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Creativity, innovation and competitive advantage:

Understanding successful companies in the global context

Creativity, innovation and competitive advantage:

Understanding successful companies in the global context

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Peter Drucker:Father of modern management

Peter Drucker:Father of modern management

Future is not to be predicted, but created.

Future is not to be predicted, but created.

What is more important than doing things right is doing the right thing

What is more important than doing things right is doing the right thing

Nature: AnimalsHomo sapien

Nature: AnimalsHomo sapien

World that existsWorld that exists

World that we have createdWorld that we have createdCulture: PeopleCulture: People

World of possibilitiesWorld of possibilitiesFuture:

Creative innovatorsFuture:

Creative innovators

Where do you live?Where do you live?

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Historical periodsHistorical periods1. Stone age2. Bronze age3. Iron age

8. Age of Creativity7. Information age6. Industrial age5. Age of Reason4. Feudal age

Where do you live?Where do you live?

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Bushmen community: Central Kalahari Botswana

Bushmen community: Central Kalahari Botswana

Pastoral nomadsNamtso Tibet in 2005Pastoral nomadsNamtso Tibet in 2005

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Mongolian yurtMongolian yurt

Inuit IglooInuit Igloo

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Nomadic Indian tribeNomadic Indian tribe

Agriculture: EgyptAgriculture: Egypt

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Korean VillageKorean Village

Farming GermanyFarming Germany

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Mechanization

Mass productionMass production

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Mass productionMass production

The Industrial RevolutionThe Industrial Revolution

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

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Rise of cities, London 1850Rise of cities, London 1850

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

Industrial workersIndustrial workers

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Child laborer, US, 1908 Child laborer, US, 1908

Ulsan industrial complexUlsan industrial complex

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Modern citiesModern cities

Cyber spaceCyber space

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Part I

Management and competitive advantage

Part I

Management and competitive advantage

Nature: Stable and dynamicNature: Stable and dynamic

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Darwin’s Theory of EvolutionDarwin’s Theory of Evolutionv As many more individuals of each species can possibly survive, there is a struggle for existence.

v If it varies in any manner profitable under varying conditions to survive, it will thus be naturally selected.

v Selected variety will propagate its new and modified form.

Porter’s Competitive advantagePorter’s Competitive advantage

3. Focus: A company focus on a narrow segment and is highly competitive in the segment and holds a competitive advantage in the market niche (e.g., Coca Cola).

2. Differentiation: A company is able to provide better service, quality and satisfaction at the same price as its competitors and is considered as a market leader (e.g., Google).

1. Cost leadership: A company is able to provide the same product or service at a lower cost than its competitors (e.g., Walmart).

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Porter’s five forces analysisPorter’s five forces analysis

SizeSize

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Size:Burj Kalifa

Size:Burj Kalifa

Tallest man-made structure in the world,at 830 meters, 163 floors

Size: Airbus A380Size: Airbus A380

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SizeSize

Super tankerSuper tanker

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

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SizeSize

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

SpeedSpeed

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SpeedSpeed

Dell computersDell computers

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Supersonic ConcordeSupersonic Concorde

PowerPower

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PorschePorsche

PersistencePersistence

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Apple: Steve JobsApple: Steve Jobs

Steve JobsSteve Jobs

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Steve JobsSteve Jobs

Honorary doctorate: Stanford 2005Honorary doctorate: Stanford 2005

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OrganizationOrganization

Toyota organizationToyota organization

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StealthStealth

StealthStealth

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Stealth bomberStealth bomber

StealthStealth

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Teaming, shoaling, schoolingTeaming, shoaling, schooling

ChinatownChinatown

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DifferentiationDifferentiation

Differentiation: Nintendo WiiDifferentiation: Nintendo Wii

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Boeing DreamlinerBoeing Dreamliner

FocusFocus

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Focus: Coca-ColaFocus: Coca-Cola

MarketingMarketing

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MarketingMarketing

MarketingMarketing

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Children’s fun cultureChildren’s fun culture

Eat with your handsEat with your hands

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Fun place to eat

Fun place to eat

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Birthday partyBirthday party

McDonald’sMcDonald’s

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QualityQuality

Homo sapienHomo sapien

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Part II

Environmentalchanges

Part II

Environmentalchanges

Economic

Industry

Competitor

Demographic

Global

Sociocultural

Political

Technological

External environmentExternal environment

From Hitt et al. (2007)

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Crisis or opportunity?Crisis or opportunity?

Crisis: 위기 (危機)Crisis: 위기 (危機)

DespairDespair

InnovationInnovation

MotivatedMotivated

HelplessHelplessOpportunity기회 (機會) Opportunity기회 (機會)

How do describe the cup?How do describe the cup?

PessimistPessimistCup is half empty:Cup is half empty:

Cup is half full:Cup is half full:OptimistOptimist

Fill the cup!Fill the cup!Creative innovatorCreative innovator

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Giant meteorGiant meteor

DinosaursDinosaurs

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Volcanic eruptionVolcanic eruption

Environmental changesEnvironmental changes

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Ice age: 18,000-15,000 BCIce age: 18,000-15,000 BC

SizeSize

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Global recession 2008Global recession 2008

GM and GMAC: BankruptGM and GMAC: Bankrupt

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Opel/VauxhallOpel/Vauxhall

SaabSaab

European brandsEuropean brands

GM restructuringGM restructuring

HummerHummer

SaturnSaturn

PontiacPontiac

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AIG bankruptAIG bankrupt

Super tankerSuper tanker

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Exxon Valdez oil spillExxon Valdez oil spill

Cruise linerCruise liner

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Costa ConcordiaCosta Concordia

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

PowerPower

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Recession proof? Luxury brandsRecession proof? Luxury brands

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

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

VW acquires PorscheVW acquires Porsche

VW buys remaining 50.1% Porsche Stake for $5.6 Billion

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US Oil priceUS Oil price

Ford F-150

Ford Expedition

Power: Gas guzzlers

Power: Gas guzzlers

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Toyota Highlander

Toyota truck

Power: Gas guzzlersPower: Gas guzzlers

SpeedSpeed

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Dell computersDell computers

2003 virus attack2003 virus attack

SpeedSpeed

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Domino PizzaDomino Pizza

Domino PizzaDomino Pizza

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Supersonic ConcordeSupersonic Concorde

CrashCrash

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DifferentiationDifferentiation

DifferentiationDifferentiation

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Bankrupt: Yohji Yamamoto Bankrupt: Yohji Yamamoto

BankruptBankrupt

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Bankrupt: Gian Franco Ferre

Bankrupt: Christian La CroixBankrupt: Christian La Croix

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Boeing Dreamliner groundedBoeing Dreamliner grounded

FocusFocus

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Coca Cola and obesityCoca Cola and obesity

Coca Cola and obesityCoca Cola and obesity

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StealthStealth

Stealth: Microsoft operating system

Stealth: Microsoft operating system

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Linux open systemLinux open system

Google: Linux open sourceGoogle: Linux open source

Samsung, LG, HTC, MotorolaSamsung, LG, HTC, Motorola

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ClusteringClustering

Clustering: Individual sacrificeClustering: Individual sacrifice

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New model: Shopping mallNew model: Shopping mall

Adaptation to new modelAdaptation to new model

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QualityQuality

QualityQuality

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QualityQuality

Lexus hybrid

Toyota Prius

Quality

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Toyota’s problemToyota’s problemRecalls 3.8 million cars, 4 deadRecalls 3.8 million cars, 4 dead

Organization: External threatOrganization: External threat

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

Toyota Prius

2011 Tsunami2011 Tsunami

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Tsunami and FukushimaTsunami and Fukushima

Japan’s problem: FukushimaJapan’s problem: Fukushima

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Thailand flooding 2011Thailand flooding 2011

Rojana Industrial Park, AyutthayaRojana Industrial Park, Ayutthaya

Rojana Industrial Park, Ayutthaya, Thailand, Rojana Industrial Park, Ayutthaya, Thailand,

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Senkaku/Diaoyu IslandSenkaku/Diaoyu Island

Political conflict with ChinaPolitical conflict with China

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

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Quality vs. low priceQuality vs. low price

Quality vs. low price: Macy’sQuality vs. low price: Macy’s

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Quality vs. low price: TGIFQuality vs. low price: TGIF

Quality vs. low price: StarbucksQuality vs. low price: Starbucks

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MarketingMarketing

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MarketingMarketing

But cannot fly…But cannot fly…

Health concernsHealth concerns

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Fast food nationFast food nation

Super size meSuper size me

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The world has changed. Our customers have changed. We have to change too.

James R. Cantaloupe, Chairmanand CEO, McDonald's, 2003

Posted first quarterly loss of $343.8 million in 2003

Premium mealsPremium meals

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McCafe: Challenge from Starbucks

Upgraded restaurants

Free WiFi

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Business environment

Business environment

External environmentExternal environment

v Threat is a condition in the general environment that may hinder a company’s effort to achive strategic competitiveness.

Obtaining credit and financial backing.

v Threat is a condition in the general environment that may hinder a company’s effort to achive strategic competitiveness.

Obtaining credit and financial backing.

v Opportunity is a condition in the general environment that, if exploited, helps a company achieve strategic competitiveness.

Green technologies: fuel cell, batteries, solar panels

v Opportunity is a condition in the general environment that, if exploited, helps a company achieve strategic competitiveness.

Green technologies: fuel cell, batteries, solar panels

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Economic

Industry

Competitor

Demographic

Global

Sociocultural

Political

Technological

ExternalenvironmentExternalenvironment

From Hitt et al. (2007)

External environment IExternal environment I

Ø Economic segment: Inflation ratesInterest ratesPersonal and business savings rateOil pricesGross domestic productTrade deficits or surplusesBudget deficits and surplusesInfrastructure

Ø Economic segment: Inflation ratesInterest ratesPersonal and business savings rateOil pricesGross domestic productTrade deficits or surplusesBudget deficits and surplusesInfrastructure

Ø Demographic segment: Population sizeEthnic mixAge structureIncome distributionGeographic distribution

Ø Demographic segment: Population sizeEthnic mixAge structureIncome distributionGeographic distribution

From Hitt et al. (2007)

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External environment IIExternal environment II

Ø Technological segment: Product innovationsApplication of knowledgeR & D expenditure, government and privateNew communcation technololgies

Ø Technological segment: Product innovationsApplication of knowledgeR & D expenditure, government and privateNew communcation technololgies

Ø Political/legal segment: Antitrust lawsLabor lawsTaxation lawsEducation policiesDegulation philosophies

Ø Political/legal segment: Antitrust lawsLabor lawsTaxation lawsEducation policiesDegulation philosophies

From Hitt et al. (2007)

Global recession 2009Global recession 2009

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

Toyota Prius

Toyota’s problem: TsunamiToyota’s problem: Tsunami

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Bangkok Airport: November, 2008Bangkok Airport: November, 2008

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

Korea: Broadband connectionKorea: Broadband connection

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China: High speed train networkChina: High speed train network

Porter’s five forces analysisPorter’s five forces analysis

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1. The threat of new entrants

Porter’s five forces analysisPorter’s five forces analysis

v Technology: Intel’s CPU

v Capital investment: Samsung, semiconductor industry

v Logistics and distribution: Walmart

v Cost advantage: ASUS Netbook

v Ability to compete with leaders: Hyundai Motors

v Brand recognition: Google Android

v Switching costs: LG appliances

v Response from the market leader: Apple vs. Samsung

v Government regulations: Northrop Grumman, aerospace and defense technology

v Barriers to entry: Patents, Pfizer’s Viagara

v Number of competitors: Car industry

Porter’s five forces analysisPorter’s five forces analysis2. Intensity of competitive rivalry

v Diversity of competitors: Food industry

v Economies of scale: McDonald’s

v Industry capacity/potential overcapacity: PC industry

v Informational complexity: Google’s search engines

v Fixed cost allocation: Semiconductor industry

v Advertising and marketing expenses: Beer industry

v Sustainable competitive advantage: Apple’s iPAD

v Exit barriers: UPS Parcel delivery service in the USA

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v Buyer volume: Walmart

Porter’s five forces analysisPorter’s five forces analysis

v Buyer switching costs: Loyalty program, SPQ, United

v Buyer price demands: Computer chips, semiconductor

v Buyer access to information: Internet price comparison

v Dependency on existing channels of distribution: Amazon

v Bargaining leverage: Purchasing automobile

v Availability of existing susbstite products: Generic drugs

v Differentiation: Nintendo Wii

3. Bargaining power of customers

v Supplier switching costs: Auto parts

Porter’s five forces analysisPorter’s five forces analysis

v Degree of differentiation of suppliers’ products: Camera for semiconductor industry

v Presence of substitute suppliers: Miscrosoft Windows

v Supplier concentration: OPEC

v Cost of providing the product: Semiconductor industry

v Commitment: Branding, McDonalds’s and Coca cola

4. Bargaining power of suppliers

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5. The threat of substitute products

Porter’s five forces analysisPorter’s five forces analysis

v Attractiveness of purchasing alternative product: iPhone

v Price advantage: Dunkin Donuts vs. Starbucks

v Buyer’s switching costs: Hyundai and US klunker’s

programv Perceived level of product differentiation: Nintento Wii

v Brand loyalty: Coca-cola, Louis Vitton