BADM 495
physicl uniqueness
(diamond mines) by definition are difficult to reproduce
which of the following is not a test of inimitability? a. customer satisfaction b. physical uniqueness c. path dependency d. causal ambiguity
a. customer satisfaction
PE cost structure
aircraft: most possible flying time out of them. 10.36 hours per aircraft per day low labor costs: received training in multiple functions facilities: workspace was low cost and strictly functional no freebies people at PE were considered the value added to the commodity
which of the following is not one of PE marketing elements? a. convenient flight schedule b. free beverages c. low fares d. positive atmosphere
b. free beverages
Which of the following companies did not meet the mark in terms of the test of substitutability? A) Express Cleaners B) People Express C) IKEA D) Disney
b. people express
Which of these is NOT a perspective of the Balanced Scorecard Framework in this article? a. customer b. internal business process c. organizational design d. financial e. learning and growth
c. organizational design
Industry Rivalry
concentration, diversity of competitors, product differentiation, excess capacity and exit barriers, cost conditions
Positioning
creation of a unique and valuable position (image in customer eyes) involving a different set of activities than competitors.
The Threat of Substitutes is high when which of the following factors are present? A) Low switching costs B) Improved products can now become substitutes C) Substitute offers attractive price -performance D) All of the above
d. all of the above
IBM creates an environment of dynamic capabilities by requiring managers to have: a. superior vision capability b. strong ability to execute c. project management skills d. insight and execution skills
d. insight and execution skills
which of the following was part of the planned human dimension at People? a. members profited substantially b. lavish office design c. specialization of tasks with little upward mobility d. cheerful, friendly atmosphere e. both a and d
e. both a and d
overview of ibm 1993
in 1993 - lou gernsner takes over - service unit = 27% of revenue - software unit did not yet exist - market cap is 30B
sustaining tehcnology
maintaining a rate of improvement on important attribute
Trade-offs:
making trade-offs in competing. Essentially making choices about what not to do!
describe strategic positioning
means performing difference activities from rivals or performing them in different ways - greater value enables charging higher unit prices - more sustainable over time than OE
describe operational effectiveness
means performing similar activities better than rivals - greater efficiency results in lower unit costs - unsustainable over time as as competitive advantage
disruptive technology
performs poorly on important attributes at first, better on unimportant attributes - eventually they meet the demands of mainstream
economic deterrence
pre empt competition by making sizable investment they will have to also build
learning and growth perspective
the priorities to create a climate that supports organizational change, innovation, and growth
performance trajectory
the rate at which the performance of a product has improved and is expected to improve in some important attribute - copies per minute
internal business processes
the strategic priorities for various business processes, which create customer and shareholder satisfaction
customer perspective
the strategy for creating value and differentiation from the perspective of the customer
financial perspective
the strategy for growth, profitability, and risk viewed from the perspective of the shareholder
describe the importance of trade offs
trade offs create the need for choice and protect against repositioners and straddlers - inconsistencies in image or reputation - trade offs reflect inflexibilities in machinery, people or systems - limits on internal coordination and control - management makes strategy clear
porter
- agrees easing regulation and global business reduce barriers - agrees companies are leaner and more nimble - claims hypercompetition is a self inflicted wound - root of the problem - operational effectiveness
describe the concept of seizing new opportunities and strategic execution
- emerging business opportunities (EBOs) - strategic leadership forums (SLFs) - corporate investment fund
overview of ibm 2007
- services and software 70% of total revenue - revenue is 91B - success comes from ibm dynamic capabilities
overview of ibm 2001
- services was 35B and software was 13B - services and software = 58% of total revenue - market cap is 173B
access based
- small town customers - standardized, low cost approaches to serve them
why does strategy often fail?
- uncertainty and complexity of competition and change - especially in fast moving markets - requires identification of relevant opportunities, and also the ability to execute on them - capturing and distilling relevant info is not a natural capability of senior management teams - many companies never see threats
how did IBM transform itself around customer needs externally?
- us postal office: developed software to optimize mail handling - boeing - technology for network centric warfare products - mayo clinic: gene profiling
in principal 5, john kotter describes how transformational change begins at the top with three discrete actions by the leaders. What are they?
1. establishing a sense of urgency 2. creating the guiding coalition 3. developing a vision and a strategy
What are the five components on which the Balanced Scorecard enabled early adopting companies to focus and align?
1. executive team 2. business unit 3. human resources 4. information technology 5. financial resource
The Balanced Scorecard provides a framework to look at the strategy for value creation; what are the 4 different perspectives and their strategic priorities?
1. financial 2. customer 3. internal business processes 4. learning and growth
4 paradigms for thinking about strategy
1. porters 5 forces: industry structure, entry deterrence, positioning 2. resource based view: difficult to imitate firm specific assets 3. game theory: bold strategic moves sending signals to competitors 4. dynamic capabilites: management builds and adapts competencies
Peoples Express 6 precepts
1. service, commitment to growth of people 2. best provider of air transp 3. highest quality of management 4. role model for other airlines 5. simplicity 6. maximization of profit
what are porters 5 forces?
1. suppliers 2. substitutes 3. buyers 4. potential entrants 5. industry competitors
substitute competition
Buyers' propensity to substitute, Relative prices and performance of substitutes
T/F Industry Structure can be reshaped by expanding the profit pool.
TRUE
T/F Opportunities for positive-sum competition greatest when industry serves diverse customer groups
TRUE
which of the following is not one of the three distinct distinct sources from which porter states that strategic positions emerge? a. variety-based b. income-based c. needs-based d. access-based
b. income based
which of the following is not one of porters five forces a. suppliers b. share holders c. idustry competitors d. buyers
b. share holders
strategy often fails because? a. the steadiness of change b. uncertainty and complexity of change and competition c. senior management is busy distilling relevant info d. r&d and project management have the same skill set
b. uncertainty and complexity of change and competition
A successful Balanced Scorecard program starts with the recognition that it is not a metrics project; it's a/an "______" project. a. Organizational b. Proposal c. Change d. Strategic
change
path dependency
(brand name) long term development of the resource
causal ambiguity
(capabilities) when difficult to disentangle the key resource and how to recreate it
discuss neutragenas positioning
- "kind to skin" - use a slow, more expensive manufacturing process to mold its fragile soap - residue free PH balanced - said no to deodorant and skin softeners - gave up large volume potential by not competing on price - created a premium "medical" soap reputation - focus on dermatologists - market through journals to doctors
What are the management implications for investing in and leveraging resources?
- Build strategies around resources that pass the tests. - Identify resources that need further investment to be maintained or to be further developed in order to pass the tests. - Resources must be joined with other resources and embedded into functional policies and activities that distinguish the company in the market.
discuss the human dimension at PE
- PE showed positive results in sphere of personal growth - high levels of employee satisfaction showed up in 1st year survey - cheerful friendly energetic atmosphere - in PE manager positon, the knowledge you gain is great opportunity - members profited substantially
What were the results of the implementation of the Balanced Scorecard at UC San Diego in 1994?
- The payroll department reduced errors by 80 percent - The financial office reduced the time to process expense reimbursement checks from six weeks to as little as three days. - The innovative program has received wide recognition, including winning the 1999 Rochester Institute of Technology/USA Today Quality Cup for Education
balanced scorecards
- broader set of performance measures - alignment to strategy - measures organizations capability for future performance
elements of PE marketing strategy
- build and maintain passenger volume by offering low fares and frequent service - convenient flight schedules - regionwide identity - pitch to smart air travelers - positive atmosphere
what is the test of substitutability?
- can a unique resource be trumped by a different resource? - steel makers lost beer market to aluminum - PE built lowcost no frills airline but then was beaten by major airlines using "yield management" capability
discuss the downside to PE growth and strategies
- chronic understaffing: constant pressure to hire hire hire, missed profit opp due to lack of personnel, maintaining high positive attitude is enough to give you a heart attack
what was the new value proposition brought about by gernster?
- customers would increasingly value companies that could provide solutions which integrated technology from multiple vendors and was directly supporting business processes of the firm - the core competence needed was the ability to integrate systems to solve customers business problems - required IBM to add the capability of customer expertise and business process expertise
what is the test of durability?
- durability leads to sustainability - but difficult these days due to pace of change - Schumpeter's competitive gale of creative destruction - new innovations overtake previous ones - Disney brand name is durable - Technological know-how is much less durable
PE structure/policies
- minimal hierarchy: no executive assitants, secretaries, support staff of any kind - ownership, lifelong job security - cross-utilization and rotation: short term inconveniences well worth the long term payoff - self management - work teams - compensation high reward for high performance
what is the test of competative superiority?
- not a feel-good exercise - problem for companies is that they view core competence as an internal only assesment of what they do best - it must instead be a harsh external assessment to identify "distinctive competence" or what they do better than competitors
What is the test of inimitability?
- physical uniqueness - path dependency - causal ambiguity - economic deterrence
how did ibm transform itself around customer needs internally?
- radical shift in approach to strategic insight and strategic execution
how did the ibm business leadership model come about and what is it?
- response to gerstner telling harreld to make a dramatic improvement in how IBM does strategy - leadership model included bringing together both strategy and executing - combined strategic insight and strategic execution - sensing and seizing
needs based
- serve all the needs of a customer segment -closest to traditional thinking of positioning
why is strategy so important?
- strategy is the answer to "how can we achieve and sustain competitive advantage?" - strategy refers to the plans and actions firms take to achieve their objectives - making quality decisions and executing well on those decisions
variety based
- superior value chain for specific product or service - usually meets only a subset of needs
supplier power
- suppliers price sensitivity - relative bargaining power
concept and elements of sensing new opportunites and strategic insight
- technology team meets monthly to assess market readiness for emerging technologies - strategy team meets monthly to examine current results and consider new growth areas - integration and values team facilitate winning plays -efforts requiring cross organization effort - deep dive: gm requests meeting with members from operating unit and strategy group to evaluate performance and opportunity gap
describe the productivity frontier and how porter believes it impacts businesses
- the sum of all existing best practices at a point in time - maximum value created at given cost using best practices - frontier constantly shifts - new technologies and management approaches - must constantly improve OE to improve profit this way - no long term relative improvement for any firm
discuss the new climate survey at people
- univ of michig climate survey showed signs of declining morale - PE managers below the top level were not as satisfied as they once were - flight managers more skeptical of cross-utilization and more uncertain of what self-management meant - leadership believed business and personal difficulties were short term and the costs were well worth the long term benefits
what is the test of appropriability?
- who captures the value that the resource creates? - leveraged buy out firms lost because network of contacts was owned by the individuals not the companies - resources must be inextricably bound to the company - they cannot walk out the door
List and describe the two ways that industry structure can be reshaped.
1. Re-dividing profitability - increase share of profits to competitors rather than to suppliers, customers, etc. 2. Expanding the profit pool - increase the total pie available
3 important points that the business leadership model makes clear
1. leadership requires strategic insight plus execution 2. start with performance or opportunity gap and then measure against business outcome metric 3. effective strategy comes from alignment of all components
2 reasons porter claims that OE is insufficient as a strategy?
1. major productivity gains drive costs down which are then passed on to customers as competitors catch up in productivity and also charge less - consulting, suppliers and customers reap this value - not providers 2. competitive convergence - benchmarking and outsourcing cause imitation - all firms begin to look the same and must eliminate the competition to win
PE bottomline business indicators
1. marketing payoff 2. cost containment 3. productivity
What 3 themes emerged in principal 4?
1. organizations began to link strategy to the budgeting process 2. the most significant was the intro of a simple management meeting to review strategy 3. a process for learning and adapting the strategy evolved
describe 3 types of fit and give an example of each. discuss "fit and sustainability"
1. simple consistency (vanguard minimizes trading costs so no need for costly money managers) 2. activities are reinforcing (neutrogena markets to upscale hotels) 3. optimization of effort (GAP does daily restocking of basic items in few colors)
describe 2 problems organizations face when implementing well-formulated strategy
1. strategies are changing but the tools for measuring strategies have not kept pace 2. attempting to implement knowledge based strategies in organizations designed for industrial age competition
The scorecard allows organizations to build a new management system which has three distinct dimensions. What are they?
1. strategy 2. focus 3. organization
7 major barriers to entry
1. supply-side economies of scale 2. demand-side benefits of scale 3. customer switching costs 4. capital requirements 5. incumbency advantages independent of size 6. unequal access to distribution channels 7. restrictive government policy
5 principles of a strategy focused organization
1. translate the strategy to operational terms 2. align the organization to the strategy 3. make strategy everyones day job 4. make strategy a continual process 5. mobilize change through executive leadership
3 distinct sources from which porter states that strategic positions emerge
1. variety based - jiffy lube 2. needs based - ikea 3. access based - carmike cinemas
what factors attributed to PE rapid success?
1. word of mouth 2. positive reviews by journalists 3. amazing employee response to PATCO strike 4. PE low cost structure enabled them to enter market at low fare
An example of the "Power of Buyers" concept is when soft drink producers control packaging manufacturers' power by actually making packaging materials themselves.
A) true
Using the scorecard should be especially helpful for organizations that are about to embark on what kind of strategy? How will it help?
Aggressive Growth strategy - "to guide the journey" - "to develop the management system for rapid growth" - "and to align existing and soon-to-be hired employees to the strategy for acquiring, retaining, and deepening relationships with targeted customers."
threat of substitution is high when
Attractive price performance trade-off Low switching costs Recent Improvements in materials enable substitutions
Describe why the "Power of Buyers" is important and give an example.
Buyers capture value when they force down prices, demand better quality or more service ex: Soft drink producers control packaging manufacturers' power by threatening or actually making packaging materials themselves
Buyer Power
Buyers price sensitivity, relative bargaining power
Which of the following aspects of the Growth Trap cause companies to fail with strategy? A) Manager's lag technology B) Aggressive marketing C) Pressure to grow cause broadening of customer targets D) None of the above
C) Pressure to grow cause broadening of custome
threat of entry
Capital requirements, economies of scale, absolute cost advantage, product differentiation, access to distribution channels, Legal/regulatory barriers, Retaliation
T/F The Balanced Scorecard is only suitable for companies experiencing declining performance.
FALSE
T/F a flexible government policy is one of the seven rtue barriers to entry
FALSE
T/F disneys brand name does not meet the test of durability
FALSE
T/F porter points out that OE is necessary to compete and sufficient to win long term
FALSE
T/F strategic positioning means performing similar activities better than rivals
FALSE
When investing in and leveraging resources, management should pay little attention to the industry forces at play. T/F.
FALSE
Buyers powerful when
Few buyers or large volume buyers Industry products are undifferentiated Few or no switching costs
Dimensions impactful when:
Focus is on price competition - causes profit to flow directly to customers Products identical and low switching costs High fixed costs and low marginal costs Capacity needs to expand greatly for efficiency Product is perishable
How has Paccar built defenses or positioned successfully within industry forces in the heavy truck market?
Focused on owner-operators Owner-operators not as price sensitive Love their trucks, take pride in them Economically dependent on them Built-to-order luxury trucks Luxury sleeper cabins Plush leather seats
1. describe Expanding the profit pool - increase the total pie available
Identify un-served markets Improve the supply chain to reduce inefficiencies - this allows more profit or stimulates demand through lower prices. Agree upon industry quality standards and drive prices up, creating additional profit potential
Describe Porter's answer to why companies fail with strategy. Focus on the Growth Trap.
Manager's chase technology to keep up Sign of weakness not to have "winner take all" attitude
Intensity greatest when:
Numerous competitors of similar strength Slow industry growth Exit barriers are high Rivals are committed and motivated beyond economics Firms unable to "read" one another's signals
Describe how and when the "Power of Suppliers" impacts an industry and give an example.
Powerful suppliers capture more of the value for themselves (charge more, limit services, etc.) Microsoft eroded the PC industry via OS pricing
How does the Resource Based View see companies? How do the elements of RBV relate to competitive advantage
RBV: companies are collections of physical and intangible assets and capabilities - unique to each company -Assets and capabilities determine how well a company performs its functions -Physical, intangible and/or organizational capability -Implication: Superior performance based on a competitively distinct set of resources deployed in a well-conceived strategy
According to Principle 2, "______" is the overarching goal of the organization. a. Financial Gain b. Development c. Synergy d. Employee Motivation
SYNERGY
describe Re-dividing profitability - increase share of profits to competitors rather than to suppliers, customers, etc.
Standardize parts specifications to more easily switch to other suppliers Expand services to raise switching costs of customers, lowering their power Neutralize rivalry by differentiating better Escalate marketing to deter entrants Offer better value or better access to deter substitutes
. Describe why the "Threat of Substitutes" is important and give an example of when threat of substitutes is likely to be high
Substitute products limit an industry's profit potential by placing a ceiling on prices. Videoconferencing versus travel, travel websites versus travel agents. Sometimes hard to see - neckties versus power tools for gifts.
Suppliers powerful when
Suppliers are more concentrated than the industry Supplier has other revenue sources Switching costs exist Differentiated products No substitutes Suppliers can credibly threaten to enter the market themselves
T/F burrs office doubled as a conference room
T
According to the article, customers wield extraordinary power in directing a company's investments.
TRUE
T/F effective strategy comes from alignment of all components
TRUE
T/F executives use the balanced scorecard to help communicate and educate the organization about the strategy
TRUE
T/F the balanced scorecard provides a framework which enables the creation of a "performance" mind-set
TRUE
The Resourced Based View (RBV) sees companies as collections of physical and intangible assets and capabilities T/F.
TRUE
Growth trap
Trade-offs appear to limit growth so are counter-intuitive to many managers Pressure to grow causes broadening of customer targets - resulting in loss of distinctiveness Instead - better meet needs and provide varieties where company is already distinctive
