STRATEGY

STRATEGY - WHAT IS STRATEGY? STRATEGY IS ABOUT CHOICE. THE...

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Unformatted text preview: WHAT IS STRATEGY? STRATEGY IS ABOUT CHOICE. THE ESSENCE OF A COMPANY'S STRATEGY IS CHOOSING WHAT TO DO AND WHAT NOT TO DO IN ORDER TO ACHIEVE COMPETITIVE ADVANTAGE. A COMPET I T IVE ADVANTAGE IS SOMET H I NG A F I R M CAN DO T HAT R IVALS CANNOT MATCH. A COMPETITIVE ADVANTAGE EITHER LEADS TO H IGHER DEMAND OR LOWER COSTS. OVER T I ME, TECHNOLOGICAL I M PROVEMENTS BECOME OBSOLETE AND AVAILABLE TO ALL F IR MS. AS A COMPANY INCREASES THE PACE OF INNOVATION, ITS PROFITABILITY OFTEN BEGINS TO STAGNATE OR EVEN ERODE. THE REASON CAN BE SUMMED UP IN ONE WORD: COMPLEXITY. THE MOST COMMON REASONS FOR THE SPREAD OF COMPLEXITY IN A COMPANY'S VALUE CHAIN: BAD ECONOMIC DATA, OVEROPTIMISTIC SALES PROJECTIONS, AND ENTRENCHED MANAGERIAL ASSUMPTIONS. I N SERV ICE AND KNOWLEDGE BUSINESSES, T HE CONT I NUAL I N TRODUCT ION OF NEW, I N FOR MAT ION R IC H OFFER INGS CAN LEAVE V IRTUALLY EVERY E MPLOYEE STRUGGL ING TO MAKE SENSE OF A COMPLEX SERVICE PORTFOL IO. ECONOMIES OF SCOPE OCCUR WHEN ONE RESOURCE SERVES MULTIPLE USES. ECONOMIES OF SCALE REFER TO DECLINES IN UNIT COSTS OF A PRODUCT AS THE ABSOLUTE VOLUME PER PERIOD INCREASES. SCALE ECONOMIES CAN BE PRESENT IN NEARLY EVERY FUNCTION OF A BUSINESS, INCLUDING MANUFACTURING, PURCHASING, RESEARCH AND DEVELOPMENT, MARKETING, SERVICE NETWORK, SALES FORCE UTIL IZATION, AND DISTRIBUTION. BECAUSE KRAFT SENDS MANY CONSUMER PRODUCTS THROUGH THE SAME DISTRIBUTION SYSTEM, IT HAS AN EDGE OVER A RIVAL THAT HAS TO MAINTAIN A SIMI LARLY LARGE SYSTEM FOR FEWER PRODUCTS. SALES, DISTRIBUTION, ADMINISTRATION, RESEARCH AND DEVELOPMENT--THESE ARE AMONG THE FUNCTIONS WHERE ECONOMIES OF SCOPE ARE MOST PRONOUNCED....
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This note was uploaded on 03/06/2011 for the course HFT 3203 taught by Professor Darby during the Spring '11 term at FIU.

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STRATEGY - WHAT IS STRATEGY? STRATEGY IS ABOUT CHOICE. THE...

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