This week has been one of the most stressful and confusing weeks for me so far. We have had two rollovers, but now we must really analyse as to whether our strategy we originally had should be continued or if we should change. From the reading Charting your Company¿s Future (2002), the idea that you should only try to be great at a few factors was compelling. I already knew that our firm should only focus on one or two factors like quality. As a team we all agreed that this would be beneficial, as it is difficult to be successful at being a low cost, quality firm and be in a large market. It is simply too difficult to begin with at the first rollover. After I read the reading, I realized that we had actually forgotten to keep our strategy of being focused on quality in mind after the second rollover. Instead we were concerned about the volume of sales other firms were making and trying to take their sales. According to our strategy we should not worry about the volume of sales, but on the gross margin of our revenue. Unfortunately we were focused on volume and as a result we would have fallen into the trap of following others.
Prior to the first real rollover this week, we decided upon our focused strategy and even decided upon key factors like gross margin to focus on and profit rather than volume to help align our decisions to our strategy. Our strategy is not about a value cost trade off, which is common in competitive markets like in red ocean strategies. Instead we want to make the competition irrelevant as seen in blue ocean strategies in the Blue Ocean Strategy reading (2004). This all seemed great, when we entered our decisions this week, until the rollover occurred. Oh no! Our SHV went down and I immediately looked at how all the other firms went. We were at the bottom in our world and I thought that our strategy was not working. It was not until I stopped looking at everyone else¿s and looked at our gross margin, efficiency and quality, that I realised that we had improved on all of these levels. When I delved deeper into the figures I actually uncovered that we did not have the lowest market capitalization and we had a high net profit. The only reason that we have a low shareholder value was because we increased debt, paid no dividends and kept equity the same, unlike many of the other firms. Instead we were producing a product that had high quality and merely used our funds more wisely to prepare our firm for producing quality goods for when our next product is launched. No, we actually did very well at fixing many capacity issues and are now ready to make our quality goods according to our planned strategy. Other firms have different strategies, so who cares what they are doing, as long as we are meeting our own goals and improving. I was very pleased that I actually looked beyond what other people were doing and did not get sucked into thinking that our strategy is not working. Instead we have a strategy that is different to others, but can still be successful as shown by our market capitalization and profit. I want to ensure that after a rollover I looked only at how our firm performed and measure the factors that we value in assessing how successful we are first. By doing this, I will prevent myself from trying that we should imitate other firms, consequently entering into a red ocean strategy.
Kim, W. C. & Mauborgne, R. (2002). Charting your company¿s future. Harvard Business Review, 80(6), 76---83
Kim, W. C. & Mauborgne, R. (2004). Blue ocean strategy. Harvard Business Review, 82(10), 75--84