1. Implementing Yin-Yang

2. WELCOME To ALL OF YOU – (Strategy)
RAHUL JAIN
(Striving for excellence)
BCOM (H), PGPM, FCS

3. Strategy formulation ...
An organization must select any of innumerable ways of seeking to attain its objectives.
Strategies define how organizations should use their resources to meet their objectives.
Hence, … strategies put constraints on employees to focus activities on what the organization does best or areas where it has an advantage over competitors.

4. Mission – Basic reason for existence
Mission: How do we intend to win in this business?
Factors influencing Mission
Stakeholders
Internal resources and Power
Values of top management
Past development of firm
Business definition
Products
Markets
Function (Technology and Processes)

5. Vision- Yin Yang Core Ideology (Core values and Purposes)
Envisioned Future (BHAG and vivid description)
A vision, is more encompassing. It answers the question, "What will success look like?" It is the pursuit of this image of success that really motivates people to work together.

6. Starbucks’ Mission and Vision
Starbucks’ mission is to “establish Starbucks as the premier purveyor of the finest coffee in the world while maintaining our uncompromising principles as we grow” (Starbucks Website, 2006, p.1).
Starbucks strategic plan to make its mission a reality is evidence by the company’s rapid expansion worldwide. Starbucks has locations in all 50 States in the US, plus the District of Columbia and Puerto Rico (Starbucks Company Fact Sheet, 2006). Starbucks can also be found in 36 countries outside the US (Starbucks Company fact Sheet, 2006). Starbucks is committed to buying only certified coffee in pursuit of selling the finest coffee.
Starbucks’ Vision
According to the company’s profile, (2006) its vision is to make Starbucks coffee the most recognized and respected brand in the world by using high quality roast beans to make coffee beverages along with other products. The company wants to develop enthusiastically satisfied customers at all times. They want to make positive contributions to their communities and their environment.

7. Has Two Levels of Strategy
A Diversified Company
Has Two Levels of Strategy
- low cost
- differentiation
- integrated low cost/differentiation
- focused low cost
- focused differentiation
How to create competitive advantage in each business in which the company competes
1. Business-Level Strategy (Competitive Strategy)
How to create value for the corporation as a whole
2. Corporate-Level Strategy (Companywide Strategy) 7

8. Cost Leadership Strategy
Key Criteria
Standard Product
Compete Based on Price:
Low costs
High volume
Low margins
Achieving Low Costs
Controlling Cost Drivers
Reconfiguring Value Chain
Characteristics of Cost Leader

9. Controlling Cost Drivers
Economies of Scale / Capacity Utilization
Learning Curve Effects
Reduce Input Costs (monitor suppliers)
Economies of Scope
Consider Vertical Integration & Outsourcing
Process Engineering / Simplification
Minimize Overhead

10. How to obtain a Cost Advantage1
Control Cost Drivers 2
Reconfigure the as needed
Value Chain
Alter production process
New raw material
Change in automation
Forward integration
New distribution channel
Backward integration
New advertising media
Change location relative to suppliers or buyers
Direct sales in place of indirect sales 36

11. Technological changes
The Major Risks involved with a
Cost Leadership Business Level Strategy
Competitors imitate
Value Chain
Focus on efficiency causes Cost Leader to overlook changes in customer preferences 51

12. Examples of Cost Leadership
Nissan; Wal-Mart; Dell Computers

13. Differentiation Business Level Strategy
Key Criteria
Value provided by unique features and value characteristics
Command premium price
High customer service
Superior quality
Prestige or exclusivity
Rapid innovation 59

14. Differentiation Business Level Strategy
Requirements
Value provided by unique features and value characteristics
Constant effort to differ-entiate products through:
Command premium price *
Developing new systems and processes
High customer service
Shaping perceptions through advertising *
Superior quality *
Product R&D capabilities
Prestige or exclusivity
Maximize Human Resource contributions through low turnover and high motivation *
Rapid innovation 64

15. Effectiveness with Differentiation grows out of Value Chain activities
Differentiation Business Level Strategy
Effectiveness with Differentiation grows out of Value Chain activities
Examples:
Heineken beer
Raw materials
Steinway pianos
Raw materials & Workmanship
Mercedes Benz autos
Technology and Workmanship
Intel microprocessors
Technological superiority
Service buyers’ needs quickly anywhere in the world
Caterpillar tractors 76

16. Opportunities exist because:
Focused Business Level Strategies
Focused Business Level Strategies involve the same basic approach as Broad Market Strategies
Opportunities exist because:
Large firms overlook small niches * *
Firm lacks resources to compete industry-wide *
Serve narrow market segment more effectively than industry-wide competitors
Direct resources to certain value chain activities to build competitive advantage * 94

17. The Major Risks involved with a Focused
“Outfocused”
The Major Risks involved with a Focused
Differentiation Business Level Strategy
Large competitors enter niche market
Preferences of niche market change to those of broad market
100

18. Focus
Examples of Differentiation Focus: any successful niche retailers; (e.g. The Perfume Shop); or specialist holiday operator (e.g. Carrier)
Strategy - Cost Focus
Here a business seeks a lower-cost advantage in just on or a small number of market segments. The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers. Such products are often called "me-too's".
Examples of Cost Focus: Many smaller retailers featuring own-label or discounted label products.

19. Integrated Low Cost/Differentiation Strategy
Firms using an Integrated Strategy:
Dual Strategic Emphasis:
Upscale product
Competitive pricing (“best value”)
Flexible Manufacturing Systems
Information Networks across multiple business units
Total Quality Management (TQM)
103

20. Key Questions of Corporate Strategy
1. What businesses should the corporation be in?
2. How should the corporate office manage the array of business units?
Corporate Strategy is what makes the corporate whole add up to more than the sum of its business unit parts 11

21. Levels and Types of Diversification
Low Levels of Diversification
Single business
> 95% of revenues from a single business unit A
Dominant business
Between 70% and 95% of revenues from a single business unit B A
Moderate to High Levels of Diversification
< 70% of revenues from dominant business; all businesses share product, technological and distribution linkages
Related constrained A B C
Related linked (mixed)
< 70% of revenues from dominant business, and only limited links exist A B C
Very High Levels of Diversification
Unrelated-Diversified
Business units not closely related A B C 15

22. BCG Matrix – Product Portfolio strategy
BCG MATRIX helps in determining the product portfolio strategy of the organization. It leverages the knowledge of the corporation to optimally utilize the resources. Resources are channelized in the right direction by appropriate product strategy.
The BCG matrix method is based on the product life cycle theory that can be used to determine what priorities should be given in the product portfolio of a business unit. It involves rating products according to their market share and market growth rate.

23. BCG Matrix – Product Portfolio strategy

24. Industry Attractiveness- Porter 5 Forces
The five forces are environmental forces that impact on a company’s ability to compete in a given market.
The purpose of five-forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.

25. Porter’s Five Forces Model of Competition
Threat of New Entrants 11

26. Threat for New Entrants
Government Policy
Economies of Scale
Product Differentiation
Capital Requirements
Switching Costs
Access to Distribution Channels
Cost Disadvantages Independent of Scale
Barriers to Entry
Expected Retaliation 12

27. Bargaining Power of Suppliers
Porter’s Five Forces
Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Suppliers 14

28. Bargaining Power of Suppliers
Suppliers are likely to be powerful if:
Suppliers exert power in the industry by:
* Threatening to raise
prices or to reduce quality
Powerful suppliers can squeeze industry profitability if firms are unable to recover cost increases
Supplier industry is dominated by a few firms
Suppliers’ products have few substitutes
Buyer is not an important customer to supplier
Suppliers’ product is an important input to buyers’ product
Suppliers’ products are differentiated
Suppliers’ products have high switching costs
Supplier poses credible threat of forward integration 15

29. Bargaining Power of Buyers
Porter’s Five Forces
Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Buyers
Bargaining Power of Suppliers 17

30. Bargaining Power of Buyers
Buyer groups are likely to be powerful if:
Buyers are concentrated or purchases are large relative to seller’s sales
Purchase accounts for a significant fraction of supplier’s sales
Products are undifferentiated
Buyers face few switching costs
Buyers’ industry earns high profits
Buyer presents a credible threat of backward integration
Product unimportant to quality
Buyer has full information
Buyers compete with the supplying industry by:
* Bargaining down prices
* Forcing higher quality
* Playing firms off of
each other 18

31. Bargaining Power of Suppliers Bargaining Power of Buyers
Porter’s Five Forces
Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Suppliers
Bargaining Power of Buyers
Threat of Substitute Products 20

32. Threat of Substitute Products
Keys to evaluate substitute products:
Products with similar function limit the prices firms can charge
Products with improving price/performance tradeoffs relative to present industry products
Example:
Electronic security systems in place of security guards
Fax machines in place of overnight mail delivery 21

33. Bargaining Power of Suppliers
Porter’s Five Forces
Model of Competition
Threat of New Entrants
Threat of New Entrants
Bargaining Power of Suppliers
Rivalry Among Competing Firms in Industry
Bargaining Power of Buyers
Threat of Substitute Products 23

34. Rivalry Among Existing Competitors
Intense rivalry often plays out in the following ways:
Jockeying for strategic position
Using price competition
Staging advertising battles
Making new product introductions
Increasing consumer warranties or service
Occurs when a firm is pressured or sees an opportunity
Price competition often leaves the entire industry worse off
Advertising battles may increase total industry demand, but may be costly to smaller competitors 25

35. Rivalry Among Existing Competitors
Cutthroat competition is more likely to occur when:
Numerous or equally balanced competitors
Slow growth industry
High fixed costs
Lack of differentiation or switching costs
High storage costs
Capacity added in large increments
High strategic stakes
High exit barriers
Diverse competitors 26