Week 10 - Corporate-Level Strategy

3M is a old company with new ideas in mind. When most of old guys like 3M tend to keep the old wisdom "If there is nothing broken, don't try to fix it", 3M encourages all employees to "fix" the "unbroken". Everyone is company is allowed to spend 15% of time to do whatever he/she chooses to do w/o approval from manager. Similar to Google's 20% free time. Beside this free time, 3M built new IT system which allow everyone to refer to others innovation to create new "usage" or enhance it. Our daily office helper, Post-It note is created not by purpose but by employee's idea. Keep the innovation in mind and really take action on it keeps 3M leading in several industries.

Diversification and de-diversification are opposite and both right direction. Some companies fly high when one of them. Intel and AMD have been fighting each other for long time. In late 90s, Intel decided to get into high speed communication business with the steps of acquisition. These acquisition made Intel to be 4th largest communication company in the world. However a new market plus a bad timing hit Intel badly and made Intel to abandon the market in 2004. This failure shows if a company diversify its business, there is a great challenge and unknown risk in front.

Compared to Intel's diversification, Tyco International has a different and refined implementation. Tyco only do friendly acquisition and carefully review candidate's financial records. Tyco only acquires companies have potential to grow and willing to be acquired. These strategy makes acquisition to be a plus to it. Another important principle is Tyco only acquires the companies which help to "glue" its current business. These principle together helps Tyco grows strongly.

Week 9 - Corporate-Level Strategy

When traditional companies operate from R&D->Production->Marketing&Sales->Customer Service. There is another trend to outsource some parts to outsiders. By outsourcing, companies can focus on their "core" components. For example, Cisco outsources "Production" to outsiders then it can focus on R&D, marketing&sales and customer support. With this model, Cisco has proven to be a great company for years. But the dot-com crash shows its drawbacks. The biggest problem is Cisco's original model works normally on growing market. When its suppliers compete each other and overproduction. Inventory disaster comes. This is fixed by a new production procedure by introduction of new central database which every supplier can check and know how much they can provide and to reduce the over-inventory problem. This is a $2.2 billion dollar lesson.

For long history, Chrysler has been working with suppliers w/o long term commitment and with minimal trust relationship. Sine earty 1990s, Chrysler adopted a new relationship with suppliers by bringing them into the early stage of car design. Encourage suppliers to provide any ideas which can improve the production by providing them a long-term contract. With this kind vertical cooperation relationship, both Chrysler and suppliers benefit. For Chrysler, with the great ideas from suppliers, its new car design time dropped from 234 weeks to 160 weeks. That is a more than 20% cost saving.

In computer manufacture world, HP, Dell are competing for many years. When in PC itself, Dell outcomes HP. But in printer world, HP wins. ex-CEO of HP, Fiorina lead the merge deal between HP and Compaq to try to save cost to provide cheaper computers to compete with Dell. HP also wants to setup a new battle field to fight with IBM on consultant business. At the end, HP can not solid win the battle. And HP also fail to fight with IBM on business consulting business.

Week 8 - Strategy in the Global Environment

When a business runs well or bad, company soon or later will consider entering global market for either even more profit or a chance to reborn. The biggest challenge of global business is to face different "environment", eg. different culture, different law. When Procter&Gamble faced the point to make changes, they decide to simplify the duplicated structures and form 7 self-contained global business units. Compared to previous redundant structures, this saves them up to $800 millions. At same time, their competitors still struggles with the high operation costs.

Wal-Mart has been very successful retailing in USA for decades. Even with its experience, it made several mistakes at first when tried to expand to global market. Different demands for products. Different transportation system and different partners. That all made great challenge to this retailing giant. With the modem low or no border trading environment, everyone needs to think about its position in industry. If it will face international challenge, it is better starting earlier and prepared.

Compared to Wal-Mart's global approach, Starbucks adopts a different and less painful way to enter global market. Starbucks uses joint ventures with foreign local companies to expand. With the initial success in Japan. Starbucks starts the global expansion with same formula. Local companies tend to know and adopt the difference between Starbucks and local culture. In Taiwan, Tong-Yi is the company which own thousands of 7-11 stores, therefore Tong-Yi has great face-to-face experience with local costumers and again Tong-Yi does a great job to make Starbucks adopts to local culture successfully when keep original spirit.

Week 7 - Strategy in High-Tech Industries

The biggest 2 groups of smart phone now are Apple's iPhone and Google alliance's Android phones. When people argue about who will win the market eventually. My opinion is both will survive. Android phones will occupy major markets. However none of Android phone provider will beat Apple alone. Apple's iPhone has its own advantage over android phones, better user experience. When all smartphones can make call and send text message/emails. iPhone's design from hardware itself like style, size, screen quality to software like more and better secure apps. At a competitive price, iPhone can keep grow strong in the future. Samsung or HTC both make great Android phones. However they compete each other instead of with Apple.

It is hard to believe if anyone never heard the name "Dolby" before. From old cassette to latest high-end audio amplifier. "Dolby" means "great pure sound". When Dolby had the chance to develop and sell its own brand of high-end audio system. They decide to stay on licensing model. This is a smart step to take especially they are relative a small company. Foxconn is a similar case. Foxconn focuses on manufacture even they know all the how-to. As long as they don't try to step into selling their own brand decives. Customers feel comfortable to outsource to them. Google mainly focuses on android OS platform development even though they can spend lots of money to sell its phones. Away from the highly competition market and focus on new technology development makes these company successful.

The biggest 3 game player manufactures in the world, Microsoft, Sony and Nintendo all doing business with a "razor-and-razor-blades" strategy. The reason is if anyone tries to raise the console price and others don't follow. Consumers will simply buy from others. So they have to lower the console price to a price which can convince consumers to buy. If all 3 companies together sell consoles with higher price, consumers may simply play PC-based games or governments will sue all 3 for monopoly. Similar situation in cell phone carriers, consumers normally won't spend over $200 to get a fancy new phone. So phone manufactures need to use a long-term contract and share the profit with carriers to make the profit.

Week 6 - Business-Level Strategy and the Industry Environment

After review of company internal strength, it is time to look outside. There are several ways a company can grow its size. The first one is 'chaining' like Wal-Mart or In-n-Out burger. The second way is 'franching', the difference between chaining and franching is the owership, ownership motivates franchisees to grow their business. McDonald is the leadership of franchise. The third way is 'horizontal merge', Dillard's is an example of this. Oracle merges Sun Micro system to grow its territory into server business too. For most of smaller business, using Internet and emergying information technology gives them the great opportunity to grow business.

Prodigy fell to hell with a burn of $1.2 billion on the venture. Prodigy was running great for the first years until AOL joining the competition. There are several minor different services between them which eventually let Prodigy down. 1. charged emails 2. no chatroom 3. out-dated user interface. All 3 factors pushed customers to AOL's side.

Vacuum tube business reached its peak at 1950s and keep fading. It is hard to believe a company named "Richardson Electric" not only survives but also makes margin profit at 35 to 40 percents. What is the secret? Richardson is the biggest supplier of vacuum tubes now and big customers like US goverment and GM still operate some old machines which need replacement of vacuum tubes. Once Richardson basically monopoly the market, it is so profitable and no competitors. They shows any kind of business could make good earning.

Week 5 - Building competitive advantage through business-level strategy

Walmart is famous for being a cost-leadership company for years. When a new Walmart store entering a new town, several local stores face closing down business in the next 1 to 2 years. However some stores still survive Walmart's low price competition when some won't. There must be some difference between the survivors and victims. One major difference is "focus". Think about a local toy shop which focuses the business on teenagers's collections with pretty much complete choices in the store. Even its price is same or a little bit higher than Walmart, local toy store will win by variety choices which Walmart is impossible to beat.

Samsung's business model in 1990s was to wait for Japanese new products reveal then copy the design and features with a lower selling price. making good profit because of low design fee. New chairman, Lee Kun Hee decided to change Samsung's strategy to become a new electronic device leader instead of a copier. He put lots of money on research and development when closing down low-profit devisions. With these activities, in years, Samsung becomes a world leading new electronic manufacture like Sony and Panasonic, the used-to-be-good imitating business now is gone. If Samsung stayed at same strategy without change, it would facing horrible challenge from China today.

When luxury car makers like BMW and Mercedes focus on differentiation, Toyota try hard to market on both cost-leadership and differentiation market. With Lexus brand, Toyota can market on focused differentiation strategy. With Scion brand, Toyota can market on younger buyers and Toyota brand on average buyers.

Week 4 - Building Competitive Advantage Through Functional-Level Strategy

Experience Curve refers to a systematic way to lower the unit cost by higher volume of production. In real life example, like buying bigger package of stuff at Costco and pays less. Of couse, once we buy too much from Costco at a time, we need to find extra space to store goods and that will cost extra. So there is a sweet spot with best unit cost and volume. By pursuing the best spot at experience curve, TI proved successful growth at 1970s. However once competitors adopt new feature strategy, they can fight with TI at different battle field and TI failed to fight back well. Toyota's Lean Production System proves a small production could beat traditional big production system like Ford using.

Six-Sigma is a program to improve quality and efficiency adopted by Motorola, GE and others. When most companies are willing to take the higher chances of defect with lower cost. GE is willing to spend more on Six-Sigma quality review to find out the problem and fix it. The result is 20-30% cost more in the front and 300% save in longer term in GE's CT scanner, Lightspeed.

American Car makers are suffering from loss of market shares for many years. There are several issues there, longer development time, inflexible working hour, and others.7 years compared to Japanese cars' 5 years, American cars are less using common parts, platforms and design between 2 generation of cars. Honda makes Oddessy and Acura's MDX with same plaform and parts which can push new models to markets quicker and less production cost which in turn push margin higher. Now American car makers are also doing same approach. Less product brands, less product lines, more share-platform cars and that make a shorter development time and less part cost. American cars are now fighting back to Japanese and Korean's.