9-3a Impediments to Coordination

Milton Hershey School provides an extremely high-quality elementary and secondary education plus medical care to very low-income students from throughout the United States. The school currently has about 1,800 students, and part of the reason the Hershey Corporation takes something of an “analyzer” strategic implementation approach relates to its ongoing financial obligation to this school and its students. Clearly, Hershey Corporation avoids taking undue business risks so that it will always have funds available to generously support the Milton Hershey School and, thus, continually protect the legacy of its founder Milton Hershey. The Hershey Corporation is constantly analyzing and balancing its strategic business needs in the context of the corporation’s obligations to the Milton Hershey School.

After formulating strategic goals, global businesses need to put them into action. They need to weigh all the pros and cons regarding different possible approaches they can take. They also need to consider how different strategic actions are likely to impact given relevant shareholder and stakeholder (such as the Milton Hershey School) groups. Once a corporate strategy has indeed been implemented, however, the next issue is how to best coordinate it—a topic we turn to next.

Reality Che C k lo-2

Do you think one of these four approaches is safer than the others, or do they all carry risks? What do you see as the key risks a company faces by taking each of these approaches to strategy formulation?

LO-3

Analyze various impediments to the coordination of strategic implementation that might exist for global businesses and the positive role knowledge management and systems can play in this regard. In particular, discuss the role of tacit versus explicit knowledge and that of the Internet.

9-3 Coordination

Just as an athlete needs to coordinate his or her movements to achieve the goal of running faster, throwing more powerfully, or striking a target, so businesses need to coordinate their actions to attain the goals set forth in their mission statements. As discussed earlier in the text, they may need, for example, to coordinate the various legal, political, and economic risks of doing business in foreign countries. Moreover, they may, for instance, have to coordinate the impact of new technologies or new events on their business model.

9-3a Impediments to Coordination

Coordinating strategy formulation and implementation may sound relatively easy in theory, but in practice it is usually not very easy at all. In the real world, impediments to coordination of strategic implementation tend to abound. Legal, political, economic, technological, and other impediments may all abound in today’s highly complex global business environment.

Take the case of Anadarko Petroleum Corporation, for example. Believe it or not, Anadarko has already been prospecting for oil in Africa! More specifically, Anadarko owns a sizeable stake in the Jubilee Oil Field in the African country of Ghana. Jubilee is one of the world’s most important recent oil discoveries, holding an estimated 1.8 billion barrels of oil. A rough dollar total valuation of the Jubilee field is about $17 billion.8

Unfortunately for Anadarko Petroleum Corporation, though, it does not own 100 percent of the Jubilee field. As frequently happens in big-dollar global business, it was able to take advantage of this opportunity only by joint venturing with other enterprises. Anadarko’s partners in this joint venture have been various private equity funds, other oil companies, and the Ghana National Petroleum Corporation (GNPC), which is owned by the Ghanaian government. Anadarko owns about a 23.5 percent stake in Jubilee.

What are some coordination problems Anadarko faces with respect to its (albeit highly successful) investment in Ghana? First, and rather obviously, Ghana is a long distance away