Professional Documents
Culture Documents
Steve Case resigned as Chairman of AOL Time Warner. Effective in May. Initially heralded as part of the new Internet era, the deal became a failure when AOLs business badly stumbled. Cultural clashes between the two companies. Stock value has wiped out nearly $200 billion in two years. A victory for Capital Grouplargest institutional investor. Case owns 11 million shares of AOL Time Warner
The Plan!?
Start researching material immediately. Read syllabus regarding the assignment. Look at the Boeing paper in the textbook plus the Wal-Mart paper on the course web page. Use links on web page for your company.
Key Factors
1. Industry definition. 2. Big Picture data regarding the industry. 3. Business and IT leaders. 4. Porter Competitive Model analysis. 5. Business Strategy Model. 6. Identifying strengths and weaknesses of the company. 7. Figuring out who runs the business on a day-to-day basis and the relationship with the person running the IS organization. 8. Concluding what the company changed through the use of Information Systems.
Chapter 1 Summary
Business and Information Systems Management Challenges
By Jamil Daouk
Business Leadership Ability to Fit the Pieces into the Increasingly Bigger Business Picture Organization Responsiveness and Resilience Solving Customer Problems Through a Combined Organizational Effort A Strong Company Culture Ability and Willingness to Innovate, Change, and Take Risks Accomplishing These Factors While Maintaining a Balance Communication Across the Entire Organization
Business Success
Figure 1-1
SIMULTANEOUS REVOLUTIONS
NEW COMPETITORS NEW RULES OF COMPETITION INDUSTRY STRUCTURE CHANGES NEW REGULATORY ENVIRONMENT
THE BUSINESS
NEW TECHNOLOGIES
Regulation
Employees/ Work
Organization
Business Processes
Competitive Options Roles, Roles and Relationships Redefine and/or Define Telecommunications as the Delivery Vehicle Success Factor Profile
Chapter 1 Conclusions
Value to customer defines the purpose and success of a business. The customer defines the business. The role of information systems is to enhance (enable) realizing the purpose of the business. Running a successful business in todays global environment involves many challenges.
Chapter 2 Introduction
Business Competitive Environment
By Melissa Chan
Business Success
Figure 1-1
Competitiveness
Competitive Model
Trade Policy Human Resources Capital Improved Domestic Performance
Decreased Budget Deficit
Stronger National Security More and Better Jobs Increased Standard of Living
Competitive Model
Inhibit Input Improved Domestic Performance Increased World Market Competitiveness Impact Impact
Input
Impact
Factor Conditions
Demand Conditions
Government
Competitiveness of Nations
Anticipate future competition from which country Types of companies that will be primary competitors Primary competitive strategies
Conclusions
Understanding the business environment through competition Position to better understand role of Information Systems
Business Environment
The global market will come to you, if you dont go to it.
An Essential Roadmap
Determining how nations, companies and individuals can and must build wealth in a knowledge-based global economy. Understanding how breakthrough technologies in microelectronics, biotechnology, new materials, telecommunications, robotics, and computers have fundamentally changed the game of creating wealth. Recognizing that relatively new industries are growing explosively and existing industries are being transformed.
US Status
In the 1990s the US was the run away leading performer in the industrial world. The US claimed nine of the ten largest companies in the world by 1998 compared to only two in 1990. Nine of the fifteen most profitable banks are in the US compared to none in 1990. The wealthiest man in the world is an American. American billionaires measure in the hundreds. US stock markets remain relatively high. Interest rates are at a forty year low. Inflation has been a minor issue.
WTO
WTO members must abide by the groups rulings. The most important of which is to give every member the same set of low tariffs and other favorable trade rules.
The most significant recent development was the admission of China to the WTO in 2000.
Presidential Commission
Letter to President Reagan Mr. President, it has been a great honor to serve you and the Nation. The competitive challenge calls for the leadership only you can provide. We thank you for your vision, interest and initiatives in making competitiveness a priority on our national agenda.
John A. Young
Chairman Presidents Commission on Industrial Competitiveness
Competitiveness Definition
The degree to which a nation can, under free and fair market conditions, produce goods and services that will meet the test of international markets while simultaneously maintaining or expanding the real income of its citizens.
Source: Presidents Commission on Industrial Competitiveness
Capital
Technology
New Competition
Presidential Commission
Recommendations:
1. Create, apply and protect technology. 2. Spur new industries and revive old ones. 3. Pursue productivity gains through technology. 4. Reduce the cost of capital to American industry. Increase the supply of capital available for investment, reduce its cost and improve its ability to flow freely to its most productive uses.
A Good Competitor:
1. Knows its products and services. 2. Knows its customers. 3. Knows its competitors.
Competitiveness of Nations
The striking internationalization of competition in the decades after World War II has been accompanied by major shifts in the economic fortunes of nations and their firms.
1. How did this happen? 2. What can one learn from this? 3. What can companies and countries do about it?
Competitiveness of Nations
Why (how) are companies in a particular nation able to gain a dominant competitive position in a specific industry against the worlds best competitors?
Competitiveness of Nations
The point of all of this:
Helps to anticipate from which country future competition is likely to come from? Helps to understand as least in basic terms what types of companies will be primary competitors? Could help to anticipate what could be their primary competitive strategies?
Organizations Compete
To Understand Competition
The industry was the basic unit of analysis. Industries are organizations that directly compete with each other. Some industries are well-defined, while others are not.
A Major Message
The role of the nation has increased as competition has shifted more to the creation and assimilation of knowledge.
Sweden
Car Carriers Communication Products Environment Control Equipment Heavy Trucks Mining Equipment Newsprint Refrigerated Shipping Rock Drills Semihard Wood Flooring Teller-operated Cash Dispensers
Italy
Ceramic Tiles Dance Club and Theater Equipment Domestic Appliances Engineering/Construction Factory Automation Equipment Footwear Packaging and Filling Equipment Ski Boots Wool Fabrics
United States
Korea
Apparel Automobiles Construction Footwear Pianos Semiconductors Shipbuilding Steel Travel Goods Video and Audio Recording Tape Wigs
Germany
Automobiles Chemicals Cutlery Eyeglass Frames Harvesting/Threshing Combines Optical Instruments Packaging, Bottling Equipment Pens and Pencils Printing Presses
Japan
Air Conditioning Machinery Home Audio Equipment Car Audio Equipment Carbon Fibers Continuous Synthetic Weaves Facsimile Equipment Forklift Trucks Microwave and Satellite Communications Equip. Musical Instruments Optical Elements and Instruments
Singapore
Airlines Apparel Beverages Ship Repair Trading
Advertising Agricultural Chemicals Commercial Aircraft Commercial Refrigeration and Air-Conditioning Computer Software Construction Equipment Detergents Engineering and Construction Motion Pictures Switzerland Patient Monitoring Banking Equipment Chocolate Syringes Confectionery Waste Management Dyestuffs Services Fire Protection Equipment Freight Forwarding Hearing Aids Heating Controls Insurance Marine Engineers Paper Product Mfg. Equipment Pharmaceuticals Surveying Equipment
The ways that firms achieve and sustain competitive advantage in global industries provide the necessary foundation for understanding the role of the home nation in the process.
Factor Conditions
Demand Conditions
Government
Competitive Success Is Not Determined By: Natural Resources Labor Pool Interest Rates and Currency Value Economies of Scale
. . . Traditional Economic Thinking
Factor Conditions
The nations position in factors of production that are prerequisites to compete in a specific industry.
Infrastructure People Skills and Training Factors Unique to a Specific Industry
A nation does not inherit but creates the most important factors.
Factor Conditions
Physical Resources: Abundance, quality, accessibility and cost of land, water, minerals, timber, hydroelectric power, etc. Climatic conditions. Location and geographic size. Time zone re: global communication.
Factor Conditions
Infrastructure: Type, quality, and user cost. Transportation Communication Mail/freight Delivery Health Care Schools Housing Stock . . .Quality of life--to live and to work.
Factor Conditions
Capital Resources: (Amount and cost of money) Secured Debt Unsecured Debt Equity and Venture Capital Savings Rate Tax Incentives Fiscal and Monetary Policies
Factor Conditions
Knowledge Resources: Scientific, technical and market knowledge that pertains to goods and services. Universities Government Research Facilities Private Research Facilities Business and Scientific Literature Market Research Databases Trade Associations
Factor Conditions
Human, knowledge and capital factors are mobile. Other elements of the diamond are more important to explain international success.
Factor Conditions
While essential to compete within a specific industry the availability of factors is not enough to explain competitive success.
Factor Conditions
Competitive advantage from factors depends on how effectively and efficiently they are mobilized and deployed in the economy.
Factor Conditions
The Japanese created and expanded needed factors at a rate far exceeding that of all other nations.
Demand Conditions
The sophistication of customer demand. The more demanding the local buyers the better to hone the global competitiveness of home-based companies.. The local market provides an early picture of the emergence of buyer needs. This factor is a major positioner for success.
The way in which companies are created, managed and choose to compete domestically.
Country Examples
Germany Italy Japan
The economy is extensively clustered. There is wide-spread private and state ownership. The structure of companies tends to be hierarchical and patriarchal. Pragmatism characterizes German management. Managers and workers are well trained in their industries. Discipline and order is evident in the way that companies are managed. Owners often have a deep involvement in all aspects of the business, especially in technical areas. They maintain an enduring relationship with employees. Particularly adept at complex production processes. Selling is technical versus advertising or intangible appeals. Complex product service requirements.
Customers tend to be conservative and cautious about new products. High levels of customer loyalty. Labor is very organized and is represented on company boards. New business formulation has traditionally been weak. Most executives have technical or scientific backgrounds. Have a stubborn desire to achieve technical and quality excellence. Invariably compete on the basis of differentiation versus cost. Unrelated diversification is rare. Do not hesitate to invest abroad. Industry is prestigious and attracts outstanding people. The unique strength of the German economy is its capacity to upgrade its advantage by increasing the quality of human and technical resources.
Jukeboxes Polyvinyl Chloride Plates Rubber, Plastics Machines Combine Harvester-Threshers Packaging, Bottling Equip. Sewing Machine Needles
Seventeen industries where Germany has 33% or more of the worlds export market.
German Companies
BASF AG - Chemicals (1861) Bayer AG - Chemicals (1863) Bayerische Motoren Werke AG - Autos, Motorcycles (1913) Bertelsmann AG - Publishing (1835) Daimler-Benz AG - Autos and Aerospace (1882) Henkel KGaA - Detergents and Chemicals (1876) Hoechst AG - Chemicals (1863) Friedrich Krupp GmbH - Steel, Engineering, Trading (1587) Mannesmann AG - Steel Tubes, Auto Parts, Etc. (1885) Robert Bosch GmbH - Electronic Auto Equipment (1886) Siemens AG - Electrical and Electronics (1847) Volkswagen AG - Automobiles (1937)
The worlds leading exporter in textile/apparel, household goods and personal products and third in food and beverages. Companies tend to be medium to small that compete primarily through export with limited direct foreign investment. Large private firms tend to dominate the home market. Companies are often managed by a commanding leader involved in all activities. Below the leader is often fluid, relatively unstructured (chaotic?) operation involving an interpersonal competition that would be rare in Japan. Managers are resourceful improvisers and able to adjust to changes, to circumvent constraints and to adapt to new rules. Companies tend to be highly specialized and compete through constant model changes and innovation.
Deal with customers on a family-like and personal basis. Combine product design with innovations in process technology. Are generally not successful where standardization, high-volume mass production, or heavy investments in fundamental research are involved. Most companies are privately owned and owners, managers and workers are closely attached to an industry. These factors lead to a long-term orientation and a commitment to sustained investment. Business is important and a magnet for talented individuals. Entreprenuership thrives in Italy--they are risk takers who are individualistic and desire independence. Benefited from a shift from standardized, mass-produced products toward more customized, higher-style, higher-quality goods. In many cases style was combined with investment with state-of-the-art production equipment.
Italian Companies
Fiat SpA - Autos and Farm Equipment (1899) Olivetti - computers and office equipment (1908) IRI Holding Co. (state owned) - 541 companies 5% of GNP Ente Nazionale Idrocarburi - Petroleum & Petrochemical (1953) Perelli SpA - Power Transmission, T/C Cables, Tires (1872) Benetton - clothes manufacturer (1955) Luxotica - frame manufacturers (NY Stock Exchange) Gewiss - electrical fittings Marposs - precision measuring equipment Safilo - frame manufacturers Persol - frame manufacturers Iris - ceramics
Possesses a large pool of literate, educated and increasingly skilled human resources. Benefit from a large pool of trained engineers. Created and upgraded needed factors that far exceeded that of all other nations. Japanese companies are hierarchical and disciplined. Cooperation and subordination are the norm with a unique ability to coordinate across functions. Relationships between labor and management are respectful and strikes are rare. Many of the talented people flow to industry. A technical orientation is pervasive and many managers have engineering backgrounds.
Strategies often follow a path of standardization and mass production with a major emphasis on quality. Ownership of companies is predominantly held in institutions and other companies. Japanese companies often define their goals in terms of volume and market share. Workers define their status on how well the company is doing. Continual learning is emphasized and accepted. An international outlook promoted by the amount of domestic rivalry which is the single biggest explanation for the success of Japanese industries. Companies relentlessly upgrade their competitive advantage. More willing to form new companies.
Machines 62.0% Outboard Marine Piston Engines 61.0% Electric Gramophones 59.0%
Microphones, Loudspeakers and Amplifiers 55.7% Motorcycle Parts & Accessories 53.4% Track-Laying Tractors 51.8% Pianos & Musical Instruments 51.0% Self-Propelled Dozers Color TV Receivers Portable Radio Receivers Other Radio Receivers Special-Purpose Vessels Electric Typewriters Steam Boiler Plants & Parts Motor Vehicle Radio Receivers TV Picture Tubes 50.6% 49.5% 48.4% 47.9% 46.8% 45.0% 42.8% 42.5% 42.2%
Prepared Sound Recording Equipment. Photo Chemical Products Metalworking Lathes Coarse Ceramic Housewares New Bus or Truck Tires Buses Sewing Machines Iron, Steel Seamless Tubes Self-Propelled Shovels, Excavators Computer Peripheral Units Lorries and Trucks Other Electronic Tubes
41.5% 41.5% 39.7% 39.3% 39.1% 38.7% 38.7% 38.7% 38.4% 37.9% 37.5% 36.5%
Metal Cutting Machine Tools Generating Sets with Piston Engine Other Cargo Vessels Iron, Simple Steel Rolled Plate Continuous Synthetic Weaves Clocks, Watch Movements Rolling Mill Parts and Rolls Liquid Dieletic Transformers 33.4%
Forty-three industries with over one third of the worlds export market share.
Japanese Companies
Honda Motor - Autos and Motorcycles Sony Crop. - Consumer Electronics Bridgestone Corp. - Tires Matsushita Electric - Consumer Electronics Toyota Motor Corp. - Automobiles Nissan Motor Corp. - Automobiles Nomura Securities - Brokerage Hitachi - Computers and Electronics NEC - Computers and Electronics Fujitsu - Computers and Electronics Mitsui Group - Trading and Holding Co. Sumitomo Group - Trading and Holding Co. Mitshubishi Group - Trading and Holding Co.
Study Postscript
What happened to Japan since 1990?
1. The second largest economy in the world. 2. Arrogance based on what they had accomplished including an assumption that the only way their economic endeavors go is up. 3. A rigidity in approach that takes too long in a fast paced, global economy.
Ironic
What makes Christmas festive for Americans is produced in the worlds officially atheistic country whose human rights abuses are deplored by officials of the US government. What this picture provides is a lesson in globalization and an example of how trade and tradition have brought together China and the US in a mutually beneficial relationship.
If not available, over half of this type of merchandise in US stores would disappear.
U.S. Merchandise Trade with China: 1988-2000 1988Year 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 U.S. Exports 5.0 5.8 4.8 6.3 7.5 8.8 9.3 11.7 12.0 12.8 14.3 13.1 15.0 U.S. Imports 8.5 12.0 15.2 19.0 25.7 31.5 38.8 45.6 51.5 62.6 71.2 81.8 99.4 U.S. Trade Balance -3.5 -6.2 -10.4 -12.7 -18.2 -22.8 -29.5 -33.8 -39.5 -49.7 -56.9 -68.7 -84.4
1999 1995
20
40
60
80
100
US Exports to China
Industrial Machinery Office Machines Fertilizer Electrical Equipment Transport Equipment Top 5 Categories All Categories 1999 1995
10
15
Critics of US-China Trade USMuch of what the US counts as exports to China are parts for assembly and return for sale in the US.
Competitiveness of Nations
It is helpful to ask what companies need to do and where does government need to play a key role?
Role of Government
Serve as a challenger and catalyst to companies to compete successfully: Focus on specialized factor creation. Avoid intervening in capital factor and currency markets. Enforce strict product, safety and environmental standards. Limit cooperation among industry rivals. Promote goals that lead to sustained investment. Deregulate competitors. Enforce domestic antitrust policies. Reject managed trade.
Singapore
An economic powerhouse. Three million people on a small island. Passed the US in average income in 1999. Worlds best infrastructure!? Safe, clean (smoggy). Interesting racial, religious and language mix. Could go from great to awesome.
Singapore Model
Strong Government (The smartest and most capable should govern) Long Term Planning Foreign Investment Clean Administration Education for All No Welfarism Family Values Law and Order Communal Harmony
Kenya
From whiskey to cooking fat to batteries to clothes, Kenya is being swamped with counterfeit goods. Some are made locally but most are imported.
Kenya
Focus on the negative impact of counterfeit goods in usually on wealthy nations where products are most often designed and developed. The effects can be even more devastating in poor and developing countries where profits of any kind are harder to come by, smuggling is more easily accomplished and enforcement is weak or nonexistent.
Kenya
Kenyan manufacturers are estimated to be losing hundreds of millions of dollars in revenue.
Eveready Batteries
Employs 350 people in Kenya. 40% of Eveready batteries sold in Kenya are counterfeit. If this continues, the company will terminate its operation in Kenya.
Kenya
80% of counterfeit goods are estimated to come from China. The business community blames much of their troubles on high costs, such as power and water, and government corruption. The government run port of Mombasa is notorious for bribery and kick-backs.
Kenya
If the business opportunity exists, would you want to do business in Kenya?
Conclusions
Todays competitive realities demand leadership. Leaders believe in change. They energize their people to innovate continuously. They recognize the need for pressure and challenges to accomplish this.
Ohmae Contentions
Four factors are usurping economic power once held by nations: 1. Capital. 2. Corporations. 3. Consumers. 4. Communication.
1998 Rankings
1. Singapore 2. Hong Kong 3. US 4. UK 5. Canada 6. Taiwan 7. Netherlands 8. Switzerland 9. Norway 10. Luxembourg 2.16 1.91 1.41 1.29 1.27 1.19 1.13 1.10 1.09 1.05 11. Ireland 12. Japan 13. New Zealand 14. Australia 15. Finland 16. Denmark 17. Malaysia 18. Chile 19. Korea 20. Austria 1.05 .97 .84 .79 .70 .61 .59 .57 .39 .37
Major Points
It is no longer possible for a country to insulate itself from the rest of the world. The possible decline of the industrialized world is merely the narrowing of the gap between it and third world countries. The accelerated pace of change is what disturbs the pessimists, because they can see it happening. It took Britain 60 years to double its output, the US 50 years but developing countries are doubling output every 12 years. China has actually doubled its GDP in seven years. In many respects the developing world is unknown economic and financial territory.
Conclusions
The diamond of national advantage makes sense as a means of understanding global economic success. Domestic success does prepare companies to compete globally. Major European and an increasing number of Asian countries are capable of competing on a global basis. The global marketplace is only going to get tougher based on more, tougher competitors. The diamond can help to anticipate new competitors.