4. Proven Business Strategy
Southwest believes in a sustainable future where there will be a balance in our
business model between Shareholders, Employees, Customers, and other
Stakeholders. In order to protect our world for future generations and uphold
our commitments, we will remain focused on sustaining our unmatched
financial position in the industry, efficiency that conserves natural resources,
fostering a creative and innovative workforce, and giving back to the
communities in which we work and live.
5. “If you get your passengers to their destinations
when they want to get there, on time, at the lowest
possible fares, and make darn sure they have a
good time doing it, people will fly your airline.”
Herb Kelleher, co-founder, Chairman
Emeritus and former CEO of Southwest
6. Total Beverage Company
Our vision is to craft the brands and choice of drinks that people love, to refresh them in body and spirit.
And done in ways that create a more sustainable business and better shared future that makes a
difference in people’s lives, communities and our planet. This has three connected pillars:
We craft meaningful brands
and a choice of drinks that
people love and that refresh
them in body and spirit.
We use our leadership to be
part of the solution to
achieve positive change in
the world and to build a
more sustainable future for
our planet.
We invest to improve
people’s lives, from our
employees to all those who
touch our business system, to
our investors, to the broad
communities we call home.
7. Overview
The Company was founded in 1901 as a retail shoe business in Seattle,
Washington under the guiding principle that success would come by offering
customers the very best service, selection, quality and value.
We offer an extensive
selection of high-quality brand-name and private label merchandise for
women, men, young adults and children focused on apparel, shoes, beauty,
accessories and home goods. No matter how customers choose to shop, we
are committed to delivering superior service, product and experience,
including alterations, order pickup, dining and styling, to make shopping fun,
personalized and convenient.
8. As our business evolves, our is a key strategic growth priority. Our strategy
leverages a strong store fleet and links our omnichannel capabilities at the local market level,
positioning us physically closer to the customer and allowing us to drive customer
engagement through better service and greater access to product.
9. “Our strategy seeks to reinforce our position as a leader
in the oil and gas industry in order to provide a
competitive shareholder return while helping to meet
global energy demand in a responsible way.”
What about this “strategy”?
10. Strategy is frequently misunderstood and therefore
misapplied. More than any other business
discipline, it suffers from crippling confusion and
over-complication. In fact, the essence of strategy is
stunningly simple, and therein lies its power.
Columbia Business School
11. Strategy -
“A dynamic plan to gain and sustain competitive
advantage in the marketplace”
Strategic Management, p.2
12. Competitive Advantage
• When a firm generates consistently higher profits
compared to its competitors
• The primary source of a company’s competitive
advantage can come from several areas of its
operations and can also come from different
functional areas within the company
13. How Do We Develop Strategy?
Strategic management process -
The process by which organizations formulate a plan and
allocate resources to achieve competitive advantage
14. In the Real World, How Does the Strategic
Management Process Work?
All over the map
Some organizations are good at developing strategy,
some are terrible
Strategy can be owned by the CEO, the executive
team, division leaders, specific strategy functions, no
one . . .
Corporate strategy, division strategy, team strategy
15. The strategic management process involves making
at least four strategic choices:
markets to compete in;
unique value the firm will offer in those markets;
the resources and capabilities required to offer that
unique value better than competitors; and
ways to sustain the advantage by preventing imitation.
16. What markets
(industries and
geographic) the
company will
pursue in search of
a high return
on invested capital.
Where do we compete?
What industries?
What customer segments?
What geographic markets?
MARKETS
17. What unique value to offer
customers in those
markets. The firm’s value
proposition (the reason
the company wins with a
set of customers).
.
What unique value do we
offer to win with
customers?
What is the value proposition?
How is it unique?
Which generic strategy for offering unique value: cost,
differentiation or value?
UNIQUE
VALUE
18. What resources (assets,
brands, etc.) and
capabilities (processes)
will allow the firm to
deliver a superior value
proposition to
customers.
How do we deliver
unique value?
What resources does the company have or need to
support the value proposition?
What capabilities does the company have or need to
support the value proposition?
How do we align the company’s structure, people,
skills, values and culture with the strategy for
delivering unique value?
RESOURCES &
CAPABILITIES
19. Cost Advantage
An advantage that a firm has over its competitors in the
activities associated with producing a product or service,
thereby allowing it to produce the same product at lower cost.
Differentiation Advantage
An advantage a firm has over its competitors by making a
product more attractive by offering unique qualities in the
form of features, reliability, and convenience that distinguishes
it from competing products.
TWO GENERIC STRATEGIES TO OFFER UNIQUE VALUE
20. A “VALUE” STRATEGY IN BETWEEN
Providing similar product
at a lower price
Providing unique product with
attributes buyers will pay for
Providing a combination
of features and price between
low priced and premium
value offerings
VALUE
Best Value for the Price
DIFFERENTIATION
Premium Value
LOW COST
Efficiency
21. Up-
Stream
Down-
Stream
Example Companies/Industries
Key activity or
capability that
confers
advantage
Companies Industries
Raw materials sourcing ∙ DeBeers Diamonds/Jewelry
Research and development ∙ Genentech Biotechnology
Design ∙ Apple
∙ IDEO
Computers, MP3s,
phones
Anything
Large scale, low cost
production capabilities
(economies of scale)
∙ Intel
∙ Boeing
Semiconductors
Aircraft
Production technology ∙ Toyota Automobiles
Sales and marketing ∙ P&G
∙ Virgin Group
Consumer products
Airlines, cell phones,
music
Store location and design skills ∙ McDonalds
∙ Starbucks
Fast food
Coffee
Servicing ∙ Nordstrom Clothing, accessories
Examples of Capabilities that Confer Advantage
22. What will prevent
imitation of the
company strategy
by competitors.
What do we do to
block competition?
Is our value proposition unique?
Can we prevent others from imitating our unique value
proposition (is there a barrier to imitation)?
What do we need to do to protect our unique
position?
If no barrier to imitation, how long will it take our
competitors to imitate the strategic initiative?
BARRIERS TO
IMITATION
23. In the mid 1980s Delta’s market researchers found that
customers (particularly business customers) were strongly influenced
to choose a particular airline by the airline’s frequent flyer program.
Consequently, to motivate customers to choose Delta, they teamed up with
American Express (an exclusive arrangement) to offer a special program:
customers receive triple miles if they fly on Delta and
purchase the tickets using the American Express card.
How would you evaluate Delta’s strategy?
Good or Bad?
DELTA MARKETING STRATEGY
24. WHAT HAPPENED?
All major competitors quickly decided to offer triple miles
with every flight—regardless of how the customer paid.
This action did not produce any sustainable advantage for Delta.
Delta’s action raised the costs of all airlines without giving any of
them an advantage—the customer was the only one better off.
Customers that wanted to pay with Visa or another credit
card—or cash—were more likely to fly another airline.
25. Lesson Learned from Delta
If competitors can quickly and easily imitate, then it
raises all rival’s costs without creating advantage.
Barriers to Imitation
26. WHAT GUIDES STRATEGY FORMULATION?
Mission
• A company’s primary purpose that often specifies the business or
businesses in which the firm intends to compete—or the customers it
intends to serve.
External Analysis (Ch. 2)
• Examining the forces that influence industry attractiveness, including
opportunities and threats that exist in the environment.
Internal Analysis (Ch. 3)
• The analysis of a firm’s resources and capabilities to assess how effectively
the firm is able to deliver the unique value (value proposition) that it
hopes to provide to customers, focusing on its strengths and weaknesses.
27. The combined results of the external analysis with
the internal analysis are often summarized as a
SWOT ANALYSIS.
Strengths, Weaknesses, Opportunities, Threats
28. What did we learn in today’s class?
• Strategy is a plan to achieve competitive advantage
• Strategy is not always clearly communicated.
• Strategy is different than visions and goals.
• Company business strategy should drive the actions of the
entire organization.
29. What did we learn in today’s class?
• Strategic management process is not one size fits all
• Strong strategic management processes should make
at least four important choices:
• Which markets?
• What unique value?
• What resources and capabilities are needed?
• Barriers to imitation?
