Slides_12 December 5 2017uu.pptx - Business Strategy and Policy Fall 2017 Professor Michelle Gittelman [email protected] s.edu Today

Slides_12 December 5 2017uu.pptx - Business Strategy and...

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Business Strategy and PolicyFall 2017Professor Michelle Gittelman[email protected]s.edu
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Today: Wrap up and reviewThursday: Walmart strategy discussionNext Tuesday Dec 12: ExamTrader Joe’s caseHypothetical numbers-based questionPlease fill out course survey:
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The essence of strategy is toCreate valueCapturevalue
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Source: Bureau of Economic Analysis; Bureau of Labor StatisticsValue creation in the economy
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Value creation vs. value capture in the economyThe Atlantic, 2/2015
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Value creation vs. value capture
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“Operational effectiveness is not strategy”Competition on efficiency or cost alone can lead to profit increases in the short term, but strategic herding and margin erosion over time“Race to the bottom” – a race no one wins
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Core Strategy Principles of “What is Strategy”?1.Establish a valuable position in the marketNew market orSimilar market but different activities2.Support the position with tailored activities and strong fit3.Your position should create trade-offs for imitators (straddling costs/conflicting activities)4.Grow into positions that deepen tailored activities 5.Avoid growth into positions which will create trade-offs (conflicts in activities/straddling costs), especially if there are powerful rivals already in those positions
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1. Establish a valuable position in the marketA position has multiple dimensions: product, customers, access, location, suppliersValuable positions are “empty beaches” – new markets, or similar markets with different activitiesValuable positions create added value – top line, bottom line, or bothHow did Ryan Air, Tesla and Walmart’s initial positions in the market affect their initial success, and rivals’ ability to respond to their market entry?
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2. Support position with tailored activities and strong fitTailored activities Are designed to reinforce a position (first order fit)Tailored activities don’t function effectively in a new position – value is maximized in the position they are tailored forReinforce eachother (Second order fit)Lead to efficiency over time within the positionHow are Amazon’s fulfillment centers tailored to e-commerce? Could they be efficient in large-volume stores? Amazon is increasingly using third-party vendors: Does this fit with Amazon’s existing logistic system and promise of same-day delivery?
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Tailored activitiesDistribution center handle large-scale inflows and outflows of merchandise to 150 discount stores each located 150 miles awayRural marketsMass market productsHigh volume suppliersLarge Stores 1960s-mid 1990s
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3. Strong fit creates tradeoffs from imitatorsIf a company achieves a strong position/tailored activities, rivals will face conflicting activities/straddling costs when they try to imitate.
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