Corporate strategy: Company with multiple businesses
Competitive strategy:
- Compete in one business.
- Set of integrated choices defining how a firm achieve sutainably superior performance Key Questions:
- Why some outperform others financially?
- how survive in short and long term
- where does success of company come from
Innovation strategy, Operations strategy, Marketing strategy...
Five Forces (Framework):
- Suppliers
- Buyers
- New entrants
- Substitutes
- Competitors
If they are strong prices low, and costs high, else vice-versa
Limitations of Five Industry Analysis: Additional drivers of industry profitability besides 5 forces:
- Technology
- Government regulation
- Cooperation
- Changes over time
Competitive Advantage: Def.: firm's ability to create large gap between cost and price
Drivers: created by mere effective or distinctive activities compared to rivals.
Cost leadership: cost and price cheaper than competition Differentiation: unique features (value-enhancing features)
less cost overhead and more efficient production with time.
A firm with a high production volume may use its market share to obtain discounts on factors of production.
can be independent of eco of scale. come from investment in own research and development. typically from proprietary manufacturing technologies.
- Product features and innovation: Quality, Design, Color, Style, Trademarks, Patented feature
- Links between functions: Sales with after sales services, distribution or financing, ...
- Timing: firstmover introduces, second mover responds, late move responds very late
- Location and presence: can be located close to suppliers, distributors, customers, online presence
- Product mix: Different products especially if technologically linked.
- Links with other firms: Collude with other firms
- Brand reputation: Reputation with customers/suppliers, Brand name, Perceptions of product quality/durability/reliablity
- Value Prop consists of: Who needs? What's needed? Price?
- value proposition defines kind of value company creates for customers. (unique to other competitors' value propositions)
- 'what's needed' often primary decision, leads to answer of other questions.
The value chain is the sequence of all activities involved in value creation and cost generation. It is tailored to a firm’s unique value proposition.
- choosing how to be different
- making clear tradeoffs
- integrating activity choices in value chain to fit and reinforce together
- mutually reinforced activities are hard to imitate
- Identify key activities (most customer value or highest cost)
- Identify fit between activites: dense map -> strong fit of activities -> strong competitive advantage
Analysis and strategic thinking -> Strategic Planning -> Execution and daily management
Internal: analyze resources/capabilities required to compete with the tools: SWOT, Value chain analysis
External: Environment and industry with: PESTEL, five forces
The PESTEL framework offers a systematic way for analyzing environmental factors and how they influence the industry, the strategic group and the firm
-
closed form: responsibility of CEO and top management (is secret)
-
open strategy form: involvement of empl., stakeholders, ...
Supplier Inputs Process Outputs Customer
Capacity: throughput of products/services Why important?: capacity planning has large impact on performance.
- Average flow time: time one unit start to finish.
- Average inventory: how many units in process
- Average flow rate: how many units leave system
avg inv. = avg flow time x avg flow rate
cool because:
- always holds (sequencing and variability do not matter)
- no need for empirical evidence (mathemtical law)
- helps to simplify
important but not everything.
- Engineer-to-Order (ETO): from drawing board
- Make-to-Order (MTO): particular to customer spec
- Assemble-to-Order (ATO): build-sub-assemblies in advance, assemble them for final product
- Make-to-Stock (MTS): mass production
Seperates order-driven activities from forecast-driven activities.
- Planning and control
- Quality
- Work organization
- Human resources
- New product development
- Performance measurement
- Facilities
- Capacity
- Process technology
- Supply network
- No Poverty
- Zero Hunger
- Good Health and Well-being
- Quality Education
- Gender Equality
- Clean Water and Sanitation
- Affordable and Clean Energy
- Decent Work and Economic Growth
- Industry, Innovation, and Infrastructure
- Reducing Inequality
- Sustainable Cities and Communities
- Responsible Consumption and Production
- Climate Action
- Life Below Water
- Life On Land
- Peace, Justice, and Strong Institutions
- Partnerships for the Goals
Corporate Sustainability: management paradigm, companies engage in activities consistent with sustainable development Competitive Advantage: activities which allow for survival in long run
=> Companies become more sustainable by maximizing intersection of these activities
Many similar concepts as corporate sustainability:
| Idea | Example | |
|---|---|---|
| Corporate Governance | prevent abuse of power within organization to protect shareholders | Prevention of accounting fraud |
| Corporate Citizenship | Company engages in protection and support of social, civil and political rights | Support of gay rights |
| Corporate philantropy | Funding initiatives that contribute to health, education or protection of the environment outside the business | Gates Foundation funds cancer research |
| Corporate Social responsibility | Voluntary activities that contribute to health, education protection of environment | Offer fathers extra holiday for parental leave |
Rejection and non-responsiveness (i.e. Opposition [actively] and Ignorance [passively])
- exploit all resources for economic gains
- Do not incorporate sustainability issues into corporate decision making
- Deny impact of activities
- Expect communities to cover costs
Compliance [Risk], efficiency [Cost] and strategic pro-activity [Competitive advantage]
Risk:
- focus on reducing risk of sanctions etc.
- Follow route of compliance to maintain image of good citizenship
Cost:
- Consider environmental management as a source of avoidable cost
- Implement monitoring to generate higher efficiency
- Increase productivity by raising employees' commitment for sustainability
Competitive advantage:
- Focus on innovation
- Seek stakeholder engagement to be eco-friendly
- Advocate good citizenship to increase attraction and retention of customers etc. to maxyimize profits
Sustaining corporation (transformation):
- re-interpret the purpose of the firm as part of society in its ecological context
- Support sustainability through society
- Sustainability vital for assessing corporate success
Freeman: Stakeholder theory (balance interest of shareholder's to other stakeholders') -- If a firm creates value for its stakeholders, it will create value for its hareholders.
Friedman: Shareholder theory (maximize shareholder value) -- engaging in social development will waste wealth negatively affecting society in the long run. leave it to government.
“One of the most responsible things we can do as a company is to make high-quality stuff that lasts for years and can be repaired, so you don’t have to buy more of it.”
What is corporate sustainability and what is the importance of integrating sustainability into core business activities?
Companies may change their organization and strategy in an incremental or radical approach. What are the impacts of such approaches?
How can companies take a transformative role to address sustainability issues? Is de-growth a potential path?
Novelty Difference: Radical <==> Incremental Input/Output: Product <==> Process Scope: Architecture <==> Component
Trend: Less Research more Development => Is this a problem?
- No, assumption corporations become more Development specialists because of reliance of alternative sources
- Desirability (Human)
- Viablity (Business)
- Feasibility (Technology)
two basic innovation models
Exploitation: Improving existing products
- Refinement, production, efficiency, implementation ...
- Returns from exploitation are reliably linked to the time and place in which they take place.
Exploration: creating new products
- Variation, risk taking, experimentation, play, flexibility ...
- Returns from exploration are uncertain, more remote in time, and organizationally distant from the locus of action and adaptation
Def: ability to simultaneously pursue incremental and discontinuous innovation
“Design thinking is a human-
centered approach to innovation
that draws from the designer's toolkit
to integrate the needs of people,
the possibilities of technology, and
the requirements for business success.”
- using logic
- get answers
- FACTS
- Learning, reward perception, memory, persistence
- using imagination
- get questions
- IDEAS
- Attention control regions, planning, idea generation