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Group Exercise

Group Exercise. For your Case Company: Are there examples of rivals that more closely follow CL, Diff, and Focus? Provide 5 different company examples (hypothetical is ok) of rivals deploying one of the named grand strategies. Break Out Reporting. Case: Industry:

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Group Exercise

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  1. Group Exercise For your Case Company: • Are there examples of rivals that more closely follow CL, Diff, and Focus? • Provide 5 different company examples (hypothetical is ok) of rivals deploying one of the named grand strategies.

  2. Break Out Reporting • Case: • Industry: • Company & Rival Generic Strategy Examples: • Grand Strategy Examples:

  3. Session 10 Business Strategy:Building Sustainable Competitive Advantages

  4. Session Objectives: Three Items • 1. Evaluating and Choosing Business Strategies: Seeking Sustained Competitive Advantage • Evaluating Cost Leadership Opportunities • Evaluating Differentiation Opportunities • Evaluating Speed as a Competitive Advantage • Evaluating Market Focus as a Way to Win Competitive Advantage • 2. Selected Industry Environments and Business Strategy Choices • Emerging Industries • Growth Industries • Mature • Declining Industries • Fragmented Industries • Global Industries • 3. Dominant Product/Service Businesses: Diversification to Build Value

  5. Key Issues: Strategic Choice in Single Businesses 1. What strategies are most effective at building sustainable competitive advantages for single business units? 2. When should dominant-product/service businesses diversify to build value and competitive advantage? What grand strategies are most appropriate?

  6. How should you choose among competitive advantage strategies?

  7. Sources of competitive advantage Prominent Sources of Competitive Advantage Cost leadership Differentiation Speed Market focus

  8. For Each of the Four: CL, Diff, Speed/RR, MF Skills and Resource Requirements Structural/Organizational Requirements Value Chain Examples Advantages Risks

  9. Evaluating A Business’s Cost Leadership Opportunities • A. Skills and Resources Fostering Cost Leadership • Sustained capital investment and access to capital • Process engineering skills • Intense supervision of labor or core technical operations • Products or services designed for ease of manufacture or delivery • Low-cost distribution system • B. Organizational Requirements Supporting Cost Leadership • Tight cost control • Frequent, detailed control reports • Continuous improvement and benchmarking orientation • Structured organization and responsibilities • Incentives based on meeting strict, usually quantitative targets

  10. Process innovations lowering production costs Product redesign to reduce number of components Technology development Safety training for all employees reduces absenteeism, downtime, and accidents Human resource management Reduced levels of management cuts corporate overhead Computerized, integrated information system reduces errors and costs General administration Profit Favorable long-term contracts; captive suppliers or key customer for supplier Procurement Subcontracted service technicians repair product correctly first time or bear costs Global, online suppliers provide automatic restocking of orders based on sales Economy of scale in plant reduces equipment costs and depreciation Computerized routing lowers transportation expense Cooperative advertising with distributors creates local cost advantage in buying media space and time Service margin Inbound logistics Operations Outbound logistics Marketing & sales Evaluating A Business’s Cost Leadership Opportunities --C. Examples of Ways Businesses Achieve Competitive Advantage

  11. Advantages of a Cost Leadership Strategy Low-cost advantages reduce likelihood of pricing pressure from buyers Sustained low-cost advantages may push rivals into other areas, lessening price competition New entrants must face an entrenched cost leader without experience to replicate cost advantages Low-cost advantages should lessen attractiveness of substitutes Higher margins allow low-cost producers to withstand supplier cost increases

  12. Key Risks of Cost Leadership Many cost-saving activities are easily duplicated Exclusive cost leadership can become a trap Obsessive cost cutting can shrink other competitive advantages involving key product attributes Cost differences often decline over time

  13. Industry Environments and Strategy Choices Emerging Industries Growth Industries Mature Industries Declining Industries Fragmented Industries Global Industries

  14. For each Industry Environment … Characteristics Strategic Options

  15. Characteristics of Markets in Emerging Industries • Proprietary technology and technological uncertainty • Competitor uncertainty regarding inadequate information • High initial cost structure • Few entry barriers • First-time buyers require initial inducement • Inability to easily obtain raw materials and components • Need for high-risk capital

  16. Strategic Options for Emerging Industries 1. Ability to shape industry’s structure 2. Ability to rapidly improve product quality 3. Establish favorable relations with key suppliers 4. Ability to establish technology as dominant force 5. Acquire a core group of loyal customers 6. Ability to forecast future competitors

  17. Overcome weaknesses Turnaround or retrenchment Divestiture Liquidation Vertical integration Conglomerate diversification Internal (redirected resources within the firm) External (acquisition or merger for resource capability) II I III IV Concentrated growth Market development Product development Innovation Horizontal integration Concentric diversification Joint venture Maximize strengths Grand Strategy Selection Matrix

  18. Rapid market growth 1. Concentrated growth 2. Vertical integration 3. Concentric diversification 1. Reformulation of concentrated growth 2. Horizontal integration 3. Divestiture 4. Liquidation Strong competitive position Weak competitive position I II IV III 1. Concentric diversification 2. Conglomerate diversification 3. Joint venture 1. Turnaround or retrenchment 2. Concentric diversification 3. Conglomerate diversification 4. Divestiture 5. Liquidation Slow market growth Model of Grand Strategy Clusters

  19. Selection of appropriate business strategie(s) involves Conclusion: Selecting a Business Strategy toAchieve a Competitive Advantage Focusing on key sources of competitive advantage requiring total, consistent commitment Weighing skills, resources, organizational requirements, and risks of each source of competitive advantage Considering unique effects of the generic industry environment on a firm’s value chain activities

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