Global Strategy Execution Flashcards
What’s the key argument to scaling?
Leverage success – a major challenge for many firms who often “leave money on table”
What do we focus on?
Our focus on physical product businesses
What are the strategic imperatives of scaling?
(A strategic imperative is a business goal, objective or target that has the highest priority)
The strategic imperatives
- Reach user‐customers speedily
- Organise the channel of delivery
- Manage the supply chain
- Control entry by rivals
- Capture the value
Why does speed of scaling matter?
(Reach user‐customers speedily)
- Once you have a successful prototype, copying by rivals is much more likely. Ideas are worthless, proof that it works makes people jealous.
- You need to be very realistic, patents, locations etc only slow down rivals, it does not stop them.
- If rivals copy they may avoid many of your costs! This may drive you out of business.
- Speedy scaling pre‐empts rivals. Copying typically takes time,
- Customers or channel providers are often likely rivals. Signing them up as partners, stops them entering. And you can be sure they will also try to keep others out.
How do we find enough customers?
(Reach user‐customers speedily)
- Scaling customers have to be found, (see pack 2).
- If we are an internet site, we have to generate traffic. Are there complementors that can help us?
- If we offer B2B service to large corporates through teams, who will introduce us to required volume clients speedily? Typically we need some big volume clients
- If we offer B2B to SMEs, how do we get the clients that typically want low ticket prices and are cautious? Maybe need partners?
- If we offer B2C service through retail outlets, how do we attract new customers at each new location? Franchise partners that know the local area may help generate create the pull
- If we are a technology platform, who will give us the volume or the licences we need? Typically it is a very high volume user.
Channel of Delivery
How can we find the customers and deliver high volumes, without compromising our standards… -> What are the three important questions to answer?
There are three very important questions to answer:
– Do we try to keep the formula constant (replication), or do we constantly adapt?
– Do we build capacity ourselves (branching) or do we licence/franchise
– Do we transfer knowledge using “templates” or “principles”?
Explain replication vs. adaption
- Capital costs can be economised if we “replicate” rather than deviate, and this directly effects ROI.
- Example: Capital Costs of first outlet is £1 millions, sales £500K and profit £50K, ROI 5%, unattractive
- Build 16 outlets, capital costs typically decline by 50% (YES THIS IS TRUE) due to equipment savings, time savings. Outlay for 16th outlet: £500K, so ROI is 10%
- Operating costs can be reduced if we replicate.
- Standardised supplying of inputs, may reduce costs by say 20%. Likewise economise on recruitment and training, and possibily “de‐skill”. Controls can be simplified, increasing span of control.
- In above example, this could increase ROI from 10% to 20%
- Brand image may be reinforced with replication
- Replication is very attractive, if the market will bear it
Explain Branching versus Franchising
(Channel of Delivery)
- If we control the whole delivery system, we have to resource the system, manage the system and get all the pieces right. Typically, this takes a long time and a lot of effort.
- Slower speed may encourage entry, and delay the profits
- Slower speed may halt the band wagon effects
- We may under‐estimate the diversity of customer needs and the difficultly of making a mass market happy
- We may be brilliant at ideas, but poor at scaling which has very different capabilities
- Partners can bring experience, resources, speed, customers and also help deter other entrants.
When is franchising or branching common?
- Branching is common when only a few outlets can cover the whole territory: e.g. super‐market super‐ stores
- Franchising is common when there are very many very small outlets e.g. coffee shops, corner shops, fast food restaurants
- Franchising is also common in B2B services for SMEs (many of them and they are often very local)
- When franchising, need to select franchisees that appreciate maintaining consistency.
What’s the motivation behind using templates and principles? (what’s the problem you try to solve)
How does one make sure that each team/each outlet “replicates” the master concept, without compromising quality? There are two approaches “templates” and “principles”.
Explain in one sentence templates and principles, respectively
+
Give example of companies that uses them
Templates: Have a working example. Watch very carefully how it is done, then try to copy exactly – but don’t ask why. The book will only tell you what to do; not why – Examples: McDonalds outlets; Intel factories
Principles: Have a clear philosophy. Explain why this works and the reason why it is done this way and then try to do it. The book will give examples and explain reasons. – Examples: TQM, Novotel, Shell, Military
Explain differences between principles and templates
- Templates
- Working example of people and technology engaged in delivery. Something that is working to a high standard, typically specially constructed to show off the system
- Has an accompanying manual that specifies the most common contingencies
- Attempts to codify most, but not all, that is tacit – What is still tacit can be learned by looking
- Principles
- A set of interlocking practices that are described for the user
- Often the practices are well known individually, but how they interlock is imperfectly known outside this context
- A clear statement of objectives and procedures accompanied by sketch examples and exhortations
- A set of steps to get to end point (e.g. consultation rules and learning requirements)
What approach should be used for McD and for high-end restaurants?
McDonalds Unskilled front line workers, inflexible customer approach, low costs = templates
– High class restaurants, customer needs idyosyncrati = principles
How to choose between the two?
(what are the four parameters and how do they two differ in regard to them?)
When scaling, what is important to note about the supply chain?
- When we scale, we need to make sure the suppliers of inputs and people can also scale.
- If the input is a product, perhaps we can outsource the production to low cost location?
- If we require human inputs on a large scale, do we know how to manage the recruitment and training?
- If there is a supply chain, have we aligned them with our interest, or will they integrated forwards and steal the business?
Whats on y-axis
what’s on the x-axis?
FIll this out
