NEWS COMMENTARY 1
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NEWS COMMENTARY 1

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NEWS COMMENTARY 1 NEWS COMMENTARY 1 Document Transcript

  • NEWS COMMENTARY 1 “Piceline will have to keep going where no retailer has gone before.” The vision of Priceline.com, quoted by William Shatner on their TV advertisements, is an accurate predictor of where Priceline.com wants to grow into the future. The success of any firm depends on how they can accurately determine their internal capabilities and their external threats. Once firms determine this information, they can use it to their advantage, or if not fully thought out, could be to their disadvantage. This paper will discuss the following: (1) summary of the article, (2) corporate vision, (3) product diversification. Summary Letting the people name their price is the name of the game for Priceline.com. They have found their niche within the industry of airline tickets, grocery products and gasoline prices. The article, written by Heather Green of the magazine Business Week, shares two basic strategic issues with readers. One is Priceline.com’s corporate vision of leading the firm into the future by entering the retail industry through the competitive advantage of the Internet. Number two is the product diversification of the firm from just letting customers name their price for airline tickets to letting them name their price for groceries and gasoline. The article also states that Priceline.com will be increasing their diversification into insurance, business-to-business services, telecommunications products and expansion into the global market starting in Japan and Europe. Corporate Vision A part of strategic leadership is the ability of the firm’s executive to articulate a vision which would energize the employees and becomes the corporate culture. The article never stated an official corporate vision of Priceline.com, however; the reader needs no help understanding the direction and goals which are predominant in the corporate culture of this firm. The vision of the corporation is important to the overall strategic positioning of the firm. A vision allows the employees, upper management and shareholders understand how they can help the firm progress and how the firm will best suit the growing needs of its customers. Priceline.com’s vision, brought about by its founder Jay Walker, moves the company forward capturing more and more customers fed-up with the lack of customer service exploitative prices in the traditional retail industry. Priceline.com’s philosophy is to leave more money in the hands of its customers which will help increase customer satisfaction and help maximize Priceline.com’s profitability. Product Diversification A good strategic philosophy is to be prepared to move into another product line called product diversification. Moving into another product line is a good way to increase a firm’s profitability and competitive advantage for the future. For example, Priceline.com began its success in the online retail business by offering airline tickets at a price which their customers would determine. In order for Priceline.com to increase its competitiveness, it has begun to diversify its product line to include groceries and gasoline. Companies in the traditional retail industry need to be aware of the new opportunity which online retail presents. If they neglect to advance into this area, they could see Priceline.com capture a majority of their market share. Conclusion We can learn from Priceline.com’s example of a corporate vision and product diversification. When a firm takes advantage of no entry barriers, as Priceline.com has,
  • the profits and success of the firm could be endless. Priceline.com needs to be aware of new entrants into the industry which could potentially takeover part of their market share. Priceline.com’s success is its strategy. NEWS COMMENTARY 2 “If you can’t beat’em, buy’em.” DaimlerChrysler, Ford and General Motors have determined that the only way to successfully compete with Korean small-car manufacturers, in the United States, is to buy them out. The main reasoning behind the buy-them-out strategy is to take advantage of the Korean automakers financial woes and to eliminate them as a threat in the inexpensive small-car market segment. This paper will discuss the following: (1) summary of the article, (2) market segmentation, (3) business- level strategy. Summary Automakers from Korea have found their way into the very competitive American car industry with hopes of increasing their competitive advantage. They have found their niche in the affordable small-car market segment selling their cars between $9,000 and $15,000. The article, written by Robyn Meredith of the magazine Forbes, shares two basic strategic issues with readers. One is the importance which the “big three” car manufacturers place on market segmentation and maintaining a competitive advantage in their market segments. Secondly the article illustrates two distinct generic business-level strategies adopted by the “big three” and the Korean automakers (Daewoo, Hyundai and Kia). Market Segmentation In order for a company to fulfill customers’ needs, they may want to consider focusing on specific market segments. Market segmentation is how a firm divides its customers as to their wants, needs and preferences. This type of analysis helps the company allocate resources for research and development, production and distribution. The article states that the Korean auto manufacturers focus their efforts on selling their cars cheaply. They cater to the customer who is not willing to spend more than $15,000 for a vehicle. GM and the others are also in that market segment, however; Korea can produce and sell their cars cheaper in the United States than can the Americans in their own country. Consequently; the Americans are aware of the growing market share which the Koreans have gained and have decided that the best way to compete is not to lower their prices but to buy the Korean companies. This would allow the “big three” to satisfy the needs of that market segment, regain their lost market share and sustain their competitive advantage. Business-level Strategy Firms can gain for themselves a competitive advantage by implementing a business strategy. Business-level strategies can help companies satisfy their customers’ needs and crush their competition. In the article, the “big three” pursue a business strategy called differentiation. This means they cater to several market segments or niches. Their customers purchase their products because of their uniqueness of quality, price or prestige. Production costs for the “big three” are high, however; their uniqueness allows them to charge a premium price which their customers are willing to pay. The
  • Koreans employ a cost-leadership strategy which allows them to produce cheaply and charge a low price. Conclusion If the “big three” really tried hard enough, could they have beaten the Koreans from gaining 14% of their small-car market share? To the Americans that market never really was profitable and they were not willing to spend “billions” to make it successful. It was easier to take advantage of the Koreans’ financial weaknesses and “buy’em.” However; the “big three” need to be aware that they will not always be able to buy out their competitors and they need to find successful ways of competing with new entrants. But if you have the money, why not just take the opportunity and “buy’em,” and let them work for you. NEWS COMMENTARY 3 Oshkosh Truck Company is finding their way through a difficult time for the truck manufacturing industry. While the competitors of Oshkosh are experiencing a slump in sales and growth, Oshkosh is strategically positioning themselves to increase their competitive advantage. The success of any firm depends on how they can accurately predict a downturn in the economy and strategically position themselves to weather out any possible financial struggles. Oshkosh is a good example of a firm which uses their instincts to strengthen their capabilities and increase their resources to conquer rivals and elevate sales. This paper will discuss the following: (1) summary of the article, (2) acquisitions, (3) business-level strategy. Summary Oshkosh truck company is focused on a new vision and are experiencing increased growth as their industry goes through a decline. The article, written by Mark Tatge of the magazine Forbes, shares two basic strategic issues with readers. First, the Oshkosh company shifted their focus away from U.S. government contracts, which made up 60% of sales, to more stable markets. Their main fear was that government cutbacks would hurt future expected sales. Lastly, the Oshkosh company was able to change its business strategy to respond to customers’ needs. Acquisitions Through acquisitions firms can diversify themselves and increase their competitive advantage over their rivals. When a firm acquires another company, they should choose a company which can increase their market share and decrease threats from competitors. Oshkosh is a great example of a firm which, by means of acquisition, was able to shift their main “bread and butter” sales to a more diversified group. This allowed them to receive revenue from several different product lines which would ensure a more stable cash-flow. For example, Oshkosh company acquired Pierce Manufacturing (fire truck manufacturer) and McNeilus Co. (concrete and garbage truck manufacturer). These two acquisitions would leave Oshkosh (military vehicle manufacturer) less vulnerable to government budget cuts. Now military contracts are only 19% of revenue, fire trucks are at 27% and concrete and garbage trucks make up the rest. Business-Level Strategy
  • As the industry began to decline, Oshkosh was able to grow because of their business-level strategy. They implemented the strategy of cost leadership and differentiation within their market. It would not be easy for a firm to utilize a cost leadership strategy and a differentiation strategy all at the same time. However; Oshkosh was able to do this through mass customization which is a combination of “high volume production with options.” Oshkosh effectively “streamlined” their factories which decreased the time it took to manufacture their trucks and they reduced their inventory costs. By decreasing operational costs and responding to customers’ needs, Oshkosh is able to perform the cost leadership function and differentiate themselves from their competition through mass customization. Conclusion Firms and managers can learn a lot from the Oshkosh company. This company was successful in many areas of strategic management. They were able to predict a possible downturn in the industry and implement a plan to diversify the proportion of their sales to other stable product markets. Through mass customization they responded to their customers and differentiated themselves from the competition. The implementation of a cost leadership and differentiation strategy is the major reason for the increased growth and a strong competitive advantage being experienced by Oshkosh Truck Company.