s.m assignment

STRATEGIC MANAGEMENT (SIM336)

A business enterprise guided by a clear sense of purpose rationally arrived at and emotionally ratified by commitment is more likely to have a successful outcome, in terms of profit and social good, than a company whose future is left to guesswork and chance.

Andrews K., (1987) The concept of corporate strategy; cited in De Wit & Meyer,(2010) Strategy Process, Content, Context, an international perspective 4th Edition

MODULE GUIDE 2012/2013

MODULE LEADER - Derek Harwood Module Team - Kristina Brown; John Davison;

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Table of Contents

Important Notes .................................................................................................................4 Introduction .......................................................................................................................6

Lecture and Seminar Programme ...................................................................................6 Sunspace Module information .....................................................................................7 University Documentation .............................................................................................7 Module Feedback ...........................................................................................................7

Assessment ........................................................................................................................8 MODULE DESCRIPTION ................................................................................................9

Introductory Lecture ............................................................................................. 12 Introductory Seminar : Review module guide and assessment! ............................. 13 Lecture One: The Strategy Labyrinth. ................................................................ 14

The Essential Reading For Lecture One ............................................................ 14 Seminar One ............................................................................................................ 15

Part 1. The Sale of Burmah Castrol to BP Amoco ................................................. 15 Part 2. Strategy Past; Strategy Futures .................................................................. 15 Lecture Two: Models, Concepts, Theories ............................................................ 16

The Essential Reading For Lecture Two ........................................................... 16 Seminar Two: The Brewery Group Denmark : Faxe, Ceres and Thor.................... 17 Lecture Three : Organizational Purpose ................................................................ 18

The Essential Reading For Lecture Three ......................................................... 18 Seminar Three : Blackberry & The Mobile Phone Industry ................................... 19 Lecture Four: Chaos and Strategy ......................................................................... 20

The Essential Reading For Lecture Four ........................................................... 20 Seminar Four: Blackberry & The Mobile Phone Industry ..................................... 20 Lecture Five: Influences On Action ...................................................................... 21

The Essential Reading For Lecture Five ........................................................... 21 Seminar Five: Ryanair .......................................................................................... 22 Lecture Six: Public Sector Strategy ...................................................................... 23

The Essential Reading For Lecture Six ............................................................. 23 Seminar Six: Strategy development at Castle Press & New Town Council ........... 24 Lecture Six A: Assignment Preparation Part 1 ...................................................... 25 Seminar 6A: Part 1 Final Preparation .................................................................... 25

This week - Hand In Part I of your Assignment. ............................................... 25 Lecture Seven: Risk Management ........................................................................ 26

The Essential Reading For Lecture Seven ......................................................... 26 Seminar Seven: Case Study: Ericssons Supply Chain .......................................... 27 Lecture Eight: Strategy - Does it Matter? .............................................................. 28

The Essential Reading For Lecture Eight .......................................................... 28 Seminar Eight : International Joint Ventures (IJVs) The Rover/Honda Alliance .. 29 Lecture Nine: Assignment Preparation Part 2 ....................................................... 30 Seminar 9: Assignment Preparation & Module feedback ...................................... 30 ASSIGNMENT 1 - TITLE: Strategic Analysis .................................................. 31

APPENDIX ONE......................................................................................................... 35 Useful URLs and important University Documents ...................................................... 35

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Important Notes

The lecture and seminar programme will be delivered during Term 1.

Lectures and seminars for this module will be delivered every week. Lecture 1 relates to seminar 1, and so on

Table I Lecture & Seminar delivery

Wk Date W/C Lecture Topic Seminar Academic paper / case study

Page

27 28 Jan 13 Module Outline

Introductory Lecture Outline of the Module & Assessment

Seminar Review module guide and assessment. Using Case studies The rationale.

-

28 4 Feb 13 Lecture 1 The Strategy Labyrinth.

Seminar 1 1.Case Study BP Amoco 2.Academic paper Strategy Past; Strategy Futures

37

47 29 11 Feb 13 Lecture 2 Models, concepts and

theories Seminar 2 Case Study - The Brewery

Group Denmark

57

30 18 Feb 13 Lecture 3 Organisational Purpose

Seminar 3 Case Study Blackberry & The Mobile Phone Industry

-

31 25 Feb 13 Lecture 4 Strategy and Chaos Seminar 4 Case Study Blackberry & The Mobile Phone Industry

-

32 4 Mar 13 Lecture 5 Influences on action. Seminar 5 Case Study Ryanair

69

33 11 Mar 13 Lecture 6 Public Sector Strategy Seminar 6 Case Studies - Strategy development at Castle Press & New Town Council

73

79 34 18 Mar 13 Lecture

6A Part 1 Assignment Preparation

Seminar 6A Part 1 Assignment preparation Electronic Databases; Keynote

-

22 Mar 13 Hand in Part 1 of your assignment

-

38 15 Apr 13 Lecture 7

Risk Management Seminar 7 Case Study - Ericssons risk management approach after a serious sub-supplier accident

87

39 22 Apr 13 Lecture 8

Finally Does it matter?

Seminar 8 Case Study - International Joint Ventures Rover / Honda

111

40 29 Apr 13 Lecture 9 Part 2 Assignment Preparation

Seminar 9 Assignment Preparation & module feedback

-

41 10 May 2013 Submit Part 2 of your assignment on Friday 10th May 2013

-

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Please note that the workshops are designed to follow the lectures. It is important that you arrive at the seminar having considered the lecture and read any case study material or academic papers given. The lectures will be available on Sunspace prior to being delivered so please ensure you print the lecture content prior to attendance at the lecture theatre then you can add notes during the lecture delivery. Failure to arrive at lectures or seminars prepared may detract from your learning and the learning of your seminar group - as well as wasting valuable time. Take advantage of the seminar process, complain (constructively) if you dont agree or give complements. Whatever you do please try to avoid being passive in the seminar process.

Derek Harwood Email: [email protected] Tel: 0191 515 2331

Kristina Brown: Email: [email protected]

John Davison Email: [email protected]

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SIM336 STRATEGIC MANAGEMENT

Personally I'm always ready to learn, although I do not always like being taught.

Sir Winston Churchill, British politician (1874 - 1965)

Introduction Traditionally, Strategic Management is presented as a final year core module in most Business Studies Degrees. The module aims are usually integrative and cumulative, in that it draws together the purposes and methodologies of the functional areas which are usually studied separately to show how they contribute to the overall purposes and aims of the organization as a whole. This synthesis and integration of the functional business areas into a real business entity is usually considered in relation to the environment in which the organization exists and with reference to a time scale from the past and more importantly projected into the future. Theoretical models are generally supplemented with case study material and students on sandwich courses returning from placement are encouraged to reflect upon their own recent experiences.

The challenge for the student and teacher is to:

analyse a complex organization; analyse a complex environment; analyse the complexity of relationships between the two; synthesise earlier diverse and possibly functional studies of the organization; assimilate new theoretical models; evaluate all models and methodologies against observations of the practices of

organizations in the real world.

The degree classification reflects the students ability to do this.

Strategic Management will have elements of all of the above although its primary aim is the study of the methodologies and models by which one might seek to grasp the extraordinary complexity of, understanding the organization in its environment as it moves through time. The application of these ideas to the analysis of real organizations is something that will be accomplished by you in the module assessment in which you will have plenty of opportunity to pursue your own ideas and to demonstrate your own abilities.

Lecture and Seminar Programme There is one lecture session each week followed by the seminar. The lectures will consist of information, explanation and exploration as detailed in this guide. You will get a lot more from the lectures if you do some directed reading from the list accompanying each lecture. The preparation will consist of reading and thinking about the issues it evokes. You may be asked to carry out some research or to undertake an exercise. Whilst most of the seminar work will relate directly to lectures and readings sometimes they will take detours and include contemporary topics.

Due to the nature of the assignment there will always be an opportunity in the seminars to discuss any particular issues that might arise during assignment preparation.

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Sunspace Module information

You will find this module guide, lectures, pod casts and other information on Sunspace at the following location :-

SIM336_1213_SEM2_A Strategic Management

University Documentation

The relevant links to the under mentioned documentation can be found in Appendix 1

1. University Generic Assessment Criteria 2. University Academic Regulations (including the Student Guide) 3. University Student Handbook 4. University Policy on Plagiarism 5. University Policy on Extenuating Circumstances 6. Guide for Students on the Supervision of Dissertations and Projects 7. University Policies on Complaints, Appeals and Student Discipline

Module Feedback

Module feedback is collated informally during the delivery of the module and formally during the last lecture. Feedback from last year and incorporated this year was would the seminar tutors review the strategic models in the seminar prior to application to the seminar case study.

Reading Information. Please note the reading is detailed week by week and the texts can generally be found in the Library (probably in limited quantity with respect to your numbers). Other texts may well be equally acceptable. Throughout the module guide I have identified at least 3 text books for reference, including page numbers, to the lectures and seminars. You could purchase these texts:

1. De Wit, B. and Meyer, R. (2010), Strategy Process, Content, Context, An International Perspective (Fourth Edition), Cengage Learning EMEA.

2. Johnson, G., Scholes, K., Whittington R., (2008), Exploring Corporate Strategy: Text and Cases (Eighth Edition), Pearson Education Ltd. - Note. There is an electronic version of this text available within the SunCat library catalogue.

3. Lynch, R. (2006), Corporate Strategy, (Fourth Edition), Financial Times, Prentice Hall, Harlow. - Note there is an electronic version of this text available within the SunCat library catalogue.

Ideally if you purchase a text I suggest you purchase 1 and/or 2 before 3. This module is a valid reason for getting into the habit of reading a good newspaper on a daily basis such as the Financial Times (FT). Note the FT is available online via the library and then the Discover icon. The FT will bring you up to date with many aspects of business topics.

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As you start work on your assignment you may find it very rewarding to browse amongst the journals on the electronic databases. This is of particular importance to your individual assignment as you choose the topic yourself so you need to choose it from some background knowledge.

Assessment The individual assignment takes the form of one 3,000 word assessment divided into two parts. It is designed to allow you to investigate an arena in which your own chosen particular aspect of Strategy may be developed, researched, analysed or synthesised in relation to your own thinking and creativity.

Culture and Structure Lectures are used to sign post ideas and thinking or develop single issues. Seminars will be used to reflect on ideas and look at examples of strategy in practice.

The early part of the course might be of concern to you in that some of your favourite strategic models of business may be questioned. Is hierarchy a good structure for an organization? What are the strengths and weaknesses of a SWOT analysis? Is strategy something you do or something you are? Is there such a thing as strategy and if there is who does it and where? There is no one view on strategy and whilst you may align yourself with a guru or a school of thought or develop your own individual view; it is important that you understand why you believe what you do and more importantly the strengths and weaknesses of your view.

We may agree, we may agree to differ; we may create something new. Where ever the course leads us it is important to remember that this is not just a course in Strategy; it is an opportunity to discover new things, question old things, create new things all of which require thinking and interaction in lectures in seminars so agree, disagree, ask questions, read and especially think.

Good luck!

Regards

Derek Harwood

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MODULE DESCRIPTION

TITLE: STRATEGIC MANAGEMENT CODE: SIM336 CREDITS: 20 LEVEL: 3 FACULTY: BUSINESS & LAW MODULE BOARD: UNDERGRADUATE BUSINESS AND MANAGEMENT

AND TOPUP PRE-REQUISITES: NONE LEARNING HOURS: 200 hours, the exact nature of which is specified in the module guide

LEARNING OUTCOMES Upon successful completion of this module, students will have demonstrated:

Knowledge K1. Understanding of the origins and various approaches to strategy K2. Understanding of the complexity of the relationships between the organisation

and its environment K3. Understanding of international/global strategic thinking K4. Understanding of the application of strategy ideas in practice

Skill S1. The ability to analyse the complexity of organisations and their environments S2. The ability to synthesise earlier, diverse and possible piecemeal studies of the

organisation and assimilate new theoretical models and offer solutions relative to strategic issues

S3. The ability to evaluate existing models and methodologies against observations of the practices of real organisations

CONTENT SYNOPSIS The module aims to be integrative and cumulative in that it draws together the purposes and methodologies of the functional areas of business policy and strategy which are usually studied separately and to show how they contribute to the overall purposes and aims of the organisation. This synthesis is usually considered in relation to the environment in which the organisation exists and with reference to a timescale projected into the future. The challenge for the student is to analyse complex organisations and their environments as well as the relationships between the two and evaluate models and methodologies against observations of the practices of real organisations. The module reflects the process of strategic management and the key schools of strategy in the context of stable or shifting, national and global environments.

TEACHING AND LEARNING METHODS This is taught on campus and off campus as a distance learning module delivered at Tutor supported centres requiring the students to work through a study guide that introduces the subject material and takes the student through a range of activities and case studies. Students will be encouraged to reflect on their own work and organisational experiences. Students will be expected to read the module guide and supported text reading and complete a range of self study activities to underpin their knowledge and develop analytical skills in respect to meeting the learning outcomes. All activities have feedback included. Off campus students will have access to a local academic Tutor who will offer workshop or online support. Students will be able to work

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with other students either on line or in workshops depending on the nature of the Centre approval. The following outline is indicative and will vary on and off campus and between Centres.

Breakdown of 200 Learning Hours Breakdown of 200 Learning Hours Weekly lectures and seminars 12 weeks @ 3 hours 36 Self directed study and individual assignment 164 12 weeks @ 13.67hours per week

Total 200 hrs

ASSESSMENT METHODS The assessment will be by one individual assignment. All learning outcomes will be assessed.

The standard University Regulations relating to the Infringement of Assessment Regulations apply. All work must be referenced using the Harvard Referencing System.

Sequence Assessment Type Marking Scheme

Weighting %

Qualifying Mark Pass Mark

001 Assignment UCMS 100 35 40

INDICATIVE READING LIST Primary Johnson,G., Scholes, K., and Whittington, R. (2011), Exploring Corporate Strategy, 9th Edition, Pearson Education Limited or earlier editions. Additional De Wit, B. and Meyer, R. (2010) Strategy Process, Content, Context. An International Perspective, 4th Edition, CENGAGE Learning.Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009) Strategy Safari, your complete guide through the wilds of Strategic Management, 2nd Edition, Pearson Education Limited.Stacey, R. D. (2000) Strategic Management & Organisational Dynamics The Challenge of Complexity, 3rd Edition, Financial Times Prentice Hall. Whittington, R. (2001) What is Strategy and does it matter? Routledge.

A number of journals are all available on the /Emerald/ system.

Students will be encouraged to use the internet as a source of contemporary material for their studies. To facilitate this, students will be given a list of journals and websites where relevant information is not only freely available, but is always up to date.

PROGRAMMES USING THIS MODULE AS A CORE OR OPTION B.A. (Hons) Leadership and Business Management BA (Hons) Business and Marketing Top-Up (Core) BA (Hons) Business Management Top-Up (Core) BA (Hons) Sports Management (Core) Combined Subjects (Business Major: (Core): Dual with dissertation: (Option):(Business Dual without dissertation/ Minor) (Core)

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Is the programme delivered On Campus or Off campus: On and Off campus Colleges: Various Approved Study Centres Work based learning: No Professional Accreditation: No

MODULE LEADER: Derek Harwood

LEAD DELIVERER As above

JACS Code: N100

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Introductory Lecture

This first session will be largely concerned with generally getting organised to commence the module. The educational aims of the module will be examined and how the assignment supports this. The preferred module culture will be described and an outline and overview of the course will be given. Included in this session will be some preliminary statements about the subject matter, the views of the teaching team, our assumptions and alternative views.. Some thought will be given to the way in which we seek to explain the world and especially the way in which we think about Strategy.

Read the Module Guide carefully, particularly the assignment and start thinking about the module and what you would like from it. Note down any queries you have, or points on which you would like further clarification. This is the normal format of suggested reading. You have generally have a choice of three texts to underpin the general discussion of the lecture topic and then a compulsory element of reading:

De Wit B. and Meyer R. (2010) p3-24 De Wit B. and Meyer R. (2004) p25-26 Reading 1.1, The First Strategists by Stephen Cummings

or

Johnson, G., Scholes, K. and Whittington. R., (2008) p1-28, p29-48. (8th Edition 658.403/J53) or

Lynch, R., (2006), p1-70. (658.403/L95)

And

McKiernan P., (1997), Strategy Past; Strategy Futures, Long Range Planning, Vol 30, No. 5, p790-798

Further Reading Victoria Griffiths, (October 1 1999) Theorists who re-invent old themes, Financial Times De Wit B. and Meyer R. (2004) p131-138 Reading 3.2 Logical Incrementalism By James B Quinn Ansoff I., (1987) Corporate Strategy, Penguin Books.

Notes: You may also find it useful to read Mintzberg et als text - Strategy Safari by Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009,) Strategy Safari, your complete guide through the wilds of Strategic Management, , 2nd Edition, Pearson Education Limited; The authors argue that there are ten schools of strategy.

These 2 are

available as an e

book from the

library: you will

need your user id

and password

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Introductory Seminar : Review module guide and assessment!

This session will be an introduction to the module and the assignment. Tutors will explain the logic of the module and discuss their/your expectations. Agreement will hopefully be reached on the approach(es) to be taken in seminars as well as ground rules of participation.

Go through the module guide with special reference to assessment. Note specifically the following:

Lectures tend to be about theory and practice, the seminars tend to be about practice and theory;

Crudely the assignment requires a lot of thinking; Start the reading now! Dont leave this module till three weeks after the start

thats too late. Every week bring questions about the lecture or directed reading what you

did/didnt understand or agree/disagree with. Seminars belong to everyone involved and can be adapted (within reason) to the needs of the class at any point. Active involvement is better than passive.

The use of Case Studies.

During the module seminars we will be using a lot of case studies to underpin Strategic Theory. This seminar will give an explanation as to the rationale for the use of case studies, the mini lecture is available on Sunspace on the home page of Strategic Management SIM336 entitled Why we use Case Studies.

Prior to ending this seminar, the seminar tutor will allocate individual groups to one of next weeks two case studies.

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Lecture One: The Strategy Labyrinth.

In summary, strategy is an elusive and somewhat abstract concept. Its formulation typically produces no immediate concrete productive action in the firm. Above all, it is an expensive process both in terms of actual dollars and managerial time. Since management is a pragmatic result-orientated activity, a question needs to be asked: whether an abstract concept, such as strategy, can usefully contribute to the firms performance.

Ansoff I., (1987:104) Corporate Strategy, Penguin Books.

This section introduces the some of the most popular models, concepts and theories of strategic management. It draws on the work of several authors of strategy including classical and contemporary thinkers. It also reviews De Wit & Meyers strategy dimensions in terms of process, content and context. A review of the history of strategy is considered applying Mintzberg et als ten schools of thought There is also an outline of the terms and relevance of voluntarism and determinism

The Essential Reading For Lecture One

De Wit & Meyer,(2010) Strategy Process, Content, Context, an international perspective 4th Edition, pp3-23. De Wit & Meyer,(2010) Strategy Process, Content, Context, an international perspective 4th Edition, pp25-26, Reading 1.1, The First Strategists by Stephen Cummings or Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009,) Strategy Safari, your complete guide through the wilds of Strategic Management, , 2nd Edition, Pearson Education Limited; pp1-19. or Johnson, Scholes and Whittington, (2008) Exploring Corporate Strategy, 8th Edition, Pearson Education Limited; pp1-28. pp29-48. or Lynch, R. (2006), Corporate Strategy, (Fourth Edition), Financial Times, Prentice Hall, Harlow. pp1-70. and Part 1 Case Study - The Sale of Burmah Castrol to BP Amoco Part 2 McKiernan P., Strategy past; strategy futures, Long Range Planning, Volume 30, issue 5, Oct 1997, pp790-798 These case studies are in the module guide

Further Reading Vickers G., (1970), Freedom in a Rocking Boat, London, Allen Lane. Lindblom C. E. (1959), The Science of "Muddling Through". Charles E. Lindblom. Public Administration Review, Vol. 19, No. 2. (Spring, 1959), pp. 79-88

Tutor Contact: Derek Harwood

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Seminar One

Part 1. The Sale of Burmah Castrol to BP Amoco Part 2. Strategy Past; Strategy Futures

This session will review some of the origins and definitions of early strategy models and then look at issues developed from the first lecture and the case study of BP Amoco and then the paper - Strategy Past; Strategy Futures by Peter McKiernan. Review Porters (1985) models - 5 Forces for Industry Analysis, Generic Strategies and the Generic Value Chain towards Competitive Advantage. Check the following link for Industry Analysis :- Last week you should have been allocated into groups and one of the case studies.

http://money.cnn.com/magazines/fortune/fortune500/2009/performers/industries/bestinv/10yr.html Date accessed: 6 Jan 2013

With regard to part 1: read the BP Amoco case study in the module guide and then answer the following questions:

1. Analyse the situation facing Burmah Castrol in the late 1990s, for example in terms of the strengths, weaknesses, opportunities and threats that it faced.

2. Explain the corporate strategy of Burmah Castrol a. prior to 1997 b. as it changed in 1997 until the sale to BP Amoco. c. being considered at the time of the sale as an alternative to that sale.

3. If the BP offer had not been forthcoming, what would you have recommended Tim Stevenson should have done?

4. Would you have recommended the sale of the company or pursued one of the above options?

With regard to part 2 read the academic paper Strategy Past; Strategy Futures by Peter McKiernan within the module guide and then answer the following questions:

1. Summarise the Planning and Practice School 2. Outline the Learning School. 3. Summarise the Positioning School. 4. Outline the differences between the Planning and Resource based Schools 5. Outline the differences between the Learning and Positioning Schools

Note that the above questions move from extracting information to picking up on the flow of an argument, to reflecting on the argument, to searching for mechanisms in operation, to thinking it through for yourself. All of these skills will be useful in your individual assignment as well as the course in general.

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Lecture Two: Models, Concepts, Theories

Initially the lecture highlights the limitations of models and their representation of reality. A review of Mintzberg et als Design School that predates 1965 which is then compared to Johnson et als more recent strategy model. Ohmaes (1982) boundaries of strategy are then considered. A broad range of strategy analytical tools are then outlined and discussed. Emphasis is then placed upon the following models - Porters (1985) models, including the 5 Forces for Industry Analysis, Generic Strategies and the Generic Value Chain, Bowmans Strategy clock, Kaplan and Nortons (1992) Balanced Scorecard, the BCG matrix and the GE McKinsey matrix, Ansoffs Product-Market Matrix and SWOT.

The Essential Reading For Lecture Two De Wit B. and Meyer R. (2010) p53-73 De Wit B. and Meyer R. (2010) p303-364 De Wit B. and Meyer R. (2010) p77-78 Reading 2.1 The Concepts Of Corporate Strategy by Kenneth Andrews

or

Johnson, G., Scholes, K. and Whittington. R. (2008) p49-92.

or

Lynch, R. (2006) pp190-268, pp446-486, pp460-506.

and

Case study: The Brewery Group Denmark in the module guide.

Further Reading Hill, T. and Westbrook, R. SWOT Its Time For A Product Recall Long Range Planning Vol 30, No 1, Feb 1997 p46-52

Notes:


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Seminar Two: The Brewery Group Denmark : Faxe, Ceres and Thor

The case study is The Brewery Group Denmark : Faxe, Ceres and Thor by Flemming Agersnap, cited in Johnson & Scholes (1997), Exploring Corporate Strategy, Text and Cases, Prentice Hall, 4th Edition, pp.574-584. This case study will give you an opportunity to apply some of the modules identified in the lecture. Notes Figures in the case study are in DKK; A quick conversion in currency - 10 Danish Kronnen = 1;

Review the case study Brewery Group Denmark (BGD) in groups.

The case study is available on Sunspace and within the module guide. 1. Apply the following models to assist you to identify the strategic position of the

company BGD :- a. Complete a Political, Economic, Social, Technological, Environmental and

Legal (PESTEL) analysis focussing on its International business. b. Complete an internal assessment of its strengths and weaknesses

i. Consider its finance, operations, marketing, production and leadership etc..

c. Porters (1985) Five Forces 2. Within the International market?

a. How does the company choose its partners? b. How does it choose its channels of distribution? c. Why does it invest in advertising?

3. What is the companys international strategy? a. How does it choose particular countries? b. Refer to the online Keynote report titled The Drinks Market 2009 Market

Review available via Athens login & the electronic databases and consider if it would be attractive for BDG to consider further expansion into the United Kingdom beer market at this present time (2009).

c. Apply Porters (1985) Generic Strategies Having applied the above strategy models, how do these strategies link together :-

What did you discover with the application of the models? Synthesise the information you have discovered from the application of the models in questions 1,2, and 3.

4. As a result of your synthesis a. What changes in strategy would you recommend and why?

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Lecture Three : Organizational Purpose

What is the purpose of organizations? Is it for the benefit of shareholders or stakeholders? The purpose is normally defined in the mission statement. The mission statement can be the anchor for the organization against which strategic direction and policy can be referenced. In a modern business what role does Corporate Governance have and how does it impact upon the performance of the business? The paradox of profitability and responsibility, and the perspectives of conflicting shareholder and stakeholder expectations will be explored.

The Essential Reading For Lecture Three

De Wit & Meyer, (2010) Strategy Process, Content, Context, an international perspective 4th Edition; pp596-612, pp617-622. or Johnson, Scholes and Whittington, (2008), Exploring Corporate Strategy, 8th Edition, Pearson Education Limited; pp131-169.

or

Lynch, R. (2006), pp340-371

And

Research Blackberry (RIM) and the Mobile Phone Industry

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Seminar Three : Blackberry & The Mobile Phone Industry

Some of the seminar will be devoted to having an individual discussion of the topic of choice for your assignment with the module tutor.

This seminar and next weeks seminar will be specifically devoted to an analysis of the Smartphone mobile phone industry and then the Blackberry Phone business within the company - Research In Motion (RIM).

The launch of the first Blackberry was in 2003. Ensure your analysis is across the Smartphone industry but consider that eventually you will put forward strategic recommendations to the Blackberry board (Research In Motion).

Essential Reading

Read chapter 2 of Johnson, Scholes and Whittington, (2008), Exploring Corporate Strategy, 8th Edition, Pearson Education Limited available online via the library.

1. Using appropriate tools for macro-environmental analysis, evaluate how macro-environmental factors have directly influenced the Smartphone industry.

a. What are the key PESTEL factors? b. Identify the Strategic Groups within the Smartphone industry?

2. What observations can be made about the influence of the macro-environmental factors on innovation among leading players in this industry? Consider the VIRO framework.

3. Apply Porters (1985) Five Forces to the Smartphone industry and discuss. 4. Review RIMs (Blackberrys) financial performance for 2010 and 2011 and

identify critical elements. For further RIM information go to :-

30 March 2012 http://www.bbc.co.uk/news/business-17557177 :Date accessed 6 Jan 13

The Research In Motion website: http://www.rim.com/investors/documents/ : Date accessed 6 Jan 13

For additional analytical tools that could be utilized refer to lecture 2:

For information on Strategic Groups refer to Johnson, Scholes,Whittington (2008:76), Exploring Corporate Strategy: Text and Cases (Eighth Edition), Pearson Education Ltd. - Note. There is an electronic version of this text available within the SunCat library catalogue.

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Lecture Four: Chaos and Strategy

The Essential Reading For Lecture Four De Wit B. and Meyer R. (2004) p477-492 De Wit B. and Meyer R. (2004) p500-505 Reading 9.2 Strategy As Order Emerging From Chaos by Ralph D. Stacey

or

Johnson G., Scholes K. and Whittington R. (2008), p557-576, p594,595.

and

Blackberry & The Mobile Phone Industry.

Further Reading Beer, S. Brain Of The Firm 2ed. Wiley 1981 p1-50 Beer, S. Beyond Dispute Wiley 1994 Lessem, R. Global Management Principles Prentice Hall 1989 p373-395 De Chardin, P. T. The Phenomenon of Man Collins London 1959 Ansoff I., (1987) Corporate Strategy, Penguin Books.

Seminar Four: Blackberry & The Mobile Phone Industry

1. Identify, in a SWOT analysis, the critical aspects you have discovered from the application of your chosen models (from last week) to the industry and then Blackberry.

2. What important factors have you discovered about the industry and Blackberry that are directly relevant to Blackberrys Strategic development?

3. Make recommendations to the Blackberry board on how it should develop its Strategy over the next 5 years note your recommendations need to be supported by evidence you have identified in seminars three and four.

4. Finally critically examine Research in Motion's decision (2012) to withdraw from the consumer market. Specifically, to what extent is the decision driven by competition or internal capabilities?


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Lecture Five: Influences On Action

Men like the opinions to which they have become accustomed from youth; this prevents them from finding the truth, for they cling to the opinions of habit.

Moses Maimonides (1135-1204); Egyptian physician and philosopher

In this session we shall look at some of the ways in which organizations carry inherent tendencies towards particular action. It is quite accepted that strategic decisions and actions will be influenced by outside forces in the environment - by competitors; by customers; by government; by global economic forces. What is less often explored is the degree to which organizations and people are locked into a limited range of choices by their own perceptions, character and history. Some positive characteristics of leaders are identified and a consideration of the dark side of leadership is also given.

Additionally a view is considered of how the growth of an organization can and does impact severely upon the leadership.

The Essential Reading For Lecture Five De Wit B. and Meyer R. (2010) p108-117 De Wit B. and Meyer R. (2010) p130-133, Reading 3.1, Managing The Strategy Process by Balaji Chakravarthy and Peter Lorange

or

Johnson G., Scholes K. and Whittington R. (2008) p399 - 423. or

Lynch, R. (2006) pp340 - 371.

and

Whittington, R. (2001) p42-61

Further Reading Wilson, D. C. A Strategy of Change Routledge 1994 Lessem, R. Global Management Principles Prentice Hall 1989 p597-660 Morgan, G. Images of Organization. Sage Publications 1986

Notes: Lessem is an excellent reference for all management thinking covering the classical to postmodern management gurus and thinkers.

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Seminar Five: Ryanair

This session will be based on topics developed in all of the lectures to date and the case study of Ryanair which consists of two articles. The first article is an extract taken from the Ryanair 2010 Annual Report, and is available in the attached case studies section. The second article is an interview conducted with Michael O Leary, Ryanairs Chief Executive Officer - Entitled Lunch with the FT: Michael OLeary, by Pilita Clark, Published: December 18, 2009. Please follow the link to the article in the Financial Times and print it out and bring it to the seminar session. The link to the Financial Times article is :-

http://www.ft.com/cms/s/2/073c8d40-e9ca-11de-ae43-00144feab49a.html

Date Accessed 25 July 11: You may need to access this via mysunderland; library services; journal search; business and management; - then the Financial Times Online.

Read both articles and then answer the following questions:

Questions 1. From the Company annual report, the Financial Times article and your previous

knowledge, determine Michael O Learys leadership style as Chief Executive and its impact upon organizational strategy?

a) Is he Machiavellian? b) How difficult would it be to replace him?

2. Consider the companys strategy and then :- b) Determine and justify the companys strategic position in terms of competitive

advantage? c) Is the identified competitive advantage sustainable over the long term?

3. Is O Learys leadership style appropriate to take the business forward over the next 5 to 10 years?

a) Consider Greiners (1975) model. b) Would Vickers (Lecture 4, slide 4) identify O Leary / Ryanair as a

Lobster?


23

Lecture Six: Public Sector Strategy

However beautiful the strategy, you should occasionally look at the results. Sir Winston Churchill, British politician (1874 - 1965)

Politics is a universal activity, the consequences of which impact on the business world in a number of ways. This session examines the nature of the complex patterns or organizational control in the public domain. The lecture will define the nature of organization and environment within public sector management thinking and will develop the meaning of strategy within this context and the issue of managing complexity.

The Essential Reading For Lecture Six The case study - Strategy development at Castle Press & New Town Council by Andy Bailey and Julie Verity.

And

Johnson G. and Scholes K.(ed), (2001), Exploring Public Sector Strategy, Financial Times Prentice Hall; p1-160. or Lynch, R. (2006), pp643-673.

Further Reading Isaac-Henry, K., Painter, C. & Barnes, C. (1993) Management in the Public Sector, chapter 3. Goldsmith A. A. (1997) Private-sector Experience With Strategic Management: Cautionary Tales for Public Administration International Review Of Administrative Sciences, Vol 63 p25-40.


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Seminar Six: Strategy development at Castle Press & New Town Council

This session will look at issues developed from the sixth lecture and the two case studies, Castle Press and New Town Council by Andy Bailey and Julie Verity. Please read the case studies before the seminar as both are fairly lengthy and require reflection and then answer the questions.

1. How do strategies come about in organizations? a. What is the strategy process at New Town Council? b. What is the strategy process at Castle Press?

2. What influences the process of strategy development? a. Why is the strategy development process at New Town as it is? b. Why is the strategy development process at Castle Press as it is?

3. What are the main differences/similarities in the strategy development process between the two cases?

4. Why do these differences exist? For example, the Chief Executive at New Town is not entirely happy with the process of strategy development in his organization, he would like to change it. a. What options are attractive to him and his team? b. Why? Is a different process feasible and if so, how could he manage such a

change?

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Lecture Six A: Assignment Preparation Part 1

This lecture will outline the requirements of the assessment particularly with respect to the formative assessment for the part1 task. Examples of previous part 1 submissions will be discussed.

Remember that this module assessment is divided into two parts, the first part is designed to assist and guide you in the development of your assignment. Please note that no marks are awarded for Part 1, it is an opportunity for you to take some observations / guidance from your tutor. The tutor must approve your idea. Approval of your chosen topic is not automatic and is conditional upon your tutor being satisfied that the analysis will offer a level of rigour commensurate with the final level of an Honours Degree: The tutor will not review your part 1 formative assessment after the submission date unless it has Not Yet Passed. Part 2 will be assessed and will contribute to 100% of the marks.

Remember there are no marks for the part 1 task, it is a formative assessment. Because part 1 attracts no marks, in the past some students have elected not to submit part 1 of this assessment, this is risky. Remember 80% of the best 100 credits at level 3 contribute to your overall degree classification.

Assignments have failed because they were inappropriate topics.

An extract from the assessment :- Task: Part 1 (Summary) For this task you must work on an individual basis. You must submit a paper based summary of no more than 300 words outlining the focus of your analysis. You will receive feedback on your Part 1 submission from your workshop tutor to assist you with the focus of your analysis for Part 2 of your assessment.

Seminar 6A: Part 1 Final Preparation

This will be a discussion and review of your part 1 that you intend to submit. The part 1 should be submitted this Friday to Assignment Services located in the library. Seminar tutors will review and discuss your part 1s that you intend to submit.

This week - Hand In Part I of your Assignment.

Dont forget to put your seminar tutors name on the Business School assessment record sheet!!

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Lecture Seven: Risk Management

If you cant manage risk, you cant control it. And if you cant control it you cant manage it. This means youre just gambling and hoping to get lucky.

J. Hooten, Managing Partner, Arthur Andersen & Co., 2000

The concept of risk management is appearing higher on the business agenda as the possibility of litigation becomes more aggressive. This session will consider the rationale and application of corporate risk management in business. Risk is categorised in terms of business risk into financial/quantitative and non-financial/qualitative This session will only consider one aspect which is the non-financial/qualitative element. It will outline the risk management process and organizational techniques for identifying risk including potential sources of business risk and some of the risk assessment models.

The Essential Reading For Lecture Seven

Heldman K. (2005); Project managers spotlight on RISK MANAGEMENT; Harbor Light Press. Chapters 1,2, 5 and 6. (658.155H24) or Project Risk Analysis and Management Guide, (2004), APM Publishing Limited. Chapters 2, 3, 5 and 7. (658.155A77) or Chapman C., and Ward S., (2004), Project Risk Management Processes, Techniques and Insights, 2nd Edition, John Wiley & Sons, Ltd. Part 1 and II. (658.404C30) or The Institute of Risk Management at www.theirm.org or Merna, M. & Al-Thani, F. F., (2008), Corporate Risk Management, 2nd Edition, John Wiley & Sons Ltd. Chapters 1,2,3, 4 and 10.

And - The Ericsson case study in the module guide.

Further Reading

Notes:

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Seminar Seven: Case Study: Ericssons Supply Chain

Norrman A., and Jansson U., (2004), Ericssons proactive supply chain risk management approach after a serious sub-supplier accident, International Journal of Physical Distribution & Logistics Management, Vol. 34 No. 5, pp. 434-456.

This session will investigate the application and rationale of risk management in Ericssons supply chain.

1. Define Risk Management.

2. Outline the Risk Management Process.

3. How would Ericssons probability / impact grid vary from the example given below which was outlined in the lecture.

Risk - Probability / Impact Grid

1

Medium High Extremely High

Low Medium High

Very Low Low Medium

High

Pro

ba

bil

ity

of

Occ

urr

en

ce

Business Impact

Low

Low

High

Medium

Medium

4. This is the last year of your degree; from a risk management perspective construct a Probability Impact Grid (PIG) of the risks that may halt your progression to successfully obtaining a BSc (Hons) Degree in your specialist programme and then attempt to mitigate the most important risks if in fact you can.


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Lecture Eight: Strategy - Does it Matter?

This lecture will synthesise the range of topics that has been covered within the Strategic Management module and then attempt to answer the above question.

The Essential Reading For Lecture Eight

Johnson, Scholes and Whittington, (2008), Exploring Corporate Strategy, 8th Edition, Pearson Education Limited, pp354-383.pp255-286, p189-203, pp293-316. and Mintzberg, H., Ahlstrand, B., Lampel, J.,(2009,) Strategy Safari, your complete guide through the wilds of Strategic Management, , 2nd Edition, Pearson Education Limited,pp3-21. or Lynch, R. (2006), pp679-719.

And

Strategic Alliance And Dependency In Design And Manufacture: The Rover-Honda Case by Pilkington:

Notes:


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Seminar Eight : International Joint Ventures (IJVs) The Rover/Honda Alliance

This session will look at issues developed from the ninth lecture and the paper Strategic Alliance And Dependency In Design And Manufacture: The Rover-Honda Case by Pilkington: Read the case study and answer the questions:

i. What were the driving forces behind Rovers decision to enter into a joint venture? ii. Outline and discuss Dunnings OLI model.

iii. Using Dunnings OLI model and/or your own thinking interpret the success of the Rover/Honda alliance from the Rover perspective.

iv. Using Dunnings OLI model and/or your own thinking interpret the success of the Rover/Honda alliance from the Honda perspective.

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Lecture Nine: Assignment Preparation Part 2

This lecture will outline and suggest some basic structures to your assessment report. It will review some past assignments and identify their strengths and weaknesses. The 5 samples of previous work that are available on Sunspace will be outlined.

Finally, a module feedback form will be issued for you to complete and informal feedback will also be taken by the module tutor.

Seminar 9: Assignment Preparation & Module feedback

This seminar will be set aside for tutors to answer questions regarding concerns you may have with your assignment that you intend to submit. This will be a drop in session for those students wishing to take further advice upon their assignment.

Finally good luck with your assignment!


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SIM336 STRATEGIC MANAGEMENT

ASSIGNMENT 1 - TITLE: Strategic Analysis

Issue Date: Week 27 of Semester 2

Due Date: Part 1 - 1.00 p.m. on 22 March 2013 Part 2 - 1.00 p.m. on 10 May 2013

Learning outcomes: Strategic analysis of an organization(s). Synthesis of ideas or solutions relating to strategy issues

Skills outcomes: Research skills Critical evaluation Creativity Communication

Moderated by: John Dixon-Dawson

All students are required to submit their Part 1 to Assignment Services in the Prospect building.

All students are required to submit their Part 2 assignment via Turnitin. The penalty for students that do not submit their Part 2 assignments through Turnitin is that they will fail the assignment. Students may submit assignment drafts through Turnitin prior to the hand in date to generate originality reports. The last submission of the assignment prior to the hand in date will be deemed to be the final submission for assessment purposes.

All work submitted must adhere to the University Policy on Cheating, Collusion and Plagiarism You must not submit an assignment that analyses the mobile phone industry or a mobile phone company.

Outline This assessment is divided into two parts, the first part is designed to assist and guide you in the development of your assignment. Please note that no marks are awarded for Part 1, it is an opportunity for you to take some observations / guidance from your tutor. The tutor must approve your idea. Approval of your chosen topic is not automatic and is conditional upon your tutor being satisfied that the analysis will offer an appropriate level of rigour. Part 2 will be assessed and will contribute to 100% of the marks.

Assignments may fail because they are inappropriate topics.

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Task: Part 1 (Summary) For this task you must work on an individual basis. You must submit a paper based summary of no more than 300 words outlining the focus of your analysis. You will receive feedback on your Part 1 submission from your workshop tutor to assist you with the focus of your analysis for Part 2 of your assessment.

Task: Part 2

You are required to submit an individual report of 3,000 10% words, which can be based on an organization or idea of your own choice. The strategic analysis must be related to a recognised aspect of business policy, strategic management or the philosophical underpinning of a particular methodology within the public or private sector strategic management domain. The assignment (Part 2) you submit, as part of the final submission may be a slightly modified version of the initial idea because as you progress, your research may cause you to re-think your ideas. Minor changes are allowed to give you some freedom. Major changes of the idea (e.g. changing the whole topic) should not be necessary, as your initial research should have got you beyond any major stumbling blocks with your topic.

The report must be written in a recognised style, i.e. table of contents, introduction, main analysis, conclusions, recommendations, references and bibliography. You must apply the Harvard system of referencing in your report.

Objectives To analyse a business policy or strategic management topic, to carry out individual research or evaluation of an organization.

Requirements Meet the learning outcomes listed above, identify and critically analyse fundamental issues related to strategic management. Undertake a study that shows clear evidence of synthesis and evaluation.

There are a number of ways you might carry out this assignment: here are a few ideas: Use a theoretical model to reflect upon the reality (practice) of a situation. Use

theory to predict the outcomes of practice. Use practice to reflect upon / modify theory;

Compare theory and practice: Does M.E. Porters (1985) model of competition support the experience of practitioners? i.e. use a practical example /case / issue to reflect on Porters model(s) and examine success and / or failure.

A case study approach: Is Steve Ballmer, C.E.O. managing Microsoft as effectively as he might? i.e. do an analysis of Microsofts performance in relation to declared (or undeclared) strategy and the efficacy of his strategy.

A recovery plan: My advice to the Chief Executive Officer of the News Corporation is i.e. suggest a way forward for the organization in light of their

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debacle over the telephone Hacking scandal and their pursuit of organizational growth.

A risk management strategy: My advice to British Petroleums Chief Executive Officer in light of their environmental disaster in the Gulf of Mexico.

These are merely examples of approaches you might take; thinking up your own ideas might be more productive and fun.

Assessment Criteria Your seminar tutor on the basis of the following general criteria will assess the paper:

Content - the quality of research and analysis undertaken and the use of initiative in finding sources of information;

Process - the quality and clarity of the assignment and your ability to demonstrate command over the subject area and the development of a case or argument;

Discretion - additional credit may be awarded to a student who tackles a difficult subject well.

The assignment will be graded for individuals on the basis of the specific criteria outlined on the following page.

The Presentation element of the Generic Assessment Criteria will be used to assess the report structure.

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Generic Assessment Criteria Undergraduate These should be interpreted according to the level at which you are working and related to the assessment criteria for the module Categories

Grade Relevance Knowledge Analysis Argument and Structure Critical Evaluation Presentation Reference to Literature

P

a

s

s

86 100% The work examined is exemplary and provides clear evidence of a complete grasp of the knowledge, understanding and skills appropriate to the Level of the qualification. There is also ample excellent evidence showing that all the learning outcomes and responsibilities appropriate to that Level are fully satisfied. At this level it is expected that the work will be exemplary in all the categories cited above. It will demonstrate a particularly compelling evaluation, originality, and elegance of argument, interpretation or discourse.

76-85% The work examined is outstanding and demonstrates comprehensive knowledge, understanding and skills appropriate to the Level of the qualification. There is also excellent evidence showing that all the learning outcomes and responsibilities appropriate to that level are fully satisfied. At this level it is expected that the work will be outstanding in the majority of the categories cited above or by demonstrating particularly compelling evaluation and elegance of argument, interpretation or discourse.

70 75% The work examined is excellent and is evidence of comprehensive knowledge, understanding and skills appropriate to the Level of the qualification. There is also excellent evidence showing that all the learning outcomes and responsibilities appropriate to that level are satisfied At this level it is expected that the work will be excellent in the majority of the categories cited above or by demonstrating particularly compelling evaluation and elegance of argument, interpretation or discourse.

60 69% Directly relevant to the requirements of the assessment

A substantial knowledge of strategy material, showing a clear grasp of themes, questions and issues therein

A good strategic analysis, clear and orderly

Generally coherent and logically structured, using an appropriate mode of argument and/or theoretical mode(s)

May contain some distinctive or independent thinking; may begin to formulate an independent position in relation to strategic theory and/or practice.

Well written, with standard spelling and grammar, in a readable style with acceptable format

Critical appraisal of up-todate and/or appropriate literature. Recognition of different perspectives. Very good use of source material. Uses a range of sources

50 59% Some attempt to address the requirements of the assessment: may drift away from this in less focused passages

Adequate knowledge of a fair range of relevant strategy material, with intermittent evidence of an appreciation of its significance

Some analytical treatment, but may be prone to description, or to narrative, which lacks clear analytical purpose

Some attempt to construct a coherent argument, but may suffer loss of focus and consistency, with issues at stake stated only vaguely, or theoretical mode(s) couched in simplistic terms

Sound work which expresses a coherent position only in broad terms and in uncritical conformity to one or more standard views of strategy.

Competently written, with only minor lapses from standard grammar, with acceptable format

Uses a variety of literature which includes some recent strategic texts and/or appropriate literature, though not necessarily including a substantive amount beyond library texts. Competent use of source material.

40 49% Some correlation with the requirements of the assessment but there are instances of irrelevance

Basic understanding of the strategy but addressing a limited range of material

Largely descriptive or narrative, with little evidence of analysis

A basic argument is evident, but mainly supported by assertion and there may be a lack of clarity and coherence

Some evidence of a view starting to be formed but mainly derivative.

A simple basic style but with significant deficiencies in expression or format that may pose obstacles for the reader

Some up-to-date and/or appropriate literature used. Goes beyond the material tutor has provided. Limited use of sources to support a point.

F

a

i

l

35 39% Relevance to the requirements of the assessment may be very intermittent, and may be reduced to its vaguest and least challenging terms

A limited understanding of a narrow range of strategic material.

Heavy dependence on description, and/or on paraphrase, is common

Little evidence of coherent argument: lacks development and may be repetitive or thin

Almost wholly derivative: the writers contribution rarely goes beyond simplifying paraphrase

Numerous deficiencies in expression and presentation; the writer may achieve clarity (if at all) only by using a simplistic or repetitious style

Barely adequate use of literature. Over reliance on material provided by the tutor.

The evidence provided shows that the majority of the learning outcomes and responsibilities appropriate to that Level are satisfied for compensation consideration. 30 34%

The work examined provides insufficient evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence provided shows that some of the learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in some of the indicators.

15-29% The work examined is unacceptable and provides little evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence shows that few of the learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in several of the indicators.

0-14% The work examined is unacceptable and provides almost no evidence of the knowledge, understanding and skills appropriate to the Level of the qualification. The evidence fails to show that any of the learning outcomes and responsibilities appropriate to that Level are satisfied. The work will be weak in the majority or all of the indicators.

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APPENDIX ONE

Useful URLs and important University Documents

Note: as URLs for some individual documents may change from year to year, some of the links are to folders within the Academic Quality Handbook which contain the relevant documents and which will not change.

University Generic Assessment Criteria (updated link 20 June 12) https://docushare.sunderland.ac.uk/docushare/dsweb/Get/Document-7861/AQH-F6-15%20Generic%20Assessment%20Criteria.pdf

University Academic Regulations (including the Student Guide) https://docushare.sunderland.ac.uk/docushare/dsweb/View/Collection-2780

University Student Handbook https://docushare.sunderland.ac.uk/docushare/dsweb/Get/Document-6248/Student+Handbook+-+Regulations%2C+Policies+and+Procedures+2012.pdf

University Policy on Academic Misconduct https://docushare.sunderland.ac.uk/docushare/dsweb/Get/Document-8019/AQH-F7b%20Academic%20Misconduct%20Regulations.pdf

University statement on the use of Turnitin https://docushare.sunderland.ac.uk/docushare/dsweb/Get/Document-8022/AQH-Fe%20University%20Statement%20on%20the%20Use%20of%20Turnitin.pdf

University Policy on Extenuating Circumstances for extension of module deadlines (Mitigation) https://docushare.sunderland.ac.uk/docushare/dsweb/Get/Document-2995/AQH-F6-13%20Procedures%20for%20Extenuating%20Circumstances.pdf

Guide for Students on the Supervision of Dissertations and Projects https://docushare.sunderland.ac.uk/docushare/dsweb/Get/Document-3001/AQH-F8+Supervision+of+Dissertations+and+Projects+-+a+Guide+for+Students.pdf

University Policies on Complaints, Appeals and Student Discipline https://docushare.sunderland.ac.uk/docushare/dsweb/View/Collection-2784

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Case Studies

37

Exploring Corporate Strategy

CLASSIC CASE STUDIES

The Sale of Burmah Castrol to BP Amoco

Gerry Johnson

In 1999, the management team of Burmah Castrol, the lubricants and chemicals business, led by its CEO Tim Stevenson, decided to recommend to the corporate board the sale of the company to BP Amoco. In what follows, Stevenson explains how the company arrived at the point of considering this option, and why the board decided to take it.

l l l

The Burmah Oil Company was founded in 1886 by Scottish entrepreneurs interested in exploiting newly found oil deposits in Burma. Success there was followed by a milestone investment in an exploration concession across a substantial area of Iran acquired from the Shah. That company, then called the Anglo-Persian Oil Company, later became British Petroleum (BP). Burmah held a major shareholding in BP right through until the early 1970s. Indeed, after a long period operating effectively as an inter- mediate holding company for BP shares, the management of Burmah in the 1960s used the value of the shares as collateral to embark on an ambitious plan to turn Burmah into both a fully integrated oil company and a substantial conglomerate group. Businesses bought included Castrol and Signal Oil and Gas; other interests included major exploration licences in the North Sea, a substantial fleet of oil tankers and a raft of other activities, including high-street retailer Halfords, various chemicals companies and Quinton Hazell, an automotive component supplier. This period of expansion was brought to an abrupt halt by the recession consequent on the Yom Kippur war in 1974. Much of the companys subsequent history is the story of how this expansionist drive was gradually unwound, and a new corporate approach and concept developed.

THE STRATEGIC DEVELOPMENT OF BURMAH CASTROL

Tim Stevenson explained how the portfolio of the Burmah Castrol businesses developed and changed from the 1960s:

First there was a process of divestment: selling Signal Oil and Gas, selling the tanker fleet, re-negotiating the Bahamas terminal and selling other peripheral companies like the automotive parts retailer, Halfords and Quinton Hazell.

This case was prepared by Professor Gerry Johnson, University of Strathclyde Graduate School of Business, based on discussions with Tim Stevenson, the past CEO of Burmah Castrol, and on published sources. The author is published with the permission of BP Amoco. It is intended as a basis for class discussion and not as an illustration of either good or bad management practice. Not to be reproduced or quoted without permission.


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Over time, and as the process of slimming down progressed, there emerged the concept a two- pronged Burmah Castrol, consisting of related businesses. One prong was the Castrol business which, throughout all this turmoil, was continuing to develop as a very successful global business with an increasingly powerful brand. The other prong was Chemicals, which it was planned could provide a substantial counter weight for Castrol. From the later 1970s/early 1980s onwards, a portfolio of speciality chemicals businesses was put together, taking some of the businesses inherited from the past as the foundation and adding to them by buying in high- quality speciality businesses as additions to the portfolio. The emerging rationale for Burmah Castrol that resulted was that the Groups business was the sale and marketing of speciality oil and chemical products. The argument was that we were good at managing Castrol and that we would be able to demonstrate to shareholders and the market that we could also very successfully manage chemical businesses whose style and approach to the market would be in certain key respects similar to that followed by Castrol. We also argued that management had skill in spotting both good managers and sound investment opportunities: the combination would enable all the Groups businesses to prosper and grow. There was sufficient similarity in terms of key factors for success between Castrol and the Chemicals businesses to enable senior management to add value across the portfolio. The idea that Burmah Castrol, as slimmed down, was a conglomerate per se was resisted.

Whilst the process of simultaneous slimming down and building up the chemical portfolio proceeded, the markets response, as measured by improvement in the share price, was satisfactory. Castrol continued to perform strongly.

There was, however, internal questioning, particularly towards the end of the 80s, about where the Group was headed over the medium to long run. There was an argument that Burmah as a two-legged stool needed a third to give it, overall, an appropriate, stable shape. This led to a search for moves that might provide such balance. Included within this search were possibilities for rendering the Chemicals portfolio as a whole more substantial and therefore more able to sit comfortably alongside Castrol. This process culminated in the successful hostile acquisition of Foseco in the early 90s. The opportunity arose because Foseco had lost its way; its share price was very depressed. In fact, as it turned out, the price wasnt quite as cheap as it might later have become, because economic conditions continued to deteriorate after the purchase. This inevitably affected Fosecos short-run performance to a greater extent than Burmah Castrol had anticipated. In turn, this meant that it took somewhat longer to achieve an appropriate return on the investment than originally planned. However, vigorous restructuring work on the business and an improved economic environment in due course demonstrated the acquisition to have been sound. But in a qualitative sense the acquisition of Foseco was important because it led to some serious questioning in the market for the first time concerning Burmah Castrols overall raison dtre. Was it appropriate for Burmah to be expanding its Chemicals businesses to such a substantial extent? How usefully related was the Castrol business to the Chemicals businesses, and what was the real value in having them in the same portfolio?

There were also other issues to sort out in the Chemicals businesses where some were underperforming: work needed to be done to improve their overall operating efficiency. That was a task that was successfully set about and delivered: significantly improved ratios were achieved through cost cutting and effective focus. But that was not enough. The market response was, Youve improved the performance but what are you going to do now? When I took over as chief executive in 1997 a clear message from some substantial investing institutions was that management should not contemplate further substantial expansion through acquisition of the Chemicals portfolio. We dont understand why you bought Foseco. We dont understand how you think you can add value to acquisitions of that sort.


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RECONSIDERING STRATEGY AND STRUCTURE

By the mid-1990s Burmah Castrol consisted of Castrol, blending and marketing lubricants; and Chemicals with a residual Fuels retailing business effectively the final relic of the past which was in the process of being sold off. Until 1997 Castrol and Chemicals were run as two distinct groups of businesses. From 1997 onwards, for reasons explained below, the corporation was restructured into discrete business units. Exhibit 1 summarises the activities and performance of these business units.

In 1994 Mike Dearden, then CEO of the Chemicals businesses, had undertaken a review of the strategy and structure of those businesses. He had inherited a situation in which the acquired businesses still provided the foundation for the structure of his group. Foseco operated as Foseco; Fosroc as Fosroc, Sericol as Sericol and so on; each with its head office and often with subsidiary geographical offices. There had been no attempt within this to sort out a rationale for the Chemicals Group. The strategic review identified an underlying theme of industrial marketing and quality service as the core competences of the successful chemicals businesses. It was clear that the success of these businesses was much more to do with understanding customer needs than the production of chemicals. This conclusion resulted in a move to much greater focus on devolution of responsibility to the market-facing business units.

In 1996 Tim Stevenson, then CEO of the Castrol business, also instigated a strategic review of that side of the portfolio. The passenger car engine oil business, which represented 75 per cent of total profits, faced the prospect of more efficient engines requiring longer and longer gaps between oil changes; and therefore of potential long-term volume decline. However, the strategic review was triggered by a short-term challenge: Tim Stevenson explained:

In 1996, we had a difficult year in North America after a run of consistently good volume and profit growth; and simultaneously we started to develop worries about long-run developments in the passenger car engine oil business in Europe. Thus we believed we had the makings of a problem in the developed world concerning the sustainability of the sorts of growth achieved in the past in selling growing volumes of high-margin sophisticated lubricants into passenger car engine oil markets. And whilst we had a very successful developing world position, particularly in Asia Pacific, that was unlikely to offer sufficient to offset the difficulties we might be going to encounter over a five-year run absent of action in the bigger developed markets in Europe and North America.

All this provoked us into having a re-look at what was happening to our passenger engine oil business, what the medium-term market development might look like and what was going to happen to the competitor structure. The conclusion was that our old approach, unaltered, was not going to enable us to continue to grow the business at the rate previous strategic plans had assumed. We also looked at the other businesses; the industrial lubricants business, the marine lubricants business and the commercial lubricants business. The key overall conclusion that emerged was that our internal structure for managing the global Castrol lubricants business was no longer appropriate if we were to optimise our position in each of the four markets. Our old structure had been a geographically based model, with four regional directors, the line managers responsible for over 50 country managers who ran their country businesses, very successfully hitherto, like individual fiefdoms. Within the country they were responsible for all aspects of Castrols business, covering all the four market areas, and for sourcing of raw materials, blending, distribution, customer relationships; everything. They had to comply with central instructions in terms of the use of the brand and other broad policy areas but, subject to a relatively small number of rules of engagement, they were left to themselves.

A problem was that some of the areas of business were suffering because of the dominant culture of the passenger car engine oil business. So, for example, an opportunity for significant business development was being missed because there was no co-ordinated policy for focusing

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Exhibit 1 The Burmah Castrol business in the late 1990s

Castrol Consumer

Castrol Consumer is world leader in the supply of car and motorcycle lubricants and services, marketing to workshops and retail chains, auto accessory stores and petrol stations. Principal products are engine oils, e.g. GTX, transmission fluids and brake fluids.

Market share 11% Market position 1 World market size 11bn litres Main competitors: Mobil Shell Texaco

Castrol Commercial Castrol Commercial provides products and services principally to on and off-road vehicle fleets. Off-road business includes vehicles used in construction, quarrying, agriculture and forestry. On-road fleets cover trucks, buses and coaches. Castrol Commercial assists its customers in optimising service intervals, achieving fuel economy and improving engine efficiencies.

Market share 2% Market position 5 World market size 11bn litres Main competitors: Exxon Mobil Shell

Sericol Printing Sericol Printing is the world leader in screen printing inks and ancillary products. It supplies inks to the graphic, textile and speciality markets which include CDs, credit cards and snowboards. Sericol provides its customers with a high level of support, including training, computerised colour matching and environmental services.

Market share 11% Market position 1 World market size 1.1bn Main competitors: Coates Screen Nazdar

Source: Burmah Castrol annual report.

Castrol Industrial

Castrol Industrial is the world leader in supplying metalworking fluid and services to industries such as transport and metal component manufacturers. The business also supplies process industries such as food and beverage, mining, power generation and offshore oil and gas production.

Market share 6% (metalworking) Market position 1 (metalworking) World market size 12bn litres Main competitors: Fuchs Houghton Milacron

Foseco Foundry Foseco Foundry is the worlds leading supplier of consumable chemicals and services to the foundry industry. Fosecos products are used in the conversion of molten metal into finished castings. This enables foundries to produce castings of high quality, strength and weight whilst improving efficiency and reducing energy consumption.

Market share 19% Market position 1 World market size 1.2bn Main competitors: Ashland Borden Huttenes-Albertus

Chem-Trend Releasants Chem-Trend Releasants is the worlds largest manufacturer of specialised mould and die cast release agents. Customers range from manufacturers of tyres and car steering wheels to shoe soles for the footwear industry. Each relies on Chem-Trends tailor-made formulations and application skills to improve quality, cost and productivity.

Market share 182% Market position 15 World market size 270m Main competitors: Acheson Acmos Wacker

Castrol Marine

Castrol Marine markets specialist lubricants and fluids to the international marine market. Customers range from the largest international shipowning groups, leisure and cruise operators to small fishing boat owners. Castrol Marine provides unique lubricant solutions and essential business information, increasingly through the Internet.

Market share 12% Market position 5 World market size 2bn litres Main competitors: BP Mobil Shell

Fosroc Construction Fosroc Construction provides formulated products for the civil engineering and construction industries worldwide. Products include concrete admixtures to provide enhanced characteristics and greater cost effectiveness; a wide range of cement-based mortars and products and systems to extend the life of concrete structures.

Market share 2% Market position 5 World market size 6bn Main competitors: SKW-MBT Sika W R Grace

Foseco Steel Foseco Steels strong market position has been built on an ability to provide major steel producers with a total package of products and services which are vital to the safe, efficient and cost-effective production of high-quality steel.

Market share 5% Market position 2 World market size 1bn Main competitors: Thor-Didier Stollberg Vesuvius

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on the industrial lubricants business. The conclusion was reached that to optimise performance over the whole business, and to achieve economies of scale, we needed to move away from a geographic structure to one focusing on each of the four areas of Castrol as global businesses in their own right. We made the decision halfway through 1997 and then implemented it in 1997 and 1998. It was a very significant cultural change for the organisation. The old structure had been immensely successful. It had enabled a very strong ethic of customer focus and a strong esprit de corps. If you had the right man in Australia or Vietnam or Brazil, and you gave him his head, he produced strong results. So turning our backs on all of that and sweeping away the country structure was a major move. We originally planned to implement over two years, phasing it in; but in practice the job was completed in just over 12 months. It was done quickly and with minimal disruption. The results didnt suffer and on balance little of our market-facing customer focus was lost. Furthermore, the early signs were that the substantial benefits that we hoped to achieve from the change would materialise.

The logic behind these changes had two main elements. First, it gave the opportunity of unleashing potential in the industrial business and the commercial business and giving marine the proper focus that it needed. But the biggest benefit, second, was that the restructuring enabled a global focus on the passenger car engine oil business. Market trends couldnt be reversed, of course; but by having a single team to think about how we were going to manage the business globally, to take advantage of economies of scale on a regional and global basis and maximise the potential of our global branding strategy, opportunities were opened up for managing that business much more effectively in what looked as though it would become a tougher environment.

Exhibit 2 summarises the financial performance of Burmah Castrol in the late 1990s.

THE GOLDEN THREAD

In 1997 Tim Stevenson took over as CEO of the Burmah Castrol Group. He was aware that some financial institutions were looking for action at the Group level. They had witnessed and approved the restructuring of the organisation; but there remained bigger questions.

I was seen by some as an opportunity to force management to look at the business with new eyes; if you like, through their eyes in terms of how value could be released to them. Our Board had earlier discussed, in general philosophical terms, what managements objectives ought to be and whether shareholder value should be the driving force of what we were doing. There was complete agreement that that had to be the guiding force. Our share price reached 10 in the early 1990s and hadnt really moved from that level. It moved to 13 at one point and down to 7 at another, but these were the extremes of a dull range. [See Exhibit 3.] When you have a share price that is doggedly stuck, but you have high-quality assets, there is an imperative to do something about it because, if you dont, sooner or later the market will find a way of doing it for you of delivering value to the shareholders.

At this time we argued with our shareholders that the rationale for Burmah Castrol lay in our having a golden thread. Although Castrol and Chemicals were separate entities and we didnt manage them as one, there were sufficient similarities in terms of the sorts of businesses they were and the way they went to market, to enable Burmah Castrol to add value at the top level.

The golden thread argument had received qualified support from a study of 21 of the most successful businesses in Burmah Castrol, spanning consumer, industrial and commercial lubricants and various chemicals businesses from different parts of the world. It concluded that the success of most of the businesses was based on competences to do with high levels of service rooted in localised knowledge

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Exhibit 2 Five-year summary of Burmah Castrol financial performance

1999 1998 1997 M M M

1996 M

1995 M

Turnover net of duties: Continuing operations (including acquisitions) 2,907.8 2,761.9 2,778.6 2,853.5 2,751.3 Discontinued operations (note (i)) 35.9 75.2 157.4 206.0 297.2

2,943.7 2,837.1 2,936.0 3,059.5 3,048.5 Operating profit before exceptional items:

Continuing operations (including acquisitions)

Castrol subsidiaries 211.4 185.8 209.6 201.4 194.7 Share of operating profit in associates 1.6 1.6 1.6 3.0 4.5 Castrol 213.0 187.4 211.2 204.4 199.2 Chemicals 78.6 71.7 72.8 64.1 60.3 Fuels 1.9 1.7 (0.8) (0.7) 3.4 Energy investments 4.0 4.0 5.9 5.1 0.7 Central management (13.6) (13.3) (13.6) (12.5) (12.6)

283.9 251.5 275.5 260.4 251.0 Discontinued operations 0.7 7.3 18.4 21.9 29.7

284.6 258.8 293.9 282.3 280.7 Interest (25.0) (9.5) (14.2) (20.9) (27.7) Profit before exceptional items and taxation 259.6 249.3 279.7 261.4 253.0 Exceptional items:

Continuing operations (76.7) (49.0) (24.1) (7.5)

Discontinued operations (7.3) 34.7 (17.9) 18.5

Profit before taxation 175.6 235.0 237.7 272.4 253.0 Taxation (79.9) (86.8) (92.2) (97.6) (97.8) Profit after taxation 95.7 148.2 145.5 174.8 155.2 Minority interests (22.7) (19.6) (22.2) (19.7) (20.2) Profit for the financial year attributable to shareholders 73.0 128.6 123.3 155.1 135.0 Balance sheet

Fixed assets 883.1 864.6 839.1 914.0 974.5 Net current assets 309.4 381.8 376.9 424.7 445.7 Total assets less current liabilities 1,192.5 1,246.4 1,216.0 1,338.7 1,420.2 Long-term creditors and provisions (603.1) (395.6) (391.9) (491.6) (631.4) Minority interests (68.7) (62.6) (61.1) (80.5) (80.7) Shareholders funds 520.7 788.2 763.0 766.6 708.1

pence pence pence pence pence Statistics per ordinary share:

Ordinary dividends (note (ii)) 47.3 43.0 40.5 36.8 33.45 Earnings per ordinary share before exceptional items 77.0 66.1 75.5 71.1 66.9 Earnings per ordinary share after exceptional items 39.0 60.7 58.0 74.2 66.9 Shareholders funds 291.5 369.4 329.6 332.6 320.8

(i) Discontinued operations relate to the results of subsidiary and associated undertakings discontinued at any time during the five year period under review.

(ii) Excluding any Foreign Income Dividend enhancement.

of how their product applications could meet customer need. Similar to the earlier exercise on the Chemicals businesses, the conclusion was that success was not so much based on the technical aspect of product as on industrial marketing and service on a local basis. An important exception to this pat- tern was that part of the passenger car lubricants business which involved sale of product through retail channels. This relied a great deal more on brand and marketing push. The results of the exercise did, however, support the decision to reorganise the Group into market-facing business units. Further, it helped identify appropriate, and inappropriate, roles for the centre. The Group centre of Burmah Castrol should concentrate on developing people with the skills to work internationally but with local sensitiv- ity; but it should avoid heavy-handed central co-ordination. The Corporate Centre was reorganised as a result of this exercise, splitting the corporate-level activity off from the servicing activity which was

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Exhibit 3 Relative performance of FTSE All-Share vs. Burmah Castrol, from January 1995 to July 2000

set up to be market responsive. So if operating companies did not want to buy the services the centre was offering they could go elsewhere.

There were, then, arguments that management could use in support of the proposition that Burmah Castrol businesses were linked by a golden thread:

We believed we had a strong story to explain to the institutions what it was we were trying to do, and how we were going to release value.

However, as we got into the streaming of Castrol into four separate business streams, this increasingly had an influence on our own thinking about the shape of the portfolio as a whole. Having split out the industrial business from the passenger car engine oil business, it further highlighted, for example, that there might be more similarities between the industrial lubricants business and the foundry chemicals business than there were between, say, the industrial lubricant business and the passenger car engine oil business. So by breaking up Castrol into business units, we had an effect on our own internal thinking.

At the same time as this change within the company, a proce

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