Introduction ? This case gives a good ? avor of the challenges of a general manager, in particular when one is new to the job. The case explores the “parachuting in” of Sarah Conner, a venture-capitalist (BLL, 60% owner of Astral) employee, to take over the running of Astral (North America) following the sudden death of its long-time president (Maxwell). Astral is mostly a manufacturer of CD records for other labels, though Maxwell has expanded its own recording business (10% of revenues) across a range of musical genres.
Astral has established a name for quality and innovation, but generallyavailable technology has become so reliable that quality no longer really serves as a differentiator in the industry. The ? rst purpose of case studies is developing a better understanding through learning to apply appropriate and diverse tools/concepts leading to “better” answers increasing your probability of success.
With the information provided make sure you 1.state the “facts”, 2. provide interpretation of these facts (also through use of concepts), and then 3. conclude. The latter two steps are often missing in case study reports. Also, structure is key. Some narration is not a problem, narration without structure de? nitely is a problem! ? ? De? ne the Context ? ? De? ning the context is not synonymous to providing a summary of the case study. Based on what you have read state, interpret and draw conclusions.
If you state the industry of Compact Discs is no longer differentiated but price is becoming the main competition issue, you need to indicate why this is relevant and what this implies (like: scale is of tremendous importance in this situation and if Astral does not ? nd another way to differentiate itself, like developing the DVD, from competitors its future will look rather grim). If you state Astral’s formation of strategy resembles that of the entrepreneurial school residing in the mind of the leader, you need to translate this into.
Astral terms (the strategy of Astral NA resided and was executed in the head of sir Max) and conclude what consequences this has for Conner (very few people in Astral NA will be able to decide according to this strategy because that is what sir Max did). If you state that sir Max resembled the artist type of a manager, you need to conclude what consequences this has/d for Astral’s operations: short on details and followthrough which means that Conner is bound to ? nd a lot of loose ends (like the letter from Yurbank dating July 1st, apparently not acted upon).
Top quality, high tech product means high investment needs, rather high entry barriers, high risk of substitutes, etc and this in turn means that one can easily ‘miss’ potential competitors; Entrepreneurial leader means low empowerment of employees and the level of political power depends on proximity to the leader; A Venture Capitalist as key stock holder means a potentially stronger focus on shorter term return; A female leader in a paternalistic working environment means Conner has some extra hurdles to take and pitfalls to avoid;
A manufacturing company like Astral means coordination by standardization of work processes implying a rather big planning and quality management department; A growth strategy means high dependency on credit lines to secure cash to secure growth; etc. ? ? ? 26, Rue Maunoir | 1207 Geneve | Switzerland | www. sustineo. org | [email protected] org | +41 79 822 3546 De? ne the Key Issues or Problems ? Cases are semi-structured problems, and problem de? nition skills are one of the main learning products of repeated case study analysis.
Stating the many weak signals and symptoms in a case study without pointing to bigger issues and/or problems does not help. What is really going on in this case study and why did it happen this way? Output of this step should be a clear de? nition of the key issues or problems at hand backed up with the data available (facts) added with assumptions made.
The type of Leadership and strategy formation of Astral is one of the key issues as it will be impossible for Conner to replicate this; This has led to an under-empowered and under-developed management (i. e. Conner will have a hard time to ? nd allies) and a lot of urgent and some important matters to deal with not limited to the memos found on Conner’s desk (there will be many other matters which were in sir Max’s head).
For Conner the key issue will be to capture the main issues at hand (management control, ? nancial shape, threats, strategy) being able to boil these down to a report to be produced in 2 weeks while needing to be in England to connect to the other major shareholder and pater familias and securing cash to continue operations. ? ? Apply Concepts?
Even though common sense and intuition are important in management and strategy it is key to apply different business concepts (both prescriptive and descriptive) in order to increase your understanding of the issues in your context (and to test the applicability of the concepts studied).
Management Control: In Wrapp’s “Good managers don’t make policy decisions” a metaphor is used describing a manager sitting in a stream: operating problems ? oat by, the manager quickly examines each one, hangs onto the good ones and after collecting a few begins to see ways in which they might relate, be perceived in the power structure, and move the organization toward its objectives. In some ways this metaphor re? ects the actual situation of Conner.
The many memo’s pointing to operating (and strategy) problems could be perceived as opportunities to learn to understand Astral. Successful executives have a talent for keeping well informed (or becoming wellinformed for Conner) about a wide range of operating decisions being made at different levels in the company. Effective executives know how to focus their time and energy on relatively few issues.
This is an issue for Conner as she is surrounded by people who are looking to her for every move. Successful executives play the power game. They recognize the ? rm’s power structure and work though corridors of comparative indifference.
Conner needs to get a grasp on the new power structure developing in this vacuum (and keep a close eye on Wallace Alexander). Successful executives also cultivate an art of imprecision, satisfying their organizations so that they have a sense of direction while avoiding public commitment to speci? c objectives. Because Conner does not have the detailed understanding of the business as a sir Max would have this art of imprecision will proof to be important.
Effective executives muddle with a purpose, recognizing that it is best to try for partial programs and modest progress toward goals, piecing together parts of different proposals. This requires wide-ranging interests and he ability to see how things relate.
Peter Senge’s “The Leader’s New Work: Building Learning Organizations” could be helpful in providing insights for Conner as she will need to help Astral to learn. She needs to help the managers to see the system; seeing the systems that control events.
The managers can no longer rely on sir Max to grasp the source of problems. Conner is a designer designing the governing ideas of purpose, vision, and core values; of the policies, strategies, and structures to translate guiding ideas into business decisions; and the creation of effective learning processes. Astral Case Study 2 ? ? ? ? ? © Dr. Lammert Vrieling / 2013 ? ? ? Conner is a teacher helping people get more insight.
It includes helping them get a better picture of their mental models and to think systematically. Conner is a steward; Stewardship applies to both the people led and the purpose that underlies the enterprise. This would be the biggest change in an organization like Astral as this is the opposite of a centralist autocratic model. It remains a question whether a steward role would work within Astral at the moment.
However, the roles of designer and teacher seem quite appropriate. For someone like Conner (not a music specialist, much younger than sir Max and female) the leadership approach needs to be quite different without “questioning” sir Max’s approach or putting too much responsibility on the managers too fast.
Huy’s “In praise of Middle Managers” states middle managers are crucial for a company: they are the entrepreneurs (able and willing to realize new business ideas), they are communicators of the needs for change, they are the therapists creating a climate of reassurance, and they are tight rope artists providing ‘business as usual’ important in times of change. This could be a helpful perspective for Conner as she needs to get her middle managers to “act” like this. (Financial) Shape of the Company:
To facilitate this evaluation exercise Rumelt’s four tests of strategy (consistency, consonance, advantage, and feasibility) could help. There does not seem to be issues of consistency: the (formulated) strategy seems to be quite straightforward and does not contain overt compromises. Consonance exists when the basic mission or scope of the ?rm matches its environment over time; the ? rm will then have a generic strategy. In Astral’s case this is differentiation (this might revert to cost leadership if new differentiation possibilities remain undeveloped.
Competitive advantage can normally be traced to one of three roots: (1) superior resources; (2) superior skills; or (3) superior position. In the past competitive advantage was based on all three; today this is less the case. The outcome of the current video compression onto disk (DVD) could create a new competitive advantage. The test of feasibility asks whether the strategy can be attempted within the physical, human, and ? nancial resources available.
Astral is running up against barriers in terms of being able to ? nance its growth. Phahalad and Hamel’s strategic intent casts a light on the earlier days of Astral and how it was founded. Today there is not a clear strategic intent guiding Astral to renewed global market leadership. After Conner has led Astral into smoother sailing this would become a point of action. Threats: Andrews in “the concept of corporate strategy” clari? es what the ? rm might do, i. e. , identifying the threats and opportunities in the environment. Second is what the ? rm can do, i. e. , appraising the ? rm’s strengths and weaknesses.
Third is what the ? rm wants to do, i. e., considering the personal values of the top management. Lastly, there is what the ? rm should do, i. e. , the ethical aspects of strategizing. Because Astral comes from an entrepreneurial strategy perspective (strategy residing in the head of the entrepreneur) it should probably shift to a more plan-based perspective emphasizing deliberation and formulation from a “design school” perspective as Conner will be the CEO to design this (rather than a special planning department in the “planning school”).
Because Astral has been successful in the past distinguishing itself from the competition through innovation a competences/resource-based analysis of Astral might be bene?cial providing insight in potential new sources of competitive advantage. Because Astral has lost (some of) its competitive advantage a ? ve forces analysis of its current position might be appropriate.
The seriousness of the threat of entry depends on the barriers present and the reaction from incumbent competitors. Astral and the industry at large has several sources of barriers to entry: economies of scale, product differentiation, capital requirements, cost advantages independent of scale, and access to distribution channels. Suppliers have bargaining power by raising prices or reducing quality and the consumer is demanding ever lower prices, higher quality and more service. Substitutes limit the pro?
t potential of an industry by placing Astral Case Study 3 ? ? ? ? ? ? ? © Dr. Lammert Vrieling / 2013 a ceiling on prices. Even though – at the time – CDs were the key product higher prices would open the door for substitutes. There is also intra-industry rivalry indicated by price competition and new service offering. Rivalry is intensi? ed by roughly equivalent competitors, slow industry growth, and lack of differentiation.
The industry is moving towards cost leadership as the dominant generic strategy. ? Barney’s looking inside for competitive advantage provides the analysis tools for a resource-based analysis mentioned above. The author identi?
es four key criteria questions that this internally-oriented analysis must address: value creation (resources and capabilities are valuable only when they exploit opportunities or mitigate threats); rareness (capabilities or resources that are valuable but common will be essential in allowing a ?
Rm to achieve parity, but not to out-compete, its rivals); imitability (resources and capabilities that are valuable and rare will confer long-term advantage if rivals ? nd it dif? cult to either duplicate or substitute for these resources and capabilities); ? nally, there is the question of organization (valuable, rare, and hard-to-imitate resources will confer superior long-term pro? tability depending on how well they are orchestrated into a coherent system.
Astral does not have a sustainable competitive advantage at the moment, it does create value because of its high quality (but this is not sustainable). Strategy: Mintzberg’s generic business strategies provide more insight into the type of generic strategy Astral could choose. Step 1 is to locate the core business in the industry (upstream, midstream, or downstream): Astral is a midstream business drawing a variety of inputs into a single production process out of which ? ows the product to a variety of users. Step 2 is distinguishing the core business – opening up the core business to distinguish the characteristics that enable an organization to achieve competitive advantage and so to survive in its own context.
We distinguish between Input sourcing strategies (procurement, recruitment, ? nancing),throughput processing strategies (process development, fabrication, assembly, product research, product development), output delivery strategies (distribution, promotion, pricing, sales, service) and supporting strategies (legal, control, training). Astral focusses primarily on throughput processing strategies and – to a lesser extent – output delivery strategies pointing to a differentiation strategy (with low cost). Initially Astral focussed on design differentiation and quality differentiation. At the moment it still has (some) quality differentiation and trying to lean on support differentiation.
Step 3 is elaborating the core business by develop its product offering within the business, developing the market via new segments, new channels or new geographical areas or push the same products more vigorously through the same markets: diversi? cation (? ), product development (better CD’s), market development (new CD labels), penetration. Step 4 is extending the core business by chain integration (extending operation downstream or upstream) including resin manufacturers (upstream) or music labels (downstream), diversi? cation strategies (entry in some business not in the same chain of operations), strategies of entry or control, or withdrawal strategies.
Finally, Step 5 is re-conceiving the core business(es) through business rede? nition strategy, business recombination strategies or core relocation strategies. At the moment this might not be an immediate option for Astral, but with the knowledge of today one could imagine a relocation strategy towards (digital) music, or a rede? nition strategy (digital storage devices). ? ? ? ? ? ? ? © Dr. Lammert Vrieling / 2013 4 Astral Case Study Provide Alternative Courses of Action ? ? ? ? ? Based on above analysis and understanding what should be done next?
What are the true alternatives at hand and when implemented what will be the expected result (i. e.will all issues be resolved or will there be remaining or new issues/problems)? What options does Conner have in the short-term? A none-negotiable is to attend to the different memo’s and generate a selection/decision mechanism.
Conner needs to fully understand Astral’s current strategy, provide a robust evaluation in terms of strategy evaluation (consistency, consonance, competitive advantage and feasibility), positioning, internal resource-base and options of generic strategies. Conner needs to propose a way forward (a 6-month plan within 2 weeks and an 18month plan at the end of the month). Conner can propose to continue the current strategy as much as possible securing a ?nancial injection by BLL, restructuring the company for improved delegation; discontinue the current strategy and focus on rationalization moving to a low cost strategy (might be dif? cult as Astral is not built on this premise);
Re-focus the current strategy changing its formation process, and re-emphasizing the differentiation strategy and strengthening competitive advantage (a bundling strategy perhaps: music, video, dvd); exit strategy: rationalization, cleaning up, reorganizing and then selling the company. Choose a Course of Action ? Choose a course of action from the alternative courses of action indicating why (explicitly considering and rejecting the other alternative courses of action). Indicate both “hard,” quantitive data and your “soft” qualitative impressions about each course of action.
For Conner we need a list of pending actions/decisions and a reasoning as to which action/decision should be taking, at what time and by whom. ? Develop an Action Plan ? Develop an action plan by which the desired action may be achieved or implemented within the context, and indicate who should do what, when and how. Also provide a procedure to evaluate your course of action of choice based on its real impact. Below you’ll ? nd a good example of a hands-on action list – by Ms. Maridali Alicea. Date: August 24th August 24th Recommendation: Keep meeting to inform staff of changes (delegation, and responsibilities) Brief him on difference in management approach.
Subject: Staff Meeting with Astral Toppers Meeting with Assistant (Wallace) MBA student visit Fox Hunt Production run out of specs BLL partners visit Overdue account Billboard Magazine interview Safety Day plans Unauthorized Return of Merchandise August 24th Reschedule September 7th Probably need to go August 25th Operations department will handle (Bart O’Reilly) – Reminder the quality of our product is one of the companies competencies September 7th.
Assistant can arrange accommodations August 26th Finance department – recommend immediate payment to prevent delays in shipment ASAP this week Reschedule for more appropriate time Manufacturing department will handle (Bart O’Reilly) – Societal concerns must be considered Marketing and Sales department will handle (G. Scott Herron)© Dr.
Lammert Vrieling / 2013 5 Astral Case Study Renewal of Revolving Credit EPA Inspection: Fish kill Contract Negotiations Safety Day plans concerns EPA Inspection: legal counsel Proposal for New Plastic Packaging August 25th Sarah Conner will handle – review capital structure Sarah Conner will handle, stress the importance of ecology compliance Marketing and Sales department will handle (G. Scott Herron).
Manufacturing department will handle (Bart O’Reilly) – Social concerns must be considered Sarah Conner will handle, stress the importance of ecology compliance Manufacturing department (Bart O’Reilly) and Marketing and Sales department (G.Scott Herron) will handle – consider the approval for New packaging equipment Manufacturing department (Bart O’Reilly) and Marketing and Sales department (G. Scott Herron) will handle – consider the proposal for New Plastic Packaging Sarah Conner will handle – review capital structure Sarah Conner will handle – importance to upcoming audit HR department.
(Sandy Bien-Fait) will handle. Operations department will handle (Bart O’Reilly) Sarah Conner will handle – consider the impact of technology innovation, but also current ? nancial limitations Sarah Conner will handle – due to ? nancial limitations unable to follow cash settlement Approval of New Packaging Equipment.
Renewal of Revolving Credit Lawsuit Hiring CD Rot Project Future Vision Lawsuit Employee Reprimand Audit Planning Meeting Equipment Maintenance Signing party and concert Anonymous note – employee behavior Capital Structure Summary August 24th HR department (Sandy Bien-Fait) will handle. September 10th Sarah Conner will handle – must be up to date with all issues relevant to lawsuits, environmental concerns, and CD Rot August 26th Finance department – remind of environmental concerns and risks Marketing and Sales department will handle (G. Scott Herron)
HR department (Sandy Bien-Fait) will handle. Sarah Conner will handle © Dr. Lammert Vrieling / 2013 6 Astral Case Study.