International Strategic Management
Chapter: C
Prof. Dr. Christian Buer
Strategic management: Table of content
A. Fundamentals of strategic management
B. Analysis and planning of business objectives and field of activities
C. General Strategic Management Concepts
D Strategic
D.
St t i Analysis
A l i and
d Planning
Pl
i IInstruments
t
t
Prof. Dr. Michael Erner · International Strategic Management · SS 10
2
General Strategic Management Concepts
II.
II.
III.
IV
IV.
V.
Overview
O
i
Porter´s Strategies and Competitive Advantage
Gilbert and Streibel
C
Case
St
Study
d P
Porter
t
Ansoff‘s Product-Market Strategies
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
3
General Strategic Management Concepts
I
I.
Overview
O
i
1. Strategies in the business context
2. Levels of strategies
3
3.
St t i approaches
Strategic
h
II. Porter´s Strategies and Competitive Advantage
III. Gilbert and Streibel
IV Case
IV.
C
St
Study
d P
Porter
t
V. Ansoff‘s Product-Market Strategies
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
4
I.1 Strategies in the business context
St t i in
Strategies
i the
th business
b i
context:
t t 7-S
7 S concept.
t
Structure
Strategy
Systems
Sh
Shared
d
values
Skills
hard facts
Style
Staff
soft facts
Source: Quoted after Bea/Haas (2005)
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
5
I.1 Strategies in the business context
E
Example:
l 7-S-concept
7S
t for
f the
th corporation
ti Matsushita.
M t
hit
Structure
 Matrix organization
 Organizational innovations
Strategy
 Own spart names
 Own distribution channels
 Long-term partnerships with traders
 Growth strategy (price cut)
 Imitation strategy(price cut, quality
i
increase)
)
Systems
Super ordinate goals
 Company as community of
employees and management
 Company as a mean to satisfy societal
needs/intellectual needs
 Comprehensive planning system
 Fully developed finance and
controlling system due to autonomy of
divisions
 Comprehensive information
systems
t
Style
 Good employee relations
 Cooperative leadership
 Acceptance times
Skills
 Strong customer- and market
proximity
Staff
 Lifelong employment
 High meaning of HR
 Comprehensive training and education
 Job rotation
 Recommendation system
Source: Quoted after Macharzina/Wolf (2005)
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
6
I.2 Levels of strategies
L
Levels
l and
d ttypes off strategies.
t t i
Levels of the company as a source for the strategy level:
Corporate level
Corporate strategies
Business units strategies
Business unit level
Functional level
Functional units
strategies
Source:Corsten (1998)
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
7
I.2 Levels of strategies
L
Levels
l and
d ttypes off strategies.
t t i
Interaction of the three major strategy levels:
.
Corporation
Functional level strategy
Business unit strategy
Func
ctional leve
el 3
Distribution
D
Func
ctional leve
el 2
Finance
Func
ctional leve
el 1
Production
P
Business unit 2
Func
ctional leve
el 3
Distribution
D
Func
ctional leve
el 2
Finance
Func
ctional leve
el 1
Production
P
Business unit1
Corporate strategy
Source: Macharzina/Wolf (2005)
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
8
I.2 Levels of strategies
L
Levels
l and
d ttypes off strategies.
t t i
Levels
Types
yp of strategies
g
Corporate strategy
Corporate level
Growth strategy
Stabilization strategy
Contraction strategy
Product-market strategies
Local, national and global strategies
Do-It-Yourself, cooperation and acquisition strategies
Business unit strategy
gy
Business unit level
Price leadership strategy
Differentiation strategy
Niche strategy
Functional level strategy
Functional level
Supply
strategy
Production
strategy
Distribution
strategy
Finance
strategy
Personnel
strategy
Technology
strategy
Source: Bea/Haas (2005)
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
9
I.3 Strategic approaches
Alt
Alternatives
ti
according
di tto Ansoff
A
ff – Product-Market-Matrix
P d tM k tM ti
Markets
Products
P0
M0
Market penetration
M1, M2, M3…. Mn
Market development
P1, P2, P3… Pn
Product development
Diversification
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
10
I.3 Strategic approaches
A
Ansoff
ff – Diversification
Di
ifi ti alternatives
lt
ti
Same area of
operations
Same value
chain level
Present business
Different
Diff
value chain
level
Vertical
diversification
Different area of operations
Horizontal
diversification
Conglomerate
diversification
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
11
I.3 Strategic approaches
Alt
Alternatives
ti
according
di tto Porter
P t
Strategic advantage
Target object
Industry wide
One segment
Singularity
Si
l it (Quality,
(Q lit
design etc.)
Cost advantage
Differentiation
Price leadership
Concentration on core competencies
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
12
I.3 Strategic approaches
Alt
Alternative
ti strategies
t t i off internationalization.
i t
ti
li ti
Market entry
and market
penetrating
strategies
Coordination
strategies
Allocation
strategies
Target market
strategies
Timing
strategies
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
13
I.3 Strategic approaches
Alt
Alternative
ti strategies
t t i off internationalization.
i t
ti
li ti
Strategies of the international corporation
Market entry and market
penetration strategies
Target market
strategies
Timing strategies
Allocation
strategies
Coordination strategies
Export
Market presence
strategy
Country specific
Configuration
strategies:
Demand reducing
coordination
Licensing
Market selection
strategy
First mover
strategy
Centralization
Outsourcing
Franchising
Market
segmentation
strategy
Follower strategy
Decentralization
Build up of superfluous
resources
C t t manufacturing
Contract
f t i
A
Across
countries
ti
Performance
P
f
strategies
Demand
D
d covering
i
coordination:
Joint Venture
Waterfall strategy
Standardization
Structural, technocratic,
personnel oriented
strategies
Strategic Alliance …
Sprinkler strategy
Differentiation
Source: Kutschker/Schmid (2008)
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
14
General Strategic Management Concepts
II.
II.
III.
IV
IV.
V.
Overview
O
i
Porter´s Strategies and Competitive Advantage
Gilbert and Streibel
C
Case
St
Study
d P
Porter
t
Ansoff‘s Product-Market Strategies
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
15
II. Porter‘s strategies and competitive advantages
B i conceptt off competitive
Basic
titi strategies
t t i according
di tto P
Porter
t
Cost advantage
Differentiation advantage
Total market
coverage
Strategy of
quality leadership/
differentiation
Strategy of aggressive
cost leadership
Concentration
Submarket
S
b
k t
coverage
Strategy of selective
quality leadership
Strategy of selective
cost leadership
Source: Porter, 1992
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
16
II. Porter‘s strategies and competitive advantages
E
Examples
l off competitive
titi strategies
t t i according
di tto Porter
P t
Cost advantage
Performance advantage
Total market
coverage
Submarket
S
b
k t
coverage
Quality leadership
VW/Audi
Differentiation
Ford
Opel
Mercedes-Benz
Concentrated
quality leadership
Porsche
 Rolls
Rolls-Royce
Royce
 Volvo
Cost leadership




Toyota
T
t
Costs
Nissan
Honda
Mitsubishi
Concentrated
cost leadership
Focusing
 KIA
 Hyndai
 Suzuki
Source: Bruhn, 2001
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
17
II. Porter‘s strategies and competitive advantages
„Stuck
St k iin th
the middle“
iddl “ problem
bl
according
di tto P
Porter
t
Companies successful in the long-term
 Small, specialized companies
(cover market niches)
 Big companies with high market
share (cover nearly the entire
market)
ROI
Stuck in the
middle
Relative
market share
Companies with mean market share run the risk to gain not enough profitability.
Source: Porter, 1992
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
18
II. Porter‘s strategies and competitive advantages
Q lit lleadership
Quality
d hi (Diff
(Differentiation)
ti ti )
Goal
Measures

Become the leading company within the selected strategic
business area

Intensive market research to identify customer needs
Ensure product and service quality


Characteristic


Expansion of the price policy options
Classical brand image strategy
High quality, constant price, ubiquity
Source: Bruhn, 2001
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
19
II. Porter‘s strategies and competitive advantages
C t leadership
Cost
l d hi
Goal
Measures

Become biggest and most efficient company within selected
strategic business area (market share as dominant objective)

Thrown up market entry barriers (e.g. investment barrier)
Control of distribution system
y
Control of costs to achieve economies of scale



Characteristic


Aggressive price competition
Lower product preferences of consumers
Small product range
Source: Bruhn, 2001
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
20
II. Porter‘s strategies and competitive advantages
P
Precondition
diti tto iimplement
l
tP
Porters
t
strategy
t t
recommendation
d ti
Differentiation strategy
gy
Cost strategy
gy
Precondition:
Precondition:
 Exclusive reputation of the
company
 High market share (Learning curve
effect)
 High-cost measures
- R&D
 Cost advantages over the
competition (e.g. raw material)
- Product design
 Strong cost evaluation
- High quality of materials
 Efficient production plants (size)
- Intensive customer care
 Exploit every possibility to reduce
costs:
 Cost orientation
 Updating the brand management
- Reduce spending level of R&D,
service, sales
representatives,
t ti
communication
Source: Trommsdorff
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
21
II. Porter‘s strategies and competitive advantages
C
Concentration
t ti on market
k t niche
i h
Goal
Measures

Focus on profitable and special market niche

Focused innovation policy
Invest into human capital and flexibility
Strategic
g cooperation
p



Characteristic
C
a acte st c


Precondition

Strategic market segmentation
Individual offering
Comprehensive expertise
Decide whether to concentrate on market niche as cost or
quality leader
Source: Bruhn, 2001
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
22
II. Porter‘s strategies and competitive advantages
I li ti
Implications
off Porter
P t to
t retail
t il
Upper market
(preference-buyer)
Mid-range market
Boutiques
Specialized shop
Department store
Lower market
(price-buyer)
Discounter
Preference
t t
strategy
up
trading
down
Price-quantity
strategy
Source: Trommsdorff
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
23
II. Porter‘s strategies and competitive advantages
P t
Porters
alternative
lt
ti strategies
t t i in
i marketing
k ti mix
i





Differentiation strategy
Cost strategy
Competitive advantage through
uniqueness and fulfillment of
additional needs
Competitive advantage through cost
orientation
(Minimum of quality and service)
Polishing an image despite higher
prices
i
Aggressive price competition
Brand-buyer
Price-buyer
Above-average product quality
Attractive packaging
Image-oriented
g
brand p
profiling
g
Personal sale / service
High price






Average product quality
Efficiently packaging
No brand
Less communication
Cheap sales channels
Low price
Source: Trommsdorff
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
24
II. Porter‘s strategies and competitive advantages
P
Pros
and
d cons off Porters
P t
strategy
t t
alternatives
lt
ti
Differentiation strategy
Cost strategy
Pros
Pros
 Customer commitment to the brand
 Low price sensitivity of the customers
 Market entry barriers due to customer
loyalty
 Dealing with suppliers
 Low buying power of key customers
(cause of unique position)
Cons
 High pre-investment within product and
brand development
 Substantial price advantages of cost
leader (financial savings for customers
more important than brand)
 Above average profit margins attract
competitors
 Imitations decrease the visible advantage
 Late market entry at price reduction (with
cost advantages)
 Protection from buying-power
buying power customers
 Protection from powerful suppliers
 High market entry barriers
 Necessary scope at the appearance of
substitutes
Cons
 Cost reduction potential can be “learned”
also by competitors
 Neglect of adaptation on market
requirements with strong concentration on
costs
 Compensation of price advantage with
effortless cost increase
Source: Trommsdorff
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
25
II. Porter‘s strategies and competitive advantages
C iti on strategy
Critic
t t
conceptt off Porter
P t
 The strategy concept of porter basically includes a directed consumer
strategy oriented on competitive advantages
 The strategy concept is to limited for the wide range of competitive
advantages
 Companies can do on the one hand a cost oriented approach and on the
other hand a quality oriented approach without being torn between two sides
in this respect (outpacing strategy).
 Dynamic aspects of strategy adaptation are not focused by Porter
Source: Bruhn, 2001
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
26
General Strategic Management Concepts
II.
II.
III.
IV
IV.
V.
Overview
O
i
Porter´s Strategies and Competetive Advantage
Gilbert und Streibel
C
Case
St
Study
d P
Porter
t
Ansoff‘s Produkt-Marktstrategien
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
27
III. Gilbert and Streibel
Th outpacing
The
t
i strategy
t t
approach
h by
b Gilbert
Gilb t and
d Streibel
St ib l
Improve the manufacturing process
High product
b
benefit
fit
Introduce a
standard
Overtake
Product
differentiation
First supplier
Low production
costs
Second supplier (Follower)
Source: Gilbert/ Strebel, 1987
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
28
General Strategic Management Concepts
II.
II.
III.
IV
IV.
V.
Overview
O
i
Porter´s Strategies and Competetive Advantage
Gilbert und Streibel
C
Case
St
Study
d P
Porter
t
Ansoff‘s Produkt-Marktstrategien
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
29
IV. Case study Porter
C
Case
study
t d costt leadership
l d hi 1
1: Aldi
1.
company
p y
2.
philosophy & implementation of cost leadership
3.
key figures
4.
conclusion
5
5.
sources
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
30
Case study cost leadership 1: Aldi
ALDI – NORD and
d ALDI SÜD
1913
 Foundation of the family company
1960
 Foundation of the both legally
independent companies ALDI O
and
a d ALDI – SÜ
SÜD
NORD
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
31
Case study cost leadership 1: Aldi
ALDI – NORD and
d ALDI SÜD
Field of business
Market position




Food trade
Discount principal
700 articles in product range
Focus on label products
 International leading brand within the area of food trade
 Three out of four households in Germany buy at ALDI
 Number 1 of the ten top-brands in Germany
((Markenwertstudie Young
g & Rubicam, 2000))
International
presence
 Around 6000 stores world-wide
 ALDI Nord runs stores in Belgium, Netherland, Luxemburg,
F
France,
Spain,
S i Portugal
P t
l and
dD
Denmark
k
 ALDI Süd runs stores in Austria, Great Britain, Ireland,
USA, Australia, Switzerland and Slovenia
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
32
Case study cost leadership 1: Aldi
Th philosophy
The
hil
h off ALDI & iimplementation
l
t ti off costt lleadership
d hi
Focus on the essentials!
Concentrated range
of goods
t
responsible
ibl
strong,
management
high quality
label products in case
of brand products
Rationalized
sales
l system
t
uncompromising
quality
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
33
Case study cost leadership 1: Aldi
Obj ti
Objectives
 Lowest price
 Lowest costs
 High quality
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
34
Case study cost leadership 1: Aldi
P iti iin strategy
Position
t t
matrix
t i off Porter
P t
Cost advantage
Performance advantage
Total market
coverage
Strategy of
quality leadership
Strategy of aggressive
cost leadership
Concentration
Submarket
S
b
k t
coverage
Strategy of selective
quality leadership
Strategy of selective
cost leadership
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
35
Case study cost leadership 1: Aldi
R li ti off costt lleadership
Realization
d hi
 World wide purchase
 Long term contracts with suppliers
 Cost-effective
C t ff ti transportation
t
t ti
 Tightened product ranges
 Cost-effective location and decoration of sales area
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
36
Case study cost leadership 1: Aldi
M k t share
Market
h
ffood
d ttrade
d Germany
G
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
37
Case study cost leadership 1: Aldi
C
Conclusion
l i
 Simplicity
p
y
 Detailed quality checks
 Decentralization
 Waive
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
38
Case study cost leadership 1: Aldi
Sources
www.wikipedia.de
p
www.aldi.de
www.suedeutsche.de
www.zeit.de
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
39
IV. Case study Porter
C
Case
study
t d costt leadership
l d hi 2
2: R
Ryanair
i
1.
company
p y
2.
philosophy & implementation of cost leadership
3.
key figures
4.
conclusion
5
5.
sources
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
40
Case study cost leadership 2: Ryanair
R
Ryanair
i
History
Facts
 1985 founded by the Irish business man Dr. Tony Ryan
 Since 1993 Michael O'Leary leads the company with
a „No-Frills“-strategy
 1997 expansion to continental Europe
 2003 takeover of BUZZ
 Stock company
p y out of Ireland
 Main base: Airport London Stansted
 320 routes between 19 European countries
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
41
Case study cost leadership 2: Ryanair
Th Ryanair
The
R
i philosophy
hil
h & iimplementation
l
t ti off costt lleadership
d hi
„No-Frills“-strategy
Low price + low additional value
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
42
Case study cost leadership 2: Ryanair
R li ti off costt lleadership
Realization
d hi
Airplane
Aircraft fleet
 Minimized comfort
 Fast cleaning and time savings
 Almost only Boing 737-800
 Discounts
Di
t with
ith B
Boeing
i
Air fields
 Not at main airports
 Fast reloading speed
Service
 Snacks and drinks for additional money
 Additional profit
Personal
 Out of countries with lower employee on-costs
 Outsourcing of several services
 Reduction
R d i off personall costs
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
43
Case study cost leadership 2: Ryanair
R li ti off costt lleadership
Realization
d hi
Pricing
 Strictly to demand situation
 Average: 38 €/ticket
Sales
 No tourist offices
 Main
M i sales
l channel:
h
l Internet
I t
t
Communication
 Aggressive advertising
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
44
Case study cost leadership 2: Ryanair
Mi h l O‘L
Micheal
O‘Leary
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
45
Case study cost leadership 2: Ryanair
K figures
Key
fi





Sales volume:…………..1,07 bill. Euro
Employees:
Employees:………...……2300
2300
Travel:…………………….23 mill. passengers
Fleet:………………………>100 jets of type Boeing
Main competitors:
Market share in European Low-cost-market
Easy Jet
Air Berlin
(number of passengers)
 Market share:………..27,3%
xx
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
46
Case study cost leadership 2: Ryanair
C
Conclusion
l i
 LCC meets customers
requirements
i
t
Trends in prices and profit margins
easyJet and Ryanair
 On time, few
flight cancellations
Average price
Average price
 Compete on the European
flight market
 Annual growth
g
of approx. 25 %
Net profit Ryanair
Net profit easyJet
15
Cost leadership strategy successful
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
47
Case study cost leadership 2: Ryanair
… Trends in prices and profit margins
easyJet and Ryanair
A
Average
price
i
Average price
Quelle: …
Net profit Ryanair
easyJet
By Prof. Dr. Michael Erner andNet
Prof.profit
Dr. Christian
Buer · International Strategic Management · SS 12
48
Case study cost leadership 2: Ryanair
Sources
http://www.ryanair.com/site/DE/about.php
http://de.wikipedia.org/wiki/Ryanair
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
49
IV. Case study Porter
C
Case
study
t d Diff
Differentiation
ti ti 1
1: L
Lufthansa
fth
1.
Lufthansa's strategic
g business units
2.
Philosophy & Implementation of differentiation strategy of
Lufthansa
3.
Key figures
4.
Conclusion
5.
Sources
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
50
Case study Differentiation 1: Lufthansa
St t i business
Strategic
b i
units
it
Lufthansa
Systems
LSG Sky
Chefs
Formerly
Thomas Cook AG
Passage
Geschäft
Lufthansa
Cargo
LufthansaTechnik
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
51
Case study Differentiation 1: Lufthansa
Phil
Philosophy
h & iimplementation
l
t ti off diff
differentiation
ti ti strategy
t t
off L
Lufthansa
fth
Source of competition
Costs
Broad
target
market
Umfassende
K t füh
Kostenführerschaft
Uniqueness
Differenzierung
Market
coverage
Narrow
target
market
Konzentration auf
Schwerpunkte
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
52
Case study Differentiation 1: Lufthansa
Phil
Philosophy
h & iimplementation
l
t ti off diff
differentiation
ti ti strategy
t t
off L
Lufthansa
fth
Quality
• Service on
Board
Innovation
Reliability
and safety
• FlyNet,
broadbandInternet
• Sensors
at the
airplane
Products
• Classes
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
53
Case study Differentiation 1: Lufthansa
Phil
Philosophy
h & iimplementation
l
t ti off diff
differentiation
ti ti strategy
t t
off L
Lufthansa
fth
Tailor-made products for the
customers
First Class
• First Class Terminal
Business Class
Economy Class
• seating comfort
• Flights for 99€
• Jet
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
54
Case study Differentiation 1: Lufthansa
K figures
Key
fi
2006
in Mill €
2005
in Mill €
Percentage
R
Revenue
18 065
18.065
16 965
16.965
+6 5
+6,5
Operating profit
577
383
+50,7
Investments
1.829
1.783
+2,6
Employees (end of the year)
92.303
90.673
+1,8
Earnings per share
0,99
0,94
+5,3
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
55
Case study Differentiation 1: Lufthansa
K figures
Key
fi
Rank
Airlines
Customers (in thousand)
1
A
American
i
Ai
Airlines
li
91 570
91.570
2
Delta Airlines
86.783
3
United Airlines
71 236
71.236
4
Northwest Airlines
56.429
5
J
Japan
Ai
Airlines
li
51 736
51.736
6
Lufthansa
48.268
7
All Nippon Airways
46 450
46.450
8
Air France
45.393
9
US Airways
42 400
42.400
10
Continental
40.584
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
56
Case study Differentiation 1: Lufthansa
Sources
www.lufthansa.com
www.mckinsey.de
mckinse de
http://www.org-portal.org/portal/artikel
http://konzern.lufthansa.com/de/
htt //
http://www.lufthansa-financials.de
l fth
fi
i l d
http://www.lufthansacityline.com/de/
http://www.stern.de
http://www.iata.de
//
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
57
IV. Case study Porter
C
Case
study
t d Diff
Differentiation
ti ti 2
2: A
Apple
l
1.
The company
p y „Apple“
pp
2.
Philosophy and implementation of differentiation strategy
3.
Facts
4.
Sources
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
58
Case study Differentiation 2: Apple
A l
Apple
 Apple Computer Inc
Inc. – computer company with headquarter in USA
 Products: Computer, consumer electronics, operating systems and
user software
ft
 Around 14.800 full-time employees
 Revenue: 3,7 Bill USD (4. Quarter 2005 world-wide)
 Profit:
P fit 430 Mill USD (4
(4. Q
Quarter
t 2005 world-wide)
ld id )
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
59
Case study Differentiation 2: Apple
Mil t
Milestones
iPod
classic
1G1
2G
3G
iPod
mini/nano
4G
5G
2G
1G
iPod
shuffle
1G
1G
6G
2G
3G
2G
iPod
touch
1G
2001
2002
2003
2004
2005
2006
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
2007
60
Case study Differentiation 2: Apple
S l
Sales
Mill. Units sold
22
20
18
1G
16
5G
1G
1
14
12
1G
10
8
6
4
4G
1G1
1st iPod
launched in
October 2001
2
0
2001
2002
2003
2004
2005
2006
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
2007
61
Case study Differentiation 2: Apple
P iti i
Positioning
Uniqueness on
customers point of
view
Differenzierung
Cost advantage
Cost
leadership
Focus
Across the
industry
One segment
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
62
Case study Differentiation 2: Apple
Obj ti
Objectives
off differentiation
diff
ti ti strategy
t t
Offering
Mp3
Market leader
PC
Target
g group
g p
Private
customers
Business
customers
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
63
Case study Differentiation 2: Apple
M k t share
Market
h
 Extraordinary market share (1/2)
Absolute amount (2005) world-wide:
40 %
iPod
MP3
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
64
Case study Differentiation 2: Apple
F t
Features
for
f differentiation
diff
ti ti
Unique
design
 User interface is patented
 Design makes the iPod to the
iPod
xx
Continuous
adaptation
at competitors
 iPod continued to develop
 Handy with iPod design
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
65
Case study Differentiation 2: Apple
F t
Features
for
f differentiation
diff
ti ti
 High quality
 Company image
 Brand image
 Design
Patience
4
Accessories
Equipment
Competitors
Design
Memory
Price
iPod
Brand
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
66
Case study Differentiation 2: Apple
M
Measures
for
f differentiation
diff
ti ti
Customer loyalty
Design
Ease of use
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
67
Case study Differentiation 2: Apple
P
Pros
and
d cons off differentiation
diff
ti ti
Pros
 Customer loyalty
Cons
 Imitation
 Low price sensitivity
 Uniqueness
 Price advantage of
other providers
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
68
Case study Differentiation 2: Apple
O tl k
Outlook
Product within the maturity phase – Relaunch?
Challenge Mobile phone market – iPhones?
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
69
Case study Differentiation 2: Apple
Revenue
apple
16.000
13.930
Reve
enue in Mill US-$
$
14.000
first iPod
10/2001
12.000
10.000
8.279
7.970
8.000
6.000
5.360
6.205
5 750
5.750
4.000
2.000
0
2000
2001
2002
2003
2004
2005
Year
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
70
Case study Differentiation 2: Apple
Sources
http://www.fscklog.com/ipod/index.html
http://de.wikipedia.org
p
p
g
http://www.heise.de
http://ipodlife.de/
http://www.ipod-fun.de/
p
p
http://de.wikipedia.org/wiki/IPod#Geschichte
http://www.hardwarecrew.com/
http://www.fscklog.com/2006/01/macs liefern nu.html
http://www.fscklog.com/2006/01/macs_liefern_nu.html
http://www.mactechnews.de
http://img.mediamarkt.de/images/
http://www mediaonline de/
http://www.mediaonline.de/
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
71
General Strategic Management Concepts
II.
II.
III.
IV
IV.
V.
Overview
O
i
Porter´s Strategies and Competetive Advantage
Gilbert und Streibel
C
Case
St
Study
d P
Porter
t
Ansoff‘s Product-Marcet Strategies
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
72
V. Ansoff‘s product-market strategies
A
Ansoff‘s
ff‘ product-market-matrix
d t
k t
ti
M k t
Market
new
old
Market
penetration
Market
development
new
Product
development
Diversification
Prod
duct
old
Source: Ansoff, 1966
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
73
V. Ansoff‘s product-market strategies
Market
A
Ansoff
ff – market
k t penetration
t ti





new
old
Market
penetration
Market
development
new
Product
development
Diversification
P
Product
R i th
Raise
the product
d t usage off existing
i ti
customers
t
old
Improvement/Adaptation of product quality
Additional benefit/value (Service, emotional positioning)
Improvement
p
of distribution
Intensify the communication
Price differentiation
Gain new customers in existing
g markets


Poach customers of competitors
Recruit customers out of not yet targeted segments e.g:
– Enhance the product
– New sales arguments/better information
– Price adjustment on level of competitors
Evaluation



Low opportunities to expand (expect in other markets)
high degree of safety
No enlargement of resources needed
Source: Trommsdorff
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
74
V. Ansoff‘s product-market strategies
Market
A
Ansoff
ff – Product
P d t development
d
l
t / di
diversification
ifi ti



new
old
Market
penetration
Market
development
new
Product
development
Diversification
P
Product
P d t modification
Product
difi ti
old
Additional value due to service extension
Extend products with individual functions
Adjustment
j
of the p
product to changing
g g needs of existing
g customers
– E.g. design, packaging, compatibility
Product innovation


Technical p
product innovation
– Application of new technologies
– Systems instead of components
– Diverse innovation strategy decisions
Mental product innovation
– Repositioning
– New positioning (relaunch)
Evaluation



Greatest possible expansion
High risk: Uncertainty in evaluation of market chances, especially with
new consumer segments
High investments in new product development,
development launch and
acquisitions needed
Source: Trommsdorff
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
75
V. Ansoff‘s product-market strategies
Market
A
Ansoff
ff – market
k t development
d
l
t

new
old
Market
penetration
Market
development
new
Product
development
Diversification
P
Product
N
New
purposes
old
Solving new problems with existing product
– Enhancement of product suitability
– Creation of new application fields
– Positioning of product to solve other problems
New users


New market
N
k t areas
– regional
– national
– international
Open new market segments (market segmentation)
– Cultivation of currently neglected market segments
Evaluation



Extended expansion possibilities
Aggravated risk, uncertainty in market chances within new segments
Investments into enhanced capacities for market cultivation, product
adaptation needed
Source: Trommsdorff
By Prof. Dr. Michael Erner and Prof. Dr. Christian Buer · International Strategic Management · SS 12
76