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Invitation to a Safari: The Strategy Safari

Invitation to a Safari: The Strategy Safari. How to create your Competitive Advantage in a Jungle Mihai Laurentiu Ganj, IH Bucharest Valencia – 2 May 2011. The market/jungle we are in:. How attractive is it? How profitable is it?

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Invitation to a Safari: The Strategy Safari

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  1. Invitation to a Safari: The Strategy Safari How to create your Competitive Advantage in a Jungle Mihai Laurentiu Ganj, IH Bucharest Valencia – 2 May 2011

  2. The market/jungle we are in: • How attractive is it? • How profitable is it? • What are the opportunities for sustained profitability in your/our jungle? • Who is the king of the jungle? • And who are you/we?

  3. What does our industry has to offer to its clients? • widely available • cheap and getting cheaper • standard • low status • undifferentiated • exclusive • expensive • unique • high status • differentiated NON- COMMODITY COMMODITY

  4. Not only we are in a jungle, but we are in a jungle full of commodities The problem with commodities: They generate small profit margins They will generate even smallerprofits…

  5. In your jungle (market): • What is your current position? • Where do you want to be? • How are you going to achieve that? • What is your strategy?

  6. What is a strategy? There are at list 10 different schools of thought that define strategy in different ways

  7. 2 definitions: • “An internally consistent configuration of activities that distinguishes a firm from its rivals” – Michael Porter • “An integrated set of choices that ensures a company enjoys higher returns on a long run” – Dr Kaplan and Dr Norton

  8. What distinguishes IHWO? YOU: 1. Your ability to think strategically 2. Your abilities to implement the strategy Because 70-90% of companies fail in the implementation phase 3. Your DELIGHT with IHWO.

  9. Did you know that? • 11.3% were very satisfied – delighted in 2010 • 21.4% were very satisfied – delighted in 2011 – this number has doubled! • 7% were unsatisfied in 2010 • 0% were unsatisfied in 2011

  10. Did you know that? • Effect on their financial strength and stability: • 2010 • 33.8% very little effect - 13% in 2011 • 26.8% good effect – 50% in 2011 – this number has doubled! • 4.2% excellent effect – 7.4% in 2011

  11. What is your strategy? • How are you going to stand our from the crowd? At the heart of a strategy is what makes you different from your competitors • What is your competitive advantage?

  12. Competitive advantage defined: • The VALUE you are able to create for your clients • The CLIENTS APPRECIATE this value you offer them and THEY ARE WILLING TO PAY what you ask for it. • It is something that helps you have HIGHER PROFITABILITY ON THE LONG RUN than the industry average

  13. How can we achieve competitive advantage: Michael Porter defines 3 generic strategies to achieve it: • Low cost • Differentiation • Focus

  14. The Low Cost generic strategy: • The firm has a broad scope (all languages) and serves many industry segments (retail and corporate; children, teens and adults, teachers etc.) • It aims at offering the lowest cost on the market • It typically sells a standard, no-frills course

  15. 1. The Low Cost generic strategy: • It offers parity or proximity in the bases of differentiation relative to its competitors • It usually requires that a firm BE the cost leader, NOT one of the companies competing for this position • When there are more than one aspiring cost leader, rivalry can be fierce and the consequences for the long term profitability can be disastrous

  16. 2. The Differentiation Strategy: • A firm seeks to be unique in an industry along some dimensions that are widely valued by buyers • It selects one or more attributes that many buyers perceive as important and uniquely positions itself to meet those needs • It is rewarded for its uniqueness with a premium price – a higher price

  17. What are the sources for the differentiation? Every activity every process of a language company can become a source of differentiation

  18. But the differentiation must be valued by our customers. And who are our customers? Corporate clients Young Adults for themselves Mature adults for themselves Parents for their children Do they value the same thing in a language course? Would there be anything in common despite the differences?

  19. Add one more variable: Corporate clients in Spain value the same stuff in a language course as corporate clients in Canada/ in Russia/ in Egypt / in the UK? Parents in Italy value the same thing for a YL summer camp as for the parents in Germany?

  20. This is the main difficulty for IHWO in defining the values of the IH brand • When it comes to think of a suggested strategy that each IH school should embrace locally, I think IHWO can present you different strategies, train you in each one of them, but ultimately it is going to be your choice in your local market what strategy is best for you • And “Choisir c’est rennoncer”

  21. The IH brand values are born from the IHWO strategy There should be an alignment: Each IH local school strategy IH brand values IHWO strategy as a ltd company

  22. Generic Processes in a language company:

  23. What are the processes in a language company?

  24. Common trap: Firms are often different but not differentiated because they pursue forms of uniqueness that buyers DO NOT VALUE

  25. What is the word we own in people’s mind? That is in another words: have we got a differentiator in people’s head? Is that word – is that differentiator valued by clients?

  26. The cost of differentiation: • How much does it cost me to develop that differentiator in people’s perception? • We must always seek ways of differentiating that lead to a premium price that is greater than the cost of differentiating • We can be an above-average performer in the language services industry if our clients are ready to pay the premium price and if this premium price exceeds the extra cost of being unique

  27. What should I do to pursue this generic strategy? • Talk to clients – organize focus groups • See what difference they value in a language course • See what premium would they be willing to pay for what they value • Calculate the cost of delivering that value • Reduce costs in all areas that do not affect differentiation • Calculate if the premium price exceeds the cost

  28. Example: • IH Bucharest decided to go for the following differentiator: “The most effective and enjoyable language course”

  29. 3. The Focus Strategy • It rests on the choice of a narrow competitive scope within an industry • It selects a segment or group of segments and tailors its strategy to serving them to the exclusion of others • Broadly-targeted competitors serve these segments poorly because they serve them at the same time as they serve others

  30. The Focus Strategy • It is based on the fact that industries are not homogeneous • Segments of an industry frequently differ in their attractiveness, the cost for obtaining the competitive advantage and how sustainable this can be over long time • It avoids on purpose the conflicts in serving different segments simultaneously

  31. Example: • English Kids Academy from IH Bucharest • Focus: English for Children • Differentiator: unique experience to learn a language for your children

  32. What is the current IH Strategy worldwide? Low cost? Differentiation? Focus? What should it be?

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