SS Lecture 6

0:00all right welcome in this chapter we

0:02will be covering competitive

0:04posturing so a lot of what we're going

0:06to be discussing here is after you've

0:08taken stock of all the variables

0:11necessary um and you're really working

0:13your strategy you

0:14have some ideas about which direction

0:17you want to go this is where you start

0:19implementing your tests okay so coming

0:21up with do we want to go on the

0:23offensive or

0:25defensive now here's the learning

0:27objectives for this particular lecture

0:31I'll give you a little bit of time you

0:32can look over them um but things that

0:35we're looking at here primarily is do

0:37you want to go on the offensive or

0:38defensive so are you trying to capture

0:41market share are you trying to protect

0:43what you have and also timing effects

0:46are going to be a big part of this

0:48lecture do you want to be a first mover

0:51or is it better to be a a fast follower

0:54let somebody else go first and show you

0:56the way and then improve upon what

0:58they've done

1:02so for maximizing the power of Any Given

1:05strategy you're going to be dealing with

1:07a number of different choices and your

1:09goal is

1:10to make choices that complement your

1:13competitive approach okay so we'll

1:15discuss offensive versus defensive

1:18actions we'll discuss timing and the

1:20scope of

1:25operations so whenever you're looking at

1:27strategy enhancing measures you could

1:29could be discussing you know any of

1:32these different things so you know you

1:34think about whatever your strategy is

1:36and then what are some moves you can

1:39take to enhance that strategy to make

1:41you more low cost to make you more

1:44differentiated um to remove some

1:47competitors out of the game all right

1:50that's what we mean by strategy

1:51enhancing measures so it deals

1:55with going on the offensive versus

1:58defensive when to

2:00enter different games okay you know fast

2:03mover versus uh late

2:06mover mergers and Acquisitions of course

2:09deal with with uh strategy enhancing

2:12measures uh so do

2:14Partnerships um Outsourcing all of these

2:17different things can be a strategy

2:19enhancing

2:22measure so first we'll talk about going

2:24on the offensive

2:26okay and whenever you go on the

2:29offensive and you try to take market

2:31share for

2:32somebody some given principles are one

2:36you want to focus on building your

2:38competitive Advantage okay what's your

2:40angle what assets do you have that make

2:43you special or unique all right is it

2:45your image is it your process is

2:49it uh you know some Design Elements you

2:53have patents on or something like that

2:55okay and you want to First focus on

2:58making sure that that thing is airtight

3:00as possible and that you're also

3:03considering how to continue leap

3:05frogging to improve it in the future so

3:07your competitors can't C keep up and

3:10then once you figure out what that piece

3:13is trying to convert it into a

3:15sustainable competitive

3:18Advantage you want to apply your

3:21strongest resources to where your Rivals

3:24are the weakest okay so you want to

3:26apply your strengths to their weakness

3:30all right otherwise um you know clearly

3:34you will lose all right if you don't do

3:35this if you're differentiated company

3:38you don't want to get in a price war

3:40with the lowcost competitor all right if

3:42you're competing with Walmart let's say

3:44you're trying to steal market share from

3:46Walmart and you're a mom and pop

3:48store last thing you want to do is get

3:52in a price war with them what you want

3:54to do is build your competitive

3:56Advantage think okay well what's our

3:57angle as a mom and pop grocery store is

4:00it that we're local maybe um is it that

4:04we sell products that are you know uh on

4:07the higher end or that we carry things

4:10that Walmart doesn't okay thinking about

4:14those sorts of aspects maybe it's that

4:15you deal exclusively with people from

4:19within a 50 mile radius okay uh well

4:23after you you figure out maybe that's

4:25your angle then you want to sort of

4:27build up that notoriety as you being the

4:30local grocery store all right and if you

4:32want to support your local farmers and

4:35produce suppliers you want to deal with

4:37us all right then when you compete

4:40against Walmart your pitch might be to

4:43customers oh yeah you know we support

4:45the local community a lot better than

4:46Walmart does you know Walmart they just

4:48send all of their money back to oh you

4:51know this Rich family and uh investors

4:54all over the country and their

4:56headquarters out in um out in Arkansas

4:59here if you shop with us you know the

5:01money stays in this uh within our state

5:05within our community making those kinds

5:07of pitches is what you want to do all

5:09right and figuring out how to use your

5:11resources like

5:13that also you want to try to employ the

5:17element of S surprise as opposed to

5:19doing what Rivals expect and are prep PR

5:22prepared for um especially if you're

5:25trying to take market share away from

5:28them I mean there's times when it's okay

5:29P for Rivals to know what you're

5:31planning to do because then they can

5:33tacitly cooperate with you okay if it's

5:36clear what your strategy is like

5:38Ferrari then companies like GM and

5:42Mercedes know no okay Ferrari's taking

5:45that angle well we'll take these other

5:48different sorts of paths okay sometimes

5:51it's okay for people to know your

5:52strategy but if you're employing an

5:54offensive where you're trying to take

5:56market share from somebody then you want

5:59to use a is an element of

6:02surprise um and lastly you want to make

6:06sure that you're you know applying a

6:07full measure all right Swift decisive

6:11overwhelming action to to take out your

6:13Rivals okay

6:15um you know you want to make sure that

6:18attempt one gets the job done before

6:20they can retaliate against

6:23you so choosing your basis for attack

6:28one again never challenge your

6:30competitor where it's the strongest okay

6:33you want to look for where they're weak

6:34and that's where you want to uh Target

6:37them all right you don't want to get

6:39into a messy war against a strong

6:42competitor um you want to use your

6:46strongest assets to attack your

6:47competitor's weaknesses again all right

6:51so you got to think about what is a

6:52pitch you can have or what is a a

6:54mechanism you can use that uh

6:59is unique to you something that your

7:01competitor cannot copy um you know take

7:05Taking use of Str strategies that they

7:07can't do all right to steal market share

7:11from them all right now there's times

7:14your offensive might not yield immediate

7:17results okay um and maybe it's assigned

7:21to wait or that you have targeted too

7:24strong of a of a competitor in which

7:27case uh you might be danger of your

7:30competitor's counter response okay uh

7:33you might be starting a price War

7:35getting into some sort of a messy battle

7:37that maybe you won't

7:42win so there's different types of

7:45strategic options out there okay one is

7:48just the straightup price War okay

7:50offering something that's as good as

7:52theirs or better but for a lower price

7:56okay um other things you can do is

7:59trying to LeapFrog your

8:01competitor by having Next Generation

8:05products sooner than your competitor can

8:08can uh turn them out okay so this is

8:12something you see like occasionally

8:14within maybe it slowed down a bit but

8:17within the mobile phones industry you

8:19know for a while it was

8:21like apple

8:23and and uh Samsung were kind of

8:26releasing mobile phones as quickly as

8:28they could trying to Leap Frog the

8:31competition um and make you know a new

8:34mobile phone here and there so that you

8:36would feel like oh well if you have this

8:39version of Samsung whatever that's the

8:40outdated one

8:43okay other things you can do is uh you

8:48know pursue Innovation all right you can

8:50be more Innovative than your competitors

8:52and try to steal uh customers away from

8:56them by saying oh you we a more creative

8:59company and that this creativity

9:01benefits you in terms of our products

9:03are better quality or they um maybe less

9:07costly to operate or that there's some

9:09sort

9:10of uh benefit to purchasing from US

9:14versus whoever it is you're competing

9:17against um pursuing disruptive product

9:21Innovations to create new markets okay

9:24so like for

9:25example with um when Kodak was kind of

9:30locking down the film industry you see

9:32this disruptive innovation by uh other

9:35camera manufacturers I believe it was

9:37Fuji he said okay well yeah Kodak maybe

9:40has a corner on that but once we start

9:43releasing digital cameras then you know

9:45all of their competitive advantages uh

9:48sort of go out the window all right

9:50we're competing in a new market and this

9:53is super disruptive for if you're

9:56looking to to purchase cameras it's

9:57going to change the industry for good

10:02um trying to steal ideas from the

10:06competition but improve on them in some

10:08way okay you don't want to do exactly

10:10what the competition does okay that's

10:12kind of like um you know that's going to

10:15be a losing strategy by just copying

10:17them they'll always stay ahead of you

10:19but if you can find a way to copy but

10:22improve upon it okay so like this is

10:25like when you look at what Apple does

10:28with the uh

10:30uh with the MP3 player all right they

10:33saw MP3 players were around for a while

10:37and uh realized well this is a trend

10:40that's going to be probably pretty

10:42popular so they copy this trend but when

10:45they released their iPod it was a much

10:48better MP3 player than anybody had ever

10:50seen on the

10:51market other things are using like

10:54hit-and-run Gorilla Marketing tactics to

10:56try to grab market share or from

10:59different types of Rivals so what

11:01Gorilla Marketing tactics are is it's

11:04sort of like unconventional marketing

11:06okay um if anyone knows who Nathan

11:09Fielder is uh he's a comedian who also

11:13does these odd business stunt type

11:16things um and he does a lot of Gorilla

11:18Marketing so like one example was he had

11:20like a coffee company that was labeled

11:22as Dumb Starbucks okay and everything

11:26looked like Starbucks but it said dumb

11:29um

11:31got tons and tons of media attention for

11:33this people were trying to buy his

11:35products and things and he was kind of

11:38quiet about it for a while and people

11:40were were were guessing you know is this

11:43something from like an art installation

11:45and had no idea as to what it was but he

11:48picked up a whole bunch of customers for

11:49for his little sort of business

11:52experiment um with this just odd stunt

11:55that went viral okay uh that's like an

11:59example example of Gorilla Marketing

12:00it's also like um you know if you were

12:03to go out and hire a bunch of like

12:06uh sidewalk

12:09um chalk artist okay to chalk the

12:13sidewalk up and put big beautiful ads in

12:16places that were conspicuous In Like a

12:18downtown that are advertising your

12:20products or whatever but it's just

12:22different types of little stunts uh

12:24creative things ways

12:26to uh promote your product through sort

12:29of of unconventional

12:31means other things can be just trying to

12:34launch preemptive strikes okay

12:38um again trying to capture resources or

12:41rare opportunities okay buying up you

12:44know speculatively buying up places

12:47where you think there might be mineral

12:48deposits or uh you know launching

12:54uh a campaign to try to hire up a bunch

12:57of computer science grads from some of

12:59the top schools before your competitors

13:01can get to them doing different things

13:04like that to try to Corner the market on

13:05different sort of limited

13:12resources another useful offensive

13:15strategy that's kind of a special case

13:16here is What's called the Blue Ocean

13:18strategy and how the Blue Ocean strategy

13:21works is it's

13:24where you try to escape the competition

13:28all right right so you can think about

13:31it as there's imagine there's you know

13:34this big ocean there's all these ships

13:36float floating around in there okay and

13:37their

13:38battleships the red ocean is where the

13:41battles are really hot between all of

13:44these ships okay and it's red because

13:46there's blood in the water all

13:48right

13:50now ways you can create your offensives

13:54is well okay we'll send the biggest

13:56battleship we possibly can into the red

13:58ocean and try to annihilate as many

14:01competitors as we can and maybe we can

14:03win this battle but the other way maybe

14:07you could eek out a living is to avoid

14:10getting into that red ocean and seek out

14:13the blue ocean okay so that's where Blue

14:15Ocean strategy comes from is sort of

14:17that

14:18analogy so examples of like a Blue Ocean

14:21strategy are uh the best one is Nintendo

14:25all right so Nintendo at one point they

14:28were competing

14:29with PlayStation and Xbox head-to-head

14:33all

14:34right and at this time it was the

14:37Nintendo GameCube PlayStation 2 and the

14:40first

14:42Xbox and they were all roughly similar

14:46gaming systems but the

14:48Nintendo just didn't quite have the

14:50horsepower of the Playstation or

14:54Xbox and Nintendo

14:56recognized when the next generation of

14:59consoles comes out they're going to be

15:01even further behind

15:03okay and they realized okay there's a

15:07lot of red ocean here in this sort of

15:09video game console industry all right

15:11everybody you know PlayStation and Xbox

15:14are really locked in this competition of

15:17you know who can produce the most high

15:19horsepower best graphics you know hard

15:22running console

15:25system uh known to

15:27man whereas

15:31what we need to do because that's just a

15:33game we can't play anymore what we need

15:35to do is find the blue ocean so what

15:38Nintendo did with the next generation of

15:41consoles is they created the Nintendo

15:43Wii and the Nintendo Wii didn't compete

15:47in terms of horsepower or Graphics or

15:49anything with PlayStation and Xbox that

15:51was when the PlayStation 3 and Xbox 360

15:55came out instead the Nintendo Wii

15:59was the most userfriendly video game

16:02console okay the remote or the

16:04controller looked like a television

16:06remote and the idea was that Nintendo

16:09was going on was well if we can avoid

16:12getting into the horsepower Wars and we

16:14target the user friendliness uh market

16:18then maybe we can get you know parents

16:20playing video games with their kids or

16:22grandparents playing video games their

16:24kids or it could be used as like a party

16:26game amongst adults and different things

16:28like that

16:29so you know the the the controller

16:32looked like a television remote so

16:34Grandpa could recognize it right away

16:36and know how to use that and everything

16:38and it was uh just meant to be this

16:41super userfriendly device that would

16:43just click with everybody very

16:44ergonomical ergonomic all right and that

16:49way they didn't have to compete with

16:53PlayStation and Xbox and that's been a

16:56strategy that they're still continuing

16:57to use um now saying okay well can we

16:59make something that's kind of like a big

17:01iPad all right everybody knows how to

17:02use an iPad and you know if we can make

17:05products that are just user friendly

17:08then we can Target that audience um

17:11people who are just getting into games

17:14kids people who want to play games with

17:16their kids that aren't looking for you

17:19know serious action games and violence

17:22and all of this stuff more

17:24familyfriendly userfriendly video games

17:26can be our angle and that's a lot less

17:30contended industry than the uh industry

17:34that PlayStation and Xbox operate

17:39in so next we can move on to defensive

17:42strategies and defensive strategies deal

17:46with trying

17:48to repel attacks

17:52okay so offensive strategies deal with

17:55trying to grab market share defensive

17:58strategies of of course deals with how

18:00you protect your own market share okay

18:03different ways you can go about it one

18:05is you can reduce the uh likelihood of

18:10being attacked all

18:12right try to show signs that you're

18:14tough or that you'll retaliate

18:17or just try to avoid the likelihood of

18:20being attacked all right there's other

18:21things you can do to try to

18:23weaken um the impact of an attack if it

18:26does occur okay and then lastly you can

18:29try

18:30to make moves that would influence a

18:34rival to attack others rather than

18:37you so defensive strategies they take

18:40two broad forms one blocking Challengers

18:45and the other is signaling the

18:47likelihood of retaliation

18:50okay either of those will deter the

18:53attack all right if you can either you

18:56know sort of uh

19:00bulletproof yourself from the attack or

19:03signal that you're prepared and that you

19:05will respond um in kind to whatever your

19:09arrival does both of those you know help

19:12you hang on to your market

19:16share so first our blocking Avenues all

19:19right one thing you can do is just try

19:22to make sure you have a product line

19:25that covers all of the different gaps in

19:29the marketplace okay so if you offer a

19:31very wide product line or a very broad

19:33part product line then there shouldn't

19:36be any vacant niches for Invaders to

19:39come in and start stealing market share

19:41from you okay so like one of the big

19:44problems or or why the uh macro Brewing

19:49industry was so vulnerable to being

19:52attacked uh the whole beer industry is

19:55there was a lot of different vacant

19:56niches that just weren't around okay um

19:59you had like Miller Cs and anheiser Bush

20:01and they were just

20:03producing I mean a handful of different

20:06types of beer but a lot of it was this

20:08sort of generic industrial beer and

20:09there was all of these vacant niches so

20:11it was really easy for these little

20:13companies to come in and start stealing

20:15market share by capturing all of these

20:17other

20:18niches other things you can do is just

20:21maintain economy pricing

20:25to avoid being attacked okay profits

20:29attract competition if people see you're

20:32really profitable that's going to bring

20:34in the Sharks that's going to bring in

20:36the imitators and other people to

20:39compete with you in that industry so

20:42this is something that Amazon does

20:46actually so one venue of business that

20:49Amazon's involved in is they rent out

20:51server space for a you want to run on

20:53like a

20:54website all right and you need server

20:57space you can rent it from Amazon

21:00um and when Amazon was doing this Jeff

21:03bezo said was talking about how he's

21:06going to price how he rents out his

21:07server

21:09space and when he was thinking about how

21:11to price it he realized that you know if

21:14we price this thing too high what's

21:16going to happen is everybody's going to

21:18come and try to compete with us anyone

21:19who has extra server space and they're

21:21going to start trying to undercut us a

21:24little bit we're going to be in a price

21:25War so why don't what we do is from the

21:27get-go will price this thing at a level

21:31where the profit margins just raise or

21:33thin and we won't attract any new

21:36competition and Jeff Bezos credited this

21:39idea with he said he looked at what

21:41happened to Apple when they R released

21:44the iPhone and how many competitors they

21:47had to deal with after they released

21:49that first iPhone so Jeff Bezos when he

21:55went to rent out the server space rock

21:57bottom prices

21:59and you don't get a lot of people

22:00interested in entering into that

22:01industry because they say oh well you

22:03know there's hardly any profits to be

22:05made you know Amazon's priced it so low

22:08that that there's not my room for my

22:13Supply um other things you can do is try

22:16to discourage competitors from trying or

22:19or discourage buyers from trying a

22:20competitor's Brands okay offering like

22:23loyalty points things like that

22:27um whatever you can do to try to get

22:30people to always purchase your product

22:33okay offer discounts in bulk so they get

22:36a whole bunch of yours and they're stuck

22:38with it for a while and they can't just

22:39kind of switch around and Shop between

22:42different people subscriptions are good

22:44for discouraging you to from trying

22:47competitor Brands because then you're

22:48locked into that subscription for a

22:51while especially if people don't want to

22:53have two subscriptions at once or if

22:55it's priced in such a way where you

22:56can't have two

23:00things you can also do is um make really

23:04early announcements about new prices

23:08um to and changes so that buyers are

23:13willing to wait for your product okay

23:15they aren't going to just switch on you

23:17they say oh well there's something new

23:19coming out from this company that I

23:21already like uh well I guess I'll hold

23:24on and I'll just wait until they release

23:26the new product so like you know if

23:28you're a fan of

23:30PlayStation um and you hear that Xbox is

23:32releasing something new and then

23:34PlayStation

23:36immediately publicizes that they're

23:39releasing a new console you if you're a

23:41fan of PlayStation you're probably going

23:42to hold off until there's the time for

23:44the PlayStation going to come out but if

23:46just Xbox releases it and then their new

23:49console comes out for a while and then

23:50PlayStation lets you know uh you might

23:53think well I I just want to be on The

23:55Cutting Edge for a while and I now's a

23:57good time to switch so you know you want

23:59to make sure that you're making those

24:02announcements so your loyal customers

24:04know well just wait it out they're going

24:06to release the products or whatever

24:08we're looking

24:12for you can uh you know again offer

24:17support special inducements loyalty

24:20programs all of those different things

24:21to get customers to avoid switching to

24:25new products all right it's like one of

24:28the things that

24:31um hotels and Airlines will try to do so

24:35you know I had a uncle who was a

24:37traveling salesman at one point and he

24:39would stay you know a 100 nights or more

24:42at on the road and he had this uh

24:47account with the Hilton and he was

24:49saying I'm whatever platinum diamond

24:52supreme or something member with them um

24:55and I get all of these different perks

24:57he was saying yeah I had to stay a 100

24:59nights on the road and exclusively stay

25:01at Hilton's to get this

25:03Rewards program that gives me all these

25:05different things uh so I really don't

25:07try any other hotels all

25:10right those are the types of people

25:12you're also trying to to hook with these

25:14programs also you know people who are

25:16buying in big volumes um you know this

25:19of course my my uncle uh wasn't paying

25:23for all of those Hotel nights it was

25:24this company really who who was the who

25:27was paying for all of those he was just

25:29being sent to those different

25:31places you can also try to challenge the

25:34quality or safety of a rival's products

25:36so you see Subaru does this a lot right

25:39in Subaru commercials maybe not so much

25:41anymore but it used to be like they made

25:44it sound like if you didn't buy a Subaru

25:46you were almost condemning your family

25:49to die in a car crash um which probably

25:52isn't true but that's the the the

25:54message that they were trying to tell

25:56their consumers always

26:01um other things you can do to try to

26:04prevent people from switching to new

26:05products is

26:07uh you know when you're dealing with

26:09Distributors offering them deals to work

26:12exclusively with you okay say well I'll

26:14give you a big discount if you'll only

26:17stock my product all right or making

26:20some kind of deals with them I'll give

26:22you better service uh I can you know

26:26make sure that I I keep on top of my

26:28inventory so you aren't having to

26:29Warehouse my products long if you only

26:32stock mine but you know trying to play a

26:35win-win game with your Distributors to

26:37make sure that they handle exclusively

26:39your

26:43products for signaling to Challengers

26:45that retaliation is likely there's a

26:47number of other tactics you can use okay

26:51um one

26:53is publicly announcing that you're

26:56committed to a particular price or

26:59market share all right what that does is

27:02well you know if you

27:04hear some CEOs or Executives or

27:08companies Rel making press releases

27:10saying you know we're committed to this

27:13particular market share um that sort of

27:16backs them into the corner okay now that

27:19they've said that they're going to

27:20defend this they have to otherwise they

27:22look like a weak company and if you try

27:24to attack them then you know they don't

27:27want to stain image so they'll do

27:29anything they can to hold on to that

27:31market share and what they're telling

27:32you is if you try to take this market

27:35share from us we're get we're happy to

27:37get in the price War do whatever um and

27:40we're both going to lose this but we're

27:42happy to lose this game um if that's

27:45what we have to do to to keep our

27:49image other things you can do is uh you

27:53can try to price match with your

27:55competitor okay if you offer PR price

27:58matching this is almost as collaborative

28:01with your competitor as it is uh being

28:04defensive but if you're a company that

28:06offers price matching then what you're

28:08telling your your competitor is um you

28:12can't beat me on price the customer is

28:14going to tell me and we'll offer the

28:15price

28:16match uh so you're going to have to take

28:20a different angle and often that's good

28:22for both companies

28:25because when there is a price match um

28:28um and both compan and and the companies

28:31know that they can't compete with each

28:33other on on the basis of price what they

28:35do is they can both price their products

28:37at

28:37a a higher level okay it's more

28:41profitable for them um and try to seek

28:45other avenues for competing against each

28:49other what you could also do is is keep

28:51a war chest of of cash marketable

28:54Securities and the idea here is that if

28:56you do get in a price War you have the

28:59cash that you can you know survive the

29:03siege for a longer than your rival can

29:06you can Outlast

29:09them um all of those are ways you can

29:13signal that retaliation is likely okay

29:17um strong counter responses all right so

29:20like when there was a new bleach company

29:23coming out and Clorox started offering a

29:25free bottle of bleach to anybody who

29:27asked for one um you know those are the

29:31types of tactics where oh you realize

29:34okay that Clorox is going to do whatever

29:36they have to do to defend that image and

29:38to defend that market share that they

29:43have so next we can move on to

29:45discussing the timing of strategic

29:48moves all right knowing when to make a

29:51move is just as important as knowing

29:54what move to make and being a first

29:56mover is no guarantee of success all

30:00right sometimes you want to be first

30:02sometimes it's better to be second all

30:05right there's different types of risk

30:07you're looking at if you go first maybe

30:09you can get a monopoly position but if

30:13you go second you can learn from the

30:15mistakes of the first mover and improve

30:17upon them and maybe you can produce a

30:20better product than them and take that

30:24Monopoly there's certain conditions that

30:28favor first mover advantages so for

30:31example if as a pioneering company you

30:35can build a reputation that creates

30:37brand loyalty then maybe it makes sense

30:39to be a first mover so you can think

30:41about like universities for example okay

30:44so like Harvard can always say it's the

30:46first University in America and that's

30:49sort of a claim to fame that they have

30:51and that they've built over time that

30:53gives them a lot of uh reputation or

30:58right loyalty Prestige by being the

31:03first there's other situations where

31:06there's certain switching costs you

31:08might face once uh if you're a first

31:11mover you can build in switching costs

31:13so that people won't switch to other

31:15brands so you can think about like when

31:18iTunes was released as sort of the first

31:20legitimate streaming site this is a long

31:23time ago and I know nobody streams

31:25anything anymore of course because was a

31:27not streaming the first legitimate music

31:31download site which I know nobody

31:33downloads music anymore because it's of

31:35streaming makes so much more sense and

31:36it's awful to download music it's a pain

31:39the neck and

31:40everything but um what iTunes would do

31:44is it was really hard to get that

31:47music um onto other devices or other

31:52formats it was like it always just

31:54wanted to stay in its iTunes like you

31:56could you could burn a CD of it which oh

31:59gosh that was an awful time um this is

32:01lecturing on this is kind of bringing

32:03back miserable memories of the dark days

32:05of music and and how big of a pain in

32:08the neck certain things were but that

32:10that was sort of the extent of it um

32:14it's not you could transfer between

32:15computers I mean it was just like in

32:17your iTunes account and you know you

32:19could pass it around but it really

32:21didn't play well with other devices and

32:24and being passed between um to other

32:27formats was kind of stuck as a iTunes

32:29and it was

32:32protected uh perhaps you could be a

32:34first mover and patent your uh process

32:37okay and get some protection that way so

32:40that others can't copy it however uh I

32:44have a good friend who's an intellectual

32:46uh property lawyer okay he does patents

32:49and things like that and he's always

32:50saying you know uh it's really hard to

32:53patent things unless you can prove that

32:55you've come up with a novel solution

32:57that

32:58um you know there's a lot of different

33:01criteria you have to meet before um you

33:05can claim intellectual property over

33:07something I mean if it's just something

33:09like uh selling music downloads well

33:13that's not unique enough really to get

33:14you a patent it has to be like a

33:16particular process you use that is

33:20particularly Innovative in all of these

33:22other different

33:23things um so sometimes you know property

33:27rights really don't work that

33:30way uh if by starting out ahead of the

33:34game you can get ahead on the learning

33:36curve that might be another situation

33:38that would make sense um it's like all

33:42of these sort of private space companies

33:45by starting out as early as they did it

33:48makes it really hard for new companies

33:50to come in because now they have to go

33:52down that same learning curve and you

33:54know by going down as far as they have

33:56already uh they at these levels of

33:59efficiency that are much much better

34:01than any would be competitor and and

34:03should be so for a

34:06while sometimes the the first mover can

34:09set the industry's technical standards

34:11okay um for example like with things

34:18um oh such

34:23as electric cars we could say you know

34:26you get Tesla or some of these early

34:28electric cars that sort of set the the

34:31uh bar for what people would expect all

34:34right you know and then everybody gets

34:38measured off of them they can they can

34:40set the bar for you know what are

34:42charging ports going to look like and

34:44all of these other things and everybody

34:47has to adopt their ideas rather than the

34:49other way

34:51around and then there's other situations

34:53where just strong Network effects can

34:55make people uh prefer the first mover

34:59versus later movers okay so again this

35:03works with situations where

35:07um there's certain products out there

35:10where they're valuable because there's a

35:13lot of other people using that same

35:15product okay so like the example used to

35:17be like telephones even though there was

35:18other ways to communicate with people

35:20the telephone network was the best one

35:22because there's it's a network you know

35:24everybody has a telephone you can expect

35:26that you can call them and get in touch

35:27with them um things like you could

35:31imagine

35:34oh perhaps like uh social media sites

35:38okay one that's like a first mover it's

35:40really

35:41popular might attract all of the

35:44particular uh uh all of the people who

35:46are sort of on The Cutting Edge or

35:48influencers onto this particular site

35:51and then it starts to build with a user

35:55base and then after a certain point if

35:58there's new competitors no one wants to

36:00enter into no one wants to take part in

36:03those other social media sites because

36:05everybody's already on social media site

36:08a okay so for example you can think

36:11about something like maybe Facebook okay

36:15uh yes there was Myspace before it but

36:17it was riddled with viruses and had all

36:19these other awful problems you'd click

36:22on it and it' start blaring somebody's

36:24music at you and you get the back would

36:27be all flashing and there was a whole

36:29bunch of awful awfulness to it but then

36:34Facebook comes out as sort of the first

36:35legitimate social media site it gets a

36:39big user group and once it gets a large

36:41enough User Group it sort of reaches

36:43this critical mass where no one's going

36:45to even try using the other social media

36:47sites because they know well if I want

36:49to reach the most people um that I

36:52probably know then I should just use

36:54Facebook okay and you can imagine that

36:57process unfolding again with

36:59other social media apps or sites such as

37:03you know Instagram if you want to share

37:04pictures or whatever or you can think

37:07about it Snapchat if you want to share

37:09disposable pictures things like

37:14that so other circumstances

37:17that reward late movers are when the

37:21pioneering

37:22firm uh can be copied all right and

37:25there's not a lot of learning curve

37:27benefit benefits for from this

37:28pioneering firm uh there's certain

37:31situations where the pioneering firm's

37:34products are like really crude and don't

37:35live up to buyer expectations okay you

37:38can think about like MP3 players when

37:41they first came out all right the first

37:43MP3 players were these really crude

37:45things that you know I remember somebody

37:47saying like you know this thing is going

37:49to hold like seven CDs on it man all

37:52right uh so 140 songs on this thing um

37:58and you know no one remembers any of

38:01those old original MP3 players

38:05instead what happened is Steve Jobs saw

38:08those and older ones and realized oh

38:11well we can make something that's way

38:13better than uh these MP3 players and

38:17they made the the iPod all right was

38:19huge improvement over anything on the

38:21market and those started to take off

38:23really quick all right and did meet

38:25buyer expectations okay was much much

38:28more than than seven CDs on a single MP3

38:32player

38:34goodness there's certain situations

38:37where perhaps the industry is just

38:39evolving very fast okay um

38:43and it makes more sense to be a uh a

38:47fast follower in that case all right you

38:49can try to Leap Frog the first mover

38:52okay so the first mover makes these

38:54particular products they seem a little

38:56bit crude but the industry still in an

38:58evolution process and you're able to

39:00LeapFrog them to the next stage and

39:02improve upon whatever they had

39:05made um other situations involve like uh

39:11when it's really unclear as to which

39:15sort of format or product is is going to

39:19be the ultimate winner so again in the

39:23early days of MP3

39:25players before iPod There Was MP3

39:28players that used like memory cards and

39:32stuff like that okay it was internal and

39:34you would have to plug your mp3 player

39:36into your computer and move songs onto

39:39it and there was also something called a

39:41mini dis player that would play these

39:44things that

39:45looked kind of

39:48like like a little hard drive sort of um

39:53but they could fit tons and tons of

39:55Music on them um and by that I mean like

39:58a few CDs on this thing that looked like

40:01a little hard drive I guess and you

40:03could buy multiples of them and the idea

40:06was that you

40:08could store a whole lot of music on each

40:11of these little hard drivey things um

40:14these mini disc as they were called and

40:18that was how you would play your MP3s

40:20okay you had this mini displayer you

40:22would put all those things in all right

40:24versus do you want to store it directly

40:26on the

40:28the MP3 player and it was something

40:30internal to it okay um well those two

40:33formats stuck around for a while and it

40:36was kind of unclear which one would win

40:38I remember my best friend had this MP3

40:41player I remember my brother had a mini

40:43dis player and thinking at the time I

40:46think the mini dis player is what's

40:47going to stick around but uh you know

40:50time told us that and probably because

40:52it was more similar to what you would

40:54expect from CDs and stuff like that um

40:57but you know It ultimately turned out

40:59that MP3s were the more um or the

41:03internally self-contained MP3 player was

41:06the format that was going to survive and

41:09you know if you were entering into that

41:11industry uh you might have wanted to

41:13wait until you see okay who's going to

41:16ultimately win minidisk or the internal

41:19hard drives and it was the internal hard

41:24drives other situations is just you know

41:27if customer loyalty is low first mover

41:29skills can be copied all right those are

41:32another situation where it pays to be a

41:34a follower fast

41:38follower so to be a first moover or not

41:41you might want to ask yourself these

41:42questions um does it depend Will the

41:47Market not take off until there's a

41:50number of complementary products or

41:52services that become that start evolving

41:55okay so like Electric cars um if you're

41:59the first company to make those uh a lot

42:01of people used to think you know

42:02electric cars are never going to take

42:04off because you can't leave your house

42:06you know you have your charging station

42:07at your house the car has a range of you

42:10know in the early days 100 miles or

42:12something like that so you can only go

42:14100 miles from your house and then you

42:16got to go back you know how's that ever

42:17going to take off um and it was BEC

42:21people started saying well maybe we can

42:22have these like charging networks and

42:24those have slowly started to evolve and

42:26become more places but as the charging

42:30networks start to get into more and more

42:33places and they're charging bays and

42:34parking lots and things like that the

42:37idea of owning electric car starts to

42:39become a more and more reasonable idea

42:41for a lot of people um and if you're

42:45going to start producing electric cars

42:47you know there might not have been a lot

42:49of demand in those early days and as it

42:50starts to grow you can sort of see okay

42:53well here's the complimentary resources

42:56and products and servic that are

42:57becoming available um you know maybe now

43:00it starts to make sense for us to enter

43:02into this industry given that demand's

43:04going to grow we know you know sort of

43:07what the format and what these things

43:09look like and what people expect out of

43:13them same thing with like new

43:15infrastructure um will buyers need to

43:18learn new skills or adopt new behaviors

43:21sort of a similar question you can think

43:23about with electric cars you know how

43:24long is it going to take before people

43:26really just understand that yeah this is

43:28all a very normal process to get this

43:31charging and Port installed in your

43:33house and to have these ports and

43:36different parking lots and things like

43:40that and also you know is there a a

43:43influential competitor that could derail

43:46your position um you know is there a big

43:49company out there that's waiting like

43:51apple was with the MP3 players to sort

43:54of turn the industry upside down is

43:56there somebody who's been discussing and

43:59flirting that with the idea of entering

44:01into this industry um you might want to

44:03wait a little while and see what they're

44:05going to

44:09do other things you can do to strengthen

44:12your firm's Market position is you can

44:15work with its scope of O operations

44:18okay so the scope of operations refers

44:22to how expansive the company is both

44:27vertically in the value chain you know

44:29how much of the process of changing

44:32those raw materials into end products

44:35and getting those end products to

44:36customers is done in house and also the

44:39breath of service The Firm offers okay

44:42product line you know how many different

44:44types of products do they make and

44:45services do they

44:47offer it also refers to the geographical

44:50coverage of the firm you know is it just

44:54in in one local region or is it

44:58Global all right it sort of and it's

45:02just size all right how big of a company

45:04is this thing

45:06also so one way you can expand your

45:09scope of operations is through mergers

45:10and Acquisitions okay and mergers and

45:14Acquisitions refers

45:16to either the merging of two firms that

45:20are s of coequal in

45:22size uh for example like Fiat and

45:25Chrysler merge together okay

45:27and they merged into a single corporate

45:30entity that's now called Fiat Chrysler

45:32all right they take on a new

45:34name Acquisitions refer to when one

45:37company buys out another okay so like

45:40when you have an industrial beer company

45:42buy somebody up like Founders or Goose

45:44Island okay clearly uh Founders or Goose

45:48Island is owned by somebody right it's

45:51not that they're co-equal in

45:55size so mergers and Acquisitions can be

45:59used and it's often just abbreviated as

46:02m& for mergers and Acquisitions so m&a

46:05can be used to expand your scope of

46:08operations both vertically you know you

46:11can buy up a distributor supplier or

46:14horizontally you can buy up a competitor

46:16or complimentary business pro uh

46:19platform you know you could do that

46:25also so

46:27the Strategic objectives of m& is

46:30usually that you're going to find some

46:32sort of cost efficient operation by

46:36combining these two firms together okay

46:40you might think well you know we could

46:41share infrastructure and bring costs

46:43down somehow or these two um you know

46:47just work really well together you know

46:50they're complimentry or we'll get access

46:53to these new resources that are going to

46:55help improve our line of products you

46:58know there's a lot of different

46:59rationals for mergers and Acquisitions

47:02at other times it's you're trying to

47:04expand your geographical coverage so

47:06like Fiat

47:08Chrysler both of the executives of those

47:11companies re Fiat realized okay we've

47:13been having a hard time getting sales in

47:15North America Chrysler realized we have

47:17a really hard time selling our cars in

47:20Europe if we merge together then we can

47:23expand both of our geographical

47:25coverages all right

47:27sometimes you might want to extend into

47:30uh new product categories okay so like

47:33when anheiser Bush wants to expand into

47:35the craft beer product category they can

47:38buy up those craft beer companies all

47:40right gaining quick access to new

47:42technologies resources capabilities so

47:45like

47:47um you know for example with apple all

47:50right uh they make a lot of really

47:55well-designed consumer electronics and

47:58when they wanted to get access to a

48:01really well-designed consumer uh

48:04headphone they realized okay well we can

48:06just buy up Beats by Dre all right

48:08that's a company that fits sort of our

48:11vision and Mission as far in terms of

48:13what types of products we want to make

48:16and would just play well with us so they

48:17buy up that company and have access to

48:20the resources and everything

48:23that existed within Beats by Dre

48:30often mergers and Acquisitions fail or

48:33don't produce the results people were

48:34looking for

48:36okay um you know you merge these two

48:39firms together and you realize that it's

48:41really hard to integrate the two okay um

48:46systems and processes and everything

48:48that you thought you could easily just

48:51blend together don't match up that well

48:54and uh the cost saving is a lot smaller

48:57than you

48:58expected often sort of coordinating the

49:01activities of two firms requires a lot

49:04extra

49:06managerial

49:08um effort and you start to lose uh cost

49:12savings because yeah maybe it's more

49:14efficient to combine the two but to

49:16combine the two you really need to

49:17manage the process well

49:20otherwise they don't fit together as

49:22well and you end up having this sort of

49:25loss because of these sort of

49:26diminishing turn returns to

49:29management um sometimes the gains just

49:32never really materialize uh at

49:36all problems you have uh typically it's

49:40cultural problems okay so you buy up a

49:43company thinking it's going to just fit

49:45in really well with your with your uh

49:48business

49:49portfolio um you know you're talking

49:51about different corporate cultures

49:53different types of managers different

49:55missions and visions and they just don't

49:58work well together often you know you

50:01get these sort

50:02of philosophical differences um where

50:06the two companies just can't be Blended

50:08together very well management styles and

50:11everything's clash and they just fall

50:13apart other times you know you buy up a

50:16company they don't like the direction

50:18that the that their new parents going in

50:21so all the good employees quit all right

50:23you lose a lot of the valuable

50:25competitive resource ources of human

50:28capital um and then you know it's just

50:32difficult to meld the two companies

50:34together all right that requires a lot

50:36of managerial capability that some firms

50:38just don't

50:41have so vertical integration strategies

50:45uh vertical integration of

50:47course refers to how many um how much of

50:53the value chain that company actually

50:56carries out out from getting those raw

50:59materials to transforming them into

51:01goods and services to getting them in

51:02the hands of the customer all

51:05right um if a firm's totally vertically

51:08integrated it means they do everything

51:11all right everything's done inhouse and

51:14the products are sold directly to the

51:16customer the vertical integration

51:19strategy is how much do you want to be

51:24involved with all of those different

51:26steps in the value chain is there any

51:29that you think you could do better by

51:31offloading those to somebody else all

51:34right Outsourcing

51:37them so firms uh will vertically

51:40integrate in all sorts of different

51:41levels okay there's some firms maybe out

51:45there that are fully integrated all

51:47right and they participate in all stages

51:49of the value

51:51chain uh I say maybe they're out there

51:54because it's really hard not to be

51:56taking something in from A supplier or

51:59some raw materials I mean the best

52:01example I can think of it's like

52:03different types of organic farms okay

52:05where they grow the grass they feed to

52:08their cows

52:10and then uh you know they butcher their

52:14cows on site and sell directly to the

52:16customers okay uh maybe you could in

52:19that case but I mean you're still going

52:22to be buying tractors and some of

52:25the some pieces that you need tools and

52:28things like that so it's hard to say I

52:31mean very very few if any examples of a

52:34firm that's fully integrated and and

52:36self-contained okay I mean even the the

52:39most extreme example of an organic

52:41farmer I can think of is is taking in

52:45you know employees from the outside I

52:47guess they could have their family

52:48working there but you you're going to

52:50have a car you're running there or a

52:52truck or something that you've bought

52:54from another company so you know it's

52:56like you're you're producing everything

52:58entirely self-contained so maybe it's a

53:00concept more than

53:02anything most firms are in some state of

53:05partial integration okay um and what

53:09this means is

53:11that they select the stages of the value

53:14chain that they operate in okay or the

53:16vertical chain all right so maybe they

53:20purchased their raw materials and

53:22everything from an external

53:25party uh um they do the uh they process

53:29those raw materials into the end Goods

53:32but then they sell them to a distributor

53:34to get to the into the hands of the End

53:36customer that would be like a partially

53:38integrated firm okay some firms are used

53:42tapered integration strategies where

53:45they do a mix all right so like um one

53:49example of this is like uh professional

53:52baseball

53:53teams some of them they they often use

53:56tapered integration strategies for

53:58getting their players okay so like their

54:00players are one of the main resources

54:02that a professional baseball team uses

54:04to uh generate entertainment right you

54:08go to watch the team play and you know

54:10that's how the sort of organization

54:12exists so to get those players they'll

54:15use tapered integration strategies in

54:17the sense that some of the players who

54:20end up playing in the Major League team

54:23come through developmental leagues okay

54:25it's like they reduce those players they

54:27build them over time by honing their

54:29skills in the minor leagues before they

54:31come up into their uh Major League other

54:35players they'll purchase on the open

54:37market all right they'll you know try to

54:41steal players from other teams look for

54:43free agents that kind of stuff okay that

54:45would be like a tapered integration

54:47strategy all

54:49right um so there's cases where firms

54:51will produce some components in house

54:54and they'll buy those exact same comp

54:56components from A supplier or they'll do

54:58some things inous and they'll do the

54:59exact same thing also through a

55:01distributor or supplier all right

55:05um you know you can think about

55:07different types of other products where

55:10maybe they have their own store where

55:13they sell their products exclusively but

55:14they also sell them from through a

55:16distributor or on Amazon also that's

55:18tapered integration

55:20too so what are the benefits of vertical

55:23integration well there's a handful of

55:25them one is you sort of add to a firm's

55:29technological capabilities and learn all

55:31right so I can give you like an analogy

55:33for this um most economists if you ask

55:38them you know is it worth it to work on

55:39your own car they'll tell you no it's

55:42not worth it to work on your own car

55:44it's more it's a better deal

55:48to go to a mechanic and pay the mechanic

55:52to fix your car and where you're better

55:55off spending time is just working extra

55:59at your job converting your labor into

56:02money working at your job which should

56:05be the most uh lucrative place where you

56:07can turn your labor into money and ping

56:10the mechanic all right so often

56:14economists and those types of people

56:15will say no because the opportunity cost

56:17of working on your car doesn't outweigh

56:20the value you would get from just going

56:22to work all right and that's why it

56:24makes sense not to work on your own car

56:26and just pay somebody else to do

56:29it well um if anyone's ever watched

56:32Mighty Car Mods which is a show about

56:34working on your own car the guy will

56:36tell you you know the yeah that argument

56:40is true to an extent but what those

56:43people who are overlooking that tell you

56:45this is they don't realize they don't

56:47value what you learn in the process okay

56:51and this is something that any hobbyist

56:53should tell themsel whether it's true or

56:55not is that you learn a lot and the

56:58value isn't what you save it's also what

57:01you've taught yourself and what you've

57:02learned and how you can solve similar

57:05problems in the future all right so like

57:08you know if you plant a garden granted

57:11you could grow tomatoes for cheaper or

57:13granted you could buy tomatoes for

57:15cheaper at Walmart or wherever but if

57:17you grow them at home

57:20um yeah you you you might be out a

57:23little bit more money it was probably

57:24more expensive for you to grow those

57:26Tomatoes than it was to to buy them at

57:29Walmart but you start learning a lot

57:30about plants okay you realize you know

57:33how you can grow things you can help

57:35people in the future who are having

57:37trouble growing plants um you know if

57:40you're ever in some survival situation

57:42we growing plants for whatever reason is

57:45necessary for your food source well now

57:47you have a leg up because you've built

57:48that skill all right you've learned

57:50about this thing um and the value of

57:54doing it yourself isn't so much the cost

57:56savings it's that you teach yourself

57:58something you teach yourself a lesson

58:00that you can use later on down the road

58:04okay that person who's fixed their car

58:06now when they break down later on and

58:08they're on the side of the highway or

58:09something or you know they're in a

58:11position where they can't get to the

58:12mechanic well they've learned something

58:15from working on their own car and maybe

58:17they can fix it and save themselves or

58:19is somebody who's you know always just

58:22taking it to the mechanic because they

58:24beli the opportunity cost logic IC um

58:27can't do that same thing with vertical

58:31integration you know your company learns

58:34a lot by producing things in house maybe

58:37you could do it more efficiently by

58:39Contracting out and buying those

58:41products on the open market but

58:42sometimes producing your own raw

58:45materials you have these breakthroughs

58:47all right it's sort of a R&D activity

58:49just by doing something and you learn

58:51about how you could solve problems um

58:54and and maybe some of those techniques

58:56you learn help you down the road in the

58:58future so that's one benefit to it

59:01another thing is it strengthens your

59:03competitive position all right same

59:05thing with uh working on your own car if

59:08you know how to work on your own car and

59:10then you go to the mechanic and let's

59:13say you're just trying to save money at

59:14this point you've already fixed this

59:16problem before but now you realize okay

59:18well I can fix that on my own if an

59:20emergency ever happens I know um but now

59:24uh time is of the s since I really don't

59:26want to spend 3 hours working on my car

59:29I'll just take it to the mechanic um if

59:32that mechanic tells you well I charge

59:35you know x amount of dollars and they

59:38try to overcharge you well you have

59:40another alternative all right it can

59:42strengthen your your strategic position

59:44or your competitive position because

59:46you're less reliant on those suppliers

59:49all right you can you're more self

59:51sustainable all right you're able to

59:53take care of yourself um less reliant on

59:57your suppliers you're less reliant on

1:00:00others which can you know help you in

1:00:03any sort of competitive

1:00:05situation another thing is you know

1:00:08maybe you really are super efficient at

1:00:11supplying yourself okay maybe there are

1:00:13some ways where you can do it more

1:00:16efficiently than the open market all

1:00:19right you can do it more efficiently

1:00:20than you could

1:00:22buying uh those supplies from A supplier

1:00:25or maybe you're a really good home

1:00:27mechanic we'll say going back to that uh

1:00:30metaphor and you actually can do it more

1:00:33cheaply than it could be done um by

1:00:36taking your car into the mechanic you're

1:00:37faster and whatever else so you know

1:00:41there's certain situations where it

1:00:42makes sense to vertically integrate

1:00:44basically you can learn from it makes

1:00:47you less reliant on others and there's

1:00:49certain situations where it might be

1:00:51more efficient to produce this thing

1:00:54inhouse than it is

1:00:56to um try to purchase it from someone or

1:01:00Farm it

1:01:05out

1:01:06so integrating backwards to achieve uh

1:01:10greater

1:01:12competitiveness so there's some cases

1:01:16where uh usually the

1:01:19reason that Outsourcing a given activity

1:01:24is more cost effective than producing it

1:01:28inhouse is because when you Outsource it

1:01:30to the market the people you're buying

1:01:33that component from are usually working

1:01:36at a greater uh scale than you are and

1:01:40because of that they're more efficient

1:01:43from the scale economy so for example

1:01:46there's no auto manufacturer that makes

1:01:48their own tires that I'm aware of all

1:01:50right they all buy tires from a tire

1:01:53company and why do they do that well

1:01:56well even if Ford makes I don't know how

1:02:00many vehicles they make a year they make

1:02:01a lot though all right Ford makes you

1:02:04know many many many vehicles per year

1:02:07however many vehicles they make per

1:02:10year um the amount of tires that they

1:02:14make or that they need is going to be

1:02:17less than the amount of tires that a

1:02:19tire company produces all right over the

1:02:22same

1:02:23span so those higher companies produce

1:02:27more tires than Ford would need and

1:02:30because they produce more tires than

1:02:32Ford would need they can operate at a

1:02:34much greater

1:02:35scale they can get toward that sort of

1:02:38minimally efficient scale that Ford

1:02:40can't um and it makes sense for Ford to

1:02:43buy those tires from the company that

1:02:47has the economy of scale all

1:02:50right now there's sometimes when maybe

1:02:52you're a really big

1:02:54company that you might have the same

1:02:57scale economies as the out out as the

1:02:59outside supplier and it makes sense to

1:03:02backward integrate and self-supply often

1:03:05it

1:03:06doesn't Okay

1:03:09um other things are reasons you might

1:03:12want to integrate backward

1:03:15is because you

1:03:19can make really good quality products

1:03:22okay or you can make really good quality

1:03:24components or inputs right you might

1:03:26look at what the supplier does and

1:03:28realize that okay they're cutting some

1:03:31Corners that we just can't do you know

1:03:33if we make this inh house it's like that

1:03:35if you want something done right you

1:03:36have to do it yourself well sometimes

1:03:39companies might say that and realize

1:03:40okay well no one's really going to build

1:03:43something as good as we can and it makes

1:03:45sense for us to do it in house all right

1:03:47there's going to be no drop off in

1:03:49quality okay and this is going to give

1:03:50us a differentiation based competitive

1:03:53Advantage all right

1:03:56so for example

1:03:58uh the car company kig seg uh advertises

1:04:02that about themsel you know they say you

1:04:03know we make every single one of our

1:04:05components except for the tires make

1:04:08every single one of our components but

1:04:09the tires in house

1:04:13um and you know everything that that is

1:04:16built here even the screws and

1:04:17everything have our logos on it it's all

1:04:20made to built to go into these

1:04:22particular cars um and it's of the very

1:04:25highest quality possible and it's all

1:04:27meant to fit together so you can count

1:04:30on our cars to always work and work

1:04:32exactly the way that they were designed

1:04:36to

1:04:38so some reasons you might want to

1:04:40integrate backward uh one to get some

1:04:44power over your supplier gets you in a

1:04:46better bargaining

1:04:47position uh it you might reduce cost

1:04:51okay if you're producing at a very large

1:04:53level maybe maybe you you you get better

1:04:56cost by producing in house all right or

1:04:58maybe you're really skilled at doing it

1:04:59and it's cheaper for you to do it

1:05:01inhouse rather than to farm it

1:05:03out um you can also you know when you're

1:05:07self-reliant you can count on yourself

1:05:09pretty well it gives you Assurance of

1:05:10the supply and flow of critical inputs

1:05:13and it can also help protect proprietary

1:05:15knowhow okay often

1:05:18suppliers you know they're probably

1:05:20working with a handful of your Rivals

1:05:21too because they're just suppliers and

1:05:23sort of neutral so if you're asking them

1:05:25to build something or create some sort

1:05:27of custom

1:05:28components and they're also working with

1:05:31the your competitors you know you never

1:05:34know if there's going to be some leak of

1:05:35information and keeping it in the house

1:05:37can keep it uh a lot more

1:05:44proprietary now there's also reasons to

1:05:46integrate forward okay um you can lower

1:05:51costs that way all right by getting

1:05:53Channel intermediaries and everything

1:05:55out of the away if you sell direct to

1:05:57customers um often that's a lot more

1:06:00efficient than trying to sell through a

1:06:02big box store all right there's certain

1:06:04things that big box stores are going to

1:06:06want that sort of just increase the cost

1:06:10okay like if you want to sell the

1:06:11Walmart you have to be selling them

1:06:13tractor trailer loads every time okay

1:06:16they won't take a pickup load truck load

1:06:18size load of of products all right so

1:06:22you know that adds another layer of

1:06:24costs you got to rent one or get

1:06:25somebody who has a who or or own a

1:06:28tractor trailer load and you know

1:06:29there's just different things that make

1:06:32it more expensive to go through that

1:06:35channel

1:06:36intermediary um also again you know it

1:06:39helps solve any sorts of problems with

1:06:42the bargaining power of buyers okay like

1:06:44a lot of craft Brewers will tell you we

1:06:47really don't like selling through beer

1:06:49distributors okay we would rather

1:06:51self-distribute because then we could

1:06:53sell you know small quantities to liquor

1:06:56stores and

1:06:57individuals um who are at a lot weaker

1:07:01bargaining positions rather than selling

1:07:03you know a very large quantity to a

1:07:06distributor at every time who you know

1:07:09knows that we need them a lot and if we

1:07:12don't have them then you know that

1:07:14they're 95% of our business or more and

1:07:17if we lose them then we're in hot water

1:07:20um and they can drive these sort of

1:07:21Hardball deals with

1:07:24us also so you can increase your product

1:07:27differentiation by uh forward

1:07:29integrating you know you can how you

1:07:32offer your products and sell them and

1:07:33present them you can customize all of

1:07:35that to fit your image uh you can

1:07:37customize that whole experience and make

1:07:40sure that it goes according to your own

1:07:46plans there's a lot of disadvantages

1:07:49also with vertical integration um

1:07:53there's a lot of risk associated with it

1:07:55because we're talking about big

1:07:58Investments okay

1:08:00um in terms of production and all of

1:08:04that and when you make those Investments

1:08:07if you want to back out of it well now

1:08:09you got to sell all that stuff off and

1:08:11fire the employees or repurpose the

1:08:13employees you hired to uh run those

1:08:17programs okay um and that's sort of

1:08:21risky and that's hard to do all right

1:08:24it's a lot easier to work with a

1:08:26supplier and you know if things don't

1:08:28work out between the two of you you can

1:08:30find a new supplier um

1:08:34versus where if is if you own something

1:08:37that's not a very flexible situation all

1:08:41right if there's new technological

1:08:43standards well you're stuck with all the

1:08:45equipment for the old technology all

1:08:48right so that's a problem also now you

1:08:51got to upgrade this or sell it or find

1:08:53some way to repurpose it to to be up to

1:08:56date so now you've taken on that risk

1:08:58and

1:09:00responsibility again there's you lose a

1:09:04lot of flexibility that's sort of the

1:09:06overall theme is when you vertically

1:09:08integrate you lose flexibility you find

1:09:11that buyers have a shifting interest

1:09:13well you've already purchased all of the

1:09:15tooling and you know capital and

1:09:18everything to serve the other interest

1:09:21that's now out of date and you're stuck

1:09:23with it

1:09:26um other problems you can have is the

1:09:31uh efficient production of internally

1:09:34produced components and parts can be

1:09:37hampered by trying to match them to the

1:09:41capacity you need so again if we go back

1:09:43to the amount of tires you

1:09:45need to produce to be minimally

1:09:48efficient versus the amount of cars that

1:09:50Ford likes to produce you run into

1:09:53capacity matching problems so what I

1:09:55mean by that is you have to produce more

1:09:59tires than Ford produces

1:10:02cars for you to be producing tires at an

1:10:06efficient rate however now you have an

1:10:08excess of tires um to your cars so what

1:10:13do you do do you try to sell do you try

1:10:14to run an auto company and a tire

1:10:16company on the side um but in any event

1:10:20the the problem is essentially that the

1:10:22minimally efficient scale for producing

1:10:24components

1:10:27is going to be different across the

1:10:29board okay so maybe to produce tires at

1:10:33an efficient rate you have to

1:10:35produce 10 million tires a year but to

1:10:38produce brakes at an efficient rate you

1:10:40only have to produce 5 million all right

1:10:42so now do you produce the extra breaks

1:10:45just because you can or what do you do

1:10:47here do you try to produce as many

1:10:50vehicles as

1:10:51[Music]

1:10:53your component production for the uh

1:10:56product that has the highest minimally

1:10:58efficient scale you run into those types

1:11:00of capacity matching problems and it can

1:11:03make you inefficient whereas it's easy

1:11:06just to buy from A supplier that's

1:11:08already producing at the efficient

1:11:13level so there's certain pros and cons

1:11:16that go with vertical integration and

1:11:18this is something to weigh anytime

1:11:19you're considering is it worth our while

1:11:22to integrate or not um you you know

1:11:25first is integration just consistent

1:11:28with your strategy is it going to lower

1:11:29your cost or increase your

1:11:31differentiation if not it's better off

1:11:35just to go with a uh to farm out that

1:11:38activity um how's it going to impact

1:11:41your uh flexibility response times all

1:11:46right that's another thing to question

1:11:49um is flexibility important or is you

1:11:53know just being super efficient and sort

1:11:56of customizing the process to fit your

1:11:59business more important all right that

1:12:01can be something else to

1:12:02consider um you know what are the

1:12:05administrative costs incurred by

1:12:08coordinating the operations across uh

1:12:11more value chain activities it's not

1:12:14like just because you have the products

1:12:16and or the tools and everything to

1:12:19produce uh you some components or

1:12:22whatever that they just run freely they

1:12:24require um uh a lot of extra managerial

1:12:29attention to operate efficiently and you

1:12:32know what kind of cost are you incurring

1:12:34on that

1:12:35angle and you

1:12:37know also just you know how costly is it

1:12:41going to be to incorporate this new

1:12:44piece to your Val value

1:12:49chain at times again it makes sense to

1:12:52narrow the scope of operations by

1:12:54Outsourcing ing all right so Outsourcing

1:12:58often makes sense because there's a lot

1:13:00of cases where um outside Specialists

1:13:04are going to be operating at a larger

1:13:06scale than you are and they could be

1:13:08they should be often more efficient than

1:13:11you are at doing uh this process

1:13:15yourself so it makes sense you know when

1:13:17it can be done more cheaply by

1:13:19specialist it's not crucial to your

1:13:21sustainable competitive Advantage all

1:13:23right you're not like Hollow following

1:13:25out the soul of your

1:13:27organization um or losing some piece

1:13:31that was really Central to what you were

1:13:33doing so if you're a you know if your

1:13:36whole business Mission and and and value

1:13:40proposition and everything the customers

1:13:41is that you uh

1:13:44locally raise your vegetables and cattle

1:13:47and whatever uh if you Outsource that

1:13:50piece um people might start not buying

1:13:54your your

1:13:55pitch anymore is being credible okay

1:13:57they'll start thinking well I think they

1:13:59were just lying to us you know there's a

1:14:01lot a lot of this doesn't seems sort of

1:14:03self-conflict

1:14:06um it makes sense if flexibility is

1:14:10prioritized to to start Outsourcing all

1:14:13right um if there's the potential of a

1:14:16change in buyer taste then Outsourcing

1:14:19starts to make more sense because you

1:14:21know gives you more flexibility to deal

1:14:23with that all right and also Outsourcing

1:14:26can allow you to you know concentrate on

1:14:29the core of your business okay so I used

1:14:32to my sister used to run a Fitness

1:14:34business for a long time and she would

1:14:36Outsource a lot of the sort

1:14:40of bookkeeping activities and that kind

1:14:43of stuff and it made a lot of sense for

1:14:45her to Outsource that type of

1:14:47administrative activities um because you

1:14:50know there there's somebody else sure

1:14:52she could have taken the time and really

1:14:55familiarized herself with how

1:14:58to track all of the numbers and

1:15:01everything and you know to still it down

1:15:04and do all of that type of work herself

1:15:07but she realized well you know the the

1:15:10amount of time I dedicate to that I'm

1:15:12sort of taking away from the core of my

1:15:14business of interacting with customers

1:15:17developing new fitness programs um you

1:15:20know my time is much more better spent

1:15:23on those activities than it is dealing

1:15:27with the numbers and the bookkeeping

1:15:29side of it so it made sense just to

1:15:31Outsource that stuff somebody could give

1:15:33it those reports to her and then she

1:15:35could make decisions or do whatever

1:15:37based off of that but she could focus on

1:15:39the sort of core aspects that made the

1:15:42most sense to

1:15:46her so again there's some risk of

1:15:49Outsourcing you can hollow out the

1:15:51resources and

1:15:52capabilities that the firm needs to a

1:15:55master of its own destiny okay you

1:15:57Outsource too much and you're kind of

1:15:59just you yourself are basically a

1:16:01middleman at at some point all right

1:16:04you're no longer the master of your own

1:16:05destiny okay you've reduced your

1:16:08self-reliance down to Reliance on a lot

1:16:11of other uh

1:16:14suppliers you start to lose control of

1:16:16the monitoring and controlling of

1:16:18activities okay um you know when you

1:16:21Outsource a particular activity to

1:16:24somebody else

1:16:25uh you're banking on their quality okay

1:16:28if there's certain things that you're

1:16:30really particular about maybe you don't

1:16:32want to Outsource that all right and we

1:16:34Outsource a lot of things in our daily

1:16:36life and come up with these same sorts

1:16:38of excuses too so like I had a friend

1:16:40once who said he he outsourced his lawn

1:16:43care by that this means he hired a long

1:16:45guy and was talking about yeah you know

1:16:49uh he hit some of my my siding and tore

1:16:52it up with the weed whacker and did all

1:16:55these other things and you after that I

1:16:57realized that I was just gonna have to

1:16:59do it myself every time after I had a a

1:17:01couple bad experiences and this is a guy

1:17:04who's really particular about his yard I

1:17:06mean granted hitting the sighting you

1:17:08wouldn't expect that from any long guy

1:17:10but

1:17:11anyways sometimes if you want things

1:17:13done a very particular way best to do it

1:17:16yourself rather than Outsource

1:17:18it

1:17:20um and then there's other times where

1:17:23you know those out iders just don't have

1:17:26the same incentives all right

1:17:31uh to to make any sorts of like

1:17:35investment specific needs to Outsourcing

1:17:38the firm's value chain okay

1:17:40so often your suppliers might be

1:17:43somewhat worried about you um trying to

1:17:46take advantage of them okay asking them

1:17:49to build these really customized

1:17:51products all right and asking them to do

1:17:55all of this different training and stuff

1:17:57so they can exclusively work with you

1:18:00well sometimes those suppliers get leery

1:18:03of making these decisions and what they

1:18:04do is you start asking them to you know

1:18:08take training and do all these things so

1:18:09they can work with your company and and

1:18:11fulfill your needs and what they're

1:18:14doing is they're getting increasingly

1:18:15worried that well what if we make all of

1:18:18these changes and we waste all of this

1:18:19time to serve this one customer and then

1:18:23you know down the road they start asking

1:18:26for lower and lower prices um we're in

1:18:29trouble because we've made all of these

1:18:30specific Investments to work with them

1:18:33right now um and that puts us in a spot

1:18:37of vulnerability so

1:18:40sometimes those uh suppliers um that you

1:18:44might try to Out Source work to just

1:18:46won't work with you on certain things

1:18:48because they're worried about or they

1:18:50will charge a very high price to take on

1:18:52the extra risk because they're worried

1:18:55about their bargaining position in the

1:19:00future one tactic you can use that's

1:19:03maybe sort of a happy medium in between

1:19:06Outsourcing

1:19:08and uh integration could be a strategic

1:19:11Alliance so a strategic Alliance is a

1:19:14formal agreement between two or more

1:19:16separate companies where they work

1:19:18cooperatively toward some particular

1:19:21objective all right

1:19:25so for example

1:19:29um you can think about different types

1:19:31of strategic alliances out there that

1:19:33have existed uh every now and then

1:19:36you'll have like you

1:19:39know one common one that you see in like

1:19:42the craft segment is there'll be like a

1:19:45a coffee house and a brewer all right

1:19:49and they'll sort of collaborate together

1:19:51to make things like coffee Porters and

1:19:54stuff like that okay they'll have this

1:19:56sort of Alliance to work with each other

1:19:58all right there was one in Louisiana

1:20:01that I knew of where that they would

1:20:02work together uh where it was the local

1:20:05coffee roaster actually um had bought

1:20:09the old brew house from the local Brewer

1:20:11and they would have all these coffee

1:20:13beer collaborations between the two of

1:20:15them and they would uh those two

1:20:18companies work

1:20:20together now a joint venture is where

1:20:23you have two companies come together um

1:20:27two or more companies come together and

1:20:30form a separate independent corporate

1:20:33entity and they draw the profits they

1:20:35split the profits between that separate

1:20:37corporate entity between themselves

1:20:41okay

1:20:42so an example of this would be like Hulu

1:20:47all right Hulu is owned by a lot of

1:20:49different media companies okay it's

1:20:52owned by Fox it's owned by Disney it's

1:20:55owned by

1:20:58uh you name it all right I mean NBC all

1:21:02the these different media companies have

1:21:04a stake in Hulu and they all came

1:21:08together and formed this joint venture

1:21:11that's a streaming

1:21:13Channel and they all draw the profits

1:21:15from the streaming Channel according to

1:21:18whatever their percentage of ownership

1:21:21is so for an alliance to be Strate iic

1:21:25all right needs to fill some sort of

1:21:28purpose okay some sort of purpose that

1:21:31fits with the company's overall strategy

1:21:34all right

1:21:36so you know it needs to enhance their

1:21:40sort of core competence in some way uh

1:21:43remedy a

1:21:45deficiency

1:21:47avoid you know different types of

1:21:49competitive threats those kinds of

1:21:51things make them a more differentiated

1:21:53Company by working together so like you

1:21:56know for example in the beer example I

1:21:58was discussing earlier where was The

1:21:59Craft Brewer and the specialty Coffee

1:22:01Roasters that came together and started

1:22:03working with each other well that's kind

1:22:06of a strategic Alliance because both of

1:22:08them wanted to pitch their we're local

1:22:10We're The Local Company you should buy

1:22:12from us because you know we're born in

1:22:15bred Louisiana this that and the other

1:22:17thing um so by working with each other

1:22:20it gives them both a little bit of

1:22:22legitimacy all right people say okay

1:22:24well yeah that's that's a super

1:22:26legitimate craft business teamed up with

1:22:29another one um and it appeals to the

1:22:32same types of buyers and it just makes

1:22:35sense it fits both of their strategies

1:22:37because they're both Pi playing the

1:22:39local pitch all

1:22:41right that's what makes a strategic

1:22:44Alliance versus just you know two

1:22:46companies that are kind of working with

1:22:48each other there needs to be some sort

1:22:49of strategic element to

1:22:52it strategy enhancing Behavior we should

1:22:57say so the benefits of alliances and

1:23:00partners are well they minimize some of

1:23:03the problems with vertical integration

1:23:05because now you don't own the particular

1:23:08technology okay or equipment and

1:23:11everything so it's it keeps the

1:23:14flexibility um and also ideally you have

1:23:20some incentives to work with each other

1:23:22okay so

1:23:24you don't have to worry as much about

1:23:26some of those supplier problems all

1:23:28right often strategic alliances and

1:23:30Partnerships will be govern through

1:23:33different types of uh mechanisms to make

1:23:35sure that the companies work together

1:23:36and have a vested interest in each other

1:23:39so maybe they'll have very lengthy

1:23:43contracts and everything spelled out to

1:23:46discuss exactly what they expect out of

1:23:48each partner at other times they might

1:23:50have something like what's called an

1:23:51equity Alliance where they buy a large

1:23:54share of stock in each other so they

1:23:56have a a financial vested interest in

1:23:58each other um or if you have a joint

1:24:02venture again you have incentives to

1:24:04work together you have a vested interest

1:24:06and seeing that that joint venture does

1:24:08well so it can get rid of some of those

1:24:11supplier issues and all and also it's

1:24:15more flexible than outright integrating

1:24:18or buying up somebody through a merger

1:24:20and

1:24:22acquisition so it's useful for extending

1:24:24your scope of operations into you know

1:24:27International expans EXT expansion or

1:24:32different types of diversification

1:24:33strategies you know it can give you

1:24:35quick access to

1:24:36different uh regions and expand your

1:24:40product line very

1:24:43quickly

1:24:46um it helps you ideally partner up with

1:24:49somebody who's very competent so you

1:24:51know it reduces the need to be entirely

1:24:55self-reliant um and you can bring in

1:24:58somebody else who's strong to work with

1:24:59you and you know there's some benefits

1:25:01in that regard you keep your

1:25:04flexibility um so there's a lot of

1:25:07benefits to strategic

1:25:11alliances so why are they advantageous

1:25:14well again they expedite the development

1:25:17of promising products Technologies all

1:25:20of those kinds of things you find

1:25:22somebody who you can work with right

1:25:23away all right and can get

1:25:26started they help you overcome some of

1:25:29your own deficits because you can start

1:25:31working with another partner who is

1:25:34particularly skilled and team up you

1:25:36know you pick your partners based on

1:25:37trying to find somebody who complements

1:25:39your own resource base and is also

1:25:41skilled um and would be a good working

1:25:45relationship for

1:25:48you so they bring together all of these

1:25:51skills and capabilities and

1:25:55you know it's a good way to get access

1:25:57to all of those other expertise without

1:26:00you know having to directly invest in

1:26:03one or having to just work through

1:26:06essentially being a customer of

1:26:08somebody so it can imp solve a lot of

1:26:13those type of problems you get access to

1:26:15economies a scale um you can get it

1:26:19access to a new market for certain

1:26:21partners and everything else so there's

1:26:22a lot of you know know helpful reasons

1:26:25to do this um it it splits up the risk

1:26:29so like one of the reasons that Hulu is

1:26:31a joint venture is because all those

1:26:33media companies Hulu was established

1:26:35very early on like around the time of

1:26:37Netflix a lot of those early media

1:26:40companies were thinking well you know

1:26:43this could be kind of risky getting into

1:26:44streaming is this really what we want to

1:26:46do and any one of those companies on

1:26:49their own might have been afraid to do

1:26:51it but when they're all teamed up

1:26:52together well it's not that much much

1:26:54risk we're sort of all just pitching in

1:26:56what we have and we'll take a roll on it

1:26:58and see what

1:27:04happens to capture the benefits of a

1:27:07strategic Alliance you need to make sure

1:27:09that you pick a good partner okay

1:27:11somebody who has a complimentary set of

1:27:13resources to

1:27:15you also it's important to recognize

1:27:18that the alliance is only going to work

1:27:20if you benefit both sides okay so you

1:27:24have to pull your weight just as well as

1:27:26them okay and and make sure that it's a

1:27:28win-win situation otherwise they're

1:27:31going to pull out of

1:27:34it um finding ways to keep commitments

1:27:37whether it's buying stock in each other

1:27:39or setting up a joint venture but trying

1:27:41to find or or perhaps a set of contracts

1:27:46but you want to make sure that both

1:27:47parties keep their commitments and

1:27:48finding ways to govern

1:27:50that um

1:27:54those are really the the the keys to

1:27:57figuring out a good strategic Alliance

1:28:00also you know figuring out okay how are

1:28:03we going to make decisions okay and how

1:28:07are we going to adjust over time so

1:28:09thinking about the future is another

1:28:10important aspect of

1:28:13it but again if we want to talk about

1:28:16the longevity of Any Given Alliance it's

1:28:20entails with it entails collaborating

1:28:24with partners that you don't directly

1:28:26compete with so people in other markets

1:28:28people in you know complimentary

1:28:30Industries things like that coffee and

1:28:33beer you know you're not directly

1:28:34competing with each other so that can be

1:28:37a very longlived Alliance where neither

1:28:39of those companies are going to step on

1:28:40each other's

1:28:43toes trying to build trust okay making

1:28:46sure that your alliance Partners

1:28:48understand that you're not going to uh

1:28:51cheat them at any point you're always

1:28:52going to keep up you know you're going

1:28:53to give them high quality components the

1:28:56best of what you have to offer that kind

1:28:58of stuff is is very

1:29:00helpful um and just understanding that

1:29:04it has to be a win-win relationship okay

1:29:06economics only transactions only occur

1:29:09when both sides come out ahead um

1:29:12relationships only last when both sides

1:29:14are coming out ahead all right if only

1:29:17one part is getting something of course

1:29:19it's going to break down over time

1:29:25drawbacks of strategic relationships or

1:29:28strategic

1:29:29alliances um culture Clash again you

1:29:33know you could be trying to get two

1:29:35companies to work together that have

1:29:37very different philosophies and

1:29:39operating uh practices and everything

1:29:41else and it just might not

1:29:45work uh you know so porfit one of your

1:29:49biggest

1:29:50problems other times you can get

1:29:52dependent on an alliance part partner

1:29:54and uh you know you can have the same

1:29:57problem as you do with supplier

1:29:58dependence but it can be Alliance

1:30:00partner uh dependence where maybe you

1:30:03customize yourself so you can only work

1:30:05with this one Alliance partner and then

1:30:08that Alliance partner says well okay we

1:30:10want to split we want to renegotiate how

1:30:12we split the profits and looks for a

1:30:14more advantageous split and when you go

1:30:16to argue with them you realize oh wait

1:30:19well if I don't work with them who can I

1:30:21work with because I've already

1:30:22customized myself to work exclusively

1:30:25with

1:30:26them um and then lastly you could

1:30:29potentially leak out proprietary

1:30:32Technologies and information to your

1:30:35alliance partner to and that's always

1:30:37something to consider it's not as

1:30:39confidential as vertical

1:30:45integration all right so there are a

1:30:48handful of advantages of strategic

1:30:51alliances over vertical inte ation and

1:30:55mergers and

1:30:56Acquisitions one you can sort of pull

1:30:59your risk sharing okay um you're taking

1:31:03a risk with a partner so you're sharing

1:31:05some of the risk and it lowers your

1:31:07Investments you're putting up some of

1:31:08the money your partners putting up some

1:31:10of the money so there's less risk it's

1:31:14flexible if things don't work out you

1:31:17guys can just go your separate ways and

1:31:19you don't have

1:31:21to get stuck with a bunch of equip

1:31:23equipment or anything you purchased and

1:31:26actually

1:31:27own and they're also pretty easily

1:31:30Deployable you just have to find

1:31:32somebody who's willing to work with you

1:31:34you don't have to take the time to build

1:31:36or buy out somebody

1:31:39um so that saves you some time over

1:31:42those other two

1:31:44methods again for making strategic

1:31:47alliances work you want to have a

1:31:49trusting relationship with your partner

1:31:52okay trust is very very important to

1:31:55having a successful strategic

1:31:59Alliance like any relationship of course

1:32:03also you do want to put in some

1:32:06different checks and balances to make

1:32:08sure you don't fall victim to the

1:32:10opportunism of your partner so you can

1:32:13put in contracts require Equity

1:32:15Investments that kind of stuff just to

1:32:19safeguards but mainly you want to make

1:32:22sure that you have a committed trusting

1:32:24relationship with your alliance

1:32:27partner and also that while you're

1:32:29working with your partner you're

1:32:31learning that's part of the main routine

1:32:33you can learn from them so if they do

1:32:38abandon you it's