Bin Flashcards
01 Notes. Strategy is about:
About the whole, not the parts, cannot be separated from the whole. It’s about the performance towards a shared objective. competitive value of interdependent parts fit/reinforce one another that makes it sustainable
01 Problem Framing is:
Recognizing and capturing a strategic issue in a specific managerial situation.
01 To achieve a strategic position and understand the whole business picture, we need:
Targeting, Value Proposition, Resources Capabilities
01 Starbucks target audience:
Affluent/high income/tech-savvy
01 Starbucks value prop:
coffee quality, store atmosphere, and good service
01 Starbucks resource:
strong brand and store environment
01 Southwest Target:
cost-conscious customers, no frills and looking for the best value for their $
01 Southwest Value Prop:
centered towards customers, allowing free checked bags, flight changes, and in-flight entertainment
01 Southwest Resource:
Operational efficiency, only 1 aircraft type and no seating assignment. easy maintenance, cabin crew training, alternative aircrafts, reduced boarding time
01 How to win competition (through holistic strategy):
Create competitive advantage within the activities that produces a system effect that’s better than competitors.
01 What is agile methodology?
Methodology mainly used in software development, which involves high collaboration and adaptive learning.
01 Strategy vs Operational Effectiveness
OE involves performing similar activities better but S.positioning involves performing different activities or similar activities in a different way
01 productivity frontier
the maximum value/best product that a company can create with its resources
01 what was the false trade-off in the 1980s?
trade-off between cost and defects, which was recognized as illusion and simply resulted in poor operational effectiveness
01 why constant OE is not sufficient? why is it mutually destructive?
such best practices, mgt techniques and technology can be rapidly diffused and immitated by competitors quickly. Ex. US commercial printing companies provide the same array of products competing head to head. they become very generic and identical
01 What do companies do to tackle OE competition?
consolidation, they buy up their rivals
01 How is Southwest Airlines different? what kind of strategy?
They offer short-haul low cost flights between midsize cities and secondary airports. They use low prices and frequent flights to attract customers who would rather have driven by car.
01 How is Ikea different?
Their target are customers who want stylish furniture at low cost. And they use a self-service model based on clear displays that eliminates the need for salespeople.
Extra services such as in-store care and extended hours that match young unwealthy customers who may not have a nanny and shop at odd hours.
They engaged in tradeoffs, where the more self-service and have people do their own assembly and delivery, the less able they are to satisfy high service requiring people.
01 Origins of strategic positions
- Producing a subset of an industry “variety-based”
- Serving a particular group of people. “needs-based”
- Segmenting customers who are accessible differently. “access-based”
01 What does Jiffy Lube do differently?
They specialize only on automotive lubricants which they produce fast at a low cost
01 What does Vanguard group do differently?
They offer funds with predictable performance. Many investors keep Vanguard funds in their portfolio while buying more aggressive ones from competitors
01 What does Bessemer trust company do differently?
They assign a sophisticated account officer to certain # of families and thus configure a personalized service
01 What does Carmike cinemas do differently?
They operate movie theaters to cities of smaller population only. Less sophisticated technology, low-cost theater systems, low rent/payroll. Being dominant in their market also allow better negotiation terms with distributors.
01 What is strategy?
creating a unique and valuable position involving all the interdependent activities within the company
What is straddling?
A type of immitation where they match the benefits of the competitor while maintaining their own position
What did Continental Airlines do?
They did straddling. They created a new service Continental Lite similar to SW which also has more frequent flights, cheaper fares while still remaining a full service airline.
Eventually, they couldn’t compete on price and pay standard agent commissions, so it had to compromise by cutting commissions, lowering rewards, and late flights. These led to angry customers and loss in profit.
What did Neutrogena do?
They engaged in trade-offs that are hard to immitate. They said no to deodorants and skin softeners and sacrificed the potential for such sales.
Why are trade-offs essential to strategy?
They prevent straddling or imitators and competitors who engage in such practices would have to degrade their own services. The essence of strategy is choosing what not to do.
01 What is Southwest’s fit
All of SW’s activities fit one another that creates economic value.
01 What is Vanguard’s fit
VG aligns its activities with its low cost strategy, they avoid broker commissions by distributing funds directly, rely on PR instead of advertising and do not need high comp money managers.
01 What is Neutrogena’s fit
They have soaps with customized packaging with hotels who are eager to offer soap recommended by dermatologists. Once guests try the product, they are likely to ask their doctor or or buy it from the drugstore.
01 What is Bic’s fit
Bic sells low-cost to all markets on all channels. This complements their manufacturing activities that focus on purchasing low-cost materials, ease of manufacturing, and in-house production.
Also, their heavy advertising, frequent packaging changes, POS displays stimulate impulse buying from customers.
01 Vanguard’s activity system
They make sure that each activity is consistent with the strategic positioning, and they let these activities reinforce/strengthen each other.
01 How can strategy be sustainable?
The strategic fit among the activities make it difficult to be immitated because competitors would need to configure many activities. The stronger the fit, the more sustainable the advantage becomes. Rivals can get little benefit unless they replicate everything.
How long should strategy take?
It should have a horizon of decade or more, not a single planning cycle.
01 Why companies don’t have a strategy?
They’re caught up with the best practice mentality, they think having a trade-off is a weakness and they try to be customer-focused which means they want to serve everybody.
The desire to grow and try to do everything
01 Case of Maytag
Because of their success with reliable washers, they were pressured by dealers and customers to extend their line of products. They acquired other businesses and sold refs and cooking products. They grew substantially but return on sales declined.
01 How to approach growth?
Profitable growth. Deepening strategic position instead of broaden it by adding easy features/services that don’t adapt to the strategy. Globalization.
02 the 5 forces
Existing competition
Bargaining power of buyers
Bargaining power of suppliers
Threat of new entrants
Substitute products
02 What advantage do incumbents have toward new entrants?
Barriers to entry
supply side economy of scale
demand side economy of scale
switching costs
02 Why supply-side economy of scale bar new entrants?
Incumbents have lower cost/unit & better supplier terms & more efficient technology
Intel have scale economies in research, marketing, and chip fabrication.
