Welcome to Business Strategy and Policy

1
Welcome toBusiness Strategy and Policy

• John A. Hengeveld
• week 3 class 1

2
AGENDA

• Microsoft Case final thoughts
• BE Ch 4-6
• Innovators Solution Ch 6

3
Microsoft Multimedia

• Final Thoughts

4
IS Ch 6 - Commoditization

• IS View of Commoditization Process
• Company Develops Proprietary product that while
  not good enough is better than others
• To Keep ahead of competitors, Company overshoots
  the functionality and reliability that customers
  in the lower tiers of the market can use.
• This causes a change in the basis of competition
  in the market which
• Creates and evolution to modular architectures
• Facilitates the de-integration of the industry
• Eliminates differentiators in performance or cost.

5
Decommoditization

1. Low cost strategy of modular product assembly is
   only viable when high cost suppliers are moved
   out of the low end, after they leave, you must
   move up market.
2. (3) Performance becomes key differentiator again
   in the modules
3. Changing the nature of competition in having
   customers of modules deliver increased
   performance in the end use products
4. Leading providers of modules make solid profits
   arming all sides
5. The next cycle of commoditization begins

6

• Discussion of Figure 6-1

7
Core Competence and ROA Spiral

• This is on my list of the top 3 most important
  AHHAs in this book.
• Competitiveness is about doing what customers
  value far more than doing what you think your
  good at
• Back to the CVD model of profitability
• Profit centers where performance is not good
  enough.

8
BE Discussion

• What happened at NewWave (ch 4)
• Relate the concept of diversification shown in
  ch4 to the innovators solution approach?
• Southwest Airlines Discussion