Sustainability: Hax's Delta Model Framework (Examination of Schwab)
/// Filed in: Management
IS
The Delta Model was proposed by
Arnoldo Hax (MIT Sloan) (Hax.03). As a unified strategic framework
developed after the mainstream adoption of Internet, it provides
specific strategic options beyond the “Best Product Strategy" (i.e.
differentiation or low cost) such as the “Total Customer Solution"
and “System Lock." Within the wide range of potential strategies
the Delta model points out the potential strategic value of IS/IT
as enabling technologies to promote boding (with customers,
complementors, partners, etc) and leading to a range of potential
strategies such as “redefining the customer experience" (e.g.
Saturn, Barnes & Noble, Startbucks iTunes), “customer
integration" (Dell, Mathworks), “dominant exchange" (Google,
YouTube, Wikipedia, iTunes), “system lock" (Intel, Microsoft).
According to the Delta Model strategies based on best product are
the most difficult to sustain; strategies based on customer
integration, customer boding are a better strategic position, and
dominant exchanges and system lock are the most sustainable since
they affect the whole system and complementors. Schwab's current
position of leadership does not seem to achieve dominant exchange
status or system lock. Dominant exchange is achieved when a
critical mass of collaborating users has been reached and each new
user makes the service more useful (e.g. youTube, Wikipedia).
System Lock represent the strongest form of bonding and integration
among complete industries around a product (e.g. all the software
companies developing Windows specific solutions). It focuses in the
entire system economics instead of product-centered economics. The
firm success is due primarily to the complementors that create
solutions based on the firm's architecture. According to this
post-internet strategic framework, Schwab has not achieved a
strategic positioning that gives them a significant competitive
advantage over its competitors. Consequently, Schwab historical
success is not necessarily sustainable, it must rely on continuous
innovation, customer bonding, as well as other intangible assets to
continue to outperform competitors in the current hypercompetitive
changing environment.
Note: This is the last posting in the series of 7 blog entries designed to examine the relationship between Charles Schwab’s Business and IS/IT strategy.
Note: This is the last posting in the series of 7 blog entries designed to examine the relationship between Charles Schwab’s Business and IS/IT strategy.
Sustainability: Advantage Through Superior IS/IT Systems (Examination of Schwab)
/// Filed in: Management
IS
Schwab initially achieved its
leadership position as a discount brokerage firm due to their
superior technological capability, IS/IT know-how, and the
scalability of their original IS/IT infrastructure. As explained
earlier, social factors such as the alignment between the firms
competitive strategy and IS/IT strategy, capability for rapid
prototyping an product development, and agility also played a
significant role in their earlier success. In fact, Schwab's
investment in IT hardware and software back in 1995 was
moderate.
As we have already pointed out in a previous post ... In the specific context of achieving sustainable competitive advantage using IS/IT, Carr has made the argument that while information technology has become the backbone of commerce, the importance of IT and information systems (IS) as a strategic resource capable of gaining sustainable competitive advantage has diminished (Carr.03). He acknowledges that IT is critical to today's competitive environment. However, he makes the point that because IT/IS has become so essential to competition it is inconsequential to strategy. This conclusion is based on the assumption that what makes a resource a source of sustainable competitive advantage is not its ubiquity but its scarcity, that is, a company gains an edge over its competitors by doing something that they can't do or have. Since IS have become commonplace (i.e. data storage, data processing, data transport, CRM, etc), standardized, and available to all competitors as common adopted technologies, its potential as a source of differentiation has diminished. In summary, IS are becoming a commodity and an expense of doing business. According to Carr, given that the value of IS as a strategy resource has been vanishing, he recommends firms nowdays to 1) spend less (research shows that companies with the biggest IT investment do not post the best financial results), 2) follow, don't lead (Moore's law guarantees that the longer you wait to make an IT purchase, the more you will get for your money, and you will be investing in IT capabilities that become more homogenized as opposed to proprietary), and 3) focus on vulnerabilities and not opportunities. While these recommendations of cautious IT investments are intended for the current environment, it is remarkable that Schwab's initial E-business strategy back in 1995 was implemented with a minor IT capital investment by using the existing infrastructure.
Brown and Hagel III (2003) agree that some business nowadays may have overestimated the strategic value of IT, significantly overspent on technology, and recognize the importance of managing IS more rigorously to reduce capital investment requirements and operating costs (Brown.03). However, they emphasize that while in many cases IT (especially standardized IT) is diminishing as a source of strategic differentiation, IT matters a lot (i.e. it does matter to the point of being critical). Brown and Hagel III are of the position that while differentiation is not in IT itself, it is in the new practices and services that IT/IS enable to create that make it critical. Consequently, while Schwab was able to achieve competitive advantages through superior IS/IT capability, it is unlikely that IT alone will be the source that enables the firm to sustain its leadership position.
As we have already pointed out in a previous post ... In the specific context of achieving sustainable competitive advantage using IS/IT, Carr has made the argument that while information technology has become the backbone of commerce, the importance of IT and information systems (IS) as a strategic resource capable of gaining sustainable competitive advantage has diminished (Carr.03). He acknowledges that IT is critical to today's competitive environment. However, he makes the point that because IT/IS has become so essential to competition it is inconsequential to strategy. This conclusion is based on the assumption that what makes a resource a source of sustainable competitive advantage is not its ubiquity but its scarcity, that is, a company gains an edge over its competitors by doing something that they can't do or have. Since IS have become commonplace (i.e. data storage, data processing, data transport, CRM, etc), standardized, and available to all competitors as common adopted technologies, its potential as a source of differentiation has diminished. In summary, IS are becoming a commodity and an expense of doing business. According to Carr, given that the value of IS as a strategy resource has been vanishing, he recommends firms nowdays to 1) spend less (research shows that companies with the biggest IT investment do not post the best financial results), 2) follow, don't lead (Moore's law guarantees that the longer you wait to make an IT purchase, the more you will get for your money, and you will be investing in IT capabilities that become more homogenized as opposed to proprietary), and 3) focus on vulnerabilities and not opportunities. While these recommendations of cautious IT investments are intended for the current environment, it is remarkable that Schwab's initial E-business strategy back in 1995 was implemented with a minor IT capital investment by using the existing infrastructure.
Brown and Hagel III (2003) agree that some business nowadays may have overestimated the strategic value of IT, significantly overspent on technology, and recognize the importance of managing IS more rigorously to reduce capital investment requirements and operating costs (Brown.03). However, they emphasize that while in many cases IT (especially standardized IT) is diminishing as a source of strategic differentiation, IT matters a lot (i.e. it does matter to the point of being critical). Brown and Hagel III are of the position that while differentiation is not in IT itself, it is in the new practices and services that IT/IS enable to create that make it critical. Consequently, while Schwab was able to achieve competitive advantages through superior IS/IT capability, it is unlikely that IT alone will be the source that enables the firm to sustain its leadership position.
Sustainability: Hyper-competition and Continuous Change (Examination of Schwab)
/// Filed in: Management
IS
The question of whether sustainable
competitive advantage is possible in fast-changing
hyper-competitive environments such as the financial services
sector is actively being debated by the research community.
Attaining and sustaining competitive advantage in today's
continuously changing hyper-competitive global environment is
challenging. Continuous and disrupting change is especially
significant in the financial services sector since regulatory
pressure and policy can change very quickly depending on the
national and global economic situation as well as political
factors.
Some authors have argued that in the current fast-changing environment the firm's objective should be directed to an active strategy of disrupting the status quo to create an unsustainable series of competitive advantages (D'Aveni.99). According to this school of thought, sustainable competitive advantages are no longer possible and we are in the next level of competition (D'Aveni.99). The reality of continuous change leads to a new competitive paradigm that goes beyond the traditional basis for competition such as service, quality, price, products, reputation, customer base, and market access. These classical factors are certainly a pre-requisite for achieving success, but sustaining a leadership position depends on great measure of intangible factors operating at the social fabric level of the firm. These include the firm's culture, processes, corporate systems, human resources, management style, adaptability and agility, as well as leadership capability and vision. Schwab's ability to quickly prototype, test, and successfully intro to market new services (e.g. e.Schwab in 1996, Schwab Brokerage Site in 1998, Schwab Alerts in 1999, Learning Center in 2000, PocketBroker in 2000, CyberTrader in 2003, Personal Choice in 2004, Rebalacing Wizard in 2004) as well as the numerous awards received since 1998 are an indication of Schwab's capability and potential for sustainable success through continuous innovation in finding new ways to add value for customers in order to retain their loyalty.
Some authors have argued that in the current fast-changing environment the firm's objective should be directed to an active strategy of disrupting the status quo to create an unsustainable series of competitive advantages (D'Aveni.99). According to this school of thought, sustainable competitive advantages are no longer possible and we are in the next level of competition (D'Aveni.99). The reality of continuous change leads to a new competitive paradigm that goes beyond the traditional basis for competition such as service, quality, price, products, reputation, customer base, and market access. These classical factors are certainly a pre-requisite for achieving success, but sustaining a leadership position depends on great measure of intangible factors operating at the social fabric level of the firm. These include the firm's culture, processes, corporate systems, human resources, management style, adaptability and agility, as well as leadership capability and vision. Schwab's ability to quickly prototype, test, and successfully intro to market new services (e.g. e.Schwab in 1996, Schwab Brokerage Site in 1998, Schwab Alerts in 1999, Learning Center in 2000, PocketBroker in 2000, CyberTrader in 2003, Personal Choice in 2004, Rebalacing Wizard in 2004) as well as the numerous awards received since 1998 are an indication of Schwab's capability and potential for sustainable success through continuous innovation in finding new ways to add value for customers in order to retain their loyalty.
RBV Framework Analysis of Schwab's Business and IS/IT Strategy
/// Filed in: Management
IS
The resource-based view (RBV) is
useful to complement Porter's competitive forces model focused on
the industry structure analysis. The RBV framework proposed by
Barney and others provides a theoretical model to analyze the
idiosyncratic attributes of the firm and their impact on its
competitive position (Barney.91).
From the RBV framework it is important to note that by the time Schwab was ready to implement the E-business strategy in 1995, it already possessed significant technological resources, systems, know-how, and capability. Ever since its inception in 1971, Schwab had been a technological front-runner. Dave Potturck (Former Schwab President) preferred to think of Schwab as a technology firm which operated in the financial services industry. Robert Duste (Senior VP, 97) remarked that technology was not a sideline but a core part of the brand and a core part of the business (``almost every business decision involves a discussion of how we're going to use technology to do things for our customers that no-one else can do"). In fact, Schwab introduced services to enable stock trading through PCs in 1985 before it started using the telephone for trading in 1989. By 1985 Schwab posessed core competencies that were difficult to replicate, transfer, and appropriate by traditional full-service financial service firms such as Merryll Lynch. Consequently, they 1) leveraged their unique technological resources to improve value, 2) differentiated their product (discount brokerage targeted to individual investors) based on core competencies (IS/IT capability), and 3) changed the rules of competition by creating new customized products based on their IS/IT leadership (Barney.91).
Beyond the actual physical IT infrastructure that Schwab already possessed by 1995 (hardware and networks), it also had three other critical resources, namely 1) the ability to mobilize and rapidly deploy new IS/IT to achieve business objectives (e.g. a 30 member team developed, prototyped, tested, and launched e.Schwab in less than 12 months), 2) human IT infrastructure (skills and management capability), and 3) intangible IT resources such as IS culture assets, customer-focused orientations, and excellent management practices capable of aligning IS and business strategy. Research has shown that precisely these intangible IT-based resources (e.g. corporate culture, customer orientation, environmental orientation, know-how, change management) deeply embedded in the firms social fabric are a major contributor to competitive advantage and superior performance (Bharadwaj.00).
From the RBV framework it is important to note that by the time Schwab was ready to implement the E-business strategy in 1995, it already possessed significant technological resources, systems, know-how, and capability. Ever since its inception in 1971, Schwab had been a technological front-runner. Dave Potturck (Former Schwab President) preferred to think of Schwab as a technology firm which operated in the financial services industry. Robert Duste (Senior VP, 97) remarked that technology was not a sideline but a core part of the brand and a core part of the business (``almost every business decision involves a discussion of how we're going to use technology to do things for our customers that no-one else can do"). In fact, Schwab introduced services to enable stock trading through PCs in 1985 before it started using the telephone for trading in 1989. By 1985 Schwab posessed core competencies that were difficult to replicate, transfer, and appropriate by traditional full-service financial service firms such as Merryll Lynch. Consequently, they 1) leveraged their unique technological resources to improve value, 2) differentiated their product (discount brokerage targeted to individual investors) based on core competencies (IS/IT capability), and 3) changed the rules of competition by creating new customized products based on their IS/IT leadership (Barney.91).
Beyond the actual physical IT infrastructure that Schwab already possessed by 1995 (hardware and networks), it also had three other critical resources, namely 1) the ability to mobilize and rapidly deploy new IS/IT to achieve business objectives (e.g. a 30 member team developed, prototyped, tested, and launched e.Schwab in less than 12 months), 2) human IT infrastructure (skills and management capability), and 3) intangible IT resources such as IS culture assets, customer-focused orientations, and excellent management practices capable of aligning IS and business strategy. Research has shown that precisely these intangible IT-based resources (e.g. corporate culture, customer orientation, environmental orientation, know-how, change management) deeply embedded in the firms social fabric are a major contributor to competitive advantage and superior performance (Bharadwaj.00).
Porterian Analysis of Schwab's Business and IS Strategy
/// Filed in: Management
IS
In this post we analyze how Schwab's
strategic use of information technology enabled the firm to address
the competitive forces at work. The well-known Porter's competitive
forces model (Porter.79) is a useful theoretical framework to start
examining the nature of the interactions between Schwab and each of
the five forces within the industry environment in which it
operates. Briefly, according to Porter's competitive forces model,
in order for a firm to succeed in any given industry, it must
effectively address five competitive forces: 1) intensity of
rivalry among the existing competitors in the industry, 2) threat
of potential new entrants, 3) threat of substitutes, 4) bargaining
power of suppliers, and 5) bargaining power of customers
(Porter.79).
Schwab's E-business strategy was part of a larger multi-channel strategy rooted on the firm's customer-focused corporate philosophy whose objective was to provide the maximum number of channels for customers to interact and transact with the company (i.e. ``to provide customers with the most useful and ethical brokerage services in the US"). The objective was to give customers a wide choice. Given this intrinsic strategic alignment between business and IS strategy (Henderson.93), IS/IT capability enabled Schwab to create competitive advantages by offering new services, improving efficiency, improving decision making, and using information systems to achieve operational effectiveness.
A key element of Schwab's IS strategy was to avoid over investing in complete new IT systems (Carr.03). As Carr points out greater IT expenditures do not necessarily lead to superior financial results. Instead, in 1995 Schwab's research group developed a software to enable the existing servers at Schwab to receive trading orders through a web-browser at a PC, send it to Schwab's operational back-end systems, fulfill the order, and pass on the confirmation to the PC. The system (e.Schwab) was developed by a 30-member team in less than a year. By 1996, e.Schwab was ready with a new internet-based product and the firm had become the first major financial services company to permit web-based trading of listed OTC stocks, mutual funds, bonds, and options. Using Porter's competitive forces framework, this new and transforming product can be considered a substitute product that enabled access to a significant market and help change the nature of the competition to put Schwab in a dominant competitive position. The Internet facilitated the completion of trade transactions at a much lower cost since it reduced the need for personnel at contact centers, and given that it did not require Schwab to make a substantial capital investment on IT infrastructure or manpower (Carr.03), the savings could be passed on to customers by charging less commission per trade.
In terms of the classical Porterian competitive strategies, Schwab was able to effectively use IS/IT in order to 1) offer a differentiated product resulting in overall best product leadership, 2) reduce operational costs resulting in overall operational leadership, and 3) lower product costs resulting in overall low cost leadership. By 1997, one year after the introduction of the transforming IS product, the value of online assets handled by e.Schwab had reached \$81B. In these earlier years of the internet revolution, Schwab critical alignment between business and IS/IT strategy enabled the firm to gain competitive advantage through information~\Porter.85 by 1) lowering costs at all levels in the value chain, 2) enhancing differentiation}by using IS/IT to customize products, 3) changing the competitive scope by using IS/IT to increase the firm's ability to coordinate its activities regionally, nationally, and globally (e.g. reducing workload at local branches); creating interrelationships among previously separated industries (e.g. services such as ``Analyst Center" provided customers access to external research from leading firms such as S\&P and DJ); segment their offerings in ways previously feasible only for focused (niche) companies (e.g. ability to provide customized service offerings depending on need of its customers); and 4) spawning new business by creating derived demand for new products and services (e.g. new Schwab services and programs such as Schwab Alerts, Learning Center, PocketBroker, Personal Choice, Rebalancing Wizard).
In the late 90s, a key element of Schwab's strategy was to use the IS/IT systems to extract data regarding the customer preferences, monitoring the customer accounts, and studying the websites customers visited in oder to segment and target its customers and use this proprietary marketing information to design innovative customized products and manage customer relationships more effectively. Thus, Schwab was effectively using IS/IT at all levels in the value chain as a powerful tool for enhancing operational effectiveness in order to complement the traditional ways of competing (Porter.01).
In summary, as a customer-focused technology firm operating in the financial services sector, Schwab was able to make effective use of their information technology and information systems capability to affect competition in three general ways: 1) changing the industry structure and the rules of competition, 2) creating competitive advantage by enabling the company to create new customized products which were both differentiated and low-cost, and 3) transforming the value chain to enhance operational effectiveness (Porter.79, Porter.85, Porter.01). Furthermore, Schwab was able to implement this aligned business/IS strategy without incurring in major IT infrastructure investments or new IS/IT systems implementation (Carr.03). Instead, Schwab's strategic impact of IT investments came from the cumulative effect of sustained initiatives to innovate business practices in the near term and aimed for differentiation not in the IT itself but in the new customized services and operational practices it enabled to create to meet the customer needs and demands (Brown.03).
Schwab's E-business strategy was part of a larger multi-channel strategy rooted on the firm's customer-focused corporate philosophy whose objective was to provide the maximum number of channels for customers to interact and transact with the company (i.e. ``to provide customers with the most useful and ethical brokerage services in the US"). The objective was to give customers a wide choice. Given this intrinsic strategic alignment between business and IS strategy (Henderson.93), IS/IT capability enabled Schwab to create competitive advantages by offering new services, improving efficiency, improving decision making, and using information systems to achieve operational effectiveness.
A key element of Schwab's IS strategy was to avoid over investing in complete new IT systems (Carr.03). As Carr points out greater IT expenditures do not necessarily lead to superior financial results. Instead, in 1995 Schwab's research group developed a software to enable the existing servers at Schwab to receive trading orders through a web-browser at a PC, send it to Schwab's operational back-end systems, fulfill the order, and pass on the confirmation to the PC. The system (e.Schwab) was developed by a 30-member team in less than a year. By 1996, e.Schwab was ready with a new internet-based product and the firm had become the first major financial services company to permit web-based trading of listed OTC stocks, mutual funds, bonds, and options. Using Porter's competitive forces framework, this new and transforming product can be considered a substitute product that enabled access to a significant market and help change the nature of the competition to put Schwab in a dominant competitive position. The Internet facilitated the completion of trade transactions at a much lower cost since it reduced the need for personnel at contact centers, and given that it did not require Schwab to make a substantial capital investment on IT infrastructure or manpower (Carr.03), the savings could be passed on to customers by charging less commission per trade.
In terms of the classical Porterian competitive strategies, Schwab was able to effectively use IS/IT in order to 1) offer a differentiated product resulting in overall best product leadership, 2) reduce operational costs resulting in overall operational leadership, and 3) lower product costs resulting in overall low cost leadership. By 1997, one year after the introduction of the transforming IS product, the value of online assets handled by e.Schwab had reached \$81B. In these earlier years of the internet revolution, Schwab critical alignment between business and IS/IT strategy enabled the firm to gain competitive advantage through information~\Porter.85 by 1) lowering costs at all levels in the value chain, 2) enhancing differentiation}by using IS/IT to customize products, 3) changing the competitive scope by using IS/IT to increase the firm's ability to coordinate its activities regionally, nationally, and globally (e.g. reducing workload at local branches); creating interrelationships among previously separated industries (e.g. services such as ``Analyst Center" provided customers access to external research from leading firms such as S\&P and DJ); segment their offerings in ways previously feasible only for focused (niche) companies (e.g. ability to provide customized service offerings depending on need of its customers); and 4) spawning new business by creating derived demand for new products and services (e.g. new Schwab services and programs such as Schwab Alerts, Learning Center, PocketBroker, Personal Choice, Rebalancing Wizard).
In the late 90s, a key element of Schwab's strategy was to use the IS/IT systems to extract data regarding the customer preferences, monitoring the customer accounts, and studying the websites customers visited in oder to segment and target its customers and use this proprietary marketing information to design innovative customized products and manage customer relationships more effectively. Thus, Schwab was effectively using IS/IT at all levels in the value chain as a powerful tool for enhancing operational effectiveness in order to complement the traditional ways of competing (Porter.01).
In summary, as a customer-focused technology firm operating in the financial services sector, Schwab was able to make effective use of their information technology and information systems capability to affect competition in three general ways: 1) changing the industry structure and the rules of competition, 2) creating competitive advantage by enabling the company to create new customized products which were both differentiated and low-cost, and 3) transforming the value chain to enhance operational effectiveness (Porter.79, Porter.85, Porter.01). Furthermore, Schwab was able to implement this aligned business/IS strategy without incurring in major IT infrastructure investments or new IS/IT systems implementation (Carr.03). Instead, Schwab's strategic impact of IT investments came from the cumulative effect of sustained initiatives to innovate business practices in the near term and aimed for differentiation not in the IT itself but in the new customized services and operational practices it enabled to create to meet the customer needs and demands (Brown.03).
Examination of Charles Schwab's Business and IS/IT Strategy Alingment
/// Filed in: Management
IS
The alignment and execution of Charles
Schwab's (Schwab) business and information systems/information
technology (IS/IT) strategies have made the firm a leading discount
brokerage firm targeted at individual investors. Schwab is now the
industry leader discount investment brokerage firm in terms of
market capitalization (17.59B) and return on equity (ttm, 31.57%).
In the following blog posts we analyze Schwab's IS/IT strategy
using Porter's competitive forces (Porter.79,Porter.85, Porter.01)
and the resource-based view (RBV) of strategy frameworks
(Barney.91,Bharadwaj.00). Finally, we address the question of
whether Schwab's success is sustainable (Carr.03,Brown.03) and
introduce Hax's Delta Model (Hax.03) to facilitate this
analysis.
Examination of Charles Schwab's Business and IS/IT Strategy
/// Filed in: Management
IS
The next series of blog post examine
the relationship between Charles Schwab’s business and information
systems/information technology (IS/IT) strategy. We analyze
Schwab’s IS/IT strategy using Porter’s competitive forces and the
resource-based view of strategy frameworks. Finally, we address the
question of whether Schwab’s success is sustainable using current
frameworks including Hax’s Delta Model.
Library of Science - Papers
/// Filed in: Programs
Papers is an excellent application for
Mac that enables you to search, download, archive papers. It allows
you to browse, organize, read, annotate, etc. Here is the link.
LaTeX Tutorial
/// Filed in: Programs
The best introduction to LaTeX I know
of is entitled “The Not So Short Introduction to LaTeX -or LateX2e
in 141 minutes” written by Toblas Oetlker. You can get the PDF by
clicking here.
Installing LaTeX
/// Filed in: Programs
Several of my students have been
asking me about installation of LaTeX for Mac OS X. Below is a
series of steps:
-1) Download the MacTeX package: http://www.tug.org/mactex/
-2) Follow the GUI instructions to install MacTeX
-3) Download and Install TeXShop: http://www.uoregon.edu/~koch/texshop/
-4) Install a reference manager such as JabRef: http://jabref.sourceforge.net/
Note: TeXShop may already be included with the newer MacTeX distributions.
-1) Download the MacTeX package: http://www.tug.org/mactex/
-2) Follow the GUI instructions to install MacTeX
-3) Download and Install TeXShop: http://www.uoregon.edu/~koch/texshop/
-4) Install a reference manager such as JabRef: http://jabref.sourceforge.net/
Note: TeXShop may already be included with the newer MacTeX distributions.
A New Category - Programs
/// Filed in: Programs
Students, friends, and colleagues
often ask me about software tools I use to prepare class materials,
record lectures, write journal papers, manage research articles,
etc. I spend a lot of time answering these individual questions by
email. Thus, I decided to create a new Category on my blog -the
Programs Category. I will go posting entries as I receive new
requests... I expect this will save a me a lot of time.
Finance and Financial Engineering
/// Filed in: Finance
I received some questions regarding
the fact that I have categories for almost all the core subjects in
the graduate management curriculum (e.g. MBA) except for finance.
Classically, the core functional areas of management are strategy,
marketing, finance, operations management, human resource
management, management information systems, and business law
(primarily IP law and contract law).
I had intentionally left out finance because I felt a little bit uneasy talking about finance on a blog that is part of my personal academic site. I have now added the category and I will probably have some postings about financial accounting and managerial accounting in the future but I don’t plan to talk about investing, trading, or any financial engineering topics in this blog.
Unless I start a new area of research focused on applying statistical signal processing and time-series analysis to study some financial engineering problems I will use a separate blog for those postings: http://www.aboyfinancial.com/
I had intentionally left out finance because I felt a little bit uneasy talking about finance on a blog that is part of my personal academic site. I have now added the category and I will probably have some postings about financial accounting and managerial accounting in the future but I don’t plan to talk about investing, trading, or any financial engineering topics in this blog.
Unless I start a new area of research focused on applying statistical signal processing and time-series analysis to study some financial engineering problems I will use a separate blog for those postings: http://www.aboyfinancial.com/
My Favorite Books on Signal Processing (Top 15)
/// Filed in: Reading and
Books
The list below includes some of the
authors and corresponding books that have influenced me the most in
the field of signal processing. The list I provide consist of my
top 15 selection. I hope to have time to do a more detailed review
of each of them someday in the future:
-Digital Signal Processing, Proakis (DSP Fudamentals)
-Introduction to Linear Algebra, Strang (Math Basics for SSP)
-Intuitive Probability and Random Processes using MATLAB, Kay (Math Basics for SSP)
-Statistical Digital Signal Processing and Modeling, Hayes (Statistical SP)
-Statistical and Adaptive Signal Processing, Manolakis (Statistical SP)
-Applied Optimal Estimation, Gelb (Kalman Filters)
-Linear Estimation, Kailath/Sayed (Kalman Fitlers)
-Statistical Signal Processing, Kay (Linear Estimation)
-Adaptive Filter Theory, Haykin (Adaptive Filtering)
-Adaptive Signal Processing, Widrow (Adaptive Filtering)
-Fundamentals of Adaptive Filtering, Sayed (Adaptive Filtering)
-Spectral Analysis of Signal, Stoica (Spectrum Estimation)
-Digital Spectral Analysis with Applications, Marple (Spectrum Estimation)
-An Introduction to the Bootstrap, Efron (Adaptive Filtering)
-Bootstrap Techniques for Signal Processing, Zoubir (Bootrap)
Of these, the most influencial books for my research have been Statistical Digital Signal Processing by Hayes and Linear Estimation by Kailath.
-Digital Signal Processing, Proakis (DSP Fudamentals)
-Introduction to Linear Algebra, Strang (Math Basics for SSP)
-Intuitive Probability and Random Processes using MATLAB, Kay (Math Basics for SSP)
-Statistical Digital Signal Processing and Modeling, Hayes (Statistical SP)
-Statistical and Adaptive Signal Processing, Manolakis (Statistical SP)
-Applied Optimal Estimation, Gelb (Kalman Filters)
-Linear Estimation, Kailath/Sayed (Kalman Fitlers)
-Statistical Signal Processing, Kay (Linear Estimation)
-Adaptive Filter Theory, Haykin (Adaptive Filtering)
-Adaptive Signal Processing, Widrow (Adaptive Filtering)
-Fundamentals of Adaptive Filtering, Sayed (Adaptive Filtering)
-Spectral Analysis of Signal, Stoica (Spectrum Estimation)
-Digital Spectral Analysis with Applications, Marple (Spectrum Estimation)
-An Introduction to the Bootstrap, Efron (Adaptive Filtering)
-Bootstrap Techniques for Signal Processing, Zoubir (Bootrap)
Of these, the most influencial books for my research have been Statistical Digital Signal Processing by Hayes and Linear Estimation by Kailath.
My Favorite Books on Management (Top 15)
/// Filed in: Reading and
Books
The list below includes some of the
authors and corresponding books that have influenced me the most in
the field of management and leadership. I hope to have time to do a
more detailed review of each of them someday in the future:
-The Delta Project, Arnoldo Hax (Strategy)
-Classic Drucker, Peter Drucker (Management)
-The Practice of Management, Peter Drucker (Management)
-The Effective Executive, Peter Drucker (Leadership)
-Kotler on Marketing, Philip Kotler (Marketing)
-Re-Imagine, Tom Peters (Innovation)
-The Circle of Innovation, Tom Peters (Innovation)
-Competitive Strategy, Michael Porter (Strategy)
-Competivite Advantage, Michael Porter (Strategy)
-Leading Change, John Kotter (Change Management)
-Marketing Management and Strategy, Peter Doyle and Phillip Stern (Marteting)
-The Dynamics of International Strategy, Susan Segal-Horn and David Faulkner (International Strategy)
-Analysis for Financial Management, Robert Higgins (Finance)
-The Human Side of Managing Technological Innovation, Ralph Katz (Technology Management)
-The Organization and Architecture of Innovation, Thomas Allen (Space & Innovation).
Of these, the authors that have influenced me the most have been Arnoldo Hax, Peter Drucker, Tom Peters, and Philip Kotler. I had the great pleasure and oppotunity to take the course on “Reinventing Business Strategy” taught by Arnoldo Hax at MIT Sloan. His presentations, analysis, and clarity of thinking was life changing. I also had the opportunity to take courses by Ralph Katz and Thomas Allen at MIT.
-The Delta Project, Arnoldo Hax (Strategy)
-Classic Drucker, Peter Drucker (Management)
-The Practice of Management, Peter Drucker (Management)
-The Effective Executive, Peter Drucker (Leadership)
-Kotler on Marketing, Philip Kotler (Marketing)
-Re-Imagine, Tom Peters (Innovation)
-The Circle of Innovation, Tom Peters (Innovation)
-Competitive Strategy, Michael Porter (Strategy)
-Competivite Advantage, Michael Porter (Strategy)
-Leading Change, John Kotter (Change Management)
-Marketing Management and Strategy, Peter Doyle and Phillip Stern (Marteting)
-The Dynamics of International Strategy, Susan Segal-Horn and David Faulkner (International Strategy)
-Analysis for Financial Management, Robert Higgins (Finance)
-The Human Side of Managing Technological Innovation, Ralph Katz (Technology Management)
-The Organization and Architecture of Innovation, Thomas Allen (Space & Innovation).
Of these, the authors that have influenced me the most have been Arnoldo Hax, Peter Drucker, Tom Peters, and Philip Kotler. I had the great pleasure and oppotunity to take the course on “Reinventing Business Strategy” taught by Arnoldo Hax at MIT Sloan. His presentations, analysis, and clarity of thinking was life changing. I also had the opportunity to take courses by Ralph Katz and Thomas Allen at MIT.
Are Information Systems a Source of Substainable Competitive Advantage?
/// Filed in: Management
IS
In his seminal 2003 Harvard Business
Review article "It Doesn't Matter" Nicholas Carr made the argument
that while information technology has become the backbone of
commerce, the importance of IT and information systems (IS) as a
strategic resource capable of gaining sustainable competitive
advantage has diminished. Carr's acknowledges that IT is critical
to today's competitive environment. However, he makes the point
that because IT/IS has become so essential to competition it is
inconsequential to strategy. This conclusion is based on the
assumption that what makes a resource a source of sustainable
competitive advantage is not is ubiquity but its scarcity, that is,
a company gains an edge over its competitors by doing something
that they can't do or have. Since IS have become commonplace (i.e.
data storage, data processing, data transport, CRM, etc),
standardized, and available to all competitors as common adopted
technologies, its potential as a source of differentiation has
diminished. In summary, IS are becoming a commodity and an expense
of doing business. In the 1990s , the US Department of Commerce's
Bureau of Economic Analysis estimated that 30% of the capital
expenditures of US companies went to IT. By the end of the decade
it had reached 50% to amount over a $2 trillium a year in
IT-related expenses worldwide.
After making the case of how the value of IS as a strategy resource has been vanishing, Carr provides three recommendations regarding IS management: 1) spend less -studies how that companies with the biggest IT investment do not post the best financial results, 2) follow, don't lead -Moore's law guarantees that the longer you wait to make an IT purchase, the more you will get for your money, and you will be investing in IT capabilities that become more homogenized as opposed to proprietary, and 3) focus on vulnerabilities and not opportunities.
Brown and Hagel III (2003) responded to Carr's paper in a letter to the editor entitled "Does IT Matter" HBR (2003). The authors acknowledged the importance and value of Carr's article and agreed that business may have overestimated the strategic value of IT, significantly overspent on technology, and recognized the importance of managing IS more rigorously to reduce capital investment requirements and operating costs. They emphasize that while in many cases IT (especially standardized IT) is diminishing as a source of strategic differentiation, IT matters a lot (i.e. it does matter to the point of being critical). Brown and Hagel III provide a detailed response to Carr's paper and conclude that while differentiation is not in IT itself, it is in the new practises that IT/IS enable.
The value of IT can be studied in terms of the three main schools of strategy: Harvard School (Porter, Five Forces, 80s), London School (Hamel/Prahalad, Resource View, 90s), and MIT Sloan School (Hax,Delta Model, 21st). For instance, in terms of Porter's five forces industry structure model, the strategic use of IS can help build barriers of entry or put in place barriers of entry for competitors, it can help increasing the switching costs for customers and decrease their bargaining power, enable companies to create substitute products, and limit the bargaining power of suppliers. The RBV emphasises how firm-level IS dynamic capabilities may translate into sustainable competitive advantage by generating "generic lead time" (time taken by a competitor to duplicate an IS system, application or IS-based product), "competitive asymmetry" (the ability of the competitor to replicate the first mover's system", and "pre-emption potential" (the ability of the first mover to pre-empt the retaliation by the follower (Feeny, Ives, 90).
In my opinion the best conceptual framework to analyze the value of IS is the Delta Model proposed by Arnoldo Hax (MIT Sloan). As a unified strategic framework developed after the mainstream adoption of Internet, it provides specific strategic options beyond the Best Product Strategy such as Total Customer Solutions and System Lock. Within the wide range of potential strategies the Delta model points out the potential strategic value of IT/IS as enabling technologies to promote boding (with customers, complementors, suppliers, etc) and lead to a range of potential strategies such as "redefining the customer experience" (e.g. Saturn, Barnes & Nobel, Startbucks iTunes), "customer integration" (Dell, Mathworks), "dominant exchange" (Google, YouTube, iTunes), etc.
References:
[1] Carr, N (2003), "IT Doesn't Matter" Harvard Business Review.
[2] Brown, JS & Hagel III, J (2003), "Does IT Matter" Harvard Business Review
[3] Laudon (2004), "Managing Information Systems - Managing the Digital Firm"
[3] Hax, A (2001), "The Delta Project"
[4] Porter, M (1980, 1985), "Competitive Strategy" & "Competitive Advantage"
[5] Barney, J (1991), "Firm Resources and Sustained Competitive Advantage"
[6] Feeny, F, Ives, B (1990), "In Search of Sustainability: Reaping Long-Term Advantage from Investments in Information Technology"
After making the case of how the value of IS as a strategy resource has been vanishing, Carr provides three recommendations regarding IS management: 1) spend less -studies how that companies with the biggest IT investment do not post the best financial results, 2) follow, don't lead -Moore's law guarantees that the longer you wait to make an IT purchase, the more you will get for your money, and you will be investing in IT capabilities that become more homogenized as opposed to proprietary, and 3) focus on vulnerabilities and not opportunities.
Brown and Hagel III (2003) responded to Carr's paper in a letter to the editor entitled "Does IT Matter" HBR (2003). The authors acknowledged the importance and value of Carr's article and agreed that business may have overestimated the strategic value of IT, significantly overspent on technology, and recognized the importance of managing IS more rigorously to reduce capital investment requirements and operating costs. They emphasize that while in many cases IT (especially standardized IT) is diminishing as a source of strategic differentiation, IT matters a lot (i.e. it does matter to the point of being critical). Brown and Hagel III provide a detailed response to Carr's paper and conclude that while differentiation is not in IT itself, it is in the new practises that IT/IS enable.
The value of IT can be studied in terms of the three main schools of strategy: Harvard School (Porter, Five Forces, 80s), London School (Hamel/Prahalad, Resource View, 90s), and MIT Sloan School (Hax,Delta Model, 21st). For instance, in terms of Porter's five forces industry structure model, the strategic use of IS can help build barriers of entry or put in place barriers of entry for competitors, it can help increasing the switching costs for customers and decrease their bargaining power, enable companies to create substitute products, and limit the bargaining power of suppliers. The RBV emphasises how firm-level IS dynamic capabilities may translate into sustainable competitive advantage by generating "generic lead time" (time taken by a competitor to duplicate an IS system, application or IS-based product), "competitive asymmetry" (the ability of the competitor to replicate the first mover's system", and "pre-emption potential" (the ability of the first mover to pre-empt the retaliation by the follower (Feeny, Ives, 90).
In my opinion the best conceptual framework to analyze the value of IS is the Delta Model proposed by Arnoldo Hax (MIT Sloan). As a unified strategic framework developed after the mainstream adoption of Internet, it provides specific strategic options beyond the Best Product Strategy such as Total Customer Solutions and System Lock. Within the wide range of potential strategies the Delta model points out the potential strategic value of IT/IS as enabling technologies to promote boding (with customers, complementors, suppliers, etc) and lead to a range of potential strategies such as "redefining the customer experience" (e.g. Saturn, Barnes & Nobel, Startbucks iTunes), "customer integration" (Dell, Mathworks), "dominant exchange" (Google, YouTube, iTunes), etc.
References:
[1] Carr, N (2003), "IT Doesn't Matter" Harvard Business Review.
[2] Brown, JS & Hagel III, J (2003), "Does IT Matter" Harvard Business Review
[3] Laudon (2004), "Managing Information Systems - Managing the Digital Firm"
[3] Hax, A (2001), "The Delta Project"
[4] Porter, M (1980, 1985), "Competitive Strategy" & "Competitive Advantage"
[5] Barney, J (1991), "Firm Resources and Sustained Competitive Advantage"
[6] Feeny, F, Ives, B (1990), "In Search of Sustainability: Reaping Long-Term Advantage from Investments in Information Technology"
Why a strategy based on technology alone cannot help organizations solve their business problems and achieve their business objectives?
/// Filed in: Management
IS
There plenty of examples of companies
that have gained sustainable competitive advantage through
effective use of information systems (e.g. Amazon, eBay, Dell,
Walt-Mart, Apple, YouTube, etc). Many other firms, however, fail to
realize the benefits of their capital investments on information
technology (IT). This is explained, in part, by the fact that
strategies based on technology alone tend to be ill-conceived and
limiting. This is the case because a mere technical strategy can
have serious negative implications for organizations because it
does not take into account numerous "societal considerations" that
are critical in order for IT to function as an effective
information system (IS). These societal considerations and human
factors include an understanding of the organizational culture,
context, values, structure, and processes. Top-down implementations
based on technology considerations alone can be extremely
disruptive to well-established and efficient business processes and
often result in resistance from the intended user-base in the
organization. Kling (2000) warns firms of the dangers associated
with the technological approach and the thinking that IT/IS are
mere "tools." According to Kling, viewing IT/IS as tools leads to
1) underestimate the cost associated with effective IS/IT
implementation and adoption, and 2) overestimate the
generalizability of applications from one setting or group of
individuals to another.
IS investments and implementations have a much better change of translating into competitive advantage when they take into account the underlying organizational context and its impact on how IS are used. Societal aspects associated with the firm will determine how the IS will be used. IS will, in turn, affect the organizational context. For instance, the IS adopted in multidomestic enterprises will probably differ from those adopted by global enterprises due to differences in organizational structures, context, and processes; and adopting a given IS may -in turn- change these enterprises to behave more or less as transnational firms.
In summary, IS should be viewed as enabling technologies that are in constant interaction with people and processes within the organization. This is due, in part, to the evolving role of IS from data processing tools (50s), to managerial control tools (60s), to decision support tools (70/80s), to institutional core activities (90s), to becoming a major source of competitive advantage (21st). The view of IS as social systems is known as the "sociotechnical approach" (Laudon 2004) and there is an extensive body of research that examines the design, uses, and consequences of information and communication technologies (ICT) in ways that take into account their interaction with institutional and cultural contexts. This area of research is now known as "social informatics" (Kling 2000).
References:
Kling. "Learning Abut Information Technologies and Social Change: The Contribution of Social Informatics." (2000)
Laudon. "Managing Information Systems - Managing the Digital Firm" (2004)
IS investments and implementations have a much better change of translating into competitive advantage when they take into account the underlying organizational context and its impact on how IS are used. Societal aspects associated with the firm will determine how the IS will be used. IS will, in turn, affect the organizational context. For instance, the IS adopted in multidomestic enterprises will probably differ from those adopted by global enterprises due to differences in organizational structures, context, and processes; and adopting a given IS may -in turn- change these enterprises to behave more or less as transnational firms.
In summary, IS should be viewed as enabling technologies that are in constant interaction with people and processes within the organization. This is due, in part, to the evolving role of IS from data processing tools (50s), to managerial control tools (60s), to decision support tools (70/80s), to institutional core activities (90s), to becoming a major source of competitive advantage (21st). The view of IS as social systems is known as the "sociotechnical approach" (Laudon 2004) and there is an extensive body of research that examines the design, uses, and consequences of information and communication technologies (ICT) in ways that take into account their interaction with institutional and cultural contexts. This area of research is now known as "social informatics" (Kling 2000).
References:
Kling. "Learning Abut Information Technologies and Social Change: The Contribution of Social Informatics." (2000)
Laudon. "Managing Information Systems - Managing the Digital Firm" (2004)
Information Systems and Their Effect on Academia
/// Filed in: Management
IS
Information Systems have affected
academia significantly. With regards to teaching, IS have became a
critical component and online/web courses are now mainstream even
at traditional face-to-face/campus universities. IS have also had a
tremendous effect on research. Most peer-reviewed journals
currently employ manuscript management systems where journal
submissions and the peer-review process takes place. This has
shortened the review and publication time. Additionally, performing
literature reviews and prior-art searches has become easier than
ever before due to improvements in IS.
What is an Information System?
/// Filed in: Management
IS
An information system is a set of
interrelated components that collect or retrieve, store, analyze,
and distribute information to support organisational decision
making an control. Information systems include technical components
(hardware, software, etc) -i.e. the Information Technology- and the
associated human interaction with technology.
Importance of MNE Structure Models and Typologies and Empirical Evidence
/// Filed in: MNEs
The
organization of modern MNEs is more complicated than the
traditional organizational models in their pure form. As modern
MNEs design and adopt new structures in order to optimize their
ability to simultaneously achieve higher levels of global
integration and local responsiveness, the traditional models no
longer can be used accurately to characterize most MNEs. Despite
this fact, the traditional models are still useful to characterize
extreme/ideal (pure) cases in the global integration/local
responsiveness matrix and to capture some of the most salient
characteristics of MNEs during the early stages of
internationalization and globalization. Additionally, empirical
analysis corroborates the existence and usefulness of the
multidomestic, global, and transnational models to characterize the
most salient features of MNEs. For instance, Harzing (2000) studied
166 subsidiaries of 37 MNCs headquartered in 9 different countries
and concluded that Barltett and Ghoshal's typology (developed based
on in-depth cases studies of nine MNEs) can be confirmed in a
large-scale empirical setting (Harzing.00).
There are many reasons why having a typology and models of organizational structures for MNEs is useful to academics, students, and executives (Dunning.01). Typologies provide a manageable framework that reduces complexity and enables practitioners to study, explain, and design organizational strategies for MNEs. To this end, in Table I, we propose a more general typology to model MNEs at different stages in their globalization cycle (Harzing.00), and provide representative examples for each organizational form. This typology includes the international exporter, traditional multidomestic, traditional global, modern multidomestic, modern global, transnational, and virtual.
In addition to the structures we already described in earlier posts, we add the "virtual" form in order to model a new type of MNEs emerging in the 21st as a consequence of the globalization forces. Specifically, the virtual form models ventures which focus exclusively on their core competencies and smartsource (outsourcing focused on value) to global companies optimally positioned to provide services such as R&D, manufacture, production, industrial design, marketing, localization, distribution, and information brokerage. The virtual form uses strategic alliances, external partnerships, mass collaboration, and dominant exchange strategies to achieve high levels of global integration and local responsiveness through co-operative strategies. On a first approximation, the virtual model resembles the transnational form but uses external partners, global experts, opinion leaders and collaborators instead of corporate subsidiaries. The virtual form tends to focus more on intangible assets rather than tangible/capital intensive assets. This form can be used to model some modern MNEs that do not fit the multidomestic, global, or transnational framework such as of the many recent US startups in professional services, manufacture (e.g. medical device manufactures), and dot-com firms (Porter.01).
There are many reasons why having a typology and models of organizational structures for MNEs is useful to academics, students, and executives (Dunning.01). Typologies provide a manageable framework that reduces complexity and enables practitioners to study, explain, and design organizational strategies for MNEs. To this end, in Table I, we propose a more general typology to model MNEs at different stages in their globalization cycle (Harzing.00), and provide representative examples for each organizational form. This typology includes the international exporter, traditional multidomestic, traditional global, modern multidomestic, modern global, transnational, and virtual.
In addition to the structures we already described in earlier posts, we add the "virtual" form in order to model a new type of MNEs emerging in the 21st as a consequence of the globalization forces. Specifically, the virtual form models ventures which focus exclusively on their core competencies and smartsource (outsourcing focused on value) to global companies optimally positioned to provide services such as R&D, manufacture, production, industrial design, marketing, localization, distribution, and information brokerage. The virtual form uses strategic alliances, external partnerships, mass collaboration, and dominant exchange strategies to achieve high levels of global integration and local responsiveness through co-operative strategies. On a first approximation, the virtual model resembles the transnational form but uses external partners, global experts, opinion leaders and collaborators instead of corporate subsidiaries. The virtual form tends to focus more on intangible assets rather than tangible/capital intensive assets. This form can be used to model some modern MNEs that do not fit the multidomestic, global, or transnational framework such as of the many recent US startups in professional services, manufacture (e.g. medical device manufactures), and dot-com firms (Porter.01).
Transnational Model
/// Filed in: MNEs
The
transnational form is used to characterize MNEs that attempt to
achieve high global integration and high local responsiveness. As
already pointed out, the limitations of the multidomestic and
global structures led to the concept of transnational corporation
(high localization/high global integration) proposed by Bartlett
and Ghoshal, and widely accepted by the research community
(Bartlett.00,Bartlett.92,Bartlett.88,Bartlett.87,Bartlett.87b,
Harzing.00,Yip.94). This organizational structure follows the
N-form (network) as opposed to the M-form (multi-divisional) since
it focuses on integration, combination, multiplication of resources
and capabilities, and managing assets and core competencies as a
network of alliances, as opposed to functional or geographical
division. The ultimate objective is to have access and make
effective and efficient use of all the resources the company has at
its disposal globally, including both globalized knowledge and
tacit localized knowledge. A potential limitation of the
transnational company is the fact that it requires management
intensive processes (Ohmae.06a). In any case, the transnational
model is still primarily considered a mindset, idea, or ideal
rather than an organization structure found on may MNEs, specially
in manufacturing (Segal-Horn.99).
- Matrix Position: high localization / high global integration.
- Stage: developed stage of internationalization.
- Subsidiary role: local responsiveness, country/region specific strategies.
- Center role: global integration, coordination, resource allocation, R\&D, knowledge transfer
- Management Decisions: bottom--down (differentiation) and top--down (integration), matrix structures, N-form.
- Technology \& Knowledge Transfer: knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: McKinsey, Cap Gemini Sogeti.
- Matrix Position: high localization / high global integration.
- Stage: developed stage of internationalization.
- Subsidiary role: local responsiveness, country/region specific strategies.
- Center role: global integration, coordination, resource allocation, R\&D, knowledge transfer
- Management Decisions: bottom--down (differentiation) and top--down (integration), matrix structures, N-form.
- Technology \& Knowledge Transfer: knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: McKinsey, Cap Gemini Sogeti.
Modern Global Model
/// Filed in: MNEs
The
modern global company follows the tradition of the old (pure)
global form but it gives a more significant role to the country
subsidiaries. The central authority is responsible for achieving
high global integration by providing 1) low cost sourcing
platforms, 2) efficient factor costs, 3) global scale, 4) product
standardization, 5) quality assurance, 6) global technology sharing
and IT, 7) brand name, and 8) global corporate strategy. Contrary
to the traditional (pure) global model, the modern global MNE makes
more effective use of the subsidiaries in order to become more
locally responsive. As traditional global firms evolve into modern
global enterprises they tend to focus more on strategic
coordination and integration of core competencies worldwide, and
protecting home country control becomes less important. Modern
global corporations may disperse R&D, manufacture and
production, and marketing around the globe. This helps ensure
flexibility in the face of changing factor costs for labor, raw
materials, exchange rates, as well as hiring talent worldwide
(Segal-Horn.99,
Yip.96,Yip.91,Yip.91a,Yip.89,Yip.00,Yip.97a,Yip.88,Yip.96a).
- Matrix Position: high global integration / medium localization.
- Stage: developed stage of internationalization.
- Subsidiary role: local responsiveness, country/region specific strategies.
- Center role: global integration, coordination, resource allocation, R\&D, knowledge transfer
- Management Decisions: bottom--down (differentiation) and top--down (integration)
- Technology \& Knowledge Transfer: knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: Gillette
- Matrix Position: high global integration / medium localization.
- Stage: developed stage of internationalization.
- Subsidiary role: local responsiveness, country/region specific strategies.
- Center role: global integration, coordination, resource allocation, R\&D, knowledge transfer
- Management Decisions: bottom--down (differentiation) and top--down (integration)
- Technology \& Knowledge Transfer: knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: Gillette
The Experience Economy
/// Filed in: Marketing
Pine and
Gilmore have argued that the "experience economy" represents the
current state of economic development in advanced nations: from
"extracting" commodities, to "manufacturing" goods, to "delivering"
services, to "staging" performances.
The following table lists the characteristics of each stage of economic development:
-Offering: Commodities, Goods, Services, Experiences
-Economy: Agrarian, Industrial, Service, Experience
-Function: Extract, Manufacture, Deliver, Stage
-Nature: Fungible, Tangible, Intangible, Memorable
-Attribute: Natural, Standardized, Customized, Personal
-Supply Method: Bulk, Inventoried, On-Demand, Revealed over duration
-Seller: Trader, Manufacturer, Provider, Stager
-Buyer: Market, User, Client, Guest
-Demand: Characteristics, Features, Benefits, Sensations
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Levitt, "The Industrialization of Service"
[5] Heskett, "The Service Management Wheel"
[6] Pine and Gilmore, "Economic Functions"
The following table lists the characteristics of each stage of economic development:
-Offering: Commodities, Goods, Services, Experiences
-Economy: Agrarian, Industrial, Service, Experience
-Function: Extract, Manufacture, Deliver, Stage
-Nature: Fungible, Tangible, Intangible, Memorable
-Attribute: Natural, Standardized, Customized, Personal
-Supply Method: Bulk, Inventoried, On-Demand, Revealed over duration
-Seller: Trader, Manufacturer, Provider, Stager
-Buyer: Market, User, Client, Guest
-Demand: Characteristics, Features, Benefits, Sensations
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Levitt, "The Industrialization of Service"
[5] Heskett, "The Service Management Wheel"
[6] Pine and Gilmore, "Economic Functions"
Service Marketing
/// Filed in: Marketing
In the
Triad nations (Ohmae) services account to 60% to 70% of national
output. Services are currently the fastest growing part of
international trade. In affluent societies, services tend to
provide higher marginal utility than goods.
It is sometimes difficult to differentiate products from services, since we typically encounter a product-service continuum. The following characteristics increase the service component of the continuum:
-1. Intangible: physical nature (tangibility) is less important
-2. Perishable: inventories cannot be kept
-3. Heterogeneous: services are "performances" and no two performances are identical.
-4. Inseparable: Production and consumption take place simultaneously.
Lovelock proposed a series of questions to help classify services and gain strategic marketing insight.
-1. What is the nature of the service?
-2. What type of relationship does the service organization have with its clients? (i.e. membership, no formal relationship, etc).
-3. How much room does the service organization has for client customization?
-4. What is the nature of the demand?
-5. How is the service delivered?
The delivery of services poses serious difficulties for managers. Of special importance is managing of personnel/employees, quality control, and productivity. Levitt proposed several solutions in his seminal paper "The Industrialization of Service" (HBR). In this line, Heskett proposed the "The Service Quality Wheel."
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Levitt, "The Industrialization of Service"
[5] Heskett, "The Service Management Wheel"
It is sometimes difficult to differentiate products from services, since we typically encounter a product-service continuum. The following characteristics increase the service component of the continuum:
-1. Intangible: physical nature (tangibility) is less important
-2. Perishable: inventories cannot be kept
-3. Heterogeneous: services are "performances" and no two performances are identical.
-4. Inseparable: Production and consumption take place simultaneously.
Lovelock proposed a series of questions to help classify services and gain strategic marketing insight.
-1. What is the nature of the service?
-2. What type of relationship does the service organization have with its clients? (i.e. membership, no formal relationship, etc).
-3. How much room does the service organization has for client customization?
-4. What is the nature of the demand?
-5. How is the service delivered?
The delivery of services poses serious difficulties for managers. Of special importance is managing of personnel/employees, quality control, and productivity. Levitt proposed several solutions in his seminal paper "The Industrialization of Service" (HBR). In this line, Heskett proposed the "The Service Quality Wheel."
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Levitt, "The Industrialization of Service"
[5] Heskett, "The Service Management Wheel"
Components of the Marketing Environment
/// Filed in: Marketing
The
marketing environment can be divided into the micro-enviornment and
the macro-environment. The competitive forces identified by Michael
Porter in his seminal works "Competitive Strategy" (1980) and
"Competitive Advantage" (1985) offer an instructive framework to
study the components of the micro-envioronment and the factors that
determine the competitive structure of the industry.
Porter five micro-enviornment forces include: 1) intensity of the industry competition, 2) bargaining power of suppliers, 3) bargaining power of buyers, 4) threat of new entrants, and 5) threat of substitute products.
Macro-enviornmental factors include PEST=Political, Economical, Societal, Technological, as well as legal and regulatory.
Both micro- and macro-environmental factors can change slowly or suddenly (disruptively) and have significant consequences for companies. The ability of companies to change fast or lead change (Kotter) is nowadays a significant competitive advantage.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Porter, "Competitive Strategy" (1980)
[5] Porter, "Competitive Advantage" (1985)
[6] Kottler, "Leading Change"
Porter five micro-enviornment forces include: 1) intensity of the industry competition, 2) bargaining power of suppliers, 3) bargaining power of buyers, 4) threat of new entrants, and 5) threat of substitute products.
Macro-enviornmental factors include PEST=Political, Economical, Societal, Technological, as well as legal and regulatory.
Both micro- and macro-environmental factors can change slowly or suddenly (disruptively) and have significant consequences for companies. The ability of companies to change fast or lead change (Kotter) is nowadays a significant competitive advantage.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Porter, "Competitive Strategy" (1980)
[5] Porter, "Competitive Advantage" (1985)
[6] Kottler, "Leading Change"
Segmentation and Targeting
/// Filed in: Marketing
Market
segmentation is the process through which the total market is
broken down to create distinctive groups. Kotler defines a market
segment as "consumers that respond in a similar way to a given set
of marketing stimuli."
The concept of segmentation was first introduced by Wendell Smith ("Product Differentiation and Market Segmentation as Different Alternative Strategies"). Segmentation is disaggreative in its effects. It consists of viewing a heterogeneous market as a number of smaller homogeneous markets. Thus, the first step in the segmentation process is to "segment" the market so that we can target the segments we want to pursue (i.e. determine in what markets we want to compete). Bases for segmentation include:
-1. Demographics: age, sex, religion, marital status, socio-economic, etc.
-2. Geographics: location, climate, terrain, population density
-3. Psychographics: AIO=Activities, Interest, Opinions & VALS=values, attitudes and lifestyle (need-driven, outer-driven, inner-driven)
-4. Behavioral
Regardless of the base for segmentation used, a target segment should be: 1) identifiable (well-defined), 2) economically reachable, 3) large enough to be profitable, and 4) more homogenous than the original market.
Doyle points out reasons to segment. These include: 1) targeted communications, 2) enhanced customization and customer service, 3) better matching of the customer needs, 4) enhanced profits, 5) enhanced opportunities for growth, 6) stimulation of innovation, and 7) market segment share.
Following the identification of the segmentation variables, a firm must decide those segments it aims to target and the positioning strategy.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Smith, "Product Differentiation and Market Segmentation as Alternative Strategies"
The concept of segmentation was first introduced by Wendell Smith ("Product Differentiation and Market Segmentation as Different Alternative Strategies"). Segmentation is disaggreative in its effects. It consists of viewing a heterogeneous market as a number of smaller homogeneous markets. Thus, the first step in the segmentation process is to "segment" the market so that we can target the segments we want to pursue (i.e. determine in what markets we want to compete). Bases for segmentation include:
-1. Demographics: age, sex, religion, marital status, socio-economic, etc.
-2. Geographics: location, climate, terrain, population density
-3. Psychographics: AIO=Activities, Interest, Opinions & VALS=values, attitudes and lifestyle (need-driven, outer-driven, inner-driven)
-4. Behavioral
Regardless of the base for segmentation used, a target segment should be: 1) identifiable (well-defined), 2) economically reachable, 3) large enough to be profitable, and 4) more homogenous than the original market.
Doyle points out reasons to segment. These include: 1) targeted communications, 2) enhanced customization and customer service, 3) better matching of the customer needs, 4) enhanced profits, 5) enhanced opportunities for growth, 6) stimulation of innovation, and 7) market segment share.
Following the identification of the segmentation variables, a firm must decide those segments it aims to target and the positioning strategy.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Smith, "Product Differentiation and Market Segmentation as Alternative Strategies"
Positioning
/// Filed in: Marketing
Positioning means different things to different
people. Some marketers consider it to be a segmentation decision
while others view it as an image decision. The term positioning
differs from the older term "image" in that positioning implies a
frame of reference (e.g. position), namely that of the
competitors.
Positioning decisions are critical as they can be central to a consumer's perception and choice decision. Ries and Trout ("Positioning: The Battle for Your Mind") define positioning as what is created in the minds of the target customers. Positioning is about image of the product in the mind of the selected target group vis-a-vis competing firms. Thus, positioning relates to the personality of the product as well as to the image and brand.
Ogilvy defines positioning as "what the product does, and who it is for" ("Ogilvy on Marketing"). The objective is to evoke an emotional response.
The steps to an effective positioning strategy include:
-1. Identify the competitors: primary & secondary
-2. Determine how competitors are perceived by the target segment
-3. Determine the positioning of the competitors
-4. Analyze the customers, their needs, wants, and demands
-5. Select a unique and differentiated positioning
-6. Monitor the position
Positioning strategies include: 1) by attribute, 2) price/quality, 3) use or application, 4) product user, 5) product class, and 6) competitor.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Ries & Trout, " Positioning: The Battle for Your Mind" (1981)
[4] Ogilvy, "Ogilvy on Marketing"
Positioning decisions are critical as they can be central to a consumer's perception and choice decision. Ries and Trout ("Positioning: The Battle for Your Mind") define positioning as what is created in the minds of the target customers. Positioning is about image of the product in the mind of the selected target group vis-a-vis competing firms. Thus, positioning relates to the personality of the product as well as to the image and brand.
Ogilvy defines positioning as "what the product does, and who it is for" ("Ogilvy on Marketing"). The objective is to evoke an emotional response.
The steps to an effective positioning strategy include:
-1. Identify the competitors: primary & secondary
-2. Determine how competitors are perceived by the target segment
-3. Determine the positioning of the competitors
-4. Analyze the customers, their needs, wants, and demands
-5. Select a unique and differentiated positioning
-6. Monitor the position
Positioning strategies include: 1) by attribute, 2) price/quality, 3) use or application, 4) product user, 5) product class, and 6) competitor.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Ries & Trout, " Positioning: The Battle for Your Mind" (1981)
[4] Ogilvy, "Ogilvy on Marketing"
Modern Multidomestic Model
/// Filed in: MNEs
The
modern multidomestic follows the tradition of the old (pure)
multidomestic but it gives a more significant role to the corporate
headquarters. As such, it is no longer a loose confederation of
assets, but a MNE with a strong culture of operational
decentralization, local adaptation, product differentiation, and
local responsiveness. Having disperse national subsidiaries with
significant autonomy, a strong geographical dimension and empowered
country managers help the modern multidomestics to maintain their
local responsiveness and their ability to differentiate and adapt
to local environments. Contrary to the traditional multidomestic
where the center had very little value added, in the modern
multidomestic the center is critical to enhance the competitive
strength of the multidomestic. While the role of the subsidiary is
to be locally responsive, the role of the center triangle is to
enhance the global integration by developing global corporate and
competitive strategies, play a significant role in resource
allocation, selection of markets, developing strategic analysis,
mergers and acquisitions, decisions regarding R\&D and
technology matters, eliminating duplication of capital intensive
assets, and knowledge transfer. A representative example of the
modern multidomestic is Nestle (Segal-Horn.99,
Yip.96,Yip.91,Yip.91a,Yip.89,Yip.00,Yip.97a,Yip.88,Yip.96a). In
summary:
- Matrix Position: medium global integration / high localization.
- Subsidiary role: local responsiveness, country/region specific strategies.
- Center role: global integration, coordination, resource allocation, R\&D, knowledge transfer
- Management Decisions: bottom--down (differentiation) and top--down (integration).
- Technology & Knowledge Transfer: knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: Nestle.
- Matrix Position: medium global integration / high localization.
- Subsidiary role: local responsiveness, country/region specific strategies.
- Center role: global integration, coordination, resource allocation, R\&D, knowledge transfer
- Management Decisions: bottom--down (differentiation) and top--down (integration).
- Technology & Knowledge Transfer: knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: Nestle.
A Modern Typology of MNEs
/// Filed in: MNEs
Given
the limitations of each of the structures in terms of global
competitiveness, most MNEs have re-evaluated their corporate and
competitive strategies and re--structured in order to
simultaneously become more globally integrated and locally
responsive. As MNEs attempt to optimize their global
integration/local responsiveness trade--off (i.e. adopting a more
"glocal" strategy) there is a certain degree of convergence, and
the old traditional organizational forms are too "pure" in nature
to accurate model most modern MNEs. The inability of the
traditional (pure) models of multidomestic and global models to
accurately describe modern MNEs has led to the new models of modern
multidomestic, modern global, and transnational. These models can
be briefly summarized as follows:
Limitations of the Traditional Organizational Structures
/// Filed in: MNEs
As we
pointed out in the previous posting, each of these organizational
structures has limitations to compete in a global economy. Briefly,
the international exporter (low global integration/low
localization) is not well positioned to compete in situations where
either economies of scale or local responsiveness are critical. The
traditional multidomestic (low global integration/high
localization) is not well positioned to exploit competitive
interdependencies and global efficiencies, and consequently it is
in significant disadvantage in situations where economies of scale
and scope are critical. Additionally, their inability to extract
value from its center headquarters significantly limits their
competitive advantage in global setting where corporate strategy,
global integration, coordination, and knowledge transfer play a
significant role. Finally, the global company (low
localization/high global integration) is not well positioned to
compete in situations requiring critical local adaptation. Perhaps
even more important is the fact that it does not extract value from
their subsidiaries including knowledge transfer, coordination, and
business strategy, enabling them to make good strategic and
tactical decisions.
New Product Development
/// Filed in: Marketing
An
important point to keep in mind when considering issues related to
new product development is the fact that most "new products" are in
fact "not new." Firms typically consider 1) New product lines
(which other companies may already have), 2) continuous improvement
to existing products, and 3) additions to product lines as "new
products."
Two important concepts related to new product development are the "adoption" and "diffusion" processes. The adoption process involves the following steps: 1) awareness, 2) interest, 3) evaluation, 4) trial, and 5) adoption. The diffusion process divides the adopters into 1) innovators, 2) early adopters, 3) early majority, 4) late majority, and 5) laggers.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
Two important concepts related to new product development are the "adoption" and "diffusion" processes. The adoption process involves the following steps: 1) awareness, 2) interest, 3) evaluation, 4) trial, and 5) adoption. The diffusion process divides the adopters into 1) innovators, 2) early adopters, 3) early majority, 4) late majority, and 5) laggers.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
Product Life Cycle (PLC)
/// Filed in: Marketing
The
concept of product life cycle (PLC) is very prominent in the field
of marketing. Briefly, the PLC concept relates the unit sales of a
product versus time as the product goes through the different
stages: 1) introduction, 2) growth, 3) maturity, and 4) decline.
The theoretical curve of the unit sales vs time is S-shaped due to
the nature of the diffusion and adoption of innovations. While the
PLC concept is widely used, some marketing scholars have pointed
out important practical limitations of the PLC concept (Doyle).
These are:
-1. Undefined concept.
-2. No common curve shape (different products have different shapes).
-3. Unpredictable turning points
-4. Unclear implications
-5. No Exogenous (the turning points are typically due to internal management decisions as opposed to external market forces).
-6. Product oriented as opposed to customer oriented.
It is also important to note that the PLC does not apply well to brands.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Robergs, "Diffusion of Innovations"
-1. Undefined concept.
-2. No common curve shape (different products have different shapes).
-3. Unpredictable turning points
-4. Unclear implications
-5. No Exogenous (the turning points are typically due to internal management decisions as opposed to external market forces).
-6. Product oriented as opposed to customer oriented.
It is also important to note that the PLC does not apply well to brands.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
[4] Robergs, "Diffusion of Innovations"
Innovation
/// Filed in: Marketing
Innovation is identifying consumer needs, and
satisfying them with goods or services in a new, creative, and
insightful way that generates a profit. The main sources of
innovation are 1) customer needs, and 2) technological
developments. Both are essential.
Peter Drucker points out that the secret of innovation is not to try to predict the future. The secret is to be able to react more quickly to market opportunities, based on a deep understanding of the present. In his seminal book "Innovation and Entrepreneurship" (1985) he stated this as predicting the future that has already happened.
It is also important to note that innovation is not invention. Innovation is a marketing concept while invention is an engineering concept.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
Peter Drucker points out that the secret of innovation is not to try to predict the future. The secret is to be able to react more quickly to market opportunities, based on a deep understanding of the present. In his seminal book "Innovation and Entrepreneurship" (1985) he stated this as predicting the future that has already happened.
It is also important to note that innovation is not invention. Innovation is a marketing concept while invention is an engineering concept.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Chong, "International Marketing Study Guide -- U.London (External)"
[3] Drucker, "Innovation and Entrepreneurship"
A Modern Typology of MNEs
/// Filed in: MNEs
The
organization of modern MNEs is more complicated than the old models
of international exporter, multidomestic (Porter, 86), and global
(Yip.89). As a consequence of the intrinsic limitations of each of
the pure structures as an optimal form to compete globally, MNEs
evolved from these traditional forms into more sophisticated
structures intended to combine the advantages of multidomestic and
global structures. Initially these led to the concept of
transnational corporation (high localization/high global
integration) developed and widely studied by Bartlett, Ghoshal, and
other scholars (Bartlett.92,Bartlett.88,Bartlett.87,Bartlett.87b,
Harzing.00,Yip.94). However, the transnational model is still
primarily considered a mindset, idea, or ideal rather than an
organization structure found on many MNEs
(Segal-Horn.99).
Traditional Global Model
/// Filed in: MNEs
The
traditional global company is the antithesis of the traditional
multidomestic company. The traditional global model is used to
characterize MNEs with globally integrated operations designed to
take maximum advantage of economies of scale and scope by following
a strategy of standardization and efficient production
(Yip.97,Yip.96,YYip.96a,Yip.98). By globalizing operations and
competing in global markets these companies aim to: 1) reduce cost
of R&D, manufacture, production, procurement, and inventory; 2)
improve quality by reducing variance, 3) enhance customer
preference through global products and brands, and 4) obtain
competitive leverage (Segal-Horn.99). The power center, corporate
strategy, resource allocation, and knowledge generation and
transfer resides in the corporate headquarters. In terms of the
global integration/local responsiveness matrix, the pure global
company occupies the position of extreme global integration and low
localization. Examples of pure global structures are found in
Japanese MNEs during the 1970s (e.g. Sony, Hitachi, Sharp, Toyota)
and US companies (i.e. Intel, TI, Coca-Cola, Gillette). As in the
case of the international exporter and traditional (pure)
multidomestic model, the traditional (pure) global company
represents an extreme ideal and an early organization structure. In
summary, the traditional (pure) global model can be characterized
as follows:
- Matrix Position: high global integration / low localization.
- Stage: Early & more recent of internationalization, transitory.
- Subsidiary Role: minimal, distribution and operations
- Center Role: Global integration, corporate strategy, competitive strategy.
- Management Decisions: top--down (from corporate headquarters to subsidiaries).
- Technology & Knowledge Transfer: kept at the headquarters, minimal knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: Japanese (i.e. Sony, Hitachi, Shap, Toyota) and US companies (Intel, TI, Gillette).
- Model Limitations: transitory organizational form, ideal conceptualization, nowadays few companies fit perfectly the pure global structure, inability to compete in environments requiring high local responsiveness and adaptation.
- Matrix Position: high global integration / low localization.
- Stage: Early & more recent of internationalization, transitory.
- Subsidiary Role: minimal, distribution and operations
- Center Role: Global integration, corporate strategy, competitive strategy.
- Management Decisions: top--down (from corporate headquarters to subsidiaries).
- Technology & Knowledge Transfer: kept at the headquarters, minimal knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: Japanese (i.e. Sony, Hitachi, Shap, Toyota) and US companies (Intel, TI, Gillette).
- Model Limitations: transitory organizational form, ideal conceptualization, nowadays few companies fit perfectly the pure global structure, inability to compete in environments requiring high local responsiveness and adaptation.
Traditional Multidomestic Model
/// Filed in: MNEs
The
traditional multidomestic model is used to characterize MNEs with a
portfolio of independent subsidiaries operating in different
countries as a decentralized federation of assets and
responsibilities under a common brand name
(Bartlett.87,Bartlett.87b,Bartlett.88). The old or pure
multidomestic form models companies that adopt country--specific
strategies with little international coordination or knowledge
transfer from the center headquarters. The power center, business
strategic decisions, resource allocation, decision making,
knowledge generation and transfer, and procurement reside with each
country subsidiary and the center adds very little value. In terms
of the global integration/local responsiveness matrix, the pure
multidomestic organizational structure represents the extreme case
of local responsiveness and localization, and low global
integration. Similarly to the international exporter form, the
traditional multidomestic organizational structure is sometimes
described as a historically early only, since this structure is not
well--positioned to compete in a post--globalization environment
where standardization, global integration, and economies of scale
and scope are critical. However, the pure multidomestic structure
is still viable in situations where local responsiveness, local
differentiation, and local adaptation are critical
(Douglas.87,Douglas.73,Wind.89,Wind.74,Wind.73), while the
opportunities for efficient production, global knowledge transfer,
economies of scale, and economies of scope are minimal
(Bartlett.87, Segal-Horn.99). As in the case of the international
exporter form, given the trends towards the globalization of
markets (Levitt.84,Levitt.83), the pure multidomestic company may
be considered a transitory organizational structure in most cases.
An example of this structure and its limitations is Philips during
the 1960 where its multidomestic organizational model made the
autonomous country subsidiaries unable to effectively compete
against global Japanese companies such as Sony, Sharp, and Hitachi.
In summary, the traditional (pure) multidomestic model can be
characterized as follows:
- Matrix Position: low global integration / high localization.
- Stage: Early & more recent of internationalization, transitory.
- Subsidiary Role: competitive strategy, tactical decisions.
- Center Role: minimal, cash dividends, global brand.
- Management Decisions: bottom--down (from subsidiaries to corporate headquarters).
- Technology & Knowledge Transfer: kept at the subsidiary level, little knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: UK companies during post-war, Philips (1960s).
- Model Limitations: transitory organizational form, ideal conceptualization, nowadays few companies are pure multidomestic, inability to exploit competitive interdependencies and global efficiencies, duplication of resources.
\end{itemize}
- Matrix Position: low global integration / high localization.
- Stage: Early & more recent of internationalization, transitory.
- Subsidiary Role: competitive strategy, tactical decisions.
- Center Role: minimal, cash dividends, global brand.
- Management Decisions: bottom--down (from subsidiaries to corporate headquarters).
- Technology & Knowledge Transfer: kept at the subsidiary level, little knowledge transfer across borders.
- Percentage of Foreign Sales: high.
- Example: UK companies during post-war, Philips (1960s).
- Model Limitations: transitory organizational form, ideal conceptualization, nowadays few companies are pure multidomestic, inability to exploit competitive interdependencies and global efficiencies, duplication of resources.
\end{itemize}
International Exporter Model
/// Filed in: MNEs
The
international exporter is used as a model to characterize companies
who are strongly dependent on their domestic sales and that export
opportunistically. As such, some scholars in the research community
do not consider these companies to be MNEs, since their foreign
sales are typically very low compared to their percentage of total
sales and their international operations are often limited to sales
outfits in foreign countries.
International exporter companies have typically a well-developed domestic infrastructure and additional capacity to sell internationally. Consequently, these companies may have aspirations to become MNEs by evolving into multidomestic, global, or transnational companies. This organizational structure is generally considered to be unsophisticated, unsustainable, and transitory in nature. In the short term, this organizational form may be viable in certain situations where the need for localization and local responsiveness is very low (i.e. the home product can be sold internationally with very minor adaptations), and the economies of global standardization are also low. The international exporter model is used to characterize many American companies in the post--war period. Currently, the model may still be useful to characterize domestic companies in the early stages of internationalization (Vernon.66} that sell standardized products internationally where economies of scale and scope do not play a significant role, but it is important to recognize that this organizational form is transitory in nature and consequently can only be used to describe a given company for a limited period of time (Segal-Horn.99). In summary, the international exporter model can be characterized as follows:
-Matrix Position: low global integration / low localization.
-Stage: Early stage of internationalization, transitory.
-Subsidiary Role: minimal, distribution.
-Center Role: corporate and competitive strategy and tactical decisions.
-Management Decisions: top--down (from corporate to subsidiaries).
-Technology & Knowledge Transfer: from corporate center to subsidiaries.
-Percentage of Foreign Sales: low.
-Example: US companies during post-war.
-Model Limitations: transitory organizational form, inability to exploit competitive interdependencies and global efficiencies, inability to exploit local differences.
International exporter companies have typically a well-developed domestic infrastructure and additional capacity to sell internationally. Consequently, these companies may have aspirations to become MNEs by evolving into multidomestic, global, or transnational companies. This organizational structure is generally considered to be unsophisticated, unsustainable, and transitory in nature. In the short term, this organizational form may be viable in certain situations where the need for localization and local responsiveness is very low (i.e. the home product can be sold internationally with very minor adaptations), and the economies of global standardization are also low. The international exporter model is used to characterize many American companies in the post--war period. Currently, the model may still be useful to characterize domestic companies in the early stages of internationalization (Vernon.66} that sell standardized products internationally where economies of scale and scope do not play a significant role, but it is important to recognize that this organizational form is transitory in nature and consequently can only be used to describe a given company for a limited period of time (Segal-Horn.99). In summary, the international exporter model can be characterized as follows:
-Matrix Position: low global integration / low localization.
-Stage: Early stage of internationalization, transitory.
-Subsidiary Role: minimal, distribution.
-Center Role: corporate and competitive strategy and tactical decisions.
-Management Decisions: top--down (from corporate to subsidiaries).
-Technology & Knowledge Transfer: from corporate center to subsidiaries.
-Percentage of Foreign Sales: low.
-Example: US companies during post-war.
-Model Limitations: transitory organizational form, inability to exploit competitive interdependencies and global efficiencies, inability to exploit local differences.
Introduction to International Corporate Structures
/// Filed in: MNEs
The
typology of international corporate structures is primarily based
on the global integration/local responsiveness framework. Bartlett,
Ghosahl, Prahalad, Stopford, Teece, Yip, Doz, and other scholars in
international management have traditionally categorized the
international corporate structure of multinational enterprises
(MNEs) according to four possible models: international exporter,
multidomestic, and --more recently-- transnational
(Bartlett.88,Bartlett.87,Bartlett.87b,,Bartlett.92,94,Yip.91,Yip.91a,Yip.00}).
These traditional organizational models of MNEs occupy well-defined
positions in the global standardization/local adaptation matrix and
are useful idealizations to describe and capture the most salient
characteristics of each of the different organizational structures
traditionally adopted by MNEs. In this paper we review the
traditional organizational models for multinational enterprises
(MNEs), discuss their usefulness as ideal models to study the
possible organizational structures of MNEs according to the global
integration/local responsiveness framework, and point out some of
their limitations as accurate characterizations of modern
MNEs.
Brand Valuation
/// Filed in: Marketing
Brand
valuation emphasizes that the most valuable assets a firm has are
not tangible, rather intangible assets such as brands, trademarks,
know-how, management expertise, etc. Brands are becoming
increasingly respected as enduring assets. However, in most cases
the full value of a brand is only realized when brand portfolios
are sold or licensed (e.g. Gillette to P&G). Accounting
standards typically do not recognize the market value of intangible
assets (i.e. these are not noted in the balance sheet). This is
because it is difficult to provide brand valuations that are
objective and verifiable.
Aaken suggest a few possible approaches for brand equity valuation:
-1. Study the price premium generated by the brand (i.e. compare the price of the branded product against unbranded equivalent products).
-2. Use the market value of the firm (i.e. stock price) minus all the tangible assets the firm owns.
-3. Estimate the discounted present value of future earnings attributed to brand-equity.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
Aaken suggest a few possible approaches for brand equity valuation:
-1. Study the price premium generated by the brand (i.e. compare the price of the branded product against unbranded equivalent products).
-2. Use the market value of the firm (i.e. stock price) minus all the tangible assets the firm owns.
-3. Estimate the discounted present value of future earnings attributed to brand-equity.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
Brand Development
/// Filed in: Marketing
Levitt
and Doyle stress that building powerful brands starts with a
strong/quality product (tangibles). When a quality product targets
a well-defined segment, is well-positioned, and satisfies the needs
of customers it is possible to take the next step and develop the
"basic brand" -positive associations, design, benefits, etc. The
basic brand can be further developed into an "augmented brand" by
exceeding the customer expectations through service (enlarging the
core product), and this into a "power/potential brand" that will
provide additional emotional/psychological benefits.
Kapfferer provides a framework for "brand building:"
-Attributes: rational product features
-Functional Benefits: rational expectations as a result of using the brand
-Emotional Rewards: emotional benefits from using the brand
-Values of Users: what the users of the brand care about the most
-Personality: image of the brand expressed in human terms
-Essence: the "soul" of the brand. The single idea that fuses key emotional and functional benefits.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
[5] Kapfferer, "Strategic Brand Management"
[6] Levitt, "Marketing Success Through Differentiation - or Anything" HRB
Kapfferer provides a framework for "brand building:"
-Attributes: rational product features
-Functional Benefits: rational expectations as a result of using the brand
-Emotional Rewards: emotional benefits from using the brand
-Values of Users: what the users of the brand care about the most
-Personality: image of the brand expressed in human terms
-Essence: the "soul" of the brand. The single idea that fuses key emotional and functional benefits.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
[5] Kapfferer, "Strategic Brand Management"
[6] Levitt, "Marketing Success Through Differentiation - or Anything" HRB
Package Design
/// Filed in: Marketing
The
importance of a good package design has been noted by marketing
scholars as an often overlooked aspects of product decisions. Good
packaging is a critical element in the positioning of the product.
Why? Because many customer decisions are made at the point of
purchase (e.g. grocery store purchase). Good packaging design helps
1) differentiate the product and 2) it gives it self impact.
Coley Porter Bell stresses that "visual equity," like brand equity, translates into goodwill (i.e. intangible assets of economic value). Visual equity should:
-1. Be a trigger for recognition and purchase.
-2. Be Differentiated.
Package design involves considerations on 1) symbol, 2) signature, 3) color, 4) shape, 5) style, and 6) slogans. A good illustrative example of great packaging is Apple Inc.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
Coley Porter Bell stresses that "visual equity," like brand equity, translates into goodwill (i.e. intangible assets of economic value). Visual equity should:
-1. Be a trigger for recognition and purchase.
-2. Be Differentiated.
Package design involves considerations on 1) symbol, 2) signature, 3) color, 4) shape, 5) style, and 6) slogans. A good illustrative example of great packaging is Apple Inc.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
Name Development
/// Filed in: Marketing
According to
Aaker, it is wasteful to attempt to community brand attributes and
benefits until a name is established in which to associate
attributes. The name is central to the personality of a brand or
business. Several name qualities are recommended. The name
should:
-1. Suggest something about the "benefits"
-2. Suggest product qualities/features/attributes or associations
-3. Be easy to pronounce, recognize, and remember
-4. Be distinctive
-5. Should not carry poor meanings in other languages
The quality of a name is typically assessed using four tests: 1) the association test, 2) the learning test, 3) the memory test, and 4) the preference test.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
-1. Suggest something about the "benefits"
-2. Suggest product qualities/features/attributes or associations
-3. Be easy to pronounce, recognize, and remember
-4. Be distinctive
-5. Should not carry poor meanings in other languages
The quality of a name is typically assessed using four tests: 1) the association test, 2) the learning test, 3) the memory test, and 4) the preference test.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
Brand Equity
/// Filed in: Marketing
Brands have
immense value to firms. They are critical to differentiate the
company's products and services and protect them against becoming a
commodity. It is important to distinguish between name recognition
and brand equity. McKinsey distinguishes between: 1) Names -name
recognition, 2) Brands -names become brans when consumers associate
a set of intangible and tangible benefits to the product/firm, and
3) Power Brands -brands that create strong emotional bonds, strong
associations, customer loyalty, and yield price premiums. Power
brands have personality, presence, and create strong
emotional/psychological bonds.
Brand equity requires differentiation and a strong alignment between what the company communicates about the brand with what it actually delivers. Having a powerful brand is critical to protect the firm and customers against imitators.
Aaker notes that brands have assets and liabilities associated with them. These can be related to 1) customer loyalty, 2) name recognition, 3) perceived quality, 4) brand associations in addition to perceived quality, and 5) other proprietary brand assets. Important points to consider include the trade dress, design patents, trademarks, copyrights, and other IP protection.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
Brand equity requires differentiation and a strong alignment between what the company communicates about the brand with what it actually delivers. Having a powerful brand is critical to protect the firm and customers against imitators.
Aaker notes that brands have assets and liabilities associated with them. These can be related to 1) customer loyalty, 2) name recognition, 3) perceived quality, 4) brand associations in addition to perceived quality, and 5) other proprietary brand assets. Important points to consider include the trade dress, design patents, trademarks, copyrights, and other IP protection.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
Identity and Image
/// Filed in: Marketing
Brands
are at the heart of business strategy. In fact, one of the main
objectives of marketing is to decommoditize the company offer. If
the offer (product or service) is perceived as being the same as
those of the competitors, then the consumers will be indifferent
and will choose the cheapest product. Companies that are forced to
compete on price alone (i.e. the product is a commodity) rarely
make satisfactory profits.
The purpose of marketing is to create a preference for the company's brand. This intangible asset is critical to adding value to the firm because identity and image are central to the positioning of products in various markets. Identity must have two facets: 1) purpose and 2) sense of belonging. A clear identity becomes a yardstick against products and company actions are measured.
It is important to realize that identity is more than a slogan. It must be visible, tangible, and all embracing. The company's identity, standards, culture and values are reflected by the products, services, buildings, communications, etc.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
The purpose of marketing is to create a preference for the company's brand. This intangible asset is critical to adding value to the firm because identity and image are central to the positioning of products in various markets. Identity must have two facets: 1) purpose and 2) sense of belonging. A clear identity becomes a yardstick against products and company actions are measured.
It is important to realize that identity is more than a slogan. It must be visible, tangible, and all embracing. The company's identity, standards, culture and values are reflected by the products, services, buildings, communications, etc.
References:
[1] Doyle, "Marketing Management & Strategy"
[2] Aaken, "Building Strong Brands"
[3] Aaken, "Brand Leadership"
[4] Chong, "International Marketing Study Guide -- U.London (External)"
Globalization and Marketing
/// Filed in: Marketing
Globalization -the fact that our economic systems
and culture are networked as part of a global system- has
significance in marketing. For instance, Theodore Levitt made the
case that since the world is becoming standardized and homogenous
companies must adapt (The Globalization of Markets, Harvard
Business Review). According to Levitt, companies have the
opportunity to offer the same products everywhere and run global
marketing campaigns (i.e. standardized campaigns). He attributes
the main force driving this trend to technology and the fact that
human beings desire similar things.
Critics to Levitt, such as Douglas and Wind, point out that standardization is only one of the options available to enter foreign markets. Levitt's thesis applies particularly well to upscale markets and especially to certain groups such as young people interested in global brands, business executives, and wealthy individuals (e.g. items such as Rolex, BMWs, Jaguars, Upscale personal items, etc). Additionally, mass appeal brands such as Coca-Cola, Levis, Nike, Apple, etc have unique opportunities for global campaigns and standardization. Nevertheless, Douglas and Wind, consider these examples exceptions rather than the rule.
Despite the fact that globalization plays a significant role on companies some authors such as Yao-Su Hu caution that the sources of competitive advantage of firms still typically lie in the home nation, and foreign sources often can only supplement national sources but are not sufficient as a substitute. According to Hu, global or stateless corporations are national firms with international operations.
References:
[1] T. Levitt. "The Globalization of Markets." HBR 1960
[2] T. Levitt. "The Pluralization of Culture." HRB 1988
[3] S. Douglas and Y. Wind. " The Myth of Globalization." Columbia Journal of World Business 1987
[4] Y. Hu. "Global or Stateless Corporations Are National Firms with International Operations" California Management Review 1992
Critics to Levitt, such as Douglas and Wind, point out that standardization is only one of the options available to enter foreign markets. Levitt's thesis applies particularly well to upscale markets and especially to certain groups such as young people interested in global brands, business executives, and wealthy individuals (e.g. items such as Rolex, BMWs, Jaguars, Upscale personal items, etc). Additionally, mass appeal brands such as Coca-Cola, Levis, Nike, Apple, etc have unique opportunities for global campaigns and standardization. Nevertheless, Douglas and Wind, consider these examples exceptions rather than the rule.
Despite the fact that globalization plays a significant role on companies some authors such as Yao-Su Hu caution that the sources of competitive advantage of firms still typically lie in the home nation, and foreign sources often can only supplement national sources but are not sufficient as a substitute. According to Hu, global or stateless corporations are national firms with international operations.
References:
[1] T. Levitt. "The Globalization of Markets." HBR 1960
[2] T. Levitt. "The Pluralization of Culture." HRB 1988
[3] S. Douglas and Y. Wind. " The Myth of Globalization." Columbia Journal of World Business 1987
[4] Y. Hu. "Global or Stateless Corporations Are National Firms with International Operations" California Management Review 1992
What is the best action to take if you find that someone has infringed upon your patent?
/// Filed in: Patent Law
Since
patent litigation is a very expensive option it is important to
make sure there is sufficient evidence to support the patent
infringement dispute in trial. Thus, the first step for the
plaintiff should be to acquire and evaluate the evidence of
infringement. This often involves purchasing the infringing
invention, documenting the dates of infringement, researching
whether the infringing party has been sued for patent infringement
in the past, and evaluating the legal claims.
The best action to take depends on many factors. These include the economic and legal resources of the plaintiff in comparison to those of the defendant, the significance of protecting the specific patent (i.e. the commercial value of the invention for the plaintiff and to the defendant), whether the infringement is literal or falls within the doctrine of equivalents, and other factors. For instance, if the plaintiff is an individual inventor with limited resources that has not been able to commercialize the invention, and she finds that a large corporation clearly infringes her patent property rights, she may want to consider negotiating a licensing or assignment agreement to obtain appropriate royalties. As a first step, the inventor can use a cease and desist letter informing the party the nature of the believed infringement and possible remedies.
The best action to take depends on many factors. These include the economic and legal resources of the plaintiff in comparison to those of the defendant, the significance of protecting the specific patent (i.e. the commercial value of the invention for the plaintiff and to the defendant), whether the infringement is literal or falls within the doctrine of equivalents, and other factors. For instance, if the plaintiff is an individual inventor with limited resources that has not been able to commercialize the invention, and she finds that a large corporation clearly infringes her patent property rights, she may want to consider negotiating a licensing or assignment agreement to obtain appropriate royalties. As a first step, the inventor can use a cease and desist letter informing the party the nature of the believed infringement and possible remedies.
Where can a listing of patent attorneys and patent agents be otained?
/// Filed in: Patent Law
The
Martindale-Hubbell (R) Law Directory has been used as an
authoritative resource for information on the worldwide legal
profession from more than 130 years. The listing includes a
database over one million law firms and lawyers in 160 countries.
The Martindale-Hubbell Law Directory is accessible on CD-ROM,
print-edition (26 volumes), and online at martindale.com, The
Martindale-Hubbell directory includes law firms by practice area
including Intellectual Property Law. Under the IP Law directory it
is possible to search by US-State, Canadian Province, US
Territories, and country.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Martindale-Hubbel Law Directory. www.martindale.com
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Martindale-Hubbel Law Directory. www.martindale.com
What three entries may qualify for small entity status?
/// Filed in: Patent Law
Qualifying small entities can pay a reduced rate
fee for their patent application if they file a small entity
declaration. For the purposes of determining the patent application
fees, small entity are defined by the USPTO as (1) independent
inventors, (2) small business concerns (i.e. a business with 500 or
less employees during a fiscal year), and (3) nonprofit
organizations. In order to qualify the the exception, independent
inventors must maintain the patent rights or transfer the rights to
a small business concern or nonprofit organization. The small
entity status does not apply in cases where the small entity
(independent inventor, small business concern, or nonprofit
organization) is transferring the rights to an entity that does not
qualify as an small entity. The reduced filing and maintenance fees
are intended to help promote innovation by small entities.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
Do patents do a good job of protecting the original owner's interest in the item?
/// Filed in: Patent Law
Patents
seem to do a good job in general when it comes to protecting the
original owner's interest in cases where the invention falls well
within the traditional matter of patents: utility patents, plant
patents, and design patents. Patent law generally provides good
protection for "classic" inventions such as machines, devices, etc
(i.e. tangible inventions). However, as we move from a
manufacture/engineering-based economy towards the digital economy
and the "service/experience" economy, traditional patent protection
has limitations. In the past 50 years US firms sought patent
protection for their inventions since manufacture and engineering
innovations gave them an important competitive advantage. As the
technology matures and global competitors can produce similar
quality products at lower cost, some of the competitive advantage
based exclusively on "tangible" inventions is more limited
(Porter). Additionally, given that nowadays the US economy is
primarily a "services economy" where even engineering companies
that have traditionally focused on device manufacture such as IBM
have shifted their orientation towards providing service solutions;
protection in the area of business processes, software, and other
more "abstract" and "intangible" inventions is becoming more
important. While the USPTO have been shown to be more capable of
adapting to accommodate this shift toward more intangible
inventions than the EPO (European Patent Office), protection is
still limited in many emerging areas.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
[4] The European Patent Convention
[5] Porter, ME. "Competitive Advantage".
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
[4] The European Patent Convention
[5] Porter, ME. "Competitive Advantage".
How does the US patent system differ from first-to-file systems?
/// Filed in: Patent Law
First-to-file patent systems such as the
requirements followed in the European Union place more importance
on the filing date than the actual date when the invention was
conceived. In the US, the PTO determines the priority between two
applications by considering the invention date as well as the
filing date. Thus, the USPTO can be considered to follow a
"first-to-invent" doctrine. An inventor can publicly disclosure the
invention (i.e. demonstrating that the invention has been fully
conceived) and wait to file a patent for up to a year in the US.
This is not the case in Europe since any public disclosure is
considered to be prior art. Consequently, only the filing date
matters. Article 60(2) of the European Patent convention
(EPC) awards priority to
the applicant that first files the invention. Under first-to-file
patent systems inventors are more pressured to prepare and file the
application as soon as possible in order to gain the IP protection
for their invention.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
[4] The European Patent Convention
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
[4] The European Patent Convention
What is the one-year rule?
/// Filed in: Patent Law
The
one-year rule, also known as the one-year grace period or on-sale
bar, is a doctrine that prevents an inventor for acquiring patent
protection if the application is filed more than one year of the
following: 1) any public use of the invention by the inventor, a
sale of the invention, an offer of sale, or public use of the
invention in the United States, OR 2) any description of the
invention by the inventor in a published document (i.e. a printed
publication) in any country. This enables inventors to market or
commercialize their inventions for up to a year and decide whether
or not they want to seek patent protection. After the one-year
period, the invention becomes public domain and is not eligible for
patent protection since it is considered to be prior art. In
general, disclosure under a signed confidentiality agreement is not
considered to be public disclosure.
In 1998 the Supreme Court established a two-part test (Plaff vs Wells) to determine the commencement of the on-sale bar. According to this test 1) there must be an offer for commercial sale -not experimentation-, and 2) the invention must be ready for patenting (i.e. it must be reduced to practice or fully documented so that a person skilled in the art could create a working version of the invention).
For the purposes of patent law, a printed publication is considered to be any method of recording information such as paper, hard-drive, CD/DVD, microfilm, etc. If the printed publication contains a full disclosure of the invention (i.e. a description with enough detail that would enable a person skilled in the art to create a working version of the invention), the inventor will be barred from patent protection if the application is filed after a year of the date of publication. For the purposes of patent law, public disclosure is considered to take place once there is public accessibility to the printed publication. For instance, in the case of a doctoral dissertation public disclosure is considered to be the date when the university catalogs the dissertation and makes it available to the public. In the case of peer-reviewed journals, the date of publication is typically considered to be the date when the paper get published (i.e. available to the public) but depends on the specific editorial policies of the specific journal. In any case, it is a good idea to file for a provisional patent before any public disclosure.
Compared with other countries, the grace period by the USPTO is very generous. For instance, the European Patent Office requires "absolute novelty" (i.e. any public disclosure would prevent the inventor for acquiring patent rights). Article 54(2) of the European Patent Convention (EPC) defines prior art to include "everything made available to the public by means of a written or oral description, by use, or in any other way, before the date of filing of the European patent application."
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
In 1998 the Supreme Court established a two-part test (Plaff vs Wells) to determine the commencement of the on-sale bar. According to this test 1) there must be an offer for commercial sale -not experimentation-, and 2) the invention must be ready for patenting (i.e. it must be reduced to practice or fully documented so that a person skilled in the art could create a working version of the invention).
For the purposes of patent law, a printed publication is considered to be any method of recording information such as paper, hard-drive, CD/DVD, microfilm, etc. If the printed publication contains a full disclosure of the invention (i.e. a description with enough detail that would enable a person skilled in the art to create a working version of the invention), the inventor will be barred from patent protection if the application is filed after a year of the date of publication. For the purposes of patent law, public disclosure is considered to take place once there is public accessibility to the printed publication. For instance, in the case of a doctoral dissertation public disclosure is considered to be the date when the university catalogs the dissertation and makes it available to the public. In the case of peer-reviewed journals, the date of publication is typically considered to be the date when the paper get published (i.e. available to the public) but depends on the specific editorial policies of the specific journal. In any case, it is a good idea to file for a provisional patent before any public disclosure.
Compared with other countries, the grace period by the USPTO is very generous. For instance, the European Patent Office requires "absolute novelty" (i.e. any public disclosure would prevent the inventor for acquiring patent rights). Article 54(2) of the European Patent Convention (EPC) defines prior art to include "everything made available to the public by means of a written or oral description, by use, or in any other way, before the date of filing of the European patent application."
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
What are the four requirements for a utility patent?
/// Filed in: Patent Law
Utility
patents are granted for inventions that can be described or
categorized as:
-Machines (i.e. a device that accomplished a specific task -e.g. an engine)
-Articles of Manufacture (i.e. a single object without movable parts or equivalent -e.g. chair, pencil)
-Processes (i.e. a method of accomplishing a result through a series of steps involving physical or chemical interactions).
-Compositions (i.e. a combination of chemical or other materials).
-New Uses of machines, articles of manufacture, processes, or compositions.
The four requirements for a utility patent are:
1. The invention must fall within one of the statutory classes
2. The invention must be useful.
3. The invention must be novel.
4. The invention must be nonobvious.
By statutory classes it is meant that the patent is a machine, process, manufacture, composition, or any new or useful improvement of these. The USPTO regards an invention as useful when it is capable of accomplishing the task it was designed for (i.e. the invention must work). Thus, when filing a patent application it is important to demonstrate that the invention works as intended and therefore has utility. Novelty is a statutory requirement of the US Patent law. By novel it is meant that it differs in some specific way form prior art (i.e. existing knowledge in the public domain or previous patents). Finally, the invention must not be considered to be obvious by people trained in the art.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
-Machines (i.e. a device that accomplished a specific task -e.g. an engine)
-Articles of Manufacture (i.e. a single object without movable parts or equivalent -e.g. chair, pencil)
-Processes (i.e. a method of accomplishing a result through a series of steps involving physical or chemical interactions).
-Compositions (i.e. a combination of chemical or other materials).
-New Uses of machines, articles of manufacture, processes, or compositions.
The four requirements for a utility patent are:
1. The invention must fall within one of the statutory classes
2. The invention must be useful.
3. The invention must be novel.
4. The invention must be nonobvious.
By statutory classes it is meant that the patent is a machine, process, manufacture, composition, or any new or useful improvement of these. The USPTO regards an invention as useful when it is capable of accomplishing the task it was designed for (i.e. the invention must work). Thus, when filing a patent application it is important to demonstrate that the invention works as intended and therefore has utility. Novelty is a statutory requirement of the US Patent law. By novel it is meant that it differs in some specific way form prior art (i.e. existing knowledge in the public domain or previous patents). Finally, the invention must not be considered to be obvious by people trained in the art.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
Who is permitted to prepare a patent application, besides the inventor?
/// Filed in: Patent Law
The US
Patent and Trademark Office (PTO) has established a certification
process that involves taking an examination (the Patent Agent's
Exam) after having obtained an approved college degree in
engineering or science. Both attorneys (i.e. people that have
completed a law degree and have passed the bar examination in a
state) and nonattorneys may take the exam as long as they have a
college degree in engineering or science that meets the PTO
requirements. A Patent Attorney is a lawyer with adequate technical
background (i.e. in possession of a college degree in engineering
or physical sciences) that has passed the USPTO Patent Exam in
addition to the bar examination in a given state. On the other
hand, a Patent Agent is a nonattorney with adequate
engineering/scientific preparation that has passed the USPTO Exam.
Patent Agents can prepare patent applications on behalf of
inventors, file patent applications, respond to USPTO office
actions (i.e. letters), and participate in the amendment of the
applications. In summary, a Patent Agent is a licensed professional
certified by the USPTO to prepare and prosecute patent
applications. The difference between a Patent Agent and a Patent
Attorney is that a Patent Agent cannot advise the inventors
regarding the legal consequences that may arise from ownership of
the IP. For instance, it cannot provide legal advise regarding how
the ownership rights may be affected in the case of a divorce, for
the purposes of making a will, or regarding the terms of a
licensing contract. These legal issues outside the scope of patent
law require the professional counsel of an attorney.
Information regarding the USPTO Patent Exam can be found at http://www.uspto.gov/go/dcom/gcounsel/oed.htm. Briefly, this site includes information regarding the requirements for registration, examples of past exams, and result statistics. Current examinations are based on the 8th Edition (Rev. 2) of the Manual of Patent Examining Procedure (MPEP). The passing rate in the last exam was 58.2%. There are many firms that offer training services, educational programs, and self-study materials for the Patent Bar Exam.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
Information regarding the USPTO Patent Exam can be found at http://www.uspto.gov/go/dcom/gcounsel/oed.htm. Briefly, this site includes information regarding the requirements for registration, examples of past exams, and result statistics. Current examinations are based on the 8th Edition (Rev. 2) of the Manual of Patent Examining Procedure (MPEP). The passing rate in the last exam was 58.2%. There are many firms that offer training services, educational programs, and self-study materials for the Patent Bar Exam.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Manual of Patent Examining Procedure, 8th Edition
What is the difference between TM and SM?
/// Filed in: Trademark
Law
TM means "trademark", while SM denotes
"service mark". Trademarks are primarily used on products (i.e.
goods), while service marks are employed to label services. Both TM
and SM can be used prior to registration with the federal trademark
office (USPTO). Once a trademark or a service mark is registered,
the (R) in a circle is used to indicate that the trademark has been
registered. The use of the symbols TM (trademark for goods) and SM
(service mark for services) is recommended to claim the rights on
unregistered marks that have not been used by others in
commerce.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
Why is it necessary to make a domain name search for a potential trademak?
/// Filed in: Trademark
Law
Domain name registration in .com,
.net, .org (i.e. domains open to any kind of registrant) follows a
first-come-first served policy. Thus, when deciding on a mark it is
often a good idea to search for potential conflicting trademarks by
researching domain names that use the mark. The unavailability of a
domain name may indicate the existence of a conflicting trademark
and it will limit the ability to differentiate products and
services.
The availability of domain names can be researched at www.whois.net. WHOIS is a searchable database maintained by registries and registrars that contains information about domain name registrations in the .com, .net, .org, .edu, and ISO 3166 country code top-level domains.
While legally registered domain names can pose a problem for new trademarks, it is also important to recognize that a similar issue is at work when choosing a domain name. It is the domain name registrant’s responsibility to make sure that the domain does not infringe or violate someone the rights of any third party (including trademark rights).
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Lanham Act of 1988.
[4] Uniform Domain Name Dispute Resolution Policy (ICANN)
The availability of domain names can be researched at www.whois.net. WHOIS is a searchable database maintained by registries and registrars that contains information about domain name registrations in the .com, .net, .org, .edu, and ISO 3166 country code top-level domains.
While legally registered domain names can pose a problem for new trademarks, it is also important to recognize that a similar issue is at work when choosing a domain name. It is the domain name registrant’s responsibility to make sure that the domain does not infringe or violate someone the rights of any third party (including trademark rights).
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Lanham Act of 1988.
[4] Uniform Domain Name Dispute Resolution Policy (ICANN)
For what activity does the Lanham Act provide criminal penalties?
/// Filed in: Trademark
Law
Criminal penalties are applicable in
severe trademark infringement cases involving counterfeiting of
products. Counterfeiting is considered to be an extreme form of
trademark infrigmement since the infriger knowlgy takes advantage
of the trademark, bandname, and goodwill of a firm to deliverately
create counterfeit products (i.e. lower quality immitations) for
the purpose of seeking economic gain. The Trademark Counterfeiting
Act of 1984 and the Anticounterfeiting Consumer Protection Act of
1996 address the problem of trafficking in countefeit trademarked
goods and the distribution of imitations of well-known trademarked
mechandize. According to these Acts "(w)hoever intentionlly
traffics or attempts to traffic in goods and services and knowingly
uses a counterfait mark on or in connection with such goods or
services" is guildty of a felony. These acts lso ammend the Lanham
Act to provide stronger civil penalties in cases involving
counterfeiting.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Acceptable Identification of Goods and Services Manual
[4] Trademark Examiners Manual of Procedure (TMEP)
[5] International Schedule of Classes of Goods and Services.
[6] Lanham Act of 1988.
[7] Trademark Counterfeiting Act of 1984
[8] Anticounterfeiting Consumer Protection Act of 1996
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Acceptable Identification of Goods and Services Manual
[4] Trademark Examiners Manual of Procedure (TMEP)
[5] International Schedule of Classes of Goods and Services.
[6] Lanham Act of 1988.
[7] Trademark Counterfeiting Act of 1984
[8] Anticounterfeiting Consumer Protection Act of 1996
What system of classification of goods and services is presently used for trademarks?
/// Filed in: Trademark
Law
Goods and services are classified
according to a numerical system of international classification
known as the International Schedule of Classes of Goods
and Services. For instance, class 35 corresponds to
"Advertising and Business" services and class 12 corresponds to
"Vehicles; apparatus for locomotion by land, air, or water" goods.
This classification is applicable to trademarks filed after
September 1, 1973. For to this date, the US Classification System
was used for categorization.
In addition to the classification of goods and services, trademark applicants must provide an identification and description of the services beyond the scope of the descriptions listed in the Intenational Classification of Goods and Services document. The USPTO Acceptable Identification of Goods and Services Manual and the Trademark Examiners Manual of Procedure (TMEP) are valuable is a valuable tools to help applicants identifying goods and sevices.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Acceptable Identification of Goods and Services Manual
[4] Trademark Examiners Manual of Procedure (TMEP)
[5] International Schedule of Classes of Goods and Services.
In addition to the classification of goods and services, trademark applicants must provide an identification and description of the services beyond the scope of the descriptions listed in the Intenational Classification of Goods and Services document. The USPTO Acceptable Identification of Goods and Services Manual and the Trademark Examiners Manual of Procedure (TMEP) are valuable is a valuable tools to help applicants identifying goods and sevices.
References:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
[3] Acceptable Identification of Goods and Services Manual
[4] Trademark Examiners Manual of Procedure (TMEP)
[5] International Schedule of Classes of Goods and Services.
Why it is necessary to evaluate the non-English meaning of trademarks?
/// Filed in: Trademark
Law
When
choosing a trademark based on an English word or group of words, it
is necessary to evaluate non-English translations of the trademark
because these may be considered confusingly similar to registered
trademarks in other languages. Similarly, word marks in languages
other than English must also be evaluated carefuly since consumers
in the United States may be familiar with marks that match the
English equivalent of the foreign term. For instance, consider a
company that has registered the mark "Arrow" in the United States.
If another company tried to use the mark "Flecha" (the Spanish
translation of Arrow) this may pose a problem (e.g. Red Bull and
Toro Rojo).
In addition to the legal issues associated with potential translations of trademarks, there are also important marketing considerations involved. For instance, a direct translation of an English word to another language may have a different meaning. A classical example used to illustrate this concept is the use of the mark Nova for an automobile since the term Nova sounds as the words meaning of "no-go or doensn't go" in Spanish.
Reference:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
In addition to the legal issues associated with potential translations of trademarks, there are also important marketing considerations involved. For instance, a direct translation of an English word to another language may have a different meaning. A classical example used to illustrate this concept is the use of the mark Nova for an automobile since the term Nova sounds as the words meaning of "no-go or doensn't go" in Spanish.
Reference:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
Will trademark law protect a personal name used as a trademark?
/// Filed in: Trademark
Law
Personal names can be used as a
trademark only if it can be demonstrated that they possess
"secondary meaning." Thus, personal names are similar to
descriptive marks and they are considered to be weak marks. For the
purposes of trademark registration, secondary meaning may be
assumed after five years of continued and exclusive use of a mark.
Black's Law
Dictionary (Fifth Edition)
defines the doctrine of secondary meaning for the purpose of
trademark law as "[A] ... party through advertising or massive
exposure ... [establishing] its trademark in the minds of consumers
as an indication of origin from one particular
source."
There are numerous examples of trademarks that use personal names: Chanel, Levis, Versace, Gucci, etc. These personal names are protected by trademark law because they have accomplished the objective of forming an association in the mind of the consumer which links the individual products with its manufacturer or distributor.
Reference:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
There are numerous examples of trademarks that use personal names: Chanel, Levis, Versace, Gucci, etc. These personal names are protected by trademark law because they have accomplished the objective of forming an association in the mind of the consumer which links the individual products with its manufacturer or distributor.
Reference:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
What is the purpose of trademark law?
/// Filed in: Trademark
Law
The overall purpose of trademark law
is to prevent unfair competition by protecting the use of a symbol,
word, logo, slogan, design, domain name, etc. that uniquely
distinguises the goods or services of a firm. This body of
common-law principles ultimately protects consumers by prohibiting
companies from using trademarks substantially similar to those of
other companies that may have more "brand equity" and customer
loyalty. Trademark law is intended to avoid consumer confusion and
preventing companies from diluting the marks of other firms.
Dilution occurs when a similar mark adversely affects the
reputation of a distinctive trademark regardless if it leads to
consumer confusion or not.
Given the increased importance of branding and the tangible economic value of the brand (brand equity) in today's experience economy, trademark law is more important than ever before. As consumers become loyal to a particular brand and make purchasing decisions based on their ability to identify a product of service by use of a logo, slogan, etc (i.e. trademark), these marks serve as a point of differentiation and competitive advantage. Consequently, trademark law is important to enable the trademark proprietor to develop goodwill for the product or service and prevent other parties from exploiting the brand.
Reference:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).
Given the increased importance of branding and the tangible economic value of the brand (brand equity) in today's experience economy, trademark law is more important than ever before. As consumers become loyal to a particular brand and make purchasing decisions based on their ability to identify a product of service by use of a logo, slogan, etc (i.e. trademark), these marks serve as a point of differentiation and competitive advantage. Consequently, trademark law is important to enable the trademark proprietor to develop goodwill for the product or service and prevent other parties from exploiting the brand.
Reference:
[1] Stim, R. "Intellectual Property. Patents, Trademarks, and Copyrights" West Legal Studies.
[2] Black's Law Dictionary 5th ed., (West Publishing, 1979).