A strategy is a combination of quantitative elements and qualitative progress. Many firms to this day experience failures due their inability to be able to accurately focus on and assess the risks and benefits of the strategy being implemented. In the article, Caroll and Mui have highlighted and explained the seven different kinds of faulty strategies that lead to disastrous outcomes .
I strongly believe that one such strategy that has repeatedly failed firms in corporate history is that of ‘Synergy Mirage’. There have been numerous instances where firms with inconsistent values and cultures rush into a merger in an attempt to raise profits. Such catastrophes occur due to many different elements, for example, the firms maybe serving entirely independent customer segments or fostering distinctive company cultures & values etc. With such dissimilar company objectives and corporate structure, a union is nearly impossible. One such alliance was that of Daimler Benz & Chrysler. Their inability to align cultures and integrate human talent led to significant merger struggles. Although Benz and Chrysler belonged to complementary geographies, they specialized & served two separate demand channels in the automotive market and structurally & financially it seemed like a complicated set up . There was a substantial level of friction amongst German and American employees due to inherent cultural differences . With Benz’s strictly hierarchical approach and Chrysler’s loose ended entrepreneurial line of philosophy, there was a foundational miscalculation in this merger process, which was bound to be a fiasco. Several other examples in history emphasize such parallel dysfunctionalities in merger practices; a few other examples to consider would be of Bank of America and Merrill Lynch, Volvo and Renault etc. We observe that such clashes in firm values, workforce skill set and company vision only further highlight the incompatibility of such unions. In an attempt to capture a fruitful opportunity, the companies invite more trouble for themselves, which eventually leads to their downfall.
In addition to mismanaged mergers, companies have also experienced a collapse in their sales because of their relentless attempts to improve their value proposition, while betting on the wrong technical horse. I strongly consider and reason, that several firms have crafted ill conceived technology dependent strategies that have destroyed their long term profitability. One such example is that of Samsung. They seemed to have placed the wrong bet on the hardware of it’s most recently launched mobile phone . Earlier this year, Samsung released their flagship phone, the Galaxy S6, with the goal to further push their profits; the company compromised their previous more popular phone features in the S6 to provide a sleek high quality metal and glass design. The very selling point, of the exciting new hardware of the S6 back fired and the company’s profits collapsed as other more attractive competitors stepped in to cannibalize Samsung sales . By negotiating their basic yet popular phone features, Samsung experienced a sudden decrease in their unit sales from last year. As a result, S6’s response was lackluster and no comparison to the 11 million units of S5 sold the previous year.
Hence, objective evaluation of strategies, helps the firms prepare and allows them to effectively capture synergies for the best outcome, while pointing them in the right direction. More importantly, it is imperative to recognize core competencies, financial merits, work culture and management structures before pursuing a merger or an acquisition to encourage the best chance for company success .
Article: Seven Ways to Fail Big (Carroll and Mui, Harvard Business Review, Sept ‘08)