M A R C U S

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved CONTINUOUS REINVENTION

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-3 Learning Objectives  Reviewing and summarizing the analytical approach to achieving sustained competitive advantage (SCA) presented in the book, which involves external and internal analysis followed by a series of moves related to timing, cost, differentiation, business scope, globalization, innovation and entrepreneurship.  Being aware that this approach to SCA must be carried out constantly and that a firm’s strategy must be regularly reinvented.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-4 Learning Objectives (Continued)  Understanding judo as a strategy, which involves rapid movement to sweet spots followed by defense of those spots against competitors’ inevitable encroachments.  Providing examples of how firms have reinvented their strategies through such means as achieving greater closeness to customers, bridging supplier-customer gaps, and putting in place smart business designs.

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-5 Ex. 8.1 Judo Strategy: David versus Goliath Netscape NavigatorMicrosoft Internet Explorer 700 employees and $80 million sales in ,000 employees and $6 billion sales in 1997 Strategy: build market share, set standard Open system Published source code Virtual R&D Essentially free via server Strategy: bundle with Windows 95 or free by downloading Outbid for customized AOL version Put AOL icon on Windows desktop Undercut MSN network

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-6 Ex. 8.2 Matched Pairs of Companies Showing Competitive Advantage and Disadvantage (selected) Companies5-Year Average Market Return, Sector Amphenol LSI Logic 34.0% 3.4 Technology SPX Snap-On Manufacturing/appliance FiServ Parametric Software Dreyers Campbell Soup Food

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-7 Ex. 8.3 Seeking Sustained Competitive Advantage AttributesAdvantageDisadvantage PositionSweet spot – being in an uncontested space Sour spot – being in a contested space MovementAgility – getting to an uncontested space Rigidity – not getting to an uncontested space Hard-to-imitate capabilities Discipline – protecting an uncontested space Ineptness – inability to protect an uncontested space ConcentrationFocus – exploiting an uncontested space Diffuseness – inability to exploit an uncontested space

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-8 A Strategic Approach to the Dilemma SCA = Sustained Competitive Advantage EA = External Analysis IA = Internal Analysis M = Moves that the strategist can take SCA = EA + IA + M

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-9 A Strategic Approach to the Dilemma (Continued) EA = External Analysis 5F = Five Forces MF = Macroenvironmental Forces SA = Stakeholder Analysis EA = 5F + MF + SA

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved A Strategic Approach to the Dilemma (Continued) IA = Internal Analysis 7S = Seven Ss VC = Value Chain RCC = Resources, Capabilities, and Competencies IA = 7S + VC + RCC

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved A Strategic Approach to the Dilemma (Continued) BS = Business Strategy T = Timing of the moves a firm might make P = Positioning BS = T+ P

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved A Strategic Approach to the Dilemma (Continued) CS = Corporate Strategy MAD = Mergers, Acquisitions, and Divestitures CS = MAD

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved A Strategic Approach to the Dilemma (Continued) GS = Global Strategy GE = Global Expansion OS = Outsource GS = GE + OS

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved A Strategic Approach to the Dilemma (Continued) IS = Innovation Strategy O = Opportunities C = Commercialization IS = O + C

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved A Strategic Approach to the Dilemma (Continued) SCA = Sustained Competitive Advantage EA = External Analysis IA = Internal Analysis BS = Business Strategy CS = Corporate Strategy GS = Global Strategy IS = Innovation Strategy SCA = [EA + IA] + [BS + CS + GS + IS]

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Ex. 8.4 From Products to Solutions

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Ex. 8.5 Micro-segmenting of Customers

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Ex. 8.6 Compressing the Supply Chain

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Ex. 8.7 Multiple Channels for Product Distribution

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Ex. 8.8 Where Can Value Chain Dominance Be Established? Support Activities Primary Activities Inputs Outputs Research and Development Production Marketing And Sales Service Company Infrastructure Human Resources Materials Management

McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved Smart Designs To create smart business designs, strategists must think in terms of customers, suppliers, distribution channels, and competing value chains. Smart designs rest on a willingness to regularly reassess them; they cannot be taken for granted.