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093009 Strategy and Competitive Advantage Posting

093009 Strategy and Competitive Advantage Posting -...

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Strategy and Competitive Advantage ENG 185A and 285A September 30, 2009 Karen Smith Bogart
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Today Strategy and competitive advantage Honda case Perspective Value Creation Tools and models Industry assessment Entrepreneurs
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Strategy Fundamentals Strategy is about winning. Strategy requires: Goals that are simple, consistent and long term. A clear and integrated understanding of the competitive environment. An objective appraisal of resources. Effective execution. Key questions: Where to compete? How to compete? “What's the use of running if you are not on the right road?” German proverb
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Honda Case What was their strategy for success in the US? What were their assumptions? Why did they desire R&D and product leadership? Were their views shaped internally or externally? Which Case was more helpful in understanding their success?
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Perspective: 30 Points of IQ Do you see a young or old woman?
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Perspective: 30 Points of IQ Do you see a young woman? Chin Necklace Eye Ear
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Or is it an old woman? Hint: She is looking down. Nose Mouth Eye Stubble Perspective: 30 Points of IQ
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A Matter of Perspective Seen one way, there is just one piece of cake. Seen another, there is only one piece missing.
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9 Strategic Opportunity Strategic Opportunity Opportunity Plan Do Define the opportunity. Determine the “aim”. Size the opportunity How will we be: Different? Compelling? Profitable? Competition: Current & future What skills do we have & need? What are the critical barriers, resources, investments, actions and measures? Commercialization and operational process Integrated marketing Channels and sales execution Service After-life Assessment Verify
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Strategy Aim: Value Creation Customer Value: Money that customers are willing to pay for a good or service. Company Value : “Profit” or the surplus of revenues over costs available to the firm. Value Added: Difference between the value of the firm’s output and the cost of all its material inputs. Firm Responsibilities: Financial Community Employer Society Environmental Customer Care
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Strategy Aim: Value Creation Profit: Motivation for the firm. How should we measure? Rate or profit? Total profit? Accounting profit? Economic profit? Time? Economic Profit: Pure surplus after all inputs including capital have been paid for. Reliable measure of profit and performance. More demanding measure as it considers the cost of capital Distinguishes types of business by cost of capital EVA (Economic Value Added) = NOPAT (Net Operating Profit after tax) – Cost of Capital Cost of Capital = Capital employed * Weighted average cost of Capital
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