Pindelski_Competitive_Strategies

on advertising control, removal thereof from city centres and protection of customers against advertising.

Social-cultural environment

People in developed countries seem to be tired of the existing forms of advertising. The susceptibility to advertising and its contents drops. Leaflets or posters gradually stop to reach the customers. The tendency to spend a lot of time in shopping centres is growing.

Technological environment

Digital Merchandising, interactive floors, large screens and development of computer systems are significant. Simultaneously, numerous problems with linking various systems arise. The costs of new technologies drop fast and even become available to small businesses. The low capacity of networks is also a problem, as in the vast majority of the shops, for example, wires were installed in the 1990’s.

Discussion questions:

1.How can the trends mentioned above impact the digital merchandising development?

2.Which of them represent opportunities and which are threats?

3.What other trends in the particular environment dimensions that could impact this solution can you specify?

4.Who can be a supplier and who can be a customer of digital merchandising?

Further readings

To be read and study by yourself . You can discuss the papers, materials and conclusions during the next class.

1.L. Richman, The New Worker Elite, “Fortune”, Sep 22, 1994, pp. 56-66

2.Pindelski Mikołaj, Mrówka Rafał, Limitations in Enterprise Strategy Performance, Practice and Research in Private and Public Sector-11, Mykolas Romeris University, Vilnius 2011, pp. 284-290

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3.1. Certainty, risk, uncertainty

First of all, risk must be distinguished from uncertainty, while uncertainty – from certainty. In the world of management these are three generally accepted basic conditions for making business decisions, setting targets, creating strategy and overall management. We may also determine a scale on which “certainty” reasonably enables us to recognize the functioning conditions and future effects of the decisions made, including strategic decisions. Under risk conditions the recognition of trends, opportunities and threats is restricted, but possibly with some probability of the right recognition thereof. Similarly, the decisions, targets and plans made under risk conditions are possible to be fulfilled, however, with some probability of the failure thereof. The uncertainty condition in turn is the state in which neither the probability of success nor the conditions or any elements composing it are known or determinable.

Tab.6 Certainty - risk - uncertainty

Level of ambiguity of the conditions of making decisions, setting targets and plans.

Source: author’s own elaboration on the basis if author’s unpublished materials

Contrary to all appearances, a vast portion of decisions in modern management is made under conditions close to certainty. It applies to e.g. selection of a supplier, business

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partner or in some cases determining elements of target environment that affect the business and delimiting the scope of the analysis thereof. Along with market consolidation, but also its more and more accurate recognition and knowledge thereon, the certainty level in some case grows as well. At present, while identifying basic current competitors over the short-term, a situation close to certainty occurs. Uncertainty or even risk appears indirectly, when competitors, so far operating elsewhere, enter the sector. For example the market of laptops and palmtops has been entered by mobile phone networks attaching the said equipment, against little payment, to web connections and data transfer they offer.

Case study 7

Asus – certainty, risk and uncertainty

Asus, while building new lines of ultra-lightweight notebooks, were considering the selection of CPU suppliers. Not only did they have to be very efficient and technologically advanced, but also they had to consume little energy, avoid overheating and be small-sized and light. Market surveillance indicated that there are three basic CPU manufacturers in the world at present, two of whom have basically dominated the market and offer the most advanced technologies in this scope. The brands were Intel, AMD and VIA-Technologies. All the offers were collected, not only the current specifications of products and delivery and sale conditions were examined in detail, but also their development plans in the future and adaptability to the manufacturing of notebooks, net-books and tablets. As a result, Intel CPU’s were selected as the most suitable ones for Asus manufacturer’s requirements.

Discussion questions:

1.Under which conditions was the decision on the selection of the supplier made?

2.How should Asus behave under such conditions? What analyses should they make?

3.What would the supplier selection be like under two other types of conditions?

Unfortunately, the businesses usually encountered risk, or even uncertainty conditions. It is often assumed that the more complex the environment is the entity operates in the higher is their business risk, while the more variable it is, with changes difficult to foresee,

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the more uncertainty shall characterize it. Stock exchange price fluctuations are in numerous cases an example of operating under uncertainty conditions, as it is often immensely difficult to estimate the stock exchange movements.

3.2. Fighting against risk and uncertainty

Businesses and their management boards, however, try to restrict the impact of negative conditions and bring as many situations as possible to the certainty criteria. The market, customers, consumers, competitors, suppliers and various environment dimensions are analyzed for this purpose. Complex projections are carried out concerning the impact of market variables on various organization activity dimensions, knowledge is gathered in knowledge and data bases and multi-variant plans are applied5.

On the strategic level the businesses keep searching for new solutions and sometimes diversify their business activity or expand its territory to other countries. A prerequisite thereof is often the improvement of certainty of the entity survival. A simple principle is applied here, namely: if something fails on one market, success on another shall compensate the losses.

Some other principles act in an exactly opposite direction. They are restricted to a narrow segment they try to recognize the best. The knowledge causes a restriction of the uncertainty, or even risk, level and causes that the entity may function efficiently in the niche it has selected. This restricts the risk of its functioning and gives it a feeling of high certainty. However, it may appear delusive, because the entity used to the stable and foreseeable conditions, shall have no methods of response and prevention of negative effects should some unexpected change occur.

Some entities try to anticipate changes and set the tone for the environment themselves. They create trends, determine new directions for competitors and become market pioneers and innovators.

However, in spite of developing methods setting them close to certainty, still the necessity to make unplanned decisions frequently appears. Such plans also consider the possibility to redesign them, while sticking to the target and the path thereto may lead them astray.

Very interesting concept according to risk in management is Fuzzyiness in management In the fuzzyiness There are five models that are distinguished in the development of methods supporting management, usually based on advanced algorithms, statistical and mathematical formulas, five models are distinguished:

5 Decker A, Galer D., (2013), Enterprise Risk Management. Straight to the Point, ERMSTTP LLC

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•A non-determinist model with known states.

•A non-determinist model with known states but events that are hardly valuable.

•A non-determinist model with known states, valuable events but not measurable.

•A non-determinist model with known states, valuable and measurable events.

•A determinist model – states, events and influences are known and results are also known.

Questions and discussions

1.What type of situations are faced by companies according to the risk and uncertainty level?

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2.How do companies counteract the uncertainty ?

3.How are the activities against uncertainty connected with the strategy types described in chapter 1 ?

4.How may correctly chosen employees influence risk in the company ?

Case Study 8

Risk counteraction in Google.com

More information about the company: www.google.com

Google.com started in 1996. Two Stanford University students, Larry Page and Sergey Brin started to work on a search engine that would beat all the so far existing solutions in this scope. Originally it was called BackRub and constructed based on the prioritization of specific web pages by links. The company in its present form and under the present name was established in 1998 only. Its name originates from the word googol i.e. 1+one hundred zeros. This was to express the infinity of information contained on the Internet. Google.com was promptly recognized as one of the 100 most important websites of 1998 and the most accurate search engine. 1999 saw the most intensive development, a growing number of employees and obtaining a company capital amounting to 25 million US $. The very platform also develops reaching a billion web pages entered in 2000. In addition the company started to cooperate with Yahoo! becoming at the same time the key supplier of the search engine service and taking over smaller companies. It made available the first additional functionalities, such as AdWords or Toolbar. Google.com home page was translated into fifteen language versions and won numerous awards. Further development stages include expansion by forums and making a graphic engine available to the users. In 2001 the company opened their overseas office and became the key internet search engine for Latin America. Two years later it took over further companies, big ones this time. It contributes to the development and launch of the AdSence service now the major functionality of business clients. Google was acknowledged the most useful word of 2002. In 2011 Google decided to make available its own service named Google+. The dynamic development of the company for the last fourteen years resulted in the fact that Google is the most recognizable and valuable business in the world now.

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Strategy

The mission of Google is to sort out all the information resources kept on the Internet in a way enabling one to reach and disseminate them promptly6. The company target is to provide information search service in a fast, accurate and, most importantly, uncomplicated way. The focus on users’ needs, expressed in the development of solutions they need most, is emphasized. In order to provide the comfort of use and efficiency of the solutions provided, measures are taken to make them simple, clear as well as functioning fast. All the actions have been focused on following the mission so far. The company concentrates on solving problems related to search for contents and pictures on the Internet only. The indexes and other questions related to the development of web search methods are worked upon. This was the reason for the dialogue with the users. The solutions were matched to the developing users’ needs and, for example, the offer included versions on the phones, available any time and under any conditions.

However, Google earns money on advertising directed almost exactly to those who search for them. The combination of search for perfection at looking for the web contents with advertising for business has brought excellent effects. Google have become an intermediary linking those who search for news, services and products with those who offer them. The major programmes for the actual advertising campaign management on the search engines are AdWords and AdSense whose target is to present advertisements matched to the search object. They are displayed on the page containing search results and are presented within the partner sites of other portals. The key words that cause the advertisement display are selected by the advert providers. Google also makes available tools for measurement and improvement of effectiveness of reaching the recipients with marketing contents.

However, Google have begun to develop a number of other solutions recently, such as Google Maps offering detailed maps of any place worldwide, also enabling display of the pictures of numerous places from the ground level. The context translator is developed along with the possibility of any text audio playing. The content of books available partially or in whole for free grows on googlebooks, the statistics of any phrases appearing on the Internet also grow. Free Gmail, Picasa-google or www Chrome.

6 http://www.google.pl/about/corporate/company/index.html

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On the one hand it is to encourage the use of the search-engine for other purposes than so far. On the other hand, however, it more and more resembles diversification of activity on the Internet. Generally, linking advert providers and advert recipients is a philosophy. So maps may include advertising information, just like a dictionary or googlebooks.

Google always puts stress on the measures to win new users within defined target segments, which is to increase the value for advert providers. Although this is still the search-engine that represents the major platform of client services and earning source, there are further ideas developed that may become a significant profit center in the future. One of the segments that generates revenue streams are companies advertising themselves on the search-engine. Google, however still assumes that advertising space purchase directly from the search-engine owner is impossible. Their positioning is determined by the word(s) searched, or specific nature of the partner site contents. The revenues generated in the way thus described enable the company subsequent accomplishment of further investments in the area of solutions provided free of charge. The continuous search for new solutions required the maintenance of an advanced technical background and top level personnel. The level of advancement and work immensity is unique. For example, the PageRank algorithm enabling the settlement of the advertisement display efficiency is based on more than two hundred indexes updated on a daily basis and determining the interest of people worldwide in the search for specific key words. Undoubtedly the market Google operates on changes dynamically, although, according to people skilled in the art, is well recognized and foreseeable to a certain extent. However, the launch of new technologies that might restrict the common nature of Google cannot be ruled out. Therefore the company must continuously watch the environment and efficiently respond to any anomalies.

Discussions questions:

1.What are, in your opinion, the conditions Google operate in? Are they certainty, risk or uncertainty conditions?

2.What is the reason for the type of Google activity conditions? What environment elements affect it?

3.How do Google cope with the conditions they operate in ?

4.What other methods could Google use in such conditions?

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