Wednesday, April 22, 2015

Fall of the Giant: the Case of Pantech

To a math and science education major, Bringing Science to the Art of Strategy’s scientific-method-based-approach in strategy development brought much pleasure. Its methodological insights would help turn strategy development process into a tangible, solid outcome as opposed to a flowery, abstract one. In particular, I was able to relate this reading to an example I closely follow in my own life: Pantech, a South Korean cell phone manufacturer.

·      From a 6-employee start up under a 29-year-old CEO to a top-7-handset-manufacturer-in-the-world, Pantech was a living legend in business venture up until early 2000’s. However, as the tides started turning against 2G phones with the emergence of smartphones, this one-time giant failed to strategize accordingly, generated huge losses, and eventually fell out of competition against SamSung and LG. I noticed how the steps laid out in “Bringing Science to the Art of Strategy” were exactly what Pantech failed to do. 

·      Pantech did not generate strategic possibilities. Given SamSung and LG’s brand power and massive capital as large conglomerates, it is true that Pantech was at a disadvantageous position. However, in the red ocean of mobile device industry, it stuck to one alternative of targeting the high-class premium smartphones while LG and SamSung diversified its product line. Pantech’s potential customer pool was small to begin with, and in the domestic setting, Apple’s iPhone and SamSung Galaxy series eventually came to dominate the premium cell phone market. Instead of over-stretching its R&D budget, Pantech should have gone for the low-cost, user-friendly smartphones with unique product design and features that Pantech was famous for in 2G cell phone market. Analyzing a single possibility of high-end smartphones surely hurt its financial records badly.
  • Pantech failed to identify barriers to success and perform design tests of each barrier condition. Pantech rushed into the smartphone market, and failure to test whether barrier conditions, such as pricing and human capital, would hold true or not meant it couldn’t keep up with the changing market trends both domestically and internationally.
  • Pantech maintained status quo when it expanded into overseas market in Japan and US. Without a careful assessment of market conditions and consumer tastes in Japan and US, Pantech brought the same product line from South Korea to the table. Of course, this did not go over well as few efforts to differentiate product design, features, and marketing were done for the obviously different customer pool and market demands. Perhaps they were trying to preserve “Pantech-ness” and build on global branding – but as writers of “Bringing Science to the Art of Strategy” warn, insisting on the status quo can sometimes lead to a decline.

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