Case Study

1
Case Study 2

• TerraCycle

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General Comments

• Business Reports are opposite to mystery novels
• First tell me who is the killer (advice) then
  explain me how do you know it
• Use the writing center

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General Comments

• TerraCycle has NOT been successful because it is
  a great product
• TerraCycle has been successful because it has
  been both
• Presented /sold to the right people in the right
  manner
• Produce / Manufacture in the right manner

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General Comments

• Marketing Brand recognition are only HALF of
  the solution
• Production / Operation, Sales and Distribution
  are equally important
• Portes 5-Forces DO NOT affect the company
• Porters -Forces are just tools to understand
  the conditions that affect the company

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General Comments

• TerraCycle does NOT make decision
• TerraCycles manager make the decisions
• This may create a conflict between Owners
  Managers

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Strategic ManagementTest Review II

• SOM 497
• Session 15

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Strategic Management

• Strategic Analysis
• External analysis (Ch 2)
• Internal analysis (Chs 3 4)
• Formulation of Strategies
• Business level (Ch 5)
• Corporative (Ch 6)
• International (Ch 7)
• Digital (Ch 8)

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Strategys Hierarchy
Corporative Level Strategy
International Level Strategy
Digital Strategy
Business Level Strategy
Operations / Tactics
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What is a Business Level Strategy?

• This is where competition takes place
• Firms performance at this level is vital to its
  overall success
• Deals with how to compete in a given industry
• Business Level Strategy Elements
• Porters framework of generic strategies
• Industry life cycles

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Business Level Generic Strategies
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Industry life cycles
Differentiation / Cost Leadership
Differentiation
Cost Leadership / Focus
Differentiation
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What is a Corporate Level Strategy?

• What business(es) should we compete in
• How to create synergies with these business(es)
  (more value by working together than if they were
  free-standing units)

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Diversification
Same Industry
Outside Industry
Backward Integration
Core
Forward Integration
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Related Diversification

• Horizontal Relationships among business units
• Economies of scope
• Leveraging core activities
• Sharing activities
• Market Power
• Pooled negotiation power (economies of scale)
• Vertical integration

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Unrelated Diversification

• Hierarchical relationships between corporate
  office and business units
• Corporate restructuring
• Acquire new business units
• Develop complementing business units
• Portfolio Management
• Resource allocation
• Rewards systems

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To Achieve Diversification

• Mergers Acquisitions (Own-Buy)
• Speed
• Know how
• Resource acquisition / control
• Alliances Joint Ventures (Share)
• Entering new markets
• Cost Reduction (Economies of Scale)
• Developing / Diffusing technologies
• Internal Development (Own-Create)
• Corporate entrepreneurship

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To Achieve Diversification

• Real Option Analysis (ROA)
• Options The right but NOT the obligation
• To option to engage in operations (buy / sell /
  invest) at a pre-establish price under
  predetermined conditions (time, milestones)

• Good
• Give Control

• Bad
• Overconfidence

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Agency Problem

• To work towards whose benefit?
• Managers
• Owners
• Employees
• Stakeholders

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What is an International Strategy?

• An strategy that is both
• global globally aware
• An strategy breaches outside the organizations
  country of birth
• Global Analysis Global Formulation Global
  Implementation

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Where to go (or not)?-Porters Advice-

• Factors Affecting a Nations Competitiveness
• Factor Conditions
• Develop the factors (resources) Labor
  Infrastructure
• Demand Conditions
• Innovation production driven by Demand
• Related Supported Industries
• Presence or absence of suppliers and related
  industries
• Firm Strategy, Structure Rivalry
• Rivalry dynamics

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Where to go or not?-Decoded-

• Factors Affecting a Nations Competitiveness
• Factor Conditions
• Demographic, Sociocultural, Political/legal,
  Technology, Economic, Global Social Capital
• Demand Conditions
• Demographic, Sociocultural, Political/legal,
  Technology, Economic, Global Social Capital
• Threat of substitutes, Power of buyers, Threat
  of New Entrants
• Related Supported Industries
• Sociocultural, Political/legal, Technology,
  Economic, Global, Social Capital
• Power of Suppliers, Threat of substitutes, Threat
  of New Entrants
• Firm Strategy, Structure Rivalry
• Demographic, Sociocultural, Political/legal,
  Technology, Economic, Social Capital
• Rivalry

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International Strategy

• Why International Strategies are pursue?
• Performance Enhancement
• Market Size (e.g. Demographics, Power of Buyer)
• Extend Products life-cycle (The ethic dilemma)
• Cost Reduction
• Economies of Scale (e.g. Demographics, Power of
  supplier)
• Optimal Value Chain (5-Forcers Value Chain)
• Risk Reduction
• Optimal Value Chain (5-Forcers Value Chain)
• Market Size (e.g. Demographics, Power of Buyer)
• Global (e.g. economic, 5-Forcers Value Chain)

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Strategy How to fit abroad?
High
Global Strategy
Transnational Strategy
Computers
Food Industry
Pressures to Lower Costs
International Strategy
Multidomestic Strategy
Rare Medicine
Music (CDs)
Low
Low
High
Pressures for Local Adaptation
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Entry How to go abroad?
Wholly Owned Subsidiary
High
Joint Venture
Strategic Alliance
Extent of Investment Risk
Franchising
Licensing
Exporting
Low
High
Low
Degree of Ownership Control
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What is a Digital Business Strategy?

• The use of Digital Technology to Analyze,
  Formulate Implement the Organizations Strategy
• or
• The Analysis, Decision and Action that an
  Organization Undertakes USING DIGITAL TECHNOLOGY
  in order to Create and Sustain Competitive
  Advantage

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An Snap Shot to Digital Technology the 5-Forces

• Threat of New Entrants
• Web-based business
• Power of Buyers
• Internet tools Information availability Search
  engines
• Power of Suppliers
• Internet tools Information availability
• Web-based business
• Threat of Substitutes
• New retail channel No Wholesaler retailers
• Rivalry
• Internet tools Information availability Search
  engines

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The Internet Digital Technologies as Added Value

• Search Activities
• Gather information identifying options
• Evaluation Activities
• Compare alternatives
• Problem Solving Activities
• Identify problems generate ideas to address
  them
• Transaction Activities
• The complete exchange process (e.g. sale)
• Other Sources of Competitive Advantage
• Costumer Feedback, Expertise Entertainment
  Programming
• Business Models
• Commission-based, Advertising-based,
  Markup-based, Production-based, Referral-based,
  Subscription-based Fee-for-service-based

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Generic Strategies

• So what about mixing the generic strategies
  the digital strategies?
• Cost Leadership
• Reduce costs efforts
• Copycats
• Differentiation
• Mass customization, value chain
• Copycats, becoming main stream
• Focus
• Open venues
• Multiple niches overlapping