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.

Week 3 - Internal Analysis

Internal Analyis is to find out company's strength and weakness to be an unique in industry. One good example is Walt Disney Company. During 1980s, new appointed CEO, Michael Eisner fully used WDC's recource like re-releasing old movies, shows, animations. He also fully used their capabilities to make new hits like Little Mermaid, Beauty and the Beast. By mixing both strength WDC has, WDC built new strategy to partner with Pixar to release Toy Story and Monster Inc. Those all made WDC successfully again.

Value Creation and Pricing Options is an interesting tool to help company decide their product's price and evaluation. "U" is utility to consumer. "P" is the price and "C" is the cost. When we compare GM and Toyota, we can find out why Toyota making more money. Due to better quality and design, Toyota cars are more welcome and consumers are willing to pay higher price. That means higher "U". In the same time, Toyota's lean production system help to reduce the cost "C". Toyota's profit, "P"-"C" is higher than GM's if "U"-"P" remains same on both companies.

ROIC is used to compare how efficient invested money does. Walmart does better than Target in ROIC. When we compare their individual items. Walmart has a higher number on COGS/Sales. That means Walmart either prices products lower OR they paid higher on products. Walmart actually priced everything lower than Target does. Everything good we heard about Walmart like lower location cost, efficient inventory, lower price, low administration cost all can be seen on ROIC diagram. It is a great tool to compare 2 companies and find out their uniqueness.