Wednesday, March 30, 2011

Rock and/or Roll Blog 2

This week, the readings focus mostly on overall industries and their make up as well as how competitive advantage can be won or lost through effective or ineffective analysis. To augment this reading I came across this: http://musicbusinessresearch.wordpress.com/2010/03/29/the-recession-in-the-music-industry-a-cause-analysis/ an article titled, “the recession in the music industry – a cause analysis”. What I found so interesting about this article, was that it argued a point I personally have long been arguing, “file sharing is not killing the music industry”.

In today’s world, technology drives everything, including the evolution of industry (at least to a point). This has been especially true in the music industry. The introduction of new mediums of music delivery turned the industry completely on its head at least 3 times over the course of history. The introduction of the LP allowed listeners to bring their favorite music home and listen to it whatever they wanted. They also gave the consumer variety as he or she could buy an entire album or often times they could buy just a 2-sided single that was cheaper and only contained the most popular song. CDs turned the industry around again by making it cheaper and easier to produce albums, giving the user the ability to skip tracks at will and providing more storage space than a record. CDs also made the single obsolete. Combining the cost of producing CDs with their ability to seek backwards and forwards there wasn’t much rhyme or reason to continue producing singles anymore, as consumers wouldn’t buy them. (Yes, I skipped the 8-track on purpose).

Most recently has been the rise in digital music. Digital music brings new convenience and storage capacity that we never would have otherwise dreamed possible. But it has brought with it a rise in online pirating. What the article argues and I wholeheartedly agree with is that a simple analysis of the industry shows that what actually has changed (arguably just as much as the technology itself) is the consumer’s preferences.

How many people have pirated an album for a single song? (I certainly have) How often after the initial download have you actually listened to any of the other songs after that? (Countless) What I have argued and the article supports perhaps better than I could on my own, is that album sales have declined because consumers are realizing their true wants. They want variety; in particular, they want a level of variety that was not previously available to them before digital music.

The point I’m trying to get to here is this; had someone taken a different approach and analyzed this industry from a different angle how would it’s layout look now? Had someone analyzed how consumer’s used to act and made the assumption that consumer preferences only changed because technology changed? I guess my question is, will the next major revolution come from analyzing consumer preferences and adapting the technology to what they want as opposed to following the natural trends of development?

Competitor Analysis – What Dell did..

According to the Harvard Business School Article Competitor Analysis, Understanding Your Components, while formulating a competitive strategy, it is essential to identify the competitors, the strategies and objectives of the competitors, map the competitor positioning, analyze the strengths and weaknesses and the aggression factor.
Dell took over market leadership by persistent focus on delivering the best customer experience by selling computing products directly, services online and through catalogs. They had a clear understanding of their strength and weaknesses as Mort Topfer who helped revive Dell's fortunes in 1990s said "We know what we are and what we're not. We are a really superb product integrator. We're a tremendously good sales-and-logistics company. We're not the developer of innovative technology"
Dell started an innovation process by asking customers what they really want and whether they know of a different way to accomplish that. They then meet the suppliers and ask them for a different way and in the end they come up with a totally different approach that exceeds the original objectives. Feedback was acted upon very seriously and Michael Dell used a variety of innovative approaches. He said, "I also enjoy roaming around outside the company to see what people think of us. On the Web, nobody knows I'm a CEO. I'll hang out in chatrooms where actual users commonly chat about Dell and our competitors. I listen to their conversations as they discuss their purchases and their likes and dislikes. It's a tremendous learning opportunity.” Dell tailored manufacturing to a customer’s specific need allowed dell to integrate production schedules with sales force, assemble all parts of the PC on suite and install the specific software that the customer requested. This not only appealed to customers but also sped up the final product completion. Dell strategically targeted only customers they wanted. They classified into specific categories as Relationship buyers, large business and institutions and Transaction buyers, small business and home PC users.
Dell’s competiveness in the industry resulted from highly efficient business model that sort every opportunity to work more productively maintaining the quality standards. Efficiency in production led to high profit margins. As Porters Five Forces demonstrates, when bargaining power of buyers is high, the potential for price battles increases. Dell overcame this by making a PC that was a better product than the competitors, yet near their competitor’s price. Their costs were able to stay competitive while delivering an exceptional product because their business kept internal costs low. Dell was able to circumvent a price war because its customers were confident of the technological value in a Dell PC.

In what market situation do you see Dell’s strategy fail? Who do you think are the potential competitors of Dell?

Blog 2 - Open Innovation at Philips

In the McKinsey Quarterly article ‘Global Trends to Corporate Strategy’, 24% of respondents said that innovation in products, services and business models contributed most to the accelerating pace of change in the global business environment today. Marla Capozzi and Bhaskar Chakravorti talk about ‘Innovating at scale’. They cite the example of P&G which employed “open innovation” networks to “broaden their sources of innovation” as growth could not be attained with only internal product development. Similarly Philips Electronics has been instrumental in coming up with many innovative products for healthcare, lighting and lifestyle. Their products have been easy to use and provide a great user experience complementing their motto of ‘sense and simplicity’.

The article ‘Global Trends to Corporate Strategy’ mentions that “large corporations must innovate to build new businesses for themselves so that their portfolios stay in line with changing consumer preferences, budding demand in emerging markets, and other global trends.” Philips has changed over time to accommodate new businesses and now has a well balanced business portfolio comprising 35% consumer lifestyle, 35% healthcare and 30% lighting.

What is noteworthy and interesting is the open innovation strategy adopted by Philips to diversify its portfolio and keep pace with the fast changing business environments. The drivers of open innovation include end-user innovation, moving from vertical integration to system integration, and widely distributed good ideas. Its open innovation strategy and relationships with institutes, academia and industrial partners has made it possible to harness creativity and expertise from a diverse range of people and organizations, enabling more innovations to be brought to the market faster and more effectively.

Philips Research founded in 1914, engages in two kinds of open innovation. Through “inside-out” innovation, it makes its skills and resources available to the outside world. It does this by undertaking contract research for external parties, providing technical facilities and support and assisting with IP licensing. Through “outside-in” innovation it leverages the capacities of individuals, organizations and start ups from across the world. To facilitate this it has built high-tech campuses in the Netherlands and China comprising different companies and institutions that work together to come up with breakthrough technology and innovative products. At their’ ExperienceLabs’ the new technologies and concepts are tested in the early stages of development.

Philips Research thus delivers:

1) Roadmap innovations to support the existing businesses in the field of Healthcare, Lighting and Consumer Lifestyle

2) Innovations adjacent to existing businesses

3) Break away innovations to address new markets in line with the strategic direction of Philips.

Thus Philips has “used scale to transform promising ideas into innovations whose value can be amplified by their diffusion among a number of customer and product segments.”

So the question I have for you now is – what steps are you taking - as an individual, as an employee of your company or as a leader of an organization – to drive innovation and benefit from the value addition that it brings about?

References:

http://www.ryutu.inpit.go.jp/seminar_a/2010/pdf/26/B3/B3-02.pdf

http://www.research.philips.com/open-innovation/index.html

http://www.philips.com/about/company/businesses/innovationemergingbusinesses/index.page

Knowing Your Competitors and Knowing Yourself (Blog 2_Week 3)

This week’s reading all share a similar conclusion that a key part of understanding the role of competition in strategy development is a full-scale examination of your competitors under changeable global environment and trends. Only after you successfully identified your competitors and their situation in terms of market share, main strategies, advantage/disadvantages, etc, one can start to formulate the right competitive strategy. As the author of “Competitor Analysis: Understand Your Opponents” mentioned, “No effective marketing program is complete without a thoughtful analysis of competitors and the competitive arena[1]”.

With all these theories presented, I start to wonder, is it possible that the result of a competition analysis shows that you and your competitor actually have a lot of things in common and you end up complement the same strategy as your competitors do? For example, the competition analysis shows that your competitors are following different strategies while pursuing the same business objectives as you are. What are you going to do? One example will be Burger King and McDonald’s. One of the major issues for McDonald’s is it competitors. Burger King is the second largest hamburger fast-food chain in the world and is the number one competitor for McDonald’s. Although they distinguished themselves in several ways, when Wendy’s implemented the 99 cent value menu as an offensive strategy to gain customers , they in response took a similar defensive approach to instituted a value menu in their respective stores so that they wouldn’t lose market share and customers to Wendy’s.

This example reminds me a famous Chinese saying “Know the enemy and know yourself, and you can fight a hundred battles with no danger of defeat” (知己知彼百战不殆). Sun Tzu, the man who said such words also wrote the great book “The Art of War” (mentioned in the first lecture). Obviously this argument contains two parts: knowing your competitors and knowing yourself. I will stop before this topic gets too carried away, but here is a question that maybe helpful when you want to think thought it:

Are these two parts enjoying an equal importance? Which one is more difficult to achieve?



[1] Harvard Business School, Competitor Analysis: Understand Your Opponents, Marketer’s Toolkit: The 10 Strategies You Need to Succeed. 2006

Personal Experience - Strategic Planning and Strategic Execution

As per Kaplan and Beinhocker, Strategic Planning as a process should be directed more towards ensuring that information is shared among all the top level management in a firm. This common understanding of the way industry is moving, the way competition is performing and the way the firm is operating will help managers be better prepared to take difficult decisions.



In this article, I would like to present my experience as an employee during a change in the strategy of the company.

I worked in a large MNC which operated in the software products space. This was the first job after I completed my undergraduate degree and in my initial years, I took time to understand how a company operated. I confess that in my initial 2 years, I never really bothered to get to know the strategy of our company. It was also true that our strategy wasn't really driven into every employee and discussed around coffee corners. In retrospect, I wouldn't have been surprised if it was information held by key individuals and not everyone or, it could also be the case that it was available for everyone but no one was interested to know it. Our daily activities was something of a nucleus and things involving strategy was almost peripheral and distant.
Every firm has been affected by the new wave of internet technologies and our firm is no exception. We had a change in the C-suite and I assume there must've been a Strategic Planning meeting underway. It was after this change that a new strategic change was announced.
This is the key part that I wish to explain to my readers. Strategy of the firm, which until then was a haze to everyone, suddenly became the buzz word in the entire organization of around 50,000 people. This sudden change can be attributed to the new and somewhat oversimplified strategy that the executives came up with, that everyone suddenly felt charged up to the task.
The new strategy was
Our firm will have a billion users in 4 years
This oversimplification, in my view somewhat drove innovation from the grass roots level. Everyone had the buzz word - 'Billion users' around them. They remembered this in each and every one of their daily activities, the key question being - 'Will the task done by me generate more users?', followed by the thought 'What can I do to increase the user base of our software?'. In my opinion, this dramatic change and impact of the key strategic intent has helped the firm. I am sure, now, every employee can relate their work to the direction where the company is headed. I am a strong believer in ensuring that strategy is not just the power of information of few but it should be the direction of movement of every single employee in the company.
I feel my company was able to achieve this and may well succeed.

A question to my readers is - Do you believe strategic planning and strategic execution at the executive level is enough OR do you also feel that every single employee should have a rubric of sorts that ties his / her work to the strategy of the firm?

Blog 2 - Analyzing your competition - new strategy by the Met

Knowing who your competition is is vital to any organization that wants to thrive. And it is even more important to know as much about your competition as possible, and to even anticipate future entrants into your marketplace. As the article exemplifies, in the entertainment industry, you find not only cultural arts organizations competing amongst one another, but sports, movies, television, DVD's, and many more fighting for people's few hours of leisure time.

Many cultural arts leaders have opted for collaboration instead of competition, arguing 1+1=3, and that such an alliance will give them more strength and power against all of the other non-arts like competitors. A few years ago the Metropolitan Opera studied their television and movie theater competition and then used this knowledge to try to appeal to a new segmentation of potential opera viewers. They did this by launching metopera broadcasts in HD quality:
http://www.metoperafamily.org/metopera/broadcast/hd_events_next.aspx

Of course the strategic move has had its skeptics. Opera goers quip that you cannot compare a live performance to one that is canned. Others worry this will actually divert audience members who would have attended the more expensive opera to this "lesser option." However, a true measure of success will be if a large number of new audience members are developed through this more casual point of entry, and if the movies generate revenue.

The arts world is watching intently on what the Met strategy's outcome will be. Of course, there is always a risk when you try to reach new segments of people and alter your product.

Blog 2, Juli Digate: The Decline of PayPal?

In the article "Competitor Analysis: Understasnd Your Opponents," we learned that strategy is dependent on a proper analysis of the market. A huge aspect of this is analysis of current and potential competitors, as Porter discussed in the "threat of rivals" and "substitutes" aspects of his industry analysis.

Recently, American Express launched "Serve," an online payment system that will be a new competitor for PayPal. Paypal has recently released expansion plans, and experts are speculating on the impact of a new competitor in their plans. Read more on American Express' new venture and how it rivals PayPal:
What strengths do you think American Express brings to the table that PayPal does not? Do you think PayPal included traditional credit card companies in their competitor analyses (assuming they did these)? If you were assessing the likelihood of Serve's success in the next few years, or the probability that they would be a viable alternative to PayPal customers, what would you say?

How to Own the Market

This weeks readings, especially "A fresh look at industry and market analysis," by Stanley F. Slater and Eric M. Olson, emphasized the dynamic operation a company has to take on if they wish to be successful for a substantial amount of time. When Michael Porter introduced the Five Forces Model of Industry Competition, he generated a model for how companies and organizations can position their business within the competitive environments they operate in. Much emphasis was put on the competition (new & old) that companies must deal with, and the sometimes turbulent markets they must constantly adapt to.

The augmented model of Porter's Five Forces-by Slater & Olson-is much more fitting for today's dynamic markets. Some additions include: 'complementors,' market turbulence/growth, composite competition (competitors/substitutes), and risk. Slater & Olson made sure not to undermine the validity of Porter's original model, and instead concentrated on "new ways of thinking about the original forces."

The root of Porter, Slater & Olson's premises is a companies yearning to find strategic positioning in competitive markets. All three authors make it very obvious that achieving this positioning is a tireless and ceaseless effort. Those that do it well thrive, and those who don't fail. In a competitive market, using a dynamic market analysis approach is the only way to survive. As Slater & Olson talked about the numerous companies that had been met with an array of challenges, resulting in major losses (i.e., Kodak due to introduction of digital photography), I though about companies that have been models of strategic positioning.

Apple, Inc., is by no means a new company, nor did they start as a portable media player company. However, they entered the portable media market with the iPod in 2001, and have held a relentless stronghold on that market since then.

Steve Jobs and the Apple team have mastered the art of strategic positioning in the portable media player market. This market is competitive and dynamic by every definition i.e., diversity of competitors (Microsoft, Sony, Dell), similar products across board, etc... The only explanation to Apple's ability to maintain footing as the sole leader in portable media players is to attribute it to their strategic positioning and exceptional awareness of what drives consumers in the market. I think it's fair to assume that their approach to maintaining their positioning takes every piece of Porter, Slater & Olson's premises into account.

Is there a better example of a company's utilization of industry and market analysis? I would like to know.

i. http://crunchgear.com/wp-content/uploads/ipod_market_share.jpg
ii. Competitor Analysis: Understand Your Opponents. Harvard Business School Press. 2006

Week 3: Blog 2: Shanna Dean

The readings for this week point to a similar conclusion: while Porter’s five forces remain foundational in understanding the role of competition in strategy development, they must be augmented by a consideration of global trends and a closer examination of competitors in terms of positioning, strengths and weaknesses, and “the aggression factor” (Competitor Analysis: Understand Your Opponents). Companies can then take advantage of the industry environment and global landscape through innovation.

The majority of the articles for this week acknowledge the rise of emerging economies and demonstrate how this rise can give way to opportunity, such as the case with Procter & Gamble, Nestle and Kraft. This rise can also present threats in the form of low-cost innovations. Experts warn that if companies like L’Occitane and Caterpillar do not give adequate weight to the threat posed by low-price competitors, they could risk losing market share.

In looking beyond these our class readings, I have found the following companies that have demonstrated an awareness of trends and competitors in developing their business strategy:

Coca-Cola:
http://www.lippincott.com/pdfs/s95_coke.pdf

Coca-Cola has clearly branded itself to appeal to emerging markets and has developed a marketing strategy that is country and culture specific. This business has also embraced employees as “knowledge workers,” term mentioned frequently in this week’s readings. This term conceptualizes workers not as traditional desk-bound, labor-oriented hands, but rather as mobile, knowledge-focused, communicative, technology-aware employees. The articles this week emphasize how businesses like Coca-Cola can develop knowledge workers to successfully competing in an increasing global, technology-driven external environment.

Honda:

http://www.autoexpress.co.uk/news/autoexpressnews/254713/honda_ceo_announces_10year_strategy.html

Honda acknowledges global trends in developing their 10-year strategy, recognizing a shift to smaller cars. In addition, their approach shows the pursuit of both emerging and developed markets, revealing that these approaches are not mutually exclusive.

On one hand, there are other companies that have successfully employed strategy with sufficient consideration of competitors and changing markets.

1.) What other companies do you feel have been particular sensitive to the external competitive environment and used it to their advantage?

On the other hand, there are also those companies whose short-sightedness has undermined their long-term strategy.

2.)Which companies have employed a strategy that you feel did not adequately take into account competitive trends?

Thanks for your input and for your consideration of these questions.

Impact of Web 2.0 Technologies

The advent of Web 2.0 technologies has changed the way people collaborate having far-reaching socio-economic impacts. Knowledge is no longer constrained by geographies or demographics. Anyone and everyone, with access to the internet, can now collaborate with people across the globe, each contributing in his/her own unique way. As a result, the world structure has become more ‘flat’ now then ever before.

Social media is having great social impact across geographies. For example, people in developing nations now feel more as the part of global community. People with common interests can now connect irrespective of the demographics. It gives them a whole new perspective of what’s happening across the globe. This exchange of ideas has also helped clear pre-conceived notions about other cultures. In my opinion, people are gradually becoming more tolerant and accepting of other cultures/religions/countries. Social media is acting as a great ‘leveler’ and will eventually leading to a more harmonized world.

Gone are the days when knowledge was the privilege of chosen few who had access to education and better amenities. In today’s networked world, information is much more easily distributed and understood. Web 2.0 technologies are empowering people in more ways than one. In my opinion, the biggest strength lies in knowledge sharing and what could be a better example than Wikipedia, the largest online encyclopedia. People can now connect in hundred different ways to collaborate and work together. Even a simple idea can turn into a business opportunity. The Web 2.0 technologies have greatly increased the scope of what we typically call a marketplace. The whole networked community has become a huge market place with no supplier or buyer too big or too small. This has completely changed the way we do business and has forced some of the largest organizations to re-align themselves to the changing market dynamics.

Do you think that Web 2.0 is a force to reckon with and is greatly affecting a change in social and economic fabric of the world ?

A Fresh Look at Industry and Market Analysis and Lightsquared

A Fresh Look at Industry and Market Analysis by Stanley Slater and Eric Olson updates Michael Porter’s 5 Forces framework for competitive analysis. The most interesting adjustment to Porter’s model comes in the Market Analysis section. The authors review the following market influences:

  • Composite Competitive Rivalry
  • Complementors
  • Customer Power
  • Supplier Power

These areas vary from Porter because they discuss interaction among parameters. They combine direct competition and new entrants as a composite factor. The threat of new entrants is often a type of substitute. Because they don’t often exist independently, they can be combined. Also, complementors considers network effects and that complementary products may make the primary good more valuable. By reconsidering the role of independence among parameters, Slater and Olson strengthen Porter’s model.


This model adjustment is exemplified by Lightsquared. Lightquared, a wholesale wireless firm, acts as both a composite competitor and a complementor. Lightsquared owns an LTE wireless technology network. This is the new standard that both ATT and Verizon Wireless, the largest wireless carries, are moving too. However, instead of competing with the firms directly, Lightsquared leases spectrum to other firms. This allows others to avoid capital costs while still servicing their clients. Lightsquared does not offer service directly to customers, so it can work with these established players as a partner instead of as a direct competitor.


Lightsquared also works with minor players MetroPCS and Leap Wireless. MetroPCS and Leap serve urban markets that primarily value price. By renting spectrum, instead of having upfront capital costs, they can lower keep their pricing low by sharing costs with firms that are potentially competitors. These firms compete with Verizon and ATT to some degree, so Lightquared benefits by increasing the rivalry for other firms in the market.


Lightsquared is a composite competitor because it can substitute for existing firms while it offers a new product. The firm is also a complementor because other wireless firms are better off when using its products. Because Lightsquared is at the forefront of a new generation of technology, it also positions its technology as a preferred standard by adding to the scale that the largest wireless companies have established in adopting LTE for their next generation technology.


Many firms fit Olson and Slater’s model. Lightsquared is a good example because it exposes how Porter’s basic framework is good, but that cooperation is also part of a competitive strategy. Dependence and independence are often temporary, yet strategies must incorporate them. This consideration allows firms to predict with see substantial opportunities that would have been overlooked under Porter’s model. This creates value and validates the benefits of the model.


Sources:

Stanley Slater and Eric Olson, A Fresh Look at Industry and Market Analysis, Business Horizons, Indiana University, HBS Publishing, 2002

Lightsquared - http://www.lightsquared.com/, Web, Accessed 03/29/2011

Bloomberg News - http://www.bloomberg.com/news/2011-03-03/metropcs-looking-at-everything-in-wireless-spectrum-search-cfo-says.html, Web, Accessed 03/29/2011

New Market Strategy Give a New Brith : New SK in China

As one of the biggest companies in Korea, SK was the first one entered China market. SK built a joint videotape production plant two year before China and Korea renewed diplomatic. With this plant success, they decide bring their core business to China which are energy, chemical and telecommunication. And they wanted make a full-scale enter the China market for new development. After a few years’ efforts, they did not achieve their goal. What 's the problem? Is their techonolgy and product not good? China is a policy-oriented market. All the core businesses of SK are the key national industries, like energy, telecommunication and chemical. They have a barrier to enter these key industries. And China government restricted investment by foreign companies. The stated owned enterprises can develop these industries with national development policy. What SK learned from this period failure? First, it is unrealistic for SK to adapt the conventional business model in China with the investment restriction policy of foreign company. Second, localization is essential in this policy drive market. Although both Korea and China are in Asia area, the business culture and the stage of economic development are different. The special new market development strategy is necessary for SK in the beginning period. What Changes after the failure? First, SK adopts the totally new localization strategy, using the motto”Of the Chinese, by the Chinese, for the Chinese”. Second, they chose to enter the non- key national industry but have inherent advantage, like internet which can take the technology advantages of their telecommunication and network. reference: http://www.sk.com/introduce/performance/performance.asp,visited by 3/30/11 , CHOI Chang-hee, China Strategies of Korea’s Winning Companies, page 7

Demonstrating Quality to Overcome Price Objection

'The question is: how does a seller demonstrate to a powerful customer why they should be willing to pay a premium for its product?' This question from Slater and Olson's article, A Fresh Look at Industry and Market Analysis, is one that our company confronts on a regular basis. In my industry, power systems, our products and services are more expensive than our competitors are. Slater and Olson recommend that overcoming the price question 'comes from providing more value to the customer than the competition provides'. One of the ways to accomplish providing value is by 'increasing benefits, such as quality or service to the customer'. This strategy, of demonstrating the value of quality to a customer in order to overcome price objections, is the strategy that my company has adopted.

Here is an example of this strategy in application. We had the opportunity to submit a $40 million bid for a project with a new customer. This customer had industry knowledge of our products, but had never purchased from us before. As the customer was planning a multi-year expansion, this $40 million project was the first in a series. If we received this initial order, it would improve our chances of getting additional orders in the coming years. In addition, as we had no work booked for 2011, getting this order was important to us.

After reviewing the bids, the customer contacted us to negotiate the price. Our price was seven figures more than the competition’s price (meaning at least a million dollars more). To close this business deal, our strategy options were: lower our price, lose money on this project, and hope to recoup it on future orders; stand firm on price and potentially lose the order; or devote resources (time, money, and opportunity cost) to demonstrate to the customer that the quality of our product was worth the premium. We chose the strategy of demonstrating our quality. We had a three phase approach: we conducted a power systems study to demonstrate that our solution would fit with their legacy systems; we conducted an environmental impact study to demonstrate why our technology was a 'green' solution; and we made changes to the project specs to better address the customer’s needs. Our strategy worked. The customer saw the quality value of our product, met our price and gave us the $40 million order.

Question: The strategy that we chose was risky- it involved spending additional resources (time and money), with no guarantee that we would get the order. Would it have been easier to lower our price, lose money on the project and hope to earn profit on future business with this customer?

Tuesday, March 29, 2011

Cloud Computing: A Sustaining or Disruptive Innovation

In the article, “Cloud Computing: A Sustaining or Disruptive Innovation?” Bernard Golden, CEO of HyperStratus Consulting, discusses the characteristics of cloud computing and its effects in the IT storage market. A self-proclaimed advocate of the theories of Harvard Business School Professor, Clayton Christensen; Mr. Golden compares the introduction of the unibody car construction as an alternative to the body-on-frame car construction to set the stage for his analysis.

According to Mr. Golden, one can label cloud computing as a sustaining innovation because it is an invention that builds on the foundation of the virtualization principle which is widely utilized in the field of data center technology. On the other hand, one could also label cloud computing as a disruptive innovation because Amazon was the first entrant in the field of private cloud computing and Amazon was not even considered as a technology vendor.

Mr. Golden concludes that cloud computing is disruptive but for the users, not the industry. He argues that users will find it insufficient to provide automated, self-service virtualization. In addition, he argues that private clouds will need to strengthen their security measures and offer “highly scalable queuing functionalities” to be able to compete against the public clouds.

This article is interesting because cloud computing is, in fact, an invention that is unclear if it is sustaining or disruptive. I think that for the moment it is a technology that is sustaining but it could become disruptive if a private provider is able to provide this service in a secure and thrifty manner with additional applications to this service.

I now pose the same question to the rest of the class: is cloud computing a sustaining or disruptive innovation?

Source: http://www.networkworld.com/news/2011/031611-cloud-computing-a-sustaining-or.html?page=2

Incorporation of the 7-S Model into Market Analysis?

Introduction: The 7-S Model can help an organization to run more efficiently and perform at a higher level if all of the elements reinforce each other. The 7-S Model is comprised of the following elements: Strategy, Structure, Systems, Staffing, Skills, Style, and Shared Values. When an organization lines these elements up correctly it can put the organization at a distinct competitive advantage. Using the 7-S Model when doing an industry or market analysis could be beneficial. Relevance: While reading "A Fresh Look at Industry and Market Analysis" it became apparent that an organization may be able to complement the suggestions proposed under the "augmented model for market analysis". The augmented model for market analysis suggests that an organization should look at the following: composite competitive rivalry, complementors, customer power, supplier power, and market change. The augmented model for market analysis will help an organization understand what it is facing the market or industry as a whole. The analysis could include any number of competitors. The 7-S Model is meant to deal with organizational structure. I propose that when an organization is conducting a market analysis that they may want to pick one or two top competitors and try to determine how their business fits into the the 7-S Model. If a company can successfully understand how a high performing company aligns itself in the 7-S Model then it may be able to leverage some of those strengths in its own organization. This may be a tedious task but it could be beneficial in the long run to improving an organization's performance and surpassing current competition. Question: Do you think it is worthwhile for an organization to study how a top competitor(s) may fit their business into the 7-S Model while conducting a market analysis?

Trader Joe's

Most of us have probably found the Trader Joe's near Bakery Square by now. Whenever I go grocery shopping there it is always busy and attracts all different sorts of customers. It seems odd to me that this grocery store chain is doing so well in and industry that is being overtaken by big box suppliers like Wal-Mart and Costco.

Trader Joe's has been able to due this with a unique strategy of competitive positioning, as discussed in "Competitor Analysis". TJ provides highly selective products that do not contain preservatives or artificial flavors. Soft drinks, for example, are not sold at Trader Joe's. Most of the items sold at TJ are store labels and thus cannot be found in other grocery stores. Additionally by providing products without preservatives or artificial flavors, TJ positions itself to cater to the food customer who would NOT shop at the big box chains and thus does not need to compete with Costco and Wal-Mart based on price (although TJ does offer many low prices on its store brands). Although the grocery/supermarket industry is shrinking as a result of the entrance of big box TJ manages to retain its core customer, who looks for food items not traditionally sold among these major competitors.

My question would be to ask you whether or not it will be possible for TJ's to maintain its profitability and market share as Wal-Mart and Costco move into organic and private label products?

Resources: http://www.traderjoes.com/about/faq.asp
http://mystrategicplan.com/resources/what-is-trader-joes-strategy/

Tech Rivalries: EBay, Amazon, Nokia, Apple

I was reading WSJ and came across the following three headlines:

I think these three news articles sum up perfectly what we discussed in lecture last time about the difficulty of identify competitors and give an illustration on the HBS book excerpt about Competitor Analysis. Looking at the four companies mentioned (EBay, Amazon, Nokia, Apple), it was hard to imagine several years ago that they would be competing fiercely with each other today on different domains, serving the same type of tech-savvy customers. EBay is trying to match Amazon’s online retail through acquiring GSI Commerce. Amazon is launching a new service, Cloud Drive, for users to purchase and store music and access from mobile devices, thus competing with Apple. Apple, on the other hand, is fighting against Nokia in the smartphone market. We have four competitors, competing with each other in three different markets. Any single move from one of them will impact the competitive landscape of another market. Another thing to be noticed is that these companies employ different strategies to grow – inorganic expansion for EBay, product development for Amazon, legal action for Nokia (reminds me of Professor Zak’s Napster lawsuit story).

As companies of this kind determine strategies,

  • - Is competitor positioning still useful, when nowadays everyone seems to try to do the same thing for everything?
  • How much should they spend on R&D and/or M&A? What factors determine which strategy is more viable?

Blog 2 Reinventing Your Business Model

Reinventing Your Business Model (EMiceli Blog 2)

Reference article: Reborn’ Dunkin’ Donuts in big daypart push: chain seeks to rival Starbucks, McD with post-a.m. focus on drinks, snacks: http://findarticles.com/p/articles/mi_m3190/is_17_40/ai_n26696519/?tag=content;col1

This past fall a Dunkin’ Donuts recently opened on the University of Pittsburgh campus on Fifth Avenue. I thought that the company had gone under and was selling only three pound bags of their coffee beans at my neighborhood Costco. Was the company back in business selling donuts? Had the company reinvented their business model? I wondered if Dunkin’ Donuts used the three simple steps of a new business model that Johnson, Christensen and Kagermann suggested in their article, “Reinventing Your Business Model?” The three steps are:

*Did they think about a real customer who needs a job done?

*Did they construct a blueprint laying out how the company will fulfill that need at a profit?

*Did they compare their existing model to see how much they would have to change it to capture opportunity?

The answer is yes, Dunkin’ Donuts did.

Dunkin’ Donuts (part of Dunkin Brands) was purchased for $2.4 billion by a consortium of private-equity firms consisting of Bain Capital Partners LLC, the Carlyle Group and Thomas H. Lee Partners LP in 2005. The new owner’s believe that the company’s real customer is still in line with their old model. The real customer is the everyday folk who work hard during the day and need a pick up snack. However, the new owner’s no longer viewed the donut as the main purchase item, but that beverages and a larger food menu would attract customers. The company’s blueprint is based on branding their product lines to include iced coffees, espresso-based lattes, smoothies, panini sandwiches, gourmet brownies and cookies. This changed was based on their “strategic platform based on two questions: Who is Dunkin’ Donuts for? What is Dunkin Donuts for?”

Question: Did the new owners believe that the great, old idea of a donut shop could be transformed into something bigger?

Blog 1 The Impact of 10 Trends


Going From Global Trends to Corporate Strategy: Exhibit 1 (EMiceli Blog 1)

In the Exhibit 1 diagram (“Going From Global Trends to Corporate Strategy” Becker and Freeman, the McKinsey Quarterly, 2006 Number 3) “The Impact of 10 Trends”, executives were surveyed on how they expect 10 trends to effect both their global business and company profitability in the next five years. The three color-coded ratings for the survey consisted of: very important/important, neither important nor important and somewhat important/not important. Overall, executives ranked seven trends high in effecting global business, while the other three trends were ranked higher in effecting company profitability. I found two interesting findings regarding the rankings.

First, four of the seven trends that ranked high in effecting global business had a 25% percent higher rating in global business compared to company profitability. For example, the “Growing number of consumers in emerging economics/changing consumer tastes” trend had an 87% ranking for effecting global business and a 63% rating in the profitability column. For the “Increasing constraints in supply or usage of natural resources” trend, global business had a 71% ranking and profitability had a 40% ranking. Within each individual trend, I found it interesting that the percentage results were not closer in number and hand-in-hand with profitability. These percentages revealed that executives did not believe that the macroeconomic trends would impact their profitability as much as their global business.

In the remaining three trends that ranked higher in profitability than global business, the column percentages were very close (an average of 6.6). The trends consisted of: “Greater ease of obtaining information, developing knowledge”, “Increasing communication/interaction in business and social realms as a result of technological innovation” and “More intense social backlash against business.” The three trends all relate to the human, social component of business, including, how global trends effects how employees gain knowledge, how they communicate with each other and how their business effect different cultures and countries. When the human, social component is analyzed, the percentage results do not receive high ratings as the macroeconomic trends; however, their percentages within each trend are much closer in number revealing that executives believe that the trends impacts both global business and profitability equally.

Question: The executives agree that the majority of the trends will impact more their global business than profitability in the next five years. Why do the executives not believe that that these trends will not effect their profitability?

Blog #1


Colgate-Palmolive’s success in Strategic Planning

The article “The Real Value of Strategic Planning” takes me back to the valuable three years I worked at Colgate-Palmolive in India. To a great extent, I relate to this article because in my tenure, I had the opportunity to learn how an iconic company places its strategies and goals every year and how it adapts itself to an unpredictable environment. Interestingly, the authors discuss different views on strategic planning. How certain strategies are simply formulated in the hallway or long flights rather than a formal meeting etc. As Sarah and Eric stress “The goal of strategic planning process should not be to make strategy but to build prepared minds that are capable of making sound strategic decisions”.

One of the core values of Colgate is Caring, among others such as Global Teamwork and Continuous Improvements. The company not only cares about its, shareholders/investors and consumers but also its employees who are termed “Colgate People”. Caring about employees does not only include monetary compensation and other benefits but also the individual’s development. In my experience, the company takes comprehensive measures to encourage leadership in every member of the Colgate family. The company has a system in place, which focuses on an individual’s development and growth in the company each year. These include goals setting, training programs that strengthen skills and support development with a continuous coaching and feedback from managers. I believe with this framework, the company aims to attain its primary goal of strategic planning which is not to make strategies but to build prepared minds that are capable of making sound decisions.

I reminisce the hours my colleagues and I spent working on presentations for my VP of Research and Development, who would in turn present to the division’s Managing Director during the annual business review. Our division had two business reviews – one at mid-year and the other at end of the year. Colgate sets a good example in terms of achieving success through its strategic planning process. It has hires the right people equipped with skills and sharpens their skills to perform more effectively. Colgate-Palmolive survived the economic downturn during the recession period because it had it strategies in place and were prepared for the worst situations. The company remained stable during the downfall of the economy, displaying resistance to the recession.


Questions:

  1. How are companies preparing themselves for another crisis if it may arise?
  2. Why did the strategies of big players such as Lehman Brothers did not work, resulting in bankruptcy? What were the strategies of those companies that time?


Sources-

  1. The Real Value of Strategic Planning (Kaplan and Beinhocker, MIT Sloan Management Review, Winter 2003)
  2. http://www.colgate.com/app/Colgate/US/Corp/LivingOurValues/CoreValues.cvsp
  3. http://www.valueexpectations.com/content/surviving-recession-colgate-palmolive
  4. www.colgate.co.in/Colgate/IN/Corp/.../Colgate-Chairman-Speach.pdf


Online Travel Industry: Competing for a tightened travel budget



In Bloomberg Business Week’s top 50 winning stocks in June 17, 2010 edition, Priceline.com—a website that helps users gain discount rate on travel-related items, was ranked the first top-performer on the list. The news made me interested in exploring more on this week’s topic, and that is to compare Priceline, one of the spearhead runners with its direct discount travel site competitors and a peek at the online travel industry as a whole.

One of the biggest online-travel industry news in 2010 was that Google “proposed $700 million acquisition of airline ticketing software company ITA Software Inc”, which triggered waves of unrest among current players like Priceline and Expedia because Google’s entrance could easily crush all its competitors. Referring to this week’s reading “A Fresh Look at Industry and Market Analysis,” where Professor Slater and Professor Olson modified Porter’s five competitive forces’ model and proposed an augmented model for market analysis. In this model, the threat of new entry and substitutes are referred to as the “composite competitive rivalry force,” where rivalry started from “civilized to cutthroat.” As more and more competitors enter the industry, the profit margin is reduced to market equilibrium where no one can even make a profit. The authors gave the example of the aviation industry in the U.S. where competition turned to vicious price wars where every player fell prey to the prison’s dilemma and ended up losing money. In the dot-com business, the truth is that if without sustaining innovation and differentiating business model, the few moguls like Google could easily utilize all its resources and customer base to beat its competitors one-sidedly.

The online travel industry is faced with, in summary, challenges like hotels and airlines bending themselves to decrease their reliance on intermediaries like Priceline; other entrants who share “a homogeneous need” and customer base. Moreover, the economy has changed consumers’ behaviors to its root, which leads to increasing bargaining power from customers.  

   

Source:
A Fresh Look at Industry and Market Analysis, Stanley F. Slater, Eric M.Olson, Indiana University Kelly School of Business
Pic source:
http://www.benzinga.com/market-update/10/08/416762/shorting-priceline-com-could-pay-off-pcln