media management 2011-strategy module - jan 21_1
DESCRIPTION
Slides from my first lecture in the Strategy module in the 2011 Media Management Course at Stockholm School of Economics and the Royal Institute of Technology. here is more information on the course: http://nordicworlds.net/2011/01/21/strategy-course-focuses-on-virtual-worlds-and-gaming-industries/TRANSCRIPT
Strategy
January 21 - Morning
Media Management – Module 1Robin Teigland
January 2011
2
Objectives of this course
To introduce you to some strategy fundamentals
To introduce you to the basics of strategy and some core concepts and analytical tools of strategic management
To develop an understanding of the complexity and dynamics of strategic management in organizations
To take a look into the future of competitive advantage
To provide you with the opportunity to apply concepts in a live case project
To provide you with an interactive and reflective experience in which we learn together
Course description Multi-method
Lectures, Presentations, and External Guests Individual Assignments
Readings for each class Install Second Life on your computer and create an avatar –
Jan 25 Questions for external guests – Jan 25, Jan 31, Feb 2
Group Assignments Cola Wars Continue (HBSP) – Jan 21 Wumart Stores (HBSP) – Jan 24 Article Summaries – Jan 26 Gaming Industry STEEP (Speaker) – Feb 2 Live Case Day (Live) – Feb 7
Exam and Reflection Active learning and shared responsibility
Open dialogue and discussion Information sharing and appropriate use of internet
elearning platform, twitter, fb, etc www.plagiarism.org
Active groupwork – pull your weight 3
4
Module Overview – 1/3 Jan 21 – What is Strategy?
Individual Assignment: Readings Group Assignment: Choose your Live Case Strategic
Issue Jan 21 – External Analysis: Industry Structure
and Competition Individual Assignment: Readings Group Assignment: Cola Wars Continue
Jan 24 –Internal Analysis: Analyzing Resources and Capabilities Individual Assignment: Readings Group Assignment: Wumart Stores
Jan 25 –An Entrepreneur’s View of Strategy in 3D Individual Assignment: Readings & Questions Guest: Steve Mahaley, PeaceTrain
5
Module Overview – 2/3 Jan 26 – Recent Developments in Strategy
Group Assignment: Article summary ppt for slideshare Jan 31 – Executing Strategy
Individual Assignment – Readings & Questions Guest: Christian Björkman, MindArk Guest: Fredrik Nilsson, IC You
Jan 31 – Exploring Business Models and role of IT Individual Assignment – Readings & Questions Guest: Paul DiGangi, Western Carolina University
Feb 2 - External Drivers of Change: Exploring the Future of the Gaming Industry Individual Assignment: Readings Group Assignment: STEEP Guest: Stefan Lampinen, Speltjänst
6
Module Overview – 3/3 Feb 2 – Creating Value Networks
Individual Assignment: Readings & Questions Guest: Malin Ströman, Independent Consultant
Feb 7 - Live Case Day: Integrating Theory with Practice Group Assignment: Virtual Worlds and Gaming
Feb 9 – Module 1 “Exam”
Live Case Teams – 16 Teams total
7
Independent research – Get started now Contact sponsors
Arrange time to talk now with sponsors to discuss issue
Ask what information and contacts they can provide Send them any questions you have in advance of your
discussion Follow related topics on twitter: opensim, virtual
world, second life, charity, gaming, etc. Check out library’s databases and library staff Blog, tweet, post, etc. about what you find
(#NVWN) Share with one another!
8
Live Case Day (February 7)
Project presentations Maximum 15 minute presentation by each Team 5-10 minutes for discussion by peer team and
other MM 2011 participants and faculty Presentations will be livestreamed on internet
and in Second Life on SSE’s island Presentations will be filmed and put on
NVWN’s blog Feedback survey -> 5 points to winning team
on final exam
Exercise
8 volunteers are needed
10
11
What is a strategy course about?
Performance varies across industries
Reproduced from Ghemawat (2000), Strategy and the Business Landscape
Above-average
returns
(15%)
(10%)
(5%)
0%
5%
10%
15%
20%
Toiletries/Cosmetics
Steel
Pharmaceuticals Soft Drink Tobacco
Food Processing Household Products Electrical Equipment
Financial Services Specialty Chemicals
Newspaper Bank Integrated Petroleum
Telecom Retail Store
Tire & Rubber Electric Utility - Central
Electric Utility - East
Medical Services Machinery Auto & Truck
Computer & Peripheral Paper & Forest
Air Transport
12
Performance varies within industries
13
Discount General Merchandise Retail Industry
20.2%
17.1%
11.4%
7.1%
-1.2%
-5.5%-0.1
-0.05
0
0.05
0.1
0.15
0.2
0.25
Wal-Mart
FamilyDollar
DollarGeneral
Consol'dStores
Fred's James-way
RO
A 1
988
- 19
92
Industry Average 9.4%
14
Where does superior profitability come from?
RATE OF RETURN ABOVE THE
COST OF CAPITAL
How do we make
money?
INDUSTRY
ATTRACTIVENESS
Where should we compete?
COMPETITIVE ADVANTAGE
How should we compete?
CORPORATE STRATEGY
BUSINESS STRATEGY
Grant 2008
15
What is the role of strategy in an organization?
Strategy as Decision Support
Strategy as Coordinationand Communication
Strategy as Target
Improves the qualityof decision making
Creates consistencyand unity
Improves performance by setting high aspirations
Grant 2008
16
Strategy must be dynamic, flexible, and innovative
Then what is the role of analysis in strategy?
Helps us to identify and understand main issues
Helps us to manage complexity
Improves decision processes (but doesn’t give answers!!)
Enhances flexibility and innovation by supporting learning
Grant 2008
Focus first on two models in this course
Industrial Organization (I/O)
Focuses on the environment outside the firm
Opportunities and threatsOpportunities and threats By studying the external
environment, firms identify what they might choose to do.
Resource-based View (RBV) Focuses on the inside of the
firm Unique resources, capabilities, Unique resources, capabilities,
and competenciesand competencies((required forrequired for sustainable sustainable competitive advantagecompetitive advantage))
By studying the internal environment, firms identify what they can do.
Successful strategy formulation and Successful strategy formulation and implementation actions result only implementation actions result only when the firm properly uses both when the firm properly uses both
models.models.18
Strategic analysis
Environment
Organization
Industry
Internal analysisRBV ModelInside->Out
External analysisI/O Model
Outside->In
19
20
What is strategy?
Greek: ”strategos”, the art of the general
von Clausewitz Strategy: the art of using battles to win a war Tactics: the art of using troops on the battlefield to win
a battle
Drucker Strategy: doing the right thing (to allocate resources) Tactics: doing things right (to use resources)
21
All the things right, but
not the right thing!
22
What is strategy? No one definition
Strategy has many definitions Some include goals and objectives in strategy Some distinguish between goals/objectives and
strategy
Scholars have different definitions Grant: A unifying theme that gives coherence and
direction to actions and decisions of organization or individual
Porter: Delivering a unique mix of value based on choosing a different set of activities
Normann & Ramírez: Art of creating value – bringing value to customers and delivering value at profit
1. Long-term goals
2. Scope of the firm
3. Competitive advantage
Components of strategy
23Hitt, Ireland, and Hoskisson 2009
What is strategy?
Strategy An integrated and coordinated set of
commitments and actions designed to gain a competitive advantage
Competitive advantage When two or more firms compete
within the same market, one firm possesses a competitive advantage over its rivals when it earns (or has the potential to earn) a persistently higher rate of profit
24Hitt, Ireland, and Hoskisson 2009
What does Professor Richard Rumelt say about strategy?
Professor Rumelt: UCLA – Anderson School of Management Respected scholar in strategy D.B.A., 1972, Harvard University M.S. (Electrical Engineering), 1965 B.S. (Electrical Engineering), 1963, UC Berkeley http://www.youtube.com/watch?v=43kZDnyDXO
c
Apple’s strategy http://www.youtube.com/watch?
v=Yu0qeb_rJYU&feature=related
25
26
The basic framework
INDUSTRY ENVIRONMENT
• Competitors
• Customers
• Suppliers
INDUSTRY ENVIRONMENT
• Competitors
• Customers
• Suppliers
STRATEGYSTRATEGYSTRATEGY
FIRM • Goals & Values
• Resources & Capabilities
• Structure & Systems
FIRM • Goals & Values
• Resources & Capabilities
• Structure & Systems
Grant 2008
The The LINKLINK between the between the FIRMFIRM & its & its ENVIRONMENTENVIRONMENT
27
Generic strategies: Strategy is about making choices…
Scope(Customer/
variety)
Type of competitive advantage
Broad
Narrow
Differentiation Low cost
Differentiation Cost leadership
Differentiation-based focus
Cost-based focus
Porter
28
Features of cost leadership and differentiation strategies
Generic strategy Key strategy elements Resource & organizational
requirements
COST Scale-efficient plants. Access to capital. ProcessLEADERSHIP Design for manufacture. engineering skills. Frequent
Control of overheads & reports. Tight cost control.
R&D. Avoidance of Specialization of jobs and
marginal customer functions. Incentives for
accounts. quantitative targets.
DIFFERENTIATION Emphasis on branding Marketing. Product and brand advertising, engineering.
Creativity. design, service, and Product R&D. quality. Qualitative
measurement and incentives. Strong cross- functional coordination
Grant 2008
29
Generic strategies in the auto industry
Scope(Customer/
variety)
Type of competitive advantage
Broad
Narrow
Differentiation Low cost
???(Differentiation)
???(Cost leadership)
???(Differentiation-
based focus)
???(Cost-based
Focus)
Porter
Can you give an example for each
box?
Avoid being stuck in the middle
Market share
Return oninvestment
High
HighLow
Low
Differentiation Cost leadership
Porter 30
31
Making choices
Strategy is about choosing what NOT to do: Which customers not to serve What products or services not to offer Which activities not to perform
Strategy is about NOT being all things to all people
Porter
32
What is the goal of strategy?
The stakeholder approach : The firm is a coalition of interest groups— it seeks to balance their different objectives
The shareholder approach : The firm exists to maximize the wealth of
its owners (= max. present value of profits over the life of the firm)
For the purposes of strategy analysis, we assume that the firm’s primary goal is profit maximization. Why? Boards of directors legally obliged to pursue shareholder interest To replace assets, firm must earn return on capital > cost of
capital (difficult when competition strong) Firms that do not maximize stock market value will be acquired Hence: Strategy analysis is concerned with identifying
and accessing the sources of profit available to the firm
Strategy as a quest for profit?
Grant 200834
36
Is anything else necessary?
3MSony
Hewlett-PackardJohnson & JohnsonProcter & Gamble
Motorola
Outperformed the stock
market by a factor of 12 since 1925 -
1996.
Collins & Porras, 1996
37
What is the goal of successful companies?
Companies most successful in creating long-termshareholder value are typically those that:
a) Have a vision and mission—They give precedence to purpose and goals other than profitability and shareholder return
b) Have strong, consistent, ethical values
Examples: • “Visionary”, e.g., Disney, HP, IBM, Merck, P&G, Shell, Wal-Mart• Boeing
• Focus pre-1996: “to build great planes,” • Weak financial controls—yet high profitability
• Focus 1997-2003 : “creating shareholder value”• Outcome: loss of market leadership, declining profitability
Grant 2008
38
Which concepts are discussed (either explicitly or implicitly)?
Successful
strategy
Long-term, simple, and agreed objectives
Deep understanding of competitive environment
Objective appraisal of resources
EFFECTIVE IMPLEMENTATION
How has Microsoft achieved success?
Grant 2007
40
What is a firm? Why does it exist?
What is a business model?What is strategy?
What is vision/mission?
Grant 2008
Assignment for today
What is strategy? (1 -2 slides) Based on the course readings, your previous experience,
and potentially other sources, develop your own definition of strategy.
What are the relationships between the concepts of vision, mission, strategy, and business model?
What is your organization’s strategy? (2-3 slides)
Pick an organization in the Virtual World or Gaming industries and answer the following questions based on information you find on the internet:
What is your organization’s mission? What is your organization’s business model? What is your organization’s strategy? Can you summarize the organization’s strategy in a “strategy
statement” (see Collis & Rukstad article)? 41
1. Long-term goals
2. Scope of the firm
3. Competitive advantage
Components of strategy
42Hitt, Ireland, and Hoskisson 2009
4343
What makes a successful strategy?
SuccessfulSuccessful
StrategyStrategy
Long-term, Long-term, simple, and simple, and
agreed agreed objectivesobjectives
Deep Deep understanding of understanding of
competitive competitive environmentenvironment
Objective Objective appraisal of appraisal of resourcesresources
EFFECTIVE IMPLEMENTATIONEFFECTIVE IMPLEMENTATION
Grant 2008Grant 2008
44
The basic framework
INDUSTRY ENVIRONMENT
• Competitors
• Customers
• Suppliers
INDUSTRY ENVIRONMENT
• Competitors
• Customers
• Suppliers
STRATEGYSTRATEGYSTRATEGY
FIRM • Goals & Values
• Resources & Capabilities
• Structure & Systems
FIRM • Goals & Values
• Resources & Capabilities
• Structure & Systems
Grant 2008
The The LINKLINK between the between the FIRMFIRM & its & its ENVIRONMENTENVIRONMENT
45
Where does superior profitability come from?
RATE OF RETURN ABOVE THE
COST OF CAPITAL
How do we make
money?
INDUSTRY
ATTRACTIVENESS
Which industries
should we be in?
COMPETITIVE ADVANTAGE
How should we compete?
CORPORATE STRATEGY
BUSINESS STRATEGY
Grant 2008
46
Module Overview – 1/3 Jan 21 – What is Strategy?
Individual Assignment: Readings Group Assignment: Choose your Live Case Strategic
Issue Jan 21 – External Analysis: Industry Structure
and Competition Individual Assignment: Readings Group Assignment: Cola Wars Continue
Jan 24 –Internal Analysis: Analyzing Resources and Capabilities Individual Assignment: Readings Group Assignment: Wumart Stores
Jan 25 –An Entrepreneur’s View of Strategy in 3D Individual Assignment: Readings & Questions Guest: Steve Mahaley, PeaceTrain
Coca-Cola vs Pepsi Case (max 15 min) Q1. Is the concentrate industry profitable? Use Porter’s five-
forces analysis to analyze the concentrate business. Put the concentrate producers in the center of the model as the industry incumbent/rivals. What are the five forces and key underlying structural determinants of each of the five forces? What are the implications for the relative power of each force? Based on this analysis, how attractive is this industry? In other words, how high is the profit potential of the industry competitors? What are the elements of your analysis that lead you to this conclusion?
Q2. Why is profitability so different between the concentrate business and the bottling business? Repeat the above five-force analysis for the bottlers. How do the economics of the concentrate business compare to the bottling business? Which industry is more attractive?
Q3. What challenges face these companies today? How has competition between Coke and Pepsi affected industry profits? What factors are affecting industry profitability? How can the five-forces analysis help you to answer these questions? 47
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