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1
Creativity, innovation and competitive advantage:
Understanding successful companies in the global context
Creativity, innovation and competitive advantage:
Understanding successful companies in the global context
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Peter Drucker:Father of modern management
Peter Drucker:Father of modern management
Future is not to be predicted, but created.
Future is not to be predicted, but created.
What is more important than doing things right is doing the right thing
What is more important than doing things right is doing the right thing
Nature: AnimalsHomo sapien
Nature: AnimalsHomo sapien
World that existsWorld that exists
World that we have createdWorld that we have createdCulture: PeopleCulture: People
World of possibilitiesWorld of possibilitiesFuture:
Creative innovatorsFuture:
Creative innovators
Where do you live?Where do you live?
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Historical periodsHistorical periods1. Stone age2. Bronze age3. Iron age
8. Age of Creativity7. Information age6. Industrial age5. Age of Reason4. Feudal age
Where do you live?Where do you live?
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Bushmen community: Central Kalahari Botswana
Bushmen community: Central Kalahari Botswana
Pastoral nomadsNamtso Tibet in 2005Pastoral nomadsNamtso Tibet in 2005
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Mongolian yurtMongolian yurt
Inuit IglooInuit Igloo
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Nomadic Indian tribeNomadic Indian tribe
Agriculture: EgyptAgriculture: Egypt
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Korean VillageKorean Village
Farming GermanyFarming Germany
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Mechanization
Mass productionMass production
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Mass productionMass production
The Industrial RevolutionThe Industrial Revolution
Agricultural based economies and labor intensive crafts to economy based on mass production and use of energy and machines.
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Rise of cities, London 1850Rise of cities, London 1850
Mass production made many peasants redundant in agriculture and cottage industry (e.g., weaving, crafts). They came to cities to find a job in the newly-developed factories.
Industrial workersIndustrial workers
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Child laborer, US, 1908 Child laborer, US, 1908
Ulsan industrial complexUlsan industrial complex
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Modern citiesModern cities
Cyber spaceCyber space
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Part I
Management and competitive advantage
Part I
Management and competitive advantage
Nature: Stable and dynamicNature: Stable and dynamic
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Darwin’s Theory of EvolutionDarwin’s Theory of Evolutionv As many more individuals of each species can possibly survive, there is a struggle for existence.
v If it varies in any manner profitable under varying conditions to survive, it will thus be naturally selected.
v Selected variety will propagate its new and modified form.
Porter’s Competitive advantagePorter’s Competitive advantage
3. Focus: A company focus on a narrow segment and is highly competitive in the segment and holds a competitive advantage in the market niche (e.g., Coca Cola).
2. Differentiation: A company is able to provide better service, quality and satisfaction at the same price as its competitors and is considered as a market leader (e.g., Google).
1. Cost leadership: A company is able to provide the same product or service at a lower cost than its competitors (e.g., Walmart).
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Porter’s five forces analysisPorter’s five forces analysis
SizeSize
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Size:Burj Kalifa
Size:Burj Kalifa
Tallest man-made structure in the world,at 830 meters, 163 floors
Size: Airbus A380Size: Airbus A380
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SizeSize
Super tankerSuper tanker
Knock Nevis is the largest super-tanker: deadweight=565,000 metric tons, length=458 meters, and carry 4.1 million barrels of crude oil
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SizeSize
Oasis of the seas is the largest cruise ship: weight=100,000 metric tons, length=458 meters, and carries over 6,000 passengers
SpeedSpeed
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SpeedSpeed
Dell computersDell computers
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Supersonic ConcordeSupersonic Concorde
PowerPower
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PorschePorsche
PersistencePersistence
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Apple: Steve JobsApple: Steve Jobs
Steve JobsSteve Jobs
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Steve JobsSteve Jobs
Honorary doctorate: Stanford 2005Honorary doctorate: Stanford 2005
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OrganizationOrganization
Toyota organizationToyota organization
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StealthStealth
StealthStealth
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Stealth bomberStealth bomber
StealthStealth
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Teaming, shoaling, schoolingTeaming, shoaling, schooling
ChinatownChinatown
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DifferentiationDifferentiation
Differentiation: Nintendo WiiDifferentiation: Nintendo Wii
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Boeing DreamlinerBoeing Dreamliner
FocusFocus
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Focus: Coca-ColaFocus: Coca-Cola
MarketingMarketing
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MarketingMarketing
MarketingMarketing
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Children’s fun cultureChildren’s fun culture
Eat with your handsEat with your hands
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Fun place to eat
Fun place to eat
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Birthday partyBirthday party
McDonald’sMcDonald’s
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QualityQuality
Homo sapienHomo sapien
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Part II
Environmentalchanges
Part II
Environmentalchanges
Economic
Industry
Competitor
Demographic
Global
Sociocultural
Political
Technological
External environmentExternal environment
From Hitt et al. (2007)
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Crisis or opportunity?Crisis or opportunity?
Crisis: 위기 (危機)Crisis: 위기 (危機)
DespairDespair
InnovationInnovation
MotivatedMotivated
HelplessHelplessOpportunity기회 (機會) Opportunity기회 (機會)
How do describe the cup?How do describe the cup?
PessimistPessimistCup is half empty:Cup is half empty:
Cup is half full:Cup is half full:OptimistOptimist
Fill the cup!Fill the cup!Creative innovatorCreative innovator
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Giant meteorGiant meteor
DinosaursDinosaurs
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Volcanic eruptionVolcanic eruption
Environmental changesEnvironmental changes
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Ice age: 18,000-15,000 BCIce age: 18,000-15,000 BC
SizeSize
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Global recession 2008Global recession 2008
GM and GMAC: BankruptGM and GMAC: Bankrupt
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Opel/VauxhallOpel/Vauxhall
SaabSaab
European brandsEuropean brands
GM restructuringGM restructuring
HummerHummer
SaturnSaturn
PontiacPontiac
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AIG bankruptAIG bankrupt
Super tankerSuper tanker
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Exxon Valdez oil spillExxon Valdez oil spill
Cruise linerCruise liner
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Costa ConcordiaCosta Concordia
On Friday, January 13, 2012 accident resulted in the loss of 32 lives. The ship had 4,252 people.
PowerPower
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Recession proof? Luxury brandsRecession proof? Luxury brands
Forbes 400: World’s richest lost $300 billion in 2009, 23% in 12 months and 35% in Asia.
Forbes 400: World’s richest lost $300 billion in 2009, 23% in 12 months and 35% in Asia.
VW acquires PorscheVW acquires Porsche
VW buys remaining 50.1% Porsche Stake for $5.6 Billion
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US Oil priceUS Oil price
Ford F-150
Ford Expedition
Power: Gas guzzlers
Power: Gas guzzlers
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Toyota Highlander
Toyota truck
Power: Gas guzzlersPower: Gas guzzlers
SpeedSpeed
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Dell computersDell computers
2003 virus attack2003 virus attack
SpeedSpeed
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Domino PizzaDomino Pizza
Domino PizzaDomino Pizza
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Supersonic ConcordeSupersonic Concorde
CrashCrash
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DifferentiationDifferentiation
DifferentiationDifferentiation
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Bankrupt: Yohji Yamamoto Bankrupt: Yohji Yamamoto
BankruptBankrupt
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Bankrupt: Gian Franco Ferre
Bankrupt: Christian La CroixBankrupt: Christian La Croix
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Boeing Dreamliner groundedBoeing Dreamliner grounded
FocusFocus
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Coca Cola and obesityCoca Cola and obesity
Coca Cola and obesityCoca Cola and obesity
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StealthStealth
Stealth: Microsoft operating system
Stealth: Microsoft operating system
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Linux open systemLinux open system
Google: Linux open sourceGoogle: Linux open source
Samsung, LG, HTC, MotorolaSamsung, LG, HTC, Motorola
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ClusteringClustering
Clustering: Individual sacrificeClustering: Individual sacrifice
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New model: Shopping mallNew model: Shopping mall
Adaptation to new modelAdaptation to new model
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QualityQuality
QualityQuality
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QualityQuality
Lexus hybrid
Toyota Prius
Quality
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Toyota’s problemToyota’s problemRecalls 3.8 million cars, 4 deadRecalls 3.8 million cars, 4 dead
Organization: External threatOrganization: External threat
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Exchange rate:2007.10: $1 = 115.9¥2012.09: $1 = 77.5¥
Toyota Prius
2011 Tsunami2011 Tsunami
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Tsunami and FukushimaTsunami and Fukushima
Japan’s problem: FukushimaJapan’s problem: Fukushima
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Thailand flooding 2011Thailand flooding 2011
Rojana Industrial Park, AyutthayaRojana Industrial Park, Ayutthaya
Rojana Industrial Park, Ayutthaya, Thailand, Rojana Industrial Park, Ayutthaya, Thailand,
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Senkaku/Diaoyu IslandSenkaku/Diaoyu Island
Political conflict with ChinaPolitical conflict with China
Deliveries declined 22% in November from a year earlier to 63,800 vehicles, compared with the 49% drop in September and a 44% slump in October.
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Quality vs. low priceQuality vs. low price
Quality vs. low price: Macy’sQuality vs. low price: Macy’s
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Quality vs. low price: TGIFQuality vs. low price: TGIF
Quality vs. low price: StarbucksQuality vs. low price: Starbucks
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MarketingMarketing
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MarketingMarketing
But cannot fly…But cannot fly…
Health concernsHealth concerns
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Fast food nationFast food nation
Super size meSuper size me
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The world has changed. Our customers have changed. We have to change too.
James R. Cantaloupe, Chairmanand CEO, McDonald's, 2003
Posted first quarterly loss of $343.8 million in 2003
Premium mealsPremium meals
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McCafe: Challenge from Starbucks
Upgraded restaurants
Free WiFi
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Business environment
Business environment
External environmentExternal environment
v Threat is a condition in the general environment that may hinder a company’s effort to achive strategic competitiveness.
Obtaining credit and financial backing.
v Threat is a condition in the general environment that may hinder a company’s effort to achive strategic competitiveness.
Obtaining credit and financial backing.
v Opportunity is a condition in the general environment that, if exploited, helps a company achieve strategic competitiveness.
Green technologies: fuel cell, batteries, solar panels
v Opportunity is a condition in the general environment that, if exploited, helps a company achieve strategic competitiveness.
Green technologies: fuel cell, batteries, solar panels
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Economic
Industry
Competitor
Demographic
Global
Sociocultural
Political
Technological
ExternalenvironmentExternalenvironment
From Hitt et al. (2007)
External environment IExternal environment I
Ø Economic segment: Inflation ratesInterest ratesPersonal and business savings rateOil pricesGross domestic productTrade deficits or surplusesBudget deficits and surplusesInfrastructure
Ø Economic segment: Inflation ratesInterest ratesPersonal and business savings rateOil pricesGross domestic productTrade deficits or surplusesBudget deficits and surplusesInfrastructure
Ø Demographic segment: Population sizeEthnic mixAge structureIncome distributionGeographic distribution
Ø Demographic segment: Population sizeEthnic mixAge structureIncome distributionGeographic distribution
From Hitt et al. (2007)
77
External environment IIExternal environment II
Ø Technological segment: Product innovationsApplication of knowledgeR & D expenditure, government and privateNew communcation technololgies
Ø Technological segment: Product innovationsApplication of knowledgeR & D expenditure, government and privateNew communcation technololgies
Ø Political/legal segment: Antitrust lawsLabor lawsTaxation lawsEducation policiesDegulation philosophies
Ø Political/legal segment: Antitrust lawsLabor lawsTaxation lawsEducation policiesDegulation philosophies
From Hitt et al. (2007)
Global recession 2009Global recession 2009
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Exchange rate:2007.10: $1 = 115.9¥2011.12: $1 = 77.5¥58% increase!
Toyota Prius
Toyota’s problem: TsunamiToyota’s problem: Tsunami
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Bangkok Airport: November, 2008Bangkok Airport: November, 2008
In December 20, 1999, Korean government subsidized the purchase of a PC and spent $24 billion in the installation of broadband lines. From 2007, Korea has become #1 in internet use in the world with 80% use daily.
Korea: Broadband connectionKorea: Broadband connection
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China: High speed train networkChina: High speed train network
Porter’s five forces analysisPorter’s five forces analysis
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1. The threat of new entrants
Porter’s five forces analysisPorter’s five forces analysis
v Technology: Intel’s CPU
v Capital investment: Samsung, semiconductor industry
v Logistics and distribution: Walmart
v Cost advantage: ASUS Netbook
v Ability to compete with leaders: Hyundai Motors
v Brand recognition: Google Android
v Switching costs: LG appliances
v Response from the market leader: Apple vs. Samsung
v Government regulations: Northrop Grumman, aerospace and defense technology
v Barriers to entry: Patents, Pfizer’s Viagara
v Number of competitors: Car industry
Porter’s five forces analysisPorter’s five forces analysis2. Intensity of competitive rivalry
v Diversity of competitors: Food industry
v Economies of scale: McDonald’s
v Industry capacity/potential overcapacity: PC industry
v Informational complexity: Google’s search engines
v Fixed cost allocation: Semiconductor industry
v Advertising and marketing expenses: Beer industry
v Sustainable competitive advantage: Apple’s iPAD
v Exit barriers: UPS Parcel delivery service in the USA
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v Buyer volume: Walmart
Porter’s five forces analysisPorter’s five forces analysis
v Buyer switching costs: Loyalty program, SPQ, United
v Buyer price demands: Computer chips, semiconductor
v Buyer access to information: Internet price comparison
v Dependency on existing channels of distribution: Amazon
v Bargaining leverage: Purchasing automobile
v Availability of existing susbstite products: Generic drugs
v Differentiation: Nintendo Wii
3. Bargaining power of customers
v Supplier switching costs: Auto parts
Porter’s five forces analysisPorter’s five forces analysis
v Degree of differentiation of suppliers’ products: Camera for semiconductor industry
v Presence of substitute suppliers: Miscrosoft Windows
v Supplier concentration: OPEC
v Cost of providing the product: Semiconductor industry
v Commitment: Branding, McDonalds’s and Coca cola
4. Bargaining power of suppliers
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5. The threat of substitute products
Porter’s five forces analysisPorter’s five forces analysis
v Attractiveness of purchasing alternative product: iPhone
v Price advantage: Dunkin Donuts vs. Starbucks
v Buyer’s switching costs: Hyundai and US klunker’s
programv Perceived level of product differentiation: Nintento Wii
v Brand loyalty: Coca-cola, Louis Vitton