Post on 11-Jan-2016
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StrategyCompetitive Advantage
• Competitive Advantage.
• Always relative not absolute – compare to benchmark
• Sustainable competitive advantage – maintain over a long period of time
• Must be based on strategic choices (cannot do everything). Example: JetBlue Airline – David Neeleman ‘Morris Air e-ticket’ bought by SW Air in 1993. Founded JetBlue 1998 – Low cost and differentiation strategy tried.
• Strategy is not: A grandiose statement such as: (we will be number 1). Managers must meet competitive challenge. Blockbuster vs. Netflix.
• Organizational performance is determined by :
• Industry effects – caused by the structure of the industry
• Firm effects – caused by the actions of management
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StrategyCompetitive Advantage
• Stakeholders and competitive advantage.
• Identify what are the interest, opportunities and threats, social issues and concerns for:
• Internal – employees, stockholders, managers
• External – customers, suppliers, partners, community, government
• Analyze, Formulate, and Implement (AFI) framework. SWOT analysis, Level of strategy ( Business, Corporate, Global ). Implement organizational design.
• Black-Swan events. The impact of a highly improbable event (Nicholas Taleb).
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Competitive Forces Shape Strategy
How Competitive Forces Shape Strategy: “By being aware of competitive forces, an organization can position itself to be less vulnerable to attack” (Michael E. Porter, 1979)
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Competitive Forces Shape Strategy
Porter’s 5 Forces Model
Threat of NewEntrants
Bargaining Industry Bargaining Power of Competitive Power of Suppliers Rivalry Customers
Threat of
Substitutes
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Strategic Planning ModelCritical Success Factor:
Strategic Innovation
Environmental ExecutionAnalysis Formulation Implementation & ControlS trengths Mission Budgets MonitorW eaknesses Objectives Programs FeedbackO pportunities STRATEGY ProceduresT hreats Organizational
Structure Policy Guidelines
Feedback
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Life Cycle and Competitive Advantage
Introduction Growth Maturity DeclineR&D Improve product Focus on Cost ControlTech change Econ of scale Standardize Reduce capacityAttention to Process improve Efficiency Cut products
quality Distribution Costs cutsDesign change Value added Few changesProcess change Forecasting Optimal capacity
Creating a Sustainable Competitive Advantage (David A. Aaker, 1989)Stage of the Product Life Cycle, Business Strategy, and Business Performance
(Anderson & Zeithaml, 1984)
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Automobile Industry: Growth to Maturity
(1932-2006)
I. Depression to WWIIII. Post WWIIIII. 1970s – The Oil Embargo and Competitive Rules ChangeIV. Today – The Rules are Still Changing
* In Maturity, focus on standardization, efficiency and costs** Grow by capturing existing market share*
U.S. Motor Vehicle Sales (Millions of units)
Year 1986 … 2000 2001 2002 2003 2004 2005 2006Units 16.1 17.1 17.5 17.2 16.9 17.3 17.4 17.0
Source: Ward’s Automotive Reports
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Automobile Industry: 1913-1932 (Growth Phase I)
* In Introduction, focus is on R&D, technical and design changes, attention to quality, and process changes*
Source: U.S. Automobile Production Figure-Wikipedia
0
200000
400000
600000
800000
1000000
1200000
1400000
1600000
1800000
2000000
1913 1915 1917 1919 1921 1923 1925 1927 1929 1931
Un
its
So
ld
Buick
Chevrolet
Ford
Source: 2007 EDPA Automotive Database
Automotive Industry ClustersAutomotive Industry Clusters
in Alabamain Alabama
Legend
Concentration of Automotive SuppliersSuppliers by Zip Code
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2
3
4 - 6
7 - 11
20
59
65
59
20
65
85
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There are more than 383 Automotive There are more than 383 Automotive Companies and Suppliers in Alabama.Companies and Suppliers in Alabama.
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Strategic Planning
The Locomotive Industry
The Big Three 1825-1956
American Locomotive (ALCO) Baldwin Locomotive Lima Locomotive
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Locomotive Industry
1939 General Motors Electro-Motive Division took lead in diesel-electric locomotives
Why? Growth MarketStrength (R&D, developmental capital, aggressive marketing)
Opportunity (Railroads wanted more diesel- electric locomotives)
WWII Opportunity offered by historyDemand not determined by general market forces
1950s End of Steam
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Strategic Planning Locomotive Industry
Technology MaturesMaturity – Focus on standardization, efficiency and costs
Strength- Efficiency through standardization
Opportunity- Growth of container freight
Today – Big Two (EMD and GE)
EMD GE
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StrategyCompetitive Advantage
Differentiation (RCA used its R&D strength and its organizational structure to market successfully Color TV)
Transformation: From ordinary to revolutionary
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RCA Strategic Advantage Differentiation
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StrategyCompetitive Advantage
Low Cost (Southwest Airlines strives to recruit and train the best personnel available, create innovative flight schedules, stress strong customer support, and provide high pay for employees)Transformation: From in-state service to national to?
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Competitive AdvantageSouthwest – Low Cost
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StrategyCompetitive Advantage
Innovation/Response (FedEx uses a hub-and-spoke system to rapidly respond to request for package shipments worldwide) Transformation: From national letter carrier to global cargo carrier
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Strategic AdvantageFedEx - Response
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StrategyCompetitive Advantage
Diversification (Boeing reacts to the maturing airframe market)Transformation: From an airplane builder to a high-tech product and service provider
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Strategic AdvantageBoeing
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Strategic AdvantageBoeing – Delta Rocket