Are You Sure You Have a Strategy? STRATEGIC MANAGE J
5 Elements of Strategy • Arenas • Vehicles • Differentiation • Staging • Economic Logic
Arenas • Where will we be active? • What product categories? • What market segments? • What geographic areas? • What core technologies • What value creation stages? • How much emphasis will each area receive? • Which areas are most important? • Which areas are peripherally important?
Vehicles • How will we get to the Areas we have selected? • Internal Development? • Joint Ventures? • Licensing? • Franchising? • Acquisitions?
Differentiation • How will we win consumers in the Areas? • Image? • Customization? • Price? • Style? • Reliability? • Overall Value?
Staging • What will be our speed and sequence of moves into Areas? • Speed of expansion? • Heavily impacted by Vehicles • May be different in different Areas • Sequence of initiatives? • Impacted by priority of Areas • May be impacted by Vehicles
Economic Logic • How will we obtain our returns? • Lowest costs through scale advantages? • Lowest cost through scope and replication advantages? • Premium prices due to unmatched service? • Premium prices due to proprietary product features? • Fees paid as a result of licensing or franchising?
http://www.enviveit.com • New Startup Company: Media Center PCs • Development Began: January 2006 • Public Site Launch: August 2006 • First Products Available: August 2006
Envive’s Strategy • Arenas • Focus exclusively on Home Theater PCs • Focus on Middle and Upper Class consumers, especially technology oriented young consumers • US market only (international restrictions on technology sales) • Sell complete PCs, Relevant Accessories, and both Readily Available and Proprietary Software • Do not manufacture components, just assemble them into a final product
Envive’s Strategy • Vehicles • Initial use of internal deployment exclusively • Initial sales online only, with one Demo room set up in Dallas, TX • Eventual deployment into Home Theater stores
Envive’s Strategy • Differentiation • Unique offerings, i.e. the fastest available micro PC as of today • Develop proprietary software • Exclusive licensing for hardware • Develop unique solutions to common Home Theater problems (like TiVo did)
Envive’s Strategy • Staging • Expansion speed reflects the speed of sales, with joint ventures and licensing as a potential accelerant • Sequence impacted by likely strong markets (urban areas) and geography • Economic Logic • Premium prices compared to major computer lines due to unmatched features • Lower cost compared to other premium Home Theater PC developers
McDonald’s • Most people are already familiar with McDonald’s Arenas, Differentiations, and Staging. • McDonald’s has made money by using the other two elements to their maximum advantage: Vehicles and Economic Logic.
McDonald’s Vehicle • One word: FRANCHISING • Franchising is a highly adaptable method for rapid expansion. • A Franchisor creates a system, which they sell to a Franchisee for a Franchise Fee and a percentage of operating profits. • This model differs many start up costs to the Franchisee. • By finding many Franchisees, a Franchisor can roll their system out into many markets simultaneously with a minimal cost.
McDonald’s Economic Logic • Economies of Scale play into profit. • The key, however, is the vehicle. • Franchisors make money through attracting the most Franchisees and giving them a successful system. • McDonald’s made the most of franchising to expand as fast a possible, and because the system was solid, the franchises made money.