AICS INTRODUCTION STRATEGY, Apuntes de Ingeniería de Edificación

¡Descarga AICS INTRODUCTION STRATEGY y más Apuntes en PDF de Ingeniería de Edificación solo en Docsity!

Introduction to Business Strategy

Professor: Emili Grifell – Tatjé Department of Business, Universitat Autònoma de Barcelona

Social sciences, scholars share a common frame of reference.

• In economics model of perfect competition, companies earn zero ( economic ) profits constitutes one such frame.
• In the strategy field companies financial vary widely with some organizations earning supranormal (economic) profits ( > 0 ) even in the long run.
• Strategic scholars seek to identify the sources of these supranormal profits and to develop advice on how to attain and sustain them.

A company’s strategy is an integrated set of choices that specifies the industries in which a firm will operate and how it will compete (Porter 1980 , 1996 ). The goal is to implement plants that enable the organization to outperform companies in the same industry over the long run. Outperform means: create value and capture it (all or part). What is Strategy?

Buyers

Firm

Suppliers

Resources Products / Services

Market Structure and Competitive

Positions

Porter ( 1980 ) based on industrial organization Under this approach, companies are under competition not only with rivals firms but also with suppliers and buyers A superior bargaining position with these players is one source of competitive advantage Industry structure and firms positioning as reasons why rents associated with superior competitive position no disappear

Productivity Accounting. The Economics of Business Performance Five competitive forces by Porter (1980) Suppliers Bargaining Power of Suppliers Potential Entrants Industry Competitors (Rivalry among existing firms) Substitutes Threat of New Entrants Buyers Bargaining Power of Buyers Threat of Substitute Products or Services The five competitive forces that determine Industry profitability (ROA)

Generic strategies Cost leadership and differentiation strategies seeks competitive advantage in a broad range of industry segments Focus strategies: cost focus or differentiation seeks competitive advantage in a narrow segment.

• What does competitive advantage mean? See graphic about generic strategies

COMPETITIVE ADVANTAGE COMPETITIVE SCOPE Lower cost Differentation Broa d Target 1. Cost Leadership 2. Differentation Narrow Target 3A. Cost Focus 3B. Differentation Focus

Learning curve

Cumulative Total Output unit cost

Willingness-to-pay^0 ---------- Firm 0

1. 0 ------------------------------------------------------- Firm 1 Willingness-to-pay 1

Price buyer 0 ( p 0 ) ------------ Price buyer^1 ( p^1 ) -------- unit cost^0 ------------------- unit cost^1 ----------

Think about the implications of a strategy of low cost It means to have a low unitary cost ( uc ) We know that it is only possible to have a low uc

• advantage in productivity or/and
• Lower input prices  pressure on the suppliers Question to the class:

Offshoring: The supplier shifts the production of the input to a location abroad e.g. China. The incentive is a lower wages in the location abroad. It allows the supplier to deliver the product with a lower price. Although, it creates additional costs for the firm e.g. transport. Offshoring is different of “outsourcing”. Outsourcing means that the firm buys from a third a service or parts of the production process that the firm used to produce itself. This does not necessarily implies offshoring. A possible motivation of outsourcing can be the restructuration of the firm with the objective of productivity gains.

Differentiation Strategy

Differentiation strategy a firm seeks to be

unique in its industry along some dimensions

that are widely valued by buyers.

High willingness to pay

A firm must truly be unique at something or be

perceived as unique.

The same situation for the case of

differentiation focus.

Willingness-to-pay 0

Firm 0 unit cost ( w T z ) ------------------------------------------------------- Additional unit economic profit from consumers Firm 1 Willingness-to-pay 1

Price buyer 0 ( p 0 ) --------------------------------------------- Price buyer 1 ( p 1 ) -------- Unit economic profit^0 ( Value Captured Firm 0 ) Unit economic profit^1 ( Value Captured Firm 1 )