Micro Business Strategy and Groups (Firms) Messo: Clusters & Innovations

(Supporting Industries)Demand

Generals Focus vs Diversify – western vs Asian > ? unrelated diversify > To access intermediate pdts / reduce risk of bankruptcy (shareholders and employees)/ political connection / lack of proprietary technology /increase in competition/ fill in institutional voids > ? diff > diff stage of diversity and ties > Grps > create barriers to MNC, dev own internal mkt for $$, talents and goods(make own pdts), less transparency > coz fund is route around(-) Firm’s Org > Centralize (Samsung) (+) share knowledge & ↑ capabilities (-) info overspill / Decentralize(Sony) As firm move up tech chainUnrelated (low P)> related > focus (High P) JV to AcquisitionFamily control 2 profession manager

Level of Coordination dy/dx success Clusters ↑ productivity and efficiency

• Efficient access • Rapid diffusion of best practices • Performance comparisons

Stimulates and enable innovation • Innovation opportunities • Knowledge creation & sharing • Experimentation

Facilitates commercialization • new biz & new lines of established biz

3 processes: local dynamism, attractiveness & link to world mkt Y clusters decline: rising cost, discontinued technology, buyers’ needs changes, lack of rivalry & regulations Diamond framework

Different type of innovation• Radical Innovation > completely new > NASA>need scientist• Incremental innovation > small improvement > need engineers• Process innovations > JIT

Readings Focus strategies wrong? -Information problems, misguided regulations & poor judicial system (emerging mkts) Institutional voids are Capital - Lack VC / $$ constrainLabor - unskilledProduct – little info & limited liability lawGovernment Regulation - ↑ Contract enforcement - WeakRoles of Grps: > cannot filled all voids stillTale – Grps help countries to catch up by RE, FDI and licensing but as they grow > Hard to RE and No one provide2 Faces – Grps helps to innovate > ↑ productive > ME F > ↑Capital, political ties & brand attract foreign firms, Share knowledge How to rebound(Japan) > performance related scheme to get new ideas and compete by dy/dx in pdt and quality (Deming) > build strong clusters (same language) & they love to make > Ipod inside all japan items

Tiger and the tech:Advantages1.Affordable labor2.Center for IT components3.CA in applied technology Obstacles1) Environment• Lack of home base market• Lack of experience and frame of mind to compete with technology2) Lack of Innovative Workforce• Education• Culture that the government promote3) Shortage of Venture Capitalist• Poor financial backing• Strong Gov. Restriction

Location matters: a ext factor. (See pic)1.Built talent and $$2.IPR & tax incentive for Inno.3.Diamond – creates need and opportunity for Inno. ↑ competitive pressure4.UNI system 2 link

Japan BIz grps:Keiretsu - Mitsubishi > too much overlapping bizNow Sony > shift towards focus + foreign managers> energy biz (toyota)

Biz culture > managers lack of empowermentlong working hours > unproductiveSeniority pay systemLess woman on top management > men stubborn more risky

Build strong clusters:strong engineersrelationship suppliers↑ buyersKnowledge sharing

strong areas In clean Tech & Silver Tech

Citizen> started with copy swiss tech & help with swiss tech> applied own knowledge > excel and dy/dx to win

Korea Chaebols: Samsung, Daewoo, Hyundai > political & financial connections > Koreans are proud of their success, global recognition but dislike e huge amt of power they weld > gradual restructuring (foreign owned, corporate governance) after 1997 crisis

Highly skilled, tech savvy workforceRigid education system>rote learning over creative approach>harder to shift 2wards new form of knowledge-based growth

But Biz group limit new firm growth

tend to support local brands

Taiwan •Hsin-Chu Science-based Industrial Park (HSIP)•One of the world’s main centers of IC manufacture, computers, and peripherals•Major Taiwan companies such as Acer, Mitac International, and UMAX Data Systems are located here••With HSIP as an industrial cluster, intense competition among these firms accounts for rising productivity and innovation.•Supported by government who do not restrain their freedom in doing business

•Dense business network allows a company to source easily for new components from local subcontractors•Firm can specialize and innovate more rapidly•SMEs in Taiwan make up for the marketing inefficiencies of each undersized member

•Local (B2B mainly), Global (B2B & B2C) demand•HSIP -Attracts MNC and thus needs to be innovative to cater to the needs of global audiences.•75% of Taiwanese electronic productions are sold under someone else’s brand name.•US is the 2nd largest importer of Taiwan’s good. A country that is at the forefront of technology.

Taiwan & China > need each other to grow > a war both suffer

Taiwan & Japan & korea > need to move up tech chain

China Old > bad coz dev in SOE > SOE not performing & band having huge (NPL) - no transpancy & corruptions among old employeesto ^ replace ironbowl, privatization Growing SME but no innovations + firm engage in copy & fakes > SME short of capital > no microfinancecoz prevented by gov (getting too big no good) > so get fund from overseas by selling stake(JV)

Improve private sector:• guan xi 2 real biz

culture > bnw• legal reform• accounting reform• IPr

India Tata > Tata industries > Vc funds > funds from other grp members > later sold to Jardine > Tata get capital & Jardine get exposureTata > selective hiring> provide training> grp them as corhort > as they spread > stay in touch and info flow

WorkforceIIT graduates (intellectual capital) plays an impt role in the economy > CEO SunMicrosystem > confidence & entrepreneurship > brain drain Workers (construction) contribute e most % to GDP Major constraint: poor infrastructure > power shortage, telecommunication

Bangalore is known as the Silicon Valley of India > India's leading IT employer & exporter

SEA: Malaysia

why no grow so well > Gov protect malay > grew lazy > eg easy to get into uni and special privileges (bumiputras)

Indonesia Lippo Group > able to lobby Gov > influence gov

Thailand Product Mkt• Potential in petrol

chemical and car parts• Net exporter of both pdts

Advantages• > free mkt (asean)

than China• China will need to

import from Thai too if it grow big

• tax incentives