Disney Land in Europe

Chapter – II

Strategic Planning and Risk Management

“I think there is a market for about 5 computers,”
-Thomas J Watson, Chairman IBM[1], 1943

“There is no reason for an individual to have a computer at home,”
-Kenneth Olsen, President, Digital Equipment, 1977

“64K ought to be enough for anybody,”
-Bill Gates, CEO, Microsoft, 1981

Understanding the importance of strategic planning
The average life expectancy of a multinational corporation has been estimated by Arie De Geus, a former Shell executive, a scholar and an expert in strategic planning to be between 40 and 50 years. Most corporations are unable to survive long enough because they are unable to manage risks effectively. De Geus’s research has revealed that enduring organizations excel simultaneously on various fronts. They are sensitive to their environment. They do not hesitate to move into uncharted areas when the situation so demands. They use money in an old fashioned way, keeping enough of it for a rainy day. In other words, long lasting companies manage the risks they face in a flexible way, backed by expertise across functions. As Collins and Porras (who have done some brilliant research on what creates lasting companies, in their book ‘Built to Last’) put it, “Visionary companies display a powerful drive for progress that enables them to change and adapt without compromising their cherished core ideals.” All companies face threats in their environment-new competition, new technology, changes in consumer tastes but only a few of them manage these risks effectively. Those who do so are alert to changes in the environment and are willing to change internally to respond to them. The Swedish company Stora, for instance, has shown a remarkable ability to formulate strategies according to the needs of the hour. It has not hesitated to go outside its core business when the situation has demanded. Once it even fought the king of Sweden to retain its independence. To cope with the

References: 1. Peter F Drucker, “Managing For Results,” William Hienemann, 1964. 8. Tatsuo Ohbora, Andrew Parsons and Hago Riesenback, “Alternate Routes to Global Marketing,” The McKinsey Quarterly, 1992, Number 3, pp. 117-126. 9. Shawn Tully and Tricia Welsh, “The modular corporation,” Fortune, February 8, 1993, pp. 106-111. 12. Louis Kraar, “Acer’s Edge: PCs to Go,” Fortune, October 30, 1995, pp. 73-86. 13. George S Yip, “Total Global Strategy,” Prentice Hall Inc., 1995. 14. Karen Barth, Nancy J Karch, Kathleen McLaughlin and Christina Smith Shi, “Global Retailing: Tempting trouble,” The McKinsey Quarterly, 1996, Number 1, pp. 116-125. 17. Tarun Khanna and Krishna Palepu, “Why focussed strategies may be wrong for emerging markets,” Harvard Business Review, July – August, 1997. 18. Hugh G Courtney, Jane Kirkland and S Patrick Viguerie, “Strategy under uncertainty,” Harvard Business Review, November – December, 1997. 20. Vijay Govindarajan and Anil Gupta, “How to build a Global Presence,” Financial Times Survey - Mastering Global Business, January 29, 1998. 22. Jonathan Moore and Peter Burrows, “Stan Shih’s Moment of Truth at Acer,” Business Week, October 12, 1998, p. 23. 23. Kasturi Rangan and Marie Bell, “Merck-Medco: Vertical integration in the pharmaceutical industry,” Harvard Business School Case No. 9-598-091, 1998. 26. Jeremy Kahn, “Wal-Mart goes shopping in Europe,” Fortune, June 7, 1999, pp 27. Heidi Dawley, “Watch out: Here comes Wal-Mart,” Business Week, June 28, 1999, pp. 28-29. 29. Carol Matlack, et al, “En Garde Wal-Mart,” Business Week, September 13, 1999, pp. 28-29. 31. Chris Lonsdale, “Effectively managing vertical supply relationships: A risk management model for outsourcing,” Supply Chain Management: An International Journal, October 4, 1999 Vol. 4, Issue 4, pp. 176-183. 32. Richard Tomlinson, “Kodak’s $1 Billion Bet,” Fortune, October 11, 1999, pp 33. Denise Incandela, Hathleen McLaughlin and Christina Smith Shi, “Retailers to the World,” The McKinsey Quarterly, 1999, Number 3, pp.84-97. 34. Kerry Cabell, et al, “Wal-Mart’s Not Secret British Weapon,” Business Week, January 24, 2000, p. 22. 35. Bruce Einhorn, Stuart Young and David Rocks, “Acer’s About-Face”, Business Week, April 24, 2000, pp. 18-19. 36. Guido A Krickx, “The relationship between uncertainty and vertical integration,” International Journal of Organizational Analysis, Volume 8, Issue 3, 2000, pp. 309-329. 37. Vinod Mahanta, “Net Impasse,” Business Today, April 6, 2001, pp. 76-78. 38. Debojyoti Chatterjee, etal, “ITC’s Big Bang,” Business Today, June 21, 2001, pp 40. Shelly Singh, “The shakeout begins now,” Business World, July 23, 2001, pp 41. Dibyendu Ganguly, “Cruising along with Pizzazz,” Economic Times Corporate Dossier, August 31, 2001, p. 1. 42. Wendy Zellner, et al, “How well does Wal-Mart travel?” Business Week, September 3, 2001, pp. 61-62. 43. Dibyendu Ganguly, “Great White Hope,” Economic Times Corporate Dossier, September 6, 2001, p. 3. 44. Shailesh Dabhal, “The task of competition,” Business Today, September 30, 2001, pp. 45-53. 45. “The next big surprise,” The Economist, October 13, 2001, p. 60. 46. Robin Wood, “Managing complexity,” Profile Books, 2001. 48. Peter Schwartz, “The official future, self-delusion and the value of scenarios,” Financial Times Mastering Risk, Volume I, 2001, pp 49. Benjamin Gomes Casseres, “Alliances and risk: securing a place in the victory parade,” Financial Times Mastering Risk, Volume I, 2001, pp 50. Jeffrey J Reuer and Michael J Leiblein, “Real options: let the buyers beware,” Financial Times Mastering Risk, Volume I, 2001, pp 51. Rory F Knight and Deborah J Pretty, “The real benefits of corporate diversification,” Financial Times Mastering Risk, Volume I, 2001, pp [8] Harvard Business Review, January – February, 1999. [11] Harvard Business Review, May-June, 1998. [13] Harvard Business Review, March-April, 1997. [14] This box item drawn heavily from the article by E K Sharma and Nitya Varadarajan, “Silent stone, wilting flower and the scream of the prawn,” Business Today, September 30, 2001, pp. 82-88. Quotes in the box item are drawn from this article. [18] Harvard Business Review, June, 2001. [27] Economic Times Corporate Dossier, August 31, 2001. [28] Economic Times Corporate Dossier, August 31, 2001. [29] Business Today, September 30, 2001.