24 Copyright 2005 Professor Michael E Porter 20060606 HSM Chicago 06052006

24 copyright 2005 professor michael e porter 20060606

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24 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Barriers to Strategy Flawed Concepts Misunderstanding of strategy itself Poor industry definition Industry Pressures Industry conventional wisdom leads all companies to follow common practices Labor agreements limit ways of configuring activities Regulation constrains price, product, service or process alternatives Customers ask for incompatible features or request new products or services that do not fit the strategy
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25 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Barriers to Strategy Capital Market Biases Strong pressures to emulate the currently “successful” peers Pressure to grow faster than the industry A strong bias for “ doing deals ” (M&A) Internal Practices Inappropriate goals and performance metrics bias strategy choices Short time horizon Over-weighting of equity-based compensation amplifies unhealthy stock market pressures Rapid turnover of leadership undermines the strategic direction to achieve short-term performance benefits A desire for consensus undermines tradeoffs Inappropriate cost allocation lead to too many products, services, or customers Outsourcing makes activities homogenous and less distinctive
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26 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Strategy for What? Defining the Right Business: Products Product A Product C Product E Product B Product D Marketing & Sales (e.g. Sales Force, Promotion , Advertisin g, Proposal Writing, Web site) Inbound Logistics (e.g. Incoming Material Storage, Data Collection, Service, Customer Access) Operations (e.g. Assembly, Componen t Fabrication , Branch Operations ) Outbound Logistics (e.g. Order Processing, Warehousing , Report Preparation) After-Sales Service (e.g. Installation, Customer Support, Complaint Resolution, Repair) M a r g i n Primary Activities Support Activities Firm Infrastructure (e.g. Financing, Planning, Investor Relations) Procurement (e.g. Components, Machinery, Advertising, Services) Technology Development (e.g. Product Design, Testing, Process Design, Material Research, Market Research) Human Resource Management (e.g. Recruiting, Training, Compensation System) Value What buyers are willing to pay Threat of Substitute Products or Services Threat of New Entrants Rivalry Among Existing Competitors Bargaining Power of Suppliers Bargaining Power of Buyers A distinct strategy is needed for each business
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27 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Customers are independent restaurants and institutions The product line consists of well over 10,000 SKUs Sales and service activities are carried out by local sales reps Value-added services, credit terms, and distributors’ private-label products are valued and allow support product/service differentiation Logistical activities are heavily local in nature (local warehouses and trucks) Defining the Right Business Foodservice Distribution
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