Dell

While surfing the Internet the other day searching for the newest laptops, I crossed over the Dell website “www.dell.com” and I realized Dell innovative and differentiation from other computer companies, and for that reason, I decided to write a blog on Dell innovative strategies and competing techniques. First, I will analyze the industry through Porter’s five forces model. The rivalry in the computer industry is intense with major well established companies controlling the market “ex: Toshiba, Compaq, IBM...” Those well established companies have heightened the barriers to entry: their sizes allow them to get the economy of scale advantage, and each company is trying to differentiate its product from the competition either by price or added features. In addition, the huge amount of capital required to be invested in the R&D decreased the attractiveness to enter. However, an innovative business concept or a big price reduction “ex: the new competition from China” could break these barriers and intense competition to provide a competitive advantage for a new entrance, in other words, globalization increased the competition level in the market. Due to their small numbers where sometimes a component is best manufactured by only one firm “ex: Intel”, suppliers’ power is high. The high level of competition increased along with the great number of choices increased the consumer power. Realizing the intensity of rivalry in the industry, Dell was one of those companies which saw an opportunity through differentiation and created a new way to compete in such market.
Dell competitive advantage comes from the synergy of all its strategies which represents a valuable and rare resource for the company along with each strategy being a valuable resource by itself. Dell innovative strategies includes: just-in-time-inventory system “decrease inventory holding cost”, customization “understand customers needs and wants”, increase customer interface through increase their service quantity and quality “increase customer satisfaction”, and elimination of intermediaries “decrease cost, increase profit, and communicate directly with customers”. Each of these strategies by itself is considered to be a valuable, rare, and hard to imitate resource. In addition, the way that Dell organizes these strategies together is also considered the most valuable resource the company possesses. In conclusion, to compete in such intense industry is not an easy task. However, Dell was successful to compete effectively through it use of differentiation strategies. But, Dell must continue its hard work in to stay in the market.

EBay

Reviewing the articles about the EBay purchase of Skype “Why EBay may makes a $3bn call to Skype” and “EBay will pay $4.1 for Skype” along with the class dissociation raised many strategic issues in mind to discuss in my blog. EBay is one of those companies that survived the Internet bubble phenomena. In other words, while other companies failed to recognize profits and even gone bankrupt, EBay business model proved to be successful and realize high profit. Analyzing the Internet industry through Porter’s five forces would provide a better understanding of the environment surrounding EBay. First, the rivalry in the market was and still very intense, the initial capital required to open a dotcom company could sometimes be small and even if it’s large it would obtained easily. In addition, in the Internet competition is global, in other words, EBay competitors could be from any part of the world which in result increase the rivalry. The global competition in the Internet, the easy access of information, security issues, and the existence of substitutes like traditional brick and mortar stores increased customer powers over Internet companies. On the other hand, Internet companies have two main suppliers: programmers and hardware providers. The huge number of Internet companies and the existence of outsourcing decreased the power of hardware providers. However, the small number of good and experience IT and websites specialists increased labor supply power over Internet companies.
EBay success story could not be fully understood by only analyzing the different forces affecting the company, however, understanding EBay valuable resources and how it utilizes it could help getting the whole picture. EBay business model is considered one of the most innovative Internet business models and the most valuable resource for the company. When EBay started operating, its business model was different, unique, and new from any other Internet business model at that time (Differentiation). The unique way that EBay connected buyers with sellers and charge fees for that service is considered to be a very valuable and rare business model. But, because of the Internet nature EBay business model is visible for the competition or new comers to duplicate and use. However, the increased quality and number of services helped EBay to stay in the lead and gain customers trust and loyalty which itself considered to be a valuable, rare, and take time to imitate resource that is gained through the years. In conclusion, to enter and compete in the Internet is not an easy task. However, EBay is one of those companies which were successful to enter and compete effectively through it use of differentiation strategies. However, EBay must continue its hard work in adding new and unique services to stay in the market.

Mecca Cola

Reading Husain Shakir Article “Mecca Cola rides anti-West wave with café chain plan” brought to my mined a couple of thoughts related to our strategic management class. The best frame work to explain this article would be Baron Frame work “the market and non-market environment”. The founder of Mecca Cola realized the increased interest of the Muslim community for boycotting western products, he reviewed the evolvement of this issue as an opportunity to grab and benefit form. This issue of anti-western products originates through the desire of the Muslim community to hurt the economy of western countries to their bad practices against Muslim people in Palestine and other parts of the worlds. Muslim peoples and communities along with western companies “those which high percent of their income is gained through exporting to Muslim countries” are the major interest groups in this issue. Economic institutions in both Muslim and western countries are both affected by such issue, an example would be: chamber of commerce, ministry of economics, ministry of industry “in western exporting countries”. In other words, this boycott will decrease the western companies’ exports and as a result decrease profit, and government institutions must find a way to solve the problem with the help of Muslim countries government and institutions. Each interest group possess different information on the issue, Muslim people & communities review the boycott as a way to make western companies force a pressure on their government to change their practices, on the other hand, from the western companies’ point of view, they are not responsible for their government actions and political positions and alliances.
The main valuable resource for Mecca Cola is considered to be its Muslim focus, in other words, that it’s all produced in Muslim country and owned by Muslims with all halal “allowed in Islam” ingredients. In order to higher it benefits form its main valuable resource, Mecca Cola founder decided to enter into the coffee shops industry by introducing its own coffee shops under the brand name Mecca Café. However, does this valuable resource considered as rare and easy or hard to imitate? As a soft drink compny, there are a lot of well established Muslim soft drink companies that have been around for a long time and gained the trust of the community, as a result, those companies could enter the Cola market or the Coffee market and compete with Mecca Cola in its own game. In other words, Mecca Cola only possess a competitive parity and should work very hard on other aspects than its Muslim focus to move its position to gain a sustained competitive advantage in the soft drink market.

Sony

When we discussed the Sony Article “Sony search for a sledgehammer” in class several weeks ago, one of my friends mentioned a point that I founded to be interesting and worth to elaborate more on it. Introducing the new generation of Sony Ericsson phones and emphasize on the “walkman” feature helped Sony to increase its phones customer base by targeting new segments. As it’s knows, Sony was the first to introduce the “walkman” technology that a person can listen to his favorite music wherever he/she goes with a superior quality sound. The well designed “walkman” technology proved to be successful for Sony and helped the company to increase its sales and image. Sony is a well known international company that known for its high quality, innovative, high tech products. Sony was successful through the years to gain customer’s trust and build a superior image and reputation among its competitors, this image and reputation was gained through the company’s hard work to stay in the lead (Unique Historical Condition). Reviewing the industry through porter five forces, the electronics industry is a very difficult market to compete in, it is full of well established companies that were there for a long time “ex: Samsung, Philips, JVC, LG…”, new technologies are easy to copy through reverse engineering, new entrance is very difficult unless a superior new technology is presented “valuable resource” and protected through copyrights “rareness & hard to imitate”. However, by time companies in the market may find a way to overstep copyrights protections either by improved technology or similar products. Because of the big variety of products available, companies in the market compete through introducing superior features products with the lowest price possible to attract customers. In other words, rivalry in the market is very high, the threat of new entrance is low, and consumer power is high.
Being a part of the high tech market, mobile phones market is very difficult to enter. However, Sony formed a coalition with a well established company “Ericsson” over come the market difficulties, their innovative coalition helped Sony to enter the market with the help Ericsson to implement superior technologies to its phones. Introducing the new walkman phone is proof of the successful coalition between the two companies. Introducing such technology helped reaching new segments “Music oriented & Young” which increased the company’s customer base. In the future we could expect more of this coalition by implementing more of Sony’s successful technologies into mobile phone “ex: handy cam…” But, the company must be careful and stay innovative because of the high level competition and the threat of reverse engineering.

The Wal-Mart Case.

Reading Peter Brown Article “Selfishness Has its value to the Economy” brought many thoughts to my mind. The article raised the issue of Wal-Mart, and how people do not like its practices but still shop in its stores. The job of retailers is one of the oldest professions in history, which is: “Trade”. Traders used to go around the glob to find things that people wants and needs in order to sell it for a profit. For example, long time ago, Arab traders used to bring spices and fabrics from India to sell it in the Arab world, which at that time didn’t possess those things. The unavailability of an item that people needs or wants, is considered as an opportunity for any company to benefit from. However, if not utilized by the company, this unavailability may create a place in the market for a new player to enter or to enhance the competition position. In addition, Globalization decreased the barriers to entry in the trading business, where businessmen from all-over the world can export and import almost anything from anywhere to any place they want. As a result, competition become very intense, and finding new markets, differentiating customers to different segments, understanding each segment needs and wants, match the company strength with satisfying those needs and wants, and come up with different products and services is now the main concern for companies all over the world.

Wal-Mart is one of those retailers who have been successful in creating a wining strategy to efficiently compete globally “Every day low prices”. By increasing its size, decreasing its suppliers power, and increasing its products variety in its stores, Wal-Mart were successful in building a world wide reputation and superior position in the high rivalry retailing market. In other words, Wal-Mart examined its strength and weaknesses, looked for market opportunities and threats, and come up with a strategy that enhanced its position in the market place above the competition. In order to minimize cost to achieve “Everyday low prices”, Wal-Mart had to provide low salaries and benefits for it employees. Employees’ salary is an important cost component for every company. Again, Globalization plays an important role. In order to minimize cost, companies are positioning their plants in low wage areas. However, since Wal-Mart is a retailing company, it can not benefit from globalization, and for that reason, hiring employees with minimum wage seems to be the best solution to decrease cost further.

In conclusion, Wal-Mart is one of the most successful retail stores in the world, and even that sometimes it uses unfavorable but legal practices, this practices is what enable it to have its wining strategy “Every day low prices”.

The Danish Boycott.

Reading the Article in the Arab news “Effect of Danish Boycott Patchy” raises many issues related to our strategic class. However, the first issue that came to my mind was Porter’s third competitive force the bargaining power of Buyers. A company’s buyers may be the customers who ultimately consume its product or the companies that distribute its product to end users. Buyers can be viewed as a competitive threat when they are in position to demand lower prices, better service, higher quality, or even boycott the company’s products. Whether buyers are able to make demands on a company depends on their power relative to that of the company, and their power is affected by many factors. Relating this to the article, the Muslim boycott of the Danish products is considered as customer power. The companies’ Muslim customers are demanding the companies to enforce pressure on the Danish government to apologize and punish such impolite behavior. But from where did Muslims get this power on the Danish companies? The answer sits within Porter’s factors that affect customer power:
- The Muslim population in the world is a huge number, and putting all the quantities that they buy constructs a considerable volume of the companies’ production, sales, and profits. In return, eliminating such segment from the companies market will hurt the companies’ sales and profits very badly.
- The switching cost for the Muslims to buy other brands is very low. Globalization had opened the door for companies all over the world to compete everywhere. For that reason, Muslims can easily switch to buy German, French, or even local products, even if those product were higher in price or lower in quality, however, they substitute this higher price and lower quality for respect for their realign.
- The easy access and availability of substitute products increased the power of the Muslim customers. As I mentioned before, globalization increased the product choice in front of the customer to satisfy the same need. For example, consumers can easily switch to use a more healthy choice to cock their food with oil than using the fames Danish butter brand LURPAK.
Putting all these factors together, increased the threat of the boycott on the Danish companies’ profits, and demand them to act fast and impose some pressure on the government to act also.
However, to be faire, why to punish a company for an act that someone did in it original country? Are the companies responsible for the country government and newspapers acts? Let’s say that an Arab newspaper attacked an important Danish figure, and the Danish people started to boycott Arab products, what’s my fault as an Arabic company which export to Denmark to lose that market and even go out of business? My compny had nothing to do with the published report, but it is going to suffer and even may go out of business and people may loss their jobs. Companies that operate internationally must come with a solution for such unpredictable, external, and uncontrolled problem.

Test Post

Test Post for MBA 618 at AUS.