Creating a unique and valuable position, involving a different set of activities
Serving few needs of many customers (jiffy lube)
Serving broad needs of few customers (Wealth management)
Serving broad needs of many customers in a narrow market (Original Walmart strategy focused on small markets)
Strategy requires you
to make trade-offs in competing-
to choose what NOT to do
Strategy involves creating a FIT among company activities
Marketing Slogan vs. Strategy
Essence of strategy is in the activities
Choosing to perform activities differently
Or to perform different activities than rivals.
Otherwise, a strategy is nothing more than a marketing slogan !
Essence of Strategic Positioning
Choose activities that are different from rivals
Strategic position is not sustainable unless there are trade-off with other positions..
More of one thing means less of another
Trade-off arise for three reasons
Different positions require different set of activities, organization structures, culture, skills
Limits on internal coordination and control..or focus
Fit drives sustainable competitive advantage
How activities fit together to deliver competitive advantage
Value creating activities
Mapping Activity systems
“ No question asked” Return Policy Computer-Aided Store Design Frequent performance Check Reduce “Shrinkage” More Incentives Improving Logistics Wired Merchandise Requests Direct Connection With Vendors Building Distribution Center (150~300 -mile radius) Diversification Small town ↓ Large town It’s Own Trucks and Trailers Quick Delivery & Using Return Trips Much less Inventory Satellite Network Measuring the success of Promotions Marketing On Lowest Prices Efficient Store Operations Focus on Increasing Awareness of New stores Takeover Specialty Departments Bargain-Basement Acquisition More Hard goods Increase in Sales per average ft 2 More Available Selling Space UPC at the Point of Sale Administration More SKUs Human Resources Management Testing Different Mixes Locating VPs in Same Area Everyday Low Prices Reduce Wage Expenses
WalMart’s Activity System Store merchandise In distribution center Providing “ Everyday Low Prices” Buy in volume at Attractive prices Centralized purchasing Inventory control Efficient Distribution network Low operating expenses Central computers Linked to vendors Hub and Spoke Distribution network Lease stores $20 million Satellite system Computer aided Design for Merchandise mix Regional vice Presidents live in Bentonville and Flown to stores Employee Salaries “ We care about Our people” “ No questions Asked” Return Policy Increased store Size and increase In the number of Store locations Computerized System in each store UPC at point of sale Store manager Salary. Autonomy in Ordering stock and Setting displays Efficient Inbound Logistics
Sources of Value (competitive advantage)
Business Model Template Brief Outline of Business Models / Nov 06 Alex Osterwalder / email@example.com
VALUE PROPOSITION value proposition 1 value proposition 2 … OFFER describing a company’s offer
VALUE PROPOSITION TARGET CUSTOMER value proposition 1 value proposition 2 … target customer 1 target customer 2 … CUSTOMER OFFER describing who a company offers value to
CORE CAPABILITIES VALUE PROPOSITION core capability 1 core capability 2 … value proposition 1 value proposition 2 … OFFER INFRASTRUCTURE describing what capabilities are required
describing what activities are required VALUE PROPOSITION VALUE CONFIGURATION CORE CAPABILITIES value proposition 1 value proposition 2 … core capability 1 core capability 2 … activity 1 activity 2 … INFRASTRUCTURE OFFER
VALUE PROPOSITION TARGET CUSTOMER CUSTOMER RELATIONSHIP value proposition 1 value proposition 2 … relationship type 1 relationship type 2 … target customer 1 target customer 2 … CUSTOMER OFFER describing the relationships a company builds
VALUE PROPOSITION TARGET CUSTOMER DISTRIBUTION CHANNEL value proposition 1 value proposition 2 … distribution channel 1 distribution channel 2 … target customer 1 target customer 2 … CUSTOMER OFFER describing how a company reaches its customers
TARGET CUSTOMER REVENUE STREAM revenue stream 1 revenue stream 2 … target customer 1 target customer 2 … FINANCE VALUE PROPOSITION value proposition 1 value proposition 2 … OFFER CUSTOMER describing how a company makes money
Re-teaching an “Old dog, old tricks”: Strategic questions for an existing business
Which of our product or services are most distinctive?
Which of our product or services are most profitable?
Which of our customers are the most satisfied?
Which customers, channels, or purchase occasions are the most profitable?
Which of our activities are the most different and effective?
VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIP TARGET CUSTOMER DISTRIBUTION CHANNEL VALUE CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS gives an overall view of a company's bundle of products and services portrays the network of cooperative agreements with other companies describes the channels to communicate and get in touch with customers describes the arrangement of activities and resources explains the relationships a company establishes with its customers sums up the monetary consequences to run a business model describes the revenue streams through which money is earned describes the customers a company wants to offer value to outlines the capabilities required to run a company's business model INFRASTRUCTURE CUSTOMER OFFER FINANCE describing a company’s business model
Template VALUE PROPOSITION COST STRUCTURE CUSTOMER RELATIONSHIP TARGET CUSTOMER DISTRIBUTION CHANNEL VALUE CONFIGURATION CORE CAPABILITIES PARTNER NETWORK REVENUE STREAMS INFRASTRUCTURE CUSTOMER OFFER FINANCE a business model describes the value an organization offers to various customers and portrays the capabilities and partners required for creating, marketing, and delivering this value and relationship capital with the goal of generating profitable and sustainable revenue streams
describing the partners that leverage the business model VALUE PROPOSITION PARTNER NETWORK CORE CAPABILITIES value proposition 1 value proposition 2 … core capability 1 core capability 2 … partner 1 partner 2 … INFRASTRUCTURE OFFER
VALUE PROPOSITION COST STRUCTURE cost account 1 cost account 2 … value proposition 1 value proposition 2 … FINANCE INFRASTRUCTURE OFFER describing the costs of a business model CORE CAPABILITIES core capability 1 core capability 2 …