Compliance and Choice Paradox
Organisations face a variety of contradictory and competing approaches when deciding whether to comply with “industry norms”. With reference to empirical example, you are required to critically examine the strategic decisions to achieve (or not) industry leadership.
INTRODUCTION
Organisations face a variety of contradictory and competing approaches when deciding whether to comply with “industry norms”. De Wit and Meyer (2004)[i] refer to these scenarios as the “Paradox of Compliance and choice”. De Wit and Meyer (page 429, 2004) further state that where firms cannot influence the structure of their industry, compliance to the rules of the game is the strategic imperative. In such cases, the strategic demand is for managers to adapt the firm to the industry context. Where firms do have the ability to manipulate the industry structure, they should exercise their freedom of choice to break the industry rules. In such circumstances, the strategic demand is for managers to try to change the terms of competition in their own favour.
This paper presents two organisations, Mercury Bank and Everfresh Dairies that had to make key strategic decisions regarding either compliance or choice in an attempt to grow and attain industry leadership. Their respective industry, strategic frameworks for decision making and their actual results against their strategic intent have been analysed in light of their growth and industry leadership objectives.
MERCURY BANK
Mercury Bank is a commercial bank in Uganda. Uganda’s banking industry consists of 15 commercial banks, 7 credit institutions, and about 200 microfinance institutions. In 2004, Mercury had a total assets market share of 3% (see Appendix I). Commercial banks dominate the financial system, representing about 83% of the financial system. The commercial banks also account for 70% of the total assets.[ii]
Five factors based on Michael Porter’s five forces model of competition (Michael Porter 1979)[iii] are key
INTRODUCTION
Organisations face a variety of contradictory and competing approaches when deciding whether to comply with “industry norms”. De Wit and Meyer (2004)[i] refer to these scenarios as the “Paradox of Compliance and choice”. De Wit and Meyer (page 429, 2004) further state that where firms cannot influence the structure of their industry, compliance to the rules of the game is the strategic imperative. In such cases, the strategic demand is for managers to adapt the firm to the industry context. Where firms do have the ability to manipulate the industry structure, they should exercise their freedom of choice to break the industry rules. In such circumstances, the strategic demand is for managers to try to change the terms of competition in their own favour.
This paper presents two organisations, Mercury Bank and Everfresh Dairies that had to make key strategic decisions regarding either compliance or choice in an attempt to grow and attain industry leadership. Their respective industry, strategic frameworks for decision making and their actual results against their strategic intent have been analysed in light of their growth and industry leadership objectives.
MERCURY BANK
Mercury Bank is a commercial bank in Uganda. Uganda’s banking industry consists of 15 commercial banks, 7 credit institutions, and about 200 microfinance institutions. In 2004, Mercury had a total assets market share of 3% (see Appendix I). Commercial banks dominate the financial system, representing about 83% of the financial system. The commercial banks also account for 70% of the total assets.[ii]
Five factors based on Michael Porter’s five forces model of competition (Michael Porter 1979)[iii] are key
Cited: in Campbell et al, 1999 page 139). However, it is possible for a business to run a hybrid strategy, having lower than industry-average costs whilst sell its products on the basis of differentiation. CONCLUSION To achieve compliance with industry norms, firms must develop structures, processes and a culture in which listening and adapting to the environment becomes a part of the business, (De Wit and Meyer page 429, 2004) ----------------------- [i] Bob de Wit and Ron Meyer (2004) Strategy: Process, Content, Context 3rd Ed, Thompson [iv] Arthur A Thompson Jr., A.J. Strickland III, John and E. Gamble (2007) Crafting and Executing Strategy, 15the Edition, McGraw-Hill [v] David Campbell, George Stonehouse and Bill Houston (1999) Business Strategy: An introduction, Butterworth-Heinemann [x] Charles W. L. Hill and Gareth R. Jones (1998) Strategic Management, An integrated approach 4th edition, Houghton Mifflin [xi] Interview with the Managing Director of Everfresh, Mr [xiv] Michael E. Porter, Competitive Advantage (New York: Free Press, 1985) Chapters 2 and 3.