Strategic Management PEARCE & ROBINSON

1. CHAPTER 7 Strategic Analysis and Choice in Single- or Dominant-Product Businesses: Building Sustainable Competitive Advantages

3. Basic Issues: Strategic Analysis and Choice 1. What strategies are most effective at building sustainable competitive advantages for single business units? 2. Should dominant-product/service businesses diversify to build value and competitive advantage? What grand strategies are most appropriate?

4. Prominent Sources of Competitive Advantage Cost leadership Differentiation Speed Market focus

6. Ex. 7-2 (contd.) Product redesign to reduce number of components Technology development Safety training for all employees reduces absenteeism, downtime, and accidents Process innovation Lowering production costs HRM Computerized, integrated info. systems Reduces errors and costs General administration Favorable long-term contracts; captive suppliers or key customer for supplier Procurement Global, online suppliers provide automatic restocking of orders based on sales Inbound logistics Economy of scale in plant reduces equipment costs and depreciation Operations Computerized routing lowers transportation expense Outbound logistics Cooperative advtg. creates local cost advantage in buying media space/time Mkt & sales Subcontracted service techs. Repair products correctly first time or bear costs Service Profit Margin Reduced level of management cuts corporate overhead

10. Ex. 7-3 (contd.) Cutting-edge production technology and product features to maintain a distinct image and actual product Technology development Programs to ensure technical competence of sales staff and a marketing orientation of service personnel HRM Comprehensive, personalized database to build knowledge of customers to be used in customizing how products are sold, serviced, replaced General administration Quality control presence at key supplier facilities; work with suppliers’ new product development activities Procurement Purchase superior quality well-known components, raising quality/image of final products Inbound logistics Careful inspection of products at each step to improve product performance and lower defect rate Operations JIT coordination with buyers; use of own/captive transportation service to ensure timeliness Outbound logistics Expensive, informative advertising and promotion to build image Mkt & sales Service personnel have considerable discretion to credit customers for repairs Service Profit Margin

15. Ex. 7-4 (contd.) Use of companywide technology sharing activities and autonomous product dev. teams to speed new product dev. Technology development Develop self-managed work teams and decision-making at the lowest levels to increase responsiveness HRM Highly automated and integrated information processing system. Include major buyers in the system on a real-time basis General administration Preapproved, online suppliers integrated into production Procurement Working very closely with suppliers to include their choice of warehouse to minimize delivery time Inbound logistics Standardize dies, etc. and prod. equipment to allow quick changeover to new or special order Operations JIT delivery plus partnering with express mail services to ensure very rapid delivery Outbound logistics Use of laptops linked directly to operations to speed order process Mkt & sales Locate service technicians at customer facilities that are geographically close Service Profit Margin

16. Activities Conducive to Building Speed-Based Competitive Advantage Product or service improvements Customer responsiveness Product development cycles Information sharing and technology Speed in delivery or distribution

18. Key Risks of a Speed-Based Strategy Speeding up activities that have not been conducted in a fashion prioritizing rapid response should only be done after attention to training, reorganization, and/or reengineering Some industries – stable, mature ones – may not offer much advantage to a firm introducing some forms of rapid response

31. Key Components of Competing in Global Industries Approach to gain global market coverage Generic competitive strategy

34. Ex. 7-8: Grand Strategy Selection Matrix I II III IV Overcome weaknesses Maximize strengths Internal (redirected resources within the firm) External (acquisition or merger for resource capability) Turnaround or retrenchment Divestiture Liquidation Vertical integration Conglomerate diversification Concentrated growth Mkt. Development Prod. Development Innovation Horizontal integration Concentric diversification Joint venture

36. Opportunities to Build Value Opportunities to build value via diversification, integration, or joint venture strategies are usually found in market-related, operating-related, and management activities. Such opportunities center around reducing costs, improving margins, or providing access to new revenue sources more cost effectively than traditional internal growth options via concentration, market development, or product development