industry analysis thursday - +5% tuesday – full credit
Post on 21-Dec-2015
213 views
TRANSCRIPT
Average 67ish 30 out of 61 above the average 80% or higher – 10 = 16th percentile 70% - 79 > 15 = 41st percentile 65 – 69 > 9 = 55th percentile 55 – 65 > 17 = 83rd percentile Below 55 > 9 Range 97 to 36
Business Level Strategy
How are we going to compete in our industry/segment?
Improving the firm’s competitive position
Competitive advantages are the single most dependable contributor to above-average profitability
Porter’s Generic Strategies
Two fundamental issues Competitive advantage - low cost vs.
differentiation Strategic Target - broad based vs.
segment
Pursuit of the generic strategies provides protection from each of the five forces
Porter’s Generic Strategies
Low Cost
Differentiation
Broad Segment/Focus
CompetitiveAdvantage
Strategic Target
Overall Low-Cost
Focused DifferentiationBroad Differentiation
Focused Low-Cost
Porter’s Generic Strategies
Low Cost
Differentiation
Broad Segment/Focus
CompetitiveAdvantage
Strategic Target
Best-CostProvider
NOT one of Porter’s Generic Strategies
Porter’s Generic Strategies
Low Cost
Differentiation
Broad Segment/Focus
WalMartDomino’sCompetitive
Advantage
Strategic Target
Porter’s Generic Strategies
Low Cost
Differentiation
Broad Segment/Focus
Grocery OutletLittle Caesar’s
WalMartDomino’sCompetitive
Advantage
Strategic Target
Porter’s Generic Strategies
Low Cost
Differentiation
Broad Segment/Focus
WalMartDominos’s
Big LotsLil Caesar’s
TargetPapa John’s
CompetitiveAdvantage
Strategic Target
Porter’s Generic Strategies
Low Cost
Differentiation
Broad Segment/Focus
WalMartDomino’s
Big LotsLittle Caesar’s
TargetPapa John’s
NordstromPapa Murphy’s
CompetitiveAdvantage
Strategic Target
Differentiation Offer attributes that customers want, and are willing to pay for. Leads to premium price, higher volume, loyalty Maintaining uniqueness can be a challenge
Kodak, Wrigley’s, Campbell’s, Coca-Cola, Gillette, Del Monte, and Nabisco all leaders since 1923 Marginal revenue must exceed the costs of differentiation
PERCEIVED VALUE versus
INCREMENTAL COSTS
Differentiation (cont.)
What firms pursue differentiation? How or on what basis do they achieve differentiation?
Starbuck’s Differentiation 4 Tablespoons of $10 bag = 40 cents
Three cups Double-Tall Latte = $3.22
Double Shot Espresso = $1.85 $3.22 - $1.85 = $1.37 for steamed milk
20 seconds to steam milk $1.37 * 3 * 60 = $246 a hour to steam milk
Customers “allow” Starbucks to draw interest in their smart-cards. Millions of dollars annually on the float “You are one of us” “Collectible”
Pretax profit margins of 10.5%
Differentiation (cont.)
Signalling important when: nature of differentiation difficult to quantify first-time purchase – re-purchase infrequent buyers unsophisticated
Differentiation (cont.)
Risky when: quick imitation no value in uniqueness over differentiation
cell phones premium price costs too high poorly understood/changing customer needs
Minivan, FAO Schwartz costs/price become more important than
uniqueness unwillingness to offer true differentiation
The Logitech Saga
Fortune’s one of 25 cool places to work
CEO complained in a 4AM phone call to their advertising agency that Logitech’s ads “failed to breakthrough the clutter of “tech and spec” in the computer publication he was reading.”
The Logitech Saga
Woolward & Partners responded to the wake-up call by developing a campaign featuring a series of improbably human images that included fat men in beanies, a urinating baby boy, and fully-clothed nuns splashing in the surf
The Logitech Saga
“After a twelve-year roller-coaster ride of profit and loss, leadership and anarchy, attention and ignorance, Logitech is now plagued with recreating itself. The company has been plagued with inefficient manufacturing, mixed marketing messages, and ill-conceived product ventures. In 1995, despite a 40% market share, the company lost $17 million. The company with advertisements featuring a peeing baby or a nose picking (Henry) Kissinger is dead”
The Logitech Saga
“We didn’t want to be in mice. They seemed beneath our intelligence. We wanted to be a software company, like Microsoft.”
“I don’t know where I am going, but I’m on my way.”
“We are the most critical users of our products. Customer need recognition is limited by their understanding of technology - they don’t know what is possible.”
Sound Familiar?
“This is what customers pay us for - to sweat all these details so it’s easy and pleasant for them to use our computers. We’re supposed to be real good at this. That doesn’t mean we don’t listen to customers, but it is hard for them to tell you what they want when they have never seen anything remotely like this.”
How has P&G responded?
Introduction of new, higher margined products like battery powered toothbrush and white strips
Introduction of “Rejuvenating Effects,” a toothpaste for women marketed as a beauty product
Using Emeril Lagasse to hawk their citrus, cinnamon, and herbal mint toothpastes
How can Differentiation protect against…?
Joe’s Coffee
Starbuck’s$1.80
AssumeEqualCosts
New Entrants
How can Differentiation protect against…?
New Entrants
Joe’s Coffee99 cents
Starbuck’s$1.80
Extra Profits
How can Differentiation protect against…?
Starbuck’s$1.80
Joe’s Coffee99 cents
Advertising& Promotionsdrive costs UP
How can Differentiation protect against…?
Starbuck’s$1.80 $1.70
Joe’s Coffee99 89 cents
Discountsand sales drive prices DOWN
How can Differentiation protect against…?
Starbuck’s$1.80
There is nosubstitute for the
truly differentiatedproduct
How can Differentiation protect against…?
Power of Buyers - How do powerful buyer’s leverage their power?
Lower Prices, Higher Quality
How can Differentiation protect against…?
Starbuck’s$1.80 $1.70
Joe’s Coffee99 89 cents
RaiseQuality
LowerPrices
How can Differentiation protect against…?
Power of Suppliers - How do powerful suppliers leverage their power?
Drive up costs
How can Differentiation protect against…?
Differentiation does not eliminate any of these forces, it just allows the differentiated firm to more easily deal with these forces, or offset the power of these forces, and potentially, remain profitable.
Low Cost Leadership
Design, produce, and market a comparable product at a lower cost
Effective utilization of value-chain capital intensive mfg processes - efficient scale process, not product engineering - cost reductions products designed for simple assembly and
sharing common components procurement and materials handling low cost distribution
Requires organizational culture to support close supervision, cost controls
Low Cost Leadership (cont.)
Attractive when price is dominant consideration commodity low switching costs powerful buyers
Low Cost Leadership (cont.)
What firms pursue a low cost strategy?
How do they drive their costs downRisky when:
technology breakthroughs frequent easy to imitate costs advantages erode more
quickly than differentiation causes near-sightedness on a few
activities/sunk costs
Less than 24 hours after rival HP reported its PC division had lost money one quarter last year, Dell lowered prices by up to 22%
Analysts believe Dell has a 5% cost advantage
HP forced to choose between market share and profitability
How can Low Costs provide protection from….
Wal-Mart Joe’s
Bottle of Tide$1.89
…can pushprices down….
How can Low Costs provide protection from….
Wal-Mart Joe’s
Bottle of Tide$1.89
…can pushprices down….
How can Low Costs provide protection from….
Wal-Mart Joe’s
Bottle of Tide$1.89
…can pushprices down….
How can Low Costs protect against…?
Low cost leadership does not eliminate any of these forces, it just allows the low costs firm to more easily deal with these forces, or offset the power of these forces, and potentially, remain profitable.
Focus
Emphasizing a market niche where customers have unique preferences or requirements. Either focus-low cost or focus-differentiation
Profitable when niche is large, growing niche is not crucial to broad-based
competitors firm is able to defend position
Focus (cont.)
What firms pursue a focus strategy? What is their niche? Risky when:
competitor “outfocuses the focuser” broad based competitors have deep pockets homogenization of customer needs economies of scope becomes a dominant KSF