Creating Competitive Advantages Over Imports
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Creating Competitive Advantages Over Imports

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