Application of Generic Strategies and Models

Module 2 Overview

This module is designed to reinforce prior learning from the MBA coursework and offer further introduction to the core concepts on strategic models and patterns. You will explore the importance of examining generic and historical models and patterns while simultaneously assessing the changing and sometimes turbulent economic environment when identifying a strategy and direction. You will also examine opportunities around formulating, designing, developing, implementing, and monitoring a diverse and flexible plan.

Key concepts in this Module

· Generic Strategies—A focus on cost differentiation (when the product or service offers something a little more unique or different than the competition), cost leadership (lower cost leader in the industry given a set quality), and strategy focus (this effort narrows the playing field / market segment and also offers some differentiation possibly in cost).

· Vertical Integration (supply chain)—Often referred to as the degree to which a firm owns its upstream suppliers and its downstream buyers. This often influences corporate strategy because a focused vertical integration approach can significantly impact cost as well as the ability to differentiate.

· Diversification (horizontal integration)—This allows for businesses to add to their existing suite of products, services, and even markets. Most often the purpose is to allow the company to enter lines of business that are related but new. However, diversification can also be completely different from current operations.

· Outsourcing—Contracting with another business or person to perform specific business functions. For example, many companies outsource their payroll function to a firm to process, manage, and distribute paychecks. Some smaller firms may have an outsourced chief financial officer (CFO). They may not need someone full time but still need the skills or expertise that a CFO can provide on a part-time and contractual basis.

· Timing—There are two old adages—“timing is everything” and “be in the right place at the right time.” Most likely these were coined by business people as timing is key. .

· Synthesize a wide variety of economic, financial, and qualitative data to draw actionable managerial conclusions that convince others of your position and analytical conclusions.

· Identify actions that effectively integrate the primary business disciplines cross functionally to move the organization toward its mission and strategic goals, while being consistent with professional standards, social norms, and corporate ethics.

· Analyze and apply practical strategic business principles, models, and theories to diverse and complex organizational situations.

Short- and Long-Term Strategy

Having a good product and being able to convey value is important. However, it is also critical to have both effective short- and long-term strategies. There are many examples of companies that rose to great heights quickly and then failed. Although there were likely numerous reasons, often the failure revolved around issues with strategy, alignment, and execution of short- and long-term business plans. Timing is a key element as well and can be as simple as the timing of an e-mail, a customer satisfaction survey, or follow-up on an issue with a defective product. Timing is an important part of the overall process to strategy development and execution.

. Evaluating and Adapting Strategy

Eastman Kodak is known for essentially creating the film-based imaging industry in the U.S. in the early 1900s, and dominating it into the 1980s. The company's strategy focused on making photography available, usable, and affordable to everyone through mass production at low cost, international distribution, extensive advertising, and product innovation through continuous research. Kodak made large profits by selling cameras at low prices while profiting from high prices on film and related consumables.

Kodak's fortunes changed dramatically in the 1980s with the introduction of digital photography. Kodak largely stuck with its film-based strategy as it diversified into new markets, including medical imaging, mass memory, bioscience and lab research firms, pharmaceuticals, and batteries. However, by 1990, digital imaging technology became popular and Kodak's expertise in film technology risked becoming obsolete. The company made an attempt to develop a digital strategy, but it was too late and its expertise in chemistry, research and development, manufacturing, and distribution was no longer valuable in digital products.

Could Kodak have avoided its dramatic downfall? Despite strong signs, the company believed that the digital revolution was not going to happen, that any strategy shift would allow cannibalization of its highly profitable film offerings, and that current customers would not demand the advantages of digital photography. In retrospect, external forces such as rapid changes in imaging technology, consumer adoption of digital devices, and the entry of consumer electronics goods makers into photography all posed obvious threats to Kodak's core business and strategy. However, the influence of internal dynamics and beliefs caused the company to refuse to acknowledge these threats and adjust its strategy to the emerging realities of digital photography.

Kodak's story illustrates a critical lesson in evaluating strategy. While strategy is anchored in occupying a beneficial market position, executing strategy is about continuously reconciling the external forces that drive changes in industry dynamics, customer preferences, and market behaviors to create new opportunities and threats with the internal forces that dictate a company's capabilities as re