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Honda - BUSI 698 BUSI 698 Strategic Management Honda...

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Unformatted text preview: BUSI 698 BUSI 698 Strategic Management Honda Strategy Implementation Announcements Announcements Second in­class test next Wednesday (Nov. 12) Will include: Corporate Strategy, Strategy Implementation and Corporate Social Responsibility Presentations will be on Nov. 17 and 19 Please email me TODAY if you have any conflicts Course Overview Course Overview Industry Structure Business Strategy: ­Competitive Positioning ­Resources & Capabilities Corporate Strategy Strategy Implementation Industry­Level Sources Firm Economic Profits Firm­Level Sources ( Π) Strategy Formulation and Strategy Formulation and Implementation Strategy Formulation: Planning for above­ average profitability Industry analysis, competitive positioning, resources and capabilities, corporate strategy Strategy Implementation: The actions and tools required for making and executing the plans Where do strategies come from? Planning and adaptation Formal and informal organization Corporate governance Honda (A) Honda (A) Is the motorcycle industry a good industry? What is Honda’s positioning strategy? Does Honda possess any resources and capabilities that Does confer sustainable competitive advantages? confer Honda’s Activities Honda’s Activities Support Activities Firm infrastructure Human resources management Technology development Procurement Emphasis on share and sales volume, not short-run profitability Relatively high labor costs Honda Technical Research Institute Design superiority Product innovation leadership Many product updates Fully integrated producer of engines, frames, chains, sprockets, etc. Inbound logistics Primary Activities Design for production Cold storage of designs Operations Highly automated plants Capacity added before demand Advanced manufacturing techniques Outbound logistics US subsidiary rather than distributor Largest dealer network Competition between dealers Extensive dealer support Marketing & sales Service Extensive advertising “Nicest People” campaign Low price ($250) Promotional prices on new models The Experience Curve (I) The Experience Curve Shows the percentage decline in the cost of production when the cumulative output is doubled. Year 1 Average Cost per Unit Produced Year 2 Year 3 Year 4 Year 5 Adapted from J. Furman q 2q Year 6 Cumulative Output The Experience Curve (II) The Experience Curve (II) Experience Curve & Economies of Scale economies of scale = average costs decrease as a function of the amount produced at one time amount experience curve = average costs decrease as a function of the cumulative # of units produced cumulative Experience Curve & Market Share Experience Market if experience curve affects all firms in industry equally… then ‘buying’ market share may be a viable way to achieve a then market low-cost leadership position low-cost data shows that high market share high profits (in many data industries) industries) experience curve can be a source of First-Mover Advantage experience First-Mover of course, having low costs may lead to high market share of market Adapted from J. Furman Is the customer always right? Is the customer always right? Suppose you were an American or European Suppose motorcycle manufacturer in the early 1960s… motorcycle would you ever believe that Honda could erode would your market share and ‘eat your lunch’? your would you ever have invested in making smaller, would lightweight motorcycles like the Supercub? lightweight By listening too closely to what your customer By wants today, you may miss on the technology (or industry) development that will drive the industry tomorrow! industry performance new technology old technology see Clay Christensen, The Innovator’s Dilemma see The time Honda (B) Questions Honda (B) Questions How does this story differ from the earlier one? Which story do you believe the most? In which ways was Honda lucky? In which ways were there opportunistic? Why did we see “foresight” and “planning” where there was none? Is case (A) useless? What can we learn from thinking about What can we learn from thinking about the case from both viewpoints? Case A Honda planned wisely Honda and had the foresight to take advantage of the economics of the experience curve, product development, develop leading-edge manufacturing facilities and design capabilities, create new products & sales channels, etc. sales Strategy requires Strategy planning & foresight! planning Adapted from J. Furman Case B Honda benefited from new Honda product development & introduction, ad campaigns, benefit from experience curve (even if “unplanned”), … “unplanned”), Strategy requires that firm Strategy strategy be adapted as circumstances require circumstances luck & pluck are luck important important Some generalizable lessons Some generalizable lessons Did it all occur randomly? What were the forces behind Honda’s emergent strategy? Background, values, and representations of the management team Adjustment to feedback from the outside world “Selective flexibility” When does experimentation make more sense than forethought? When the cost of each trial is low, When feedback from trials is rapid, When adjustment after the trial is inexpensive, When live trials give far better information that any effort at prediction would yield Intended vs. Realized Strategy Inte nde d St r ateg y Deliberate Strategy Realized Strategy Unrealized Strategy Emergent Strategy Henry Mintzberg: (1987) “Crafting Strategy”, Harvard Business Review, Mintzberg – Another view on Strategy Mintzberg – Another view on Strategy “Strategies grow like weeds in a garden.” Emergent strategies emerge without – or in spite of – Emergent clear intentions: Actions converge into patterns. clear Strategies can form as well as be formulated. Strategies as The role of the strategist is to allow these patterns to The emerge and recognize them. emerge Strategy formulation and strategy implementation are Strategy intermingled. intermingled. Deliberate and emergent strategies coexist. So, What Is Strategy? So, What Deliberate Strategic Planning (e.g. Porter) Planning oriented Analyze forces in an industry and position within industry Evolving Identify and design distinct activities to position firm Evolutionary perspective Accumulation of resources and capabilities over time “Routines” form and get selected through trial and error within organizations Emergent Strategy as Process or Pattern (e.g. Mintzberg) Strategy is a result of day-to-day decisions and actions An interesting book An Examines the viewpoints and Examines actions of the US and USSR from multiple perspectives from Allison was Asst. Secretary of Allison Defense for Kennedy & founding Dean of Kennedy School at Harvard Harvard Three perspectives rational actor mechanism political manipulation view bureaucratic decision process Viewing from different lenses Viewing yields alternate understandings of crisis and choices of Adapted from J. Furman Takeaways from the Honda Case Takeaways from the Honda Case Strategy formulation and implementation are Strategy intermingled intermingled Firms use trial-and-error as much as formal planning There is typically an element of “luck” and “taking There chances” in every success story… chances” However, “fortune favors the prepared mind”. Your business education should… Help you recognize opportunities Give you knowledge of your objectives Provide you with tools to analyze and take advantage of Provide opportunities in a timely manner opportunities ...
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