Todays Agenda: 92407

1
Internal analysis tips

• Think beyond what a firm HAS - to what it CAN
  DO.
• Be alert for effective combinations of tangible
  and intangible resources.
• Look for clusters of strong activities - within a
  value chain area, or in combination across areas
  for a more potent strength.

2
More internal analysis tips

• Recognize/respect the extensive competence
  development process.
• Identify, protect, use, develop, renew and
  leverage/extend the core competencies - these are
  your strongest cards to play!
• Strive to attain the 4 (3?) criteria that help
  translate core competencies into sustainable
  competitive advantage.

3

• Vision and Mission
• ? ?
• External analysis Internal analysis
• ? ?
• Opportunities threats Strengths
  weaknesses
• Key success factors Distinctive competence
• ? ?
• Strategy
• Social ? ? ?Managerial
• responsibility values
• Implementation
• ?
• Sustainable competitive advantage
• Above average returns

Strategy
4
Strategy

• an integrated and coordinated set of commitments
  and actions designed to exploit core competencies
  and gain a competitive advantage (Hitt, Ireland,
  and Hoskisson)
• a game plan to beat the competition (Froelich)
• Involves CHOICES (tradeoffs) of what to do, and
  what NOT to do

5
Effective strategies match the firms core
competencies with customer needs, paying
attention to

• careful selection of the target market
• insightful knowledge of and effective
  relationships with the target market
• providing unexpected value
• continuous improvement of strategy execution
  throughout the value chain

6
The most effective strategies

• go beyond just doing something BETTER than rivals
• focus on performing value chain activities
  DIFFERENTLY than rivals, and/or performing
  DIFFERENT value chain activities than rivals
• utilize core competencies, within and among value
  chain activities

7
Two levels of strategies

• 1. Business-level - The simpler of the two
  types, found at the DIVISION level of the firm.
  (Firms with more than one division can have more
  than one business strategy.)
• 2. Corporate-level - More complex, involving the
  firm as a whole. Firms generally exhibit one
  primary corporate strategy.
• Firms have BOTH business-level and
  corporate-level strategies.

8
Generalized corporate structure
9
Generic business-level strategy

• how a firm intends to compete at the
  _____________________ level, in
• VERY GENERAL terms . . . .
• 2 VERY BASIC ways to compete to achieve
  above-average profits
• 1.
• 2.

10
Also consider target market breadth

• Broad scope
• the firm competes in many market (customer)
  segments
• Narrow scope
• the firm selects one or two market segments

11
Five Business-Level Strategies
SOURCE Michael E. Porter
Figure 4.1
12
Cost leadership strategy

• An integrated set of actions taken to produce
  goods or services with features that are
  acceptable to customers at the lowest cost,
  relative to that of competitors
• Relatively ________________ products
• Features acceptable to many customers
• Market segmentation is generally ______________
  a mass market approach
• Lowest competitive price

13
Cost leadership strategy - Steps to develop

• Examine value chain for potential cost savings
• Pay extra attention to cost drivers
  (
  )
• No stone is left unturned! No sacred cows! (But
  need to maintain product acceptability)
• Look both inside and outside the firm for
  potential areas of cost savings
• Reconfigure the value chain to accomplish cost
  savings

14
Ideas for cost reduction

• Primary Value
• Chain Activities

• Support Activities in the Value Chain

15
Common characteristics of cost leaders

• (see value chain example, Fig. 4.3, pg. 117)

16
Cost leadership strategy

• Important advantages?

• Risks/disadvantages?

17
Differentiation strategy

• An integrated set of actions taken to produce
  goods or services that customers perceive as
  being different and better in ways that are
  important to customers (at acceptable cost)
• Products are ______________________________
• Customers value differentiated features more than
  they value low cost
• Market segmentation is generally quite
  __________________________

18
Differentiation strategy -Steps to develop

• Identify the target market, the real buyers,
  and others influential in the buying process
• Determine important buyer purchasing criteria
  throughout the value chain understand the
  buyers purchase process (consumer behavior!)
• Develop relevant sources of uniqueness -- as long
  it is as reasonable in terms of cost
• Lower costs elsewhere in value chain if possible

19
Relevant sources of valued uniqueness

• Primary Value
• Chain Activities

• Support Activities of the Value Chain

20
Common characteristics of differentiators

• (see value chain example, Fig. 4.4, pg. 123)

21
Differentiation strategy

• Major advantages?

• Risks/disadvantages?

22
Different strategies ? different organizational
profiles different advantages, challenges and
risks . . .

• These organizational profiles comprising needed
  specific skills and attributes are not developed
  overnight!
• Flipping between the two major business-level
  strategies is not likely to be successful!

23
Focus (or niche) strategies

• An integrated set of actions taken to produce
  goods or services that serve the needs of a
  particular market segment
• Focus is typically on one or two specific (and
  relatively narrow) _________________________
• Can use either cost leadership or differentiated
  approach, but the latter is more common

24
Factors that drive niche strategies

• Large players may overlook small niches
• A smaller/newer player may lack the resources
  needed to compete in the broader market
• Often a focused organization can serve a market
  segment more effectively than larger, broader
  rivals
• Focusing allows the firm to effectively direct
  its resources to build competitive advantage
• Expanding to additional target markets is
  possible when a strong niche position is
  established

25
Competitive risks/potential disadvantages of
niche strategies

26
Integrated cost leadership/ differentiation
strategy

• It sounds ideal to be simultaneously the cost
  leader and a strong differentiator.
• Increasingly, firms are trying to blend the two
  major business-level strategies.
• But formulation is easier than implementation!
  (What does this mean?)

27
Integrated cost leadership/ differentiation
strategy - risks

• Often involves compromises
• Becoming neither the lowest cost nor the most
  differentiated firm
• Consider the complicated value chain decisions
  for firms attempting to use this strategy
• Becoming stuck in the middle
• Lacking the strong commitment and expertise that
  accompanies firms following either a cost
  leadership or a differentiated strategy
• Results in no strong competitive advantage!
• These firms are very vulnerable to competition!

28
Characteristics to facilitate successful
implementation of integrated cost
leadership/differentiation strategy -

29
Advice for business-level strategy -

• Understand your resources, capabilities, and
  target market(s) yours key rivals
• Be true to your distinctive competence -- base
  your strategies on your strengths!
• Be as good as possible at activities not primary
  to your strategy -- without eroding your
  competitive advantage.
• Remember -- strategies must be implemented
  through value chain activities
• Realize that you cannot be all things to all
  people -- or you will be valuable to none!