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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?
Discussion Guidelines
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
4/17/23, 1:56 PM W3: Strategic Risks and Hazard Risks – SCMG301 B001 Spring 2023
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LATASYA CAUSEY
mitigate the impact of supply chain disruptions. At the same time, those with a singlesource 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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