corporate strategies study blue final

8/9/2019 Corporate Strategies Study Blue Final

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1

Has rubber made been successful

No. Rubbermaid is referred to as the "fallen icon".

Pofits peaked in 1994 and

Earnings fell from 158 million to 60 million

2

Principal Strategy of Rubbermaid

Unique product feature, quality, rapid innovation.3

Related linked Diversification

Transfer core competencies: Managerial and Technical4

Related Constrained Diversification

Market power: Multipoint competition and vertical integration5

Three types of diversification to add value

Related-Constrained

Related-linked

unrelated6

Acquisition

Action taken by one company to buy a controlling interest in the voting stock of

another company. 7Takeover

Special type of acquisition strategy wherein the target firm did not solicit the

acquiring firm's bid

Hostile Takeover: Unfriendly takeover that is unexpected and undesired by the

target firm8

merger

a process in which two or more firms combine their operations.

9

downsizing

a managment action to take drastically reduce the size of a companys workforce10

Downscoping

Divestiture or spin-off of unrelated businesses.11


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Leverage Buyout

A party buys all of the firm's stock to take it private12

BCG matrix

A portfolio strategy, developed by the Boston Consulting Group, that categorizes a

corporation's businesses by growth rate and relative market share and helps

managers decide how to invest corporate funds.13

Promise Newell executives made concerning the performance of the combined

newell and rubbermaid...

On-time and Line-fill performance - 98%

Minimum pre-tax margin percent - 15%

Operating income increase by the year 2000 - $300-$350 MM

14

Primary challenges facing Wal-Mart's executives in the Wal-Mart case?

Overcome slowing sales growth and slowing same store sales growth.15

3 basic Wal-Mart store formats


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Discount Stores

Super Centers

Sam's Club

16

Before the recession what was Wal-Mart's strategy to attract customers as the

company began to saturate the U.S. market?

Wal-Mart went "up-scale" to attract upper income shapers. They cleaned up the

stores and brought in trendy clothing items.17

In the early part of the recession, why were Wal-Mart's investors "cheering".

Middle income shoppers "traded down" to discount stores to buy basic supplies,

increasing Wal-Mart sales.18

4 strategies Wal-Mart is considering or pursuing to restore its historical salesgrowth.

Supercenters with groceries

Urban Wal-mart Express stores

Return to commitment to low prices

e-commerce

19

What is a Blue Ocean?

Blue Oceans are all the industries not in existence today, and are defined by

untapped market space.20

Where is a Blue Ocean usually created?

usually created in "uncontested market space.21

Value Innovation

Make competition irrelevant by creating a leap in value for buyers and company,opening up new, uncontested market space.22

4 guiding foundational principles for the successful formulation of blue ocean

strategy? and the risks that they overcome.

Reconstruct market boundaries Search Risk

Focus on big picture not #s Planning Risk


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Reach beyond existing demand Scale Risk

Get the strategic sequence right Business model

23

4 factors of the four action framework to create a new value curve?

Raise

Create

Reduce

Eliminate24

The Blue Ocean Strategy defines good strategy as having what three

characteristics?

1. Focus - does not diffuse company's efforts

2. Divergence - differs from other competitors in the market

3. Compelling Tagline - can be summarized in a clear-cut statement25

What is "Right to Left" thinking?

left - where you are now

Right - is your goal for the future

26

What risk does "Reconstruct Market Boundaries" reduce?Search Risk

27

6 pathways to reconstruct market boundaries

Look across

Alternative industries

Strategic groups within industries

The chain of buyers

Complimentary product or service offerings The functional or emotional appeal

Time

28

What risk in creating Blue Oceans is reduced by "Reaching Beyond Existing


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Demand?"

Scale Risk29

in "Reaching Beyond Existing Demand," what are the three tiers of non-

customers?

Minimal purchasers

Refusing non-customers

Unexplored non-customers30

Who founded Medtronic? When?

Earl Bakken

194931

How many parts are there in Medtronic's Mission?6

32

What does medtronic do?

Manufactures biomedical devcies33

What were the sales of Medtronic?

$16.2 BB34

How much did Medtronic's revenue grow in FY20012 vs. FY20114%35

What is the Net Income of Medtronic?

$3.6 BB36

What contributed to the performance in FY2012?

International growth

New product introductions

37

What risk in creating Blue Oceans is reduced by "Getting the Strategic Sequence

Right?

Business model risk38

Strategic Sequence of Blue Ocean Strategy


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1. Buyer utility

2. Price

3. Cost

4. Adoption39

The Blue Ocean Strategy defines good strategy as having what three

characteristics?

1. Focus - does not diffuse company's efforts

2. Divergence - differs from other competitors in the market

3. Compelling Tagline - can be summarized in a clear-cut statement40

What determines if a company should price at the high, middle or low range in the

price corridor of the masses?

How much protection does the new product have? or How difficult is the product

to imitate?41

If a company is unable to meet that target cost, what two tempting actions should

the company not pursue?

Raise price or reduce buyer utility

42

What are the three principle levers a firm should employ to meet its target cost?

Streamlining or cost innovationChanging the industry pricing model

Partnering

43

Who are the three groups that might have fears around a company launching a new

product or business model, thus reducing or slowing down adoption?Customers

Partners

Employees44

Reasons for Acquisitions

Market PowerNew Capabilities


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Increased Diversification

Low New Product Risk45

Reasons for Diversification

Antitrust Regulation

Low Performance

Uncertain cash flows

Synergy and Firm Risk Reduction

46

Problems with Acquisitions

Too Much Debt

Too large

Unable to achieve Synergy

Too Much diversification47

Percentage of business Launches that are Blue Oceans

14% to 86% non48

Percentage of Revenue impact compared to blue oceans

38% to 62% non

49

Percentage of profit impact compared to blue oceans61% to 39% non

50

Strategic Move

Set of managerial actions and decisions involved in making a major market-

creating business offering.51

Red Ocean

Defense against competition within existing industry order.52

Value Innovation Graph

Broad Target/Cost - Cost leadership

Cirque du Soleil

Broad Target/Uniqueness - Differentiation


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Narrow Target/Cost - Focused Cost leadership

Narrow Target/Uniqueness - Focused Differentiation

53

Execution Principles of a Blue Ocean Strategy

Overcome organizational Hurdles

Organizational Risk

Build execution into strategy

Management Risk

54

4 organizational hurdles to strategy execution

Cognitive

Political

Motivational

Resource55

What are the three groups of the organics-buying constituency?

core

mid-level

periphery

56

Based on the Stakeholder Report, what were Whole Foods Markets sales in 2012?

$11.7 BB57

Based on the Stakeholder Report, what were Whole Foods Markets Operating

Income (or Net Income) in 2012?

Operating income = $750

Net income = $465

58

What contributed to Whole Foods 2012 results?

New Store openings

Comparable stores sales growth 7.8%

Gain market share from competitors


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59

Where is our possible 2nd stop today?

The wedge cooperative

60

What is a competitive advantage?

A firm has a competitive advantage wn it implements a strategy which competitors

are unable to duplicate or find too costly to try to imitate.

61

What is a strategy?

A strategy is an integrated & coordinated set of commitments and actions to

exploit core competencies and gain a competitive advantage.

62

What two factors create hyper competitive environments and influence the natureof the current competitive landscape?

The global economy.

Technology (and technological changes).

I would also add:

Relationships Government

63

Who are the three stakeholder groups in a firm?


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Capital markets shareholders & suppliers of capital (banks).

Product market primary customers, suppliers, Host communities, Unions

Organizational employees, managers, non-managers

64

Why should a firm strive to achieve higher than expected (above-average) returns?

How does this affect the stakeholders?

Above average returns are returns in excess of what an investor expects to earn

from other investments with a similar amount of risk.

65

What is the difference between a business-level strategy and corporate-level

strategy?

A business-level strategy describes the actions a firm decides to take in order to

exploit its competitive advantage over rivals.

66

List (depending upon your textbook) the 6 or 7 segments of the External General

Environment


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Demographic

Economic

Socio-CulturalPhysical

Global

Technological

Political-Legal

67

What is the formula to calculate market share?

Market share = Firm's sales (or revenue) / Total market sales (or revenue)68

As a firm analyzes the External Industry Environment, what is the firm ultimately

trying to learn about its competitors?

How its competitors will respond to the strategic initiatives of the firm

69

substitute

Substitute products are goods or services from outside a given industry that

perform a similar or the same functions as a product or service that that industry

produces or provides.

70

competitor

Companies against which a firm directly competes.


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71

Complimentor

Complimentors are companies that sell goods or services that are compatiblewith (and may help) the firms goods or services.

72

Why should a firm strive to achieve above-average returns?

(Above average returns are returns in excess of what an investor expects to earn

from other investments with a similar amount of risk.)

73

tangible

items that can be held like products or resources.

74

intangible

things that can not be held like ideas. They are harder for competition to imitate.75

What makes a resource become a capability?

Capabilities are resources of a firm that are superior to its competitors.

76What makes a capability become a core competency?

Core competencies are capabilities that provide a firm a competitive advantage.

77


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Four elements that make a core competency sustainable.

Valuable(to a firms customers)

Rare(possessed by few others)

Costly to imitate(by competitors) Non-substitutable(no strategic equivalent)

78

Give two (2) reasons why a firm may seek to increase its market share.

reputation

increased bargaining power

79

Compare the growth rate of Whole Foods Markets and the growth rate of the

organic/natural retail grocery market. What conclusion do you draw from these

numbers? (You may refer to your work on the Market share & financial analysis

of Whole Foods & competitors.)

Whole Foods has been growing in the low 20% per year range. This is 3 times

faster that the market growth. This indicates that Whole Foods is significantly

increasing market share.

80

What are the four principle types of business level strategies? (For most of our

discussion, we will ignore the Integrated Cost Leadership/Differentiation

strategy.)

Cost Leadership

Differentiation

Focused Cost Leadership

Focused Differentiation


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81

Can the broad market have two or more cost leaders? Why or why not?

Cost leader means the lowest cost producer. There can be only one lowest cost

producer, and, therefore, only one cost leader.

82

What is one of the competitive risks of a Cost Leadership strategy?

Focus on cost reduction reduces customer sensitivity

Cost leadership is imitated

Products services become obsolete

83

What is one of the competitive risks of a Differentiation strategy?

Price premium seen as in excess of value

Imitation will erode price premium

Experience /time narrows perception of value

84

What is the usual market analysis tool that is used to help a firm focus in on a

certain segment of its potential customers?

Market segmentation

85

External analysis helps a firm identify its...and...This helps a firm discover what

it...do

opportunities


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threats

might

86

Internal analysis helps a firm identify its...and...this helps a firm discover what

it...do

strengths

weaknesses

can

87

The article "the Real Value of Strategic Planning" recommends hold two strategic

planning meetings. Topics of the first and second meeting?

Business unit Strategy

To set financial targets88

4 segments of the ansoff matrix on the left with the corresponding product-market

combination of that segment.

Diversification | Existing products & existing markets

Market Development | Existing products & newMarket Penetration | new & existing markets

New | New

89Is a firm more likely to attack another firm with high market commonality or low

market commonality? Why would the firm act this way?

A firm is more likely to attack another firm with which it shares LOW MARKET

COMONALITY. This is because the firm believes that when it attacks its


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competitor in one market, its competitor cannot retaliate in another market because

they do not share that market. Thus the attacking firm has MOTIVATION because

it believes it will GAIN MARKET SHARE.90

Is a firm more likely to attack another firm with high resource similarity or low

resource similarity? Why would the firm act this way?

A firm is more likely to attack another firm with LOW RESOURCE SIILARITY.

This is because the firm believes that its superior or different resources will

overpower its competitor. Thus the attacking firm has the ABILITY TO ATTACK

its competitor.91

Match the industry on the left with its Market Cycle speed on the right.

Steel Products | Slow cycle market

Food Products | Medium cycle market

Electronics | Fast cycle market

92

Why are firms in a fast cycle market more likely to be first movers of attack?

To stay ahead of competition in a fast cycle market, a copany must be continually

introducing new products as competitors copy their earlier products and offer them

at a lower price.

93

Why is there little advantage to being a first mover in a slow cycle market?

Because a second or late mover can easily copy the first mover, without incurring

the investment costs required of a first mover. In a slow cycle market, the second

or late move will not have lost much opportunity because customers will have

moved very little.


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94

In class we discussed the four elements of a strategy or strategic statement. These

are: "Who?" "What?" "How?" and "Why?" Define what these four elements mean.

Who? Which customers or market segments will we target?

What? What customer needs will be fulfilled?

How? What core competencies will we bring to bear to provide a competitive

advantage?

Why? What is the benefit to the firm in doing this?95

Why do strategic actions by a firm elicit fewer responses from its competitors than

tactical actions?

Competitors can quickly respond to tactical actions with their own tactical actions

because they require less planning and less resources. Competitors may find it

difficult to launch as strategic response to a firms strategic action because it take

more time to plan and implement and requires more resources.

96

Why are competitors more likely to respond to attacks by market leaders or those

regarded with high reputation in the industry?

Competitors regard the market leader (or those with high reputation) as trend

setters in the industry. When the market leader launches a competitive initiative,

competitors assume that the industry will all follow so they determine that they

must get on board.97

Why are firms with high market dependence more likely to respond to an attack in

their industry?If a firm is highly dependent on a particular market, its future success depends

upon being successful in that market. If attacked in that market it will view its

future as in jeopardy, so it will feel compelled to respond for its survival.


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98

What are the two paradoxical traits of a Level 5 CEO, as defined in Chapter 2 of

Good to Great?

Personal humilityProfessional will or Unwavering resolve get the job done

99

Describe how a High Profile CEO thinks with regard to the Window and the

Mirror?

a. Window: (1 pt)

Out there is the problem. If it were not for circumstances or the people that work

for me, I would have accomplished more.

b. Mirror: (1 pt)

Look at me. Look how much I have accomplished. I am the reason for success.

100

Describe how a Level 5 CEO thinks with regard to the Window and the Mirror?

a. Window: (1 pt)

Out there are the reasons for success. The people that work for me made our

achievements possible. Also, circumstances just fell into place to make us

successful.

b. Mirror: (1 pt)

What could I have done better to help the organization be more successful?

101


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What are the three simple truths about staffing your organization?

If you begin with who rather than what, you can more easily adapt to achanging world

If you have the right people on the bus, the problem of how to motivate &

manage people largely goes away.

If you have the wrong people, it doesnt matter whether you have the right

direction; you still wont have a great company.102

Build a superior Executive Team and figure the best path to greatness with themis the

way a Level 5 Leader operates.

103Develop a road map for the future and enlist a highly capable crew to implement

it is the

way a genius with a thousand helpers (Level 4 leader) operates.

104

What are Jeff Immelts typical work week hours?

100 hours per week

105

What method of employee performance evaluation and compensation is Microsoft


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doing away with?

Stacked ranking

106

In which activity do CEOs spend most of their time?

Meetings107

What did GTG companies continually do as they progressed down the path to

greatness?

Continually refined the path to greatness with the brutal facts of reality

108

What are the four actions to create a climate where truth is heard?

Lead with questions, not answers

Engage in dialog & debate not coercion.

Conduct autopsies without blame

Build red flag mechanisms109

What is the Stockdale Paradox?

Unwavering _______ resolve __________ that they would ______ prevail

_________________as a great company. Relentlessly disciplined at

_________confronting the most brutal facts of their _____________of theircurrent reality. Strip away noise & _______focus_____________ on things of

greatest impact.110

The introduction of Chapter 5 of Good to Great introduces the concept of the

Hedgehog.

Foxes pursue - many ends (goals) at the same time


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Hedgehogs - simplify a complex world into a single organizing idea _ or see what

is essential

and ignore the rest __ or take a single concept & implement with fanatical

consistency.111

What are the 3 circles of the Hedgehog Concept?

What you are deeply passionate about

What you can be the best in the world at

What drives your economic engine

112

hedgehog concept is measured in terms of...

Profits113

Why was Targets financial performance more impacted by the recession than

Wal-Marts?With no stores outside of the U.S., Target was more impacted by the U.S.

Recession.

114

What strategic dilemma was Steinhafel, CEO of Target, facing as the company

attempted to compete by advertising low process during the recession?

By emphasizing and advertising low prices, was Target possibly eroding its core

promise of offering unique and upscale products?

115


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Since 1994 Target had been promoting its brand promise of

Expect more...Pay less

116

In launching its Super Target stores, Target faced (as identified in the case) four

challenges of entering the grocery market. List one of these challenges:

Logistics of fresh food

Different vendors

117

What is Targets P-Fresh concept?

Expanding the food in smaller, non-Super Target stores.

118

What are the two (2) categories of Best Buys chief competitors as identified in thecase?

Online Retailers

Discounters119

Despite their current struggles, Best Buy, at the time of the case, has been seeing

promising growth in what two (2) product areas?

Online

mobile

120


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Why did Best Buy CEO Brian Dunn have to resign in 2012?

personal conduct

121

Best Buy has been able to remake itself several times in its history. Each of these

was identified as a new Concept. What was the core concept of one of those

concepts?

Concept I Superstore

Concept II Grab and go.

Concept III Upgrade & broaden its product line

Concept IV Customer centricity

122

What is one of the countries Best Buy expanded into as part of their international

expansion, as identified in the case?

China

Canada

UK

123

As companies grow, why do they add bureaucracy?

To manage the small percentage of the wrong people on the bus

124

Good-to-Great Companies to establish a Culture of Discipline and avoid

bureaucracy:

Build a culture of freedom & responsibility (or self discipline)

Fill that culture with disciplined people


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Within a framework bounded by the three circles of the Hedgehog Concept

125

How do Level 4 Leaders in Comparison Companies establish discipline?

Personal discipline and using bureaucracy.

126

In Good to Great companies, technology is used to accelerate momentum after

hitting

breakthrough127

Profit

Difference between revenues & costs.

Essential for investment for future.

Essential to attract financing.128

Risk

an investor's uncertainty about the economic gains or losses that will result from a

particular investment129

average returns

Returns equal to those an investor expects to earn from other investments with a

similar amount of risk.130

above average returns

returns in excess of what an investor expects to earn from other investments with a

similar amount of risk.131

Strategy

An integrated and coordinated set of commitments and actions designed to exploit

core competencies and gain a competitive advantage.132

Competitive advantage

When a firm implements a strategy that its competitors are unable to duplicate or


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find too costly to try to imitate.133

Strategic Management process

The full set of commitments, decisions, and actions required for a firm to achieve

strategic competitiveness and earn above-average returns.134

Why increase market share?

Economies of scale cost advantage

Grow in a stagnant industry

Market leader clout

Bargaining power with suppliers

135

How increase market share?

Change the variables of the marketing mix 4 Ps

136

Reasons not to increase market share?

Near capacity need capital investment

Reduced profits if market share growth achieved by price

Start a price war

Attract competition to your niche

Antitrust issues137

Resources

intangible

tangible


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138

Capabilities

Superior to competitors

139

Core Competencies

provides competitive advantage

140

Determine core competencies

Resources | All Resources

Capabilites | Superior to competitorsCore competencies | Provide competitive advantage

141

Sustainablitity

valuable

rare

costly to imitate

non-substitutable

142

internal environment

strengths and weaknesses - what can do

(core-competencies, capabilities, resources)

143

External environment

opportunities and threats-what might do(competitor, industry, general)

144

Cost leadership


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Focus on cost reduction reduces customer sensitivity

Cost leadership is imitated

Products services become obsolete145

Differentiation

Price premium seen as in excess of value

Imitation will erode price premium

Experience /time narrows perception of value

146

Focused

Competitor Out-Focus

Industry-wide competitor enter focus market

Customers move to broader market

147

Product-Market Matrix

Products

existing | new

Market Penetration | New Products

Markets

new | existing

Market Development | Diversification

148

BCG Matrixstars - H|H

question marks - L|L

cash cows - L|H

dogs - L|L

149


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merger

agree - integrate operations - relatively co-equal basis150

acquisition

one buys controlling, or 100% interest in another firm151

takeover

hostile acquisition

152

reasons for acquisitions

market power

new capabilities

increased diversification

overcome entry barriers153

Tipping point leadership

resources push through the hurdle and get the company to success

154

Hedgehog concept

Flywheel

Principled peoplelevel 5 leadership | first who then what

Disciplined Thought

confront brutal facts | Hedgehog

Disciplined Action

culture of discipline | technology accelerators

155

hedgehog concept line through

buildup and then breakthrough

156

3 Simple truths


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if you begin with "who" rather than "what"

If you have the right people on the bus

If you have the wrong people it doesn't matter

157

Level 5 management team

first who, then what158

genius with a thousand helpers

first what, then who159

Pay?

it is who you pay not what you pay them

160

3 practical disciplines

When in doubt, don't act

When you know you need to make a people change make it.

Put your best people on your biggest opportunities, not your biggest problems

161

Good to Great the bus

if you have the right people on the bus, they will be self motivated.

162

Creating a climate where truth is heard

lead with questions, not answers

engage in dialogue and debate, not coercion

Conduct autopsies without blame

Build "red flag" mechanisms

163

The stockdale paradox

Unwavering faith that they would prevail as a great company.

Relentlessly disciplined at confronting the most brutal facts of their current reality.


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Strip away noise and focus on the things of greatest impact.164

Foxes

pursue many ends at the same time and see the world in all its complexity165

hedgehogs

simplify a complex world into a single organizing idea a basic principle or concept

that unifies and guides everything.166

Build up time

3 years + 1 year buildup167

The council

ask questionsdialogue debate

executive decisions

autopsies and analysis

168

Culture of discipline

Growth = Bureaucracy

169

Good to Great technology

technology is used to accelerate momentum after hitting "breakthrough"

170

Flywheel

steps forward, consistent with hedgehog concept

accumulation of visible results

people line up, energized by results

flywheel builds momentum

171

Doom Loop

disappointing results


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no build up

new direction, program, leader

reaction - without understanding

corporate strategies study blue final

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