The Strategic Limit of Technology
For a firm, product/ service differentiation is crucial in intensifying its revenue-generating capabilities. This is because differentiation strategy seeks to be different from the firm’s competitors on as many product/ service feature as possible (Porter 1980). In this manner, the focal point of the strategy, which is to provide goods/ services that are perceived by customers in different ways that are important to them, can be attained. However, commissioning external suppliers would result to competitors having the same inputs (from raw material suppliers), having the same machines (from production suppliers), having the same technology (from software-providers) and even having the same strategy (from consultants). If not identified by firms before formally running the value chain, customers might see personal value, however, not on a single firm, but on almost all the industry players. Thus, their bargaining power and choices increase to the detriment of differentiation strategy (Sloman & Sutcliffe 2001).
In the past, Bavarian Motor Works or more popularly known as BMW tried to emphasize cost leadership strategy rather than differentiation to reduce designing costs and increase productivity leading to higher revenues (Hitt, Hoskisson & Ireland 2003). This made the management buy a technology that transformed the formerly manual crash-testing into machine-operated procedure. Although efficiency is enhanced, the differentiation of such technique (a previously unique internal process of BMW) from the auto-industry was easily copied by its competitors through contracting with identical vendors which literally devalue BMW’s design. The error was later identified in undermining a complex intangible resource (the interactions among design engineers of BMW) in the purchase decision. The pursuit of automation, subsequently the purchase, omitted such occurrence.
Since a firm does not have limitless competencies and even some competitive advantages are short-lived (Bernard 1993), differentiation is a process that involves product customization that undermines economies of scale particularly in production. In doing so, it can be able to extend the life of its competitive advantage or survive competition from a niche of selected customers who value their produced. However, when revenues rather growth is emphasized, mass production will take-over the corporate approach which goes for efficiency with a large customer base waiting to buy a low-priced produced. Henry Ford manufacturing is an example (Mccarthy 2001). Since value-creation is non-existent within the approach, the firm would tend to externalize the value chain that can lead to more cost-efficiencies due to downsizing, down scoping and short-lived supplier contracts. Eventually, creating core competency, internal improvement and building a learning curve will be overtaken by outsourced entities (outsourced technology, purchased trademark/ patent, shared plant, etc.)
In the contrary, the example of BMW shows that the value that can derive from cost leadership strategy is minimal, non-growth, unshielded to leakage/ imitation and machine-oriented. Unfortunately, external purchase and outsourcing coincides with cost leadership. When a firm buys an organizational asset/ knowledge from a supplier, the change is very drastic. In addition, departmental adjustments (technical, relational and behavioral levels) would likely be minimal except possibly in the technical side. This is contrary to internalization (a firm internally produces the asset/ knowledge) where organizational members (possibly the entire stakeholders) are involved in the product/ process development that makes the change periodic and adjustments longer. In this view, outsourcing strategy makes a firm and its units an outsider of the new potential value-creating asset. In effect, the former differentiation of their produced from competition is unable to be implemented not only because competitors have resorted to the same supplier but also the new technology/ asset/ knowledge might not conform with the current corporate culture, structure, controls and strategy.
The Fall of the Pooled Global Resources
On the verge in the popularity of offshore labor outsourcing in the shoe industry, New Balance deviated from the beliefs of some biggest names that follow the trend like Nike and Reebok (Hitt, Hoskisson & Ireland 2003). This is despite low cost structures (cheap labor) and comparative advantages are present in foreign countries like China. However, resisting the cost-effective promises of outsourcing offshore made New Balance to retain its competitive advantage in design and quality control including location advantages to high-end markets. In doing so, while producing shoes is still cheaper for offshore outsourcing (.30 compared to New Balance United States operation of .00), New Balance domestic manufacturing is more efficient (24 minutes per shoe compared to three hours per shoe in offshore outsourcing). The firm succeeded as it focused in upgrading low-skill jobs in the line.
Again, it is obvious how sustainable and growing firms undermine revenues (through external purchase) in favor of retaining competitive advantage. In doing so, they maintain their independence as well as total control of their destiny. In an opposite view, revenue-maximizing but non-growth firms would not bother to scan its internal and external environment in favor of one-time resource acquisition. In addition, the outsourcing attitude would also separate them to the idea in investing in research and development. In effect, the rationale behind competitive advantage (hard to duplicate and costly to imitate) would be short-lived as a firm exposes it to competitors. The latter can simply buy the offshore product/ service or pirate the former suppliers into a closed deal. This is why New Balance came out to be more efficient and more in-control of quality because it internalized its competitive advantage and further improved its effectiveness.
Competitive advantage must be enhanced and developed internally in order for the firm to enjoy revenue-generation in a sustainable manner. BWM was able to implement differentiation strategy because it had a competitive advantage in communication among its design engineers. On the other hand, New Balance has competitive advantage in production efficiency and quality control that resulted to faster production and quality produced. However, when firms desire to hold an instant revenue-generation capability without undergoing expensive R&D, internal and external audit or leadership change due to risk of insolvency and plummeting market share, they opt to outsource to short cut the process and gain instantly (Takeishi 2001). The point is that sustainability is undermined in favor of opposing business or market demise. In the contrary, the business who implemented such tactic would confuse the solution to a problem (outsourcing technique) to a sustainable value-creating corporate strategy. In doing so, it thought it had already bring down its cards on the table but erred that it merely resolved a short-term issue. At this juncture, outsourcing/ purchasing externally can be said to be a short-term solution possibly to continue business or confuse competitors behind a real strategy but creating/ maintaining/ developing competitive advantage is for growth and long-term goals.
The Role of Ethics in Decision-Making
In definition, “ethics is a set of principles of right conduct. It is a moral philosophy that conforms to standards of what is right or just in behavior” (Questia Dictionary). The irony is that it has number of definitions but in sense, no theory or philosophy had really elaborate its meaning because it is basically based in norms, customs, values, culture and laws of a certain society. There can never be universality as countries and other ethnic groups have differences. Suffice to hear the word right and just and leave to the various societies, perhaps the majority, judgment of the succeeding individual actions, corporate strategies, government policies or international events.
In private corporations, decision-making plays a very important role in strategies especially its implementation. Company’s overall vision and mission is applied in most of its huge and crucial undertakings usually executed by the Chief Executive Officer (CEO) but lower-levels of management and their decision-making is the instrument used to spread and implement the goals of company. There actions tend to affect the decision of CEO and as a whole, the fate of the company.
The case of the historic fall of Enron is a relevant example which is written by Thomas, C. William in 2002. CEO K. Lay was impressed to Skilling that he gave the latter the position to run one of its divisions. No doubt Skilling is tough and innovative because of his major contribution to transform the company into one of America’s best performing corporations in history. But then, ethical standards seemed to slip in his consideration as he focused too much of growth and prosperity.
He instituted a harsh review committee for employees that made them taught that “performance measure was the amount of profits they could produce.” Since then, employee turnover rose as he (Skilling) hired the best employee in the business and replace the incapable to adopt and pass his policy.
This is started the “darker tone in the internal culture of the company.” Further, Fastow, the man who handled the finances and financial records of the company, also displayed injurious decisions to the company by not disclosing its real financial standing. In addition, it is also discovered that Anderson, both external and internal auditor, was closely linked with the firm’s “internal accountants and controllers as they were his former executives.”
These aspects of unethical practices of the top managers of Enron caused the eventual fall of the company. There is no question of there actions and decisions as being unethical because they constitute unfair treatment to employees who are not “money-based” but cannot be judged as underperforming, to the company who is voluntarily accept their decisions in the hope of achieving its goal and finally, the society because they created fraud and hid transparency.
Ethical practices of a person definitely influence his decision-making for the company. Since the shareholders and even the CEO cannot monitor certain actions of its operational managers (especially in big and multi-national corporations), the latter is given freedom of choice and decision. With this, decision-making must take into account common good and not individual interests. Decision making is ethical if it is rational and able to weigh the benefits and costs of a certain action not only in the context of a company but also its “well-being, justice and sustainability” (Kirkman, 2005) that will effect individuals, groups, government or even other nations It is an ethical decision if it quoted responsibility in it.
Technology and Stress
As defined by Peter Varhol (2000), “stress is the body’s natural reaction to events or activities that its subconscious find threatening or challenging.” In small doses, stress is beneficial as its helps a person to keep motivated to work on big responsibilities. But regular or chronic stress can bring negative effects especially in long-term work-related cases like difficulty in sleeping, stomach irritation, decrease interest in your work, and irritability toward others. (Varhol, 2000)
In this fast-phased environment we are living, companies are too busy with their daily works and undertakings. Probably, most of them, especially the ones who give less priority on employee motivation, found themselves confronted with uncommitted, hot-headed and insensitive employees. There is a specific case in United States wherein “work-related emotional disorders (like stress, etc.) are recognized in its 19 States and accounted for more than 15 percent of total workers’ compensation costs in California in 1980.” (as cited in Linsenmayer, 1985). Even though a country has its answers to work-related stress because of it has control of its law, budget, natural resources and the minds of its great leaders and CEOs, among others, there is one thing in this world that cannot be controlled— the uprising of machines also tagged as Technological Revolution.
Technology had greatly impacted the labor sector in several periods in history that can be related to its stress levels when it comes to work. Some people, like traditional typist, are anxious not by the technology (specifically computers) itself but the pressure of producing more (output) in less time (cited in Brosnan, 1998, p. 20). This “fear or anxiety of computers” (cited in Brosnan, 1998, p.12) or Technophobia added to those factors, if not rare, of making an employee stressful. The ignorance leading to anxiety of using the technology, especially the adults, seemed a threat to the efficiency of companies that places experienced people on the top of its organizational structure.
On the other hand, industrial robots and other computer controlled machine tools is a promising technology that can reduce workplace injuries and illnesses (Linsenmayer, 1985). This is true in manufacturing companies that handle different toxic substances or construction firms that are exposed to falling debris, shocks and elevation. Using this incentive, companies bring to employees their needed warmth and respect by promoting their welfare, especially the hazards of the occupation.
Technology applied in labor had threatened in many company cases lay-off and automation that adversely affected employment and social responsibility. Not to mention its work-related stress due to complexity of its function and operation that adult employees think that they have no enough time to study all over again and adopt the technological change. The younger generation can be the solution but there is a research that the “anxiety level of them to technology is increasing…” (cited in Brosnan, 1998, p.11).
Finally, we are caught between the good and bad effects of the things man’s curiosity had developed. As explained and presented, technology can cut stress or reinforce it. Countries, in general and companies in particular, cannot control programmers, inventors and scientists from creating breakthroughs. The later will not bother of employee’s difficulty of using their creations. But they certainly make solutions to corporate problems, effectiveness and efficiency. Happily, they continuously create “anti-venom for the venom” as a vicious cycle.
Bibliography
Book
Brosnan, M. (1998). Technophobia: The Psychological Impact of Information Technology. New York: Routledge.
Hitt, M, Hoskisson, R & Ireland 2003, Strategic Management: Competitiveness and Globalization, 5th Edition, South Western; Thomson Learning, Singapore.
Porter, M 1980, Competitive Strategy, Free Press, New York.
Sloman, J & Sutcliffe, M 2001, Economics for Business, 2nd edition, Prentice Hall.
Journal
Bernard, K 1993, ‘Business Marketing Relationships’, University of Strathclyde Graduate School of Business, vols. 1-2.
Kirkman, R. (2005). Gwinnett Opinions: Ethics also should be part of growth debate. The Atlanta Journal and Constitution.
Mccarthy, T 2001, ‘Henry Ford, Industrial Ecologist or Industrial Conservationist? Waste Reduction and Recycling at the Rouge’, Michigan Historical Review, vol. 27, no. 2. pp. 53+.
Linsenmayer, T. (1985). ILO examines impact of technology on worker safety and health. Monthly Labor Review.
Takeishi, A 2001, ‘Bridging inter- and intra-firm boundaries: Management of supplier involvement in automobile product development’, Strategic Management Journal, vol. 22, pp. 402-433.
Magazine
Thomas, W. (2002, April 1). The rise and fall of Enron; when a company looks too good to be true, it usually is. Journal of Accountancy.
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