MGMT415 AIU Nokia Generic Business Strategy Presentation The Questions
(I’m doing Nokia Corporation)
Part 1 – Individual Homework Company Analysis – BAD 490
Q1 – Business Strategy
15
Q2 – Industry Environment
20
Q3 – Value Chain Analysis
20
Total (note 5 points of bonus)
50
The Basics
This assignment is to be done in PowerPoint and submitted electronically.
The purpose of this assignment is to use the tools from class to analyze a real company. Ideally, you will be able to take these tools and use them in companies that you work for, work with, or found.
You are expected to use course material to help you with your analysis and you should be able to do the assignment using only your company’s annual report and letter to shareholders and related documents (some companies split out their annual report materials into multiple documents).
Avoid at all costs: generalities, platitudes, gut-instincts and blah-blah-blah-ing.
No fluff, please! Good answers are specific and concrete, and use things like numbers and identifiable products, brands, names and locations.
The Questions
(15 points; 3 slides max) Generic Business Strategy (Intro; Chapter 5). Identify and explain how your company achieves its generic business strategy.
Clearly identify your company’s generic business strategy (Broad Differentiation, Broad Low Cost, Focused Differentiation, or Focused Low Cost?)
Explain how/why the company’s scope is narrow or broad. Remember that a scope discussion MUST address products, customers and geography.
Where does its main competitive advantage flow from? If it is a low cost leader, explain how it keeps costs down. If it is a differentiator, explain how it makes itself better/different/superior than others.
(20 points; 3 slides max) Industry Environment (Chapter 2). Do a Porter’s Five Forces analysis of your company’s industry environment using the factors identified in class.
For each force, address at least 2-3 different factors impacting the strength of that force. Note that you are expected to use course material here. Reference things like switching costs, economies of scale, differentiation of products, etc.
Assess the strength of each force and assign them as High/Medium/Low based on your analysis above. Please note that the strength of force in (b) must logically follow from the factors addressed in (a).
(20 points; 4 slides max) Value Chain Analysis (Chapter 3). Do a Value Chain Analysis of your company. Remember that there are two types of activities: Primary, which includes Inbound Logistics, Operations, Outbound Logistics, Marketing & Sales, and Service; and Support/Secondary, which includes General Administration, Human Resources, Technology Development, and Procurement. A proper analysis will include:
For all activities, explain the company executes them. Generally speaking, you’ll need 3-5 bullet points to give a rough outline of how the activity is accomplished. If your company outsources an activity, that is still noteworthy here.
Highlight visually 1-2 primary activities and 1-2 support activities that are key to your company’s performance. Note that not all activities can be key, and that your selection of key activities should be reflective of the value chain as well as the company’s strategy. Part 1 – Individual Homework Company Analysis – BAD 490
Q1 – Business Strategy
Q2 – Industry Environment
Q3 – Value Chain Analysis
Total (note 5 points of bonus)
15
20
20
50
THE BASICS
•
•
•
•
•
This assignment is to be done in PowerPoint and submitted electronically.
The purpose of this assignment is to use the tools from class to analyze a real company.
Ideally, you will be able to take these tools and use them in companies that you work
for, work with, or found.
You are expected to use course material to help you with your analysis and you
should be able to do the assignment using only your company’s annual report and
letter to shareholders and related documents (some companies split out their annual
report materials into multiple documents).
Avoid at all costs: generalities, platitudes, gut-instincts and blah-blah-blah-ing.
No fluff, please! Good answers are specific and concrete, and use things like numbers
and identifiable products, brands, names and locations.
THE QUESTIONS
1. (15 points; 3 slides max) Generic Business Strategy (Intro; Chapter 5). Identify and
explain how your company achieves its generic business strategy.
a. Clearly identify your company’s generic business strategy (Broad Differentiation,
Broad Low Cost, Focused Differentiation, or Focused Low Cost?)
b. Explain how/why the company’s scope is narrow or broad. Remember that a
scope discussion MUST address products, customers and geography.
c. Where does its main competitive advantage flow from? If it is a low cost leader,
explain how it keeps costs down. If it is a differentiator, explain how it makes
itself better/different/superior than others.
2. (20 points; 3 slides max) Industry Environment (Chapter 2). Do a Porter’s Five
Forces analysis of your company’s industry environment using the factors identified in
class.
a. For each force, address at least 2-3 different factors impacting the strength of
that force. Note that you are expected to use course material here. Reference
things like switching costs, economies of scale, differentiation of products, etc.
b. Assess the strength of each force and assign them as High/Medium/Low based
on your analysis above. Please note that the strength of force in (b) must
logically follow from the factors addressed in (a).
3. (20 points; 4 slides max) Value Chain Analysis (Chapter 3). Do a Value Chain
Analysis of your company. Remember that there are two types of activities: Primary,
which includes Inbound Logistics, Operations, Outbound Logistics, Marketing & Sales,
and Service; and Support/Secondary, which includes General Administration, Human
Resources, Technology Development, and Procurement. A proper analysis will include:
a. For all activities, explain the company executes them. Generally speaking, you’ll
need 3-5 bullet points to give a rough outline of how the activity is accomplished.
If your company outsources an activity, that is still noteworthy here.
b. Highlight visually 1-2 primary activities and 1-2 support activities that are key
to your company’s performance. Note that not all activities can be key, and that
your selection of key activities should be reflective of the value chain as well as
the company’s strategy.
Chapter Three
▪ Provides a meaningful integration of many issues that come into
evaluating a firm’s performance
▪ Four key perspectives
▪ Customers
▪ Internal Business Processes
▪ Innovation and Learning
▪ Financial
2
▪ Industrial Organization (I/O) View
▪ Externally-focused
▪ Choose a good industry, then choose a good strategy for that industry
▪ Resource-Based View (RBV)
▪ Internally-focused
▪ Look at the firm’s internal resources and capabilities and choose a strategy
that best fits firms resources to the environment at hand.
▪ Who’s right? Both
2
▪ Value-chain analysis: a strategic analysis a firm’s value-creating
activities.
▪ Two types of activities:
▪ Primary – contribute to the physical creation of the product or service, its
sale and transfer to the buyer, and its service after the sale.
▪ Support – activities of the value chain that add value themselves or add
value through relationships with primary activities or other support activities
3
Exhibit 3.1
5
Primary Activities
▪ Inbound Logistics – Receiving, storing and
distributing inputs to the product
▪ Operations – Transforming inputs into the
final product form
▪ Outbound Logistics – Collecting, storing, and
distributing product or service to buyers
▪ Marketing & Sales – Inducing customers to
buy the product or service.
▪ Service – Providing service to enhance or
Support Activities
▪ HR – recruiting, hiring, training, development,
and compensation of all types of personnel
▪ Tech Development – R&D activities for
process and product initiatives
▪ General Administration/Infrastructure –
Organizational culture, control systems,
organizational structure
▪ Procurement – the purchase of inputs
including raw materials, equipment, supplies
maintain the value of the product or service
6
1.
Do what you do best, outsource the rest
2.
Spend time/money/effort on the things that will lead to SCA
7
▪ Resource-based view of the firm
▪ A firm is a bundle of resources and capabilities
▪ SCA requires: V, R, D to I, D to S
▪ RBV Analysis
▪ Step 1: Inventory of Resources & Capabilities
▪ Step 2: Test the best candidates for SCA
8
▪ Tangible resources
▪ Easy to identify
▪ Include: physical assets, financial resources, organizational resources, and
technological resources.
▪ Intangible resources
▪ assets that are difficult to identify and account for and quantify
▪ Include: human resources, innovation resources, and reputation
▪ Organizational capabilities
▪ The competencies and skills that a firm employs to transform inputs into
outputs
9
No advantage. Must be
Valuable AND Rare for
advantage
Potential Source
of SCA
Candidate #1
(e.g., superior
brand image)
Candidate #2
Candidate #3
Candidate #4
Competitive
advantage rendered
unsustainable
Valuable?
Rare?
Difficult to
Imitate?
Difficult to
Substitute?
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
✓
Effect on
Perform.?
Parity, No
Advantage
Temporary
Advantage
Parity, no
advantage
SCA
3-10
Chapter Two
Internal
External
▪ Firm’s strategy must:
▪ Build on its strengths
▪ Remedy the weaknesses or work
around them
▪ Take advantage of opportunities in
the environment
▪ Protect the firm from threats
Positive
Negative
S
O
W
T
2-2
▪ Strengths
▪ Strong & adaptable brand image
▪ Weaknesses
▪ Limited ability to develop new non-traditional products
▪ Opportunities
▪ Growing leisure interest in motorcycles worldwide
▪ Threats
▪ Differing foreign policies governing motorcycles
2-3
Threat of New
Entrants
Power of
Suppliers
Rivalry
Among
Competitors
Power of
Customers
Threat of
Substitutes
4
Threat is LOWER when:
▪ Profitability requires economies of scale
▪ Products are differentiated
▪ Brand names are well-known
▪ Initial capital investment is high
▪ Consumer switching costs are high
▪ Accessing distribution channels is difficult
▪ Location is an issue
▪ Proprietary technology or materials are an issue
▪ Government policy/regulation is an issue
▪ Expected retaliation of existing firms is an issue
5
Threat is LOWER when:
▪ Consumer switching costs are high
▪ Substitute product is more expensive than industry product
▪ Substitute product quality is inferior to industry product quality
▪ Substitute performance is inferior to industry product performance
▪ No substitute product is available
6
Power of Buyers is HIGHER when:
▪ Buyers are more concentrated than sellers
▪ Buyer switching costs are low
▪ Threat of backward integration is high
▪ Buyer is price sensitive
▪ Buyer is well-educated regarding the product
▪ Buyer purchases product in high volume
▪ Buyer purchases comprise large portion of seller sales
▪ Product is undifferentiated
▪ Substitutes are available
7
Power of Suppliers is HIGHER when:
▪ Suppliers are more concentrated than buyers
▪ Buyer switching costs are high
▪ Threat of forward integration is high
▪ Buyer is not price sensitive
▪ Buyer is uneducated regarding the product
▪ Buyer purchases product in low volume
▪ Buyer purchases comprise small portion of supplier sales
▪ Product is highly differentiated
▪ Substitutes are unavailable
8
Rivalry is HIGHER when:
▪ Competitors are numerous
▪ Competitors have equal size
▪ Competitors have equal market share
▪ Industry growth is slow
▪ Fixed costs are high
▪ Products are undifferentiated
▪ Brand loyalty is insignificant
▪ Consumer switching costs are low
▪ Competitors are strategically diverse
▪ There is excess production capacity
▪ Exit barriers are high
9
Chapter Five
2
Exhibit 5.1
▪ Companies pursuing a broad cost leadership strategy
▪ McDonald’s
▪ WalMart
▪ Companies pursuing a broad differentiation strategy
▪ Nordstrom
▪ Apple
▪ Companies pursuing a focus strategy
▪ Diane von Furstenberg
▪ Just Ice
Exhibit 5.2
5-4
How it Works:
▪ Tight cost and overhead control
▪ Avoidance of marginal customer accounts
▪ Cost minimization in all activities in the firm’s value chain
Potential Pitfalls:
▪ Too much focus on one or a few value-chain activities
▪ All rivals share a common input or raw material
▪ The strategy is imitated too easily
▪ A lack of parity on differentiation
▪ Erosion of cost advantages when prices become known
▪ How it Works:
▪ Creates differences in the firm’s offering that is perceived as unique and
valued by customers.
▪ Examples of ways to differentiate: prestige or brand image, technology,
innovation, features, customer service, reliability
▪ Potential Pitfalls:
▪ Uniqueness that is not valuable
▪ Too much differentiation
▪ Too high a price premium
▪ Differentiation that is easily imitated
▪ Dilution of brand identity through over-expansion
▪ Perceptions of differentiation may vary between buyers and sellers
▪ Focused Cost Leadership
▪ Firm strives to create a cost advantage in its small industry segment
▪ Focused Differentiation
▪ Firm seeks to differentiate in its small industry segment
▪ Potential Pitfalls
▪ Erosion of cost advantages within the narrow segment
▪ Focused products and services still subject to competition from new
entrants and from imitation
▪ Focusers can become too focused to satisfy buyer needs
Exhibit 5.8
5-8
Note to Students
• These examples are good but NOT perfect
– Make sure to answer the question in its entirety
– Try to improve upon these examples
• Please keep in mind that the questions may be
slightly different for your assignment.
• Your job is to apply the tools covered in class by
analyzing your company.
• Copying bad form or mistakes found in these
examples is not an excuse for doing a poor job.
– Please check the comments I have added to help you
Q1 – Business Strategy
• Please see the lululemon sample presentation
from class. Make sure to answer the whole
question:
– Identify your company’s generic strategy
– Justify your answer along the two dimensions
covered in class:
• Scope – Is it broad or narrow? How? Why?
• Competitive Advantage – Is it low cost or differentiated?
How? Why?
Q1: Business Strategy
Cost Leadership
Focused Cost
Leadership
Broad Differentiation
Focused
Differentiation
From the company’s
annual report:
“Our core strategy is
to grow our
streaming
subscription
business
domestically and
internationally.”
Their Strategy: Broad Differentiation
➢ Netflix’s competitive scope consists of a very broad market.
➢ Netflix subscriptions include more than 33 million global subscribers.
▪ More than 27 million members in the United States.
▪ Company is expanding international in over 40 countries, including
Canada, Latin America, and the United Kingdom.
➢ They provide a broad library of more than one billion hours of streaming
content, including an increasing amount of original and licensed exclusive
content.
➢ Services are offered through an increasing amount of Internet-connected
devices, such as home theater systems, mobile devices, PCs, and smart TVs.
Netflix’s Differentiation Strategy
Netflix is the “world’s leading Internet television network.” It differentiates
itself from competitors by providing a rich streaming content library to
create an “outstanding member experience”
➢ Rich Streaming Content Library:
▪ Increasing the licensed original and exclusive content allows
customers to enjoy a rich streaming content library
➢ Outstanding Member Experience:
▪ Effective user interface enhances the streaming video experience to
its users
▪ The focus on innovation and technology has allowed viewers the
convenience of watching unlimited video “on nearly any Internetconnected screen”
▪ Video and movie recommendations based on viewer preferences are
customized to each member
“Our members can watch as much as they want, anytime, anywhere, on
nearly any Internet-connected screen” (annual report).
Q2 – Porter’s Five Forces
• Please see the lululemon sample presentation
from class. Make sure to answer the whole
question:
1. Address 2-3 factors that affect the strength of
each force (see class notes and Exhibit 2.8 in the
text)
2. Rate each force as High/Medium/Low based on
the information above
Porter’s Five-Forces of Model
Industry Environment
Threat of
new
entrants
Bargaining
power of
suppliers
Rivalry of
competitors
Threat of
Substitutes
Bargaining
power of
buyers
Porter’s Five Forces
Note that this student does
an amazing job, but spends
7 slides doing so. This could
Medium
be scaled back by half and
Switching costs for buyers are low.still
Buyers
receivedon’t
a perfecthave
score!
(remember
you have
to bargain with Walmart for lower prices
orthat
higher
slide limits as well)
• Bargaining Power of Buyers (
–
)
quality products since Walmart has established and
become known for their EDLP strategy.
– Product differentiation is low. Although Walmart
offers a wide variety of different products under
different brand names, their competitors offer the
same broad assortment of products at the same level
of quality.
Porter’s Five Forces
• Bargaining Power of Suppliers (Low)
– Switching Costs for Walmart are low
HIGHLIGHT: Student covers
2-3 factors (see Exhibit 2.8 in
text for list) for all forces and
explains their influence
(again, this can be done in
half the space)
• If a supplier fails to meet the Walmarts expectations, they will be
dropped and a new supplier will gladly take their place
– Availability of substitute products is high
• Walmart sources supplies from around the world. They have no
fear of losing any one supplier because they currently have a total
of 100,000 different suppliers from different parts of the world
– Importance of Walmart as a customer is high
• Being the globally recognized retailing giant that Walmart is, the
opportunity for a business to become a supplier to Walmart will
essentially guarantee a long strong business relationship.
Porter’s Five Forces
• Threat of Entrants (Low)
– Walmart has high economies of scale
• Walmart has mastered the art of logistics to a point where competitors may find it hard
to keep costs as low as Walmart
– Overall, there are high capital requirements for new entrants
• High barriers of entry discourage new companies attempting to enter into the retail
industry.
• Main threat is from other large retailers such as Target, Kmart and Shopko attempting to
offer the same assortment of products and services
– Since Walmart sources supplies from over 100,000 business worldwide, it has very low
switching costs
– Customer Loyalty is strong thanks to advertisements and key strategies
• The Walmart brand image is known world wide thanks to $2.3 billion being spent on
advertisements during 2013 and 2012
• In addition, key strategies such as Everyday low costs (EDLC) lead to the ability to
establish Everyday Low Prices (EDLP).
Porter’s Five Forces
• Threat of Substitutes (Medium)
– Walmart offer undifferentiated products
• The wide variety of everyday products that Walmart sells can just
as easily be sold at other retail stores.
– However, this threat is mitigated by Walmart’s ability to offer lower
priced products that are of the same quality as those offered by
competitors.
– Concern over competitors copying Walmart’s strategy
• Although they plan to open 220 to 240 more retail units this next
year, their relatively new strategy of having local neighborhood
markets that cater to the local ethnic populations may be copied if
successful
Porter’s Five Forces
•
Rivalry of Competitors (Medium)
– Number of competitors is relatively low
•
•
The only main competitors to Walmart are Target, Kohls, Kmart, Meijer and Shopko
Walmart has three different operating segments (Walmart US, Walmart International, Sam’s Club)
–
Together these operating segments generated a total of $466,114,000 in Net Sales for the fiscal year 2013 and
with the addition of 36 to 40 million square feet these sales are expected to increase
– Low Product differentiation
•
Although the products and services offered are not unique, Walmart has had a 59% increase in EPS
and a 123% increase in FCF during the last 5 years despite having to combat with a weak economy
– Fixed Costs are high
•
•
Walmart Invested $12.9 billion dollars last year to add 34.6 million square feet of floor space with
plans of adding an additional 15 to 17 million square feet of floor space this year.
The costs of operating stores of these sizes are extremely high, so competitor must be sure they have
the capital to support them.
– Combining this information with the fact that there are only a few retail stores of comparable
size suggests that Walmart is in relatively little danger of competitors stealing their market
share
Q3 – Value Chain Analysis
1. For ALL nine activities identify the key things that
the company does to accomplish that activity.
2. For Primary and for Support activities, indicate
clearly and visually 1-2 activities that are key to
the company’s performance.
Value Chain Analysis: Primary Activities
–
Sony has begun using 3rd party manufacturers to produce their products
– This allows Sony to pass warehouse management and expenses to
the 3rd party
– Although Sony handles the procurement of supplies it’s the 3rd
party’s responsibility to store the supplies before production
–
Sony utilizes 3rd party manufactures to efficiently manufacture their products
– This allows them to take advantage of low labor costs in other countries such
as China and Japan
– This reduces the overall overhead for producing Sony’s products allowing
them to provide a high quality product at a lower cost to the consumer
–
Reducing transportation weight through the reduction of the finished
product’s weight
Also by reducing the volume of packaging materials the total
transportation weight is reduced
Since Sony moves materials across many countries they have invested in
technology to track all their products
They also train employees on how to use this equipment and effectively
manage the complex logistics
Inbound Logistics
Operations
–
Outbound
Logistics
–
= Company’s Advantage
Value Chain Analysis: Primary Activities
Marketing and
Sales
–
Market themselves as an innovator who makes high quality products
Use “make.believe” campaign to achieve this marketing goal
– A promise from Sony that anything you can imagine they can make
it real
– “A place where imagination becomes real and you’re invited”
-…
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