chapter 6 business strategy. strategic planning strategic analysis
TRANSCRIPT
CHAPTER 6CHAPTER 6BUSINESS STRATEGYBUSINESS STRATEGY
BUSINESS STRATEGY
• Strategic Planning
• Strategic Analysis
STRATEGIC PLANNING
• Core Competency
• Outsourcing
• Sustainable Competitive Advantage
CORE COMPETENCY
The primary areas that an organization is excellent at in making decisions
CORE COMPETENCY EXAMPLES
• Pappas
• IBM
• DuPont
IBM CORE COMPETENCY
Mainframe Computers
Consulting Services
Cloud Software
OUTSOURCING
Transferring a business function to an external provider
REASONS FOR OUTSOURCING
• Cost savings
• Focus on core business
• Improve quality
OUTSOURCING EXAMPLES
• Call Centers
• Supply Chain Function
• Small Businesses
SUSTAINABLE COMPETITIVE ADVANTAGE
Maintaining a Competitive Advantage Over a Long Period of Time
SUSTAINABLE COMPETITIVE ADVANTAGE EXAMPLES
• Digging a moat strategy
•Patents/copyrights
• Brand equity
•Low cost organizations
DIGGING A MOAT STRATEGY
• Obtain a strong competitive advantage
•Fend off existing and new challenges
• Isolate firm from competition
• Maintain a low cost structure
LACK OF A GM MOAT
Situation GM ToyotaTotal Labor $1,000 per $800 perCost Vehicle Vehicle
Parts Sources 37% from On-site Michigan Suppliers
Hourly Labor $81 $35Cost
PATENTS/COPYRIGHTS
Patents and copyrights are monopoly awards given by the government for new technology and innovations
PATENT/COPYRIGHT EXAMPLES
• Lipitor drug patent
• Song/movie/book copyrights
• Dead moneymaker royalties
BRAND EQUITY
Brand equity is the goodwill of a brand
• Coca Cola
• Intel
LOW COST ORGANIZATIONS
• GEICO Low agent costs
• Walmart Low supply chain costs
• Amazon.com Low internet costs
STRATEGIC ANALYSIS
• Business Models
• Changing Business Models
• Cash Flow Business Models
• Threatened Business Models
BUSINESS MODELS
Traditional Business Model• Many Levels of Management• Focus on Command and Control
Entrepreneurial Business Model• Few Levels of Management• Focus on Recognition and Response
FOCUS ON RECOGNITION AND RESPONSE
• Changing Buyer Needs
• Changing Competition
• Environmental Threats and Opportunities
SWOT ANALYSIS
Controllable Uncontrollable
Strengths Opportunities
Weaknesses Threats
U.S. AVG LIFE EXPECTANCY AT 65
1950 13.6 years
2013 19.1 years
CONTROLLABLE AREAS
• Products
• Price
• Promotion
• Distribution
UNCONTROLLABLE AREAS
• Competition
• Changing buyer needs
• Environmental changes
• New technology
CONCEPT OF MISTAKES
• Mistakes can be valuable
• The worst mistake is to act as if you do not make mistakes
• Question: What did you learn?
NASA SLOGAN
“Failure is Not an Option.”
“Those Who Never Make Mistakes Work For Those of Us Who Do.”
Henry Ford
CHANGING BUSINESS MODELS
• General Motors
• Southwest Airlines
• Freemium Models
GENERAL MOTORS BUSINESS MODEL
• Union contract
• Health care costs
• # of car brands
• Excessive inventory
• Too many dealers
SOUTHWEST AIRLINES BUSINESS MODEL
• Use one type of plane – Being 737
• Avoid hub airports in favor of secondary airports
• Concentrate on short-haul flights
• Use low-fare pricing
FREEMIUM BUSINESS MODELS
• Hotmail
• Dropbox
LINKEDIN REVENUE(200 million members)
• Free standard use
• Premium subscriptions
• Online ads
CASH FLOW BUSINESS MODELS
• Geico
• Groupon
• Infomercials
GROUPON CASH FLOW
Collect Revenue
Pay Retailer (slowly)
Incur Costs
THREATENED BUSINESS MODELS
• Agents and Brokers
• Post Office
• Real Estate
POST OFFICE MAIL
2006 213 billion
2009 177 billion
2020 (est) 150 billion
POTENTIAL CHANGES IN POST OFFICE SERVICE
• Rent space in retail stores
• Stop home delivery on Saturday
• Close small rural post offices