SCMG301 Week 3 DQ & DQR

4/17/23, 1:56 PM W3: Strategic Risks and Hazard Risks - SCMG301 B001 Spring 2023

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W3: Strategic Risks and Hazard Risks

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Week 3 Discussion: Strategic Risks and Hazard Risks

CO3:Differentiate risk among components including strategic, hazard, financial, and operations

Discussion Prompt:

We learned of multiple perspectives on the meaning and application of strategic risk. An example of a strategic risk event occurred on March 17, 2000, when a ten-minute fire at a Royal Philips Electronics semiconductor plant in Albuquerque, New Mexico, "touched off a corporate crisis that shifted the balance of power between two of Europe's biggest electronics companies..." (Wall Street Journal, January 29, 2001). This occurred because, besides directly destroying several thousand chips for mobile phones, the fire contaminated the clean room environment in the semiconductor plant, effectively shutting it down for weeks. At the time, both Nokia and Ericsson were sourcing microchips from the Philips plant. However, while Nokia was able to quickly shift production to other Philips plants and some Japanese and American suppliers, Ericsson was trapped by its sole source dependence on the Philips plant (Strategic Risk from Supply Chain Disruptions, Hopp, et al.) Using perspectives from Ch. 4, how do you think these two companies viewed strategic risk, before the fire?

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4/17/23, 1:56 PM W3: Strategic Risks and Hazard Risks - SCMG301 B001 Spring 2023

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Week 3 Jonathan Gonzalez Jonathan Gonzalez posted Apr 17, 2023 2:09 AM Subscribe

Greeting Professor and Classmates

Based on the information provided in the scenario, it can be inferred that Nokia and

Ericsson had different views on strategic risk prior to the fire incident. Nokia seemed to

have a more diversified approach to its supply chain, while Ericsson had a single source

dependence on the Philips plant.

According to the book "Strategic Risk Management: A Practical Guide to Portfolio

Management and Decision Making," by David Iverson, companies that have a diversified

supply chain are better equipped to manage risks. They can spread their sourcing across

multiple suppliers and locations, reducing the impact of any disruption in any single

location. On the other hand, companies that rely on a single supplier or location are more

vulnerable to disruptions, which can have significant negative consequences.

In the case of Nokia, they were able to quickly shift production to other Philips plants and

some Japanese and American suppliers, indicating that they had a diversified approach to

their supply chain. However, Ericsson's dependence on the Philips plant suggests that they

may have had a more narrow view of strategic risk and may have overlooked the potential

for a supply chain disruption.

Additionally, in the book "Strategic Risk from Supply Chain Disruptions," by Hopp et al., the

authors discuss the importance of assessing and managing risks in the supply chain. They

argue that companies need to proactively identify potential risks and develop contingency

plans to mitigate the impact of any disruptions. It is possible that Nokia had a more

proactive approach to managing strategic risk than Ericsson, which allowed them to quickly

respond to the fire incident.

Overall, it can be inferred that Nokia had a more diversified and proactive approach to

managing strategic risk, while Ericsson may have had a more narrow view of strategic risk

and was more vulnerable to supply chain disruptions.

Best Regards

Jonathan Gonzalez

References

4/17/23, 1:56 PM W3: Strategic Risks and Hazard Risks - SCMG301 B001 Spring 2023

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LATASYA CAUSEY

1. Iverson, D. (2014). Strategic Risk Management: A Practical Guide to Portfolio

Management and Decision Making. Hoboken, NJ: John Wiley & Sons.

2. Hopp, W. J., Lovejoy, W. S., & Spearman, M. L. (2011). Strategic Risk from Supply

Chain Disruptions. Journal of Operations Management, 29(3), 234-252.

3. Gosh, S., & Nieuwenhuis, P. (2005). Strategy and Business Process Outsourcing:

Leveraging Knowledge Capabilities. Hershey, PA: Idea Group Pub.

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Dorvil: W3: Strategic Risks and Hazard Risks DOMINIQUE DORVIL posted Apr 17, 2023 5:48 PM Subscribe

Nokia and Ericsson likely considered strategic risk a potential threat to achieving their

objectives. However, their perspectives on strategic risk may have differed based on their

respective supply chain strategies. For example, the fire at the Philips plant affected both

companies. However, Nokia responded more quickly to the supply chain disruption and

shifted production to other plants and suppliers due to its diversified supply chain strategy.

In contrast, Ericsson's reliance on a single supplier made the company more vulnerable to

supply chain disruptions and affected its ability to meet customer demand and maintain its

competitive position.

Nokia, which had a more diversified supply chain, may have viewed strategic risk as a

factor in ensuring operational resilience and flexibility. By having multiple suppliers and

manufacturing sites, Nokia likely aimed to mitigate the impact of any potential supply chain

disruptions. This approach may have allowed Nokia to respond more quickly to the

semiconductor plant fire and shift production to other plants and suppliers.

On the other hand, Ericsson, which depended solely on the Philips plant for microchips,

may have viewed strategic risk as a significant threat to its ability to meet customer

demand and maintain its competitive position. Ericsson's supply chain strategy likely

focused on cost savings through economies of scale, and its reliance on a single supplier

may have been a strategic decision to achieve this goal. However, this approach may have

made the company more vulnerable to supply chain disruptions, such as the fire at the

Philips plant.

Therefore, before the fire, Nokia may have viewed strategic risk as a factor in ensuring

operational resilience and flexibility. In contrast, Ericsson may have viewed strategic risk as

a significant threat to its ability to meet customer demand and maintain its competitive

position. In addition, companies with diversified supply chains may be better positioned to

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LATASYA CAUSEY

mitigate the impact of supply chain disruptions. At the same time, those with a single-

source strategy may be more vulnerable to such disruptions.

- Dorvil

Schlegel, G. L., & Trent, R. J. (2014). Supply Chain Risk Management: An Emerging

Discipline. Boca Raton: Taylor & Francis Group.

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Week 3 LATASYA CAUSEY posted Apr 17, 2023 6:59 PM

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Nokia and Ericsson had different views on strategic risk before the fire in the Philips plant. Nokia had a more proactive and comprehensive approach to risk management, while Ericsson had a more reactive and narrow approach. Nokia had installed a monitoring process that allowed them to identify the disruption quickly, even before Philips officially informed them of the issue. They also had a contingency plan to switch to alternative suppliers and sources of chips in case of a supply chain disruption. Nokia's cross-functional team coordinated their response and communicated with Philips and other stakeholders. Nokia was able to minimize the impact of the fire on its production and market share.

On the other hand, Ericsson relied solely on Philips as their supplier of chips and needed a backup plan. They were caught unawares by the fire and lacked a clear strategy to mitigate it. They also needed help with Philips and within their organization. Ericsson suffered significant delays, losses, and damage to their reputation due to the fire. Therefore, Nokia viewed strategic risk as something that could be anticipated, mitigated, and managed through effective processes, systems, and teams. Ericsson viewed strategic risk as

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W3: Strategic Risks and Hazard Risks Jennipher Armstead posted Apr 11, 2023 8:47 PM Subscribe

Hi Class,

4/17/23, 1:56 PM W3: Strategic Risks and Hazard Risks - SCMG301 B001 Spring 2023

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Last post 18 hours ago by

Jonathan Gonzalez

Before the fire at the Philips plant, it is likely that Nokia and Ericsson viewed strategic risk

from different perspectives. Nokia, which had a more diversified and flexible supply chain

strategy in place, probably viewed strategic risk as an opportunity to gain a competitive

advantage by having a more resilient and adaptable supply chain (Schlegel & Trent, 2018).

By having multiple sources of supply, Nokia was better prepared to respond to unexpected

events and mitigate the risk of any single source of supply being disrupted.

On the other hand, Ericsson, which was solely dependent on the Philips plant for

microchips, likely viewed strategic risk as a potential threat to its operations. Ericsson's

supply chain strategy may have been focused on cost savings rather than diversification

and flexibility, which left the company vulnerable to supply chain disruptions. Ericsson may

have viewed strategic risk as a necessary trade-off for cost savings, rather than as an

opportunity to gain a competitive advantage (Hopp et al., 2004).

The fire at the Philips plant highlighted the importance of strategic risk management in

supply chain management. Companies need to have a comprehensive understanding of

their supply chain risks and develop strategies to mitigate them. This includes identifying

critical suppliers, developing alternative sources of supply, and implementing contingency

plans to respond to unexpected events (Schlegel & Trent, 2018). Companies that view

strategic risk as an opportunity to gain a competitive advantage by building a more resilient

and adaptable supply chain are better prepared to navigate supply chain disruptions and

emerge stronger from unexpected events.

References:

Hopp, W. J., Lovejoy, W. S., & Spearman, M. L. (2004). Strategic risk from supply chain

disruptions. Journal of Operations Management, 22(4), 523-544.

Schlegel, G. L., & Trent, R. J. (2018). Supply chain risk management: An emerging discipline.

CRC Press.

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