-Example of Multidimensional scaling- Keiko Nakashima

Introduction Purpose of Research The Basic Model (Literature Review) Methodology Application Analysis and Results Discussion Limitation

Competitive Strategy is the search for an advantage within a given competitive arena Strategy and Performance are… 1. Complex 2. Multidimensional 3. Interrelated system of valuables of valuables Strategy AStrategy BStrategy CProfitabilityGrowth Market position …… Performance

Previous researches… Strategy AStrategy BStrategy CStrategy D Growth Performance “Performance” as a Simple and Unidimensional construct Strategy “Strategy” as Set of complex and Multidimensional interrelationship Performance Simple !! Set of Complex !!

Real world… in number of ways The performance of a Strategic Business Unit(SBU) can be evaluated in number of ways each of which indicates an entirely different dimension ProfitabilityGrowth Market Position Cash Flow … Performance

In addition… Performance dimensions Performance dimensions are sometimes incompatible with one another (there is a complex trade-offs between performance) Needs tools to guide Needs tools to guide managers in selecting various Performance and Strategies which better than just an intuition !!

develop a methodology complex interplay of Strategy and Performance To develop a methodology that captures the complex interplay of Strategy and Performance for given group of SBU’s or firms in an industry develop Strategy Map a. Propose multidimensional scaring methodology to develop Strategy Map of inter-business competition for a given industry b. Necessary trade-offs that a competitor must make in targeting its goals c. Examine the relative importance of the competitive strategy variables in the derived competitive space

The Competitive Strategy Model Competitive Environment Competitive Strategy Performance

Competitive Environment The most common competitive environment (Porter 1980) 1. Fragmented industries 2. Global industries 3. Emerging industries 4. Transition to maturity dimensions 5. Transition to maturity industries This research focuses on… Business from one fragmented, mature, industrial supply industry

Performance Performance goals has three dimensions (Quinn and Rohrbaugh 1983) external & internal 1 st dimension captured external & internal focus flexibility VS control 2 nd dimension reflected the organization desire for flexibility VS control higher order objective (an interim end) VS an ultimate end in itself (final outcome) 3 rd dimension incorporated the degree to which each performance objective was the mean to another, higher order objective (an interim end) VS an ultimate end in itself (final outcome) Performance is a hierarchical system !!

Performance (con’t) in isolation Most competitive strategy research has focused on relationship between competitive strategy and individual measures of performance in isolation The Method used in this research… Strategy AStrategy BStrategy CProfitabilityGrowth Market position Interrelationships Assigns the various competitors their relative positions along these performance dimensions ……

Porter(1980) identified three generic strategies; 1. Cost leadership 2. Differentiation 3. Focus define the competitive strategy in terms of resource deployments define it in terms of market scope This research… Competitive strategy resource deploymentmarket domains Competitive strategy is defined as the pattern of choices about resource deployment and market domains along the distinctive competencies with the distinctive competencies Competitive Strategy

Competitive strategy chosen will depend on the nature of the competitive environment and the Performance objectives Competitive Environment A Competitive Strategy A Performance A Competitive Strategy (con’t)

Multidimensional space Drawing the Map of the Business and Performance measures in a Multidimensional space Basic model assumption…the performance of business is a DIRECT outcome of their strategy and the competitive environment Competitive Environment Competitive Strategy Performance DIRECT GENFOLD2…multidimensional unfolding procedure (DeSarbo and Rao 1984,1986)

Drawing the Map (example) A 2 1 B Firm Positions Relative to Performance in a Competitive Space ABAB Performance Measures Firm 2 is better performance for A

(PIMS) project The data used in this study were drawn from the Profit Impact of Marketing Strategies (PIMS) project insure the homogeneity The sample was drawn from one single four digit SIC code to insure the homogeneity Fourteen Fourteen “clean” observations (samples) were found

in Sample industries Nature of competition and competitive strategies in Sample industries are…  Economies of scale are limited  Competitors are at limits of their production capacity  Market are defined regionally  Customer incur little or no switching cost in moving from one competitor’s products to another’s

Performance Dimension of Performance construct and their operational measures were chosen based on 3 criteria: 1. Theoretical relevance 2. Use in previous empirical studies 3. Use by practicing manager in this industry to evaluate business performance

Strategy Map GrowthProfitability Market Position

2 dimensional solution was performed on 13 business with one business as hold out case The result are compared with previous result using canonical correlation analysis. All canonical correlation derived were greater than 0.99  valid Predicted one business performance using existing 13 business performance. The result showed that predicted performance was using 14 business analysis and using 13 business analysis. Both goodness of fit measures are quite small indicating effective prediction  valid

Strategic tool “Strategy Map” has potential as a Strategic tool which manager can use to get a better picture of their competitive situation LiteratureBest Practices The result consistent with Literature and Best Practices

Static analysis developed for one time period meaning that performance and level of strategy were measured in the same period Dynamic approach is needed which all business are allowed to move in the competitive environment over time All relevant variables may not have been included because PIMS lacked measures for them