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session_5_10-4-10_ - MGMT670 MGMT670 Session5 Strategy...

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MGMT 670 MGMT 670 Session 5:  Strategy
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Strategy Strategy What business are you in? How do you compete?
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Strategy Defined Strategy Defined “Strategy is a deliberate search for a  plan of action that will develop a  business’s competitive advantage and  compound it.” “The differences between you and your  competitors are the basis of your  advantage.” (Henderson)
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Strategy as a plan to interact with the  competitive environment to achieve  organizational goals
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Organizational Strategy Organizational Strategy “Each [company] must be different  enough to have a unique advantage.” No two competitors can coexist if they  seek to do business in the same way. (Bruce Henderson, Boston Consulting)
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Therefore, competitive strategy is  about being different and deliberately  choosing a different set of activities to  deliver unique value.  (Porter) Being different is not enough:   strategy must deliver value – something that the customer values  (e.g., lower cost, greater convenience,  greater reliability, faster delivery,  ambiance, aesthetics, etc.)
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Trade-offs and Activities Trade-offs and Activities All strategies require tradeoffs. Companies that try to be all things to all  customers often confuse their employees  and customers. (Porter) Some companies ‘straddle’: maintain existing  strategy and copy a successful rival “The essence of strategy is choosing what  not to do.” (Porter) Competitive advantage results from  combining a set of activities that cannot be  copied.
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Competitive Advantage   Competitive Advantage   (Porter) (Porter) Low cost leadership Product/service differentiation
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Porter’s Five Forces Porter’s Five Forces Threat of new entrants Depends on barriers to entry Power of suppliers Sole suppliers have greater power Power of buyers Powerful customers Demands from customers for better  quality, lower cost, higher service
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Threat of substitutes Alternatives and substitutes for a product  or service Rivalry among existing competitors Influences by preceding four forces, as  well as cost and product differentiation This leads to Porters four types of  strategy
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Low Cost Leadership Low Cost Leadership Deliver goods at lower prices than  others.
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