MBA 614 Strategic Innovation and Competitive Rivalry

Walter J. Ferrier, Ph.D.

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The Paper Fight

• Two stacks of paper• Anything goes…

…Go!

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The Paper Fight

• What happened?

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The Paper Fight

• What happened?• Another round…?

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The Paper Fight

• What happened?• Another round…?

• What was different this time…?

The Big Picture

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Project Connect

The Big Picture

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Project Connect

Top-line Revenue:• Opportunity-seeking• Innovation advantage• Uniqueness advantage

The Big Picture

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Project Connect

Operational Efficiency:• Cost advantage• Timing advantage• Quality advantage

The Big Picture

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Project Connect

Growth and Synergy:• Diversification• Scale advantages• Corporate Venturing

The Big Picture

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New

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tStrategy, Competitive Rivalry

NPD Processes

Marketing

Finance

Accounting

Management Processes

Schedule

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Oct 11 Oct 12 Oct 13 Oct 14 Oct 15

Morning Cohort

Afternoon Cohort

8:00-10:00

1:00-3:00

10:00-12:00

3:00-5:00

8:00-10:00Combined a.m. and p.m. cohorts

9:00-12:00@ Awesome

Inc.

1:00-4:00@ Awesome

Inc.

4:00-5:30

Oct 18 Oct 19 Oct 20 Oct 21 Oct 22Morning

Cohort

Afternoon Cohort

8:00-10:00

1:00-3:00

10:00-12:00

3:00-5:00

8:00-10:00

1:00-3:00

10:00-12:00

3:00-5:00

Topics and Readings

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Tuesday, OCT 12: Situation Analysis and Generic Strategy

Framing questions: Which analytical frameworks and tools enable organizational leaders to better assess the current and likely future states of the organization’s context or situation it faces? …to better assess its own strengths/weakness in current and future capabilities relative to rivals? What are the fundamental strategic alternatives that organizations adopt in an effort to both leverage its capabilities and seize new opportunities in the marketplace?

Web: PEST Analysis Web: Porter’s Five Forces Analysis Web: SWOT Analysis Web: Value Chain Analysis Web: Competitive Advantage PPoint: Situation Analysis PPoint: Resources and Capabilities

Web: Porter’s Generic Strategies Web: Steamrollered by Dell (Newsweek @ MSNBC.com) Task: Razor Trials PPoint: Competitive Strategy

Live Web Links

Graded Assignments

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Genetically-Modified Food Debate Memo 10%

Wargaming Simulation Memo 10%

New Product Strategy Audit Oral Presentation

60%

Peer Evaluation 10%

In-Class Participation/Discussion 10%

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What is strategic management?

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Strategic Management…Action that Creates Value

Pazzo’s

Lynagh’sPub

Lynagh’sPub

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Coke’sStrategicActions

Pepsi’sStrategicActions

Rivalry

CompetitiveOutcomes

IndustryCharacteristics

OrganizationalCharacteristics

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Strategic Management – Developing a set of coordinated and integrated capabilities, decisions, and actions required to achieve competitive advantage…

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Profit = (Price – Cost) x Qty.

… i.e., action that creates value

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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

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Strategy in “Other Markets” and Non-Profits

Regulated Utilities

Educational Institutions,Departments & Programs

GovernmentInstitutions

PhilanthropicOrganizations

CreativeArts

Organizations

ReligiousOrganizations

Political & Social

Organizations

EnvironmentalOrganizations

Resources Legitimacy Human Capital“Market Share” Position Reputation Survival Effectiveness Attention

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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…

Top Management

Don’t let this be you.

?

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Start-ups, small business, autonomous business units

YOU will be a top officer, strategist, decision-maker:–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• Globalization• Technological change• Diverse and increasingly vocal and influential stakeholders

• Wall Street• The Natural Environment

Internal Stuff• 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

AircraftEngines

LightBulbs

Appliances PowerGeneration

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Corporate Strategy

PROCTER & GAMBLE

Soaps Food Beverages PaperProducts

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Corporate Strategy

PEPSI

CarbonatedBeverages

Juices,Water,Sportsdrinks

SnackFoods

Fast Food

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COCA-COLA

CarbonatedBeverages

Juices,Water,Sportsdrinks

Corporate Strategy

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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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1. Articulate Mission / Intent

• Sense of purpose, direction…• In which industries does firm compete?• How does firm compete?• Who are customers?• Who are competitors?

Strategic Planning Process

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2. Set Objectives & Performance Targets

• Financial– Achieve 10% ROE and $1.55 EPS by YE2011

– Increase stock price by $4.00-5.00/share• Strategic

– Become low price leader in industry by YE2012

– Enter five new country markets by YE2014

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3. Develop a Strategy

• Strategic themes/thrusts …How to compete:– International expansion– Increase brand name and reputation– Innovate by introducing new products– Aggressive behavior against rivals in old products

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4. Implement Strategy• Develop action plan at functional level

–Establish European distribution center• Buy warehouse facility near airport in Germany• Re-tool with robotic material handling system

–Create new ad campaign for 2012 Olympics• Get endorsement contract with Lance Armstrong,

Marylou Retton, Mia Hamm, and Michael Johnson• Develop TV ad with Spike Lee

–Launch new version of product• Create multifunctional design team• License Oracle’s newest technology• Increase R&D budget by 30%

–Cut prices on older version of product by 33%

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5. Evaluation and Adjustment

• Assess results relative to goals–Established price leadership in 2012–Achieved only 4% ROI in 2011

• Identify new opportunities / constraints–New technologies are coming–Rivals are merging

• Change strategy / implementation plan (as needed)

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DroppedStrategicActions

IntendedStrategy

StrategyCarried Out

EmergentStrategicActions

Strategic Planning vs. Strategizing

• Flexibility, Quick Decisions

• Adaptive Agility• Opportunism• White space opportunity• New voices and perspective

• Experimentation• Innovation• Dynamic Maneuvering• Break the rules• Thrive in chaos

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Strategic Planning is “Dead”

Strategic Management

…Questions?