1.

0 Introduction:

In a world of truly limited resources, a company that tries to compete in every market with no
specific direction will soon squander its resources and fall behind its competitors. Sustainable
Strategy’s central role is to provide the focus essential to successful organizations. In this
paper, we will discuss in detail about why do some firms succeed and why do others have
failed. To answer this, the paper proceeds as follows. At the beginning of this essay, we will
discuss why companies are successful by looking from five different fortune 500 companies.
After that, we will explore another five well-known multinational companies that have failed
or to some extent un-successful over the last few years.

2.0 Successful Organizations

2.1 Dell’s Success

Major reason for Dell’s high performance is the way it manages its supply chain to minimize
its cost structure, in particular the costs of holding inventory, yet with the ability to built a
computer to individual customer specification with in three days, (see fig-1 supply
management and fig-2 for the final product handles and channel customization).
Fig-1 Supply Chain Management
Eliminating Middle Man

Source: Yen, M (2003), ‘Customize GIS Education with SCM Model’ Viewed at 10/7/2006, Available at
http://gis.esri.com/library/userconf/proc03/p0253.pdf.

Fig-2 Dell’s Web Browser interface

Source: Kraemer, K.L, Dedrick, J and Yamashiro, S, (2000), ‘Re-ning and Extending the Business Model with Information
Technology: Dell Computer Corporation, Viewed at 12/7/06 http://www.indiana.edu/~tisj/readers/full-text/16-kraemer.pdf

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Such practice (see fig-3), eliminates inventories for both raw materials and finish goods. It
frees up capitals and improves products quality. It also resulted in greater customer
satisfaction. Furthermore, it allows Dell the flexibility to adapt new technologies (Yen 2003).
Fig-3 Refinement of the dell strategy model

Source: Kraemer, K.L, Dedrick, J and Yamashiro, S, (2000), ‘Re-ning and Extending the Business Model with Information
Technology: Dell Computer Corporation, Viewed at 12/7/06, http://www.indiana.edu/~tisj/readers/full-text/16.kraemer.pdf

Dell uses the internet to feed real-time information about order flow to its suppliers so they
have the minute information about demand trend, along with volume expectations for
upcoming months. Moreover, Dell suppliers use this information to adjust their own
production schedules, manufacturing just enough components and shipping it by most
appropriate so that they arrive just-in-time. Moreover, Dell’s use of the direct approach
reportedly provides it with nearly a 6% cost advantage compared to indirect sellers
(Kirkpatrick, 1997), Dell inventory turnover accounts for 55.5% compare to other rivalries
(see fig-4) (further, see Appendix-1 comparing Dell Vs Compaq).
Fig-4 Dell Inventory Turnover

Source: Kraemer, K.L, Dedrick, J and Yamashiro, S, (2000), ‘Re-ning and Extending the Business Model with Information
Technology: Dell Computer Corporation, Viewed at 12/7/06 http://www.indiana.edu/~tisj/readers/full-text/16-
kraemer.pdf

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Dell launches a price war strategy. Bypassing middlemen to deliver PCs cheaper than any of
its rivals, with a far-flung supply chain knitted together so tightly that it's like one electrical
wire, humming 24/7, (Business week, 2003). Dell emphasizes on more personalize marketing
strategy to penetrate market with its competitive pricing strategy also where convenience and
value to time is an industry benchmarking. Further, employees are motivated with two
reasons mainly, first, marketing department aren’t looking for hypothetical targets, largely
because customers place orders online, eventually Dell’s have less HR-issues, low turnover,
technology transfer to competitors through employees and other reason is that when customer
place an order it becomes almost zero human error when taking orders from customers online
than from telephonic conversation (effective delivery services).

2.2 Gillette’s turnaround.

Recent years Gillette’s manages to execute impressive turnaround. A central element of that
turnaround was the company’s disciplined planning to sustainable strategy, which has
established powerful new levels of accountability and awareness. Furthermore Company’s
new commitment to actionable strategy, “Total Brand Value” internally throughout the
company, and externally to Wall Street. It was a strategy designed to align Gillette’s future
with its recognized history as an innovator and value creator. Gillette was able to manage
information and communication among all upstream parties in its value chain.

Suppliers, distributors and retailers are all been efficiently and effectively connected through
highly digitized RFID (Radio Frequency Identification) technology (see fig-1 and fig-2
product with RFID technology). Moreover, managers are responsible for contributing to an
annual operating plan and a three-year strategic growth plan that sets performance
expectations.

Fig-1 Supply Chain Management with RFID Radio Frequency Identification technology
• Strategies for reducing safety stocks
• Reduce spoilage in the supply chain
• Methods for tagging and tracking metal parts
• Share supply chain data securely with partners
• Strategies for improving cold chain management with RFID sensors
• Reduce shrinkage from theft and administrative error

Source: Supply chain management session, (2006), ‘The world’s RFID Authority’, Viewed at 09-07-06
<http://www.rfidjournal.com/live2006/supply_chain_management.php>.

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 Fig-2 RFID Tag attach with Gillette product MACH 3

RFID Tag

Source: Supply chain management session, (2006), ‘The world’s RFID Authority’, Viewed at 09-07-06
http://www.rfidjournal.com/live2006/supply_chain_management.php.

Gillette quickly began moving in a new direction of the team members. Performance-based
compensation arrangements were introduced, rewarding results instead of effort.
Communication and collaboration became essential to groups striving to meet new
performance targets. “As a result, cross-functional teams and groups were established,
Managers discuss the objectives and targets of their own groups, which cascade down to their
staffs which also used in individual performance appraisals”. (High Performance Marketing,
2006)

Cost reduction strategy in every stage along the supply chain. With its low cost leadership

strategy through strong supplier and distribution network, a strong satellite system, advanced

electronic technology and warehousing, Wal-Mart is able to offer low prices to its customers,

thus, saving the customer’s money. And through this, Wal-Mart could build a strong

relationship with its customers based on trust and at the same time reduce its operation costs

by shortening the lead times (effective inventory management).

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2.3 Eastman Kodak secret to success

Kodak is not just selling their still image films, Kodak have quite number
of product lines and service to offer (Product diversification), such as
digital images, printer cartridges, paper kits and innovative big sign
boards, which Kodak sells globally. Further, Kodak’s quality goal and
overall objective is to achieve Total Customer Satisfaction. This is
accomplished by utilizing appropriate process improvement techniques
(e.g. Zero Defects, Supplier Certification, Lean, Six Sigma, etc.) in a
manner that delivers improved productivity and the optimal deployment
of resources.

Kodak achieves their objective through the Supplier Quality Process (SQP).
Which utilizes a number of different elements to improve, measure,
monitor. The flexible design of SQP allows it to be applied to the specifics
of each Kodak / Supplier relationship. The improvements gained should
benefit all suppliers’ customers and eliminate unnecessary costs.
Furthermore, each supplier is expected to measure their performance in a
way that is consistent with Kodak’s business needs, and they are
responsible for driving continuous improvement within their operations.
Effective quality improvement is hardly easy, but if SQP has been
deployed well, the following results should occur for both Kodak and
suppliers.
• Defect trends will decrease and overall performance improve
• Number of supplier “corrective action” requests will decrease
• Productivity/Cost of Quality (COQ) savings will result
• Number of certified suppliers will increase
Fig-1 Major Elements of the SQP Process

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 Source: Eastman Kodak, (2006), ‘Kodak Online: Revised’, Viewed at 12/7/2006, Available at
http://www.kodak.com/US/plugins/acrobat/en/corp/purchasing/revised_2006.pdf

As more people are worry about environmental conditions vis-à-vis, Kodak also show
concerns over environment, Kodak begins its mass advertisement in 2005 and manifests
their philosophy as environment friendly relating with ISO’s certification on their products,
which Kodak also sees their CSR (Corporate social responsibility) as environment friendly.
Kodak projected their societal marketing strategies, plays an important role towards their
products as safe to use.

Environmental delicacy and companys’ strategies towards it as waste management, to

becoming environmental friendly Kodak products are more appreciated among existing as
well as potential and target customers. Kodak Greenhouse Gas (GHG) emissions represent a
waste so Kodak have to take action to reduce GHG emissions, (see fig-2).

Fig-2 Kodak Safety Incident Rate

Source: Farris, D and Jim, C, (2006), ‘Good to Great: Why Some Companies Make
the leap and others don’t’, Library Journal, Retrieved from proQuest.

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2.4 Exxon Mobile- Another Successful Company.
Horizontal merger between Exxon and Mobil, result in 23% increased in market share,
according to Fortune 500, ExxonMobil, stands at No1 position in 2006, further mergers are
crucial components for the company’s survival and growth in the long term.

ExxonMobil adopted a balanced scorecard strategy. In general, however ExxonMobil

adopted the differentiation strategy with their operational efficiency. ExxonMobil sought to
attract customers that are willing to pay additional premiums for their products and at the
same time improving efficiency in the supply chain in order to reduce cost. Moreover,
ExxonMobil has focused on its strengths on its core business research and development to e-
business and venture capital activities.

ExxonMobil, venture to a complete new strategy, apart from their core business such as
gasoline related products. ExxonMobil encourages its customers to purchase goods from its
convenience stores apart from filling gasoline in the ExxonMobil gas station. Second, with
its superior buying experience, the company has also able to provide convenient and fast
service, hygiene restrooms and friendly employees to its customers. This exceptional service
has made the relationships with its customers to become more bonded than ever before.

ExxonMobil focuses on “operational efficiency, margin improvement initiatives, and prudent

capital management” (Raymond 2004). To achieve this, the company continues to advance
its technologies, introducing marketing innovations, expanding the business lines and
established markets in overseas, for example, for the refining process ExxonMobil has
continuously improve health and safety procedures to reduce accidents. This focus strategy
on controlling costs has helped the company to reduce costs, thus, becoming more efficient.
And finally fourth, the success of the company is also derived from the effort and
commitment of its employees. The ability and flexibility to continuously change in this
volatile industry is a competitive advantage over the other companies. (See fig-1,
ExxonMobil Market segmentation, on following page)

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 Fig-1 ExxonMobil Market Segmentation
Road Warriors -16%: Generally higher-income, middle-aged men who
drive 25,000 to 50,000 miles a year ... buy premium gasoline with a credit
card ... purchase sandwiches and drinks from the convenience store ... will
sometimes wash their cars at the carwash

True Blues -16%: Usually men and women with moderate to high
incomes who are loyal to a brand and sometimes to a particular station...
frequently buy premium gasoline and pay in cash

Generation F3- 27% : Fuel, Food and Fast: Upwardly mobile men
and women-half under 25 years of age- who are constantly on the go
... drive a lot and snack heavily from the convenience store

Home bodies-27%: Usually housewives who shuttle their

children around during the day and use whatever gasoline
station is based in town or along their route of travel

Price Shoppers-20%: Generally aren't loyal to either a

brand or a particular station, and rarely buy the premium
line ... frequently on tight budgets.

Source: Kaplan and Norton, The Strategy Focused Organization, page 33

ExxonMobil Strengths

ExxonMobil has delivered strong cash flows at the operating level, and has continued to do so. Operating profit
is approximately three times that required for operational activity, further, approximately 30-40% of net
earnings is normally paid out as dividend. Recently EMC heavy investment in recent years in enhancing the
efficiency means that capital expenditure is likely to be modest over the years ahead.

EMC employees are self motivated, because as company grows, workers see their carrier building and their
growth, moreover EMC is given employees intrinsic motivated in terms of dividends as well as extrinsic
motivations, in terms of recognition, such as certificates and recognition like Loyal Employee of the year
award.

ExxonMobil Weaknesses.

Since EMC is making huge investing in non-gasoline products, EMC has to keep company’s core competence
intact, Further, ecological disaster, which spill thousands or gallon in Artic ocean, because of this EMC image
hampered in the market place, to built the image, EMC should help clean the disasters areas, which still effected
by EMC oil spill, consider as most worst ecological disaster in century. Furthermore compensatory program
must be introduced and try to resolve this issue and get the certification of oil barges and buy more two hull oil
tankers rather than one hull oil tanker .
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2.5 Pfizer Success.
Pfizer offers an excellent example of how executives can recognize what their companies do
well and use that understanding to build superior strategies.

The key to success of Pfizer is their strong sales team and huge investment on R&D.
Moreover, Pfizer sales force uses leading edge information systems and technology to track
the perception histories of physicians and to respond with sales coverage that delivers the
biggest bang for the sales effort. The company’s information system also allows top
management to plan the expansion of the sales force, to track its performance, and to link that
performance with compensation. Further, this strong sales capability is a major asset of
Pfizer, won the company co-marketing rights for several major drugs produced by other
companies like Glaxo SmithKlein. Furthermore, an aggressive investment in R&D, Pfizer
hired many of industries most experienced and talented scientist by offering them attractive
compensation and un-beatable opportunity to conduct leading edge research.

‘Zoloft’, Pfizer’s most lucrative mental drug in history. According to analyst ‘Zoloft’,
accounted for 40% of the market share in antidepressant bazaar compare to 18% Eli Lilly’s
‘Prozac’. Despite the similarity between two products, Pfizer gained share from Eli Lilly in
the marketplace. The main reason for this success seems to have been Pfizer’s aggressive
marketing and sales strategy, which created an impression in the eyes of physicians that
Zoloft is a safer drug. Moreover Company creates a value chain through distribution strategy
to the customers because of easy availability of Zoloft. Moreover, Pfizer sales force also
logged more “face time” with psychiatrists than Eli Lilly.

The target market strategy was not just psychiatrists. Pfizer sales rep(s) also meet with
general physicians to recommend the basic primary care if the patient cites with nausea,
nervousness, anxiety, insomnia, and drowsiness. General Physicians are encouraged to
prescribe Zoloft as antidepressants drug.

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Pfizer’s weaknesses and threats cont............
Although it seems all promising to Pfizer. However. there is one important issue that Pfizer needs to
take into account, and this is the ability of Pfizer to translate its competencies on brick-and mortars to
an online environment. This is crucial because this B2C online business could be another strong
source of competitive advantage and a weapon to destroy its competitors through lowering the price
strategies.

From our observations, it is found that up till now Pfizer still has a poor website and online shoppers
perceive inconvenience to purchase products due to the complex Pfizer design. Pfizer has yet needs to
prove to public its ability to transfer its specialized knowledge on traditional physical world into
virtual world in order to sustain its already strong competitive edge.

The major threat to Pfizer is that companies who counterfeit the product like Zoloft and sell it, as if
their own products and taking profits. Therefore, Pfizer have to broaden their distribution channels
globally, in order to gain the market and awareness to the customers.

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3.0 Un-successful Organizations

3.1 Sun Microsystems

• Rank 211 loss $107.0 Million

The problems could be neatly summed up by saying, when the fish are jumping in the boat,
sun focused strategy on building the biggest boat. Sun ended up with $7.5 billion in cash,
(Corcoran, 2005). Pervasive quality problems and a real strategic disconnect with where the
market was quietly heading in part because Sun Microsystems were much more interested in
monetizing the high end customers than Sun is worrying about the adoption of the core
software assets on the low end.

Sun Microsystems focus strategy tends be product-oriented firm rather than customer-
oriented firm. The company has poor marketing practice and ignored the customer’s needs,
and also, the overall quality of its operations of marketing the products, and business
practices were relatively poor compared to the other firms such as Microsoft. Moreover the
biggest customers of Sun have today are the customers that subscribed to Sun’s core
hardware and software architectures a decade ago.

Sun's overall strategy suggests that company focuses on their UltraSparc stations (Hardware),
which eventually has no future. Company’s main revenue generator is there Java and J2ME
(Java to micro edition, embedded software in 3rd and 4th generation mobile systems), and
company is swapping and pouring the large sums into UltraSparc development in the past
and is being forced to do so even now, but UltraSparc has been clinically dead for a long time
now. It lags benchmarks and likely costs the company more than 50 percent of its R&D
budget taking from J2ME.

The prime reason that Sun Microsystems have not fully understood and embrace the TQM
concept, They were looking for quick fix, whereas implementing a quality improvement
program is a long-term commitment.

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 • Sun Microsystems Interoperability with x86 (Intel) Strategy.

Over the years Sun Microsystems has been extremely apprehensive of Linux operating
systems, and x86 based servers. Sun did recognize cheap x86 (Intel, compatible and non
Compatible hardware) as a threat long time ago, but the company didn't know what to do
about it. Sun was afraid of entering the x 86 markets as the margins in the x 86 markets were
not healthy, and such a move would have cannibalized its high-margin UltraSparc business.

After the dotcom bubble burst, Sun made a number of bizarre moves with regards to the x86
markets, but these days Sun looks firmly committed to a game plan. Solaris x86 which Sun
was once planning to discontinue has become central to the company's plans. Sun is cutting
back on UltraSparc development, and is readying itself to pursue life as a major x86 server
vendor.

According to a report by The Register, Sun will be rolling-out a number of in-house

engineered Opteron based servers (www.sun.com) and storage solutions in 2005. Another
report by The Register claims that, Sun is planning to sell 414,000 Opteron based servers in
2007, and the company is aiming for a double-digit share of the x86 server market.

Some of Sun's x86 gains will surely come at the expense of its high margin Sparc business so
the company has to compensate for that loss. But, Sun can't expect to gain market share
quickly if it doesn't price its x86 hardware competitively. Sun is faced with two conflicting
goals in the x86 market, but the company has figured out a way to extract decent margins
while pricing its x86 hardware competitively.

Sun also intends to combat the Linux advantage by assuring that the money it puts in Solaris
yields a competitive advantage in the form of clear technical superiority over the
competition. Sun will also attempt to tightly integrate software and hardware development in
order to quickly bring advanced functionality to the market. But, the real key to Sun's success
will be volumes.

If Sun manages to sell millions of servers, Sun Solaris operating system development costs
will get dispersed over the large number of units shipped and become irrelevant. Moreover,
Sun will be able to make money from add-on sales, and service/maintenance contracts. Also,
Solaris operating system will displace Linux operating system as the open source operating
system of choice, and this will allow Sun to steal IBM and HP's UNIX customers.

If Sun's Opteron sales takeoff, the company will become less reliant on UltraSparc revenue
and the incentive to keep wasting money on UltraSparc will diminish.

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Sun has placed a very bold bet on x86, and the company will emerge highly profitable and
competitive if it manages to execute its game plan effectively. The downside is that if the
game plan fails so will Sun. In that case, Sun will get swamped by hardware and software
development costs and quickly goes out of business.

3.2 Gateway falls short of their strategies.

• Rank 495 (2005), Exit from Fortune 500 (2006), loss $3,649.7 Millions

Gateway has attempted to revive itself by becoming a producer of a wide variety of

consumer electronics products branded with the group's name. But PCs still make up the bulk
of its sales

Compare Dell’s and Apple’s highly disciplined innovation efforts to Gateway’s shoot-
anything-that-moves approach. Gateway started as a process innovator, becoming, with Dell,
a pioneer of direct distribution, but it also tried to be a product differentiator, maintaining
relatively high-cost manufacturing plants, investing more than Dell in R&D, and launching
expensive brand-advertising campaigns. It innovated aggressively on the retailing end as
well, pioneering the exclusive stores that Apple would later (and more successfully) copy. It
even tried to be a service innovator, pursuing a highly publicized “beyond the box” strategy
involving the provision of various consulting services to small businesses. By trying to
innovate everywhere, Gateway failed to build a strong competitive advantage.

Company fail to leverage their brand name, they were investing every where, in electronic
industry and missed their core competencies as PC maker, eventually they looses ground in
market place, by clearly not understanding the behavior of consumer market. Moreover,
Gateway complex website for selling Personal Computers is hard to understand and
customizing it, company website is poorly segmented where advance and simple features are
on the same HTML (hyper text machine language). Further, their value added advantages are
next to zero, including customer support solution, in addition, Gateway’s, AMD (Athelon,
Intel rival) 1.8Ghz notebook designs are exact imitation of exact Compaq V1000 Presario.

When Gateway, was the market leader in the US, the company was not aggressively
emphasized on competing with the other Japanese firms where at that time, the Japanese
products were starting to enter the US market with low-priced and high-quality personal

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computers. The ignorance and the poor response of Gateway had cost the company to lose
huge percentage of its market share in the US and worldwide. Gateway was unable to lower
its costs and improve its brand image.

3.3 Alcatel failure

Alcatel market share deteriorated, and this is partially due to the slow movement made by the
company to shift from a wireless phone industry to digital technology. Other words from
AMPS (Advanced Mobile Phone System), D-Amps (Digital-Advance Mobile phone
systems) to GSM (Global system mobile system) technology.
These problems were aggravated when analyst found that there is a high level of competition
within the mobile industry. There is a risk of supplier threats, the industry was mature and
growth was slow where in many cases manufacturers are consolidating. And at the same
time, Motorola does not have the capitalization or expertise to compete effectively with its
fierce rivals such as Nokia and Sony Ericsson.

The biggest setback of Alcatel was a fail M&A between lucent technology and Alcatel.
Company managers was having a high expectations, experiencing Sony and Ericsson M&A.
Moreover, the problems with the proposed merger was the duplication in the two companies'
product lines and both companies had a lot of traditional products in their portfolio that
overlapped significantly, and it would be a logistical nightmare to decide which ones they
would retain. Moreover, The megamerger could also have raised some antitrust issues.
This fail M&A between Alcatel cost $550 million liqudation. (Fyffe, 2001).

On the other hand, Nokia which has a competitive advantage over Alcatel, through being a
low cost company. Nokia achieved this through utilizing a small number of platforms to
produce a wide range of phones (creating economies of scales) and managing its inventories
more efficiently than its rivals like Alcatel. Furthermore, Alcatel Corporate strategy was
hierarchal, which means more paper work, consuming time on, making manager frustrated
on work, Alcatel starting to loosing their best talent headcounts in late 90’s resulting failure

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in company, now Alcatel have to adapt their strategies to be more focused on 3G mobile and
4G mobile system, in today’s customer needs in order to find a niche of the company.

3.4 Dec (Digital Equipment Corp)

The root of competitive failures can be found in what he termed the Icarux paradox. (Miller,
1994). Miller identifies four major categories among the rising and falling companies, which
he label
• Craftsman
• Builders
• Pioneers
• Salesman

Dec original success was founded on the minicomputer, a cheaper, more flexible version of
its mainframe. Company improved on their original mini computers until they could not be
beat for quality.

Company rank was 27th in fortune 500 and remains in for decade, until they turned a blind
eye, DEC turned into an engineer monoculture, its engineers became idols, Components
specification and design standards were all that senior managers understood. Furthermore,
technological fine tuning became such an obsession that the needs of customers for smaller,
more economical, user friendly computers were ignored. DEC’s personal computers, for
example, bombed because they were out of touch with the needs of customers, and the
company failed to respond to the threat to its core market presented by the rise of computer
workstations and client-server architecture.

Texas instrument was with the same icarux paradox, masterful engineers and turns those into
rigidly controlled operations, Texas instrument’s technocratic cultures alienate customers
with perfect but irrelevant offerings. Eventually, the demand of Texas instruments product
was falling.

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Bill Gates once said that, its not necessary that Microsoft Xp could be the best product,
available but Microsoft business strategy was to put this Xp as user friendly and cost
leadership, operating system as house hold of the world.

3.5 Enron failure

Enron is a company that operates in the energy sector. Later it expanded its operations to Gas

Bank, electricity sector, water, metal, broadband and newsprint. In 2002, the company used

to be the number 5 of the top 500 fortunes companies but later on after facing an accounting

scandal, the company started to collapse. Enron has transformed its company from being an

old economy company focusing on hard assets to a new economy firm focusing on a strategy

of creating new markets HFV (Hypothetical Future value). Enron’s strategy to differentiate in

the market was through reducing physical assets, keeping key assets (peak demand

generators) and developing a core competence of risk arbitraging. With its core competency

on risk management, managing the risk of commodities through purchasing electricity at a

fixed price with suppliers and then sell electricity to customers with the new price, Enron was

able to increase its profits, some thing Enron called M2M (Marked to Market Accounting).

Now the question is how Enron has collapsed? The collapse of Enron was the largest

bankruptcy in the US history. The stock’s price dramatically collapsed from $80 per share to

30 cent per share. The collapse was mainly due to the management’s fraudulent practices.

Enron lied about its profits and when the deception was unfolded, investors and creditors pull

back their financial resources, which finally cause the company to face bankruptcy. Over

expansion and excessive borrowings have also

contributed to the company’s eventual demise. The

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finances were a disaster, this happens because of poor management and due to intentional

deception and fraud. Poor management, we referred this as a systemic corporate governance

failure.

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