MAN 6635

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techniques for analyzing product attributes and positioning

- multidimensional scaling -conjunct analysis -hedonic price analysis -value curve analysis

factors of spectrum of industry structure

-(C)concentration -(EE)entry and exit barriers -(PD)product differentiation -(I)information

evolution of strategic management

-1950: financial budgeting -1960-70: corporate planning -1970-80: emergence of strategic management -1980-2000: quest for competitive advantage -2000-12: adapting to turbulence

oligopoly factors

-C=a few firms -EE=significant barriers -PD=potential for product differentiation -I=imperfect availability of information

perfect competition factors

-C=many firms -EE=no barriers -PD=homogeneous product -I=perfect information flow

monopoly factors

-C=one firm -EE=high barriers -PD=potential for product differentiation -I=imperfect availability of information

duopoly factors

-C=two firms -EE=significant barriers -PD=potential for product differentiation -I=imperfect availability of information

Strategy as Positioning

-Where are we competing? How are we competing? =competing for the present

resource and organizational requirements of cost leadership strategy

-access to capital -process engineering skills -frequent reports -tight cost control -specializations of jobs and functions -incentives linked to quantitative target accounts

Identifying Key Success Factors

-analysis of demand -analysis of competition

production markets source of imperfection on competition

-barriers to imitation -barriers to innovation

indicators of intangible reputation resources

-brand equity -costumer retention -supplier loyalty

supplier power factors

-buyers price sensitivity -relative bargaining power

external sources of change

-changing costumer demand -changing prices -technological change

the industry environment attributes

-competitors -customers -supplier

types of competitive advantage

-cost -differentiation

innovatory strategies

-creating whole new markets/industries (myspace and Facebook in social networking) -creating new costumer segments (Nintendos wii games console) -new sources of competitive advantage (reconfiguring value chain, reconceptualizing the product, new performance combinations)

indicators of tangible financial resource

-debt/equity ratio -credit rating -net cash flow

isolating mechanism for incentives for imitation

-deterrence: signal aggressive intentions to imitators -preemption: exploit all available investment opportunities

drivers of cost advantage

-economies of scale -economies of learning -production techniques -product design -input costs -capacity utilization -residual efficiency

indicators of Human Resources

-employee qualifications -pay rates -turnover

how does competitive advantage emerge?

-external sources of change -internal sources of change

Mintzberg's Critique of Formal Strategic Planning

-fallacy of prediction (the future is unknown) -fallacy of detachment (impossible to divorce formulation from implementation) -fallacy of formalization (inhibits flexibility, spontaneity, intuition and learning)

tangible resource

-financial (cash, securities, borrowing capacity) -physical (plant, equipment, land and buildings, mineral reserves, raw materials)

corporate functions

-financial control -management development -strategic innovation -multidivisional coordination -acquisition management -corporate social responsibility

support activities

-firm infrastructure -human resource management -technology development -procurement

strategy analysis analyzes?

-goals and performance -competitive environment -resources and capabilities

the firm attributes

-goals and values -resources and capabilities -structure and systems

the firm factors

-goals and values -resources and capabilities -structure and systems

factors of how will we get there

-guidelines for development -priorities for capital expenditure, R & D -growth modes: organic growth, M & A, alliances

production markets opportunity for competitive advantage

-identify potential barriers to imitation (ex: deterrence, preemption, causal ambiguity, resource immobility, etc) and base strategy upon them -difficult to influence or exploit

Characteristics of strategic decisions

-important -involve a significant commitment of resources -not easily reversible

role of strategy analysis in strategy making

-improves decision processes, but doesn't give answers -assists us to identify and understand the main issue -helps us to manage complexity -can enhance flexibility and innovation by supporting learning

primary activities

-inbound logistics -operations -outbound logistics -marketing and sales -service

Sources of Superior Profitability

-industry attractiveness (which business should we be in?)=corporate strategy -competitive advantage (how should we compete?)=business strategy

defining industry boundaries

-key criterion: substitution -they need to analyze market competition at different levels of aggregation (depending on the issues being considered)

indicators of tangible physical resource

-market value of fixed assets -scale of plants -alternative uses for fixed assets

resource and organizational requirements of differentiation strategy

-marketing abilities -product engineering skills -cross functional coordination -creativity -research capability -incentives linked to qualitative performance targets

factors of what do we want to achieve

-mission statement -perfomance goals

macro environment (environment analysis)

-national and international economy -technology -government and political forces -natural environment -demographics -social forces

trading markets opportunity for competitive advantage

-none -inside trading -cost minimization -superior diagnosis -contrarianism

trading markets source of imperfection of competition

-none(efficient markets) -imperfect information -transaction costs -systematic behavioral trends -overshooting

indicators of intangible technology resource

-number of patents owned -royalty income -R&D expenditure -R&D staff

tangible differentiation

-observable product -characteristics (size, color, materials, performance, packaging, complimentary services)

forecasting industry profitability

-past profitability is a poor indicator of future profitability -if we can forecast changes in industry structure we can predict likely impact on competition and profitability

spectrum of industry structure

-perfect competition -oligopoly -duopoly -monopoly

the porter value chain is made of

-primary activities -support activities

sources of uniqueness on supply side

-product features and performance -complementary services -intensity of marketing activities -technology embodied in design and manufacture -quality of purchased inputs -procedures that impact customer experience -skill and experience of employees -location -degree of vertical integration

factors of where to compete

-product market scope -geographical scope -vertical scope

identifying key factors by analyzing profit drivers

-return on sales -sales/capital employed

analyzing resources and capabilities

-role of resources and capabilities in strategy formulation -identifying resources and capabilities -appraising resources and capabilities -developing strategy implications

key strategy elements of cost leadership strategy

-scale efficient plants -design for manufacture -control of overheads and R&D -process innovation -outsourcing -avoidance of marginal customer

Human Resources

-skills/know-how -capacity for communication and collaboration -motivation

3 types of resources

-tangible -intangible -human

intangible resources

-technology (patents, copyrights, trade secrets, R&D facilities, technical and scientific employees) -reputation (brands costumer loyalty, relationships) -culture

Porter's Five Forces competition framework

-threat of entry -threat of substitute -supplier power -buyer power -competitive rivalry

objectives of industry analysis

-understand how industry structure drives competition, which determines the level of industry profitability -assess industry attractiveness -use evidence on changes in industry to forecast future profitability -formulate strategies to change industry structure to improve industry profitability -identify key successful factors

strategy as direction

-what do we want to become? -what do we want to achieve? -how will we get there?

analysis of competition

-what drives competition? -what are the main dimensions of competition? -how intense is competition? -how can we obtain a superior competitive position?

factor of how to compete

-what is the basis of our competitive advantage?

strategies to improve industry profitability

-what structural variables are depressing profitability? -which can be changed by individual or collective strategies?

analysis of demand

-who are our costumers? -what do they want?

framework for apprising resources and capabilities

-zone of irrelevance=low relative strength, low strategic importance -superfluous strength=high relative strength, low strategic importance -key weaknesses=low relative strength, high strategic importance -key strengths=high relative strength, high strategic importance **rectangle divided into 4. -superfluous is upper left, key strengths is upper right, zone of irrelevance is bottom left, key weaknesses is bottom right -horizontal scale is relative strength -vertical scale is strategic importance

profitability of US products (2000-2010): LOW

1) airlines (-11.3%) 2) motor and vehicle parts (4.4%) 3) food production (5.2%) 4) telecommunications (5.8%)

worlds most valuable brands (2011)

1) coca-cola 2) IBM 3) microsoft 4) google 5) general electric

sources of competitive advantage

1) cost advantage -similar product at a lower cost 2) differentiation advantage -price premium from unique product

Hierarchy of Capabilities

1) cross functional 2) broad functional 3) activity related (operations related only) 4) specialized (manufacturing related only) 5) single task

the framework for analyzing resources and capabilities

1) identify the firms resources and capabilities (resources --> capabilities) 2) appraise the firms resources and capabilities in terms of strategic importance and relative strength (potential for sustainable competitive advantage) 3) develop strategy implications (strategy) -how can strengths be exploited most effectively -in relation to weaknesses (what can be outsources, different strategy to minimize impact of weakness?, strengthening resources/capability by investment)

stages of analysis in using the value chain for cost analysis

1) identify the main value chain activities 2) allocate total costs between value chain activities 3) identify the cost drivers at each stage of the value chain 4) identify linkage between activities 5) identify opportunities for cost reduction

strategic importance of resources and capabilities

1) potential to establish competitive advantage (scarcity, relevance) 2) sustainability of the competitive advantage (durability, transferability, replicability) 3) appropriabili (property rights, relative bargaining power, embeddedness)

two approaches to identifying and organizations resources and capabilities

1) starting from the inside 2) starting from the outside

three key influences determining industry profitability

1) the value of the product to costumers 2) the intensity of competition 3) relative bargaining power at different stages of the value chain

profitability of US industries (2000-2010): HIGH

1) tobacco (33.5%) 2) household and personal products (27.8%) 3) pharmaceuticals (20.5%) 4) food consumer products (20.0%)

basic frame work for analyzing resources and capabilities

1)resources --> 1)capabilities --> 2)potential for sustainable competitive advantage --> 3)strategy

threat of entry factors

=entrants threat to industry profitability depends on height of barriers to entry principal sources of barriers to entry: -capital requirement -economies of scale -absolute cost advantages -product differentiation -access to distribution -legal barriers -retaliation

threat of substitute factors

=extent of competitive pressure from producers of substitutes depends on: -buyers propensity to substitute -relative prices and performance of substitutes

rate of profit above the cost of capital

=how do we make money?

competitive advantage from internally generated change

=strategic innovation

the industry environment (industry analysis)

=suppliers, competitors, customer -lies at the core of macro environment -macro environment impacts the firm through its effect on the industry environment

intended(design) strategy + emergent(process) strategy

?=realized strategy

buyer power factors

The threat to which buyers are ablate depress profitability depends on: =price sensitivity -cost of production relative to total cost -product differentiation -competition between buyers =bargaining power -size and concentration of buyers relative to producers/suppliers -buyers switching costs -buyers information -buyers ability to backward integrate *analysis of supplier power is symmetric

product integrity

The total balance of product features

focuses differentiation

appealing to what distinguishes different costumer groups (MTV, Harley-Davidson, Armani)

broad scope differentiation

appealing to what is common between different customer (McDonalds, hones, Gillette)

isolating mechanism for resource acquisition

base competitive advantage upon resources and capabilities that are immobile and difficult to replicate

internal product integrity

consistency between the function and structure

key to differentiation of product integrity

consistency of all aspects of the firms relationship with its customers

key to successful differentiation strategy

consistency of internal and external integrity

strategy as coordination and communication

creates consistency and unity

strategic innovation

creating customer call from new products, experiences or modes of product delivery

differentiation key issue

creating value for the costumer

differentiation vs segmentation

differentiation= concerns choices of how a firm distinguishes its offerings from those of its competitors (how the firm competes) Segmentation= concerns choices of which customers, needs, localities a firm targets (where the firm competes)

what makes a successful strategy?

effective implementation of: clear and consistent long term goals, understating of competitive environment, objective appraisal of resources

key strategy elements of differentiation strategy

emphasis on: -branding -advertising -design -service -quality -new product development

hedonic price analysis

estimates the price that consumers will pay fro particular product attributes

external product integrity

fit between the product and consumers objectives, values and lifestyle

importance of market share

if all firms in an industry have the same experience curve then: change in relative costs over time = f(market share) this implies that market share is like to profitability BUT -association does not imply causation -costs of acquiring market share offset the returns to market share

strategy as target

improves performance by setting high aspirations

strategy as decision support

improves the quality of decision making

internal vs external environment

internal= the firm external= the industry

starting from the outside

key success factors: -how do costumers choose? -what do we need to survive competition? ==what resources and capabilities do we need to deliver these key success factors

value curve analysis

maps competing products according to bundles of attributers in order to identify opportunities for new products with a different combination of attributes

multidimensional scaling

maps consumer perceptions of competing products along key differentiating variables

is strategy the same as tactic?

no. tactic is a scheme for a specific maneuver

does differentiation imply segmentation?

not necessarily, depends upon the differentiation strategy -broad scope or focused differentiation

isolation mechanism for identification

obscure superior performance

identifying key success factors through modelling profitability

profitability=yield x (load factor - unit cost) or income=revenue x (RSPMs - expenses)

Differentiation

providing something unique that is valuable to the buyer beyond simply offering low price not just about the product, it embraces the whole relationship between supplier and costumer

isolating mechanism for diagnosis

rely upon multiple sources of competitive advantages to create "casual ambiguity"

sustaining competitive advantage against imitation

requirement for imitation: -identification -incentives for imitation -diagnosis -resource acquisition

primary sources of profitability to a firm

resources and capabilities

links between resources, capabilities and competitive advantage

resources and organizational capabilities along with industry key success factors form a strategy and that forms competitive advantage

internal sources of change

some firms have greater creative and innovative capability

key success factors

starting point for the analysis of competitive advantage

basic framework of strategy

strategy as a link between the firm and its environment

what is strategy?

strategy is the overall plan for deploying resources to establish a favorable position

starting from the inside

supportive and primary activities

competitive rivalry factors

the extent to which industry profitability is depressed by aggressive price competition depends on: -concentration (number and size distribution of firms) -diversity of competitors (difference in goals, cost strategies, etc.) -product differentiation -excess capacity and exit barriers -cost conditions

the experience curve "the law of experience"

the unit cost of value added for a standard product declines by a constant proportion (typically 20-30%) each time cumulative output doubles

Intangible Differentiation

unobservable and subjective characteristics that appeal to the costumers image, status, identity and desire for exclusivity

conjunct analysis

uses estimates of consumer preferences for particular product attributes to forecast demand for new products that comprise different bundles of product attributes

how are resources integrated to create organizational capabilities?

via: -process -organizational structure -motivation -organizational alignment

factor of what do we want to become

vision statement


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