Todays Agenda

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Todays Agenda

• News You Can Use
• Video cases
• Business-Level Strategy
• Corporate-Level Strategy
• Group Projects Info
• Resources Peer Evaluation and Library
  Information
• Whats Expected
• Financial Overview
• Exam review

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Knopf Fruit Company

• Chapter One Planning, SWOT Analysis
• Discussion Questions
• 1. Who are their stakeholders?
• 2. Who initiated the planning process?
• 3. Would their expansion effort have been as
  successful without strategic/operational
  planning? Why or why not?

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Central Michigan Community Hospital

• Chapter Two Business Environment
• Discussion Questions
• 1. Is the hospital significantly affected by
  changes in its external environment? Cite
  examples.
• 2. Who are their customers? Why?
• 3. Rate the future prospect of the hospital if
  they ignore concerns of their stakeholders.

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Business-Level Strategy

• A Strategy is an integrated and coordinated set
  of commitments and actions designed to gain a
  competitive advantage.
• A Business-level strategy is a (strategy)
  targeted to specific, individual product markets.

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Generic Business Level Strategies
Source of Competitive Advantage
Cost
Uniqueness
Cost Leadership
Differen- tiation
Broad Target Market
Breadth of Competitive Scope
Focused Differen- tiation
Focused Low Cost
Narrow Target Market
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Cost Leadership Business Level Strategy
Requirements
Relatively standardized products
Constant effort to reduce costs through
Features acceptable to many customers
Lowest competitive price
Building efficient scale facilities

Monitoring costs of activities provided by
outsiders
Tight control of production costs and overhead


Minimizing costs of sales, RD and service


Simplification of processes
State of the Art manufacturing facilities

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Cost LeadershipCompetitive Risks
Focus on VOLUME

• Loss of cost advantage due to technology
• Loss of cost advantage due to imitation
• Customer interest in a differentiated product

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Differentiation Business Level Strategy
Requirements
Value provided by unique features and value
characteristics
Constant effort to differ-entiate products
through
Developing new systems and processes
Command premium price

High customer service

Shaping perceptions through advertising
Superior quality

Quality focus
Prestige or exclusivity
Capability in RD

Maximize Human Resource contributions through low
turnover and high motivation

Rapid innovation
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Types of Differentiation Themes

• Unique taste -- Dr. Pepper
• Multiple features -- Microsoft Windows and Office
• Wide selection and one-stop shopping -- Home
  Depot and Amazon.com
• Superior service -- FedEx, Ritz-Carlton
• Spare parts availability -- Caterpillar
• More for your money -- McDonalds, Wal-Mart
• Prestige -- Rolex
• Quality manufacture -- Honda, Toyota
• Technological leadership -- 3M Corporation, Intel
• Top-of-the-line image -- Ralph Lauren, Chanel

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DifferentiationCompetitive Risks
Focus on MARGINS

• Price does not justify the features
• Unique features no longer valued
• Loss of differentiation due to imitation

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Focused Business Level Strategies
Focused Business Level Strategies involve the
same basic approach as Broad Market Strategies
However.....
Opportunities may exist because
Large firms may overlook small niches

Firm may lack resources to compete industry-wide

May be able to serve a narrow market segment more
effectively than industry-wide competitors

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Examples of Focus Strategies

• eBay
• Online auctions
• Porsche
• Sports cars
• Horizon and Comair (commuter airlines)
• Link major airports with small cities
• Jiffy Lube International
• Maintenance for motor vehicles
• Bandag
• Specialist in truck tire recapping

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FocusedCompetitive Risks

• Firm may be out-focused by competitors
• Large competitor may set its sights on your niche
  market

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Integrated Low-Cost/Differentiation

• What is it?
• The best of both worlds. Both low-cost and
  differentiated.

• Potential problems?
• Unachievable! Can easily get stuck in the middle.

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Pres./Memo One - Expectations

• Provide a Brief company overview
• Highlight results of the general environment
  analysis
• Scanning, monitoring, forecasting, assessing
• Conduct a detailed Five Force analysis
• Provide a rough determination of the impact of
  each force force (support your position)
• Summarize the overall model results
• Explain where your company fits in the industry
• Briefly mention the type of generic
  business-level strategy pursued by the company
• The memo should replicate the presentation

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Project Expectations

• Keys to Success
• Report the RESULTS of your analysis, not the
  process of analysis. However,
• Make sure you SUPPORT YOUR ARGUMENT!!!
• Be thoughtful (whats really going on)

Data, data and more data - support your
position! (not a suggestion, a requirement)
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Financial Overview(Measures of Profits)
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Financial Overview(Measures of Liquidity)
Could be an important signal of a firms ability
to expand
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Financial Overview(Measures of Leverage)
Can you borrow money to expand if desired?
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Financial Overview(Activity Ratios)
How effectively is the company utilizing its
existing resources?
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Exam One Review

• Topics Covered
• If it was assigned reading or we talked about it
  in class, its included (does not include text
  examples).
• Exam Format
• 18 multiple choice (1 pt), 11 short answer (2
  pts).
• Entire 110 minutes to finish the exam.
• Focus on the Exam
• A combination of knowing basic concepts and
  applying these concepts to real situations.

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Exam One Review

• Chapter One
• What is the study of strategy and what are the
  competing models?
• Chapter Two
• What is the general environment and how do we
  include it in our analysis of strategy?
• Five Forces in detail!

• Chapter Four
• What are the business-level strategies and when
  is a particular business-level strategy
  appropriate?
• Chapter Six
• What are the corporate-level strategies and when
  is a particular corporate-level strategy
  appropriate?

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Next time