Define Ethics:
Business ethics is the study of proper business policies and practices regarding potentially controversial issues, such as corporate governance, insider trading, bribery, discrimination, corporate social responsibility and fiduciary responsibilities.
Define Morals:
Morals refer to an individual's own principles regarding right and wrong.
Stealing is wrong.
Lying to get a date is OK.
Define Values:
Values describes individual or personal standards of what is valuable or important.
A civilized society's first line of defense is not the law, police and courts but customs, traditions and moral values. Behavioral norms, mostly transmitted by example, word of mouth and religious teachings, represent a body of wisdom distilled over the ages through experience and trial and error.
"I see little to no admission of moral error from O'Reilly nor from Fox News," he writes. "O'Reilly blamed others, and his victimization. He used to mock liberals as the 'whiny left' when it came to blaming society for crimes by-say-black youths. O'Reilly said his 'departure' was not his fault but the cost of being a media personality."
Fox News faces growing legal troubles just a week after firing star anchor Bill O'Reilly. Eleven current and former employees filed a class-action lawsuit claiming they subjected minorities in the company to "abhorrent, intolerable, unlawful and hostile racial discrimination." This suit expands on a discrimination suit filed last month.
Wednesday April 24, 2017
Corporate Social Responsibility (CSR)
Social responsibility is an ethical framework and suggests that an entity, be it an organization or individual, has an obligation to act for the benefit of society at large. Social responsibility is a duty every individual has to perform so as to maintain a balance between the economy and the ecosystems.
Diversification: How do companies diversify their businesses?
New Product
Old Product in New Market
Acquire Business
Reason Why:
Growth
Risk
Four Strategies:
Concentric - Expand into new markets with same product
Conglomerate - Operate new business that are not related
Veritical - Buy businesses along the production line - Control
Horizontal: Buy competition
:
Why Diversify
McDonald's Diversification Strategy.
What is a conglomerate?
Group on should have sold
Agriculture
Farms diversify by expanding product lines and using items both to sell and to use in production of other goods. Dairy farms produce milk as their core product, but from this root, a farm can branch into making related products such as cheese or ice cream. A farm with enough space can grow different crops, thus having multiple product lines. Some farms raise cattle for sale and use the cattle’s organic matter to fertilize and support the growth of crops; similarly, wheat or corn can go to market or into the mouths of livestock.
Restaurants
A restauranteur can tap revenue streams beyond serving meals in the restaurant. Grocery stores can carry the restaurant's line of salad dressings, marinades, or sauces, for example. A restaurant might have a gift shop to sell gifts tailored to the restaurant, its menu, or community, such as cookbooks, travel books and videos, souvenirs, and postcards.
Sporting Goods
The sporting goods market encompasses a customer base with diverse sports and recreational interests. Many retailers will have an assortment of choices to meet these needs. For example, a store may carry shoes for runners, basketball players, golfers, soccer players, and baseball players. Sports and outdoor equipment includes balls, bats, gloves, shin guards, golf clubs, camping gear and fishing poles. Diversification has led outdoor stores to include outdoor apparel, GPS devices, and cameras along with the more traditional fishing poles, rifles, and tents.
Construction Equipment
Construction equipment dealers diversify by branching out their goods, services and locations. Geographic diversity can help a dealer hedge against a slowdown in construction or industrial activity in one region. Other dealers have added safety consultation, training, and construction materials such as pipes to their staples of maintenance and rentals. Dealers may choose farm equipment to counterbalance significant drops in construction equipment sales and rentals. For example, by one estimate, construction machinery sales in 2009 dropped 40 percent against only a 5-percent decline in farm equipment sales.
Conglomerate Diversification
Some businesses merge with or acquire other businesses. Congolmerate diversification can involve related or often unrelated enterprises. For example, an entrepenuer might operate a restaurant, a car dealership, and a land development business under one umbrella. Financial considerations, rather than similarities among lines of business or other strategic concerns, predominate mergers and acquisitions.
April 19, 2017 - Class #23
The Process
1) When to consider Diversification
a) Building Stockholders Wealth
b) Risk Adverse
Mistake - Myspace
2) Approach to Diversification
a) Acquisition
b) New Internal Business
c) Joint Venture
3) Diversification Path
a) Related
- Transfer competitive Advantage
- Cost Sharing - Economies of Scale
- Brand
b) Unrelated
- Growth Industry
- Undervalued Stocks
- Struggling Companies
4) Evaluation
a) Attractiveness
b) Position Strength in new market
c) Strategic Fit
d) Resource Fit
e) Rank Options and allocate resources
f) Update new corporate Strategy with addition(s)
a) Scope of Operations
This refers to the range of activities the firm performs internally, the breath and depth of its products and services offered to the extent of its geographic market presence and its mix of businesses.
b) Vertical and Horizontal Integration Strategy
When a company wants to grow, it has two options: expand its current business or go into business with other companies through acquisition or merger. If it chooses the acquisition option, it can do so in a way that strategically enhances its current operations through vertical or horizontal integration.
A horizontal integration consists of companies that acquire a similar company in the same industry,
while a vertical integration consists of companies that acquire a company that operates either before or after the acquiring company in the production process.
Vertical
Horizontal
Problems
c) Outsourcing
Outsourcing is a practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally. Outsourcing is an effective cost-saving strategy when used properly. It is sometimes more affordable to purchase a good from companies with than it is to produce the good internally.
d) Alliances & Partnerships
A partnership company is formed when the parties involved agree to share the business’s profits or losses proportionately. This business is a separate entity, jointly owned and operated by the people in the partnership. An alliance is formed when businesses agree to collaborate without giving up their independent status. A strategic alliance (also see strategic partnership) is an agreement between two or more parties to pursue a set of agreed upon objectives needed while remaining independent organizations. A strategic alliance will usually fall short of a legal partnership entity, agency, or corporate affiliate relationship.
A business has a strategy that can not be static. It must continually be adjusted. This week we want to discuss strategies to handle competition.
Today companies and constantly under attack as all industries are changing due to the rapid change in technology. Even giants like Walmart are under attack by amazon and on-line retailers.
A company can go on offense or defense to create opportunities and/or protect their markets and competitive advantage.
OFFENSIVE VS DEFENSIVE STRATEGIES
Offensive and defensive strategies have distinct benefits, depending on the status of your business and how successful you are in the market. An offensive strategy provides a means for business to hit the market strong and establish a presence, whereas a defensive strategy can help keep you at the top of your industry. Each type of marketing requires careful planning and resource allocation to reach the largest number of consumers.
Offensive Marketing Definition
An offensive marketing strategy seeks to attack the market by targeting the weaknesses of the competition and emphasizing the company's strengths in comparison. Offensive marketing does not seek to challenge an industry leader's strengths since that would only play to the leader's defensive marketing capabilities. This strategy attacks the industry leader where the company is at its most vulnerable. For example, a company using an offensive marketing strategy may seek to target an established industry leader's shaky product safety record by emphasizing the safety of its own products.
Offensive Marketing Techniques
The marketing attack from an offensive-minded company must be as focused as possible. A focused attack hammers home the company's product message to consumers and casts doubt on the industry leader's weakest areas. An attack that is too broad risks its message losing focus with consumers. This may also mean a company using an attacking strategy will introduce only one product at first to clearly establish it as a challenger to the industry leader's own product.
Reactionary Marketing Strategy
A defensive marketing strategy is largely reactive to the competition or perceived occurrences in the market. A defensive strategy seeks to counter product claims made by the competition or to stem the tide of a perceived competitor advantage. For example, a company that highlights the effectiveness of its products in the wake of competitor claims of product inferiority is using a defensive marketing strategy. A company may also seek to introduce products into the market that are better than its existing offerings as part of a defensive marketing strategy.
Defensive Marketing Advantages
For an established company with a wide customer base, defensive marketing is a useful strategy. The company doesn't have to actively work to generate customer interest in its products and can simply reinforce its product messages with consumers. A well-built reputation through quality products makes it difficult for a new competitor to enter the market and attack the established company's customer base. The established company simply uses its defensive marketing to reinforce customer confidence in its products and swat the newcomer away.
OFFENSIVE ATTACK
Offensive business strategies involve taking proactive, often aggressive action in the market. This action can be focused directly at competitors or aimed at securing market share regardless of the existing competition.
Direct Competition
A classic example of an offensive business strategy is direct, head-to-head competition. This type of direct competition could take the form of selling a product similar to a competitor's at a lower price or highlighting quality differences between one product and another. This type of offensive strategy can lead to destructive price wars that ultimately harm both organizations, however.
Aggressive Marketing
Direct competition strategies often involve an element of aggressive marketing. For example, one competitor might openly point out flaws in another competitor's product or service as a way to dissuade customers from doing business with the competitor. Such advertisements could be done with an objective price comparison or a more aggressive form of derision. Companies must be careful when using overly aggressive advertisements directed at competitors, as some customers may find these advertisements to be in poor taste.
Niche Market
Not all offensive strategies are directly aimed at a specific competitor. Some companies aggressively seek out new niches in the market that have not been tapped by the existing companies. For example, if the market for automobiles consisted primarily of large muscle cars, a company with an aggressive approach could offer a smaller, more fuel-efficient model to establish a new market. Similarly, a company’s offensive strategy may target a new geographic market not presently being served with a particular type of product.
Innovation
Similar to establishing a new niche, many companies aggressively seek out new innovations to market to consumers. Innovation is not strictly limited to inventing a new product or a new process for creating a product. Innovation can also come in the form of inventive ways to run an existing business model more efficiently or more profitably.
DEFENSIVE ATTACK
Competition is inevitable in the business world. The threat of competitors swooping in to steal your customers or your share of the market can sometimes seem overwhelming for a small-business owner. There are steps you can take, however, to defend your products and your share of the market from competition.
Understanding Strategy
Defensive strategies are management tools that can be used to fend off an attack from a potential competitor. Think of it as a battleground: You have to protect your share of the market in order to keep your customers happy and your profits stable. Defending your business strategically is about knowing the market you're best equipped to operate in and about knowing when to widen your appeal to enter into new markets. In contrast to offensive strategies -- which are aimed to attack your market competition -- defensive strategies are about holding onto what you have and about using your competitive advantage to keep competitors at bay.
Approaches to Defensive Strategy
There are two approaches to defensive strategy in strategic management. The first approach is aimed at blocking competitors who are attempting to take over part of your business's market share. Cutting the price of your products, adding incentives or discounts to encourage customers to buy from you or increasing your advertising and marketing campaigns are the best common ways of going about this. The second approach is more passive. Here, you announce new product innovations, plan a company expansion by opening a new chain or reconnect with old customers to encourage them to buy from you. This is still a method to prevent the competition from taking away your customers and earning, but it is done in a more relaxed and less-aggressive manner, whereas the first approach is active and direct.
Advantages of Defensive Strategy
Employing a defensive strategy in your business can have many perceived and real benefits. First, you are increasing your marketing and advertising, which can be an effective way of getting both old and new customers through the door. Second, defensive strategies are typically less risk-laden than offensive strategies. You have the option to take passive measures to ensure your share of the market and you don't have to necessarily feel threatened at every turn. The third benefit of defensive strategy is that you are working to enhance the value of your products or services. By emphasizing the benefits of your brand, you are simultaneously devaluing the value of your competitors. This can be an effective long-term strategy in securing a niche market for your products and services.
Disadvantages to Defensive Strategy
The biggest disadvantage to defensive strategy comes when a business does not understand its target market. All products and services should be aimed at particular demographics of the broader marketplace. If you sell children's bicycles, for instance, aim your marketing at the demographic most likely to buy from you: probably young to middle-aged adults with children. It wouldn't make sense to target your children's bicycles to older adults without children or to teenagers who are no longer interested in riding children's sized bikes. The key is to know your share of the market and to work hard to hold onto that piece of the pie. Along with this major disadvantage comes the risk that you may rest on your laurels when it comes to innovation and product development. Successful businesses also keep their eyes open for opportunities to engage in new markets, to sell cutting-edge products and to reach new customers. Thus any defensive strategy you employ should be balanced with a long-term strategy for growing your business.
What happens when you do not develop a strategy against your competition?
What Is the Chief Difference Between a Low-Cost Provider Strategy and a Focused Low-Cost Strategy? Two of the five strategies.
Being a low-cost provider is a basic business strategy. It is the straightforward strategy of selling at a lower price than your competitors. But even such a basic strategy comes in two different types -- the low-cost-provider strategy and the focus low-cost strategy. These two strategies are appropriate for differently sized businesses.
Low-Cost Provider Strategy
The objective of a company using a low-cost provider strategy is to sell its products at the lowest possible price to attract customers. This is known as a price advantage. Companies using this strategy will typically earn low margins but achieve high sales volumes. Low-cost providers aim their products at the broad market, making them appeal to as many consumers as possible to achieve high sales volume.
Focused Low-Cost
The focused low-cost strategy also aims to create a price advantage for the company. Where the focused low-cost strategy differs from the low-cost provider strategy is in the company's focus. A company using this strategy focuses on a specific market niche, offering products to a narrow market segment instead of a broad one. The company then aims to be the cheapest supplier in this niche but not necessarily in the overall market. Which to Use
The low-cost provider strategy is typically only used by large corporations that have theeconomies of scale to produce or purchase goods cheaply. Small businesses typically cannot achieve the necessary economies of scale and therefore cannot use the low-cost provider strategy. The focused low-cost strategy is better suited to small businesses, because small businesses with limited resources can focus their resources on a narrow market segment.
After a company completes their SWOT analysis and/or Porter's 5 Forces analysis, they need to develop an action plan based on the analysis.
This week we will discuss how a company develops a strategy to combat competitive forces.
In the SWOT analysis, the competition can show up in any of the four sections:
Success
Weakness
Opportunity
Threat
In Porter's 5 Forces analysis, the competition can show up in:
Rivalry
Substitutes
New Entries
The Five Generic Strategies:
Low-Cost Provider Strategy - Broad set of customers with lower overall costs.
Broad Differentiation Strategy - Broad set of customers with a customized product/service
Focused Low-Cost Strategy - Narrow set of buyer segment(s) (niche) with lower cost product/service
Focused Differentiation Strategy - Narrow set of buyer segment(s) with customized product/service
Best Cost Provider Strategy - Provide best value - Best price for the product or service attributes compared to competitors
1) LOW COST PROVIDER:
Works best when:
Price Competition is strong
Product Identical
Few ways to achieve differentiation
Buyers can easily switch
Few large volume buyers
New Entries use lower intro prices to grab market share
Problems:
Lower prices and profits
Too fixated on cost
Reduced cost approaches can be copied by competition
2) BROAD DIFFERENTIATION:
Works best when product/service can become unique.
Input Quality
Marketing/Brand
Employe Skills/Training/Experience
Continuous Quality Improvement
R&D
Product Features
Innovation
Works best:
Buyers are diverse
Many ways to differentiate the product
Few rivals
Technology changes fast
Risks:
Over differentiate so that the quality exceeds he buyer's needs
Premium price too high
Being too timid
3) FOCUSED LOW COST PROVIDER:
Works best when the company has a competitive advantage over its competition within a target market. See video below for discussion on competitive advantage.
4) FOCUSED DIFFERENTIATION PROVIDER:
They create carefully designed products or services to appeal to a unique target Market.
Gucci
Four Season Hotels
BMW
Works When:
Target market is large enough
Leaders choose not too compete
Too costly for others to compete
Too many market segments, so each company can have their own
Risks:
Market so profitable, other enter and lower prices
Customer preferences change over time
Competition find ways to reduce your competitive advantage
5) BEST COST PROVIDER:
Works Best:
Product Differentiation is the norm
Large number of Value customers
Market has both high price and low price competitors
When economy is slow
Risks:
Hard to remain in the middle and provide value as competitors move up and down to grab market share.
In Class #8 we discussed Porter's Five forces and how its used to analyze a company and industry. In Class #10 (Last Class), we discussed using SWOT analysis to analyze a company and industry.
How are these tools related? What are their differences and similarities?
SWOT and Michael Porter's Five Forces analysis model are both useful tools in strategic planning. While they both help in assessing your company's strengths and weaknesses relative to industry opportunities and challenges, a primary difference is that SWOT focuses more on company-specific elements while Five Forces involves a look at five important competitive factors when making a strategic decision.
SWOT Basics
SWOT is a basic assessment of your company's current position based on strengths and weaknesses, as well as a look at opportunities and potential threats as the company moves forward. To conduct this analysis, company leaders often set up a table that includes key points in each of the four SWOT categories. Strengths and weaknesses are analyzed relative to how your company currently measures up against competitors. Identifying opportunities and threats involves brainstorming future events or direction.
Five Forces Basics
The Five Forces model includes five factors in a competitive assessment. They include supplier power, buyer power, competitive rivalry, substitution threat and threat of new entry. You use Five Forces analysis to figure out the competitive advantages your business has in each area. As a product reseller, for instance, it helps to know your relative bargaining power with industry suppliers and buyers. The general level of competition may also affect your opportunities. Substitution threats and potential new entries involve analyzing long-term viability if you enter a market.
Level of Specificity
One major distinction between the two is that
1) SWOT is a general, overall assessment, while
Five Forces is typically focused on a single growth decision (one product).
You might start with SWOT to paint the picture of your company's current position in the marketplace and then look ahead to future strategic options.
Then, Five Forces provides a tool to assess viability of particular product, service or industry expansion. You can weigh diversification into a product category using Five Forces, for instance.
Competition and Time-Orientation
1) SWOT is about your business and its position, and
Five Forces is a tool you use to analyze competitors and how they could inhibit you.
Generally, the best opportunities for a business lie in situations where a company's strengths relative to competition align with its opportunities and less inhibiting competitive factors. Time-orientation is also slightly different with SWOT and Five Forces. With SWOT, you assess your current position and future endeavors. Five Forces is centered mostly on future decisions.
SWOT Analysis is a simple but useful framework for analyzing your organization's strengths and weaknesses, and the opportunities and threats that you face. It helps you focus on your strengths, minimize threats, and take the greatest possible advantage of opportunities available to you.
Broken into two parts:
1) Chart - outline
2) Analysis
Example
SWOT - Autonomous Cars
1) OUTLINE
2) Analysis
Autonomous driving would create a transportation revolution, not only economically, but culturally. Handsfield reiterates the common topic of isolationism when he says, “As urbanists, we’ve often succumbed to a gut reaction that cars are bad, transit is good. However, the reality is that it is not cars that are bad, but the single-occupancy driver paradigm that is so damaging to our environment, urban fabric and quality of life.” While self-driving cars might change the way we own and share automobiles for transportation, will it isolate us further from one another? [5]
The technology itself also poses major threats. Will the software systems be tamper-proof? What if someone reprogrammed a self-driving car for malicious purposes?
In order to operate efficiently, there must be a single, ultimate network on which these vehicles communicate and operate with one another. Privacy concerns will surely arise when your location can be tracked based on your transportation history. Surely someone will seek to collect and sell that information much the same way your browsing habits are recorded online. Public response to such an invasion of privacy could have a staggering effect on the implementation of a self-driving automobile into society.
All of these threats (and many more) will likely become factors in the biggest threat to autonomous driving; the special interest lobby. There are a lot of people with a lot of money that would not like to see the current paradigm of transportation change. Auto manufacturers, driver’s unions, oil companies, etc. The list is potentially endless of influential groups that would see self-driving cars as a threat.
1) both classes will be on Youtube
a) Monday February 20, 2017
b) Wednesday February 22, 2017
2) chapter 3 will be covered in both classes
3) exam #3 - Thursday Feb. 23, 2017 thru Sunday Feb, 26, 2017 at Midnight
