Q1. What are the main strategic issues in this case study?
In this case study, among the main strategic issues are:
Failure of Strategic Management/Planning and Corporate Governance
Planning is commonly known as the process of formulating in advance as organized behaviour action. While it is true that people do not always plan their actions, it is inherent for any organizations to plan. However, whether dealing with the context by which planning is occurring, whether on the individual or organizational level, the process takes shape according to the prevailing attitudes, beliefs and goals that are involved. The term strategic management is also used synonymously with strategic planning (David 2001).
In Baan Company, the management’s ambitious strategy neglected some important aspects of the company’s operation. The aggressive action to abruptly expand and grow contributed to fall of the productive and increasing market share. Strategic management as well as corporate governance is guiding an organization relative to challenges and opportunities appearing in the contingent environment. This environment is composed of those external elements that most directly affect organizational goal achievement and new goal development. Thus, organization system design and management should complement strategic actions taken for productive subsystems, as well as those providing output delivery and other support functions for the organization. To the extent possible, the organization bases its actions on strategic planning that, rather than a one-time effort, is an ongoing process of adaptation of original conceptions of mission, goals, structure, roles, and so forth relative to environmental dynamics (Siegel 1992). The failure in corporate governance is a real threat to the future of every corporation. To make matters worse, standards of corporate governance are changing rapidly in response to random events which capture public imagination. These are the simplest prime reasons why the company failed.
Change Management
Change management is basically defined as the formulation and assimilation of change in a methodical process. The major objective of change management is the introduction of innovative means and systems in the work organization. Businesses, like Baan Company must normally undergo change in order to evolve to a higher level of for instance, stability, management or production. Appointing a new head officer, for example, can greatly enhance his subordinates based on his management principles and personality.
Due to the proposed ambitious strategy, organizational change is part of and a result of struggles between contradictory forces. Also, change management practice is related with endeavoring to manage their competing demands. To understand why and how to change organizations, it is first necessary to understand their structures, management and behaviour.These systems of ideas, or organizational theories are crucial to change management in two respects. First, they provide models of how organization should be structured and managed. Second, they provide guidelines for judging and prescribing the behaviour and effectiveness of individuals and groups in an organization. It is clear that in many organizations there is no clear understanding if the theories. Change cannot hope to be fully successful under circumstances (Burnes 1996). Again, this simple principle with the ideas embodied on it were overlooked by the Baan Company management.
Weakened Leadership
Leadership comprises the aptitude and ability to inspire and influence the thinking, attitudes, and behavior of other people (Adler, 1991; Bass, 1985; Bass and Stogdill, 1989; Bennis and Nanus, 1985; Kotter, 1988). Leadership is a process of social influence in which one person is able to enlist the aid and support of other individuals in the achievement of a common task (Chemers, 1997). With the Baan Company case, the sudden resignation of Jan Baan can be attributed to the decline of the company’s performance. He is an effective leader as shown in the rapid growth of revenues of the company. However, the fall of the organization is not dependent on his resignation.
Technology and Competition
The technological upheaval and intense international competition tender significant challenges to an organization’s capability to keep up their competitiveness (Bettis & Hitt 1995; Hitt, Keats, & DeMarie 1998). In a micro economic sense, competitiveness is defined as sustainable development in productivity motivated by the quality of business strategy and operations, the quality of business and environment and the prevalent macro economic environment (Yener 2001). In a macro economic point of view, competitiveness is the degree to which a country can under free and fair market conditions, produce goods and services which meet the test of international market, while simultaneously maintaining and expending the real incomes of its people over a long term (Garelli 2002). This is evidently projected in the case of Baan Company. The challenges of global competition and technological advancement triggered or contributed to its eventual economic tragedy.
Q2. What should the Baan Company's leadership do?
At the business level strategy, knowing what the market demands and the latest trends could help Baan Company to fully exploit its research and development capabilities and come out with new practical and applicable strategies or plans which are cost-effective but high in quality and performance. The strategic option can even be used as marketing tool where the focus is on staying close to your customers and listening to their feedbacks. On the flip side of the coin, there will be huge mobilization of resources involved, and the associated risks bestowed on the corporation.
At the corporate level strategy, understanding the strategic importance of its subsidiaries is something Baan Company has to be familiar with. This allows information dissemination to be retained at the corporate headquarters of the whole company (Tweedale 2002).
At the network level strategy, there are various strategic options available for Baan Company. These are enumerated as follows:
• Tie up with more related companies
• Collaboration with its major competitors
• Alliances with leading suppliers in software technologies
A tie-up or merger with various related companies offers tremendous benefits in terms of access to Baan Company subscribers, infrastructure and even its resources. However, the firm must not lose sight of its core competencies while pursuing these tie-ups. Otherwise, its image might be put in jeopardy. Meanwhile, the collaboration with its major competitors can be seen as a ridiculous move at first. However, upon close examination, this move could pave the way to increase even more its market shares and revenues. The bottom line is both sides would be able significantly gain financially in such an alliance. One possible setback, however, is the differences in the cultures of the companies involved. Another possible setback could be whether any of competitors has the need to form alliances. The third option also focuses on alliances, but this time with either one of the suppliers specializing in manufacturing of software technologies. The benefits of these alliances should outweigh the costs in the long run.
In terms of appropriateness, all three options are able to directly address the current issues mentioned. However, the question remains whether Baan Company could be able to implement any of these options, and whether these options can be acceptable to the key stakeholders. Any merger or alliances may also involve the sharing of expertise. Baan Company has traditionally relied on the inside-out approach. It is important to note that any merger transactions would have many implications on the firm’s values and culture as well as the resources. The key stakeholders definitely would be concerned with such options and need to be convinced of the positive aspects. Somehow, it will be able to overcome this barrier in managing strategic changes in the process of implementing any of the above mentioned strategic options.
Q3. What does the case say about the 'Corporate Governance' and 'Corporate Social Responsibilities? Discuss what you believe Baan's corporate social responsibilities might have been in the circumstances of the case?
According to Stapledon (1996), corporate governance can be defined as a system that is used in order to direct and control companies. Corporate governance on this case can be judged as profit-oriented. The managers are greedy at some instances. Due to the aggressive desire to expand and grow in its line of operation, the management forgot to take a closer look and give a significant amount of attention to the various sectors of the organization. Planning and making up practical and applicable plans were taken for granted. The authorities are concentrated in profit making thus neglecting its financial capability, human resources, and management strategy.
The Baan Company corporate social responsibility on this case was also not fully implemented. The company served as a venue for economic growth for the management, state, and work force. With its failure, the corporate social responsibility to provide economic growth opportunity to every party concerned vanished. However, there are also areas of social responsibility that the company excels. Among these are focused on the product like responses to customer complaints, product warranties, and processes for exchanging purchases. The corporate social responsibility to its workers was not fully manifested. Data included on this case study says that the company tends to ignore the substantial contribution of the human resources in the continuous growth and development of the company and its operations. Instead, the company technically laid-off some of the useful employee during its momentous decline.
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