MMVA ZG512 Manufacturing

Strategy
Rajiv Gupta
BITS Pilani
Live Lecture 10
 Recitation 10
• Module 1
– Topics Covered in Taped Lectures 13 and 14
• Module 2
– Discussion on Taped Lecture 13
• Module 3
– Discussion on Taped Lecture 14
• Module 4
– Brief Summary of Taped Lecture 15
• Module 5
– Brief Summary of Taped Lecture 16
• Module 6
– Next Recitation

2
 Recitation 10
• Begin Module 1
– Topics Covered in Taped Lectures 13 and 14

3
 Taped Lecture 13
• In Lecture 13 we discuss the concept of Strategic
Intent and contrast it with Traditional Strategy
• In Traditional Strategy, we typically tend to look at
the current competition and our current resources.
• It appears to be a snapshot in time and generally
does not take into account where the competition
may be headed, or what resources we may be able
to acquire or develop in the future.
• In this way, Traditional Strategy is limited in terms of
its long term view.
 Taped Lecture 13
• In Traditional Strategy we tend to be too consumed by
the current moves of the competition, including any
move to offshore or outsource, without considering what
may be the long term implications of such moves.
• Such myopic thinking has often led market leaders to
dismiss or ignore potential competition that is not yet on
their radar, such as the Japanese automakers being
ignored as a threat by the Big 3 US auto companies until
it was too late or Wal-Mart not being considered a threat
by K-Mart during its early years.
 Taped Lecture 13
• As opposed to this, Strategic Intent considers the kind of
capability and resources that a company can, or must,
develop over the long run to be able to assume a
leadership position in the market.
• This provides a long term goal for the entire organization.
• In Traditional Strategy we consider Strategic Fit based on
current resources. If the current resources are
insufficient, we trim the goals.
• However in Strategic Intent we try to leverage current
resources and work toward stretch goals that provide
direction.
 Taped Lecture 13
• Several differences between Strategic Intent and
Strategic Fit are discussed in the lecture.
• The main differences lie in the fact that typical Strategic
Fit is detailed and concerns with the present. Strategic
Intent is less specific and is not as much constrained by
current limitations as by the ability to create the future
the company wants.
• Strategic Intent usually begins with the desire to be the
market leader. This desire does not change over time. But
the specific means to achieve this goal may be modified
based on market conditions, technology, capability, etc.
 Taped Lecture 13
• It is the responsibility of management to develop the
goal, sell the idea to the rest of the company, provide
adequate training and skill building opportunities,
and be relentless about the pursuit of the goal with
appropriate measurements.
• An example of Komatsu’s Strategic Intent was
discussed in the lecture.
• We also discuss the topic of Competitive Innovation
where we talk about continually creating advantages
over the competition.
 Taped Lecture 13
• The goal of competitive innovation is not parity with
the competition, but superiority.
• Sometimes we may need to look for niche areas to
exploit, change the rules of the game, and form
creative collaborations to edge out competition.
 Taped Lecture 14
• In Lecture 14, we continue with the discussion on
Strategic Intent specifically talking about how and
why Strategic Intent can allow a company to build a
market leadership position over a period of time.
• Companies using Strategic Intent tend to develop
their capabilities while remaining off the competitive
radar. They tend to do so by either restricting their
product range or operating in a limited geography.
• The market leaders do not consider them as threats
until it is too late.
 Taped Lecture 14
• By that time the companies using Strategic Intent
have honed their capabilities which the incumbent
market leader cannot replicate quickly. The capability
cannot be purchased or hired in. It is an
organizational capability which the newcomer has
invested several years in developing.
• Usually the result is that the specific capability gives
the challenger an edge which cannot be overcome
and the challenger becomes the new market leader.
Examples of Wal-Mart etc. have been discussed.
 Taped Lecture 14
• Then we discuss the topic of Core Competence in Lecture
14.
• C.K. Prahlad and Gary Hamel have defined Core
Competence as "a harmonized combination of multiple
resources and skills that distinguish a firm in the
marketplace.“
• Core competencies must fulfill three criteria:
– Provide potential access to a wide variety of markets.
– Should make a significant contribution to the perceived
customer benefits of the end product.
– Be difficult to imitate by competitors.
 Taped Lecture 14
• A case is discussed in the lecture involving NEC and
GTE.
• We see how NEC, a relatively small company in the
early 1980s developed specific capabilities over the
next decade to topple GTE from the position of
market leadership.
• The specific Core Competencies that NEC chose to
develop included capabilities in telecommunication
and semiconductors.
 Taped Lecture 14
• With their existing capability in computers and the
newly acquired capabilities, NEC was able to get into
products as diverse as laptop computers, cell phones
and fax machines. GTE was reduced to being only a
telecommunications company.
• We then discuss the concept of Core Products. Core
Products are products that can be used by a
company in a number of different end products, and
which give the company an edge, e.g., Honda’s
engines.
 Taped Lecture 14
• It is also discussed that traditional the SBU structure
of corporations is not conducive to the development
of Core Competencies.
• Core Competencies should be usable over a range of
products that could be made by multiple SBUs. This
requires co-operation among the SBUs that needs to
be coordinated by the corporate head quarters.
 Recitation 10
• End of module 1

16
 Recitation 10
• Begin Module 2
– Discussion Based on Taped Lecture 13
 Recitation
• What do you think would be the advantages
of having a Strategic Intent for your
organization?
• Can you think of a Strategic Intent for your
company?
• Can you think of a Strategic Intent for yourself
 Recitation 10
• End of module 2

19
 Recitation 10
• Begin Module 3
– Discussion Based on Taped Lecture 14
 Recitation
• Would you say that your organization has a
core competence? What is it?
• Think of any company you are familiar with
that has a core competence. Discuss.
 Recitation 10
• End of module 3

22
 Recitation 10
• Begin Module 4
– Brief Summary of Taped Lecture 15

23
 Brief Summary of Lecture 15
• Taped Lectures 15 and 16 discuss the topic of
strategy in the context of global commerce
• Global expansion of commerce and trade has
increased significantly over the last several decades.
In India, the major growth took place since the early
1990s
• Global trade has several advantages as well as
disadvantages
• It allows companies to expand their markets and
their scale of operations goes up, driving down costs
 Brief Summary of Lecture 15
• At the same time consumers around the world have
access to more choice
• But despite the growth in global trade, the majority
of the business in a country or a region tends to be
local or regional
• Some of the reasons why companies go global are to
grow their markets, to become efficient, to gain
knowledge, to serve customers better, to reply to
competition, and to build a global brand
 Brief Summary of Lecture 15
• Growth and economies of scale are typical benefits
most recognize. However, in addition to these the
other reasons are also important
• When a company goes global, it can leverage the
special capability and knowledge of that part of the
world. Also, having a presence in a particular country
helps a company understand its customers better
• Sometimes companies go global to keep pace with
the competition. Also, a global brand tends to have a
wider market acceptance than a local brand.
 Brief Summary of Lecture 15
• In the past, a company used to be considered global
if it exported goods to other countries. Today there
are different aspects and levels of going global.
• Today there are companies which:
– Manufacture globally
– Source globally
– Have a global financial base
– Have a global mindset
 Brief Summary of Lecture 15
• Also global companies can be either
– Domestic or multi-domestic
– International or multi-national
– Global
• Domestic or multi-domestic companies tend to operate
either in one country or in multiple countries, but each
operation is autonomous.
• International or multi-national companies operate in
multiple countries, have customized products for each
market, and have co-ordination with the home office.
Information is shared.
 Brief Summary of Lecture 15
• Global companies tend to be present in practically all
countries in which demand for their product exists.
• They tend to have different parts of the value chain
located in different countries, therefore co-
ordination becomes much more complex than the
other types of companies.
• Global strategy requires two main questions to be
answered
– How the different activities will be configured
– How will the coordination among the activities take place
 Recitation 10
• End of module 4

30
 Recitation 10
• Begin Module 5
– Brief Summary of Taped Lecture 16

31
 Brief Summary of Lecture 16
• In Lecture 16, we continue with the discussion on global
strategy. We define the tasks required for configuring the
activities of an international or global company among
the various countries. We also discuss the issue
concerning the co-ordination of the activities.
• The issue in configuration is where to locate the
activities, and whether the activities should be
concentrated or dispersed
• The motivation for locating an activity in a certain
country or region may to gain a comparative advantage
or a competitive advantage
 Brief Summary of Lecture 16
• Comparative advantage comes from access to factors
such as low cost labor and raw materials
• Competitive advantage comes from environments for
innovation and productivity growth
• Configuration also involves determining the number
and concentration of activities. The greater the
number and dispersal of activities, the more difficult
is the co-ordination
 Brief Summary of Lecture 16
• The general trend in the global world is to have a
greater concentration of activities as opposed to
their dispersion
• A company should ideally disperse a specific activity
to obtain a particular benefit, but not disperse other
activities, e.g., the sales and service function needs
to be dispersed in all regions where the product is
sold
• Concentration of activities allow for efficiency and
ease of innovation
 Brief Summary of Lecture 16
• Coordination deals with sharing information across
dispersed activities and assigning responsibilities and
finding synergies across different locations
• Next we discuss the risks involved in globalization
• The risks a global company faces can be categorized as:
– Political risks
– Legal risks
– Financial risks
– Social and Cultural risks
 Brief Summary of Lecture 16
• Finally, we discuss the comparative and competitive
advantages of nations based on a book by Michael Porter
“The Competitive Advantage of Nations.”
• Comparative advantage of a nation arises from the
availability of low cost labor, abundant and cheap raw
materials, land, and other production factors or favorable
exchange rates
• Competitive advantage comes from an environment that
fosters better productivity and innovation
• Comparative advantages can be matched by other
countries, and are temporary at best
 Brief Summary of Lecture 16
• According to Michael Porter, the competitive
advantage of a nation comes from four areas
– Factor (Input) Conditions
– Context for Strategy and Rivalry
– Demand Conditions
– Related and Supporting Industries
 Recitation 10
• End of module 5

38
 Recitation 10
• Begin Module 6
– Next Recitation

39
 Next Recitation
We will not have class next week due to the mid term
make up exams. Our next live class will be 2 weeks from
today.
We will have a case study involving Walmart and
Amazon in our recitation next week. The links to
articles for the case and the discussion questions will
be posted in an Announcement
Questions?