Upload
joshua-barker
View
217
Download
0
Tags:
Embed Size (px)
Citation preview
What is Strategy?
“Strategy can be defined as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of course of action and the allocation of resources necessary for carrying out these goals.”
Chandler, 1962,
“to fight and conquer is not supreme excellence . . ;
. . . supreme excellence consists in breaking the enemy’s
resistance without fighting . . . ” Art of War - Sun Tzu Bingfa (350 BC)
What is Strategy?(Porter, M.E. (1996), “What is Strategy,” Harvard Business Review,
74(12): 61-78.
• Rivals can easily copy your improvement in quality and efficiency. But they shouldn’t be able to copy your strategic positioning--what distinguishes your company from all the rest.
• Strategy is the creation of a unique and valuable position, involving a different set of activities.
• Strategy require you to make trade-offs in competing--to chose what not to do.
• Strategy involves creating “fit” among a company’s activities.
Operational Effectiveness is not Strategy
• What is operational effectiveness?
• Why is it not strategy?
• Why both operational effectiveness and strategy are important?
Productivity Frontier(state of best practice)
lowhigh
low
high
Relative cost position
Non
-pric
e bu
yer
valu
e de
live
red
Operational Effectiveness is not Strategy
• Operational effectiveness means
performing similar activities better
than rivals perform them.
• Strategic positioning means
performing different activities from
rivals’ or performing similar activities
in different ways.
• Operational effectiveness and strategy
are both essential to superior
performance, which is the primary
goal of any enterprise.
Operational Effectiveness Tools
• Total quality management (360 Degrees)
• Benchmarking
• Outsourcing
• Partnering
• Reengineering
• Change management
Strategy Rest on Unique Activities
Competitive strategy is about being different.
• What are the sources of differentiation?
• How valuable is the differentiation to the buyer?
• How much of this differentiation is tactical , how much is strategic?
• What is the buyer’s reservation price for this difference?
• How much of this difference is “jnd”
Sources of Strategic Positions
• Variety-based positioning
• Needs-based positioning
• Access-based positioning
“a clever combatant imposes his will
on the enemy but does not allow the
enemy’s will to be imposed on him”
Create focal points that make dominant strategies yield maximum
payoffs
Create focal points that make dominant strategies yield maximum
payoffs
Art of War Art of War
Strategy is about Being Different
• Air Deccan– Low Price– Short / Medium
Routes– No frills
• Jet Airways – Premium Price– Short & Long
routes– Frills (Jet kids
pack for kids etc..)
Variety-based positioning
Customer Needs
Customer Groups
Technology
Reference: Abell, 1980
- Different types of soaps for different women groups
Beauty Skin
Working
Non - Working
Dove
Needs-based positioning
Customer Needs
Customer Groups
Technology
Reference: Abell, 1980
Television screens are 29inch , 25 inch and 14 inch for different drawing room dimensions
Access-based positioning
Customer Needs
Customer Groups
Technology
Reference: Abell, 1980
Mainframes require different processing speed as compared to a personal
PC
Strategic Management & SWOT
Strengths&
Weaknesses
Opportunities&
Threats
STRATEGYSTRATEGYSTRATEGYSTRATEGY
Valuesof
Managers
Valuesof
ShareholdersObjectives
Drivers
Inte
rnal
Env
iron
men
tE
xternalE
nvironment
References: Andrews, 1971; Hofer and Schendel, 1978
Craft aStrategy
to AchieveObjectives
Craft aStrategy
to AchieveObjectives
SetObjectives
SetObjectives
Develop aStrategic
Visionand
Mission
Develop aStrategic
Visionand
Mission
Implementand
ExecuteStrategy
Implementand
ExecuteStrategy
Improve/Change
Revise asNeeded
Revise asNeeded
Improve/Change
Recycleas Needed
Task 1 Task 2 Task 3 Task 4 Task 5
Monitor,Evaluate,and Take
CorrectiveAction
Monitor,Evaluate,and Take
CorrectiveAction
Strategic Management Tasks
Assets/ Core
Competencies
Inputs, Raw Material
Product/ Service Offering
ChannelsThe
Customer
The Traditional Value ChainStart with Assets, Core Competencies
Customer Priorities Channels Offering Inputs, Raw
Material
Assets/ Core
Competencies
The Modern Value ChainStart with the Customer
Redefining the Value Chain
(Slywotzky, Morrison, 1997)
Customer Priorities
Channels OfferingInputs, Raw
Material
Assets/ Core Competencies
Truly Understanding the Customer
Truly Understanding the Customer
The Modern Value Chain
(Slywotzky, Morrison, 1997)
Decision-Making ProcessDecision-Making Process
Purchase OccasionPurchase Occasion
PreferencesPreferences
Buyer BehaviorBuyer Behavior
Power over decision Power over decision
Customer Anger(against existing products)Customer Anger(against existing products)
Functional NeedsFunctional Needs
Purchase CriteriaPurchase Criteria
Porter’s (1980) Five Forces Model of Competition
Threat of Substitute Products
Threat of New Entrants
Threat of New Entrants
Rivalry Among Competing Firms in
Industry
Bargaining Power of Buyers
Bargaining Power of Suppliers
Cutthroat competition is more likely to occur when: Numerous or equally balanced competitors
Slow growth industry
High fixed costs
Lack of differentiation or switching costs
High storage costs
Capacity added in large increments
High strategic stakes
High exit barriers
Diverse competitors
Intensity of Rivalry Among Existing Competitors
Intensity of Rivalry Among Existing Competitors
High Exit Barriers are economic, strategic and emotional factors which cause companies to remain in an industry even when future profitability is questionable.
Specialized assets
Fixed cost of exit (e.g., labour agreements)
Emotional barriers
Government restrictions
Strategic interrelationships
Intensity of Rivalry Among Existing Competitors
Intensity of Rivalry Among Existing Competitors
Bargaining Power of SuppliersBargaining Power of Suppliers
Suppliers exert power in the industry by:
Threatening to raiseprices or to reduce quality
Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases
Suppliers are likely to be powerful if: Supplier industry is dominated by a few firms
Suppliers’ products have few substitutes
Buyer is not an important customer to supplier
Suppliers’ product is an important input to buyers’ product
Suppliers’ products are differentiated
Suppliers’ products have high switching costs
Supplier poses credible threat of forward integration
Threat of New EntrantsThreat of New Entrants
Barriers to Entry
Economies of Scale
Product Differentiation
Capital Requirements
Switching Costs
Access to Distribution Channels
Cost Disadvantages Independent of Scale
Government Policy
Expected Retaliation
Bargaining Power of BuyersBargaining Power of Buyers
Buyer groups are likely to be powerful if:
Buyers are concentrated or purchases are large relative to seller’s sales
Purchase accounts for a significant fraction of supplier’s sales
Products are undifferentiated
Buyers face few switching costs
Buyers’ industry earns low profits
Buyer presents a credible threat of backward integration
Product unimportant to quality
Buyer has full information
Buyers compete with the supplying
industry by:
Bargaining down prices
Forcing higher quality
Playing firms off ofeach other
Threat of Substitute ProductsThreat of Substitute Products
Products with similar function limit the prices firms can charge
Products with improving price/performance tradeoffs relative to present industry products
For Example:
Keys to evaluate substitute products:
Electronic security systems in place of security guards
Fax machines in place of overnight mail delivery
5 Forces correlation
Business power
Power of the Five forces
• Power of forces are mutually exclusive of each other-
(Any collinearity occurring should be excluded for
purposes of calculation)
• Their combined power inverses the power of the
business
• Their probability of occurrence and power the power
of their impact change over time (By function they are
hetroscedastic )
• They determine the relative bargaining power of the
business and the businesses ability to augment its
market share and or its profitability
Effects of Entry Barriers and Exit Barriers on Industry Profits
Effects of Entry Barriers and Exit Barriers on Industry Profits
High, Risky Returns
Entry Barriers
Exit Barriers
High
Low
HighLow
Low, Stable Returns
High, Stable Returns
Low, Risky Returns
Future ObjectivesHow do our goals compare to our competitors’ goals?
Where will emphasis be placed in the future?
What is the attitude toward risk?
Competitor Analysis
What Drives the competitor?
What is the competitor doing?What can the competitor do?
Current StrategyHow are we currently competing?
Does this strategy support changes in the competitive structure?
Competitor Analysis
What does the competitor believe about itself and the industry?
Do we assume the future will be volatile?
Are we assuming stable competitive conditions?
What assumptions do our competitors hold about the industry and themselves?
Assumptions
Competitor Analysis
What are the competitor’s capabilities?
What are my competitors’ strengths and weaknesses?
How do our capabilities compare to our competitors?
Capabilities
Competitor Analysis
Future ObjectivesHow do our goals compare to our competitors’ goals?Where will emphasis be placed in the future?
What is the attitude toward risk?
Current StrategyHow are we currently competing?
Does this strategy support changes in the competition structure?
Do we assume the future will be volatile?
Are we operating under a status quo?
What assumptions do our competitors hold about the industry and themselves?
Assumptions
ResponseWhat will our competitors do in the future?Where do we have a competitive advantage?
How will this change our relationship with our competition?
Capabilities
What are my competitors’ strengths and weaknesses?
How do our capabilities compare to our competitors?
Competitor Analysis