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Introduction

This paper analyses the strategies adopted by failed and successful companies. Together

there are 10 cases. The first 5 cases are successful companies followed by 5 cases of failed

companies. For each case, the paper will define the strategy pursued by the company,

specify the company that used it, how the company become successful or failures, and what

the symptoms or outcomes for their success and failures.

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1. Low Cost Leadership

The low cost strategy is achieved when a firm in an industry become the cost leader as

compared to its rivals. This means the firm can sell its products or services at average

industry prices or even lower than its rivals. The former enables the firm to earn a profit higher than its rival while the latter is practiced when firm intends to gain more market share (Porter

1980).

Wal-Mart uses this strategy. The strategy has transformed Wal-Mart into the world’s largest

retailer. This is achieved by implementing sophisticated technology, adopt a frugal corporate

culture and a corporate mission to reduce price all the times, thus the mission statement

“everyday low prices”

Through technology, Wal-Mart adopted radio frequency identification technology (RFID) to

lower overall operation cost by streamlining the overall value chain. The RFID technology

enables Wal-Mart to possess superb control over its inventory. It helps to track its inventory

real time meaning anytime anywhere.

As the whole supply chain is connected, supplier will be notified automatically whenever stock

level reaches reorder point. Such feature has reduces out of stock situation significantly which

a major issue faced by retailer.

Besides RFID technology, Wal-Mart frugal culture is another success factors and part of its

low cost strategy. Wal-Mart only spends on needs and cut down what deem unnecessary. It’s

headquarter office is located away from expensive city. The building is old and dull.

Executives do not drive limousines and work longer than other. They even share hotel rooms

with employees. The objective is to keep operation cost low so that savings could be passing

on to customers, thus lower retail price. It is estimated that Wal-Mart is able to help shoppers

to save about 15 percent on each cart of groceries (Fishman, 2006).

Last but not least, being the largest retailer in the world bestow Wal-Mart the power to control

its suppliers especially on prices by leading and helping them to become cost efficient. For

example, supplier who wants to supply to Wal-Mart must implement the RFID system. Others

include participating in supplier’s research and development process, such as Coca Cola.

I find Wal-Mart successful in many ways. First, it successfully transforms itself into the world’s

biggest retailer with 2009 revenue more than USD400 billion, about 5.7 times more than

second largest retailer Home Depot. Back. In 2006, it has opened about 6,200 outlets and

employs more than 1.6 million employee (Wilbert, and created 70 percent of all new retail jobs

in United States from 1994 to 2004 (Fishman, 2006).

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The return of equity (ROE) is compounding at more than 20 percent. This means Wal-Mart is

efficient in utilising shareholders fund, thus its fruitful return. Last but not least, Wal-Mart has

successfully achieved its mission every day low prices.

2. Differentiation Strategy

Porter (1980) defines the strategy where firm has the ability to persuade or make customer

perceive their products and services to be as highly valuable and unique as compared to their

competitors. The strategy of differentiation can be in many forms. It could be an elite or

exclusive brand, new technology, special product or service features, superb customer

services, quality consistency, and many.

Louis Vuitton (LV) uses this strategy to differentiate its products from its peers. To date, LV

has become the world’s largest profitable luxury brand (Matlack, 2002). How does LV do that?

What is it capabilities and strengths? How does LV translate the strategy into actions? Why

people want a piece of it so badly?

LV products are never put on discount nor on sale and you can only purchase the product at

the original own brand stores. This differentiates the product in terms of its value and

exclusivity towards its customers. Such kind of differentiations induces some kind of desire

and emotion towards LV’s customers.

To them, owning LV’s product is about trendy, exclusivity, status, luxurious, possession and

prestigious. Lee (2009) shows the reason customer buy again from LV is to experience the

exclusive feeling. Consequently, overtime coupled with successful advertisings, such

associations create true brand loyalty in customers.

Another key area to its success is the joining of famous French designer, Marc Jacobs as

LV’s creative director. He comes up with creative and innovation product designs that

successfully mix the traditional and modern values of the LV brand. He said it is human

instinct to want to be part of the elite brand that is also highly recognizable (Anonymous,

2009).

Last but not least is the persistent quality of the products. Every product produced goes

through stringent quality test to ensure top quality. This includes resistance to fading test

using ultraviolet rays, zipper durability test by open and shut it by 5000 times, and bracelets

shaking test where a mechanical dummy wears bracelets and shake it strongly to ensure

none of them fall off, and handbag durability testing where a 3.5kg handbag is hang on a

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robotic dummy arm half a meter from the floor, lift and drop consecutively for four days

(Matlack, 2004).

Its success can be identified by its steady sales growth with profit from USD11.5 billion to

USD17.1 billion in ten years time. The latest financial statements release shows the firmperforms well under both good and bad economic environment, continue to gain market

shares in key markets, achieved double digit growth in revenue and superb profitability,

increase free cash flow and reduce debt by significant percentage (Press Release July 27)

and last but not least, its share price increase by about 20 percent in first half of 2010

(Spencer 2010).

3. New Product Development Strategy

The strategy is defined as to create new products or services to serve existing market in order

to sustain firms bottom-line. This could be an extension of current products or services or an

entire new product or services to serve existing market (Luck 2008).

Kraft Food, the largest manufacturer for food and beverage in US and the world second

largest after Nestle uses this strategy. Kraft uses this strategy to increase its top line growth at

the same time retain and sustain its bottom-line. This is achieved in three ways. First, the firm

improvises on existing products in terms of quality, packaging style or new benefits. Second,

it creates new extension lines of products and develops new products. Third, it acquires newbrands through acquisition.

The key success factors to Kraft success lies in its ability to identify the markets that fits with

new product development, accompany with proper fund allocation and research in those

markets. There are four strategic platforms identified for such purpose. There are convenient

meals, beverages, health and wellness.

Such ability is supported by sound formulation and execution strategy. Strategy formulation

includes defining project’s potential and gathering consumer feedback through research.

Information collected includes consumer acceptance on new product, potential size of the

business, potential sales of the product, and the overall potential of the product.

This will tell Kraft whether the new project fits with overall corporate strategies, its

sustainability, how much time and money will be needed and whether is worthwhile and

efficient to pursue. This initial planning is critical to Kraft as it prevent failure at later stage

which is costly to firm’s resources.

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One example is the Tombstone Mexican Style Pizza, an extension focused at specific

customer group. Kraft’s consumer research shows young boys love Mexican cuisine and

pizza is their favourite. With this information, a new product is developed based on young

boys in mind couples with notions of convenient and healthy food for parents who perceive

pizza as junk food. The new product was a hit when introduced and has contributedsignificantly to Kraft’s top line as well as bottom-line. Its investment in time and money has

been worthwhile.

Besides that, acquisition is part of its success. Through acquisition, Kraft is able to flood the

marketplace with new products. This happened when Kraft acquires Balance Bar and Boca

Burger. Acquisition can complement and enhance Krafts business as well. For example, Kraft

gains both good brands and products when it acquired Nabisco. Other than that, Kraft also

technology knowledge and expertise from Nabisco which complements Kraft core

technologies (Lori, 2002).

For the past ten years, the firm sales grow from USD22 billion to USD40 billion with profit

(“Kraft Foods Inc: Financial Statement” 2010). For the past three financial years, free cash

flow increased by about 65 percent, dividends per share increased by almost 12 percent, and

earnings per share increased by almost 20 percent (“Kraft Food 2009 Fact Sheet” 2010).

4. Supply Chain Management Strategy

Supply chain strategy is defined as how a supply chain should operate in order to compete

(Happek 2005). It ensures the right product reach the right place at the right time or shortest

possible time in the right quantity as per customer’s need and expectation by developing and

utilizing effective and efficient production and delivery mechanism and processes (Fisher

2002).

Spanish clothing retailer Zara is well known for its ability to design and distribute its product to

its customer market in just 15 days where its competitors take months, thus the term fast

fashion system (Ferdows 2005). This is achieved through effective and efficient supply chain

strategy which serves as Zara’s competitive advantage. Here is how the whole supply chain

works.

At Zara retail store, customer always find new product with limited quantity and very often

sold off if customers are not fast enough. This is a marketing strategy to portray product

exclusiveness by the firm. To support such concept, the firm must be able to replenish stock

in small quantity fast. The firm created 40000 designs a year where 10000 will be marketed

(Ferdows 2005). Hence, information flow along the supply chain is critical. That is why the

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firm’s structure, operations, office layouts are designed to streamline information flow along

the supply chain.

The firm organisation structure is designed in such a way that design and production facilities

are centralised at headquarters, and are divided into three lines, mainly men, women andchildren. Each line has its own designers, salesman, purchasers, and production planners.

Though is costly to operate this way but it improves the accuracy and speed of information

flow, thus improving the responsiveness of the supply chain.

The firm hired hundreds of young designers in their early twenties who are enthusiastic and

talented only. In terms of office orientation, they sit and work closely with planners, market

specialists and buyer where large tables are located for adhoc meeting; walls are hanged with

latest fashion magazines catalogs, and prototype shop to encourage discussion and feedback

on latest fashion information.

Such close working distance among employees improves the speed and quality of operations

processes, interactions and collaborations. Designer confirms new designs with marketers

who are constantly in talk with store managers retrieving and feeding latest information

regarding fashion designs trends and market pricing. Buyer and planners estimates cost and

production capacity status. Cross functional teams then finalised design and commit

resources needed. All these are achieved in just few hours time (Ferdows, Lewis & Machuca

2005).

Last but not least, Zara uses technology to connect retail stores and headquarter in real time

mode. This means information exchange can be done anytime anywhere. This has minimised

the costly bullwhip effect to traditional retailers. Collaboration among members along the

supply chain is also key to its success.

Zara success includes being the world’s largest fashion retailers after took over American

rival Gap Inc in 2008 (Gammell, 2008) and being the leader in product to market timing of 15

days. In terms of numbers, Zara’s sales, profit, free cash flow and equity fund grew 200

percent for past 6 years (Financial Data 2010).

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5. Market development strategy

This is a growth strategy where a firm looks for new market to sell its existing product. This

includes exporting product to new market, seek new distribution channel, introduce new

packaging and create new pricing policies to attract different customer groups and marketsegments (Luck 2008).

Procter & Gamble (P&G) uses this strategy to sustain and fuel its future business growth

when she realised is not enough by just relying on internal innovation and costly research and

development (R&D) work, which believed to have reached a stagnated point due to intense

competition, flattening sales, declining earning and stock price (Huston, 2006).

Since then, P&G seeks to develop in emerging markets in developing nations. In 2009, more

than a third of its total sales were derived from developing nations, a steady increase since

2002, where the percentage of sales is only 20 percent of revenue of USD8 billion. This

shows a steady contribution from new markets (“P&G 2009 Annual Report” 2009).

Moving forward, P&G wish to extend presence and grow sales in China and India. The target

is one billion customers by 2014 (Cheng 2010). Over the past 5 years, P&G products have

been doing well in China and Russia, thus P&G will focus to establish more of its products in

this market. The success is due to wide distribution network coverage in China (800 million

people) and Russia (80 percent of population) (P&G Annual Report 2008).

Besides network coverage, the products fit to target market requirements is important too. To

achieve that, P&G must understand target market and its consumer behaviour well, of which it

did. For example, the introduction of Downy Single Rinse in countries where consumers use

limited water to wash clothes.

Understanding consumer spending power on P&G products is important also in estimating

sales. The average spending power for Mexican is USD20, USD3 for Chinese and USD1 for

India. P&G could add 40 billion to its top line if it can match the sales level in China and India

to Mexico.

P&G’s success for the past 10 years, include its ability to grow sales by 100 percent, improve

profit margin from single digit to double digit, improve earnings per share over 200 percent

and share price increase 100 percent .

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6. Stuck in the middle strategy / vague strategy

According to Porter (1985), a firm which failed to adopt a strategy out of the genericstrategies, mainly focused, differentiation and low cost leadership, is stuck in the middle and

is considered the worst strategic situation a firm can be in. This is so because the firm do not

have clear objectives or direction. Is like a ship without a rudder.

My company is currently in such situation. The company supplies flexible packaging material

to different industry ranging from consumer goods to medical products. The company failed to

do well because it does not have a clear corporate and business strategy. The firm is unable

to tell where to compete, how to compete and what to compete.

Besides, it does not know its strengths and weaknesses as well as the external forces that

shape the industry. No industry analysis, competitor analysis or SWOT analysis are done. All

these are pre-requisites to good strategy formulation processes. Lacking of such knowledge

has created a blurred corporation with blurred culture.

As you have guessed so, such uncertainty has lead to poor execution in everyday activities

and failed to link daily routines to business objectives. This poor execution translates into high

cost of operation. Production cost is often high due to high internal wastage and qualitydeficiency. As a result, delivery to customers is often delayed and goods are often short.

Customers are not satisfied with the service and thus move to other competitors.

Besides, employees are not held accountable or responsible for major mistakes and thus

keep repeating the same costly mistake again and again. No clear goals are set for

employees in different departments. Very often, performance appraisal and incentive system

is not emphasized thus there is no need to outperform oneself. Employees are not motivated,

absenteeism and turnover is high. Weak human resource policies are part of the causes here.

Over time, the firm lost its high volume customers who demand low price to low cost

competitors. It also lost its high margin customers to competitors who are focused on high

margin targets. The lost of sales has make the firm hard to sustain itself financially.

Consequently, the firm freeze its headcount and promotion back in 2008 credit crunch.

The indications of failure are many. The firms’ revenues are declining every year due to

shrinking market share, not making any profit for years; employee motivation is low and high

absenteeism, share price declining over time and shrinking shareholders fund.

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7. Organisational Restructuring strategy

Ramu (1999) defines this strategy as a strategy that involves changing the firm’s structure for

the purpose to increase its efficiencies and effectiveness, to make it more profitable andbetter organised to fit current business needs.

Due to changing economic and competitive conditions over time, firms with non-differentiated

products are left to compete on price, thus emphasizing the need for low cost strategy. To

avoid this, Sun Microsystems chooses differentiate focus strategy where it produces high

powered and expensive machines in selected market segments than those standard one

offered by its competitors.

The strategy was working well and firm’s sale increased as customers pays a premium on the

products. This does not last long as competitors’ capabilities and market changes. That is

when competitors introduced same products that match its high performance but with cheaper

price. Failed to retaliate and left with no choice, Sun decided to change its strategy from

differentiate focus to low cost focusing on standardised products to compete with its rivals. As

firm structure follows strategy, such change has put Sun into more troubles.

The failure is due to new strategy not supported by the old capabilities, skills and resources,

which favour differentiation strategy for years, and not low cost. Different strategies demandsdifferent capabilities. Attempting to execute a new strategy with old capabilities can only lead

to massive problems.

The indications of failure are decline in sales when customer switched to competitors cheaper

products offerings, thus losing market share and affecting top line and bottom-line. Its shares

price headed south tremendously to USD3.50 from a high of USD65 in 2000 (Hrebeniak

2005).

In 2008, in order sustain its business, the firm restructured further to reduce operating cost by

retrenching 18 percent (6000 workers) of its global workforce (Rogers 2008). But to no avail,

the firm was completed acquired by Oracle early 2010 (SHankland 2010).

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8. Merger

Merger is defined as joining of two or more firms after they have come under common

ownership (Lajoux 2006).

Both Daimler and Chrysler use this strategy thus formed DaimlerChrysler. The purpose of

such merger strategy is to tap on each other strengths to create competitive advantage to

compete globally by introducing a new series of small cars to the emerging classes. Chrysler

will use Daimler’s Mercedes technology while Daimler could use Chryslers as hedging

platform when the luxury car market segment deteriorates. It was believed the merger breed

synergies and cost savings but this was not the case (Welch, 2005).

The merger failed due to poor planning and poor execution which leads to poor merger

results. Inadequate due diligence is a critical aspect in DaimlerChrysler merger planning. This

include cultural due diligence which is vital to the merger success. This is the soft matters

related to culture similarities and differences between merger partners such as people,

culture, values, and this is where DaimlerChrysler merger failed to carried out.

The cultural differences between the German and American firms were vast. For example, the

merger failed to integrate its operation and management successfully due to difference in

management style. Daimler’s management style is structured, formal, centralised and

dominant while Chrysler was flexible, informal, decentralised, and non-authoritarian.

On top of that, there were different views on compensation schedules that caused serious

cultural and perceived equity problems. The style and process differences have made the

cultural integration difficult. As a result, the merger faced poor performance, high employee

dissatisfaction and high employee turnover (Ojha 2008).

Failed merger is often costly. In this case, the merger was formed with value USD36 billion in

1998. In 2006, Chrysler posted operating loss of USD1.5 billion and dropped to rank four in

the car market behind Toyota. In 2007, Chrysler restructured by cutting off 16 percent (13,000

workers) of its global workforce. The same year, Daimler put it on sale options and sold it for

USD7.4 billion. In 2009, Chrysler seeks for bankruptcy protection (Daimler AG 2010).

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9. Distribution strategy

This strategy defines how to get a product upon creation to the right place, to the right person,

at the right time in an efficient and effective approach. The objective is to minimize the overall

distribution cost, select the best target markets and suitable channels for each marketdepending on the product characteristics (Harper 2003).

Apple practices such strategy in 1990s. Apple revamps its distribution strategy by selling

direct to computer reseller (with sales threshold conditions) and bypassing the firm’s

distributors. The objective is to save the additional mark-up added at distributors’ level. This

means the resellers were able to reap a discount by buying direct from Apple than they

bought through distribution channel. Not only did the revamp failed to meet its objectives, it

turns out to be a disaster.

The reason behind the failure is that Apple does not have the system to handle direct sales

operations at that time. Resellers failed to receive goods from Apple as lower priority was

given to them because they are buying less than distributors and larger superstores. But the

resellers are preferred customers to the distributors.

There were no proper logistics systems to track new incoming direct customers as well as

those who leave the program. Worst still, there were no additional sales force cater to handle

problems arises and to settle dispute between resellers and Apple. The firm’s largestdistributor said the problem arises when Apple sells more in the direct channel than the

distribution channel. As such, the Apple incapability in handling distribution complexities has

led to destroy its own channel. Less than two years, the distributor sales plummeted by 75

percent (Kanellos 1997)

From the case, the failure is purely a result of a weak strategy in both formulation and

execution. This is because Apple lack of understanding of its current operations and have not

discussed or analyze the kind of impacts the revamp could have on the value chain with the

value chain members, in this case, the distributors the resellers or dealers.

Such poor planning and execution comes with great cost. The negative results for such

revamp include sales loss to Apple as resellers could not get products. Consequently, to fulfil

customers’ orders, resellers were forced to buy from superstores thus setoff the cost savings

they should have through direct channel. Distributors lost millions of sales and promotion

commission. All these add up to be total loss for Apple. Besides numbers, the program

caused hostile arguments with distributors, thus damaging years of good relationship.

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10. International Strategy

International strategy is a strategy where firms used to acquire growth value by bringing home

products and services to foreign markets where these products and services do not exist

(Kozami 2002). With the strategy, overseas production is controlled by firm and productoffered are standardised with little differentiation.

In 1990s, Kellogg’s experienced declining growth in the cereal industry in its two major US

and European markets. As a result, Kellogg’s look outside these markets to look for cereal

consumers and had selected India due to its huge population. The India market is so big that

a mere 2 percent market share is greater than US market. As such, Kellogg’s invested

millions of dollars to launch its signature product (Haig 2003).

Unfortunately, the results were not as rosy as Kellogg’s expected. First obstacles is cereal

breakfast is new to Indian and they favoured hot vegetables for breakfast. So, the debut sales

were acceptable but not at later point. The second issue is product was expensive. Kellogg’s

not lowering the price at the same time introduce more products without engage in further

market research. The outcome was none of them were sellable. Kellogg’s tried to blend the

products with Indian flavour but turn out disastrous. Kellogg’s re-strategise and sells biscuit.

The causes for failure were Kellogg’s lack of market research towards India and blinded by its

population. Even though the population is huge only a fraction of it was middle class.Kellogg’s later find out affordable consumer segment accounted for 100 million only and their

buying behaviour varies significantly across the regions. Others include speaking many types

of languages and believe in many religions throughout the states. This leads to the cause of

failure, that is do not understand Indian culture. So, only companies who know the cultural

complexities will be able to do and get business in India.

Such poor strategy formulation and execution has led Kellogg’s wasted millions of dollar of

invested, time and effort. Besides, the worst dilemma is whether its brand would be associate

d more with biscuit than cereal by the Indians, thus spoiling its brand identity there.

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Conclusion

In conclusion, it is essential to note that strategy formulation is not an easy task and strategy

execution is much more difficult.

From the cases discussed above, the successful ones clearly demonstrate certain key

success factors. They are clear with their business strategies and able to align its core

competence to strategies, and execute it smoothly.

Whereas for those failed cases, most of them failed because they have poor planning, failed

to manage cultural clashes or manage change, do not have proper strategy formulation which

leads to poor execution and poor results.

Different companies can adopt same strategies but each may get different results. Very often,

the success and failures of a company lies in its strength and weaknesses and not a bad

strategy but only bad execution.

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