Industry Life Cycle Essays

Industry Life Cycle Essays Industry Life Cycle Essay Industry Life Cycle Essay and China, such that in 2006 more than 1 billion new handsets were sold. At the same time, the industry has seen ongoing technological change, both in the mobile telephone system (through the adoption of new technologies such as SMS, WAP, 3G, camera phones and now mobile TV) and in key component technologies such as LCD screens and rechargeable batteries. At the same time, developed markets have approached saturation as per capita adoption rates have exceeded 75% in these major markets. In such markets, network operators face steadily falling unit prices and must offer new services in hopes of increasing (or maintaining) average revenue per user (ARPU). Handset makers face similar challenges - commoditization of voice handsets and an imperative to offer ever more-capable phones to maintain high average selling prices in developed markets. The few remaining growth markets (such as China and now India) offer little consolation, as they feature highly price sensitive buyers and strong local competition. Throughout, handset makers face a unique distribution system, where even the most strongly branded firm must sell its phones in a given national market through one of three or four local operators: by one estimate, only 0. 5% of the handsets sold in the U. S. are not sold directly an operator or its agents. 1 Manufacturers thus face both high bargaining power by their main distributors, and the requirement to introduce new technology to align to their distributors’ business models. -1- Despite such pressures, leadership in the mobile handset business has remained a remarkably stable oligopoly, with today’s market share leaders reflecting successful entry decisions made at the beginning of the cellular era. Motorola invented the portable cell phone in 1973, while both Nokia and Ericsson rode the rapid adoption of Nordic Mobile Telephones in the 1980s. Other European makers have come and gone, while Japanese makers have dominated their home markets but have enjoyed limited export success. The only new firm in the list of 2006 top three manufacturers is Samsung of Korea, which has been in 3rd place since 2001 (Table 1). In 2007, a new entrant unveiled its strategy for challenging this stable oligopoly. Unlike the three long-established handset makers - or challengers like Samsung, Matsushita and LG - this niche player has no manufacturing and has never been a high-volume phone producer. It has pre-announced its product more than a year before entry into the competitive European and Asian markets, giving competitors plenty of time to match its product features. Customers loyal to the incumbents and many analysts dismissed the entry strategy as doomed to fail. However, the new entrant is Apple Inc. ,2 and its unreleased iPhone is the industry’s most talked-about product of the year. Despite a lack of telecommunications experience, the company can draw upon core competencies in product innovation and marketing developed over its 30 year history. It also hopes to leverage the market-leading ecosystem it has built for online music distribution. Here we analyze Apple’s market entry strategy in the light of three key constraints: its own competencies, the existing industry value network, and the ongoing efforts to deliver a converged mobile device that equally provides voice, entertainment and the mobile Internet. From this, we offer observations about Apple’s strategies and the future of the convergence market. -2- Apple’s Differentiation Competencies Apple Computer has introduced a series of innovative products that changed the industry, of which the best known are the Apple II, Macintosh and iPod (Table 1). Over the past decade, the company has combined product innovation with industrial design and clever marketing to gain a reputation far out of proportion to its size or market share. Since its earliest days suing makers of unauthorized Apple II clones, Apple has had a reputation of aggressively protecting its trademark, copyrights and other intellectual property. Its IP strategy - particularly its decision (with a brief exception) to ban clones of its computers - has made it an exemplar for many of a â€Å"closed† business model. At the same time, the company has long sought to nurture a vibrant ecosystem. Software developers were crucial to its Macintosh adoption, while both content providers and third-party add-on suppliers helped drive success of its iPod/iTunes music business. Finally, no discussion of Apple’s strategy of the past decade would be complete without acknowledging the influence of company founder Steve Jobs, who returned to become interim CEO in 1997 and officially CEO in 2000. Both his perfectionism and his ability to enforce decisions solved the product execution difficulties that plagued the company during its previous decade (West, 2002). Historic Differentiation Strategy In its early years, the company’s initial success came from the technical innovation of cofounder Steven Wozniak, such as his ability to use software and clear hardware design to reduce chip counts and thus manufacturing parts costs. Apple’s personal computers increasingly reflected a systems approach, from the Apple III (1979), Lisa (1983) and then the Macintosh (1984). -3- Throughout its first decade, Apple demonstrated two key marketing-related competencies inextricably linked to co-founder Steve Jobs, culminating in the 1984 introduction of the Macintosh: Product design. Its Apple II is widely credited as the first personal computer designed as a consumer product, with a molded plastic case instead of a hobbyist-style metal case. Beginning with the Macintosh, Jobs pushed Apple engineers to produce â€Å"insanely great† products that differed substantially from anything marketed before (cf. Levy, 1994). Public relations. Apple was able to build excitement with product launch events that were unmatched in the industry until Microsoft’s launch of Windows 95. Under Jobs, such launches created suspense through pre-release secrecy and spectacular gestures. The marketing itself became a news story. This culminated in the â€Å"1984† advertisement for the Macintosh, which is widely remembered as one of the most successful Super Bowl commercials in history. Apple’s Partly Open Ecosystem Strategy One criticism of Apple has been that it pursued a â€Å"closed† strategy. But as West (2006) argues, the nature and value of openness differs between various stakeholders: suppliers, customers, end-users and complementors. With regards to systems vendors, Apple’s architecture was less open than the â€Å"IBM PC† (later â€Å"Wintel† platform) eventually led by Microsoft and Intel. Except for a brief period of authorized cloning (1994-1997), Apple operated as a vertically-integrated supplier of operating system software and hardware, exclusively available from Apple. Meanwhile Microsoft and Intel gladly sold their technology to systems vendors such as IBM and Dell - but vigorously fought rival attempts at competing implementations of their respective de facto standards. -4- However, with regards to third-party complements, as the leader of the Apple II (and later Macintosh) ecosystem, Apple worked nearly as vigorously to attract a supply of crucial software and hardware. For hardware, Apple helped create a market for third-party expansion cards with its Apple II, which was the largest market for such cards until the 1981 introduction of the IBM PC. Its 1984 Macintosh - sold as an information appliance - had no such internal expansion, but it promoted external expansion through such industry standard technologies as SCSI, Firewire and USB. Beginning in 1987, it allowed internal expansion of its desktop computers through the NuBus and later PCI standards. 4 Unlike Microsoft, Apple sold only a limited range of software applications and aggressively courted third party suppliers. For the Macintosh, it created a new job category - â€Å"software evangelist† - to attract 500 new titles from independent software vendors (ISVs) in the first year after the computers’ introduction (Levy 1994). Such complements are in the platform owner’s interest because they make it more valuable - the â€Å"hardware-software paradigm† identified by Katz and Shapiro (1985). In its strategy of controlling the entire platform but encouraging third party software, Apple was consistent with the longstanding strategy of computer platform developers such as IBM and Digital Equipment. The Microsoft and Intel role - unintended beneficiaries of IBM’s longstanding market power - marked an exception where proprietary platform leadership was divided between multiple firms. (Moschella, 1997; Bresnahan Greenstein, 1999). As with nearly all personal computer makers, Apple purchased its microprocessors from third parties who also supplied potential competitors. 5 -5- This computer-centric model of complements is not the only approach towards industry standardization. For decades, consumer electronics appliances - such as radios, televisions and CD players - were not user extensible, but ommunicated with external devices via well-defined standards. 6 Until they were cross-pollinated with handheld computers in 1996, cell phones more closely followed the appliance model than the computing one. And even today, there’s not a clear correlation between openness and sales in mobile phones. 1987-1997: The Lost Decade After the 1987 introduction of the Macintosh II , the first Macintosh with color graphics and internal expansion cards, Apple’s rate of innovation slowed to eventual stagnation. One key problem was losing the loyalty of an ecosystem that turned its attention to the fastergrowing IBM PC platform. Apple had helped launch the ComputerLand franchise chain in the U. S. with its Apple II product, but after 1981 the retailer increasingly used that nationwide network to sell IBM PCs (Moritz 1984). In 1985, Apple had used its advertising dollars to promote the new Aldus PageMaker software package, but in 1986 Aldus released a version for the IBM PC that bundled Microsoft’s fledgling Windows 1. 0 software (Woolf, 2002). To counter the threat of Windows, Apple in 1988 filed a lawsuit accusing Microsoft of copying the Macintosh user interface with Windows. Apple lost its lawsuit on the strength of a 1985 GUI license that (Apple partisans charge) was extorted by Microsoft under threat of Apple losing its right to ship the Microsoft-developed Basic interpreter for the Apple II, then Apple’s main revenue-generating product (Linzmayer 1999). Some (including even Bill Gates) once suggested that Microsoft should license its Macintosh technology to PC rivals (Carlton, 1997). However, such a shift could have reduced Apple’s margins and overall revenue stream to support its RD budget (which was larger than -6- Microsoft’s until 1994) (West, 2005). There have been no successful examples of a computer company shifting from a systems to licensing model (with NeXT, Apple and Palm being notable failures) and only one major example (Novell) of a hardware company shifting to software - very early in the product lifecycle. Whether or not Apple would have done better as a licensing company, from 1987-1997 it suffered major problems in terms of strategic leadership, implementation and operations. Mobilized to release the Macintosh in 1984, the company drifted after Jobs left in a 1985 power struggle with successor John Sculley. In the absence of the strong leader, the company’s freewheeling culture spiraled out of control. From 1987-1997, the company spent about $1. 5 billion in RD for cancelled or failed technologies, and lost another $1 billion in 1997 due to poor inventory management (Carlton, 1997; West, 2005). In particular, Apple failed with two attempts to update its aging operating system. In desperation, in December 1996 it purchased NeXT - where Jobs was chairman - and six months later Jobs became de facto CEO of Apple once more. Turnaround in the Jobs II Era In Steve Jobs’ second turn as CEO, the company moved dramatically both to fix operational problems and reassert its innovation leadership. Some of the changes were straightforward, such as outsourcing manufacturing and improving inventory turns to match Dell, the industry leader (West, 2002). In doing so, in the formulation of Moore (2005), Apple put its primary emphasis on marketing innovation but achieved strategic parity in process innovation. In minor ways, Apple’s product strategy became more open. Rather than various proprietary hardware interfaces that it had maintained for 15 years, it moved to embrace de facto or open -7- industry standards. These included the VGA video connector, the IEEE-1394 (â€Å"Firewire†) bus standard, and the Intel-created Universal Serial Bus (West, 2002). With its Mac OS X operating system (released in 2001), it sought to de-emphasize its own AppleTalk networking standard in favor of TCP/IP and other Internet standards. In 2006, it began shipping computers using the same Intel processors as the rest of the PC industry. However, in other ways, Apple became more vertically integrated and (at least as defined by Chesbrough 2003) less â€Å"open† in its innovation strategies: Distribution. From 1997-2000, Apple created its own online stores in the U. S. and 14 other countries, shifting distribution away from dealers that primarily sold Wintel machines. In May 2001, Apple opened its first retail stores in the US in May 2001, and six years later has some 170 stores in four countries. In Fiscal Year 2006, 16. 7% of its computer unit sales were through the Apple-owned stores - not counting online stores (Apple Computer, 2006). Applications. Jobs’s first major step as acting CEO in 1997 was to negotiate an agreement with Microsoft CEO Bill Gates to continue to provide Microsoft Office for the Macintosh. But since that time, Apple has bundled its own web browser, e-mail program, contact manager and music player with its OS, and developed separate software for page layout, presentations, photo layout, music editing and movie editing. Apple also pursued a vertically integrated strategy in its music business, as discussed below. Ironically, recent trends have seen increasing convergence in strategies between Apple and Microsoft. For its video game business, like its rivals Sony and Nintendo, Microsoft buys its microprocessors but designs its own software and hardware, and does not license them to others. Meanwhile, Microsoft’s â€Å"Zune† music players emulate Apple’s iPod vertically integrated product strategy ([emailprotected], 2006). -8- Successful Entry into Music Jobs’ largest strategic change was to engineer a successful related diversification into the music industry, beginning with a PC-based MP3 player application, then its iPod portable music player, and finally with its iTunes Music Store. The diversification has been crucial to Apple’s success, with music-related products accounting for 49. 5% of $19. 3 billion in 2006 revenues (Apple Computer, 2006). It has also had a major impact on the industry: It’s hard to overstate the impact of the iPod on the computer, consumer electronics and music industries since it was introduced in 2001. The iPod, arguably, is the first â€Å"crossover† product from a computer company that genuinely caught on with music and video buffs. It’s shown how a computer can be an integral part of a home entertainment system. Krazit 2006) One key to Apple’s success has been the iPod family of products - designed by Apple but assembled from third-party components by Chinese contract manufacturers (Cf. Sherman, 2002). 7 The iPods have won praise for elegance and ease of use, as have its iTunes software and music store download sites. As a result, in 2006 Apple held roughly 62% unit share in the US market for music players, and 29% of the global market, with a greater share of revenues (Wolverton, 2006; â€Å"A High Point for Apple†, 2007). The widespread adoption has brought a broad supply of complementary hardware and accessories, such as cases, home stereos and automobile adapters. Apple also successfully navigated the content landmines that plague any new entertainment media - in this case the â€Å"Big Six† (now â€Å"Big Four†) music labels. In the unfamiliar situation of high supplier power, Apple was still able to complete its catalog by attracting all the majors and -9- many independents, while capping the retail prices for individual songs at $0. 99 or â‚ ¬0. 9 in the US and EU, respectively. However, Apple made three other key strategic decisions: Systems innovation. As with its computers, Apple designed an entire system to work well together, including the player and music store. This was a contrast to most other manufacturers, which concentrated on either the store or the player, and could not coordinate their interaction as closely as Apple could. Even when Apple’s music players d id not have the best price or features, the overall system capabilities and integration set it apart. Platform agnostic. Apple made its entire system work equally well on Windows as on the Mac - something that it did with its QuickTime media software of the 1990s but not with its LaserWriter laser printers of the 1980s. The latter was later cited by Sculley as one of his major strategic mistakes (Yoffie, 1992). Closed design. Apple used a proprietary encryption system for encoding its music downloads, which meant that songs purchased from Apple could only be used on Apple players. On the one hand, as Jobs argued in an open letter to record companies, the secrecy made it less likely that the encryption would be cracked by hackers (Jobs, 2007). On the other hand, the decision created switching costs and helped protect Apple’s market share lead. Desperately Seeking Convergence The original idea of digital convergence - specifically convergence of communications and computing - is credited to a 1977 speech by NEC chairman Koji Kobayashi (cf. Kobayashi, 1986). During the 1980s and early 1990s, key aspects of the convergence idea were developed 10 and popularized by futurist Nicholas Negroponte and Apple CEO John Sculley (Sculley, 1987; â€Å"From Idiot Box to Information Appliance,† 1994; Gordon, 2003). By the mid-1990s, convergence was a reality, and strategists like David Yoffie (1997) were offering broad strategies for firms to cope with these changes. A variety of different approaches towards convergence devices have been tried (Table 3). Over time, both the optimism and the technology of convergence devices have affected the product design strategies of mobile phone makers, particular for the more expensive (and more profitable) upper end of the market. Even before mobile phones, convergence has been a recurring theme in the technology industry for years, with decidedly mixed results. In the late 1980s, Canon offered a converged personal computer called the Navi which incorporated a PC, fax machine, phone, answering machine, and printer into a single case. It died quickly (Johnstone, 1994). Converged GPS PDA systems were popular in Europe for several years, but were supplanted by dedicated car navigation systems (Canalys, 2006). On the other hand, converged printer-scanner-fax devices have been quite successful in the computing peripherals market. Convergence Imperatives in Mobile Handsets The appeal of convergence to the mobile phone industry is grounded in economics. With Europe’s mobile markets saturated, and the US close behind, the operators’ best hope to increase billings in those countries is to drive more revenue per user. That means people must be convinced to do more than just talk and send text messages with their mobile phones. Handset vendors, too, feel substantial pressure to add more features to their phones. A company that gets an edge in a new feature can gain a substantial margin and share advantage. For example, the Razr slim phone helped rescue Motorola’s leadership in the US market, while 11 Nokia’s lead in cameraphones in Europe helped it solidify its position there. Meanwhile, Nokia’s failure to emphasize flip phones cost it significant momentum in the US market. Converging a personal computer and a mobile phone seems like a logical way to get a new feature advantage. It ought to create new (data transmission) revenue streams for the operators as users browse the web wirelessly. And presumably a well converged phone might give the handset vendor that made it a major advantage in the market. Market Experiments The first five years of convergence mobile phones brought a series of failures and no true marketplace successes. Some of the problems were - as with the Newton PDA - due to an incomplete understanding of the product category by both producers and users. The products were also limited by the available hardware, including LCD screens, computing-capable microprocessors, and the batteries that both power-hungry components required. What is widely considered to be the first convergence phone came in 1996, when Nokia introduced the Nokia 9000, a mobile phone with built-in QWERTY keyboard marked in Europe as a replacement for a small laptop. However, the computer weighed 397 grams (about 3. 5 iPhones), and was not a major sales success. For the US market, in 1998 Qualcomm shipped the pdQ, the first converged mobile phone based on Palm OS. Like the Nokia 9000 it was too large and heavy (285 grams) for a cellphone, and found only a small audience, as did Qualcomm’s 208 gram follow-on product, sold as the Kyocera 6035 two years later. In 1998, Nokia, Psion, Motorola, and Ericsson banded together to create Symbian, a joint venture to adapt Psion’s EPOC PDA operating system for use in mobile phones. The next year, Ericsson shipped the first mobile phone based on Symbian, the r380, which did not sell well. 12 However, by 2001, both the device size and the design choices began to more closely match what customers wanted. The first such product was the Handspring Treo 180, the best-integrated (and almost immediately the most popular) Palm OS-based smartphone. In 2002, two other important smartphones came to market. The RIM Blackberry 5810 was the first RIM e-mail device to include a built-in phone. And Ericsson released the p800, a touchscreen-based smartphone whose early sales in Europe were comparable to what the Treo was doing in the US. The year 2002 also saw the first shipments of smartphones based on Windows Mobile (called Pocket PC at the time). As with other device makers who witnessed the rents extracted by Microsoft from PC makers, the major mobile phone vendors were leery of partnering with Microsoft, so it focused on working with second-tier Asian manufacturers eager to gain market entry using Microsoft’s brand and access to key enterprise buyers. RIM smartphone sales quickly surpassed those of both Palm and Ericsson (later SonyEricsson), but its dominance in North America had little impact elsewhere in the world, garnering only 8% of overall 2006 smartphone shipments. The leading smartphone vendor in 2006 was Nokia, with 50. 2% of the world market, while Symbian OS is the leading smartphone OS, with 67% share (Canalys 2007). Since its initial Nokia 9000 smartphone, Nokia has developed 10 subsequent models in its Communicator family, cutting the weight nearly in half with the 9300/9500 and the planned E90. However, most of its smartphone sales come either from phones in more traditional form factors or those (such as the E61/E62) that resemble the RIM BlackBerry. Canalys (2007) estimates 2006 smartphone sales as 64 million units - less than 7% of the total market. Even that figure is misleading, because it includes all mobile phones that have a â€Å"smartphone† operating system in them, regardless of whether the customer uses its features. 13 Market research conducted by Palm in 2004 showed that the vast majority of Symbian customers were unaware that the OS was built into their phones and were not making substantial use of its data features. This is more than an academic distinction, since the motivation for the industrys investment in smartphones was to drive more use of mobile data. If the customers don’t use the data features, the investment in smartphone software and hardware was largely wasted. As of 2007, the most successful converged phones in terms of actual data usage in the US and Europe are the e-mail devices, led by the RIM Blackberry. The Blackberry’s basic screen and keyboard layout has been copied by a wide range of competitors, including the Palm Treo, Nokia E-series, Motorola Q, and Samsung Blackjack. Efforts to create a converged entertainment device have been much less successful. The Nokia N-Gage gaming phone, launched in 2003, was a spectacular failure,9 as was (on a much smaller scale) the TapWave Zodiac, a converged PDA and game device. The Danger Hiptop youth communicator has been a mild success in the US and several other countries, but is offered by only a single operator and shows no signs of rapid growth. In 2005, Motorola launched the Rokr, a merged iPod and a mobile phone. It could hold only about 100 songs, and disappeared from the market quickly. Steve Jobs said later that his experience with the Rokr made him realize that Apple needed to completely control the mobile phone’s design in order to be successful - although critics at the time argued that the phone’s music capabilities were deliberately crippled by Apple to avoid cannibalizing iPod sales. As of early 2007, the most successful entertainment phones are probably the SonyEricsson Walkman phones. They are not widely available in the US, but in Europe they have helped increase SonyEricsson’s share and improved its image as a design leader. 14 Apple’s iPhone Strategy Product Concept While the existence (and name) of the iPhone had been anticipated, Steve Jobs nonetheless enjoyed tremendous interest when he announced the iPhone at the annual Macworld trade show on January 9, 2007. If the goal was creating interest, Jobs was successful: less than two months later, the term â€Å"iPhone† could be found (by Google) on some 60 million page s on the World Wide Web. 10 Compared to earlier generations of convergence phones, the main difference in the iPhone’s features was the screen. The iPhone featured the largest screen (8. 9cm diagonal, 320480) of any standard-sized cellphone. 11 To make room for the larger screen, the phone deleted a dialing keypad, and instead uses a touchscreen for dialing and other input functions. Under this screen was a stripped-down version of Apple’s Unix-based OS X operating system, with an iPhonespecific user interface that’s claimed to match the ease of use of the Macintosh and iPod. Despite an overwhelming avalanche of free publicity, the phone was not without its detractors. As with the original iPod, many analysts proclaimed the product overpriced, too big, or a niche product. Others questioned the lack of tactile feedback from the touchscreen keyboard, lack of a user-replaceable battery, lack of support for 3G networks, absence of an expansion slot, or more than a dozen other possible features (e. g. , O’Grady, 2007). The greatest criticism about Apple’s strategy was that the phone was â€Å"closed†. The most user-visible way was that (the initial model of) the iPhone was restricted to a single carrier, Cingular (which was renamed AT in January 2007). While new phones in the U. S. are typically â€Å"locked† to a single carrier to assure payback of an initial handset subsidy by the carrier, Apple used its iPod success to demand unprecedented control of iPhone distribution. 15 Cingular, the largest US carrier (26. 6% market share), was more willing to agreed to Apple’s terms that Verizon (24. 4% market share)12 (Sharma et al, 2007). The other major criticism was that Apple’s phone - unlike its PCs and even its iPods - allowed almost no user-installable software. In this regard, Apple was following a platform strategy distinct from both its own PC and other convergence phones. Platform Strategy Most of the earlier attempts at making convergence phones- as well as other convergence devices such as PDAs and handheld game players - have utilized the general-purpose computing platform strategy, first developed by IBM and adapted for minicomputers, workstations and personal computers (Moschella, 1997). Successful platform strategies have been shown to have three key attributes. New platforms identify a need (i. . customer market segment) not met by prior platforms - and win adoption by serving that segment better than other existing alternatives (Bresnahan Greenstein, 1999). Over time, winning platforms have shifted from vertically integrated strategies (e. g. , the IBM S/360) in which a single firm controlled the entire platform, to divided technical leadership where different firms control different parts of the platform (Bresnahan Greenstei n, 1999). And controlling the value provided by the platform requires control of the complements (e. g. through application programming interfaces) that make the platform valuable (West and Dedrick, 2000). The leading cell phone vendors have adopted inconsistent and changing strategies in operating systems. At first they embraced a business model styled after the PC market. Several vendors - including Nokia and Motorola - banded together to create Symbian, a shared operating system that they were all to use. Palm licensed its operating system to a spinout 16 company, PalmSource, and it was adopted by several major vendors including Sony and Samsung. Microsoft focused on licensing its Windows CE operating system to as many companies as possible, with its biggest successes coming from HP, Dell, and a series of companies in Asia. But recently the handset vendors’ OS strategies have become more proprietary. Nokia runs a proprietary software layer, called S60, on top of its Symbian based phones. SonyEricsson runs an incompatible layer called UIQ on its Symbian devices. Palm now has regained rights to its OS, and can make proprietary changes to it. Motorola is a Microsoft and Symbian licensee, but is investing heavily in its own version of Linux. As of early 2007, the mobile phone market appears to be headed toward a situation where the leading vendors will each have their own incompatible operating software (Table 4). Apple’s strategy is even more proprietary. It adapted its desktop operating system - in this case an unspecified subset of its Mac OS X desktop operating system - to run the iPhone. This lets Apple leverage some of its desktop software, including TCP/IP, web browser, and its QuickTime media player. Apple claims this will let the iPhone display standard HTML and http websites that were created for personal computers. This could be a substantial advantage, as most mobile device browsers have trouble displaying some websites designed for PCs. Although mobile browsers have made substantial progress, differences between the mobile web and the PC web have been an ongoing source of confusion for users, dating back to the introduction of the Wireless Application Protocol, which (among other problems) promised a mobile internet experience that it could not deliver (cf. Sigurdson, 2001; Palomaki, 2004). 17 However, Apple’s overall platform strategy is more akin to a consumer electronics appliance than a general-purpose computer. Unlike Symbian, Palm, and Microsoft, Apple is not allowing open development of third party applications for the iPhone,13 which has generated considerable controversy (e. g. Claburn, 2007). The idea of providing new functionality through software has been a common thread for computers and video games, but not for televisions, radios or (pre-†smartphone†) mobile phones. The utility of the home consumer electronics device has been provided by the content - whether pre-recorded or broadcast - and thus such platforms have evolved only rarely due to the high switching costs for infrastructure (or consumer library) investments to support a fixed standard. The different pattern of technological change has meant a different strategy for the adoption of new platforms. As with computing platforms, one entry opportunity for appliances is the unmet need, as with video recorder or MP3 format. Another option is superior performance - which is less often used for computing platforms, because all competing platforms will incorporate incremental improvements on an ongoing basis. However, the fixed standards of consumer appliance make improvements episodic: to compete with vinyl records, the compact cassette offered portability while the CD offered sound quality (cf. Grindley, 1995). In parallel, to improve sound quality broadcast audio progressed from AM to FM to digital (via the Internet, satellite, or over-the-air). Segmentation Strategy Despite predictions of convergence devices taking over the entire electronics industry, many of the results thus far has been disappointing. The Apple strategy illustrates the controversy between two market conceptions. 18 On the one hand is the goal of producing the device that converges the maximum number of functions for a broad mass market. This has been fueled by both the Kobayashi and Sculley utopian visions, and the product strategies of many firms offering convergence devices - whether it is MP3 players in cell phones, DVD (or Blu-ray or HD DVD) players built into videogame consoles, or Sony’s UMD movie format for its PlayStation Portable. With this market conception, the ideal mobile device would span the various possible roles: computing, communications, entertainment content, information management and any other function that could be offered in a portable device. In this case, the device supplants the need for a phone, an MP3 or video player, a laptop computer, handheld game console, and any other similar function. Both the Microsoft Windows Mobile phones and many of the Symbian phones (particularly those from Nokia) have sought this goal. The Apple strategy of an appliance device allows for an Internet-enabled web appliance, but without user-installable applications, it is not a general purpose extensible computer. Some believe this has doomed the iPhone; as venture capitalist Paul Kedrosky wrote: Is Apple serious that it won’t let third-party developers build software for the thing? If so, and put simply, the device will fail. A closed-box consumer electronics mentality will work in music players, but the future of mobile devices is as a platform, and that requires developers. (Kedrosky, 2007). Others have argued that the design tradeoffs in making devices means that no one product can be optimal on all dimensions. Strategy consultant Michael Mace (2007) argues that there are three distinct drivers for mobile devices: communications (as with a mobile phone), entertainment (as with an MP3 player or handheld game console) and information access (such as provided by a PDA). Each driver serves a different, distinct group of customers who don’t 19 want the other drivers. Under this typology, the iPhone would be an entertainment device with some communication and information capabilities - as with some of the Sony Ericsson Walkman phones - while most smart phones are more focused on communication (Figure 1). If this latter view is correct, then the mobile device market - like many other product categories - would be segmented into different types of users and user needs. The iPhone might be a poor substitute for a Nokia E90 (which seeks to be a laptop replacement), but instead would be competing with the Walkman phones and other entertainment devices. Mace concluded: Rather than looking for the mobile market to â€Å"converge† the way that most PCs converged to Windows, I think we should expect mobile devices to diverge into different segments. The right analogy for the mobile market isn’t PCs, it’s cars. As the car market grew in the 1900s, it stratified into trucks and minivans and SUVs and sports cars and so on. Mace 2007) Conformance and Deviation from Earlier Strategies Research on strategic management has traditionally emphasized how managerial discretion allows the manager to choose strategies that maximize a firm’s success (e. g. , Finkelstein Hambrick, 1996). More recent research has emphasized the durable interfirm differences that drive both strategies and the success of these strategies - either from scarce, inimitable and valuable resources, or from a firm’s capabilities and competencies derived from those resources (Barney, 1991; Grant, 1991; Galunic Rodan, 1998). Here we suggest the complex inter-dependencies of Apple’s iPhone strategy with its existing resources and competencies, as illustrated by Figure 2. From top to bottom: iPod. If resources are valuable, rare and inimitable, then clearly Apple’s greatest asset in entering the convergence phone business relates to the iPod. That includes not only its 20 innovation competencies, but brand awareness, reputation and distribution. In particular, the market-leading iTunes Music Store is an asset that none of the competing hardware vendors (or their operator customers) have fully replicated. Existing business model. The leveraging of the iPod ecosystem (particularly music and video downloads) directed Apple towards an iPhone business model, as would concerns about cannibalizing the existing iPod and download sales that comprise half the company’s revenues. Entertainment segment. Leveraging the iPod and iPod ecosystem would mean that Apple’s best opportunity for market entry lay in addressing what Mace (2007) terms as the entertainment segment of the device market that most closely matched existing resources and capabilities. This segment also had a strong affinity with the Macintosh market, which has traditionally been focused on creative users as opposed to mainstream business professionals. Entertainment-centric phone. From its segmentation and capabilities - including the lack of phone competencies - the device would be more oriented towards entertainment than a phone. Appliance. As with the iPod or a CD player, the device would be more like an appliance than a computer. â€Å"Locked† or â€Å"closed† strategy. The company’s business model - particularly the switching costs created by the copy-protection of its music store - encouraged the choice of a closed business model. The company appears to believe that the choice of an entertainment segment and an appliance concept allows it to use a more closed model, and by doing so it can avoid the price wars and commodization facing other mobile phone makers, 21 Lack of a software ecosystem. The choice of a closed strategy (for applications) makes Apple independent of the need to build an ecosystem of third-party software developers, as have Symbian, Microsoft and Palm. Power of the network operators. The oligopoly power of the mobile phone operators both supports and allows Apple’s model. As Claburn (2007) wrote: â€Å"Only the phone and cable companies want to remain closed, which is why †¦ everyone hates them. † Need to acquire phone competencies. Although software is often a problem for electronics makers - as with the HP and IBM examples reported by Leonard-Barton (1992) - Apple has long been strong in software. With the iPod, it has developed capabilities for designing portable battery-powered devices. However, even with help from experienced manufacturers, Apple may need several years to develop and integrate the necessary competencies for selling world-class phones - including radio engineering, regulatory compliance and working with network operators. For example, in 2000 PDA maker Handspring sought to become a mobile phone company by releasing an expansion card for its PDA, but more than six years (and 10 Treo models) later, its phones have still have disadvantages compared to the top four phone makers (Nokia, Motorola, Samsung, Sony Ericsson). Discussion Openness in Mobile Devices Firms face an inherent trade-off in choosing the level of openness in their platform strategies. A completely open strategy will not capture value, while a completely closed one will not create value, so the optimal profit is obtain by an intermediate selection (Simcoe, 2006). While Apple’s strategy for the iPhone was criticized as being â€Å"closed,† the relevant questions are: Compared to what? And closed to whom? 22 The later computer industry was relatively open, particularly in the 1990s. With two major operating systems available for license - Windows and Unix - there were many entry opportunities for both systems vendors and markets of application software, increasing competition and presumably reducing buyer prices. However, such licensing did not facilitate entry by competing operating systems vendors (Bresnahan and Greenstein, 1999; West, 2006). At the other extreme, the most popular computerized entertainment device - videogame consoles - have a largely closed system. Since the 2001 exit by Sega, the home console market has been a cozy oligopoly with only three firms: Sony, Microsoft, Nintendo. Meanwhile, console makers use intellectual property law both to decide which complements will be provided, and to extract royalties from complement makers (Sheff, 1993; Gallagher and Park, 2002). Console makers today attract new adoption by setting a low initial hardware price, which is cross-subsidized by the subsequent revenue stream of videogame sales. But this â€Å"razor and razor blade† strategy was actually initiated by US cell phone carriers (and later imitated by their overseas counterparts), in which phones were â€Å"locked† to a specific network in order to recover the handset subsidy through subsequent monthly service revenues. Apple’s decision to lock the first model of a popular phone series to a single carrier is comparable to the rollout strategies of many earlier phone families. Its decision to block (or at least restrict) the addition of third party software is unusual for a convergence phone, but would not be considered unusual for an appliance phone or a home electronics product. This raises the question as to whether iPhone users will see the complement that adds the most value as being software (which is not allowed) or content (which is encouraged). Finally, its locking of its copyprotected music downloads to its own product is consistent with its current iPod strategy (later 23 imitated by Microsoft), and thus far consumers have favored Apple’s integrated (but highswitching-cost) ecosystem over more open alternatives. Apple’s Strategy It would be silly to judge a company on the success of a single product strategy - or, even more so, to judge the success of such a strategy before a single product had been shipped. However, Apple’s iPhone strategy is of huge importance to Apple, marking only its fourth industry entry after personal computers (1977), PDAs (1993) and portable music players (2001). 14 Many of the strategies are dictated by the core competencies that the company has acquired over its thirty year history - notably in product marketing and innovation. It also reflects the competencies not available to Apple - but to its competitors - such as the financial assets and market power of Microsoft and the mobile phone distribution channels of Nokia and Motorola. Still, there have been important changes in Apple’s strategies over the years. To use the typology developed by Leonard-Barton (1992) in her study of Hewlett-Packard and IBM, Apple had a consistently high level of technical skills, the effectiveness of the managerial systems varied dramatically between the two reigns of Steve Jobs as CEO and the intervening period of ineffective leadership. Absent strong leadership, the innovation empowerment culture became an dysfunctional entitlement, both as predicted by Leonard-Barton and recounted in various early and later histories of the company (Moritz, 1984; Carlon, 1997). Meanwhile, although Apple has sought to both nurture and control its ecosystem since the Apple II days, the iPhone reflects the least nurturing and most controlling strategy to date. Whether this is because of organizational learning (the use of Macintosh complements to support rival platforms) or the product model (a music appliance) is hard to determine from outside the 24 nusually secretive company. A third possible explanation is that the iPhone reflects the intersection of a platform with an increasing number of bundled applications (OS X) with a product category that has seen disappointing third-party software sales. Still, the decision to break from the PC-centric model of platform and application software - to an appliance-centric entertainment de vice - suggests that Apple is less constrained by the â€Å"dominant logic† (in the terms of Prahalad and Bettis, 1986) of PC platform competition than its non-PC rivals. The Apple strategy might appear to match the Bresnahan Greenstein (1999) typology of indirect entry of a new platform into a contested market, by using the iPod to first serve an untapped need and then extend to cover the convergence device market. The problem with such a characterization is that this assigns an intentionality (or strategic foresight) to the 2001 market entry strategy that appears to be absent from both accounts of the iPod’s development (Kahney, 2004) and accounts that the decision to enter the phone market dated only from 2005 (Sharma et al, 2007). Instead, the utilization of the iPod as a beachhead to convergence devices fits Mintzberg’s (1978: 946) classic definition of an emergent strategy, in which the absence of perfect a priori information, â€Å"Strategy formation then becomes a learning process, whereby socalled implementation feeds back to formulation and intentions get modified en route. † As with the Mintzberg critique, it would appear that the indirect entry can be subdivided into the a priori and ex post facto alignment of a new market as entry to an existing one. Dominant Design An extensive literature has postulated that new technologies converge onto a single â€Å"dominant design† (Anderson Tushman, 1990; Utterback, 1994). But even supporters have questioned whether some definitions of a dominant design are tautological - i. e. the design that dominates is the one that gets dominant market share (Suarez and Uttterback, 1995). 25 The current trajectory of the convergence device market raises a more fundamental question: is it reasonable to assume a priori the emergence of a single converged design? And, if the definition of a â€Å"dominant† design is the common subset across multiple successful product approaches, then is it possible for managers to anticipate which features will be common to the ultimate winner and which ones will allow for firm variation and market experimentation? As of today, neither the unified nor segmented model of convergence devices has been proven (or disproven). But there are more example of the latter - multiple winning designs - model than has been emphasized in the dominant design literature. Take the typewriter, a product ategory commoditized by the mid-20th century but still subject to product variation. Prior research posits the design was crystallized by the beginning of the 20th century, with the Underwood manual desk typewriter. But does this allow for the portable variant, or the electric typewriter? If the dominant design includes typebars, then how does that allow for the main office typewriters of the 1970s , the typeball (from IBM) and daisywheel (from Xerox)? Closer to the convergence example, broadcast radios tended to have a volume and tuning knob and some sort of dial - but these are merely examples of form following function. Within radios, there are a variety of form factors - desktop radios, pocket radio, portable â€Å"boom box,† clock radio, component and min-component stereos: are these all reflecting a single dominant design? Among home phones, three models emerged: desk phones, wall phones and cordless phones, while personal computers had different desktop and laptop designs. So if firms stop experimenting when a design takes the lead, are they conforming to the dominant design or foreclosing the opportunity to service significant untapped markets? 26 References â€Å"A High Point for Apple,† New York Times, 10 January, 2007, URL: nytimes. om/imagepages/2007/01/10/technology/20070110_APPLE_GRAP HIC. html derson, Philip and Michael Tushman, â€Å"Technological Discontinuities and Dominant Designs: A Cyclical Model of Technological Change,† Administrative Science Quarterly, 35, 4 (December 1990), 604-633 Apple Computer, Inc. , Form 10-K, U. S. Securities and Exchange Commissi on, 29 Dec. 2006. 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Chposky, James and Ted Leonsis, Blue Magic: The People, Power and Politics Behind the IBM Personal Computer, New York: Facts on File, 1988. 27 Claburn, Thomas, â€Å"Is a closed iPhone doomed to fail? † Information Week, 11 Jan 2007, URL: informationweek. com/showArticle. jhtml? articleID=196802882 Finkelstein, Sydney and Donald Hambrick, Strategic leadership: top executives and their effects on organizations. Minneapolis/St. Paul: West Pub. Co. , 1996. â€Å"From idiot box to information appliance,† Economist, 330, 7850 (Feb. 12, 1994), pp. 5-7. Gallagher, Scott and Seung Ho Park, â€Å"Innovation and Competition in Standard-based Industries: A Historical Analysis of the U. S. Home Video Game Market,† IEEE Transactions on Engineering Management, 49, 1 (February 2002): 67–82. Galunic, D. Charles and Simon Rodan, â€Å"Resource Recombinations in the Firm: Knowledge Structures and the Potential for Schumpeterian Innovation,† Strategic Management Journal, 19, 12 (Dec. , 1998), pp. 1193-1201. 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Bettis, ed. , Strategy in Transition, Oxford: Blackwell, 2005, pp. 274-301. 31 West, Joel, â€Å"The Economic Realities of Open Standards: Black, White and Many Shades of Gray,† in Shane Greenstein and Victor Stango, eds. Standards and Public Policy, Cambridge: Cambridge University Press, 2006, pp. 87-122. West, Joel and Jason Dedrick, â€Å"Innovation and Control in Standards Architectures: The Rise and Fall of Japan’s PC-98,† Information Systems Research, 11, 2 (June 2000): 197-216. Wolverton, Troy, â€Å"Zune doesn’t shake iPod’s market lead,† San Jose Mercury News, 17 Dec. 2006, mercurynews. com/mld/mercurynews/16263552. htm Woolf, Gordon, â€Å"What We Might Have Done,† PC Update (newsletter of Melbourne PC User Group), Nov. 2002, URL: melbpc. org. au/pcupdate/2211/2211article3. htm Yoffie, David B. â€Å"Apple Computer - John Sculley, Chairman CEO - Presentation to ISMP Participants, July 6, 1992,† videotape, catalog #793507, Harvard Business School Publishing, December 1992. Yoffie, David B. in â€Å"CHESS and competing in the age of digital convergence,† in David B. Yoffie, ed. , Competing in the Age of Digital Convergence, Boston, Mass. : Harvard Business School Press, 1997. 32 Figures and Tables Table 1: Durability of global market share by leading mobile phone makers Company 1994 2000 2006 Nokia 21. 0% 30. 6% 34. 1% Motorola 32. 5% 14. 6% 21. 3% Sony Ericsson § 10. 9% 10. 0% 7. 3% Samsung ; 5% 5. 0% 11. 6% LG ; 5% ; 5% 5. % NEC 8. 9% ; 5% ; 5% Matsushita 5. 4% 5. 2% ; 5% Source: Dataquest (1994, 2000) and IDC (2006)  § 1994, 2000: Combined share of Sony Ericsson joint venture partners. Table 2: Key milestones in Apple product strategies Date April 1976 April 1977 Jan. 1983 Jan. 1984 Sept. 1985 March 1987 Oct. 1991 1987 Aug. 1993 Dec. 1996 Sept. 1997 May 1998 Nov. 1997 May 1998 Jan. 1999 March 2001 May 2001 Oct. 2001 Apr. 2003 Oct. 2003 Jan. 2004 Sep. 2005 Oct. 2005 Jan. 2007 Segment corporate PC PC PC corporate PC PC PDA PDA corporate corporate PC distribution distribution distribution PC distribution music music music music music music music Milestone Steve Wozniak demonstrates Apple I circuit board Apple introduces Apple II Lisa introduced with $10,000 list price Macintosh introduced at $2,500 Co-founder Steve Jobs leaves Apple to found NeXT First Macintosh with color and built-in expansion slots First PowerBook laptop computer John Sculley touts â€Å"Knowledge Navigator† product concept Newton MessagePad introduced Apple purchases NeXT for NextStep operating system; Jobs returns to Apple Jobs named interim CEO Jobs introduces iMac Apple opens first online store, serving U. S. customers Apple U. K. pens first online store outside US Apple Store extended to France, Germany and five other countries Apple ships Mac OS X based on NextStep and BSD Unix, its first all-new PC operating system in 17 years First Apple-owned retail stores open near Los Angeles and D. C. First iPod models introduced at $400 and $500 iTunes Music Store opens in U. S iPod, iTunes Music Service add Windows support Apple, Motorola begin phone collaboration Motorola introduces ROKR mobile phone with iTunes Apple adds video to iPod, iTunes Music Store; featured on cover of Time magazine iPhone announced; company renamed from â€Å"Apple Computer† to â€Å"Apple† 33 Table 3: Evolution of convergence phones Date 1967 1972 1984 1987 April 1993 Aug. 1993 Sept. 1993 March 1996 1996 Nov. 1996 Sept. 1998 Feb. 1999 March 1999 Oct. 1999 2000 July 2001 Oct. 2001 2001 2001 May 2002 2003 June 2003 Sept. 2005 Jan. 2007 Company NEC Xerox Psion Apple AT Apple Sharp Palm Computing Nokia Microsoft Qualcomm Research in Motion Ericsson Samsung Nokia Psion Handspring Research in Motion Ericsson Audiovox Nokia Palm Motorola Apple Product Announcement Chairman/CEO touts CCC. Researcher Alan Kay publishes paper advocating handheld computer (â€Å"DynaBook†) Psion Organizer, keyboard-based database CEO John Sculley touts â€Å"Knowledge Navigator† product concept EO pen-based PDA Newton MessagePad pen-based PDA Sharp PI-3000 (â€Å"Zaurus†) pen-based PDA Palm 1000, 5000, pocket-sized pen-based PDAs Nokia Communicator 9000, keyboard-based cell phone Windows CE 1. shipped in H/PC (â€Å"Handheld PC†) devices from NEC and Casio pdQ, first Palm OS-based cell phone First BlackBerry keyboard-based e-mail appliance Pen-based Ericsson R380 is first smartphone with Symbian OS MP3 Phone supports eight downloadable songs Nokia Communicator 9210, keyboard-based smartphone with Symbian OS Exits PDA business Treo 180, phone with stylus and keyboard based on Palm OS First BlackBerry e-mail device with voice telephony built in p800 touchscreen-based smartphone with Symbian OS Thera is first US phone shipped with Microsoft Pocket PC operating sy stem N-Gage game/phone device Acquires Handspring and its Treo phone line ROKR phone with support for Apple’s iTunes Music Store iPhone touchscreen handset 34 Table 4: Comparison of mobile device platforms Vendor Model Intro date Weight Height Width Thickness Screen size Screen resolution Form factor Input mode Network WiFi OS Downloadable apps Memory capacity Memory card MP3 Java Camera Apple iPhone 7-Jan-2007 Samsung SGH-F700 12-Feb-2007 Sony Ericsson W950 13-Feb-2006 Nokia E90 7-Feb-2007 Nokia E61i 12-Feb-2007 Research in Motion 12-Feb-2007 Palm 15-May-2006 Motorola Q 16-May-2006 BlackBerry 8800 Treo 700p 134 g 114mm 66mm 14mm 2. 5† 320240 BlackBerry Thumb keyboard GSM+EDGE proprietary BlackBerry 64mb microSD X X 180 g 112mm 58mm 23mm 2. † 320320 BlackBerry Thumb keyboard CDMA; EvDO Palm OS 5. 4 Palm OS 128mb SD X X 1. 3 mp 135 g 114mm 61mm 11. 7mm 3. 5† 480320 Tablet Touchscreen GSM+GPRS X Modified Mac OS X 4GB,8GB X 2. 0 mp n. r. 104mm 50mm 16mm 2. 8à ¢â‚¬  440240 Slide-out Mini keyboard GSM; HSDPA proprietary n. r. n. r. microSD X X 5. 0 mp 112 g 106mm 54mm 15mm 2. 6† 240320 Candy bar 10 key GSM; WCDMA Symbian OS 9. 1 UIQ 4GB X 210 g 132mm 57mm 20mm 4. 0† 800352 Clamshell Mini keyboard GSM; HSDPA X Symbian OS 9. 2 S60 n. r. microSD X X 3. 2 mp 150 g 117mm 70mm 13. 9mm 2. 8† 320240 BlackBerry Thumb keyboard GSM; WCDMA X Symbian OS 9. 1a S60 n. r. microSD X X 115 g 116mm 64mm 11. 5mm 2. † 320240 BlackBerry Thumb

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Systems and Operations Management - Assignment Example The solution provided by the combination of a supply chain management system and enterprise resource planning solution will provide the framework that will support Atokowa in terms of its demand for data, information and knowledge. Corporate ambidexterity will enable Atokowa to respond to the current challenges and the demands of the future while protecting its bottom line. The same is true for transforming Atokowa into a learning organization. The recommended solutions not only will support an ambidextrous organization it will also provide the necessary infrastructure to a learning organization. The initiatives proposed by George Hargreaves and Hayley Atokowa can be considered the first step towards the right direction in expanding the market and widening the demography of Atokowa. The proposed implementation and integration of an enterprise resource planning solution and supply chain management system will support the initiatives. Creating an ambidextrous and learning organization will create the necessary corporate culture of excellence geared towards continuous improvements. Table of Contents Executive Summary 2 Table of Contents 3 Background of the Case 4 Business Analysis 4 Issues 5 Pricing Strategy 5 Operating Issues of ASIS 6 Customer Service Operations 6 Custom Print 6 Warehousing 7 Atokowa Supply and Purchasing: 7 Atokowa Brands: 7 Expanding Presence in the Internet 8 Information Technology 8 Conclusion 8 Recommendations 10 Pricing Strategy 10 Operating Issues of ASIS 10 Customer Service Operations 11 Custom Print 11 Warehousing Supply and Purchasing 11 Atokawa Brands 12 Internet Initiatives 12 Atokawa as a Learning and Ambidextrous Organization 13 Change Management 14 Bibliography 15 Background of the Case Atokowa is an Australian company providing office supplies and stationary products catering to business and individual clientele. Founded in 1964 the company now boasts of key presence all over Australia providing one stop shops for stationary and office supplies. When the company was turned over to Jonathan Atokowa, he expanded the business to include several key executives covering specific areas of operation within the company. Jonathan also focused on technology after realizing that this will be the future of the industry. Business Analysis Atokowa business process can best be described as having three revenue streams. The service revenue stream is provided by the Custom Print, the product label stream and the retail outlet revenue stream. Custom Print provide a production chain process that starts with an order from a client, actual production work from Atokowa and then delivery of the manufactured goods. Atokowa labels are conferred to generic products for maximum profit. However, the choice of product is random and there are no real criteria or structure in the choice of product and the quality of product that will be sold under the Atokowa label. A real effort to develop an Atokowa brand and have it Toll Manufactured to ensure quality and consistency should be planned for the future (Henry J. Johansson, 1993). Atokowa retail process includes consignment and actual purchase of items from vendors then selling it at a slightly higher price. Agreements with label owners and manufacturers and distributors do not include actual supply chain plan agreement, purchases and supply are determined by orders from Atokowa for delivery to the warehouse then eventual

Gillingham FCs Essay Example for Free

Gillingham FCs Essay Scott Jones is a 27 year old, mediocre footballer, who plays for First Division club Gillingham. Gillingham are an average side who are likely to be in the First Division for a long while as they dont possess the quality to reach the Premiership, but they are too good to be relegated to Division two. Scott enjoys his job as a footballer due to the fact that he is getting paid a lot of money. He does enjoy his football, but the main reason he is a footballer is because he wants lots of money. Scott got recognised as a good footballing talent when he caught the eye of one of Gillingham FCs local scouts. Scott was playing for his Sunday league team at the age of 18, and gave an excellent performance. He had no knowledge of the scouts presence, until the manager said that the scout thought he had serious potential and wanted to sign him for Gillingham. Scott did sign, and within a few months of him joining Gillingham FC, Scott made the first team, and became a regular from there on. Scott has been at Gillingham for 9 years now and has become one of their best players. Scott enjoys playing for Gillingham FC but little does he know that his career is about to take a huge turn. Scott sat anxiously outside the managers office. He adjusted his tie, which he wasnt used to wearing, and sat there thinking to himself what this meeting could be about. He was confused as to whether he had done something wrong or whether perhaps the club wanted to extend his contract. He had no idea and was eager to get it out of the way. Scottie, do you want to come in? We need to have a little chat said Phil Taylor, the Manager of Gillingham Football Club. Scott stood up and entered the room nervously. Now Scott, we wanted your opinion on this and wanted to see how you felt before we did anything. Weve had an offer come in from Fulham for you. It is very generous, for both the club, and for you. You will be able to get a very good contract from them, and youll be able to play Premiership football. What do you say? Do you want to stay, or are you happy to leave? said Phil. Scott, who felt relieved that he wasnt in trouble, then replied Sounds good to me. If its good for the club then Ill go. Scott was extremely excited about the prospect of playing in the Premiership, but he would have to wait 2 months until he could sign, as the transfer window was closed. Scott was even happier about the fact that he would be getting paid an awful lot more money, his wages were being doubled. Scott felt on top of the world! As he was still contracted to Gillingham for 2 more months, Scott still had to train with them; however, he didnt have to play for them as Fulham made an agreement with Gillingham as part of the deal. Scott enjoyed training, even more so now that he knew he was moving to Fulham next season. Scott still trained hard, but didnt take it as serious as usual, as all he could think about was all that money he would be getting. Right lads, well do some 5 a side. Do some stretches then get yourselves into teams said the manager. Scott just wanted to play 5 a side and so didnt bother doing any stretches. This was a silly thing to do. Halfway through the game, Scott was running with the ball at his feet, and just as he was going to shoot, his studs got caught in the ground and he twisted his knee. It looked incredibly painful, and Scott was in agony. The Physio came on and took him back to the medical room, to see what he had done. It was very serious and so Scott had to be taken to hospital. About an hour after taking a look at Scott and doing some tests, the doctor came back with his diagnosis. Im afraid, its bad news. Youve torn cruciate knee ligaments in your right knee and you have also broken your ankle. This will take an enormously long time to recover from, and there is a 50% chance you will not be able to continue your career as a footballer, if indeed you do recover Scotts heart sank. His career was over, as was his dream of playing in the Premiership. At the age of 27 Scott would only have about 5 years maximum left to play as a footballer, but now, he would be out for at least 2 years, and if he did recover, he would be past his best. Scott was absolutely devastated. He would have to stay in hospital over night while they did more tests and then in a week, he would have to undergo a major operation. For the next week, Scott just stayed at home, in bed, thinking of what he could have become and how much money he could have got. He felt sorry for himself but he was also beating himself up thinking that maybe this whole thing would never have happened had he done his stretches before playing 5 a side. Scott was distraught and he had never been so down in his life. He was thinking, what can he do now?

Csr Case Study On Ikea Management Essay

Csr Case Study On Ikea Management Essay This report identifies Corporate Social Responsibility (CSR) as a demanding topic that has moved from ideology to reality and is acknowledged as a significant dimension of contemporary business practices and has been recognized as an important tool for business survival in the 21st century. This report takes into deep understanding of CSR by depicting a road map of core subjects with related issues and implementation based on the principles of CSR and discusses briefly on its characteristics; pros and cons; theories and approaches; justifications and fundamental principles. This report gives an insight on the significance of CSR and examines in detail about the expected key potential gains from its operational use followed by the discussion on the problems and barriers that CSR generally faces .Finally the report chooses the case study on IKEA and discusses in depth about its CSR experiences by studying its development and strategy dimensions of CSR in corporate social agenda(strateg ic and responsive forms of CSR) and analyses IKEAs responsibilities as integral elements of strategy with a brief discussion on CSR communication. The concept of CSR has widened its scope and its increasing global demand makes us to realize the responsibilities of a firm with its dimension towards social, economic and environmental impacts. INTRODUCTION: This report identifies Corporate Social Responsibility (CSR) as a hot topic and the reason for choosing CSR is due to its high profile attainment in the academic domain and most of us feel CSR as an absolute necessity to define the roles of organizations in Society and apply their responsibilities to their businesses in terms of social, ethical and legal standards. Moreover, CSR has become a globalised concept and achieved business prominence because of its geographical prevalence from US origin to its widespread suitability and establishment in Europe. This report structures the content to understand the concept of CSR by depicting a road map of core subjects with related issues and implementation based on the principles of CSR and discusses briefly on its characteristics; pros and cons; theories and approaches; justifications and fundamental principles. This report gives an insight on the significance of CSR and examines in detail about the expected key potential gains from its ope rational use followed by the discussion on the problems and barriers that CSR generally faces .Finally the report chooses the case study on IKEA and discusses in depth about its CSR experiences by studying its development and strategy dimensions of CSR in corporate social agenda(strategic and responsive forms of CSR) and analyses IKEAs responsibilities as integral elements of strategy with a brief discussion on CSR communication. UNDERSTANDING CSR: The term CSR seem to be new but research predicts that there has been an evolution of its concept throughout many decades. Way back in 30s of last century, the focus of marketing was initially on distribution and logistic, that was about how to provide some products at minimal cost. With the total marketing, the centre of attention is to set on the selling systems on the marketing mix comprising the 4 Ps: Price, Products, Place, Promotion. Social marketing emerged in the 70s whereby the company decides on the long-term interests of stakeholders internally as well as externally. A stakeholder could be any individual or a group, who can influence or get influenced by behavioral impacts of an organization. The categories of the companys stakeholder are shown in the table below: Companys Organizational structure and location Involvement in the Business activity Internal External Direct Shareholders, investors, managers, employees Customers, Lenders, Tax agencies Indirect Consultants, Suppliers, contractors Community, NGOs, Media General public Professional bodies The impact of any organization on the society through their operations, products or services rendered by associating with stakeholder groups such as customers, suppliers, employees, investors and community and this can be displayed in the form of a diagram below Source: Mallen Baker (2007) Different terms and ideas are associated and so it is difficult to define CSR due to ambiguity in the CSR field of research. There is always a problem to stick onto universal definition of CSR as the concept ranges from mere compliance with law to pure Philanthropy. Corporation refers to group of members acting as an individual, be it for business or elsewhere. Philanthropy has little to do with CSR because philanthropy is about how a company spends its money and CSR is about how a company generates money and how responsibly they conduct their business in doing so. However, European commission identifies CSR as a broad concept and recognizes, CSR as a concept whereby companies integrate social and environmental concerns in their business operations and in their interactions with their stakeholders on a voluntary basis(Commission of the European Communities 2001). WHAT CSR IS NOT? 1. It is not an alternative for the regulation of companies! 2. It is not a replacement for how companies should manage their social, ethical and environmental impacts! 3. It will not save the world! CHARACTERISTICS OF CSR: The main features of CSR can be summarised as shown in the table below: Features Description Triple-bottom-line Economic, social and Environmental Voluntary All activities are taken up voluntarily. Stakeholders integrity Connecting all parties involved. Long-term action Carrying activities over a long-term period. Credibility Enhances the credibility of the firm. PROS AND CONS OF CSR: Arguments for CSR Arguments against CSR Enhances reputation in society. Solves the problems caused by business in society. Stabilises corporate power with responsibility. Increases long-term profitability Beyond government regulations. Adjusts to imbalanced demands of stakeholders. Improves environmental conditions. Business should be meant for profit maximization. Enforces unequal costs among competitors. Stakeholders compelled to hidden costs. Business may lack social skills. Makes to forget the aims of the business Social responsibility cannot be a legal responsibility. Places responsibility on the business but not on individual. CSR THEORIES AND APPROACHES: The focus on economic, political, social and ethical aspects in social reality aspects according to Parsons (1961) are primarily based on four features that can be perceived in any social structure such as adaptation to the environment ,goal attainment, social integration and pattern maintenance or latency. This hypothesis led to the classification of CSR theories into four types which can be depicted in the following table with their related approaches. TYPES OF THEORIES AND ITS FOCUS APPROACHES ILLUSTRATION INSTRUMENTAL THEORIES Focus on the economic aspect of the interaction between business and society Augmentation of shareholder value This theory argues that CSR is the only means to the end profits. It is based on wealth creation that is measured by share price. Strategies for competitive advantage Social investments in the context of competition Strategies based on the view of firms available natural resources. Strategies related to the bottom of the economic pyramid. Cause -related marketing Considering Socially recognised philanthropic activities applied as an instrument in marketing POLITICAL THEORIES Focus on the business power applicable in the areas of politics Corporate constitutionalism Firms social responsibilities arise from their strength of social power Integrative social contract Assumption of the existence of contract between the business and society. Corporate citizenship The firm is perceived as a citizen with participation in community. INTEGRATIVE THEORIES Focus on the integration of social demands Issues Management Firms response to the social and political issues and their impacts Public Responsibility Current legal procedures and public policies are considered as recommendations for social performance Stakeholder management Stabilizing the firms stakeholders Corporate social performance Exploring the responses from social legitimacy to social issues ETHICAL THEORIES Focus on the right factor to attain a good society Stakeholder normative theory Considering trustful duties towards firms stakeholders Universal rights Considering the frameworks related to human rights, labour rights and respect for environment Sustainable development Achievement of human progress by accounting present and future generations The common good Awareness towards the common good of society JUSTIFICATIONS FOR CSR: The prevailing justifications for CSR are shown in the picture below: Moral obligation Attaining commercial accomplishment in approaches that tribute ethical value Insufficient assistance to stabilize complicated competence related to social and economic interests. Varied personal values among managers and stakeholders Licence to operate Developing goodwill to safeguard the consent of Governments and stakeholders Licences and approvals are needed for a business to operate. However, this kind of approach will have to compromise in controlling CSR agenda to the externals that lack knowledge about companys operations and competitive positioning. Encourages defensive responses for time being. Sustainability Self-interest to encounter the present needs without compromising the future needs Efficiency on environmental issues yielding immediate economic benefits. In other aspects other than environmental issues, intangible long-term results give a weak justification for short-term costs. Existing justifications focus on the pressure between the firm and society rather than bringing coordination. These generic rationales give a trivial guidance for taking up company activities. FUNDAMENTAL PRINCIPLES OF CSR: CSR mainly relies on three fundamental principles such as Economic, Social and Environmental areas. The purpose of CSR is to integrate business activity with its culture for attaining sustainability in its economic, social and environmental areas. Each fragment of CSR includes activities, which differ depending on the type of firm and the needs of stakeholders. ECONOMIC AREA: The firm is expected to behave as a transparent enterprise .Positive relationship among the investors, customers, suppliers and shareholders is expected. Economic impacts at local, national and international levels should be monitored. Stakeholders and the activities of CSR in the economic area of the market are shown in the table below: Economic area Market Stakeholders Owners and investors Customers/consumers Suppliers /partners Regulatory bodies Media CSR activities Creates ethical codex Transparency Best practice management Practice anti-corruption Build Stockholders relations Build Customer/consumer relations Build suppliers relations Build investors relations Protect intellectual property SOCIAL AREA: Responding and tackling the behavioral attitudes to employees in the working environment and focuses on assisting the local community. The company influences the working standards, education, health safety and develops the cultural aspects. The stakeholders and CSR activities in the social area are shown in the table below: Social area Stakeholders Work location Local community Employees Unions Non-Profit organizations Public CSR activities Health safety of the employees Human resources development Get rid of child labour Follow working standards Supporting laid-off employees Assurance of jobs Supporting social integrity Corporate volunteerism Donor ship Educating Public Improving the quality life of employees Creation of jobs and develop local infrastructure. ENVIRONMENTAL AREA: The Company focuses on its impact on ecosystem and elements like land, air and water. The company feels its determination to protect the natural resources. Environmental area Stakeholders Groups related to environmental aspects. CSR activities Eco-friendly processing and manufacturing products and services. Agreement with regulatory and standards(ISO,EMAS) Renewal of energies policy by recycling and using eco-friendly products. Lessening the environmental impacts. Protecting the natural resources. ROADMAP FOR CSR: The following roadmap depicts the core subjects and CSR implementation based on the principles . Source: vi.unctad.org/russiast09/docs/millercsr.ppt CORE SUBJECTS AND ISSUES: Issues related to core subjects of CSR can be depicted from the following table: CORE SUBJECTS ISSUES ORGANIZATIONAL GOVERNANCE Shareholder activism Political economy Cross border investments by foreign investors HUMAN RIGHTS Due attentiveness Risk conditions Escaping complicity Determining grievances Inequity and susceptible groups Civil rights Political rights Employees fundamental rights Socio-economic and cultural rights LABOUR PRACTICES Social conversation Child labour Forced labour Employment relationships Work conditions Social security Health and safety at employment Training and progress in the employment ENVIRONMENT Avoidance of Pollution Maintenance of resources Mitigating and adapting climatic change Protecting the nature REASONABLE OPERATIONS Anti-corruption Sensible political implications Good competition Encouraging social responsibility in the field of influence Assessing the value for property rights CONSUMER ISSUES Awareness Market sensing Health and safety for consumer protection Consumption sustainability Consumer support and solution for disputes Data security and privacy Entry to necessary services COMMUNITY PARTICIPATION AND IMPROVEMENT Education Culture Creating employment and developing skills Advancement of technology Income generation Social investment Community health CSR DRIVERS: The key drivers of CSR are discussed in the table below: DRIVERS DESCRIPTION Profound self-interest Generate ethical, social and economical cohesion where markets, labour and communities are linked to work together. Social investment Social capitalism and contribution to infrastructure has been seen progressively as necessary part of business activity. Transparency and trust Public perceives business as low ratings of trust. Public expectation about companys openness and accountability leads to prepare a report encompassing their performance in the areas of social and environmental issues. Increased public expectations of business Public expects beyond the companys contribution to the economy by taxation and provision of employment. In addition to the above key drivers, the following list shows general drivers of CSR. Business Risk management Reputation and brand management Learning and innovation Cost savings and operational efficiency Competitiveness and market positioning Improved relations with regulators Organizational transformation and continued improvement IMPLEMENTING CSR: Each firm is unique in its operational procedures, its awareness of CSR issues and the amount of work done towards CSR implementation.Therefore; different firms adopt different frameworks depending on their CSR approach.However, it adds value to the firm when CSR is implemented in a systematic route by integrating its mission, strategy, cultural, environmental and risk profiles, processes and activities. The following framework for CSR implementation gives scope to build quality and environmental management, which follows the model of plan, do, check and improve based on ISO standards .This flexible framework can be adapted by any firm as suitable for its organization. Implementation Framework PHASES STEPS TASKS Plan 1.Perform CSRassessment Gather a CSR management team Work out the definition of CSR Re-examine corporate documents, processes and activities Recognize and connect key stakeholders 2. Build up a CSRstrategy Develop support with experienced managerial staff Investigate others tasks Design a format of proposed CSR activities Build the ideas for scheduling and the business case for them Fix on areas of roadmap, methodology and focus Do 3. Explore CSRcommitments Take a glance on CSR commitments Organize discussions with key stakeholders Design the group to develop the commitments Plan for an introductory draft Check with concerned stakeholders 4. Implement CSRcommitments Build an integrated CSR decision-making framework Prepare a CSR business plan Lay down the quantifiable goals and find out the measures of performance Slot in the employees and to whom so ever applicable to CSR commitments Propose and perform CSR training Set up workshop to address the behavioural problems Design for setting up internal andexternal communications Check 5. Authenticate and report on progress Gauge the performance Hold stakeholders Report on performance Improve 6. Evaluate and Enhance Assess the performance Discover the opportunities for enhancement Engage stakeholders Double-check: Once a cycle completes Go back to plan and go ahead with subsequent cycle SIGNIFICANCE OF CSR: The issue of CSR initiatives and the perceptions of ethical standards have gained more attention by the management in considering approaches to strategic marketing. Usually, CSR is of growing importance towards managing the business processes and is magnetizing growing company investment. Unfortunately, marketing departments lack the skills to manage even the issues related to reputation thereby narrowing the insights. For example, pharmaceutical companies were criticised in the media for arrogance and lack of transparency. In order to rebuild its reputation, Pfizer took initiative to offer free medicines to those who were laid-off during recession. So marketing strategy expects to look for opportunities for better competitive positioning in market segments through increased customer value integrated with CSR initiatives. Majority of business leaders are focusing on CSR as a tool for differentiation and competitive advantage leading to generate revenue. CSR is not only important in considering the consumer relationships but also scrutinizes business-to-business relationships (comprising supply chain partners) with stakeholders like investors, government and lobby groups. CSR is an important business strategy by giving meaning and direction to day to-day operations. Satisfying each of the stakeholder groups allows companies to maximize their commitment to another important stakeholder group-their investors, who benefit most when the needs of these other stakeholder groups are being met. The business succeeds when values within the decision-making process and objectives of the organization are met. Lifestyle brand firms, in particular, need to live the ideals they convey to their consumers. CSR as a strategy is becoming increasingly important for businesses today because of three specific trends shown in the table below: Trends Discussion Changing social expectations: Consumers and society in general expect more from the companies whose products they buy with the regulatory bodies and organizations in place to control corporate excess. Increasing affluence: A society in need of work and inward investment is less likely to enforce strict regulations and penalize organizations that might take their business and money elsewhere. Globalization: The Internet fuels communication among like-minded groups to initiate a product boycott. These three trends portend corporate success. The result of this mix is that consumers today are better informed and feel more empowered to put their beliefs into action. CSR is particularly important within a globalizing world because of the way brands are built, at a time when these values and demands are constantly evolving. CSR can therefore best be described as a total approach to business in maintaining brand dominance. KEY POTENTIAL BENEFITS OF CSR: The benefits to firms, community and environment by practicing CSR can be discussed at length in the following table: KEY POTENTIAL BENEFITS DISCUSSION Efficiency in risk management: CSR oversees and scrutinizes the corporate activities by effectively managing the risks involved in governance, social, economic, environmental and legal aspects in day-to-day complicated market, thereby safeguarding the supply for overall market stability. Impact analysis about a firm by considering the concerns of the parties involved is one of the better ways to anticipate in managing the risks. This ultimately sharpens the decision-making. Enhanced reputation management: Reputation of a firm is mainly based on values such as trust, quality, reliability, which reflect the organizations image and brand recognition and so any firm concerned about addressing the CSR issues, can manage their reputation with effective CSR management. Ability to develop the recruitment and retention of staff: Effectiveness in CSR policies improvise the human resource management which has direct impact on firms image related to its products and services.CSR indirectly aids in executing the programs that enhance the morality and loyalty of employees who are valuable resources for companys performance. Fostering innovation, competitiveness and market positioning CSR gives positive impact in avoiding the risks by tackling diverse stakeholders who are the basic sources for generating ideas for novel products and markets thereby differentiating from its competitor, which result in competitive advantage, thus developing competitive strength based on innovative business models. For instance, a certified firm with social and environmental standards improves the chance to become a supplier to specific retailers. Increased operational efficiencies and cost reductions: By implementing CSR, there is always an opportunity to transform waste streams into revenue streams by systematic approach of environmental aspect of renewable energies by reducing costs through recycling. Tangible cost savings signify the reduction in carbon emissions. Building efficient supply chain relationships: A firm is at risk to susceptibility in its supply chain. Companies with like-mindedness can build long-term business relationships with aim to increase their profits by maintaining standards and thereby tackle the risks. Larger firms encourage smaller firms with whom they are related to take up CSR approach. For example, particular retailers may require their suppliers to adopt certain codes and practices. Improved ability to tackle change: CSR aids as a radar to anticipate the emerging market trends and by regular stakeholder dialogue with customers, a company can respond to any changes that occur in regulatory, economic, social and environmental aspects. Generate robust social licence to function in the community: Better understanding between citizen and stakeholder recognition of the firms activities and objectives can render enhanced stakeholder relations, thereby giving scope for robust alliances of public, private and civilized society.CSR enhances the social capital. Enhances investment: As CSR enhances the brand reputation, it leads to raising the companys profile in the investment community. The company value can be improved through further investments.CSR approach drives the financial institutions about incorporation of social and environmental criteria into their project plan leading sharp decision-making of where to invest money and this motivates the investors to look for better CSR management. Better relations with media and government regulators: CSR indicators act as tool for the governments to decide on obtaining export assistance contracts in some countries. In many cases, though CSR activities are beyond the regulatory requirements, governments considered CSR views to expedite the approval processes for firms in order to meet their sustainability goals by recognizing the business sector engagement as a requirement. Building customer relationships: In Cause related marketing the altruistic activities of the firms can be recognized by morally conscious customers who may be flexible in paying higher prices or in reduced costs may increase their purchasing power and so CSR in broader sense has significant impact in building the long-term customer legitimacy,loyalty,trust or brand equity. Acting as a catalyst for responsible consumption: In order to combat with the ever changing consumption patterns, company has to play a key role in achieving sustainability by the way it supplies its goods and services in the marketplace to meet responsible consumerism which considers to relate consumer rights and issues and how well the relationship between producers and consumers is authorized by regulatory bodies. BARRIERS AND CHALLENGES: CSR implementation in a competitive world draws certain barriers and challenges which are due to : Difficulty in implementing CSR concurrently with other business Concerns in a balanced and remarkable manner Difficulty of transparency Lack of clear communication Economic thoughtlessness Various instability problems in developing countries especially problematic for SMEs Complexity of the issues involved and so difficulty in managing the supply chain and regulating the sub-contractors Complex set of issues as CSR covers a broad array of direct and indirect business performances, achievements, and so its impacts differ from one business sector to another International differences that may lead to lack of universal acceptance in examining the potential impacts of CSR. Misinterpretation due to CSR being judged differently in many parts of the world depending on different priorities. For example, Chinese consumers interpret social responsibility as safe, high-quality products, while South Africans consider it as a contribution to healthcare and education. In Australia, Canada, Indonesia and the UK the highest priority is to protect the environment. In Turkey, it is believed as an indicator for charitable donation. In U.S, France, Italy and Switzerland and most of South America, the highest priority is towards fair treatment of employees. Complex set of stakeholders appealing to the business for a CSR attitude the appropriate stakeholders need to be involved stakeholder involvement is important, yet difficult Always ambiguity between CSR and financial success Low voluntary acceptance of CSR can lead to green washing Lack of devices to measure, monitor evaluate and report the impacts Two myths Smaller companies think it the responsibility of the bigger ones and It is mainly a philanthropic exercise High overheads of implementing and sustaining CSR efforts. No universally accepted frameworks Some of the main internal company barriers to CSR initiatives are: Executives recommending strategic marketing programmes that focus on CSR-based positioning must be aware of the likely barriers and challenges from those who do not believe CSR as a legitimate strategic tool. CASE STUDY: CSR AT IKEA: The reason for choosing IKEA as case study of CSR work is to understand its CSR focus as a leading company, which ranks as the first in CSR in the Accountabilitys Responsible Competitiveness Index 2008 (RCI). IKEA was selected due to its long history and experience in the area and its response to several CSR-related crises and criticisms that has enabled the organization to develop structured policies and a range of collaborations and initiatives with stakeholders and could set an example for companies aiming to develop their economic and environmental sustainability. IKEA is a value-based Swedish furniture giant that has wide recognition for its focus on cost reduction and it is a progressive company that manages to integrate its cost focus with CSR issues. This report discusses in detail about how this integration is possible for IKEA and it is interesting to know its implications for other companies who want to combine CSR into their business practices. The CSR experience gained by IKEA can make other companies to realise that CSR is not necessarily a cost addition but it is a cost-cutter, which imparts increasing knowledge on how companies can be socially responsible. The aim is therefore to analyze the