class 2
TRANSCRIPT
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Strategy Concepts
John A. Hengeveld
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Agenda for Today
• Term Project Discussion (0:40)• How Functions impact competition• Strategy Concepts – Grant Chapter 5 (1:30)• HE Butt Case (1:00+)
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Term Project• Emerging Technology Briefing
– 20 minute powerpoint presentation– Written report
• I am about to provide you with a list of “EMERGING TECHNOLOGIES that will change the world”
• Each team gets one and provides an analysis (the result of research)– Describe the technology and its value proposition application and impact
within the context of an actual industry– Look at candidate strategies for firms engaged in developing this technology.– Potential limitations and contingencies that may affect the innovation’s
applicability, now and in the future. Here you will be interested in the maturity of the technology, its long-run practicality, possible limits on its scope of application, and negative side-effects (and who, specifically, may suffer from these).
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Term Project - cont• Presentation. Your class presentation should be supported by a small
number of professional quality visuals, rendered in Powerpoint. Visuals might include outlines, diagrams, and/or text; taken together they should summarize the important issues surrounding the topic. Keep in mind the basic factors that make for a good set of visuals:
– Provide slides that will help the audience to visualize the overall structure of the presentation.
– You should have "something to show" for each major point you make verbally. That is, you shouldn’t find yourself yakking at length about some concept without a corresponding visual element for the audience to consider.
– Don’t put too much on any one slide. Minimize clutter, in order to support efficient scanning by the audience during your presentation.
– Every element should be big enough to see from the back of the room. This is obvious, yes, but commonly overlooked.
– Think carefully about what kind of written support you want in front of you, as you present.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Term Project – written report
• The written report should present in written form the same information you offered in your class presentation. Strive for a professional looking report.
• The written report should also provide additional details on the topic that you encountered during your research but did not have time to cover during your brief presentation.
• Such details might include: additional information on how the technology works; more insight into secondary or unintended consequences; issues and challenges in implementing the technology; more examples of its business use, and definitions for key terms.
• The written report must include a complete bibliography giving all references used in preparing your report. Include full URLs for Web-based materials.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Topics: • Universal Translation
• Nanowires
• Terrahertz Imaging Systems
• Piezo Fuel Injection
• Microfluidic Optical Fibers
• Synthetic Biology
• Personal Genomics
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Value Chain of the Firm
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
InboundLogistics
Operations OutboundLogistics
Marketing& Sales
Service
Materialshandlingdelivery
PrimaryActivities
SupportActivities
Mfg. &assembly
OrderprocessingShipping
ProductPricingPromotionPlace
CustomerserviceRepair
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
The Value System• The model can be extended by linking many
value chains into a value system.• Much of the advantage of supply chain
management comes from understanding how information is used within each value chain of the system.
• This can lead to the formation of entire new businesses designed to change the information component of value-added activities.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Supplier’svaluechain
Firm’svaluechain
Channel’svalue chains
Buyer’s valuechains
The value system: interconnecting Relationships between organizations
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
The Value System and Strategic Alliances
• Many industries are experiencing the growth of strategic alliances that are directly linked to sharing information resources across existing value systems.
• An alliance between American Airlines, Marriott and Budget Rent-A-Car called AMRIS provides travelers with a single point of contact.
• Electronically pooling information services of several companies can create competitive advantage by saving customers time.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Generic Strategies
DifferentiationOverall CostLeadership
Cost Focus
UniquenessLow Cost Position
Com
pet
itiv
eS
cop
eCompetitive Advantage Sought
Differentiation Focus
Nar
row
B
road
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Porter’s Competitive Advantage Strategies
• Cost leadership: be the cheapest
• Differentiation: focus on making your product stand out for non-cost reasons
• Focus: occupy narrow market niche where the products/services can stand out by virtue of their cost leadership or differentiation.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Variants on Differentiation Strategy
• Shareholder value model: create advantage through the use of knowledge and timing (Fruhan)
• Barriers to entry model: firms create barriers to entry to keep competitors out of their markets
• Unlimited resources model: companies with a large resource can sustain losses more easily than ones with fewer resources
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Hypercompetition and the New 7-S’s framework
(D’Aveni)• Sustained competitive advantage is not possible• Only temporary advantages exist, created by a
company’s speed and aggressiveness.• Assumes:
– Every advantage becomes eroded– Sustaining an advantage uses too much time and
resources.– Instead, companies must seek to stay ahead of its
competitors by creating temporary advantages– These are done in small steps over short competitive
cycles. Focus on creating the next temp. advantage.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Co-opetition
• More about forming alliances to better compete. • Companies, competitors, customers and suppliers
are participate in (and compete in) “the value net”.• Key concept is “complementors”, companies that
sell complementary products and services. • These can often gain advantage by forming an
alliance to provide a more competitive
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Why are strategic advantage Models essential to planning?
• Business strategy needs to address: – What is the business goal or objective?– What is the plan for achieving it? – Who are the crucial competitors and
cooperators,and what is required of a successful player in this value net?
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Strategic Process MAPGenerate Strategic
Alternatives
StrategicOptions
Generator
Analyze StrategicFramework
ExternalAnalysis
InternalAnalysis
KSF
R/C
Competitive MappingCustomer Value DriversSustaining ProfitabilityGlobal Framework
CompetencyRent Earning PotentialResource/Capability Map
CRITERIA
Sel
ect S
hort
Lis
t v C
rite
ria
StrategicDue Diligence
DraftImplementation
Congruence
R/C Review
CompetitiveResponse
RiskIdentification
And Reduction Sel
ect S
trat
egic
Dir
ecti
on
StrategicImplementation
OrganizationalStructure
Process
ChangeManagement
ImplementationPlan
RiskMitigation
Implementation
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Grant Chapter 5
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
4. Develop strategy implications: (a) In relation to strengths--How can these be exploited more effectively and fully? (b) In relation to weaknesses --Identify opportunities to outsourcing activities that can be better performed by other organizations. --How can weaknesses be corrected through acquiring and developing resources and capabilities?
3. Appraise the firm’s resources and capabilities in terms of:
(a) strategic importance(b) relative strength
2. Explore the linkages between resources and capabilities
1. Identify the firm’s resources and capabilities
STRATEGY
CAPABILITIES
RESOURCES
POTENTIAL FOR SUSTAINABLE COMPETITIVE ADVANTAGE
A Framework for Analyzing Resources and CapabilitiesA Framework for Analyzing Resources and Capabilities
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
THE FIRM
Goals and Values
Resources andCapabilities
Structure and Systems
THE INDUSTRYENVIRONMENT
•Competitors•Customers•Suppliers
STRATEGYSTRATEGY
Shifting the Focus of Strategy Analysis:From the External to the Internal Environment
Shifting the Focus of Strategy Analysis:From the External to the Internal Environment
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Rationale for the Resource-based Approach to Strategy
Rationale for the Resource-based Approach to Strategy
• When the external environment is subject to rapid change, internal resources and capabilities offer a more secure basis for strategy than market focus.
• Resources and capabilities are the primary sources of profitability
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
1948 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995
Founding ofHonda motor
company
50cc 2-cycle engine
4 cycle engines
405ccmotorcycle
Related products:ground tillers, marineengines, generators,pumps, chainsaws
First product: clip-on engine
for bicycles
The 50ccsuper-cub
N360 minicar
1000ccGoldwing
touringmotor cycle
Acura Cardivision
The Evolution of Honda Motor Company The Evolution of Honda Motor Company
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Precision Mechanics
Fine Optics
Micro-Electronics
35mm SLR cameraCompact fashion cameraEOS autofocus camera
Digital cameraVideo still camera
Plain-paper copierColor copier
Color laser copier Laser copierBasic fax
Laser faxMask aligners
Excimer laser alignersStepper aligners
Inkjet printerLaser printer
Color video printerCalculator
Notebook computer
Canon: Products and Core Technical CapabilitiesCanon: Products and Core Technical Capabilities
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
STRATEGY
INDUSTRY KEYSUCCESS FACTORSCOMPETITIVE
ADVANTAGE
ORGANIZATIONALCAPABILITIES
RESOURCESTANGIBLE INTANGIBLE HUMAN
•Financial•Physical
•Technology•Reputation•Culture
•Skills/know-how•Capacity for communication & collaboration•Motivation
The Links between Resources, Capabilities and Competitive Advantage
The Links between Resources, Capabilities and Competitive Advantage
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Appraising ResourcesAppraising ResourcesRESOURCE CHARACTERISTICS INDICATORS
Financial Borrowing capacity Debt/ Equity ratioInternal funds/ generation Credit rating
Tangible Net cash flowResources Physical Plant and equipment: Market value of
size, location, technology fixed assets.flexibility. Scale of plantsLand and buildings. Alternatives for fixedRaw materials. assets
Technology Patents, copyrights, know how No. of patents owned.R&D facilities. Royalty income
Intangible Technical and scientific R&D expenditure.Resources employees R&D staff
Reputation Brands. Customer loyalty. Company Brand equity. Productreputation (with suppliers, customers, price premium.government) Recognition.
Human Training, experience, adaptability, Employee qualifications,Resources commitment and loyability of customers pay rates, turnover.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Identifying Organizational Capabilities :Functional Approach
Identifying Organizational Capabilities :Functional Approach
FUNCTION CAPABILITY EXEMPLARSCorporate Financial management Exxon, Coca ColaManagement General Electric,
Strategic Control Emerson Electric, GECoordinating decentralized ABB, Shellbusiness unitsManaging Acquisitions Nationsbank, ConAgra
MIS Speed and responsiveness through American Airlinesrapid information transfer LL Bean
R&D Research capability Mereck, AT&TDevelopment of innovative new products Sony, 3M
Manufacturing Efficient volume manufacturing Briggs & StrattonContinuous Improvement Nucor, MotorolaFlexibility Benetton
Design Marketing Design Capability Apple, Swatch,Brand Management Proctor & Gamble,
PepsiCoSales & Distribution Promoting reputation American Express
Responsiveness to market trends The GapSales Responsiveness Microsoft, GlaxoEfficiency and speed of distribution Federal ExpressCustomer Service Walt Disney
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
A Hierarchy of Capabilities: A Telecom Manufacturer
A Hierarchy of Capabilities: A Telecom Manufacturer
A u tom atedth rou g h -h o lecom p on en t
in sertion
P rin tedc ircu it-b oard
assem b ly
M an u fac tu rin gcap ab ility
op era tion scap ab ility
N ew p rod u c td eve lop m en t
cap ab ility
C u s tom ersu p p ort
cap ab ility
M an u a lin sertion o f
com p on en ts
Te lse tassem b ly
M ateria lsm an ag em en t
cap ab ility
R & D an dd es ig n
cap ab ility
S u rfacem ou n tin g o fcom p on en ts
W aveso ld erin g
S ys temassem b ly
P rocessen g in eerin g
cap ab ility
M IScap ab ility
P rod u c ten g in eerin g
cap ab ility
M arke tin gan d sa lescap ab ility
Tes ten g in eerin g
cap ab ility
H u m anresou rce m g t.
cap ab ility
Q u a litym an ag em en t
cap ab ility
CROSS FUNCTIONAL CAPABILITIES
BROAD FUNCTIONAL CAPABILITIES
ACTIVITY RELATED CAPABILITIES (Operations related only)
SPECIALIZED CAPABILITIES (Manufacturing related only)
SINGLE-TASK CAPABILITIES (Only those related to PCB assembly)
INDIVIDUALS’ SPECIALIZED KNOWLEDGE
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Scarcity
Relevance
Durability
Mobility
Replicability
Property rights
Relative bargainingpower
Embeddedness ofresources
THE EXTENT OF THE COMPETITIVE ADVANTAGE
ESTABLISHED
SUSTAINABILITY OF THE COMPETITIVE ADVANTAGE
APPROPRIABILITY
THE PROFITEARNING POTENTIALOF A RESOURCE OR
CAPABILITY
The Rent-Earning Potential of Resources and Capabilities
The Rent-Earning Potential of Resources and Capabilities
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Appraising the Capabilities of a Business School
Appraising the Capabilities of a Business School (illustrative only)
Re
lati
ve
Str
en
gth
Superior
Parity
Deficient
Not important
Critically important
5
6
9
3
2
4 8
10 7
1
C1 Alumni relationsC2 Student
placementC3 TeachingC4.AdministrationC5 Course devlpmntC6 Student
recruitmentC7 ResearchC8 Corporate
relationsC9 MarketingC10 ITC11 PRC12 HRM
Importance
Key weaknessesKey weaknesses
Key strengthsKey strengthsSuperfluousstrengths
Superfluousstrengths
Inconsequentialweaknesses
Inconsequentialweaknesses
11
12
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Amoco’s Appraisal of Organizational Capabilities(illustrative only)
Pe
rform
an
ce
Superior
Parity
Deficient
Not important
Needed to play
Needed to win
5
6
9
4
2
3 11
101 8
1
1. Effective deal making
2. Rapid new product development
3. Relentless cost forms
4. Product quality5. JV management 6. Superior EH&S
management7. Managing culturally
diverse workforce8. Fast decision
making9. Customer
segmentation10.Capture synergies
across divisions11. Effective
procurement
ImportanceImportance
Key strengthsKey strengths
Key weaknessesKey weaknessesSuperfluousstrengths
Superfluousstrengths
Inconsequentialweaknesses
Inconsequentialweaknesses
7
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
4. Develop strategy implications: (a) In relation to strengths--How can these be exploited more effectively and fully? (b) In relation to weaknesses --Identify opportunities to outsourcing activities that can be better performed by other organizations. --How can weaknesses be corrected through acquiring and developing resources and capabilities?
3. Appraise the firm’s resources and capabilities in terms of:
(a) strategic importance(b) relative strength
2. Explore the linkages between resources and capabilities
1. Identify the firm’s resources and capabilities
STRATEGY
CAPABILITIES
RESOURCES
POTENTIAL FOR SUSTAINABLE COMPETITIVE ADVANTAGE
A Framework for Analyzing Resources and CapabilitiesA Framework for Analyzing Resources and Capabilities
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Value Chain of the Firm
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
InboundLogistics
Operations OutboundLogistics
Marketing& Sales
Service
Materialshandlingdelivery
PrimaryActivities
SupportActivities
Mfg. &assembly
OrderprocessingShipping
ProductPricingPromotionPlace
CustomerserviceRepair
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
The Value System• The model can be extended by linking many
value chains into a value system.• Much of the advantage of supply chain
management comes from understanding how information is used within each value chain of the system.
• This can lead to the formation of entire new businesses designed to change the information component of value-added activities.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Supplier’svaluechain
Firm’svaluechain
Channel’svalue chains
Buyer’s valuechains
The value system: interconnecting Relationships between organizations
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
The Value System and Strategic Alliances
• Many industries are experiencing the growth of strategic alliances that are directly linked to sharing information resources across existing value systems.
• An alliance between American Airlines, Marriott and Budget Rent-A-Car called AMRIS provides travelers with a single point of contact.
• Electronically pooling information services of several companies can create competitive advantage by saving customers time.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Strategic option generator
Differentiation
What is the strategic target?
What is the strategic market?
What is the mode?
What is the direction?
Supplier Customer Competitor
Cost Innovation AllianceGrowth
Offensive Defensive
Use Provide
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Example of strategic targets
Suppliers:
Raw materials
Information
Labor
Capital
Insurance
Utilities
Transportation
Customers:
Channel distributors
Consumers
Industrial
Reseller
Government
International
Competitors:
Direct
Potential
Substitute
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Strategic option generator
Differentiation
What is the strategic target?
What is the strategic market?
What is the mode?
What is the direction?
Supplier Customer Competitor
Cost Innovation AllianceGrowth
Offensive Defensive
Use Provide
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Types of Strategic Thrusts• Differentiation Thrusts: focus resources on
unfilled product or service gaps.• Cost Thrusts: focus is on reducing costs or
increasing competitor’s costs• Innovation Thrusts: focus on creating new
products or new ways to sell, create, produce or deliver products.
• Growth Thrusts: focus on increasing size of the market size or adding more value adding activities in the value chain
• Alliance Thrusts: combine with other groups to create a more competitive position.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
What is the Mode?• A firm has two choices for the mode of a a
strategic thrust:– The firm can act offensively to improve its
competitive advantage -- or – A firm can act defensively to reduce the
opportunities available to competitors.
• For example, a firm can innovate offensively to gain product leadership in a market, while others use innovation defensively to imitate the product leader.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Strategic Options Generator• Wiseman combined the questions of mode, direction
and strategic thrust into a strategic options generator • Example: Dell computer’s initial thrust:
– Strategic Target: (direct market to) the customer– Mode: Offensive– Direction: Use IS to gain advantage
• Second thrust: provide customer information to suppliers
• Third thrust: let customers auto-configure systems directly via the Internet.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Time-Based Competitive Advantage
• The Internet is increasing the pace of technological change by refocusing competitive efforts towards creating time-based competitive advantage.
• Information resources are the key to creating those advantages.
• For example, Dell’s direct strategy has been to build and deliver computers in as little as 5 days.
• Thus, the speed at which an organization adapts its business processes will the true measure of its’ ability to maintain competitive advantage.
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Setup of the HE Butt case• HE Butt was 3rd largest grocery retailer in the US
in 1992 ($3.2B)• Mass merchandisers entered the market and
represented a serious threat.. Why?• Implement ECR system which moved buying
logistics to suppliers! – Radically increased inventory turns– Eliminated “death by price promotion”– Levered improvements in scanner technology to
automate inventory management
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
Simplified Grocery Value Chain
Factory
Warehouse
Manufacturers Distributors Stores
Warehouse
$$ $$
Info Info
Goods Goods
Customers
RawMaterials
Storage
Shelves
HE Butt Grocery: A Leader in ECR Impl (Abridged) HBSP
SCHOOL OF BUSINESS ADMINISTRATIONSCHOOL OF BUSINESS ADMINISTRATIONBA 530 – John A. Hengeveld Winter 2004BA 530 – John A. Hengeveld Winter 2004
HE Butt Discussion Questions• (note.. These things need to be in your writeup,
but they are only part of what you need to do…..)• What is going on in the industry and what are the
dynamics of competition? (ie: provide an industry and competitive analysis)
• What is HE Butts generic strategy?• What do you think of the plan in Exhibit 1?