Early the products functionalities do not meet key customers yet. As a result, companies have to compete on product performance. Hence they must always challenge new technological boundaries, such as developing and combining product components more efficiently, using interdependent, proprietary product architectures. Companies need to be vertically integrated to bring the value chain under one roof, enabling substantial improvements. Later, when the technologies improve and customers’ needs are met, companies have to compete on the basis of convenience, customization, prices and quality – the concept of disruptive technologies. (74-75)
Going to pieces
At this stage vertical integration becomes a competitive disadvantage in terms of speed, flexibility and price, and the industry tends to disintegrate as a consequence (Clayton M. Christensen, 2001, p.76). Different links in the value chain becomes modular, and the chain going into pieces.
It is all about the interfaces between stages in the value chain, such as the interfaces between components and subsystems (Clayton M. Christensen,2001, p.77). Further the most profitable point shifts from end-use products to components and subsystems. These have still technologically interdependent architectures. Instead of redesign everything, they can now mix and match the best components from different suppliers to meet customers’ needs. This will lead to creating interdependent links between components and subsystems.
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Where the money goes
In the article the authors suggest that “the bedrock principle is this: Those who control the interdependent links in a value chain capture the most profit” (Clayton M. Christensen, 2001, p.77). This means that the makers of the proprietary products should be aimed at the end users. Further the products become standardized, will the profits shift to components makers, and then even additional back in the value chain as components become standardized.
Where companies go wrong
When a company starts to fragment, a very predictable thing happens to companies that design and assemble modular product. They get pressured to improve their return on assets from investors (Clayton M.Christensen, 2001, p.80). This is difficult since they can’t differentiate their product or make them at lower cost than competitors. As a result, they cannot improve the numerator of their ROA ratio. They try to sell off asset-intensive units that design and manufactures to companies that are more progressively more interdependent, and it is these companies that improves their ROA.
To sum up this article the important thing is to become consummately fast, flexible and convenient. Therefore it is important to know what to outsource and what to hold on to.
What the key points mean to a manager in terms of how they would do their job
The key points are giving the manager a model how to create a perfect strategy to skate to where the money will be in the future. They always have to think how far their product has come to meet the customers need, when to outsource, look at the pattern of disruptive technologies. They have to be aware of that in the first stage when they are competing on basis of performance the company should be a vertical integrated company. When the technological process overshoots mainstream customer can make use of, they have to start thinking different. They have to fragments the value chain and start competing on the basis on speed, flexibility and price. This means they have to start disintegrate the whole company. Probably the most important thing a manager has to remember is to control the interdependent links in the value chain. That is the place where they will increase market share.
Meeting the challenge of disruptive change
Overdorf, C. M. C. a. M., 2000. Meeting the Challenge of Disruptive Change. Harward business review 78, no.2, March-april, pp. 66-76.
Summary of article number 1
This article gives managers a strategy to help them to understand what their organizations are capable of accomplishing. The firm must change it organizational structure to react to disruptive technologies and to increase their profit. If the firm rushes to adapt they may ruin its core competencies. Therefore is this important to avoid. Managers should clarify what their organization can and cannot do, before taking a drastic change. Hence it follows that the manager should consider their companies’ resources, processes, and value framework (Overdorf, 2000). If you are responding to disruptive change could it also become a change in these aspects, then the manager should consider three options.
Internally developing new capabilities and strengths.
Spin off an organization that has the resources needed to build a strong position in the new market.
Acquire another company that has the requisite capabilities.
What the main points mean to a manager in terms of how they would do their job
The main points are for the manager a framework to how he/she should handle disruptive change and the change in market. When there is a disruptive change is it important to handle correct since this is essential for increasing profit. It is important that the manager do not rush into anything, but carefully takes everything into account. The manager should understand what their company is capable of accomplishing and to understand this they have to consider three aspects of their companies’ resources, processes and value framework. The article provide three strategic opportunities if they have to change in these aspects. As a result, the manager got three options to what he/she should do to respond on disruptive change.
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How this article is related to the topic and set article
This article considers strategic opportunities for how to handle the disruptive change in the market. The article gives managers a framework that tells what to do and what to avoid, when their goal is to increase profit as much as possible. This is what the core essence is in “Skate to where the money will be”.
Strategic Res true turing and Ou tsourcing: The Effect of Mergers and Acquisitions
and LBOs on Building Firm Skills and Capabilities
Hitt, D. L. a. M. A., 1995. Strategic Restructuring and Outsourcing: The Effect of Mergers and Acquisitions and LBOs on Building Firm Skills and Capabilities. Journal of Management Vol. 21, No. 5, October, pp. 835-859
Summary of article number 2
The core idea behind this article is the framework that looks on the relationship between corporate restructuring and outsourcing of key value-adding activities to external suppliers and partners. The restructuring process is divided into series of complex changes within the firm that make outsourcing an attractive alternative to internal investments in the development of new skills and capabilities. Essential thing to create competitive advantage in a company is always create new skills and capabilities. This may happen by outsourcing. Further in the complex change there are levels of merger and acquisition activity, and also leveraged buy outs. These are expected to produce diminished resource base for organizational learning and technology development. Companies need to be aware that they do not have to be addicted on outsourcing, because it may “lock out” the firm from participating in future technologies and new industries. If there is a restructuring change in the firm, there is also three pronounced managerial characteristics that also must change. This is:
Change of the nature of the top management team
They have to use more financial controls to manage the firm
Tendency for use of alliances or other supply arrangement to share the operational risks of competing within a particular business.(Hitt, 1995, p.844)
What the main points mean to a manager in terms of how they would do their job
To keep pace with the constant change in the market can restructuring and outsourcing help a manager to go where the profit is. The article gives a framework for the manager for how he/she should restructuring and where outsourcing is an attractive alternative investment idea. On the other hand must the manager be aware of too much outsourcing will not gain the firm in the future. Restructuring and outsourcing helps the manager to create a competitive advantage in a company. The main points say also what the manager should do after a restructuring change. Everything will help the manager to do a better job and differentiate its company.
How this article is related to the topic and the set article.
This article also considers strategic opportunities. It is related to the set article because it discuss about what to outsource to become more competitive as a company. Also it gives a framework that helps the manager to restructuring its company so it can handle the change in the market. At last the article says it is important to create competitive advantage to succeed in creating new skills and capabilities.
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