35.+Class+Topics

__**The Concept of Strategy - The Creation of Value**__
 * 1) Competitive Strategy - Focus on differences to deliver a unique value mix
 * Doing things different, not better
 * 1) The ability to create value determines competitive success
 * Customer Value - Price increase commanded for product/service above cost of inputs
 * Competitive Success - Sustained profit against rivals
 * Winning the competitive game - know:
 * What drives customer value
 * How to manage firm to maximize value creation over time
 * 1) Strategy: Design vs. Process
 * Intended strategy becomes:
 * Unrealized strategy &
 * Deliberate Strategy
 * Realized Strategy made up of:
 * Deliberate Strategy &
 * Emergent Strategy
 * 1) Strategic Management Characteristics important to competitive success
 * Goals - Simple, consistent & long term
 * Provides commitment and strategic direction
 * Deep understanding of competitive envrionment
 * Necessary to identify requirements for success
 * Objective appraisal of resources
 * Provides understanding of current and future options
 * Effective implementation
 * 1) Strategy in Value Creation
 * Target
 * Goals, values, mission & vision
 * Provide direction for action and motivate achievement
 * Process for coordination
 * Identification of goals provide consistency of action at multiple levels
 * Decision Support
 * Strategy provides analytical frameworks and techniques that direct attention and provide input
 * 1) Role of Analysis in Strategy
 * Strategy is:
 * Complex
 * Emergent
 * Not easily formulated
 * Is ignored in the long term at the manager's risk
 * Provides basis of sound strategy

__**Industry and Competitor Analysis - Analyzing external context**__
 * 1) Importance of analyzing the external environment- Understand why the environment is the way it is and what can be done to leverage it to your advantage
 * Competitive success - Created within the context of firm's external environment
 * Understanding of environment is critical to development of strategies that lead to competitive success
 * 1) External Analysis Elements
 * Industry Analysis
 * Industry Definition
 * Industry Attractiveness
 * Segmentation
 * Key Success Factors
 * Competitor Analysis
 * Projections/forecasting
 * Predicted response to a course of action
 * 1) Industry Definition
 * Input markets (supply)
 * Output markets (demand)
 * Boundaries defined by substitutability of activities on supply & demand side
 * Definition based on:
 * purpose and context of analysis
 * Longer term --> Broader industry definition
 * Shorter term --> Narrower industry definition
 * judgment, clarity & consistency
 * 1) Industry attractiveness - Degree to which structure of industry is favorable to high industry profitability
 * Understanding industry structure can lead to the ability to change it
 * Drives competition among rivals, customers & suppliers which affects profitability
 * 1) 5-forces model
 * Know:
 * Definition of each force
 * Determinants of its influence on competition
 * Role played in influencing competition
 * 1) Influencing and Projecting industry profitability
 * 5-forces model helps to understand industry well enough to forecast future and potentially alter industry profitability
 * Each force is influenced by current industry structure
 * What influence will macro trends have on current structure
 * How will changes in structure influence forces of competition
 * How can strategies be formulated that will influence industry structure and as a result, the forces of competition in a favorable way
 * 1) 6th force? - Complements
 * Increase the value of product/service
 * May lead customer to view value of your product/service as indistinguishable from that of the complement (system view)
 * To capture value of system, firm must have a stronger market position and create the perception of greater value through:
 * Differentiation
 * Commoditizing complementing products/services
 * 1) Beyond 5-forces: Industry Dynamics
 * 5-forces is useful for understanding industry competition and profitability in all but the most dynamic industries
 * 1) Key Success Factors: Industry Drivers of Competitive Advantage
 * Requirements for success are different for each industry
 * How well one meets customer demands determines success
 * KSF come from understanding what customers want - Defines what data needs to be collected to meet customer needs
 * Customer needs:
 * Who are they?
 * What are their needs?
 * What influences a purchase decision?
 * What must be done to win customers?
 * Survive the competition:
 * What drives competition (5-forces)?
 * How intense is competition?
 * What is necessary for the firm to respond to these forces?
 * 1) Looking within industry structures
 * Structure and profitability can differ between segments
 * Segmentation Analysis helps to:
 * Identify profitable niches and unmet demand
 * Identify potential entrants
 * Make decisions regarding breadth
 * Industry Segmentation
 * Create Definition
 * Identify variables
 * Construct matrix
 * Evaluation
 * Attractiveness
 * KSF
 * Scope
 * 1) Analyzing the competition: Competitive Intelligence
 * Goals and objectives - Drive decisions and evaluation of outcomes
 * Create a strategy that creates a competitive advantage without eliciting an effective response
 * Current competitive strategy - words/actions provide insight into how firm intends to compete in the future
 * Industry Assumptions - Untested beliefs about industry and how to succeed
 * Can help identify blind spots
 * Resources and capabilities - Tools that firms have to compete with
 * Focus on differentiation that is immune to competitive price changes
 * 1) Use competitor analysis to make projections
 * What strategy changes will the competitor initiate?
 * Are current goals/objectives being met?
 * What current/future threats exist to current goals/objectives?
 * How will competitors respond to strategic initiatives?
 * Does initiative threaten a competitor main goal/market?
 * Does initiative contradict their assumptions?
 * Do they have the resources and capabilities necessary to respond effectively?
 * How might my firm influence the actions of this competitor?
 * Can competitor's attention be redirected away from my initiative?
 * Can competitor be influenced to abandon a particular market of interest to me?

__**Analyzing the Internal Context - Resource Based View**__
 * 1) Resource Based View - Firm-based rents
 * Firms are comprised of bundles of resources and capabilities
 * Focus on firm's skills, not the products
 * Some resources and capabilities, if properly exploited through strategy can generate sustainable rents
 * Focus on what is different
 * 1) Layers of Resources in Building Complex Capabilities
 * Resources --> Capabilities --> Complex Capabilities (rare, relevant)
 * 1) Evaluating Profit Producing Potential
 * Profit-Earning Potential of a Resource or Capability
 * Extent of Competitive Advantage Established - How big?
 * Scarcity (complex capability not resource)
 * Relevance (complex capability not resource)
 * Sustainability of the competitive advantage - How long?
 * Durability (pace of change)
 * Transferability (pace of change)
 * Replicability (difficulty to copy)
 * Appropriability - Who gets it? $
 * Property Rights
 * Relative bargaining power of people
 * Embeddedness of resources to firm
 * 1) Use Value Chain to Identify and Assess Resources and Capabilities
 * Ultimate Goal:
 * Lower costs
 * Improve pricing power

__**Competitive Advantage - Creating Advantage through Business Level Strategy**__
 * 1) Competitive Advantage - Comprised of:
 * Firm's internal analysis of:
 * Goals & values
 * Resources & capabilities
 * Core competencies
 * Industry external analysis of:
 * Industry definition
 * Macro forces
 * 5-forces analysis
 * Competitive analysis
 * 1) Defining Competitive Advantage
 * Results from outperforming competitors on cost or differentiation
 * May be in the form of:
 * lower costs
 * uniqueness that creates value for customer
 * Effect of both is to increase margins and/or capture market share
 * 1) Value Creation, Competitive Advantage and the Value Chain
 * Search for value creation
 * Evaluate resources and capabilities for their capacity to increase margins by:
 * lower costs
 * differentiation
 * 1) Value Chain Analysis
 * When you are focused on both responsiveness and efficiency, you will be outperformed by a focused competitor
 * Determine where you can be efficient, otherwise differentiate
 * 1) Cost leadership Advantage
 * Little product differentiation
 * Little market segmentation
 * Primary source of advantage lies in efficiency of:
 * manufacturing
 * materials
 * logistics
 * Relentless focus on bottom-line cost reduction
 * Things to consider:
 * Can specialized labor contribute to lower costs?
 * Difference between:
 * economies of scale
 * economies of learning
 * Role of product and process design in lowering costs
 * Supplier role in lowering costs
 * Capacity utilization in lowering costs
 * Organizational slack and higher costs
 * 1) Differentiation Advantage - Based on uniqueness valued by customer
 * May/may not occur across segments
 * Search for responsiveness that can rest in:
 * R&D
 * Sales
 * Marketing
 * 1) Differentiation Potential - Two ends of the value chain
 * Demand
 * Product attributes
 * Supply
 * Firm's potential to differentiate
 * Creating product uniqueness and/or communication of uniqueness
 * 1) Value Chain Linking: Key to Understanding how to create value through differentiation - Figure out what a customer's value chain is and meet their needs
 * Develop firm value chain
 * Develop customer value chain
 * Look for sources of uniqueness that will create value for customer
 * Integrity of differentiation is key to success
 * 1) Sustainability of Competitive Advantage
 * Depends on competitors ability to:
 * see your advantage
 * motivate to copy
 * identify the basis of the advantage
 * build/acquire resources & capabilities

__**Managing Innovation to Capture Value - Industry dynamics and competitive advantage in technology and innovation-based industries**__
 * 1) Industry Life Cycle
 * Introduction
 * Growth
 * Maturity
 * Decline
 * 1) Driving Forces of Industry Evolution
 * __//**Insert Industry Evolution pic here**//__
 * Competition increases
 * Demand for new differentiation increases
 * Bargaining power of distributors increases
 * Develop internet distribution capability
 * Leverages existing internet infrastructure to deliver content
 * Eliminates royalties paid to theater
 * Reduced price and convenience represents value to the customer
 * Establish open store presence and become industry standard
 * Where is blu-ray trying to appropriate too much value
 * 1) Evolution of Key Success Factors
 * Innovation: Product --> Process, marketing/dist., R&D
 * Manufacturing/Distribution: Short Runs/Specialized Channels --> EOS/Channel competition
 * Technology: Competing Standards & innovation --> Standardization & Incremental Improvement
 * Products: Poor quality/rapid evolution --> Commoditization w/differentiation
 * 1) Technology & Innovation-Based Industries
 * Emerging Industries - Introductory & growth phases
 * Well established - Where technology or innovation continue to be major driver of competition
 * 1) Benefactors of Innovation
 * Profitability of innovation depends on:
 * Value created by the innovation
 * Share of value that innovator is able to appropriate
 * Regime of appropriability - Conditions that influence the distribution of an innovations value
 * Strong Regime - Innovator can capture much of value created
 * Weak Regime - Other parties capture most of value
 * 1) First-Mover Advantages - Strengthen regimes of appropriability
 * Brand loyalty
 * Position on experience curve
 * Control over scarce resources
 * High switching costs - Monetary & physical
 * 1) Protecting First-Mover Advantages
 * Barriers that delay imitation
 * Property rights
 * Tacit vs. codifiable knowledge
 * Complexity
 * Capitalizing on lead times
 * Complementary Resources
 * Resources and capabilities required to successfully exploit innovation
 * Costs of acquisition may make exploitation of innovation impossible or require sharing of the gains
 * If costs to you are low and high to others, costs of acquisition can serve as a barrier
 * Having to share costs for specialized resources may require sharing resulting gains but can also be barrier to imitation
 * 1) First Mover Disadvantages to Innovation - Weaken regimes of appropriability
 * Technological uncertainty (supply) - How will the technology evolve?
 * Market uncertainty (demand) - What will the market want and how big will it be?
 * Free-rider effect - How quickly will others follow?
 * 1) Managing Risk
 * Cooperate with lead users that can act as:
 * Early warning system
 * Development assistance
 * Conservative fiscal policies
 * Strategic flexibility
 * 1) Establishing Standards
 * When do they appear?
 * When network externalities (need for compatibility) exist
 * Products whose value is based on network of other users
 * Need to utilize complementary products/services
 * Minimizing likelihood of incurring future switching costs
 * 1) Winning the Standards War
 * Consider where to fight
 * Identify the part of the industry value chain where you are best able to push for innovation and appropriate accompanying returns
 * Assemble allies
 * Complementors
 * Early adopters
 * Competitor cooperation
 * Preempt the market
 * Enter fast
 * Price low
 * Rapid & continuous development
 * Manage expectations upward
 * Convince others that you will win the battle
 * Share the wealth
 * Entice others with attractive terms
 * 1) Timing your entry
 * Early entry when you have:
 * Property rights
 * Lead time
 * Potential to establish a standard
 * Later entry when:
 * Significant complementary resources required
 * 1) Alternative Strategies
 * Alone
 * License
 * Partner

__**Strategy in Mature/Declining Industries - Managing Rivalry and creating value for customers**__
 * 1) Mature Industries
 * Low to zero demand growth
 * Knowledgeable customers
 * Characterized by commoditized products
 * Wide diffusion of process technology
 * 1) Mature Industry Strategy
 * Seek the lowest possible costs
 * Economies of scale - especially in manufacturing & advertising
 * Low-cost inputs - for manufactured goods
 * Low overhead - Centralized management and decision-making
 * Continually review costs associate with each:
 * segment
 * customer
 * product
 * Seek to manage rivalry while avoiding complacency
 * Price signaling - Communicate price intentions and willingness to match prices
 * Price leadership - Done by Industry leader
 * Capacity Control - Form of signaling that seeks to limit motivation for rivalry
 * Differentiation
 * Market penetration - Increased consumption to existing customers
 * Product innovation - New product features/services
 * Market Innovation - New customer groups
 * Product proliferation - New products for new segments
 * Seek to deter entry
 * Product proliferation/segment selection - Fill the emerging niches a new entrant may seek to fill
 * Limit pricing - set prices profitable for incumbents but not for new entrants
 * Excess capacity - maintained to signal to potential new entrants
 * 1) Declining Industries - Occurs where there are negative changes in demand
 * Factors leading to emergence of destructive competition
 * Barriers to exit - If they exist, current players will fight to remain rather than exit
 * Speed/predictability of decline - If rate is slow/predictable stronger players can remain profitable with gradual and planned strategy adjustments
 * Strategy
 * Moderate speed/predictability of decline and modest exit barriers
 * Strong firms may adopt leadership or niche strategy
 * Review product offerings
 * Watch price signals
 * Manage capacity
 * Weak players harvest or divest
 * In rapidly declining/high exit barrier industry
 * Strong firms may adopt harvest or niche strategy
 * Weak firms should quickly divest

__**International Strategy**__
 * 1) __Internationalization__ - Occurs through trade and direct investment
 * Sheltered Industries - Protected by regulation, public ownership, barreirs to trade or local suitability of goods
 * 1) How intenationalization increases rivalry
 * Lowering firm market dominance (fragmentation)
 * Competitor Diversity
 * Excess Capacity
 * 1) __Competitive Advantage__ - When a firm matches its resources and capabilities to the key success factors of its industry
 * A country has a competitive advantage in products that use resources abundantly available in the country
 * 1) Determinants of Geographic Location
 * National resource availability
 * Firm-specific competitive advantage
 * Tradability
 * 1) Foreign Entry Strategy Questions
 * Is competition advantage firm-specific or country-specific?
 * Is product tradable?
 * Are resources available necessary to establish competitive advantage in overseas market?
 * Can firm appropriate return of its resources?
 * What transaction costs are involved?
 * 1) Effective Alliance Management
 * Strategic intent of partners must be clear
 * Contribution appropriability
 * Identify goals for partnership

__**Organizing for International Competitiveness**__ - Limited organizational capabilities is the most critical constraint
 * 1) Successful transnational companies integrate:
 * efficiency
 * responsiveness
 * ability to integrate learning
 * 1) Competitive Advantage comprised of:
 * Global-scale efficiency
 * Nationally responsive strategies
 * Learning/knowledge transfer
 * 1) New competitive environment
 * Game-changing advancements incorporate higher technology with a lower level of required labor into a new product
 * Consolidated bargaining power gives holder upper hand in margins and expenses
 * Global efficiency, local responsiveness and knowledge transfer is becoming evident in product development
 * 1) Classifications
 * __Multi-National__ - World-wide business where the need for local differentiation made multiple national industry structure successful
 * __International__ - Where the key to success is the ability to transfer knowledge to overseas units while managing product life-cycles efficiently and flexibly
 * __Trans-national__ - Globally efficient and nationally responsive world-wide learner
 * 1) __Administrative Heritage__ - Asset to protect and obstacle to overcome. Adjust but don't overhaul
 * Organizational assets
 * capability configuration
 * managerial responsibility distribution and influence
 * relationships
 * 1) Success in today's International Environment
 * Fit between industry characteristics and strategic posture
 * Ability to adapt posture to multi-dimensional demands of industry characteristics
 * 1) Key considerations when developing strategic posture
 * Assumption that strategic choices are mutually exclusive are dangerous
 * Strong geographic management is required for dispersed responsiveness
 * Global efficiency and integration requires strong business management
 * Strong functional management allows organization to build and transfer core competencies
 * 1) Picture of the successful Transnational
 * Differentiated tasks
 * Relationships of interdependence between divisions
 * Central management develops ways for differentiated and independent organizations to share a strategic vision for their work
 * 1) __Important Flows at the center of emerging organizational relationships__
 * Product interdependence while integrating world-wide manufacturing and sourcing flexibility to remain nationally sensitive
 * Resource interdependence to optimize flow of scarce resources
 * Operations interdependence has created need to manage flow of intelligence, ideas and knowledge
 * 1) Transnational capability and mentality will separate winners from losers in international environment