Corporate Entrepreneurship Assignment
Name of Student: Hazeem Azam Naz Dar Company: Nokia
(a) Discuss ways in which Nokia could achieve sustainable competitive advantage
There are four ways Nokia gain competitive advantage: 1) Cost Leadership 2) Differentiation 3) Cost Focus 4) Differentiation Focus
Cost leadership:
With this strategy, the objective is to become the lowest-cost producer in the industry. Simply being amongst the lowest-cost producers is not good enough, as you leave yourself wide open to attack by other low-cost producers who may undercut your prices and therefore block your attempts to increase market share. The traditional method to achieve this objective is to produce on a large scale which enables the business to exploit economies of scale. There are two main ways for achieving this: a) Increasing profits by reducing costs, while charging industry-average prices. b) Increasing market share through charging lower prices, while still making a reasonable profit on each sale because you've reduced costs.
A strategy of cost leadership requires close cooperation between all the functional areas of a business. To be the lowest-cost producer, a firm is likely to achieve or use several of the following: * High levels of productivity * High capacity utilisation * Use of bargaining power to negotiate the lowest prices for production inputs * Lean production methods (e.g. JIT) * Effective use of technology in the production process * Access to the most effective distribution channels
Differentiation:
Differentiation involves making your products or services different from and more attractive than those of your competitors. These strategies are best in industries and segments where customers or potential customers are not price sensitive. To make a success of a Differentiation strategy, organizations need: * Good research, development and innovation. * The ability to deliver high-quality products or services. * Effective sales and marketing, so that the market understands the benefits offered by the differentiated offerings.
Firms perusing this strategy have to be not only up to date with latest innovations but be the leaders of innovations
Cost focus Strategy:
In cost focus strategy, the firm chooses a segment of the market it wants to serve and then charge the lowest prices relative to other firms in that segment. Redbox, for example, uses vending machines placed outside grocery stores and other retail outlets to rent DVDs of movies for $1. There are ways to view movies even cheaper, such as through the flat-fee streaming video subscriptions offered by Netflix. But among firms that rent actual DVDs, Redbox offers unparalleled levels of low price and high convenience.
Differentiation Focus Strategy
While applying this strategy, the firm chooses a segment of the market and provides the most differentiated offering to that segment relative to other firms. When it comes to uniqueness, few offerings can top Kopi Luwak coffee beans. High-quality coffee beans often sell for $10 to $15 a pound. In contrast, Kopi Luwak coffee beans sell for hundreds of dollars per pound. These beans are found in the back excrement of the civet, a nocturnal, furry, long-tailed catlike animal that are found Southeast Asia’s coffee-growing lands for the tastiest, ripest coffee cherries. Although many consumers consider Kopi Luwak to be disgusting, a relatively small group of coffee enthusiasts has embraced the coffee and made it a profitable product.
(b) Discuss how environmental turbulences create a need for the practice of corporate entrepreneurship in Nokia.
I will divide the turbulences into four categories: 1) Customers 2) Technology 3) Competitors
Customers
1) Fragmented markets require companies to adopt multiple approaches to serve different target audiences. Corporate Entrepreneurship allows us to develop agility, and Innovation ability to make necessary changes to the culture and company successfully. 2) Rapidly rising customer expectation. Corporate Entrepreneurship’s main focus is innovation and enabling elements that help innovation. Hence Corporate Entrepreneurship allows us to meet customer expectations successfully. 3) Sustainable growth means learning new skills and human resource strategies to create culture of entrepreneurship allows the company to do so.
Technology
1) Companies have to change the wat they operate internally and externally because of new IT technologies, new production technologies, new logistics technologies etc. Corporate Entrepreneurship not only helps us adapt to these technologies successfully but it also encourages to innovate so that we can have competitive advantage.
Competitors
1) Aggressive competitors move quickly to mimic anything new attempted by the company. But they cannot compete with us if we excel in people department. Through Corporate Entrepreneurship we can develop a very competitive, risk taking and expert employees who can take in the best competitors. 2) Companies find themselves competing with companies in different industries that play by different rules. Corporate Entrepreneurship helps us develop a workforce that can keep up with competitors but also help us with new strategies and innovation to create blue oceans.
(c) Describe the various forms of corporate venturing which are available to Nokia and explain the motives for corporate venturing.
There are many reasons corporate venturing should be pursued by Nokia and other large companies: 1) Easier Disengagement:
It is well known that many executives find it difficult to abandon the not-quite-good enough innovations that come out of R & D are not going anywhere. These projects can last for more years in R & D and only waster money like Nokia’s insistence on developing phones using the Symbian operating system. The arm’s-length relationship between companies and their venture funds offers advantages in this regard: The best funds tend to be quicker on the trigger than their corporate parents. Even if a corporation is unwilling to terminate an unpromising initiative, the presence of co-investors may force the decision. 2) A Better View of Threats:
A venture fund can serve as an intelligence-gathering initiative, helping a company protect itself from emerging competitive threats. Traditional R&D doesn’t do a good job of sniffing out competitive threats. More and more, corporate R&D units tend to focus on a narrow range of projects, thus potentially neglecting disruptive advances that occur outside the company. Plenty of executives in companies with robust R&D functions lie awake wondering whether their firms are about to be blindsided by technologies they’ve never heard of. 3) Better ROI:
By combining its own capital with that of other VCs, a corporate venture can magnify the impact of its investments. This is particularly beneficial when technological uncertainty is high. A great example would be the iFund of Apple, a 100 Million Dollar fund apple used to spend in companies developing games and tools etc. Whereas Nokia only developed its OS. The result was the destruction of Nokia and Apple gaining hundreds of great software for its systems.
Finally, there’s the purely financial aspect of venturing. For independent VCs, making money for the limited partners is the primary if not the sole object. For corporate venture funds, gaining strategic benefits is usually the main goal; profits from venturing typically aren’t significant enough to matter to the parent company’s bottom line. Still, profits are always nice to have.
Types of corporate ventures available to Nokia
There are three types of corporate ventures available to Nokia: 1) VC-like investments:
Large companies may have a venture capital arm, like iFund for Apple, dedicated to investing strategic stakes in smaller companies which are otherwise unconnected to that large company. This type of venture model may be thought of as a large company diversifying into the VC business. Accordingly, companies which are going to do this (sometimes known as CVCs) need to believe that they have better access to deal flow than other independent venture capitalists and can add value through their existing business and brand. 2) Joint Venture:
A joint venture is a corporate or contractual collaboration between trading companies. Usually it is a small venture partnering with large company to benefits from its resources and expertise and large company does it gain the benefits mentioned in previous section. These ventures are often done between cross-border companies. There are benefits among the companies but investors should also realize that they cannot control the venture as if it is their own firm. 3) Corporate Spin-out:
Corporate spin out enables large companies to extract value from assets or technology that they have that is not core to their business. This is don’t by creating a new corporation and putting that technology there. There can be a loss of personnel if this strategy is perused as people will be needed to run that company. (d) Describe the key elements of the human resource management system required for Nokia to create an entrepreneurial environment.
For this I will take lessons from Apple, one of the most admired and entrepreneurial company in the world. 1) Hire Entrepreneurial People:
These people are naturally more inquisitive and critical of the status quo. They are also good at generating tons of ideas, so much so that they may often seem eccentric and a bit odd. Creative people suffer from an inability to suppress irrelevant thought processes and ideas, something called latent inhibition, but that "inability" provides 2) the very raw ingredients of creativity. They are opportunists, and highly proactive. 2) Five success factors linking HR and CR:
Hornsby, Kuratko, and Montagno (1999) identify five success factors linking HR practices to CE. These include the appropriate use of rewards, the provision of management support for innovation, the availability of resources for innovation, an organizational structure conducive to learning and cooperation, and individual risk taking. 3) Support informal employee contribution:
Studies of HRM practices and CE have mentioned the need for HR systems to support informal employee contributions, to encourage cooperation and to avoid unnecessary bureaucratic constraints on behaviour.
4) Love and Cherish Innovators:
A report from Business Net reported,” the way Apple “reliably churns out the industrial equivalents of da Vinci paintings … stems from the meticulous care and feeding provided to a specific group: the creatives. Apple’s segmented, stratified organizational structure - which coddles its most valuable, productive employees - is one of the company’s most formidable assets.”
5) Empower employees to make decision:
An employee at apple was once asked about why Apple employees seems so empowered. That employee’s response was.” It sounds corny, but it’s Steve’s reality distortion field. He says they can make a difference, and in a cult-like way, they believe it.” 6) Employee Development: In an interview Steve Jobs said, “My job is to not be easy on people. My job is to make them better. My job is to … take these great people we have and to push them and make them even better, coming up with more aggressive visions of how it could be.” An interview for BNET said, “Apple employees that he met are at the top of their game or they believe they are. Both of which is good for them.”
7) Have consistent internal Policies:
Studies have found that It is generally proposed that when HRM practices are internally consistent, they reinforce one another so that their sum is a synergistic influence upon desired employee behaviours.
8) Accountability:
Brutally enforce accountability. Have PIC (person in charge) on every project and let everyone know who they are and punish them if they don’t do a good Job.
9) Team Work:
Brandon Carson, a contractor that worked with Apple said,” "They desire and demand a collaborative atmosphere. Your work is peer-vetted -- we had to present our work to the team and take feedback. At first I found this a bit disruptive, cause I'm used to working on my own projects in a silo, but at the end of the day, the collaboration ensured a better product. And the work didn't progress too far without checks and balances. More companies need to operate like that internally."