Growth Strategies: Mapping Out Problems

GROWTH STRATEGIES Introduction and Key Concepts Pavel Olegovich Luksha [email_address]

Quick question: why do we talk about growth and not simply strategy ? PESSIMIST VIEW OPTIMIST VIEW

How to recite Torah on one leg

One thing to take away: The Essential Growth Strategy DO WHAT YOU LIKE AND WHAT OTHERS WANT

Minicase: Mirax Group
Founded in 1994
Focused on premium real estate
Grew into the top Russian developer with international presence in USA, UK, France, Switzerland, Cambodia, Turkey, Montenegro etc. Development portfolio over 12 Million square meters
Had to freeze nearly all objects in late 2008
Undergoing major restructuring; major part of its property under control of AlfaBank and other financial institutions

Minicase: Research In Motion
Developer of BlackBerry – the leading communicator for corporate emails
Began to work for Ericsson and RAM Mobile Data as the developer of pager technologies
Benefited from the growth of Internet and wireless technologies
Grew to 6 Bln turnover over eight years

What does a shampoo bottle tell us about strategy and growth?

Why so many kinds of shampoo?

Minicase: P&G
Started as an inexpensive soap manufacturer in 19 century
Expanded over years into different consumer segments such as baby care, hygiene products, beauty products, fabric care, consumer electronics etc.
24 brands with sales over billion (e.g. Pantene, Wella, Head&Shoulders, Tide, Ariel, Lenor, Always, Oral-B, Duracell, Gillette, Pampers, MaxFactor, Pringles …)
Multinational presence: factories around the globe (30+ only in China)
Intense investment in R&D and advertising (first producer of soap operas)

Minicase: Lush
Began in 1994 as a soap-making company (produced products for The Body Shop since 1980s)
Focused on hand-made natural cosmetics
Promotes environmental friendliness and animal right protection (active participation in protesting campaigns)
Grew to 600+ shops in 43 countries

Minicase: Swatch
Launched in 1983 as the Swiss watchmaker response to growing electronic handwatch market (taken by Japanese companies such as Seiko)
Name means ‘Second Watch’ implying images of watches as casual, fun, and relatively disposible
Watches as collector items for kids and youth
Around half of the sales portfolio of Swatch Group (25% of world market, 5 bln USD)

Key concepts: markets Value proposition Branding Promotion strategies Hypercompetition Differentiation

Where has your laptop been made?

Minicase: Nokia
R&D centers in Finland, Denmark, Germany, China, Japan, UK and US.
Nokia Institute of Technology in Brazil.
Design Department in Finland.
Production facilities in Finland, Brazil, China, UK, Hungary, India, Mexico, Romania and South Korea.
Total of 128K employees in 120 countries and sales in 150+ countries
Number one brand in Asia (2007) and Europe (2008), fifth most valuable global brand (BusinessWeek 2008)

Minicase: DHL Express
Created in 1969 to service US-Hawaii route, expanded across US, Pacific and Europe
Acquired by Deutsche Post in 2001, now part of Deutsche Post World Net, largest global logistics group
Able to ship to any destination (incl. countries where US companies are embargoed)
300K employess in 220 countries
Owns four airlines to serve parts of the globe

Minicase: Zara
Opened in 1975, now world’s largest fashion clothing chainstore: 1500+ shops in 70+ countries
Revolutionized fast fashion:
design-to-distribution cycle of 10-15 days (vs two months industry average)
over 10,000 new designs every year
Production: >50% in Spain/Portugal, ~25% outsourced to Asia (longer shelflife products)
IT system critical for logistics and fast design-to-distribution!

Key concepts Globalization Flexibility Innovation Technology Outsourcing & integration

What problems does your local McDonald’s face?

Minicase: McDonald’s
The world’s largest fastfood chain (58 Mil customers daily), the first ‘speedy service system’ (since 1940s)
31K restaurants in 119 countries with 1.5 Mil employees. Keeps growing despite crisis
Seen as an outpost of globalization
Criticisms for menu (‘Super Size Me’)
Criticisms for environment record: packaging problem
Criticisms for ‘inhumane’ labor practices

Minicase: Severstal
Top 3 steel producer in Russia
Wave of global acquisitions:
Lucchini in 2003 (2 nd largest Italian steel group, 20 plants in five EU countries)
US entry: Rouge Industries in 2004
Severstal NorthAmerica expansion: Sparrows Point (Maryland), WCI Steel (Ohio), Esmark Steel (West Virginia) in 2008
failed acquisition of Arcelor in 2006
Became third largest steel group in the US – but faces downturn troubles…
Issues to handle in M&A: guaranteed output, trade unions, corporate social responsibility

Key concepts Globalization: transnational corporativism Integration Environmental friendliness Socio-sustainability Cross-cultural management

What does future bring to your favorite newspaper?

Minicase: Amazon & Kindle
One of the first online retailers (1995), survived dotcom crisis to become largest global online shop since 2003
Bookstore diversified to VHS, DVD, music CDs and MP3s, computer software, video games, electronics, apparel, furniture, food, toys, etc.
Dominates eBook reader market with Kindle (Kindle2 launched in Feb 2009)
over 600,000 titles for download
subscription to daily / weekly newspapers
user document conversion services
built-in Internet browsing

Minicase: IBM mainframe business
Dates back to 1880s, became one of first computer manufacturers in 1950s
Absolute domination in computer market in 1960-80s with ‘mainframe’ concept
Overlooked PC market
software: Microsoft
mighty competitors: Compaq, Dell, HP
mainframe concept out of fashion (drop in demand)
sold PC division to Lenovo and focused on integration services

Minicase: Kodak in digital age
The largest manufacturer of cameras and photographic materials until 1990s (originated in 1880s with first cameras for non-expert use)
Was the first to develop digital photo technology (1972) and commercial digital camera (1991)
Stayed in analog camera market and lost digital camera market to faster competitors (Canon, Nikon, Sony, …)
Stopped analog camera production in 2004
Lost 65% of jobs between 1987 and 2007, 25% of jobs between 2000 and 2007

Key concepts Global trends Innovation Hypercompetition Flexibility Technology

Mapping growth strategies Global markets Hypercompetition Leadership & entrepreneurship Innovation Technology Society & environment

Growth Strategies: Mapping Out Problems

by Pavel Luksha

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