Theme 1
what is strategy?
- a set of rules that enables the company to make many decisions over a period of time.
- It explains how an organization will achieve superior performance (above average) through value
creation within a certain business context.
- Context, content, process
- HOW to compete, improve, respond, manage etc. à HOW YOU WILL GET THERE
- Must have a diagnosis and a direction/plan of action
- Being unique (on your own terms) and different from rivals (= taking a certain position)
Strategy: Creation of value, you need to capture it. Performance should be above average.
It’s about finding a way to grow into the future.
Why would you rather choose Nike or Adidas?
It has to do with the purpose (vision, mission, values)
Nike:
- just do it
- performance als main target!
- Focus on athletes: Ronaldo
- Sporty
- Vision Nike: to bring inspiration and innovation to every athlete in the world. (if you have a body, you
are an athlete)
- Mission: sport, athletes, performance
o If you look at Nike’s vision and mission: to bring inspiration and innovation to every athlete in
the world. They are referring to the performance of athletes today. The vision is not so
different, because they are very consistent. They want to be the best sportswear for athletes.
Adidas
- Fashion
- Design
- Influencers: Kanye west, Beyoncé
- Also sporty
- Vision: the Adidas group strives to be the global leader in the sporting goods industry with brands built
on a passion for sports and a sporting lifestyle.
- Mission: fashion, cool, streetwear
o Adidas emphasizes on lifestyle, which distinguishes them from Nike. Adidas’ mission is to be
the global leader in the sporting goods industry with brands built on a passion for sports and
a sporty lifestyle.
Give the difference between Business Strategy and corporate strategy?
Business = for divisions bv. Disney channel, Disney amusement park, Disney movies, etc. OR Philips Lightning,
Philips Healthcare, etc.
Corporate = overarching / umbrella effect for the whole organization, synergy for all the businesses bv. Walt
Disney is related to family entertainment OR Philips
,What is the strategy of Netflix, why are they so successful?
History: streaming online
There was a company in the US, called Blockbuster, that was already renting videos. The reason for Hastings
(CEO and founder of Netflix) to start his own company, was because he was late in bringing back his rented
movie and he had to pay a fine. And business is about resolving challenges and resolving problems, about
creating and capturing value where customers are willing to pay a price for. It is providing a service or product
that people are willing to pay for. Netflix would not send fines if you were a little late.
In the 90’s, technology was not allowing to do what Netflix is doing nowadays. This was only possible from the
early 2000’s and onwards. So when Internet allowed it, they started sending videos online. Blockbuster then
around 2010 went bankrupt because they didn’t go with the streaming trend.
Competition: making own content & having own production house
Nowadays Netflix has a lot of competitors: Hulu, HBO, Apple TV,... So to stay competitive with the others,
Netflix also makes their own productions/content (House of Cards, Orange is the New Black) = That is risky
because only 1 out of 10 succeeds (15 billion dollars a year they spend). HBO still beats Netflix for awards and
why are they stronger and do they have a competitive advantage; Game of Thrones.
Why are they investing in their own movies/shows?: data to predict
In order to finance the content, they have to use a lot of money which is very risky. Netflix get their money
from subscribers. Subscribers leave traces and data while watching. Netflix uses this data to make really good
predictions about out behavior. They know exactly which kind of movie or show we like.
How do they predict? Algorithms & AI à makes them powerful
Strategy is about the future, but the future is uncertain. But the more data these companies have, the easier it
will be to determine how many people will buy a product. Netflix is, like Amazon, one of those companies that
is using the algorithm that helps them predict which kind of movie people will like. Their a secret strategic
weapon is Artificial intelligence / Data Analytics. That is what makes Netflix so powerful!
Netflix versus Amazon: Why is Amazon a competitor?
Amazon is, like Netflix, one of those companies that is using the algorithm that helps them predict
which kind of book people will like. They want to send it so the people before they’re even asking for
the book. Amazon has data on you on everything you buy online
Strategy is about the future and the future is uncertain but the more data these companies have, the
easier it will be to determine how many people will buy a product.
Culture of Netflix
They use Principles rather than Procedures is what matter. Culture is their true operating system. They really
lead with context and not with control, it’s all about innovation.
Seven Aspects of Netflix’s Culture:
- Values are what we Value
- High Performance
- Freedom & Responsibility
- Context, not Control
- Highly Aligned, Loosely Coupled
- Pay Top of Market
- Promotions & Development
, Challenges for Netflix
Gaining competition & international expansion.
What is the strategy of Honda in the 1950’s?
1950 happened that Honda decided to enter the Us market in the 50’s. they have a good bike that can compete
with Harley Davidson. That was there intended strategy. (what is the plan of action, what do we want to do =>
compete with Harley Davidson with our new bike)
By importing x amounts of bike into California made the plan materialized (proactive = deliberate strategy). But
the plan didn’t work out very successfully, they didn’t gain a lot of market share. One of the reasons was that
the Honda wasn’t accustomed to the heat of California (unrealized strategy). By coincidence the Japanese sales
people were using the small moppets to the stores to try to buy the big bikes in California stores. One of the
store managers wanted the moppet not the big bike because those are easier to sell (reactive = emergent
strategy). The emergent strategy became the realized strategy.
So moral of the story: you may have an idea of what you may think as a business, but that idea needs to be
translated into a success story and if that doesn’t work you change/ adapt to a reality. That’s where business
and entrepreneurs are likeminded. They both change and adapt the plan to the reality.
At the moment this process goes really quickly because of big data. We often know in advance what will work,
so the ‘trial and error’-phase is shorter than it used to be and the ‘adapt’ as well.
What happens when the WTP = < P ?
- If the WTP < Price charged, what does that mean?
- There will be no business to talk about, no one will buy.
- If the WTP = Price charged (so it’s equal), what does that mean?
- A lot of people will leave because the competition will react on this and will lower their price.
- If the WTP > Price charged, what does that mean?
- Easy, you’ll have a lot of satisfied customers
Crucial: everything in-between WTP and WTS = value creation.
What makes a good strategy? When is a strategy successful?
A winning strategy must pass three tests:
- The competitive advantage test: can it help the firm achieve a significant and sustainable competitive
advantage? It is no good that you have a temporary advantage, it needs to last more time (when they
copy you fast, it is not an advantage).
- The strategic fit test: Does it exhibit dynamic fit with the external and internal aspects of the firm’s
overall situation? The product that you offer needs to fit in the portfolio of the company. Netflix has a
superior algorithm so they know what you like (they are confident that the movies they create, will be
watched). Ferrari would have trouble selling a little city car because it is another market. P&G can
offer different types of shampoo and tooth paste.
- The performance test: Can it produce good performance as measured by the firm’s profitability,
financial and competitive strengths, and market standing? Does your value proposition lead to
economic profitability? Does your value proposition lead to an economic profitability? →Cash is to
organization as what blood is to humans. (translation into financial terms)
