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Strategy (Lecture 3: the danger of straddling (strategy (definition…
Strategy
Lecture 3: the danger of straddling
creating economic value
definition
percieved value - TC = economic value created
the economic value created is split between the conpany and the consumer
Producer and consumer surplus
strategy
definition
matching firm´s resources and capabilities to the oppertunities that arise in the external enviroment
plot strategy
position yourself
create competitive advantage
fundemental strategy choices/dimensions
basic
differentiated
seek a much higher willingness to pay without driving cost to high
dual
trying to achieve both higher willingness to pay and lower cost than competition
hard if not impossible to achieve because companies hat specialize on one strategy can attack you and you are likely to be suck in the middle
low cost
drive cost much lower than rivals without not sacrificing too much in willingness to pay
scope
niche competitor
narrow product line
particular geographical and small target market
broad competitor
types of strategies
broad differentiated
examples
starbucks
focused differentiated
examples
ducati
mulberry
broad low cost
examples
walmart
focused low cost
examples
Ryanair
competitive advantage
To achive competitive advantage you need to generate a larger gap between willingness to pay and TC than your competition
systemview
CA is an integrated, self reinforcing system of capabilities, resources and choices
your firm must be different you cant just copy the assortment of resources and capabilities that your rivals has achieved
Copying one aspect of a successful firm is often not very effective because that aspect on its own i not the reason why the competitor is successful
SCA results from the synergy achieved from the system of capabilities, resources and choices
rigidity
since underlying mechanisms for CA is often interluded in the particular environments it can be hard to expand into a new market, what is considered as a strength in one environment can become an encumbrance in another
example
IBM and DELL
SCA
threats to SCA
external threats
substitution
holdup
imitation
psychological/internal threats
not perceiving and/or reacting adequately to threats
confirmation bias
sunk cost effect
group think
etc
heard behavior
stems from risk aversion
Lecture 1 Strategy is making choices
organizational performance
factors
competitive advantage
key questions
how do you establish a distinctive competitive position and create advantage over your rivals?
how do you sustain that advantage against a variety of external and internal threats?
industry attractivness
four key facts
the industry you are in matter a great deal
competitive advantage may be fleeting
industry structure varies widely around the world
industries vary widely in profitability
strategic planning
definitions
explicit process for formulating strategies, for understanding goals and how they will be achieved
focus on where and how to compete
criticism at how strategic planning is misused
ritual rain dance
bureaucratic and cumbersome
focus more on budgeting than on strategy
key questions
whats your winning aspiration?
where will you play?
how are you going to win?
what capabilities must be in place to execute your strategy?
what management systems are required to implement your strategy?
Lecture 2: How apple raises competitive barriers
industry attractivness
five forces model
the five forces
threat of substitutes
bargaining power of suppliers
bargaining power of customers
rivalry among existing competitors
barriers to entry
applying the model
analyisis
indentify the players
assess the strength of each force using quantitative data
predict future developments
define the industry
crafting strategies
purpose
mitigate negative forces in your industry, create inequality and CA
example apple
own operating system
made it difficult for others to enter apples market (raised barriers to entry)
differentiates the products, mitigates the power of microsoft
own stores
mitigates the power of retailers
substitutes
apples has developed substitutes for their own products reducing the ability fo other to do so by sacrificing some sales due to cannibalizing their own offerings
mistakes
applying to a company instead to the industry
spend to much time looking back and to little looking forward
neglecting dynamics, it can only take one negative force to make the industry hard to compete in
limitations
wors primarily for industries where there are clear boundaries
provides limited tools and techniques for understanding the nature of rivalry
it dosn´t address the issue of complements
L 4: what trader Joe´s dosen´t do
strategy
the essence of strategy is choosing what not to do
need a clear understanding of the things your rivals offer and not offer the same
being diffrent by making tradoffs
trade-offs makes your firm distinct and make you hard to imitate and mitigates negative forces
examples
Ryan air
strategies
private label products
mitigate buyer power since people cant compare prices
distinctive in-store experience
mitigates buyer power and rivalry
everyday low pricing
willingness to alter product mix
mitigates supplier power, if they raise prices you are out
locate in older strip malls
the growth trap
forces
pressures from wall street, own ambitions to earn more
CEO sets aggressive growth targets
trade offs constrains growth it makes you a more nischcompetitor
Blue ocean strategy