Escolar Documentos
Profissional Documentos
Cultura Documentos
Firms can achieve a better performance if they are able to develop a unique strategic position (decisions on the level of
non-price value delivered and on the cost level).
Innovative strategies are the result of entrepreneurial processes that allow the exploitation and development of a unique set
of resources.
RESOURCES ! Entrepreneurial processes ! STRATEGIC POSITIONING ! Innovative strategies
development ! INDUSTRY STRUCTURE
Which industry should we choose?
An industry that is attractive and we therefore conduct an Industry structure analysis
Which tools do we use?
Industry Life-cycle
In order to overcome the difficulties/barriers we have to develop a strategy based on positioning choices ! Strategic
positioning:
1. Range (where to compete)
a. New geographical markets
b. New products for a new market segment
c. Distribution channels
d. Products
2. Value proposition
a. Differential value: to be focused on costs trying to get the maximum efficiency that will determine lower
prices for customers
b. Costs: to offer a greater non price value to customers due to performance of products and services
provided
c.
There are two ways to implement the value proposition:
No companies can be outstanding in adopting simultaneously both strategies but companies that work for the differentiation
advantage must consider effectiveness and companies that work in order to get the max efficiency must have the ability to
deliver a minimum non price value
1. DIFFERENTIATION STRATEGY
Costs of differentiation need to be lower than the potential benefit that can be obtained. In practice, the benefit obtained by
the customer (through the companies differentiation strategy) is called the differentiation value, and has to be greater than
the premium price charged in order to cover the cost of differentiation.
Cost of differentiation < Premium price < Differentiation value
2. COST STRATEGY
A company wants to have a cost-strategy that is more efficient than the average of the sector. The pricing will be lower or
equal to the average of the sector.
Value for customer > Price > Costs
In order to understand which strategy to implement more, we have to understand which are the most important value-chain
activities (supply, logistics, marketing & sales, services).
The only method that allows a company to achieve better performance is through strategic innovation (pushing up the
uniqueness curve). Strategic innovation is realized when a company redefines its own strategic positioning with a higher
non-price value for the customer OR/AND with a lower price determined by a more effective cost structure.
A strategic position is the sum of the answers to:
WHO should I target as customers? Identification of new customer segments that are underserved; new
geographical markets
WHAT products or services should I offer them? Redefinition of the product and service peculiarities that are
offered
Aim: increase non-price buyer value offered or to guarantee a minimum value, but with a price lower or equals to
the average market price.
HOW should I do this is an efficient way? How are products and services offered/delivered to customers?
(Achieved in redefining: distribution channels, advertising and communication, customers relationships,
development of complementary services in relation to products/services offered)
Strategic innovations are the result of:
Potential for the hosting organization to lose their competitive advantage as a consequence of revealing
intellectual property
Increased complexity of controlling innovation and regulating how contributors affect a project
Realigning innovation strategies to extend beyond the firm in order to maximize the return from external
innovation
New trends in innovation
R&D=raising costs
Diminishing returns to scale
Productive lives of strategies is getting shorter (e.g. cell phones)
Challenges in Innovation
NIH syndrome (Not Invented Here): overcome the prejudice that if something is not invented inside the company,
then it is not valid: Example of the new member outside of the circle. He tends to be disregarded, because he has
no legitimacy to say anything. We tend to think that the quality of his ideas is lower. If you rely on your own
ideas, you think you are minimizing the risks. Maybe the outcome will be of lower quality, but Im sure it will be
done.
Use unused technologies can lead to the discovery of new product markets and thus sustain growth and thus
profits
Maximizing something: rational motive. Max profits by buying a synergetic firm. We can grow together.
Spirits industry. Vodka and Rum are trendy today (not here). Vodka company started. Aim: sell it for millions to
Campari... they have synergies in the distribution channel. Also financial and managerial synergies: by being
acquired, good managers can bring the knowledge required to grow.
Agency problems: increase the size of the firm because our prestige as CEOs will be higher if our company is
big. Conglomerates decrease the risk for the manager (not for shareholders)! Especially during the crisis
Monopoly motives: increase mkt share to exclude new entrants. Buy startups, collude, deter entry.
Other motives (non-rational)
Cognitive biases/Process theory: reasoning by analysis, illusion of control, escalating commitment. You spent
millions in lawyers and consulting, that you acquire the company!
Causes for M&A: macroeconomic disturbances. Exogenous shocks that make everyone start buying. Rumors
about stock prices. Then when people realize there is no reason for the price to be so high, prices drop.
Common view: there are some synergies. But its hard to detect synergies! Inspection problem: you are buying
the wrong target. Integration problem: hard to integrate. Price problem: too high!
Rules:
Dont acquire just for technology, acquire for capabilities! Not only about the patents! Buy them for the
technology they will develop in the future. Think about the CV! What we have done matters only as a signal of
what we will do. Some people will hire us because of what we have done, not because of what we will do.
Capabilities are in people, and sometimes in teams! Its not about the person sometimes. If the team is important, if one
person of the team is missing, things may change. Capabilities and productivity of the team can change.
Takeaways:
o Retaliation to keep customers is relatively attractive in industries with high fixed and low marginal costs
" Low marginal costs ! companies are willing to drop price very low in order to keep an
incremental customer
o Retaliation is relatively unattractive when
" The entrant is small and is expected to stay that way
" The incumbent base is large and an across-the-board price cut is necessary to keep customers
o Price-based retaliation is more attractive when n demand is elastic and increased volume makes up for
some of the decline in price
n targeted retaliation is easier
n the incumbent cares more about the future profits
Lecture (BIG IDEAS analysis)
Remark:
Idea generation: Hunts! Big events when inventors present their ideas before a group of judges. Outsourced
flow: big companies ask BIG to screen ideas that go to big companies as Toys R us. Professional inventors
network of people who do it as a job. Orphaned products: ideas started out and aborted. Ideas in the warehouse.
Website gathers ideas, as well as the newsletter.
Winnowing: selection of the best ideas by a panel of experts. Aim: knowledge about the business but no/low
bias: different perspectives and backgrounds.
Refinement: improve the idea by designing it in a better way, testing it, packaging it.
Capturing value: channel selection and sale of the idea to them for a premium price. They DO NOT
manufacture, but they can SELECT the most appropriate channel! They choose the one with the best advertising
skills, capabilities and complementary assets.
Where to diversify?
o In a market where high innovation is required
o Short product lifecycle
o Big market with a high potential
o No economies of scale in R&D. They want a mismatch of scale
o Regulation is an issue
o An industry where it doesnt take that much to have an idea, but its very hard to commercialize the idea.
The inventors will ever bring their ideas to the larger scale alone.