Strategic Management Assignment Examining Business Case Scenarios

Question

Task:
The strategic management assignment consists of the following sections:

SECTION A
Answer the ONE question

1. Porter and Kramer (2006) state that effective CSR initiatives occur when shared value is created. Netflix are reviewing their CSR strategy and considering the following CSR initiatives:

a. Supporting Wildlife Works, a non-profit organisation that seeks to create marketbased solutions for wildlife conservation, on a project protecting a migration corridor for elephants and other animals in Rukinga, Kenya.

b. Continued involvement in the Dimpact collaboration lead by the University of Bristol. The aim of researchers, in consortium of 16 media companies, is to develop an online tool that calculates the carbon emissions of the delivery digital media content.

c. Making a new series of “Our Planet” with David Attenborough – a programme alerting a global audience to the impact of climate change on wildlife. Production will be prioritised ahead of new series of popular shows such as Stranger Things, Queen’s Gambit and Bridgerton.

d. With half its carbon emissions being generated in film production, a scheme to replace all on-set diesel generators with batteries and solar panels. Diesel generators account for around a sixth of Netflix’ film production carbon footprint (area quickly becoming important to consumers and in attracting government grants and potentially tax rebates).

Use Porter and Kramer’s CSV framework to critically consider which, if any, of these initiatives Netflix should continue or adopt. (Up to 1000 words)

SECTION B
Answer TWO questions selected from the four options

2. Critically discuss using the RBV theory (Barney 1995) if CEMEX’s continuing success in Mexico has been the result of the ownership of a chain of Cement and Concrete production facilities. (Up to 1000 words)

3. Blockbuster’s failure in 2010 was a result of poor management. Use Christensen’s theory of disruptive innovation to critically assess if this interpretation is correct. (Up to 1000 words)

4. Use Campbell, Goold and Alexander’s (1995) parenting matrix to critically assess if Esquel’s vertical integration moves deliver shareholder value. (Up to 1000 words)

5. Porter (1996, 2014) argues firms often try to straddle between industry positions and as a result dilute their competitive advantage. Critically consider if this is true in the case of Jet Blue’s introduction of the Mint class on its planes. (Up to 1000 words)

Answer

Section A
Strategic Management Assignment Question 1: CSR strategy of Netflix
Netflix is a renowned streaming organization that has gained immense popularity in the entertainment industry. The unique and original approach of Netflix has made it popular in the global digital streaming market and makes it one of the strongest contenders in the sector. However, it is important for the organization to form a link between competitive advantages and corporate social responsibility so that they can contribute within reformation of the society and planet. Multiple initiatives have been undertaken by the organization to reduce the production of carbon footprint and increase the awareness among the customers about the impact of climate change and global warming.

The main purpose of Netflix's existence is to entertain their targeted customers and for that they require a habitable world to entertain. Therefore, it is essential for the organization to adopt an effective sustainability approach to improve the future of the planet. As per the Porter and Kramer framework, organizations need to form a linkage between the business goal and their CSR initiatives that will not only encourage them to emphasize on their CSR activities but also attain business goals that are equally important for increasing the involvement of shareholders. According to the analysis of Porter and Kramer, the present CSR strategy of organizations is fragmented and it is not aligned with the strategic goals of business. In order to overcome the fragmented CSR strategies, Porter and Kramer have developed a new CSR approach that will address the interdependence among companies and the broader community (Moon and Parc, 2019). Their strategy has also encouraged organizations to develop tailored CSR strategy rather than practicing generic CSR strategy. Due to the intensified level of competition in the market, it is important for companies to gain benefit from their strategies and also make significant social impact to improve their global reputation.

Netflix can adopt the scheme to replace their diesel-based generators with batteries and solar planes so that they can reduce the level of carbon footprint generation that also influences the operation cost of the organization. Netflix has already adopted the science driven carbon reduction strategy that will allow them to control the greenhouse gas generation and enable the organization to achieve the goal of net zero greenhouse gas emission (Netflix.com, 2022). It has been seen that in 2020, 1 million metric ton carbon generated and half of the greenhouse gas generation is associated with the physical production of stories that viewers watch on Netflix. Therefore, it is important for the organization to continue with the replacement of diesel-based power with batteries and solar panels that will not only reduce the carbon generation but also establish their business as sustainable business. Continuation of this particular strategy will help in enhancing the profit margin by reducing the operational cost. Inclusion of solar PV helps in reducing the operational cost by 65%. According to the data of Energy Sage, it has been seen that energy cost can be controlled by 75% and households can save more than $1500 monthly in their electricity bill. On the other hand, businesses can also make profit with installation of solar panels without making investment in the Power Purchase agreement. Installation of solar based panels can also add benefit to the business of Netflix by providing them free source of electricity for the long term as most of the solar panels are capable of providing service for at least 25 to 30 years. This type guarantee also enhances the reliability of the business and improves their position in the international market.

Installation of solar panels will also allow the organization to receive help from the government as organizations that are installing new solar panels in their practice can receive that is equal to the 30% cost of the solar panel (Energy.gov, 2021). On the other hand, there are also multiple states in the US that also announced incentives for organizations that involve solar panels in their business and control the reduction of greenhouse gas. This type of tax rebates and involvement of incentive will motivate the organization to emphasize more on their CSR practice and improve the function that will strengthen their position in the global market. On the other hand, it has been also witnessing that the trend of using renewable energy in the US market has been increasing by a significant margin and their market has already installed 14.5 gigwatts of solar panels within 2016. Due to the announcement of government incentives, both the commercial and residential sectors have been encouraged to install solar based panels in their business to gain business advantages.

As per the suggestion of Porter and Kramer, it is important for any type of business to mitigate the demand of their important stakeholders and organizations are responsible for returning sustainable profit to their investors so that they can attract and retain new investors with the business. Netflix's strategy to control their operation cost by relying on renewable energy will successfully attract investors in their business and add advantage to their business practice (Jastram and Berberyan, 2021). On the other hand, alteration in both internal and external activities of business will enhance the capacity of the business by creating tailored CSR strategy that can address the particular social context. In addition to that, Netflix has also prioritized hiring local crew and members to reduce the necessity of transportation and other related activities. Involvement of local members will not only control the operational cost of business but it will also allow the organization to contribute in the community by creating job opportunities for local people (Chao and Hong, 2019). They are also using their streaming service to enhance the awareness among their viewers about sustainability. It has been seen that 160 million viewers around the world have at least once watched their documentary to gain better understanding about climate change and inspire to adopt a sustainable approach. Their shows like Our Planet, My Octopus Teacher and Down to Earth are some of their notable efforts to alert the global audience about the drastic impact of greenhouse gas and carbon emission.

Section B
Q2: Discussion of Cemex
Operations of success in Cemex
Cemex has been a multinational building and construction industry in San Pedro, Mexico since 1906. The firm manufactures and distributes ready-mix materials, cement and other building aggregates in over 50 countries. According to a report, Cemex holds an estimated 50% market share in Mexico via hardware and construction materials stores (cemex.com). The firm owns about 15 cement plants, 49 quarries and 85 distribution centres across the country with a potential capacity of 29.3 million tons per year. They have significantly invested in technological alliance over the last 25 years and have accorded operational improvements. The brand awareness of Cemex was more than 90% after the implementation of the Construrama network of independent retailers in Mexico. Strategy function operations of Cemex have provided senior management with an improved decision-making and strategic planning process. As per the report, the revenue of Cemex was 1300 crores USD in 2020 and the total assets owned by the company has reached US$ 27.4 billion (cemex.com, 2021). Cemex has focused more on the individual construction or DIY market across the Mexican stores to schedule deliveries within 20 minutes through a GPS tracking system in their operational chain.

Theoretical implications
Effective management of resources encourages the organisations to deliver consequent projects within the estimated deadline. It is due to the allocation of proactive resource management that fosters insight into resource availability and enhances the timeline projections. The theory is one of the dominant perspectives in the strategic management that withstand great profitability and help to gain competitive advantage for the firm. Implementation of RBV in Cemex has been beneficial in terms of their competitive success as measured through internal resources and external factors (Gupta et al. 2018). The industry has owned a number of cement plans across Mexico, reflecting the right data on their hand to allocate the resources efficiently. Acquiring its own cement plant in each and every city has revolved a great round of applause for Cemex as well as switched by a number of long-term supply contracts. By keeping an eye on the construction or building materials project, Cemex has access to greater capital resources that have already reduced their double bookings and oversights. Integration of RBV theory has showcased the large ownership of the chain of Cemex where they have progressed to international ambitions in Spain with a codified PMI process. This has resulted to become a leading state-owned producer in Indonesia through the standardised approaches of Cemex. The tight regional integration of Cemex’s production plan has revealed their utmost efficiency of resources, neglecting the ill effects of resource under and over-utilisation (Zhao and Fan, 2018). Application of RBV theory through VRIO has ensured imperfect imitability, rareness, valuation and sustainability with a number of imports, export services as well as for third parties. The industry has also looked to outsource non-core capabilities by effectively emphasising on external resources in order to gain access as a world-class building expertise and cut additional costs. Due to the strategic focus on technological innovation, the resource management of Cemex has uniquely served the purpose of the firm in terms of serving the global needs of the customers. The industry has always focused on the customer segment by ensuring a concrete value chain process through logistic supplies and inventories. Strategic agreement with IMB through the outsourcing resources has well enhanced the capital structure of Cemex as well as lowered the additional expenses of operation (Gao et al. 2018).

Figure 1: RBV theory

(Source: Gao et al. 2018)

Involvement of RBV theory in the operation and production process of Cemex has highly evolved the customer engagement of the firm through sustainable development practises. They also undergo periodic financial analysis in order to identify the continued success rate of the company as accessed through acquisition and structural capabilities of the target market. Maximising the resources of Cemex has been advantageous in terms of owning the major production facilities across the global building sector. Actively engaging with resource management practises through RBV, the organisation has strongly focused on staff training and healthy-safety programs that has led to a strategic ownership chain around the world. Owning a private fleet of trucks and railcars around their distribution centres has also ensured competitive advantage and continued success since the last 25 years. This has been the cause of emerging net sales of 52% in Mexico, while 5% for aggregates and 24% for mix concretes (Shan et al. 2019). As the industry attracts high calibre staff and claims to acquire proper human resources through effective recruitment chains, the capital expenditure raised to US$98m in 2012. In addition, Cemex also owns 286 concrete ready-mix plants as well as 2320 concrete delivery trucks in more than 80 cities to cover a large part of the building and construction territory. By adhering RBV theoretical implication in the management perspectives of Cemex, the industry has also focused on technological resources through its own satellite communication system, naming it as CEMEXNET. This has been possible due to the great acquisition of a number of ownership of chains around the production facilities of Mexico. Owning the market share at an explicit worth of 52%, the industry has highly engaged in operational investment through a suite of decision-making IT application and bespoke production chain. The continued success of Cemex is also on the causes of their intangible assets where the organisation has attributed to a great brand awareness on the instances of Construrama that has significantly raised market above 90%, comparing that of the other construction materials chains (Gupta et al. 2018). Integration of RBV theory in the resource management practises of Cemex has showcased a broad differentiation with the tangible assets where the organisation has profoundly been capital intensive with a data-driven culture. Due to the accessibility to resources and capabilities has remained at an explicit level in Cemex, they have continued to strive excellence as per the firm’s competence in the production facilities. In addition, owning some outlets and chains of most of the retailers, Cemex has gained competitive advantage in the cases of Cement and Concrete production facilities.

Q3: Disruptive innovation of Blockbuster
Failure of Blockbuster
Blockbuster, officially known as Blockbuster LLC was an American organization that provides rental based video and gaming service to their customers. In the 1990s, the organization reached its peak and expanded its operation by opening more than 9094 stores and hiring 84,300 people in their organization that allow them to perform their business operations outside the US. Despite witnessing such huge success between 19945 to 2004, Blockbuster failed to continue their business growth and their business has been severely declined due to the increasing competition in the global streaming service (Forbes.com, 2014).

Poor leadership is one of the main reasons that cause the drastic impact on the business. In 2000, Blockbuster became one of the top rated companies in the video rental service that attracted millions of customers from different locations. The company has also earned enormous amounts of money by charging late fees to their customers. It has become an integral part of Blockbuster Revenue model but it has also become the weak part of their business model that their leaders have failed to revive. One of the greatest rivals of Blockbuster, Netflix has eased up the service and despite renting videos to their customer, they have started a subscription process that allow customers to avoid unnecessary payment of late fees. On Netflix, customers can watch as much content as they want within their subscription plan. On the other hand, management of Blockbuster are sceptical about including an online service facility to their customers that can remove the obligation to visit their stores to collect videos (Karyawati et al. 2018). Netflix has already sent videos in their online service that is more convenient for their viewers. Inability to adapt with the new changes has severely damaged the performance of Blockbuster.

Blockbuster not only faces a high level of competition from Netflix only, Wal-Mart, Target and Best Buy have also played significant roles in the drastic changes in the position of Blockbuster. The price of their offered DVDs is significantly less than Blockbuster that reduces the involvement of customers with the organization. The leaders have failed to accommodate competitive pricing strategies in their business that can add competitive advantages to the business (Indigo9digital.com, 2021). Management of Blockbuster has also failed to use the advantages of social networks that can allow their business to gain popularity by addressing the changing demand of customers. Involvement of a broader network can increase the alignment of customers and influence of customers on each other can make significant differences in business outcome. The tight network system of the organization has not provided any scope to enter new information and execute plans according to it. Failure of leadership to determine the fate of business has greatly influenced the end result of Blockbuster.

Theoretical framework of disruptive innovation
Disruptive innovation is a modernised approach of innovation in the advanced market segment that transforms highly expensive products and services to afford a broader population. Christensen’s theory of disruptive innovation states the incumbent business availability where a small firm can easily take over the challenge of an established business by entering the bottom of the market and ensuring a move-up (McDowall, 2018). Due to the consideration of inconsistent titles of Blockbuster, their films were lesser known and were independent, reflecting an irrelevant management practises around the industry. In 2010, Blockbuster’s growth was seriously declined in terms of the rise in global streaming service of Netflix that has gained more competitive advantage than Blockbuster. The disruptive innovation strategy of Blockbuster has failed to attract the incumbent business mainstream of customers around the market due to the uprising innovation of Netflix. Application of Christensen’s theory has showcased the rationality of failed disruptive innovation strategy in Blockbuster where their fees represented 10% of the revenues as well as led to an increase in the levels of stockouts. The extrinsic cost of incremental rental opportunities and reduced customer innovation reveals the improper capability and allocation of resources in Blockbuster that remained elevated while challenging the revolving business market of Netflix. In addition, cases of poor leadership were very common in the industry that reflects the absence of new business model centricity in terms of Christensen’s theory (Christensen et al. 2018). Due to the great implications in terms of a weaker revenue model, the disruptive innovation stated by Blockbuster failed to showcase the sophisticated product or service as accompanied by the firm’s film base and stockouts. It can be observed from the theoretical viewpoint of Christensen that Blockbuster has not engaged in an online business chain, similarly like the Netflix which is a crucial part of disruptive innovation strategy. According to the standpoint of disruptive innovation, industries need to innovate new products in order to accomplish the demands of their clients through a more appealing way and ignoring the needs of the downmarket. Integration of Christensen theory reveals the presence of failed adaptability with the online or digital services that can correspond to a higher market share for Blockbuster in those times. It is also due to the high level of competition from Walmart, Best Buy and Target that caused a low-end disruption in Blockbuster in terms of greater profit margins, reflected from the Christensen theory (Wilson and Tyfield, 2018). Lack of reliability on the independent films as well as lower performance of the film production process of Blockbuster has been the greatest reason for poor management practises identified through Christensen’s theory of disruptive innovation. Failure in a broader network through effective suits of disruptive innovation emerged under Christensen’s theory is another reason for low customer engagement. Thus, the failure of Blockbuster in 2010 is the deadliest cause for poor management as identified through the tight network of the organisation, showcasing the ill effects of Christensen's disruptive innovation theory.

Reference list
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