01. Why Strategy Matters?Rev: Feb, 2015

Euiho (David) Suh, Ph.D.

POSTECH Strategic Management of Information and Technology Laboratory(POSMIT: http://posmit.postech.ac.kr)

Dept. of Industrial & Management EngineeringPOSTECH

2

Why Strategy Matters?

■ Old Paradigm:– God helps those who help themselves!

■ New Paradigm: – God helps those who have strategies,

not those who just work hard without strategies!

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NEW COKE vs. CLASSIC COKE

What happened?

■ Customers’ Strong Cultural Resistance to NEW COKE– Americans in the Southland regarded CLASSIC COKE as a symbol and tradition of

America– Replacing COKE with NEW COKE was perceived as breaking the symbol and tradition

“Cultural Resistance”

vs.

WIN!

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NEW COKE vs. CLASSIC COKE

What happened?

■ Customers’ Strong Cultural Resistance to NEW COKE– Americans in the Southland regarded CLASSIC COKE as a symbol and tradition of

America– Replacing COKE with NEW COKE was perceived as breaking the symbol and tradition

“Cultural Resistance”

vs.

WIN!

What would be another caseabout cultural resistance?

5

WALMART vs. E-MART

Criteria WALMART

Interior Style Warehouse

Size of Product Bulk package

Cultural Facility Almost none

vs.

E-MART

Decentness

Small package

Beauty shop, Photo studio, Restaurant, Nail shop, etc.

’06 Withdrawal out of Ko-

rea,

selling 16 stores to E-

MARTWIN

!

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We are young, too!

ASIANA AIR vs. KOREAN AIR

vs.

What happened?

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ASIANA AIR vs. KOREAN AIR – Answer

■ Competition in Disadvantageous Condition– Airplanes of Asiana Airlines were newer than airplanes of KOREAN AIR

→ KOREAN AIR can’t beat Asiana Airlines in the age competition

■ Marketing of KOREAN AIR in Different Angles– KOREAN AIR emphasized their skilled service, know-how, and experiences

WIN!

■ Change of Rule of Competition

8

STARBUCKS SYNDROME

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QWERTY vs. Dvorak

QWERTY Keyboard Dvorak Keyboardvs.

What happened?

10

QWERTY vs. Dvorak – Answer

QWERTY • Making typing speed slow to prevent adjacent keys from jamming on• Dominantly spread in 19th century

Dvorak • Designed ergonomically and efficiently• Offering fast speed and convenience

WIN!

■ Customer Addiction

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QWERTY vs. Dvorak – Answer

QWERTY • Making typing speed slow to prevent adjacent keys from jamming on• Dominantly spread in 19th century

Dvorak • Designed ergonomically and efficiently• Offering fast speed and convenience

WIN!

■ Customer Addiction

What would be another caseabout customer addiction?

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Miwon vs. Mipung

Miwon • First MSG [Daesang, 1958]• Extremely dominant among housewives

Mipung • MSG made by a major company, Samsung

“Verbal Addiction”

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Miwon vs. Mipung

Miwon • First MSG [Daesang, 1958]• Extremely dominant among housewives

Mipung • MSG made by a major company, Samsung

“Verbal Addiction”

WIN!

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Up-selling

■ Sales technique that a seller induces the customer to purchase more expen-sive items, upgrades, or other add-ones

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Cross-selling

■ Sales technique that a seller analyzes the customers’ pattern and suggests products which are often sold together

&

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Information Technology Strategy Case (1/5)

■ Marriott Hotel

Saving and managingVIP customers’ information

Allowing customersto check in and check out

without going to the front desk

Usually business people or young couple mind tocheck in and check out at the hotel front desk

Problem

“Customer Relationship Management (CRM)”

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Information Technology Strategy Case (2/5)

■ Asiana Airlines

• Risk of loss• Higher likelihood of terrorist attacks

Difficulties in tracking and managing baggage

• RFID: Radio Frequency Identification• Automatic identification method, relying on storing and re-

motely retrieving data using devices called RFID tags or transponders

RFID-enabled air baggage tracking and control system

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Information Technology Strategy Case (3/5)

■ G-market

Problems

E-security • Weak payment system• Certificate user by ID/password

Reliability of transaction

• Deception of trade• Weak warranty of the products

quality

Solution

SSL complementary sys-tem

(SSL: Secure Sockets Layer)

Escrow service

Escrow service of G-market

Customer G-market Seller1. Purchase/Pay-ment

2. Delivery Re-quest

3. Sending Prod-uct

5. Transferring Payment

4. Receipt Comfir-mation

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Information Technology Strategy Case (4/5)

■ Shinhan Bank

Problem

Characteris-tics of

Financial Product

• Intangibility• Geographical dispersion• Balancing growth with

risk• Lack of Special Identity• Individual Marketing Sys-

tem• Inseparability

SRMS (2000)

• Catching Symptom of Customer Secession• Scheduling for Salespeople• Customized Portfolio

Back-end Office System Middle Office SystemFront Office System

Data Collecting and Auditing Mining

DB

AnalysisCRM Mart

CRMDB

Inter-nal

Data

Exter-nal

Data

Visualized An-swer tool

Visualized Campaign Evaluating tool

Visualized Campaign

Design tool

Data MiningSystem

OLAPSystem

CampaignManagement

System

Call Center

Branch

Internet Banking& Tele-Banking

CD / ATM

Tele-marketer

DMI

Customers

CustomerInformation

CampaignInformation

SamplingTransformationTransmission

“Customer Relationship Management (CRM)”

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Information Technology Strategy Case (5/5)

■ Korail

KOVIS

• PM (Plant Management)• SEM (Strategic Enterprise manage-

ment)• AM (Asset Management)• CM (Cost Management)• FA (Financial Accounting)• MA (Management Accounting)• MM (Materials Management)• ESS (Employee Self Service)

Problems

• Symbol of “Red Tape”• Criticism towards the bureaucracy of

Korail• Opening of KTX, less competitive

compared to vehicle transportation• Increase in deficit, bad management in-

dex

“Enterprise Resource Planning (ERP)”