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Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
Growth Strategies: Internal Environment - Sources for Growth
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Growth Strategies: Internal Environment - Sources for Growth

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This is the 4th part of the undergraduate course in Growth Strategies: Internal Environment - Sources for Growth. Read by Pavel Luksha

This is the 4th part of the undergraduate course in Growth Strategies: Internal Environment - Sources for Growth. Read by Pavel Luksha

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  • 1. GROWTH STRATEGIES Internal Environment: Sources for Growth Pavel Olegovich Luksha [email_address]
  • 2. Four criteria of sustainable competitive advantage: resource & capabilities
    • Valuable: help the firm to exploit opportunities or neutralize threats in its external environment
    • Rare: possessed by few, if any, competitors
    • Costly-to-imitate: cannot be easily developed by other firms
    • Non-substitutable: don’t have strategic equivalents
  • 3. Leveraging on core competencies
    • Firms achieve strategic competitiveness when their unique core competencies are effectively acquired, bundled and leveraged to take advantage of opportunities in the external environment
    • Over time, any firm’s value-creating strategy can be copied by its competitors, THUS need for sustaining current core competencies while simultaneously developing new ones
  • 4. Strategic flexibility: Panasonic
    • Modular production systems give fast switch between assembled models and swift implementation of new products
    • JIT: cluster of synchronized robots at Saga plant - time to finishing gadgets reduced from 2.5 days to 40 minutes
    • Steady growth to 91 Bln USD in 2008, profit to 4.1 Bln USD
    Range of Panasonic products, including digital TV, camera and phone
  • 5. Creating value: Lego
    • Focus on quality: elements with tolerance of 2 microns
    • Cost-cutting: manufacturing outsourced to cheaper locales like the Czech Republic and Singapore
    • Faster development cycles: development time for new toys has been sliced in half (through use of parallel 3D modeling)
    • ‘ Hot’ theme sets: SpongeBob, Harry Potter, Indiana Jones etc.
  • 6. Resources and core competencies
    • Compared to tangible resources, intangible resources are a superior and more potent source of core competencies
    • Intangible resources are less visible and more difficult for competitors to understand, imitate or duplicate
    • The more intangible a resource is, the more sustainable will be the competitive advantage that is based on it
  • 7. Capabilities
    • Capabilities: the firm’s capacity to deploy resources that have been purposely integrated to achieve a desired end state
    • Emerge over time through complex interaction among tangible and intangible resources
    • Based on developing, carrying and exchanging knowledge and unique skills grounded in organizational practice
  • 8. The internal environment: Caterpillar’s competitive advantage
    • Resources :
      • modernized factories with new robots and automated tools (109 worldwide)
      • a global distribution network to sell and service Cat’s equipment (220 dealers)
      • R&D facilities
    • Capabilities : R&D, production, distribution, branding
    • Core competencies : building innovative machinery and trucks for construction, mining, forestry etc.
    Cat’s mining truck
  • 9. Capabilities: Vopak
    • Created in 1999 as the merger of two oldest Dutch companies in shipment sector (Van Ommeren & Pakhoed), focused on chemical shipment since 1980s
    • Sold lowprofit divisions ( transport and distribution of chemicals )
    • Focused on port storage and loading of chemicals and oil products
    • Grew 15-17% p.a. in 2003-7 up to 850 Mil.Euro in 2007, high profitability (180 Mil. Euro in 2007)
    Vopak storage Singapore
  • 10. Capabilities: Avon’s direct marketing
    • Receives 70% of its sales from overseas (fastest growing are China and Russia)
    • Relies on ‘Avon ladies’ MLM along with shop sales
    • Introduced 1,000 new skin-care and makeup products (lab of over 300 researchers)
    • Reached 10 Bil USD in sales by 2007
    Avon makeup line
  • 11. Core competencies: Starbucks
    • Plans to have 40K stores worldwide by 2012 (10K more than McDonald’s)
    • Leverages underperforming shop closing in developed countries by continuing expansion into emerging markets
    • Long-term contracts with selected coffee and cocoa producer
    • CoffeeMaster program (since 2004) to improve personnel skills in coffee brewing
    Starbucks coffee shop
  • 12. Novozymes: leader in enzymes
    • Division of Novo Nordisk that has become independent in 2002. Focused on medical and technical enzyme synthesis.
    • Expansion in non-medical enzymes :
      • detergents , lubricants etc.
      • food & fodder enzymes
    • Leveraging R&D competencies :
      • customized enzyme production
      • reduce development cycle from five to two years
    • Leader in global enzyme market (40%), dominant in niche markets ( e.g. enzymes for breweries )
    Novozymes lab, Denmark
  • 13. Growing competencies and growing: Lenovo
    • Became IBM distributor in 1984
    • Localized IBM PCs for Chinese market in late 1980s
    • Began to produce PCs in early 1990s using components and competencies of IBM suppliers (became top Chinese player by 1996)
    • Exited retail and focused on production in 1999
    • Bought IBM global division of PC and notebook production in 2005
    • Third largest computer manufacturer by 2008 (after HP and Dell)
    Lenovo ‘Olympic’ laptop
  • 14. Managing internal environment: ‘point of view’
    • Revising the ‘point of view’ can be the most important (and one of the cheapest) innovations that helps boost both the growth and the performance
    • This is the essence of management innovation as a source of growth
  • 15. Business model: the key management innovation
    • Business model is the core of business: how to make money with your value proposition
    • Some business models :
      • razor & blades ( or bait & hook )
      • MLM
      • product as service
      • clicks & bricks
    HP Laserjet: bait & hook Amazon Kindle: clicks to bricks
  • 16. Eastern Exclusives: pioneer in couponing
    • Direct marketing company that prints discounter coupon books for students
    • Books distributed under agreements with university administration
    • Organizations that sell goods & services to students in university neighborhoods pay to appear in coupon books
  • 17. Amway: success in MLMs
    • Sells homecare products, electronics, health & beauty (60% of sales), jewelry etc.
    • Operates as MLM: consumers as promoters, gain income depending on the level of distribution they control
    • Sales of 8.4 Bln USD in 2008, top private company & top retailer
    SA8 fabric care line
  • 18. Management innovations (G. Hamel)
    • Change of organizational management practice
      • budgeting ( DuPont), brand management ( Procter&Gamble), project management ( Lockheed) , lean manufacturing ( Toyota)
    • Can give greater return than any R&D
    • Four principles :
      • the bigger the problem , the more serious innovation can be
      • search for new principles
      • abandon strict rules of the existing management system
      • search for similarities in non-typical organizations
  • 19. Aldi : pioneer in super-discounter format
    • Cost cutting in service :
      • minimal no of shopfloor workers ( long queues compensated by effective counter checkout system)
      • minimal advertisement
      • compensation for additional service: plastic bags , shopcart deposits
    • Goods presented in wholesale pallets, minimal shelf spreading
    • Efficient system of procurement and logistics planning
    Palettes in Aldi
  • 20. Zara : management innovations Traditional industry business model Zara business model
    • long design to production cycles ( around 6 months )
    • collections change by seasons (average shelflife 2-3 months)
    • tastes are ‘forecasted’ by fashion collections of future seasons
    • model design and development is a responsibility of a single author
    • divide between design and production , cost cutting through outsourcing to Asia
    • short design to production cycles ( not more than 10-15 days )
    • collections change constantly (average shelflife 2 weeks)
    • fast adaptation to trends instead of ‘taste forecasting’
    • designer of house of 200+ designer team
    • major production facilities in Europe , cost cutting through efficient inventory management and logistics
  • 21. No need for IT solutions: dabbawallah
    • Lunch delivery organization in Mumbai
      • dabbawallah-collectors pick lunchboxes from home kitchens and deliver to train stations
      • dabbawallah-delivers collect at stations and deliver to offices
      • average 175-200 K lunchboxes delivered daily by 5K delivers
    • Standardization and color coding create highly reliable delivery system
      • 1 error in 6 Mil boxes (!) ( no hightech solution – same is Kanban )
      • efficient teamwork ( flat hierarchy , high autonomy , team pride ) & time management
    Dabbawallah at a train station
  • 22. Time for the group project Organizational ‘core competences’: how does ‘thinking out of box’ help in redefining organizations?
  • 23. Building core competencies: learning organizations
    • Organizations learn from failure more than they learn from success
    • Employees know things better than their managers
    • Divisions need information exchange to get knowledge to those who need it most
    • New knowledge must be sought outside of organization
    • Learning organizations are those where knowledge is gained and retained
  • 24. GE: innovation from the bottom
    • Stimulate organizational and technological breakthrough
      • middle-management trained in methods that help create and implement innovations
      • Imagination Breakthroughs are selected and implemented
      • additional communication channels to collect innovative ideas from employees ( e.g. virtual Idea Box in company intranet )
    • Encourage innovators :
      • bonuses and prizes for ‘growth heroes’ and ‘best innovators’
    • Dynamic portfolio of breakthrough innovations is ca. 50-100 projects
  • 25. Innovations as planned failures
    • Multi-layer automotive glass :
      • created when the lab analyzed why the retort with liquid plastic did not break
    • Cardio-stimulator
      • created as a by product of military research in fast reheating of seamen
    • Viagra
      • created due to occasional by-effect of a new (failed) heart medicine
  • 26. Building blocks of learning organizations 1: Supportive environment 2 : Specific learning practices & processes 3 : Leaders that support learning a . Psychological safety ( opportunity to express yourself , to fail etc .) b . Acknowledged differences ( opportunity to have different opinions or do things differently ) c . Openness to new ideas d . Time to reflect ( no tight workload or tough time schedules, time to think and discuss ) a . Experimenting b . Data collection ( clients, competitors , trends ) c . Analysis d. Training and education ( inside and outside organization ) e . Knowledge exchange ( inside / between divisions , or with external environment ) Support from managers ( support to alternative and non-standard opinions , support and provision of resources in data collection and analysis , acknowledgement of self-limitation in knowledge or competencies )
  • 27. Google: the learning organization
    • Innovations built into workload
      • engineers : 80% for research related to core business ( search & ads ), 20% for projects of their choice
      • managers : 70% for core business , 20% for related projects , 10% for completely new projects
      • motto : if you don’t like it, change it yourself
    • Cultivate taste for errors and chaos
      • the sooner it is clear that the project failed, the faster one can move on to try something else
    • Use data to inspire
      • huge analytical database : data on user behavior , information traffic etc.
      • over 300 groups involved in future forecasting
  • 28. Organizational culture of Prime Movers
    • ‘ Prime Movers’:
    • do not accept the ‘rules of the game’, but create these rules for themselves and the industry : ‘map changes the landscape’
    • split and revise familiar value chain divisions in search of new value propositions
    • stress non-monetary values
    • project their culture over their business partners: suppliers and consumers
    Richard Normann
  • 29. IKEA as Prime Mover
    • Value proposition
      • cheap functional furniture with designer quality
    • Revising relations with consumers :
      • shift part of the traditional furniture producer costs: choice, picking from the warehouse, delivery and assembly
    • Revising relations with suppliers :
      • outsourcing & localization
      • modular solutions
      • efficient logistics and warehouse management
  • 30. Creativity in Pixar
    • Delegation : project managers responsible for product development ( not the top-management )
    • Culture and processes facilitate exchanges about unfinished work and create mutual support
    • Natural barriers between divisions are broken
    • Constantly incoming ‘outsiders’ disrupt organizational status-quo
    • No drive on success: ‘post mortem’ consideration of mistakes even in successful projects, reminder of previous failures
    • Strong leadership supporting creative culture ; yet leaders encourage initiative
  • 31. Five elements of efficient learning culture
    • 1. Increase innovation activity among employees .
      • ‘ how to’ training for employees ( e.g. Whirlpool)
      • ‘ Innovation Days’ ( e.g. Cemex)
      • time to create ( e.g. W.L.Gore or Google)
    • 2. Increase share of radical innovation that :
      • (а) change expectations or behavior of consumer , and/or
      • (б) change competition grounds ( e.g. digital cameras in photo industry ), and / or
      • (в) change industry economics ( e.g. no-frills airways in air transportation )
  • 32. Five elements … (2)
    • 3. Increase share of innovations coming from outside ( clients, suppliers etc .).
      • Epic Games uses Internet to bring game players to develop and customize their products
    • 4. Gain more innovations through organizational learning .
    • 5. Focus on a low number of goals in innovative activities and stick to them .
  • 33. Innovation in Cemex
    • Mexican producer of construction materials ( no.1 globally ) and cement ( no.3 globally )
    • Innovation Day ( 9 times a year ). Innovations sorted into four categories :
      • stars ( big & valuable, implement immediately ),
      • balls ( interesting, need to push around awhile ),
      • apples ( small immediate improvements ),
      • bones ( no particular value )
    • Top-management Innovation Committee monthly considers new project portfolio to support initiative within divisions
  • 34. Sources of growth for snack producing companies

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