a new paradigm of strategy in the 21 st century

1Copyright by Prof. DS Cho

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A NEW PARADIGM OF STRATEGYIN THE 21ST CENTURY

DONG-SUNG CHO

Dean, Professor of Strategy and International BusinessCollege of Business Administration, Seoul National University


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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”

THE CONCEPT OF STRATEGY (SUMMARY)


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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.)

THE CONCEPT OF STRATEGY (1)


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Since the business firms recognizedthe strategy as part of their activities.

Business Strategy

(A filler of the gapbetween theory and reality)

THE CONCEPT OF STRATEGY (2)


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STRATEGY

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

THE GAP BETWEEN THEORY AND REALITY?


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In the 1930-60s

The Subject of study for CEO

(Strategy is risk taking,thus the role of an entrepreneur)

THE CONCEPT OF BUSINESS STRATEGY (1)


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In the 1970-80s

The Environment-based Strategy

(Stratety is match-up ofexternal opportunities

and internal resources)

THE CONCEPT OF BUSINESSSTRATEGY (2)


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In the 1990s

The Resource-based Strategy

(Strategy is specifying a resource profileto find optimal product-market

combination)



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5,350,000 WON5,080,000 WON

COMPARISON OF ATOS & MATIZ


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In the Future

The “ser-M” Paradigm

(Mechanism creation by a subject based on resources

in a certain environment)



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SUBJECT

1930s

ENVIRONMENT

1970s

Energy Crisis

RESOURCES

1990s

Japanese Dominanceover American Firms

MECHANISM

2000sCompetitionfrom all over

THE “SER-M” PARADIGM: HISTORIC EVOLUTION


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Mechanism isthe eventual

source ofcompetitiveness

Subject

Environment Resources

Mechanism

THE “SER-M” PARADIGM: CONTENT


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A framework for identifying causesof a certain matter or phenomenon.

A shopping list

WHAT IS THE “SER-M” PARADIGM?


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1. Corporate-level Mechanism- Strategy- Structure- Networking- Governance- Culture

2. Functional-level Mechanism- Manufacturing/Operational- Marketing/Sales- HR/Incentive- Financial/Accounting

THE “SER-M” PARADIGM: STATIC SYSTEM


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InitialCondition

Coordinating Mechanism

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Resourceaccumulated

Managementcontinued

Environmentsustained

Resourceimpaired

Managementsuccession

Environmentchanged

Learning Mechanism

Selecting Mechanism

THE “SER-M” PARADIGM: DYNAMIC SYSTEM


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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.

THE “SER-M” PARADIGM: APPLICATION


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1) Causal ambiguityOutsiders have difficulty in identifying mechanisms.Competitors have difficulty in imitation (Coca-Cola).

2) Path dependenceSelf-reinforcing as well as self-destructive (large p

rojects).

3) Inertia Resistance to any changesNo mechanism is perfect!

CHARACTERISTICS OF MECHANISM


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1) Competitive strategy

Cost leadership and differentiation strategies can be concurrently pursu

ed.

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.

APPLICATIONS OF MECHANISM


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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

MECHANISM FOR INDUSTRY LEADERSHIP


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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.

MECHANISM, SYSTEM, PROCESS


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THANKS FOR YOUR LISTENING!

a new paradigm of strategy in the 21 st century

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