Chapter 6 Fit-The Amplifier
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Transcript of Chapter 6 Fit-The Amplifier
Fit : The Amplifier
Truk Karawawattana ID:5610213003
Fit
“How the activities in the value chain relate to one another.”
✖ Popular misconception, that competitive success can be explained by
one core competence. (independent choice)
✔ Good strategies don’t rely on just one thing, on making one choice.
but they depend on the connection among many things, on making
interdependent choices.
Amplifier
Chapter 4
Value proposition and value chain give rise to competitive advantage
Chapter 5
Involve trade-offs, the strategy becomes more valuable and more difficult
to imitate
Fit = an amplifier, raising the power of both effects
Competitive advantage – lowering the cost or raising customer value
Sustainable – raising barrier to imitation
What is Fit?
IKEA’s competitive advantage
Flat packs – lower the shipping costs and product damage
Suburban store location – lower the cost (land is cheaper)
These two choice are interdependent. Value of flat packs is amplifier by
the car-friendly locations that make it easier for customers to load their
purchases into their cars.
IKEA
IKEA’s competitive advantage
Huge store – global scale product sourcing and give more space to showcase all its merchandise in fully decorated room displays(more valuable if customer are willing to spend more time per visit)
Free childcare and in-house cafeteria – possible for customer to take their time
“Fit means that the value or cost of one activity is affected by the way other activities are performed”
ZARA
Value proposition is “Speed” everything Zara does is tailored to getting
the latest styles into its store fast (2-4 weeks)
Control its value chain from end to end and make some significant trade-
offs
Some of the choice may not seem cost effective given Zara’s low relative
price positioning
ZARA
Zara’s design team is twice the size of H&M’srather than pay big-name designer, Zara has scouts around the world looking for the latest fashion trend and their large team of in-house designer can create a new collection in under a month
Zara does it own manufacturing, most of it done in Europe (Not Asia)production in-house, configured for small-batch. Zara own a fleet of trucks to speed goods from its centralized logistics hub in Spain to its stores throughout Europe in 24 hours
Garment arrived ticketed and hungthis raise shipping costs but means the merchandise arrives ready to sell (no in-store ironing)
Zara’s store locate in the highest-rent districts in townhigh foot traffic. new goods arrive in limited supply, send a clear message : “buy it now or losing the opportunity”
ZARA
All of this add up to Zara’s superior results (competitive advantage)
Zara’s customers shop more often than others
They buy more merchandise at full price
Zara was marking down about 10% (industry average 17%)
Zara spend less than 1/3 of 1% of its revenue on advertising
(most fashion brand spend 3-4%, H&M spend 5%)
How Fit Work
1. Basic Consistency – each activity is aligned with the
company’s value proposition and each contributes incrementally
to its dominant themes
(When activity are inconsistent, they cancel each other out)
How Fit Work
2. Real synergy – each activities complement or reinforce each other
eg. Home Depot’s value proposition : huge selection, everyday low
price, knowledgeable service
the large warehouse store offering both selection and low prices. But
without excellent service, customers would have felt lost in the
warehouse stores
How Fit Work
3. Substitution – performing one activity make it possible to eliminate
another
IKEA’s full-room displays and product hang-tags substitute for sale
associates
Zara’s prominent store locations and the rapid turnover of its
collections make traditional advertising unnecessary
Activity Map
Activity map can help you to identify ways to strengthen fit,
find new ways in which activities can reinforce each other or
where one activity can substitute for others
Fit & Core Competence
✖ A common mistake in strategy is to choose the same core
competence as everyone else in your industry
✖ Companies should focus on their core activities. Those that aren’t
“core” can be outsourced
(The fewer element that remain in the company’s value chain, the fewer
the opportunity to extend tailoring, trade-offs, and fit)
✔ Fit means that the whole matters more than any individual part,
a success depend on a whole system of interdependent activities
Fit Makes Strategy More
Sustainable Trade-offs make it hard for rivals to copy a successful strategy.
Fit make it even harder, because they have to copy a whole nest of
interdependent activities
The more a company’s positioning rests on complex fit, the harder it is
for rivals to know exactly what it is they are trying to copy.
The more activities rivals try to reconfigure, the more damage they will
do to their current positions
Each thing you do amplifier the value of the other thing you do. That
enhances competitive advantage. And it enhanced sustainability as well.