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Today and coming attractions

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  1. Today and coming attractions • Q&A from Day 1: Questions about syllabus, readings, projects, resources? • The 10-K Integration Project • You have a handout on this. Let’s walk through it briefly • Case 1: Industry analysis • You have a handout on this one, too. Let’s walk through it as well. • Mission, & begin external analysis

  2. Topic: Mission

  3. Conversation: What is Mission?

  4. Some definitions • Some terminology: • Mission vs. vision • Goals and objectives • Strategies and tactics

  5. Some definitions • Mission vs. vision: Current vs. future. • Goals vs. objectives: Both are targets. Goals are general (#1 airline in America). Objectives are specific, measurable, dated (20% increase in sales by 2013). • Strategies vs. tactics: Both are actions. Strategies are general (horizontal diversification). Tactics are specific (training policies, debt structures).

  6. Strategic Mission • Who are we and what do we do? • Thoughts from Jack Welch at GE: • (You can’t talk strategy without talking Jack Welch)

  7. Books by and about Jack Welch • Jack Welch Speaks (2007) • Jack Welch and The 4 E's of Leadership (2005) • Jack Welch on Leadership (2004) • Jack Welch & The G.E. Way (2004) • The Welch Way (2003) • Jack: Straight from the Gut (2003) • 29 Leadership Secrets from Jack Welch (2002) • The Jack Welch Lexicon of Leadership (2001) • Get Better or Get Beaten (2001) • At Any Cost: Jack Welch, GE, and the Pursuit of Profit (2011) • Winning (2010) • Jack Welch (2010) • Jack: Straight from the Gut (2009) • Business the Jack Welch Way (2008) • Winning (2008) • Jacked Up (2007) • What Made Jack Welch JACK WELCH (2007) • The Secrets to GE’s Success (2007)

  8. Strategic Mission • Who are we and what do we do? • Thoughts from Jack Welch at GE: • Note the “get out” theme. Fits with Good to Great (and other impactful books), Peter Drucker, etc. • If they can do it, anyone can

  9. Mission: • Differentiate mission statement (later on) from strategic mission (this) • Who we are, what we do, where we do it • Often reflects a company’s generic strategy (aka strategic posture) • More to come on this • It’s the corporate fingerprint: What makes us unique?

  10. Porter’s generic strategies reflect a firm’s basic strategic posture: Low Cost Differentiation Broad Focus

  11. Porter’s generic strategies reflect a firm’s basic strategic posture: Low Cost Differentiation Broad Retrenchment Focus Stability Growth

  12. Porter’s generic strategies reflect a firm’s basic strategic posture: Low Cost Differentiation Pretty simple for cost vs. differentiation Broad Retrenchment Focus Stability Growth

  13. Porter’s generic strategies reflect a firm’s basic strategic posture: Low Cost Differentiation MaxJet Silverjet Eos

  14. Porter’s generic strategies reflect a firm’s basic strategic posture: Low Cost Differentiation Broad Much more challenging for this dimension Retrenchment Focus Stability Growth

  15. Strategic focus in the airline industry • Market types • Major hubs vs. resort vs. international vs. small towns • Market location • In and around Florida, entire Southeast, U.S., international • Most common measure: Fleet diversity • SeeOfficial Airline Guide (U.S. ed.), FAA, NTSB

  16. The basic strategic posture: Low Cost Differentiation Broad X Focus

  17. The key question regarding mission is… • What business are we in?

  18. Exercise: What business are you in?

  19. The key question regarding mission is… • What business are we really in?

  20. What business are we really in? • George Will: “Starbuck’s coffee is not that much better than everyone else’s coffee, so what is Starbucks really selling?” • An aside: See Virginia Postrel’s (2004) The Substance of Style: How the Rise of Aesthetic Value is Remaking Commerce, Culture, and Consciousness

  21. What business are we really in? • What business is United Airlines in? • Who are its main competitors in that business? • What are its strengths and weaknesses relative to those competitors? • What if we take a different view of that? What if the answer is different? • The competitors are different! • The substitutes are different!

  22. What business are we really in? • You can’t do a single step of strategic analysis or planning until you know the answer to this question

  23. What business are we really in? • What business is United Airlines in? • Travel? • Business travel? (Let’s see) http://www.youtube.com/watch?v=nU5DasW5nUY&feature=related

  24. What business are we really in? • Who are its main competitors in those businesses? • Let’s consider business communication: http://www.youtube.com/watch?v=8fmz4jkRxqo&feature=PlayList&p=9D8BD338D148BB9A&index=2 http://www.youtube.com/watch?v=FK2ankGTdpc&feature=related http://www.youtube.com/watch?v=MPP5bwyUdag

  25. What business are we really in? • Who are its main competitors in those businesses? • What are its strengths and weaknesses relative to them?

  26. What business are we really in? • Lots of examples: Andre Heineger and Rolex

  27. What business are we really in? • Lots of examples: Andre Heineger and Rolex • Another easy example:

  28. Consider McDonald’s… • What business are they really in?

  29. Consider McDonald’s… • What business are they really in? • What do they sell? • What do they really sell?

  30. Exercise: What business are you really in?

  31. Corporate Mission How we view what business we’re in can determine how competitive we are. Corollary: When making a decision about what business we’re in, we should consider where we would be most competitive.

  32. Corporate Mission A tool for analysis HIGH Hall, W. K. 1980. Survival strategies in a hostile Environment. Harvard Business Review, 58: 75+. LOW LOW HIGH

  33. Corporate Mission HIGH Relative Differentiation LOW LOW HIGH Relative Cost

  34. Corporate Mission HIGH Zone of Competitive Battle Relative Differentiation Danger Zone LOW LOW HIGH Relative Cost

  35. Corporate Mission HIGH Power Alley Relative Differentiation Power Alley LOW LOW HIGH Relative Cost

  36. Corporate Mission HIGH G of E Relative Differentiation Death Valley LOW LOW HIGH Relative Cost

  37. Corporate Mission HIGH G of E Power Alley Zone of Competitive Battle Relative Differentiation Power Alley Danger Zone Death Valley LOW LOW HIGH Relative Cost

  38. Current relative cost continuum: HIGH Relative Differentiation Chery QQ3Y Maruti 800 ($5000) Bugatti Veyron ($1.7m) LOW LOW HIGH Relative Cost

  39. Potential relative cost continuum: HIGH Relative Differentiation From power alley to danger zone, just like that! LOW LOW HIGH Relative Cost

  40. Relative cost continuum is pretty straightforward: HIGH Relative Differentiation LOW LOW HIGH Relative Cost

  41. But what constitutes differentiation? HIGH Relative Differentiation LOW LOW HIGH Relative Cost

  42. Let’s consider the Airline industry

  43. Let’s consider the Airline industry • What makes for a differentiated airline?

  44. Weights by scores and sum…

  45. Plot on vertical axis Air Schminke = 3.8 Air Go = 3.4 Relative Differentiation Air Pro = 2.9 Air No = 2.3 LOW HIGH Relative Cost

  46. Who is most competitive? Air Schminke = 3.8 Air Go = 3.4 Relative Differentiation Air Pro = 2.9 Air No = 2.3 LOW HIGH Relative Cost

  47. Do this for all companies: Do the same for cost (rank order, entire axis) LOW HIGH RelativeCost

  48. Do this for all companies: AN 7.2¢ AP 9.1¢ AS 11.3¢ AG 13.5¢ RelativeCost

  49. Do this for all companies: Air Schminke = 3.8 AS AG Air Go = 3.4 Relative Differentiation Air Pro = 2.9 AP Air No = 2.3 AN AN AP AS AG RelativeCost

  50. Do this for all companies: Air Schminke = 3.8 AS AG Air Go = 3.4 Relative Differentiation Air Pro = 2.9 AP Air No = 2.3 AN AN AP AS AG RelativeCost