Transcript Operations - Gatton College of Business and Economics

Strategic Management
Walter J. Ferrier
The Paper Fight
• Two stacks of paper
• Anything goes…
Go!
…
Page 2
The Paper Fight
• What happened?
Page 3
The Paper Fight
• What happened?
• Another round…?
Page 4
What is strategic management?
Page 5
Strategic Management…Action that Creates Value
Pazzo’s
Lynagh’s
Pub
Lynagh’s
Pub
Page 6
Competitive
Outcomes
Coke’s
Strategic
Actions
Organizational
Characteristics
Rivalry
Pepsi’s
Strategic
Actions
Industry
Characteristics
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Strategic Management – Developing a set of coordinated and
integrated capabilities, decisions, and actions required to achieve
competitive advantage
Page 8
…Action that Creates Value
Profit = (Price – Cost) x Qty.
Page 9
Strategic Management in the News
• Low price leader…Price cutting
• Differentiated player…Unique product or marketing
• M&A…Restructuring…Turnaround
• Alliance…Joint venture
• New international market…Off-shore manufacturing
• New plants & equipment…Efficient manufacturing
• Market pioneer…Innovator….New products
Page 10
Where Does Strategy Occur?
CEO & Board of Directors
Top Management
Functional
Management
•
•
•
•
•
Marketing
Production
R&D
Logistics
Acct./Fin.
Everyone else
Strategy is everyone’s job
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Be strategy-savvy at Hitachi
Top Management
Don’t let
this be you.
?
Page 12
Start-ups, small business, autonomous business units
YOU will be a top officer, strategist, decisionmaker:
–Pazzo’s vs. Joe Bologna’s vs. Domino’s
–Lexington Brewing Co. vs. Anheuser-Busch
–John’s Running Shop vs. Footlocker
–Pannell’s Swim Shop vs. Dick’s Sporting Goods
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What do strategists do/think about?
• Strive for competitive advantage / above-average
returns
• Assess external factors causing change
• Develop internal factors that create advantage
• Navigate stakeholder landscape
• Strategic management process… Five Stages
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What else…..?
External Stuff
Internal Stuff
• Globalization
• Technological change
• Diverse and increasingly
vocal and influential
stakeholders
• Wall Street
• The Natural Environment
• Building functional capabilities
• Organizational culture
• Leadership
• Strategic HRM
• Board of Directors
• Efficiency
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Levels of Strategy
• Corporate Strategy
• Business Strategy
• Functional Strategy
Value can be created an any or all levels
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Corporate Strategy
• Decide scope/reach of the firm
In which businesses or industries do we compete?
GENERAL ELECTRIC
Aircraft
Engines
Light
Bulbs
Appliances
Power
Generation
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Corporate Strategy
PROCTER & GAMBLE
Soaps
Food
Beverages
Paper
Products
Page 18
Corporate Strategy
PEPSI
Carbonated
Beverages
Juices,
Water,
Sports
drinks
Snack
Foods
Fast Food
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Corporate Strategy
COCA-COLA
Carbonated
Beverages
Juices,
Water,
Sports
drinks
Page 20
Corporate Strategy
Hitachi
Automotive
Systems
Power
Systems
Consumer
Products
Telecommunication
Systems
Page 21
Business Strategy
• Since we’re in the XYZ industry, how do we compete?
Profit = (Price – Cost) x Qty.
•
•
•
•
•
Cost advantage
Size advantage
Differentiation advantage
Positional advantage…New market space
Bridge converging industries
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Functional Strategy
• Given our choice of corporate- and/or business-level
strategy…
–
–
–
–
–
Marketing
Production
R&D
Human resource management
Finance
• How do we coordinate and integrate business functions to carry
out the strategy?
• What functional changes or innovations are required to improve
the strategy?
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Strategy as Heuristic
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Situation Analysis
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Hierarchy of External Influences
•
•
•
•
•
Social
Economic
Technical
Global
Political/Legal
Firm
•
•
•
•
•
Five Forces
Competitor Intelligence
Industry Structure
Strategic Groups
Political/Legal
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Industry Vital Statistics
• Industry scope: How is the industry defined? What
are its boundaries?
• General: Size, growth rate
• Key Players: Rivals, customers, suppliers, government
agencies
• Structure: Fragmented vs. concentrated; vertically
integrated, etc.
• Performance: Profit levels, trends, distribution of,
variability of
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Life Cycle Stage
Growth Rate
Growth is Good
Time
Page 28
Innovation Cycle Time
Growth Rate
Slow is good, unless you’re the one driving innovation
t1
t2
t3
Time
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Concentrated Structure
Fringe
Players
Dominant
Player
No. 2
Concentrated is good, if you’re No. 1 or No. 2
…or, if you’re a smaller player in a protected niche
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Fragmented Structure
No Clear
No. 2
No Dominant
Player
Multiple
Players
Fragmented is good, if you’ve got the best strategy/technology
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Porter’s Five-Forces of Industry Analysis
Threat
of
New Entry
(+) or (-) or no influence on...
Profit = (P – C) x Qty.
Bargaining
Power
of Suppliers
Intensity
of
Rivalry
Bargaining
Power
of Buyers
Threat of
Substitute
Products
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Intensity of Rivalry Among Existing Competitors
Plays out in the following ways:
*
Jockeying for strategic position
*
Price competition
*
Advertising wars -- Coke vs. Pepsi
*
Increasing consumer warranties or service
*
New product introductions – Cheerios cereal (14 types)
• Regular Cheerios
•
•
•
•
•
•
•
Apple-Cinnamon Cheerios
Honey-Nut Cheerios
Frosted Cheerios
Three-Grain Cheerios
Cheerios with Berries (blueberry, strawberry, banana, mixed)
Yogurt Cheerios (vanilla or straw)
Fruity Cheerios (like Fruit Loops, only healthier)
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Situation Analysis Summary Grid
IMPACT
Serious
Threat
General
Economics
Environment
Demographics
Mild
Threat
Benign
Potential
Oppty.
Strong
Oppty.
Political-Legal
PEST
Sociocultural
Technological
Global
Competitive
Potential Entry
Environment
Suppliers
Five
Forces
Customers
Substitutes
Rivalry
TOTAL IMPACT
Page 34
Situation Analysis – Auto Industry
IMPACT
Serious
Threat
General
Economics
Environment
Demographics
Benign


Sociocultural
Technological
Global
Competitive
Potential Entry
Environment
Suppliers
Five
Forces


Customers
Substitutes
Rivalry
Potential
Oppty.
Strong
Oppty.

Political-Legal
PEST
Mild
Threat





TOTAL IMPACT
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Strategic Dimension
/ Coordinate #2
Strategic Map
Strategic Dimension / Coordinate #1
Strategic Map: Beer
(Pre-light / Pre-microbrew)
Dark/Full
Amber
Regular
Light
Low Price
High Price
Strategic Map: Beer
(Current)
Guinness
Killian’s Brown
Blackened Voodoo
Lowenbrau Dark Anchor Porter
Dark/Full
Amber
Amber Bock
Killian’s Red
Red Wolf
Lowenbrau
Bud
Miller
Regular
Old Swill
Light
Sam Adams
Bass Ale
Milwaukee’s
Best Light
Low Price
Pilsner Urquell
Miller Lite
Bud Light
Amstel
Cardinal
High Price
Strategic Map: Beer-like Beverages?
Woodchuck
Guinness
Cider
Blackened Voodoo
Anchor Porter
Dark/Full
Amber
Regular
Light
Sam Adams
Bass Ale
Killian’s Red
Red Wolf
Bud
Miller
Pilsner Urquell
Milwaukee’s
Best Light
Low Price
High Price
Mike’s
Hard
Lemon
Smirnoff
Ice
New
Strategic
Dimension
Resources and Capabilities
Page 40
Competitive Advantage: An Internal View
• What is a resource?
• What is a capability?
• What’s the difference:
–Potential vs. Kinetic energy?
• How do resources and/or capabilities
contribute to competitive advantage?
–Decisions
–Actions and maneuvers
–Force, endurance
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Resources vs. Capabilities vs. Actions
Page 42
Resources
• Inputs into a firm’s value-producing stream
• What a firm has
• Capital equipment
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•
•
•
Skills of employees
Brand names
Deep pockets
Strategic alliances
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Capabilities
• The ability to integrate resources to achieve a
desired objective
• What a firm can do
• Quick introduction of new products
• Preemptive price-cutting
• Attention-grabbing advertising
Page 44
Boxing Resources
Boxer 1
Boxer 2
• 6’6” tall
• 5’10” tall
• 233 lbs
• 175 lbs.
• Runs 24 mi./week
• Practices yoga
• Eats 240g protein/day
• Likes to eat pasta and salad
• Has 20/20 vision
• Has 20/100 vision, must wear
contacts
• Quick reflexes
• Fought in 3 championship fights
• Coached by Cuban national
team coach
• Just learned how to box
• Prefers to coach himself
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Boxing Capabilities
Boxer 1
Boxer 2
• Longer punching reach
• ??
• ??
• Punches with great force, speed and
power
• Endurance to compete aggressively
for 10-round match
• Able to quickly move away from fierce
attacks
• Able to quickly see and interpret
rival’s hand, feet, and eye movements
• Able to blend own and coach’s
experience for superior strategy and
tactics
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Value Chain Analysis
To identify which resources and capabilities can add value
Support
Activities
Primary Activities
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Inbound
Logistics
Support
Activities
Primary Activities
Page 48
Operations
Inbound
Logistics
Support
Activities
Primary Activities
Page 49
Outbound
Logistics
Operations
Inbound
Logistics
Support
Activities
Primary Activities
Page 50
Primary Activities
Marketing
& Sales
Outbound
Logistics
Operations
Inbound
Logistics
Support
Activities
Page 51
Primary Activities
Service
Marketing
& Sales
Outbound
Logistics
Operations
Inbound
Logistics
Support
Activities
Page 52
Primary Activities
Service
Marketing
& Sales
Outbound
Logistics
Operations
Inbound
Logistics
Support
Activities
Procurement
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Technological Development
Primary Activities
Service
Marketing
& Sales
Outbound
Logistics
Operations
Procurement
Inbound
Logistics
Support
Activities
Page 54
Technological Development
Primary Activities
Service
Marketing
& Sales
Outbound
Logistics
Operations
Procurement
Inbound
Logistics
Support
Activities
Human Resource Management
Page 55
HQ: TMT & Firm Infrastructure
Technological Development
Primary Activities
Service
Marketing
& Sales
Outbound
Logistics
Operations
Procurement
Inbound
Logistics
Support
Activities
Human Resource Management
Page 56
HQ: TMT & Firm Infrastructure
Technological Development
Primary Activities
Service
Marketing
& Sales
Outbound
Logistics
Operations
Procurement
Inbound
Logistics
Support
Activities
Human Resource Management
Page 57
Competitive Strategy
Page 58
Business-level [Competitive] Strategy
• Since we’re in the XYZ industry, how do we compete?
Profit = (Price – Cost) x Qty.
• Cost advantage
• Size advantage
• Differentiation advantage
• New market space
• Bridge converging industries
Page 59
Generic Business Level Strategies
Source of Competitive Advantage
Cost
Breadth of
Competitive
Scope
Broad
Target
Market
Uniqueness
Low
Cost
Narrow
Target
Market
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Low-Cost Strategy - Operational Advantage
“Dell finds it hilarious that HP and Sony fund
researchers to come up with new ideas.”
“Steamrollered by Dell” Newsweek, February 21, 2005
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Value Chain and Low Cost Strategy
Firm Infrastructure
Human Resource Management
Technological Development
Service
Marketing
& Sales
Outbound
Logistics
Operations
Inbound
Logistics
Procurement
Page 62
Inbound
Logistics
Inbound
Logistics
Highly Efficient
Systems to Link
Suppliers’ Products
with the Firm’s
Production
Processes
Located in Close
Proximity with
Suppliers
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Operations
Firm
Efficient Plant Scale
to Minimize Mfg.
Infrastructure
Costs
Relatively Few Management
Layers to Reduce Overhead
Effective Training Programs to
Improve Worker Efficiency and
Effectiveness
Human Resource Management
Timing of Asset
Purchases
Investments in Technology in order to
Reduce Costs Associated with
Manufacturing Processes
Technological Development
Policy Choice of
Plant
Technology
Frequent Evaluation
Processes
to Monitor
Procurement
Organizational
Small, Highly Trained
Sales Force
Learning
Products Priced to
Generate Sales
Volume
Service
Outbound
Logistics
Efficient Plant
Delivery Schedule
Scale to Minimize that Reduces
Manufacturing
Costs
Costs
Selection of Low
Timing of Asset
Cost Transport
Purchases
Carriers
Operations
Inbound
Logistics
Suppliers’ Performances
Policy Choice of Efficient Order
Plant Technology Sizes
Organizational
Learning
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Outbound
Logistics
Firm Infrastructure
Delivery Schedule
that Reduces Costs
Human Resource ManagementSelection of Low
Technological Development
Cost Transport
Carriers
Efficient
Frequent Evaluation Processes to
Monitor Suppliers’ Performances
Sizes
Procurement
Effective Product
Interrelationships
Installations to
with
Sister
Units
Reduce
Frequency
Marketing
& Sales
Service
Outbound
Outbound
Logistics
Logistics
Delivery Schedule Small, Highly
that Reduces
Trained Sales
Costs
Force
Order
Selection of Low
Cost Transport
Carriers
and Severity
Products Priced to of Recalls
Generate Sales
Volume
Efficient Order
Sizes
National Scale
Advertising
Interrelationships
with Sister Units
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Marketing &
Sales
Firm Infrastructure
Human Resource Management
Technological Development
Products Priced to
Generate Sales
Volume
Global Scale
Advertising
Marketing
& Sales
Marketing
& Sales
Service
Outbound
Logistics
Operations
Inbound
Logistics
Procurement
Small, Highly Trained
Sales Force
Page 66
Firm Infrastructure
Human Resource
Service
Effective
Product
Installations to
Management
Reduce
Recalls
Technological Development
Marketing
Service
& Sales
Service
Outbound
Logistics
Inbound
Logistics
Operations
Procurement
Page 67
Firm Infrastructure
Human Resource Management
Technological Development
Procurement
Systems and Procedures to Find
the Lowest Cost Products to
Purchase Raw Materials
Marketing
& Sales
Service
Outbound
Logistics
Inbound
Logistics
Operations
Procurement
Procurement
Frequent Evaluation
Processes to Monitor
Suppliers’ Performances
Page 68
Firm Infrastructure
Human Resource Management
Technological Development
Marketing
& Sales
Easy-to-Use Manufacturing
Technologies
Outbound
Logistics
Operations
Inbound
Logistics
Technological Development
Service
Procurement
Investments in Technology in order
to Reduce Costs Associated with
Manufacturing Processes
Page 69
Firm Infrastructure
Human Resource Management
Technological Development
HumanProcurement
Resource Management
Service
Marketing
& Sales
Effective Training Programs to
Improve Worker Efficiency and
Effectiveness
Outbound
Logistics
Operations
Inbound
Logistics
Consistent Policies to
Reduce Turnover Costs
Page 70
Human Resource Management
Firm Infrastructure
Technological
Development
Service
Relatively Few
Management Layers to
Reduce Overhead
Marketing
& Sales
Simplified Planning
Procurement
Practices to Reduce
Planning Costs
Outbound
Logistics
Inbound
Logistics
Cost Effective
MIS Systems
Operations
Support
Activities
Firm Infrastructure
Page 71
Generic Business Level Strategies
Source of Competitive Advantage
Breadth of
Competitive
Scope
Broad
Target
Market
Cost
Uniqueness
Cost
Leadership
Differentiation
Narrow
Target
Market
Page 72
Differentiation Strategy – Uniqueness Advantage
SOUTHWEST
Page 73
Value Chain and Differentiation Strategy
Firm Infrastructure
Human Resource Management
Technological Development
Service
Marketing
& Sales
Outbound
Logistics
Operations
Inbound
Logistics
Procurement
Page 74
Inbound
Logistics
Firm Infrastructure
Superior handling of
incoming raw
materials
to
Human Resource
Management
minimize damage
and improve the
Technological
Development
quality
of the final
product
Service
Outbound
Logistics
Inbound
Logistics
Inbound
Logistics
Operations
Procurement
Page 75
Operations
Firm
Consistent
manufacturing of
Infrastructure
attractive products
Human Resource Management
Technological
Rapid responses to
customers unique
Development
manufacturing
specifications
Service
Outbound
Logistics
Inbound
Logistics
Operations
Operations
Procurement
Page 76
Outbound
Logistics
Firm Infrastructure
Technological Development
Outbound
Outbound
Logistics
Logistics
Inbound
Logistics
Operations
Procurement
Rapid and timely
product deliveries to
customers
Marketing
& Sales
Service
Human Resource
Accurate and
responsive order
Managementprocessing
procedures
Page 77
Marketing &
Sales
Firm Infrastructure
Human Resource Management
Outbound
Logistics
Inbound
Logistics
Operations
Procurement
Extensive personal
relationships with
buyers
Premium
Pricing
Marketing
& Sales
Marketing
& Sales
Service
Technological Development
Strong Coordination
among functions in
R&D, Marketing and
Product Development
Page 78
Firm Infrastructure
Human Resource
Service
Complete field
stocking of
Management
replacement
parts
Technological Development
Marketing
Service
& Sales
Service
Outbound
Logistics
Inbound
Logistics
Operations
Procurement
Page 79
Firm Infrastructure
Human Resource Management
Technological Development
Coordination among
R&D, marketing and
product development
Outbound
Logistics
Inbound
Logistics
Operations
Technological Development
Marketing
& Sales
Service
Procurement
Investments in technol-ogies Strong
to produce highly
capability in
differentiated products
basic research
Page 80
Support
Activities
Firm Infrastructure
Human Resource Management
Technological Development
HumanProcurement
Resource Management
Marketing
& Sales
Service
Outbound
Logistics
Inbound
Logistics
Operations
Compensation programs which Extensive use of
encourage worker creativity
subjective performance
and productivity
measures
Superior
personnel
training
Page 81
Human Resource Management
Firm Infrastructure
Technological
Development
Outbound
Logistics
Inbound
Logistics
Operations
Highly developed Information
Systems to better understand
Procurement
customers’ purchasing preferences
A companywide culture
emphasizing quality and
innovation
Marketing
& Sales
Service
Support
Activities
Firm Infrastructure
Page 82
Marketing/Innovation Advantage
Page 83
Where’s the Differentiated Beef?
Bluegrass Meadows Beef
Page 84
Still Perkin’
…but a little hurtin’
Page 85
Generic Business Level Strategies
Source of Competitive Advantage
Breadth of
Competitive
Scope
Broad
Target
Market
Narrow
Target
Market
Cost
Uniqueness
Cost
Leadership
Differentiation
Cost
Leadership
Focused
Differentiation
Page 86
Page 87
Page 88
Page 89
Other Strategy Heuristics
•Corporate-level strategy
–Management of portfolio of business units
–Complementarities & synergies
–Mergers & acquisitions
•Organizational structure & governance
–Functional, product, or geographic organizational
differentiation
–Ownership & strategic discretion
–Alliances and joint ventures
•International strategy
–Foreign market entry modes
–Operational standardization vs. national adaptations
Page 90
Razor Trials
•
•
•
•
Try the razors
Compare
Evaluate
Discuss on Thursday
Page 91
Strategic Management
…Questions?