01. Why Strategy Matters?
Rev: Feb, 2015
Euiho (David) Suh, Ph.D.
POSTECH Strategic Management of Information and Technology Laboratory
(POSMIT: http://posmit.postech.ac.kr)
Dept. of Industrial & Management Engineering
POSTECH
Why Strategy Matters?
■ Old Paradigm:
■ New Paradigm:
– God helps those who help themselves!
– God helps those who have strategies, not
those who just work hard without
strategies!
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NEW COKE vs. CLASSIC COKE
vs.
What happened?
“Cultural Resistance”
■ Customers’ Strong Cultural Resistance to NEW COKE
– Americans in the Southland regarded CLASSIC COKE as a symbol and tradition of America
– Replacing COKE with NEW COKE was perceived as breaking the symbol and tradition
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NEW COKE vs. CLASSIC COKE
vs.
What happened?
“Cultural Resistance”
■ Customers’ Strong Cultural Resistance to NEW COKE
– Americans in the Southland regarded CLASSIC COKE as a symbol and tradition of America
– Replacing COKE with NEW COKE was perceived as breaking the symbol and tradition
4
WALMART vs. E-MART
vs.
Criteria
WALMART
E-MART
Interior Style
Warehouse
Decentness
Size of Product
Bulk package
Small package
Cultural Facility
Almost none
Beauty shop, Photo studio,
Restaurant, Nail shop, etc.
5
ASIANA AIR vs. KOREAN AIR
We are young, too!
vs.
What happened?
6
ASIANA AIR vs. KOREAN AIR – Answer
■ Change of Rule of Competition (Competition Basis)
■ Competition in Disadvantageous Condition
– Airplanes of Asiana Airlines were newer than airplanes of KOREAN AIR
→ KOREAN AIR can’t beat Asiana Airlines in the age competition
■ Marketing of KOREAN AIR in Different Angles
– KOREAN AIR emphasized their skilled service, know-how, and experiences
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ASIANA AIR vs. KOREAN AIR – Answer
■ Change of Rule of Competition (Competition Basis)
■ Competition in Disadvantageous Condition
– Airplanes of Asiana Airlines were newer than airplanes of KOREAN AIR
→ KOREAN AIR can’t beat Asiana Airlines in the age competition
■ Marketing of KOREAN AIR in Different Angles
– KOREAN AIR emphasized their skilled service, know-how, and experiences
8
Namyang Dairy
 Result
 100 million packs sold in 100 days after Launching

The most sold milk in a day (1million packs a day)
Criteria
White Milk
Functional/Processed Milk
Advantage
Stable market
Low production costs
Well-being trend
Higher profits
Disadvantage
Strong competitors
Lower profits and Customer’s needs
High elasticity of demand
High production and development costs
All the main competitors focused on
Functional & Processed milk
Namyang focused on white milk
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STARBUCKS SYNDROME
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STARBUCKS SYNDROME
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POSTECH’s success
Stumbling Blocks
Built-in reputation
Built-in reputations of SKY and KAIST
Rural Setting: Geographical Location
High Cut-off Score
for Admission
Quality
Not Quantity
Pre-set cutoff score compatible
With SKY and KAIST
“Cream of the crop”
Great Success
In
Applicants Pool
Top Class Students
Nationwide
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QWERTY vs. Dvorak
QWERTY Keyboard
vs.
Dvorak Keyboard
What happened?
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QWERTY vs. Dvorak – Answer
■ Customer Addiction
QWERTY
Dvorak
• Making typing speed slow to prevent adjacent keys from jamming on
• Dominantly spread in 19th century
• Designed ergonomically and efficiently
• Offering fast speed and convenience
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QWERTY vs. Dvorak – Answer
■ Customer Addiction
QWERTY
Dvorak
• Making typing speed slow to prevent adjacent keys from jamming on
• Dominantly spread in 19th century
• Designed ergonomically and efficiently
• Offering fast speed and convenience
15
Miwon vs. Mipung
Miwon
• First MSG [Daesang, 1958]
• Extremely dominant among housewives
Mipung
• MSG made by a major company, Samsung
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Miwon vs. Mipung
Miwon
• First MSG [Daesang, 1958]
• Extremely dominant among housewives
Mipung
• MSG made by a major company, Samsung
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Miwon vs. Mipung
Miwon
• First MSG [Daesang, 1958]
• Extremely dominant among housewives
Mipung
• MSG made by a major company, Samsung
“Verbal Addiction”
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Up-selling
■ Sales technique that a seller induces the customer to purchase more expensive items,
upgrades, or other add-ones
19
Cross-selling
&
■ Sales technique that a seller analyzes the customers’ pattern and suggests products
which are often sold together
20
Information Technology Strategy Case (1/6)
■ Marriott Hotel
Problem
Usually business people or young couple mind
checking in and checking out at the hotel front desk
Storing and managing
VIP customers’ information
DB Marketing
Allowing customers
to check in and check out
without going to the front desk
“Customer Relationship Management (CRM)”
21
Information Technology Strategy Case (2/6)
■ Asiana Airlines
Difficulties in tracking and managing baggage
• Increasing risk of loss of baggage
• Higher likelihood of baggage terrorism
RFID-enabled air baggage tracking and control system
• RFID: Radio Frequency Identification
• Automatic identification method, relying on storing and remotely
retrieving data using devices called RFID tags or transponders
22
Information Technology Strategy Case (3/6)
■ G-market
Problems
E-security
Reliability of
transaction
Solution
SSL complementary system
• Weak payment system
• Certificate user by ID/password
(SSL: Secure Sockets Layer)
• Deception of trade
• Weak warranty of the products quality
Escrow service
 Escrow service of G-market
4. Receipt Comfirmation
Customer
1. Purchase/Payment
5. Transferring Payment
G-market
3. Sending Product
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2. Delivery Request
Seller
Information Technology Strategy Case (4/6)
■ Korail
Problems
KOVIS
•
•
•
•
•
•
•
•
• Symbol of “Red Tape”
• Criticism towards the bureaucracy of Korail
• Opening of KTX, less competitive
compared to vehicle transportation
• Increase in deficit, bad management index
PM (Plant Management)
SEM (Strategic Enterprise management)
AM (Asset Management)
CM (Cost Management)
FA (Financial Accounting)
MA (Management Accounting)
MM (Materials Management)
ESS (Employee Self Service)
“Enterprise Resource Planning (ERP)”
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Information Technology Strategy Case (5/6)
■ Wal-Mart
Battle with K-Mart
• K-Mart founded 1899 in Detroit. The King of retail chain with 3000
stores until 1970s and early 80s.
• Bankrupted in 2002 by losing the battle to Wal-Mart
Wal-Mart’s Challenge
• Founded 1962, only 30 stores in South area : Arkansas, Missouri, Oklahoma, etc
 In 1987, 1200 stores , revenue $ 16 b (half of K-Mart)
•
In 1991, surpasses K-Mart $ 76 (1.5 times of K-Mart) , $ 480 in 2014
•
What are the CFFs of K-Mart ?
•
Potential Entrants (Porter), Core Rigidity, Technology (SCM/IT,
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Cross-docking)
WAL-MART: BUSINESS PROCESS
Satisfying Customer Demands Depends on Critical Success
Factors
Critical Success Factors
(CSF)
Customer Demands
• Quick responsiveness to
market changes
• The right products
• Low inventory
• In stock
• Quick replenishment of
inventory
• Best value
• Service and quality
cmpm A00267ppmmJun93G
• Efficient distribution
system (Cross-Docking)
- 26 -
WAL-MART: BUSINESS PROCESS
Wal-Mart Fulfills the Customer-Satisfaction Critical Success
Factors
CSF
Quick Responsiveness
to Market Changes
Low Inventory
Quick Replenishment
Efficient Distribution
System
cmpm A00267ppmmJun93G
• Customer demand “pulls” product through the
supply chain
• Tracking product movement at individual stores by
market traits (e.g., size, color)
• Investment in IT ensures timely analysis of
sales/customer/market information and trends
• Formal and informal cooperation among stores,
distribution centers, and suppliers
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WAL-MART: BUSINESS PROCESS
Wal-Mart Fulfills the Customer-Satisfaction Critical Success
Factors (cont.)
CSF
Quick Responsiveness
to Market Changes
Low Inventory
Quick Replenishment
• Direct high-level and long-term relationship with
suppliers enabled by high information sharing:
-
Some vendors directly manage distribution warehouse inventory
of their products
• Efficient transportation system
• Investment in IT (e.g., EDI, Quick Response, Radio
frequency terminals)
• = Cross-docking
Efficient Distribution
System
cmpm A00267ppmmJun93G
- 28 -
WAL-MART: BUSINESS PROCESS
Wal-Mart Fulfills the Customer-Satisfaction Critical Success
Factors (cont.)
CSF
Quick Responsiveness
to Market Changes
• Highly automated distribution centers (e.g.,
laser-guided conveyor belts)
• A fleet of 2,000 company-owned trucks
Low Inventory
• High leverage of supplier relationships:
Quick Replenishment
- Some suppliers ship goods “sales floor ready”
- = Cross-docking
Efficient Distribution
System
cmpm A00267ppmmJun93G
- What is it ?
- 29 -
Information Technology Strategy Case (6/6)
■ Wal-Mart
“Capabilities-based competition”
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Discussion Questions
1. For the following cases, name the strategy for each one.
(1) Qwerty Typewriter
(2) Asiana vs Korean Air
(3) Coca Cola
(4) Starbucks
2. What are the critical success factors (CSFs) for the Wal-Mart's success?
3. What are the key information technology (IT) or information strategy (IS) for the
following strategic information system (SIS) cases?
(1) Marriott
(2) Asiana
(3) G-Market
(4) Korail
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Exam Question Candidates (not limited to)
1. DQ 1~3
2. Present your own examples of
Culture Resistance, Change of Competition Basis,
Status Synchronization, Customer Addiction, etc.
3. Present your own examples of strategic use of IS or IT for competitive advantage.
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