Differentiation + Cost Leadership
- how could you be both? And still be successful?
- When you come into the market with a new business model you are able to do both - EXAMPLE: Dell was the first to sell online - they sold cheaper than in store. * IBM followed suit by lowering prices - lowering profit
* Dell revolutionized sales
* How? Instead of selling to the retailers, where they make 60% profit, they make the profit. They sell wholesale. Cut out the middle man. * They took cost leadership in wholesale computers
* They were able to differentiate by selling online and with the extra money they are able to advertise. * IBM suffers
* This is a new business model - selling online
* innovation that works is not based on a new product
* instead you need to create a new business model
* Steve Jobs (Apple) invented iTunes - instead of selling CD's for $20, you could download songs for $.99 * Google in 2000 won the search engine competition. The innovation was the business model. Google posted advertisements which led to it's road to fame. * AIG insurance company came to Israel. It challenged the Israeli insurance companies, like Migdel. They knew it would take 1 -2 years before AIG would be situated in the market. Howveer they did not retaliate. AIG has a new business model, and goes directly to the customer, instead of through agents, like what Migdel had. Migdel agents would achieve 30% profit, whereas, AIG cut out the middle man, achieved 15% profit, and thus were able to sell the policies cheaper. * Stint (a small spring that you can insert into your heart arteries, inorder to clear them). Johnson and Johnson invented the stint 20 years ago. First model; it enlarges the arteries, but then the body responses by attacking the stint because they recognize it as a foreigner. So, due to this response, the person with a stint usually has another heart attack, and the doctors then stick another stink in the arteries. Product cost was $20, but sell for $1000. An Israeli company invented a drug that they could coat the stint with so that the body would not retaliate against the stint. * Lexus vs Meredes - Lexus came into the market with the LS45 with one option, but they made a car that was on the standard of a BMW etc... They sold it $34,000. They made it half the price. They focused on cost leadership rather than differentian. Two ways of crafting a strategy
- first you need to access the enviroment
- then you need to adapt yourself to the market
- take your inner strength and try and make something out of it STRATEGIC GROUPS
Anaylzing the external - enviroment
Distribution will be the basis of the competition
Competition will be decided by the products and the consumers * Cosemetics - what would bring success?
* Quality produts
* Shelf space
* What are the different companies competing for???
* two major differences between all of the make up companies: * Distribution
* L'Oreal and Revelon can be found all over the world
* The more prestigious brands will be distributed only in about 15% of the market * Lacome decreased their sales from 1700 t0 100, but what happened? They doubled their sales. How? Before Lacome was on every shelf, and as a result became equated as any product on the shelf. In the 100 stores, they made demands - 1. hire their trained customer service people, 2. cannot sell their competitors, 3. STores would bcome pretigious. Lacome now had top service and lots of shelf space.
WEEK #3a - Strategic Approaches
- Information Technology
- Human Resources
- Research Development
* Marketing and Sales
* Outcome Logistics
* Incoming Logistics
What defines a good unit in a good industry