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Strategic choices - Coggle Diagram
Strategic choices
Business models
describes value proposition for customers and other participants, an arrangements of activities that produces this value, and associated revenue and cost structures
Three elements of business model
Value creation, configuration and capture
Value creation
What is offered to what customer segment?
customer needs, target customer and market segment
Value capture
Value configuration
How is the value proposition structured?
Composition and selection of resources and activities, linkages between and system of activities, ID what participants perform what activities
Why does the model generate a margin?
Revenue stream and payments, cost structure and drivers, apportaion of value between stakeholders
two things to consider
Once established, models are rarely questioned - until Airbnb no one questioned hotel model
business models become institutionalised and part of industry's 'recipe'
Models can be shared, strategy still differs
Airbnb, wimdu
Patterns
Razor and blade
Gilette, razor cheap, blades expensive. focus on value capture component
Freemium
Basic free, premium cost. Flickr
P2P
brings people/businesses together, based on co-operation.
Uber, Airbnb build on for profit orgs.
Multi-sided platform
Facebook, Apple, Amazon, Netflix, Google, Baidu, Alibaba, Tencent. Companies all built on platforms.
Bring together two or more distinct but interdependant groups to interact on a platform
Youtube, brings together video creators and viewers
Game consoles - Gamers, game developers
Search engines - searches/advertisers
Network effects intimately related, more users = better for everyone
THREE important factors
Distinctiveness and size
Choosing platform sides
1 more item...
Generic Competetive strategy
How an org/BU achieves competetive advantage
Costs, products, service features, branding
Competetive advantage is how an org/BU creates value for its users, greater than costs of supplying them and superior to that of rivals
An absence of competetive advantage = vulnerable to competitors with better products // lower prices
Two ways
Differentiated products / services
Lower costs
Cost Leadership strategy
Differentiation strategy
Focus strategy
Targets a narrow activity, tailors products or services to that specific segment at exclusion of others
Two variations
Cost
ID areas that broader strategies fail - Iceland targets frozen and chilled, reduced costs against fresh groceries, less complexity
Differentiation
Look for diff needs broader orgs don't serve well. Build on specialist tech / knowledge. ARM dominates market for smarphone & tablet chips, yet tiny in comparison to Intel & AMD
Three key factors
Distinct segment needs
if distinctiveness erodes, hard to defend segment. Tesla - expensive electric motors, boundaries become blurred with eco friendly consumers and other electric cars, easier for competitors to attack niche
Distinct segment value chains
IF value chains are difficult for rivals to construct, strategy is strengthened
Viable segment economics
Segment becomes too small to serve economically as demand or supply conditions change
Uniqueness that is sufficiently valued by customers to allow a price premium
Miele
BMW/Mercedes
Product and service attributes
better or unique features
possibilities virtually endless, colour, design, speed, performance, user convenience, safety, style, taste, sound
Customer relationships
perceived value, responsiveness
SAP customises to meet customer needs
marketing and reputation, emotional and psychological aspects
Starbucks price = ambience at outlets
Complements
Consumed with other product or service
Higher prices, usually comes at a cost
R&D, Branding, staff quality
systematically become lowest cost org in domain of activity
Input costs
Labour, raw materials
Economies of scale
Increasing scale reduces average cost
Experience
Experience curve implies more experience = reduction in unit costs
Savings from more efficient designs, labour productivity as staff learn to do things more cheaply over time
Cost typically more at start, early entrants typically have advantage
Product/Process design
Efficiency 'designed in' at outset
ASDA, LIDL, ALDI, Iceland
Two tough requirements
If second lowest cost, implies competetive disadvantage. ALWAYS at risk of being undercut
Low cost shouldn't be pursued with total disregard for quality
cost-leaders have two options
parity
charge same prices as competitors, pocket difference
Proximity
Closeness in features, slightly lower cost may be enough to compensate for slightly lower quality
Hybrid strategy
Dangerous, can be stuck in the middle doing no strategy well
Can be achieved
Organisational separation through strategic business units (SBUs)
Tech or managerial innovation - internet retailing reduced costs, improved quality, increased differentiation through greater product ranges, online reviews, better advice
Complex. Pursue with caution
How an org at business level positions itself in relation to competition
Strategic Direction
Methods by which to pursue strategies
Organic development, acquisitions, alliances with other orgs?
Which products, industries, markets to pursue
Deciding how to compete in a market
Choices interact with competitors
Interactive price and quality strategies
Mercedes improves quality, keeps cost. Ford then looks like worse value to Mercedes. Hyundai as lowest cost has more expected of it. Ford adjusts quality further than Mercedes, pushing Mercedes to lower costs or improve quality again
Game Theory
Moves and countermoves can be dangerous to all competitors. Best interest to restrain competition/collaborate?
Game theory encourages an organisation to consider competitor's likely moves and implications of these for its own strategy
Get in mind of competititors
Think forwards, reason backwards