Vertical Integration and Horizontal Division of Labor, Direct Management and Franchising
Vertical Integration and Horizontal Division of Labor, Direct Management and Franchising
The semiconductor industry is healthy around the world.
Arm, Qualcomm, Apple, Intel, Samsung, TSMC,
But all these companies are not working at the same stage.
Arm in the UK only designs cores.
Qualcomm and Apple buy the designs they design.
When Qualcomm buys the design, it becomes the Snapdragon chip, and when Apple buys it, it becomes the A12 and other (Apple Silicon) A-series and other chips.
TSMC and Samsung manufacture and increase production.
It is a complete horizontal division of labour and the aggregation of the best technologies at each layer.
Design → chip design → manufacturing.
Because they specialize in their work, their expertise is enhanced, and they grow at a speed and precision that other companies cannot imitate.
On the other hand, Intel.
No one has ever thought that this giant company would fall.
It is the Intel of "It's Intel.
It was recognized and used as the chip for most of the PC industry.
There was a competitor, AMD, but they couldn't hold a candle to them.
People say that the playing field has changed, the environment has changed, and the stage has changed.
They say that the era has changed from PCs to smartphones, and the chips are smaller and more power-efficient.
They say it is a dilemma of innovation.
People say that Intel's enormous successes in the past have become the cause of its decline in the future.
Is that really true?
Yes, the playing field has changed.
But wasn't the biggest reason for Intel's decline in the vertically integrated, all-in-house management style that the company continued to follow?
Vertically integrated management style where design, chip design, manufacturing, and sales are all done in-house.
Dog years, Moore's law (semiconductor integration rate doubles in 18 months).
It is quite ironic that these words describe Intel or came from Intel
Earlier.
blogged about the difference in growth potential between Windows and LINUX.
This goes hand in hand with this.
→ http://blog.assentia-hd.com/ceo-blog/20101127
This semiconductor industry idea applies to other industries as well.
How about the franchise industry I work in?
I believe that the way franchising will change dramatically in the future.
From vertical integration (direct management) to the horizontal division of labour (franchise)
The very structure of the franchise business itself is based on the horizontal division of labour.
Employees at headquarters tend to think that directly managed stores must perform better than franchise stores.
What if it is simply a division of roles? What would happen?
The reasons for headquarters to take the franchise management approach will change in the future.
Is it because it is faster to develop stores through franchising?
Is it because it is easier to develop stores through franchising?
Is it a good hedge against risk in areas where the company has no familiarity with the land?
What if there are advantages to franchise headquarters beyond capital and earnings?
It is the accumulation of management know-how.
Depth and breadth of various know-how. The speed of their accumulation.
It is meaningless to develop a franchise chain unless various know-how is accumulated in the chain as a "collective genius.
What if the horizontal division of labour (franchise) is more effective in accumulating know-how throughout the chain than the vertical integration (direct management)? What if the know-how can be deepened both vertically and horizontally?
What do you think?
Corporate franchisees have their core business.
Industry-specific know-how intersects, and a variety of things tend to accumulate, including business management methods and sales promotion know-how.
It is also easy to generate a variety of know-how that makes use of the core business.
What if franchisees could notice things that headquarters does not notice and turn them into know-how?
Because they are independent management entities different from the headquarters, they are also serious about management itself.
This is different from directly managed chains, which only have salaried store managers.
The reason is that they do not automatically receive a salary every month.
That is why they think.
Both franchise owners and store managers think until their heads go bald.
When I managed a franchise headquarters in the past, there were nearly 400 franchisees (about 150 member companies).
The success stories of these franchisees were remarkable.
At the time, I had a dilemma: Why didn't more great know-how emerge from the directly managed shops?
I remember feeling quite dilemma at the time.
In-house meetings were held, and the directly managed and franchise divisions exchanged know-how and competed with each other.
This created an environment of friendly competition between the directly managed and franchise divisions within the headquarters.
Reasons for franchise development
The reason for franchise development is "to create chain know-how more speedily and diversely through horizontal division of labour. The know-how is then absorbed by the head office, brushed up rapidly, and horizontally deployed to each franchisee to raise the level of the entire chain!
Know-how rots the moment it is enclosed.
The times are changing, so we must modify it accordingly.
To do so, we need to expose it to many situations and adapt it.
We have been creating know-how only through direct management for 20 years!
The time has come when such a thing is meaningless.
Yes, after 20 years, business conditions and know-how are obsolete.
Nothing stays the same.
Companies are in the business of adapting to the environment.
If know-how does not adapt to the environment, it will die.
Business is about momentum.
There is much to learn from other industries.
The method to learn is simple.
Watch success stories from other industries and ask yourself, "What would happen if I were in my industry?
And then, simulate the successes in your own industry.
It is easy.
Assentia Holdings Corporation
Akira
