STRATEGIC ANALYSIS AND CHOICE
Abstract
Palm Inc was once at the top of the PDA industry’s food chain. It was even among the first-entrants in the said industry. However, recent accounts on the company’s performance have monoliths like Microsoft taking over the market. One major element that could have made this happen is the strategic choices held by Palm Inc. Specifically, this might be attributed to the inability of the company to recognise the paradox of compliance and choice that existed in their industry and how to balance it to their advantage. The following discussion will analyse the circumstances surrounding the issue by using marketing concepts and organisational theories initially espoused by theorists like Michael Porter and many other who have pointed out the importance of industry dynamics and competitive advantage in gaining leadership in any market.
Abstract
Table of Contents
Introduction
Literature Review
Background of the Company
Discussion and Findings
Palm Inc and its Value Chain and Competitive Advantage
Palm Inc and the Level of Rigidity of its Industry
Paradox of Compliance and Choice in Palm Inc
Conclusion
Reference
Greater market share, stronger competitive advantage, wider market range, these are among the most common elements required of an organisation seeking continued survival and even excellence in their respective fields. There are tools accessible for these organisations in addressing the demands of their respective environments. Strategies are among those in organisations’ arsenal that could help them brace up with the rigors that they encounter in their operations. Numerous organisational studies have indicated the importance of strategy and in the operations of the company. This has come to the point where companies could find it troublesome to find the single most effective way of strategy formulation and implementation. This paper intends to take a closer look in this area seeking to understand the dynamics of a strategy and the consideration of the conditions surrounding the company. The study will look on the case of Palm Inc, a company among those on top of the market of handheld hardware. Specifically, the study intends to analyse the following questions:
· How does Palm Inc treat its value chain and competitive advantage?
· How does Palm Inc address the level of rigidity of its industry?
· How does the paradox of compliance and choice appear in the case of Palm Inc?
· How does the Palm Inc strategy help in its performance in the market?
Literature ReviewOrganisational studies and theories on strategy formulation have pointed out numerous conflicting ideas that tend to be rather confusing for the modern organisation. Nonetheless, there are still elements in classical organisational studies that appear to be rather practicable generally for firms. For instance, the models forwarded by the renowned theorist Michael Porter have been immensely helpful for organisations. Concepts like the value chain and competitive advantage increases the firms’ awareness on their environment and how they could deal with the issues that it bestows them. In the context of competitive advantage, companies have to realise the “logic of overall leadership and differentiation” in order to maximise the results. ( 1980, 1999) However, recent studies have indicated that immediate reaction to the minor changes in the market spells the capability of a firm to acquire its competitive advantage. (1999) On the other hand, the concept of a value chain refers to an approach which (1985, 1992) indicated as a means to acquire competitive advantage. In the context of the modern organisation, this approach sees “human resource management as a support activity that along with technology development and procurement, serves to sustain higher priority primary activities.” (1992) However, there is an increasing regard on the incompatible nature of the value chain model in the current environment of modern companies. Basically, the incompatibility lies on the paradox provided by the model regarding competition and collaboration among firms. (2001) The paradox lies on the perspective used by an organisation whether they will adhere to firm compliance or strategic choice. (1998)
Another model provided by Porter that proved to be valuable for organisations in terms of strategy formulation is his five forces model. Basically, this model presents the rigidity of the industry and the overall environment on which a company operates. One element that this model presents is the underlying conditions inherent in the industry which points out the key success indicators for an organisation. ( 1999) For some industries, the economies of scale are important. For others, the integration of the processes involved is seen as an imperative. In any case, these underlying factors establish what is known as the inherent power structures in the industry. Based on the five forces model, elements like the power of buyers, suppliers, new entrants, and substitute products or service are presented. (2006) Upon knowing these, organisations now possess the information they require to formulate courses of action relating to what could be their individual strategies. Studies have been made regarding the possible regard of the company based on their views of the risks and their consequent dislike or neutrality on the matter. This aversion or neutrality thus indicates the kinds of activities an organisation would undertake to address their status in the market. Risk-averse organisations could take on firm compliant measures which doesn’t compromise or place a significant amount of risk on the company. (2001) On the other hand, risk neutral or risk-taking companies would be taking strategic choices ranging from basic expansion or development to bold, revolutionary initiatives that will shake the industry. (2001)
In establishing the individual strategies and courses of action on each company in the industry, they inevitably create some sort of unwritten set of rules. These set of rules tend to be further moulded into norms and to some extent cultural principles with regards to the conduct of business and operations. This is what is collectively known as industry norms. In the study made by (1999 29) they called these norms as industry recipes which “result from industry participation and contribute to making firms within an industry more similar to each other than to firms outside the industry.” This is supported by (1996) they described these industry norms as an “appropriate coherent way of looking at its world (a paradigm), which was validated by practice in that world.” It is in these types of norms and accepted principles that decision making of those in position is influenced. To some extent, organisations have to deal with such issues on the context of the standards held by their peers, those who operate within their market, such that they are ensured that business will continue. On the other hand, aside from the industry norms provided by the industry recipes, influence on the strategic decision making of a company could be seen from other forces. (2002) noted that these institutional pressures come not from other businesses but from the other elements of society, specifically the stakeholders of the company. These may include the government, the public, and even civil society.
Going back to the issue of competitive advantage, the firm thus have the choice to comply with the industry standards or to take on the direct opposite of these norms. In any case both means still seeks to continue as players in the industry. A distinction between the two poles is that in the context of firm compliance, the company meet the terms of the standards indicated in both the industry recipe and institutional pressures to attain a level of “alignment” among the competitive players in a particular industry. On the other hand, the perspective of strategic choice takes a hands-on and practical means to acquire an advantage over the rest of the players even if it means breaking the established norms in the industry.
Studies thus point to the key regards of a particular priorities of companies in the paradox. For companies covering firm compliance, the priority is to cover the industry dynamics and not the attainment of industry leadership. This is the converse in companies seeking strategic choice. At a certain point, organisations must recognise that in dealing with such a paradox, placing themselves in a particular extreme would be close to commercial suicide. One could not constantly be adapting to the environment without even considering the possibility of development. In the same manner, one could not constantly take on strategic options that assault the very norms that have established the industry. Companies have to constantly be aware of their boundaries particularly in their operations. Compliance to both the industry recipe as well as the institutional pressures is incontrovertible as they have to take on transactions with these institutions and organisations eventually. However, constantly submitting to the demands for compliance would be rather foolish especially if the end result would be detrimental on the welfare of the firm. In the context of employing a strategic choice, the firm should recognise that there are still norms and rules that should be taken into consideration before deeming a strategy fully operational. A reasonable strategic plan does not run the risk of compromising the welfare of the company.
Thus, seeing the discussions in this review, the paradox of compliance and choice does provide modern companies with the alternative as to the strategic perspective that they require based on their specific goals. However, it similarly presents the reality that industries are not static that only a particular perspective, be it firm compliant or strategic, would work all the time. In the same manner, cognition of the established norms would give the organisation the ability to maximise their capabilities without breaking any rules or offending any part of society. In addition, any firm could similarly use a good strategy that would essentially place them in a competitive position, not just merely to align themselves with the standard level of performance with the other players in the industry. The message of the theory manifests the need for flexibility and compromise on the part of the individual organisation. Recognition of the level of demand as well as the degree to which an organisation could take risks is imperative. More so is the fact that every step or strategy made by the firm should be calculated and measured such that any loss or misstep could be remedied with minimal effort.
Background of the Company
Palm Inc is the company synonymous with handheld devices, particularly personal digital assistants (PDAs). Basically, this company is one of the forerunners in developing the hardware and the software for PDAs with its inception in 1992 by cofounders and . The initial strategy that the company took is based on the assumption that PDAs are next in the evolution of the computer technologies with reference to the progression of PCs to laptops to notebooks. In the initial stages of the company, they were the only players in the newly created industry yet they could still not appeal for the public on acquiring their products as they are far from offering convenience with their bulky and rather complex operating system.
Though there are considerable parts of the market which are more inclined to take on these products, the public still opts to use the substitute products as opposed to PDAs. This makes the dynamics of the industry rather complex especially as competitors and other manufactures of hardware for PCs set out to engage Palm as they enter the PDA fray. With its operating system (OS), being the standard in the PDA market, Palm was kept in the top position. However, with the presence of its direct competitors with companies like Handspring and Microsoft, the fate of Palm appears to be rather grim. This vision is further realized upon the connections made by the other competitors with other handheld gadgets like mobile phones. For instance, a direct competitor of Palm, Psion, forged an agreement (Symbian) with phone companies like Nokia, Eriksson, and Motorola to employ their operating system called EPOC in their mobile products. Thus, this provides modern mobile phones with PDA-like features essentially called smart phones.
Eventually, Palm went on to address the demands of the environment by installing a three-pronged strategy. The first is to create a new company, Palm Source, to “spin off” Palm’s operating system. Palm Source was also seen as the one responsible for the developments in the OS of the company to keep its hold on the top position in the market. The second part of the strategy seeks to address the behaviour of the buyers in the industry. Basically, it will be responsible for knowing what the PDA user needs and wants in his/her handheld device. In the same manner, this part of the strategy allows the company to take into consideration the possible collaboration with other mobile phone companies or push the envelope further by creating wireless communication possible for handheld PDAs. The third part of the strategy is to establish a new target market for the company. Traditionally, the company survives in catering for the tech savvy, business-driven, young professionals. At some point, Palm recognised the possibility of tapping other markets like home-makers and housewives. Essentially, Palm is bent on widening its market by creating a buzz with the untapped part of the market. The problem in this context is that there are accounts indicating that this course of action taken by Palm may have been a little too late. For some reason, there are reasons to believe that this assumption is possible. The inability of the company to establish what is required of them by its environment strategically may have been the key to Palm’s struggles in the industry.
Discussion and Findings
The analysis of the strategic choices of Palm Inc will be analysed using the framework presented in the literature review earlier. Specifically, the analysis will be covering the consideration of the company on its value chain and competitive advantage; how it addressed the rigidity of the industry; and existence of the compliance and competition paradox in Palm Inc.
Palm Inc and its Value Chain and Competitive Advantage
The competitive advantage of Palm Inc lies on its consideration of the value chain that existed in the company. Specifically, how the company treated its primary and support activities greatly influenced how Palm Inc fared in the industry that they have created. In the context of their primary activities, it is seen that the creation and delivery of the products is held highly in the industry. In the case of Palm Inc, the products ranged from the hardware to the operating systems used in such handheld technologies. The constant changes seen in the product from being considered as “bricks” to its sleek and savvy visage of today’s handheld PDAs manifest the recognition of the company regarding the needs of its consumer. This indicates the responsiveness of Palm on the every need of its end user, nevertheless, there seemed to be a rather limited effort from the company is its marketing responsibilities. Though the product did quite a buzz on the market and among the tech savvy consumers, the lack of an aggressive marketing scheme have failed the Palm Inc in acquiring potential users from different segments of society. At some point, new entrants in the market created by Palm Inc have realised this and thus created a foundation on the market by tapping these elements overlooked by Palm for its potential. In the context of the secondary activities of the company, increased effectiveness and efficiency fell short on the part of Palm Inc as they have failed to protect their position as the primary holder of the OS of PDAs in the market. Their OS were seen as less friendly when compared to that made by the Microsoft produced PDAs. In the end, the most recent models of Palm Inc are now made to be compatible with this Microsoft-developed OS, which essentially establishes the one produced by Palm as inferior to the one developed by Microsoft, at least as the consumers demand it.
Palm Inc and the Level of Rigidity of its Industry
Another element that requires scrutiny on the part of Palm Inc is on the consideration of the rigidity of the industry. Basically, Palm Inc was not able to discern the level of effort required of them as seen in their rather rigid industry. At first, one must consider the underlying conditions of the industry. First, it is seen that the industry has rather fragmented buyers. Seeing the current state of the PDA market and the products they offer, every single individual could now take advantage of the features of the PDA. The problem for the case of the Palm Inc is that they treated the buyers as if they were concentrated. This is the basis of the claim on the case study. If the company have realised the potential regarding the behaviour of consumers even before it started its operations, then it would have still dominated the market. Another underlying condition is that given their operations in the tech industry, they are bound to encounter trade battles with monoliths like Apple and Microsoft. For some reason, Palm Inc has not taken advantage of their position in the market being among the forerunners in the PDA industry. Based on the case study, Palm Inc has taken their operations up to a higher level when Microsoft entered the PDA fray.
In the context of power structures, the case study has established that the buyers do have high considerably high influence in the industry. They have freedom to choose as to whether to go for the PDAs or their equally powerful substitutes. As seen in the case study, the substitutes for the PDA is extremes to say the very least. There are the PCs, notebooks, and mobile phones on the one part, which is considerably more powerful and offers more technological features than the PDA. In the other end of the pole, PDAs have to contend with the much cheaper and less complex pen and paper medium which includes the classic leather-bound planners.
At some point, the management of Palm Inc should recognise the timely need for their company to make an actual demand for their product and not to wait for consumers to recognise the need for PDAs for themselves. To some extent, this may be attributable to the level of averseness of Palm Inc on taking risks. Essentially, as seen in the case study, their decisions in taking actual courses of marketing action tend to be rather belated. One could only assume that this lapse in time could only mean that the company is reviewing their decisions rather intensely thus calling for a protracted period of time. Unfortunately, this averseness to risk has given its competitors as well as its substitute products ample time to exploit a particular segment of the market and even maximise its returns.
Paradox of Compliance and Choice in Palm Inc
The issue pertaining to the leadership of the industry or consider the dynamics of the industry tends to apply, though in a considerably complicated manner, on the part of Palm Inc. Basically, the rather complicated nature is that Palm Inc was initially competing for industry leadership where they were the sole player. They went head-to-head with the players in the high-tech substitutes like PCs and notebooks. They overlooked the potential of being a first-entrant in the industry. At this point, they should have recognised that being the industry leader would not have been relevant if they are not aware of the actual dynamics of the market. Thus, in the initial stages, Palm should have taken advantage on being the only provider of handheld PDAs. Though this has been their achievement in the OS sector, their development was close to being stagnant which resulted to Microsoft overtaking them on the OS market. Seeing this occurrence, Palm could not even jive its operations with the dynamics of the market. Unless Palm Inc could address its problems and deal with the dynamics of the industry, then its eventual demise could be imminent.
Conclusion
Strategies and heir direction frequently indicates as to whether a company will be able to achieve its organisational goals or not. In the same regard, the choices of made by companies regarding their take on strategies engaging in strategic choice or compliance shows how they are well versed in the dynamics of their individual environment. In the case of Palm Inc, they have taken strides that inherently compliment their respective environments. However, the question lies on the timing and immediacy of their decision as to implement specific strategies. Based on their history, Palm Inc has encountered different changes in leadership and ownership which essentially reflects the direction on which the company views the paradox of compliance and competition. Initial stages of the organisation have manifested a great cognition of competition taking on large established technologies such as PCs and notebooks. They did this without realising that they have been competing with the wrong element. This shows that early on the company has some issues on the direction on which industry they intend to take on. To some degree, this may be understandable in their situation given that they made a new environment on which they have no other company to pattern to. This makes the choice of compliance over competition rather complicated. However, this does not justify the meagre performance of the company as they have the responsibility to closely monitor the subtle changes in their environment. This alone could determine whether they are to take on strategies that will make them industry leaders or mere players in the PDA industry.
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