wk10_ch13n - Ch 13: Strategy, Balanced Scorecard and...

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Ch 13: Strategy, Balanced Scorecard and Strategic Profitability Analysis
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Strategy Strategy specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives or, strategy describes how an organization can create value for its customers while differentiating itself from its competitors
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Two Basic Business Strategies  (aka “generic strategies”) 1. Product Differentiation – offer products or services perceived by the customers to be superior and unique relative to the products or services of your competitors Leads to brand loyalty and the willingness of customers to pay high prices 1. Cost Leadership – achieve lower costs relative to competitors through productivity and efficiency improvements, elimination of waste, and tight cost control Leads to ability to charge lower selling prices than competitors while still making good profits
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Five Aspects of Industry Analysis (aka the “Five Forces”) 1. Number and strength of competitors 2. Potential entrants to the market 3. Availability of equivalent products 4. Bargaining power of customers 5. Bargaining power of input suppliers A thorough understanding of the industry is critical to formulating and implementing a successful strategy is it an attractive industry or a death trap? how should you position yourself within the industry?
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Example: Southwest Airlines’ strategy a low-cost airline providing a very specific type of service (a very careful choice of what they do and what they DON’T do, and how they do it): point-to-point service (not a hub-and-spoke network) serves midsize cities and secondary airports in large cities, avoids large airports no assigned seats, no premium classes of service standardized fleet of 737-s … continued on next slide (from Michael Porter, “What is Strategy?”)
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source: Michael Porter “What is Strategy?”, Harvard Business Review
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Balanced Scorecard “9 out of 10 companies fail to execute their strategies” (Fortune Magazine) 2 key questions in strategy implementation: 1. Are we implementing the strategy as planned? 2. Is the (well-implemented) strategy working as expected? (i.e., you can implement a bad strategy well…)
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wk10_ch13n - Ch 13: Strategy, Balanced Scorecard and...

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