Quiz #1 Flashcards
What is Strategy?
- A pattern of decisions in a company that reveal objectives,purposes,goals
- Unique and valuable position involving different activities
- A pattern of integrated activities
- Must be specific when targeting market (shouldn’t be vague)
What Makes Good Strategy?
Adjectives (1) Unique (2) Sustainable (3) Specific (4) Creative (5) Feasible/realistic (6) Internal Consistancy
What Strategy is Not?
-Catch all for organizational decisions (integrated set of choices)
-Operational Effectiveness; performing different activities from rivals or performing similar activities in different ways
Ex) Money ball, people catch on
Ex) Southwest Airlines: Not going after first class experience; target markets
Summary Statement of Your Strategy
- Characterizes product line/services offered
- Markets and their market segments
Key Aspects of Strategy: Formulation
o Deciding what to do, how do you decide, what do you look to do
♣ Is the market there? Is there interest?
o Externally/Environment
♣ ID opportunities and risks
♣ Responsibility to society
♣ Sell how you’re different
o Internally
♣ Determine capabilities, resources, weaknesses
♣ Personal values and goals of management
o SWOT analysis
♣ Strengths, weaknesses, opportunities, threats
Implantation of Strategy
o Achieving results, what aspects are thought about?
o Organizational structure and relationships (division of labor)
o Organizational processes and behavior (incentive systems and rewards)
o Culture —> symbols
o Top leadership —> alignment and fit
Model of Strategy in Context
Mission –> Objective –> Strategy –> Implementation
Summary of Strategy
o Strategy is the activities that make it different and unique
o Lots of formulation and implementation
The Five Forces
- Customers
- Suppliers
- Competitors
- Threat of Substitutions
- Possible/potential entrants
o RIVALRY AMONG FIRMS (PORTER)
Power of Buyers
o Why is this a threat?
♣ Limits on profit potential
♣ Demand better quality, more service, or be concerned with prices
o Dependent on…
♣ Negotiating Leverage
• Few buyers
• Industry products are standardized or undifferentiated
• Face few switching costs (doesn’t take much to move between products) different chargers for new phones
♣ Price Sensitivity
• Elastic and inelastic demand
• Big cost, strapped for cash
• Quality not affected by product
• Product has little affect on other costs
o When this is high…
♣ Build on relationship, switching cost is high, make them reliant
♣ Make it hard to leave
Power of Suppliers
o Threat?
♣ Can capture value for themselves
♣ Charge higher prices lower quality or shift costs
o Dependent on power, higher if…
♣ One of a kind, monopoly on the market
♣ Switching costs in a changing suppliers
♣ Products differentiated
♣ No substitute
o If high…
♣ Standardize specifications so you can easily switch
Threat of Substitutes
o Threat?
♣ Perform same or similar functions by different means (outside the industry)
♣ Customers may switch to substitutes
♣ Place ceiling on prices (can’t keep charging more risk of loss)
o When high…
♣ Offers better price-performance trade off
♣ Buyers cost of switching is low
o What do you do?
♣ Uniqueness, differentiation (game day vs. at home)
♣ Better value and wider accessibility
Threat of Entry
o Threat? ♣ Limits profit potential of industry o Depends on… ♣ Cost of start up or entry ♣ Barriers to entry • Benefits of seale (big batches) • Customer switching costs • Capital requirements, unequal access to distribution ♣ Reaction of incumbents • Substantial resources to fight • Won’t cut prices • Industry growth is low ♣ When high… • Keep prices down • Boost investments
Rivalry/Competitors
o Threat? ♣ Limits profitability o Depends on… ♣ Intensity to compete • Competitors are numerous • Slow growth • Exit barriers are high • Rivals are high committed • Firms cannot read signals o Basis of Competition ♣ Price (if people keep lowering price, consumers get better value, lose profitability) ♣ Build in value (customer service, different features, quality)
• Strategy Formulation: Other External Factors
o Industry growth rate
o Technology and innovation
o Government
o Complementary products and services
o Changes to industry structure and 5 forces
Global Sourcing
o Key Decisions:
♣ 1) Outsource or not – “Make or Buy”
♣ 2) Where should value adding activities be located
o Pros: insourcing = more control
o Cons: large initial investment in another country, high short term costs for insourcing
Global Sourcing and the Five Forces
o Activities aim to exploit comparative advantages and maximize competitive advantages, but benefits depend upon…
♣ 5 forces including competitors and relationships with suppliers
♣ all has pros and cons, but need to align with strategic objectives, past experience, and environmental changes
Innovation
new ideas, specific function of entrepreneurship; an have innovation w/ entrepreneurship
Entrepreneurship
• realizing profit, need for something that people didn’t know they needed; difficult to copy, simple, doesn’t costs a lot to get started
o Growth and development overtime
Sources of Good Ideas
o 1) Unexpected Occurrences (IBM Watson, Play-Doh)
o 2) Incongruences (tweaking something)
o 3) Process Needs (make people’s lives easier)
o 4) Demographic Changes
o 5) Changes in Perception (healthy, but not healthy enough, GMOs)
o 7) New Knowledge (new technology)
o 8) Traveling = highlighted sense of awareness
Entrepreneurship Steps
o 1) ID the market o 2) Create business plans o 3) Seek investors o 4) Build enterprise o 5) Put together a team (creation of human capital)
Elements of a Business Plan
o Company overview, mission statement, description of product, competitive analysis, marketing strategy, objectives, financial plans, operations
Lean Start-Up (Blank Article)
o Testing and failing multiple times
o Start slow and small; hypothesis
Business Model Canvas
o Laid out on one sheet
♣ Partners, channels, relationships, customer segments, value propositions, cost structure
o Reduces ricks
Takeaways (Business Model)
o There’s a difference between innovation and entrepreneurship; not all ideas are profitable
o Good ideas come from a variety of places; think like a traveler
o Lean start-ups allow faster, cheaper, less risky ventures
Exercise App Case
o Core features vs. full product rollout
o FIRST IMPRESSION IS EVERYTHING, adding things along the way
♣ If core features aren’t different, then there’s the issue of people thinking it has been done
♣ PRODUCT MUST BE UNIQUE
o Relationship with customers?
♣ Testing and feedback
o Bowen’s Role
♣ Must be able to wear a lot of the hats; no hierarchy
o Product Scalability
♣ State with a particular sport, build on that
o Usage measures
♣ Downloads, purchasing videos
♣ Videos downloaded per person; are people coming back to the product
Ensure that your product is ready for release
What Makes an Entrepreneur
o 1) Possession over a company, enterprise or venture
o 2) Bring creative and innovative ideas and actions
o 3) Management and organization skills
Lessons
o Limited resources, must make tradeoffs, build the right human capital, focus on the market, build relationships with key stakeholders, create buzz through word of mouth
Takeaways (Entrepreneurship)
o Customer co-creation can support creation process and lead to other capabilities
o Value propositions differ depending on types of users
o Entrepreneurs have a lot to cover businesswise and with innovation
Key Positioning Strategies
o 1) ARENAS – where you are active
o 2) VEHICLES – how you will get there
o 3) DIFFERENTIATION – how will you win in the marketplace
o 4) STAGING – speed and sequence of moves
o 5) ECONOMIC LOGIC – how we will retain returns
Types of Strategic Positioning
o Variety Based
o Needs Based
o Access Based
o MUST BE: (1) FOCUSED (2) BROAD
Sustainable Competitive Advantage
o Whole matters more than individuals parts
o New position, don’t imitate
o Deepen, not dilute
Trade offs
You also need to make tradeoffs – chose what not to do, in order to have sustainable competitive advantage
Some activities are incompatible: gains in one area can only be achieved at the expense of another area
Create a need for choice and purposefully limit what companies can offer
Without these you may have inconsistent and confuse customers
Need to go alongside positioning
Tradeoff between cost and quality
Protects straddles of repositions
Fit
competitive advantage and sustainability
Locks out imitators by creating a chain of activities that complement one another and a system that is difficult to copy
Combine and configure unique activities to be consistent and reinforcing
Competition cannot imitate
Creates a chain of activities that are complementary to one another
Ex: South west airlines
Why Organizations Fail
o Don’t think they need to choose or trade off
o Try to serve to all customers AKA too broad
Take Aways
o Strategic positioning is about performing different activities
o Different sources of positioning
o Take a sustainable position
Internal Resources of a Company
uniqueness; don’t have to be tangible (culture, motivation); rare, difficult to copy, or valuable; physical resources
Assets used to Develop Products
o Financial, physical, human, organizational
Resource Based View
o Assumptions – certain resources means a competitive advantage; firms have heterogeneous bundles of resources
o Reality – competitive advantage exists if resources are VALUABLE, RARE, & INIMITABLE
Strategically Valuable Resources
Difficult to copy, depreciate slowly, value controlled, not easily substituted
Components of a Vision
Core Ideology, Core Values, Core Purpose, Envisioned Future
Core Ideology
♣ Defines what you are ♣ Unchanging ♣ Not created, but discovered ♣ Authentic ♣ Guides and inspires, not about differentiating
Envisioned Future
BHAG and vivid description; what you aspire to become, achieve and create
BHAG
♣ BHAG – Big Hairy Audacious Goal; target, common-enemy, role-model, internal transformation
• Ex) Stanford: Harvard of West; Nike: Crush Adidas
Vivid Description
♣ Vivid Description – writing up future, vibrant, what happens when the BHAG is reached, paints a picture, passionate, emotional, and convincing
o Necessary to make informed decisions, stay on track, and offer strategy and guidance
o Not boring, alignment with core ideals, fundamental dynamic: preserve core, stimulate progress
Model of Strategy in Context
o Does not fit in a box
o Contains a mission, objectives, and strategic analysis
o Stakeholders can be customers, consumers, etc.
Stakeholder
anyone affected by achievement in objectives
