Q: Steve Jobs, the founder of Apple, was asked to come back as Chief Executive in 1997 when the business was making a loss. Jobs was appointed to provide a clearer vision for the business and to improve its profitability. How easy is it for a Chief Executive to change a struggling business into a more successful one? Justify your answer with reference to Apple and/or other organisations you know.
A: There have been many different companies in the past which have suffered from internal / external problems. However they have also recovered because of critical decision-making and also because of strong leaders who have also the skill of being potential visionaries and mavericks. Steve jobs had been replaced by John sculley (who was previously CEO of PepsiCo) this was because the shareholders in Apple disagreed with jobs’ vision for the company ahead. He was fired but later returned in 1997 to the struggling apple to lead them to becoming one of the most successful companies in the current world. Steve jobs had essential skills and qualities, which made him a great leader and a visionary. Although he came from a struggling background, he had the passion and the drive initially which gave him the boost to become very successful and he also received help from a great workforce. He recovered the business by restructuring the company’s production line.
This shows that he had to take critical and essential decisions which might have seemed risky, however all great leaders have been renowned to be risk-taking and optimistic. Another example of a leader whose company was struggling is Howard Schultz, who had been the founder of ‘Starbucks’ in Seattle Washington 1997. He left the company initially in 1985 because he wanted to create his own coffee-bar enterprise – later called ‘Giornale’. 2 years later he wanted to acquire Starbucks again, therefore when the deal happened the two companies merged and the company was called Starbucks Corporation. In 2008, Starbucks’ stock prices fell and the company was struggling; Howard Schultz responded with this comment, “I deeply wanted people to fall back in love with Starbucks”. He made an unthinkable decision, which was critical, if he wanted his company to survive. Schultz ordered 7,100 Starbucks stores to shut their doors for the day so that he could — despite the enormous financial and PR hits — retrain the company’s baristas on the art and technique of espresso making.
Howard Schultz was a person who thought greatly about his stakeholders and his main customers. With a simple transition, he gradually got the company’s sales up and made the customers love the company again. Despite the main external factors affecting the situation such as competition from Dunkin’ doughnuts and McDonalds, he still prevailed and got the company to its current position. But to get the franchise back up to that standard again he had to take this risk, which shows his authority as a leader. With this new change, the employees would have been more motivated and driven to give the best possible customer service and quality of coffee – which linked to their main mission and corporate objectives of the business.
Chief executives all have different styles of leading: (Authoritarian, Democratic, Paternalistic and laissez – faire). However different situations require different styles of leadership. In a crisis situation – an authoritarian approach would be best because critical decision making and organisation is key, however when the leader has better relations with his employees and subordinates a more democratic or paternalistic approach would be best. This makes the employee feel that they’re more involved in the decision-making and increases staff morale, which may also increase productivity and profitability. Howard Schultz and Steve jobs would have taken an authoritarian approach towards the situation their company was in. Their experience and strong-minded will would have led them into taking those essential decisions.
Any large company should have contingency plans, which will enable them to recover from a sudden crisis whether internal or external. The chief executive should have a vision initially created which enables the managers to use and employ in the business. They should be responsible for planning, organising, coordinating and monitoring. However with any firm, a crisis may occur and cause the overall downfall of the company. Some adversities cannot be foreseen e.g. external changes such as social taste, economic negative growth and environmental concerns. It’s relatively easier to deal with internal problems rather than external. Another example of a leader who changed a company’s future is Sir Terry Leahy – Former CEO of Tesco supermarkets. His company struggled previously because there was heavy competition from the 2 main oligopolies – Marks and Spencers and Sainsburys. Under his leadership, Sales quadrupled & Profit levels increased by 6 times to 3.2 Billion in 2010.
He had 10 principles which made him a great leader however all his main principles relied upon: goals and corporate objectives for the company, employee well-being and customer satisfaction. He believed in the company and the staff. He also had a lot of love for his organisation just like Steve jobs and Howard Schultz. The love – which all these great leaders had for the companies, is what drove them to the success. A recent example of a CEO who has been appointed to recover a business is the new CEO of Sony – Kazuo Hirai. Previously, the ex-chief executive (Howard Stringer) had a bad experience of looking after the business as the company is facing its fourth consecutive annual loss, and stock value has dropped by more than 50% since Stringer became the company’s first non-Japanese CEO in 2005.
As president of the Consumer Products & Services Group at Sony as well as chairman of Sony Computer Entertainment, Hirai is already considered to be one of the most powerful executives in Sony. His existing experience in the Japanese market should enable him to understand his key stakeholders and consumers better than the previous CEO. Therefore as the newly appointed CEO, Kazuo Hirai has a big task of increasing share price, look at the product portfolio and increase innovation in the digital media sector. This is essential for the company to stay competitive, as they have received heavy competition from key conglomerates such as Apple, Samsung, and Google.
By Innovating their products, they will be able to differentiate against competitors, however the digital industry has ultimately reached its peak so therefore they may have to invest heavily on R&D so that they may become more competitive. This could be a constraint for a CEO as spending finances could lower their position furthermore. Redundancies could be also made to save costs if finances are one of the main concerns, however for the survival of the business I think Kazuo Hirai will have to make autocratic decisions so that the company can meet the corporate objectives and recover.
Another thing in common these 3 leaders have is that they took consumer taste and opinions into consideration. Consumers are their main stakeholders! Sir Terry Leahy made his company rise because he chose a market knowledge strategy where he introduced Tesco clubcards – this meant that he could monitor the shopping habits, movements, and political opinions of clubcard holders. Howard Schultz retrained his staff solely for the purpose of his customers receiving the quality of coffee, which they expected from Starbucks. Steve jobs relied heavily upon product innovation and research and development so that he could appeal to his consumers and also have a strong market share position as consumer taste developed. Finally, Kazuo Hirai will have the same approach as he may try to use innovation to try to appeal to his key stakeholders and demographics.
However these leaders didn’t solely do the implementation process for these companies. They only provided the companies with the direction they needed for them to become successful. Managers, employees and subordinates are also an essential part of a company’s success or failure. The difference between a manager and a leader is that a leader is someone who has a vision for the company and who provides the inspiration and motivation for the subordinates whereas the manager is someone who plans, organises and coordinates. Both are essential in a company and they both need to co-exist and cooperate if they want the firm to have a healthy outlook.
In conclusion I believe, that the success will depend on many factors not just the leader, e.g. resources, external environment, the culture and the competition. It’s not as easy for a CEO to take a struggling company and turn it into a more successful one however most businesses also realise how important key stakeholders such as employees and customers are to the company. Without the combination of the range of all these factors coming together, the company would not be as successful.
Courtney from Study Moose
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