strategy dr. ananda sabil hussein. strategy an action managers take to attain a goal of an...
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StrategyDr. Ananda Sabil Hussein
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Strategy
An action managers take to attain a goal of an organization.
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Superior Performance
Superior performancerequires …
Highprofitability
Growth in profits over
time
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Wal-Mart
First year of operation – 1962 – Rogers, Arkansas
1960s – 15 Wal-Mart stores
1979-80 – 276 stores with $1 billion in sales
1989 – 1,400 stores with $26 billion in sales
1983 – SAM’s Club
1988 – Supercenters
Today -- More than 1.8 million associates worldwide, nearly 6,500 stores and wholesale clubs across 15 countries, and over $312 billion in sales.
Source: www.walmart.com
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Competitive Advantage
Competitive advantage: Advantage obtained when a firm outperforms its rivals.
Distinctive competency: A unique strength that rivals lack.
Sustainable competitive advantage: A distinctive competency that rivals cannot easily match or imitate.
Barrier to imitation: Factors that make it difficult for a firm to imitate the competitive position of a rival.
Legacy constraints: Prior investments in a particular way of doing business that are difficult to change and limit a firm’s ability to imitate a successful rival.
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Competitive Advantage
Distinctivecompetencies
Competitive advantage
Low costs
Productdifferentiation
Superiorperformance
If protected from copying bybarriers to imitation and
legacy constraintscompetitive advantage
will be sustained
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Business-Level Strategy
Business-level strategy: Strategy concerned with deciding how a firm should compete in the industries in which it has elected to participate.
Low-cost strategy: Focusing managerial energy and attention on doing everything possible to lower the costs of the organization.
Economies of scale: Cost advantage derived from a large sales volume.
Differentiation strategy: Increasing the value of a product offering in the eyes of consumers.
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The Low-Cost Value Cycles
Lower costs
Economiesof scale
Lower prices
Increaseddemand
Higherprofitabilityand profit
growth
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Options for Exploiting Differentiation
Increaseprices morethan costs
Higherprofitabilityand profit
growth
Op
tion
1
Successfuldifferentiation
Moderate orno priceincrease
Increaseddemand
Economies ofscale and
lower costs
Opti
on 2
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Segmenting the Market
Markets are characterized by different types of consumers.
Some are wealthy, some are not.
Some are old, some are not.
Some are influenced by popular culture, some never watch TV.
Some care deeply about status symbols, others do not.
Some place a high value on luxury, some on value of money.
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Consumer Markets
Consumer markets segmentation characteristics:
Geographic
Demographic
Psychographic
Behavioralistic Source: www.netmba.com
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Choosing Segments to Serve
Focus Strategy: Serving a limited number of segments.
Broad market strategy: Serving the entire market.
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Types of Business-Level Strategy
Broad low cost Broad differentiation
Focused low costFocused differentiation
Many
Seg
men
ts
serv
ed
Few
Low cost DifferentiationCompetitive
theme
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Configuring the Value Chain
Primary activities: Activities having to do with the design, creation, and delivery of the product; its marketing; and its support and after sales services.
Support activities: Activities that provide inputs that allow the primary activities to occur.
Organization architecture: The operations of the firm are embedded within the internal organization architecture of the enterprise, which includes the organization structure, incentives, control systems, people, and culture of the firm.
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Strategic Fit
Operationsstrategy
Internalorganizationarchitecture
Business-level
strategy
Industryconditions
Supports
Fits
Supports
Su
pp
ort
s
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Competitive Tactics
Competitive tactics: Actions that managers take to try to outmaneuver rivals in the market.
Tactical pricing decisions:
- Price war
- Price signaling
- Razor and razor blade pricing
Tactical Product decisions:
- Product proliferation
- Bundling
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Corporate-Level Strategy
Corporate-level strategy: Strategy concerned with deciding which industries a firm should compete in and how the firm should enter or exit industries.
Vertical integration: Moving upstream into businesses that supply inputs to a firm’s core business or downstream into businesses that use the outputs of the firm’s core business.
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Diversification
Diversification: Entry into new business areas.
Related diversity: Diversification into a business related to the existing business activities of an enterprise by distinct similarities in one or more activities in the value chain.
Unrelated diversity: Diversification into a business not related to the existing business activities of an enterprise by distinct similarities in one or more activities in the value chain.