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Southwest Airlines Team: Strategy and Management

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Introduction

Southwest Airlines Team: Strategy and Management Anne Der�gnaucourt, Saskia Dheedene, Michael Garlin, Mark de Rond Kyungwha Ji, Fanny Mayer, Thomas Mulliez Case for week n�5 "Shell sells Billiton" Main idea: To what extent has Shell's assumption of core competencies, needed to proceed to a diversification, contributed to Billiton's failure? The idea explained below, indicates that the definition of core competencies relating to a diversification, is crucial in order to make it successful because it affects strategy in a very crucial way. Part 1: Shell's assumption: Similarities in processes are the crucial core competency Shell searched for an alternative to guarantee future sustainable growth. In order to proceed to a successful diversification, Mr. Van der Toorn declared: "It is important that we search for opportunities in industries that closely relate to the Group's strengths." (p. 1056). Similarities between oil and metal industry processes were the main rationale behind Shell entering the metals business. ...read more.

Middle

In their definition of core competencies needed to make a diversification succeed, Shell didn't even mention the importance of being familiar with the industry you are entering. However, we believe that knowledge of the sector is a crucial element in making good managerial decisions. Different examples illustrate that Shell's ignorance of the metal industry also contributed to Billiton's failure, viz. their investment policy (p. 1057), their diversification strategy (p. 1063), their job rotation policy (p. 1063) and their postulated objectives for Billiton to reach (p. 1063). Billiton, knowing the metal sector, was rather reluctant and appeared to be right afterwards, because the decisions mentioned above were capital errors. Part 3: Gencor's strategy: Sector-as-a-core-competency approach. The well-known saying: "One can only talk metals after at least 20 years." (p. 1062) indicates that one should not only focus on similarities between processes but also on the knowledge of the sector. ...read more.

Conclusion

If you think of being able to diversify with only money, you will fail. If you have nothing to offer but money, a certain expertise which makes you do things better than others, don't even start." (p. 1070), has brought evidence to this statement. This is also presented in the little graph below, explaining that it is crucial not only to consider similarities in business process, the importance of knowing the sector you want to enter shouldn't be underestimated either. Oil industry Metal industry Similar business process Shell Billiton Gencor1 We believe that in order to make a diversification go a company's definition of core competencies needed to proceed to a diversification impacts on the strategy it will pursue in a crucial way. So, by considering and possessing both similar processes and knowledge of the sector, a well-adapted strategy and consequently a successful acquisition will very likely arise. 1 In fact, we do not know for certain if processes at Gencor are similar with those at Billiton. But we are almost convinced they are, because both companies are active in the metal industry. ...read more.

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