Theme 1 and 2

Question 1

What are Strategies?

Answer 1

Strategies are set of choices made by CEO , or board or excutives .

it result in creating a superior value for customer and shareholders.
it is like a hypothesis because no one can guarantee a good outcome or ensure beneficial results for the organization

Question 2

context, content and process ?

Answer 2

all three together form a strategy

context : what is our present situation ?
content : where do we want to go from here ?
process: how are we going to get there ?

Question 3

Proactive and Reactive Stratrgies?

Answer 3

Proactive : strategy elements include both continued and new initiatives

Reactive : (Emergent) strategy elements that are required due to unanticipated developments and market conditions, Emergent strategy should be flexible adapting using trial and error process ( Honda case )

Question 4

How can Internal + external+ purpose create a strategy ?

Answer 4

internal analysis refers to capabilities
external analysis refers to what is going in the industry
Purpose is related to the Vision, Mission and Values

Question 5

what is the Willingness to pay ?

Answer 5

the more unique the value is the more customer are willing to pay ,higher the customers are willing to pay the higher profit you will achieve and the way to raise the willingness to pay is by offering superior value to customers.
• A company’s aim is always to push up the willingness to pay among customers and push down the cost because it means that the company can increase prices and generate more profit (economic profit)

Question 6

what is the economic profit ?

Answer 6

it is the difference between price and the cost , which means the difference between the value proposition and the value chain activities

Question 7

what is the value proposition

Answer 7

• Value proposition is WHAT the company offers and to who
• The value proposition is related to the price, which means the better the value proposition is the more the customers are willing to pay which enables a company to increase their price

Question 8

what is the value chain activity

Answer 8

• It is the HOW which means what are the activities and the tools that a company to achieve the value proposition
• Related to the cost

Question 9

what is a competitive advantage ?

Answer 9

in what that you are better than others .

it is where you meet customer needs more effectively with products or services that customer value more highly

Question 10

Rent creating factor?

Answer 10

external industry analysis

- attractiveness of the industry

Question 11

Industry attractiveness ?

Answer 11

• the industry is very important and its attractiveness depends on three factors
o the intensity of competition (explained by 5 forces of Michael porter)
o demand and supply
o regulations

Question 12

Is the attractiveness of the industry relevant to the organization? Does industry matter

Answer 12

• When a large numbers of companies in a certain industry are making on average more than other companies in other industries is when this industry is more attractive
• Attractiveness in an industry will attract people to invest in it
• Investing in a non-attractive industry requires you to be above average in order to generate profit as much as an attractive industry
• when a industry is not attractive that doesn’t mean that you cant make money because there might be companies that are performing way better than the average industry and making tons of money
o example IKEA when the industry average profit was only 4.9% IKEA was achieving 22.9%

Question 13

SUSTAINABLE COMPETITIVE ADVANTAGE

Answer 13

• competitive advantage for long term ,sustainable
• Giving buyers lasting reasons to prefer a firm’s products or services over those of its competitors on the long term
• Satisfy customer on the long run

Question 14

INNOVATION

Answer 14

• Innovation in business is giving another life to a certain company
• Because of the fast changing world, all companies have to innovative in order to stay alive
example : the video curve that was changed into DVD then Blue ray , now we are having a streaming service

Question 15

Sweet spot ?

Answer 15

it is when your company capabilities meet with your customer needs, while competitors cannot reach this spot.
• The sweet spot is where you use your capabilities to accomplish the customer needs and this is when you can excel

Question 16

Vision?

Answer 16

it fosters commitment from your employees
• Emotions need to exist in a vision (you need to give your employees a dream) (like how steve jobs gave a dream to apple employees)
• It ensures an understanding of what the company is looking for in the future
• Vision demonstrates the future strategic direction the company needs to go
• A vision is not only inspiring the employees it also inspires customers and make them believe in you company which will make them buy and support you more

Question 17

Mission?

Answer 17

• It is the identity of the organization
• It is describing the value chain activities of the company to accomplish a certain goal
• It is describing who we are and what we do

Question 18

MICHEAL PORTER 5 FORCES INDUSTRY ANALYSIS

Answer 18

forces that affect your organization performance because they enhance competition
• Competitors
Competitors will squeeze your profit margin
• Bargaining power of buyers
Example in phone industry the power of customers of Samsung is higher than apple customers because they can change to other android competitors but apple customers have low buying power because they don’t have a replacement for the IOS that is why apple generates more profit
• Bargaining power of suppliers
Example of coca cola company: coca cola needs bottles and cans so the suppliers are bottle and can manufacturers and when they tried to push their power and increase their prices which will increase the cost of coca cola. But because coca cola is a big giant they decided to buy a can manufacturer to indicate to the suppliers that coca cola have a big power over them and can substitute them whenever they want, So the bargaining power of supplier in this case is low and will not affect the profitability of the company as if they had more power
• New entrants
This is what happened with Netflix when Disney decided to enter the streaming industry business and now they are competing and big threat to Netflix, the same happened with apple and amazon
New entrance are an additional factor that determine the attractiveness and the profitability of an industry
• Substitute products
Coffee is a sub for tea, gin is a sub for beer
Sub product can increase competition because customers will have another option to choose especially if subs can position and market themselves in a good way
This also what happened with Starbucks when they introduce their products in Asian markets where they didn’t like coffee and where too attached to tea but Starbucks managed to do it

Question 19

what is a concentrated industry

Answer 19

• For example the manufacturing aircrafts industry which has only two manufacturers such as Boeing. This industry is concentrated into only two organizations which control the market (there are a few other firms but they are small
• In this kind of any industry there is not many competitors which means the profitability is good
• But this industry is prone to economic environment and these organizations are seriously affected and may lose all their profitability
• Because companies invest a lot in these industries, they cannot leave and quit when something goes bad like now with the corona situation because they have a lot invested in (exit barrier here is the high investment)

Question 20

Exit barriers

Answer 20

As described in the concentrated market, aircraft manufacturers cannot just exit the market and shut down their business because this industry have very hard exit barriers

Question 21

Entry barriers

Answer 21

For the same aircraft industry the entry barriers are also very hard and that is because it needs a lot of technology and capital which makes this industry extremely hard to enter

Question 22

PEST ANALYSIS

Answer 22

PEST analysis measures the macro-environmental factors that may impact a business organization.
any PEST change will directly affect the industry.

P : political : change in government policy ( taxation )
E : Economic: change in the level of economic activity ( growth rates)
S : Social : change in demographics or social structure
T : Technological : Development of new products, information or communication technologies.

Question 23

for a company is it better to be the best or to provide unique product or service?

Answer 23

Having unique value proposition makes more sense because you position yourself in a higher value proposition that is different because you avoid competitive wars.

being unique (on your own terms) that allows you to deliver value to
customers who are willing to pay a proper price for your value proposition.
If you want to be the best, that is going to be a hard game. The best is not necessarily the best
strategy. It is much easier to play your own game, to be unique.

example : Profit margin iPhone vs Samsung:
® iPhone: 40%
® Samsung: 17%
What is the reason for this? Google owns the Android system. Any Samsung you buy, the hardware
manufacture you buy, they have to share the profit with Google. Apple has created a very open ecosystem.
They own every detail. This explains the profitability issue.

Question 24

what is Apple strategy ?

Answer 24

• Apple strategy is that they managed to create a system that is unique and only available for Apple products which is the IOS, compared to Samsung or galaxy this strategy enabled Apple to reduce cost by having their own system not like Samsung or any other devices which are paying for Android system. That is the reason which allowed Apple to be able to achieve revenue of around 40% which is higher than Samsung’s revenue which is 18%.
• When Apple created this superior value to their customers it was able to push up the willingness to pay among customers. And push down the supplier bargaining power , which extended the profit margin
• What apple stands for? Their status is being different, they are unique
• Steve jobs had a very clear and inspiring vision and it was a dream which helped him fostering commitment from his team

Question 25

What is Nike strategy ?

What is the value that Nike creates compared to Adidas?

Answer 25

• Nike follows a differentiation strategy

Nike is more about performance and they use athletes and athletic influencers as their marketing
• Adidas is more about fashion and they use a different type of influencers which are more about fashion
• Nike outsources everything including production of shoes but they emphasize on Research &Development in marketing

Question 26

Netflix strategy ?

Answer 26

Netflix used 4 moves :
1- The first move was turning from DVDs to television series and internet
2- The second move for Netflix was after they got rejected by the CEO of blockbuster to run online streaming for them, they went and started paying producers in Hollywood to produce content for Netflix to online stream them
3- The third move was to building in house studios which means they moved from outsourcing content to producing successful shows such as the house of cards and la casa de Papel
4- The fourth move was becoming global and streaming in 190 country

• Netflix strategy is to bring a tailored service to their customers by broadcasting what the customers want
• Netflix power lies in their data, they were able to collect data on their customers and this what makes them so competitive and allows them to know what their customers exactly want

Netflix uses AI to accurately predict what the customers like using algorithm and that easy for them because they have 190 million customers

Question 27

McDonalds case ?

Answer 27

• Improved restaurant operations (they created new operation way of service for restaurants)
• Affordable pricing
• Wide menu variety and beverage choices
• Convenience and expansion of dining opportunities
• Ongoing restaurant reinvestment and international expansion
• Low cost
• Fast food service \

Question 28

Honda case?

Answer 28

Reactive Emergent strategy
Back in 1995 Honda wanted to go out of the Japanese markets and get into the American market in Callifornia, they tried to do that by trying to penetrate the markets using big 750cc bikes to compete with Harley Davidson. Unfortunately, because of the weather the bikes started having mechanical problems so their sales dropped and their strategy didn’t work out. But while one sales employee was looking for showrooms and trying to promote the big bikes while using a small Honda 50cc bike, a sales manager in a company liked his small bike and wanted to sell just like it in his showroom.
• What Honda did was implementing what is called an Emergent Strategy, and switch their initial strategy which was selling the big bike to marketing and selling smaller bikes and they target ladies as their audience
• This is a proof that strategies might not always work but adaptation is more important and it is what made Honda penetrate he US market successfully
• Emergent strategy is a flexible adapting strategy using the trial and error process

Question 29

Lady GAGA case

Answer 29

Value proposition : combining fashion and dancing in a singing context
• Lady gaga understands her weaknesses and strengths and uses them optimally, which means she shows her strengths and use them to hide or to cover for her weaknesses
• Compared to other singers like Maria Cary or Adel, lady gaga’s voice is not as power full or beauty full so what she did is changing her strategy towards fashion, choreography
• Due to her strategy she was able to come up with a unique style which combine singing, dancing and fashion and this is what we can describe as her purpose.

Question 30

Starbucks case?

Answer 30

• Starbucks strategy is not just selling coffee, their coffee is not the only reason they achieve high profits
• What Starbucks is selling is experience
• The CEO decided to choose the US as a market because back then in the US they didn’t have good coffee and that made it easy for him to achieve high sales.
• Initially he got the idea from Italy (the Baristo) where he found good coffee shops and he wanted to imitate it in the US, so he started to put opera in the coffee shop but the Americans didn’t like opera which made him change his strategy (emergent strategy)
• Now They stand for having a second home, and that’s why they offer wi-fi and nice leather sofa
• They are competitive in US and Asia and not in Europe and Australia, and the reason for that is that in Europe and Australia the know how to make coffee and they already have good coffee shops and they only have shops in these countries in airports for tourists
• The problem that occurred was that when the Mckinzey guy was appointed as CEO he applied the Mackinzey strategy of rapid expanding, this forced strabucks to deviate from their differentiation strategy and started to an extent applying the cost leadership strategy which made Starbucks lose its identity until 2015 when they restored it.

Question 31

Gucci Strategy

Answer 31

They changed their customers from wealthy upper class customers to the fashion conscious young local customers world wide with good quality
They also changed their marketing to using young sexy models
To conclude
The value preposition now of Gucci is fashionable high quality good value ready to wear

Question 32

Ryanair case

Answer 32

Ryan air strategy is cost leadership because they cut the cost and we see that buy their very low prices. the target market is tourists and people who want to pay less
The value chain activities of Ryanair:
• short point to point secondary small airports and this reduces paying standing fees for airplanes compared to larger airports
• standardizing air fleet which means less repairing cost and all the staff and captains have only one model to get used to
• no connecting flights which means no need for a complicated expensive system to organize flights and baggage transfers which also means less cost wages for people who transfer baggage
• limited passenger service which also reduce costs
• not food
• no travel agencies so they don’t pay royalty fees
to conclude, Ryanair value preposition is bringing you low price point to point to your destination