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Q.No.1. Read the case and answer the given questions. (4)
Last week, two iconic American brands patted ways: McDonald’s and Heinz, which had supplied red goop to the golden arches for 40 years. There a son? Heinz’s new private equity owners had installed Bernardo Hees, formerly CEO of Burger King World wide and currently still a board member, as the company’s new chief executive. It’s not an unprecedented food fight: When PepsiCo owned fast food brands like Taco Bell, other franchises engaged in proxy wars by allying themselves with different a companies.
Here are a few fascinating facets of the now-ruptured relationship.
- Heinz and McDonald’s have been through this before.
Back in the early 1970s, Heinz supplied most of McDonald’s ketchup. But in 1973, a tomato shortage shuck, and Heinz prioritized its glass bottle customers over its bulk fast food accounts. McDonald’s abruptly terminated their agreement. “From there on after, we’ve been on the outside looking in, “a Heinz executive told the Wall Street Journal in 2006. Indeed: Heinz’s investors pressed the company to sell more to McDonald’s, before it was purchased by a partnership of Berkshire Hathaway and Burger King’s parent company, 3G Enterprises (some analysts predicted that would create problems with the world’s biggest fast food chain).
- Heinz could be hit hardest oversea
U.S. burger eaters probably won’t notice much of a difference, since McDonald’s was only using Heinz ketchup in its Minneapolis and Pittsburgh markets; the rest is private label. It will, however, lose out in emerging countries, where McDonald’s has 66 percent of its sales, and where Heinz had had more success in working with it. North America makes up only 40 percent of the Heinz company’s total sales, and it’s looking overseas for more growth in Ketchups & Sauces-which it estimates is a $110 billion business—and being cut out of the McDonald’s business could hinder it.
“This category represents the past and future of Heinz and we possess numerous competitive advantages, including rapidly growing businesses in Emerging Markets, upside potential in Developed Markets and our unique, proprietary Heinz Seed capabilities, which deliver superior, great-tasting tomatoes for Heinz® Ketchup & Sauces, “reads its 2012 annual report.
- McDonald’s was still a small pa1t of Heinz’s business
McDonald’s won’t give out numbers for the amount of ketchup it consumes globally, but in 2006, it rep 01 tedly used 250 million pounds of the stuff in the US, only a small fraction of which came from Heinz. For a rough comparison, today Heinz says it sells 650 million bottles per year worldwide, which works out to 569 million pounds—not including bulk sales to fast-food restaurants.
- Ketchup isn’t even most of Heinz’s busine
The company has grown far beyond its horseradish roots. Ketchups and sauces are the company’s largest core category, but not ketchup itself; the company now has licensing agreements with restaurants like T.G.L Friday’s*, owns lines of food like Ore-Id a potatoes, and makes diet foods like Small Ones. The loss of one ketchup customer isn’t going to hurt too badly.
- The rivalsai-en’t that huge
In fact, McDonald’s in-house ketchup may be the second biggest one: While Heinz says it did $5 billion in sales for all ketchups and sauces in 2012 (it doesn’t break them out by condiment), Con Agra’s Hunt ketchup only did $69.5 million between May 2011 and May 2012, and has 14.6 percent market share.
Question to the case study:
- Name the factors of internal environment of both McDonald’s and Heinz.
- Name factors of both external environments for both enterprise.
- What would you do if you were MacDonald’s CEO in this case?
Q.No.2. . Read the case and answer the given questions. (7)
The U.S. Navy and the U.S. Naval Academy, the prestigious undergraduate college of the Navy service in Annapolis, Maryland, might not be places that come to mind when you think of organizations that are superior diversity champions.79 Yet the Navy is just that. In fact, the enlisted force of the Navy is more than 40 percent diverse. The Deputy Chief of Naval Operations Vice Admiral says, “We view the diversity imperative as a strategic issue for several reasons.” One reason is the changing demographics of the United States. With nearly 70 percent of new workers entering the workforce in our recruitable demographic being women and minorities, the Navy has to pay attention to diversity. Another compelling reason is that the Navy’s strategic imperative has evolved over time to include preventing wars, not just winning wars.
This approach involves engaging in humanitarian assistance, disaster relief, and building strong maritime partners around the world, all of which benefit from a diverse naval force. For instance, after the Indonesian tsunami in late December 2004, a Navy hospital ship was relocated to that region. During that event, the public opinion of the United States changed in a few short months from 70 percent not liking to 70 percent supporting. Since that time, the hospital ship has been to South America and other places. “We see America’s Navy as a force for good around the globe.” At the Naval Academy, where the military branch’s future leaders are educated, applications have increased 57 percent among Black, Latino, and other traditionally underrepresented applicants.
The Naval Academy Superintendent Vice Admiral says that, although there’s no specific numerical diversity goal, it makes sense to have representation close to the demographics of the country. The faculty/staff at the Naval Academy have seen changes with the new generation of “millennial” midshipmen (the “students” at the Naval Academy) and have adjusted their methods and approaches to accommodate those changes. “How we reach out to them is different. We just have to be smart enough to understand that.” Changing demographics and the adoption of a strategy that prevents as well as wins wars have brought more ethnic and gender diversity to the U.S. Navy and the U.S. Naval Academy.
- How are population trends affecting the U.S. Navy’s education and operations? What might the organization have to do to adapt to these trends beyond what they’re already doing?
- What challenges might the Navy face in adapting to a more diverse student body at the Naval Academy?
- Just like the dilemma that businesses face in retaining diverse employees, the Navy has to ensure that once its workforce is trained that those individuals stay with the organization. What can the Navy do to assure this?
- Would mentoring or employee resource groups be appropriate for a military organization? Explain. How a mentoring program or employee resource groups might be implemented in the Navy?
Q.No.3. Read the case and answer the given questions. (7)
As the world’s biggest maker of mobile phones, Nokia, the Finnish company, is a “powerhouse in Europe, Asia, and Latin America, with market shares regularly topping 30 percent.”42 However, in the United States, Nokia phones have lost popularity over the last few years. In March 2002, Nokia led the American market with 35 percent market share. By June of 2009, its share was only 7 percent. What happened and more importantly, what is Nokia doing about it? As mobile phone usage skyrocketed, Nokia was the most popular choice. It was the “cool” phone—the one that everyone, from business executive to high school student to stay-at-home-mom wanted. In 2005, Nokia had just launched the N series, an innovative new line with a Web browser, video, music, and pictures in a single phone. That device moved Nokia a generation ahead in the race to build the first real smart phone.
The “forecast for Nokia was as sunny and clear as an endless Finnish summer day.” Then came Apple and its iPhone with its clever touch screen and sophisticated software and services. With rave reviews and a reputation for being cool, customers flocked to buy one. However, Nokia executives dismissed the iPhone, saying they were “unimpressed by its engineering.” Now, three years after Apple introduced the iPhone in 2007, Nokia still has no alternative. It did not anticipate changes in American consumer tastes, like flip phones or touch screens. Another major strategic blunder 246 PART THREE | PLANNING was that its models were based on a European communications standard called GSM when roughly half the United States market used the CDMA (code division multiple access) format. One former Nokia executive said, “Nokia, at the height of its success, decided not to adapt its phones for the U.S. market. That was a mistake and they’re still trying to recover from this.” An executive at a North American network operator said, “The attitude at Nokia was basically: Here is a phone. Do you want it? Nokia wouldn’t play by the rules here, and they have paid a price.”
That arrogant attitude and the global economic slowdown have continued to hurt the company’s sales and earnings. Meanwhile, Nokia set up liaison offices in Atlanta, Dallas, Seattle, and Parsippany, New Jersey, cities where the top American operators have big business units. And it has recently revamped its U.S. operations to collaborate more closely with those major operators. For example, AT&T has begun billing its customers who use Nokia services, keeping those customers from receiving a second bill from Nokia. Best Buy began carrying a Nokia netbook, which is a model for its new collaborative strategy. Nokia also forged a deal with Qualcomm, the largest maker of mobile phone chips for CDMA devices in the United States. It also struck a deal with Microsoft to design Windows Office Mobile software applications for phones that use Nokia’s Symbian operating system. Despite these efforts, however, some industry executives remain unimpressed. One analyst said, “They claim they get it and understand the U.S. market. But the execution still is not there.”
Mark Louison, president of Nokia’s North American unit, who has a seat on Nokia’s global management board, said, “In the past, we had a one-size-fits-all mentality that worked well on a global basis but did not help us in this market. That has changed now.” The company recognized that its former strategy had not worked in North America and began trying to lay the groundwork for long-term success. Louison says, “Everything you see us doing is to build the broad set of capabilities to take us broader and deeper into the U.S. market.”
- What strategic mistakes did Nokia make in the U.S. market?
- Why do you think a “smart” company makes “dumb” mistakes?
- What strategies is Nokia using to revitalize its North American business?
- How could Nokia have done better at using strategic management? What does this case story tell you about strategic management?