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Table of Contents

1.Strategic Options Available to Megacorp3
1.1Introduction3
1.2Strategic Positioning3
1.3Value Chain Analysis4
1.3.1Primary Activities4
1.3.2Support Activities5
1.4Outsourcing5
1.5Shared Service Centre (SSC)5
2.Captive Shared Service Centre Locations7
2.1Location Selection7
2.2Cebu, Philippines7
2.2.1Political/Legal Factors7
2.2.2Economic Factors8
2.2.3Social Factors8
2.2.4Technological Factors9
2.2.5Environmental Factors9
2.3Montevideo, Uruguay9
2.3.1Political/Legal factors9
2.3.2Economic10
2.3.3Social10
2.3.4Technology11
2.3.5Environmental11
3.Conclusion11
4.References12
5.Appendix16
5.1Appendix A – PESTEL (Cebu, Philippines)16
5.2Appendix B – PESTEL (Montevideo, Uruguay)16
5.3Appendix C - Assumptions16
5.4Appendix D – Information Gaps17
5.4Appendix E – World Map of Shared Service Centre Locations17 5.5Appendix F – Presentation Slides18


1.Strategic Options Available to Megacorp

1.1Introduction

Megacorp is facing an impending patents cliff, resulting in a loss of competitive advantage, due to new market entrants. In response to this potential loss in revenue they will need to evaluate their strategic options in order to remain competitive.

Chandler (1962, p.13) defines strategy as ‘the determination of the long run goals of an enterprise and the adoption of the courses of action and the allocation of resources necessary for carrying out these goals.’ From this, Megacorp will need to redefine basic goals that will efficiently allocate their resources, in order to reduce overheads.

1.2Strategic Positioning

To outperform new entrants in the market, Megacorp need to develop an internal strategy that will create a defendable position in the long run (Porter, 1985). Porter’s generic strategy model, as seen in Fig. 1, can help Megacorp develop an internal strategy that will support the achievement of their goals.

Currently, Megacorp is following a differentiation strategy, as they are able to offer unique products, protected by patents, at a premium price. However, the impending patents cliff faced by Megacorp could see their internal strategy moving from differentiation to cost leadership, where the focus is on a vigorous pursuit of cost reduction through cost control. Where new entrants gain market share through sales, a cost leadership strategy will ensure profit margins are maintained, whilst the focus remains on supplying to the mass market.

When implementing either strategy, Megacorp must consider the potential shortcomings of moving dimensions in Porters model. Firstly, a cost leadership focus should not affect other areas of the business such as service or quality. Secondly, management need to ensure they avoid getting ‘stuck in the middle’ between differentiation and cost leadership as Porter (1980, p.41) suggests a lack of focus may guarantee low profitability.

1.3Value Chain Analysis

Porter (1985) identifies value chain analysis as a method to lower costs, as it seeks to maximise value. The value chain, as seen in Fig. 2, identifies the discrete activities a firm performs in a products lifecycle. By finding linkages between value creating activities in the value chain, Megacorp could lower their costs (Seal et al, 2009).

According to Kaplinsky and Morris (2002), Megacorp should focus on core competences, whilst outsourcing functions that are not central to the main business. These competencies can be seen in Fig. 2, as primary activities and support activities.

1.3.1Primary Activities

When focusing on creating efficiencies in their primary activities, Megacorp may benefit from implementing more modern lean strategies, as opposed to a single generic one (Cooper, 1996). Implementing strategies, such as Just-in-time, Total Quality Management and Continuous Improvement, could help Megacorp find cost efficiencies through stock management and quality...
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