Empirical Approach Intensity of sales by customer type product type Product

Empirical approach intensity of sales by customer

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Empirical Approach Intensity of sales by customer type / product type Product / customer profitability Analytical Approach Creative segmentation of product varieties and customer groups Building off activities with true uniqueness Finding tradeoffs in the value chain Looking for new configuration choices for activities Finding new combinations of activity choices Migrate toward the chosen strategic position Focus incremental efforts on reinforcing the chosen position
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34 Copyright 2002 © Professor Michael E. Porter FEI Conference Halifax – 06-06-02 AF Profitable Growth - I 1. Introduce new technologies, features, products or services tailored to the strategy 2. Deepen the strategic position rather than broadening and compromising it Raise market penetration of the chosen position Communicate the strategy better to other customers who should value it Make the company’s activities more distinctive Strengthen fit 3. Expand geographically / globally to tap new markets using the same positioning Leverage and reinforce company’s unique advantages and identity 4. Expand the market for what the company can uniquely deliver Extend the same positioning to new segments Find adjacent segments that involve no/minimal tradeoffs Seek ways to minimize the tradeoffs of serving a wider market It is an illusion that growth (and profitability) are easier to achieve in untapped or growth segments
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35 Copyright 2002 © Professor Michael E. Porter FEI Conference Halifax – 06-06-02 AF Profitable Growth - II When broadening the strategy is unavoidable , the risks are best contained by creating stand alone units , each with its own brand name and tailored system of activities Positioning determines whether acquisitions should be “integrated”
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36 Copyright 2002 © Professor Michael E. Porter FEI Conference Halifax – 06-06-02 AF Strategy The right goal Unique value proposition Tailored activities Clear tradeoffs Activities fit together in an integrated system Continuity of position but consistent improvement What  Is  a Strategy? What is  Not  a Strategy? Best practice improvement A vision Learning Agility Flexibility Innovation Restructuring Mergers / Consolidation Alliances / Partnering Customer relationship management The Internet
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37 Copyright 2002 © Professor Michael E. Porter FEI Conference Halifax – 06-06-02 AF The Role of Financial Executives in Strategy Define and institutionalize the proper goal for the company Institute accurate financial reporting “Pro forma” income, write-offs, etc. are misleading for strategy Manage the tight linkage between financial performance and strategy Bring economic rigor to the strategic planning process Distinguish between operational effectiveness and strategy in financial planning and budgeting Create cost accounting systems that inform strategic choices
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