Building Network Capabilities in Turbulent Competitive Environments

Citation

Jungbae Roh, J. (2013), "Building Network Capabilities in Turbulent Competitive Environments", Management Decision, Vol. 51 No. 4, pp. 913-915. https://doi.org/10.1108/00251741311326644

One of the key words for twenty‐first‐century business is globalization, which places emphasis on a company's capability to work with layers of suppliers spread around the world. Sourcing, manufacturing, and delivering of products take place in a variety of places, and a company's core competence lies in its agility in building a network where suppliers support the core mission and functions of a firm in an efficient and reliable way. One of the prime examples would be Apple's recent move to partner with Foxconn in China as their core supplier in charge of assembly. Steve Jobs checked the prototype of the iPhone a few days before the project launch day and decided to change the plastic cover to glass within a week. The request came to realization because of the tremendous flexibility and commitment of Foxconn, and iPhone produced another success story.

Methods and insights have gradually evolved, and remarkable progress has been made in researchers' efforts to build solid paradigms for understanding the network capabilities of a firm and the relationship of these capabilities to the creation of competitive advantage in this global business landscape. Yet much research is needed to shed light on the processes of how firms have carved such competitiveness into their network capabilities. The book by Park and Hong, Building Network Capabilities in Turbulent Competitive Environments (2012), compares the strategic management practices of Korean and Japanese firms, and analyzes how their network capabilities have driven economic growth around the world. Over the past three decades, companies in Korea and Japan have been rivals with regard to a variety of products and have competed with each other in terms of what they have made or how they have made it. Since the 1990s, the nature of competition has changed, involving not only manufacturing processes but also organizing and managing global network capabilities to achieve strategic goals. In the eastern Asian context, while Japanese companies have struggled to maintain their competitive presence in the global market, a few Korean companies have risen to global prominence in the steel, mobile phone, automobile, and electronics industries. Park and Hong posit that network capability is one key contributor to this trend. Although a plethora of studies have delved into the rise and fall of Japanese companies between the 1970s and the 1990s, there is a dearth of studies that investigate the shift of firms' strategies in their efforts to build a sustainable advantage through global network capabilities after the first decade of the twenty‐first century. What makes Park and Hong's book unique is that intensive studies provide the academic community with a theoretical framework and first‐hand empirical evidence on the effective use of network capability. Another unique contribution of this book is its comparison of Japanese firms with Korean firms in relation to their supply chain and network competence, which is quite rare in the extant literature. Extensive case studies, interviews, and analysis profiling Korean and Japanese companies uncover the fact that while Japanese firms have faced obstacles in global competition during the last decade, Korean firms have integrated modular product architecture, global supply chain management, and IT strategy under the active guidance and support of the Korean government, which has fostered the strategic move to key industries and collaboration with small‐medium sized enterprises. The book consists of 14 chapters, organized under three themes:

1. 1.

   History and development of network capabilities.

2. 2.

   Case studies of the Korean IT industry.

3. 3.

   Infrastructure of IT capability.

The first four studies fall under “History and development of network capabilities.” The study in chapter 1 defines network capabilities as derived from the extant literature, which can be summarized as “systematic connectivity between a focal company and all the interrelated entities that form a vital stakeholder group for the shared goals and mission.” The study in chapter 2 discusses the recent phenomenal growth of Korean semiconductor and mobile phone companies in comparison with their counterparts in Japan. The Korean government established policies conducive to network leadership formation and technological standardization compatible with the global market. The study in chapter 3 illustrates a growth mechanism of the Korean economy by showcasing Samsung Electronics and Hyundai‐Kia Motor Company. The use of IT and organizational learning enabled the executive managers to make speedy decisions in terms of large‐scale investment. Thus the growth mechanisms can be summed up in terms of swift decision making via a decision support organization system and IT systemization. Chapter 4 sheds light on how Korean firms have expedited product design and technology transfer in the fast‐paced business environment, namely, with the effective use of product architecture in the semi‐conductor, TV, and DVD industries.

The next four studies tackle the second theme of the book: “Case studies of the Korean IT industry.” Chapter 5 shows how both Japanese and Korean companies caught up in the field of semiconductor technologies, one of the key IT industries, with developed countries. Although the two countries share commonality in achieving such excellence, they diverge in decision‐making speed and the promptness of business and technology development. The case of liquid‐crystal display industry (LCD) in chapter 6 reveals how integration of the upstream supply chains and efficient communication with downstream TV manufacturers have enabled Korean LCD panel makers to overcome the challenge of expensive component cost. In the TV industry context, chapter 7 reinforces the importance of the integration of both the business model and operational practices. LG Electronics has adopted the Toyota Production System and utilized modular product architecture intensively in both plasma display panel and liquid‐crystal display TV across upstream and downstream supply chains and achieved global competitive advantage. Another important IT context is that of the mobile phone industry. Competitors in this industry have experienced ebbs and flows, and Korean companies have remained strong. Chapter 8 investigates the reason for this and discovers that these companies have pursued a mobile operations system platform and the application software market simultaneously and directed their focus on to user‐initiated innovation. In this way, the firms have built network capabilities in the mobile phone industry.

The final theme, “Infrastructure of IT Capability,” has played a key role in building and supporting network capabilities, and chapters 9 to 13 address this issue. In the context of the Korean automobile and steel industries, chapter 9 shows that the Hyundai‐Kia automotive group and POSCO have shifted their strategy from vertical integration to support of suppliers due to the increasing competition and effective use of global supply chain management. The shift happened late in the first decade of this century in both industries, triggered by the government's realization of the significance of the small‐medium enterprises for global competitiveness and its active involvement in setting fair trade conditions favoring the coexistence of large firms and their suppliers and collaboration between them. Chapter 10 tackles the issues of product design and commercialization in the Japanese electronics industry. Rapid product design and commercialization carry such significance that they make or break a company in today's fierce competition, in particular, in the electronics industry. Three‐dimensional computer‐aided design has come to prominence due to its promise to expedite the process, reduce trial and error, and increase the dissemination of product development information across the supply chains. However, the research reports that Japanese electronics companies took more time to develop products because they placed too much emphasis on quality and because of the lack of organizational process capabilities supporting three‐dimensional computer‐aided design. The study in chapter 11 investigates how Korean and Japanese firms differ in implementing their IT strategy to support supply chain management. Japanese firms can learn from Korean firms in their strategic move to make a sufficient level of IT investment and provide strong management leadership to support database integration throughout the supply chains. Chapter 12 delves into product life cycle (PLM) management by Japanese firms. The firms have endeavored to construct a globally integrated PLM that provides the basis for coordinating their domestic R&D and product development functions. The study highlights the need for developing PLM practices tailored to strategic focus, product and market characteristics. Three case studies in chapter 13 discuss the urgent necessity to develop futuristic product life cycle management models. Japanese companies excel in product development capabilities and yet struggle to link such capabilities to customer values. Futuristic PLM is a must for them to explore.

Building Network Capabilities in Turbulent Competitive Environments is the first book of a series that aims to show how firms successfully combat the global competition. Network capability has been always important, but its significance further increases as the competition stretches over the world, as the competitors and collaborators exist globally, and as the customer needs constant rapid change. This book explicates how to build network capability in collaboration with government, face the competition, and create sustainable competition in this business landscape. This book will be of interest to researchers, policymakers, and practitioners who desire to take a deeper look at the trajectory of supply chain management and network building.