Team 2 Amy, Marlee, Jennifer, Corbin, Logan, & Josh.
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Transcript of Team 2 Amy, Marlee, Jennifer, Corbin, Logan, & Josh.
TakeawaysTeam 2
Amy, Marlee, Jennifer, Corbin, Logan, & Josh
To sustain a competitive advantage in a constantly changing environment strategic managers need to consider and focus on…
◦ Guerrilla View
Takeaway 1
Guerrilla view focuses on◦ Concept that a firms competitive advantage is only
temporary, and that the environment is constantly changing
◦ Ex) The Technology, electronic, and computer industry is constantly changing- Apples competitive advantage now is the “user friendly” concept they incorporate into their products. Eventually everyone in the market will adapt to their competitive advantage and Apple will find a new direction.
Guerrilla View
Through the Guerrilla View..◦ A firm needs to be able to constantly adapt to
new changes in technology, market instabilities, and any other change that may affect their industry
◦ Ex) Apples industry is constantly changing through innovation and creativity- The must be able to stay up with the changes to stay ahead of the competition
Guerrilla View
Specific Environment is analyzed using Porter’s Five-Force’s Model◦ Current Rivalry, Potential Entrants, Bargaining
Power of Buyers, Bargaining Power of Suppliers, Substitute Products
General Environment includes the economic, demographic, sociocultural, political-legal, and technological sectors.◦ The trends in these sectors could have a positive
impact (opportunity) or a negative impact (threat) on the organization
Takeaway 2 Chapter 3: External Analysis
Current Rivalry among Existing Firms◦ Ex: Apple’s would be Dell, Toshiba, Hewlett-
Packard, etc. The rivalry among these competitor’s could be
considered intense or cut-throat Porter’s eight conditions that contribute to
intense rivalry: ◦ Numerous or equally balanced competitors; slow
industry growth; high fixed or storage costs; lack of differentiation or switching costs; addition of capacity in large increments; diverse competitors; high strategic stakes; high exit barriers
Specific Environment: Porter’s Five Forces
Threat to entry depends on Barriers to Entry◦ Obstacles to entering the industry◦ Low threat of entry is positive to the industry
because profitability won’t have to be divided up among more competitors
Porter’s seven major entry barriers◦ Economies of scale; cost disadvantages from
other than scale; product differentiation; capital requirements; switching costs; access to distribution channels; government policy
Potential Entrants
If buyers have a lot of bargaining power, they can drive down prices, bargain for higher quality or more services, or even play competitors against each other to get the best deal possible
What makes a buyer powerful?◦ Whether the buyer purchases large volumes of the seller’s
product; whether purchased products represent a large portion of their costs or purchases; whether purchased products are standard or undifferentiated; if buyer has low profits or income levels; if buyer has ability to manufacture product; if the industry’s product isn’t important to the quality of the buyer’s products or services; if they have full information about demand, prices and costs
Bargaining Power of Buyers
Suppliers include◦ Raw material sources; equipment manufacturers;
financial institutions; labor sources, etc.
Factors that lead to increased supplier power◦ Domination by a few companies and more
concentration than the industry; lack of substitute products; industry is not an important client; suppliers product is important to the industry; differentiated product is important or switching costs; supplier capability to provide what your industry offers
Bargaining Power of Suppliers
Could another industry satisfy the consumer need that our industry is satisfying?
Ex: Coca-Cola or Pepsi◦ Fruit drinks, energy drinks, alcoholic beverages or
milk, etc. could be substitute products
Substitute Products
Economic: Includes macroeconomic data such as interest rates and inflation rates, etc.◦ Look at current info as well as forecasted trends◦ Different industries affected differently by economic trends◦ Organization’s performance determined by how it responds
to the economic opportunities and threats
Demographics: businesses use this to make strategic decisions, understand customers, and target potential customers◦ Ex: Apple places retail stores in higher-end shopping areas
while also placing some of it’s lower-priced products in stores like Wal-Mart
General Environment
Sociocultural: what is a country’s culture like and how is it changing?◦ Ex: Some current trends include consumers
purchasing healthier foods
Political-Legal: Analyzes laws, regulations, judicial decisions and political forces in effect at the federal, state and local levels of government◦ Can have a big impact on companies’ financial
performance
General Environment, cont.
Technological: Scientific or technological innovations that create opportunities or threats
Two areas most affected by this sector are product research and development and organizational work processes◦ Faster production times and communication◦ Ex: Apple- technological advances can be an
opportunity to improve existing products or create new products, or it can be a threat if utilized by competitors
General Environment, cont.
The process of evaluating an organizations resources and capabilities, and core competencies
Three different approaches for doing an internal analysis◦ 1. Value Chain Analysis◦ 2. Internal Audit◦ 3.Capabilities Assessment Profile
Takeaway 3 Internal Analysis
A systematic way of examining all the organization’s functional activities and how well they create customer value
Value comes from 3 broad categories:◦ Product is unique and different◦ Product is low priced◦ Product meets the needs of a specific group of
customers quickly and efficiently
Value Chain Analysis
Activities in the Value Chain
Support Activities:o Procurement
o Technological development
o HR Management
o Firm Infrastructure
Primary Activities:o Inbound logistics
o Operations
o Outbound logistics
o Marketing and sale
o Customer service
A thorough examination of an organization’s internal areas
Begins with premises that every organization has functions it must perform, and strengths and weaknesses are based on how well they are performed
Looks at six organizational functional areas and measures the efficiency of each area
Internal Audit
Six organizational functional areas◦ Production and operations◦ Marketing◦ Research and Development◦ Financial and accounting◦ Management◦ Information systems and information technology
Organizational functional Areas
An in-depth evaluation of an organization’s capabilities
Assessing capabilities can be complex since they arise from the ways the resources are combines in the organization’s basic work processes and routines
Capabilities Assessment consists of two Phases:◦ Identifying distinctive capabilities◦ Developing and leveraging these distinctive
capabilities
Capabilities Assessment Profile
Takeaway 4 Chapter 5 An organization needs functional strategies,
which there are three functional concerns :
◦ The Product
◦ The People
◦ The Support Process
The Product◦ Is the product going to be new or use new
innovations or does it mimic others?◦ Will there be formal or informal process to
generate ideas?◦ What type of and how much research will be
involved?◦ Will there be extensive or limited use of product
prototypes, product tests, design reviews, and test markets?
Functional Strategies
The People-High Performance Work Practices◦ Self directed work teams◦ Problem solving groups◦ Attitude Surveys◦ Contingent pay◦ Job rotation◦ Information sharing◦ Top Quality Management programs
Functional Strategies cont.
The Support Process◦ Information systems
Information affects how effectively and efficiently organizational members can do their work.
“I.S.” –collecting, processing, storing any and all information needed to operate a business
◦ Financial Accounting Systems Provides strategic decision makers with information
about the organization’s financial transactions, accounts, and standing.
Functional Strategies cont.
Once there is a need for a functional strategy to emerge, you must implement it, evaluate it, and then make any necessary changes. This process is a continual process in the three functional areas of the product, the people, and the support process.
Functional Strategies
Porter’s Generic Competitive Strategies◦ Strategies can be pursued by any type/size of
organization in any type/size of industry
◦ Cost Leadership Strategy◦ Differentiation Strategy◦ Focus Strategy
*Competitive strategy should exploit the competitive advantages the organization has developed
Takeaway 5 Chapter 6
Organization strives to have the lowest costs in its industry and produce products for broad customer base
Allows better position if price war starts
To be successful:◦ Be efficient in all areas◦ Narrow product lines aimed at average customer◦ Have plain/effective establishments
Cost Leadership Strategy
Provide unique products with features that customers value and see as different, so they pay a premium for it
Offer wide product lines to create value for customer
Work to establish brand loyalty Unique resources and capabilities tend to
be in marketing and research & development
Differentiation Strategy
Organization pursues cost or differentiation advantage within a limited customer group
Focus on specific market niche Three broad ways to segment specialized
market niches:◦ Geographical- region◦ Type of customer-customer’s unique needs◦ Product line segment-specific & specialized
product line
Focus Strategy
Concentration
Vertical Integration
Horizontal Integration
Diversification
International
Takeaway 6Organizational Growth Strategies
Concentrates on its primary line of business and looks for more ways to meet its growth goals by expanding its core business
Product-Market Exploitation◦ Sales of current products in current markets
Product Development Exploitation◦ New products to current customers
Market Development◦ Sells current products in new markets
Concentration
Organization grows by gaining control of it inputs (backward), it outputs (forward) or both
Backward Vertical Integration◦ Control inputs/resources…become its own supplier◦ eBay created and owns its own online payment
business Forward Vertical Integration
◦ Control outputs, become your own distributor◦ Apple created retail stores to sell their products
Vertical Integration
Organization grows by combining operations with their competitors
Keeps organizations in same industry as well as expand market share…is it legal◦ Anti-Trust Laws◦ AT&T and T-Mobile Merger
Appropriate when◦ Enables the company to meet its growth needs◦ Can be strategically managed to attain a sustainable
competitive advantage◦ Satisfies legal and regulatory guidelines
Horizontal Integration
Organization grows by moving into a different industry
Related (Concentric) Diversification◦ Different industry but related some way to current
business◦ Apple:
IPod, IPhones, IPad, PCs, Laptops, online music Un-Related (Conglomerate) Diversification
◦ Diversify into a completely different industry not related to the current business
◦ May do this if there is no growth potential in current industry
◦ Fortune Brands: Jim Bean, Courvoisier cognac, Moen Faucets, cabinets, Titleist
golf balls, and Master padlocks
Diversification
Organizations may take advantage of potential opportunities offered by global markets or by protecting current markets from global competitors
May use any of the other strategies to expand globally
International