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A NEW PARADIGM OF STRATEGY IN THE 21 ST CENTURY

A NEW PARADIGM OF STRATEGY IN THE 21 ST CENTURY. DONG-SUNG CHO Dean, Professor of Strategy and International Business College of Business Administration, Seoul National University. THE CONCEPT OF STRATEGY (SUMMARY).

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A NEW PARADIGM OF STRATEGY IN THE 21 ST CENTURY

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  1. A NEW PARADIGM OF STRATEGYIN THE 21ST CENTURY DONG-SUNG CHO Dean, Professor of Strategy and International Business College of Business Administration, Seoul National University

  2. THE CONCEPT OF STRATEGY (SUMMARY) A mean to win the war, while tactic is a mean to win the battle Military S Finding right product mix for market segmentation Marketing S Risk taking, thus the role of an entrepreneur S since the 1930s Match-up of external (market) opportunities and internal resource S since the 1970s An object of economic research that can be empirically tested S through IO, PIMS Specifying a resource profile to find optimal product-market combination S since the 1980s Somewhere between objective and operation S within hierarchy After vision and objective, but before plan and result Joke A gap between theory and reality “ser-M”

  3. THE CONCEPT OF STRATEGY (1) When the business firms did not think of the strategy as part of their activities. Military Strategy (Strategy is a mean to win the war, while tactic is a mean to win the battle.)

  4. THE CONCEPT OF STRATEGY (2) Since the business firms recognized the strategy as part of their activities. Business Strategy (A filler of the gap between theory and reality)

  5. THE GAP BETWEEN THEORY AND REALITY? • Economic Theory: No above-normal profit in the long run. • Business Reality: Many cases of above-normal profit in the long run. • Exxon: 1870s – present (over 120 years) • GM: 1920s – present (over 70 years) • Microsoft, Cisco: 1980s – present (over 20 years) • Sony: 1940s – present (over 50 years) • Toyota: 1950s – present (over 40 years) • Samsung, LG: 1940s – present (over 60 years) • Hyundai, SK: 1960s – present (over 30 years) • Oreo Cookies: 1917 – present (84 years) • A Gap between Theory and Reality STRATEGY

  6. THE CONCEPT OF BUSINESS STRATEGY (1) In the 1930-60s The Subject of study for CEO (Strategy is risk taking, thus the role of an entrepreneur)

  7. THE CONCEPT OF BUSINESSSTRATEGY (2) In the 1970-80s The Environment-based Strategy (Stratety is match-up of external opportunities and internal resources)

  8. THE CONCEPT OF BUSINESS STRATEGY (3) In the 1990s The Resource-based Strategy (Strategy is specifying a resource profile to find optimal product-market combination)

  9. COMPARISON OF ATOS & MATIZ 5,080,000 WON 5,350,000 WON

  10. THE CONCEPT OF BUSINESS STRATEGY (4) In the Future The “ser-M” Paradigm (Mechanism creation by a subject based on resources in a certain environment)

  11. MECHANISM RESOURCES ENVIRONMENT SUBJECT 1930s 1970s 1990s 2000s Competition from all over Energy Crisis Japanese Dominance over American Firms THE “SER-M” PARADIGM: HISTORIC EVOLUTION

  12. THE “SER-M” PARADIGM: CONTENT Subject Mechanism is the eventual source of competitiveness Mechanism Environment Resources

  13. WHAT IS THE “SER-M” PARADIGM? A framework for identifying causes of a certain matter or phenomenon. A shopping list

  14. THE “SER-M” PARADIGM: STATIC SYSTEM • Corporate-level Mechanism • Strategy • Structure • Networking • Governance • Culture • Functional-level Mechanism • Manufacturing/Operational • Marketing/Sales • HR/Incentive • Financial/Accounting

  15. Learning Mechanism Resource impaired R Resource accumulated Management succession Management continued S M Environment sustained Environment changed E Selecting Mechanism THE “SER-M” PARADIGM: DYNAMIC SYSTEM Coordinating Mechanism Initial Condition

  16. THE “SER-M” PARADIGM: APPLICATION KEY FACTORS OF SUCCESS IN SAMSUNG SEMICONDUCTOR BUSINESS 1) Chairman Byung-Chull Lee was committed to the business. 2) Many U.S. semiconductor companies including Intel abandoned manufacturing of memory chips in 1986. In the early 1990s, a vacuum was created in the U.S. market due to the agreement between the U.S. and Japanese governments on restricting export volumes of Japanese chips. 3) Samsung-affiliated companies provided manpower and money needed for starting the semiconductor business. 4) Internal competition was encouraged among departments within Samsung Semiconductor for next generation products. Objective criteria were set up to evaluate the performance of the people within the company. AS A RESULT, SAMSUNG SEMICONDUCTOR BECAME THE LEADER IN MEMORY CHIP BUSINESS.

  17. CHARACTERISTICS OF MECHANISM 1) Causal ambiguity Outsiders have difficulty in identifying mechanisms. Competitors have difficulty in imitation (Coca-Cola). 2) Path dependence Self-reinforcing as well as self-destructive (large projects). 3) Inertia Resistance to any changes No mechanism is perfect!

  18. APPLICATIONS OF MECHANISM 1) Competitive strategy Cost leadership and differentiation strategies can be concurrently pursued. 2) Diversification strategy Relatedness in diversification should be judged not by the SIC code, but by transferability of existing mechanisms. 3) Industrial policy The mechanism for developing and implementing industrial policies is as important as, if not more important than, their content.

  19. MECHANISM FOR INDUSTRY LEADERSHIP 1) Traditional strategy: adapting to changes in environment. In reality, environment adaptation can lead to survival, but no more. (Chameleons, Aborigines) 2) New wave of strategy: creating resources. (P&H, Nonaka) Yet, resource creators are bound to hyper-competition. (D’Aveni) 3) Road to sustained industry leadership: MECHANISM FOR CREATING ENVIRONMENT

  20. MECHANISM, SYSTEM, PROCESS SYSTEM: (example 1) (example 2) A critical mass which has its own mechanism to an automobile city achieve a certain predetermined objective. transportation system MECHANISM: A bundle of processes that take place within a system power train, traffic mechanism and that are repeatedly exercised by the subject in transmission, control mechanism an effort to link external environment and internal break mechanism. resources. PROCESS: A stepwise sequence of activities which stems from moving to cylinder, signaling, causes and arrives at effects of a certain matter or Ignition, accidents, phenomenon. pushing piston, emergency, gas and air mixed, flow of autos, etc. etc.

  21. THANKS FOR YOUR LISTENING!

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