JWI540 Anthem College Phoenix Week 6 Strategic Assessment Executive Brief

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Business Finance

JWI540

Anthem College - Phoenix

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Attached is week 6 lecture, assignment 2 details, and assignment 1 that gives insight to the power move. Power move should be based on company adding additional food and beverage outlets to hotel chain.

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Playing Field, Competition, and Our Organization (Student will update all sections color-coded in RED) Introduction As the Chief Strategy Officer, the purpose of this Executive Briefing is to highlight our current competition in our playing field. Our company, Embassy Suites, is a solid competitor in the playing field when compared to our competition. One thing that sets us apart is our low daily rates and our complimentary evening reception. The competitors, Springhill Suites and Courtyard by Marriott, both have solid rankings with catering to extended stay travelers, offering complimentary breakfast, and all suite rooms. The ultimate goal of this analysis will lead way to recommend a game winning change for the company that will allow us to increase in revenue and profits. Playing Field Company Name Organization within the company Industry Market Size Recommended Playing Field Rationale for Recommended Playing Field Embassy Suites Hotel Division Hospitality Industry The market size estimate for the playing field is plenty. There are several hotels that cater to extended travelers in the playing field that and each offers complimentary breakfast options. Three-star two room suite hotels in mid-atlantic US area that caters to extended stay travelers and serves complimentary breakfast with daily room rate of $100-$250 per night The ability to increase revenue based on adding an additional outlet to the hotel chains. Competitor 1: Springhill Suites Size Most Significant Strength Most Significant Weakness Recent Performance Major Developments? Springhill Suites is similar in size with regard to rooms and hotel size. The hotel is the largest all suite brand under the Marriott portfolio. As a result, the hotel chain is a market leader for their targeted market. Under the Marriott portfolio, largest all suite brand targeted to extended stays, also offers comp breakfast. Hotel offers inviting and modern décor. Over 360 locations. While the hotel offers comp breakfast, they do not offer comp evening reception. Due to large portfolio, with more hotels with modern decor, hotel is winning above competitors. An optional bar plan is available to enhance the evening experience with detailed bar programming to help drive profitability. The Suite Unwind Program offers a seasonal beverage and snack cart (for purchase) in the evenings (Springhill Suites) Competitor 2: Courtyard Marriott Size Most Significant Strength Most Significant Weakness Recent Performance Major Developments? One of the most longstanding and similar in size hotels Longest two room suite chain with solid and consistent reputation of meeting the needs of customers Lacks evening reception Due to their long-standing solid reputation and amount of hotels, the chain is winning Courtyard has introduced game-changing amenities like The Bistro — a leading fast casual restaurant (Courtyard Marriott.com). Our Organization: Embassy Suites Size Most Significant Strength Most Significant Weakness Recent Performance Major Developments? Solid in playing field; hotel offers two room suites, comp breakfast, similar to the competition Complimentary breakfast and added bonus of complimentary evening reception; atrium setting, under Hilton brand. Less modern and inviting décor in rooms; 245 locations which is less than both competitive hotels. Limited F&B outlets that allows for evening dinner. Due to added addition of comp evening reception, this caters to guests and helps level the limited F&B outlets so can be deemed as the company winning in the playing field Digital check in options which allows check in to rooms without having to visit front desk Key Conclusions In conclusion, all hotels effectively cater to their market. However, there are some additions that could be added to bring Embassy Suites ahead of the competition. The brand is expected to add over 100 more hotel in the next few years. This addition will help the company gain more business by being able to offer more availability in more areas throughout the United States. The comp evening reception is one of the most significant strengths that helps the hotel compete effectively. This is one function that causes the hotel to truly stand out as it is the only hotel that offers complimentary reception. While the other hotels offer bundle packages or the ability to pay for evening drinks, Embassy Suites is the only one to offer this feature on a free basis. References: Courtyard Marriott. (2019). Retrieved from https://hotel-development.marriott.com/wpcontent/uploads/2019/09/Courtyard-NoAm-August-2019-One-Pager.pdf Embassy Suites Brand Overview. (n.d.). Retrieved from https://newsroom.hilton.com/embassy/page/embassy-suites-hotels-brand-overview Springhill Suites Alexandria. (2019). Retrieved from https://www.marriott.com/hotels/travel/wasax-springhill-suites-alexandria/ JWI 540: Strategy Assignment 2 Assignment 2: How to Win: Strategic Options Assessment and Recommendation Due Week 8, Sunday, midnight of your time zone (Weight: 25%) Introduction “Strategy means making clear-cut choices about how to compete. You cannot be everything to everybody, no matter what the size of your business or how deep its pockets.” – Jack Welch – Whew! You have generated some great insights about the Playing Field and Competitors and your own Organization from the work you did in Assignment 1. Now you will transition from looking back to looking ahead and develop the primary “How to Win” strategy that will be your game-winning move! Your CEO has clarified that you need to think expansively and recommend a Move that is transformative rather than incremental. To help with this, you have decided to consider each of the seven common winning moves outlined in the Week 6 lecture, and intend to pick one of them as your preferred game winning move. This is an exciting opportunity to actually create the plan instead of just execute the plan and thus you want to do your best work. You know that your Game Winning Move will be a decisive choice for the company. But in choosing this Move (as is the case with any strategic initiative), the company will risk money and resources. If your Move is the right one, you will grow sales and profits and beat your competitors! If your Move is the wrong one, you risk disappointing your investors and letting your competitors gain competitive advantage. Given the importance of this Move, you want to evaluate each of the seven Moves and do a deep dive on the attractiveness and feasibility and risks of your chosen Move. Your CEO is expecting an executive brief in Week 8 that summarizes your analysis of the Move you feel offers the most potential and your conclusion on the Game Winning Move that will you be presenting in Week 10. Instructions for Assignment 2 Important note: We are striving to help you create game-winning moves, and not just evaluate other people’s game winning moves. For this Assignment, do NOT recommend a Move that is identical or very similar to a real-life example for your company. As an example, don’t recommend that Tesla/Apple/Google/Uber/etc. invest in self-driving car technology or recommend that CVS acquire Aetna as those are all in the public domain. Instead, recommend a Move that is novel and innovative for your company. Prepare an executive brief for your CEO which provides the following information: © Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This course guide is subject to change based on the needs of the class. JWI 540 – Assignment 2 (1186) Page 1 of 4 JWI 540: Strategy Assignment 2 1. Opening paragraph summarizing the purpose and content of this brief. 2. Consider the applicability and attractiveness of each of the 7 common winning moves (from the Week Six lecture notes) for your organization and your competitive situation in your chosen Playing Field. List your top three most attractive Moves in order from most attractive to least attractive. 3. For your most attractive Move, provide specifics about the Move you would recommend. For example, if you chose acquisition, who might you buy? If you chose geographic expansion, where would you expand? If you chose discontinuous innovation, what would the innovation be? Explain why you think it will generate financially attractive growth (which includes both incremental revenue growth and commensurate incremental profit growth). 4. How does this Move align (or conflict) with your key strength/weakness identified in your Playing Field template? 5. Most Moves require investments of resources and money. What are some significant investments that would be required to implement this move? Note, we are not looking for dollar figures; instead, we are looking for the key categories of investments (like hiring people, investing in new capabilities, or building new manufacturing plants, etc.) 6. Most Moves have risks that need to be considered. What are the most significant risks and what is your recommended risk mitigation plan? 7. How do you think the competition will react to your Move? 8. Conclude with a final paragraph or two which includes a summary of your Game Winning Move and conclusions on the above topics. Formatting and Submission Requirements • The executive brief submission should be 2 to 3 pages (not including the cover page or appendixes/references page. • Typed, single-spaced, professional font (size 10 – 12) with one-inch margins on all sides. • Include a cover page containing the title of the assignment, your name, professor’s name, and the course title and date. • Include a references page at the end documenting sources and citations used. You must cite three or more current media sources. • Use headings to identify main topics and subtopics. • You are welcome to include charts, tables, and graphs in-text or in an appendix. • Develop and support your research with facts and in-text citations, appendixes, and references. © Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This course guide is subject to change based on the needs of the class. JWI 540 – Assignment 2 (1186) Page 2 of 4 JWI 540: Strategy Assignment 2 RUBRIC Assignment 2 Criteria 1. Recommend a specific Game Winning Move. Weight: 30% 2. Alignment and Investments. Weight: 20% Unsatisfactory Low Pass Pass High Pass Honors The student does not provide a Move ranking and/or unsatisfactorily describes their recommended Move and how it might generate financially attractive growth for the company. The student partially describes their recommended Move, but does not include a Move ranking. The student only partially describes how the Move might generate financially attractive growth for the company. The student rank orders 3 Moves and satisfactorily describes their recommended Move and satisfactorily describes how the Move might generate financially attractive growth for the company. The Move might or might not be reasonably logical or reasonably feasible, but must derive from the 7 common Moves. The student rank orders 3 Moves and completely describes their recommended Move with sufficient specificity to provide a clear understanding of the Move. Student also completely describes how the Move might generate financially attractive growth for the company. The Move must be reasonably logical and reasonably feasible and derive from the 7 common Moves. The student rank orders 3 Moves and exemplarily describes their recommended Move with sufficient specificity to provide a clear and unambiguous understanding of the Move. Student also exemplarily describes how the Move might generate financially attractive growth for the company. The Move must be reasonably logical and reasonably feasible and derive from the 7 common Moves. The student does not include or unsatisfactorily describes how the Move relates to their company’s strength/weakness and significant investments that might be required. The student partially describes how the Move relates to their company’s strength and weakness. The student partially describes significant investments that might be required. The student satisfactorily describes how the Move relates to their company’s strength and weakness. The student demonstrates satisfactorily describes some significant investments that might be required. The student clearly and concisely describes how the Move relates to their company’s strength and weakness. The student demonstrates sound logic and reasoning on some of the significant investments that might be required. The student clearly and concisely describes how the Move relates to their company’s strength and weakness. The student demonstrates exemplary logic and reasoning and foresight on the most significant investments that might be required. © Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This course guide is subject to change based on the needs of the class. JWI 540 – Assignment 2 (1186) Page 3 of 4 JWI 540: Strategy Assignment 2 Criteria 3. Risks and competitive response. Weight: 20% 4. Provide an effective and persuasive conclusion that is “fit for use” for a CEO. Unsatisfactory Weight: 15% Pass High Pass Honors Student does not include or unsatisfactorily demonstrates risk mitigation. Student unsatisfactorily anticipates competitive response. Student partially demonstrates anticipation of the risks of the Move and partially provides risk mitigation plans. Student’s competitive response predictions partially address the likely outcomes. Student demonstrates satisfactory anticipation of the risks of the Move and provides satisfactory risk mitigation plans. Student’s competitive response predictions are not unreasonable. Student demonstrates good anticipation of the most significant risks of the Move and provides sound risk mitigation plans. Student’s competitive response predictions demonstrate sound logic and reasoning. Student demonstrates exemplary anticipation of the most significant risks of the Move and provides cogent and novel risk mitigation plans. Student’s competitive response predictions demonstrate exemplary logic and reasoning. The conclusion is missing or presents an unsatisfactory summary of the Move, risks, and investments. The conclusion partially summarizes the Move and partially addresses other factors like risks and investments. The conclusion is a satisfactory synopsis of the key elements of the Move. Conclusion satisfactorily asserts the recommended move, while simultaneously providing some perspective on risks and/or investments. The conclusion is a complete and succinct synopsis of the Move. Conclusion persuasively asserts the recommended move, while simultaneously providing reasonable fair-balance on investments and risks. The conclusion is an exemplary and succinct synopsis of the Move. Conclusion persuasively asserts the recommended move, while simultaneously providing reasonable fairbalance on investments and risks. Excised from the brief, the conclusion paragraphs could effectively be used as the elevator pitch for the Move. Brief is missing significant content and generally unprofessional in appearance or due to multiple mechanics and usage errors. Brief is partially well-written and semi-professional in appearance. Several mechanics and usage errors make parts of the text difficult for the reader to understand. Some recommendations, assertions, and facts are supported with in-text citations, appendixes, and references. Brief is satisfactorily well-written and generally professional in appearance. There may be a few mechanics and usage errors, but they do not have a major impact on the flow. Many recommendations, assertions, and facts are supported with in-text citations, appendixes, and references. Brief is succinct and well-written and within the threepage limit (excluding cover, references, and appendices) and professional in appearance. It includes a cover page. Mechanics and usage errors, if any, are minor and have no impact on the flow. Most recommendations, assertions, and facts are supported with in-text citations, appendixes, and references. Brief is succinct and well-written and within the threepage limit (excluding cover, references, and appendices) and very professional in appearance. It includes a cover page. There are no mechanics or usage errors. All recommendations, assertions, and facts are exemplarily supported with intext citations, appendixes, and references. Weight: 15% 5. Present information professionally within the three-page limit, and support recommendations, assertions, and facts with in-text citations, appendixes, and references. Low Pass Most recommendations, assertions, and facts are not supported with in-text citations, appendixes, and references. © Strayer University. All Rights Reserved. This document contains Strayer University confidential and proprietary information and may not be copied, further distributed, or otherwise disclosed, in whole or in part, without the expressed written permission of Strayer University. This course guide is subject to change based on the needs of the class. JWI 540 – Assignment 2 (1186) Page 4 of 4 JWI 540: Strategy Week Six Lecture Notes © Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWI 540 (1192) Page 1 of 8 CREATING MEANINGFUL DIFFERENTIATION What it Means Failure to create a value proposition that is meaningfully different from those of your competitors will reduce your business model to a commodity play often with a race to the bottom on pricing. When thinking about meaningful differentiation, however, not every winning move requires a breakthrough invention like the iPhone. There are plenty of companies that make money in sectors that are commoditized (think of the retail gasoline business, for example). However, even in highly commoditized and mature industries, there are still opportunities for meaningful differentiation. Why it Matters • If your self-assessment shows that your organization is not focused on making dynamic, gamechanging moves, then this is a significant warning sign that whatever competitive advantage you currently hold is vulnerable to erosion. • It’s easy to underestimate the power and capabilities of competitors. Too often, the assumption is that rivals aren’t getting faster, better and more innovative. This is how a company can lose its competitive edge in a short timeframe. • The future of your business must always be at the top of a leader’s mind: it enables organizations to make smart moves faster than their competition. “Getting the right strategy means you have to assume your competitors are damn good, or at the very least as good as you are, and that they are moving just as fast or faster.” “If the rate of change outside exceeds the rate of change on the inside, the end is near.” Jack Welch © Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWI 540 (1192) Page 2 of 8 WHAT IS “MEANINGFUL” DIFFERENTIATION? For differentiation to be meaningful, it must be something that makes your offering stand out, AND it must be something that matters enough to customers that they are willing actually buy it. Any strategic move aimed at creating meaningful differentiation must increase your competitiveness in the market and improve your customer loyalty. There are plenty of engineers and designers who are passionate about the products they create and support who will advocate for ides that make the products better, but that’s not really what’s at the heart of this. The real question is whether the move to make something better results in an offering that matters to your customers and is a something that is not easily copied. The real question in the pursuit of meaningful differentiation is the one that was introduced last week: “What can you do to change the playing field?” 7 WAYS TO WIN Below is a brief outline of seven of the most common (and proven) ways that organizations can create competitive advantages and secure a dominant place in the market. The list is not exhaustive, and you may discover that some strategists divide things up a little differently. That’s fine. The purpose is not to force potential strategic moves into overly rigid categories. It is to make use of groupings as a way to help you create and evaluate a checklist of options that might point to the right growth paths for your business. Few strategic moves are undertaken in isolation. While many will be centered on a single core focus area, most will have other elements (such as branding) working together to support the initiative. When considering any strategic move, you will have to assess not just whether the idea could be a money maker, but also whether it could actually backfire by distracting your organization from its core business. You also have to assess what it would take to implement the move. Is it simple or complex? Is the cost high or low? Is it risky or relatively safe? Does it align with the mission, or does it require the organization to redefine why it is in business? As you review the following, keep in mind that the best moves are those that actually expand the market by bringing in new customers, rather than just finding ways to get a larger share of an existing pie. Geographic Expansion One of the most straightforward ways to grow your business is to expand geographically. You can think of plenty of examples of such growth, including Target stores expanding into Mexico, or a local or regional © Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWI 540 (1192) Page 3 of 8 company expanding nationally. The logic is that if something is working well in one market, then reproducing the success elsewhere should be an obvious path to growth – just keep repeating what worked. However, to say that this type of move is “straightforward” is not to say it is easy. The factors that have led to success in a particular city, region, or country may be quite different than those in the new geography. Further, expansion of any sort takes resources. Attempting aggressive geographic growth without adequate funding and a good plan is an almost guaranteed recipe for failure. If you are considering a geographic expansion for your business, you will need to carefully assess a wide range of questions, including: • • • • • • How do the competitive dynamics in your new market compare to your current one? How will the expansion be managed? Are there supply chain or quality-control challenges that could surface with the new geography that are not present in your current market? Is the customer base different in the new geography? What will the management and ownership structure look like? Is franchising a way to go? If you are considering an international expansion, a whole additional set of issues comes into play including taxation, regulation, cultural and legal differences, etc. Are you prepared to address these issues? Still, despite all this, geographic expansion (when properly managed) is one of the most proven pathways to generating growth, and one worthy of consideration for any business that has the potential for scalability. New Price Tiers Outside of commodity sales or products that have very tightly defined performance requirements (think about any products that have strict safety standards), nearly all businesses will position their offerings along a price-performance or price-quality continuum. Typically, there will be groups of customers who, given a range of choices, will self-select the price-performance intersection that is right for them. The automotive industry is a classic example of this. Toyota built a successful business selling reasonably priced cars that were reliable. Believing there was an opportunity in the luxury segment, they developed the Lexus brand, which has been hugely successful for them. Price tier moves can go in the other direction, also. Mercedes and other German automotive brands that were historically known (at least in the U.S.) for top-of-the-line cars started making entry-level models. The objective with these moves was not just to sell more cars to a segment that was not part of their current market, but to build loyalty by getting younger, less affluent customers into the brand earlier, and then moving them up into their more premium models as they got older and their income rose. In reality, this is exactly what General Motors was doing back in its prime with its suite of offerings from Chevy to Pontiac to Oldsmobile to Buick, and eventually to Cadillac. While not every customer had the means to move all the way to the top, the ability for GM to deliver a wide range of solutions to the same customers was (at least for a while) a successful example of levering pricing tiers to drive brand loyalty. © Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWI 540 (1192) Page 4 of 8 As you consider the potential of developing a new pricing tier for your offerings, you will need to assess: • Whether you can actually deliver a higher or lower tier of offerings. There may be certain minimum performance demands that (presently) cannot be met at a lower price point. Or there might be performance limits that cannot be surpassed at any price point. Or, if they can be surpassed, the cost is beyond what the market is willing to pay. • How an up-market or down-market offering will be perceived. A mid-level brand seeking to enter into a premium-tier space will typically have a lot of work to do to build the reputation and status needed to succeed. Conversely, premium brands considering a less expensive offering have to assess whether such a move will jeopardize the brand. Think about ultra-premium brands. What might happen if Rolls-Royce or Bentley started offering modestly priced, entry-level cars? What if Rolex started marketing a $500 wristwatch? Vertical Integration Vertical integration refers to supply chain moves in which companies take over additional parts of the production (and potentially, distribution) process. As you evaluate your supply chain, and how your product is created and delivered to the customer, think about ways of eliminating interim steps or completely changing how your customer purchases or receives your product. This tactic can be one of the most powerful ways of changing the playing field. Supply chain optimization became a hot topic in the mid-seventies through the 80s. A whole consulting specialization was built around this, but the principles are at least as old as the Industrial Revolution. In the early 20th century, companies like Ford owned almost the entire production chain from raw materials to finished products. At one point, Ford even owned the land and harvested the rubber that went into tires. But one doesn’t have to look nearly that far back. There are plenty of more modern examples, such as Apple deciding to make their own chips instead of buying from Intel. Vertical integration strategies are about improving business alignment in ways that allow profits generated from previously outsourced (or inefficient) production to be realized internally. These operational efficiencies result in improvements in pricing, speed, or quality. Such efficiencies, if properly exploited, can create value that is meaningful if passed on to your customers. Additionally, vertical integration can increase supply chain control and security. Most suppliers sell to more than one single buyer. That means that buyers (even ones with a lot of power, like Walmart or Apple) still have to purchase from vendors who have other customers. These competing demands on the seller can lead to delays and risks, including quality control issues. The opposite of vertical integration is outsourcing – taking a part of the production process that is currently done in-house, and finding an external provider to take over the task. Specialized providers are often more efficient at performing these tasks, since that is all they do. It is their core competency, and they have developed tools and expertise that would take non-specialists years to replicate. © Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWI 540 (1192) Page 5 of 8 If you are considering a vertical integration (or an outsourcing) move for your business, you’ll have to assess some important questions: • What evidence do you have that you possess (or could efficiently develop) the expertise and capacity to take over a production phase currently handled by a supplier? • Even if you can (profitably) take it over, should you? If the profit margins are lower than those of your core business, or if taking it over creates a distraction that draws resources and focus away from your core business, then a move that looks good on paper could actually hurt the business. • If you do make the move, what will it allow you to do now that you couldn’t do before, and what would stop your competitors from making a similar move, thus negating any advantage you had gained? Moving into Adjacent Product Segments Expanding into adjacent product groups can be a winning move for companies whose products are closely associated with other functions. Think about Nike expanding from clothes/shoes into making golf clubs/golf balls. The success of these sorts of moves typically depends on being able to capitalize on one or both of the following: • Leveraging a strong brand connection. This occurs when customers like a brand so much for its core offerings, that they are open to expanding their interaction with it into other areas. • The second common way to move into an adjacent product segment is the “convenience play.” Consider, for example, a company that only sold furniture, but expands to also sell design services, or the gas station that adds a car wash. Is it the best car wash in town? Probably not. But if you can add the purchase of a car wash at the pump when you finish filling up, and it’s here and now, then why not? It’s not so much about a strong brand connection. It’s about the convenience. If a customer can buy two items from one supplier, it may just simply be easier than managing two separate buying processes. New Distribution Channels Another way companies create meaningful differentiation is through identifying a new way to distribute their products or services. Amazon and Netflix enjoyed tremendous growth by leveraging novel ways of distributing existing products and becoming experts in their fields. Amazon accomplished this by offering a vast array of consumer products at lower prices, and shipping directly to their customers' doorstep. In addition to the convenience of home shipping, Amazon eliminated the "middle man," local stores, and could offer cheaper prices. © Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWI 540 (1192) Page 6 of 8 Netflix accomplished a similar feat by making movies available first by mail, and then through the Internet through a variety of devices. This paradigm shift in how consumers could access movies stole a huge market share from the largest vendor of movie rentals, Blockbuster, ultimately leading to its bankruptcy. Building a winning move around opening new distribution channels is, in some ways, similar to moving into a new geography, in that the core principle is to get your same product offerings in front of more buyers. Another example of this is Iams dog food expanding from specialty pet stores into mass market grocery stores. Originally a premium product, sold only through specialty stores, Iams was well-liked by its customers, but a significant number of pet owners wanted the convenience of being able to buy their dog food at the same time and place that they bought their (human) groceries, and were unwilling to make a separate trip to a specialized retailer. Opening new distribution channels can enable businesses to gain access to new markets with little to no disruption to the current function. As such, this is often a lower-risk strategy. However, lower-risk does not mean no-risk. Opening new channels can take considerable work to not only identify viable channels, but negotiate distribution terms, and then, once the new channel is operational, manage the channel. There may be pricing concessions required that can negatively impact margins, and there is a possibility of a backlash from current distributors who feel your new sales channels are a threat to their business and an insult to their loyalty. But generally speaking (and despite these cautionary factors), the more ways you can get your products to qualified buyers, the better. As you explore ideas to open new distribution channels for your business, you will want to look at all the ways that your current competitors get to market. You will also need to assess whether it is worth it to gain market share if your margins are reduced to the point that either your quality or ability to meet demand is threatened. Discontinuous Innovation Every once in a while, individuals and companies hit upon an idea that is so revolutionary, it disrupts the way that business is done. Often, these breakthroughs are technological in nature, such as Tesla launching battery-powered autos. But other times, the breakthrough is less about a new technology than it is about creating value for customers through a different operating model, such as Southwest Airlines building a business around point-to-point flights, standardized planes, and quick turnarounds at the gate. It’s well and good to always be on the lookout for innovations that have the potential to disrupt, but if you don’t have any idea of what the breakthrough would even look like, or the R&D budget needed to fund it, this may not be a viable winning move at this point in time. Discontinuous innovation is a wonderful way to gain market share. Every company should spend some time thinking about what it can do differently to totally disrupt the market, but changes in the very way that products function (Apple’s iPhone) or that customers buy (Amazon) are rare. Investing too much energy into seeking groundbreaking “eureka” moves can distract from continuous improvement, and from being a good operator of the current business. © Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWI 540 (1192) Page 7 of 8 As you assess whether there is a potential for discontinuous innovation for your business, you have to: • • • • Identify the most fundamental problems that are just not getting addressed with the current solutions. Determine, if you were to innovate and disrupt, how difficult it would be for your competitors to copy your move. Look for ways to get more out of your team with brainstorming sessions or with incentive programs that reward new ideas. Look outside your industry for ideas that could be transferable. Mergers & Acquisitions Especially in crowded industries, one of the most dramatic and powerful ways to change the playing field is to acquire, or merge with, a competitor. Companies can benefit from economies of scale and by pooling resources together to increase efficiency. They can also broaden their product portfolio and possibly their geographical reach. As you evaluate your possible strategic direction, give some serious thought to whether an acquisition or a merger may be the most effective way to gain competitive advantage. Don’t let old biases and grudges blind you to the potential of what such a move could accomplish. The more commoditized your industry, the more likely your company’s size may be important for success. In fact, M&A is such a significant pathway to market leadership, that we will focus on it in Week 8 of our course. There are numerous reasons why an M&A move can be a winning one, but the majority of these come down to one single thing – efficiency. This pursuit of efficiency typically falls into one of three categories: • Economy-of-scale drivers where being larger enables companies to negotiate better deals with suppliers or distributors, or where manufacturing or selling in larger quantities creates better operating margins. • Ending a futile competition in a market without a growing pie. Think about Sirius merging with XM Radio, or about the numerous airline mergers that have taken place over the last two decades. • Acquiring a capability (or access to a market segment) that would take longer or cost more to develop organically. © Strayer University. All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. JWI 540 (1192) Page 8 of 8
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