Multiple perspectives on the meaning and application of strategic risk

Full Answer Section

      Ericsson:

• Perspective:Risk as an Unforeseen Threat: Ericsson's heavy reliance on the Philips plant suggests they might have viewed strategic risk as an unforeseen threat, focusing on efficiency and cost savings rather than diversification.
• Evidence:Sole-source dependence can offer cost benefits through negotiation and volume discounts. However, in this case, it left Ericsson vulnerable to a single point of failure. This suggests a focus on efficiency over risk mitigation.

Chapter 4 Perspectives on Strategic Risk: Chapter 4 likely explores various perspectives on strategic risk, including:

• Risk as a Threat:This view emphasizes the potential negative consequences of risk events. Ericsson's situation exemplifies this perspective.
• Risk as Uncertainty:This view acknowledges the inherent uncertainty in business environments and the need for flexibility to adapt to changing circumstances. Nokia's approach reflects this perspective.
• Risk as an Opportunity:This view recognizes that risk can present opportunities for innovation and competitive advantage. Nokia's ability to find alternative suppliers demonstrates this perspective.

Lessons Learned: The Philips fire illustrates the importance of a proactive approach to strategic risk management. By diversifying suppliers, Nokia mitigated the impact of the fire and potentially gained a competitive advantage over Ericsson. This case highlights the need for companies to:

• Identify and assess potential risks across their supply chains.
• Develop contingency plans to address potential disruptions.
• Maintain a balance between efficiency and risk mitigation in sourcing strategies.

By adopting a more comprehensive understanding of strategic risk, companies can be better prepared to navigate unforeseen challenges and emerge stronger.  

Sample Solution

     

Nokia vs. Ericsson: Contrasting Views on Strategic Risk (Pre-Fire)

Based on Chapter 4 and the Philips fire case study, we can infer how Nokia and Ericsson likely viewed strategic risk before the event:

Nokia:

• Perspective: Risk as an Opportunity: Nokia seems to have approached strategic risk from a more proactive and opportunity-seeking perspective.
• Evidence: Their ability to quickly shift production to other suppliers suggests they had already identified potential risks associated with sole-source dependence and had established alternative sourcing options. This demonstrates a proactive approach to mitigating supply chain risks.