JWI 540 SU Week 6 Strategic Options Assessment and Recommendation Plan

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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 – Congratulations! In your first executive brief, you generated some great insights about the playing field and competitors and how your own organization stacks up. Now you will transition from looking back to looking ahead. You will develop your “How to Win” strategy that will feature 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 Notes and pick one of them as your preferred game-winning move. 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 decision, you will evaluate each of the seven common winning moves and then do a deep dive into the attractiveness, feasibility and risks of your chosen strategy. Your CEO is expecting your second executive brief in Week 8 to summarize your analysis of the strategy you believe offers the most potential and your recommendation for the game-winning move that you will be presenting in Week 10. Instructions for Assignment 2 Your objective is to create a game-winning move, not just evaluate other people’s moves. For this assignment, do NOT recommend a move that is identical or very similar to a real-life move made by your company. For 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. © 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 document is subject to change based on the needs of the class. JWI 540 – Assignment 2 (1214) Page 1 of 6 JWI 540: Strategy Assignment 2 Craft your second executive brief to include the following: 1. An opening paragraph summarizing the purpose and content of the brief. 2. Rank Order Your Three Top Moves: Review the applicability and attractiveness of each of the 7 common winning moves (from the Week 6 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. Detail your Recommended Move: For your most attractive move, provide details about what you would recommend as a part this move. 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. Alignment of the Move to Organizational Strength and Weakness. How does this move address your key strength/weakness identified in your playing field assessment from Assignment 1? 5. Required Investments. Most strategic initiatives require an investment of resources and money. What are some significant investments that would be necessary to implement this move? Note, we are not looking for dollar figures; instead, we are looking for the key categories of investments such as hiring people, investing in new capabilities, building new manufacturing plants, etc. 6. Risks and Risk Mitigation. Most game-changing moves are bold initiatives and have risks that need to be considered. What are the most significant risks and what is your recommended risk-mitigation plan? 7. Competitive Response: How do you think the competition will react to your move? 8. Concluding statement. Conclude with a brief a summary of your game-winning move and conclusions on the above topics. Consider how the move effectively balances investments and risks. How will the move position your company against the competition? 9. References: Include in-text citations for all data, assertions, and facts, and a corresponding reference list. Appendices are allowable if additional supplemental information is needed for the brief. © 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 document is subject to change based on the needs of the class. JWI 540 – Assignment 2 (1214) Page 2 of 6 JWI 540: Strategy Assignment 2 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 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 document is subject to change based on the needs of the class. JWI 540 – Assignment 2 (1214) Page 3 of 6 JWI 540: Strategy Assignment 2 RUBRIC: Assignment 2 Criteria 1. Describe and rank three the top potential game winning moves and recommend a preferred game-winning move. Unsatisfactory Does not provide any ranking and/or unsatisfactorily describes a recommended move and how it might generate financially attractive growth for the company. Weight: 30% 2. Explain the alignment of recommended move to a core company strength and weakness and identify necessary Investments Does not include or unsatisfactorily explains how the move relates to the company’s strength and weakness or does not identify significant investments that will be required. Weight: 20% Low Pass Pass Does not include a move ranking and/or is missing a ranked option. The 3 moves are ranked and satisfactorily described. Partially describes recommended move. Recommended move is identified and how it will generate financially attractive growth is satisfactorily explained; however, there is a lack of detail in one of the three areas: clarity, feasibility or logic. A basic explanation for how the move might generate financially attractive growth for the company is provided; however, the move lacks sufficient detail that impacts two of the three areas: clarity, feasibility, or logic. Partially explains how the move relates to the company’s strength and weakness. Satisfactorily explains how the move relates to the company’s strength and weakness. May include a basic description of investment but lacks more than one important investment category. Provides satisfactory description of some of the significant investments that will be required but may be missing at least one important investment category. High Pass Honors The 3 moves are well described and clearly ranked. The 3 moves are exceptionally well described. Recommended move has wellarticulated specificity to provide a clear understanding of how the move will generate financially attractive growth for the company. Recommended move is innovative and presented in a clear and unambiguous way. The move is reasonably clear, logical and feasible Excellent rationale for how the move will generate financially attractive growth for the company. The move is clear logical and feasible Clearly and concisely explains how the move relates to the company’s strength and weakness. Clearly and concisely explains how the move relates to the company’s strength and weakness. Demonstrates sound logic and reasoning regarding most of the significant investments that will be required. Demonstrates excellent logic, reasoning and foresight about the most significant investments that will 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 document is subject to change based on the needs of the class. JWI 540 – Assignment 2 (1214) Page 4 of 6 JWI 540: Strategy Assignment 2 Criteria 3. Identify risks and anticipated competitive response Weight: 20% Unsatisfactory Does not include, or unsatisfactorily demonstrates anticipation of the most significant risks of the move Low Pass Explains at least one risk associated with the move but these risks may be lacking in detail or logic. or Does not include risk mitigation plans for the identified move. 4. Provide an effective and persuasive conclusion that is “fit for use” for a CEO. Risk mitigation plans may not be complete, logical, or aligned with the risks. . Unsatisfactorily anticipates competitive response. Competitive response predictions partially address the likely outcomes but are overly vague. Conclusion is missing or presents an unsatisfactory summary of the move, risks, and investments. Conclusion partially summarizes the move and partially addresses other factors of risks and investments. Weight: 15% Pass High Pass Clearly explains at Clearly and logically least two risks of the explains most of the move. significant risks of the move. Provides logical risk mitigation plans for Provides cogent at least one of the and novel risk identified risks. mitigation plans for most of the Competitive response predictions identified risks. are reasonable and include an acceptable amount of detail. Conclusion is a satisfactory synopsis of the key elements of the move and satisfactorily asserts the recommended move while simultaneously providing some perspective on risks and/or investments. Honors Clearly and logically explains the most significant risks of the move. Provides cogent and novel riskmitigation plans to address each identified risk. Competitive response predictions demonstrate sound logic and are clearly explained. Competitive response predictions demonstrate exemplary logic and reasoning and are clearly explained. Conclusion presents a complete and succinct synopsis of the move and persuasively asserts the recommended move while simultaneously providing a reasonable, fair and balanced position on investments and risks. Conclusion is extremely well crafted and provides a clear and succinct synopsis of the move. Persuasively asserts the recommended move while providing a reasonable fair and balanced position on investments and risks. Excised from the brief, the conclusion could effectively be used as the elevator pitch for the move. © 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 document is subject to change based on the needs of the class. JWI 540 – Assignment 2 (1214) Page 5 of 6 JWI 540: Strategy Assignment 2 Criteria 5. Present information professionally within the three-page limit, and support recommendation, assertions, and facts with intext citations, appendixes, and references. Weight: 15% Unsatisfactory Low Pass Brief is missing significant content or is generally unprofessional in appearance due to multiple grammatical and mechanical usage or spelling errors. Brief is partially well-written and professional in appearance. Brief is well-written and generally professional in appearance. Brief is succinct and well-written and professional in appearance. Has several grammatical and mechanical usage or spelling errors that make parts of the text difficult for the reader to understand. Conforms to pagelimit and formatting requirements Conforms to pagelimit and formatting requirements There may be a few grammatical and mechanical usage errors, but they do not have a major impact on the flow. Grammatical and mechanical usage errors, if any, are minor and have no impact on the flow. Most recommendations, assertions, and facts are not supported with intext citations or references. Some recommendations, assertions, and facts are supported with in-text citations and references. Pass Most of the recommendations, assertions, and facts are supported with in-text citations and references. High Pass The majority of recommendations, assertions, and facts are supported with in-text citations and references. Honors Brief is succinct and exceptionally well-written and professional in appearance. Conforms to pagelimit and formatting requirements There are no grammatical and mechanical usage errors. All recommendations, assertions, and facts are exemplarily supported with intext citations 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 document is subject to change based on the needs of the class. JWI 540 – Assignment 2 (1214) Page 6 of 6 TO: Insert name of CEO of selected Company FROM: Your name DATE: Today’s date RE: How to Win: Strategic Options Assessment and Recommendation (Student to update all sections color-coded in RED and change color to BLACK) 1. Introduction Include a brief opening paragraph that summarizes the purpose and key content of this executive brief. 2. Suggested Ranked Moves: The three Game-Winning Moves I considered are in rank order: • • • Top-ranked move [Summarize the best move from Week 6 lecture notes with a few details to explain. 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?] Second-ranked move [Summarize your second-best winning move as described above] Third-ranked move [Summarize your third-best winning move as described above] 3. Recommended Move Expand on your top ranked move from the list here. Provide your rationale on why you think it will generate financially attractive growth (including both incremental revenue growth and commensurate incremental profit growth). 4. Alignment Describe how your top-ranked move aligns (or conflicts) with your key strength/weakness identified in your Playing Field template? 5. Required Investments 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. Risks and Risk Mitigation Most moves have risks that need to be considered. What are the most significant risks and what is your recommended risk mitigation plan? How do you think the competition will react to your move? 7. Competitive Response Explain how you think the competition will react to your Move. What counter moves might they make? How much, if any, uncontested space will your move create and for how long? 8. Conclusion Provide an effective persuasive concluding paragraph that is “fit for use” for a CEO. This summary should assert the recommended Move while simultaneously providing reasonable and fair balance on investments and risks. If this conclusion is excised from the executive brief, it could effectively be used as the elevator pitch for the Move. 9. References Include in-text citations for all data, assertions, and facts, and a corresponding reference list. Appendices are allowable if additional supplemental information is needed for the brief. Playing Field, Competition, and Our Organization TO: FROM: IKEA Company Rickiea Small DATE: August 11, 2021 RE: Playing Field, Competition & Our Organization 1. Introduction and Playing Field Description In this report, I propose a move that will allow my company to maintain steady revenue and profit growth while simultaneously creating an advantage over its competitors. The focus will be on finding an innovative cost structure within the furniture retail industry. Ikea is still one of the largest retailers that makes ready-to-assemble furniture. IKEA continues to grow and we want to make sure it stands out within the furniture retail sector. This report discusses the playing field, the strengths and weaknesses of the other two retailers, and recommendations for strategic growth. a. Company Name and Organization within the company b. Industry c. Market Size d. Playing Field e. Rationale for Selection 2. Competitive Analysis IKEA 78 years old Dutch-based Swedish multinational company deals in furniture products globally. It was started as a retail store in 1958 in Smaland, Sweden, and has grown to be the world's largest furniture retailer due to its Scandinavia style (2). The company has over 250 stores in Europe and approximately 100 stores in other regions. The company operates in the retail industry. The retail industry mainly deals in sales of goods and services to the consumer that includes but is not limited to food, motor vehicles, apparel, furniture, and electronics. Furniture Retail Industry The retail industry is one of the largest industries that integrate both online, and offline channels hence operate an omnichannel model. It has a larger market size generating $ 25 trillion annually, and is projected to reach $ 27 trillion by 2022. Figure 1 illustrates the market size of the industry. Figure 1: Market Size of the Retail Industry(3) The segment of the retail industry can be characterized in terms of age, occupation, income level, and lifestyle. It mainly targets young adults and students, individuals earning between $ 15000-$ 50000, and budget-conscious families. The paper seeks to recommend a gamewinning move that will allow your IKEA company to achieve strong revenue and profit growth and to create a sustainable competitive advantage. I selected this segment owing to its population size. According to the latest statistics, the majority of the world's population are young adults seeking quality and affordable furniture. Competitor 1: Amazon a. Size b. Most Significant Strength and Weakness c. Competitive Impact of Strength and Weakness. d. Recent Performance e. Major Developments The company faces competition from Ashley Furniture Industries controls 20% of the market share. Other companies such as Steelcase Inc., Man Wah Holding, and La –Z-Boy Incorporated controlling the remaining share. This can be illustrated as shown below. Figure 2: Household Furniture Market, Key Competitors Market Share(Kim, & Lee, 2020) High quality is their most significant strength. Poor brand recognition is the most significant weakness of the company. High quality as a strength positively impacts them in terms of increased sales volumes. Low brand recognition, on the other hand, has negatively impacted the company in terms of reduced sales volumes. Impacts of the Recent Results of the Competitors on the Playing Field. Their recent performance indicates that they are generally winning the playing field. This is evident in Amazon’s sharp increase in revenue amid the pandemic. According to Aversa et al. (1), Amazon recorded net revenue of $108. 518 billion by 2021. Amazon company has introduced the use of a cloud technology platform to improves its ecommerce trade. The use of cloud technology platforms has enabled the organization to develop a key competitive advantage that has resulted in an increase in total revenue by 43.8% as of 2021. Figure 5 below shows the impacts of the new technology on Amazon's financial performance. Figure 5: Amazon’s Net Income(3) Competitor 2: Walmart a. Size b. Most Significant Strength and Weakness Walmart had a total of 11,443 retail stores throughout the world as of January 31, 2021. Additionally, the company operated 404 distribution facilities. In total Walmart operated 11,847 stores. (4) Walmart's revenue amounted to 559 billion U.S. dollars worldwide (5) Walmart's global net sales in 2020 reach 519 billion USD. (6) Walmart helps people around the world save money and live better anytime and anywhere by providing the opportunity to shop in retail stores. Walmart is accessible and close by in your local neighbor, which is very convenient to its customers. Walmart boasts some of the highest revenues of any company anywhere in the world. It competes with companies like Amazon, Alibaba, eBay, and more for its total sales figures, and it is frequently featured in the list of companies with the greatest quantity of storefronts across the globe. In fact, in a way, Walmart has made its very name on size: its retail locations are known for their massive layouts and a staggering amount of products to choose from.(7) c. Competitive Impact of Strength and Weakness. d. Recent Performance For a company that boasts such powerful sales figures and revenues, the profit margin for Walmart is actually relatively low. Offering such competitive prices to consumers, even with lower production prices at the outset, means that the relative profit for each item sold is much lower than at other retailers. Walmart relies on the vast economies of scale involved in its selling machine to achieve the high sales and profit figures it enjoys, which may be reliable but are not the most profitable terms to operate under.(7) Walmart's supply chain management strategy has provided the company with several sustainable competitive advantages, including lower product costs, reduced inventory carrying costs, improved i-store variety and selection, and highly competitive pricing for the consumer. Considering the total growth of the company, I would say performance is very well. The firstquarter revenue and profit for 2021 increased. Walmart took in $6.34 billion above those estimates. Walmart saw a significant boost in e-commerce sales across its various outlets. ~Total revenue: $138.3 billion, an increase of $3.7 billion, or 2.7% YOY ~Adjusted EPS: $1.69 ~Operating income: $6.9 billion ~37% growth in U.S. Walmart e-commerce sales ~47% growth in U.S. Sam’s Club e-commerce sales ~49% growth in Walmart International e-commerce sales (8) e. Major Developments Online grocery pickup is one of the major development. This makes it more convenient for customers to shop for items needed or wanted while never having to go inside the store to gather items themselves. 3. Organizational Assessment a. Size b. Most Significant Strength and Weakness c. Competitive Impact of Strength and Weakness. d. Recent Performance e. Major Developments We are the largest company in household furniture controlling up to 60% of the total market share. Affordability is its most significant strength Low quality is the most significant weakness of the company. Affordability as a strength positively impact the organization in terms of increased sales volumes and profits as a majority of the target markets are young adult and students who earn between $ 15000-$ 50000 and are budget-conscious. (3) Low quality, on the other hand, has negatively impacted the company in terms of reduced sales volumes. Our recent performance indicates that the company is losing on the playing field. Based on the recent statics, the company only recorded a net income of 1.19 billion euros, almost 50% less than the 4.2 billion euros recorded in 2016. Figure 4 illustrates IKEA's recent financial performance. Figure 4: IKEA Net Income(3) The company has introduced a green business model. The green business model has provided the organization with a key competitive advantage in terms of attracting new customers that are environmentally conscious. 4. Key Conclusions IKEA 78 years old Dutch-based Swedish multinational company deals in furniture products globally. The segment of the retail industry can be characterized in terms of age, occupation, income level, and lifestyle. It mainly targets young adults and students, individuals with lower income, and budget-conscious families. Affordability is its most significant strength, while low quality is the most significant weakness of the company. The other competing firms, however, have high quality as their most significant strength, while poor brand recognition is their most significant. References 1. Aversa, P., Haefliger, S., Hueller, F., & Reza, D. G. (2020). Customer complementarity in the digital space: Exploring Amazon’s business model diversification. Long Range Planning, 101985. 2. Batarfi, S., &Attia, A. (2021). MEASURING THE EFFECT OF QUALITY MANAGEMENT PRACTICES ON COMPANY FINANCIAL PERFORMANCE-A CASE STUDY ON IKEA. PalArch's Journal of Archaeology of Egypt/Egyptology, 18(15), 113-121. 3. Kim, S. Y., & Lee, S. M. (2020). Vying with IKEA: HANSSEM’s Competitive Advantage at Marketing Frontier. ASIA MARKETING JOURNAL, 22(2), 87-98. 4. Walmart stores worldwide 2021 (Published by Statista Research Department & 11) https://www.statista.com/statistics/256172/total-number-of-walmart-stores-worldwide/ 5. Walmart annual revenue 2012-2019 Published by Statista Research Department & 11 https://www.statista.com/statistics/555334/total-revenue-of-walmart-worldwide/ 6. Walmart's revenue 2006-2020 (Published by Statista Research Department & 11) https://www.statista.com/statistics/183399/walmarts-net-sales-worldwide-since-2006/ 7. SWOT Analysis for Walmart (2021): 27 Big Strengths and Weaknesses (Gaille) https://brandongaille.com/walmart-swot-analysis/ 8. Walmart Q1 2021 earnings: retail giant beats on revenue and EPS as e-commerce sales soar (Grothaus) https://www.fastcompany.com/90637819/walmart-q1-2021-earnings-retail-giant-beats-on-revenue-andeps-as-e-commerce-sales-soar 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 – Lecture Notes (1214) Page 1 of 11 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, such as the retail gasoline business. 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, this is a significant warning sign that whatever competitive advantage you currently hold is vulnerable to erosion. • It is easy to underestimate the power and capabilities of competitors. Too often, the assumption is that rivals are not 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 on the 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 – Lecture Notes (1214) Page 2 of 11 YOUR STARTING POINT 1. Looking at the history of your organization, has your success been fueled primarily by organic growth or by acquisitions and partnerships? 2. Will the business model/product mix that has driven your past success continue to be viable for future growth? Why? 3. Are the core offerings of your organization meaningfully different from those of your competitors? 4. Is the rate of change within your organization consistently higher than that of your competitors? How can you validate that? 5. Do you have the capabilities required to disrupt the playing field to your advantage by leveraging only the resources that you currently have within your organization? 6. Is your organization open to developing new offerings or establishing strategic alliances with other organizations? © 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 – Lecture Notes (1214) Page 3 of 11 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 to 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. They will advocate for ideas that make the products better, but that is not really the heart of the matter. The real question is whether the move to make something better results in an offering that matters to your customers and is not easily copied. Sherman, in chapter 6 of If You’re in a Dogfight, Become a Cat! notes that “[m]eaningful differentiation should be a company’s consummate strategic objective. No business can succeed long-term unless it maintains a compelling consumer value proposition.” (p. 131). 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 Here is a brief outline of seven of the most common 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 their approaches 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. Besides, 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 make money, 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. 1. 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 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. © 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 – Lecture Notes (1214) Page 4 of 11 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, an 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. 2. New Price Tiers Outside of commodity sales or products that have very tightly defined performance requirements, such as 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, too. Mercedes and other German automotive brands that were historically known 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. It was also to build loyalty by getting younger and less affluent customers into the brand earlier, and then moving them up into their more premium models as they got older and their incomes 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, GM’s ability to deliver a wide range of solutions to the same customers was – for a while – a successful example of levering pricing tiers to drive brand loyalty. 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 cannot presently be met at a lower price point. There might © 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 – Lecture Notes (1214) Page 5 of 11 be performance limits that cannot be surpassed at any price point. If they can be surpassed, the cost may be 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? 3. Vertical Integration Vertical integration refers to supply chain moves in which companies take over additional parts of the production process, and potentially the distribution process, too. 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-70s 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 there are also 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. 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? © 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 – Lecture Notes (1214) Page 6 of 11 • Even if you can take it over profitably, 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 that you could not do before? What would stop your competitors from making a similar move, thus negating any advantage you had gained? 4. 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 and shoes into making golf clubs and 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 “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 the car wash is right there, then why not? It’s not so much about a strong brand connection. It is about the convenience. If a customer can buy two items from one supplier, it may just be easier than managing two separate buying processes. 5. New Distribution Channels Another way a company can 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' doorsteps. In addition to the convenience of home shipping, Amazon eliminated the "middleman," local stores, and could offer cheaper prices. Netflix accomplished a similar feat by making movies available 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. 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 own groceries, and they were unwilling to make a separate trip to a specialized retailer. © 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 – Lecture Notes (1214) Page 7 of 11 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 also negotiate distribution terms and, once the new channel is operational, manage the channel. There may be pricing concessions required that can negatively impact margins. There is also a possibility of backlash from current distributors who feel your new sales channels are a threat to their business and an insult to their loyalty. But in general, 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 gaining market share if your margins are reduced to the point that either your quality or ability to meet demand is threatened. 6. 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 is well and good to always be on the lookout for innovations that have the potential to disrupt. But if you do not have any idea of what the breakthrough would 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 (e.g., Apple’s iPhone) or that customers buy (e.g., 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. 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. 7. Mergers, Acquisitions, and Strategic Alliances 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 pooling © 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 – Lecture Notes (1214) Page 8 of 11 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. Do not 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 element – 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. About strategic alliances: Although often not as involved as an M&A deal, strategic alliances offer an alternative approach to achieving many of the same benefits. By negotiating terms of how each partner will combine resources, customers, or capacity, collective synergies can be created. Consider, for example, the mutual benefits achieved by the partnership between Barnes & Noble and Starbucks that began in 1993. At the time, both companies had a similar vision and a compatible customer base. The presence of Starbucks coffee in the bookstores added to the close community feel that Barnes & Noble desired for its customers. The partnership also attracted customers to the bookstore during morning hours, a time period that was previously known for decreased customer traffic. In turn, Starbucks was able to retain ownership of its cafés within the physical footprint of the Barnes & Noble stores, which was a much less expensive proposition than opening their own stores in specific locations. Starbucks also generated more customers who would take breaks from their shopping to enjoy a cup of coffee. This strategic alliance served both companies very well for years. © 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 – Lecture Notes (1214) Page 9 of 11 SUCCEEDING BEYOND THE COURSE As you read the materials and participate in class activities, stay focused on the key learning outcomes for the week and how they can be applied to your job. • Examine “meaningful differentiation” as a strategic lever Too many companies allow themselves to believe that what is important to them is also important to their customers. You don’t get to define what your customers will see as a meaningful differentiator, that is up to them. Explore ways of engaging your customers in your strategy development. Ask, “What would make a real difference to the way this product satisfies your needs, and what would you be willing to pay for it?” Depending on what business you’re in, you may even be able to enlist the help of your customers and get them to purchase a product before others have access to it. In exchange for their guidance, you could even offer an attractive discount to early adopters. • Explore ways to identify unmet needs and untapped market segments This is a great time to review Jack’s first slide. Don’t treat the strategy development process as a one-way journey from slide 1 through slide 5. As you explore new ideas for winning moves, some of these may lead you to reevaluate your assessment of the playing field, customer needs, and market segmentation. • Assess the market potential of new or improved solutions Assuming your organization has delivered at least one disruptive move over the last year, gather your team and discuss the following questions: o o What is the cumulative impact of the disruption on the growth of our business? Is the impact of our disruptive actions on our business more or less than any disruptive moves made by our competition on their businesses? If you can’t come up with a single example of a game-changing move you made in the last year, it may be time for a significant review of the overall vitality of your business. A year without any attempt at a game-changing move is a long time! If you can’t come up with a single example of a move your competitors made, it may be sign that your industry is in a mature phase of growth where “business as usual” is the motto. If this is the case, it may be time for you to shake things up! © 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 – Lecture Notes (1214) Page 10 of 11 ACTION PLAN To apply what I have learned this week in my course to my job, I will… Action Item(s) Resources and Tools Needed (from this course and in my workplace) Timeline and Milestones Success Metrics © 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 – Lecture Notes (1214) Page 11 of 11
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1
TO:

IKEA Company

FROM:
DATE:
RE:

How to Win: Strategic Options Assessment and Recommendation

1. Introduction
In this report, I would be assessing the IKAE company's competitive advantage that would
offer it the winning ability within the retail market of furniture items. The purpose of the report is
to ensure that the company is oriented in a transformative channel that would allow it to recover
from the decreased revenues in its sales estimated from 2016 to the present date (Baraldi, 2008).
Hence, the transformative techniques should be applicable in allowing the company to increase
its revenues and profitability to transform its operations and enable the firm to grow
incrementally. The growth will ensure that the company is sustainable enough to overcome the
economic shocks experienced when the economy is not performing well. Also, as a company
operating in the retail market, it needs to ensure that it can reach a large demographic outline to
maintain its reputation and attractiveness to the people. The people will ensure they purchase
their furniture in large volumes since it is comprised of people who are developing their young
families, some are youths who are commencing their livelihood and would prefer high-quality
items that are produced by the company and people who are moving in new spaces that would
desire to furnish the niche (Baraldi, 2008). Therefore, this report will provide an insight into the
playing field and competitors and how IKAE will stacks up to offset the competition that it faces
from other companies. It will allow the company to risk limited money and resources while
implementing the operation mode and provide a game-winning move that will ensure it remains
sustainable in the long run relative to its competing firms.
2. Suggested Ranked Moves: The three Game-Winning Moves I considered are in rank
order
The first-ranked game-winning move is the geographic expansion of the company. Expanding
the company's operations beyond the areas in which it is operating will ensure they follow the
transformative path of their operation, which will increase their revenues and profitability. The
move is motivated by the need of the company to meet the demand of the expansive retail
market, which keeps on increasing over the years due to the global population, which is always
on the rise (Kim & Lee, 2020). The geographic expansion will ensure that the company can
cover a large demographic space in offering their products that will meet the satisfaction of their
customers, who are spread globally. However, the expansion is not a straightforward move since
there are various factors of consideration while implementing geographical expansion as a gamewinning move to offset the competition in the retail furniture market. It is due to the different
needs and factors that influence the demand of the people in the various destinations that the
company seeks to expand its operations towards. They include a difference in the per capita
income in the regions, the demographic age and the state, and preference of the furniture the

2
people will seek the firm to s...


Anonymous
Really helped me to better understand my coursework. Super recommended.

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