Lina's Blog

Sunday, April 30, 2006

Making Money From Online Maps

It is funny how businesses around the world try to be as creative as possible in order for them to retain their current costumers, and create an even wider customer base. The internet business is of no exception today. Companies such as Yahoo and Google are providing online maps for internet surfers, hoping to grab them to their websites and keep them there for as long as possible, thereby attracting companies worldwide to advertise on their websites. According to an article I found on, titled "Making Money from Online Maps", each portal player is trying to show that their "map service is bigger, better and more accurate". I looked at that article and got shocked at the fact that there were many things which we learned in strategy this semester and that can apply to these portal players differently if we look at different dimensions! To make my point clearer, take Google for example. What are their strategic resources? Are they the experts and the technicians who work on improving the portal? Or is it the internet surfers who, the more they are, the better are Google's chances to get companies to advertise on their website? Who exactly is the customer? Furthermore, this article shows many applications of the Hamel framework, and some of Porter's competitive forces appear here and there as we read along.

First of all, the article mentions that Yahoo for instance was trying to enter the market after Google. This shows Porter's point of how companies that are close rivals are dependent on each other and it actually proves that there is rivalry among existing competitors. This also means that Yahoo and Google for example are competitors that are roughly equal in size and in power. Furthermore, Yahoo's move towards introducing "satellite images of the entire world to its services" also shows that this is an industry that has low switching costs, if we are thinking of the customers to be the internet surfers in this case. These surfers can move from one website to another without incurring any costs at all, and a portal with additional services would definitely be a better option for them to choose. Therefore, Yahoo knew better and it introduced this map service.

However, the article states that Yahoo "took one step further", and has actually introduced satellite maps that are much more detailed than those maps of competitors. Thus, we can think of Yahoo as trying to improve the services it is offering, probably for a number of reasons. First of all, from Porter's point of view, Yahoo could be trying to raise its barriers to entry through product differentiation. This way, internet surfers would see more value on Yahoo than on Google for instance, which is also an implication of Hamel's core competencies component of the strategic resources. Yahoo introduced that service obviously because it knew something that was unique, valuable to the internet surfers, and transferable to new opportunities. In fact, I look at the whole map services idea as being a core competency right from the start of it. This makes it a new business concept innovation, according to Hamel. In addition to that, from Hamel's framework, we see that Yahoo is pursuing a basis for differentiation. This portal player is trying to compete differently from its competitors, such as Google, by having a resolution that is "now one meter per pixel for U.S. locations and 15 meters per pixel for the rest of the world."

Furthermore, the article also quotes the Yahoo! Maps product manager who says that they keep their eye on what their competitors are doing because this is an indication of what the internet users want. Therefore, with that we see that Yahoo is trying to collect information about the internet surfers, which Hamel mentions in his business concept innovation framework to be part of Information and Insight. However, I do not think that this is the best way for Yahoo to know more about their users. They should be pursuing other ways to know that. Moreover, Hamel's framework appears again as we see Fulfillment and Support with the portal players trying to reach out for their users through a unique way, which is through map services.

On the other hand, if we think of the companies that advertise on Google and Yahoo as being the major customers, then there could be other implications of the frameworks that we studied throughout the semester. First of all, we can think of these portals' primary strategic resources as being the internet surfers or the users who visit their websites. They should try to keep these users on their websites for as long as possible, thereby enhancing their resources. Hamel's framework comes into appearance here again first through the strategic resources, and second through the pricing structure, since Google's way is to auction its advertising spaces. As to Yahoo, it allows users "to select a various chain of locations to show up on a map search." Those deals included companies like Holiday Inn and Washington Mutual. Here Yahoo can be thought of as trying to adopt a basis for differentiation to the main customers, the businesses in need for advertisements. In addition, they are trying to create value for these customers. However, looking at Barney's framework, it is true that these resources are valuable and allow Yahoo to take advantage of opportunities in the market, but they are easy to imitate by competitors. Just like Yahoo imitated the whole idea of Map services, Google can do the same with regards to this idea.

With this, I feel like I can still go on and talk even more in depth about the frameworks and how they apply to this article. I think that now I can easily see through and understand how these frameworks are not only theoretical, but actually exist in the real business world. I am glad that became transparent to me because it helped me better understand why businesses act in certain ways that are sometimes difficult to understand.

Friday, March 24, 2006

Wal-Mart Fishes Upstream

Wal-Mart has been growing and expanding its presence in the market for so long, and its opening a new store in Plano, Tex., was no exception. However, according to the article "Wal-Mart Fishes Upstream" by Mark Morrison, indicates that the new store-opening is not merely a geographic expansion. In fact, it is more of a market expansion to reach out to new customers. Wal-Mart is trying to target customers with a higher income range, and this is obvious with the variety of products that the new store offers. From this article, I was able to perceive several elements of the Hamel and Porter Frameworks.

First of all, there is a change in core strategy. Wal-Mart apparently is trying to transform itself into targeting customers with an income in the $30,000 to $40,000 range. The new store provides a variety of goods or products where you can find for example "not the standard-issue McDonald's but a kick's coffee and snack shop that has the looks – and nearly the prices – of a Starbucks." According to Hamel, one of the elements of the Core Strategy component of the business concept is product/market scope. The store chose to compete in a new geographical area to target more customers, or rather, different customers. Now it is possible that the core strategy is not going through a complete change. That is, Wal-Mart might not be changing its whole idea of being the affordable store that targets the "bread-and-butter customers" to being the store that targets wealthier people. Wal-Mart might just be expanding its market to reach out for these wealthier customers. They are probably trying to compete with new customers and new geographic areas.

Second, I think that Wal-Mart possesses strategic resources that enable it to take advantages in the market. First of all, it is apparent that Wal-Mart has core competencies, and that is why it is expanding to cover a wider market range. However, what Wal-Mart is doing is not unique to customers. They can get these same things from other stores. For example, you are reminded of a trip to Best Buy or compUSA when you visit the Electronics part in the new store. Therefore, I do not see how Wal-Mart is choosing to compete differently. In other words, I can't see how Wal-Mart plans its basis for differentiation.

Third, with regards to Porter's framework, I can see that Wal-Mart is posing a threat of entry to other companies in the area. In addition, I think that Wal-Mart is also posing a threat of substitution because some companies, like Super Target, complained that Wal-Mart was "copying" them.

Wednesday, March 08, 2006

Lebanon's hospitality sector taps into virgin boutique hotel market

The other day in my Strategic Management class we were talking about Emaar and Armani's contract of working together on introducing luxury hotels to Dubai's market, with the construction of Emaar and the designs of Armani. The introduction of a different kind of luxury hotels, called Boutique Hotels, is also under development currently in the Lebanese market. According to Lysandra Ohrstorm, a writer for The Daily Star, Lebanon's hospitality sector is spreading out to the "boutique hotel market". In her article, "Lebanon's Hospitality Sector Taps into Virgin Boutique Hotel Market", she talks about how the demand for hotel rooms in Lebanon is increasing, and how some projects are being under construction currently in different places in Lebanon.

The question that arises here is: Where do we see the strategies and the frameworks we saw in such an article? Where do Porter, Hamel, Baron, and Barney even show up? Well, I think that this article is a perfect example of strategy, or maybe I am getting better able at seeing more into articles to detect underlying strategies. First of all, I think that these boutique hotels pose a threat of entry to 5-star luxury hotels in the market, which is one of Porter's five competitive forces. The other hotels, from Porter's view, should probably come up with ideas with regards to creating barriers to entry for those boutique hotels. However, the boutique hotels are already differentiating themselves in the way they treat their customers (a point I will get back to later on) and in the view of how luxurious they are. There is too much room for competition, and I can even expect some retaliation because these 5-star chains have been there in the Lebanese market for quite a while now, and they do have the necessary cash and resources to "fight back". However, I wonder: is there a threat of substitution? According to Porter, "identifying substitute products is a matter of searching for other products that can perform the same function as the product of the industry". In that case, I would think that the Boutique hotels truly are a substitute for the 5-chain hotels, and that is why I disagree with Mr. Christian FernainŽ, the cofounder of the management consulting firm Ulysses, who has been quoted to say that the new boutiques will not challenge the market-share of bigger luxury hotels, because they are targeting a different market segment. He stated for example that these boutiques are targeting customers between the ages of 25 and 35, and that, unlike the 5-chain hotels, they are not targeting families. That much I agree with. However, part of the big market segment that the 5-chain hotels are targeting includes those customers of the ages between 25 and 35. Right? I think so. Therefore, Porter's threat of substitution also appears here.

Hamel, as usual, with his detailed framework as to where strategies appear in any market and in any company, appears again all over the article. We see Core Strategy, as the boutiques chose a way in which they want to compete. Product/Market scope appears when we see that the boutiques are choosing specific geographic locations to compete. In this case, they are competing in the Lebanese market, which is a place that Ohrstorm indicates to have "plenty of room for even more boutique hotels" and a place which she refers to as "the virgin Lebanese market." Also, the basis for differentiation shows how these boutique hotels are trying to compete in a different way from other 5-chain hotels in the market, especially through personalized customer treatment, and through the luxurious facilities that we do not see in other 5-star hotels. Their strategic resources come into our view in this article as we see that the core competencies of the firm (what the firm knows about the demand rise in the Lebanese market for more rooms) is helping them with developing a product that is valuable and unique to the customers, and what can be transferable into new opportunities. Moreover, since these boutique hotels are on the lookout for changes in demand in that market, we can sense that information and insight. These hotels are trying to collect information about the customers in the market.

Moving on to Baron, I think we see a non-market issue in several places. First of all, the drop in the tourism level in Lebanon is an issue that the boutique hotels need to consider. Politics is playing a major role in Lebanon these days, and is showing a negative effect on many companies' books. Therefore, the boutique hotels need to see who the parties of interest are in this case, and how can they get them to come to Lebanon, despite the news and the fact that there are too many political issues there. On the other hand, we see an increase in the demand for these boutique hotel rooms in Lebanon! How so? The article does not talk about that part, and was getting a bit self-contradictory in that case. However, even if demand was increasing, then there must have been some social arrangement going on. The wealth of people in Lebanon is increasing, and I don't think that this would be possible with the current situation over there. This leaves me wondering: How is demand increasing? How did these boutique hotels KNOW that demand will be increasing soon?

As to Barney, we see the question of value arising as the boutique hotels see an increase in the demand, which is an opportunity in the environment, and they take advantage of it, assuming that demand is truly expected to increase of course. What remains unknown is whether these boutique hotels will be able to respond to environmental threats in Lebanon. Thus, the question of value remains standing, especially with the current political situation in Lebanon. With regards to the question of rareness, there aren't many other competing boutique hotels in Lebanon that have the same resources or capabilities, especially that budget constraints now are severe for many companies and investors there, since not many investors are willing to invest in a place that bears that much risk.

Thursday, February 16, 2006

The New School

More than 1.2 million college graduates every year face the harsh reality of competing against other graduates for jobs in the marketplace, according to the article "The New School" by Kim Jack Riley. That is why many students who complete their Bachelors degree go on to continue their MBA studies in order to have a better competitive advantage over others when they graduate. The question is that: Is this a good strategy? Could be, but I am not sure it works out all the time for several reasons. If we think of MBA students as firms trying to compete against rivals, and we apply the strategic theories of Porter, Hamel and Barney, we can reach interesting conclusions.

From Porter's point of view, since there are many suppliers (students with MBAs) in the market, then the buyers (companies hiring students in the marketplace) will start possessing bargaining power. The supply is greater than the demand for what students call a "good job". Not many companies are capable of giving students compensation that is suitable or acceptable to them. Sometimes it is because the students think that they are worth more than that. Nevertheless, the bargaining power of companies offering the "good jobs and positions" is increasing, and this could be one thing that is a competitive force in the economy. Moreover, there are those MBA students who already have jobs but are looking for better positions. What about them? Aren't they afraid of potential entrants who might snatch away those positions before they do? Yes, that is true. Those MBA students are threatened, and that does nothing but adds to the competitive forces in the hunt for jobs. That is why those who are threatened should create value for themselves and distinguish themselves, a fact that takes me to the next framework, created by Barney.

Barney's question of value appears when we wonder whether the MBA students who already have jobs, but are still looking for better positions, possess the capabilities and resources that enable them to respond to environmental threats and opportunities. For example, their experience in the market gives them value against potential entrants (a combination of ideas I have made between Porter's and Barney's frameworks). However, the experiences they get should enable them to compete and win in the marketplace. The degree by itself cannot be considered valuable because it does not allow them to respond to the threats of potential and new entrants. In addition to that, we can clearly see that the MBA degree is not a rare resource. Today, many people already possess that "MBA resource". Furthermore, there is no question as to whether this resource is imitable or not. Most people have the resources and capabilities to get an MBA degree. Therefore, there is no cost advantage in this case for obtaining an MBA except if students lack the financial abilities to do so. Imitation in this case can take the form of direct duplication, if it was obtained from the same university as others working in the market, or it can take the form of substitution if the MBA degree was from any other university. What I think would make each MBA student different is the question of organization in Barney's framework. As a matter of fact, I think it is the most important in considering the strengths and weaknesses of any individual or any organization. We can clearly see that when, in the article, Tony Lee, editor-in- chief of the College Journal, is sited when he affirmed that "the primary concerns of employers today are:

Even if the applicant has an M.B.A., does the job seeker really have the aptitude to do well in the job?Was the decision to go to graduate school made last minute out of desperation to get a job?Was the M.B.A. received at a top-tier business school?"

Now these are good indicators to the fact that an MBA degree by itself is not enough. It is how that degree is used that matters to employers – that is, how the "organization" of that MBA graduate is. How he or she can use the MBA degree to enable him or her to fully exploit the full competitive potential of that degree, according to Barney's definition.

Moving on to Hamel's theory, if we think of MBA students as firms competing in the market, then we can state that they must have a core strategy in order for them to succeed. One element of Hamel's core strategy that MBA graduate can use is the basis for differentiation. They have an advantage with their degree, no doubt about that, but they also need to know what the best way is for them to compete differently from their rivals. The key word here is "differently". Furthermore, according to Hamel, these students with MBA degrees have a strategic asset which if used properly, will enable them to succeed.

Going back to the question I posted in the beginning (Is obtaining an MBA degree a good strategy to compete in the market for jobs?), and applying the three frameworks, we can see that an MBA degree by itself is not a very good strategy. According to Porter, the degree only increases the competitive force, while with Barney's framework; the discussion above will show you that these graduates do not have a perfect competitive advantage. Moreover, with Hamel, MBA degrees by themselves are just an addition. They cannot do anything without some other supportive strategy, like competing differently for example.

Tuesday, February 07, 2006

Effect of Danish Boycott Patchy

After the controversial cartoons portraying pictures of the Muslims' prophet, Muhammad (peace be upon him), were issued in a Danish newspaper, Muslims started boycotting Danish products. This affected different parts of the economy, and the interesting part is that, even though the "Effect of Danish Boycott Patchy" article is all about politics, Hamel's frameworks and Porter's forces arise again as part of the strategic decisions that were made and that we could see.

First of all, with the collective boycott for Danish products, we can tell how powerful buyers can be if they work together and agree on one thing. In this case, the boycott forced sales of Danish products to drop, even though they have been very profitable and were doing well. We could also sense the power of buyers in that supermarkets, when they knew about the boycott, pulled down the Danish products from the shelves, leaving these shelves empty for a while so that buyers can notice that this particular store does not sell Danish products. It was like these supermarkets were fearful of the buyers' power that they didn’t want to give them the impression that "we see what you boycott". They probably did not want that kind of risk of losing the customers.

Second, the article tells us that supermarkets and hypermarkets pulled down Danish products leaving the "shelves empty for the people to notice". Now I would think of this as one of Hamel's customer interface component of the business concept. I think it fits properly under "fulfillment and support". These supermarkets are reaching the customers by providing them with support. In this case, it is not necessarily a physical support with the products, but rather an emotional support. This is important because it keeps the customers loyal. In addition, I think that leaving the shelves empty for the customers to see falls also under "information and insight". They are providing customers with the necessary information: "Hey! We are with you! We do not sell things you do not like and you can see that from the empty shelves!" In fact, I liked that strategy. Furthermore, one manager said, "as the situation stand, [Danish products] are off for the foreseeable future", and that was followed by "positive feedback from [the] customers". Now that is information and insight again. This manager is on the lookout for customer feedback in order for him to be able to extract insight from this information… exactly what Hamel explained in his business concept innovation! I also see information and insight when SADAFCO was trying to tell its customers (and shareholders) that they "do not import or sell any products from Denmark or Norway". They were trying to convey the message to the customers that their wishes are the demands of the companies in the market. We can tell here how important a role the media plays in the daily decisions of managers. It's their channel of getting information over to the customers. That is something I never noticed before.

Third, "relationship dynamics" comes into play in this particular article when we are told about the customer who came back with the Danish product and asked for a refund. This person's wishes were respected and he was given his money back. Now I think that this is a kind of interaction between the buyer and the seller. It creates a sense of loyalty among the customers to that particular store.

Fourth, with regards to Hamel's strategic resources, I suppose we can say that core processes (which is what the people in a firm do) appear all over the article! First of all, we see how companies responded. The actions they took in order to satisfy the customers for example included removing the Danish products from the supermarkets. It is true that in this example I gave the supermarkets did not physically transform inputs into outputs, but hey! They did create value for the customers through their actions. Those actions were valuable to Muslims probably because this is their religion and the cartoons might have been offensive to them!

However, I would like to point out that even though strategic assets (which are part of the strategic resources) are thought to enhance a business concept, I think they worked against the firms and the supermarkets in this article. Strategic assets are what firms own, and in this case, the supermarkets owned the unwanted Danish products and brands that were part of their inventory and, thus, part of their assets. It caused them trouble rather than added value and growth. However, core competencies helped the companies know what to do. Because they were aware of what was going on in the market, they were able to respond, and their response, I think, was suitable to the situation.

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Wednesday, February 01, 2006

Google is Destined to Fail in China

We all heard about Google's continuous attempts to enter the Chinese market and get hold of its internet population. However, these attempts, unfortunately to Google, turned out to be a failure simply because Google is not a Chinese company! According to the article "Google Is Destined to Fail in China" by Perry Wu, the search engine market is not a weak sector in China, and Google probably saw that. Perry Wu goes on and emphasizes in his article how different Google is from Chinese internet companies and explains the main features that may deter Google from being able to enter the Chinese market.

As I went through the article, it was difficult for me not to notice how some of the five competitive forces discussed by Associate Professor, Michael Porter, stood out. In fact, before I knew about Porter's competitive forces, I never noticed how companies and governments have different strategies when it comes to real life.

First of all, we see that there is an expected retaliation from the existing Chinese companies like Sohu, Sina, and Netease. History has shown that many companies like Yahoo and Lycos tried to enter China to win, but ended up investing their money in the country and then leaving "poor, confused and embarrassed". Wu, in his article, explains how Chinese internet companies act in "cooperation" rather than in "competition". They have a mutually beneficial relationship where they try to remain of the same size and try not to grow too big, because it is known that they might end up falling hard. This fact can lead to a slow growth in the industry, and according to Porter, slow industry growth signals that there is a strong likelihood of the local competitors to retaliate. In addition, the history of Lycos and Yahoo for instance is a good indication that there has been retaliation in the past. Otherwise, why would these companies leave a county with a big internet population?! Moreover, the Chinese companies are well-established and are probably supported by their government. This brings government policy into action as a barrier to entry for the foreign internet companies.

Since the Chinese companies are more into socialism, they are more likely to remain in the same market position, as they do not plan to grow. However, a company like Google has a major objective of growing and that is the main reason it is entering the Chinese market in the first place. Therefore, even though Porter does not discuss that, I think it is a major barrier to entry for Google. The stockholders at Google want it to grow, but if it enters China, it will have to remain in the same market position for one of two reasons: either that the competitors will retaliate (which is reflected in Porter's competitive forces) or Google will risk being a "Titan" and "falling hard".

Moreover, government policy (discussed in Porter's barriers to entry) appears when Wu implies that China is a socialist nation. This means that they companies in China are owned collectively by a centralized government that often plans and even controls the economy. Google is a global internet search engine! According to Wu, it is an open company, and many things that happen in China can seem to be fine in the country, but not in Wall Street. Now that can be a serious barrier to entry for Google, and, in this case, it is also about ethical and corporate governance. I agree with Porter as to how vital government policy is when it comes to market entry, but I think he also should have emphasized on the importance of corruption as part of government policy when he talked about the five competitive forces. Chinese companies got into lawsuits that merely appeared in 60-minute shows, and some of them have gotten away with firing a top executive without giving notice to the press! Is that possible for Google, a company operating in the global marketplace, to indulge in? Maybe not, and this becomes a barrier to entry from my point of view.

In addition to that, towards the end of the article, Wu states that Google has agreed to censor its search results, and with that government policy comes into play again. However, I can also see bargaining power. The Chinese population is the buyer, while the Chinese government is the supplier, and in this case, the Chinese government possesses the bargaining power of the supplier, which is a competitive force discussed by Porter. The government is exerting that power by reducing the quality of the searches that are provided by Google, since they will be censored. Google is not such an important customer to Chinese government, especially that there are other internet companies available in the country.

In conclusion, I think that Google needs to defend itself by taking into consideration Porter's five competitive forces. For example, Google can differentiate its search engine in a certain way that the Chinese government cannot refuse. Google should turn the "bargaining power of the supplier" to its side, because, at the end of the day, Google is the company providing the differentiated service.

Saturday, January 21, 2006

Test Post

Test Post for MGT 406 at AUS