What are the key elements of Sharp Corporation’s strategyjcp016300/documents/BPS 6210 GLEMBA... · Web viewConstantly monitoring the environment to know and forecast consumer trends

Ireri M Isaac 999-01-6360BPS 6210.595 Strategic Management Final Exam

What are the key elements of Sharp Corporation’s strategy over the past 50 years? How has the strategy evolved? Has it been consistent? Does Sharp Corporation’s strategy make more sense from the perspective of Porter’s article What is Strategy?, or within the framework provided byPrahalad and Hamel in The Core Competence of the Corporation?

The following constitute the key aspects of Sharp Corporation’s strategy over the last 50 years.

i. Continuous innovation – new product development. Sharp Corporation sought to

create products that competitors could not copy easily. This, Sharp Corporation was able

to sustain by creating an organization structure that stimulated innovation through

instilling a ‘crisis feeling’.

ii. Continuos improvement of old products. Sharp Corporation established a research

and development capability in Japan and a few other countries. For example, the Sharp

Corporation continuously developed the LCD technology and the TV and video

technologies even after many competitors bailed out after realizing that the market had

matured. Continuous funding of these centers and the policy of cost sharing amongst

manufacturers who used their developments ensured that they never lacked funds for

research and development.

iii. Continuous learning from the environment – for example, from US’s Litton

Corporation. Sharp Corporation learnt from Litton and went on to become the second

largest in the Japanese microwave business.

iv. Growth through creating demand for their products and international expansion

(and subsequent vertical integration of these operations). Sharp Corporation’s

organization structure had incorporated into it a unit whose sole purpose was to create

new lifestyles for its customers (or new needs they never knew existed) and thus propel

demand for Sharp Corporation’s products.

v. Constantly monitoring the environment to know and forecast consumer trends.

The first time being when Hayakama moved into TV assembly when he realized the

upcoming launch of the TV in Japan, when Sharp Corporation’s Chairman (correctly)

predicted that electricity consumption rather than performance would drive the demand

for calculators.

vi. Riding the wave till the market or product matures and then changing strategy.

Unlike most firms, Sharp Corporation never bailed out when the market reached

maturity. Instead, it would use its innovativeness to create a new lifestyle, thus, a new

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demand. For example, when most US firms exited the TV market, Sharp Corporation

came up with the HDTV idea.

vii. Forming alliances – firstly with RCA and later with other investors in joint

manufacturing ventures in Asia. These alliances are maintained through learning from the

partners, continued financial commitment and nurturing of relationships.

viii. Recruiting, training and retaining the best human resource. This changed from

egalitarian to merit over time in response to a changing human resource pool.

ix. Gate keeping or self-preservation in markets – for example, Sharp Corporation

formed a manufacturing company in the US, SMCA, in response to new government

regulation that restricted its operation as a foreign entity in the US and later investing

$640 million in research and development to maintain its technological lead.

x. Vertical integration of its foreign operations – that is, design, manufacturing,

marketing and distribution. The economies obtained from vertical integration allow Sharp

Corporation to lead the market or, gain considerable market share.

xi. Formalized strategic planning – 10 year long-term, 3 year near-term and 6 month

operational strategies. Sharp Corporation deliberately creates 6 month policies that are

very changeable/flexible in nature.

xii. Technology acquisition, development, transfers across the organization and

feedback. In 1992, Sharp Corporation spent 8.2% of its revenues on research and

development. It had established a formal program for technology transfer and had built

up feedback systems.

Some of the strategies remained consistent over time while others changed. Hayakamana first

acquired technology from dismantling a US built radio. Sharp Corporation has consistently

tried to acquire technologies and develop them – both in-house and through acquisitions, but

largely, in-house. Also, Sharp Corporation has constantly sought how to improve its

technologies – original or otherwise. The company has sought opportunities for growth since

its inception.

Up until 1969, Sharp Corporation was more focused on operational efficiencies than on building

core competencies. In 1969, Saeki saw the danger of maximizing operational efficiencies and

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decided to re-focus to company in terms of building and sustaining core competencies. Sharp

Corporation’s strategies (1960s to 1990s) make more sense when viewed the light of Prahalad

and Hamel’s The Core Competence of the Corporation. This article stresses the need to do

different things in different ways from competitors. For this to turn out into a competitive

advantage in the long run, it must be continuously improved.

Overall, Sharp Corporation’s competitive advantages have been honed by the fact the company

is Japanese as explained in the conclusion.

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What are Sharp Corporation’s core competencies in 1992? Evaluate each using the criteria specified by Prahalad and Hamel. How do these translate into competitive advantages? Are these competitive advantages sustainable? How and why?

Prahalad and Hamel stated that a core advantage must satisfy three criteria to qualify as a core

competence:

It should allow for wide access to a variety of markets.

It should make a significant contribution to the perceived customer value.

It must be difficult to copy.

In view of the foregoing criteria, the following were Sharp Corporation’s core competencies

in 1992:

i. Unique and innovative technologies. These include the IC, CMOS, LCD

technologies, optosemiconductors and laser diodes. The initial technologies used in

trying to enter the mainframe computer market were later used in gaining market

leadership in the Japanese calculator market. Sharp Corporation was adept at

leveraging its technologies over a large spectrum of products, for example, CMOS

technology.

ii. Technology preservation. The optosemiconductor technology was kept incubated

for a few years until the opportunity to commercialize it came up. Other

optosemiconductor competitors literally threw this technology away.

iii. A mass international distribution channel. Such a network takes years and lots of

money to build up.

iv. Continuous product development and nurturing – for instance, the LCD

technology.

v. Learning from partners – for instance, the Litton Corporation. Many firms partner

but very few learn as illustrated in Kanter’s article.

vi. A complex and large management structure that was reconfigured as need arose

due to market and technology changes. Many organizations suffer from denial and

perceptual defensiveness and refuse to change with the environment. Communication

also seemed to flow very well despite the disadvantages of distances in the pre-

Information Age.

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These core competencies are difficult to imitate and thus give Sharp Corporation the momentum

for head starts and the ability to catch up with its competitors while they (competitors) try to

attain Sharp Corporation’s advantages.

These advantages are only as sustainable as their validity in terms of the environment and how

wells Sharp Corporation monitors the environment.

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Q: is Sharp Corporation diversified or vertically integrated, or both? Is there a consistent logic behind its strategies for diversification and/or vertical integration?

In its most basic form, Sharp Corporation’s corporation consisted of a 3-level value chain, that is

– acquisition of raw materials, assembly, and distribution.

In 1969, with Sharp Corporation’s entry into the semiconductor business, the firm saw the need

to vertically integrate and control its manufacturing functions as well as the design functions.

Sharp Corporation is largely diversified on product-category basis. For instance, in the

information equipment category, Sharp Corporation has a large variety of products. The same is

the case with the appliances business and consumer electronics. This has been made possible by

leveraging Sharp Corporation’s core competence of technologies that have granted it access to

the different markets, for example, micro-computers, electronic cash registers, liquid tone

copiers, personal computers, word processors and faxes, each of these categories being a distinct

market.

The rationale behind integration is to attain economies of scale. In view of the ‘diseconomies’ of

information of yesteryears, Sharp Corporation had to vertically (in similar geographic locations)

integrate in order to attain economies of scale.

The rationale behind diversification is to minimize risk and thus optimize returns. Sharp

Corporation is more diversified on the international scene than on its products base. Its current

product categories all fall under one heading of ‘electronics’.

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Where has Sharp Corporation realized synergies across its global organization? What specific internal policies and practices have been effective in enabling them to realize synergies and leverage their knowledge assets?

Sharp Corporation has realized the following synergies on an international level:

i. Efficient manufacturing and sourcing of components and products between the

manufacturing and selling functions, respectively. This is attributable to the internal

market system that allows the manufacturers within the group to choose whom to sell to,

and the sellers, the freedom to choose who to buy from. The sellers have the freedom to

buy their products from Sharp Corporation’s competitors (although this hasn’t happened

as per the case), if those competitors offer a superior product to Sharp Corporation’s

manufacturers. Similarly, manufacturers can refuse to sell to Sharp Corporation buyers.

This has resulted in improved product quality for Sharp Corporation.

ii. Sharp Corporation has been able to integrate design and manufacturing capabilities in

local markets. This it has done by vertically integrating the design and manufacturing

processes in local markets. This allows the manufacturing operation to have direct control

over their products.

iii. Research and development – the international center for research and development in

Britain has shared its findings and advancements with the rest of the group. This helps

reduce duplication of effort in terms of research and development, saving Sharp

Corporation money.

Several specific internal policies and practices have been effective in enabling Sharp Corporation

to realize synergies and leverage its knowledge assets. These are:

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i. Good communication within the organization of its strategic plans, its creed and business

philosophy. This ensures goal congruency – that all people on board the ship know the

destination and their roles in getting there.

ii. Heterogenity of top management – the mix of different personality types has led to a

hybrid decision-making record, since the different personality types compliment each

other very well.

iii. Sharp Corporation has managed to integrate into its fabric a ‘feeling of crisis’ culture,

while still remaining very proactive. This obviously has led to faster turnover in product

development with the company.

iv. A well defined Human Resource Management system which has the following features:

A paternalistic approach whose objective is to increase cooperation by creating a

family feeling.

A lifetime employment policy that has led to lower turnover rates.

A merit-based system that focuses on salary, bonuses, and promotions.

Intensive training programs – across manufacturing groups, cross-functional and

chemicalization for senior researchers.

A recruitment policy that incorporates aggressive headhunting, mid-career hiring and

promoting from within. This helps reduces the stagnation of new ideas as a result of

complacency.

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Sharp Corporation has been involved in a number of collaborative relationships and strategic alliances over the years. How successfully has Sharp Corporation been in leveraging these relationships and alliances?

In her article ‘Collaborative Advantage’, Kanter gives three fundamental aspects of business

alliances. These are:

i. That alliances must yield benefits for the partners.

ii. That alliances that both partners ultimately consider successful involve collaboration –

that is, creating new value together.

iii. That alliances cannot be “controlled” by formal systems but require a dense web of

interpersonal connections and internal infrastructures that enhance learning.

In Sharp Corporation’s case, the first alliance was forged with RCA in 1953. This was a

licensing deal that allowed Sharp Corporation to assemble TVs using RCA’s parts and market

them under Sharp Corporation name. Kanter called this a mutual service consortia. This is the

simplest form of partnership. Prahalad and Doz stated that ‘collaboration is competition in a

different form’. In this case, its appears that Sharp Corporation reaped the benefit of gaining a

national customer base in Japan but the benefits for RCA are not clear. These may be assumed to

be revenues from the licenses and sales of components. The level of collaboration was very low

since Sharp Corporation seemed to learn and thus gain more.

In the second instance, we see Sharp Corporation entering into an alliance with foreign

companies, specifically in Taiwan, Brazil, Korea and Malaysia, to establish production facilities.

These were also based on licensing rather than as wholly owned subsidiaries. Clearly, Sharp

Corporation used these alliances to gain entry into these countries while at the same time,

avoiding additional upward investment. Sharp Corporation refused to exploit developing

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countries in these foreign ventures. This may be seen as offering the foreign firms an opportunity

to learn from Sharp Corporation.

Later on, Sharp Corporation in working with Litton, the US innovator in microwave ovens,

capitalized on it’s learning capability which it effectively to become the second largest

producer/seller of microwaves in the local Japanese microwave sector in a span of slightly over

two decades. Sharp Corporation acquired and shared what it learnt from Litton very effectively.

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Q: What kind of uncertainties is Sharp Corporation facing in 1992?

In 1992, the Japanese economy went bust. Japan is at the time a major player in the world

economy. It is one of the G-7 countries and its woes cause a ripple effect around the world. In

view of the fact that Sharp Corporation is a Japanese corporation with international operations, it

faces the following uncertainties:

i. How to adopt a structure that will ensure that Sharp Corporation stays at the cutting edge

of technological advancements as the rate of change changes even faster.

ii. How to integrate further or unbundle the firm due to the increasing economics of

information.

iii. A shrunken home and international customer base due to eroding of the customer base.

iv. Significant reduction in the company’s asset base which limits expansion.

v. How to position itself in a weakened economy or who to partner with in the future. This

is strategically protecting its current market share.

In their paper, ‘Collaborate with your competitors’, Prahalad and Doz not that mutual gain is

only possible if the following conditions are met:

Both firms have similar strategic goals, but divergent competitive goals. That is, both

companies have a similar approach to attain their goals, save for the fact that they do not

have the same customers.

Both firms have modest market size and power as compared with the market leader. This

avoids domination by one partner over the other.

Each partner believes it can learn from the other and at the same time limit access to its

proprietary skills.

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The challenge that faces Sharp Corporation is that of defending its customer base while at the

same time, pursuing new opportunities for growth. Sharp Corporation has two potential partners

with whom it can form alliances at this time. These are Intel and Apple Computer. I will use the

5 factors of that shape competitive forces (Buyers power, suppliers power, threat of entry, threat

of substitutes, jockeying for position among current players) to analyze these two possible

alliances.

a. Buyers power

All the 3 companies have core competencies in technologies that have high demand amongst

sophisticated buyers. As these firms continue to innovate, it can be expected that the buyers will

become even more sophisticated. This reduces the competitiveness of the firms.

b. Suppliers power

All the 3 firms are large multinationals with large resource bases. They most likely have greater

influence over the suppliers due to the ‘large customer’ status. This allows them to source

materials cheaper, increasing their competitiveness.

c. Threat of entry

The market for flash memories is expected to grow by 11 times in two years. This, in a nearly

perfect would is likely to entice a few other competitors very fast. The only deterrent may be the

cost of entering the market due to very high capital investments required. In the US, capital is a

lot easier to raise if one can demonstrate project viability.

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A new entrant does need to have an elaborate distribution network. These three companies have

established good international distribution networks, which they can use for their products and

lock out potential competition using.

d. Threat of substitutes

The current substitutes for flash memories are the disks – hard and floppy. Flash memory flaunts

the advantages of cost-effectiveness, reliability and performance. On the other hand, there exists

comparable operating systems Apple’s, the most common being Microsoft’s.

e. Jockeying for position among current players

In the early 1990s, high tech firms are enjoying unprecedented growth, especially amongst the

software and chipmakers. Intel is a chipmaker and is currently experiencing high growth. Intel is

slowly emerging as the chipmaker bluechip corporation while Microsoft is getting ahead of

Apple with its operating system and rage of other software.

Intel-Sharp Corporation alliance would add new value in the form of a new product. It is

intended to be a fully integrated venture with design, manufacturing, and marketing and

distribution capabilities.

The Apple-Sharp Corporation alliance does not seem to create any unique value since there are

other firms at the time who have comparable operating systems. Despite that fact, Sharp

Corporation may want to collaborate with Apple since Apple isn’t the market leader and that

would significantly reduce Apple’s bargaining power.

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Using this analysis, I would recommend that Sharp Corporation forge an alliance with Intel.

Ofcourse, the venture must be a viable one. Sharp Corporation should use this opportunity to

learn from Intel and thus strengthen its position further.

On the other hand, Kanter brought out the fact that alliances are living systems that evolve

progressively in their possibilities. Beyond the financial gain, the firms must find the chemistry

in non-numeric values, like:

Similar strategic goals but divergent competitive goals.

Ease of employees getting along – this being from the top to bottom and not just the top.

Each firm should feel that they have the potential to reasonably protect their proprietary

rights, while at the same time, adding value to the alliance.

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Q: Sharp Corporation is a global company based in Japan. Have its Japanese origins been

important to the development of Sharp Corporation’s strategies and global

competitiveness?

According to Porter, competitive advantage is created and sustained through a highly localized

process. According to Porter’s 4 determinants of national competitive advantage, Sharp

Corporation is competitive for the following reasons:

i. Factor conditions

Japan has a highly educated and trained workforce. It is a member of the G-7. Japan also boasts

of an extensive transport and telecommunications network. These have placed the country better

at the forefront of national competitive wars.

ii. Demand conditions

Japan has a high demand for electronic goods that has driven its local markets for long. The users

tend to be very sophisticated and thus demand very high quality products. This forces Japanese

firms to attain this superiority and thus compete better internationally.

iii. Related and supporting industries

Japan has a highly developed service industry. although the country has literally no raw

materials, it is a leader in production of goods that require high raw material content, for

example, autos and electronics.

iv. Firm strategy, structure and rivalry

Japan has enjoyed a lot of protectionism from its government, pitting it at an advantage over

other countries that had an almost free market economy by gaining access to such countries

while at the same time, blocking access to their lucrative home market. Japanese firms were first

to maximize their gains by attaining operational effectiveness before their western counterparts.

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Due to their ‘learning’ nature, by the time western firms attained similar operational efficiencies,

the Japanese firms had learnt marketing from western firms and gotten a foothold in many world

markets.

Sharp Corporation followed other Japanese firms in learning (for example, Hayakama learnt

about radios through ‘copyright infringement’), attaining operational efficiency and later gaining

desirable market positions internationally.

In its mission and philosophy, we see enshrined therein traditional values like humility which

one could easily mistake for a weakness. This mental and emotional disposition helped Japan

overtake the West, without the West realizing what was happening.

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What are the key elements of Sharp Corporation’s strategyjcp016300/documents/BPS 6210 GLEMBA... · Web viewConstantly monitoring the environment to know and forecast consumer trends