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STRATEGY MAPS:A SPATIAL REPRESENTATION OF INTRA-INDUSTRY
COMPETITIVE STRATEGY
-Example of Multidimensional scaling-
Keiko Nakashima 29009701
OverviewsIntroductionPurpose of ResearchThe Basic Model (Literature Review)MethodologyApplicationAnalysis and ResultsDiscussionLimitation
Introduction Competitive Strategy is the search for an
advantage within a given competitive arena
Strategy and Performance are…
1. Complex2. Multidimensional3. Interrelated system of valuables
Strategy A
Strategy B
Strategy C
Profitability
Growth
Market position
… …
Performance
Introduction (con’t) Previous researches…
Strategy A
Strategy B
Strategy C
Strategy D
Growth
“Performance” as a Simple and Unidimensional construct
“Strategy” as Set of complex and Multidimensional interrelationship
Performance
Simple !!
Set of Complex
!!
Real world…
Introduction (con’t)
The performance of a Strategic Business Unit(SBU) can be evaluated in number of ways each of which indicates an entirely different dimension
Profitability Growth
Market PositionCash Flow
…Performance
In addition…
Performance dimensions are sometimes incompatible with one another (there is a complex trade-offs between performance)
Needs tools to guide managers in selecting various Performance and Strategies which better than just an intuition !!
Introduction (con’t)
The Purpose of this paper is... To develop a methodology that captures the
complex interplay of Strategy and Performance for given group of SBU’s or firms in an industry
a. Propose multidimensional scaring methodology to develop Strategy Map of inter-business competition for a given industry
b. Necessary trade-offs that a competitor must make in targeting its goals
c. Examine the relative importance of the competitive strategy variables in the derived competitive space
The Basic Model (Literature Review)
The Competitive Strategy Model
Competitive
Environment
Competitive Strategy
Performance
The Basic Model (Literature Review)
Competitive EnvironmentThe most common competitive environment (Porter
1980)1. Fragmented industries2. Global industries3. Emerging industries4. Transition to maturity dimensions5. Transition to maturity industries
This research focuses on… Business from one fragmented, mature,industrial supply industry
The Basic Model (Literature Review)
PerformancePerformance goals has three dimensions (Quinn and
Rohrbaugh 1983)
1st dimension captured external & internal focus2nd dimension reflected the organization desire for
flexibility VS control3rd dimension incorporated the degree to which
each performance objective was the mean to another, higher order objective (an interim end) VS an ultimate end in itself (final outcome)
Performance is a hierarchical system !!
The Basic Model (Literature Review)Performance (con’t)
Most competitive strategy research has focused on relationship between competitive strategy and individual measures of performance in isolation
The Method used in this research…
Strategy A
Strategy B
Strategy C
Profitability
Growth
Market position
Interrelationships
Assigns the various competitors their relative positions along these performance dimensions
……
The Basic Model (Literature Review)
Porter(1980) identified three generic strategies;1. Cost leadership2. Differentiation3. Focus
define the competitive strategy in terms of resource deployments
define it in terms of market scope
This research…
Competitive strategy is defined as the pattern of choices about resource deployment and market domains alongwith the distinctive competencies
Competitive Strategy
Competitive strategy chosen will depend on the nature of the competitive environment and the Performance objectives
Competitive Environment
A
Competitive Strategy
A
Performance A
The Basic Model (Literature Review)
Competitive Strategy (con’t)
Methodology Drawing the Map of the Business and
Performance measures in a Multidimensional space
Basic model assumption…the performance of business is a DIRECT outcome of their strategy and the competitive environment
Competitive
Environment
Competitive Strategy
Performance
DIRECT
GENFOLD2…multidimensional unfolding procedure (DeSarbo and Rao 1984,1986)
Methodology Drawing the Map (example)
A
2
1
B
Firm Positions Relative to Performance in a Competitive Space
1 2
10 100100 10
AB
PerformanceMeasures
Firm2 is better performance
for A
The data used in this study were drawn from the Profit Impact of Marketing Strategies (PIMS) project
The sample was drawn from one single four digit SIC code to insure the homogeneity
Fourteen “clean” observations (samples) were found
Application (Sample)
Application (Sample)
Nature of competition and competitive strategies in Sample industries are…
Economies of scale are limited Competitors are at limits of their
production capacity Market are defined regionally Customer incur little or no switching cost
in moving from one competitor’s products to another’s
Application (Strategy measures)
Dimension of Performance construct and their operational measures were chosen based on 3 criteria:
1. Theoretical relevance2. Use in previous empirical studies3. Use by practicing manager in this
industry to evaluate business performance
Application (Performance measures)
Application (Performance measures)
Application (Strategy Map)
Strategy Map
Growth
Profitability
MarketPositio
n
Analysis and Results (Validation)
2 dimensional solution was performed on 13 business with one business as hold out case
The result are compared with previous result using canonical correlation analysis. All canonical correlation derived were greater than 0.99 valid
Predicted one business performance using existing 13 business performance. The result showed that predicted performance was 0.049 using 14 business analysis and 0.068 using 13 business analysis. Both goodness of fit measures are quite small indicating effective prediction valid
Discussion
“Strategy Map” has potential as a Strategic tool which manager can use to get a better picture of their competitive situation
The result consistent with Literature and Best Practices
LimitationStatic analysis developed for one
time period meaning that performance and level of strategy were measured in the same period
Dynamic approach is needed which all business are allowed to move in the competitive environment over time
All relevant variables may not have been included because PIMS lacked measures for them
Thank You!!