Tour 161 - Chapters 5-7 PDF

Tour 161 – Chapter 5 operations when compared to its competition or competitive set. Business - Level Strategies 1. ability of the firm to serve it...

Tour 161 – Chapter 5 operations when compared to its competition or competitive set. Business - Level Strategies 1. ability of the firm to serve its market with the same products and services that THE PARAMETERS OF COMPETITIVE competition does, but at lower cost STRATEGY 2. ability to provide products and COMPETITIVE STRATEGY services to the market that are superior to define a firm’s position in relation to its the competition. competitors in a given market. What is the Basis of a Good Strategy ? enable a firm to develop its market Uniqueness position while being able to create a sustainable competitive advantage Strategy enables a firm to become unique in terms of the position it occupies in the implementing competitive strategies market. that defend or extend their market position, firms are able to add value to A good strategy should be accompanied their bottom line in terms of return on by a clear definition of the industry and investment. the products and services. The Largest and best hotel chains in the Strategy enables a firm to make the right world decisions regarding the choices pertaining to the course of action.  Mariott  Hyatt Strategy is developed on market  Holiday Inn information and analysis:  Hilton  Ramada Inn 1. outside-in approach  La Quinta - starting with an external market  Sheraton orientation and scrupulously studying  Rodeway Inn customer insights before creating  Holiday Inn express marketing strategies  Sofitel  Westin 2. inside-out approach  Hampton - developing strategy based on the firm’s  Best Western resources, capabilities, and competencies,  Intercontinental while tapping opportunities based on its  Omni Hotels strengths Competitive advantage defined as the above- average profits a firm is able to generate from its business Positioning 3. Focus strategy pertains to the market position that narrow in scope in terms of the market firms aim to create. segment and the product- service offerings. “based on customers’ needs, customer’s accessibility, or a variety of company’s cost focus - seeking a cost advantage in products and services” the target market segments Positioning has to be driven by three differentiation focus - differentiating the factors: firm’s products and services in the target market segments  variety-based  needs-based Tour 161 – Chapter 6  access-based Corporate Strategy Generic Strategies Corporate Strategy Corporate strategy is a firm’s overall approach to gaining a competitive advantage by operating in several businesses simultaneously. This level of strategy is only necessary when the company operates in two or more business areas through different 1. Cost leadership strategy business units with different business- level strategies that need to be aligned to maintaining a low cost position form an internally consistent corporate- level strategy. Example : AERO CONTRACTORS, where passengers who book ahead of time enjoy The Portfolio Approach over 70% discounts, resulting to high sales of seats prior to scheduled flights, Easy Jet compared to other competitors. 2. Differentiation strategy stems from a firm’s objective of providing unique products and services to its customers as compared to competition. Example: Hilton offer luxury products with the objective of differentiating their offerings from competition. Portfolio Analysis One of the most popular aids to Multi-domestic Strategy developing a corporate strategy that addresses the preceding issues in a A firm using a multi-domestic strategy multibusiness H&T organisation is does not focus on cost or efficiency but portfolio analysis. emphasizes responsiveness to local requirements within each of its markets. In the case of Easy Jet, the chief executive Rather than trying to force all of its officers of the company view airlines, American-made shows on viewers around hotels, cruise business, car rentals, and the globe, Netflix customizes the cinemas as separate business units, and programming that is shown on its they evaluate the return and contribution channels within dozens of countries, of each business line to the overall including New Zealand, Portugal, Pakistan, organisation’s performance. and India. Ex: Netflix Global Strategy A firm using a global strategy sacrifices responsiveness to local requirements within each of its markets in favor of emphasizing lower costs and better efficiency. This strategy is the complete BCG MATRIX FOR THE PRODUCT LINE OF opposite of a multi-domestic strategy. COCA-COLA Ex: Microsoft Question Marks: Fanta and Sprite Transnational Strategy Stars: Kinley water and maaza mango juice A firm using a transnational strategy seeks a middle ground between a multi- Cash cows” Limca and Coca Cola bottle domestic strategy and a global strategy. Such a firm tries to balance the desire for Dogs: Diet coka and minute maid lower costs and efficiency with the need Four Main Organizational Strategies to adjust to local preferences within various countries. International Strategy Ex: Mcdo and KFC Firms pursuing an international strategy are neither concerned about costs nor Core Competence Approach adapting to the local cultural conditions. Core Competency They attempt to sell their products internationally with little to no change. For any organization, its core competency refers to the capabilities, knowledge, skills Ex: Guylian Chocolate and resources that constitute its "defining strength." A company's core competency is distinct, and therefore not easily replicated by other organizations, whether they're existing competitors or Tour 161 – Chapter 7 new entrants into its market. Network Level Strategies 3 Key Characteristics of Core Competencies  It must provide superior value to WHAT IS NETWORK LEVEL STRATEGIES? the customer or consumer.  It should provide potential A network strategy consists of your plan for building and managing a network of access to a wide variety of partner in a way best suited to meet your markets. shared goals. It includes considerations of  It should not be easy to replicate HOW you'll build your network, in terms or imitate. of what you will do, and won't do, to slign Sources of core competencies your work with your goals. Contributions to a company's core Strategic Alliances competencies can come from its: ❑defined as an agreement between two ✓ People or more partners to share resources and knowledge that could be beneficial to all ✓ Capital parties involved. ✓ brand equity ❑These strategic alliances can be as simple as two companies sharing their ✓ Assets technology or marketing resources in order to develop products jointly and ✓ intellectual property market and promote collaboratively. Real-world examples of core MOTIVATIONS IN FORMING STRATEGIC competencies ALLIANCES  McDonalds  Power Mac ❑Entering New International Markets  Walmart ❑Circumvent Foreign Market Barriers ❑Defend Home Market Competitive Position ❑Extend The Product Line ❑Entering New Emerging Industries ❑Reduce Future Competition just more hands on deck to increase speed to market ❑Increase Available Resources NEW MARKET PENETRATION. In some Types of Strategic Alliances cases, a strategic alliance gives access to new markets with a solution that would’t  EQUITY STRATEGIC ALLIANCE have been possible for either company on  NON EQUITY STRATEGIC their own. For instance, companies going ALLIANCE global often work with a trusted local  JOINT VENTURE partner to get an advantage in an EQUITY STRATEGIC ALLIANCE emerging market. An equity strategic alliance occurs when EXPANDED PRODUCTION. When it comes one company purchases equity in another to manufacturing and distributing business (partial acquisition), or each products, strategic alliances allows business purchase equity in each other partners to increase their capabilities and (cross- equity transactions). scale quickly to meet demand. NON EQUITY STRATEGIC ALLIANCE DRIVE INNOVATION. With the right alliance, partners can outpace the Organizations create an agreement to competition with new solutions that are a share resources without creating a complete package for their customers. separate entity or sharing equity. Non- These alliances are creative and equity alliances are often less strict and revolutionary and change the market more informal than a partnership landscape in a dramatic way involving equity. These make up most business alliances. DISADVANTAGES OF STRATEGIC ALLIANCES JOINT VENTURE LOSS OF CONTROL. In an alliance, both A joint venture is a child company of two organizations must cede some control parent companies. It’s maintained by over how their business is run and sharing resources and equity with a perceived. A strategic alliance requires binding agreement. Whether it’s formed honesty and transparency, but that trust for a specific purpose or an ongoing isn’t built overnight. Without significant strategy, a joint venture has a clear buy-in from both parties, an alliance may objective, and profits are split between suffer. the two companies. INCREASED LIABILITY. In a joint venture or ADVANTAGES OF STRATEGIC ALLIANCES equity strategic alliance, both companies are on the hook for the outcome. If SHARING RESOURCES AND EXPERTISE. A something happens to stall production or strategic alliance should combine the best create unhappy customers, both partner both companies have to offer. This can be are at risk for the loss in reputation. a deeper understanding of the product, sales, or marketing knowledge, or even WHAT IS FRANCHISING? ❑a business strategy for getting and ADVANTAGES AND DISADVANTAGES OF keeping customers. It is a marketing FRANCHISOR system for creating an image in the minds of current and future customers about how the company's products and services can help them. It is a method for distributing products and services that satisfy customer needs. ❑Franchising is a network of interdependent business relationships that allows several people to share: MANAGEMENT CONTRACTS ✓ A brand identification Management contracts are legal ✓ A successful method of doing business agreements that enable one company to have control of another business's ✓ A proven marketing and distribution operations. Business owners often sign system these written agreements directly with the management company. This typically FRANCHISOR VS. FRANCHISEE gives the management company operational control for an established THE “FRANCHISOR” IS THE PERSON OR period, usually for two to five years. Most CORPORATION THAT OWNS THE TRADE - management contracts are task- specific MARKS AND BUSINESS MODEL and focused on the work itself, not THE “FRANCHISEE” IS THE PERSON OR established outcomes. CORPORATION THAT OWNS AND ADVANTAGES OF MANAGEMENT OPERATES THE BUSINESS USING THE CONTRACTS TRADE - MARK AND BUSINESS MODEL SYSTEM LICENSED FROM THE ❑Using a contract management, company FRANCHISOR can give business owners more time to ADVANTAGES AND DISADVANTAGES OF focus on growing the business instead of FRANCHISEE daily operational tasks. ❑ Contract management companies can complete a wide range of tasks, including hiring, firing, and recruiting. ❑A contract management company can help business owners manage more than one business. ❑Management contracts typically have a high degree of accuracy and efficiency. DISADVANTAGES OF MANAGEMENT CONTRACTS ❑ Unlike when you hire an employee into your company, using a management company means that you will have to give up some privacy by letting another company know about your company's internal operations. ❑ The management company will be exposed financially, which can make your company more vulnerable to exposure and fraud. ❑ You may end up with a conflict with a contract management company that is unexpected. ❑ Using a contract management company can change financial forecasts and outcomes. ❑ If the management contract is industry- specific, the management company may also manage the operations of your competitors.