Man Strat Live Lecture 6-11-Merged

MM ZG512 Manufacturing
Strategy
Rajiv Gupta
BITS Pilani
Live Lecture 6
Recitation 6
• Module 1
– Term Paper
• Module 2
– Apple Foxconn Case Study
• Module 3
– Topics Covered in Taped Lectures 9 and 10
• Module 4
– Discussion Questions Based on Taped Lectures 9 and 10
2
Recitation 6
• Begin Module 1
– Term Paper
3
Term Paper
• So far, you should have worked on
– Analyzing your industry using the 5 Competitive
Forces of Porter
– Determined what Generic Strategy your company
uses, or should use, with reasons
• Next you need to
– Determine the types of requirements posed by the
customers that your company chooses to serve
– How do these translate into specific manufacturing
outputs that should be the company’s focus?
4
Term Paper
– How do these manufacturing outputs translate
into specific attributes of the manufacturing
levers?
– Where does the company lie on the volume
variety/layout matrix and where should it be?
5
Recitation 6
• End of module 1
6
Recitation 6
• Begin Module 2
– Apple Foxconn Case Study Discussion
7
Apple Foxconn Case Study
Questions for Discussion on Apple-Foxconn Case
Q 1. What is the case about?
Q 2. What, according to the author, should the important points of focus
have been in the Macintosh plant in the 1980s? Do you agree with the
author?
Q 3. Do you agree that cost should have been the least important of the
three Key Manufacturing Tasks at the Macintosh plant?
Q 4. What were some of the clues from the photos that reveal the
possible problems at the plant?
Q 5. What, according to the author, were the mistakes made by Apple in
the Macintosh plant?
Q 6. What are the main points regarding manpower and support
personnel in the current Foxconn plant in China?
8
Q 7. What are some drawbacks at present, and in the future, for
the Foxconn plant that Apple should be aware of?
Q 8. What are the similarities that the author mentions between
Henry Ford’s plant, and the Foxconn plant?
Q 9. How well did Foxconn take care of the 3 key manufacturing
tasks?
Q 10. What are the key differences/advantages that the author
mentions between production in China versus the US? Comment
on this.
Q 11. What does the author recommend in terms of workforce if
Apple moved the production back to the US?
Q 12. What does the author recommend in terms of the layout and
workflow?
9
Q 13. What are the implications for the supply chain if Apple
moves manufacturing to the US?
Q 14. What should have Apple considered when automating the
Fremont plant?
Q 15. Do you think it make sense to move production back to the
US? Why?
10
Recitation 6
• End of module 2
11
Recitation 6
• Begin Module 3
12
Taped Lecture 9
• In Lecture 9 we discuss the article “Competing Through
Manufacturing.”
• We discuss the 4 stages that were introduced in Lecture 8.
• It is mentioned that Stages 1-3 are very different from Stage 4
as the first 3 stages do not entail a rethink of the
manufacturing function, and its relationship with the rest of
the organization.
• Companies in Stages 1-3 tend to have a command and control
attitude, and do not look to engage the workforce.
• Stage 4 is one where the creativity of the entire workforce is
sought to be harnessed.
13
Taped Lecture 9
• Most companies begin in Stage 1 or 2 because their main
focus is on a product or service that they feel gives them
an edge in the marketplace.
• The transition from Stage 1 to 2 comes about without
much effort and sometimes the organization is not even
aware of the change.
• The move from Stage 2 to 3 occurs when management
realizes that traditional approaches do not work any
more.
• Early success attaining Stage 3 can also signal a reversal
back to Stage 2. This may happen due to complacency, or
due to the initial leaders being promoted elsewhere.
14
Taped Lecture 9
• The jump to Stage 4, however, is a very difficult one.
• Management has to start questioning the role of
manufacturing and how it relates to the rest of the
organization.
• Several companies do not feel that they need to
move to Stage 4 as several of the benefits are
obtained in Stage 3.
• Also there is great uncertainty with regard to what is
in store in Stage 4, scaring top management to play it
safe.
15
Taped Lecture 10
• In Lecture 10, we begin with the case study of GE’s
Dishwasher SBU in the 1970s.
• The SBU had been very successful, but its products
and processes were getting dated.
• Management was considering the infusion of capital
to upgrade the product design and to get new
equipment. It was considered a move from Stage 2 to
Stage 3
• In going through the analysis, the management
realizes that there is greater potential for change.
16
Taped Lecture 10
• Senior management of GE felt that, by investing
more capital and by instituting some fundamental
changes, they could achieve bigger benefits and be in
Stage 4.
• Careful implementation of the changes resulted in
significant improvement in overall performance of
the SBU.
• Next we introduced the topic of Strategic Fit based
on Michael Porter’s article, “What is Strategy?”
17
Taped Lecture 10
• Strategic Fit deals with the relationship of the
different activities that a company chooses to do.
• By ensuring a tight meshing among the various
activities, the company can not only gain superior
performance, but also make it difficult for any other
company to copy part of the system.
• There are three levels of orders of Fit as suggested by
Porter.
• The first order Fit considers the synchronization of all
activities toward the corporate strategy
18
Taped Lecture 10
• In the second order Fit, the activities not only
support the company strategy, but also mutually
reinforce each other. There is synergy among the
activities.
• In the third order Fit, the activities go beyond
synergy. The activities attempt to optimize the
performance of the entire system.
• An example of Southwest Airlines is presented to
illustrate the concept of Strategic Fit.
19
Recitation 6
• End of module 3
20
Recitation 6
• Begin Module 4
– Discussion Questions Based on Taped Lectures 9
and 10 (for next recitation)
– Please note that we will not have class next week
as I am travelling. Our next live class will be 2
weeks from today.
21
Recitation
• Based on the characteristics discussed in the lecture,
which stage describes your organization? Discuss one
or two important points in this regard.
• What do you think it would take to transition to the
next stage? Is there a risk of slipping to an earlier
stage?
• Do you agree with the premise that a lot of
companies focus on product technology rather than
their process capability as their strength? Support
your answer with reasons/examples.
22
Recitation
• How well does top management in your organization
support creativity and innovation?
• How much is the drive for creating a learning
environment versus a command and control state?
23
Recitation
• What do you understand from strategic fit?
• To what extent do you see strategic fit in your
organization?
• Is the strategic fit first order, second order, or
third order? Give your reasons.
• Where do you see potential for improvement
by implementing strategic fit in your
company?
24
Recitation 6
• End of module 4
25
Questions?
26
Strategy
Rajiv Gupta
BITS Pilani
Live Lecture 7
Sample Exam Question
Suggest why a process type layout is better suited for a

job shop while a product layout is better suited for line
production? (2+2 marks)
2
Recitation 7
• Module 1
• Module 2
– Discussion Questions Based on Taped Lecture 9
• Module 3
• Module 4
– Brief Introduction Taped Lectures 11 and 12
• Module 5
– Discussion Questions for the next Recitation
3
Recitation 7
• Begin Module 1
– Topics Covered in Recorded Lectures 9 and 10
4
Recorded Lecture 9
• In Lecture 9 we discuss the article “Competing Through
Manufacturing.”
• We discuss the 4 stages that were introduced in Lecture 8.
• It is mentioned that Stages 1-3 are very different from Stage 4
as the first 3 stages do not entail a rethink of the
manufacturing function, and its relationship with the rest of
the organization.
• Companies in Stages 1-3 tend to have a command and control
attitude, and do not look to engage the workforce.
• Stage 4 is one where the creativity of the entire workforce is
sought to be harnessed.
5
Recorded Lecture 9
• Most companies begin in Stage 1 or 2 because their main
focus is on a product or service that they feel gives them
an edge in the marketplace.
• The transition from Stage 1 to 2 comes about without
much effort and sometimes the organization is not even
aware of the change.
• The move from Stage 2 to 3 occurs when management
realizes that traditional approaches do not work any
more.
• Early success attaining Stage 3 can also signal a reversal
back to Stage 2. This may happen due to complacency, or
due to the initial leaders being promoted elsewhere.
6
Recorded Lecture 9
• The jump to Stage 4, however, is a very difficult one.
• Management has to start questioning the role of
manufacturing and how it relates to the rest of the
organization.
• Several companies do not feel that they need to
move to Stage 4 as several of the benefits are
obtained in Stage 3.
• Also there is great uncertainty with regard to what is
in store in Stage 4, scaring top management to play it
safe.
7
Recorded Lecture 10
• In Lecture 10, we begin with the case study of GE’s
Dishwasher SBU in the 1970s.
• The SBU had been very successful, but its products
and processes were getting dated.
• Management was considering the infusion of capital
to upgrade the product design and to get new
equipment. It was considered a move from Stage 2 to
Stage 3
• In going through the analysis, the management
realizes that there is greater potential for change.
8
Recorded Lecture 10
• Senior management of GE felt that, by investing
more capital and by instituting some fundamental
changes, they could achieve bigger benefits and be in
Stage 4.
• Careful implementation of the changes resulted in
significant improvement in overall performance of
the SBU.
• Next we introduced the topic of Strategic Fit based
on Michael Porter’s article, “What is Strategy?”
9
Recorded Lecture 10
• Strategic Fit deals with the relationship of the
different activities that a company chooses to do.
• By ensuring a tight meshing among the various
activities, the company can not only gain superior
performance, but also make it difficult for any other
company to copy part of the system.
• There are three levels of orders of Fit as suggested by
Porter.
• The first order Fit considers the synchronization of all
activities toward the corporate strategy
10
Recorded Lecture 10
• In the second order Fit, the activities not only
support the company strategy, but also mutually
reinforce each other. There is synergy among the
activities.
• In the third order Fit, the activities go beyond
synergy. The activities attempt to optimize the
performance of the entire system.
• An example of Southwest Airlines is presented to
illustrate the concept of Strategic Fit.
11
Recitation 7
• End of module 1
12
Recitation 7
• Begin Module 2
– Discussion Questions Based on Recorded Lecture
9
13
Recitation
• Based on the characteristics discussed in the lecture,
which stage describes your organization? Discuss one
or two important points in this regard.
• What do you think it would take to transition to the
next stage? Is there a risk of slipping to an earlier
stage?
• Do you agree with the premise that a lot of
companies focus on product technology rather than
their process capability as their strength? Support
your answer with reasons/examples.
14
Recitation
• How well does top management in your organization
support creativity and innovation?
• How much is the drive for creating a learning
environment versus a command and control state?
15
Recitation 7
• End of module 2
16
Recitation 7
• Begin Module 3
– Discussion Questions Based on Recorded Lecture
10
17
Recitation
• What do you understand from strategic fit?
• To what extent do you see strategic fit in your
organization?
• Is the strategic fit first order, second order, or
third order? Give your reasons.
• Where do you see potential for improvement
by implementing strategic fit in your
company?
18
Recitation 7
• End of module 3
19
Recitation 7
• Begin Module 4
– Brief Introduction to Taped Lectures 11 and 12
20
Taped Lecture 11
• In Lecture 11 we continue the discussion based on
Michael Porter’s article, “What is Strategy.”
• In lecture 10 we had discussed the concept of Strategic
Fit. In lecture 11 we consider two of the remaining points
covered by Michael Porter, i.e., Focus and Trade-offs.
• Focus implies that we need to concentrate our efforts
toward a limited set of objectives. Ideally the focus ought
to be derived from the set of customers we choose to
serve well.
• Once a focus has been developed, then all activities can
be designed to help achieve the aims of the focus.
21
Taped Lecture 11
• The first example that is discussed is Southwest Airlines.
• Southwest has a clear focus in terms of the target flying
population it wishes to serve. The typical Southwest
passenger is one who is looking to get from Point A to
Point B and is interested in getting there at a low cost.
Southwest does not target business travelers .
• Once the airlines has defined its target customers, it
designs its activities, such as the selection of airports,
routes, and aircraft, etc. to meet the needs of the
customers while keeping operating costs low.
22
Taped Lecture 11
• In order to ensure that the activities fit the needs of the
customer, there are a number of trade-offs that Southwest
has to make.
• For example, Southwest does not provide baggage transfers
to connecting flights at airports. It also chooses to fly out of
secondary airports to reduce the airport fees . Also, by
flying out of smaller, less congested airports, Southwest
ensures that there are fewer delays.
• When competitors, such as Continental, tried to copy some
of Southwest’s tactics, but did so without making trade-
offs, the result was chaos and the CEO had to resign as a
result.
23
Hub and Spoke
HUB
24
Taped Lecture 11
• We also discuss the case of Ikea wherein we
see how the ideas of strategic fit, focus, and
trade-offs are demonstrated. Ikea is a very
successful, Swedish furniture retailer, with
stores in several countries.
• Again, by choosing its target customer
segment, the company has designed its
activities to best meet the requirements of its
customers while keeping costs and prices low.
25
Taped Lecture 11
• Next we do a review of the material covered in the
course up to now.
• It is discussed that the steps and approaches
discussed so far seem to be static in nature and the
concepts are available to all companies.
• Then how do only a few companies manage to be
successful?
• Also, Japanese companies such as Toyota seem to
have excelled in more than one dimension. Then,
why the need for focus?
26
Taped Lecture 12
• In Lecture 12, we continue with the questions raised
at the end of lecture 11.
• We ask what is it that differentiates companies from
one another, since the same information is available
in the public domain, the same equipment is
available in the market, the people can be recruited
from other companies?
• The concept of capabilities is introduced.
• It is discussed that capabilities are the reason for the
difference in performance of different companies.
27
Taped Lecture 12
• Capabilities are the abilities of a company that are
not necessarily visible on the surface.
• Capabilities are developed over a long period of time
and cannot be gained in any other way except by
direct experience.
• Capabilities of individuals do not necessarily
translate into capabilities of companies. Also,
sometimes companies, as well as individuals are
incapable of verbalizing how they are able to
accomplish things that others find difficult to
achieve.
28
Taped Lecture 12
• Three types of capabilities are discussed; process
based, systems based and organization based.
• Process based capabilities are the simplest while the
organizations based capabilities are the most
complex and difficult to achieve. But the
organizational capabilities yield the highest returns
and are the most difficult to imitate.
• Finally a case study is presented illustrating how Wal-
Mart developed its capability over several years to
become the top retailer in the world.
29
Taped Lecture 12
• Wal-Mart began as a small retailer in the rural
Southern United States.
• It developed its capabilities in logistics and systems,
without attracting the attention of the industry
leader Kmart, which was primarily present in urban
areas.
• By the time Wal-Mart launched its attack on Kmart,
the latter was incapable of retaliating because it was
not possible to create the capabilities of Wal-Mart in
a short time. Ultimately Wal-Mart became the
industry leader.
30
Recitation 7
• End of module 4
31
Recitation 7
• Begin Module 5
and 12 for the next recitation
32
Recitation
• Does your organization display a clear focus? What would
you say it is?
• What could be some examples of trade-offs made by
your organization? Do you feel that these trade-offs were
necessary?
• Do you agree that companies need to make trade-offs?
What would happen if a company did not make trade-
offs?
• Do you agree that a company typically should try to excel
in terms of only one or two of the manufacturing
outputs?
33
Recitation
• Does your company have any special
capability which cannot be not easily
imitated? How was it developed?
• Do you have any personal capability which is
has taken years to develop? Can you describe
the process of obtaining this capability?
34
Recitation 7
• End of module 5
35
Questions?
36
Strategy
Rajiv Gupta
BITS Pilani
Live Lecture 8
Recitation 8
• Module 1
• Module 2
– Discussion on Taped Lecture 11
• Module 3
• Module 4
– Brief Summary of Taped Lecture 13
• Module 5
• Module 6
– Next Recitation
2
Recitation 8
• Begin Module 1
3
Taped Lecture 11
serve well.
4
Taped Lecture 11
5
Taped Lecture 11
has to make.
result.
6
Taped Lecture 11
7
Taped Lecture 11
course up to now.
successful?
8
Taped Lecture 12
9
Taped Lecture 12
direct experience.
achieve.
10
Taped Lecture 12
11
Taped Lecture 12
areas.
industry leader.
12
Recitation 8
• End of module 1
13
Recitation 8
• Begin Module 2
14
Recitation
you say it is?
necessary?
offs?
outputs?
15
Recitation 8
• End of module 2
16
Recitation 8
• Begin Module 3
17
Recitation
18
Recitation 8
• End of module 3
19
Recitation 8
• Begin Module 4
20
Brief Summary of Lecture 13
• In Lecture 13 we discuss the concept of Strategic
Intent and contrast it with Traditional Strategy
• In Traditional Strategy, we typically tend to look at
the current competition and our current resources.
• It appears to be a snapshot in time and generally
does not take into account where the competition
may be headed, or what resources we may be able
to acquire or develop in the future.
• In this way, Traditional Strategy is limited in terms of
its long term view.
21
• In Traditional Strategy we tend to be too consumed by
the current moves of the competition, including any
move to offshore or outsource, without considering what
may be the long term implications of such moves.
• Such myopic thinking has often led market leaders to
dismiss or ignore potential competition that is not yet on
their radar, such as the Japanese automakers being
ignored as a threat by the Big 3 US auto companies until
it was too late or Wal-Mart not being considered a threat
by K-Mart during its early years.
22
• As opposed to this, Strategic Intent considers the kind of
capability and resources that a company can, or must,
develop over the long run to be able to assume a
leadership position in the market.
• This provides a long term goal for the entire organization.
• In Traditional Strategy we consider Strategic Fit based on
current resources. If the current resources are
insufficient, we trim the goals.
• However in Strategic Intent we try to leverage current
resources and work toward stretch goals that provide
direction.
23
• Several differences between Strategic Intent and
Strategic Fit are discussed in the lecture.
• The main differences lie in the fact that typical Strategic
Fit is detailed and concerns with the present. Strategic
Intent is less specific and is not as much constrained by
current limitations as by the ability to create the future
the company wants.
• Strategic Intent usually begins with the desire to be the
market leader. This desire does not change over time. But
the specific means to achieve this goal may be modified
based on market conditions, technology, capability, etc.
24
• It is the responsibility of management to develop the
goal, sell the idea to the rest of the company, provide
adequate training and skill building opportunities,
and be relentless about the pursuit of the goal with
appropriate measurements.
• An example of Komatsu’s Strategic Intent was
discussed in the lecture.
• We also discuss the topic of Competitive Innovation
where we talk about continually creating advantages
over the competition.
25
• The goal of competitive innovation is not parity with
the competition, but superiority.
• Sometimes we may need to look for niche areas to
exploit, change the rules of the game, and form
creative collaborations to edge out competition.
26
Recitation 8
• End of module 4
27
Recitation 8
• Begin Module 5
28
• In Lecture 14, we continue with the discussion on
Strategic Intent specifically talking about how and
why Strategic Intent can allow a company to build a
market leadership position over a period of time.
• Companies using Strategic Intent tend to develop
their capabilities while remaining off the competitive
radar. They tend to do so by either restricting their
product range or operating in a limited geography.
• The market leaders do not consider them as threats
until it is too late.
29
• By that time the companies using Strategic Intent
have honed their capabilities which the incumbent
market leader cannot replicate quickly. The capability
cannot be purchased or hired in. It is an
organizational capability which the newcomer has
invested several years in developing.
• Usually the result is that the specific capability gives
the challenger an edge which cannot be overcome
and the challenger becomes the new market leader.
Examples of Wal-Mart etc. have been discussed.
30
• Then we discuss the topic of Core Competence in Lecture
14.
• C.K. Prahlad and Gary Hamel have defined Core
Competence as "a harmonized combination of multiple
resources and skills that distinguish a firm in the
marketplace.“
• Core competencies must fulfill three criteria:
– Provide potential access to a wide variety of markets.
– Should make a significant contribution to the perceived
customer benefits of the end product.
– Be difficult to imitate by competitors.
31
• A case is discussed in the lecture involving NEC and
GTE.
• We see how NEC, a relatively small company in the
early 1980s developed specific capabilities over the
next decade to topple GTE from the position of
market leadership.
• The specific Core Competencies that NEC chose to
develop included capabilities in telecommunication
and semiconductors.
32
• With their existing capability in computers and the
newly acquired capabilities, NEC was able to get into
products as diverse as laptop computers, cell phones
and fax machines. GTE was reduced to being only a
telecommunications company.
• We then discuss the concept of Core Products. Core
Products are products that can be used by a
company in a number of different end products, and
which give the company an edge, e.g., Honda’s
engines.
33
• It is also discussed that traditional the SBU structure
of corporations is not conducive to the development
of Core Competencies.
• Core Competencies should be usable over a range of
products that could be made by multiple SBUs. This
requires co-operation among the SBUs that needs to
be coordinated by the corporate head quarters.
34
Recitation 8
• End of module 5
35
Recitation 8
• Begin Module 6
– Next Recitation
36
Next Recitation
• Would you say that your organization has a
core competence? What is it?
• Think of any company you are familiar with
that has a core competence. Discuss.
Next Recitation
• What do you think would be the advantages
of having a Strategic Intent for your
organization?
• Can you think of a Strategic Intent for your
company?
• Can you think of a Strategic Intent for yourself
Questions?
Strategy
Rajiv Gupta
BITS Pilani
Live Lecture 8
Recitation 8
• Module 1
• Module 2
• Module 3
• Module 4
• Module 5
• Module 6
– Next Recitation
2
Recitation 8
• Begin Module 1
3
Taped Lecture 11
serve well.
4
Taped Lecture 11
5
Taped Lecture 11
has to make.
result.
6
Taped Lecture 11
7
Taped Lecture 11
course up to now.
successful?
8
Taped Lecture 12
9
Taped Lecture 12
direct experience.
achieve.
10
Taped Lecture 12
11
Taped Lecture 12
areas.
industry leader.
12
Recitation 8
• End of module 1
13
Recitation 8
• Begin Module 2
14
Recitation
you say it is?
necessary?
offs?
outputs?
15
Recitation 8
• End of module 2
16
Recitation 8
• Begin Module 3
17
Recitation
18
Recitation 8
• End of module 3
19
Recitation 8
• Begin Module 4
20
its long term view.
21
22
direction.
23
the company wants.
24
25
26
Recitation 8
• End of module 4
27
Recitation 8
• Begin Module 5
28
29
30
14.
marketplace.“
31
GTE.
market leadership.
and semiconductors.
32
engines.
33
34
Recitation 8
• End of module 5
35
Recitation 8
• Begin Module 6
– Next Recitation
36
Next Recitation
Next Recitation
organization?
company?
Questions?
MMVA ZG512 Manufacturing
Strategy
Rajiv Gupta
BITS Pilani
Live Lecture 9
Recitation 9
• Module 1
• Module 2
• Module 3
• Module 4
• Module 5
• Module 6
– Next Recitation
2
Recitation 9
• Begin Module 1
3
Taped Lecture 13
its long term view.
4
Taped Lecture 13
5
Taped Lecture 13
direction.
6
Taped Lecture 13
the company wants.
7
Taped Lecture 13
8
Taped Lecture 13
9
Taped Lecture 14
10
Taped Lecture 14
11
Taped Lecture 14
14.
marketplace.“
12
Taped Lecture 14
GTE.
market leadership.
and semiconductors.
13
Taped Lecture 14
engines.
14
Taped Lecture 14
15
Recitation 9
• End of module 1
16
Recitation 9
• Begin Module 2
– Discussion Based on Taped Lecture 13
17
Recitation
organization?
company?
18
Recitation 9
• End of module 2
19
Recitation 9
• Begin Module 3
– Discussion Based on Taped Lecture 14
20
Recitation
21
Recitation 9
• End of module 3
22
Recitation 9
• Begin Module 4
23
• Taped Lectures 15 and 16 discuss the topic of
strategy in the context of global commerce
• Global expansion of commerce and trade has
increased significantly over the last several decades.
In India, the major growth took place since the early
1990s
• Global trade has several advantages as well as
disadvantages
• It allows companies to expand their markets and
their scale of operations goes up, driving down costs
24
• At the same time consumers around the world have
access to more choice
• But despite the growth in global trade, the majority
of the business in a country or a region tends to be
local or regional
• Some of the reasons why companies go global are to
grow their markets, to become efficient, to gain
knowledge, to serve customers better, to reply to
competition, and to build a global brand
25
• Growth and economies of scale are typical benefits
most recognize. However, in addition to these the
other reasons are also important
• When a company goes global, it can leverage the
special capability and knowledge of that part of the
world. Also, having a presence in a particular country
helps a company understand its customers better
• Sometimes companies go global to keep pace with
the competition. Also, a global brand tends to have a
wider market acceptance than a local brand.
26
• In the past, a company used to be considered global
if it exported goods to other countries. Today there
are different aspects and levels of going global.
• Today there are companies which:
– Manufacture globally
– Source globally
– Have a global financial base
– Have a global mindset
27
• Also global companies can be either
– Domestic or multi-domestic
– International or multi-national
– Global
• Domestic or multi-domestic companies tend to operate
either in one country or in multiple countries, but each
operation is autonomous.
• International or multi-national companies operate in
multiple countries, have customized products for each
market, and have co-ordination with the home office.
Information is shared.
28
• Global companies tend to be present in practically all
countries in which demand for their product exists.
• They tend to have different parts of the value chain
located in different countries, therefore co-
ordination becomes much more complex than the
other types of companies.
• Global strategy requires two main questions to be
answered
– How the different activities will be configured
– How will the coordination among the activities take place
29
Recitation 9
• End of module 4
30
Recitation 9
• Begin Module 5
31
• In Lecture 16, we continue with the discussion on global
strategy. We define the tasks required for configuring the
activities of an international or global company among
the various countries. We also discuss the issue
concerning the co-ordination of the activities.
• The issue in configuration is where to locate the
activities, and whether the activities should be
concentrated or dispersed
• The motivation for locating an activity in a certain
country or region may to gain a comparative advantage
or a competitive advantage
32
• Comparative advantage comes from access to factors
such as low cost labor and raw materials
• Competitive advantage comes from environments for
innovation and productivity growth
• Configuration also involves determining the number
and concentration of activities. The greater the
number and dispersal of activities, the more difficult
is the co-ordination
33
• The general trend in the global world is to have a
greater concentration of activities as opposed to
their dispersion
• A company should ideally disperse a specific activity
to obtain a particular benefit, but not disperse other
activities, e.g., the sales and service function needs
to be dispersed in all regions where the product is
sold
• Concentration of activities allow for efficiency and
ease of innovation
34
• Coordination deals with sharing information across
dispersed activities and assigning responsibilities and
finding synergies across different locations
• Next we discuss the risks involved in globalization
• The risks a global company faces can be categorized as:
– Political risks
– Legal risks
– Financial risks
– Social and Cultural risks
35
• Finally, we discuss the comparative and competitive
advantages of nations based on a book by Michael Porter
“The Competitive Advantage of Nations.”
• Comparative advantage of a nation arises from the
availability of low cost labor, abundant and cheap raw
materials, land, and other production factors or favorable
exchange rates
• Competitive advantage comes from an environment that
fosters better productivity and innovation
• Comparative advantages can be matched by other
countries, and are temporary at best
36
• According to Michael Porter, the competitive
advantage of a nation comes from four areas
– Factor (Input) Conditions
– Context for Strategy and Rivalry
– Demand Conditions
– Related and Supporting Industries
37
Recitation 9
• End of module 5
38
Recitation 9
• Begin Module 6
– Next Recitation
39
Next Recitation
We will have a case study involving Walmart and
Amazon in our recitation next week. The links to
articles for the case and the discussion questions will
be posted in an Announcement
40
Questions?
41
MMVA ZG512 Manufacturing
Strategy
Rajiv Gupta
BITS Pilani
Live Lecture 10
Recitation 10
• Module 1
• Module 2
– Next Recitation
2
Recitation 10
• Begin Module 1
3
• In Lecture 16, we continue with the discussion on global
strategy. We define the tasks required for configuring the
activities of an international or global company among
the various countries. We also discuss the issue
concerning the co-ordination of the activities.
• The issue in configuration is where to locate the
activities, and whether the activities should be
concentrated or dispersed
• The motivation for locating an activity in a certain
country or region may to gain a comparative advantage
or a competitive advantage
4
• Comparative advantage comes from access to factors
such as low cost labor and raw materials
• Competitive advantage comes from environments for
innovation and productivity growth
• Configuration also involves determining the number
and concentration of activities. The greater the
number and dispersal of activities, the more difficult
is the co-ordination
5
• The general trend in the global world is to have a
greater concentration of activities as opposed to
their dispersion
• A company should ideally disperse a specific activity
to obtain a particular benefit, but not disperse other
activities, e.g., the sales and service function needs
to be dispersed in all regions where the product is
sold
• Concentration of activities allow for efficiency and
ease of innovation
6
• Coordination deals with sharing information across
dispersed activities and assigning responsibilities and
finding synergies across different locations
• Next we discuss the risks involved in globalization
• The risks a global company faces can be categorized as:
– Political risks
– Legal risks
– Financial risks
– Social and Cultural risks
7
• Finally, we discuss the comparative and competitive
advantages of nations based on a book by Michael Porter
“The Competitive Advantage of Nations.”
• Comparative advantage of a nation arises from the
availability of low cost labor, abundant and cheap raw
materials, land, and other production factors or favorable
exchange rates
• Competitive advantage comes from an environment that
fosters better productivity and innovation
• Comparative advantages can be matched by other
countries, and are temporary at best
8
• According to Michael Porter, the competitive
advantage of a nation comes from four areas
– Factor (Input) Conditions
– Context for Strategy and Rivalry
– Demand Conditions
– Related and Supporting Industries
9
Recitation 10
• End of module 1
10
Recitation 10
• Begin Module 2
– Next Recitation
11
Next Recitation
We will have a case study involving Walmart and
Amazon in our recitation next week. The links to
articles for the case and the discussion questions are
given here.
12
Recitation 10
Articles for the Case on Amazon vs. Walmart
• https://www.supplychainbrain.com/articles/32039-whole-foods-is-left-behind-in-amazons-pandemic-fueled-
boom
• https://www.cnbc.com/2020/10/05/walmart-signs-drone-deals-as-it-races-to-play-catch-up-with-amazon.html
• https://www.inc.com/minda-zetlin/walmart-launches-prime-competitor-service.html
•
• Amazon vs. Walmart: Which one will prevail?

http://knowledge.wharton.upenn.edu/article/amazon-vs-walmart-one-will-prevail/
• Amazon vs. Walmart is shaping up to be a battle of mega-retailers

• http://www.nydailynews.com/life-style/amazon-wal-mart-shaping-battle-mega-retailers-article-1.3452650
•
• Amazon wants to become Walmart before Walmart can become Amazon
• https://techcrunch.com/2017/06/16/amazon-wants-to-become-walmart-before-walmart-can-become-amazon/
•
• Amazon’s domination is blocked by a delivery truck
• https://www.bloomberg.com/gadfly/articles/2017-10-05/amazon-s-domination-is-blocked-by-a-delivery-truck
13
Case Discussion Questions
Discussion Questions:
1. How do you broadly view Walmart and

Amazon as companies?
2. What are the similarities and differences
between Walmart and Amazon?
3. What are the traditional strengths and
weaknesses of Walmart?
4. What are the strengths and weaknesses of
Amazon?
5. What steps are Walmart and Amazon taking to rival each
other?
6. What are the risks associated with the steps described in
the previous question?
7. What are the advantages and disadvantages of buying
Whole Foods for Amazon?
8. What are the challenges facing Walmart and Amazon?
9. What are the similarities in this situation and what
happened when Walmart unseated Kmart?
10. What should each company do, going forward?
11. Who do you think will win?
Questions?
16
Strategy
Rajiv Gupta
BITS Pilani
Live Lecture 11
Wal Mart Amazon Case
Recitation 11
• Begin Module 1
– Walmart Amazon Case Study Discussion
2
Recitation 11
• https://www.retaildive.com/news/walmart-gains-traction-5-months-after-
launch/595029/#:~:text=Five%20months%20after%20Walmart's%20membership,Research%20Partners%20analys
is%20released%20Wednesday.
boom
•


•
•
3

Amazon?
other?
Amazon Revenues and Net Profits 2015-2019
Fiscal year is January-December. All
2015 2016 2017 2018 2019
values USD millions.
Sales/Revenue 107.01B 135.99B 177.87B 232.89B 280.52B
Gross Income 35.36B 47.72B 65.93B 93.73B 114.99B
Net Income 596 M 2.37B 3.03B 10.07B 11.59B

Walmart Revenues and Net Profits 2016-2020
Fiscal year is February-

January. All values USD 2016 2017 2018 2019 2020
millions.
Net Income 14.69B 13.64B 9.86B 6.67B 14.88B

Amazon Revenue Source 2020
Revenues 2020
North America
International
AWS
Amazon Profits 2020
Profit 2020
North America
International
AWS
Recitation 11
• End of module 1
11
Questions?
Strategy
Rajiv Gupta
BITS Pilani
Live Lecture 11
Wal Mart Amazon Case
Recitation 11
• Begin Module 1
– Walmart Amazon Case Study Discussion
2
Recitation 11
• https://www.retaildive.com/news/walmart-gains-traction-5-months-after-
launch/595029/#:~:text=Five%20months%20after%20Walmart's%20membership,Research%20Partners%20analys
is%20released%20Wednesday.
boom
•


•
•
3

Amazon?
4
other?
5
Amazon Revenues and Net Profits 2015-2019
Fiscal year is January-December. All
2015 2016 2017 2018 2019
values USD millions.
Net Income 596 M 2.37B 3.03B 10.07B 11.59B
6
Walmart Revenues and Net Profits 2016-2020
Fiscal year is February-

January. All values USD 2016 2017 2018 2019 2020
millions.
Net Income 14.69B 13.64B 9.86B 6.67B 14.88B
7
8
9
10
Amazon Revenue Source 2020
Revenues 2020
18%
61%
27% North America

International
AWS
11
Amazon Profits 2020
Profit 2020
38%
59%
North America
International
AWS
3%
12
Growth of Ecommerce and Retail in
the US
$523 B $598 B
2019
2018
$3780 B
$3626 B
$4040 B $861 B
Red – Total retail sales US
2020 Blue – Ecommerce sales US
13
Recitation 11
• End of module 1
14
Questions?
15

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MM ZG512 Manufacturing

Suggest why a process type layout is better suited for a

• Amazon vs. Walmart: Which one will prevail?

• Amazon vs. Walmart is shaping up to be a battle of mega-retailers

1. How do you broadly view Walmart and

• Amazon vs. Walmart: Which one will prevail?

• Amazon vs. Walmart is shaping up to be a battle of mega-retailers

1. How do you broadly view Walmart and

Sales/Revenue 107.01B 135.99B 177.87B 232.89B 280.52B

Gross Income 35.36B 47.72B 65.93B 93.73B 114.99B

Net Income 596 M 2.37B 3.03B 10.07B 11.59B

Fiscal year is February-

Sales/Revenue 482.13B 485.14B 499.91B 514.41B 523.96B

Gross Income 121.15B 123.89B 126.51B 129.1B 129.36B

Net Income 14.69B 13.64B 9.86B 6.67B 14.88B

• Amazon vs. Walmart: Which one will prevail?

• Amazon vs. Walmart is shaping up to be a battle of mega-retailers

1. How do you broadly view Walmart and

Sales/Revenue 107.01B 135.99B 177.87B 232.89B 280.52B

Gross Income 35.36B 47.72B 65.93B 93.73B 114.99B

Net Income 596 M 2.37B 3.03B 10.07B 11.59B

Fiscal year is February-

Sales/Revenue 482.13B 485.14B 499.91B 514.41B 523.96B

Gross Income 121.15B 123.89B 126.51B 129.1B 129.36B

Net Income 14.69B 13.64B 9.86B 6.67B 14.88B

27% North America

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