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How to Establish a B-to-B Brand With Oligopoly Strategy – A Study of Wintek Corporation
Hyley Huang
Wintek Corporation, Taiwan
and
Jen-Hung Huang
National Chiao Tung University, Taiwan
The 15th annual Conference on Pacific Basin Finance, Economics, Accounting and Management
Page 2
Introduction
Technology is borderless. Fueled by the 150 billion dollar market for personal computers and 100 billion dollar market for mobile phones, technology brands are becoming a new force in the world. The rise of the global economy and Internet over the past twenty years has made brands more influential than any time in history. It is undeniable that technology has had a major hand in the growth of the global society over the past twenty years. Amidst this wave of change, technology companies are now occupying a different market position than they have in the past. Oligopoly strategy encourages companies to throw off the chains of competition and shift their focus away from their competitors, By moving outside of the price cutting red ocean, companies enter high value added and high profit niche markets. Oligopoly strategy is the best strategy for building brands. From another perspective, successful brand strategy can also create oligopoly markets and realize the oligopoly strategy.
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※ B-to-B Mainly Offers Customer Competitiveness ※ From Oligopoly Strategy to B-to-B Brand
Technology and Scale Become Industry Benchmarks
Technology and Scale Become Industry Benchmarks
Maximize Consumer
Surplus
Maximize Consumer
Surplus
B-to-BOligopoly
Competition
B-to-BOligopoly
Competition
DevelopB-to-B
Oligopoly Markets
DevelopB-to-B
Oligopoly Markets
B-to-B BrandB-to-B Brand
A.B.C. StrategyA.B.C. Strategy
Wintek Oligopoly Strategy
Wintek Oligopoly Strategy
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How to Establish a B-to-B Brand
Technology and Scale are Industry Benchmarks:
A B-to-B company can share technology field with company brand by developing technology and scale to industry benchmark levels and this also brings brand value to the company.
For example, Intel usually comes to mind when thinking of CPUs. When one thinks of small to medium mobile phone display suppliers, one thinks of suppliers such as Epson, Samsung, Sharp and Wintek. Wintek Corporation is a leading company in the small to medium STN and CSTN mobile phone panel field. In fact, the name “Wintek” has become the representative brand in
the industry.
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How to Establish a B-to-B Brand
Maximize consumer surplus: • B-to-B oligopoly definition – Selected qualified suppliers of dominant
company.
• When the consumer surplus reaches the industry benchmark, the company easily becomes selected qualified supplier of dominant companies. Once the company becomes one of these few suppliers, the company can then develop B-to-B oligopoly markets and build a B-to-B brand.
Customer value
Sale price
Cost
Consumer Surplus
Profit
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LRAC1
LRAC2
D2
D1
a
c
h
b
d
e f
g
y
X
Demand
Long-range average cost curve
P 1
P 2
Q 1 Q 2 Quantity
Price
資料來源：藍海策略資料來源：藍海策略
Page 7
LRAC1
LRAC2
D2
D1
a
c
h
b
e f
g
y
X
Long-range average cost curve
P2
Q 1 Q 2 Quantity
Price
P1
Consumer surplus
d Supplier profit
資料來源：朱博湧整理資料來源：朱博湧整理
Demand
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LRAC2
P 1
P 2
Q 2
LRAC1
D2
D1
a
c
h
b
d
e f
g
y
X
Demand
Long-range average cost curve
Q 1Quantity
Pric
e
Consumer
surplus
Supplier profit
資料來源：朱博湧整理資料來源：朱博湧整理
Page 9
LRAC2
P 1
P 2
Q 2
LRAC1
D2
D1 a
c
h
b
d
e f
g
y
X Demand
Long-range average cost curve
Q 1 Quantity
Pric
e
D1 D2
LRAC1 LRAC2
P1 P2 Q1 Q2
Profit abcd efgh
Consumer surplus
Xab
yef
資料來源：朱博湧整理資料來源：朱博湧整理
Page 10
Wintek oligopoly Strategy
1.Establishing core competency through knowledge management
– For sales, technology, product, service, system, management, finance and assets.
Increase customer value, reduce cost
2.Core vertical integration
Increase customer value, reduce cost
3.Dominant products
Increase customer value, reduce cost
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Establishing core competency through knowledge management
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Using the strategic architecture process, companies can reconceptualize the marketplace and redirect future business development by determining what core competencies are needed to establish a blueprint for future development.
When the strategic architecture is put into place, all personnel in the organization clearly understand how various resources are allocated to create shared goals for everyone in the organization.
Strategic architecture processes allow the company to overcome the technical barriers in building or acquiring core competencies. The critical technology, which can be obtained through attracting talent, independent development, licensing or business alliances, is then integrated into a core competency that is capable of
creating value for the customer.
Strategic Architecture Concept
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Core competence and Business Strategy
Energizing the Whole Organization, Shared Mind Set, CompetencyAcquisition, Corporate Challenges, Individual and Team Motivation.
Creating NewCompetitive
Space
New BusinessDevelopment
Strategic Architecture
Core Competencies
Core Platforms
Core Products
Strategic Intent
CORE COMPETENCY MANAGEMENT
Aspiration Level of the Organization
Capacity to LeverageCorporate Resources Competing for the
Future
(Hamel & Prahalad 1989, Hamel & Prahalad 1990)
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Core Competency Business Concepts
Prahalad and Hamel core competency business thinking
Core competency of an organization is “organization-wide knowledge especially technology that organizes different product skills and integrates different trends.”
Core competency is comprised of the skills and knowledge from various departments in the organization. It is cross-functional work that involves personnel and functions from many departments and levels of the organization.
Companies should first develop core competencies and then expand the range of products (business units) that employ these core competencies.
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Five Characteristics of Core Competency Core competency is group learning in an organization.Core competency organizes different skills and
integrates related technology throughout the organization.
Core competency is communication, participation and dedication across department lines (organizational levels).
Core competency is not used up like a tangible asset. Core competency focuses on application and sharing or customer requirements.
Core competency acts as an adhesive between business units and a driving force for future new businesses and should be combined with business strategy.
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Knowledge management
-Knowledge spiral
(Nonaka, 1991, 1995)
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CC1
CC2
CCn
CSF
BCC
TK1
TK2
TKn
……
.
Tacit Knowledge
Knowledge Management
Company Capability
Critical Success Factor &
Business Core Competences
KM1
KM2
KMn
……
.CC
The Process of Business Core Competences
2.No SBU Barriers 3. BCC Formation1.KM
KM1
KM2
KMn
……
.
21 3
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Application of ESADI CC
CC1
CC2
CCn
CSF
BCC
Application of Competence
Enable- company- to
Succeed –And
competitor- Difficult- to Imitate CC
Enable- company- to
Succeed –And
competitor- Difficult- to Imitate CC
ESADI CC ：ESADI CC ：
SalesTechnology
ProductServiceSystem
ManagementFinanceAsset
SalesTechnology
ProductServiceSystem
ManagementFinanceAsset
Application of ESADI CC ：
Application of ESADI CC ：
Increase Customer
Value&
ReduceCost
Increase Customer
Value&
ReduceCost
ESADI CC/BCC Formation
Page 19
Core Vertical Integration
Page 20
ResistanceTouch PanelManufacture
ITO Sputtering on Film
AR Coating on Film
Hard Coating on Film
Digital
Analog
Cr Mask
ToolingManufacture
Screen Mask
APR Mask (PI coating)
Film MaskWintek’s LCM SolutionHi-FAS
LCM DrivingManufacture
COG
COF
TAB
COBMLA
IC Design(Sytronix)
Backlight moduleManufacture
Chemical Etching
Micro Lens
V-cut
EL
Single chip LED
Color Filter
Substrate Polish Tech.
TN
STN
CSTNITO Sputtering
Low Temp. ITO SputteringTR-CSTN
Inner Transflector SputteringOLED (RD)
Vertical Integration - Total Solution for Customers
Equipment MP
TFT
LCD Panel
Manufacture
Total solution for customers
Page 21
Dominant products, dominant strategy
Imbalance advantage
Page 22
Average market price
Average industry cost
80% of average industry cost
Dominant product cost 70%of average industry cost
Fixed cost
Variable cost V
ertical in
tegration
Ch
ina
prod
uct
ion
facilities
Pu
rchase of u
sed
equ
ipm
ent
Investm
ent
in
equ
ipm
ent
man
ufactu
rers
Page 23
Background Information – Vertical Integration
Beginning 1999
End 1999 Current
Purchase Purchase fromfrom
external external partiesparties
Sputtering
(ITO Coating)
MotherGlass
Cutting
Polishing
In-house In-house
$11.6
$ 6.28
$ 2.5
Savings from in-house 0.5mm (300mm*350mm) ITO glass production (in USD)
Note: Current conditions: Externally purchased ITO conductive glass costs US$7. Cost of self-manufactured ITO conductive glass is US$2.5.
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97.5 431.9 689.1 1,097.3 2,270.6 2,515.64,169.1
6,481.9 4,963.07,989
14,825
32,655
55,118
33,694
-
10,000.0
20,000.0
30,000.0
40,000.0
50,000.0
60,000.0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Hyley Huang named Preside
nt
Core vertical integration, development of dominant
products;
Established Dongguan back-end assembly plant in April and American subsidiary in
December
OLED division spun off to form
Windell Corporation;
Invest in Mactech, issued CB
Net Sales and Major Investment Milestone
1990
Company
established
Issued ECB,
issued GDR
Unit:$Million
Acquired TFT module
assembly technology and mass produced
CSTN
Signed foreign US$70
million, GDR issued in
Nov
3G TFT production line
purchased, India
subsidiary established
Strategic panning introduced ,
Establishment of core competency
H.K subsidiary founded in April
Introduction of knowledge
management; signed foreign s US$34 million
dollar loan
Europe subsidiary founded;
introduced COG
production line
Subsidiaries set up in Japan,
England, Germany,
STN/ITO line introduced
Korean subsidiar
y and United
Win (China) founded
Page 25
Conclusion
Wintek’s oligopoly strategy increases customer value, reduces cost, raises entry barriers of price and cost for other competitors, and has made Wintek into one of the selected qualified suppliers of dominant company.
Wintek continuously creates oligopoly strategy for an improved future has also made Wintek’s technology and scale into a benchmark of the industry which in
turn BUILDS WINTEK’S B-TO-B BRAND.
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The End
