Can you think of an organisation that has implemented a ‘high risk strategy’ that has resulted in success (why was it high risk at the time and why was it a success – was it good luck or good judgement)?
> 'High risk strategy' as the name suggests is the strategy that may put an organisation in a risky situation which might subject to potential danger or hazard but may sometimes work as a success. Various companies implement high risk strategy and some turns out to be a great success and some to be an epic fail.
According to me an organisation that has implemented a 'high risk strategy' that has resulted in success would be Apple Inc.
Apple was founded in the year 1976 in partnership by three people: Steven Gary Wozniac, Steven Paul Jobs and Ronald Gerald Wayne. By the time it incorporated on January 3rd, 1977, Wayne wrote the apple 1 manual, drifted the partnership agreement, and drew the first apple logo.(facts.randomhistory.com, 2013) Once after Apple's incorporation, it started expanding and growing at like anything. I believe it is the one company that has gained massive success in such a short period of time, making it an unbeatable company and setting a benchmark worldwide at present.
Apple has also faced series of failures over the years. After Steve Jobs was ousted from the company in the year 1985 as he lost a power struggle with board of directors, Apple was in the brink of bankruptcy.It's computers struggled to survive declining market shares and inefficient leadership. In fact, Apple was named the worst run company of 1996 by investment giant CalPERS (California Public Employees' Retirement System). However, after all this Apple brought Steve Jobs back and again things started working right.
Apple always focused on innovations and I think it's strategy of innovating new ideas was a high risk strategy in the market place but nevertheless, it's strategy extensively has proved to be a success. When Apple established itself as a company over 30 years back, it was a high risk strategy at that moment, there were no such company established similar to Apple. That was a brand new start of a brand new idea and innovation Apple did and no one knew how the response would be at the end, making it a very high risk taker.And look at it now, the High risk strategy proved to be a great success for Apple.
'Apple's success is due to significant skill and a healthy portion of good luck.'(Don Reisinger, technology columinist at CNET)
The most expensive Apple Store, 5th Avenue, Manhattan, NYC
Now, do the same for an organisation who embarked on a high risk strategy that resulted in some sort of failure (why was it high risk and why did it fail – bad luck or poor judgement?)
> The organisation who embarked on a high risk strategy that resulted in some sort of failure for me would be Halifax Bank Of Scotland plc (HBOS)
HBOS plc is the banking and insurance company in the UK, a wholly owned subsidiary of the Lloyds banking group. HBOS plc was formed in the year 2001 when Halifax plc and Bank of Scotland merged.
The bank was running quite smoothly until when they started taking high risks. In 2008, it suffered from short selling and credit crunch, soon after they were indulged in controversies like links to the arms trade, Mortgage Fraud, HBOS bad loans e.t.c.
According to the Financial Services Authority (FSI), HBOS corporate division ran out an aggressive high risk growth strategy prioritized optimism over prudence and sanctioned too many big loans to a small number of borrowers. It is said the bank was too optimistic over bad debts and did not take 'reasonable care' to control its affairs. (the guardian, 9 march, 2012). HBOS set business plans that had ever increasing profit growth in the corporate arm. Thus, by the first half of 2001, the targets increased to an exceptional level as they looked up to the corporate division to make up for the under performance of the retail arm.
The main problems the bank faced were:
- They failed to take reasonable action to control and organize its affairs.
- The lending division of the corporate focused on revenues rather than on minimizing risks.
- The corporate was not able to re-evaluate its lending when the market started to deteriorate in the 2007.
- They failed to manage high value transactions.
The reasons behind HBOS plc's failure was clearly because of the poor judgement taken by them and the implementation of the high risk strategy time and again.
References:
http://www.theguardian.com/business/2012/mar/09/bank-of-scotland-fsa-serious-misconduct, accessed on November, 2013
http://facts.randomhistory.com/interesting-facts-about-apple-and-mac.html, accessed on November, 2013
http://passioncapitalists.wordpress.com/2010/06/22/69/?gclid=COu8x7Tii7sCFQcB4godZkQA0g, accessed on November, 2013
Image sources:
www.google.com.np/search?q=apple+store+5th+ave&source=lnms&tbm=isch&sa=X&ei=vqKZUondOdCqrAf65oGYDw&ved=0CAcQ_AUoAQ&biw=1366&bih=666
www.google.com.np/search?q=halifax+bank+of+scotland&source=lnms&tbm=isch&sa=X&ei=ZKOZUornKsWXrgeH_4CYDw&ved=0CAcQ_AUoAQ&biw=1366&bih=666#facrc=_&imgdii=_&imgrc=tE3Z1lwLNgoGmM%3A%3Bj7LAWBUGiQTS6M%3Bhttp%253A%252F%252Fwww.empireclaims.co.uk%252Fblog%252Fwp-content%252Fuploads%252F2012%252F10%252FHalifax-Bank-of-Scotland.jpg%3Bhttp%253A%252F%252Fwww.empireclaims.co.uk%252Fblog%252Findex.php%252Fdi
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