Creating Competitive Advantages Over Imports


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Creating Competitive Advantages Over Imports

  1. 1. Strategic Management: Creating Competitive Advantages over Imports
  2. 2. Introduction <ul><li>&quot;The Oxford expandable folder on your desk was assembled in Mexico. Your Papermate pencil is from Japan, and that blue-and-white J. Crew striped shirt was stitched in Mauritius. The pillowcase on your bed comes from India. Your dining-room table is from Italy; the tea candles on it are from Hong Kong. If you or your children have a Schwinn or Huffy bike, it probably came from China.”-- “Surviving the Onslaught,” Wall Street Journal, October 6 2003 </li></ul>
  3. 3. Introduction <ul><li>Wall Street Journal published a series of articles analyzing how U.S. companies can strategically counter competition from global imports </li></ul><ul><li>Part 1: “Surviving the Onslaught” </li></ul><ul><li>Parts 2 – 5: Each part was dedicated to studying a particular company and its strategic approach to competing against imports </li></ul>
  4. 4. “Surviving the Onslaught” <ul><li>Imports have touched $1.2 Trillion!! </li></ul><ul><li>Why are imports so successful? </li></ul><ul><li>What have been the effects so far? </li></ul><ul><li>Can U.S. companies successfully withstand the invasion of imports? </li></ul>
  5. 5. “Surviving the Onslaught” <ul><li>What are some battle strategies that U.S. companies can use? </li></ul><ul><ul><li>Value chain approach: merge automation, quality with rapid response to customer needs </li></ul></ul><ul><ul><li>Differentiation: custom-made products, niche positioning </li></ul></ul><ul><ul><li>Outsourcing: outsource everything or outsource based on a product-by-product analysis </li></ul></ul><ul><li>Is outsourcing the only way? </li></ul><ul><ul><li>“ outsourcing…makes most sense if a product is stable, requires lots of labor and doesn’t need lots of technical support” </li></ul></ul>
  6. 6. “ Three Countries, One Dishwasher” <ul><li>The company: Maytag </li></ul><ul><li>The products: Appliances, i.e. dishwashers </li></ul><ul><li>The problem: Lower labor and production costs overseas have more than offset the freight costs of importing appliances </li></ul><ul><li>The solution… </li></ul>
  7. 7. Maytag Revalues Value chain <ul><li>Distributed Manufacturing to take advantage of Locational Benefits </li></ul><ul><ul><li>Selective outsourcing </li></ul></ul><ul><ul><li>Motors in China </li></ul></ul><ul><ul><li>Wring assembly in Mexico </li></ul></ul><ul><ul><li>Final Assembly in US </li></ul></ul><ul><li>Result: Achieve cost parity while maintaining customer focus. </li></ul><ul><li>Products tailored for Local US Customers </li></ul>
  8. 8. Transnational Strategy High High Low Pressure for Local Adaptation Pressure to Lower Costs
  9. 9. “The Allure of Bundling” <ul><li>The company: Timken Co </li></ul><ul><li>The products: Roller and Ball Bearings </li></ul><ul><li>The problem: Cheap Imports of standard bearings and Intense Competition on Price </li></ul><ul><li>The solution… </li></ul>
  10. 10. Differentiate for Customer Value <ul><li>Timken’s strategy is to differentiate from its competitors by working closely with customers. </li></ul><ul><li>Provide solution for friction by bundling flaps for lubrication instead of just bearings </li></ul><ul><li>Work closely with customers to develop solutions. This will: </li></ul><ul><ul><li>Create Value to customers </li></ul></ul><ul><ul><li>Increases Switching Costs for customers </li></ul></ul>
  11. 11. Timken’s Sustainable Advantage <ul><li>By providing solutions, Timken has a competitive advantage as long as they achieve Price parity with respect to competition </li></ul><ul><li>Danger: If Timken’s customers move their manufacturing abroad, Timken will have to follow suit. </li></ul>
  12. 12. Domestic Strategy High High Low Pressure for Local Adaptation Pressure to Lower Costs
  13. 13. “Smaller Runs of More Things” <ul><li>The company: Plexus Corp </li></ul><ul><li>The products: Contract Electronic Manufacturing </li></ul><ul><li>The problem: Lower labor costs for foreign competitors gives them an obvious cost advantage </li></ul><ul><li>The solution… </li></ul>
  14. 14. Build to Order <ul><li>Plexus’s strategy is to focus on fast customer response, - “A Focus strategy” </li></ul><ul><li>By having a build-to-order strategy, Plexus is able to fend off competition from abroad by offering services unique to contract manufacturing </li></ul><ul><li>Totally customer focused while marinating cost parity </li></ul>
  15. 15. Long term Sustainability <ul><li>Most competitors of Plexus have moved manufacturing abroad, This leaves the local market for small orders totally for Plexus </li></ul><ul><li>A complicated manufacturing management system required to run a build-to-order factory is difficult to imitate </li></ul><ul><li>Imports have longer turn around, so customers will remain with Plexus as long as the prices are not out of control </li></ul>
  16. 16. Domestic Strategy High High Low Pressure for Local Adaptation Pressure to Lower Costs
  17. 17. “The Plastic Bag Fight” <ul><li>The company: Sonoco Co </li></ul><ul><li>The products: Everyday Shopping Plastic Bags </li></ul><ul><li>The problem: Cheaper imports from Asia and high energy costs are driving out US manufacturers </li></ul><ul><li>The solution… </li></ul>
  18. 18. Lobby for Protection <ul><li>Government Policies and Tariffs greatly affect the business environment </li></ul><ul><ul><li>E.g.: US Steel Industry </li></ul></ul><ul><li>Protection is good for manufacturers but hurts consumers </li></ul><ul><li>Indicates that the industry does not have a long term sustainable advantage! </li></ul>
  19. 20. Conclusion <ul><li>Realize greater cost economies from manufacturing parts where they are most efficient. – “A Transnational Strategy” by Maytag </li></ul><ul><li>Build-to-order strategy provides a competitive advantage because of the ability to efficiently meet customer needs – “Focus Strategy” by Plexus </li></ul>
  20. 21. Conclusion <ul><li>Differentiate from Competition by offering unique solutions which are highly valued by customers -- “Differentiation Strategy” by Timken </li></ul><ul><li>Rely on the government for help as a strategy falls short of the other strategies – low cost, differentiation, and rapid response -- “Influence the Business Environment” By Sonoco </li></ul>
  21. 22. Thank you Arun Kottolli