FINAL CASE REPORT

Strategic Management

by

Lucia Veronica Denis Senwayo

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Q1. Why was it so difficult for Compaq to imitate the Direct Model of Dell

Computer?

Dell operated as a pioneer in the direct model approach, delivering individual customized

according to costumer specification. Selling direct to end costumer dell can keep a larger

slice of profit for itself, by experiencing historical sales record and anticipating costumer

demand. Additionally, Dell Applied Just-in –time, establishing close relationship with

suppliers, co-location close to them, and thus minimizing inventory cost.

Dell’s activity system diagram bellow describes the correlation between the activities

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On the other hand, Compaq sells through three distinct ways: 67% of its PCs through

44,000 distributors and resellers, 25% at retail, and 4% direct. Later, Compaq unveiled its

DirectPlus Program, intended to sell customized PCs directly to small and midsize

companies. Compaq target individual costumers and business companies.

While Compaq supplied machines based on orders from distributors, resellers, and

retailers and direct, Dell took orders directly from customers. Dell focused on large

companies (Businesses and government institutions accounted for 77% small office users

18%, and educational institutions 5% and single costumers less than 2% of Dell’s sales).

The table bellow summarizes the business model used by Dell and Compaq.

Dell Compaq

Distribution system Direct to end costumers Distributers, resellers and

direct model

Target costumer Largely Businesses and

government institutions

Largely individual and

small companies

Costumer support Hotline and on-site support Support services

Push/ pull approach Pull. Based on costumer

order

Push. Based on demand

forecast from retailers

Inventory Reduced inventory (low

cost)

High level inventory

To sum up, Compaq lied on imitating some features of Dell Business model, which leads

the company to loose focus. A combination of direct model with the use of

intermediary’s distributers is difficult to manage, as well as even using direct model the

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target segment were different. Dell has a unique activity system, where activities are

tightly linked and indeed to that the company established sustainable strategic position

rather than operational effectiveness. So, it was difficult for compact to imitate the whole

system.

Q.2 Assess the cross-border transferability of Google’s search engine business. What

should be its access form?

On Google’s statement mission aimed to organize world’s information and make it

universally accessible and useful, the company has established competitive advantage by

improving in search and advertising and establishment of strong corporate value. Because

search engine business is valuable and demanded worldwide, it would be transferable,

however cultural, political and legal factors might challenge Google’s ability to keep its

“Don't Evil” corporate value at cross-border.

Regarding to access form, it should be technology focus and firm based. Google

competitive advantage is its brand, strategic innovation and management capabilities, and

then as long as it can transfer its capabilities, Google can exploit foreign markets by

either by direct investment or licensing its technology for local company or establish joint

ventures with local companies. For example, on the point of view of Human Resources,

the ability of Google to transfer cross-border is high due low transnational cost needed,

but Google can either decide to exploit internal HR by outsourcing some services or

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licensing technology. So, Google’s search engine cross-border would transferable trough

explicit articulation.

Despite the transferability, as a result of Internet, the world has become flatter, thus

search business engine business should be able to cross borders and profitably easily.

However, cross-border search business might always be challenged by ethical issues,

authorities in some countries may have some hard rules regarding to Internet. They may

impose some restrictions the corruption of their nation’s youth and culture, restrict any

content that they judge as possibly threatening state security, disturbing social order, and

infringing on other’s legitimate rights. So, Google’s corporate value transferability might

be challenged and new versions of search might be necessary.

In conclusion, Google’s search business is somehow transferable.

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Q.3 What was the strategic intent behind the Organization 2005 initiative? What

VRIN resources did they want to create for what opportunities?

Organization 2005 was an aggressive restructuring program designed to development and

roll out of new products globally, and thus generating bolder innovations, boosting P&G

growth (sales and profit), expediting of management decision-making for the company's

global marketing initiatives and fixing the strategy-formulation and profit-creation

responsibilities on products rather than on regions. Basically, Organization 2005 strategy

intended several changes on P&G organizational culture, process and structure.

The need of cultural organizational changes results from P&G slow culture, conformist

and risk averse that has leaded to company’s losses, and a cultural revolution based on

stretch, innovation and speed would allow P&G to implement a global rollout of new

products. Complementary to organizational culture, changes in traditional systems and

processes that include performance-based component of compensation, extension of

stock option plan and budget system would result on flexible and integrated business

planning process. Finally, by changing the structure from the primary profit responsibility

of P&G four regional organizations to seven global business units responsible for product

development, manufacturing marketing, would eliminate bureaucracy and increase

accountability.

The table bellow describes P&G VRIN characteristics.

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Resource Value Rare Inimitability Non-Substitutability

Competitive advantage offered

Research and Development

Yes Yes P&G exploits technology worldwide.

Yes. Difficult to imitate. P&G combines global and local R&D teams

Yes Sustainable competitive Advantage

Brand reputation

Yes Yes. Unique brand awareness achieved through SK-II

Yes Yes In specific case of SK-II in Japan

Sustainable competitive Advantage

Human Resources

Yes No Difficult to imitate. Global HR combination

No Depends on P&G ability to keep HR structure

Horizontal integration

Yes. Enhance product portfolio

No Imitable. But might be difficult for competitors to succeed by non core business products

No Sustainable competitive advantages (in Japan)

Marketing Yes Yes. The use beauty counselors and celebrities.

No.But depends on competitors capital

No Sustainable in Japan

Organizational Culture

Yes No No stretch, innovation and speed can be imitate by competitors

No Might change as company age or changes on team management or international competitive environment

It can bring either short or long term competitive advantage

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