Description
Our paper about strategic transformation of a ship parts agent company.
International Conference on Business Management and Information Technology Application
BMITA 2009 207
Strategic Transformation of a Ship Parts Agent
Company
Chung Su
Department of Business Administration, KYU
[email protected]
Tzong-Der Horng
Department of International Business, KYU
[email protected]
Abstract
S.F.C. is the sole agent of N company, the Japanese ship parts supplier. The company
has been passed more than one industrial life cycle since it founded. It faced the first
decline in sales when the R.O.C. government published the fishing trawler license
prohibition in 1975. S.F.C. implemented market development strategy immediately and
overcame the crisis of slump successfully. Gradually, S.F.C. forwarded to new life
cycle.
However, some sales data indicate that the business environment is changing and alarm
the top of the company to react in time. The fact that the sales of S.F.C. has seen turn
down over two years also notices the top of S.F.C. that the company is facing the second
decline in sales. To improve current situation is the most important mission to the
company.
In this qualitative study, we induct all information and suggest two strategies to solve
problems that S.F.C. is encountered. The first strategy is that S.F.C. was restructured and
become a holding company. The parent company holds a new company which is
engaged in developing ship parts agent market of mainland China. This solution is one
of the acquisition growth strategies [1]. The second strategy is that S.F.C. was
restructured and become a holding company. The parent company holds a new company
which is engaged in developing generators agent market of mainland China. This
solution is a mix of acquisition strategy and collaborative strategy which is a new type
of strategic transformation.
Keywords?Turnaround; Repositioning; Strategic Transformation; TOWS
International Conference on Business Management and Information Technology Application
208 BMITA 2009
1. Introduction
Some time, as Day and Jung [2] stated, a company must change more quickly than this
gradual evolution allows; it need break with past, an accelerated pace of change-a
transformation. So does S.F.C., a member of ship parts industry. In fact, the sales
performance of Taiwan ship parts industry turned down by some factors, including the
uncertainty of global oil price, the trend of global economy, the open policy of mainland
China and the business of main ports in Taiwan downward these years. S.F.C. is also
affected and is now at the bottleneck of sales. It must react to the problem of external
change as soon as possible or it will lose market gradually. Thus, developing a strategy
set to cope with gap between the needs of the market and the capabilities of the
enterprise is essential.
Based on the focused group interview, this paper proposes strategies which follow and
extend the approach of strategic transformation [1] for top executives of S.F.C. to solve
the problem. According to reference [1], strategic transformation is the last step in the
process of business turnaround and consists of two broad options: company growth
through acquisition or diversification and collaborative growth through alliances or joint
ventures. However, the study conducts all information and finds out that there exists a
third option: a combination of diversification and joint venture. This is a mixture, a new
type, of strategic transformation.
The purpose of this study is to address the question that in general, which strategic
moves are associated with successful turnaround? Before making out this question, we
should understand the terms, turnaround and repositioning, which is relative to the
question.
2. Review of Literature
Turnaround
In 1975, Schendel and Patton [3] presented a question. ”Why are some firms able to
break-out of stagnating or declining performance pattern?” Therefore, they were
regarded as the first that considered the cause of the turnaround situation in assessing
the appropriateness of turnaround strategies [4].
Although turnaround is an important concept that many firms would have to think of it
in their life cycles, not many studies have delved into the field between the
mid-seventies and the early nineties; thus, the topic is considered largely idiosyncratic
and open-end [5].
International Conference on Business Management and Information Technology Application
BMITA 2009 209
The definition of turnaround is varying with different aspects and research strategies.
From the point of management aspects, some view turnaround as a performance issue in
strategic management; some view turnaround as a process in organizational
management. The research strategies also vary from one context to another. As stated by
Krueger and Willard [6]:
Researchers have asked managers for their perceptions of decline and recovery, gleaned insights
from secondary data and used data base.
From the point of strategic management, Krueger and Willard [6] stated precisely that a
turnaround can be considered complete after there has been an increase in earnings
before taxes and extraordinary items during a minimum of four years following the
nadir of the turnaround; Chathoth, et al. [7] defined briefly that a turnaround is as the
action taken to prevent the occurrence of financial disaster.
An extensive literature review indicates that many studies focus their preference on the
strategies changes to prevent/cope with the occurrence of financial disaster. In terms of
strategic changes, Hofer, for example, analyzed written cases on 12 poorly performing
firms and found support for his theory that the appropriateness of a strategic or
operating turnaround depends on whether the firm's "illness" stems from poor strategy
or poor operations [8]; In additional, the study of other scholars, Bibeault, 1982;
Robbins and Pearce, 1992; Pearce and Robbins, 1993, also reveal that organizational
turnaround can be achieved through a two-stage process: retrenchment and recovery.
The division of response tactics and turnaround stages broke out a series of arguments.
Hambrick and Schecter criticized that the work of Schendel and Patton [3] is subjective;
the strategic turnaround seems not as realistic as Hofer’s claim, causing 100percent and
200 percent or more increases in market share, for most mature businesses. He reasoned
that 90 percent of all year–to-year market share changes of mature businesses,
according to PIMS data base, were less than five share-points. Presumably, weak
businesses would exhibit even a more negative distribution.
His study presented that efficiency-oriented moves, the short-term tactics, but
entrepreneurial initiatives were associated with successful turnaround. After this article,
the discussion of entrepreneurial strategies was not many. The main stream of research
focused efforts on that the efficiency/retrenchment strategies are necessary or not in the
turnaround process.
Balgobin and Pandit [9] proposed a five stage model which identified five overlapping
but distinct stages of the turnaround process. These five stages were termed: decline and
crisis; triggers for change; recovery strategy formulation; retrenchment and stabilization;
International Conference on Business Management and Information Technology Application
210 BMITA 2009
and return to growth. Afterward, Boyne [10] proposed a framework, the 3R model, to
describe the stages of the turnaround process. He regarded that turnaround is influenced
positively by retrenchment, repositioning and reorganization.
No matter how many stages a turnaround process was divided. These models are static.
Chowdhury thought that turnaround is not a single state but a process composed of a
sequence of events, that is to say, turnaround involves change which is dynamic [5].
From the point of organizational management, Chowdhury [5] defined turnaround to
occur when a firm perseveres through an existence-threatening performance decline;
ends the threat with a combination of strategies, systems, skills, and capabilities; and
achieves sustainable performance recovery. According to the definition, Chowdhury
developed a four-stage model which divided the elements of turnaround into three
critical requirements, including incidents, events and concepts; the model also explained
how the elements germane to each stage. Based on the concept of decline, Chowdhury
[5] extended the trace.
The skeleton for the model comes mainly from the work of Bhave (1994), Krueger and Willard
(1991), and Weitzel and Jonsson (1989). We then derive the elements from a disparate literature on
decline and turnaround, place them in their respective stages, and, finally, amalgamate the stage into a
composite model. This approach is consistent with Weitzel and Jonsson (1989).
Chowdhury opposed the view of strategic management that turnaround responses are
broadly categorized as strategic and operating. He proposed three events, domain
definition; scope overlap; and strategic contours, in this model to modify the dichotomy.
Regardless of the approach taken, the point of strategic management or the point of
organizational management, researchers are always interesting in the treatments of
responding decline. Generally, operating, or efficiency, turnarounds seem to focus on
short-term tactics, for example, cost controls, asset reduction, and revenue generation.
Strategic, or entrepreneurial, turnarounds seem to focus on long-term moves such as
new products, diversification, vertical integration, new market share initiatives, and
redefining the business. The discussions about that the efficiency turnarounds are
necessary or not have been last for two and half a decades. However, the exploration
about entrepreneurial turnarounds is relative rare.
As to entrepreneurial strategy, Castrogiovanni [11] stated that traditional views on
turnaround have maintained that the response should match the problem. Thus, when
the problems arise primarily from inefficiency, retrenchment is warranted. However,
when problems are strategic, the turnaround effort should focus on entrepreneurial
moves to reposition the business. Obviously, entrepreneurial moves exhibit a high
International Conference on Business Management and Information Technology Application
BMITA 2009 211
degree of correlation with repositioning in the marketing.
Repositioning
The concept of repositioning can be found across a broad range of marketing or strategy
literature. It has been variously employed as an element to competitive strategy [12], as
a mean of strategic change [13], as a category to product strategy [14] and as essential
to corporate transformation [15]. The term “repositioning” is conscious adaptation to
change a firm’s product, service, and market segments or even value proposition to
smooth the gap between the needs of the market and the capabilities of the enterprise
[16].
Boyne [10] compared retrenchment with repositioning and stated that retrenchment can
be viewed as an “efficiency” strategy, repositioning is an “entrepreneurial” strategy that
emphasizes growth and innovation. This response to failure involves a new definition of
the mission and core activities of an organization, by becoming more dominant in an
existing market or by diversifying into new markets and products. He also regarded that
repositioning is the driving force of turnaround.
Pearce and Robbins [1] pick the term, strategic transformation, to represent a set of
indications which are developed to help an enterprise creating the repositioning strategy.
A useful way to think about strategic transformation is in terms of the two broad options that make
it possible to achieve a competitive repositioning of the firm: company growth through acquisition,
and collaborative growth through alliances or joint ventures.
Thus, the relationship between repositioning and strategic transformation is that the
repositioning takes a backseat to a consideration of strategic transformation.
According to the opinion of Pearce and Robbins [1], it is obviously that strategic
transformation consists of two groups of strategy: acquisition growth strategies and
collaborative growth strategies. All of the seven strategies placed in Fig. 1. In spite of
indicating the company's strategic directions, these strategies represent the different
magnitude of change with the different speed of change.
International Conference on Business Management and Information Technology Application
212 BMITA 2009
Key:
A
Acquisition Strategies
C
Collaborative Strategies
Fig. 1 Speed and magnitude of strategic transformation; Resource from Pearce and Robbins,
strategic transformation as the essential last step in the process of business turnaround,
2008:125
To summarize, the idea of strategic transformation derives from turnaround. Turnaround
is a topic that involves lots of benefits of firms, but only a few researchers explore the
project. Authors, Schendel et al (1976), Hofer (1980), Bibeault (1982), and Hambrick
and Schecter (1983), were important antecedents of this project. Especially, Bibeault
(1982) was the first author to discuss a multistage model of turnaround [4].
Besides the discussion of multistage model, including strategic approach and
organizational approach, a notable stream of research is the argument of responding of
firms to deal with decline. In spite of different sets of terms, operating/strategic,
efficiency /entrepreneurial, and retrenchment/repositioning, they point the same sets of
solutions. Finally, the scope of repositioning and strategic transformation is different,
though they seem alike at first sight.
3. Method
Focus Group
As a qualitative method, focus groups bring together participants to discuss a topic
which is mutual interest to both researcher and participants and to collect data. Thus,
there are two characteristics of a group: interaction and participants sharing a common
identity relevant to the discussion [17].
The major advantage of focus groups is that they offer the chance to observe
participants engaging in interaction that is concentrated on attitudes and experiences
which are of interest to the researcher [18]. In addition to the advantage, the process of
focus groups also offers new idea regarding the topic, modification in opinion. For these
reasons, we choose focus groups to collect information.
International Conference on Business Management and Information Technology Application
BMITA 2009 213
The goal of focus groups design is to reach the point of theoretical saturation. To
achieve the goal, we planned multiple-category design in this case. The design allows us
to make comparisons in two ways, from one group to another within a category and
from one category to another category. The major benefit of the design is that we can
obtain accurate information by way of triangulation process.
The groups we conduced include the engineers of N company (S
1
), the staffs of
Kaohsiung Harbor Bureau (R
1
), the employees of W shipyard at Kaohsiung Harbor (R
2
),
the employees of X shipyard at Mai Liao Harbor (R
3
), the employees of Y shipyard at
Taichung Harbor (R
4
), the staffs, managers; engineers; and sales, of S.F.C. which were
divided into three groups as E
1
, E
2
, and E
3
. We elaborate briefly on the framework of
multiple-category design as follows.
Table I: multiple-category design
Category of supplier S
1
Category of S.F.C. E
1
,E
2
, E
3
Category of retailer (official) R
1
Category of retailer (private) R
2
, R
3,
R
4
The study adopts purposive sampling because the topic about ship parts industry is not a
common issue; the knowledge resource and scope of participators is limited and specific,
i.e., a probability sampling method is not suitable in this case.
Data Analysis
After comparing and contrasting results of every group, we extract points that are
relevant to competition of S.F.C. and conduct these data with TOWS Matrix, an analysis
tool, which is designed for matching the environmental threats and opportunities with
the company's weaknesses and especially its strengths [19].
The environmental threats to competition of S.F.C. are follows:
T1: Chinese port business, especially Shanghai port and Ningbo Port, develop radically.
T2: Chinese ship parts industry develops also speedy.
T3: The business of official retail is reduction because of out sourcing.
T4: Low price ship parts are popular.
The environmental opportunities to competition of S.F.C. are follows:
O1: Chinese government keeps the market-open policy
International Conference on Business Management and Information Technology Application
214 BMITA 2009
The company's weaknesses to competition of S.F.C. are follows:
W1: The speed of delivery is not competition.
W2: The language skill of engineers who were sent to N company receiving training is
not corresponding to requirement.
W3: The status of sole agent limits the attempt of S.F.C. to develop overseas market.
W4: S.F.C. seems entering a decline stage.
The company's strengths to competition of S.F.C. are follows:
S1: N company provides technology support only to S.F.C. in Taiwan.
S2: N company trusts S.F.C. and keeps good relationship with the company.
S3: S.F.C. owns good reputation in the ship parts industry.
S5: S.F.C. owns the experiences of selling generators in Taiwan.
According to O1-W2 and O1-W3, we developed a strategy that S.F.C. was restructured
and become a holding company. The parent company holds a new company which is
engaged in developing ship parts agent market of mainland China. We named it as
strategy L.
According to O1-S5, we developed a strategy that S.F.C. was restructured and become a
holding company. The parent company holds a new company which is engaged in
developing generators agent market of mainland China. We named it as strategy M.
4. Results and Discussion
From the point of strategic transformation, Strategy L is, no doubt, joint venture.
However, strategy M belongs to neither acquisition growth strategies nor collaborative
growth strategies. In fact, this strategy is a mix of acquisition strategy and collaborative
strategy, i.e., this is a new category of strategic transformation.
Key:
A
Acquisition Strategies
C
Collaborative Strategies
M
Strategy M
Fig. 2 The territory of strategy M; Modified from Pearce and Robbins,2008
Strategy M
M
International Conference on Business Management and Information Technology Application
BMITA 2009 215
In practice, the main distinctive competence, the unique strength to achieve superior
efficiency; quality; innovation or customer responsiveness, of S.F.C. is technology
which is supported from N company. The works of ship parts such as overhaul,
renovation, and repair need expertise, because these works influence life span of ship
parts and operational safety of a ship deeply. In ship parts industry, the company that
has the capability to reduce these perceived risks of customers is S.F.C.
According to the opinion of Hill and Jones [20], the distinctive competencies of an
organization arise from two complementary sources: its resources and capabilities.
Grant [21] also stated that a firm’s ability to earn a rate of profit in excess of its cost of
capital depends on two factors: the attractiveness of the industry in which it is located,
and its establishment of competitive advantage over rivals. Moreover, the ability to
establish competitive advantage is much more important than that to build up industry
attractiveness. In the context of ship parts, S.F.C. possesses, both sole agent status of N
company and word of mouth in service, barriers to enter which is the character of
industry attractiveness. The achievement in the industry is incomparable under current
circumstance. What the company needs to improve is competitive advantage, for
example, access to low price input.
The results of focus groups interview reveal that China market is a significant
opportunity that associated with obtaining low price input and high quality human
resource. However, the sole agent contract that S.F.C. had signed with N company is a
limitation for S.F.C. to invest China market at this moment. On the other hand, China
market also attracts Japanese businessmen. The volume of trade between Japan and
China has been in excess of that between Japan and America since 2004. For Japanese
businessmen, it is predictable that the trend of inclining to China market would not be
changed. The external environment offers an opportunity to S.F.C. playing the “market
gateway to the P.R.C. [22]” for Japanese supplier. Thus, the solution that S.F.C. become
a holding company and holds a new company to develop China market actually benefits
both S.F.C. and N company.
The contribution of this research is to suggest an assumption of category in strategic
transformation on the basis of Pearce and Robbins [1]. We propose a possible approach
between acquisition growth strategies and collaborative growth strategies to deal with
decline. According to the opinion of Pearce and Robbins [4], "A turnaround situation
exists when a firm encounters multiple years of declining performance subsequent to a
period of prosperity". Thus, the next step of this research is to examine the strategy,
strategy M, in practice.
International Conference on Business Management and Information Technology Application
216 BMITA 2009
Reference
[1] John A. Pearce II and D. Keith Robbins, “Strategic transformation as the essential
last step in the process of business turnaround.”, Business Horizons, Vol. 51, pp.
121-130, 2008
[2] J. D. Day and M. Jung, “Corporate Transformation Without a Crisis.”, McKinsey
Quarterly, Iss4, pp.117-127, 2000
[3] Dan Schendel and G. R. Patton, “An Empirical Study of Corporate Stagnation and
Turnaround.”, Academy of Management Proceedings, p49-51, 1975
[4] John A. Pearce II and Keith Robbins, “Toward Improved Theory and Research on
Business Turnaround.”, Journal of Management, Vol. 19, No.3, pp. 613-636, 1993
[5] Shamsud D. Chowdhury, “Turnarounds: A Stage Theory Perspective.”, Canadian
Journal of Administrative Sciences,” Vol. 19, No.3, pp. 249-266, 2002
[6] David A. Krueger and Gary E. Willard, “Turnarounds: A Process, not an Event.”,
Academy of Management Proceedings, l p26-30, 1991
[7] Prakash K. Chathoth, Eliza Ching-Yick Tse, and Michael D. Olsen, “Turnaround
Strategy: A Study of Restaurant Firms.”, Hospitality Management, 25, pp. 602-622,
2006
[8] Donald C. Hambrick and Steven M. Schecter, “Turnaround Strategies for Mature
Industrial-Product Business Units.”, Academy of Management Journal, Vol. 26,
No.2, pp. 231-248, 1983
[9] Rolf Balgobin and Naresh Pandit, “Stages in the Turnaround Process: The Case of
IBM UK.”, European Management Journal, Vol. 19, No.3, pp. 301-316, 2001
[10] George A. Boyne, “A ‘3Rs’ Strategy for Public Service Turnaround: Retrenchment,
Repositioning and Reorganization.”, Public Money & Management, Vol. 24 Issue 2,
pp. 97-103, 2004
[11] Gary J. Castrogiovanni and Garry D. Bruton, “Business Turnaround Processes
Following Acquisitions: Reconsidering the Role of Retrenchment.”, Journal of
Business Research, 48, pp. 25-34, 2000
[12] “Christopher Lovelock and Jochen Wirtz.”, Services Marketing, 6th ed, New Jersey,
USA
earson Prentice Hall, 2007
[13] Paul Ryan, Mike Moroney, Will Geoghegan, and James Cunningham, “A
Framework for a Strategic Repositioning Strategy: A Case Study of Bulmers
Original Cider.”, The Irish Journal of Management, Vol. 28, Issue 1, pp. 81-102,
2007
[14] Philip Kotler, “Marketing Management.”, The millennium ed, New Jersey, USA:
Prentice-Hall, 2000
[15] Dexter C. Dunphy and Doug A. Stace, “The Strategic Management of Corporate
Change.”, Human Relations, Vol. 46, No.8, pp. 905-920, 1993
[16] Colin Turner, “Issues and Challenges in Strategic Repositioning : The case of Cable
and Wireless.”, Strategic Change, Vol. 12, pp. 251-257,2003
[17] Alfred E. Goldman, “The Group Depth Interview.”, Journal of Marketing, Vol. 26,
Issue 3, p61-68 ,1962
[18] David L. Morgan and Margaret T. Spanish, “Focus Groups: A New Tool for
Qualitative Research.”, Qualitative Sociology, Vol. 7 Issue 3, p253-270, 1984
[19] H. Weihrich?“The TOWS Matrix – A Tool for Situational Analysis.”, Long Range
Planning, Vol.15 No.2, pp.54-66 1962
International Conference on Business Management and Information Technology Application
BMITA 2009 217
[20] Charles W. L. Hill and Gareth R. Jones, “Strategic Management Theory: An
Integrated Approach”, 5th ed, Boston: Houghton Mifflin, 2001
[21] R. M. Grant., “The Resource-Based Theory of Competitive Advantage:
Implications for Strategy Formulation.”, California Management Review, Vol. 33,
No.3, pp.114-135,1991
[22] Chong-Pin Lin, “ Perchance prescient: opeds and observations on Taiwan security
and beyond”, Taipei, Taiwan: Li Ming Cultural Enterprise Co. 2008
doc_793934215.pdf
Our paper about strategic transformation of a ship parts agent company.
International Conference on Business Management and Information Technology Application
BMITA 2009 207
Strategic Transformation of a Ship Parts Agent
Company
Chung Su
Department of Business Administration, KYU
[email protected]
Tzong-Der Horng
Department of International Business, KYU
[email protected]
Abstract
S.F.C. is the sole agent of N company, the Japanese ship parts supplier. The company
has been passed more than one industrial life cycle since it founded. It faced the first
decline in sales when the R.O.C. government published the fishing trawler license
prohibition in 1975. S.F.C. implemented market development strategy immediately and
overcame the crisis of slump successfully. Gradually, S.F.C. forwarded to new life
cycle.
However, some sales data indicate that the business environment is changing and alarm
the top of the company to react in time. The fact that the sales of S.F.C. has seen turn
down over two years also notices the top of S.F.C. that the company is facing the second
decline in sales. To improve current situation is the most important mission to the
company.
In this qualitative study, we induct all information and suggest two strategies to solve
problems that S.F.C. is encountered. The first strategy is that S.F.C. was restructured and
become a holding company. The parent company holds a new company which is
engaged in developing ship parts agent market of mainland China. This solution is one
of the acquisition growth strategies [1]. The second strategy is that S.F.C. was
restructured and become a holding company. The parent company holds a new company
which is engaged in developing generators agent market of mainland China. This
solution is a mix of acquisition strategy and collaborative strategy which is a new type
of strategic transformation.
Keywords?Turnaround; Repositioning; Strategic Transformation; TOWS
International Conference on Business Management and Information Technology Application
208 BMITA 2009
1. Introduction
Some time, as Day and Jung [2] stated, a company must change more quickly than this
gradual evolution allows; it need break with past, an accelerated pace of change-a
transformation. So does S.F.C., a member of ship parts industry. In fact, the sales
performance of Taiwan ship parts industry turned down by some factors, including the
uncertainty of global oil price, the trend of global economy, the open policy of mainland
China and the business of main ports in Taiwan downward these years. S.F.C. is also
affected and is now at the bottleneck of sales. It must react to the problem of external
change as soon as possible or it will lose market gradually. Thus, developing a strategy
set to cope with gap between the needs of the market and the capabilities of the
enterprise is essential.
Based on the focused group interview, this paper proposes strategies which follow and
extend the approach of strategic transformation [1] for top executives of S.F.C. to solve
the problem. According to reference [1], strategic transformation is the last step in the
process of business turnaround and consists of two broad options: company growth
through acquisition or diversification and collaborative growth through alliances or joint
ventures. However, the study conducts all information and finds out that there exists a
third option: a combination of diversification and joint venture. This is a mixture, a new
type, of strategic transformation.
The purpose of this study is to address the question that in general, which strategic
moves are associated with successful turnaround? Before making out this question, we
should understand the terms, turnaround and repositioning, which is relative to the
question.
2. Review of Literature
Turnaround
In 1975, Schendel and Patton [3] presented a question. ”Why are some firms able to
break-out of stagnating or declining performance pattern?” Therefore, they were
regarded as the first that considered the cause of the turnaround situation in assessing
the appropriateness of turnaround strategies [4].
Although turnaround is an important concept that many firms would have to think of it
in their life cycles, not many studies have delved into the field between the
mid-seventies and the early nineties; thus, the topic is considered largely idiosyncratic
and open-end [5].
International Conference on Business Management and Information Technology Application
BMITA 2009 209
The definition of turnaround is varying with different aspects and research strategies.
From the point of management aspects, some view turnaround as a performance issue in
strategic management; some view turnaround as a process in organizational
management. The research strategies also vary from one context to another. As stated by
Krueger and Willard [6]:
Researchers have asked managers for their perceptions of decline and recovery, gleaned insights
from secondary data and used data base.
From the point of strategic management, Krueger and Willard [6] stated precisely that a
turnaround can be considered complete after there has been an increase in earnings
before taxes and extraordinary items during a minimum of four years following the
nadir of the turnaround; Chathoth, et al. [7] defined briefly that a turnaround is as the
action taken to prevent the occurrence of financial disaster.
An extensive literature review indicates that many studies focus their preference on the
strategies changes to prevent/cope with the occurrence of financial disaster. In terms of
strategic changes, Hofer, for example, analyzed written cases on 12 poorly performing
firms and found support for his theory that the appropriateness of a strategic or
operating turnaround depends on whether the firm's "illness" stems from poor strategy
or poor operations [8]; In additional, the study of other scholars, Bibeault, 1982;
Robbins and Pearce, 1992; Pearce and Robbins, 1993, also reveal that organizational
turnaround can be achieved through a two-stage process: retrenchment and recovery.
The division of response tactics and turnaround stages broke out a series of arguments.
Hambrick and Schecter criticized that the work of Schendel and Patton [3] is subjective;
the strategic turnaround seems not as realistic as Hofer’s claim, causing 100percent and
200 percent or more increases in market share, for most mature businesses. He reasoned
that 90 percent of all year–to-year market share changes of mature businesses,
according to PIMS data base, were less than five share-points. Presumably, weak
businesses would exhibit even a more negative distribution.
His study presented that efficiency-oriented moves, the short-term tactics, but
entrepreneurial initiatives were associated with successful turnaround. After this article,
the discussion of entrepreneurial strategies was not many. The main stream of research
focused efforts on that the efficiency/retrenchment strategies are necessary or not in the
turnaround process.
Balgobin and Pandit [9] proposed a five stage model which identified five overlapping
but distinct stages of the turnaround process. These five stages were termed: decline and
crisis; triggers for change; recovery strategy formulation; retrenchment and stabilization;
International Conference on Business Management and Information Technology Application
210 BMITA 2009
and return to growth. Afterward, Boyne [10] proposed a framework, the 3R model, to
describe the stages of the turnaround process. He regarded that turnaround is influenced
positively by retrenchment, repositioning and reorganization.
No matter how many stages a turnaround process was divided. These models are static.
Chowdhury thought that turnaround is not a single state but a process composed of a
sequence of events, that is to say, turnaround involves change which is dynamic [5].
From the point of organizational management, Chowdhury [5] defined turnaround to
occur when a firm perseveres through an existence-threatening performance decline;
ends the threat with a combination of strategies, systems, skills, and capabilities; and
achieves sustainable performance recovery. According to the definition, Chowdhury
developed a four-stage model which divided the elements of turnaround into three
critical requirements, including incidents, events and concepts; the model also explained
how the elements germane to each stage. Based on the concept of decline, Chowdhury
[5] extended the trace.
The skeleton for the model comes mainly from the work of Bhave (1994), Krueger and Willard
(1991), and Weitzel and Jonsson (1989). We then derive the elements from a disparate literature on
decline and turnaround, place them in their respective stages, and, finally, amalgamate the stage into a
composite model. This approach is consistent with Weitzel and Jonsson (1989).
Chowdhury opposed the view of strategic management that turnaround responses are
broadly categorized as strategic and operating. He proposed three events, domain
definition; scope overlap; and strategic contours, in this model to modify the dichotomy.
Regardless of the approach taken, the point of strategic management or the point of
organizational management, researchers are always interesting in the treatments of
responding decline. Generally, operating, or efficiency, turnarounds seem to focus on
short-term tactics, for example, cost controls, asset reduction, and revenue generation.
Strategic, or entrepreneurial, turnarounds seem to focus on long-term moves such as
new products, diversification, vertical integration, new market share initiatives, and
redefining the business. The discussions about that the efficiency turnarounds are
necessary or not have been last for two and half a decades. However, the exploration
about entrepreneurial turnarounds is relative rare.
As to entrepreneurial strategy, Castrogiovanni [11] stated that traditional views on
turnaround have maintained that the response should match the problem. Thus, when
the problems arise primarily from inefficiency, retrenchment is warranted. However,
when problems are strategic, the turnaround effort should focus on entrepreneurial
moves to reposition the business. Obviously, entrepreneurial moves exhibit a high
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degree of correlation with repositioning in the marketing.
Repositioning
The concept of repositioning can be found across a broad range of marketing or strategy
literature. It has been variously employed as an element to competitive strategy [12], as
a mean of strategic change [13], as a category to product strategy [14] and as essential
to corporate transformation [15]. The term “repositioning” is conscious adaptation to
change a firm’s product, service, and market segments or even value proposition to
smooth the gap between the needs of the market and the capabilities of the enterprise
[16].
Boyne [10] compared retrenchment with repositioning and stated that retrenchment can
be viewed as an “efficiency” strategy, repositioning is an “entrepreneurial” strategy that
emphasizes growth and innovation. This response to failure involves a new definition of
the mission and core activities of an organization, by becoming more dominant in an
existing market or by diversifying into new markets and products. He also regarded that
repositioning is the driving force of turnaround.
Pearce and Robbins [1] pick the term, strategic transformation, to represent a set of
indications which are developed to help an enterprise creating the repositioning strategy.
A useful way to think about strategic transformation is in terms of the two broad options that make
it possible to achieve a competitive repositioning of the firm: company growth through acquisition,
and collaborative growth through alliances or joint ventures.
Thus, the relationship between repositioning and strategic transformation is that the
repositioning takes a backseat to a consideration of strategic transformation.
According to the opinion of Pearce and Robbins [1], it is obviously that strategic
transformation consists of two groups of strategy: acquisition growth strategies and
collaborative growth strategies. All of the seven strategies placed in Fig. 1. In spite of
indicating the company's strategic directions, these strategies represent the different
magnitude of change with the different speed of change.
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Key:
A
Acquisition Strategies
C
Collaborative Strategies
Fig. 1 Speed and magnitude of strategic transformation; Resource from Pearce and Robbins,
strategic transformation as the essential last step in the process of business turnaround,
2008:125
To summarize, the idea of strategic transformation derives from turnaround. Turnaround
is a topic that involves lots of benefits of firms, but only a few researchers explore the
project. Authors, Schendel et al (1976), Hofer (1980), Bibeault (1982), and Hambrick
and Schecter (1983), were important antecedents of this project. Especially, Bibeault
(1982) was the first author to discuss a multistage model of turnaround [4].
Besides the discussion of multistage model, including strategic approach and
organizational approach, a notable stream of research is the argument of responding of
firms to deal with decline. In spite of different sets of terms, operating/strategic,
efficiency /entrepreneurial, and retrenchment/repositioning, they point the same sets of
solutions. Finally, the scope of repositioning and strategic transformation is different,
though they seem alike at first sight.
3. Method
Focus Group
As a qualitative method, focus groups bring together participants to discuss a topic
which is mutual interest to both researcher and participants and to collect data. Thus,
there are two characteristics of a group: interaction and participants sharing a common
identity relevant to the discussion [17].
The major advantage of focus groups is that they offer the chance to observe
participants engaging in interaction that is concentrated on attitudes and experiences
which are of interest to the researcher [18]. In addition to the advantage, the process of
focus groups also offers new idea regarding the topic, modification in opinion. For these
reasons, we choose focus groups to collect information.
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The goal of focus groups design is to reach the point of theoretical saturation. To
achieve the goal, we planned multiple-category design in this case. The design allows us
to make comparisons in two ways, from one group to another within a category and
from one category to another category. The major benefit of the design is that we can
obtain accurate information by way of triangulation process.
The groups we conduced include the engineers of N company (S
1
), the staffs of
Kaohsiung Harbor Bureau (R
1
), the employees of W shipyard at Kaohsiung Harbor (R
2
),
the employees of X shipyard at Mai Liao Harbor (R
3
), the employees of Y shipyard at
Taichung Harbor (R
4
), the staffs, managers; engineers; and sales, of S.F.C. which were
divided into three groups as E
1
, E
2
, and E
3
. We elaborate briefly on the framework of
multiple-category design as follows.
Table I: multiple-category design
Category of supplier S
1
Category of S.F.C. E
1
,E
2
, E
3
Category of retailer (official) R
1
Category of retailer (private) R
2
, R
3,
R
4
The study adopts purposive sampling because the topic about ship parts industry is not a
common issue; the knowledge resource and scope of participators is limited and specific,
i.e., a probability sampling method is not suitable in this case.
Data Analysis
After comparing and contrasting results of every group, we extract points that are
relevant to competition of S.F.C. and conduct these data with TOWS Matrix, an analysis
tool, which is designed for matching the environmental threats and opportunities with
the company's weaknesses and especially its strengths [19].
The environmental threats to competition of S.F.C. are follows:
T1: Chinese port business, especially Shanghai port and Ningbo Port, develop radically.
T2: Chinese ship parts industry develops also speedy.
T3: The business of official retail is reduction because of out sourcing.
T4: Low price ship parts are popular.
The environmental opportunities to competition of S.F.C. are follows:
O1: Chinese government keeps the market-open policy
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The company's weaknesses to competition of S.F.C. are follows:
W1: The speed of delivery is not competition.
W2: The language skill of engineers who were sent to N company receiving training is
not corresponding to requirement.
W3: The status of sole agent limits the attempt of S.F.C. to develop overseas market.
W4: S.F.C. seems entering a decline stage.
The company's strengths to competition of S.F.C. are follows:
S1: N company provides technology support only to S.F.C. in Taiwan.
S2: N company trusts S.F.C. and keeps good relationship with the company.
S3: S.F.C. owns good reputation in the ship parts industry.
S5: S.F.C. owns the experiences of selling generators in Taiwan.
According to O1-W2 and O1-W3, we developed a strategy that S.F.C. was restructured
and become a holding company. The parent company holds a new company which is
engaged in developing ship parts agent market of mainland China. We named it as
strategy L.
According to O1-S5, we developed a strategy that S.F.C. was restructured and become a
holding company. The parent company holds a new company which is engaged in
developing generators agent market of mainland China. We named it as strategy M.
4. Results and Discussion
From the point of strategic transformation, Strategy L is, no doubt, joint venture.
However, strategy M belongs to neither acquisition growth strategies nor collaborative
growth strategies. In fact, this strategy is a mix of acquisition strategy and collaborative
strategy, i.e., this is a new category of strategic transformation.
Key:
A
Acquisition Strategies
C
Collaborative Strategies
M
Strategy M
Fig. 2 The territory of strategy M; Modified from Pearce and Robbins,2008
Strategy M
M
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BMITA 2009 215
In practice, the main distinctive competence, the unique strength to achieve superior
efficiency; quality; innovation or customer responsiveness, of S.F.C. is technology
which is supported from N company. The works of ship parts such as overhaul,
renovation, and repair need expertise, because these works influence life span of ship
parts and operational safety of a ship deeply. In ship parts industry, the company that
has the capability to reduce these perceived risks of customers is S.F.C.
According to the opinion of Hill and Jones [20], the distinctive competencies of an
organization arise from two complementary sources: its resources and capabilities.
Grant [21] also stated that a firm’s ability to earn a rate of profit in excess of its cost of
capital depends on two factors: the attractiveness of the industry in which it is located,
and its establishment of competitive advantage over rivals. Moreover, the ability to
establish competitive advantage is much more important than that to build up industry
attractiveness. In the context of ship parts, S.F.C. possesses, both sole agent status of N
company and word of mouth in service, barriers to enter which is the character of
industry attractiveness. The achievement in the industry is incomparable under current
circumstance. What the company needs to improve is competitive advantage, for
example, access to low price input.
The results of focus groups interview reveal that China market is a significant
opportunity that associated with obtaining low price input and high quality human
resource. However, the sole agent contract that S.F.C. had signed with N company is a
limitation for S.F.C. to invest China market at this moment. On the other hand, China
market also attracts Japanese businessmen. The volume of trade between Japan and
China has been in excess of that between Japan and America since 2004. For Japanese
businessmen, it is predictable that the trend of inclining to China market would not be
changed. The external environment offers an opportunity to S.F.C. playing the “market
gateway to the P.R.C. [22]” for Japanese supplier. Thus, the solution that S.F.C. become
a holding company and holds a new company to develop China market actually benefits
both S.F.C. and N company.
The contribution of this research is to suggest an assumption of category in strategic
transformation on the basis of Pearce and Robbins [1]. We propose a possible approach
between acquisition growth strategies and collaborative growth strategies to deal with
decline. According to the opinion of Pearce and Robbins [4], "A turnaround situation
exists when a firm encounters multiple years of declining performance subsequent to a
period of prosperity". Thus, the next step of this research is to examine the strategy,
strategy M, in practice.
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