what is strategy recap

What is Strategy ? Recap• Creating a unique and valuable

position, involving a different set of activities

– Serving few needs of many customers (jiffy lube)

– Serving broad needs of few customers (Wealth management)

– Serving broad needs of many customers in a narrow market (Original Walmart strategy focused on small markets)

• Strategy requires you – to make trade-offs in competing-

– to choose what NOT to do

• Strategy involves creating a FIT among company activities

Marketing Slogan vs. Strategy

• Essence of strategy is in the activities

– Choosing to perform activities differently

– Or to perform different activities than rivals.

• Otherwise, a strategy is nothing more than a marketing slogan !

Essence of Strategic Positioning

• Choose activities that are different from rivals

• Strategic position is not sustainable unless there are trade-off with other positions..–More of one thing means less of another

• Trade-off arise for three reasons– image/reputation–Different positions require different set of activities, organization structures, culture, skills

–Limits on internal coordination and control..or focus

Fit drives sustainable competitive advantage

• How activities fit together to deliver competitive advantage–Value creating activities–Mapping Activity systems

“No question asked” Return

Policy

“No question asked” Return

Policy

Computer-Aided Store

Design

Computer-Aided Store

Design

Frequent performance

Check

Frequent performance

CheckReduce

“Shrinkage”

Reduce “Shrinkage” More

Incentives

More Incentives

Improving Logistics

Wired Merchandise

Requests

Wired Merchandise

Requests

Direct Connection

With Vendors

Direct Connection

With Vendors

Building Distribution

Center(150~300 -mile radius)

Building Distribution

Center(150~300 -mile radius)

Diversification

Small town↓

Large town

It’s OwnTrucks and

Trailers

It’s OwnTrucks and

Trailers

Quick Delivery &

Using Return Trips

Quick Delivery &

Using Return Trips

Much less Inventory

Much less Inventory

Satellite Network

Satellite Network

Measuring the success of

Promotions

Measuring the success of

Promotions

MarketingOn Lowest

PricesEfficient

Store Operations

Focus on Increasing

Awareness of New stores

Focus on Increasing

Awareness of New stores

Takeover Specialty

Departments

Takeover Specialty

Departments

Bargain-Basement Acquisition

Bargain-Basement Acquisition

More Hard goods

More Hard goods

Increase in Sales per

average ft2

Increase in Sales per

average ft2

More Available

Selling Space

More Available

Selling Space

UPC at the Point of Sale

UPC at the Point of Sale

Administration

More SKUsMore SKUs

Human Resources

Management

Testing Different

Mixes

Testing Different

Mixes

Locating VPs in Same

Area

Locating VPs in Same

Area

Everyday Low

Prices

Reduce Wage

Expenses

Reduce Wage

Expenses

WalMart’s Activity System

Store merchandiseIn distribution center

Providing “Everyday Low

Prices”

Buy in volume atAttractive prices

Centralizedpurchasing

Inventorycontrol

EfficientDistribution

network

Low operatingexpenses

Central computersLinked to vendors

Hub and SpokeDistribution

network

Lease stores

$20 millionSatellite system

Computer aidedDesign for

Merchandise mix

Regional vice Presidents live inBentonville and Flown to stores

Employee Salaries

“We care aboutOur people”

“No questionsAsked” Return

Policy

Increased storeSize and increase In the number of

Store locations

ComputerizedSystem in each store

UPC at point of sale

Store managerSalary. Autonomy in Ordering stock and

Setting displays

EfficientInboundLogistics

Sources of Value (competitive advantage)

• Postioning–Brand–Regulatory–Geography

• Capabilities–products/services–Technology–Processes–Business model

tomorrow’s organization. today.

Business Model TemplateBrief Outline of Business Models / Nov 06

Alex Osterwalder / alex@arvetica.com

VALUEPROPOSITION

value proposition 1value proposition 2

…

OFFER

describing a company’s offer

VALUEPROPOSITION

TARGETCUSTOMER

value proposition 1value proposition 2

…

target customer 1target customer 2

…

CUSTOMEROFFER

describing who a company offers value to

CORECAPABILITIES

VALUEPROPOSITION

core capability 1core capability 2

…

value proposition 1value proposition 2

…

OFFERINFRASTRUCTURE

describing what capabilities are required

describing what activities are required

VALUEPROPOSITION

VALUECONFIGURATION

CORECAPABILITIES

value proposition 1value proposition 2

…

core capability 1core capability 2

…

activity 1activity 2

…

INFRASTRUCTURE OFFER

VALUEPROPOSITION

TARGETCUSTOMER

DISTRIBUTIONCHANNEL

value proposition 1value proposition 2

…

distribution channel 1distribution channel 2

…

target customer 1target customer 2

…

CUSTOMEROFFER

describing how a company reaches its customers

TARGETCUSTOMER

REVENUESTREAM

revenue stream 1revenue stream 2

…

target customer 1target customer 2

…

FINANCE

VALUEPROPOSITION

value proposition 1value proposition 2

…

OFFER CUSTOMER

describing how a company makes money

Re-teaching an “Old dog, old tricks”: Strategic questions for an existing business

• Which of our product or services are most distinctive?

• Which of our product or services are most profitable?

• Which of our customers are the most satisfied?

• Which customers, channels, or purchase occasions are the most profitable?

• Which of our activities are the most different and effective?

VALUEPROPOSITION

COSTSTRUCTURE

CUSTOMERRELATIONSHIP

TARGETCUSTOMER

DISTRIBUTIONCHANNEL

VALUECONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

REVENUESTREAMS

gives an overall view of a company's bundle of products and services

portrays the network of cooperative

agreements with other companies

describes the channels to communicate and

get in touch with customers

describes the arrangement of

activities and resources

explains the relationships a

company establishes with its customers

sums up the monetary consequences to run a

business model

describes the revenue streams through which

money is earned

describes the customers a company wants to offer value to

outlines the capabilities required to run a

company's business model

INFRASTRUCTURE CUSTOMER

OFFER

FINANCE

describing a company’s business model

VALUEPROPOSITION

COSTSTRUCTURE

CUSTOMERRELATIONSHIP

TARGETCUSTOMER

DISTRIBUTIONCHANNEL

VALUECONFIGURATION

CORECAPABILITIES

PARTNERNETWORK

REVENUESTREAMS

INFRASTRUCTURE CUSTOMEROFFER

FINANCE

a business model describes the value an organization offers to various customers and portrays the capabilities and partners required for creating, marketing, and delivering this value and relationship capital with the goal of generating profitable and

sustainable revenue streams

Template

describing the partners that leverage the business model

VALUEPROPOSITION

PARTNERNETWORK

CORECAPABILITIES

value proposition 1value proposition 2

…

core capability 1core capability 2

…

partner 1partner 2

…

INFRASTRUCTURE OFFER

VALUEPROPOSITION

COSTSTRUCTURE

cost account 1cost account 2

…

value proposition 1value proposition 2

…

FINANCEINFRASTRUCTURE OFFER

describing the costs of a business model

CORECAPABILITIES

core capability 1core capability 2

…