Those of us who have waited for hours in line in Sina Road in Athens to buy a railroad ticket to Thessaloniki, the introduction by OSE (ΟΣΕ- Hellenic Railways Organization S.A. and its subsidiary Trainose) of an online reservation system last year must have seemed like too good to be true, coming from an organization who is single-handedly responsible for a sizeable portion of Greece’s debt and still owes about 8 billion Euros to the Greek state (link to company’s unofficial blog in Greek).
Last week’s article in New York Times about Carrefour (Carrefour Rethinks Its ‘Bigger Is Better’ Strategy) is the perfect argument in favor of the view that there is no substitute for a sound strategic analysis of the competitive environment.
The gist of the story is that Carrefour bet heavily during the last decade in expanding the average store size from 8,927 square meters in 2000 to 9,647 square meters in 2010, going against the trend of more compact hypermarkets that its competitors preferred. Carrefour judged that online commerce is too small in total size to be of any serious threat to its business. But, as usual, the devil is in the details: the added capacity was primarily used to offer non-food items that represent infrequent consumer purchases, exactly the type that is increasingly being sold online. Predictably (in retrospect), the extra capital investment was nowhere near as productive as Carrefour would have hoped, costing the company in market capitalization and probably costing the CEO his job.
Those of us that think and do research about Information Systems Strategy, should never forget that as important as network economics and IT-enabled strategic resources are, a proper analysis of the competitive environment, including substitute products and services, is the one step we can never afford to miss.
Photo by Kees van Mansom (flickr) Attribution-NonCommercial licence
We recently discussed major differences between how Apple’s app-store is set up versus how Google’s android market is set up, especially regarding the process (or lack thereof) of screening the applications that are offered through their markets.
Last week Symantec identified 13 different malicious applications in the Android market with 5 million combined downloads between them. Symantec’s announcement was, of course, highly embarrassing for the “self-policed” system set up by Google. However what was even more embarrassing was Ars Technica’s report yesterday that a week later, six of these applications were still available in the Android market!
I know that we explained in class that the process differences reflect fundamentally different strategies from Google and Apple in the management of their platforms, but it is getting very hard to justify Google’s complete hands-off approach…
Pic by Don, Flickr (cc license)
The Inditex (Zara) case that we discussed today, gave us an opportunity to expand on the role of contract manufacturing to modern supply chains. Even though your notes mainly mention cost savings as a major driving force behind contract manufacturing, It has been convincingly argued that Asian economies offer other advantages as well.
For example Apple has noted that if it were to manufacture its iPhones in the USA, it would need 9 months just to find the thousands of engineers that would be needed to oversee operations.
In addition, the amount of flexibility that Chinese and other Asian factories can display in production scheduling is beyond anything that can be matched by western firms. (read: How the U.S. Lost Out on iPhone Work including the memorable story about waking up 8,000 workers in the middle of the night to start the 12 hour shift for the first production run of the iPhone).
Unfortunately, such flexibility often comes by engaging in serious violations of ethical norms that most western firms adhere to and also serious violations of labor and safety laws. An article published 2 days ago in the New York Times does a superb job in describing these problems: In China, Human Costs Are Built Into an iPad
Pic by R. Donovan, Flickr (cc license)
In our discussion on the increasing importance of consumer reviews we talked about businesses’ efforts to enhance and even manipulate their image online. A collection of carefully staged hotel pictures can be found at oyster.com. Note that most these pictures are not digitally manipulated (photoshopped) and it is unlikely that we will soon be able to develop automated tools to detect this type of manipulation.
It is easier to detect photoshopped images, which are usually employed to sell beauty and lifestyle products. A recent scientific article on the topic can be found here and a relevant funny video (that also features a well known Greek pop-star @ 1:45) is available from you tube.
Researchers also try to develop tools that will analyze the language of text reviews and spot fakes. A nice article on this was posted in the New York Times.
How many Henry Fords are there today?
I have always wondered how great business managers of the past, like Jack Welch, Michael Eisner, or even further back all the way to Henry Ford, would compare to today’s top business talent. But how can we make such a comparison? A recent paper on top chess players has given me a couple of ideas on how to approach this question.