1. M A R C U S

2. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-2 8 CONTINUOUS REINVENTION

3. 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.

4. 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.

5. 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 1997 17,000 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

6. 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, 1997-2002 Sector Amphenol LSI Logic 34.0% 3.4 Technology SPX Snap-On 28.8 1.7 Manufacturing/appliance FiServ Parametric 31.2 -21.2 Software Dreyers Campbell Soup 22.4 -2.8 Food

7. 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

8. 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

9. 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

10. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-10 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

11. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-11 A Strategic Approach to the Dilemma (Continued) BS = Business Strategy T = Timing of the moves a firm might make P = Positioning BS = T+ P

12. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-12 A Strategic Approach to the Dilemma (Continued) CS = Corporate Strategy MAD = Mergers, Acquisitions, and Divestitures CS = MAD

13. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-13 A Strategic Approach to the Dilemma (Continued) GS = Global Strategy GE = Global Expansion OS = Outsource GS = GE + OS

14. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-14 A Strategic Approach to the Dilemma (Continued) IS = Innovation Strategy O = Opportunities C = Commercialization IS = O + C

15. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-15 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]

16. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-16 Ex. 8.4 From Products to Solutions

17. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-17 Ex. 8.5 Micro-segmenting of Customers

18. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-18 Ex. 8.6 Compressing the Supply Chain

19. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-19 Ex. 8.7 Multiple Channels for Product Distribution

20. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-20 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

21. McGraw-Hill/Irwin © 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-21 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.