The Shifting Language of Strategy

My post on International Business terms got me thinking about the shifting popularity of Strategic Management terms.

So, here we go with some comparisons.

Let’s start with the topic itself and its two main constituent threads (i.e. strategic management, corporate strategy, and business strategy):

All three terms boomed from the late 1970s, but it was business strategy (i.e. decisions about how to compete in markets) that screamed away from corporate strategy (what markets to compete in).  As with many of the IB terms, all the concepts have faded in recent years, perhaps as conversations became more specific (or even less-business focussed).

It doesn’t surprise that such corporate strategy has waned in a relative sense, as the orthodox rhetoric has been towards streamlined, focused organisations.  Looking at some of the typical such corporate strategy terms (diversification, mergers, acquisitions, outsourcing), shows a genuine plateauing in all terms, other than outsourcing which has raced up in the past decade (this no doubt reflects not just usage by strategy scholars, but also the critics thereof). Diversification peaked way back in the late 1980s (although this term has a considerably wider usage than its strategy meaning), which correlates pretty nicely with the decline in such behaviour (at least by Western firms):

The influence of Michael Porter, and his big ideas/tools (Five Forces, generic strategies) have proven surprisingly consistent in terms of usage, although they too have waned this millennium:

In terms of talking about competitive advantages, core competences/core competencies peaked in the early 200s, while dynamic capabilities are still on a steady rise (I get similar results with the singular versions of the terms):

What terms have I missed (conscious that comparing phrases with different word counts is not practical/tenable, nor does it make much sense to use terms with other common uses, such as resources)?

As this is likely to be my last pre-Christmas post, I wish you all a fun festive season and safe passge into 2011.

 

Fastest start-up in history?

I love this tale from Aussie blogger Ben Rowe about setting up a new web-based business. He went from conception to execution in 4 hours at the cost of $25 (not including labour – but it was a Friday evening, so probably free).

He taps into several staples of the web 2.0 zeitgeist – Twitter, t-shirts, outsourcing and tailored e-commerce.

His idea? Printing twitter posts onto t-shirts. Or, in fact, coming up with a neat design for the shirts and getting someone else to print on demand if an order comes through.

There doesn’t seem to have been any orders yet, so it remains to be seen whether this is a viable business (although there haven’t been many expenses yet anyway).

Ben has also noted that it turns out he wasn’t first to market. Will first mover advantage squash him?

Or will the market power of the existing on-line t-shirt giant Threadless see them win out with this little diversification/product-line extension?

What can Ben do to achieve a sufficient point of difference in the market?

The Umbrella-seller-fella answers your questions (Part 2)

My dialogue with Steven Pawsey from Stevie Marx continues (see earlier posts: 1, 2 and 3). He is answering questions from you International BS Blog readers.

Shaun: What impact, if any, has the global financial crisis having on your business? Is there anything you can do to minimise the impact or is it a macro-level effect out of everyone’s hands?

Steven: Every business in the world has been impacted by the global financial crisis; a lot negatively and a rare few positively. Retail in Australia and the world over seems to be shot and I must admit I am not positive about retail sales in 2009 across the board. Consumer spending seems to have stagnated when the economy needs it the most and apart from some Government intervention the underlying problems we have are going to be more constant. It is also a problem when a lot of businesses have slowed or stopped spending as much as possible to try and protect themselves for the storm that is brewing.

As for Stevie Marx, it has been affected to a degree, but is in a very good position for 2009. I would expect retail sales will be softer in 2009 that would have otherwise been if Stevie Marx was created 5 years ago (and therefore would have experienced another boom year during its second year of expansion). Nonetheless, Stevie Marx has a long term vision for the umbrella industry and will still make good growth in 2009, and that is all that can be asked of a two year old company.

Ami: My friend also imports a range of products from China and he has found that due to the decrease in value of the Aussie dollar he is obviously making less money to the point where he is not going to ship in any more product until things improve again. Are you going through the same motions?

Steven: The Australian Dollar crisis (for importers) is one of the most pressing problems at the moment. Stevie Marx has been shielded nicely from this problem as FOB remains the only method of importation and this means we have traded in USD. So relatively dollar changes have not influenced our profitability. However, allot of other importers that I know of have had massive issues with shipments they were going to make large sums of money on now worthless or even some losing money. These shipments would have been costed up to 4 months ago when the dollar was sitting pretty about 90 cents, and suddenly a large depreciation has wiped their profit margin away.

As for Stevie Marx, we have had to re-cost all our umbrellas for 2009 allowing our retailers to make the same % margin as before, as they have to buy in USD and sell in AUD. If we were to keep prices relative then retailers would be hit with a massive loss which would ultimately lose Stevie Marx business.

Sookjin Ong: Apart from the forex issues, manufacturing costs in China are escalating too, and this might make it expensive for businesses to have their products manufactured in China. Have you considered expanding your production activities elsewhere in the near future?

Steven: This problem, along with the Australian Dollar, is really causing many wholesalers and importers hassles. Things in China have been tightening up for the past 4-5 months with the costs of inputs rising and their own currency problems. It has meant that no price quoted to me can last longer than 4 weeks unless I order immediately. Thus, if I had a meeting two months ago, I have to get the same goods requoted for my next meeting as there is a high chance prices have fluctuated (not greatly but by a percent or two). As for samples, there has been a severe restriction on the amount you can get as there is a shortage of umbrella frames at the moment in China. Thus, at the moment in the current economic climate, especially in China it can be very slow and frustrating. However, this is all part of the everyday challenges of doing business in the global economy.

I have not, and do not intend in look elsewhere for the production of umbrellas for Stevie Marx. I am satisfied with the model I have at the moment and believe it best serves Stevie Marx customers in both price and quality, while in Australia we have all our umbrellas designed with one of the best designers in the world.

The Umbrella-seller-fella answers your questions (Part 1)

You may recall my two part interview with a student, Steven Pawsey who runs his own international business called Stevie Marx. If not check out this page… and this. Not surprisingly, you guys had loads of questions about his experiences. Steven has been kind enough to deal with most of them. So here are the first three (more to come tomorrow):

From several folks on my old blog: How much capital did it take to get started? How much would I need to start a business?

Steven: I get this question quite a lot. The answer to this really does depend on many variables. You really need to take the perspective that money saved is money earned when you’re starting a new business. I managed to personally fund the business off a part time job, so anything is possible. You would need to ideally save a few thousand dollars before you embark on any new venture. Sometimes the less money you have teaches you better to allocate resources, however this can often lead to another challenge that faces so many small businesses.

There are certainly new business ventures that are capital intensive and these types of business require large sums of money. Whenever you start a new business you are always going to spend more money that you probably need to, but this is all part of the learning curve. The quicker you can learn to save money that is wasteful spending the higher chances you will have to create a business with the potential to survive and succeed.

Charles: How do you see the negotiation process and business transaction in china, as opposed to in Western countries? Is it more or less formal (in terms of reliance on contracts)? Is there it changing?

Steven: Whenever you deal cross borders you suddenly experience a shift in values, expectations and processes in with dealing with other businessmen and women. As a 19 year old dealing with businessmen that have been in the industry for 30 years, it is somewhat daunting but at the same time educational. Makers in China live and die by sales. They are very informal when they are trying to get your business. Through the aid of emails and telephones they come off very friendly and you could be fooled sometimes into thinking they have been your friend for many years. This is similar when you meet them; they are always greet you with a big smile and try to do anything for you while in their company.

A container full of Stevie Marx umbrellas - we love containers

It is once you start to do business with them that you notice the more formal and serious side to these business men and women that have made them so successful. I have been very lucky that I found a manufacturer that has been, on the whole, a pleasure to work with (but I have been assured there are many in China that can be painful at times).

In Western Countries I seem to find things are much easier, as you seem to be working on the same wave length and working more together to try to produce a mutually beneficial outcome. When dealing in China, even though you are working together to produce your item, it can feel that you are on opposing sides and can be as painful as pulling teeth out when dealing with matters of price and quantities.

Charles: How do you think an entrepreneur can protect themselves against deceptive manufacturer in China?

Steven: Protection for entrepreneurs against misconduct in China is a very hard problem and one that many are still unable to resolve. When you have something of value, of which many people believe they do when they head to China to get things made, you want to protect your interests in that product as highly as possible. The best you can do is to protect it between concept and being delivered to stores around the world, as this allows you enough competitive advantage for the market to know it is genuinely your product or design.

Once it is in stores anyone can steal the design or concept (if not legally protected – which a lot of products/designs are not). There is no fool proof way to try and keep your concept sheltered until it hits stores; the only thing you can try is to find the most trustworthy manufacturer that protects your interests. I find that if you continually communicate with your manufacturer and always talk about the future and the possibilities of expansion this gets them excited enough to protect your interests. If every time you speak to your maker it is just about price problems or quality problems they are less likely to care about your interests, as they will always feel under pressure from your requests.

Part two is here.

Talking to the Umbrella-seller-fella (Part 1)

Note: this is an interview I did earlier this year, but all the issues are current and exciting and I thought it should get front page coverage on the Blog.

One of my first-year undergraduate students is an international businessman of some note. Steven Pawsey was recently awarded Victorian Young Entrepreneur of the year for his Stevie Marx business. I recently took the opportunity to interview him exclusively for this Blog about his experiences. Below is the first part of this conversation:

Andre: What products do you sell?

Steven: Stevie Marx Australia produces ladies fashion umbrellas. The range varies from super small mini umbrellas up to the large jumbo golf-style umbrellas.

Andre: Do you make these umbrellas yourself, or does someone else manufacture them?

Steven: All Stevie Marx umbrellas are produced in China in the city of Guangzhou. The factory specialises in the production of umbrellas and makes 30,000–60,000 umbrellas per day.

Andre: Why did you choose China as the sourcing location? What advantages did that location have?

Steven: In the modern economy, for most goods the desired production location is China. China has developed the correct infrastructure and support structure to allow buyers to satisfactorily get what they need at the price they desire. The advantage of China is that, because there are so many makers located in China, the free market competiveness works well in keeping prices relatively low. Many people associate this primarily with the cheaper labour available, however, this is only one of the many factors. The main factor is that competion is so strong in China that to maintain business they work on turnover. They know that if they earn less per product it does not matter, as they can produce 10 times as much as can otherwise be produced in other countries. So much more money is flowing in.

Andre: What have been the main challenges in managing the relationship with the manufacturer? What are the major risks?

Steven: The number one challenge in managing an effective relationship in China is the difference in language and culture. In China the language barrier can become haphazard and miscommunication can lend itself to problems of quality, production timelines and even being offered the wrong product entirely. I have had times when my maker in China has said ‘yes’ and I interpreted that as a ‘I agree’, then one week later I found out that yes meant ‘I understand what your saying but I don’t agree’. The culture difference between the West and East is also significant. Western culture endorses larger amounts of spending on things such as development, samples, production etc. Asian culture is more about conserving money, e.g. making exactly the right amount and only offering a specific amount of samples (thus minimising waste and saving money). This can get very frustrating when you have say a Target or Big W in Australia wanting five different styles of umbrella samples and the maker refuses so he can ‘save money’. This is pretty common right across China no matter what good is being produced.

In relation to risk management the major risk associated with China is quality. You need to find a maker that satisfactorily produces to your quality expectations, the consumer’s expectation and local legal requirements. You may remember a complete recall on Chinese-made Mattel toys earlier last year. This type of recall or problem always remains in the back of any importer’s mind. Their producer could make the wrong decision and lead to a disaster.

Later this week, I will post more of this conversation (Part Two is now up here). I am sure Steven would love to hear your feedback and questions thus far (I certainly would). Fire away.

Update: Steven popped back into the International BS Studios (well, he replied to my emails!) to answer the many question below. See his responses here and here.