Session 2 Strat 392 Sec 4 Key Slides.pptx
- 2. “A dynamic plan to gain and sustain competitive advantage in the marketplace” Strategic Management, p.2 (learn this definition)
- 3. Do they have a good strategy?
- 4. Proven Business Strategy Southwest believes in a sustainable future where there will be a balance in our business model between Shareholders, Employees, Customers, and other Stakeholders. In order to protect our world for future generations and uphold our commitments, we will remain focused on sustaining our unmatched financial position in the industry, efficiency that conserves natural resources, fostering a creative and innovative workforce, and giving back to the communities in which we work and live.
- 5. “If you get your passengers to their destinations when they want to get there, on time, at the lowest possible fares, and make darn sure they have a good time doing it, people will fly your airline.” Herb Kelleher, co-founder, Chairman Emeritus and former CEO of Southwest
- 6. Total Beverage Company Our vision is to craft the brands and choice of drinks that people love, to refresh them in body and spirit. And done in ways that create a more sustainable business and better shared future that makes a difference in people’s lives, communities and our planet. This has three connected pillars: We craft meaningful brands and a choice of drinks that people love and that refresh them in body and spirit. We use our leadership to be part of the solution to achieve positive change in the world and to build a more sustainable future for our planet. We invest to improve people’s lives, from our employees to all those who touch our business system, to our investors, to the broad communities we call home.
- 7. Overview The Company was founded in 1901 as a retail shoe business in Seattle, Washington under the guiding principle that success would come by offering customers the very best service, selection, quality and value. We offer an extensive selection of high-quality brand-name and private label merchandise for women, men, young adults and children focused on apparel, shoes, beauty, accessories and home goods. No matter how customers choose to shop, we are committed to delivering superior service, product and experience, including alterations, order pickup, dining and styling, to make shopping fun, personalized and convenient.
- 8. As our business evolves, our is a key strategic growth priority. Our strategy leverages a strong store fleet and links our omnichannel capabilities at the local market level, positioning us physically closer to the customer and allowing us to drive customer engagement through better service and greater access to product.
- 9. “Our strategy seeks to reinforce our position as a leader in the oil and gas industry in order to provide a competitive shareholder return while helping to meet global energy demand in a responsible way.” What about this “strategy”?
- 10. Strategy is frequently misunderstood and therefore misapplied. More than any other business discipline, it suffers from crippling confusion and over-complication. In fact, the essence of strategy is stunningly simple, and therein lies its power. Columbia Business School
- 11. Strategy - “A dynamic plan to gain and sustain competitive advantage in the marketplace” Strategic Management, p.2
- 12. Competitive Advantage • When a firm generates consistently higher profits compared to its competitors • The primary source of a company’s competitive advantage can come from several areas of its operations and can also come from different functional areas within the company
- 13. How Do We Develop Strategy? Strategic management process - The process by which organizations formulate a plan and allocate resources to achieve competitive advantage
- 14. In the Real World, How Does the Strategic Management Process Work? All over the map Some organizations are good at developing strategy, some are terrible Strategy can be owned by the CEO, the executive team, division leaders, specific strategy functions, no one . . . Corporate strategy, division strategy, team strategy
- 15. The strategic management process involves making at least four strategic choices: markets to compete in; unique value the firm will offer in those markets; the resources and capabilities required to offer that unique value better than competitors; and ways to sustain the advantage by preventing imitation.
- 16. What markets (industries and geographic) the company will pursue in search of a high return on invested capital. Where do we compete? What industries? What customer segments? What geographic markets? MARKETS
- 17. What unique value to offer customers in those markets. The firm’s value proposition (the reason the company wins with a set of customers). . What unique value do we offer to win with customers? What is the value proposition? How is it unique? Which generic strategy for offering unique value: cost, differentiation or value? UNIQUE VALUE
- 18. What resources (assets, brands, etc.) and capabilities (processes) will allow the firm to deliver a superior value proposition to customers. How do we deliver unique value? What resources does the company have or need to support the value proposition? What capabilities does the company have or need to support the value proposition? How do we align the company’s structure, people, skills, values and culture with the strategy for delivering unique value? RESOURCES & CAPABILITIES
- 19. Cost Advantage An advantage that a firm has over its competitors in the activities associated with producing a product or service, thereby allowing it to produce the same product at lower cost. Differentiation Advantage An advantage a firm has over its competitors by making a product more attractive by offering unique qualities in the form of features, reliability, and convenience that distinguishes it from competing products. TWO GENERIC STRATEGIES TO OFFER UNIQUE VALUE
- 20. A “VALUE” STRATEGY IN BETWEEN Providing similar product at a lower price Providing unique product with attributes buyers will pay for Providing a combination of features and price between low priced and premium value offerings VALUE Best Value for the Price DIFFERENTIATION Premium Value LOW COST Efficiency
- 21. Up- Stream Down- Stream Example Companies/Industries Key activity or capability that confers advantage Companies Industries Raw materials sourcing ∙ DeBeers Diamonds/Jewelry Research and development ∙ Genentech Biotechnology Design ∙ Apple ∙ IDEO Computers, MP3s, phones Anything Large scale, low cost production capabilities (economies of scale) ∙ Intel ∙ Boeing Semiconductors Aircraft Production technology ∙ Toyota Automobiles Sales and marketing ∙ P&G ∙ Virgin Group Consumer products Airlines, cell phones, music Store location and design skills ∙ McDonalds ∙ Starbucks Fast food Coffee Servicing ∙ Nordstrom Clothing, accessories Examples of Capabilities that Confer Advantage
- 22. What will prevent imitation of the company strategy by competitors. What do we do to block competition? Is our value proposition unique? Can we prevent others from imitating our unique value proposition (is there a barrier to imitation)? What do we need to do to protect our unique position? If no barrier to imitation, how long will it take our competitors to imitate the strategic initiative? BARRIERS TO IMITATION
- 23. In the mid 1980s Delta’s market researchers found that customers (particularly business customers) were strongly influenced to choose a particular airline by the airline’s frequent flyer program. Consequently, to motivate customers to choose Delta, they teamed up with American Express (an exclusive arrangement) to offer a special program: customers receive triple miles if they fly on Delta and purchase the tickets using the American Express card. How would you evaluate Delta’s strategy? Good or Bad? DELTA MARKETING STRATEGY
- 24. WHAT HAPPENED? All major competitors quickly decided to offer triple miles with every flight—regardless of how the customer paid. This action did not produce any sustainable advantage for Delta. Delta’s action raised the costs of all airlines without giving any of them an advantage—the customer was the only one better off. Customers that wanted to pay with Visa or another credit card—or cash—were more likely to fly another airline.
- 25. Lesson Learned from Delta If competitors can quickly and easily imitate, then it raises all rival’s costs without creating advantage. Barriers to Imitation
- 26. WHAT GUIDES STRATEGY FORMULATION? Mission • A company’s primary purpose that often specifies the business or businesses in which the firm intends to compete—or the customers it intends to serve. External Analysis (Ch. 2) • Examining the forces that influence industry attractiveness, including opportunities and threats that exist in the environment. Internal Analysis (Ch. 3) • The analysis of a firm’s resources and capabilities to assess how effectively the firm is able to deliver the unique value (value proposition) that it hopes to provide to customers, focusing on its strengths and weaknesses.
- 27. The combined results of the external analysis with the internal analysis are often summarized as a SWOT ANALYSIS. Strengths, Weaknesses, Opportunities, Threats
- 28. What did we learn in today’s class? • Strategy is a plan to achieve competitive advantage • Strategy is not always clearly communicated. • Strategy is different than visions and goals. • Company business strategy should drive the actions of the entire organization.
- 29. What did we learn in today’s class? • Strategic management process is not one size fits all • Strong strategic management processes should make at least four important choices: • Which markets? • What unique value? • What resources and capabilities are needed? • Barriers to imitation?