Why has strategic management become so important to today’s corporations and how does it typically evolve in a corporation?
Assignement Questions
Section I. Discussion Questions (15 marks)
Discuss briefly the following questions (maximum 200 words for each question). (3 marks each question)
1. Why has strategic management become so important to today’s corporations and how does it typically evolve in a corporation?
2. Discuss how a development in a corporation’s natural and societal environments can affect the corporation through its task environment.
3. How can value-chain analysis help identify a company’s strengths and weaknesses?
4. What are the advantages and disadvantages of being a first mover in an industry? Give some examples of first-mover and late-mover firms. Were they successful?
5. Why are many strategic alliances temporary?
Notes:
– Using the terminology developed in the course of strategic management will be highly valued.
– Your answers MUST include at least 7 outside references (other than the slides and textbook) using a proper referencing style (APA).
– Using references from SDL will be highly valued.
– You answers should not exceed 1500 words.
Section II: Case study(15 marks)
Read carefully case No 8 from your textbook (entitled ‘iRobot: Finding the Right Market Mix?) and answerbriefly the following questions: (1.5 marks for each question)
1. Draw the SWOT matrix of the iRobot company.
2. What is the competitive strategy used by iRobot company?
3. Use the five forces of the M. Porter matrix to describe the robot-based product industry.
4. Describe the different functional strategies of the iRobot company.
5. Describe the relationship of iRobot with its primary stakeholders.
6. Describe the core competency and the outsourcing strategy of iRobot
7. What kind of strategic alliance is used by iRobot? Why does iRobot choose it?
8. What are the main challenges that iRobot faces?
9. Assess the competitive advantage of iRobot in its market.
10. Recommend solutions for iRobot to improve its competitive advantage.
Good Luck
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Answers
Section 1
1.
Section 2
1.
Requirements: 1200-1600
IROBOTCORPORATION,FOUNDEDIN1990INDELAWARE, designed and built a vast array ofbehavior-based robots for home, military, and industrial uses. iRobot was among the firstcompanies to introduce robotic technology into the consumer market. Home care robotswere iRobot’s most successful products, with over 5 million units sold worldwide andaccounting for over half of its total annual revenue. iRobot had a long-standing contrac-tual relationship with the U.S. government to produce robots for military defense.iRobot was fully gauged toward first mover radical innovation with an extensive R&Dbudget. Made up of over 500 of the most distinguished robotics professionals in theworld, it aimed at leading the robotics industry. By forming alliances with companieslike Boeing and Advanced Scientific Concepts, it is able to develop and improve uponproducts that it otherwise is incapable of obtaining using only its own technology. The company also has a healthy financial position with an excellent cash and long-termdebt rate.Despite these competencies, iRobot still had serious concerns. Although the roboticsindustry was not highly competitive, iRobot needed more competition to help build up the totalscale and visibility of the fledgling industry it had pioneered. Home care robots, its biggestrevenue source, was a luxury supplemental good. Times of economic recession could prove to8-1CASE8iRobot: Finding the Right Market Mix?Alan N. HoffmanThis case was prepared by Professor Alan N. Hoffman, Bentley University and Erasmus University. Copyright ©2010 byAlan N. Hoffman. The copyright holder is solely responsible for case content. Reprint permission is solely granted to thepublisher, Prentice Hall, for Strategic Management and Business Policy, 13thEdition (and the international and electronicversions of this book) by the copyright holder, Alan N. Hoffman. Any other publication of the case (translation, any formof electronics or other media) or sale (any form of partnership) to another publisher will be in violation of copyright law,unless Alan N. Hoffman has granted an additional written permission. Reprinted by permission. The author would like tothank MBAstudents Jeremy Elias, Ryan Herrick, Steven Iem, Jaspreet Khambay, and Marina Smirnova at BentleyUniversity for their research. RSM Case Development Centre prepared this case to provide material for class discussionrather than to illustrate either effective or ineffective handling of a management situation. Copyright ©2010, RSM CaseDevelopment Centre, Erasmus University. No part of this publication may be copied, stored, transmitted, reproduced ordistributed in any form or medium whatsoever without the permission of the copyright owner, Alan N. Hoffman.
be a problem for the sales of iRobot’s consumer goods given that discretionary budgets arelikely decreased. In addition, iRobot had over 70 patents, many of which will begin to expirein 2019. In a rapidly advancing industry, technology can also become obsolete quickly andrender patents useless. Additionally, iRobot was highly dependent on several third-party sup-pliers to manufacture its consumer products. It also depends on the U.S. government for thesales of its military products. Any volatility in its supply chain or government fiscal policy hasgrave consequences for the company’s future.8-2SECTION DIndustry One—Information TechnologyCompany HistoryIn the late 1980s, the coolest robots in the world were being developed at the MITArtificialIntelligence Lab. These robots, modeled on insects, captured the imagination of researchers,explorers, military, and dreamers alike. iRobot cofounders, MITprofessor Rodney Brooksand graduates Colin Angle and Helen Greiner, saw this technology as the basis for a wholenew class of robots that could make people’s lives easier and more fun. So, in 1990, the threedecided to work full time on fulfilling this promise and incorporated iRobot in Delaware.1After leaving the MITextraterrestrial labs, the three entrepreneurs focused their businesson extraterrestrial exploration, introducing the Genghis for robotic researchers in 1990. In 1998,the founders shifted their focus onto military tactile robots and consumer robots after landing apivotal contract with the U.S. Defense Advanced Research Project Agency (DARPA). This con-tract provided the funding for necessary R&D to develop new technologies. As a direct result,iRobot delivered the PacBot to the government in 2001 to assist in the search at the NYC WorldTrade Center. In 2010, thousands of PacBots were serving the country on the war front.In 2002, iRobot began selling its first practical and affordable home robot, the Roombavacuuming robot. With millions of Roomba vacuums sold, iRobot has continued to developand unveil new consumer robots such as a robotic gutter cleaner and pool vacuum. In 2005,iRobot raised US$120 million in its IPO and began trading on the NASDAQ stock exchange.iRobot’s Products and DistributioniRobot designed and built robots for consumer, government, and industrial use, as shown inExhibit 1.On the consumer robots front, the company offered floor cleaning robots, poolcleaning robots, gutter cleaning robots, and programmable robots. iRobot sold its homerobots through a network of over 30 national retailers. Internationally, iRobot relies on anetwork of in-country distributors to sell these products to retail stores in their respectivecountries. iRobot also sold its products through its own online store and other online storeslike Amazon and Wal-Mart.Home robots have been the company’s most successful products with over 5 million unitssold worldwide. Sales of home robots accounted for 55.5% and 56.4% of iRobot’s totalrevenue in 2009 and 2008, respectively.2Currently, iRobot is exploring new technologicalopportunities, including those that can automatically clean windows, showers, and toilets. Thepotential to fully clean one’s house using automated robots is appealing to customers.On the government and industrial robotics front, iRobot offered both ground andmaritime unmanned vehicles, selling the vehicles directly to end-users or through primecontractors and distributors.3Its government customers included the U.S. Army, U.S. MarineCorp, U.S. Army and Marine Corps Robotic Systems Joint Program office, U.S. NavyEOD Technical Division, U.S. Air Force, and Domestic Police and First Responders. For2009 and 2008, 36.9% and 40.3% (respectively) of iRobot total revenue came from theU.S. government.
CASE 8iRobot: Finding the Right Market Mix?8-3ConsumerProducts:Roombafloor vacuuming robot: vacuum floors and rugs at the press of a button(US$129–US$549).Scoobafloor washing robot: preps, washes, scrubs, and dries hard floor surfaces(US$299–US$499).Verropool cleaning robot: cleans a standard size pool in about an hour while removing debrisas small as two microns from the pool floor, walls, and stairs (US$399–US$999).Loojgutter cleaning robot: simplifies the difficult and dangerous job of gutter cleaning(US$69–US$129).Createprogrammable robot: a fully assembled programmable robot based on the Roombatechnology that is compatible with Roomba’s rechargeable batteries, remote control, andother accessories (US$129–US$299).Government and Industrial Products:iRobot 510 PackBot (advanced EOD configuration)iRobot 510 PackBot (FasTac configuration) iRobot 510 PackBot (First responder configuration)iRobot 510 PackBot (Engineer configuration)iRobot 210 Negotiator310 SUGViRobot 1Ka SeaglideriRobot 710 Warrior Daredevil ProjectLANdroids ProjectEXHIBIT1iRobot CompleteProduct ListingiRobot’s distribution networks were carefully monitored. “We closely manage hand-pickeddistributors, so that our involvement on the ground is critical as far as how to sell the product, howto help them understand the product. But their local knowledge has proven to be equally critical infinding the right sorts of distribution and handling the customers,” iRobot CEO, Colin Angle, said.4CompetitionThe robot-based products market was an emerging market with high entry barriers as it re-quired new entrants to have access to advanced technology and large amounts of capital to in-vest in R&D. As a result, the market had relatively few companies competing with each other.iRobot competed with large and small companies, government contractors, and government-sponsored laboratories and universities. It also competed with companies producing traditionalpush vacuum cleaners such as Dyson and Oreck.Many of iRobot’s competitors had significantly more financial resources. They includeSweden-based AB Electrolux, German-based Kärcher, South Korea-based Samsung, UK-basedQinetiQ, and U.S.-based Lockheed competing against iRobot mainly in the robot vacuumcleaning market and the unmanned ground vehicle market. The iRobot product (for example,its Roomba vacuum robot) was not the most expensive but was rated the highest across themajority of the comparison points.AB ElectroluxFounded in 1910, Electrolux was headquartered in Stockholm, Sweden. It did business in 150 countries with sales of 109 billion SEK (US$15 billion), and was engaged in the
8-4SECTION DIndustry One—Information Technologymanufacture and sales of household and professional appliances. Its Electrolux Trilobitevacuum cleaner competed with the iRobot’s Roomba vacuum cleaner in the internationalmarkets. Although Electrolux Trilobite is currently unavailable in the United States it wasanticipated to be sold on the company’s website. An Electrolux Trilobite was priced at aboutUS$1,800, much more than a Roomba, which retailed between US$200 and US$500.Alfred Kärcher GmbH & Co.Founded in 1935, Kärcher was a German manufacturer of cleaning systems and equipment,and was known for its high-pressure cleaners. Kärcher did business worldwide, with sales of€1.3 billion (US$1.7 billion). In 2003, it launched Kärcher RC 3000, the world’s first au-tonomous cleaning system that competed with the iRobot Roomba vacuum cleaner in the in-ternational markets. Kärcher RC 3000 is not currently sold in the United States but can bepurchased and shipped directly from Germany for approximately US$1,500.Samsung Electronics Co., LtdFounded in 1969, Samsung was headquartered in South Korea. Samsung was the world’slargest electronics company with revenue of US$117.4 billion in 2009. It was a prominentplayer in the world market for more than 60 products including home appliances such aswashing machines, refrigerators, ovens, and vacuum cleaners. In November 2009, Samsunglaunched Tango, its autonomous vacuum cleaner robot, which was available in South Korea.In March 2010, the company launched the Samsung NaviBot, an autonomous vacuumcleaner, in Europe. It was priced at €400 to €600 (US$516 to US$774).QinetiQFounded in 2001, QinetiQ was a defense technology company headquartered in the UK withrevenues of £1.6 billion (US$2.4 billion). It produced aircraft, unmanned aerial vehicles, andenergy products. iRobot’s stiffest competitor in the unmanned aerial vehicles market wasQinetiQ, which had 2,500 Talon robots deployed in Iraq and Afghanistan. iRobot haddelivered more than 3,000 PackBot robots worldwide.Lockheed Martin CorporationBased in Maryland, the U.S.-based Lockheed was the world’s second largest defensecontractor by revenue and employed 140,000 people worldwide. It was formed by the mergerof Lockheed and Martin Marietta in 1995, and competed with iRobot in the unmanned groundvehicle market.Research and Development at iRobotResearchanddevelopment (R&D)wasacriticalpartofiRobot’ssuccess.Thecompanyspentnearly6%ofitsrevenueonR&D.In2009,itstotalR&DcostswereUS$45.5million,ofwhichUS$14.7millionwasinternallyfundedwhiletheremainingamountwasfundedbygovernment-sponsoredresearchanddevelopmentcontracts.iRobotbelievedthatbyutilizingR&Dcapitalitwouldbeabletorespondandstayaheadofcustomerneedsbybringingnew,innovativeproductstothemarket.iRobothad538full-timeemployees,254ofwhichwereinR&D.5Thecompany’scoretechnologyareaswerecollaborativesystems,semi-autonomousoperations,advancedplatforms,andhuman-robotinteraction.Eachareaprovidedauniquebenefittothedevelopmentandadvancementofrobottechnology.Researchinthesefieldswas
CASE 8iRobot: Finding the Right Market Mix?8-5Financial ResultsSales, Net Income, and Gross MarginsFrom 2005 through 2009, iRobot total revenue more than doubled from US$142 million toUS$299 million. Revenues received from products accounted for nearly 88% of total rev-enue, far greater than the remaining 12% received from contract revenue, though contractrevenue showed a record high of US$36 million by the end of 2009. (See Exhibit 2).Revenues from 2009 showed a decline of US$9 million from 2008 that was mainly attrib-utable to a 6.3% decrease in home robots shipped. This decrease resulted from softeningdemand in the domestic market. On a more positive note, the total US$30.9 million decreasein domestic sales was partially offset by an increase in international sales (US$23.2 million).Even though revenues declined in 2009, iRobot was able to control its costs and operatingexpenses, resulting in an increase in net income of over four-fold from US$756,000 in 2008to US$3.3 million in 2009.Cash and Long-Term DebtiRobot was in a strong financial position as it related to cash and long-term debt. In 2009,iRobot increased its cash position by over US$31 million while decreasing the amount of long-term debt by about US$400,000. Its cash position by the end of 2009 was US$72 millionversus US$41 million in 2010, an increase of over 77%. This put iRobot in a good position tocontinue investing in research and development even if sales began to slow. At the end of 2009,iRobot’s long-term debt was just over US$4 million (see Exhibit 3). iRobot’s financial statusgives it a competitive edge as it should be able to withstand both current and future unforeseenswings in sales, supplier issues, and cancellation of government contracts.doneinthreedifferentmethods:teamorganization,spiraldevelopment,andtheleveragedmodel.Team organization revolved around small teams that focused on certain specific projectsor robots. They worked together with all different lines of the business to ensure that a prod-uct was well integrated. Primary locations for these teams were Bedford, Massachusetts;Durham, North Carolina; and San Luis Obispo, California.Spiral development was used for military products. Newly creatd products were sent intothe field and tested by soldiers with an in-field engineer nearby to receive feedback from thesoldiers on the product’s performance. Updates and improvements were made in a timely man-ner, and the product was sent back to the field for retesting. This method of in-field testing hasallowed iRobot to quickly improve its technology and design so it can truly fulfill the needs ofthe end-users.The leveraged model used other organizations for funding, research, and product devel-opment. iRobot’s next generation of military products were supported by various U.S. govern-ment organizations. Although the government had certain rights to these products, iRobot did“retain ownership of patents and know-how and are generally free to develop other commer-cial products, including consumer and industrial products, utilizing the technologies developedduring these projects.”6The same methodology holds true when designing consumer products.If expertise was developed that would assist in governmental projects, then it is transferred tothe appropriate team.iRobot’s continued success depended on its proprietary technology, intellectual skills ofthe employees, and the ability to innovate. The company held 71 U.S. patents, 150 pendingU.S. patents, 34 international patents, and more than 108 pending foreign applications. Thepatents held, however, will start to expire in 2019.
3Understand the benefits of strategicmanagementExplain how globalization andenvironmental sustainability influencestrategic managementUnderstand the basic model of strategicmanagement and its componentsIdentify some common triggering eventsthat act as stimuli for strategic changeUnderstand strategic decision-makingmodesUse the strategic audit as a method ofanalyzing corporate functions andactivitiesLearning ObjectivesGatheringInformationPutting Strategy into ActionMonitoringPerformanceSocietalEnvironment:General forcesNaturalEnvironment:Resources andclimateTaskEnvironment:Industry analysisInternal:Strengths andWeaknessesStructure:Chain of commandCulture:Beliefs, expectations,valuesResources:Assets, skills,competencies,knowledgeProgramsActivitiesneeded to accomplisha planBudgetsCost of theprogramsProceduresSequenceof stepsneeded to do the jobPerformanceActual resultsExternal:Opportunitiesand ThreatsDevelopingLong-range PlansMissionReason forexistenceObjectivesWhatresults to accomplishby whenStrategiesPlan toachieve themission &objectivesPoliciesBroadguidelinesfor decisionmakingEnvironmentalScanning:StrategyFormulation:StrategyImplementation:Evaluationand Control:Feedback/Learning: Make corrections as neededAfter reading this chapter, you should be able to:
8-6SECTION DIndustry One—Information TechnologyYear EndingJanuary 2,2010December 27,2008December 29,2007December 30,2006December 31,2005REVENUEProduct revenue$262,199$281,187$227,457$167,687$124,616Contract revenue36,41826,43421,62421,26817,352Total revenue298,617307,621249,081188,955141,968Cost of revenueCost of product revenue176,631190,250147,689103,65181,855Cost of contract revenue30,79023,90018,80515,56912,534Total cost of revenue207,421214,150166,494119,22094,389Gross margin91,19693,47182,58769,73547,579Operating expensesResearch and development14,74717,56617,08217,02511,601Selling and marketing40,90246,86644,89433,96921,796General and administrative30,11028,84020,91918,70312,072Litigation and related expenses—-2,341—-Total operating expenses85,75993,27285,23669,69745,469Operating (loss) income5,437199(2,649)382,110NETINCOME$3,330$756$9,060$3,565$2,610Net income attributable to common stockholders$3,330$756$9,060$3,565$1,553Net income per common share Basic$0.13$0.03$0.37$0.15$0.13Diluted$0.13$0.03$0.36$0.14$0.11 Shares used in per common share calculationsBasic24,99824,65424,22923,51612,007Diluted25,64025,53325,50125,60114,331EXHIBIT2Consolidated Statement of Operations: iRobot Corporation (Dollar amounts in thousands per share of data)MarketingiRobot’s promotion strategies varied by product group; however, neither its defense productgroup nor its home care product group utilized television or radio advertising. Since defenseproducts were produced solely for the U.S. government, promotion was unnecessary. Homecare products, on the other hand, needed to be marketed to generate public demand. iRobotaggressively utilized social media tools such as Facebook and Twitter primarily for promot-ing support services and brand recognition. For example, Facebook had at least 10 fan pagesfor either iRobot Corporation or selected iRobot home cleaning products like Roomba.Another branding strategy used by iRobot education. iRobot recognized that fewer andfewer American children went into STEM (science, technology, engineering, math) areas.Therefore, it launched the SPARK (Starter Programs for the Advancement of Robotics Knowl-edge) program to stimulate an interest in science and technology. The program catered tostudents from elementary school to university. iRobot also initiated an annual National Robot-ics Week program to educate the public on how robotics technology impacts society. The firstnational robotics week was held in April 2010 in the Museum of Science in Boston.iRobot developed an education and research robot, the Create(R) programmable mobilerobot, to provide educators, students, and developers with an affordable, pre-assembled plat-form for hands-on programming and development. Students can learn the fundamentals of
CASE 8iRobot: Finding the Right Market Mix?8-7Year EndingJanuary 2, 2010December 27, 2008ASSETSCurrent assetsCash and cash equivalents$71,856$40,852Short-term investments4,959–Accounts receivable, net of allowance of $90 and $65 at January 2, 2010, and December 27, 2008, respectively35,17135,930Unbilled revenue1,8312,014Inventory32,40634,560Deferred tax assets8,6697,299Other current assets4,1193,340Total current assets159,011123,995Property and equipment, net20,23022,929Deferred tax assets6,0894,508Other assets14,25412,246Total assets$199,584$163,678LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’EQUITYCurrent liabilitiesAccounts payable$30,559$19,544Accrued expenses14,38410,989Accrued compensation13,5256,393Deferred revenue and customer advances3,9082,632Total current liabilities62,37639,558Long-term liabilities 4,0144,444Commitments and contingencies:Redeemable convertible preferred stock, 5,000,000 shares authorized zero outstanding—-Common stock, $0.01 par value, 100,000,000 and 100,000,000 shares authorized and 25,091,619 and 24,810,736 shares issued and outstanding at January 2, 2010, and December 27, 2008, respectively251248Additional paid-in capital140,613130,637Deferred compensation(64)(314)Accumulated deficit(7,565)(10,895)Accumulated other comprehensive loss(41)–Total stockholders’ equity133,194119,676Total liabilities,redeemable convertible preferred stock,and stockholders’ equity$199,584$163,678EXHIBIT3Consolidated Balance Sheet: iRobot Corporation (Dollar amount in thousands)robotics, computer science, and engineering; program behaviors, sounds, and movements; andattach accessories like sensors, cameras, and grippers. It also ran a unique and multifacetedEducational Outreach Program that included classroom visits and tours of its company head-quarters. It was designed to inspire students to choose careers in the robotics industry andbecome future roboticists.Despite multiple methods of reaching out to current and potential consumers, some indus-try analysts claimed iRobot lacked aggressiveness toward customer acquisition. According toMark Raskino, analyst for Gartner Research, “iRobot needs more competition, not less, to helpbuild up the total scale and visibility of the fledgling industry it has been pioneering.”7
8-8SECTION DIndustry One—Information TechnologyThe Robotic IndustryRobots serve a wide variety of industries such as consumer, automotive, military, construc-tion, agricultural, space, renewable energy, medical, law enforcement, utilities, manufactur-ing, entertainment, mining, transportation, space, and warehouse industries.In 2008, before the economic downturn, the global market for industry robot systems wasestimated to be about US$19 billion.9Industrial robots sold worldwide in 2009 slumped byabout 50% compared to 2008. The sales started to improve from the third quarter of 2009onward with the slow recovery coming from emerging markets in Asia and especially fromChina. In North America and Europe, sales were also seen slowly improving from late 2009.10The sales of professional services robots, including military and defense robots, wereabout US$11 billon at the end of 2008 and were expected to grow by US$10 billion for theperiod of 2009 to 2012.11Twelve million units of household and entertainment robots were expected to be sold from2009 to 2012 in the mass market, with an estimated value of US$3 billion.12New MarketsThe2009economicrecessionhadnegativeimpactsonconsumerspending.iRobotdomesticsalesofrobotvacuumcleaners,predominantlytheRoomba,weredowncomparabletootherUS$400discretionarypurchases,anditsinternationalsalesalsoexperiencedaslowdown.13Inadditiontolowerconsumerdemand,thenationalandinternationalcreditcrunchesledtoascarcityofcredit,tighterlendingstandards,andhigherinterestratesonconsumerandbusinessloans.Continueddisruptionsincreditmarketsmaylimitconsumercreditavailabilityandimpacthomerobotsales.If the robot market does not experience significant growth, the entire industry may notsurvive. “Fallout has forced the robotics industry to look outside of its comfort zone and moveinto emerging energy technologies like batteries, wind, and solar power,” said Roger Christian,Vice President of Marketing and International Groups at Motoman Inc. He also predictedgrowing demand for robotics in healthcare and the food and beverage industry.14Under theObama administration, there were economic incentives devoted to R&D in alternative energyindustries. For example, “the Stimulus Act passed by Congress in early 2009, a US$787 billionpackage of tax cuts, state aid, and government contracts, has made some impact on the alter-native energy market in favor of robotics.”15In addition to its home care and military markets, iRobot hoped to expand into the civillaw enforcement market and the maritime market. It also explored possibilities in theOperationsiRobot was not a manufacturing company, nor did it claim to be. Its core competency wastodesign, develop, and market robots, not manufacture them. All non-core activities wereoutsourced to third parties skilled in manufacturing. While third-party manufacturers pro-vided raw materials and labor, iRobot concentrated on developing and optimizing prototypes.Until April 2010, iRobot used only two third-party manufacturers for its consumer prod-ucts: Jetta Co. Ltd. and Kin Yat Industrial Co. Ltd., both located in China. iRobot did not havea long-term contract with either company, and the manufacturing was done on a purchase order basis. This changed in April 2010, when iRobot entered a multi-year manufacturingagreement with electronic parts maker Jabil Circuit Inc., which would make, test, and supplyiRobot’s consumer products, including the Roomba.8
CASE 8iRobot: Finding the Right Market Mix?8-9Challenges AheadConsumer MarketplaceiRobot was competing in a new and emerging market. Although the industry had relativelylow competition, analysts believed iRobot needed “more competition, not less, to help buildup the total scale and visibility of the fledgling industry it had been pioneering.”18If thedemand for the home robots became stagnant or declined, this would greatly impact thevitality of iRobot and put it under pressure to remain innovative and adaptive to consumerneeds in the event that it did gain widespread popularity.iRobot’s consumer products were primarily a luxury supplemental good gauged towardthe middle and upper class. iRobot’s home cleaning robots were reasonably priced fromUS$129 to US$1,000, depending on the model and accessories. Such a price range was com-parable with luxury brands of vacuum machines. However, times of economic recession couldprove to be a problem for iRobot’s consumer goods sales given that discretionary budgets havecontracted. To save money, iRobot’s base customers may revert to manual labor.Supply ChainFor many years, iRobot had only two China-based manufacturers to produce its home clean-ing robots and had no long-term contract with either of those companies. Its best-sellingRoomba 400 series and Scooba series, for example, were both produced by Jetta at a singleplant in China. This put iRobot in a high-risk situation if Jetta was unable to deliver productsfor any unforeseen reason, or if quality started to dip below standards.Fortunately, iRobot was aware of the problem and signed a new manufacturing agree-ment with U.S.-based Jabil Circuit. This relationship would provide iRobot with numerousbenefits, including diversifying key elements of its supply chain, providing geographic flexibility to address new markets, and expanding overall capacity to meet growing demands,explained Jeffrey Beck, president of iRobot’s Home Robots Division. Whether this attemptto diversify its supply chain with a new partnership will work out is of crucial importance foriRobot.Intellectual PropertyAlthough iRobot had over 70 patents and over 150 patents pending, finding ways to continueto protect this intellectual property in the long run will be a challenge. The patents iRobotholds will begin to expire in 2019. In a rapidly advancing industry, technology can alsobecome obsolete quickly and render patents useless.Continued development of products that were difficult to duplicate through reverse engi-neering will be the key to success in this area. By maintaining strong relationships and givingsuperior service to customers such as government agencies, iRobot can create an advantageeven if they are unable to ultimately protect their technology from being duplicated. At thesame time, iRobot also needs to ensure that its employees will continue to be innovative andcreate new technologies to keep iRobot competitive for years to come.healthcare market.16It partnered with the toy company Hasbro to enter the toy market withMy Real Baby—an evolutionary doll that has animatronics and emotional response software.iRobot continued to grow its international presence by entering new markets. The percent-age of its international sales rose from 38% in 2008 to 53.8% in 2009.17Its growing focus oninternational sales resulted in an increase of US$23.2 million in international home robotsrevenue for 2009 compared to 2008. iRobot also sold its military products overseas in compli-ance with the International Traffic in Arms Regulations.
8-10SECTION DIndustry One—Information TechnologyGovernment ContractsNearly 40% of iRobot’s revenues were from government-contracted military robots. As acontractor or a subcontractor to the U.S. government, iRobot was subject to federal regula-tions. Fiscal policy and expenditure can be volatile, not only through a single presidency, butcertainly during the transition from one presidency to the next. The volatility and unknowndemand of the U.S. government presented a problem. The economic fallout from the reces-sion also impacted U.S. federal budgetary considerations. Emphasis and focus had beenplaced on larger, more troubled industries, with large bailout packages made available tofinancial and automotive companies. It remains to be seen how these large outlays will affectthe federal government’s ability to continue to fund contracts for robotics.Strategic AlliancesiRobot relied on strategic alliances to provide technology, complementary product offerings, andbetter and quicker access to markets. It entered an agreement with The Boeing Company to de-velop and market a commercial version of the SUGVthat was being developed under the Army’sBCTM (formerly FCS) program. It also formed an alliance with Advanced Scientific ConceptsInc. for exclusive rights to use the latter’s LADAR technology of unmanned ground vehicles. Inexchange, iRobot commited itself to purchase units from Advanced Scientific Concepts.iRobot’s ChallengeiRobot’s focus on home cleaning products differentiates iRobot from all the other manufac-turers in the robotics industry, which are mainly focused on manufacturing robots for theautomotive sector. iRobot’s focus on two entirely different markets—consumer and military—allowed it (1) the ability to leverage its core capabilities and diversification, and (2)providedit with a hedge against slower demand in one sector. By introducing robotics to the consumermarket, iRobot created a “blue ocean of new opportunities.” However, iRobot had numerouscompetitors with more experience in the consumer marketplace.Ananalystwonderedifthelong-termsuccessintheconsumermarketwouldrequireiRobottodevelopmore“blueoceans.”Also,diditmakesenseforiRobottocontinuetodevelopnewcon-sumerproductsorwoulditbebetterofffocusingonthemilitaryandaerospacemarketplace?1.http://www.irobot.com/uk/about_irobot_story.cfm.2.iRobot 2009 Annual Report, Form 10K, filed February 19, 2010.3.Ibid.4.M. Raskino, (a), 2010, “Insights on a Future Growth Industry.”An interview with Colin Angle, CEO, iRobot. http://my.gartner.com/portal/server.pt?open=512&objID=260&mode=2&PageID=3460702&resId=1275816&ref=QuickSearch&sthkw=irobot.5.iRobot 2009 Annual Report, 2010.6.Ibid.7.M. Raskino, (b), 2010, “Cool Vendors in Emerging Technologies,”2010. http://my.gartner.com/portal/server.pt?open=512&objID=260&mode=2&PageID=3460702&resId=133843&ref=QuickSearch&sthkw=irobot.8.“iRobot Enters Manufacturing Deal with Jabil,” The LowellSun, (April 28, 2010). http://www.lowellsun.com/latestnews/ci_ 14830219.9.Press information, World Robotics 2009—Industrial Robots.http://worldrobotics.org/downloads/PR_Industrial_Robots_30.09.2009_EN(1).pdf.NOTES10.Gudrun Litzenberger, IFR Statistical Department, “The Robot-ics Industry Is Looking Ahead with Confidence to 2010,” http:// www.worldrobotics.org/downloads/IFR_Press_release_18_ Feb_2010.pdf.11.Ibid.12.Ibid.13.M. Raskino, (a), 2010.14.B. Brumson, 2010, “Robotics Market Cautiously Optimistic for2010.” Robotic Industries Association. http://www.robotics.org/content-detail.cfm/Industrial-Robotics-Feature-Article/Robotics-Market-Cautiously-Optimistic-for-2010/content_id/1936.15.Ibid.16.Robotreviews, 2010, “iRobot Celebrates Two Decades of Inno-vation in Robotics,” http://www.robotreviews.com/news/its-national-robotics-week.17.iRobot 2009 Annual Report, 2010.18.M. Raskino, (b), 2010.
College of Administrative and Financial Sciences
Assignment
Strategic Management (MGT 401)
Due Date: 03/08/2023 @ 23:59
For Instructor’s Use only
General Instructions – PLEASE READ THEM CAREFULLY
The Assignment must be submitted on Blackboard (WORD format only) via allocated folder.
Assignments submitted through email will not be accepted.
Students are advised to make their work clear and well presented, marks may be reduced for poor presentation. This includes filling your information on the cover page.
Students must mention question number clearly in their answer.
Late submission will NOT be accepted.
Avoid plagiarism, the work should be in your own words, copying from students or other resources without proper referencing will result in ZERO marks. No exceptions.
All answered must be typed using Times New Roman (size 12, double-spaced) font. No pictures containing text will be accepted and will be considered plagiarism).
Submissions without this cover page will NOT be accepted.
Course Learning Outcomes (CLOs):
Recognize the basic concepts and terminology used in Strategic Management (CLO1)
Describe the different issues related to environmental scanning, strategy formulation, and strategy implementation in diversified organizations- CLO2
Explain the contribution of functional, business, and corporate strategies to the competitive advantage of the organization-CLO3.
Distinguish between different types and levels of strategy and strategy implementation-CLO4
Communicate issues, results, and recommendations coherently, and effectively regarding appropriate strategies for different situations-CLO6
Assignement Questions
Section I. Discussion Questions (15 marks)
Discuss briefly the following questions (maximum 200 words for each question). (3 marks each question)
Why has strategic management become so important to today’s corporations and how does it typically evolve in a corporation?
Discuss how a development in a corporation’s natural and societal environments can affect the corporation through its task environment.
How can value-chain analysis help identify a company’s strengths and weaknesses?
What are the advantages and disadvantages of being a first mover in an industry? Give some examples of first-mover and late-mover firms. Were they successful?
Why are many strategic alliances temporary?
Notes:
Using the terminology developed in the course of strategic management will be highly valued.
Your answers MUST include at least 7 outside references (other than the slides and textbook) using a proper referencing style (APA).
Using references from SDL will be highly valued.
You answers should not exceed 1500 words.
Section II: Case study (15 marks)
Read carefully case No 8 from your textbook (entitled ‘iRobot: Finding the Right Market Mix?) and answer briefly the following questions: (1.5 marks for each question)
Draw the SWOT matrix of the iRobot company.
What is the competitive strategy used by iRobot company?
Use the five forces of the M. Porter matrix to describe the robot-based product industry.
Describe the different functional strategies of the iRobot company.
Describe the relationship of iRobot with its primary stakeholders.
Describe the core competency and the outsourcing strategy of iRobot
What kind of strategic alliance is used by iRobot? Why does iRobot choose it?
What are the main challenges that iRobot faces?
Assess the competitive advantage of iRobot in its market.
Recommend solutions for iRobot to improve its competitive advantage.
Good Luck
______________________________________________
Answers
Section 1
Section 2
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