Blog #1- Industry Dynamics Amidst Global Pandemic

Today offers a new perspective, a perspective that is filtered through COVID-19 tinted lenses. Words like "quarantine" and "social distancing" are heard daily and take new prevalence in our lives. Recent Google trends like "Who gets stimulus checks?" and "When will social distancing end?" paint a vivid picture of worry and sincere concern for our well-being (Google Trends). Companies that once thrived in the growing economy entering 2020 must now rely on trillion-dollar stimulus packages to persevere through the pandemic. Programs developed and enacted during this time are to aid in overcoming the economic downturn that the novel coronavirus has caused. COVID-19, to say the least, has been a disruptive event that puts pressure on different industries to adapt, overcome, and survive in the ever-changing external environment. I am not writing today to increase fears, but to offer evidence of resiliency and hope for our economy to come.

If we look in the past, this type of event has not been unheard of. The challenges that we face today may not be a replica of the past, but they do rhyme. The United States alone has experienced 47 recessions since 1785 in varying sizes and impact, "There have been as many as 47 recessions in the United States dating back to the Articles of Confederation…" ("List of recessions in the United States" 2020). All of which were caused by a variety of external factors from wars to pandemics, not unlike what we are currently facing. Yet, we have seen the overall growth of markets, urbanizations, globalization, and economic-growth experimentation that, as Mckinsey & Company experts describe as "The results of experimentation - will have dramatic implications for our world, for the business environment, and corporate performance." (Greenberg, Hirt, & Smit). Knowing the past, that the economy has had its ups and downs based on different domestic and global factors, each recession offered new challenges that were faced and conquered. Let us look back and find strength in the fact that humankind has faced these obstacles before, and we have overcome.

What Dobbs, Manyika, & Woetzel illustrate throughout their 2015 article, "The Four global forces breaking all the tends" still holds. Two of the four global forces discussed, Accelerating Technological Change and Greater Global Connections, offer specific insight even today. With the COVID-19 lockdown taking effect, companies are scrambling to make the changes necessary to shift to full remote teleworking, schools are offering virtual classrooms, and different learning platforms are providing their resources for free. The overall virtual experience of learning, working, and entertaining has been seen at full strength. Binge-watching on your favorite streaming services, utilization of platforms like Uber Eats, Postmates, and GrubHub are all seeing a spike in demand.  This quick shift to online sources was results of the Greater Global Connection, where the authors describe trends either "Breaking down, breaking up, or simply break up." (Dobbs, Manyika, & Woetzel). Today, we are seeing how companies are handling a black swan event such as this and seeing which trends are "breaking down, breaking up, or simply just breaking." Overall, one may look at the current situation with anguish and despair, but let me offer hope. This time may be turbulent, but if we can learn from the past, we can genuinely believe that within it lies opportunities never seen. Industry leaders have adapted before and will do so again. So until next time, stay safe and stay healthy.

References

 "Coronavirus Search Trends." Google Trends, Google, trends.google.com/trends/story/US_cu_4Rjdh3ABAABMHM_en.

Dobbs, Richard et al. "The Four Global Forces Breaking All the Trends." McKinsey & Company, www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-four-global-forces-breaking-all-the-trends.

Greenberg, Ezra, et al. "The Global Forces Inspiring a New Narrative of Progress." McKinsey & Company, www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/the-global-forces-inspiring-a-new-narrative-of-progress.

"List of Recessions in the United States." Wikipedia, Wikimedia Foundation, 31 Mar. 2020, en.wikipedia.org/wiki/List_of_recessions_in_the_United_States.

Blog #1 - Strategic Planning and Evaluation

The four articles all talked about some common things about strategic planning: vision, adaption, and fast growth. 
Adapting the industry trend and growing fast are especially emphasized by the article “The Strategic Yardstick You Can’t Afford to Ignore”. They are key strategies for companies to move to the upper class or keep their position.
But the word “vision” has two different directions of definition in those articles. In “Your Strategy Needs a Strategy”, “vision” is presented as a “visionary style” that is about knowing and predicting the market trend. Here, vision is more of a clear plan and goal. It’s not suitable for those unpredictable industries. While in “Building Your Company’s Vision”, “vision” is the long-term audacious goal of the company. It’s not that relevant to the outside market. It’s about the companies themselves.
Two kinds of strategy are also explained by these four articles. One is the strategy for company operation, such as core ideology, envisioned future, the process of strategic planning, etc. Another is the strategy for the market, such as market plan and goal. The difference between different industry strategists is also very impressive. The strategist of the oil industry may fail in the software industry due to the distinct predictability of the two industries.
The UPS example in “Your Strategy” reflects the survey results in “The Strategic Yardstick”. UPS realized the vision of e-commerce and quickly adjusted its strategy to capture the trend. It made an ambitious investment in integrating its package service with providers and expanding its global delivery capacity. Those actions meet the implications summarized by the survey results. UPS rid the “favorable industry trend”, made a huge shift and successfully moved to a higher class – having 60% e-commerce delivery market share.
Those methods can be not only applied to the business world but also policymaking. The environment of policymaking includes so many factors that are very unpredictable. It requires the policymakers to analyze certain issues or trends and design relevant policies timely.  Policies are not fixed. As the authors of “Your Strategy” said: “…regularly reviewing the accuracy of your forecasts...” Policies also need to be regularly reviewed and adjusted regarding the fast-changing environment. Take China’s One-Child Policy as an example. Since the date it came out, it has been changing and editing exemptions till today based on the development of society. Due to the current demographic crisis caused by it, this birth-control policy may even be completely abolished in the close future. Even though it keeps changing, it still doesn’t “ride the trend”. If policymakers could realize the potential problems caused by this policy earlier, they would have enough time to make a shift and correct the demographic structure.
The ability to make a prediction, embrace changes, and quickly adapt the trend is key to both companies and governments.

Blog #1: The Strategic Environment of Federal Consulting

While reading Michael Porter’s The Five Competitive Forces that Shape Strategy, I began reflecting on my former industry, federal consulting, through the prism of Porter’s 5 forces. Having worked at multiple firms performing both client-facing work and internal work – such as developing strategic initiatives, authoring new business proposals, and managing business operations – my perspective on the industry is well-rounded.

Porter’s 5 forces are a powerful means of assessing an industry’s trends, boundaries, and profitability. The 5 forces are rivalry among existing competitors, the bargaining power of buyers, the bargaining power of suppliers, the threat of new entrants, and the threat of substitute products or services. I will touch upon each to elucidate the strategic environment of federal consulting.

Rivals. Porter holds that rivalry intensity and basis of competition determine how rivalries among existing competitors impact industry profitability. With regards to rivalry, there are numerous consultancies (both large and small) that compete for contracts. However, the industry continues to grow (especially in digital and tech consulting). Exit barriers are not high and firms sell unproductive LOBs (as exemplified by PwC’s 2018 sale of its public sector practice). Firms compete on price, but this is not the top evaluative factor for contract awards, which is best value. This allows differentiated firms to command lucrative margins.

Buyers. Porter posits that buyers’ ability to lower industry profitability depends on two factors: buyer power and price sensitivity. Consultancies provide differentiated service packages, and buyers face high switching costs due to loss of service between the outgoing consulting team “ramping down” and the incoming teams “ramping up”. Federal procurement officers are not cash-strapped and have a limited ability to “shop around” after an RFP is released. Furthermore, the quality of consulting services heavily impacts the federal buyer's organization.

Suppliers. Porter argues that as powerful suppliers capture more value for themselves, industry profitability falls. Federal consulting involves selling human capital and relies on few external suppliers. Exceptions include specialized technical roles that a consultancy must source through an independent subcontractor. However, if that supplier demands an exorbitant fee, competitive consultancies simply bring the required talent in-house.

New entrants. Porter argues that if new entrants can easily join the industry, profitability declines. Several of Porter’s new entrant barriers apply to federal consulting: switching costs (described above), incumbency advantages in trust / brand-image, supply-side economies of scale, and government policy (new firms must win contract vehicle awards before competing for actual contracts). However, newcomers face little retaliation and require low start-up costs. As a result, there are a plethora of small consultancies that either provide lower quality service at lower cost, or specialized services.

Substitutes. Porter defines a substitute as something that “performs the same of similar function as an industry’s product by a different means.” The human capital provided to the federal government by consultancies is difficult to replicate. Federal clients purposefully outsource for human capital because it frees them from needing to provide robust, internal training programs. As such, this substitute is unattractive.

Blog #1 - Future of Manufacturing Strategy

Throughout the past 250+ years, manufacturing centers have shifted geographically in accordance with labor rates and access to technology.  The industrial revolution began in England in the 18^th century, then became more widely adopted in the United States in the late 18^th and throughout the 19^th century.  This stayed the case until after World War II, in which new players started emerging, namely Japan and Korea.  With the advance of technology adoption and the globalization of large countries like China and India, we have now seen rapid shifts of manufacturing centers across the globe.  During the late 1980s and early 1990s, manufacturing first shifted to Mexico.  Shortly thereafter saw migration to China and Southeast Asia.  However, as those countries prosper from this influx of job opportunities and rapid economic growth, standard of living increases force manufacturing to find other cost-effective locations.  Currently, Africa is seeing significant growth as the newest center for manufacturing. 

The effect we’re seeing with manufacturing can be explained through several of the factors explained in The Four Global Forces Breaking All the Trends (Dobbs, et al) and The Global Forces Inspiring a New Narrative of Progress (Greenberg, et al).  The rate of changing the location of manufacturing can be compared with the rate of change of technology.  As technology continues to improve exponentially, so does the rate of adoption of that technology.  Furthermore, with access to technology comes the opportunity to use that technology to advance yourself and your local economy.  Technology ultimately helps to more quickly establish the middle class in a previously underdeveloped country.  The rate of change of technology also proliferates the greater global connections that a company or country can make.  It is no longer inconceivable to manufacture goods on the other side of the world from your primary market.

However, Greenberg, Hirt, and Smit make a valid counter-point:  Governmental other trend factors are attempting to stymie trade across geographical locations.  Brexit and USMCA showcase these attempts to stimulate local economies over that of the global demand. 

The back-lash to strategy is considerable with this trend.  In the past, if I were building a new plant, I could count on at least a few decades of production to maximize my ROIC.  However, with locations shifting at an ever-increasing rate, I can no longer be sure of my success.  This is a predominant reason for the rise of contract manufacturers, especially for new companies.  But mature companies may have a tough decision to make – whether to keep an existing plant open or to close it in favor of economics.  In my previous role with VF Corporation, current employees (not much older than myself) have seen factories in the US close, the opening of new ones in Mexico, supplementing production in Asia, and now the Mexico plants are closing in favor of contract manufacturers in Bangladesh and Egypt.  Future strategists will need to be exceptionally aware of economic and political trends when deciding where to manufacture and how much to invest in physical capital.