Strategy - STRAT (Class notes)

Professor: Sam Hariharan 307 Olin (Hariharan), X4306, shariharan@babson.edu 

Session 1: Sep 2, 2011
check slides

Session 2: Sep 6, 2011

Assignment:

In this session, we use the Wal-Mart cases to introduce basic building blocks for crafting a strategy from an "inside-out" perspective. The three building blocks are:

a)Value Creation

b) Value Delivery

c) Value Capture 

We will explore each of these three areas in turn.

Assignment Questions:

1. What are the distinctive features of Wal-Mart's strategy? Consider the following questions:

a. What does Wal-Mart offer to potential customers?

Price that they want and availability of products
convenience, low stockouts

b. Why would people shop at Wal-Mart on a recurring basis?

c. How, if at all, does Wal-Mart's strategy differ from that of its competitors, e.g., other mass merchandisers or the earlier variety and department stores.

d. Do these differences give Wal-Mart an advantage over its competitors? If so, how?

e. What about the scope of Wal-Mart's business, e.g., merchandise categories offered, location patterns? Why does Wal-mart differ from its competitors in these? Is there a strategic logic to these choices?

2. Compare Wal-mart's expense and profit ratios with those for the overall industry. Can you explain any of the differences in terms of what you know about Wal-Mart's strategy?

As we move from Value Creation to Value Delivery and Value Capture, we now focus on the complex delivery system (value chain) through which that strategy is enacted on a daily basis, and how this links to Wal-Mart's profitability.

1. Develop your own map of Wal-Mart's value chain. This map should (a) identify major clusters of activities which create value for customers and (b) indicate important linkages among value clusters.

2. Analyze Wal-Mart's profitability over the 1991-1993 period using the data in the case. Develop the financial footprint for Wal-Mart along the lines of what we developed for Dell in the first session.

3. Can you relate your value chain map to the comparative income statement ratios? In what way is Wal-Mart's strategy evident in its financial footprint?

As we move on to Wal-Mart's situation in 2007, we now focus on:

1. What has Wal-Mart done since 1994. Why?

2. What challenges has Wal-Mart encountered as it has expanded into new formats and new geographic markets?

3. How have these moves affected Wal-mart's financial performance?

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Wal-Mart Value Chain:
Procurement & Inbound logistics

• Hub & spoke system
• backhaul
• scale

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Session 3: Sep 8, 2011

Case: Cola wars

discussion on Porter's 5 forces.

The threats of entry - low

Industry rivalry - high

bargaining power of suppliers - low

bargaining power of buyers - low

threats of substitutes - medium (going from low to high)

Cokes growth:

International expansion

variety of products

Pepsi growth:

Non CSDs

Snack foods

buying food chains

sent 3 students outside for a blind test of pepsi and coke

Session 5: Sep 15, 2011


Economies of scale. Discussion of the article Competitive Cost Dynamics: The experience curve (Hax and Majluf)

There is another concept of experience curve which is different from scaled economies curve (drawn left) for the experience curve there is Cumulative volume on the x-axis (or the experience or time). So there are industries where early entrants have an advantage.




Vanguard
CVP (Customer value proposition)
- Low cost / low price
- High quality of customer service

Underlying assumption/logic
- you cannot beat the market consistently

types of investors
Self directed - 10%
deligators - 50%
validators - 40%

deligators are more inclined towards indexed funds

Structure
Investment Portfolio management:
- Little research investment
- management (passive)
- Funds activity, for actively managed funds they have external  advisers
- (They bargain with the external advisers, pay them on performance)

Marketing:
- Low advertisement
- Reputation from trust
- Direct distribution


Client service:
Lot of IT investment

Session 6: Sep 20, 2011
Apple 


comparison of Apple and Dell (exhibit 7)
Use the 5 forces model.
Use the ecosystem reading

Session 8: Sep 27, 2011


We have studied about identifying the strategy of a company:

1. Cost leadership
2. Differentiation
3. Platform

Session : Oct 4, 2011

Case: Circles

customer acquisition cost

life time value of teh customer (CLTV)

need to see if CLTV > CAC or not