Kellogg on Strategy - Concepts, Tools, and Frameworks for Practitioners
David Dranove and Sonia Marciano
Kellogg on Strategy is the book that provides many tools and templates that are useful for practitioners like MBA students, managers or business executives to conduct strategic analysis and identify and choose the optimal strategic options. This book presents basic strategic concepts and serves as a practical guide to show people how to apply strategies effectively to make the business successful. The main ideas the authors discussed in this book are as follow: * Evaluate the firm’s strategic position
* Identify the symptoms of competition
* How to cure the cancer of competition
* Coping with new entrants
* Establish a long-term sustainable competitive advantage. Evaluate the Firm’s Strategic Position
A firm must have a superior position in the industry to generate superior profits (15). The main concept in the positioning analysis the authors focused on is the “B Minus C” framework. B Minus C framework defines that B equals to the benefit or happiness of the products given to the customers in monetary term, and C equals the production costs of the products (32). The amount of value the firm created is B – C (B minus C). A firm must have a higher B – C value than its rivals to outperform them. If a firm can offer higher B – C value than its rival, it will be able to offer more benefits to the customers than the competitors and generate higher profit and obtain more market share. The quantitative assessment of B – C needs be performed to determine a firm’s B – C value. Cost advantage of the firm can be measured by accounting tools such as activity based costing (ABC). However, intangible benefits of the products, such as perception of quality and branding, are much harder to be quantified. The authors used the method of “Willingness to Pay” to measure the intangible benefits. B part of the B – C can be done by describing the benefits in qualitative terms and asking the consumers how much they are willing to pay for the benefits (86). Conducting survey is one of the methods that can be used to determine consumers’ willingness to pay. Surveys are to be designed to obtain useful results and avoid outliers, which is the observation or response that appears to deviate from the rest of group chosen for the surveys. A firm needs to define its core competencies; however, core competencies do not always guarantee profits. SWOT analysis can be used to identify a firm’ strengths in qualitative terms; however, it does not provide quantifiable list of core competencies. Value creation is the key to profitability. B Minus C Framework allows the firms to utilize the B – C assessment to determine its position in the industry in quantitative term instead of just qualitative traits. The firms need to know how value is created that will outperform their rivals. With this framework, the firms can identify the areas they can improve on to create more value. For instance, the surveys could provide feedbacks on why customers value the competitor’s products more or less. The B – C assessment also helps the firms to identify key asset that help the firms to stay competitive but also provide sustain competitive advantages in the long run. Business executives and managers can apply B – C framework to evaluate the position of their business today. However, it may be difficult for the firms to perform the quantitative assessment of the B – C, especially on the value of benefits. The relevant question is how the firms can really determine what consumers perceived as the real benefits on the products. The results of the surveys could be biased and misleading even if the right target or group was chosen to do the surveys. Every person values the benefits of product differently, but the surveys can provide general ideas of customer’s perception. Firm with limited resources may not be able to perform...