What are the ingredients of Action Research Model in Organization Development (OD)? How does it benefit?

Action research is essentially a mixture of three ingredients:

A) The highly participative nature of OD,

B) The consultant nature of OD, the consultant role of collaborator and co-learner, and

C) The iterative process of diagnosis and action.

The action research model as applied in OD consists of:-

(1) A preliminary diagnosis,

(2) Data gathering from the client group,

(3) Data feedback to the client group,

(4) Exploration of the data by the client group,

(5) Action planning by the client group,

(6) Action taking by the client group, and

(7) Evaluation and assessment of the results of the actions by the client group with an OD practitioner acting as a facilitator throughout the process.

Action research yields both change and new knowledge: Change occurs based the actions taken, and new knowledge comes from examining the results of the actions. The client group learns what works, what does not work, and why.

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Explain Pro- Note

Pro-note means a Promissory Note as per Negotiable Instrument Act. Section 4 of the Negotiable Instrument Act, 1881  defines a promissory note as an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument

• The Promissory Note has to be written, duly signed by the maker.

  

  Sample of Pro-note for concept

• It should be properly stamped as per Indian Stamp Act. 
• It must make a promise to pay and not an acknowledgement of indebtedness.
• The amount payable must be certain.
• It can be endorsed to a third party
• Acceptance is not essential

The Parties to Pro Note are :

1. The maker or Drawer :  The person who makes the note and promises to pay the amount stated there in.
2. The Payee – The person to whom the amount is payable.

In case of the transfer of Promissory Note by payee to others, payee becomes  the Endorser.

1. The Endorser :-  The person who endorses the note in favour of another person
2. The Endorsee – The person in whose favour the note is negotiated by endorsement.

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Why is identification of SBU important?

It is important to remember that competitive strategy in an organization is created in the separate business units of the organization. Most organizations have a number of business units, which are competing in different markets, where customers or clients have different needs and require different products or services. So to understand business-level strategy it is important to be able to identify the SBUs in an organization.

Definition : A strategic business unit is a part of an organization for which there is a distinct external market for goods or services that is different from another SBU.

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What care is required while Identifying Strategic Business Units ?

A strategic business unit is a part of an organization for which there is a distinct external market for goods or services that is different from another SBU.

Identification of SBU is essential to the development of business level strategy, as its unique for each SBU.

There are two opposing pitfalls that need to be avoided:

If each product and each geographical branch (and so on) is considered to be an independent SBU such immense variety of competitive strategies for a single organization would create a lack of focus and inefficiency.

On the other hand, the concept of the SBU is important in properly reflecting the diversity of products and markets that actually exist.

There are two broad criteria which can help in avoiding these two pitfalls and, therefore, in identifying SBUs that are useful when developing business level strategies.

External criteria for identifying SBUs are about the nature of the marketplace for different parts of the organization.

·         Two parts of an organization should only be regarded as the same SBU if they are

Ø  Targeting the same customer types,

Ø  Through the same sorts of channels and

Ø  Facing similar competitors.

For example, a ‘unit’ tailoring products/services to specific local needs cannot belong to the same SBU as another that offers standardized products or services globally. Nor are units that offer the same products to a customer group through exclusively different channels (retail or mail-order/internet).

Internal criteria identifying SBUs are about the nature of an organisation’s strategic capability its resources and competences.

·         Two parts of an organization should only be regarded as the same SBU if they have

Ø  Similar products/services built on

Ø  Similar technologies and

Ø  Sharing a similar set of resources and competences.

This usually means that the cost structure of the ‘units’ will be similar.

So within a company like Kodak the units offering film based products are not in the same SBU as those offering digital photography products even though they are addressing the same customers through the same channels.

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Name the strategies MNEs choose to compete in international environment

Generally, MNEs choose from four basic strategies to guide how they will enter and compete in the international environment:

1. An international strategy,

2. A multi domestic strategy,

3. A global strategy, or

4. A transnational strategy.

Each of these strategies differs fun­damentally regarding where managers put value activities and how they try to run them. We now define each strategy, identifying its implications for configuring and coordinating a value chain, and discuss its particular benefits and drawbacks.

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Define and Explain International Business Strategy

International strategy is “A strategy through which the firm sells its goods or services outside its domestic market.”

Companies adopt an international strategy when they aim to leverage their core competencies by expanding opportunistically into foreign markets. International firms include the likes of McDonald's, Kellogg, Google, Haier, Wal-Mart, and Microsoft.

The international model relies on local subsidiaries in each country to administer business as instructed by headquarters. Some subsidiaries may have freedom to adapt products to local conditions as well as to set up some light assembly operations or promotion Programs. Still, ultimate control resides with managers at headquarter who reason they best know the basis and potential extension of the company’s core competencies.

International strategy and the value Chain: Historically, critical elements of the company’s value chain, such as research and development to branding, have been centralized at headquarters.

Firms that pursue an international strategy try to create value by transferring core competencies and unique products to those foreign markets where rivals are unable to develop, match, or sustain them. The international strategy, therefore, facilitates the transfer of skills, expertise, and products from the parent company to its subsidiaries. Headquarters can translate their expertise in and control over important activities into powerful positions to command foreign operation to follow their lead.

This expertise and control can take place in manufacturing processes or general management skills. The latter, for example, explains the growth of international hotel chains such as Hilton International, Four Seasons, and Sheraton.

Liability of International Strategy: Under an international strategy, however, the central of headquarters often hinders identifying and responding to local conditions.

These limitations become costly when other companies emphasize customizing their goods and services to local conditions. Carrefour, for instance, ran into this problem in the United States. Carrefour tried shifting its strategy to deal better with local tastes and preferences, but this eventually proved too costly and the company shut down its U.S. operations.

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Define and Explain Multi Domestic Business Strategy

A multi domestic company, sometimes called a locally responsive company, follows a strategy that allows each of its foreign-country operations to act fairly independently.

The company's subsidiaries in their respective local markets have the authority to design, make, and market Products that directly respond to local customers' preferences. Johnson & Johnson is an example of a company that follows a multi domestic strategy to great success.

Foreign Companies are independent

ulti domestic Strategy and the Value Chain :  Firms applying a multi domestic strategy design a value chain that gives each country's operations the discretion to respond to its local cultural, legal-political, and economic environments.

  

Companies applying a multi domestic strategy customize their products, marketing and service program to local conditions. These decisions require the multi domestic company to decentralize decision making from head quarters to subsidiary operations so local executives have the authority to manage their responsibilities.

Basically, managers in a multi domestic company hold a polycentric point of view that people who are close to the market (philosophically, culturally, and physically) ought to run the business. Thus, for example, the managers of a backpack factory in Singapore have the right to decide what sort of backpack they want to make-even if the size, shape, and style differ from those made in the United  States, Mexico, or Ukraine.

Benefits of Multi domestic Strategy: A multi domestic strategy makes great sense when the company faces a high need for local responsiveness and low need to reduce costs via global integration. It has other benefits, such as minimizing political risk given the local standing of the company, lower exchange rate risk given  the low need to repatriate funds to the home  office, greater prestige given  its national prominence, higher potential for innovative products from  local R&D, and  higher  growth potential due to entrepreneurial spirit.

For example, Procter & Gamble has followed a multi domestic strategy. The R&D unit at its Japanese subsidiary, responding to the low storage space in the typical Japanese home, invented technology that reduced the thickness of an infant's diaper without any loss of absorbency. This innovation created value for Procter & Gamble in Japan and, eventually, for Procter & Gamble worldwide.

Limitations of Multi domestic Strategy: These benefits do come with costs. The multi­ domestic strategy leads to duplication of management, design, production, and marketing activities. Each local subsidiary builds value chain operations to meet local demands. Hence the multi domestic strategy is often economically impossible in industries that have intense cost pressures.

Too, decentralizing control of value activities to local managers can create powerful subsidiaries that behave as autonomous units.

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Define and Explain Global Business Strategy

Global Business Strategy can be defined as the business strategies engaged by the businesses, companies or firms operating in a global business environment and serving consumers throughout the world. (Ref Economy Watch.Com )

The company adopting a global strategy chooses to maximize integration. This decision spurs a company to make and market a standardized product, such as razor blades, or service, such as package delivery, for a specific global market segment.

The global strategy pushes companies to think in terms of creating products for a world market, manufacturing them on a global scale in a few highly efficient plants, and marketing them through a few focused distribution channels. Thus, companies that adopt the global strategy see the world as one market  and assume  there are either no differences among  countries  with regard to consumer  tastes and preferences or, if there are, then consumers will sacrifice them if given the opportunity to buy a comparatively higher-quality product for a lower price.

Operationally, MNEs that adopt a global strategy aim to become the low-cost player in their industry.

Whether it is a sneaker factory in Vietnam, an auto parts maker in China, or a service call center in India. In other words, managers aim to convert the gains of efficient operations into cost reductions that drive profitability.

Strengths of Global Strategy: Generally, the global strategy is best suited for those industries that put strong pressures on efficient operations and where local responsiveness needs are either nonexistent or can be neutralized by offering a high-quality product for a lower price than the local substitute.

Similarly, the credit card industry has specified a range of standards and rules for electronic payment protocols that supports customers using and merchants accepting this mode of payment around the world. In both cases, firms act accordingly; in wireless, Nokia and Texas Instruments, and in credit cards, American Express, all pursue a global strategy.

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Define & Explain Transnational Business Strategy.

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Define and Explain Transnational Business Startegy

Business Dictionary defines TRANSNATIONAL STRATEGY  as :

“An international business structure where a company's global business activities are coordinated via cooperation and interdependence between its head office, operational divisions and internationally located subsidiaries or retail outlets. A transnational strategy offers the centralization benefits provided by a global strategy along with the local responsiveness characteristic of domestic strategies.

Transnational Companies

The transnational strategy is arguably the most direct response to the growing globalization of business. It holds that today’s environment of interconnected consumers, industries and markets requires an MNE to find ways to configure a value chain  that exploits location economies, coordinate value activities  to leverage core competencies effectively, and ensure that the value chain deals directly with pressures for local responsiveness.

The MNE applying a transnational strategy differentiates capabilities and contributions from country to country, finding ways to learn systematically from its various environments, and then ultimately integrating and diffusing this knowledge throughout its global operations.

A transnational strategy simultaneously exploits location economies, leverages core competencies, and pays attention to local responsiveness.

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