Goodyear Tire and Rubber Become a market focused tire company providing

Goodyear tire and rubber become a market focused tire

This preview shows page 28 - 42 out of 45 pages.

Goodyear Tire and Rubber Become a market-focused tire company providing superior products and services to end-users and to our channel partners, leading to superior returns for our shareholders. Lafarge To be the undisputed world leader in building materials Marriott International, Inc. To be the number one lodging company in the world. Copyright 2005 © Professor Michael E. Porter
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Setting the Right Goals The fundamental goal of a company is superior long-term return on investment Growth is good only if superiority in ROIC is achieved and sustained Prevalent accounting adjustments to reported profitability (e.g., writeoffs, writedowns, restructuring charges) can obscure true economic performance and lead to bad competitive choices Profitability must be measured realistically, capturing the actual profits on the full investment Profitability metrics besides ROIC (e.g. return on sales; ebitda margin; pro-forma earnings; cash flow margin) are risky for strategy Goodwill must be treated as part of investment Setting unrealistic profitability or growth targets can undermine strategy Copyright 2005 © Professor Michael E. Porter
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Economic Foundations of Competition Causes of Profitability The fundamental unit of strategic analysis is the industry Defining the relevant industry is essential to strategy Company economic performance results from two distinct causes: Strategy must encompass both Industry Structure Relative Position Within the Industry - Overall Rules of Competition - Sources of Competitive Advantage Copyright 2005 © Professor Michael E. Porter
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Threat of Substitute Products or Services Threat of New Entrants Rivalry Among Existing Competitors Bargaining Power of Suppliers Bargaining Power of Buyers Determinants of Long-Term Industry Profitability Copyright 2005 © Professor Michael E. Porter
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32 Copyright 2005 © Professor Michael E. Porter
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Clusters and Competitiveness
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Who benefits from Globalization?
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Italy - Local, World Class Clusters Udine - furniture Biella - wool textiles Milan - finance, machine tools, fashion Turin - autos Parma - food industries Carrara - stonework Prato - wool textiles Montebelluna - ski boots Carpi - knitwear Sassuolo - ceramic tiles Modena - sports cars Bologna - food machinery & packaging machinery Castel Goffredo - hosiery Source: Cluster Navigators, NZ The Italian Case: Small Enterprises competing successfully in global markets due to cluster support
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Definition of a Cluster A cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field, linked by commonalities and complementarities. The geographic scope of clusters ranges from a region, a state, or even a single city to span nearby or neighboring countries. -- Michael Porter
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What is a Cluster ? Working Together Leading Firms Key firms exporting Goods and Services Outside the Region Human Resources Technology Access to Capital Business Climate Physical Infra- structure Economic Foundations ©  1998 Economic Competitiveness Group, Inc.                Network of Supplier Firms Firms supplying inputs, raw materials, components, parts, and specialized services
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Evolution Stages of Clusters Pre-cluster Emerging Clusters Expanding Cluster Transforming Cluster
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Singapore 620 km² Pop: 3.2 million GDP: US $85 billion 40% World Market Share in Hard Disks
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Ringkjøbing County, Western Denmark Pop: 120,000 60% World Market Share in Wind Turbines
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Copyright © 1998 Professor Michael E. Porter
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