Strategic Management

1. Strategic Management Walter J. Ferrier

2. Strategy as Process and Perspective

3. 1. Articulate Mission / Intent Strategic Management Process • Sense of purpose, direction… • In which industries does firm compete? • How does firm compete? • Who are customers? • Who are competitors?

4. 2. Set Objectives & Performance Targets • Financial • Achieve 10% ROE and $1.55 EPS by YE08 • Increase stock price by $4.00-5.00/share • Strategic • Become low price leader in industry by YE09 • Enter five new country markets by YE11

5. 3. Develop a Strategy • Strategic themes/thrusts …How to compete: • International expansion • Increase brand name and reputation • Innovate by introducing new products • Aggressive behavior against rivals in old products

6. 4. Implement Strategy • Develop action plan at functional level • Establish European distribution center • Buy warehouse facility near airport in Germany • Re-tool with robotic material handling system • Create new ad campaign for 2008 Olympics • Get endorsement contract with Lance Armstrong, Marylou Retton, Mia Hamm, and Michael Johnson • Develop TV ad with Spike Lee • Launch new version of product • Create multifunctional design team • License Oracle’s newest technology • Increase R&D budget by 30% • Cut prices on older version of product by 33%

7. 5. Evaluation and Adjustment • Assess results relative to goals • Established price leadership in 2006 • Achieved only 4% ROI in 2006 • Identify new opportunities / constraints • New technologies are coming • Rivals are merging • Change strategy / implementation plan (as needed)

8. Strategic Planning vs. Strategizing Intended Strategy Strategy Carried Out Dropped Strategic Actions Emergent Strategic Actions

9. Miles & Snow Strategy Types Defenders Prospectors Analyzers Reactors(?) Competitive advantage results from a clear and direct match between the firm’s: • Mission and values • The firm’s definition of itself • Approach to business-level strategy • New vs. existing markets, first-mover advantage, cost vs. innovation • Characteristics and behaviors • Organizational structure, corporate culture, command/control systems

10. Perspective Defend current markets Narrow product domain Cautious growth strategies Emphasis on efficiency Process Intensive, systematic strategic planning Centralized control systems Leverage existing, proven technologies Performance based on efficiency Defenders

11. Perspective Open to experimentation Exploration of new markets Aware of external trends Open to growth spurts Emphasis on innovation Process Strategy driven by innovation First-mover advantage Decentralized control systems Performance based on results Prospectors

12. Perspective Keenly aware of external trends Balance between exploration and exploitation Purposeful growth building on proven capabilities, ideas Process Strategy driven by competitive intelligence, analysis “Fast-second” strategic maneuvering Performance based on results Analyzers

13. What Makes Shareholders Rich?...Create New Wealth • Vision looks beyond current boundaries • Strategy as continuous process • New perspectives, voices, conversations • Change rules of game • Experimentation, surprise

14. New Strategy Glossary – Fresh Perspective • Value migration: movement of growth and profit opportunities from one industry player to another • Co-evolution: by working with direct competitors, customers, and suppliers, a company can create new businesses, markets, and industries • White-space opportunity: overlooked areas of growth possibilities that don't exactly match existing skills • Strategic intent: corporate goal or destiny that represents a stretch for the organization, a point of view about the competitive position a company hopes to build over the coming decade

15. Adidas-Reebok Merger + vs.

16. Adidas-Reebok Merger

17. Strategic Innovation

18. Tower-building Competition • Three teams build TinkerToy tower • 90 seconds each attempt • Tallest tower wins • Competing teams may observe/scout, plan, organize, etc.

19. High Jump Innovation: Scissor Kick 1929: 6’8”

20. High Jump Innovation: Forward Roll 1960: 7’1”

21. High Jump Innovation: Fosbury Flop 1968-present: 7’7” to 8’1/2”

22. High Jump Innovation 2.75m 2.50m 2.25m 2.00m Fosbury Roll Scissor 1925 1950 1975 2000 2025

23. High Jump Innovation 2.75m 2.50m 2.25m 2.00m The Ferrier Flight ? Fosbury Roll Scissor 1925 1950 1975 2000 2025

24. Innovation and Organic Growth • Emphasis on: • Top-line revenue • Customer-centric, customer value • Internal and external social interactions • Cross-functional and cross-experiential teams • Empathetic, high EI people • Experimentation, learning • Entrepreneurial culture, boldness, audacity • Value-creating strategy vs. Value-enhancing strategy

25. Value-creating vs. Value-enhancing Strategy Profit Plateau Competition Erodes Profits New Product Introduction Profit Product1 Product2 Product3 Product4 time

26. Apple iPod

27. Value-creating vs. Value-enhancing Strategy Profit Plateau Competition Erodes Profits New Product Introduction Profit Value-creating Innovation Product1 Product2 Product3 Product4 time Value-enhancing Innovation Profit Product1 Product2 Introduce iPod Windows compatible iPod Photo WiFi iPod Price Cut iPod Video iPod + Nike Shoe iPod Mini BMW iPod Adaptor iPod Wireless Remote iPod + Timex Watch

28. Apple’s iPod Innovation Network Alliance Network and Innovation 10 parts create 85% of the iPod’s cost Samsung (Korea) – Mobile SDRAM memory Toshiba (China) – Hard Drive Toshiba-Matsushita (Japan)- Display Module Nike Disney Timex Broadcom (Singapore)-Multimedia Processor PortalPlayer (US) Portal Player CPU Apple iPod Inventec (Taiwan)-Assembly, Testing Renesas (Japan) Display Driver Digital Music Group Ford Delta Airlines GM Unknown Battery Pack Unknown Mainboard PCB Unknown Back Enclosure Source: Portelligent, Inc. and Linden, Kraemer & Dedrick, 2007. 400 additional inputs with values from $2 to fractions of a penny, with an average value of $.05

29. Alliance Network and Innovation Apple Computuer High Level of VC + VE Apple – alliance network in 1995 Apple – alliance network from 1995-1997

30. Introducing the iPod Commode-dore…

31. Innovation (good intentions)……………..……………….flop

32. Unique Perspective

33. How do you define the coffee industry? Leisure, Enjoyment, Social Interaction • Coffee • Packaged • Convenience coffee • Café/restaurant drinking Caffeine Source Food & Beverage Item Fashion

34. How does Starbuck’s define coffee industry?

35. Red vs. Blue Oceans

36. Coffee’s Next Blue Ocean? ? Strategic Dimension 2 Strategic Dimension 1

37. Early U.S. Auto Industry

38. Blue Oceans and The Auto Industry

39. Blue Oceans and Computer Industry

40. Strategic Map: PC Industry(Pre-MacIntosh) Fast/ High Capacity IBM Apple II Wang Slow/ Low Capacity Low Price High Price

41. Strategic Map: PC Industry(Post-McIntosh; Pre-Dell) • User Friendliness • GUI • Drop & Drag • Mouse • WYSIWYG AppleMacIntosh Wang IBM DOS-based Operating System >copy *.doc A:\ Low Margin High Margin

42. Strategic Map: PC Industry (After Dell Enters) Dell High Quality & Dependability Apple H-P Lenovo Low Price Adequate Quality High Price “Regular” Supply Chain Management “Efficient” Supply Chain Management

43. Personal Computers …what’s the next big thing? Strategic Dimension 2 ? Strategic Dimension 1

44. Tablet PC Wearable PC IBM Mainframe Compaq Laptop Apple II IBM Wearable PC Apple MacIntosh IBM PC Compaq Portable

45. Innovation in Shaving Razors Try the razors Compare Evaluate

46. What’s the next big thing? ? Strategic Dimension 2 Strategic Dimension 1

47. Gillette: More is Better…? 12 Blade

48. Razors • Design features of razors and shaving performance • Do they make a difference? • Do they create [real or perceived] value? • What are relevant “strategic dimensions” of razor industry? • What needs [real or perceived] do these dimensions fulfill? Strategic Dimension 2 ? Strategic Dimension 1

49. MBA 606 New Restaurant Concepts

50. MBA 606 New Restaurant Concepts