Part Three: Outline Your Strategy
Chapter 4 of the textbook details business-level managerial strategies and Chapter 8 details the corporate-level strategy considerations. Familiarity with these concepts is essential to plan your company’s strategy in the simulation. At the beginning of the simulation, your team faces an unusual business situation – all companies and products are identical to each other. In the real world this situation rarely if ever occurs. The closest analog might be a highly regulated industry.
Looking into the future, the simulated industry will rapidly differentiate. Nothing you can do will stop it. Given time, the industry will evolve into a state where competitors occupy defendable strategic positions. There are two important questions. “How long will the process take?” “Will two or more competitors attempt to occupy the same position?”
Let’s use an analogy. Picture a flat landscape. Now imagine several hills placed on the landscape. Each of the hills represents a strategy. Your success depends upon how quickly you can identify a hill, and how high you can climb it. Your hope is that you will choose a hill that nobody else picks, and that you can defend it against competitors. Complicating this is the fact that some hills are more attractive than others. Further, the more companies trying to climb a particular hill, the more difficult it is for each of them to successfully climb it.
The Capstone site and Chapter 12 of the Team Member Guide provide a series of methods and techniques that will help you identify 6 basic strategic approaches to climbing these hills. They include:
Broad Cost Leader
Broad Differentiator
Niche Cost Leader (Low Technology)
Niche Differentiator (High Technology)
Cost Leader with Product Lifecycle Focus
Differentiator with Product Lifecycle Focus
In a 1-page section, incorporate the two approaches to selecting and climbing a hill and determining a strategy combination you would like your team to pursue. Your proposal should address these issues:
1) Segments. Which market segments matter to you? How much share of those segments must you achieve to be an “average competitor” in the overall industry? For example, if you choose to play only in Traditional and Low End, you would have to command a higher share of those segments to achieve “average industry sales.”
2) Profit potential. How likely are you to face high versus low cost pressures? How likely are you to face high versus low demand for local customization?
3) The speed at which you can create a defendable position. For example, new products typically take two years to bring to market. Significant productivity improvements could take several years. Is this type of differentiation important?
4) Priorities. Which products are most important to you? Which are least important?