MIM 578: Global Strategy II Day 2

1. MIM 578: Global Strategy IIDay 2 Scott Marshall SBA Corporate Partners Professor School of Business Portland State University

2. Product and Market Strategies • Differentiation Strategies • Price • Image • Support • Quality • Design • Undifferentiation

3. Product and Market Strategies • Scope Strategies • Unsegmentation • Segmentation • Niche • Customization

4. Product and Market Strategies • Intensive Strategies • Market Penetration • Market Development • Product Development

5. Competition and Latent Markets and Products • The Intensity of Existing Products & Markets • Strategy: Cost or Differentiation • Competition: Make value/cost tradeoff • Product Markets: Supply-based • Innovation: Incremental Improvements

6. Competition and Latent Markets and Products • The Potential of Latent Products and Markets • Strategy: Cost and Differentiation • Competition: Break value/cost tradeoff • Product Markets: Demand-based • Innovation: New Market Space

7. Competition and Latent Markets and Products • Examples of Exploited Latent Products and Markets • 1984: Chrysler Minivan – preferred features at ‘car’ price • 1985: Cirque du Soleil – improved acts and experience at high price • 1990s: Dell’s build-to-order PCs – greater convenience at lower price • 1995: AMC Megaplex – improved experience at lower cost • 2001: Casella Wine and [yellow tail] – fun, quality wine at moderate cost • 2003: Apple’s IPOD – enhanced convenience & experience at moderate cost

8. Competition and Latent Markets and Products Product Attribute Model: Latency Identification

9. Competition and Latent Markets and Products Strategy Canvas: Competitive Attribute Differentiation

10. Competition and Latent Markets and Products • British retailer enter the hyper-competitive US market… • Tesco Announces the Entry… • The Economist analyzes the model…

11. Competition and Latent Markets and Products • In-Class Exercise • For Icebreaker, complete a: • “Blue Oceans” Product Attribute Model • “Blue Oceans” Strategy Canvas • From these analyses, what do you conclude?

12. Strategic Uncertainty • Traditional Strategic Emphases: Efficiency and control • Works flows, job designs, control mechanisms, organizational structures • Emergent Strategic Emphases: Innovation and speed • Design teams, forward and reverse supply chain collaboration, product & technology cannibalism, internal venturing

13. Strategic Uncertainty • Knowable (What can we ‘know’?) • Market Segment Demographics • Marketplace Offerings • Past Technology Trends • Competitiveness. (adapted from Courtney et al, 1997)

14. Strategic Uncertainty • Unknown but Knowable (What can we ‘figure out’? • Firm’s and its competitors’ Capabilities • Performance attributes of current technologies, • Demand elasticities for different products, • Competitors’ general technology and product commitments. (adapted from Courtney et al, 1997)

15. Strategic Uncertainty • Residual Uncertainty (What is difficult, if not impossible, to ‘figure out’ until it becomes ‘knowable’?) • Performance attributes of new technology, • Outcomes of regulatory issues, • New competitive entry from unrelated industry.

16. Strategic Uncertainty • Residual Uncertainty • Level 1:A Clear-Enough Future: If the “unknown but knowable” is sufficiently researched, residual uncertainty is sufficiently small that strategy may proceed. • Example: Took many years and billions of dollars in failures before new entrants learned to compete with Southwest Airlines. (adapted from Courtney et al, 1997)

17. Strategic Uncertainty • Residual Uncertainty • Level 2:Alternative Futures: Residual Uncertainty can be classified into discrete scenarios with approximate probabilities. • Example: Nike and Factory Location Disclosure Analytical Tools: Decision analysis, option valuation models, game theory (adapted from Courtney et al, 1997)

18. Strategic Uncertainty • Residual Uncertainty • Level 3: A Range of Futures: Numerous potential futures are possible, defined by a limited number of market, technology, and competitive variables. However, actual outcome may lie anywhere along the continuum. Analytical Tools: Latent demand research, technology forecasting, scenario planning (adapted from Courtney et al, 1997)

19. Strategic Uncertainty • Residual Uncertainty • Level 4: True Ambiguity: No basis for future forecast; Rare and tends to migrate towards other Levels. Analytical Tools: Analogies and pattern recognition, nonlinear dynamic models (adapted from Courtney et al, 1997)

20. Strategic Uncertainty • Residual Uncertainty • Level 4: True Ambiguity: (adapted from Courtney et al, 1997)

21. Strategic Uncertainty • Residual Uncertainty • Level 4: True Ambiguity: (adapted from Courtney et al, 1997)

22. Strategic Uncertainty • Strategic Postures: • Shapers – set standards • Adapters – react through speed and flexibility • Reserving the Right to Play – invest to play later • Portfolio of Actions - Payoffs: • Big Bets – Positive in some, negative in other scenarios • Options – Positive in many scenarios, Small Negative in some scenarios • No-Regrets – Positive under any scenario (adapted from Courtney et al, 1997)

23. Strategic Uncertainty In-Class Video • Michael Raynor Discusses The Strategy Paradox

24. Strategic Uncertainty Not a competitive option. Create value through innovation in products & services Causes higher levels of uncertainty, and tries to change industry Invest in ‘understanding’ options and players Try to reduce uncertainty by setting standards for certain alternative Build capabilities related to discrete strategic options. Maintain flexibility and speed, as well as investments in org’l capabilities Make big bets and move industry and market in certain direction. Send ‘trial balloons’ so ready to go if industry moves. Maintain flexibility and speed, as well as investments in org’l capabilities Create vision amongst key players in the industry. Generally a poor posture.

25. Strategic Uncertainty In-Class Exercise • What strategic product- and market-related issues faced by Icebreaker are: • Knowable • Unknown, but Knowable • Residual Uncertainty • Level 1 • Level 2 • Level 3 • Level 4 • For issues that fall under Residual Uncertainty Levels 1-4, should Icebreaker play the role of Shaper, Adapter, or Reserve the Right to Play. Why?

26. Strategic Uncertainty …and making commitments… • Strategic management often referred to as the “resource allocation process” • Identify position. • Identify strategic alternatives. • Determine the ‘best’ path. • And allocate resources… • Resources are allocated for planned, personal and/or political reasons.

27. Strategic Uncertainty …and making commitments… • Barriers to effective resource allocation • Overprotection of resources and reluctance to take risk • Too much emphasis on short term financial returns • Organizational politics • Vague strategy targets

28. Strategic Uncertainty

29. Strategic Uncertainty Marketing Commitments at Samsung • Situation: • In 1999, 14 product categories in 200 countries; 476 category-country combinations. • Strategic Goal - Match Sony’s brand in 5 years. • The Challenge: Optimal Marketing resource allocation. • Information: • Needed Comparability – Collect, cleanse and harmonize • Needed Benchmarks – Minimum industry investments in regions • Operational Goal – Evaluate all potential allocation scenarios for ROI.

30. Strategic Uncertainty Marketing Commitments at Samsung • Findings: • By regions: • Overinvestment – 2 regions (NA & Russia) with relatively limited growth • Underinvestment – 2 regions (Europe and China) with relatively high growth. • By categories • Over/Underinvestment – 3 categories (mobile phones, vacuum cleaners & AC units) receiving too much funding relative to other high growth categories

31. Strategic Uncertainty Allocation Assessment Model

32. Strategic Uncertainty Marketing Resource Allocation at Samsung • Situation: • Strategic Goal - Match Sony’s brand in 5 years. • Interbrand’s Rating of Global Brands - 2006

33. Strategic Uncertainty R&D and Design Commitments at Samsung

34. Strategic Uncertainty R&D and Design Commitments at Samsung

35. Strategic Uncertainty Top 10 Private Sector Patent Recipients 2003 Calendar Year

36. Strategic Uncertainty Top 10 Private Sector Patent Recipients 2004 Calendar Year

37. Strategic Uncertainty Top 10 Private Sector Patent Recipients 2005 Calendar Year

38. Key Take-Aways from Today • Fundamentals of Product & Market Strategies • Competitive Intensity in Existing Markets • Potential of Latent Markets • The Reality of Uncertainty • Making Commitments/Allocating Resources in this Reality