• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Competitive Positioning: The New Learning MASTER COPY (LONG LOOP)
 

Competitive Positioning: The New Learning MASTER COPY (LONG LOOP)

on

  • 1,268 views

 

Statistics

Views

Total Views
1,268
Views on SlideShare
1,268
Embed Views
0

Actions

Likes
0
Downloads
58
Comments
0

0 Embeds 0

No embeds

Accessibility

Categories

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Competitive Positioning: The New Learning MASTER COPY (LONG LOOP) Competitive Positioning: The New Learning MASTER COPY (LONG LOOP) Presentation Transcript

    • Strategic Thinking: Implications for Turkish Companies Professor Michael E. Porter Harvard Business School Istanbul, Turkey October 17, 2009 This presentation draws on ideas from Professor Porter’s books and articles, in particular, Competitive Strategy (The Free Press, 1980); Competitive Advantage (The Free Press, 1985); ―What is Strategy?‖ (Harvard Business Review, Nov/Dec 1996); ―Strategy and the Internet‖ (Harvard Business Review, March 2001) and On Competition (Harvard Business Review, 2008). No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Michael E. Porter. Additional information may be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu. Version: Oct 14, 2009 20091017 – Turkcell (Strategy).ppt 1 Copyright 2009 © Professor Michael E. Porter
    • Strategic Thinking COMPETING TO BE THE BEST COMPETING TO BE UNIQUE • The worst error in strategy is to compete with rivals on the same dimensions 20091017 – Turkcell (Strategy).ppt 2 Copyright 2009 © Professor Michael E. Porter
    • Flawed Concepts of Strategy • Strategy as action – “Our strategy is to merge…” – “… internationalize…” – “… consolidate the industry…” – “…double our R&D budget…” • Strategy as aspiration – “Our strategy is to be #1 or #2…” – “Our strategy is to grow at…” – “Our strategy is to provide superior returns to our shareholders…” • Strategy as vision – “Our strategy is to best understand and satisfy our customers’ needs…” – “…to advance technology for mankind…” • Strategy defines the company’s distinctive approach to competing and the competitive advantages on which it will be based 20091017 – Turkcell (Strategy).ppt 3 Copyright 2009 © Professor Michael E. Porter
    • Setting the Right Goals • Strategic thinking starts with setting proper financial goals for the company • The fundamental goal of a company is superior long-term return on investment • Growth is good only if superiority in ROIC is achieved and sustained – ROIC threshold • Setting unrealistic profitability or growth targets can undermine strategy 20091017 – Turkcell (Strategy).ppt 4 Copyright 2009 © Professor Michael E. Porter
    • Shareholder Value Is Not The Goal Superior Economic Shareholder Value Performance • Sustained ROIC and Growth • Stock Price • Shareholder value is the result of creating real economic value • Pleasing today’s shareholders is not the goal 20091017 – Turkcell (Strategy).ppt 5 Copyright 2009 © Professor Michael E. Porter
    • Levels of Strategy Competitive or Business Strategy • How to compete in each distinct business or industry Corporate or Portfolio Strategy • The company’s overall mix of businesses and the integration of business unit strategies 20091017 – Turkcell (Strategy).ppt 6 Copyright 2009 © Professor Michael E. Porter
    • Economic Fundamentals of Competition • The unit of strategic analysis is the industry − Defining the relevant industry is essential to sound strategy • Company economic performance results from two distinct causes Relative Position Industry Within the Structure Industry - Overall Rules of Competition - Sources of Competitive Advantage • Strategic thinking must encompass both 20091017 – Turkcell (Strategy).ppt 7 Copyright 2009 © Professor Michael E. Porter
    • Disaggregating Economic Performance: Industry vs. Position 35% 31.6% 30% 27.8% Return on 25% ROIC = Earnings before interest Invested Capital and taxes divided by invested 1993-2007 capital less excess cash 20% 15% 13.6% 10.5% 10% 5% 0% Revlon Paccar Industry Average Note: Excess cash is calculated by subtracting cash in excess of 10% of annual revenue. Source: Compustat (2008), author’s analysis 20091017 – Turkcell (Strategy).ppt 8 Copyright 2009 © Professor Michael E. Porter
    • Understanding Industry Structure Threat of Substitute Products or Services Bargaining Power Rivalry Among Bargaining Power of Suppliers Existing Competitors of Buyers Threat of New Entrants 20091017 – Turkcell (Strategy).ppt 9 Copyright 2009 © Professor Michael E. Porter
    • Redefining Industry Competition Zero Sum Competition Positive Sum Competition • Compete head to head • Compete on strategy • One company’s gain requires other • More than one company can be companies loss successful • Competition undermines industry • Competition expands the value value pool 20091017 – Turkcell (Strategy).ppt 10 Copyright 2009 © Professor Michael E. Porter
    • Positioning and Industry Structure Heavy Trucks Threat of Substitute Products or Services • Railroads • Water transportation Bargaining Power of Rivalry Among Bargaining Power Suppliers Existing Competitors of Buyers • Large independent suppliers • Heavy price competition on • Large fleets of engines and drive train standardized models • Leasing companies components • Small fleets and owner operators • Unionized labor Threat of New Entrants • Many truck producers are assemblers 20091017 – Turkcell (Strategy).ppt 11 Copyright 2009 © Professor Michael E. Porter
    • Paccar Strategic Positioning • Focus on owner-operators • Design trucks with special features and amenities • Customization and build-to-order • Design for low truck operating costs • Offer extensive roadside assistance to truckers • Premium price • Different customers / different basis of competing 20091017 – Turkcell (Strategy).ppt 12 Copyright 2009 © Professor Michael E. Porter
    • Strategic Positioning Economic Fundamentals Differentiation (Higher Price) Competitive Advantage Lower Cost 20091017 – Turkcell (Strategy).ppt 13 Copyright 2009 © Professor Michael E. Porter
    • Foundations of Competitive Advantage The Value Chain Firm Infrastructure (e.g. Financing, Planning, Investor Relations) Human Resource Management Support (e.g. Recruiting, Training, Compensation System) Activities Technology Development (e.g. Product Design, Testing, Process Design, Material Research, Market Research) M Value Procurement a (e.g. Components, Machinery, Advertising, Services) r What buyers are g willing to pay Inbound Operations Outbound Marketing After-Sales Service i Logistics Logistics & Sales (e.g. Installation, n (e.g. Incoming Material (e.g. Assembly, (e.g. Order Processing, (e.g. Sales Force, Customer Support, Storage, Data Component Warehousing, Report Promotion, Complaint Resolution, Collection, Service, Fabrication, Branch Preparation) Advertising, Proposal Repair) Customer Access) Operations) Writing, Web site) Primary Activities • Competing in a business involves performing a set of discrete activities, in which competitive advantage resides • Strategy is reflected in how activities in the value chain are configured and linked together 20091017 – Turkcell (Strategy).ppt 14 Copyright 2009 © Professor Michael E. Porter
    • Achieving Superior Performance Operational Effectiveness is Not Strategy Operational Strategic Effectiveness Positioning • Assimilating, attaining, and extending • Creating a unique competitive position best practices Do the same thing better Do things differently to meet different needs 20091017 – Turkcell (Strategy).ppt 15 Copyright 2009 © Professor Michael E. Porter
    • Five Tests of an Excellent Strategy • A unique value proposition • A different, tailored value chain • Clear tradeoffs, and choosing what not to do • Activities in the value chain that fit together and reinforce each other • Strategic continuity with continual improvement in realization 20091017 – Turkcell (Strategy).ppt 16 Copyright 2009 © Professor Michael E. Porter
    • Strategic Positioning IKEA, Sweden Distinctive Activities Value Proposition • Young, first time, or price-sensitive buyers • Modular, ready-to-assemble, easy to package designs • Stylish, space efficient and scalable furniture and accessories at • In-house design of all products very low price points. • Wide range of styles displayed in huge warehouse stores with large on-site inventories • Self-selection • Extensive customer information in the form of catalogs, explanatory ticketing, do-it-yourself videos, and assembly instructions • Ikea designer names attached to related products to inform coordinated purchases • Long hours of operation • Suburban locations with large parking lots • On-site, low-cost, restaurants • Child care provided in the store • Self-delivery by most customers 20091017 – Turkcell (Strategy).ppt 17 Copyright 2009 © Professor Michael E. Porter
    • Defining the Value Proposition What Customers? Which Needs? • What end users? • Which products? • What channels? • Which features? • Which services? What Relative Price? • Premium? Discount? • A distinctive value proposition usually expands the market 20091017 – Turkcell (Strategy).ppt 18 Copyright 2009 © Professor Michael E. Porter
    • Five Tests of an Excellent Strategy • A unique value proposition • A different, tailored value chain • Clear tradeoffs, and choosing what not to do • Activities in the value chain that fit together and reinforce each other • Strategic continuity with continual improvement in realization 20091017 – Turkcell (Strategy).ppt 19 Copyright 2009 © Professor Michael E. Porter
    • Making Strategic Tradeoffs • Tradeoffs exist where strategic positions are incompatible Strategic Tradeoffs – Incompatible product or service features or attributes – Differences in the value chain deliver a chosen value proposition – Inconsistencies in image or reputation across positions – Limits on organizational capacity to implement multiple ways of competing simultaneously • Tradeoffs make strategy hard for competitors to imitate • An essential part of strategy is choosing what not to do 20091017 – Turkcell (Strategy).ppt 20 Copyright 2009 © Professor Michael E. Porter
    • Strategic Tradeoffs IKEA, Sweden IKEA Typical Furniture Retailer Product Product • Low-priced, modular, ready-to-assemble designs • Higher priced, fully assembled products • No custom options • Customization of fabrics, colors, finishes, and sizes • Furniture design driven by cost, manufacturing simplicity, and • Design driven by image, materials, varieties style Value Chain Value Chain • Centralized, in-house design of all products • Source some or all lines from outside suppliers • Medium sized showrooms with limited models on display • All styles on display in huge warehouse stores • Limited inventories / order with lead time • Extensive sales assistance • Large on-site inventories • Limited sales help, but extensive customer information • Traditional retail hours • Long hours of operation 20091017 – Turkcell (Strategy).ppt 21 Copyright 2009 © Professor Michael E. Porter
    • Integrating the Value Chain Zara Apparel Word-of-mouth Cutting- edge Customers chic fashion at marketing and but cost- moderate price repeat buying conscious and quality Wide range of styles Global team of trend-spotters Very frequent Majority of Advanced Little media product production in production advertising changes Europe machinery Extensive use of store sales Prime store data locations in high traffic areas Very flexible Tight coordination production JIT delivery with 20 wholly- system owned factories • Strategic fit comes from leveraging what is different to be more different Source: Draws on research by Jorge Lopez Ramon (IESE) at the Institute for Strategy and Competitiveness, HBS 20091017 – Turkcell (Strategy).ppt 22 Copyright 2009 © Professor Michael E. Porter
    • Strategic Continuity • Continuity of strategy is a precondition for sustainable competitive advantage – e.g., understanding the strategy – building truly unique skills and assets – establishing a clear identity – strengthening fit • Reinvention and frequent shifts in direction are costly and confuse the customer, the industry, and the organization • Strategic continuity requires an enduring value proposition while continuously improving ways to realize it – Strategic continuity and continuous change should occur simultaneously – Continuity of strategy allows learning and change to be faster and more effective 20091017 – Turkcell (Strategy).ppt 23 Copyright 2009 © Professor Michael E. Porter
    • Growing Strategically 1. Make the strategy even more distinctive 2. Deepen the strategic position with target customers (rather than broaden it) 3. Expand geographically to tap new regions or countries using the same positioning 4. Expand the market for what the company can uniquely deliver • It is an illusion that growth in new, unserved segments is profitable • It is dangerous to attempt to grow faster than the underlying market for an extended period. • Industry leaders should concentrate as much, or more, on growing the industry as on growing market share 20091017 – Turkcell (Strategy).ppt 24 Copyright 2009 © Professor Michael E. Porter
    • Creating Corporate Value Added M a r g i n M a r g i n • Successful companies capture interrelationships across the value chains of business units – Transferring proprietary knowledge and skills across units – Sharing activities across business unit value chains 20091017 – Turkcell (Strategy).ppt 25 Copyright 2009 © Professor Michael E. Porter
    • Diversification in an Emerging Economy Developing Country Diversified Companies in Advanced Conglomerate Economies Walt Disney Hollywood Pictures Time Real Sharing Miramax Estate Mickey’s Touchstone Develop- Kitchen* Computer ment Resort Motion Wholesaler Hotels Picture Distribution Cruise Fast Food Real Estate Line Franchises Family Services Motion Theme Parks Pictures Financial Airline Tobacco Services Sports Team Animated Traveling Multi- Broadway Broadway Feature Films media Imports/ Food Shows Productions Productions Theater Distribution Processing Direct Consumer Television Grocery Marketing Products Program- Hotel Textiles Disney ming Disney Stores Records Channel Industrial Retail Adult Car Stores Youth Cable Dealership Parts Books and Channels Educational Hollywood Materials Records Sugar Television Network Hyperion Books Adult Discover Radio Publishing / Television Magazine Stations Newspapers Stations 20091017 – Turkcell (Strategy).ppt 26 Copyright 2009 © Professor Michael E. Porter
    • Strategic Thinking at Turkish Companies • Low Price • Superior Value • Share of Market • Unique Position • Product / Product Innovation • Customer Experience • Total Customer Support • Export Uniform Products • Locally-Tailored Global Strategy • Large Business Groups • Integrated Multi-Business Companies 20091017 – Turkcell (Strategy).ppt 27 Copyright 2009 © Professor Michael E. Porter
    • Obstacles to Strategic Thinking • Misunderstanding of strategy principles • Industry conventional wisdom leads all companies to follow common practices • Customers ask for incompatible features or request new products or services that do not fit the strategy • Inappropriate goals and performance metrics bias strategy choices • A desire for consensus blurs strategic tradeoffs • Short term pressure to please shareholders 20091017 – Turkcell (Strategy).ppt 28 Copyright 2009 © Professor Michael E. Porter
    • Understanding Strategy What Is a Strategy? What is Not a Strategy? • A unique value proposition compared to other • Best practice improvement organizations • Execution • Aspirations • A different, tailored value chain • A vision • A brand • Clear tradeoffs, and choosing what not to do • Learning • Agility • Flexibility • Activities that fit together and reinforce each other • Innovation • The internet (or any technology) • Downsizing • Strategic continuity with continual improvement in realization • Restructuring • Mergers / consolidation • Alliances / partnering • Outsourcing • Internationalizing • Networking 20091017 – Turkcell (Strategy).ppt 29 Copyright 2009 © Professor Michael E. Porter
    • The Role of Leaders in Strategy • Drive operational improvement, but clearly distinguish it from strategy • Lead the process of choosing the company’s unique position – The CEO is the chief strategist – The choice of strategy cannot be entirely democratic • Communicate the strategy relentlessly to all constituencies – Harness the moral purpose of strategy • Maintain discipline around the strategy, in the face of many distractions. • Decide which industry changes, technologies, and customer needs to respond to, and how the response can be tailored to the company’s strategy • Measure progress against the strategy using metrics that capture the implications of the strategy for serving customers and performing particular activities • Sell the strategy and how to evaluate progress against the strategy to the financial markets • Commitment to strategy is tested every day 20091017 – Turkcell (Strategy).ppt 30 Copyright 2009 © Professor Michael E. Porter
    • Strategy in Economic Downturns • Create a positive agenda • Refocus on strategy • Return to economic fundamentals • Downsize to a strategy, not across the board • Do not overreact to distressed industry conditions • Use the downturn to get things done that would be more difficult in normal times • Position for long term economic performance, not near term stock price • Seize opportunities for discontinuities which are more likely to emerge • Strategy is more important in downturns, not less 20091017 – Turkcell (Strategy).ppt 31 Copyright 2009 © Professor Michael E. Porter