lecture 2 Flashcards
Strategy
“stategy is about making choice; its about deliberately choosing to be different”
Business strategy
An idea, a business concept, a plan
The search for a favourable competitive positioning
Six principles of business strategies
1) Quest for competitive advantage
2) fit between the company (inside-out view) and the market (outside-in view)
3) Strategy is about being different and choosing what to do
4) strategy pursues the achievement of a desired long-term aspiration
5) consistency in behavior
6) multiple level and theme alignment
Initial strategic situaion: selected key stakeholders of the company
4 things
1) identify relevant stakeholder groups
2) prioritizing stakeholders
3) capturing key stakeholder expectation
4) integrating stakeholder insights into the strategy
E.g. Tinder
1) customers
2) Customers
3) uni students want uni students (tinder uni (capturing expectation))
Panic Button
4) implement these things
A strategic analysis framework covers different layers and areas for investigation to identify opportunities, threats, strengths and weaknesses
Company (strength and weakness internal)
Competitive arena (suppliers competitors etc)
Industry (supplier bargaining power, potential entrants etc.)
Macro enivironment (socioculturalm ecological, legal etc.)
Macro environment: Factor radar with strategy relevance and timeline
The framework helps to identify braod macroenvironmental factors that may have an impact on a firms future profits
Political(zero emissions, new free trade zones), economic (intensified eco-competition), sociocultural (new societal values and lifestyles), technological (industry 4.0), ecological(intensified climate change) and legal (compulsory sustainability reporting standards).
Defining the relevant market (industry boundaries) is an essential first step for analyzing competitive forces
Box in a box; entire market scope and relevant market
How should a company that launches an unalcoholic beer define its industry: beer? soft drink? isotonic drink market?
According to the figure a market should be defined by a few criteria
BMW: criteria 1: car its self (large small etc9
criterea 2: type of transportation (train, bus)
criteria 3: customer group (are my customers private or commercial etc)
Industry: the porter five forces model of industry profitability
The nature of competition in an industry (relevant market) and its profit potential can be analyzed with the porter five forces model
Intensity of rivalry among existing competitors consists of:
Threat of new entrants
(takes a lot to enter inudstry,)
Bargaining power of buyers
(few buyers many suppliers)
Threat of substitute products or services ( difficulty of switching etc)
Bargaining power of suppliers
(lost of buyers they control price)
Competitive arena (how to identify competitors)
Ask (ask potential customers, eg talk to dog owners and ask what they do to take care of their dog when they are out or on vacation)
Search for them (e.g. search dog sitting, see whos buying ads etc.)
Competitive arena (competitors)
various elements need to be considered for gaining insights about how different direct or indirect competitors may impact a firms performance
Competitor action or response exists from:
Size, growth and profitability
Image and positioning
Objectives and commitment
Current and past strategies
Leaders, culture and structure
Cost structure
Exit barriers
Strengths and weaknesses
Size growth and profitability (competitors)
often measured by market share (indicates how much sales you generate compared to competitors)
–> does not lead to higher profits
Competitive arena: relevance of market share
meta analysis on the market share - financial performance relationship
863 elasticities (i.e. % change in financial performance of a 1% change in market share) from studies
Studies were published between 1972 and 2017, come from six different continents and deal with a wide range of manufacturing and service industries
meta-analysis aims at identifying the average elasticity as well as the moderating effect of var study characteristics (e.g. industry, region, timer period) on the relationships
1% increase in market share does not indicate profit
However, an increase in customer related assets increase, financial performance increases
Additionally brand related assets (brand image etc.) lead to higher financial performance
Reasons for low performance relevance of market share
global reasons (digitalization, globalization)
Customer specific reasons (loss of exclusivity, negative network effects)
Firm specific reasons (slow processes, excessive competitor orientation, motivation prolbems for the market leaders)
Customer segmentation (competitive arena)
strategically addressing the relevant market may require a segmentation into distinct and homogeneous submarkets based on various criteria:
Socie demographic (i.e. age, gender, merital status)
Geographic (place of residence)
Psychographic (e.g. lifestyles, personal characteristics)
Behavioral (e.g. price sensitivity, actual buying and consumption)
Competitive arena: a life without research on customer needs
The formulation of specific market strategies requires a comprehensive understanding of customer needs, wants, demands, and requirements
Competitive arena: sources of customer heterogeneity
Identifying and exploiting customer heterogeneity is key to developing effective marketing strategies
Source: individual differences,
Life experience, functional needs, self-identify/image, marketing activities
Internal strategy: stengths and weaknesses profile
The analysis of a firms resources and capabilities can be facilitated and visualized with a chekclist based strengths and weaknesses profile
Left column: Success factors, then they are weighted, and evaluated
DO this for both companies and focal areas are where you have significant advantage or disadvantage
S7 model for internal strategy
Identify strengths and weaknesses with the 7s model emphasizes hard and soft factors that drive a firms performance and their interrelation
Structure, strategy, systems, shared values, skills, style and staff all interconnected
Internal strategy (value chain model)
the value chain model helps to identify strengths and weaknesses by analyzing value addint activities within and across afirms value chains
set of activities that create value, begins with raw materials from suppliers and ends with distribution. Identify primary and secondary activities across the entire value chain
overview of the stages of a market research project
1) Problem definition: translate the managerial question into a research question
2) Project design: selection and design of relevant data collection and analysis methods for solving the identified problems
3) Data collection: establish the target population, source of data and sampling procedure
4) Analysis and interpretation: Process the data to generate valuable information via statistical inference and visualization
5) Decision and actions: Use the information to develop actionable recommendations
Some first insights into the project design (2nd step of research project)
project appraoch –>
1) Exploratory research
Generate general insights into a problem, identify decision options, identify relevant varialbes, (collect qualitative survey or ad hoc survey)
2) Descriptive research
Precise description of a phenomenon/state (univariate analysis)
3) Causal research
Identify and quantify (multivariate analysis) (e.g. what are the drivers of the purchase process and how strong are they) (ad hoc survey, panel or experiment)
