Session 04 of 06 (3 Hours)

@ PGPM

Dr. Easwar Krishna Iyer

Professor, Content Specialist, Psephologist
easwar@greatlakes.edu.in
 SENSING SESSION 02

Sustainable Competitive Advantage

A 4 Stage hunt for 1 a. I need to first sense how I can be competitive
b. For that I need to do an environmental scan
8TH APRIL / FRIDAY
3 HOURS
c. Weighted Porter Model – A numerical model

CREATING SESSION 03, 04

a. Treacy Wiersema Model [Three Axis Model]
2
20th April / WED
b. Porter Generics [Five Axis Model] 30th April / SAT
c. Porter Diamond [Four Determinant Model]
6 HOURS
d. Samsung Case

SUSTAINING SESSION 05

3 a. Ghemawat Framework [Tetra Threat]

b. Kaplan Framework [Three Risk Vectors]
1st May / SUN
3 HOURS
c. Bow Tie Framework [If Time Permits]

EVOLVING SESSION 06

4 a. Blue Ocean Strategy

b. Structuralism vs. Reconstructionism
7th May / SAT
3 HOURS
c. Digital Disruption Modelling
How do
COUNTRIES
gain a
COMPETITIVE
ADVANTAGE
 Twin Oil Shocks of the 70s
Oil shoots up from 3 $ / barrel to 30 $ / barrel
 Falling real wages
Reduces standard of living of the average American
 Sliding US labor productivity
Flight of manufacturing to Asian countries
 Slipping spot in World Trade
No longer the global hegemony of old

Not a Great Inheritance …

Two years into his first Presidential Term – in 1983 …
Ronald Reagan summoned Harvard’s Michael Porter, then a 35 year old Professor, to Oval Office ….
Over a cup of tea, the President threw an apparently innocuous question to Porter…
WHAT IS THE COMPETITIVE ADVANTAGE OF THE UNITED STATES OF AMERICA?
 ABSOLUTE ADVANTAGE [ADAM SMITH]
WHAT IS GOOD AND WHAT IS NOT GOOD

COMPARATIVE ADVANTAGE [DAVID RICARDO]

WHAT IS GOOD AND WHAT IS VERY GOOD

INHERITED FACTOR CONDITIONS [KARL MARX]

HOW DO YOU
EXPLAIN …..
In Porter Diamond, Rivalry has What Porter means by Demand
exactly the same meaning as is Home Demand in terms of:
Rivalry in 5 Forces Model:
3  Quantity
 But opposite implication !!
 Rivalry is good for National  Economies of Scale
Competitiveness  Quality
1  Sophisticated Buyers

Start with basic factors of
production. Then add:
 Cultivated Capabilities
4
 Knowledge Resources
 Cultural Adaptability
 Innovation Capability
 Time Zone Advantages
2
National advantage occurs when R&S
INDUSTRIES emerge around a key
industry (industry clusters)
 These supplier are themselves globally
competitive sub-industries
 Eventually they create a national
advantage for the Original Downstream
industry
1 MORE ON
FACTOR CONDITIONS

1. Human Resources [English speaking] – BPO & Philippines

2. Human Resources [Hands on skills] – Manufacturing & China

3. Knowledge Resources [Academic & Tacit] – IT & India
4. Capital Resources [Venture Capital Funds] – Dubai & Singapore

5. Time commonality [Same Time Zone] – UK and South Africa

6. Time difference [Opposite Time Zones] – India & USA

7. Cultural adaptability [Capability and willingness] – BPO & India

 2 MORE ON
DEMAND CONDITIONS

1. Finland & Sweden’s inhospitable terrain & wireless communication – NOKIA , Eriksson
2. American air traffic is between cities with fewer passengers / flight. But European air traffic is
between country capitals with heavier passenger load. So larger aircraft – Airbus
3. Japanese passion for recording events / travels – Camera
4. Germans have no speed limits. Their slogan is “Free speed for free people” – High-end Cars
5. British renowned for their gardens / gardening – Lawnmowers
6. Italy & its passion for fashion – High End Apparels & Accessories
 RELATED AND SUPPORTING INDUSTRIES EMERGE AS
3 MORE ON INDUSTRY CLUSTERS

RELATED & SUPPORTING THESE SUPPLIER INDUSTRIES ARE THEMSELVES

INDUSTRIES INTERNATIONALLY COMPETITIVE
SUB-INDUSTRIES

1. USA leads the world in Computer manufacturing because all key supplier industries are again US
[Semiconductor – Intel, AMD O/S – Microsoft, Apple Applications – Oracle Cloud Solutions – Amazon ]
2. Italy is successful in footwear because it is equally & independently strong in Leather Processing
3. Chennai - Detroit of India [Hyundai, Ford, Chrysler & Mahindra, Nissan] because it is equally strong as an auto ancillary vendor.
TVS group, Rane Group, Visteon, MRF etc are strong auto ancillary vendors – all operating mainly out of Chennai
4. Bangalore - IT / hub of India because of the emergence of support industries like HR head hunters, voice & accent training centers
5. Mumbai - Financial hub of India has got ancillary support in Merchant bankers, Lead Managers, Venture Capitalists etc.
 4 MORE ON
FIRM STRATEGY,
STRUCTURE & RIVALRY

1. BASF, Hoechst & Bayer – Germany & Chemical Industry

2. Roche, Ciba-Geigy & Sandoz – Swiss & Pharma Industry

3. Sony, Sanyo, Panasonic, Matsushita – Japan & Electronics Industry

4. Infosys, TCS, HCL, Satyam, Wipro, CTS, Hexaware, Polaris, Mindtree -

INDIA & IT INDUSTRY

To Complete the Model, Porter added 2 more variables that impact all 4 determinants
Chance & Government
A QUICK COMPARISON

Firm level Model Country level Model 1

Rivalry is a Threat Rivalry is a Requisite 2

Threat List Wish List 3

Little / No Interplay High Interplay 4

In the context of the Porter 5 Let us try to understand this Interplay

Forces Model, this lack of using an analogy between
Interplay is obvious Music & Porter Diamond
SELF-REINFORCING INTERPLAY OF ADVANTAGES

 Absolute Strength of one determinant not enough unless reinforced by others vectors
 This reinforcement ensures only Few Industries develop as Competitive for any Nation
 Simply put, no country in the world can be a net exporter of everything !!!

Now for the Analogy …

Mutual Reinforcement
 Q1
How did Korea build the “PORTER
DIAMOND” advantage in consumer
durables?
What is the role of Samsung in that growth
story?
 Firm Strategy, Chaebols
Economic Structure & Samsung, LG, Hyundai,
& Rivalry Daewoo etc
Strategic 4

1 2
Factor Demand
Conditions Conditions

3 Reverse
Related & PLC
Supporting
Reverse Industries
Engineering
 Q2
Where is the similarity between
Samsung’s Global Footprint
&
CKP’s Strategic Intent?
Reverse PLC
Unseen
Commodity Market
Products Strategic Intent
Junior Partner in Global JVs

Reverse Engineering Underestimated

Setting up of Subsidiaries Resourcefulness
Vertical Integration

Innovation
Unconventional
R&D investment
Entry Tactics
Global Acquisitions
Product / Market
Leadership
Do you see:
Q3
• Cost
• Differentiation
• Focus
• Preemption &
• Synergy

In the Samsung story?

100%
3. Growth Products
1979
14 years gap

20%
VCR, MWO 4. Introductory Products
1992
10 - 0 years gap
Semi Conductor technology
10%

1. Divested Products
1971
40 years gap
5%

2. Mature Products
1976 Monochrome TV
21 years gap
1%

Color TV

10.0 2.0 1.0 0.5 0.1

Started with COST
Ended with DIFFERENTIATION
FOCUSsed on - Commodity Markets, Vertical integration, Reverse Engg.
Reverse PLC has built in elements of PREMPTION

Synchronization of Multiple Strategic variables is SYNERGY

 Size Collaboration

Coordination

Delegation

Direction Red Tape

Creativity
Control

Autonomy

Leadership
Age

The progression of FIRMS over 5 phases

Can you read the evolution of free India’s Collaborative
Governance?
Political History in this framework? States Regional,
Single Party
Demand for regional National?
autonomy across India,
Revolution, triggered
in the Rajiv era Red tape,
corruption,
Emergency, trying to Revolution,
give a sense of new AAP/TMC?
direction, Revolution,
Indira back in power Coalition politics, no party
in 20 months will - from now on - will get
a clear majority in Delhi

Two-party system, Indira’s mature 2nd

innings and Rajiv’s ‘immature’ single innings
(The 2 assassinations were apolitical)

Formative decades, single party governance, ends with

the perceived necessity for a heavy handed leader
An EKI slide
04