Creativity, innovation and competitive advantage:

Understanding successful companies in the global context

Peter Drucker: Father of modern management

Future is not to be predicted, but created. What is more important than doing things right is doing the right thing

Where do you live?

World that exists Nature: Animals Homo sapien World that we have created Culture: People World of possibilities Future: Creative innovators

Historical periods 1. 2. 3. 4. 5. Stone age Bronze age Iron age Feudal age Age of Reason

6. Industrial age 7. Information age 8. Age of Creativity

Where do you live?

Bushmen community:
Central Kalahari Botswana

Pastoral nomads
Namtso Tibet in 2005

Mongolian yurt

Inuit Igloo

Nomadic Indian tribe

Agriculture: Egypt

Korean Village

Farming Germany

Mechanization

Mass production

Mass production

The Industrial Revolution

Agricultural based economies and labor intensive crafts to economy based on mass production and use of energy and machines.

Rise of cities, London 1850

Mass production made many peasants redundant in agriculture and cottage industry (e.g., weaving, crafts). They came to cities to find a job in the newly-developed factories.

Industrial workers

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Child laborer, US, 1908

Ulsan industrial complex

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Modern cities

Cyber space

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Part I Management and competitive advantage

Nature: Stable and dynamic

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Darwins Theory of Evolution

v As many more individuals of each species can possibly survive, there is a struggle for existence. v If it varies in any manner profitable under varying conditions to survive, it will thus be naturally selected. v Selected variety will propagate its new and modified form.

Porters Competitive advantage

1. Cost leadership: A company is able to provide the same product or service at a lower cost than its competitors (e.g., Walmart). 2. Differentiation: A company is able to provide better service, quality and satisfaction at the same price as its competitors and is considered as a market leader (e.g., Google). 3. Focus: A company focus on a narrow segment and is highly competitive in the segment and holds a competitive advantage in the market niche (e.g., Coca Cola).

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Porters five forces analysis

Size

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Size: Burj Kalifa

Tallest manmade structure in the world, at 830 meters, 163 floors

Size: Airbus A380

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Size

Super tanker

Knock Nevis is the largest super-tanker: deadweight=565,000 metric tons, length=458 meters, and carry 4.1 million barrels of crude oil

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Size

Oasis of the seas is the largest cruise ship: weight=100,000 metric tons, length=458 meters, and carries over 6,000 passengers

Speed

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Speed

Dell computers

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Supersonic Concorde

Power

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Porsche

Persistence

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Apple: Steve Jobs

Steve Jobs

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Steve Jobs

Honorary doctorate: Stanford 2005

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Organization

Toyota organization

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Stealth

Stealth

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Stealth bomber

Stealth

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Teaming, shoaling, schooling

Chinatown

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Differentiation

Differentiation: Nintendo Wii

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Boeing Dreamliner

Focus

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Focus: Coca-Cola

Marketing

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Marketing

Marketing

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Childrens fun culture

Eat with your hands

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Fun place to eat

Fun place to eat

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Birthday party

McDonalds

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Quality

Homo sapien

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Part II Environmental changes

External environment
Economic Demographic Sociocultural

Industry Competitor
Political Technological Global

From Hitt et al. (2007)

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Crisis or opportunity?
Innovation

Crisis: () Opportunity ()

Motivated

Helpless

Despair

How do describe the cup?

Cup is half empty: Pessimist

Fill the cup! Creative innovator Cup is half full: Optimist

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Giant meteor

Dinosaurs

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Volcanic eruption

Environmental changes

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Ice age: 18,000-15,000 BC

Size

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Global recession 2008

GM and GMAC: Bankrupt

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European brands

Opel/Vauxhall

Saab

GM restructuring

Hummer

Pontiac

Saturn

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AIG bankrupt

Super tanker

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Exxon Valdez oil spill

Cruise liner

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Costa Concordia

On Friday, January 13, 2012 accident resulted in the loss of 32 lives. The ship had 4,252 people.

Power

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Recession proof? Luxury brands

Forbes 400: Worlds richest lost $300 billion in 2009, 23% in 12 months and 35% in Asia.

VW acquires Porsche

VW buys remaining 50.1% Porsche Stake for $5.6 Billion

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US Oil price

Power: Gas guzzlers

Ford Expedition Ford F-150

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Power: Gas guzzlers

Toyota Highlander

Toyota truck

Speed

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Dell computers

2003 virus attack

Speed

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Domino Pizza

Domino Pizza

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Supersonic Concorde

Crash

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Differentiation

Differentiation

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Bankrupt: Yohji Yamamoto

Bankrupt

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Bankrupt: Gian Franco Ferre

Bankrupt: Christian La Croix

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Boeing Dreamliner grounded

Focus

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Coca Cola and obesity

Coca Cola and obesity

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Stealth

Stealth: Microsoft operating system

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Linux open system

Google: Linux open source

Samsung, LG, HTC, Motorola

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Clustering

Clustering: Individual sacrifice

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New model: Shopping mall

Adaptation to new model

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Quality

Quality

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Quality

Quality

Toyota Prius

Lexus hybrid

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Toyotas problem
Recalls 3.8 million cars, 4 dead

Organization: External threat

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Exchange rate: 2007.10: $1 = 115.9 2012.09: $1 = 77.5

Toyota Prius

2011 Tsunami

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Tsunami and Fukushima

Japans problem: Fukushima

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Thailand flooding 2011

Rojana Industrial Park, Ayutthaya

Rojana Industrial Park, Ayutthaya, Thailand,

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Senkaku/Diaoyu Island

Political conflict with China

Deliveries declined 22% in November from a year earlier to 63,800 vehicles, compared with the 49% drop in September and a 44% slump in October.

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Quality vs. low price

Quality vs. low price: Macys

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Quality vs. low price: TGIF

Quality vs. low price: Starbucks

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Marketing

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Marketing

But cannot fly

Health concerns

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Fast food nation

Super size me

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Posted first quarterly loss of $343.8 million in 2003 The world has changed. Our customers have changed. We have to change too. James R. Cantaloupe, Chairman and CEO, McDonald's, 2003

Premium meals

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McCafe: Challenge from Starbucks

Upgraded restaurants

Free WiFi

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Business environment

External environment
v Opportunity is a condition in the general environment that, if exploited, helps a company achieve strategic competitiveness. Green technologies: fuel cell, batteries, solar panels v Threat is a condition in the general environment that may hinder a companys effort to achive strategic competitiveness. Obtaining credit and financial backing.

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External environment
Economic Demographic Sociocultural

Industry Competitor
Political Technological Global

From Hitt et al. (2007)

External environment I
Demographic segment: Population size Ethnic mix Age structure Income distribution Geographic distribution Economic segment: Inflation rates Interest rates Personal and business savings rate Oil prices Gross domestic product Trade deficits or surpluses Budget deficits and surpluses Infrastructure

From Hitt et al. (2007)

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External environment II
Political/legal segment: Antitrust laws Labor laws Taxation laws Education policies Degulation philosophies Technological segment: Product innovations Application of knowledge R & D expenditure, government and private New communcation technololgies
From Hitt et al. (2007)

Global recession 2009

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Exchange rate: 2007.10: $1 = 115.9 2011.12: $1 = 77.5 58% increase!

Toyota Prius

Toyotas problem: Tsunami

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Bangkok Airport: November, 2008

Korea: Broadband connection

In December 20, 1999, Korean government subsidized the purchase of a PC and spent $24 billion in the installation of broadband lines. From 2007, Korea has become #1 in internet use in the world with 80% use daily.

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China: High speed train network

Porters five forces analysis

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Porters five forces analysis

1. The threat of new entrants
v Barriers to entry: Patents, Pfizers Viagara v Government regulations: Northrop Grumman, aerospace and defense technology v v v v v v v v Capital investment: Samsung, semiconductor industry Technology: Intels CPU Logistics and distribution: Walmart Cost advantage: ASUS Netbook Ability to compete with leaders: Hyundai Motors Brand recognition: Google Android Switching costs: LG appliances Response from the market leader: Apple vs. Samsung

Porters five forces analysis

2. Intensity of competitive rivalry
v Number of competitors: Car industry v Diversity of competitors: Food industry v Economies of scale: McDonalds v Industry capacity/potential overcapacity: PC industry v Informational complexity: Googles search engines v Fixed cost allocation: Semiconductor industry v Advertising and marketing expenses: Beer industry v Sustainable competitive advantage: Apples iPAD v Exit barriers: UPS Parcel delivery service in the USA

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Porters five forces analysis

3. Bargaining power of customers
v Buyer volume: Walmart v Buyer price demands: Computer chips, semiconductor v Buyer switching costs: Loyalty program, SPQ, United v Buyer access to information: Internet price comparison v Dependency on existing channels of distribution: Amazon v Bargaining leverage: Purchasing automobile v Availability of existing susbstite products: Generic drugs v Differentiation: Nintendo Wii

Porters five forces analysis

4. Bargaining power of suppliers
v Supplier switching costs: Auto parts v Degree of differentiation of suppliers products: Camera for semiconductor industry v Presence of substitute suppliers: Miscrosoft Windows v Supplier concentration: OPEC v Cost of providing the product: Semiconductor industry v Commitment: Branding, McDonaldss and Coca cola

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Porters five forces analysis

5. The threat of substitute products
v Attractiveness of purchasing alternative product: iPhone v Price advantage: Dunkin Donuts vs. Starbucks v Buyers switching costs: Hyundai and US klunkers
program

v Perceived level of product differentiation: Nintento Wii v Brand loyalty: Coca-cola, Louis Vitton

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