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MBA 614
Strategic Innovation
and Competitive Rivalry
Walter J. Ferrier, Ph.D.
What is strategic management?
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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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Strategic Management…Action that Creates Value
Pazzo’s
Lynagh’s
Lynagh’s
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Competitive
Outcomes
Alfa’s
Strategic
Actions
Organizational
Characteristics
Rivalry
Mythos’
Strategic
Actions
Industry
Characteristics
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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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… i.e., action that creates value
Profit = (Price – Cost) x Qty.
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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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Strategic Management in the News
• What did you find…?
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Strategy in “Other Markets” and Non-Profits
Educational Institutions,
Departments & Programs
Regulated
Utilities
Political
& Social
Organizations
Creative
Arts
Organizations
Resources
“Market Share”
Survival
Philanthropic
Organizations
Government
Institutions
Environmental
Organizations
Religious
Organizations
Legitimacy
Position
Effectiveness
Human Capital
Reputation
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, decisionmaker:
–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
Internal Stuff
• Globalization
• Technological change
• Diverse and increasingly
vocal and influential
stakeholders
• Wall Street
• The Natural Environment
• 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
Aircraft
Engines
Light
Bulbs
Appliances
Power
Generation
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Corporate Strategy
PROCTER & GAMBLE
Soaps
Food
Beverages
Paper
Products
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Corporate Strategy
PEPSI
Carbonated
Beverages
Juices,
Water,
Sports
drinks
Snack
Foods
Fast Food
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Corporate Strategy
COCA-COLA
Carbonated
Beverages
Juices,
Water,
Sports
drinks
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Business Strategy
• Since we’re in the XYZ industry, how do we compete?
Profit = (Price – Cost) x Qty.
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•
•
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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…
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–
–
–
–
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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Strategic Management Process
1. Articulate Mission / Intent
• Sense of purpose, direction…
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•
•
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In which industries does firm compete?
How does firm compete?
Who are customers?
Who are competitors?
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2. Set Objectives & Performance Targets
• Financial
– Achieve 10% ROE and $1.55 EPS by 2011
– Increase stock price by $ 4.00-5.00/share by 2011
• Strategic
– Become low price leader in industry by 2012
– Enter five new country markets by 2015
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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 2011 Formula 1 racing season
• Get endorsement contract with famous soccer players
• Develop TV ad with European MTV
– 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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Strategic Planning vs. Strategizing
Intended
Strategy
Strategy
Carried Out
Dropped
Strategic
Actions
Emergent
Strategic
Actions
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The Almond Milk Wars
“Move Over, Cow: Almond Milk Sparks Fight
in Dairy Case”
Wall Street Journal, January 12, 2011
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The Milk Wars
vs.
Not
bad...
Yuck!
Made
from
what?
Really…?
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The Milk Wars
vs.
• Which do you like better…?
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The Milk Wars
vs.
• Are these “new milks” successful?
• How do they compete…
• …against “regular milk”?
• …against each other?
• What’s next?
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Break…
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