Download - 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