compared to other organizations • A different , tailored value chain • Clear tradeoffs, and choosing what not to do • Activities that fit together and reinforce each other • Continuity of strategy with continual improvement in realizing the strategy
25 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Defining the Value Proposition What Relative Price? What Customers? Which Needs? • What end users? • What channels? • Which products? • Which features? • Which services? • A novel value proposition can also grow the pie/expand the industry
26 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Strategic Positioning Enterprise Rent-A-Car • Home-city replacement cars for drivers whose cars are being repaired or who need an extra vehicle, at low rates (30% below airport rates) • Numerous, small, inexpensive offices in metropolitan areas, including on-premises offices at major accounts • Open during daylight hours • Deliver cars to customers’ homes or rental sites, or deliver customers to cars • Acquire new and older cars, favoring soon-to-be discontinued older models • Keep cars six months longer than other major rental companies • In-house reservations • Grassroots marketing with limited television • Cultivate strong relationships with auto dealerships, body shops, and insurance adjusters • Hire extroverted college graduates to encourage community interaction and customer service • Employ a highly sophisticated computer network to track its fleet Value Proposition Distinctive Activities
27 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Strategic Positioning Whole Foods Markets • Natural, fresh, organic, and prepared foods and health items with excellent service at premium prices • Educated, middle class, and affluent customers passionate about food as a part of a healthy lifestyle • Well-lit, inviting supermarket store formats with appealing displays and extensive prepared foods sections • Produce section as “theater” • Café-style seating areas with wireless internet for meetings and meals • Each store carries local produce and has the authority to contract with the local farmers • Information and education provided to shoppers along with products • High touch in-store customer service via knowledgeable, non-unionized, highly motivated personnel • Egalitarian compensation structure • Own seafood procurement and processing facilities to control quality (and price) from the boat to the counter • Donates 5% of profits to non-profits • Each store has “green projects,” directed by employees to improve environmental performance Value Proposition Distinctive Activities • Excellent strategies often include a social dimension of the value proposition
28 Copyright 2005 © Professor Michael E. Porter 20060606 HSM Chicago – 06052006 Final NV.ppt Making Strategic Tradeoffs • Tradeoffs occur when strategic positions are incompatible – the need for a choice
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