Our second PBL session felt much better than the first one. We are starting to get familiar with the process and I am sure our group is on the right track. The second topic is actually somehow related to the first one since it is a lot about change and innovations, which is something we already had to focus on. The material we got describes the story of the Fujifilm company, which succeeded in the changing markets by using the existing technologies and diversifying their products.
We agreed that the main question related to the case is:
How does a company adapt to changing markets
The subquestions that we are supposed to solve, basically describe the process of this adaptation and they are:
a) Methods used to predict changing markets
When talking about predictions, we must separate two things: prediction of a whole economy and prediction of a specific market. The first one basically means following the economic cycle- if there is a crisis, consumers have lower buying power and don't want to buy for example luxury products. The second one is related to the future of specific products. For example according to many assumptions, in the future, packages will be delivered by drones-so there might possibly be less profit for delivery companies (such as DHL)
With predicting there are basically two problems. The first one is that we tend to only consider innovations as a driver of change, in fact there is much more. We should for example look into demographic statistics and changes in the population. Most commonly known trend is the aging population and generally the fact that right now we have in Europe many different generations and each of them grew up in completely different conditions.
A very good article briefly summarizing the aging population can be found on the Stratfor webpage, this idea is further developed in a book called The Consistent Consumer, where I read the chapter 3: Understanding the ages with the description of different generations and their specifics.
As an example of company taking advantage of the shift in population age, I have chosen the company BASF, a world-wide producer of chemical products. After noticing demographic change, BASF started to focus on products for old customers, creating skin care or hair products for mature skin. To attract young customer as well, they started to focus on sustainability of their products, which is becoming important for young people in the developed world.
Important point, which was highlighted in almost any article that I have read about this topic is that a prediction of the future development of markets is only possible with a certain amount of luck. Simply nobody can be 100% sure what will happen next month or year, we can't know who comes with which invention that might totally change the way we see today's products.
However, being ahead of our competitors is and will be the key to success.
b) Financial aspects behind changing markets
With the quick changing world companies often face the decision: do we stick with what we do and believe in our loyal customers? Do we improve our products and try to keep up with our competitors? Or do we completely renew our product portfolio?
The website Fast Company looks into the difficult part of innovations. It compares the process of innovating to waiting in a line just to find out that there is another line to wait in. The key skill according to the article is quick and strong decision making. A potentially successful company in today's world needs strong leaders, who are ready to make decision and take responsibility. Often in the middle of innovation process, the company has to go to a completely different direction because of the quick changes in the world.
The problem with today's world is that there doesn't necessarily have to be a linear connection between the time, money, research,... spend and the financial outcome. It may happen that the company invests a lot of time and money going the wrong direction and then these expenses have to be reflected in the price of final products, which then might discourage potential customers. Innovating is not something that has a clear start, outcome and process how to get from point A to B. There are many obstacles on the way a company has to get through.
In the Forbes' article 5 Reasons Big Companies Struggle With Innovation, there are the typical mistakes most companies do, believing it will ensure the company keeping up with the innovations. Often these seem to be logical steps, but in fact might lead to the opposite outcome. The article highlights the importance of the right people and gives an example the case of Apple and Steve Jobs and on the other hand Google, where the founders were kept in the company under a supervision of experienced leader of a big company.
c) Diversification on the changing market
Harvard Business Review claims that the decision whether to diversify or not is one of the most crucial decision a company has to make within its lifetime. According to this article a company should ask itself the following questions:
What can our company do better than any of its competitors in its current market?
What strategic assets do we need in order to succeed in the new market?
Can we catch up to or leapfrog competitors at their own game?
Will diversification break up strategic assets that need to be kept together?
Will we be simply a player in the new market or will we emerge a winner?
What can our company learn by diversifying, and are we sufficiently organized to learn it?
This analysis can make it much easier for decision makers to realize which direction to go. These questions cover the main problems: competition, necessary asset, general strategy or finding one's role on a new market. As an example of successful diversification, this article mentions Disney, whose main revenues now come from media networks (TV channels ABC and ESPN) and new genre of movies (the newest Star Wars). Other successful diversification is shown on the example of the Oetker Group. Most people associate Dr. Oetker with frozen pizza or pudding powder, when in fact the company (Oetker group) has in their portfolio beer, sparkling wine and even container ships.
In today's world, adapting to innovations is inevitable is a business wants to remain profitable. One of the possible ways is diversification, which can help a company remain or get to the top. We can see many examples of successful companies as well as business failure. It is a certain option but definitely it is not a rule each company should follow.
Sources
Beller, K. & Weiss, S. & Patler. L, 2005. The Consistent Consumer. Deaborn Trade Publishing. Chicago
Chemical Week. Consumers, Demographics Drive Market Changes. URL: https://ezproxy.haaga-helia.fi:3401/docview/1039136950/fulltext/6F7AAF46CC4947C9PQ/1?accountid=27436. Accessed: 9. September 2017.
Come To Know. How Much Does It Cost To Innovate? URL: http://www.cometoknow.com/how-much-does-it-cost-to-innovate. Accessed: 11. September 2017.
FastCompany. Inovation Isn't About New Products, It's About Changing Behavior. URL: https://www.fastcompany.com/1844177/innovation-isnt-about-new-products-its-about-changing-behavior. Accessed: 11. September 2017.
Forbes. The 5 Reasons Big Companies Struggle With Innovations. URL: https://www.forbes.com/sites/georgedeeb/2014/01/08/the-five-reasons-big-companies-struggle-with-innovation/#6086ca222958. Accessed: 11. September 2017.
Harvard Business Review. To Diversify or Not To Diversify. URL: https://hbr.org/1997/11/to-diversify-or-not-to-diversify. Accessed: 11. September 2017.
Stratfor Worldview. Europa's Shrinking, Aging Population. URL: https://worldview.stratfor.com/article/europes-shrinking-aging-population. Accessed: 11. September 2017.
The Motley Fool. Walt Disney Co.'s Biggest Strength: Diversification. URL: https://www.fool.com/investing/general/2015/07/31/disneys-biggest-strength-diversification.aspx. Accessed: 11. September 2017.
We agreed that the main question related to the case is:
How does a company adapt to changing markets
The subquestions that we are supposed to solve, basically describe the process of this adaptation and they are:
- What methods does a company use to predict changing markets?
- Financial aspects behind changing markets.
- Diversification of changing markets.
a) Methods used to predict changing markets
When talking about predictions, we must separate two things: prediction of a whole economy and prediction of a specific market. The first one basically means following the economic cycle- if there is a crisis, consumers have lower buying power and don't want to buy for example luxury products. The second one is related to the future of specific products. For example according to many assumptions, in the future, packages will be delivered by drones-so there might possibly be less profit for delivery companies (such as DHL)
With predicting there are basically two problems. The first one is that we tend to only consider innovations as a driver of change, in fact there is much more. We should for example look into demographic statistics and changes in the population. Most commonly known trend is the aging population and generally the fact that right now we have in Europe many different generations and each of them grew up in completely different conditions.
A very good article briefly summarizing the aging population can be found on the Stratfor webpage, this idea is further developed in a book called The Consistent Consumer, where I read the chapter 3: Understanding the ages with the description of different generations and their specifics.
As an example of company taking advantage of the shift in population age, I have chosen the company BASF, a world-wide producer of chemical products. After noticing demographic change, BASF started to focus on products for old customers, creating skin care or hair products for mature skin. To attract young customer as well, they started to focus on sustainability of their products, which is becoming important for young people in the developed world.
Important point, which was highlighted in almost any article that I have read about this topic is that a prediction of the future development of markets is only possible with a certain amount of luck. Simply nobody can be 100% sure what will happen next month or year, we can't know who comes with which invention that might totally change the way we see today's products.
However, being ahead of our competitors is and will be the key to success.
b) Financial aspects behind changing markets
With the quick changing world companies often face the decision: do we stick with what we do and believe in our loyal customers? Do we improve our products and try to keep up with our competitors? Or do we completely renew our product portfolio?
The website Fast Company looks into the difficult part of innovations. It compares the process of innovating to waiting in a line just to find out that there is another line to wait in. The key skill according to the article is quick and strong decision making. A potentially successful company in today's world needs strong leaders, who are ready to make decision and take responsibility. Often in the middle of innovation process, the company has to go to a completely different direction because of the quick changes in the world.
The problem with today's world is that there doesn't necessarily have to be a linear connection between the time, money, research,... spend and the financial outcome. It may happen that the company invests a lot of time and money going the wrong direction and then these expenses have to be reflected in the price of final products, which then might discourage potential customers. Innovating is not something that has a clear start, outcome and process how to get from point A to B. There are many obstacles on the way a company has to get through.
In the Forbes' article 5 Reasons Big Companies Struggle With Innovation, there are the typical mistakes most companies do, believing it will ensure the company keeping up with the innovations. Often these seem to be logical steps, but in fact might lead to the opposite outcome. The article highlights the importance of the right people and gives an example the case of Apple and Steve Jobs and on the other hand Google, where the founders were kept in the company under a supervision of experienced leader of a big company.
c) Diversification on the changing market
Harvard Business Review claims that the decision whether to diversify or not is one of the most crucial decision a company has to make within its lifetime. According to this article a company should ask itself the following questions:
What can our company do better than any of its competitors in its current market?
What strategic assets do we need in order to succeed in the new market?
Can we catch up to or leapfrog competitors at their own game?
Will diversification break up strategic assets that need to be kept together?
Will we be simply a player in the new market or will we emerge a winner?
What can our company learn by diversifying, and are we sufficiently organized to learn it?
This analysis can make it much easier for decision makers to realize which direction to go. These questions cover the main problems: competition, necessary asset, general strategy or finding one's role on a new market. As an example of successful diversification, this article mentions Disney, whose main revenues now come from media networks (TV channels ABC and ESPN) and new genre of movies (the newest Star Wars). Other successful diversification is shown on the example of the Oetker Group. Most people associate Dr. Oetker with frozen pizza or pudding powder, when in fact the company (Oetker group) has in their portfolio beer, sparkling wine and even container ships.
In today's world, adapting to innovations is inevitable is a business wants to remain profitable. One of the possible ways is diversification, which can help a company remain or get to the top. We can see many examples of successful companies as well as business failure. It is a certain option but definitely it is not a rule each company should follow.
Sources
Beller, K. & Weiss, S. & Patler. L, 2005. The Consistent Consumer. Deaborn Trade Publishing. Chicago
Chemical Week. Consumers, Demographics Drive Market Changes. URL: https://ezproxy.haaga-helia.fi:3401/docview/1039136950/fulltext/6F7AAF46CC4947C9PQ/1?accountid=27436. Accessed: 9. September 2017.
Come To Know. How Much Does It Cost To Innovate? URL: http://www.cometoknow.com/how-much-does-it-cost-to-innovate. Accessed: 11. September 2017.
FastCompany. Inovation Isn't About New Products, It's About Changing Behavior. URL: https://www.fastcompany.com/1844177/innovation-isnt-about-new-products-its-about-changing-behavior. Accessed: 11. September 2017.
Forbes. The 5 Reasons Big Companies Struggle With Innovations. URL: https://www.forbes.com/sites/georgedeeb/2014/01/08/the-five-reasons-big-companies-struggle-with-innovation/#6086ca222958. Accessed: 11. September 2017.
Harvard Business Review. To Diversify or Not To Diversify. URL: https://hbr.org/1997/11/to-diversify-or-not-to-diversify. Accessed: 11. September 2017.
Oetker-Gruppe. Business Divisions. URL: http://www.oetker-group.com/en/business-divisions/business-divisions.html. Accessed: 11. September 2017.
Stratfor Worldview. Europa's Shrinking, Aging Population. URL: https://worldview.stratfor.com/article/europes-shrinking-aging-population. Accessed: 11. September 2017.
The Motley Fool. Walt Disney Co.'s Biggest Strength: Diversification. URL: https://www.fool.com/investing/general/2015/07/31/disneys-biggest-strength-diversification.aspx. Accessed: 11. September 2017.
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