Strategic management fundamentals and practices

¶ … online music rights" highlights the environmental aspect of strategic management. Apple wished to set up an online iTunes store to service the entire European Union, but the union's rules forbid it to do so. Apple, faced with a challenging legal environment that required it to buy music licenses for each country individually, had to make a strategic decision with respect to how they would enter the European market with iTunes. This paper will outline the case and analyze it within the context of strategic management.

Apple had altered its entry strategy into the European market because of the burdensome legal requirements. The company had undertaken an environmental scan in advance of its international expansion of the important iTunes product. The scan of the societal environment revealed difficulties that prevented wholesale entry into the market by the same means as was used in the U.S. One of the outcomes was that online music sales in Europe had lagged those in the U.S. dramatically. Apple was faced with the choice to either work within the current system, or try to enact changes in the legal environment to make it more amenable to Apple's desired business model. It entered some European markets, but was unable to offer a full selection of music to those markets due licensing restrictions.

In this case, Apple was able to successfully negotiate, along with a host of other companies involved in the music downloading business, a deal with the EU to create online stores for the EU, rather than dozens of separate stores. The deal removes the previous legal barriers and thereby grants Apple a more favorable legal environment. As a result of the ruling, Apple is expected to launch a pan-Europe iTunes in the future. The store is expected to have a much broader selection of music than is presently available at any of the national iTunes stores already in place.

Apple's environmental scanning revealed a problem in the legal environment. They were able to take steps, however, to deal with the problem so that they are now able to operate within the EU in the manner that best suits their business model. In petitioning the EU for changes, Apple demonstrated the potential impact that environmental scanning can have on the business. It also illustrated that a firm can influence the external environment if conditions are difficult and the company has a better vision of what it would like to see from the environment.

AXA SA, the French insurance giant, is considering selling its stake in Taikang Life Insurance, the fourth-largest life insurance company in China. Selling a major asset is a major strategic decision. A number of factors must be taken into account with such a sale, including the overall strategic direction of the parent company and the operating environment of both the parent and the subsidiary. In this case, it appears that two factors have come into play. The first is that the French firm is seeking to improve its balance sheet; the second is that there is regulatory pressure to divest the Chinese subsidiary. As the latter is more of a forced situation that has relatively less bearing on strategic management, this paper will analyze the decision to sell this major asset in the context of internal and external analysis.

AXA management has recognized that their balance sheet is in a weak position, a consequence of the global economic slowdown. One of the more common solutions to this problem is the sale of non-core assets. Minority stakes in foreign companies are often the target of asset sales to generate cash that will improve a company's weak balance sheet. An internal analysis such as a SWOT can reveal such weaknesses in a company's finances and guide management towards opportunities for solutions in the marketplace.

Furthermore, if a firm such as AXA is faced with multiple potential divestitures, it can narrow down the asset to be sold on the basis of asset value and the competitiveness of the asset within its industry. Porter's Five Forces model can reveal the potential sale asset with the least favorable operating conditions. Many Western firms have determined recently that the conditions in the Chinese insurance market are presently unfavorable.