The Paradox of Synergy and Responsiveness Essay Example

The Paradox of Synergy and Responsiveness Essay Example The Paradox of Synergy and Responsiveness Essay The Paradox of Synergy and Responsiveness Essay The corporate realm is today made very complex by the fact that businesses are increasingly consolidated and large. This is to say that practices of creating multilayered firms in both the serve and the product industries have created business models that must depend on both large and small goals. For a large firm which holds many different types of operations, making the right decisions for how to best manage these individual units while still promoting a larger and singular identity can be a big determinant of success. This discussion is guided by the concept found in the De Wit and Meyer text, stating that such large firms must deal with the so-called Paradox of Synergy and Responsiveness. According to this paradox, it is a constant challenge for large firms to find a balance between the interest of consolidating its brand identity into a single, monolithic corporate structure and the interest in responding with sensitivity to the needs presented by individual factors. As the discussion and the selected case study example will show, individual factors such as customer orientation, financial performance and industry conditions. In the paradox between these two sometimes opposite demands, companies must often make hard decisions about how to pursue their operations. In the context of something such as the service industry, we can see that the achievement of this balance will be directly related to how a business manages its portfolio of operations. For the ever-growing service industry, this causes an interesting investigation into the way that unit management can be central to an operation. The approach taken by a company in the hospitality sector of the service industry, for example, should serve as a useful illustration of how organizations approach a market shaped by the De Wit and Meyer paradox. Introduction: In our consideration of the Marriott Corporation, which is an extremely successful service sector company, we can see that the way a company moves its operational assets around will be important to its management effectiveness. According to the article entitled Marriott Corporation: The Cost of Capital, the hospitality industry has been through both very fast growth and very sharp retraction. This has been particularly true for Marriott, which seized on an era of increased tourism and hospitality investment in order to catapult to the top of the market. However, changing market realities and the increased nuance of the hospitality industry would force Marriott to consider altering its corporate structure so it could make a change to a context where it could more effectively approach hurdles distinct to individual divisions. This would be a demonstration of its responsiveness, even as synergy had been the primary guide in its initial growth. The example here, based on the discuss at hand, will remark upon the strategies regarding capital investment, stakeholder responsibility and debt management which would effectively be approached by the corporation in managing its portfolio of units. The primary avenue to be taken by Marriott in achieving the goal of managing its operational orientation would be the creation of a new department with a more refined focus on financial strategies and investment properties relating to the specific aspect of hotel management (as opposed to the real-estate operation) For the stock-holder, this would mean more directed and informed decisions as well as a relative insulation from revenue trends, making for a more stable market in times of real estate instability. Again, we can see that Marriott would be turning toward a strategy of responsiveness. Such is to say that Marriot determined to protect the value of its existing capital by establishing a circumstance in which growth and synergy could no longer be identified as the primary interest. Instead, ensuring the retention of capital at a rate justifying its debt condition, Marriott would being a new phase in its history in which hurdle rates for achieving growth would be purposefully higher. In this way, even growth would be directed from corporate HQ by responsive rather than synthetic origins. In our research, we find that the Marriot transition was not without its costs. These would make Marriott go through some real economic changes that are part of the paradox between synthesis and responsiveness. By being forced to change operational gears, Marriott would experience a decline in earnings during its period of transformation. Due to the debt challenges noted, Marriott’s bond ratings, declined to a B level according to both SP and Moody’s in the face of real estate declines, have resulted in a higher long-term expense on new bond issues for the company. One of the key ways that Marriott would deal with its debt maturities in order to afford the transition would be in its mortgage financing of its ‘trophy’ properties, which were those continually successful marquis lodging facilities there were no longer in any mortgage debt. The greatest concern to manu financial institutions in this case was the condition that Marriott’s heavy dependency on invested debt might create a scenario where it would be incapable of covering its obligations. Naturally, this is a fear which is facing so many corporations on this scale today. That shows just how relevant the paradox discussed is. That is why the Marriott example is very useful, because it would use portfolio management strategies to deal with this financial risk. Marriott would basically create a spin-off in its new management company. A spin-off is the divestment of a company in which, rather than selling off aspects of itself in poor market conditions, it distinguishes one aspect of itself to be set apart as an independent business. This independent business will take on its own structural and financial parameters while retaining branding, technology and, in some instances, access to assets, of the parent company. This would be the essential response by Marriott to the distinct obstacles created by the changing market, particularly in consideration of the corporate retraction likely due to markedly rapid corporate growth. The divestment of the company into management and real estate firms would essentially serve to unlock the company’s assets to the benefit of the stakeholder, with the stock owners particularly served by this approach. We can therefore ultimately begin to resolve that the approach taken by Marriott would be a natural outcome in consequence to its singularly high rate of growth from a synergy centered strategy and what might be characterized as its saturation of its own market. The impact would require a responsiveness in a market approach to diminishing the corporations inherency toward this rate of growth. Though we can suggest that the consequences are likely to be somewhat severe to the organization’s personnel and resource orientation in the short term, it will undoubtedly benefit the value and extent of capital usability for individual facilities, thus improving quality organization-wide. De Wit, B. Meyer, R. (1999). Strategy Synthesis. International Thomson Business. Ruback, R. S. (1998). Marriot Corp. : The Cost of Capital. Harvard Business Publishing.