Smashing the Cube Corporate Transformation at CIBA GEIGY Ltd Case Solution

2. Corporate Strategy

Ambrosini & Bowman (2003 pp. 213-221) argued that there are some objectives or “rationales” due to which strategists feel the need to devise a strategy in the first place. The first reason that was presented was portfolio planning. The strategists have to develop a plan for the whole company, which includes large strategic business units. This rationale has been explained by the phrase “sticking to the knitting”, which means focusing on profitable strategic business units. The second rationale is to develop synergies. The company takes advantage of enhanced operational efficiency by joining two (or more) sets of resources. The third, most important, the rationale was reported to develop or utilize core competencies. Growth and survival were the last two rationales that were explained which are imperative when it comes to any type of business.

The company’s new corporate strategy has been summed in plain words as “By striking a balance between our economic, social, and environmental responsibilities, we want to ensure the prosperity of our enterprise beyond the year 2000.” This brief strategy was divided into three pillars. The first pillar was “portfolio and business strategies”. Following map provides a graphical representation of the company’s portfolio:

The company altered its strategy in such a manner that it focused only on chemistry and biology-related projects. It abandoned the physics related activities. The company sold off its physics units like Spectra-Physics. Moreover, the company divided its portfolio into four categories, development, core, growth, pillar, and niche.

The second pillar of the revised corporate strategy was “organization and system”. The main aspect of this pillar was related to the company’s functions and organizational hierarchy. The flow of work and operations is clearly directed by the company’s organizational hierarchy. Geographical location and business were taken as the main axis while remaking the company’s organizational hierarchy. One of the main important and innovative aspects of this transformation was that each business unit was turned into an autonomous unit i.e. it was given the autonomy to sell its services/products to other units at break-even prices. In this way, other unit benefitted from low-cost services and products. However, bringing such a radical change definitely demands a change in organizational culture.

The third pillar was “People and Leadership”. This pillar mainly focused on changing the organizational culture from bureaucratic culture to entrepreneurial culture. The company had to abolish bureaucratic culture prevalent in the organization.

3. Core Competencies

According to Ghemawat (2007), a company’s strategy is devised as per its competitive advantage; this notion has been supported by several other academics, as well (Bowman, Ward & Kakabadse, 2002 pp. 671-679). So, it is important to have a view of the company’s strategy in order to report and analyze its competitive advantage.

It can be clearly seen that the company derives its competitive advantage from the three pillars of its new strategy. These pillars have been discussed in the aforementioned text in the context of strategy, whereas this section covers these three pillars in the context of competitive advantage. The company has to sustain and enhance its competitive advantage via its revised strategy.

The company derives its competitive advantage from organizations and systems. The company has enabled itself to procure cheap raw material/services by altering “organization and systems”. The organization has been divided according to businesses. Each unit of the company acts as an autonomous business, and it has been enabled to sell its products and services to others at the minimum price of the break-even point. However, the extra price can be charged, which is dependent on the dynamics of the transaction. This unique idea adds to the company’s competitive advantage. Looking from another perspective, the company is basically exploiting its own resources in an innovative manner. The core behind this newly implemented system is that the company has enough resources that it can support its, individual business, units by giving them autonomy.

This brings the argument to the pillar of “portfolio and divisional strategies”. The company has diversified itself in such a manner that it is able to support its inter-departmental dependencies. However, an important aspect pointed out in the case was that the company has been now focusing on chemical and biological businesses and has shunned physics-related businesses. So, the company is looking forward to enhancing its competencies in biology and chemical-related businesses.

The whole new innovative system has a high probability of collapsing in case it is not handled by “right” (Minbaeva, 2013 pp. 378-390) personnel. So, the company has brought in a cultural change that supports entrepreneurship, creativity, innovation, and risk-taking. The company seems to be planning to make its human resources its competitive advantage by inculcating entrepreneurship and innovative behavior. So, it can be asserted that the company derives its competitive advantage from its innovative organizational system, human resources, and a diverse portfolio.

4. Strengths

The main strength of the company is its size. Specifically, its diversified portfolio. The company has invested heavily in various companies that deal in a whole array of various products. The company’s portfolio range from textile dyes to seeds. The second strength of the company is that it has strong financials and has been able to maintain strong financial health despite various macro-environmental impacts.

The third strength that the company contains is also based on its large size, but in the context of human resources. The company’s employees do not have to switch industries in order to enhance their skills as a professional. The company size is big enough to support their career development and the new strategy supports its growth opportunities in a friendly manner. The fourth strength of the company has been related to its proactive approach towards environmental deterioration. As a chemical producing company, the company faced rigid regulations from its host and home countries. The company added the environmental aspect in its strategy at an early stage before it had to “pay hell”. So, the company derives its strengths from various resources but is mainly based on its new vision.

5. Weaknesses

The new strategy has its own dark side as there are a number of factors that hinder the implementation of it. The first area from which the company faced resistance was from its own employees. The new organizational hierarchy and culture made a number of employees upset as their previous monotonous or “easy” jobs were transformed into vague and competitive jobs. In order to solve this problem, the company revised its reward and performance management system. The new system focused on incentives. This created another problem for the company i.e. employees started focusing “too much” on the incentives. Despite such huge incentives, the company still faced resistance from its employees as some strategists were shoved down in middle management. Moreover, too much autonomy misleads the employees when it came to the development of policy.

Another weakness that the company had before Vision 2000 was that the company had that its own employees started to resist when various incidents occurred in chemical factories like Carbide incident and Bhopal incident. However, the company tackled this by implementing environmental friendly policy. Moreover, the new changes brought in the organization forced the company to lay off its employees. This must-have created a demoralizing environment in the whole organization due to low job security (Armstrong-Stassen, Wagar & Cattaneo, 2001 pp. 211-233).

6. Financial Analysis

The most important ratio that checks the liquidity aspect of a given company is its current ratio. It divides current assets to current liabilities. IN absolute terms, the ratio needs to be higher than 1, which means that the company has enough current assets to pay off its current liabilities. In the case of Ciba Cergy, the current ratio has been kept above 1; in fact, the minimum current ratio that the company has been in the years 1990-1991; 1.79.