JWI 540 Strategy Week1 , 7/1/12
Jack Welch Management Insitute
Learning Objectives
*******************
Analyze the business rationale for strategic management.
Differentiate among various types of strategies.
I. Carpenters & Sanders, Chapter1: Introducing Strategic Management
********************************************************************
Strategy is the coordinated means & pattern of actions by which an organization pursues and achieves its goals in the face of competition
Strategy outlines the means by which a firm creates unique value for its customers and stakeholders
It forces the firm's managers to think holistically about what the firm does
and why those activities consistently lead customers to prefer the firm's products & services over those of competitors
Strategy means General's view ie CEO's view, strategic leader's perspective
It is a big picture perspective on the firm and its context (ie over and above the myopic details & operational tactics of a single functional area)
It is a holistic view of the organization and a plan that will lead the firm to victory
It determines how competetive decisions need to be made
Strategic Management
********************
Process by which a firm manages the formulation and implementation of its strategy to perform in the marketplace
Helps understand which activities are important and why
(i) Vision, Mission, Values - Fundamental org purpose and character
(ii) Goals & Objectives - Specific targets for success
(iii) Strategy Diamond - Coordinated pattern of attack
Arenas: Where will we compete? Product categories, channels, market segments, geos, core technologies, stages of value-creation ?
*******
Vehicles: How will we get there? Internal organic investment & development, Joint Ventures, Licensing/Francising, Alliances, Acquisitions?
********
Differentiators: How will we win in the marketplace?
***************
Why customers would choose firm's product or services over those of competitors?
Customer perceives higher value through Image, Customization, Technical superiority, Price, higher Quality, better Service, Reliability, Style, Features, Speed to Market ?
Make tough tradeoffs and decide early
Staging & Pacing: What will be our speed and sequence of strategic moves? Speed of expansion, Sequence of growth initiatives?
*****************
Depends on resources -Cash, human capital, knowledge, urgency, credibility, need for early wins
Economic logic: How will we obtain our returns?
***************
lowest costs - doing tasks fundamentally differently & efficiently, or through scale ?, special deals?, scope?, replication?
premium price - due to unmatched service, proprietary product features?
(iv) Internal & External Sources of Competitive Advantage
************************************************
Internal - Possess or Acquire Unique Resources that rivals cannot duplicate
External - Position the firm to take advantage of industry opportunities
Dynamic - Look for opportunities to shape high velocity & interconnected markets
(v) Strategic Leadership
(va) Implementation Levers
*************************
Organizational structure:
*************************
How Responsibilities, Tasks, People are organized; authority, hierarchy, units, divisions, coordinating mechanisms
Is the current structure appropriate for the intended strategy?
Are the reporting relationships and delegation of authority set up to execute the strategic plan ?
Is the organization centralized or decentralized for the strategy ?
Systems & Processes:
********************
organizational processes and procedures used in daily operations
Control & incentive systems, Resource Allocation procedures, info systems, budgeting, distribution
People & Rewards:
*****************
Get the right people, develop & train them to realize the strategy
Rewards can accelerate or undermine (rewards for A hoping for B)
(vb) Resource allocation decisions
**********************************
develop support among stakeholders
Strategy Diamond can be applied at multiple levels:
**************************************************
Product Strategy
Business Strategy - spell out how the firm plans to compete; use strategy diamond
Corporate Strategy - spell out which businesses the firm will compete in, how ownership by the corporate parent adds value to business, how diversification helps each LOB compete better
Global Strategy
Strategy Implementation
***********************
Organization should coordinate its structures, systems, processes & strategic leadership to translate strategy to action
The success of a strategy depends on vision, planning and execution
A firm's performance is directly related to the quality of its strategy and competency in implementing it
Strategy is also referred to as Business Policy
Responsibility of strategy is to ensure firm's whole is greater than sum of parts (distinct business units; functional units)
Strategy is affected by functional areas of the firm - marketing, finance, accounting, operations
Analyze the conditions of a firm, the industry, formulate strategies, determine how to implement the strategy
What should be the objectives of your firm?
How will competition interfere in getting there and what needs to be done to minimize threats?
Three themes
************
(i) Strategy is dynamic
************************
Firms, industries and competitive environments are dynamic in nature
*************************************************************************
Look at it not as a snapshot in time but an ongoing movie
A firm's position is a result of many strategic decisions made over time
Capabilities and resources have to be developed over time
(ii) Strategy Formulation and Implementation should be connected
******************************************************************
Beware the knowing-doing gap
Use levers to get alignment: Org structure, systems & processes, people & rewards
All of firm's activities must complement each other and support the strategy
(iii) Strategic leadership is key
*********************************
for a firm to formulate and implement strategies that create value
Make substantive implementation-lever and resource-allocation decisions
Develop support for strategy from key stakeholders
Business Strategy
*****************
Ways by which a firm goes about achieving its objectives within a particular line of business (LOB), industry or segment
in the short term and in the long run
How GE competes against Rolls-Royce for contracts from Airbus & Boeing
How it cooperates with other suppliers of technology
Decision to scale up to reduce the cost
Corporate Strategy
******************
A firm like GE or 3M can have 100s of LOBs
(i) In what businesses will we compete in ?
*******************************************
Decide if the firm should enter or exit a business
(ii) How can we, as a corporate parent, add value to our various LOBs?
*********************************************************************
Find ways to create value by having two or more LOBs cooperate and share
GE - Senior management orchestrates synergies across commercial and consumer finance groups
UnderArmour - Create synergy between performance apparel and athletic footwear
(iii) How will diversification or entry into a new industry help compete in other industries ?
**********************************************************************************************
UnderArmour: Entering Athletic footwear may help sell more performance apparel and better compete with Nike which operates in both markets
WalMart: Diversification into grocery business segment of retail increases foot traffic and boosts sales of non-grocery retail products
Strategy Formulation & Implementation are linked
*************************************************
Strategy Formulation: Decide what to do
*********************
Strategy Implementation: Perform all activities necessary to do what has been planned
***********************
Good strategies present solutions to complex problems
*****************************************************
Externally - enable production of goods and services that beat the competition and have a ready market
Internally - provide all employees with clear guidelines about what the firm should and should not be doing
Competitive Advantage
*********************
A firm's ability to create value in a way that its rivals cannot.
Firms attempt to achieve a position of Competitive Advantage over their rivals when serving target customers.
3 perspectives of Competitive Advantage are used to formulate effective strategies
****************************************
Internal Perspective - CA is a function of Unique firm-specific Resources and Capabilities that allow firms to beat competition
External Perspective - CA is largely a function of overall structure, attractiveness, profitability of industries & a firm's position
Dynamic Perspective - no firm can sustain Competitive Advantage over a long period of time
Internal perspective of CA
***************************
Analyze firm's resources and determine strategies rivals can't duplicate
Resource-based view of the firm
Firms with superior Resources and Capabilities gains the advantage
Firms obtain valuable and rare resources, develop capability and drive customers to their products and services at the expense of competitors
Objective of managers is to determine what resources and capabilities offer the most value, acquire them if lacking, leverage them in executing the firm's strategy
External perspective of CA
***************************
Analyze industry and position firm to take advantage of industry opportunities
Industry attractiveness and position of firm relative to competitors determines CA
Firms should position themselves to compete in attractive industries OR adopt strategies to make their current industries more attractive (Michael Porter)
Dynamic perspectives of CA
***************************
Competitive Advantage is temporary - a firm's current market position is not an accurate predictor of future performance.
Look at the firm's past for clues about how it arrived at its present position. Look at the future competitive landscape and how the firm can influence it.
Look for opportunities to shape high velocity and interconnected markets
Develop unique resources to create disruptive change
II. Winning, Welch, Chapter11: It's All in the Sauce
*****************************************************
Strategy
- A living breathing dynamic game about how to win
An approximate course of action that you can frequently revisit, redefine
according to shifting market conditions
- it is fun, fast, alive and gets you where you want to go
- pick a general direction and implement like hell
- Don't make it too complex: Do not let details cloud clarity on what to do
Ponder less, Do More to Win
- Make clear cut choices about how to compete
- It is the job of the CEO, not a wide-scale, bottom-up activity
- Decommoditize: Make distinctive products & services thrpough innovation, technology, service add-ons, unique internal processes
3 steps for Strategy Implementation
************************************
(i) Find a Big Aha to set a broad direction (2-30 days)
********************************************
Fast & Simple way to get to competitive advantage
Find a strategic position where no one can beat you
(ii) Put Right people & Skills in right jobs to drive the Aha forward
********************************************
Fit & match skills to strategy
Key Skills For commodity business (Quality, Cost, Service):
Hard driving, Detail oriented, Meticulous, Disciplined, Efficient
Focus on Operating Margins, Cash Flow
Key Skills For High Value-Add business:
Dreamers in love with ideas, Visionary
Focus on long term Strategy
(iii) Relentlessly seek Best Practices
***************************************
Companies that win Imitate & Improve
To implement the hell out of the Big Aha
Seek out best practices from inside or outside the company
Adapt, continuously improve the best practices & make it fun
Create a thriving, thirsting, learning organization
where everyone is searching for a better way
filled with energy, curiosity & can-do spirit
operate with speed, informality, open communication as in a corner store
new products, services, procedures, ideas, growth opps should pop out as a norm
Upper Crust Pizza: Strategy is all about Pizza Product
Gary Drug: Strategy is Service
5 Slides
*********
Playing Field, Competitors, You, what's around corner, Winning Move
********************************************************************
Leap from Analysis to Action:
Launch the New Product, Make the Acquisition, Double the Sales Force, Invest in major new capacity
Slide1: What the playing field looks like now
**********************************************
(i) Who are the competitors ? Large, Small, Old, New
How big is the market and where do we fit in ?
(ii) What is the Marketshare ? Globally & in each market ?
(iii) What are the business characteristics ? Commodity or High Value ? Long or short cycle ?
Where is it on the growth curve ?
What are the drivers of profitability ?
(iv) Strength & Weakness of each competitor
How good are their products?
R&D spending of each ?
How big is Sales force?
Is Culture performance driven ?
Who are the main customers? How do they buy?
Slide2: What has the competition been up to ?
********************************************
What does each competitor have for breakfast ?
(i) What has each competitor done in past year to change the playing field?
eg. stealing key sales people, introduced 2 new products, merged & has integration difficulties
(ii) Anyone introduced game-changing new products, new technologies, new distribution channel?
(iii) Any new entrants? What have they done in the past year?
Slide3: What have you been up to?
*********************************
(i) What have you done in past year to change competitive playing field ?
(ii) Bought a company, introduced a new product, stole key people, licensed new technology?
(iii) Lost any competitive advantage, sales person, special product, proprietary tech?
NET - outflanked ? are you leading the market or chasing it?
Slide4: What's around the corner?
*********************************
(i) What scares you most in the year ahead ?
What 1 or 2 things can a competitor do to nail you ?
(ii) What new products or technologies could your competitors launch that might change the game?
(iii) What M&A might knock you off your feet ?
Slide5: What's your winning Move?
*********************************
(i) What can you do to change the playing field?
Acquisition, new product, globalization ?
(ii) What can you do to make customers stick to you more than ever, and more than to anyone else?
III. Welch, Business Week 2009, Shareholder Value
********************************************
Shareholder value is an outcome, not a strategy
Shareholder value increases as an outcome of implementation of successful strategies
Strategies drive business
eg. innovation aimed at producing leading products in every cycle
low-cost global supplier
globalize a company taking its strengths in one market and translating them to every market
Strategy is something you can touch
helps you know what to do when you come to work every day
It energizes and motivates employees
For sustained shareholder value, the job of a leader is to deliver commitments in the short term
while investing in the long-term health of the business
Good managers know how to eat today and dream about tomorrow at the same time
How everybody Wins:
*******************
Employees get job security, better rewards
Customers will get better products and services
Communities will benefit from employees giving back
Shareholders get short term commitments and long term vision
Future of Capitalism
*********************
What do companies do
How do they reward people
Who they are for
IV. Assignment1 Preparation
****************************
Bartlett & Nanda Case Study: Ingvar Kamprad and IKEA
Moon Case Study: IKEA Invades America
V. JWI540 Jack Welch Video WK1
******************************
Global competitive situation - have nots want what wants have
will get more intense
need to innovate, do more with less, provide most value
innovative product & services
Drugstore facing CVS- by name, 30 mins prescriptions delivered home, credit line, takes care of you
Strategy is Service - challenge is to find that big Aha in the business
Pizza place strategy - Sauce, the best in Boston
No charts, books, analysis - just great sauce
To find your strategy, think, where is the special sauce in your business ?
VI. Week1 Lecture1 (Trish Gorman)
**********************************
Strategy
********
- is about winning by beating competitors
execution is of paramount importance ie. focus not on thick ppts but on action, results, winning
- is a customized playbook to help the business beat competition
- is a set of guiding principles that define how people in the business
should and shouldn't act
what they should and shouldn't prioritize
to achieve their goals
over a given time period
- takes into account the organization's skills, customers, environment
- guides in efficient use of resources and in getting additional resources needed
- changes when company's business environment changes
- provides guiding principles for the long-term
- leverages tools as well as gut calls
- should be nested and consitent: developed for business functions, business units and entire company
Strategy at Different Levels of the Organization
*************************************************
Functional Strategies (Mfg, IT, Marketing & HR)- can operate across the organization or in specific business unit areas
R&D - Develop viable options to extend products with more and different features and services
Marketing - Segment and identify high potential markets within current consumer base
Operations - Identify and implement production of new offerings
Business unit strategies - Extend product offerings with different features & services to current consumer base in select geos
compete for marketshare, develop new products, control operational costs
corporate strategy - Leverage existing brands with loyal consumers
Focus on Decisions at the top:Resource Allocations & Budgets across the firm, select Acquisitions & Divestitures, systems shared across business units
Elements of a Good Strategy (Objective, products/customers Scope, what will be superior to competition -Competitive Advantage)
******************************************************************************************************************************
Competition - what, where, how
******************************
Jack Welch 5 slides
*******************
(i) Strategic objectives:
**************************
Gain market share, contain costs, increase profit margins, meet financial targets, increase customer satisfaction
- GE: To defeat rivals, shift from low-value commodities to high-value technology products; sell services instead of products
- How strategic objective is expressed makes a big difference
in guiding and energizing people, heighten urgency, sharpen focus, inform the attitude of every employee
Jack Welch blunty said GE would become #1 or #2 in arenas it competed in; else fix, sell or close
(ii) Scope - Where will we compete
***********************************
3 competitive arenas
(a) Customer or product/service offerings
******************************************
Identify target customers; be clear about what you will and will not sell them
Cannot be all things to all people
(b) Geographic region
**********************
Determine how broadly you'll compete geographically - regionally, nationally, globally
taking into account company's ambition, industry dynamics, economic environment
(c) Degree of Vertical integration
***********************************
How much of the value chain your company will choose to control
end-to-end raw materials to products & after-sale servicing
OR
focus only on final products & leave component parts and sales of of product to others
eg. Edward Jones strategy
Defined by
chosen customer segment - customers who don't like risk and don't want to manage their own investments
Geographic location - convenient locations in suburbs and small towns
Degree to which it is vertically integrated - controlling a limited distribution channel made up of one-person offices
These decisions shape the company's important decisions, about what it'll do and what it won't
eg. it will not offer online trading
(iii) competitive advantage
**************************
outcome to achieve & timeframe, arena to compete, methods to achieve the objectives and win
How to gain competitive advantage over rivals
Why we need a formal strategy
******************************
- coordinate activities across the organization: balance freedom with constraints of guiding principles
- respond quickly and coherently to change in marketplace conditions: when new competitor enters or demand drops, changes including direction need to be made
Major decisions and how they will affect competitive advantage should be guided by a coherent strategy
- resources are limited: managerial time, money and resources to launch and grow new businesses are constrained
Go beyond Defense & Play offense:
*****************************
Plan desired strategic behavior (possess some unique skills & core competencies, make some contribution, apply some process better than anyone else)
=> Execute brilliant offensive competitive maneuver
=> seize competitive advantage & Thrive
Dr DP
Jack Welch Management Insitute
Learning Objectives
*******************
Analyze the business rationale for strategic management.
Differentiate among various types of strategies.
I. Carpenters & Sanders, Chapter1: Introducing Strategic Management
********************************************************************
Strategy is the coordinated means & pattern of actions by which an organization pursues and achieves its goals in the face of competition
Strategy outlines the means by which a firm creates unique value for its customers and stakeholders
It forces the firm's managers to think holistically about what the firm does
and why those activities consistently lead customers to prefer the firm's products & services over those of competitors
Strategy means General's view ie CEO's view, strategic leader's perspective
It is a big picture perspective on the firm and its context (ie over and above the myopic details & operational tactics of a single functional area)
It is a holistic view of the organization and a plan that will lead the firm to victory
It determines how competetive decisions need to be made
Strategic Management
********************
Process by which a firm manages the formulation and implementation of its strategy to perform in the marketplace
Helps understand which activities are important and why
(i) Vision, Mission, Values - Fundamental org purpose and character
(ii) Goals & Objectives - Specific targets for success
(iii) Strategy Diamond - Coordinated pattern of attack
Arenas: Where will we compete? Product categories, channels, market segments, geos, core technologies, stages of value-creation ?
*******
Vehicles: How will we get there? Internal organic investment & development, Joint Ventures, Licensing/Francising, Alliances, Acquisitions?
********
Differentiators: How will we win in the marketplace?
***************
Why customers would choose firm's product or services over those of competitors?
Customer perceives higher value through Image, Customization, Technical superiority, Price, higher Quality, better Service, Reliability, Style, Features, Speed to Market ?
Make tough tradeoffs and decide early
Staging & Pacing: What will be our speed and sequence of strategic moves? Speed of expansion, Sequence of growth initiatives?
*****************
Depends on resources -Cash, human capital, knowledge, urgency, credibility, need for early wins
Economic logic: How will we obtain our returns?
***************
lowest costs - doing tasks fundamentally differently & efficiently, or through scale ?, special deals?, scope?, replication?
premium price - due to unmatched service, proprietary product features?
(iv) Internal & External Sources of Competitive Advantage
************************************************
Internal - Possess or Acquire Unique Resources that rivals cannot duplicate
External - Position the firm to take advantage of industry opportunities
Dynamic - Look for opportunities to shape high velocity & interconnected markets
(v) Strategic Leadership
(va) Implementation Levers
*************************
Organizational structure:
*************************
How Responsibilities, Tasks, People are organized; authority, hierarchy, units, divisions, coordinating mechanisms
Is the current structure appropriate for the intended strategy?
Are the reporting relationships and delegation of authority set up to execute the strategic plan ?
Is the organization centralized or decentralized for the strategy ?
Systems & Processes:
********************
organizational processes and procedures used in daily operations
Control & incentive systems, Resource Allocation procedures, info systems, budgeting, distribution
People & Rewards:
*****************
Get the right people, develop & train them to realize the strategy
Rewards can accelerate or undermine (rewards for A hoping for B)
(vb) Resource allocation decisions
**********************************
develop support among stakeholders
Strategy Diamond can be applied at multiple levels:
**************************************************
Product Strategy
Business Strategy - spell out how the firm plans to compete; use strategy diamond
Corporate Strategy - spell out which businesses the firm will compete in, how ownership by the corporate parent adds value to business, how diversification helps each LOB compete better
Global Strategy
Strategy Implementation
***********************
Organization should coordinate its structures, systems, processes & strategic leadership to translate strategy to action
The success of a strategy depends on vision, planning and execution
A firm's performance is directly related to the quality of its strategy and competency in implementing it
Strategy is also referred to as Business Policy
Responsibility of strategy is to ensure firm's whole is greater than sum of parts (distinct business units; functional units)
Strategy is affected by functional areas of the firm - marketing, finance, accounting, operations
Analyze the conditions of a firm, the industry, formulate strategies, determine how to implement the strategy
What should be the objectives of your firm?
How will competition interfere in getting there and what needs to be done to minimize threats?
Three themes
************
(i) Strategy is dynamic
************************
Firms, industries and competitive environments are dynamic in nature
*************************************************************************
Look at it not as a snapshot in time but an ongoing movie
A firm's position is a result of many strategic decisions made over time
Capabilities and resources have to be developed over time
(ii) Strategy Formulation and Implementation should be connected
******************************************************************
Beware the knowing-doing gap
Use levers to get alignment: Org structure, systems & processes, people & rewards
All of firm's activities must complement each other and support the strategy
(iii) Strategic leadership is key
*********************************
for a firm to formulate and implement strategies that create value
Make substantive implementation-lever and resource-allocation decisions
Develop support for strategy from key stakeholders
Business Strategy
*****************
Ways by which a firm goes about achieving its objectives within a particular line of business (LOB), industry or segment
in the short term and in the long run
How GE competes against Rolls-Royce for contracts from Airbus & Boeing
How it cooperates with other suppliers of technology
Decision to scale up to reduce the cost
Corporate Strategy
******************
A firm like GE or 3M can have 100s of LOBs
(i) In what businesses will we compete in ?
*******************************************
Decide if the firm should enter or exit a business
(ii) How can we, as a corporate parent, add value to our various LOBs?
*********************************************************************
Find ways to create value by having two or more LOBs cooperate and share
GE - Senior management orchestrates synergies across commercial and consumer finance groups
UnderArmour - Create synergy between performance apparel and athletic footwear
(iii) How will diversification or entry into a new industry help compete in other industries ?
**********************************************************************************************
UnderArmour: Entering Athletic footwear may help sell more performance apparel and better compete with Nike which operates in both markets
WalMart: Diversification into grocery business segment of retail increases foot traffic and boosts sales of non-grocery retail products
Strategy Formulation & Implementation are linked
*************************************************
Strategy Formulation: Decide what to do
*********************
Strategy Implementation: Perform all activities necessary to do what has been planned
***********************
Good strategies present solutions to complex problems
*****************************************************
Externally - enable production of goods and services that beat the competition and have a ready market
Internally - provide all employees with clear guidelines about what the firm should and should not be doing
Competitive Advantage
*********************
A firm's ability to create value in a way that its rivals cannot.
Firms attempt to achieve a position of Competitive Advantage over their rivals when serving target customers.
3 perspectives of Competitive Advantage are used to formulate effective strategies
****************************************
Internal Perspective - CA is a function of Unique firm-specific Resources and Capabilities that allow firms to beat competition
External Perspective - CA is largely a function of overall structure, attractiveness, profitability of industries & a firm's position
Dynamic Perspective - no firm can sustain Competitive Advantage over a long period of time
Internal perspective of CA
***************************
Analyze firm's resources and determine strategies rivals can't duplicate
Resource-based view of the firm
Firms with superior Resources and Capabilities gains the advantage
Firms obtain valuable and rare resources, develop capability and drive customers to their products and services at the expense of competitors
Objective of managers is to determine what resources and capabilities offer the most value, acquire them if lacking, leverage them in executing the firm's strategy
External perspective of CA
***************************
Analyze industry and position firm to take advantage of industry opportunities
Industry attractiveness and position of firm relative to competitors determines CA
Firms should position themselves to compete in attractive industries OR adopt strategies to make their current industries more attractive (Michael Porter)
Dynamic perspectives of CA
***************************
Competitive Advantage is temporary - a firm's current market position is not an accurate predictor of future performance.
Look at the firm's past for clues about how it arrived at its present position. Look at the future competitive landscape and how the firm can influence it.
Look for opportunities to shape high velocity and interconnected markets
Develop unique resources to create disruptive change
II. Winning, Welch, Chapter11: It's All in the Sauce
*****************************************************
Strategy
- A living breathing dynamic game about how to win
An approximate course of action that you can frequently revisit, redefine
according to shifting market conditions
- it is fun, fast, alive and gets you where you want to go
- pick a general direction and implement like hell
- Don't make it too complex: Do not let details cloud clarity on what to do
Ponder less, Do More to Win
- Make clear cut choices about how to compete
- It is the job of the CEO, not a wide-scale, bottom-up activity
- Decommoditize: Make distinctive products & services thrpough innovation, technology, service add-ons, unique internal processes
3 steps for Strategy Implementation
************************************
(i) Find a Big Aha to set a broad direction (2-30 days)
********************************************
Fast & Simple way to get to competitive advantage
Find a strategic position where no one can beat you
(ii) Put Right people & Skills in right jobs to drive the Aha forward
********************************************
Fit & match skills to strategy
Key Skills For commodity business (Quality, Cost, Service):
Hard driving, Detail oriented, Meticulous, Disciplined, Efficient
Focus on Operating Margins, Cash Flow
Key Skills For High Value-Add business:
Dreamers in love with ideas, Visionary
Focus on long term Strategy
(iii) Relentlessly seek Best Practices
***************************************
Companies that win Imitate & Improve
To implement the hell out of the Big Aha
Seek out best practices from inside or outside the company
Adapt, continuously improve the best practices & make it fun
Create a thriving, thirsting, learning organization
where everyone is searching for a better way
filled with energy, curiosity & can-do spirit
operate with speed, informality, open communication as in a corner store
new products, services, procedures, ideas, growth opps should pop out as a norm
Upper Crust Pizza: Strategy is all about Pizza Product
Gary Drug: Strategy is Service
5 Slides
*********
Playing Field, Competitors, You, what's around corner, Winning Move
********************************************************************
Leap from Analysis to Action:
Launch the New Product, Make the Acquisition, Double the Sales Force, Invest in major new capacity
Slide1: What the playing field looks like now
**********************************************
(i) Who are the competitors ? Large, Small, Old, New
How big is the market and where do we fit in ?
(ii) What is the Marketshare ? Globally & in each market ?
(iii) What are the business characteristics ? Commodity or High Value ? Long or short cycle ?
Where is it on the growth curve ?
What are the drivers of profitability ?
(iv) Strength & Weakness of each competitor
How good are their products?
R&D spending of each ?
How big is Sales force?
Is Culture performance driven ?
Who are the main customers? How do they buy?
Slide2: What has the competition been up to ?
********************************************
What does each competitor have for breakfast ?
(i) What has each competitor done in past year to change the playing field?
eg. stealing key sales people, introduced 2 new products, merged & has integration difficulties
(ii) Anyone introduced game-changing new products, new technologies, new distribution channel?
(iii) Any new entrants? What have they done in the past year?
Slide3: What have you been up to?
*********************************
(i) What have you done in past year to change competitive playing field ?
(ii) Bought a company, introduced a new product, stole key people, licensed new technology?
(iii) Lost any competitive advantage, sales person, special product, proprietary tech?
NET - outflanked ? are you leading the market or chasing it?
Slide4: What's around the corner?
*********************************
(i) What scares you most in the year ahead ?
What 1 or 2 things can a competitor do to nail you ?
(ii) What new products or technologies could your competitors launch that might change the game?
(iii) What M&A might knock you off your feet ?
Slide5: What's your winning Move?
*********************************
(i) What can you do to change the playing field?
Acquisition, new product, globalization ?
(ii) What can you do to make customers stick to you more than ever, and more than to anyone else?
III. Welch, Business Week 2009, Shareholder Value
********************************************
Shareholder value is an outcome, not a strategy
Shareholder value increases as an outcome of implementation of successful strategies
Strategies drive business
eg. innovation aimed at producing leading products in every cycle
low-cost global supplier
globalize a company taking its strengths in one market and translating them to every market
Strategy is something you can touch
helps you know what to do when you come to work every day
It energizes and motivates employees
For sustained shareholder value, the job of a leader is to deliver commitments in the short term
while investing in the long-term health of the business
Good managers know how to eat today and dream about tomorrow at the same time
How everybody Wins:
*******************
Employees get job security, better rewards
Customers will get better products and services
Communities will benefit from employees giving back
Shareholders get short term commitments and long term vision
Future of Capitalism
*********************
What do companies do
How do they reward people
Who they are for
IV. Assignment1 Preparation
****************************
Bartlett & Nanda Case Study: Ingvar Kamprad and IKEA
Moon Case Study: IKEA Invades America
V. JWI540 Jack Welch Video WK1
******************************
Global competitive situation - have nots want what wants have
will get more intense
need to innovate, do more with less, provide most value
innovative product & services
Drugstore facing CVS- by name, 30 mins prescriptions delivered home, credit line, takes care of you
Strategy is Service - challenge is to find that big Aha in the business
Pizza place strategy - Sauce, the best in Boston
No charts, books, analysis - just great sauce
To find your strategy, think, where is the special sauce in your business ?
VI. Week1 Lecture1 (Trish Gorman)
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Strategy
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- is about winning by beating competitors
execution is of paramount importance ie. focus not on thick ppts but on action, results, winning
- is a customized playbook to help the business beat competition
- is a set of guiding principles that define how people in the business
should and shouldn't act
what they should and shouldn't prioritize
to achieve their goals
over a given time period
- takes into account the organization's skills, customers, environment
- guides in efficient use of resources and in getting additional resources needed
- changes when company's business environment changes
- provides guiding principles for the long-term
- leverages tools as well as gut calls
- should be nested and consitent: developed for business functions, business units and entire company
Strategy at Different Levels of the Organization
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Functional Strategies (Mfg, IT, Marketing & HR)- can operate across the organization or in specific business unit areas
R&D - Develop viable options to extend products with more and different features and services
Marketing - Segment and identify high potential markets within current consumer base
Operations - Identify and implement production of new offerings
Business unit strategies - Extend product offerings with different features & services to current consumer base in select geos
compete for marketshare, develop new products, control operational costs
corporate strategy - Leverage existing brands with loyal consumers
Focus on Decisions at the top:Resource Allocations & Budgets across the firm, select Acquisitions & Divestitures, systems shared across business units
Elements of a Good Strategy (Objective, products/customers Scope, what will be superior to competition -Competitive Advantage)
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Competition - what, where, how
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Jack Welch 5 slides
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(i) Strategic objectives:
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Gain market share, contain costs, increase profit margins, meet financial targets, increase customer satisfaction
- GE: To defeat rivals, shift from low-value commodities to high-value technology products; sell services instead of products
- How strategic objective is expressed makes a big difference
in guiding and energizing people, heighten urgency, sharpen focus, inform the attitude of every employee
Jack Welch blunty said GE would become #1 or #2 in arenas it competed in; else fix, sell or close
(ii) Scope - Where will we compete
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3 competitive arenas
(a) Customer or product/service offerings
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Identify target customers; be clear about what you will and will not sell them
Cannot be all things to all people
(b) Geographic region
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Determine how broadly you'll compete geographically - regionally, nationally, globally
taking into account company's ambition, industry dynamics, economic environment
(c) Degree of Vertical integration
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How much of the value chain your company will choose to control
end-to-end raw materials to products & after-sale servicing
OR
focus only on final products & leave component parts and sales of of product to others
eg. Edward Jones strategy
Defined by
chosen customer segment - customers who don't like risk and don't want to manage their own investments
Geographic location - convenient locations in suburbs and small towns
Degree to which it is vertically integrated - controlling a limited distribution channel made up of one-person offices
These decisions shape the company's important decisions, about what it'll do and what it won't
eg. it will not offer online trading
(iii) competitive advantage
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outcome to achieve & timeframe, arena to compete, methods to achieve the objectives and win
How to gain competitive advantage over rivals
Why we need a formal strategy
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- coordinate activities across the organization: balance freedom with constraints of guiding principles
- respond quickly and coherently to change in marketplace conditions: when new competitor enters or demand drops, changes including direction need to be made
Major decisions and how they will affect competitive advantage should be guided by a coherent strategy
- resources are limited: managerial time, money and resources to launch and grow new businesses are constrained
Go beyond Defense & Play offense:
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Plan desired strategic behavior (possess some unique skills & core competencies, make some contribution, apply some process better than anyone else)
=> Execute brilliant offensive competitive maneuver
=> seize competitive advantage & Thrive
Dr DP
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