MGT. 5391

1
MGT. 5391 Session 7 Strategic and Global
Management Main Types of Strategies (Corporate
and Business)
2

• Two Types of Strategies
• Corporate/ Enterprise
• Business/ GBU/ SBU

3

• Todays Discussion will focus on Business
  Strategies at the GBU/ SBU Division level

4
Strategies
Strategies represent integrated and coordinated
set of actions (deployment/execution) that are
taken to exploit core competencies to
improve the firms four capabilities and gain a
competitive advantage.
4-4
5
What is a Strategy for Exemplar Performance?
Michael E. Porter defines organization strategy
as creating a companys position, making
trade-offs, and forging fit among
activities Strategy is the creation of a
unique and valuable position, involving
position, involving a different set
of activities. Strategy is making trade-offs
in competing. The essence of
strategy is deciding what not to do. Strategy
is creating fit among a companys
activities.
Source Michael E. Porter, What is Strategy,
Harvard Business Review, November-December, 1996,
p. 62
6
Internal and External Growth Strategies
Increased Commercial, Technological,
Organizational, Team Capabilities (Internal Grow
th)
Market/Customer Insights (from EBE)
Internal Business Environment (5)
Value Chain Core Competencies Identification
Increased Performance
Corporate Business Strategies
Outsourcing (Non- Core Competencies)
MA/JVs (External Growth)
________________ Source B.A.Macy, Successful
Strategic Change Berrett-Koehler Publishers, San
Francisco, CA (forthcoming)
7
What is a business-level strategy?
Discuss the relationship between customers and
business level strategies in terms of who, what,
and how.
4-4
8
Summary Review A Diversified Company Has Two
Levels of Strategy
2. Corporate/Firm Level (Next Week)
9
THE THREE TYPES OF BUSINESS STRATEGIES TO MEET
MARKET DEMANDS

• PRODUCT LEADERSHIP
• BEST PRODUCT
• OPTIMISED FOR INNOVATION SPEED
• PRODUCT FEATURES THAT DELIVER RESULTS

CHOICE

• CUSTOMER INTIMACY
• BEST TOTAL SOLUTION
• OPTIMIZED FOR SPEED AND RESPONSIVENESS
• VALUED ADVICE
• CUSTOM - TAILORED SERVICE

• OPERATIONAL EXCELLENCE
• BEST TOTAL COST
• OPTIMIZED EFFICIENCE
• LOW LOWEST PRICE
• HASSLE-FREE, RELIABLE

Source Adopted from M. Porter, Competitive
Advantage, The Free Press, 1985
10

• Example Four Types of Enterprise/Business Level
  Strategies
• 1. Monetize Assets (Sell all or parts)
• 2. Optimize (Cash Cow)
• Grow/Create more Market Share
• Internal Growth (Increased capabilities and core
• competencies)
• External Growth (MA)
• Combination of above (be specific as
• to what businesses and/or product
• lines)

11
Enterprise Level and S.B.U. Actions to Create
EVA and Growth - 1
I. Create New Pathways for Increasing Returns

• Market Services and Knowledge Products Create
  Value-added Price Tower or
• Minimally Secure Share or Price Extract
  Royalty/License Human Capital Revenue as
  Appropriate
• ? Proprietary Data Bases and Data Based
  Management for Operations, Regulatory Acceptance
• Compliance, Suppliers Performance to Value
  Chain, Customers Operations
• Disruptive Technologies for Industry Niche e.g,
  Nonstick Conveyance, Noninvasive
• Monitoring Process Control, On-line Quality
  Measurement, Applied Fluid Dynamics in
• Design, Shift Engineering Emphasis Capital
  from Reaction to Raw Materials and Logistics
• to Customer, in particular, Packaging and
  Storage, Remote Process Control, I-Situ Quality
• Control, Quality Bridges from Manufacturing
  to Customer Use
• Adaptation of Product Chemistry in Customers
  Operations
• Recoup Sunk RD Costs in Negotiated Transactions
• Transfer and Maintain Technical Competencies,
  Information / Communication / Learning

12
Enterprise Level and S.B.U. Actions to Create
EVA and Growth - 2
I. Create New Pathways for Increasing Returns

• Infrastructure for Channel Partners, and
  Financial Solutions in Credit Analysis and Credit
• Create Training Brokering Venture
• Leverage Internet Protocols for Industry Niche
  e.g., Go Direct for Small Customers with Improved
  Service Level and Credit Facility, Portal for
  Industry Niche, Virtual Value Web for
• RD, Logistics Optimization, Regulatory
  Compliance Monitoring, E-Commerce E-Credit
• Customer Intimacy Strategy RD/Technology
  Innovation, Precision Accuracy in Support of
  Data Mining Harvesting for Customer and Their
  Consumers, Shared Growth, Shared
• Planning, Co-location, Co-Facility Use, Mirrored
  Enterprise Units
• Reaction Innovation i.e., Formulation, Bio-based
  Solutions, in particular in Human Animal Care
• E-Commerce Ventures
• Creation of Virtual Organization to handle your
  key customers Value-Chain transitions.
• Creation of dot.coms (both inside and outside)

13
Enterprise Level and S.B.U. Actions to Create
EVA and Growth - 3
II. Optimize Against Diminishing Returns

• Rationalize Current Operations (Seamless Internal
  Value Chain for Marketing to RD to Manufacturing
  to Technology to Sales Customer Services to
  Logistics)
• Introduce Best Practices/High Performance Across
  Value Web (i.e., Internal Structure, Organization
  Cultural Flexibility/Responsiveness/Creativity,
  Commercial Financial Architecture, Partnering
  Solutions, Customer Intimacy - Enterprise Teams)
• Supply and Demand Logistics Renovation e.g.,
  Automation, Robotics, Gravity-based Conveyance,
  Packaging, Toll Manufacturing, Integrated
  Manufacturing Logistics, SAP Adapted to
  Operations Customer Needs.
• Spread All Costs Over Larger Sales Volume

14
Enterprise Level and S.B.U. Actions to Create
EVA and Growth - 3
II. Optimize Against Diminishing Returns

• Share Channel / Value Pipelines e.g, Consortia,
  Industry Lobby, Value-added Services Delivery
  through Channel Partners, i.e., Technical
  Training to Users,Life Cycle Management of
  Product Packaging, Credit Credit Networks to
  Capture Other Volume/High Value Purchases, Shared
  Channel Capital Projects Investment,
  Cross-Selling of Technology with Like Customer
  Bases)
• Consolidate Among Strategic Players (Must Emerge
  as Critical Mass and Be More than Combination)
• Roll-up Privately-held Firms (Must Emerge as
  Critical Mass and Be More than
• Combination)
• New user friendly, low cost software emerging in
  Fall, 2000 will possibly eliminate the use of SAP
  and other Value-chain systems.

15
Enterprise Level and S.B.U. Actions to Create
EVA and Growth - 3
III. Monetize Current Acquired Assets
Re-channel Capital to Priority Projects or
Reduce Risk

• Sell Utilities and Waste Operations for Old and
  New Manufacturing Sites
• Sell Under Performing Businesses
• Sell Nonaligned Businesses
• LBO or ESOP LBO Any of the Aforementioned
• Create JVs (in US, LLCs, LLPs) to Retain
  Equity Participation (Or Control) while Not
  Duplicating Levy Exposure yet Providing Risk
  Transfer to a Corporate Entity with Off the
  Books Financing of Assets - Leverage Good Credit
  with Entrepreneurial Partners
• Establish Toll Manufacturing Network
• Create Equipment and Talent Leasing
• Trade Assets Human Capital Talent for More
  Liquid Position

16
S.B.U. Competitive Strategies

• Competitive Strategies
• Definitions of Competitors
• Competitive Strategies
• Miles and Snow
• Porter
• First Mover Strategy

17
Strategy and Competitive Advantage

• Competitive Advantage exists when a firms
  strategy gives it an edge in
• Defending against competitive forces and
• Securing customers
• Key to Gaining a Competitive Advantage
• Convince customers firms product/service offers
  superior value
• Offer buyers a good product at a lower price
• Use differentiation to provide a better product
  buyers think is worth a premium price

18
Core Competition

• When organizations battle for some desired
  object/outcome
• Who are our core competitors
• Industry perspective
• Market perspective
• Strategic group perspective

19
Industry and Market Approaches to Defining
Competitors
Industry
Market
Same Product-Service
Customer Needs
20
Strategic Group Approach to Defining Core
Competitors

• Possible strategic dimensions for identifying
  strategic groups
• Price
• Quality
• Geographic scope
• Product line breadth-depth
• RD expenditures
• Product characteristics

21
Different Types of Competitive Strategies

• Miles and Snow typology
• Prospector
• Seeks innovation
• Survey dynamic environment and develops new
  products
• Competitors are uncertain about prospectors
  future decisions and actions

22
Different Types of Competitive Strategies (cont.)

• Miles and Snow typology
• Defender
• Searches for market stability
• Limited product line
• Seeks to defend position
• Prevents others from entering its turf
• Can create and maintain niches

23
Different Types of Competitive Strategies (cont.)

• Miles and Snow typology
• Analyzer
• Strategy of analysis and imitation
• Copies promising new activities
• Reactor
• Lacks a strategic plan
• Reacts to environmental changes
• Makes adjustments when forced to
• Unable to respond quickly to changes

24
Porters Generic Strategies

• Market Scope
• Broad or Narrow
• Competitive Advantage
• Low cost or differentiated
• Integrated differentiated/low cost

25
Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
1. Cost Leadership
2. Differen- tiation
Broad Target Market
Breadth of Competitive Scope
4. Focused Differen- tiation
3. Focused Low Cost
Narrow Target Market
26
Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
1. Cost Leadership
Broad Target Market
Breadth of Competitive Scope
Narrow Target Market
27
How to Obtain a Cost Advantage
1. Determine and Control Cost Drivers2.
Reconfigure the Value Chain (Supply and/or Demand
Chains) as needed

• Determine Core Competencies
• Possible Outsource Non-Core Competencies
• Alter Production Process
• Change in Automation
• New Distribution Channel
• New Advertising Media

• New Raw Material
• Forward Integration
• Backward Integration
• Change Location (i.e., Co-Location) Relative to
  Suppliers and Buyers
• Direct Sales in Place of Indirect Sales

28
Three Key Questions
How can an activity be performed differently or
even eliminated?
1.
2.
How can a group of linked value activities be
regrouped or reordered?
3.
How might coalitions with other firms lower or
eliminate costs?
Gallo sold wine through grocery stores rather
than liquor stores because they were more
efficient distributors
29
Cost Leadership Business Level Strategy
Key Criteria
30
Cost Leadership Strategy
Unifi, Inc., one of the worlds largest
texturizers of filament polyester and nylon
fiber, makes significant investments in its
manufacturing technologies to drive its costs
lower even though prices for raw materials and
packaging supplies are rising.
4-9
31
Cost Leadership Business Level Strategy
Requirements
Constant effort to reduce costs through
32
Major Risks of Cost Leadership Business Level
Strategy
33
Low-Cost Leadership

• Make achievement of low-cost relative to rivals
  the theme of firms business strategy
• Finds ways to drive costs out of business
  year-after-year

Low-cost leadership means low overall costs, not
just low manufacturing or productions costs!
34
When does Low-Cost Leadership Work?

• It works when
• Price competition is vigorous
• Product is standardized
• Buyer incur low switching costs
• Industry newcomers use introductory low prices to
  attract and buyers and build customer base
• Pitfalls with this strategy
• Being overly aggressive in cutting prices
• Low-cost methods are easily imitated by rivals
• Differentiation matters

35
Cost Leadership Strategy
Consolidated Stores, Inc. seeks to earn
above-average profits in its Closeout Division
by retailing brand-name merchandise below
discount price found by traveling the country in
search of manufacturer overruns and
discontinued styles and buying leftovers at
below wholesale prices.
36
Cost Leadership Strategy
Through cost-leadership strategy, low cost steel
producer, Nucor Corporation, relies on
investments in efficient-scale facilities to
achieve strategic competitiveness (operating
profitably ever since 1966).
37
Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
1. Cost Leadership
2. Differen- tiation
Broad Target Market
Breadth of Competitive Scope
Narrow Target Market
38
Differentiation Strategies

• Incorporate differentiating features that cause
  buyers to prefer firms product or service over
  brands of rivals
• Keys to success
• Find ways to differentiate that create value for
  buyers that are not easily matched or cheaply
  copied by rivals
• Not spending more to achieve differentiation than
  the price premium that can be easily changed

39
Differentiation Business Level Strategy
Key Criteria
40
Differentiation Business Level Strategy
Requirements
41
Differentiation Business Level Strategy
Effectiveness with Differentiation grows out of
Value Chain activities
Examples
42
Create Value with Differentiation by
Lowering Buyers Costs
Raising Buyers Performance
Creating Sustainability through

• Creating barriers by perceptions of uniqueness

• Creating switching costs through differentiation

43
Types of Differentiation

• Unique Taste Dr. Pepper
• Wide Selection and One-stop Shopping Home Depot
  and Amazon.com
• Superior Service FedEx and Ritz-Carlton
• Spare Parts Availability Caterpillar
• More for your Money McDonalds and Wal-Mart
• Prestige Rolex
• Quality Manufacture Honda and Toyota
• Top-of-the-Line Image Ralph Lauren and Chanel

44
Major Risks Involved With a Focused Differentiatio
n Business Level Strategy - 4
45
Differentiation Strategy Examples

• Some examples include
• Ralph Lauren and Tommy Hilfiger differentiate
  their clothing line through image
• Rolex watches are differentiated by prestige and
  image
• Starbucks Coffee differentiates itself by
  listening to customers
• Intel uses speed, innovation, and manufacturing
  techniques as bases if uniqueness

4-9
46
Signaling Value as well as Delivering Value

• Buyers seldom pay for value that is not
  perceived!!!
• Signals of Value may be as important as actual
  value when
• Nature of differentiation is hard to quantify
• Buyers are making first-time purchases
• Repurchase is infrequent
• Buyers are unsophisticated

47
When does Differentiation Work?

• It works when
• There are many ways to differentiate a
  product/service that has added-value and pleases
  customers
• Buyer needs and uses are diverse
• Technological change and product innovation are
  fast-paced

48
When does Differentiation Work? (cont.)

• Pitfalls
• Charging to high a price or over differentiating
• Failing to signal value
• Not understanding what buyers want or prefer and
  differentiating on the wrong things

49
Competitive Strategy Principle
A low-cost provider strategy can defeat a
differentiated strategy when buyers are satisfied
with a standard product and do not see extra
differentiating attributes worth paying for!
50
Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
1. Cost Leadership
2. Differen- tiation
Broad Target Market
Breadth of Competitive Scope
4. Focused Differen- tiation
3. Focused Low Cost
Narrow Target Market
51
Integrated Low-Cost / Differentiated

• Combine a strategic emphasis on low-cost with a
  strategic emphasis on differentiation
• Make an upscale product at a lower cost
• Give customers more value for the money
• Deliver superior value by meeting or exceeding
  buyers expectations on product attributes and
  beating their price expectations

52
Basis for Customer Segmentation
Industrial Markets 1. End use segments
(identified by SIC code) 2. Product segments
(based on technological differences or production
economics) 3. Geographic segments (defined by
boundaries between countries or by regional
differences within them) 4. Common buying factor
segments (cut across product/market and
geographic segments) 5. Customer size segments
53
Basis for Customer Segmentation

• Consumer Markets
• 1. Demographic factors (age, income, sex, etc.)
• 2. Socioeconomic factors (social class, stage
  in the family life cycle)
• 3. Geographic factors (culture, region or
  country differences)
• 4. Psychological factors (lifestyle, personality
  traits)
• 5. Consumption patterns (heavy, moderate, and
  light users)
• 6. Perceptual factors (benefit segmentation,
  perceptual mapping)
• 7. Brand loyalty patterns

54
Integrated Low-Cost / Differentiation Strategy
Southwest Airlines
Low-Cost
Differentiation

• Use a single aircraft model (Boeing 737)
• Use secondary airports
• No meals
• 15 minute turnaround time
• No reserved seats

• Focus on customer satisfaction
• High level of employee dedication
• Unique Culture
• A HPWS

55
Risk of and Integrated Provider Strategy

• Risk An integrated provider may get squeezed
  between strategies of firms using low-cost and
  differentiation strategies
• Low-cost leaders may be able to siphon customers
  away with a lower price
• High-end differentiators may be able to steal
  customers away with better product attributes

56
Focused Business Level Strategies - 1
Focused Business Level Strategies involve the
same basic approach as Broad Market Strategies.
However, opportunities may exist because
57
Focused Business Level Strategies - 2
Focused Business Level Strategies involve the
same basic approach as Broad Market Strategies.
However, opportunities may exist because
Examples
58
Focused Business Level Strategies - 3
Focused Business Level Strategies involve the
same basic approach as Broad Market Strategies.
However, opportunities may exist because
Example
59
Integrated Low Cost/Differentiation Strategy
Southwest Airlines
60
Integrated Low Cost/Differentiation Strategy
Firms using an Integrated Strategy may
61
Create Value with Differentiation by
Lowering Buyers Costs
Raising Buyers (Retail Store) Performance (their
Market Share)
Creating Sustainability through

• Creating barriers by perceptions of uniqueness/
• customization

• Creating (higher) switching costs through
• product/service differentiation

62
Differentiation Business Level Strategy
Effectiveness with Differentiation grows out of
Value Chain activities
Examples
63
Focus / Niche Strategies

• Involve concentrated attention on a narrow piece
  of the total market
• Objective
• Serve niche buyer better than rivals
• Keys to Success
• Choose a market niche where buyers have
  distinctive preferences, special requirements, or
  unique needs
• Develop unique capabilities to serve needs of
  target buyer segment

64
What Makes a Niche Attractive for Focusing?

• Big enough to be profitable and offers good
  growth potential
• Not crucial to success of industry leaders
• Costly or difficult for multi-segment competitors
  to meet specialized needs of niche members

65
What Makes a Niche Attractive for Focusing?
(cont.)

• Focuser has resources and capabilities to
  effectively serve an attractive niche
• Few other rivals are specializing in same niche
• Focuser can defend against challengers via
  superior ability to serve niche members

66
Risks of a Focus Strategy

• Competitors find effective ways to match a
  focusers capabilities in serving niche
• Niche buyers preferences shift towards product
  attributes desired by the majority of buyers
  niche becomes part of overall market
• Segment becomes so attractive it becomes crowded
  with rivals, causing segment profits to be
  splintered

67
Value Chain Analysis
68
Three Parts of Value-Chain Design
3 SUPPLIERS/ VENDORS
1 YOUR COMPANY
2 CUSTOMERS
COMMUNITY
Supply Chain
Demand Chain
69
Value Chain
Back
Front
Core Technologies
Market (Customer)
Develop
Design
Conceive
Support
Sales
Market
Procedure
Distribute
70
Six Common Factor as to Why U.S. Organizations
are Successful Global Competitors
1. Close ties/direct and formalized partnerships
with customers (internal and external).
2. Close ties/direct and formalized partnerships
with vendors/suppliers (reduction in number
and certification).
3. Integrated and simultaneous efforts to improve
quality, cost, delivery and speed (product
development) to the marketplace.
4. Greater functional (staff and support units)
integration (decentralization) and less
stratification (centralization).
5. Integration of technology into manufacturing
and marketing strategies linked to continuous
organizational improvements that promotes
teamwork (teams), training and continuous
learning.
6. Create a broad learning environment that
emphasis's training and re-training, coaching
and development (job, team, pass-offs, internal
customer and supply- chain linkages) -- an
Organizational University.
Summary However, it is not surprising that it is
very unclear to U.S. Key stakeholders how you
design and implement these six design features
and their accompanying strategies. Although
organizations feel these (global) pressures (to
change), particularly as one moves toward the
top, the kind of change that is needed to
accomplish these goals is organization wide.
Traditional change strategies that begin at the
top and organizations need to more responsive.
71
Six Questions of the Value Chain

• What is the Value Chain?
• What are the component parts of the Value Chain?
• How does a firms core competencies relate to the
  Value Chain?
• How can a firm create value via Value Chain
  maximization?
• Demand Chain?
• Supply Chain?
• Both?
• What gets outsourced?
• How to improve the four capabilities?

72
Financial Saving through Value Chain Improvement
15 - 25 of Total World-Wide Sales Revenue
________________ Source B.A.Macy, Successful
Strategic Change Berrett-Koehler Publishers, San
Francisco, CA (forthcoming)
73
Critical Design Elements for Horizontal
Organization
Alliances with Competitors
Suppliers
Consumers
The Firms Value Chain
Customers
Supply Chain
Demand Chain
Other Alliances and Partnerships
74
SUPPLY
DEMAND
75
Source Digital Capital, D.Tapscott et.al.,
Harvard Business School Press, 2000
76
1
3
4
Vision Direction
Front of the Shop
Back of the Shop
2
Strategies
3rd Optimize Supply
1st Align Strategy
2nd Create Demand
Improved Capabilities via Core Competencies
Horizontal Designs Core Processes
_____ Source Barry A. Macy, Successful
Strategic Change, Berrett-Koehler Publishers, San
Francisco, CA. (forthcoming)
77
Three Potential Sources of Leverage in Leveraged
Business Groups
Back (Offering)
Front (Market/Customer)
Middle Infrastructure

• Creation of
• products/offerings

• The customers
• interface

• Means used to
• produce and deliver
• products and
• services to
• customers

• Platforms for
• manufacturing
• products

• How the Business
• goes to market

• How the
• organization
• responds to the
• customer

• Technologies
• underlying products

Each component is a potential source of leverage
78
ILLUSTRATIVE SUPPLY CHAIN FORTUNE 100 COMPANY
DISTRIBUTION, ENGINEERING AND MANUFACTURING
SUPPLY CHAIN CONCEPT
EQUIPMENT
SUPPLY CHAIN CONCEPT
CUSTOMER
PLANT
RAW MATERIALS PACKAGING
DIRECT
PEOPLE
DISTRIBUTION
EXTRENAL DISTRIBUTION
79
Product Supply Example Teams to Manage Order
Fulfillment
Product
Customer
Assembly
Outbound logistics team
Order entry team
Order
Materials
Leadership team
Inbound logistics team
Vendor orders
80
How Do You Create a 18 Billion Company in only
13 Years?
____________________________ Source B.A. Macy,
Successful Strategic Change, Berrett-Koehler
Publishers, San Francisco, CA (forthcoming)
81
Direct Business Model (Dell Computers)

• Sell directly to consumers
• Build products to consumer (customer)
• order
• Eliminate retail mark-ups and costs
• Reduce risks associated with large
• inventories of finished goods
• Relationship with consumers
• Leverage relationship with suppliers
• and consumers
• Use information to enhance the Value Chain

____________________________ Source B.A. Macy,
Successful Strategic Change, Berrett-Koehler
Publishers, San Francisco, CA (forthcoming)
82
The Value Chain The Dell Example
Suppliers
Mfg.
Product Supply
Centers of Competency
Consumer
Customers
Various Business Segment
Corporate Services
Expertise Centers
______________________ Source Dr. Barry A.
Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA
(forthcoming)
83
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Support Activities
Primary Activities
84
Value Chain Analysis
Identifying Resources and Capabilities That Can
Add Value
Firm Infrastructure
Human Resource Management
Support Activities
MARGIN
Technological Development
Procurement
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
MARGIN
Operations
Primary Activities
85
Inbound Logistics
Superior handling of incoming raw materials to
minimize damage and improve the quality of the
final product
86
Operations
Consistent manufacturing of attractive products
Rapid responses to customers unique manufacturing
specifications
87
Outbound Logistics
Accurate and responsive order processing
procedures
Rapid and timely product deliveries to customers
88
Marketing Sales
Strong Coordination among functions in RD,
Marketing and Product Development
Extensive personal relationships with buyers
Premium Pricing
Customer Intimacy (formalized CATs and
Supplier Enterprise Teams)
89
Service
Complete field stocking of replacement parts
90
Procurement
Systems and procedures used to find the highest
quality raw materials
Purchase of highest quality replacement parts
Located in Close Proximity with Suppliers
91
RD Technological Development
Coordination among RD, marketing and product
development
Investments in technologies to produce highly
differentiated products
Strong capability in basic research
92
Human Resource Management
Compensation programs and other HR Systems and
Processes which encourage worker creativity and
performance
Extensive use of subjective performance measures
Superior personnel training/ development
coaching
93
Firm Infrastructure/Macro Structure
(Corporate GBU/SBU Supply Chain Demand Chain,
and Enterprise Team(s) Alignment)
Highly developed Information Systems to better
understand customers purchasing preferences
A company-wide emphasis on producing high quality
products
94
Value Chains are part of a Total Value System
Supplier Value Chain
Firm Value Chain
Channel Value Chain
Buyer Value Chain
Each firm must eventually find a way to become a
part of some buyers value chain
Upstream Value
Perform valuable activities that complement the
firms activities
Ultimate basis for differentiation is the ability
to play a role in a buyers value chain
This creates VALUE!!
Value chains vary for firms in an industry,
reflecting each firms unique qualities

• History
• Strategy
• Success at Implementation

95
Outsourcing
Strategic Choice to Purchase Some Activities From
Outside Suppliers
Firm Infrastructure
Human Resource Management
Support Activities
MARGIN
Technological Development
Procurement
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
MARGIN
Operations
Primary Activities
96
Outsourcing
Strategic Choice to Purchase Some Activities From
Outside Suppliers
Firm Infrastructure
Human Resource Management
Human Resource Management
Firms often purchase a portion of their
value-creating activities from specialty external
suppliers who can perform these functions more
efficiently
Support Activities
Technological Development
MARGIN
Technological Development
Procurement
Procurement
Service
Service
Marketing Sales
Inbound Logistics
Outbound Logistics
MARGIN
Operations
Outbound Logistics
Marketing Sales
Operations
Inbound Logistics
Primary Activities
97
Strategic Rationales for Outsourcing
Improve Business Focus
Lets company focus on broader business issues by
having outside experts handle various operational
details
Provide Access to World-Class Capabilities
The specialized resources of outsourcing
providers makes world-class capabilities
available to firms in a wide range of
applications
Accelerate Business Re-Engineering Benefits
Achieves re-engineering benefits more quickly by
having outsiders--who have already achieved
world-class standards--take over process
Share Risks
Reduces investment requirements and makes firm
more flexible, dynamic and better able to adapt
to changing opportunities
Free Resources for Other Purposes
Permits firm to redirect efforts from non-core
activities toward those that serve customers more
effectively
98
How does it fit together?
Vision Direction and Strategies
Strategies (Corporate and Business)
Vision Direction
1st
Business Imperatives
Globalization (External Growth)
2nd
Year 2009 KPI Goals (Internal)
Capabilities
Strategic Alliances/ Partnerships (Ext. Int.
Growth)
Increased Capabilities via identified Core
Competencies
3rd
Future Work Trends
Barry A. Macy, Successful Strategic Change,
Berrett-Koehler Publishers, San Francisco, CA.
(forthcoming)