In accordance with the opinion of Keyes(2016), corporate strategy is concerned with creating value in various businesses. From the perspective of McCambridge, Hawkins and Holden (2014) corporate also concentrates on the ways of creating value which helps the business firms to attain its targeted goals and objectives. In the opinion of Kleinbaum and Stuart(2014), corporate strategy plays a vital role in utilizing the resources of the company in an effective manner. Moreover, it aids the respective business organizations to develop their competitive position. As opined by Zhu and Chen(2015), corporate strategy aims to enhance the shareholder’s value. This particular study focusses on corporate strategy and its significance on business operations. This study has been conducted on the corporate strategy of Sotheby’s. A brief overview on the chosen organization has been described in this particular study. Some aspects of corporate strategy with reference to Sotheby’s has been explained in this study. Apart from this the effectiveness of corporate strategy are explained in this particular study. In addition to this, predictions on whether corporate strategy will add value ordestroy value are covered in this particular study.
Background of Sotheby’s
Sotheby’s is one of the biggest multinational corporation in Britain. The headquarter of this leading multinational corporation is situated at New York City. This company is one of the globe’s biggest brokers of fine art, jewelry, collectibles, real estate as well as decorative art. Its business operations are categorized into auction, finance as well as dealer. It conducts its business operations in 40 nations. As per the statistics of 2016, about 1617 skilled professionals work at this particular company (Sothebys.com 2018). In 2016, about US$122.616 million is the operating income of Sotheby’s. About US$74.112 million is the net income earned by this company as per the statistical information in 2016 (Sothebys.com 2018).
Corporate strategy of Sotheby’s
It has been observed that this company has adopted growth strategy for earning more profitability from its business operations. According to Kleinbaum and Stuart(2014), growth strategy of any business firm is highly dependent on its economic situation, regulations of the government as well as the competition. Market penetration, product expansion, market expansion, product diversification as well as acquisition are certain strategies which are usually adopted by business organizations. It is seen that Sotheby’s follows acquisition strategy in order to capture a larger market share in Britain. Apart from this, a flexible corporate governance framework is being followed by the management of Sotheby’ s. It is seen that affairs of this organization are taken care by the Board and the Committees. In this context, it can be stated that the Board is responsible for minutely reviewing the fruitfulness of the policies and undertaking important decisions for the benefit of the company.
Analysis of corporate strategy of Sotheby’s
It has been observed that the management had acquired Mei Moses Art Indices in the month of July, 2016. It has been observed that as per the report of November 2016, this reputed company had acquired Orion Analytical. In this context, it can be stated that the company had already acquired these firms in order to expand its business operations in the existing market but still they are considering to acquire other companies in the new markets for retaining their comparative advantage in the existing markets along with new markets. It has been observed that this company had paid around $85 million in order to purchase the 22-month-old art advisory organizationNytimes.com 2018). It has been announced by the company that Art Agency as well as 12 skilled professionals should instantly start working for 271-years-old auction house (Nytimes.com 2018). In this context, it can be stated that the drastic slump down in stock price by approximately 51% has compelled the management to terminate at least 80 professionals through buyouts (Nytimes.com, 2018).
Auction sales amounting $6.1 billion in the year of 2015 were 2% down than that of $6.1 billion earned in 2014 as per the report of Securities and Exchange Commission (Zhu and Chen, 2015). Amy Cappellazzo, ex-chairwoman of contemporary art at Christie’s is the owner of Art Agency Partners. The other two valuable customers of the art world are Schwartman, and Chinn. This new division will look after the sales of the 2oth as well as 21stcentury artwork via auctions as well as private transactions. In this context, it can be stated that ac question strategy has been adopted by this repute company in order to increase its overall profit percentage. In accordance with the opinion of Keyes(2016.), acquisition strategy will aid the company to build a strong market presence. In this regard, it can be stated that the acquisition of Mei Moses Art Indices has aided Sotheby’s to establish a strong presence in the existing market thereby enhancing its brand image and identity.
From the perspective of Johnson(2016), acquisition strategy enables the business organizations to increase its market share. It has been noticed that the revenue has increased by 15% in case of Sotheby’s thereby showcasing the fact that Sotheby’s has succeeded in capturing a larger market share in the existing market of UK (Theartnewspaper.com 2018). It is seen that the business of Sotheby’s becomes prosperous in London. About $1.32 billion sales has been made by this respective organization (Zhu and Chen, 2015). As opined by Larson and York (2017), market barriers can be overcomed by the organizationif it considers to incorporate acquisition in its working procedures. In this regard, it can be stated that acquisition of 271-year-old auction house has helped Sotheby’s toovercome the barriers that restricts the organization to enter into the new market. In the opinion of Kleinbaum and Stuart(2014), acquisition gives an expectation to the organizational stakeholders that it is possible to dominate the market by capturing a larger market share. Therefore, it is the expectation of the stakeholders of Sotheby’s that they will be able to retain their competitive advantage in the existing market. It has been noticed that sometimes diversity as well as expansion aids the business firm to capture a larger market share in the competitive fine arts market of UK (Kleinbaum and Stuart, 2014). This is applicable for Sotheby’s. In addition to this, it can be stated that this particular strategy helps the different organizations including Sotheby’s to reduce the barriers while they were acquiring other companies. In this context, it can be stated mutual knowledge sharing enhances the knowledge of the staffs working at Sotheby’s.
It has been noticed that acquisition often gives outcomes more quickly incomparison with other growth strategies. Moreover,McCambridge, Hawkins and Holden (2014) commented that merger and acquisition aids the firms such as Sotheby’s to achieve both short- term as well as long-term strategic goals and objectives. On the other hand, Kim(2015) commented that organization might concentrate on capturing other organizations rather than focusing on making internal developments. This is applicable for Sotheby’s. It might happen that acquirer has to pay high rates, if the acquirer captures aggressively other companies. Sometimes, it might happen that executed price saving might not materialize. These are certain disadvantages that Sotheby’s might have to face after capturing other companies.
It has been observed that above 1, 70, 000 individuals around the globe with the net worth amounting to approximately $30 million in the year of 2014, with the total wealth which estimated ofapproximately $21 trillion (Artmarketmonitor.com 2018). In this context, it can be stated that it is needed for the management of Sotheby’s to restructure their strategy in order to satisfy the expectations of ultra-high net worth people by defining their architecture. In addition to this, the management have to establish certain standards in terms of quality as well as elegance. In this context, it can be stated that Sotheby’s will conduct a fact-based research in order to enhance the fruitfulness of growth strategy (Artmarketmonitor.com 2018).
The managers and top executivesworking at Sotheby’s will have to form a strong relationship with their clients in order to sustain in an advantageous position in the existing market. Growth strategy of Sotheby’s will focus on developing consignment hedging techniques, and it is needed for the managers to maintain a consistency between marketing and events in order to increase the image of the respective organization in the eyes of its customers (Artmarketmonitor.com 2018).In orderto increasethe efficacy of the growth strategy, it is required for the management to align the incentives internally, and maintaining a transparency in the sales approaches of Sotheby’s (Artmarketmonitor.com 2018).
In the opinion of Keyes(2016), proper implication of growth strategy enables the respective organization to earn more profit percentage and revenue. In 2016, Sotheby’ s had earned a revenue of around US$806 million (Statista.com, 2018). On the other hand, total revenue earned by Sotheby’s in 2017 amounts to US$989.39 million. This shows that revenue generation of Sotheby’s has increased to a great extent (Statista.com 2018).One of the greatest advantages of growth strategy lies on reaching new clients or markets. Adoption of growth strategy enables Sotheby’s to attract new clients.
From the perspective of McCambridge, Hawkins and Holden (2014),shortage of funds can cause problems in implementing the growth strategy properly. However, this is applicable to Sotheby’s. Apart from this, extra work pressure on the skilled workforce might reduce their moral,thereby increasing the chances of high employee turnover rate. In this regard, it can be commented that there are chances that employees of Sotheby’s might leave the company as their workload has increased after the company has opted for growth strategy in order to reach new clients or market.
It has been noticed that net income earned by Sotheby’s is around $118.8 million (Rugman and Verbeke, 2017).This outcomeshows that developments of 60% from $74.1 million and $73% from $1.27 in the previous year. It is noticed that consolidated sales enhanced 12% in 2017 and aggregated Auction sales increased 8% in 2017 versus the preceding year. This statistical fact showcases the factgrowth strategy is a useful technique for increasing the sales of the respective organization (Brewster, 2017). It has been observed that management of the respective organization has hired talented employees in order to enhance its productivity. In this context,it can be stated that these individuals will use their creativity and they will streamline the procedures in order to incorporate innovation within the working environment of Sotheby’s` In addition to this, the growth strategy aids the organization to maintain a consistency throughout its working processes.
From the perspective of Kleinbaum and Stuart(2014), proper application of growth strategy aids the company to broaden its client base. In this regard, it can be stated that adoption of growth strategy will increase the sales volume of the respective organization.However, this is applicable for Sotheby’s. It should be noted that Aggregate Auction Sales amounts to $1.6 billion, which has been contributed by Asian customers as per the statistics of 2017 (Sothebys.com 2018). It has been noticed that mutual knowledge sharing will increase the core competencies of the staffs working at Sotheby’s. In addition to this, market share of Sotheby’s can be increase through implementation of merger and acquisition strategy.
In accordance with the opinion of Kleinbaum and Stuart(2014), merger and acquisition enables the companies to reduce the number of competitors from the existing market. Therefore, it is possible for Sotheby’s to decrease the extent of competition from the existing market. According to Kim(2015), adoption of merger and acquisition strategy will satisfy its customer base by offering them diverse range of services or goods. In case of Sotheby’s, diversification of services can be offered to its clients thereby enhancing their satisfaction level to a great extent. It has been observed that Sotheby’s sales have increased to US$108 billion as per the statistics of 2017 (Nasdaq.com 2018). This statistic reveals the fact that its growth strategy and acquisition strategy is quite effective. As a result, it adds value to its business operations (Zhanget al. 2016).
It has been noticed that corporate governance of Sotheby’s has been established to maintain certain standards in its working procedures. The Board of Directors are liable to review the efficacy of the Chief Executive Officer (CEO) and rest managers who are given the responsibility of conducting ethical operations on a daily basis The Directors are given the responsibility of reviewing the fact that whether code of ethics are being maintained by the respective company or not (Sothebys.com, 2018).In this context, it can be stated that Board is responsible for keeping updated information on the best governance working practices.
Predictions on corporate strategy of Sotheby’s
It is seen that growth strategy is quite effective in case of Sotheby’s. It has been observed that acquisition strategy is quite effective in nature. It is expected that sales volume of this company will increase in future. It can be predicted that these strategies will add value to the business operations of Sotheby’s. According to Johnson (2016), acquisition strategy is considered as a time-effective growth strategy. Therefore, it is expected that adoption of acquisition strategy will help the respective company to increase its resources. In addition to this, this particular strategy will help the respective organization to use its available resources in an effective way thereby increasing the overall productivity of Sotheby’s. On the other hand, it has been observed that despite fluctuations in the stock prices, it is expected that adoption of both these strategies will bring success in the respective organization thereby increasing the overall productivity as well as profitability of the respective company. In this context, it can be stated that both of these strategies should be minutely monitored by the management working at Sotheby’s in order to check the fact whether these strategies are properly implemented or not (Kim, 2015).
Conclusion
From the above discussion, it can be concluded that a fruitful corporate strategy aids the companies like Sotheby’s to retain their advantageous position in the existing market. In this context, it can be stated that corporate strategy should be formulated by keeping it aligned with the strategic goals of the respective company. It has been noted that merger and acquisition strategy has enabled this company to take over other companies like Moses Art Indices, Orion Analytical and 271 years- old art advisory home. This particular technique has increased Sotheby’s share in the current market. It has been observed that its sales volume rose by 15%, which showcases the fact that this company is dominating the competitive fine arts sector in the UK (Larson. and York, 2017). It has been observed both the strategies are cost-effective and time-effective by nature. These techniques aid the company to enhance its image in the eyes of the clients thereby attracting more customers.Apart from this, it can be stated that growth and acquisition strategies helps the companies like Sotheby’s to acquire the available resources as well as core competencies. Besides, mutual knowledge sharing among the staffs of Sotheby’s and acquired companies enhances the knowledge as well as professional skills of the employees working at Sotheby’s.
References
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