BUSI 2701, NOVEMBER 7 2013
What is strategy
A firm’s strategy refers to the actions that manager take to attain the goals of the firm.
Getting a certain number of market share it’s a nonfinancial goal
Vision of where you are trying to go or what you are trying to do.
How do you increase profitability and grow profit
Firms have options they can
Add value to the product
Lower costs of production
Sell more in existing markets
Sell more by expanding internationally
1. Using a differentiation strategy adding value to a product so that customers
are willing to pay more for it
the higher the value customers place on a firm’s products, the
tighter the price the firm can charge for those products
e.g: Canada goose is trying to do with moose
2. Using lowcost strategy lowering costs of production combination of both.
Reality is both have combination.
Strategic choice in the international hotel industry:
Four seasons: 600700 dollars their conserve services and marriot
They have differentiated themselves
Why is strategic positioning important?
Michael porter argues that firms need to choose either differentiation or low cost ( or a
combination), and then configure internal operations (the cost structure) to support the
So to maximize long run return on invested capital firms must:
Pick a viable position (marketing decisions) on the efficiency
Configure internal/external operations (production decisions) to
support that position
have the right organization structure (human resources decisions) is
place to execute….
How are a firm’s operations configured?
Where is the value coming from? It could come from anywhere in the organization
A firm’s operations can be thought of as a value chain composed of a series of distinct
value creation activities/opportunities including:
• Materials management
• Supplier management
• Research and development
• Human resources
• Information systems
Competitive advantage: marketing for Canada goose
Value creation activities can verses categorized as:
1. Primary activities
R & D, production, marketing and sales, customer service
2. Support activities
Information systems, logistics, human resources
usually the distinction is which activity is customer facing / touching
primary activities are dealing with clients/customers and support activities are behind
EXTENDED VALUE CHAIN
Every firm exists somewhere along a value chain that starts with raw materials
(tangible or intangible) and ends with products / services for the final customer
(business or consumer)
Each firm takes inputs from upstream and converts them into outputs for downstream
Value is added, hopefully, by each firm in the chain
Must understand where real value is being created
by your suppliers
by your firm
Assignment 2 ? use it strong statement
Where the value is coming from.
Types of value
raw materials provision
research and development
etc How can firms increase profits through international expansion?
A combination/permutation of several factors
realize location economies disperse value creation activies to
locations where they can be performed most effitly and efficely
realize greater cost economies
what is joe fresh competive advantage for low cost value creation:
creating in Bangladesh
what’s Canada goose location advantage?
Its not a location advantage in terms of production.
The implication is the firm that has better location economies has the competitive
advantage via its competition
Whats the competitor of joe fresh and walmart.
East Africa low labor cost and port.
If joe fresh went to Africa…
Why are experience effect important?
The experience curve refers to the systematic reductions in production costs that
occurs over the life of a product…..
Cost reductions come from learning effects and ….
As the economies of scale go down the production goes up
Labor productivity increases as:
Production workers learn through repletion the most efficient ways to perform
Managers learn how to manage the new operation more efficiently
What learning curve is joe fresh/loblaws is going through?
They have been in the press for the last five six month
Started with the fire in Bangladesh.
Loblaws : gave money to the people