Reference no: EM132422910

Question

Case Exercises  Strategic Management

Bang & Olufsen

The Danish company Bang & Olufsen manufactures upscale electronic products. Using its core competencies in product design and manufacturing, the firm produces an array of what have been labeled as "fantastic-looking" luxury items. Among its offerings are $1,800 to $5,000 television sets. Striving deliberately for high style and quality, the firm's top-of-the-line products are targeted to audiophiles and video buffs that are willing to pay premium prices. In describing the company's product design, Ole Bek, director of Bang & Olufsen international distribution center, noted that he learns much more by window shopping at Luis Vuitton in Paris than by looking at consumer electronics outlets. 

To highlight more clearly and consistently the uniqueness of its products and to better serve the specialised interests and needs of its target customers, the firm decided recently to launch a string of impeccably (perfectly) designed stores that sell only its own products. Simultaneously, Bang & Olufsen discontinued the practice of distributing its products through what it considered to be "downscale" shops. The practice of concentrating on its own dedicated shops as the primary means of product distribution is consistent with actions taken by other companies that serve upscale customer needs. Luis Vuitton, for example, sells its bags only in its own boutiques. Cartier International Inc. and Guicci Group have pulled their products from the shelves of hundreds of stores in the United States. Moreover, selling products through its own retailing outlets allows Bang & Olufsen to move even further upscale.

How does the Bang & Olufsen move to distribute its own products affect its value capture part of its strategy? Explain.

What is the rationale behind that move from a corporate strategy point of view?

2.The Cemex Strategy

The problem with ready-mix concrete is that it's highly perishable; it begins to set when a truck is loaded, and the producer has only limited time to get it to its destination. In Mexico traffic, weather, and unpredictable construction labor make it incredibly hard to plan deliveries accurately. So a construction contractor might have concrete ready for delivery when the site isn't ready or, worse, expensive work crews at a standstill because the concrete hasn't arrived.

Cemex sold concrete by the cubic yard. But its customers tightly considered concrete a commodity product. What they value is that the right amount of concrete delivered just when it is needed. Realizing this, Cemex staffers studied how FedEx, pizza delivery companies, and ambulance squads worked. Eventually, they developed digital systems that allowed Cemex to adjust, in real time, where trucks were bound. Cemex then oriented its information, logistics, and delivery infrastructure in alignment with that, creating far-reaching changes in the company .They learned to optimize delivery patterns across a whole region; customers who unexpectedly needed concrete could be served, often by shipments that had unexpectedly been postponed by other customers.

Cemex can now deliver concrete within hours -- sometimes even minutes. It can accept unlimited change orders. It can help customers anticipate demand and cash-flow requirements. Cemex, once a regional company operating in Mexico, is now the third-largest ready-mix concrete business in the world, with plans to capture the number two spot.

3. FineCatering's Strategy

FineCatering is a highly profitable international food-service company. It is able to obtain premium prices from corporate and institutional clients by offering a level of customized service and responsiveness that competitors cannot match. The company seeks out only those clients that want superior food service and are willing to pay for it. For example, once domestic airlines became less interested in distinguishing themselves through their in-flight meals, FineCatering dropped that segment.

FineCatering uses its huge scale of operations and presence in multiple market segments (business, educational, healthcare, and correctional-system food service) to achieve a sizeable cost advantage in food purchases - an advantage that competitors cannot duplicate.

4. Automobile Retailing Industry

Internet technology provides buyers with easier access to information about products and suppliers. It mitigates (eases) the need for such things as an established sales force or access to existing channels; and it enables new approaches to meeting needs and performing functions. Because it is an open system, companies have more difficulty maintaining proprietary offerings. The use of the Internet also tends to expand the geographic market, bringing many more companies into play with one another. And Internet technologies tend to reduce variable costs and tilt cost structures toward fixed cost, creating significantly greater pressure for companies to engage in the operational efficiency game.

The Internet then, makes information widely available; reduces the difficulty of purchasing, marketing, and distribution; and allows buyers and sellers to transact business with one another more easily. 

In the automobile retailing, for example, the Internet allows customers to gather extensive information about products easily, from detailed specifications and repair records to wholesale prices for new cars and average values for used cars. Customers can also choose among many more options from which to buy, not just local dealers but also various types of Internet referral networks (such as Autoweb and AutoVantage) and on-line direct dealers (such as Autobytel.com, AutoNation, and CarsDirect.com). Because the Internet reduces the importance of location, at least for the initial sale, it widens the geographic market from local to regional or national.

Questions:

Evaluate the strength of each of the automobile retailing industry five forces.

What is the net effect of Internet on the industry structure?