In a highly commoditized and competitive industry such as the cement space in Latin America, digitalizing the supply chain can become a lever to boost profitability and build a sustainable competitive edge.
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I really enjoyed reading this article. It gives a vivid example of the implications of isolationism. I absolutely agree with the author that Nissan could be doing much more to address the risk that Brexit poses to its supply chain, and would like to propose an additional initiative to mitigate some of the risk in the front-end of the business (i.e. from the Sunderland Plant to the end consumers in the countries that it serves).
In the light of the Brexit and isolationism in general, I believe that Nissan should revise and regionalize its go-to-market strategy. This means re-assessing – under the Brexit context – how effectively they could compete in price in each country, and shifting its go-to-market levers (pricing, discounts, advertising, sales force, etc.) accordingly. By shifting its go-to-market focus and resources towards countries in which they will be better positioned vs key competitors, and away from countries in which key competitors will be better positioned then Nissan, the company “sends a signal” to its competitors. Once the competitors “read this signal”, they will be incentivized to shift their go-to-market levers in Nissan’s opposite direction. By doing this, each competitor inevitably gains market share in the countries that they can serve more efficiently, and give up share in other countries. Once this occurs, both competitors would have increased their profits. This is a practice that is commonly used in other industries with high geographical barriers, such as the cement industry. I believe that, in light of isolationism, it can be adapted to and implemented in the auto industry.
In regard to the back-end of the business (i.e. sourcing plus production), I really liked the idea mentioned by the author of finding and developing local suppliers in the UK, as well as the idea of partnering with other automakers to implement cross-production across the EU.
Very interesting article! As I read it, I was struggling with one of the questions that you posed towards the end: Does it really make sense for an airline like Emirates to make an effort to reduce its carbon emissions? Initially, I thought the answer was necessarily ‘no’, because it just seemed to be such a low-return investment. Even if they were able to get all the airlines in the world to follow – which seems like a long shot – they would be addressing less than 2% of their actual problem. And Emirates is, after all, a for-profit organization so they probably cannot afford to embark on such a costly mission for – arguably – symbolic reasons. Is there a way for Emirates to contribute to such a broad and complex problem while getting a return on its investment? After giving it some thought, two ideas came to mind. By implementing them, they might be able to capitalize their efforts and even gain a competitive edge.
1. Advertising their efforts both to customers and investors. Although air travel is a price sensitive industry, brand awareness/image still plays a role for customers and global warming is becoming an important component of this. From an investor’s perspective, Emirates efforts can signal an adequate management of the imminent risk of increasingly strict regulations around environmental impact.
2. Perhaps more importantly: lobbying. If Emirates is able to follow Delta and become an industry leader in terms of reduced emissions, they could push regulators to set higher standards and more strict laws/norms around emissions. Competitors who have not taken actions on his regard will necessarily be in disadvantage.
How else can Emirates help reduce carbon emissions while getting a return on its investment?
Very interesting article!
I totally agree that Hyundai is moving in the right direction by reducing its supply chain’s environmental impact. This represents such an imminent and material risk that the South Korean automaker should proactively try to minimize it. However, as doing so is expensive – as you point out, I also agree that the company should seek to capitalize all its good work. In addition to advertising all of its efforts (although being cautious as MS suggests in his/her comment), it occurs to me that they should explore another lever: lobbying. Although Hyundai might not be at the same level of some of its North American counterparts in terms of managing climate change risk, it seems that they are one of the most advanced players in their local industry, or even in Asia. Therefore, lobbying to push regulations up to their current standards might help them gain a relevant competitive edge. Many of the other Asian automakers, mainly those competing in the economy segment but that have managed to steal market share from Hyundai, could be caught off guard. If new regulations are pushed, suddenly, their costs would inevitably increase and they would have to either charge higher prices to customers or be willing to reduce sacrifice margins. This would put them in a very tough position as price tends to be their main differentiator and margins are thin already. Hyundai, on the other hand, would be prepared.
If such a strategy has been so successful in industries such as Mining, why not give it a try?
Very interesting article!
To your first point: I do think that it is possible to get to a run size of one at a reasonable cost, because I believe that the required technologies – such as 3D printing – are very close to reaching the level required to do so – both in terms of quality and cost. As a matter of fact, a few months ago, Adidas went from seeing 3D printing as a mere prototyping method, to using it as an actual mass production process. This winter, the company will start selling the Futurecraft 4D, the first shoe with a 3D printed sole [1]. It would not surprise me that within a couple of years, Adidas or one of its competitors is able to use this technology to produce an entire shoe, at a competitive cost. Once this happens, reaching a run size of one does not seem such a long shot anymore.
It is important to point out, however, that having a fully functional and economically viable technology in place is not enough. Reaching a run size of one implies many drastic changes in the company’s entire supply change and operating model. The company must, therefore, “…find people with the right skills, and manage the shift to a culture that’s willing to carry out the effort. In other words, they must transform their entire organization.” [2]
To your second point, I would just like to provide some food for thought: Would it make sense for Adidas to adopt or, at least, explore the approach towards Big Data that Gap is starting to implement? This year, Gap’s CEO – Art Peck – decided to eliminate his creative directors and put in place big data and advanced analytics tools to identify consumer trends and design new products accordingly [3].
[1] Yurieff, K. (2017). Adidas unveils new 3D printed shoe. CNN Tech. [online] Available at: http://money.cnn.com/2017/04/07/technology/adidas-3d-printed-shoe/index.html [Accessed 29 Nov. 2017].
[2] Schrau, S. and Berttram, P. (2017). Industry 4.0: How Digitization Makes the Supply Chain More Efficient, Agile, and Customer Focused. PwC.
[3] Israeli, Ayelet, and Avery. Predicting Consumer Tastes with Big Data at Gap. Harvard Business School Case 517-115, May 2017. (Revised July 2017).
Very relevant topic and discussion!
To your second question: I absolutely agree that DHL must have a solid strategy to defend itself from logistics tech start-ups. This is a real threat for DHL. There is, for instance, an HBS start-up called Veho that is doing exactly what DHL seeks to do through MyWay. They deliver packages through crowdsourced drivers and offer many of the services that you mention are being offered by Chinese players (e.g. real-time tracking of packages and direct communication with the person making a delivery). Veho has already started operations in Boston quite successfully. (See: http://veho-technologies.com/)
Having said that, I believe that, in addition to effectively leveraging its fleet size to outcompete potential entrants in terms of delivery promise (as suggested by ChS in her comment), DHL should consider two additional elements as part of its competitive strategy:
1. Invest more in R&D and/or design thinking: I disagree with your point that DHL should try to improve its existing customer service without major R&D investment. I actually believe they should go much further, proactively exploring cutting edge digital technologies, and implementing those that enable the company to either increase the efficiency of its supply chain or make DHL more “sticky” for clients.
2. Invest more in marketing: Although – as you point out – there is low brand loyalty and relatively high price sensitivity in this sector, there might be marketing initiatives that might make DHL more “sticky” for clients (e.g. loyalty programs, etc.). DHL should come up with such initiatives and implement them fast.
It would be very difficult for start-ups to replicate these two elements, as it would very hard for them to match DHL’s potential levels of investments in these matters. DHL is, after all, a 57 billion euro company.