Urinary has lower profit margins because initial investment is high The more you have control over the industry the safer for you; integration Positioning (vision statement) Differentiated competitor: has both value and price; but focuses on one thing Competitor with dual advantage: balances both value and price Two types of consisting: cost leadership; quality leadership Base price on supplier, buyer, and competitors Always set your price lower than a buyer’s willingness to pay Return on sales (ROSS) Return on equity (ROE) Return on asset (ROAR) Quality differentiation: to push WET up Communicate reasons for higher WET week 2 (Apple) Supplier power: ex. Intel chips power of supplier and buyer depends on the number and relationship (goodwill, reputation) Consider complements when analyzing technological industry (pod needed tunes to beat Windows Media Player) Week 3 (Husky)
Process differentiation: how you do things Scope: geography (where), consumer (for whom), product (what) Two types of sales: BOB (GOES smaller) and BBC Deviating from mission statement can be a risk because profits may erode and you may go from a force specialist to a generalist Change will destroy internal consistency week 3 (Ducats) If scope and differentiation is clear, position will be good (focus +differentiation = attractive position) VIRGIN: valuable, rare, inimitable, institutions blew Products and services should be superior on at least one feature: durability, mage, speed of delivery, variety, ease of use etc. In the industry, you need multiple differentiation factors (ex.
Retail industry: you need store experience, trendiest, etc) Week 4 (Urinary) Don’t enter industry if: rich competitors, high initial investment, competition on operational efficiency, without changing cost structure Likeliness of price Economies of learning: the more you learn by amount of experience in the industry Added value; captured value Hold-up: barrier to entry/growth Week 4 (Wall-Mart) Walter good example of how HER is important Employees were personally involved with the company when they become stakeholders Hired too many part-time workers who were working long hours and not getting the benefits of the employees; bad PR Walter’ success: low cost operations, market position, culture and management Primary activities: infrastructure, set-up Of company etc. Support activities: how you manage it etc.
Walter is a specialist in cost leadership Week 5 (RIB) RIB looks within the company and what you do with what you have Resources are productive assets an organization has (treatable and non- pacific to firm) Capability: what you do with these resources VIRGIN (valuable, rare, inimitable, unsustainable, durable) Capability are firm-specific External environment is subject to rapid change, but internal resources ad capabilities offer a more secure basis for strategy Resources and capabilities are the primary sources of profitability Types of resources: tangible (financial, physical), intangible (technology, reputation), HER Capabilities is the core of a firm or else two companies would be completely the same To gain nominative advantage, resources and capabilities must be valuable and rare To sustain, resources and capabilities must be inimitable, non-transferable, and durable Analyze your own R, rate importance, and then analyze your competitors You – environment – goals; in the middle (environment) is where you use your resources and capabilities Capability development: internal development (make), incubating (buy), knowledge management, acquisition of capabilities (buy) Types of knowledge: explicit (knowing about; like resource), tacit (knowing how; like capability) Dynamic capabilities: adapt to paid and discontinuous change of the environment; maintain standards to ensure survival Two focuses Of dynamic capability: 1 . How can you change your existing mental models and paradigms to adapt to radical discontinuous change? 2. How can companies maintain threshold capability standards and hence ensure competitive survival?
Difference of RIB and 5 forces: see Jet’s Feb. ms To set up a strategy: use 5 forces, RIB, SOOT Maker buy, connect – look at examples Week 6 (Blue ocean) Blue ocean: entering an industry/market that does not exist; no competition; rate demand Simultaneous pursuit of differentiation and low cost Focused on innovation Red ocean: intense rivalry; existing market; beat competition; exploit existing demand; Strategic gaps based on SF (critical success factors) First, second, third tier ERRS (what you do with an existing industry): eliminate, reduce, raise, create Because you’re creating a new demand, you should target all tiers to increase the amount of consumers Price insensitive customers: people with disposable income probably Set attractive price because: volumes gives economies of call, all or nothing, and lack of calculability (free-ride) Overcome key organizational hurdles: cognitive hurdle, resource hurdle, motivational hurdle, political hurdle Week 7 (Corporate Reputation) Intangible asset Reputation always in comparison with leading rivals Reputation building activities: advertising sponsorship/philanthropy Good reputation increases WET Hard to imitate Why is profit not the only important thing?