Chapter 2
description
Transcript of Chapter 2
- Dwayne D. Gremler
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Corporate & Business Unit Strategy (Chapter 2)
• What is strategy?
• What is the “classical framework” for strategic management?
• Issues in the “new economy”
• eBay example
- Dwayne D. Gremler
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Classical Framework for Strategic Management
ImplementationImplementation
Internal (Company) Analysis
Internal (Company) Analysis
External Analysis
External Analysis
Control and
Monitoring
Control and
Monitoring
Strategy Formulation
Strategy Formulation
Corporate Business unit Functional Operating
ObjectivesObjectives
MissionMission
Exhibit 2-1
- Dwayne D. Gremler
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Creating Competitive Advantages
Investment to Create and Sustain Advantage
Investment to Create and Sustain Advantage
Distinctive Competencies
Distinctive Competencies
Competitive Advantages
Competitive Advantages
Performance Outcomes
Performance Outcomes
Adapted from: Day, G.S. and R. Wensley. “Assessing Advantage - A Framework for Diagnosing Competitive Superiority.” Journal of Marketing, vol. 52 (1988): 1-20.
e-Marketing Strategye-Marketing Strategy
Positioning and target-market selection Marketing tactics: (4 p’s)
Superior customer value
Low-cost producer
Superior skills Superior
resources
Satisfaction Loyalty Market share Profitability
Exhibit 2-2
- Dwayne D. Gremler
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The Value Chain
Firm Infrastructure(Financing, planning, investor relations)
Human Resources Management(Recruiting, training, compensation system)
Technology Development(Product design, testing, process design, market research, material research)
InboundLogistics
Procurement(Raw materials, advertising space, health services)
M
A
R
GI
N
Primary Activities
SupportActivities
Operations OutboundLogistics
Marketingand Sales
After-SaleService
(Data collection, material storage, customer access)
(Component molding, branch
operations, underwriting)
(Order processing, warehousing, report
preparations)
(Sales, proposal writing,
advertising, trade shows)
(Installation, customer support,
repair)
Exhibit 2-3
- Dwayne D. Gremler
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The Five Forces AnalysisRisk of Entry by
Potential Competitors
Risk of Entry byPotential Competitors
Bargaining Powerof Suppliers
Bargaining Powerof Suppliers
Rivalry AmongEstablished Firms
Bargaining Powerof Buyers
Bargaining Powerof Buyers
Threat of Substitute ProductsThreat of Substitute Products
Source: Porter, Michael E. “How Competence Forces Shape Strategy.” Harvard Business Review (March-April 1979).Copyright © 1979 by the President and Fellows of Harvard College. All rights reserved.Adapted and reprinted by permission of Harvard Business Review.
Exhibit 2-6
- Dwayne D. Gremler
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Centricity of TechnologyCentricity of Technology
CustomerGains Control
CustomerGains Control
Strategy Formulation
Fast, UnpredictableCompetition
Fast, UnpredictableCompetition
Rapidly ReconfiguredCompany Resources
Rapidly ReconfiguredCompany Resources
The Effects of the Networked Economy on Strategy Formulation
Exhibit 2-7
- Dwayne D. Gremler
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The Networked Economy’s Impact on Porter’s Five Forces
The Internet provides direct connection to customers; however, it minimizes supplier’s bargaining power
Suppliers can access end-users through the Internet, minimizing the need for middlemen
Differentiation becomes more difficult as access to suppliers is equalized via digital markets and Internet purchases
Fewer barriers to entry result in increased buyer competition thus boosting supplier bargaining power
Reduces bargaining power of channels
Consumers have more information and ability to search for better deals
Decreases switching costs
Wherever technology enables a task to be easily undertaken, barriers to entry go down New market entrants can acquire technology applications easily Large capital pool has attracted new entrants to many industries High technology costs and expertise increase barriers to entry
Especially for Internet-related technology or services, substitute products can easily be offered Internet has introduced new business methodologies thus creating additional substitution threats
Internet minimizes ability to product differentiate; less differentiation means more competition over price
Low barriers to entry open markets to heavier competition
Variable costs decrease as a percentage of fixed costs, leaving price discounting as a primary method of competition
Risk of Entry byPotential Competitors
Risk of Entry byPotential Competitors
Bargaining Powerof Suppliers
Bargaining Powerof Suppliers
Rivalry AmongEstablished Competitors
Bargaining Powerof Buyers
Bargaining Powerof Buyers
Threat of Substitute ProductsThreat of Substitute Products
Source: Adaptation of data from a discussion drawn for Michael Porter’s research with David Sutton.
Exhibit 2-8
- Dwayne D. Gremler
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The Offering — Interactivity and Individualization
Low
Game sitesNapsterHotmail
Low High
High
Myteam.comeBay
myCNN.comAmazon.com
First-generation websitesMost content sites
(magazines)
Individualization
Interactivity
Exhibit 2-9
- Dwayne D. Gremler
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LowLow High
High
Sweet Spot:
Amazon.comeBay
Resource Contained:
drkoop.com
Vulture Victim:
Boo.comPointCast in its early days
Quality of Customer Insight
Quality of the Resource System
Low Payoff:
Rx.com, Drugstore.comMarketWatch.com
Yahoo’s auction siteBlackBerry, Visor
Resource Insight Matrix: How to Win — Sources of Competitive Advantage
Exhibit 2-10
- Dwayne D. Gremler
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Extended Classical Framework for Strategic Management
ImplementationImplementation
Internal (Company) Analysis
Internal (Company) Analysis
External Analysis
External Analysis
Control and
Monitoring
Control and
Monitoring
Strategy Formulation
Strategy Formulation
Corporate Business unit Functional Operating
ObjectivesObjectives
MissionMission
Reconfigure Company
Resources
Reconfigure Company
Resources
Centricity of Technology
Centricity of Technology
Customer Control and
Power
Customer Control and
Power
Fast, Unpredictable Competition
Fast, Unpredictable Competition
Exhibit 2-11
- Dwayne D. Gremler
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Chapter Summary Conclusion
Strategy addresses how a firm fulfills its mission and achieves its goals
The field of strategic management has gone through several shifts in thinking in the past four decades: the 60s (The Planning Era), ‘70s (Diversification), ‘80s (Industry Attractiveness) and ‘90s (Core Competencies and Resource-Based Views)
Four principle networked-economy forces significantly affect the strategy formulation process: the increasingly central role of technology, fast and unpredictable competition, reconfigured company resources, and customer control and power
The classical framework for strategic management remains the same; however, networked-economy firms require further considerations in the framework, such as a technology element and input from “Resource-Insight Matrix” and the “Interactivity-Individualization” Matrix