STRATEGIES TO AVOID
Several strategies, which could be considered corporate, business or functional, are very dangerous. Managers who made a poor analysis or lack creativity may be trapped into considering some of the following strategies to avoid, namely:
- Follow the Leader – Imitating a leading competitor’s strategy might seems to be a good idea, but it ignores a firm’s particular strengthens and weakness and the possibility that the leader may be wrong. Eg: Fujitsu Ltd, 2nd largest computer maker, was driven sine the 1960’s with the ambition of catching up with IBM. It competed as a mainframe computer-maker but failed to notice that the mainframe business had reached maturity by 1990.
- Hit Another Home Run – If a company is successful because it pioneered an extremely successful product, it tends to search for another super product that will ensure growth and prosperity. Eg: Palaroid spent a lot of money in developing and “instant” movie camera, but the public ignored it in favour f the camcorder.
- Arms race – Entering into a spirited battle with another firm for increased market share might increase sales revenue, but that increase will probably be more then offset by increases in advertising, promotion, R&D, and manufacturing cost. Eg: Since the deregulation of airlines, price wars and special rates have contributed to the low profit margins or bankruptcy of many major airlines such as Eastern and Continental.
- Do Everything – When faced with several interesting opportunities, management of a corporation might have enough resources to develop each idea into a project, but money, time and energy are soon exhausted as the many projects demand large infusions of resource. Eg: Walt Disney Company’s expertise in the entertainment industry led it to acquire the ABC Network, as the company progressed, it spent $750 M to build new theme parks and buy a cruise line. By 2000, even though corporate sales continued to increase, net income was falling.
- Leasing Hands – A corporation might have invested so much in a particular strategy that top management is unwilling to accept its failure. Believing that it has too much invested to quit, the corporation continues to throw “good money after bad”. Eg: PAN American Airlines close to sell its profitable PAN AM Building and intercontinental Hotels to keep its money losing airline flying. It continued to suffer losses, until it had sold off everything and went bankrupt.
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