Context Models Strategy Models Performance Models Change Models Organizational Models Marketing Models Sector Analysis Model Stakeholder Model 5-Forces Model Value Chain Generic Strategy Life Cycle Model Marketing Mix Operating Structures Administrative & Technology Systems Corporate Cultures Transition Management Contingency Models (7’s and Congruence Model) Accounting Ratios Economic Value Shareholder Value Balanced Scorecard Business Drivers
Strategy – involves committing to undertake one set of actions rather than another and, in the process, creating a unique and valuable position that allows the firm to perform better than its competitors.
It is about which activities to perform and which ones not to perform
Operational Efficiency – involves performing similar activities better than rivals do.
The profit-oriented aspects of firm’s business strategy with the associated operational efficiency and implementation.
The set of activities which a firm performs so as to offer its customers benefits they want and to earn a profit. It involves firm’s decision on which activities to perform, how to perform, and when to perform.
Subscription Model – customer pays a flat fee for the right to use the product for a period of time whether she uses it or not. E.g., rent, flat-rate phone service, etc.
Fee-for-Service Model – customer pays for only service she uses.
Markup Model – firm buys a product and resells it to the customer at a markup price.
Commission Model – brokerage fee, firm acts as a mediator/match maker/or broker.
Advertising Model – firm’s product can perform a function of a media for other firms to advertise their products on. E.g., ATM slip, bank statement, building surface, internet banner, club magazine, etc.
Ex. eBay decided to outsource its back end internet activities to 2 companies: Abovenet and Exodus. These 2 companies would be responsible for the maintenance and performance of web servers, database servers, internet routers, and other technologies that were critical to the availability of eBay’s site for trading. Has eBay done right?
First, identify eBay’s Competitive Advantage
Network Size and Brand Name
Outsourcees’ capability: Both are specialists.
Market power: There are many and eBay picked 2.
Integrative capability: Keeping website up does not require much integration.
Criticalness of activities: Learning how to run a website is not critical to the eBay’s competitive advantage.
Instead of backward vertical integration where firm produces its own input another way is to form Strategic Alliances or Strategic Collaboration where 2 or more firms agree to combine their resources to carry out a project.
Strategic Alliances can be formed for a specific time and/or specific operations.
Ex. Joint Venture: collaboration creates a separate legal entity.
Offer Superior Value – Activities should be consistent with the type of value the firm offers customer
Ex. Southwest Airline, the most profitable low-cost airline in the US, offers low cost value hence its activities to ensure low fare to customer include offer no meal, operate largely from uncongested airports, etc.
Air Asia can save ticket reservation cost through internet system.
Coca-Cola offers differentiation value then activities performed are aimed to create Brand Equity.
Take Advantage of Industry Factors – Critical industry factors must be identified and exploited.
Ex. Airline industry – capacity utilization is critical. Plane should not be sitting at a terminal but rather should be flying. By choosing to fly out of uncongested airports, Southwest planes can land and take off more quickly.
PC’s short shelf-life is critical. So if they sit on dealers’ shelves too long they will be obsolete. Dell build-to-order attributes take advantage of this characteristic.
Bank’s transaction cost over Teller counters is critical (about 7 Bt./transaction) but with a mass number of customers who make basic transactions, bank then offers e-Banking, m-banking including e-branch with no tellers.
After deciding which activities to perform ( doing the right things ) firm is to decide how to perform them ( doing things right ).
Process – the patterns of interaction, coordination, communication, and decision making – that a firm uses to perform the activities that transform its resources into customer value and position the firm to appropriate the value.