Competitive advantage and strategic planning
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Competitive Advantage and Strategic Planning. Purpose. Business is about an idea/strategy to make money. Cash flow is a measurement of the effectiveness of your idea/strategy. Approaches to developing effective strategies. Which of the following is the best business opportunity and why.

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Purpose l.jpg
Purpose

  • Business is about an idea/strategy to make money.

  • Cash flow is a measurement of the effectiveness of your idea/strategy.

  • Approaches to developing effective strategies.


Which of the following is the best business opportunity and why l.jpg
Which of the following is the best business opportunity and why

  • Developing a software/spyware program that monitors internet usage for advertising purposes.

  • Starting a formal wear rental business in Ames

  • Starting a college selection advising service. It includes guidance in financial aid.

  • Starting a national chain of cemeteries.

  • Starting a brokerage firm for life insurance policies. Matching corporate buyers and corporate sellers of large personal or group life insurance policies.


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Discuss in groups. why

  • What were reasons for rejecting or selecting different ideas/strategies for making money?



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Boeing VS airbus why

  • Head to head competition especially in larger planes. Airbus assumes no new gates and as demand increases on major routes need new planes.

  • Airbus wins market share for larger planes.

  • What will Boeing do?



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Strategic planning why

  • Relevant for new markets

  • Relevant for entire corporations

  • Need to look at the whole industrial sector and assess how to enter and compete with existing firms in an industrial sector.



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Key words why

  • Competitive advantage—the ability of the firm to win consistently over the long term.

  • Sustainability.

  • Think in military terms—What made the US so competitive with Military? What do we have that others do not have?

  • Same is true in business.


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Examples of competitive advantage why

  • Wal Mart and logistics

  • Patents

  • Honda and motors (knowledge/patents)

  • Microsoft—near monopoly (note its slowly eroding).

  • Hickory Park


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How these provide competitive advantage why

  • Superiority/value—What you choose to do, you need to be best at it. Its not directly price—its how you do it. If you do it well, price will be low or customers will be attracted to quality. Wal Mart is great example.


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Appropriability products/services. How competitive is your industry?

  • Cash flow high

  • Supernormal returns Nokia 80% of market share on cell phones.

  • Profit margins. Think about Microsoft. What should it charge for windows?


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Economic theory suggests products/services. How competitive is your industry?

  • No profits in true competition. Airlines since deregulation.

  • Need to find ways to minimize true competition. Gain competitive advantage.

  • Strategizing. No different than military. Better strategy usually wins. Strategy entails more than troop movements in both business and military.


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How do we develop a competitive advantage products/services. How competitive is your industry?

  • Strategic Planning Process.


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Step 1 products/services. How competitive is your industry?

  • SWOT Analysis; Strengths, Weaknesses,

    Opportunities, Threats.


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Internal analysis products/services. How competitive is your industry?

  • What are your strengths and weaknesses.


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It helps to look at the value chain. products/services. How competitive is your industry?

  • What functions do you do well or do poorly.


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Primary activities—production /service products/services. How competitive is your industry?

  • Inbound logistics

  • Operations

  • Outbound logistics

  • Marketing/sales

  • After sale service


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Support activities products/services. How competitive is your industry?

  • Procurement—global connections.

  • Technology

  • Human Resources—Employees and culture pp 100-101.

  • Infrastructure (miscellaneous such as finance, legal, government relations, etc).

  • Enron—Skilling and George Bush.

  • OR GE and Finance


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Strength is how you choose to compete. products/services. How competitive is your industry?

  • What is your core competency? What do you do significantly better than your competitors? Provides Value.

  • Weakness— Achilles heel? Outsource to someone who can do better than you. Example, small drug company partners with Merck to distribute drug. Strength is research program. Or can take cash flow to minimize weakness.


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Hard work! Not a science. products/services. How competitive is your industry?


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Focus on Boeing; Wells Fargo, Hickory Park. products/services. How competitive is your industry?

  • Strengths.


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Environmental analysis products/services. How competitive is your industry?

  • In terms of opportunities and threats.


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Focus on products/services. How competitive is your industry?

Task environment—forces affecting organizational performance on an immediate or short term basis.

Commonly an industry analysis. What are your competitors doing?


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Value line examples. products/services. How competitive is your industry?

  • Number of competitors. (opportunity or threat?)


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  • Entry barriers and switching costs. products/services. How competitive is your industry?

  • Entry barriers—capital investment.

  • Switching costs—contractual relationships or capital investment (Software).


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Customers products/services. How competitive is your industry?

  • Of course its very important.

  • Consider Numbers, fragmentation, segmentation, product knowledge, etc.

  • Example Coke and growth to a global soft drink provider.


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Strategic Partners/Alliances products/services. How competitive is your industry?

  • Perhaps input perhaps industry relationships and outsourcing (threat or opportunity).


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Labor products/services. How competitive is your industry?

  • Supply and demand. Critical in tight labor markets.


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See jet blue products/services. How competitive is your industry?


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General environment products/services. How competitive is your industry?

  • Forces that influence the task environment and indirectly the organization. Longer term trends.


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Sociocultural products/services. How competitive is your industry?

  • Demographics and changing societal values.


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Technology products/services. How competitive is your industry?

  • Product

  • Process (includes information technology)


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Economic forces products/services. How competitive is your industry?

  • Conditions, cyles, structural changes


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Political and legal forces products/services. How competitive is your industry?

  • Influences the regulators—but changes more slowly.


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Global forces products/services. How competitive is your industry?

  • World trade, strength of the dollar, terrorism.


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Coca cola example products/services. How competitive is your industry?


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Generic Strategies to consider—how to focus against competition

  • Cost leadership. Low expenses. Wages, Inventory management, use of raw materials (less expensive), technological investments (lower labor costs).


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Differentiation competition

  • Distinguish your products from competitors in some manner. Quality, Branded Image, bells and whistles.

  • Nike, Toyota, electronics, patents.


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Scope competition

  • General or focused.

  • General—all purpose. Advantages in that large market.

  • Focused—niche market. Limited scope or breadth of focus. Geographic, customer segment. Advantage, less competitive but smaller market share.

  • Take a movie like the incredibles vs the grudge.

  • Similar with firms.


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Putting it all together is the greatest challenge. competition

  • Current situation and future. Strategic plan is long term. Unexpected changes will always happen. New markets, new technology etc. Do your best to plan for all of these.

  • Most firms start off with differentiation or niche strategy focus.


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Step 5 competition

  • Mission statement/strategic intent

  • Statement of company philosophy

  • Identity

  • Primary products services

  • Customers/markets

  • Geographic focus

  • Obligations to shareholder/employees.

  • Does not need to include all of these.


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Examples Boeing competition

  • People working together as a global enterprise for areospace leadership

  • Competencies are detailed customer knowledge and focus

  • Large scale systems integration

  • Lean enterprise



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Wells fargo competition

  • The Vision & Values of Wells Fargo

  • Our product: SERVICE. Our value-added: FINANCIAL ADVICE. Our competitive advantage: OUR PEOPLE



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Step 6 shopping.


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Strategic Objectives shopping.

  • Translates mission into concrete and measurable goals

  • Needs to be related to mission.

  • Book lists group. But Boeing—what are good measures? Wells Fargo what are good measures?

  • If mission statement does not lead to strategic objectives


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After this you begin the internal planning process (strategy implementation)

How do you strive to meet those objectives!

We will discuss this later when it comes to organizing.


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Top level managerial work (strategy implementation)

  • Competitive intelligence, environmental scanning, building alliances, setting vision. communicating vision, scanning for new opportunities that support vision, and implementing vision.


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What is your image of (strategy implementation)

  • Free associate

  • Target & Younkers


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Target vision statement (strategy implementation)

The everyday items you need most.

The absolute latest fashions. Variety.

No one gives you more reasons to go

shopping than Target. Or more

reasons to go “wow.”

it’s been our goal to offer

more fun, more style, and more value

than anyone else. At Target, we really

want you to Expect More and Pay

Less


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Proffitts/Younkers (strategy implementation)

  • The Friendliest Department Stores in America!

  • Style

  • Quality

  • Service

  • Integrity


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What is the match between (strategy implementation)Image and operating goals?


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Effective strategic planning (strategy implementation)

  • Goals--value driven -- inside out planning or they can be opportunistic--outside in planning or Public relations driven--sounds good


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Cont (strategy implementation)

  • No right way

  • No right goal (tolerance for uncertainty)

  • Set Metrics for goals (usually quite broad at the strategic level).


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Wal-mart’s strategic mission (strategy implementation)

  • We're all working together; that's the secret. And we'll lower the cost of living for everyone, not just in America, but we'll give the world an opportunity to see what it's like to save and have a better lifestyle, a better life for all. We're proud of what we've accomplished; we've just begun."


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Job Search hint #1 (strategy implementation)

  • Read the Mission statement before any job interview.


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Summary (strategy implementation)

  • Need to consider planning as a central management function

  • Effective Planning

  • Developing strategic plans.


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