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Technology Management and Strategy. DUOBACK Case. Introduction. 1.1 Company Overview 1.2 Core Technology of Duoback. 01. 1. Introduction. 1.1 Company Overview.

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slide2

Introduction

1.1 Company Overview

1.2 Core Technology of Duoback

01

slide3

1. Introduction

1.1 Company Overview

Duoback Korea is leading ergonomic manufacturer of office furniture and services and Their motto is “Your Comfort, Our Happiness”

Duoback Korea Introduction

Leading ergonomic manufacturer of office furniture and services that create great places to work, live, and rest.

Our Management Philosophy is “Your Comfort, Our Happiness.” and this pledge became the foundation of our company, passed on from decade to decade.

International Brand

Address: http://www.duorest.com

CEO Jung Kwan Yong

slide4

1. Introduction

1.1 Company Overview

Duoback Brand is for Ergonomic Chair and their brand power is much larger than others

DUOBACK Brand Introduction

Ergonomic Chair Brand That it apply prof. Bruning’s “Duoback Theory” to chair at first time in KOREA

“A healthy world starts from your comfortable chairs”

Overwhelming Brand Recognition

Duo-Back

Duoback

(60%)

High-pack

Borneo

Livart

iloom

others

0

10

20

30

40

50

60

(%)

70

slide5

1. Introduction

1.1 Company Overview

Duoback Korea acquired Duo-back license in 1995 and then they could produce and sell Duoback chairs monopoly in Korea

History of Duoback Korea

1987.05

Established the Hae Jung in InCheon, Korea

Initiation Stage

1995.11

Acquired Duo-back license from GRAHL company

Exercised monopoly production and selling rights to July, 2009

Paid EURO 701,111 in intallment during 15yrs as a royalty of rights

2002.08

  • Acquired certifications ISO 9001/14001

2002.12

  • Changed Company name as Duoback Korea, Ltd and became a sole distributor of Duoback chair in Korea.

2003.04

  • Register Duoback chair as supply product in the Supply Administration

2003.09

  • Certificated as INNO-BIZ from the Small and Medium Business Administration

Take-off Stage

2004.01

  • Acquired the patent of the Duoback chair from Prof. Brunig
  • Diversified Duoback product line such as Duo-school, Duo-seminar

2006.11

  • Won 8th Ergonomic design award from Ergonomics Society of Korea

2009.07

  • Signed the strategic partnership agreement with I-market Korea
slide6

1. Introduction

1.1 Company Overview

There are 8 main categories as to Duoback user and usage and each has various sub-model on price level

Duoback Products

DUOBACK Chairman

DUOBACK Leaders

DUOBACK Smart

DUOBACK Lady

DUOBACK Kids

DUOBACK Idea

DUOBACK Seminar

DUOBACK School

slide7

1. Introduction

1.2 Core Technology of Duoback

There are 4 Core technologies of Duoback; Rucksack Effect, Dynamic sitting, Personalized Chair, Ergonomic Design.

  • 1) Rucksack Effect
  • Feel less fatigue as back muscles are supported and continuously massaged by the weight of the rucksacks.

DUOBACK offers similar massaging effect on your back while you are sitting

  • 2) Dynamic Sitting
  • While sitting on a chair, people unconsciously move their bodies to lesson muscle strain and fatigue.

DUOBACK are designed to support your back comfortably in all directions your body moves, enabling freer movement on a chair

slide8

1. Introduction

1.2 Core Technology of Duoback

There are 4 Core technologies of Duoback; Rucksack Effect, Dynamic sitting, Personalized Chair, Ergonomic Design.

  • 3)Personalized Chair
  • To enjoy sitting comfort, adjust seat height, headrest height, backrest height and width, armrest height and width, tilt tension and tilt lock angle position

DUOBACK parts can be easily adjusted to accommodate individual body requirements.

  • 4)Ergonomic Design
  • Designed to efficiently reduce fatigues on your back, spine and thigh, by dispersing pressures with maximized contact area between your body and chair.

DUOBAKC’s ergonomically contoured and separate dual backrest and hip & thigh line contoured waterfall edge seat

slide10

2. Motivation of Duoback Innovation

2.1 Motivation

These day, Customer who use machine or work in office want to buy functional product and Duoback tried to catch that needs

21st Century Consumption trend

Environment

Necessity for developing sensitive product

Customer oriented era

Interaction

Human

Machine

Needs for Functional Product

slide11

2. Motivation of Duoback Innovation

2.1 Motivation

Most workplace of clerical workers is chairs and by this they are injured body parts; waist, trunk, legs, shoulder, etc. So ergonomics concept is emerged.

Injury by Parts

Workplace for Clerical Workers

Others

Chairs

Ergonomics concept is emerged

slide12

2. Motivation of Duoback Innovation

2.1 Motivation

Due to public interest in well-being culture and Ergonomics, Chair industry is moved from simple chairs Era to Technology-oriented chairs Era

Transition Period

Growth Period

  • Public interest in well-being culture
  • Raising Ergonomics concept
  • Increasing demand for functional chairs
  • Highlight on importance of chairs

Formative Period

  • Drastic growth in demand as an attachment of desk
  • Success in OEM
  • Aggressive Sales
  • Housing Improvement business by government
  • Transition from “Sitting of the floor” culture to “Standing Culture”

Technology-oriented Chairs Era

Simple Chairs Era

slide13

2. Motivation of Duoback Innovation

2.1 Motivation

Many motivations such as well-being trend, Ergonomic Design, Demand for functional chairs and duo-back theory make duoback innovation possible

Public interest in Well-being Trend

Ergonomic Design

Increasing demand for functional chairs

Highlight on importance of chairs

Duo-back Theory in Germany

Duoback innovation

slide14

Timing of Entry

3.1 First-mover Advantages

3.2 First-mover Disadvantages

3.3 Overcoming Disadvantages

03

slide15

3. Timing of Entry

3.1 First-mover Advantages

DuobackKorea was the first-mover of the functional chair market in Koreaand it had first-mover advantages.

Technological Leadership

Brand Loyalty

Brand Recognition Rate

17

44

37

Duoback

Highpack

Borneo

Livart

Design

Patent

Utility Model

iloom

others

0

10

20

30

40

50

60

70

(%)

  • These numbers are not less than the number of patent rights of the big conventional furniture companies.
  • ex) SIDIZ has 53 patent & utility model rights and 38 design rights
  • There are many egronomic furniture companies, but Duoback is overwhelmingly well known to customers.
slide16

3. Timing of Entry

3.2 First-mover Disadvantages

DuobackKorea was the first-mover of the functional chair market in Koreaand it had first-mover disadvantages.

R&D Expenses

Undeveloped Distribution Channels

Ignorance of

New Technology

  • Chairs are almost
  • purchased from offices, but usually with desks, so Duoback can not sell its products to offices.
  • Distributors were reluctant to buy unproven duoback products.
  • Customers and distributors were familiar with conventional chairs and did not know the real value of this new technology.
  • There was no anthropometric data of Korean, so DuobackKorea collected the data by itself.
  • Nowadays, anyone can get the data provided by KATS from SizeKorea.
slide17

3. Timing of Entry

3.3 Overcoming Disadvantages

DuobackKorea overcome customer ignorance by advertising during IMF crisisand it finally worked out.

Subway Advertisement

Home shopping Channel

Newspaper and Magazine Advertisement

Customers became curious about these Duoback products

and it directly boosted its sales.

Even though a new innovation or a technology is valuable,

if customers do not feel the real value

it will never last long.

slide18

Sources and Types of Innovation

4.1 Sources of Innovation

4.2 Types of Innovation

4.3 Innovation S-curves

04

slide19

4. Sources and Types of Innovation

4.1 Sources of Innovation

DuobackKorea has retained several innovation sources since it was established

Acquiring Exclusive License from Grahl

License

  • Grahl is a furniture company in Germany.
  • Grahl required DuobackKorea to pay different amount of loyalties proportional to GNP growth per a product.
  • DuobackKorea had paid loyalties of EUR 701,111(1 billion Won) through 15 years.
  • The License permitted exclusive production and sales rights in Korea.
  • The license expired in July 2009.
slide20

4. Sources and Types of Innovation

4.1 Sources of Innovation

DuobackKorea has retained several innovation sources since it was established

In-house R&D

  • Headquarter
  • It is located in Seo-Gu, Incheon.
  • It consists of offices, factories, and laboratories.
  • Ergonomics Design R&D Center
  • It was recently established at Mok-dong, Yangchun-Gu, Seoul in 2006.
  • About 10 experts in furniture and industrial design work for
  • penetrating foreign market
  • customized products
  • and product diversification
slide21

4. Sources and Types of Innovation

4.1 Sources of Innovation

DuobackKorea has retained several innovation sources since it was established.

Collaboration with Universities and Other Laboratories

  • Inha University
  • DuobackKorea and Inha University collaborated to conduct several researches on
    • improving chairs in schools ergonomically in 2001
    • aches in lower back of middle and high school students in 2002
    • Based on these researches, DuobackKorea intended to penetrate school facility market.
  • Other Laboratories in Foreign Countries
  • It seeks to find new collaboration with labs in U.S., Japan, etc.
slide22

4. Sources and Types of Innovation

4.1 Sources of Innovation

DuobackKorea has retained several innovation sources since it was established.

Customers

Customer opinions and suggestions are reflected to its product for improvement.

  • Auto-lock System
  • Many parents complain thattheir kids sitting on chairs with wheels easily get distracted.
  • When kids sit on the chair, it is locked automatically
  • and then wheels are fixed.
  • Replaceable Fabric Cover
  • Fabrics on chairs easily get stained and many customers wanted this problem to be solved.
  • It is sanitary and design-changeable.
slide23

4. Sources and Types of Innovation

4.2 Types of Innovation

Innovation of Duoback could be categorized as four types: Product, Radicaland Incremental, Competence-enhancing, Component Innovations.

Innovations in Duoback Kids

DK-028N

DK-028E

DK-128A

DK-028D

DK-028LDS

slide24

4. Sources and Types of Innovation

4.2 Types of Innovation

Innovation of Duoback could be categorized as four types: Product, Radicaland Incremental, Competence-enhancing, Component Innovations.

A chair itself is a productnot a process.

Its appearance was radical innovation, but it has been undergone incremental innovations.

Product

Radical &Incremental

Duoback

Competence-enhancing

Component

Innovations arebased upon itscore duoback technology.

Components of a chairsuch as a back and armsare the target of Innovations.

slide25

4. Sources and Types of Innovation

4.3 Innovation S-curves

Every new version of innovation replaces the older one, and disconnection

of the replacement results in low growth rate.

  • Each S-curve means market saturation level of a certain version of a product and moving upward means performance improvement.
  • Functional chair market is easily saturated when it comes to a certain version of a product.
  • When DuobackKorea does not introduce a new product in time, that is when technology disconnection occurs and its growth rate becomes lower.
  • DuobackKorea should renew its versions before the market is saturated.

Disconnected

Connected

Performance

Time

slide26

Protecting Innovation

5.1 Methods for Protecting Innovation

05

slide27

5. Protecting Innovation

5.1 Methods for Protecting Innovation

Licensed innovation was unsafe and DuobackKorea has been in trouble withother companies making clones, so it needed to protect the innovation.

Buying Patent Rights from the Original Owner

  • Original owner is Dr. Bruning, a physicist in Germany.
  • DuobackKorea acquired the rights in January 2004.
  • It possesses the whole rights of duoback technology.
  • It receives loyalties from Grahl, reversely.
  • It can export duoback products to other countries, except for Europe.

Suing Other Companies Making Clones

  • All Duoback-looking chairs infringe DuobackKorea’s Rights.
  • Suing other companies making clones, DuobackKorea won several cases.
  • It is also warning distributors to stop handle clones.
slide28

5. Protecting Innovation

5.1 Methods for Protecting Innovation

Licensed innovation was unsafe and DuobackKorea has been in trouble withother companies making clones, so it needed to protect the innovation.

Operating Certificate of Authenticity System

  • It is a procedure to ascertain if a duoback product is made by DuobackKorea using barcodes and serial numbers after a customer purchases it.
  • Customers who get certificates are given several advantages, and it can inducts prospective customers to purchase its products

Extended warranty period

Fast warranty service

Special events

Brand Marketing

  • Comparison between its product and clones was advertised on the newspaper.
  • Airing TV Advertisement was effective for maintaining brand loyalty.
slide29

Analysis of the Company

6.1 Current Market Situation

6.2 Financial Overview

6.3 SWOT Analysis

6.4 Five Forces Analysis

06

slide30

6. Analysis of the Company

  • 6.1 Current Market Situation

Duoback patent has been expired by July, 2009. Many followers will copy the design and the competition is going to be tougher.

There are too many copies.

This is a big crisis!!

slide31

6. Analysis of the Company

  • 6.2 Financial Overview

Sales and operating profit of Duoback has been decreased because of many copies and patent expiration.

(억원)

(억원)

<Annual Data>

<Quarter Data>

Low operating profit

  • The price of the raw material has been increasing, so operating profit is low in this year.
  • Many copies and patent expiration have made sales and operating profit decreased

“Financial Crisis!!”

slide32

6. Analysis of the Company

  • 6.3 SWOT Analysis

Strength

Weakness

  • Narrow product portfolio (only focused on functional chairs)
  • Decreasing sales
  • Expensive product
  • Powerful brand image
  • Diversified distribution channel
  • Many patents

SWOT

  • Opportunity for B2B sales
  • Potentials for exports to east Asia including China
  • Well-being culture becomes powerful and powerful
  • Decreased brand power due to many copies
  • Competition will become severe after the patent expiration

Opportunities

Threats

slide33

6. Analysis of the Company

  • 6.4 Five Forces Analysis

Potential Entrance

  • Existing Korean furniture companies
  • Foreign high quality furniture companies

Bargaining power of suppliers

Bargaining power of buyers

Existing Rivalry

  • Copies(ex. Dualback)
  • Fursys, Hanssem, Iloom, Livart, etc.
  • Raw materials are easy to buy
  • Good relationship with suppliers
  • Many copies with cheap price
  • Other kinds of functional chairs

Threats of substitutes

  • General chairs
slide34

6. Analysis of the Company

  • 6.4 Five Forces Analysis(cont.)

Degree

Low

High

Explanations

Middle

Forces

  • After patent expiration, more companies might copy Duoback design
  • Big furniture company made spinoff for functional chairs(ex. Fursys-Sidiz)

Existing

Rivalry

  • Any furniture companies can easily get into functional chair market
  • But, they are reluctant to do so because there are many competitors

Potential Entrance

  • More and more people are highly interested in their health, so general chairs are not really threats to functional chair market

Threats of Substitutes

  • Raw materials of Duoback are easy to get
  • Duoback Korea has a good relationship with its suppliers, such as 덕진하이텍, 듀오칼라.

Bargaining Power

of Suppliers

  • Customers can choose the product out of a variety of functional chairs.
  • Lots of copies cheaper than Duoback

Bargaining Power

of Buyers

slide35

Suggestion

7.1 Implications from Five Forces Analysis

7.2 SWOT Analysis(Revisited)

7.3 Strategies from TOWS

7.4 Priority of the Strategies

7.5 How to Implement the Strategies

7.6 Balanced Scorecard

07

slide36

7. Suggestion

  • 7.1 Implications from Five Forces Analysis

Degree

Low

High

Middle

Forces

Existing

Rivalry

Strategic Implications

  • Duoback should reinforce its “#1 company in functional chair market” image to mitigate the threats of competitors
  • It must not stick only to the technology, but to sales and marketing.

Potential Entrance

Threats of Substitutes

Don’t worry about these

Bargaining Power

of Suppliers

Bargaining Power

of Buyers

slide37

7. Suggestion

  • 7.2 SWOT Analysis(Revisited)

Strength

Weakness

  • Narrow product portfolio (only focused on functional chairs)
  • Decreasing sales
  • Expensive product
  • Powerful brand image
  • Diversified distribution channel
  • Many patents

SWOT

  • Opportunity for B2B sales
  • Potentials for exports to east Asia including China
  • Well-being culture becomes powerful and powerful
  • Decreased brand power due to many copies
  • Competition will become severe after the patent expiration

Opportunities

Threats

slide38

7. Suggestion

  • 7.3 Strategies from TOWS

From TOWS analysis, we can obtain several strategic options.

S-O (Offensive)

(Risk Aversion) S-T

  • Focus on stabilizing its “high quality and luxurious” brand image through TV commercials
  • Strategic collaboration with main furniture producers
  • Penetrate Chinese market with “Korea #1” brand image
  • Active contact with many institutes and schools which are potential customers(B2B sales)
  • Diversify its product portfolio

TOWS

  • Price competitiveness through B2B sales strategy
  • Minimize its R&D cost on new product and focus on sales and marketing

W-O (Defensive)

(Turn-around) W-T

slide39

7. Suggestion

  • 7.4 Priority of the Strategies

Concerning current financial crisis and implications from five forces analysis, we can give priority to some selected strategies in TOWS analysis

Financial Crisis

Implications from 5-forces

  • Decreasing sales and operating profit
  • Should reinforce its brand power
  • Should focus on sales and marketing

#3

S-O

#2

S-T

  • Focus on stabilizing its “high quality and luxurious” brand image through TV commercials
  • Strategic collaboration with furniture producers
  • Penetrate Chinese market with “Korea #1” brand image
  • Active contact with many institutes and schools which are potential customers(B2B sales)
  • Diversify its product portfolio

#1

TOWS

#3

W-O

W-T

#1

#1

  • Price competitiveness through B2B sales strategy
  • Minimize its R&D cost on new product and focus on sales and marketing
slide40

7. Suggestion

  • 7.5 How to Implement the Strategies

Duoback should implement the strategies according to the priorities of the strategies.

Phase 2: Brand Management

Phase 3: Expansion Strategy

Phase 1: Crisis management

  • Minimize its R&D cost on new product and focus on sales and marketing
  • Active contact with many institutes and schools which are potential customers(B2B sales)
  • Price competitiveness through B2B sales strategy
  • Focus on stabilizing its “high quality and luxurious” brand image through TV commercials
  • Strategic collaboration with furniture producers
  • Penetrate Chinese market with “Korea #1” brand image
  • Diversify its product portfolio

Preparation for a jump

Leap by using saving power

Financial Stability

slide41

7. Suggestion

  • 7.6 Balanced Scorecard

Vision

Global ergonomic product company within 10 years

Customers’ comforts equal to Duoback Korea’s comforts

<Financial Perspectives>

<Customer Perspectives>

<Internal Perspectives>

<Innovation and Learning>