1. CHAPTER 6 BUSINESS STRATEGY

2. Strategic Planning Strategic Analysis

3. STRATEGIC PLANNING Core Competency Outsourcing Sustainable Competitive Advantage

4. CORE COMPETENCY The primary areas that an organization is excellent at in making decisions

5. CORE COMPETENCY EXAMPLES Pappas IBM DuPont

6. IBM CORE COMPETENCY Mainframe Computers Consulting Services Cloud Software

7. OUTSOURCING Transferring a business function to an external provider

8. REASONS FOR OUTSOURCING Cost savings Focus on core business Improve quality

9. OUTSOURCING EXAMPLES Call Centers Supply Chain Function Small Businesses

10. SUSTAINABLE COMPETITIVE ADVANTAGE Maintaining a Competitive Advantage Over a Long Period of Time

11. SUSTAINABLE COMPETITIVE ADVANTAGE EXAMPLES Digging a moat strategy Patents/copyrights Brand equity Low cost organizations

12. DIGGING A MOAT STRATEGY Obtain a strong competitive advantage Fend off existing and new challenges Isolate firm from competition Maintain a low cost structure

13. LACK OF A GM MOAT Situation GM Toyota Total Labor $1,000 per $800 per Cost Vehicle Vehicle Parts Sources 37% from On-site Michigan Suppliers Hourly Labor $81 $35 Cost

14. PATENTS/COPYRIGHTS Patents and copyrights are monopoly awards given by the government for new technology and innovations

15. PATENT/COPYRIGHT EXAMPLES Lipitor drug patent Song/movie/book copyrights Dead moneymaker royalties

16. BRAND EQUITY Brand equity is the goodwill of a brand Coca Cola Intel Google

17. LOW COST ORGANIZATIONS GEICO Low agent costs Walmart Low supply chain costs Amazon.com Low internet costs

18. STRATEGIC ANALYSIS Business Models Changing Business Models Cash Flow Business Models Threatened Business Models

19. BUSINESS MODELS Traditional Business Model Many Levels of Management Focus on Command and Control Entrepreneurial Business Model Few Levels of Management Focus on Recognition and Response

20. FOCUS ON RECOGNITION AND RESPONSE Changing Buyer Needs Changing Competition Environmental Threats and Opportunities

21. SWOT ANALYSIS Controllable Uncontrollable Strengths Opportunities Weaknesses Threats

22. U.S. AVG LIFE EXPECTANCY AT 65 195013.6 years 201319.1 years

23. CONTROLLABLE AREAS Products Price Promotion Distribution

24. UNCONTROLLABLE AREAS Competition Changing buyer needs Environmental changes New technology

25. CONCEPT OF MISTAKES Mistakes can be valuable The worst mistake is to act as if you do not make mistakes Question: What did you learn?

26. NASA SLOGAN “Failure is Not an Option.”

27. “Those Who Never Make Mistakes Work For Those of Us Who Do.” Henry Ford

28. CHANGING BUSINESS MODELS General Motors Southwest Airlines Freemium Models

29. GENERAL MOTORS BUSINESS MODEL Union contract Health care costs # of car brands Excessive inventory Too many dealers

30. SOUTHWEST AIRLINES BUSINESS MODEL Use one type of plane – Being 737 Avoid hub airports in favor of secondary airports Concentrate on short-haul flights Use low-fare pricing

31. FREEMIUM BUSINESS MODELS LinkedIn Hotmail Dropbox

32. LINKEDIN REVENUE (200 million members) Free standard use Premium subscriptions Online ads

33. CASH FLOW BUSINESS MODELS Geico Groupon Infomercials

34. GROUPON CASH FLOW Collect Revenue Pay Retailer (slowly) Incur Costs

35. THREATENED BUSINESS MODELS Agents and Brokers Post Office Real Estate

36. POST OFFICE MAIL 2006 213 billion 2009 177 billion 2020 (est) 150 billion

37. POTENTIAL CHANGES IN POST OFFICE SERVICE Rent space in retail stores Stop home delivery on Saturday Close small rural post offices