. Intermediate

2. a. Decrease labor dependency HR Intermediate

b. Lifting Production Intermediate

3. a. Dedicated design Sales + Production Short

4. a. Lifting Production Intermediate

b. Factory expansion Production Long

c. Engine production Production Short

5. a. Individual designs Production Shortb. Colors Sales Short

c. Sports car Production Short

d. Sports gear Production Short

6. a. Reward HR Short

b. Commission HR + Finance Short

7. a. Geographic promotion Adv. & Prom. Intermediate

b. Care solutions Sales Long

8. a. Vertical Integration Production Short

b. Lifting Production Intermediate

c. Expansion Production Long

9. a. Low costing promotion Adv. & Prom. Intermediate

b. Status Promotion Adv. & Prom. Long

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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