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: Study of human interaction and cooperation in a dynamic competitive situation. •Benefit: Allows us to model competitive interaction. •Why is this important for strategic management? •Frames strategic decisions. •Identifies the players. •Specifies their options and any rules or constraints. •Assesses potential opportunities for conflicts and cooperation. •Identifies the payoffs of every combination of options. •Considers the sequencing of decisions. •Predicts the outcomes of competitive situations. •Identifies best optimal choices
25 Opportunity Plan Do Target and size the opportunity Define target market Customer benefit Expected value Desired advantage Basis for difference Competition Skills and resources Action steps and measures: Goals Commercialization and Operations Marketing and Sales Ongoing Service(s) After-life support Verify Strategy
Patagonia Case (2013) •Background: - American clothing firm since 1973 - Ventura, CA based - $600M+ Revenue (Private B Corporation) - High-quality sporting wear & equipment at premiumprices (+20%). - Costs are 10% higher than competitors. Only 1% on Marketing. •Objectives: Cause no unnecessary harm and: - Be profitable! - Higher Gross Margins than competitors: Nike, VF, Columbia. - Achieve 10% annual sales growth for next 5 years (vs. 6%) - Stay true to environmental commitments •Questions:- Are the above achievable? How? - How important is the environmental positioning to the firm’s business model?
Patagonia: Vision & Mission (combined): “Build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis”.Values: Quality. Integrity. Environmentalism. Not bound by convention. Commitment: (1%) of annual net revenue to nonprofit charitable organizations that promote environmental conservation and sustainability: Cash, products and services. Products: Sportswear (47%), Technical Outwear (30%), Technical Knits (12%), Hard Goods (6%), Misc. (5%). Product GMs: 50%+
Patagonia: •Commitments and Practices: oSustainable supply chain development: Limit environmental impact. Quality. oProduct Lifecycle Initiative: Unique differentiation. Encourage consumers to “reduce, pair, reuse, recycle” their clothing.oProduct innovation, quality, performance, application, and sensitivity. oShare its practices/learnings with other firms. o1% of revenues to environmental causes, etc…•Customer: 38 years. High income: $160K Household income.
SWOT Analysis: Patagonia Helpful to Achieving Your Objective Harmful to Achieving Your Objective Internal Origin Strengths (Internal) •Private •Profitable •Higher Margins than competitors •Premium pricing •Environmental differentiation •Best practices: Green supply chain •Culture Weaknesses (Internal) •Higher costs •Smaller operational base •Smaller financial base External Origin Opportunities (External) •Customer loyalty •Customers willing to pay more for high quality & green commitment •Product Lifecycle Initiative (PLI) •LEAN: Supply chain efficiencies to reduce costs •