Uploaded by Computer Help

Critical Business Skills

advertisement
Topic
Professional
Subtopic
Leadership Skills
Critical Business Skills
for Success
Course Guidebook
Professors Thomas J. Goldsby, Ryan Hamilton,
Clinton O. Longenecker, Michael A. Roberto,
and Eric Sussman
PUBLISHED BY:
THE GREAT COURSES
Corporate Headquarters
4840 Westfields Boulevard, Suite 500
Chantilly, Virginia 20151-2299
Phone: 1-800-832-2412
Fax: 703-378-3819
www.thegreatcourses.com
Copyright © The Teaching Company, 2015
Printed in the United States of America
This book is in copyright. All rights reserved.
Without limiting the rights under copyright reserved above,
no part of this publication may be reproduced, stored in
or introduced into a retrieval system, or transmitted,
in any form, or by any means
(electronic, mechanical, photocopying, recording, or otherwise),
without the prior written permission of
The Teaching Company.
Michael A. Roberto, D.B.A.
Trustee Professor of Management
Bryant University
Professor, Critical Business Skills: Strategy
P
rofessor Michael A. Roberto is the Trustee
Professor of Management at Bryant
8QLYHUVLW\ LQ 6PLWK¿HOG 5KRGH ,VODQG
where he has taught since 2006. Before joining
%U\DQW 3URIHVVRU 5REHUWR VHUYHG DV D IDFXOW\
PHPEHU DW +DUYDUG %XVLQHVV 6FKRRO DQG DV D YLVLWLQJ SURIHVVRU DW 1HZ
<RUN8QLYHUVLW\+HHDUQHGDEDFKHORU¶VGHJUHHLQ(FRQRPLFVIURP+DUYDUG
&ROOHJH DV ZHOO DV DQ 0%$ ZLWK KLJK GLVWLQFWLRQ DQG D GRFWRUDWH LQ
%XVLQHVV$GPLQLVWUDWLRQIURP+DUYDUG%XVLQHVV6FKRRO
3URIHVVRU5REHUWR¶VUHVHDUFKIRFXVHVRQRUJDQL]DWLRQDODQGWHDPGHFLVLRQ
PDNLQJ SURFHVVHV +H KDV IRFXVHG H[WHQVLYHO\ RQ WKH GHFLVLRQPDNLQJ
EUHDNGRZQVWKDWOHDGWRODUJHVFDOHRUJDQL]DWLRQDOIDLOXUHV+LVQH[WERRN
ZLOO IRFXV RQ WKH FKDOOHQJHV WKDW HVWDEOLVKHG RUJDQL]DWLRQV IDFH DV WKH\
WU\ WR HPEUDFH WKH GHVLJQ WKLQNLQJ DSSURDFK WR FUHDWLYH SUREOHP VROYLQJ
DQGLQQRYDWLRQ
7KH 0%$ VWXGHQWV DW %U\DQW 8QLYHUVLW\ KDYH FKRVHQ 3URIHVVRU 5REHUWR
IRU WKH ([FHOOHQFH LQ 7HDFKLQJ$ZDUG RQ HLJKW RFFDVLRQV +H DOVR HDUQHG
WKH$OO\Q<RXQJ3UL]HIRU7HDFKLQJDW+DUYDUGRQWZRRFFDVLRQV3URIHVVRU
5REHUWR¶V LQQRYDWLRQV LQ WHDFKLQJ ZLWK WHFKQRORJ\ KDYH HDUQHG VHYHUDO
PDMRUDZDUGV7KHEverest Leadership and Team SimulationZRQWRSSUL]H
in the eLearning category at the 16th $QQXDO 0,7; ,QWHUDFWLYH $ZDUGV
7KLV FRPSHWLWLRQ UHFRJQL]HV DFKLHYHPHQWV LQ WKH FUHDWLRQ RI ZHE DQG
PRELOH LQQRYDWLRQV DQG HPHUJLQJ DSSOLFDWLRQV SURGXFHG DQG GHYHORSHG LQ
1HZ (QJODQG 3URIHVVRU 5REHUWR¶V PXOWLPHGLD FDVH VWXG\ DERXW WKH VSDFHVKXWWOHDFFLGHQWWLWOHGColumbia’s Final MissionHDUQHGWKHVRIWZDUH
LQGXVWU\¶VSUHVWLJLRXV&2'L($ZDUGLQ
i
Professor Roberto is the author of two books: Why Great Leaders Don’t
7DNH <HV IRU DQ$QVZHU 0DQDJLQJ IRU &RQÀLFW DQG &RQVHQVXV DQG Know
What You Don’t Know: How Great Leaders Prevent Problems before They
Happen +H KDV SXEOLVKHG DUWLFOHV LQ WKH Harvard Business Review, MIT
Sloan Management ReviewDQG California Management Review. Professor
5REHUWR DOVR KDV WDXJKW WZR SUHYLRXV *UHDW &RXUVHV 7KH $UW RI &ULWLFDO
'HFLVLRQ 0DNLQJ DQG Transformational Leadership: How Leaders Change
Teams, Companies, and OrganizationsŶ
ii
Thomas J. Goldsby, Ph.D.
+DUU\70DQJXULDQ-U)RXQGDWLRQ3URIHVVRU
RI%XVLQHVVDQG3URIHVVRURI/RJLVWLFV
7KH2KLR6WDWH8QLYHUVLW\
Fisher College of Business
3URIHVVRU&ULWLFDO%XVLQHVV6NLOOV2SHUDWLRQV
P
URIHVVRU 7KRPDV - *ROGVE\ LV WKH +DUU\
7 0DQJXULDQ -U )RXQGDWLRQ 3URIHVVRU RI
%XVLQHVV DQG 3URIHVVRU RI /RJLVWLFV DW 7KH
2KLR 6WDWH 8QLYHUVLW\¶V )LVKHU &ROOHJH RI %XVLQHVV +H KDV KHOG SUHYLRXV
IDFXOW\ DSSRLQWPHQWV DW WKH 8QLYHUVLW\ RI .HQWXFN\ 7KH 2KLR 6WDWH
8QLYHUVLW\ DQG ,RZD 6WDWH 8QLYHUVLW\ 3URIHVVRU *ROGVE\ KROGV D %6 LQ
%XVLQHVV$GPLQLVWUDWLRQIURPWKH8QLYHUVLW\RI(YDQVYLOOHDQ0%$IURP
WKH 8QLYHUVLW\ RI .HQWXFN\ DQG D 3K' LQ 0DUNHWLQJ DQG /RJLVWLFV IURP
Michigan State University.
3URIHVVRU*ROGVE\LVFRHGLWRULQFKLHIRITransportation JournalWKHROGHVW
DFDGHPLF MRXUQDO LQ WKH ¿HOG RI EXVLQHVV ORJLVWLFV FRHGLWRU LQ FKLHI HOHFW
of the -RXUQDO RI %XVLQHVV /RJLVWLFV DQG FR±H[HFXWLYH HGLWRU RI /RJLVWLFV
Quarterly PDJD]LQH+H DOVR VHUYHV DV DVVRFLDWH GLUHFWRU RI WKH &HQWHU IRU
2SHUDWLRQDO ([FHOOHQFH D UHVHDUFK IHOORZ RI WKH 1DWLRQDO &HQWHU IRU WKH
0LGGOH0DUNHWDQGDUHVHDUFKDVVRFLDWHRIWKH*OREDO6XSSO\&KDLQ)RUXP
DOOKRXVHGDW2KLR6WDWH¶V)LVKHU&ROOHJHRI%XVLQHVV+LVUHVHDUFKLQWHUHVWV
LQFOXGH ORJLVWLFV VWUDWHJ\ VXSSO\ FKDLQ LQWHJUDWLRQ DQG WKH WKHRU\ DQG
SUDFWLFHRIOHDQDQGDJLOHVXSSO\FKDLQVWUDWHJLHV
3URIHVVRU *ROGVE\ KDV SXEOLVKHG PRUH WKDQ DUWLFOHV LQ DFDGHPLF DQG
SURIHVVLRQDO MRXUQDOV +H LV UHFRJQL]HG DV RQH RI WKH PRVW SURGXFWLYH
UHVHDUFKHUV LQ WKH ¿HOG RI ORJLVWLFV PDQDJHPHQW 3URIHVVRU *ROGVE\ LV D
UHFLSLHQW RI WKH %HVW 3DSHU $ZDUG DW WKH Transportation Journal ±
DQG WKH %HUQDUG - /D/RQGH $ZDUG DW WKH Journal of Business
/RJLVWLFV ,QDGGLWLRQKHKDVWZLFHUHFHLYHGWKH$FFHQWXUH$ZDUGIRU
%HVW3DSHUSXEOLVKHGLQThe ,QWHUQDWLRQDO-RXUQDORI/RJLVWLFV0DQDJHPHQW
DQG +H KDV UHFHLYHG UHFRJQLWLRQ IRU H[FHOOHQFH LQ WHDFKLQJ
iii
DW,RZD6WDWH8QLYHUVLW\7KH2KLR6WDWH8QLYHUVLW\DQGWKH8QLYHUVLW\RI
.HQWXFN\3URIHVVRU*ROGVE\KDVVXSHUYLVHGPRUHWKDQ/HDQ6L[6LJPD
VXSSO\FKDLQSURMHFWVZLWKLQGXVWU\SDUWQHUVFKDLUHGVL[3K'GLVVHUWDWLRQV
DQG VHUYHG DV DQ LQYHVWLJDWRU RQ ¿YH IHGHUDOO\ IXQGHG UHVHDUFK SURMHFWV
H[FHHGLQJ PLOOLRQ LQ JUDQW SURFHHGV +H KDV IXO¿OOHG YLVLWLQJ SURIHVVRU
DVVLJQPHQWV DW WKH 3ROLWHFQLFR GL 0LODQR ,WDO\ :+82WWR %HLVKHLP
6FKRRO RI 0DQDJHPHQW *HUPDQ\ DQG WKH &RSHQKDJHQ %XVLQHVV 6FKRRO
'HQPDUN 3URIHVVRU *ROGVE\ LV WKH FRDXWKRU RI IRXU ERRNV The Design and
Management of Sustainable Supply Chains 7KH 'H¿QLWLYH *XLGH WR
7UDQVSRUWDWLRQ3ULQFLSOHV6WUDWHJLHVDQG'HFLVLRQVIRUWKH(IIHFWLYH)ORZ
RI *RRGV DQG 6HUYLFHV *OREDO 0DFURWUHQGV DQG 7KHLU ,PSDFW RQ 6XSSO\
Chain Management: Strategies for Gaining Competitive Advantage DQG
/HDQ 6L[ 6LJPD /RJLVWLFV 6WUDWHJLF 'HYHORSPHQW WR 2SHUDWLRQDO 6XFFHVV.
3URIHVVRU *ROGVE\ LV D PHPEHU RI WKH VHOHFWLRQ FRPPLWWHHV IRU VHYHUDO
LQGXVWU\DZDUGVLQFOXGLQJ*DUWQHU¶V6XSSO\&KDLQ7RSWKH&RXQFLORI
6XSSO\&KDLQ0DQDJHPHQW3URIHVVLRQDOV¶6XSSO\&KDLQ,QQRYDWLRQ$ZDUG
/RJLVWLFV 4XDUWHUO\¶V 6XVWDLQDELOLW\ 6WXG\ DQG $ZDUGV 3URJUDP DQG WKH
8QLYHUVLW\RI.HQWXFN\¶V&RUSRUDWH6XVWDLQDELOLW\$ZDUGVŶ
iv
Eric Sussman, M.B.A.
6HQLRU/HFWXUHU$FFRXQWLQJDQG5HDO(VWDWH
University of California, Los Angeles,
$QGHUVRQ6FKRRORI0DQDJHPHQW
Professor, Critical Business Skills:
)LQDQFHDQG$FFRXQWLQJ
P
URIHVVRU(ULF6XVVPDQLVD6HQLRU/HFWXUHULQ
$FFRXQWLQJDQG5HDO(VWDWHDWWKH8QLYHUVLW\
RI &DOLIRUQLD /RV $QJHOHV 8&/$ $QGHUVRQ 6FKRRO RI 0DQDJHPHQW ZKHUH KH KDV WDXJKW VLQFH +H
UHFHLYHG KLV 0%$ IURP 6WDQIRUG 8QLYHUVLW\ ZLWK KRQRUV LQ DIWHU
JUDGXDWLQJVXPPDFXPODXGHIURP8&/$LQ+HLVDOLFHQVHG&3$LQ
the state of California.
3URIHVVRU6XVVPDQKDVUHFHLYHG7HDFKLQJ([FHOOHQFH$ZDUGVYRWHGRQ
E\ $QGHUVRQ¶V 0%$ VWXGHQWV DV ZHOO DV WKH &LWLEDQN 7HDFKLQJ $ZDUG
DQGWKH1HLGRUI³'HFDGH´7HDFKLQJ$ZDUGERWKYRWHGRQE\DFRPPLWWHH
RI IDFXOW\ PHPEHUV ,Q Bloomberg Businessweek UHFRJQL]HG KLP
DV RQH RI WKH 0RVW 3RSXODU 3URIV DW7RS %XVLQHVV 6FKRROV DQG KH KDV
EHHQQDPHGRQHRIWKH0RVW,QÀXHQWLDO%XVLQHVV3URIHVVRUV$OLYH7RGD\
by Top Business Degrees D ZHEVLWH GHYRWHG WR EXVLQHVV VFKRRO UDQNLQJV
,Q DGGLWLRQ 3URIHVVRU 6XVVPDQ KDV DGYLVHG QXPHURXV IXOOWLPH DQG IXOO\
HPSOR\HG 0%$ ¿HOG VWXG\ WHDPV DQG KDV OHG VWXGHQW WUDYHO JURXSV
WR %UD]LO &KLQD 'XEDL 6DXGL $UDELD DQG $EX 'KDEL +H WHDFKHV FRVW
PDQDJHULDODFFRXQWLQJ¿QDQFLDODFFRXQWLQJ EHJLQQLQJWKURXJKDGYDQFHG ¿QDQFLDOVWDWHPHQWDQDO\VLVHTXLW\YDOXDWLRQFRUSRUDWH¿QDQFLDOUHSRUWLQJ
DQG UHDO HVWDWH LQYHVWPHQW DQG ¿QDQFH WR XQGHUJUDGXDWH JUDGXDWH DQG
H[HFXWLYHHGXFDWLRQVWXGHQWV
3URIHVVRU 6XVVPDQ KDV FRQVXOWHG IRU ODUJH DQG VPDOO ¿UPV QDWLRQDOO\
DQG JOREDOO\ DQG LV D IUHTXHQW OHFWXUHU RQ YDULHG WRSLFV LQ ¿QDQFLDO
DFFRXQWLQJ DQG FRUSRUDWH UHSRUWLQJ ,Q DGGLWLRQ KH FUHDWHG ,QVLJKW )6$
DQ DQDO\WLFDO VRIWZDUH WRRO WKDW DXWRPDWLFDOO\ PHDVXUHV HYDOXDWHV DQG
UHSRUWV RQ WKH ¿QDQFLDO DFFRXQWLQJ DQG FRUSRUDWH UHSRUWLQJ ULVN IRU DOO
v
SXEOLF FRPSDQLHV YLD ('*$5 2QOLQH +H DOVR KDV VHUYHG DV DQ H[SHUW
ZLWQHVV DQG FRQVXOWDQW IRU FRPPHUFLDO OLWLJDWLRQ LQYROYLQJ PDWWHUV RI
FRUSRUDWH ¿QDQFLDO UHSRUWLQJ DQG GLVFORVXUH DXGLW HIIHFWLYHQHVV YDOXDWLRQ
UHDOHVWDWHGXHGLOLJHQFHDQGUHODWHGSUDFWLFHVDQGRYHUDOOGDPDJHDQDO\VHV
3URIHVVRU6XVVPDQLV3UHVLGHQWRI$PEHU&DSLWDO,QF0DQDJHURI)RXQWDLQ
0DQDJHPHQW //& DQG &OHDU &DSLWDO //& DQG 0DQDJLQJ 3DUWQHU RI
6HTXRLD 5HDO (VWDWH 3DUWQHUV //& DQG WKH 3DFL¿F 9DOXH 2SSRUWXQLWLHV
)XQGV ZKLFK KDYH DFTXLUHG UHKDELOLWDWHG GHYHORSHG DQG PDQDJHG
PRUH WKDQ PLOOLRQ VTXDUH IHHW RI UHVLGHQWLDO DQG FRPPHUFLDO UHDO HVWDWH
LQ WKH SDVW \HDUV 7KH ¿UPV¶ SRUWIROLR FXUUHQWO\ FRQVLVWV RI LQGXVWULDO
PXOWLIDPLO\ UHVLGHQWLDO VLQJOHIDPLO\ UHVLGHQWLDO DQG UHWDLO SURSHUWLHV
+HLV&KDLUPDQRIWKH%RDUGRI7UXVWHHVRI&DXVHZD\&DSLWDO0DQDJHPHQW¶V
JURXSRIIXQGV ZKLFKFROOHFWLYHO\KDYHLQH[FHVVRIELOOLRQLQDVVHWV VLWV
RQ WKH %RDUG RI 'LUHFWRUV RI 3DFL¿F &KDUWHU 6FKRRO 'HYHORSPHQW DQG
%HQWOH\)RUEHV*URXS//&DQGLVIRUPHU&KDLUPDQRIWKH3UHVLGLR)XQG
DQG IRUPHU $XGLW &RPPLWWHH &KDLU RI $WODQWLF ,QHUWLDO 6\VWHPV ,QF D
SURGXFHUDQGPDQXIDFWXUHURIHOHFWURPDJQHWLFVHQVRUVŶ
vi
Clinton O. Longenecker, Ph.D.
6WUDQDKDQ3URIHVVRURI/HDGHUVKLSDQG
2UJDQL]DWLRQDO([FHOOHQFH
'LVWLQJXLVKHG8QLYHUVLW\3URIHVVRU
7KH8QLYHUVLW\RI7ROHGR&ROOHJHRI%XVLQHVV
DQG,QQRYDWLRQ
Professor, Critical Business Skills:
2UJDQL]DWLRQDO%HKDYLRU
P
URIHVVRU &OLQWRQ 2 /RQJHQHFNHU LV D 'LVWLQJXLVKHG 8QLYHUVLW\
3URIHVVRU DQG WKH 6WUDQDKDQ 3URIHVVRU RI /HDGHUVKLS DQG
2UJDQL]DWLRQDO([FHOOHQFHLQWKH&ROOHJHRI%XVLQHVVDQG,QQRYDWLRQ
DW 7KH 8QLYHUVLW\ RI 7ROHGR ZKHUH KH KDV WDXJKW VLQFH +H KROGV D
%%$ LQ 0DUNHWLQJ DQG DQ 0%$ LQ 0DQDJHPHQW IURP 7KH 8QLYHUVLW\
RI7ROHGRDVZHOODVD3K'LQ0DQDJHPHQWIURP7KH3HQQV\OYDQLD6WDWH
8QLYHUVLW\3URIHVVRU/RQJHQHFNHUDOVRKDVVHUYHGDVD9LVLWLQJ/HFWXUHUDW
7KH8QLYHUVLW\RIWKH:HVW,QGLHVDW&DYH+LOO%DUEDGRVDQGKDVOHFWXUHG
H[WHQVLYHO\LQ3RODQG+XQJDU\DQG5XVVLD
3URIHVVRU /RQJHQHFNHU¶V WHDFKLQJ UHVHDUFK DQG FRQVXOWLQJ LQWHUHVWV DUH
LQ KLJKSHUIRUPDQFH OHDGHUVKLS DQG WKH FUHDWLRQ RI JUHDW RUJDQL]DWLRQV
+H KDV SXEOLVKHG PRUH WKDQ DUWLFOHV DQG SDSHUV LQ OHDGLQJ DFDGHPLF
DQG SURIHVVLRQDO MRXUQDOV LQFOXGLQJ WKH MIT Sloan Management Review,
Industrial Management, Business Horizons, The European Business Review,
2UJDQL]DWLRQDO '\QDPLFV DQG RWKHUV +H LV D IUHTXHQW PHGLD VRXUFH DQG
KLV UHVHDUFK KDV EHHQ IHDWXUHG LQ The Wall Street Journal DQG Investor’s
Business DailyRQ061%&DQG135DQGLQDZLGHYDULHW\RIRWKHURXWOHWV
3URIHVVRU /RQJHQHFNHU LV DQ DFWLYH PDQDJHPHQW FRQVXOWDQW HGXFDWRU DQG
H[HFXWLYHFRDFK+LVFOLHQWVUHSUHVHQWDEURDGUDQJHRI)RUWXQH¿UPVDQG
HQWUHSUHQHXULDORUJDQL]DWLRQVLQFOXGLQJ+DUOH\'DYLGVRQ&RQ$JUD)RRGV
WKH662(*URXS3UR0HGLFD+HDOWK6\VWHPV:KLUOSRRO&RUSRUDWLRQ(DWRQ
&RUSRUDWLRQ&RRSHU7LUH 5XEEHU&RPSDQ\'DQD+ROGLQJ&RUSRUDWLRQ
WKH+RZDUG+XJKHV0HGLFDO,QVWLWXWHDQG2,,QFDPRQJRWKHUV3URIHVVRU
vii
/RQJHQHFNHUKDVEHHQGHVFULEHGE\&DUHHU3XEOLFDWLRQVDV³RQHRIWKHWRS
PRWLYDWLRQDO VSHDNHUV LQ WKH 86 ZKR FDQ EOHQG FXWWLQJ HGJH UHVHDUFK
FRPPRQVHQVHKXPRUDQGFRQYLFWLRQLQWRDUHDODQGLQVSLULQJFDOOIRUEHWWHU
SHUIRUPDQFHWKDWFDQKHOSXVDOO´
3URIHVVRU /RQJHQHFNHU KDV UHFHLYHG PRUH WKDQ RXWVWDQGLQJ WHDFKLQJ
VHUYLFH DQG UHVHDUFK DZDUGV DQG LV WKH RQO\ SURIHVVRU LQ WKH KLVWRU\ RI
7KH 8QLYHUVLW\ RI 7ROHGR WR KDYH EHHQ WKH UHFLSLHQW RI WKH XQLYHUVLW\¶V
2XWVWDQGLQJ 7HDFKHU 2XWVWDQGLQJ 5HVHDUFKHU DQG 2XWVWDQGLQJ 6HUYLFH
DZDUGV,QDGGLWLRQKHKDVUHFHLYHGQXPHURXVLQGXVWU\DZDUGVLQFOXGLQJWKH
(UQVW <RXQJ(QWUHSUHQHXURIWKH<HDU$ZDUGD7RDVWPDVWHUV,QWHUQDWLRQDO
/HDGHUVKLS$ZDUGDQGD-HIIHUVRQ$ZDUGIRURXWVWDQGLQJSXEOLFVHUYLFH+H
KDVEHHQUHFHQWO\UHFRJQL]HGE\7KH(FRQRPLVWDVRQHRIWKHWRSEXVLQHVV
SURIHVVRUVLQWKHZRUOG
3URIHVVRU/RQJHQHFNHU¶VEHVWVHOOLQJERRNGetting Results: Five Absolutes
IRU+LJK3HUIRUPDQFH FRDXWKRUHGZLWK-DFN6LPRQHWWL GHVFULEHVWKHEHVW
SUDFWLFHV RI PRUH WKDQ KLJKSHUIRUPDQFH PDQDJHUV DQG KRZ WKH\
DFKLHYH RXWVWDQGLQJ SHUIRUPDQFH WKH ERRN KDV EHHQ WUDQVODWHG LQWR QLQH
languages. His latest book is The Two-Minute Drill: Lessons for Rapid
2UJDQL]DWLRQDO ,PSURYHPHQW IURP $PHULFD¶V *UHDWHVW *DPH SXEOLVKHG
ZLWK*UHJ3DSSDQG7LP6WDQV¿HOG7KHERRNFKURQLFOHVWKHNH\VWRUDSLG
SHUIRUPDQFH LPSURYHPHQW IURP WKH DXWKRUV¶ UHVHDUFK RQ PRUH WKDQ RUJDQL]DWLRQDO LPSURYHPHQW LQLWLDWLYHV 3URIHVVRU /RQJHQHFNHU LV DOVR
IHDWXUHG LQ D QXPEHU RI HGXFDWLRQDO YLGHRV LQFOXGLQJ WKH DZDUGZLQQLQJ
&50 WUDLQLQJ ¿OP (IIHFWLYH 3HUIRUPDQFH $SSUDLVDO DQG Continuous
,PSURYHPHQWLQ0DQXIDFWXULQJEDVHGRQKLVUHVHDUFK
3URIHVVRU /RQJHQHFNHU LV DQ DFWLYH FRPPXQLW\ VHUYDQW DQG D %LEOH VWXG\
OHDGHU DQG &KULVWLDQ VSHDNHU +H KDV VSHQW H[WHQVLYH WLPH ZRUNLQJ LQ
WKH FRXQWU\ RI +DLWL PDQDJLQJ VHYHUDO PLVVLRQDU\ VFKRROV DQG KRVSLWDO
FRQVWUXFWLRQSURMHFWV+HLVKDSSLO\PDUULHGWRWKHIRUPHU&LQG\%UHHVHDQG
KDVWKUHHFKLOGUHQŶ
viii
Ryan Hamilton, Ph.D.
Associate Professor of Marketing
(PRU\8QLYHUVLW\*RL]XHWD%XVLQHVV6FKRRO
Professor, Critical Business Skills: Marketing
P
rofessor Ryan Hamilton is an Associate
3URIHVVRU RI 0DUNHWLQJ DW (PRU\
8QLYHUVLW\¶V *RL]XHWD %XVLQHVV 6FKRRO
ZKHUH KH KDV WDXJKW VLQFH +H UHFHLYHG KLV
3K'LQ0DUNHWLQJIURP1RUWKZHVWHUQ8QLYHUVLW\¶V
.HOORJJ6FKRRORI0DQDJHPHQW+HDOVRKDVD%6LQ$SSOLHG3K\VLFVIURP
%ULJKDP<RXQJ8QLYHUVLW\ZKHUHKHSDUWLFLSDWHGLQSURWRQLQGXFHG;UD\
HPLVVLRQUHVHDUFKXVLQJD9DQGH*UDDIISURWRQDFFHOHUDWRU
3URIHVVRU+DPLOWRQLVDFRQVXPHUSV\FKRORJLVWZKRVHUHVHDUFKLQYHVWLJDWHV
VKRSSHU GHFLVLRQ PDNLQJ KRZ EUDQGV SULFHV DQG FKRLFH DUFKLWHFWXUH
LQÀXHQFH GHFLVLRQ PDNLQJ DW WKH SRLQW RI SXUFKDVH +LV UHVHDUFK JHQHUDOO\
¿WV ZLWKLQ WKH VFKRRO RI EHKDYLRUDO GHFLVLRQ WKHRU\ H[DPLQLQJ KRZ
FRQWH[WXDO IDFWRUV SURGXFH GHFLVLRQ ELDVHV DQG LUUHJXODULWLHV ,Q KH
ZDVUHFRJQL]HGE\WKH0DUNHWLQJ6FLHQFH,QVWLWXWHDVEHLQJDPRQJWKHPRVW
SURGXFWLYH\RXQJVFKRODUVLQKLV¿HOG
3URIHVVRU+DPLOWRQKDVUHFHLYHGPXOWLSOHWHDFKLQJH[FHOOHQFHDZDUGVIURP
KLV0%$VWXGHQWVDW(PRU\DQGLQZDVQDPHGRQHRI³7KH:RUOG¶V
%HVW%6FKRRO3URIVXQGHUWKH$JHRI´E\Poets & Quants, an online
PDJD]LQHWKDWFRYHUVWKHZRUOGRI0%$HGXFDWLRQ
3URIHVVRU +DPLOWRQ¶V UHVHDUFK ¿QGLQJV KDYH EHHQ SXEOLVKHG LQ VRPH
RI WKH PRVW SUHVWLJLRXV SHHUUHYLHZHG MRXUQDOV LQ PDUNHWLQJ DQG
PDQDJHPHQW LQFOXGLQJ WKH -RXUQDO RI &RQVXPHU 5HVHDUFK, the Journal of
0DUNHWLQJ 5HVHDUFK, the Journal of Marketing, 0DQDJHPHQW 6FLHQFH DQG
2UJDQL]DWLRQDO%HKDYLRUDQG+XPDQ'HFLVLRQ3URFHVVHV+LV¿QGLQJVDOVR
KDYH IRXQG DQ DXGLHQFH LQ WKH SRSXODU SUHVV KDYLQJ EHHQ FRYHUHG E\ The
New York Times, The Wall Street Journal, TIME, USA TODAY, 7KH)LQDQFLDO
Times, New York PDJD]LQH DQG&11+HDGOLQH1HZV
L[
3URIHVVRU+DPLOWRQLVWKHSURXGIDWKHURI¿YH\RXQJFKLOGUHQZKLFKPHDQV
WKDWKHVSHQGVPXFKRIKLVWLPHH[KDXVWHGDQGVOLJKWO\UXPSOHG+HLVDOVR
D IRUPHU DPDWHXU VNHWFK DQG VWDQGXS FRPHGLDQ DQG SHUIRUPHG LQ WKDW
FDSDFLW\LQFOXEVDQGRQFROOHJHFDPSXVHVDFURVVWKHFRXQWU\Ŷ
[
Table of Contents
INTRODUCTION
Professor Biographies .........................................................................i
LECTURE GUIDES
Critical Business Skills: Strategy
Scope .................................................................................................1
LECTURE 1
Strategy Is Making Choices ................................................................3
LECTURE 2
How Apple Raises Competitive Barriers ...........................................10
LECTURE 3
The Danger of Straddling .................................................................17
LECTURE 4
What Trader Joe’s Doesn’t Do..........................................................24
LECTURE 5
First Movers versus Fast Followers ..................................................31
LECTURE 6
:KHQ1HWÀL[0HW%ORFNEXVWHU ..........................................................38
LECTURE 7
Anticipating Your Rival’s Response ..................................................44
LECTURE 8
:K\'LG'LVQH\%X\3L[DU"..............................................................51
[L
Table of Contents
LECTURE 9
7KH'LYHUVL¿FDWLRQ'LVFRXQW .............................................................58
LECTURE 10
Forward and Backward Integration...................................................65
LECTURE 11
Mergers and Acquisitions—The Winner’s Curse ..............................72
LECTURE 12
Launching a Lean Start-Up...............................................................79
Critical Business Skills: Operations
Scope ...............................................................................................89
LECTURE 13
The Power of Superior Operations ...................................................91
LECTURE 14
Leaner, Meaner Production ..............................................................98
LECTURE 15
5H¿QLQJ6HUYLFH2SHUDWLRQV ...........................................................106
LECTURE 16
Matching Supply and Demand ....................................................... 114
LECTURE 17
Rightsizing Inventory ......................................................................122
LECTURE 18
Managing Supply and Suppliers .....................................................129
LECTURE 19
The Long Reach of Logistics ..........................................................136
[LL
Table of Contents
LECTURE 20
Rethinking Your Business Processes .............................................143
LECTURE 21
Measuring Operational Performance..............................................150
LECTURE 22
Keeping an Eye on Your Margins ...................................................157
LECTURE 23
Leveraging Your Supply Chain .......................................................164
LECTURE 24
Reducing Risk, Building Resilience ................................................171
Critical Business Skills: Finance and Accounting
Scope .............................................................................................181
LECTURE 25
Accounting and Finance—Decision-Making Tools .........................183
LECTURE 26
How to Interpret a Balance Sheet...................................................190
LECTURE 27
Why the Income Statement Matters ...............................................198
LECTURE 28
How to Analyze a Cash Flow Statement ........................................206
LECTURE 29
Common Size, Trend, and Ratio Analysis ......................................213
LECTURE 30
&RVW9ROXPH3UR¿W$QDO\VLV ...........................................................220
[LLL
Table of Contents
LECTURE 31
Understanding the Time Value of Money........................................228
LECTURE 32
7KH7UDGH2IIEHWZHHQ5LVNDQG5HWXUQ ........................................236
LECTURE 33
How Investors Use Net Present Value ...........................................244
LECTURE 34
Alternatives to Net Present Value ...................................................252
LECTURE 35
:HLJKLQJWKH&RVWVRI'HEWDQG(TXLW\ ..........................................259
LECTURE 36
How to Value a Company’s Stock ..................................................267
Critical Business Skills: Organizational Behavior
Scope .............................................................................................279
LECTURE 37
Achieving Results in Your Organization..........................................281
LECTURE 38
The Value of Great Leadership.......................................................288
LECTURE 39
Emotional Intelligence in the Workplace.........................................295
LECTURE 40
The Art of Effective Communications .............................................303
LECTURE 41
The Motivation-Performance Connection .......................................310
[LY
Table of Contents
LECTURE 42
Winning with Teamwork ..................................................................317
LECTURE 43
Coaching—From Gridiron to Boardroom ........................................324
LECTURE 44
Understanding Power Relationships ..............................................331
LECTURE 45
+DQGOLQJ:RUNSODFH&RQÀLFW ..........................................................338
LECTURE 46
(WKLFVDQGWKH%DWKVKHED6\QGURPH .............................................345
LECTURE 47
Leading Real Organizational Change.............................................352
LECTURE 48
Lifelong Learning for Career Success ............................................359
Critical Business Skills: Marketing
Scope .............................................................................................369
LECTURE 49
:KDW,V0DUNHWLQJ".........................................................................371
LECTURE 50
How to Segment a Market ..............................................................377
LECTURE 51
Targeting a Market Segment ..........................................................384
LECTURE 52
Positioning Your Offering ................................................................391
[Y
Table of Contents
LECTURE 53
Identifying Sources of Sales Growth ..............................................398
LECTURE 54
Deriving Value from Your Customers..............................................405
LECTURE 55
&UHDWLQJ*UHDW&XVWRPHU([SHULHQFHV...........................................412
LECTURE 56
The Tactics of Successful Branding................................................419
LECTURE 57
Customer-Focused Pricing .............................................................426
LECTURE 58
Marketing Communications That Work ..........................................433
LECTURE 59
The Promise and Perils of Social Media.........................................439
LECTURE 60
Innovative Marketing Research Techniques ...................................446
SUPPLEMENTAL MATERIAL
%LEOLRJUDSK\ ....................................................................................454
[YL
Disclaimer
7KH ¿QDQFLDO LQIRUPDWLRQ SURYLGHG LQ WKHVH OHFWXUHV LV IRU LQIRUPDWLRQDO
SXUSRVHVRQO\DQGQRWIRUWKHSXUSRVHRISURYLGLQJVSHFL¿F¿QDQFLDODGYLFH
)LQDQFLDOLQYHVWLQJFDUULHVDQLQKHUHQWULVNWKDW\RXZLOOORVHSDUWRUDOORI
\RXULQYHVWPHQW,QYHVWRUVPXVWLQGHSHQGHQWO\DQGWKRURXJKO\UHVHDUFKDQG
DQDO\]H HDFK DQG HYHU\ LQYHVWPHQW SULRU WR LQYHVWLQJ 7KH FRQVHTXHQFHV
RI VXFK ULVN PD\ LQYROYH EXW DUH QRW OLPLWHG WR IHGHUDOVWDWHPXQLFLSDO
WD[ OLDELOLWLHV ORVV RI DOO RU SDUW RI WKH LQYHVWPHQW FDSLWDO ORVV RI LQWHUHVW
FRQWUDFWOLDELOLW\WRWKLUGSDUWLHVDQGRWKHUULVNVQRWVSHFL¿FDOO\OLVWHGKHUHLQ
8VHRIWKHVHOHFWXUHVGRHVQRWFUHDWHDQ\¿QDQFLDODGYLVRUUHODWLRQVKLSZLWK
7KH7HDFKLQJ&RPSDQ\RULWVOHFWXUHUVDQGQHLWKHU7KH7HDFKLQJ&RPSDQ\
QRU WKH OHFWXUHU LV UHVSRQVLEOH IRU \RXU XVH RI WKLV HGXFDWLRQDO PDWHULDO RU
LWV FRQVHTXHQFHV <RX VKRXOG FRQWDFW D ¿QDQFLDO DGYLVRU WR REWDLQ DGYLFH
ZLWKUHVSHFWWRDQ\VSHFL¿F¿QDQFLDOLQYHVWLQJTXHVWLRQV7KHRSLQLRQVDQG
SRVLWLRQVSURYLGHGLQWKHVHOHFWXUHVUHÀHFWWKHRSLQLRQVDQGSRVLWLRQVRIWKH
UHOHYDQWOHFWXUHUDQGGRQRWQHFHVVDULO\UHÀHFWWKHRSLQLRQVRUSRVLWLRQVRI
7KH7HDFKLQJ&RPSDQ\RULWVDI¿OLDWHV3XUVXDQWWR,56&LUFXODUDQ\
WD[DGYLFHSURYLGHGLQWKHVHOHFWXUHVPD\QRWEHXVHGWRDYRLGWD[SHQDOWLHV
RUWRSURPRWHPDUNHWRUUHFRPPHQGDQ\PDWWHUWKHUHLQ
7KH 7HDFKLQJ &RPSDQ\ H[SUHVVO\ ',6&/$,06 /,$%,/,7< IRU DQ\
',5(&7 ,1',5(&7 ,1&,'(17$/ 63(&,$/ 25 &216(48(17,$/
'$0$*(625/267352),76WKDWUHVXOWGLUHFWO\RULQGLUHFWO\IURPWKH
XVH RI WKHVH OHFWXUHV ,Q VWDWHV WKDW GR QRW DOORZ VRPH RU DOO RI WKH DERYH
OLPLWDWLRQVRIOLDELOLW\OLDELOLW\VKDOOEHOLPLWHGWRWKHJUHDWHVWH[WHQWDOORZHG
by law.
[YLL
[YLLL
Critical Business Skills:
Strategy
Michael A. Roberto, D.B.A.
Critical Business Skills: Strategy
Scope:
S
XFFHVVIXO EXVLQHVVHV IRUPXODWH D FOHDU FRPSHWLWLYH VWUDWHJ\ 7KH\
PDNHWKHWRXJKFKRLFHVDERXWKRZDQGZKHUHWRFRPSHWH7KHVH¿UPV
GRQRWWU\WREHDOOWKLQJVWRDOOSHRSOH,QVWHDGWKH\VHOHFWWKHLUWDUJHW
PDUNHWVFDUHIXOO\DQGWKH\FKRRVHZKDWQRWWRGR%\PDNLQJFOHDUWUDGH
RIIVWKH\GHYHORSDGLVWLQFWLYHSRVLWLRQLQWKHPDUNHWSODFHDQGWKH\PDNHLW
TXLWHGLI¿FXOWIRUHVWDEOLVKHGULYDOVWRHQJDJHLQVXFFHVVIXOLPLWDWLRQ
,QWKLVVHFWLRQRIWKHFRXUVHZHZLOOH[SORUHWKHIXQGDPHQWDOTXHVWLRQ:K\
GRVRPH¿UPVSHUIRUPEHWWHUWKDQRWKHUV"7RDQVZHUWKLVTXHVWLRQZHZLOO
H[DPLQHWZRIDFWRUVLQGXVWU\DWWUDFWLYHQHVVDQGFRPSHWLWLYHDGYDQWDJH:H
ZLOOOHDUQWKDWVRPHLQGXVWULHVHDUQPXFKKLJKHUUHWXUQVRQLQYHVWPHQWWKDQ
RWKHUV,QWKH¿UVWVL[OHFWXUHVZHZLOOLQWURGXFHDIUDPHZRUNIRUDQDO\]LQJ
LQGXVWU\VWUXFWXUHDQGH[SODLQLQJWKHVXEVWDQWLDOGLIIHUHQFHVLQSUR¿WDELOLW\
DFURVV LQGXVWULHV 2I FRXUVH FRPSDQLHV FDQ HDUQ KLJKHU UHWXUQV WKDQ WKHLU
FRPSHWLWRUV E\ EXLOGLQJ FRPSHWLWLYH DGYDQWDJH ZLWKLQ ZKLFKHYHU LQGXVWU\
WKH\FKRRVHWRFRPSHWH:HZLOOH[DPLQHKRZ¿UPVHVWDEOLVKDGLVWLQFWLYH
FRPSHWLWLYHSRVLWLRQDQGFUHDWHFRPSHWLWLYHDGYDQWDJHRYHUULYDOV0RUHRYHU
ZHZLOODQDO\]HKRZ¿UPVFDQVXVWDLQWKDWFRPSHWLWLYHDGYDQWDJHDJDLQVWD
YDULHW\RIH[WHUQDODQGLQWHUQDOWKUHDWV0RVW¿UPVFDQQRWVXVWDLQDGYDQWDJH
IRUDOHQJWK\SHULRGRIWLPH:HZLOOWU\WRXQGHUVWDQGZK\DQGKRZOHDGLQJ
FRPSDQLHVORVHWKHLUFRPSHWLWLYHHGJH
7KH VHFRQG VL[ OHFWXUHV VKLIW IRFXV IURP EXVLQHVV VWUDWHJ\ WR FRUSRUDWH
VWUDWHJ\ 7KH ODWWHU WRSLF HPSKDVL]HV WKH VWUDWHJLF FKRLFHV IDFHG E\
GLYHUVL¿HG PXOWL±EXVLQHVV XQLW FRPSDQLHV :H ZLOO H[DPLQH ZK\ WKHVH
¿UPV FKRRVH WR H[SDQG WKHLU KRUL]RQWDO DQG YHUWLFDO VFRSH ,Q WKLV VHFWLRQ
ZHDVNWKHIXQGDPHQWDOTXHVWLRQ,VWKHZKROHZRUWKPRUHWKDQWKHVXPRI
WKHSDUWV",QRWKHUZRUGVKRZFDQFRPSDQLHVFUHDWH RUGHVWUR\ YDOXHE\
FKRRVLQJWRRZQDQGRSHUDWHPXOWLSOHEXVLQHVVXQLWVFRPSHWLQJLQGLIIHUHQW
SURGXFW PDUNHWV" 7KLV VHFWLRQ RI WKH FRXUVH FORVHV E\ H[DPLQLQJ WKH UROH
1
RIWKHHQWUHSUHQHXU:HH[DPLQHKRZVWDUWXSVFDQXVHDOHDQDSSURDFKWR
ODXQFKLQJ D QHZ EXVLQHVV ZKLOH DSSO\LQJ PDQ\ RI WKH VWUDWHJLF FRQFHSWV
LQWURGXFHGLQWKHVHOHFWXUHV
Scope
7KURXJKRXW WKH OHFWXUHV ZH ZLOO XVH D ZLGH YDULHW\ RI FDVH VWXGLHV WR
LQWURGXFHNH\FRQFHSWVIURPWKH¿HOGRIFRPSHWLWLYHVWUDWHJ\)RULQVWDQFH
ZH ZLOO H[DPLQH WKH G\QDPLFV RI VXFK LQGXVWULHV DV DLUOLQHV SHUVRQDO
FRPSXWHUV DQG SKDUPDFHXWLFDOV :H ZLOO ORRN DW KRZ VXFK ¿UPV DV
$SSOH KDYH SRVLWLRQHG WKHPVHOYHV WR VXFFHHG LQ FKDOOHQJLQJ FRPSHWLWLYH
HQYLURQPHQWV :H ZLOO H[SORUH KRZ 7UDGHU -RH¶V PDGH D VHULHV RI WUDGH
RIIVWRHVWDEOLVKDSRVLWLRQWKDWRWKHUVFRXOGQRWLPLWDWHHDVLO\DQGZHZLOO
DQDO\]HWKHFRPSHWLWLYHEDWWOHEHWZHHQ%ORFNEXVWHUDQG1HWÀL[:HZLOODOVR
H[SORUH WKH GLYHUVL¿FDWLRQ DQG YHUWLFDO LQWHJUDWLRQ VWUDWHJLHV XVHG E\ VXFK
¿UPVDV'LVQH\DQG=DUD$VZHH[DPLQHWKHVHFDVHVWXGLHVZHZLOOVHHKRZ
WKHFRUHLGHDVRIEXVLQHVVVWUDWHJ\ZRUNLQSUDFWLFHQRWMXVWLQWKHRU\Ŷ
2
Strategy Is Making Choices
Lecture 1
A
QG\ *URYH WKH &(2 RI ,QWHO KDV QRWHG WKDW LQ EXVLQHVV RQO\
WKH SDUDQRLG VXUYLYH $V SURRI RI WKLV LGHD FRQVLGHU ZKDW KDV
KDSSHQHGLQMXVWDIHZLQGXVWULHVLQUHFHQW\HDUV7KHPRYLHUHQWDO
EXVLQHVV%ORFNEXVWHUKDVEHHQWRSSOHGE\1HWÀL[UHFRUGVWRUHVKDYHJLYHQ
ZD\ WR PXVLFVWUHDPLQJ VHUYLFHV VXFK DV 6SRWLI\ DQG WD[LFDEV PD\ VRRQ
EH VXSSODQWHG E\ 8EHU ,Q HDFK RI WKHVH LQGXVWULHV D GLVUXSWLYH ULYDO KDV
HPHUJHGDQGWKUHDWHQHGRUHOLPLQDWHGWKHLQFXPEHQWSOD\HUV,QWKLVVHFWLRQ
RIWKHFRXUVHZHZLOOWU\WRXQGHUVWDQGKRZ\RXFDQVXVWDLQDFRPSHWLWLYH
DGYDQWDJHLQ\RXULQGXVWU\RUKRZDVDQHZHQWUDQW\RXFDQSORWDVWUDWHJ\
WRNQRFNRIIWKHWRSSOD\HUV
The Field of Business Strategy
% 7KH¿HOGRIEXVLQHVVVWUDWHJ\PLJKWEHVDLGWRKDYHHPHUJHGIURP
an ancient Chinese military treatise, The Art of War, written by Sun
7]X 0DQ\ LQ EXVLQHVV KDYH XVHG WKLV WH[W WR IRUPXODWH LGHDV RQ
KRZFRPSDQLHVFDQEXLOGDQGVXVWDLQFRPSHWLWLYHDGYDQWDJH
%
,QWKHVDQGVOHDGLQJEXVLQHVVVFKRROVEHJDQWRH[SORUH
WKH LGHD RI FRPSHWLWLYH VWUDWHJ\ ,Q WKH HDUO\ V WKH EXVLQHVV
KLVWRULDQ $OIUHG &KDQGOHU VWXGLHG VRPH RI $PHULFD¶V JUHDW th
FHQWXU\ FRUSRUDWLRQV +H QRWHG WKDW DV WKRVH ¿UPV FKDQJHG WKHLU
VWUDWHJLHV WKH\ DOVR KDG WR FKDQJH WKHLU RUJDQL]DWLRQDO VWUXFWXUHV
V\VWHPV DQG SURFHVVHV )RU WKLV UHDVRQ KH DUJXHG WKDW VWUDWHJ\
GULYHVVWUXFWXUHLQODUJHRUJDQL]DWLRQV
%
%XWLQ-RVHSK%RZHUDW+DUYDUG%XVLQHVV6FKRROWXUQHGWKDW
DUJXPHQW RQ LWV KHDG +H GLGQ¶W GLVDJUHH ZLWK &KDQGOHU EXW KH
DUJXHGWKDWLQVRPHFRPSDQLHVVWUXFWXUHFDQDOVRGULYHVWUDWHJ\7KH
FKRLFHVD¿UPPDNHVUHJDUGLQJV\VWHPVRUJDQL]DWLRQDOVWUXFWXUHV
SURFHVVHV PHDVXUHPHQWV DQG VR RQ FDQ GULYH WKH ¿UP¶V IXWXUH
6XFK FKRLFHV DUH EHKLQG WKH NLQGV RI LGHDV WKDW EXEEOH XS IURP
EHORZDERXWQHZSURGXFWVDQGVHUYLFHVDQGUHDFKWRSPDQDJHPHQW
%
7KH PRGHUQ ¿HOG RI VWUDWHJ\ ZDV LQLWLDWHG E\ .HQ$QGUHZV DQG
KLV FROOHDJXHV DW +DUYDUG %XVLQHVV 6FKRRO 7KH\ DUJXHG WKDW
VWUDWHJ\LVDSDWWHUQRIFKRLFHVWKDWUHYHDOVWKHSXUSRVHDQGJRDOV
RIDQRUJDQL]DWLRQ
%
(FRQRPLFVKDVDOVRLQÀXHQFHGWKH¿HOGRIVWUDWHJ\0LFKDHO3RUWHU
ZDV RQH RI WKH HDUO\ HFRQRPLVWV ZKR EHJDQ WR IXVH LGHDV IURP
HFRQRPLFVZLWKLGHDVIURPWKH¿HOGRIEXVLQHVVPDQDJHPHQW
Lecture 1: Strategy Is Making Choices
Organizational Performance
% 7KHIXQGDPHQWDOTXHVWLRQZH¶OOWU\WRDQVZHULQWKHVHOHFWXUHVRQ
VWUDWHJ\LVVLPSOH:K\GRVRPH¿UPVSHUIRUPEHWWHUWKDQRWKHUV"
7R DQVZHU WKLV TXHVWLRQ ZH PXVW ORRN DW WZR IDFWRUV LQGXVWU\
DWWUDFWLYHQHVVDQGFRPSHWLWLYHDGYDQWDJH
%
,QGXVWU\ DWWUDFWLYHQHVV VLPSO\ PHDQV WKDW VRPH LQGXVWULHV DUH
PRUHSUR¿WDEOHWKDQRWKHUV,QWKRVHHQYLURQPHQWVWKHUHDUHPRUH
RSSRUWXQLWLHVIRUPRUHFRPSDQLHVWRPDNHKHDOWK\UHWXUQV,QRWKHU
LQGXVWULHVLW¶VPXFKPRUHGLI¿FXOWIRU¿UPVWRPDNHPRQH\7KXV
RQH SDUW RI H[SODLQLQJ D ¿UP¶V SHUIRUPDQFH LV XQGHUVWDQGLQJ WKH
HQYLURQPHQWLQZKLFKLWFRPSHWHV
%
%XWZHDOVRWKHQKDYHWRXQGHUVWDQGKRZD¿UPFRPSHWHVDJDLQVWLWV
ULYDOV'RHVLWKDYHDQDGYDQWDJHRYHUULYDOV",VLWDEOHWRJHQHUDWH
UHWXUQV DERYH WKH LQGXVWU\ DYHUDJH" $QG FDQ LW GR VR \HDU DIWHU
\HDU"7KDW¶VZKDWZHPHDQE\FRPSHWLWLYHDGYDQWDJH
%
:H FDQ DOVR LGHQWLI\ WZR NH\ TXHVWLRQV UHODWHG WR FRPSHWLWLYH
DGYDQWDJH +RZ GR \RX HVWDEOLVK D GLVWLQFWLYH FRPSHWLWLYH
SRVLWLRQ DQG FUHDWH DGYDQWDJH RYHU \RXU ULYDOV" +RZ GR
\RX VXVWDLQ WKDW DGYDQWDJH DJDLQVW D YDULHW\ RI H[WHUQDO DQG
LQWHUQDOWKUHDWV"
ż :HOLYHLQDZRUOGZKHUHLQIRUPDWLRQLVUHDGLO\DYDLODEOHDQG
PRYHVTXLFNO\$Q\RQHFDQJHWRQWKH,QWHUQHWDQGOHDUQDERXW
FRPSHWLWRUV&RQVXOWDQWVFDQEHKLUHGWRKHOSEHQFKPDUND¿UP
DJDLQVWWKHFRPSHWLWLRQ
ż
:LWKRXWTXHVWLRQLI\RX¶YHSURYHQWKDW\RXKDYHDVXFFHVVIXO
SURGXFW RU VHUYLFH LI \RXU FXVWRPHUV DUH KDSS\ DQG \RXU
investors are getting attractive returns, others will try to imitate
\RX7KH\ZLOOORRNIRUDVOLJKWO\EHWWHUZD\WRGRZKDW\RX¶UH
GRLQJ²DQGWKH\ZRQ¶WVWRS
ż
)RU WKLV UHDVRQ XQGHUVWDQGLQJ KRZ WR VXVWDLQ FRPSHWLWLYH
DGYDQWDJHLVFUXFLDOWREXVLQHVVVWUDWHJ\
‹0LQHUYD6WXGLRL6WRFN7KLQNVWRFN
Strategic Planning
% 3RUWHUKDVDUJXHGIRUWKHLPSRUWDQFHRIKDYLQJDQH[SOLFLWSURFHVV
IRU IRUPXODWLQJ VWUDWHJLHV IRU XQGHUVWDQGLQJ WKH JRDOV RI D
FRUSRUDWLRQ DQG KRZ WKH\ ZLOO EH DFKLHYHG %XW VRPH KDYH EHHQ
PXFKPRUHVNHSWLFDODQGFULWLFDORIWKHLGHDRIVWUDWHJLFSODQQLQJLQ
RUJDQL]DWLRQV)RUH[DPSOHPDQDJHPHQWSURIHVVRU5XVVHOO$FNRII
VDLG³0RVWFRUSRUDWHSODQQLQJLVOLNHDULWXDOUDLQGDQFH,WKDVQR
effect on the weather that follows, but it makes those who engage in
LWIHHOWKDWWKH\DUHLQFRQWURO´
In many corporate strategic planning processes, discussions focus more on
¿QDQFLDOWDUJHWVDQGEXGJHWVWKDQDERXWZKHUHDQGKRZWRFRPSHWH
%
,W¶VLPSRUWDQWWRQRWHWKDW$FNRIILVFULWLFL]LQJWKHVWUDWHJLFSODQQLQJ
SURFHVV DV LW RFFXUV LQ PDQ\ FRPSDQLHV 7KDW SURFHVV HVSHFLDOO\
LQODUJHRUJDQL]DWLRQVWHQGVWREHEXUHDXFUDWLFDQGFXPEHUVRPH,W
WDNHVDJUHDWGHDORIWLPHDQGLWWHQGVWRIRFXVRQEXGJHWLQJUDWKHU
WKDQ VWUDWHJ\ ,Q FRQWUDVW VWUDWHJ\ IRUPXODWLRQ VKRXOG IRFXV RQ
ZKHUHDQGKRZWRFRPSHWH
%
6RPHKDYHDOVRFULWLFL]HGWKH¿HOGWKHVWUDWHJ\E\DUJXLQJWKDWLW¶V
VLPSO\ QRW DSSURSULDWH WR WDON DERXW HVWDEOLVKLQJ DQG VXVWDLQLQJ
FRPSHWLWLYHDGYDQWDJHLQWRGD\¶VWXUEXOHQWHQYLURQPHQW
ż 5LWD0F*UDWKDW&ROXPELDKDVVDLGWKDWFRPSHWLWLYHDGYDQWDJH
LV WUDQVLHQW ,W¶V VLPSO\ WRR GLI¿FXOW VKH VD\V IRU ¿UPV WR
HVWDEOLVKDQDGYDQWDJHDQGVXVWDLQLWRYHUDORQJSHULRGRIWLPH
Lecture 1: Strategy Is Making Choices
ż
6
$FFRUGLQJWR0F*UDWK¿UPVPXVWDGDSWFRQVWDQWO\PDQDJLQJ
DSLSHOLQHRILQLWLDWLYHVQRWMXVWRQHVWUDWHJ\$Q\RUJDQL]DWLRQ
VKRXOG H[SHULPHQW LWHUDWH DQG OHDUQ$GDSWLQJ LV ZKDW JUHDW
¿UPV GR QRW SORWWLQJ D GLVWLQFWLYH SRVLWLRQ DQG WU\LQJ WR
sustain it.
%
5RJHU 0DUWLQ IURP WKH 8QLYHUVLW\ RI 7RURQWR GLVDJUHHV ZLWK
0F*UDWK6WUDWHJ\KHVD\VVKRXOGQRWEHFRQIXVHGZLWKVWUDWHJLF
SODQQLQJSURFHVVHV<HV\RXURUJDQL]DWLRQVKRXOGDGDSWDQGLWHUDWH
but you must begin with a clear set of choices. You must know the
GLUHFWLRQLQZKLFK\RX¶UHKHDGHG)URPWKHUH\RXFDQDGDSW%XW
PDQ\ PDQDJHUV DFFRUGLQJ WR 0DUWLQ HPEUDFH WKH DGDSWLYH YLHZ
EHFDXVHWKH\GRQ¶WZDQWWRPDNHKDUGFKRLFHV
%
%RWK 0DUWLQ DQG 0F*UDWK IXQGDPHQWDOO\ DJUHH WKDW VWUDWHJ\
XOWLPDWHO\FRPHVGRZQWRPDNLQJFKRLFHVDERXWZKDWWRGRDQGZKDW
QRWWRGR$QG0DUWLQZRXOGDJUHHZLWK0F*UDWKWKDWFRPSHWLWLYH
DGYDQWDJHLVPRUHÀHHWLQJWRGD\WKDQLWZDVGHFDGHVDJR%XW0DUWLQ
EHOLHYHVDQRUJDQL]DWLRQPXVWVWDUWZLWKDFOHDUGLUHFWLRQIURPWKHUH
PDQDJHUVPXVWVFDQWKHPDUNHWWKHFXVWRPHUDQGWKHFRPSHWLWLRQ
DQGEHUHDG\WRÀH[WKHVWUDWHJ\DSSURSULDWHO\
%
,W¶V JHQHUDOO\ QRW WKH FDVH WKDW VWUDWHJ\ IRUPXODWLRQ LV H[SOLFLW
FRQVFLRXV DQG SXUSRVHIXO ,W¶V PRUH RIWHQ WKH WUXH WKDW VWUDWHJ\
HPHUJHV DQG HYROYHV RYHU WLPH ,W¶V LPSRUWDQW WR WKLQN DERXW
VWUDWHJ\DVDSDWWHUQLQDVWUHDPRIGHFLVLRQVDQGDFWLRQVLW¶VQRWDQ
HYHQWEXWDSURFHVV
%
The authors of Playing to WinKDYHQRWHG¿YHNH\TXHVWLRQVWRDVN
\RXUVHOIZKHQSORWWLQJVWUDWHJ\
ż :KDW¶V\RXUZLQQLQJDVSLUDWLRQ",QRWKHUZRUGVZKDWDUH\RX
WU\LQJWRDFKLHYH"
ż
:KHUH ZLOO \RX SOD\²LQ ZKDW SURGXFW PDUNHWV VHJPHQWV
DQGJHRJUDSKLHV"
ż
+RZDUH\RXJRLQJWRZLQ"7KDWLVZKDWDUH\RXJRLQJWRGR
WKDWZLOOJLYH\RXDQDGYDQWDJHRYHUWKHFRPSHWLWLRQ"
ż
:KDWFDSDELOLWLHVPXVWEHLQSODFHWRH[HFXWH\RXUVWUDWHJ\"
ż
:KDW PDQDJHPHQW V\VWHPV DUH UHTXLUHG WR LPSOHPHQW \RXU
VWUDWHJ\"
Competition
% )RXU IDFWV DERXW FRPSHWLWLRQ ZLOO VHW WKH VWDJH IRU RXU DQDO\VLV
RI FRPSHWLWLYH HQYLURQPHQWV DV ZH PRYH WKURXJK WKHVH OHFWXUHV
)LUVWLQGXVWULHVYDU\ZLGHO\LQWKHLUSUR¿WDELOLW\7KDWLVLQVRPH
EXVLQHVVHVLWZLOOEHGLI¿FXOWWRPDNHPRQH\QRPDWWHUKRZVPDUW
the management team or how great the strategy.
%
6HFRQGWKHLQGXVWU\\RX¶UHLQPDWWHUVDJUHDWGHDOLQRWKHUZRUGV
VRPHWLPHV WKHUH DUH IRUFHV EH\RQG \RXU FRQWURO GULYLQJ \RXU
SUR¿WDELOLW\ 7KRVH LQ WKH QHZVSDSHU EXVLQHVV IRU H[DPSOH KDYH
OHDUQHGWKLVOHVVRQDVWKH,QWHUQHWKDVJURZQ
%
7KLUGFRPSHWLWLYHDGYDQWDJHPD\EHÀHHWLQJ
7
%
)RXUWK LQGXVWU\ VWUXFWXUH YDULHV ZLGHO\ DURXQG WKH ZRUOG ,W¶V
WUXH WKDW ZH OLYH LQ D PRUH JOREDO ZRUOG WRGD\ EXW FRPSHWLWLYH
HQYLURQPHQWV FDQ ORRN YHU\ GLIIHUHQW LQ GLIIHUHQW SDUWV RI WKH
ZRUOGIRUDYDULHW\RIUHDVRQVIURPFRQVXPHUWDVWHVDQGFXOWXUHWR
JRYHUQPHQWUHJXODWLRQDQGLQVWLWXWLRQV
Industry Structure and Competitive Advantage
% ,QWKHUHWXUQRQDVVHWVIRU3¿]HUDSKDUPDFHXWLFDOFRPSDQ\
ZDV)RU$ODVND$LUOLQHVLWZDV&DQZHFRQFOXGHWKDW
3¿]HULVDEHWWHUPDQDJHG¿UPWKDQ$ODVND$LUOLQHV"1RZHFDQ¶W
ORRN RQO\ DW DEVROXWH ¿QDQFLDO UHWXUQV WR PDNH FRQFOXVLRQV DERXW
WKHVHWZRFRPSDQLHV
ż 7KHSKDUPDFHXWLFDOVLQGXVWU\LVKLJKSUR¿WZKLOHWKHDLUOLQHV
LQGXVWU\LVORZSUR¿W,IZHORRNPRUHGHHSO\ZHZRXOGOHDUQ
WKDW$ODVND$LUOLQHVRXWSHUIRUPVULYDOVLQLWVLQGXVWU\
Lecture 1: Strategy Is Making Choices
ż
8
7KDW¶VWKHNH\FRPSDULVRQZHQHHGWRPDNH:H¶UHORRNLQJIRU
FRPSDQLHVWKDWJHQHUDWHH[FHVVUHWXUQVUHODWLYHWRWKHLQGXVWU\
DYHUDJHWKDW¶VFRPSHWLWLYHDGYDQWDJH
%
$VZHORRNDFURVVLQGXVWULHVZHDOVRVHHWKDWLQVRPHLQGXVWULHV
WKHOHDGHULQRQH\HDULVPXFKPRUHOLNHO\WRVWD\RQWRSWKDQWKH
OHDGHULQRWKHULQGXVWULHV,QRWKHUZRUGVFRPSHWLWLYHDGYDQWDJHLV
ÀHHWLQJEXWLW¶VPRUHÀHHWLQJLQVRPHLQGXVWULHVWKDQRWKHUV
%
7KH IDFW WKDW \RX¶UH LQ DQ LQGXVWU\ WKDW¶V ORZ SUR¿W GRHVQ¶W PHDQ
\RXFDQ¶WPDNHPRQH\
ż ,QWKHVXSHUPDUNHWEXVLQHVVPDQ\¿UPVJHQHUDWHUHWXUQVRQ
DVVHWV LQ WKH ORZ VLQJOH GLJLWV EXW LI ZH ORRN DW WKH PDMRU
FRPSHWLWRUV ZH VWLOO VHH YDULDWLRQ LQ UHWXUQV )RU H[DPSOH
LQ :KROH )RRGV JHQHUDWHG DQ UHWXUQ RQ DVVHWV
ZKLOH .URJHU JHQHUDWHG (YHQ WKRXJK WKH LQGXVWU\ DV
DZKROHJHQHUDWHVWKLQPDUJLQVZHVHHZLGHYDULDWLRQDFURVV
PDMRUFRPSHWLWRUV
ż
7KLV WHOOV XV WKDW :KROH )RRGV KDV IRXQG D ZD\ WR EXLOG D
VWURQJ FRPSHWLWLYH DGYDQWDJH LQ DQ RWKHUZLVH VWUXFWXUDOO\
XQDWWUDFWLYH EXVLQHVV ,Q WKH FRPLQJ OHFWXUHV ZH¶OO ORRN DW D
QXPEHURIFRPSDQLHVWKDWKDYHGRQHMXVWWKDW$VZH¶OOVHHZH
FDQOHDUQPRUHDERXWVWUDWHJ\E\VWXG\LQJFRPSDQLHVLQWRXJK
EXVLQHVVHVWRLGHQWLI\KRZWKH\DFKLHYHGDGLVWLQFWLYHSRVLWLRQ
WKDQZHFDQE\ORRNLQJDWFRPSDQLHVWKDWFRPSHWHZLWKPDQ\
RWKHUSOD\HUVWKDWDOVRJHQHUDWHKHDOWK\HDUQLQJV
Suggested Reading
$UEHVPDQ³)RUWXQH7XUQRYHUDQG,WV0HDQLQJ´
/DÀH\DQG0DUWLQ Playing to Win.
0F*UDWKThe End of Competitive Advantage.
Questions to Consider
1. 6KRXOG ¿UPV HVWDEOLVK D ORQJWHUP VWUDWHJ\ RU VKRXOG WKH\ HPEUDFH D
PRUHDGDSWLYHDSSURDFKWRPDQDJHPHQW"
2. :K\ GR PDQ\ VWUDWHJLF SODQQLQJ SURFHVVHV IDLO WR SURGXFH SRVLWLYH
UHVXOWV"
3. :K\LVLWVRGLI¿FXOWIRU¿UPVWRVXVWDLQKLJKSHUIRUPDQFH"
9
+RZ$SSOH5DLVHV&RPSHWLWLYH%DUULHUV
Lecture 2
R
/HFWXUH+RZ$SSOH5DLVHV&RPSHWLWLYH%DUULHUV
LFKDUG %UDQVRQ WKH %ULWLVK HQWUHSUHQHXU DQG VXFFHVVIXO IRXQGHU
RI WKH 9LUJLQ *URXS RQFH MRNHG WKDW LW¶V UDWKHU HDV\ WR EHFRPH
D PLOOLRQDLUH \RX VLPSO\ VWDUW DV D ELOOLRQDLUH WKHQ JR LQWR WKH
DLUOLQH EXVLQHVV :DUUHQ %XIIHWW LQ KLV DQDO\VLV IRXQG WKDW WKH DLUOLQH
LQGXVWU\ DV D ZKROH KDV ORVW PRQH\ IRU WKH ODVW \HDUV :KDW H[SODLQV
WKHGLIIHUHQFHEHWZHHQWKHQRWRULRXVO\ORZSUR¿WDLUOLQHLQGXVWU\DQGKLJK
SUR¿W LQGXVWULHV VXFK DV SKDUPDFHXWLFDOV" ,Q WKLV OHFWXUH ZH¶OO ORRN DW
0LFKDHO3RUWHU¶VVHPLQDOZRUNRQWKH¿YHIRUFHVWKDWVKDSHVWUDWHJ\ZKLFK
RIIHUV D FRPSUHKHQVLYH IUDPHZRUN WR KHOS XQGHUVWDQG WKHVH GLIIHUHQFHV LQ
SUR¿WDELOLW\DFURVVLQGXVWULHV
The Five Forces
% 7KH¿UVWRI0LFKDHO3RUWHU¶V¿YHIRUFHVVKDSLQJVWUDWHJ\LVEDUULHUV
WR HQWU\ $V 3RUWHU DUJXHG KLJK EDUULHUV WR HQWU\ LPSURYH WKH
SUR¿WDELOLW\RIDQLQGXVWU\
10
%
7KH VHFRQG IRUFH LV WKH WKUHDW RI VXEVWLWXWHV WKDW LV DOWHUQDWLYH
SURGXFWV RU VHUYLFHV WKDW IXO¿OO WKH VDPH QHHG 7KHVH PD\ QRW
DOZD\VEHGLUHFWULYDOVEXWLQVRPHFDVHVTXLWHGLIIHUHQWSURGXFWV
RUVHUYLFHVWKDQWKHRQHV\RX¶UHVHOOLQJ)RUH[DPSOHVXEVWLWXWHVIRU
¿WQHVVFHQWHUVPLJKWLQFOXGHKRPHZRUNRXWHTXLSPHQWGLHWSODQV
YLGHR JDPH V\VWHPV IRU H[HUFLVLQJ DQG HYHQ ORFDO EDUV EHFDXVH
VRPHSHRSOHMRLQ¿WQHVVFHQWHUVIRUVRFLDOSXUSRVHV
%
7KHWKLUGIRUFHVKDSLQJVWUDWHJ\LVWKHEDUJDLQLQJSRZHURIVXSSOLHUV
:KRSURYLGHVWKHNH\LQSXWVDQGFRPSRQHQWVIRU\RXUSURGXFWRU
\RXU¿UPDQGGRWKRVHVXSSOLHUVKDYHOHYHUDJHRYHU\RX"&DQWKH\
H[WUDFWVRPHRIWKHSUR¿WV\RXPLJKWRWKHUZLVHPDNH"
%
7KH IRXUWK IRUFH VKDSLQJ VWUDWHJ\ LV WKH EDUJDLQLQJ SRZHU RI
WKH FXVWRPHU $JDLQ ZKR KDV WKH OHYHUDJH LQ WKH EX\HUVHOOHU
UHODWLRQVKLS"
%
)LQDOO\ WKH ¿IWK IRUFH LV ULYDOU\ DPRQJ H[LVWLQJ FRPSHWLWRUV ,Q
SDUWLFXODULW¶VLPSRUWDQWWRFRQVLGHUZKHWKHU¿UPVLQWKHLQGXVWU\
FRPSHWHKDUGRQSULFH$UHWKHUHIUHTXHQWSULFHZDUVLQWKHLQGXVWU\
RULVWKHHQYLURQPHQWRQHRIIULHQGO\FRPSHWLWLRQSHUKDSVRQHLQ
ZKLFKFRPSHWLWRUVHQJDJHLQPXWXDOO\EHQH¿FLDODFWLYLWLHV"
Applying the Framework: Airlines
% $W ¿UVW JODQFH EDUULHUV WR HQWU\ PLJKW VHHP KLJK LQ WKH DLUOLQH
LQGXVWU\\HWRYHUWKHSDVWIHZGHFDGHVWKHLQGXVWU\KDVVHHQPDQ\
QHZ SOD\HUV ,Q IDFW WKH EDUULHUV DUHQ¶W DV KLJK DV WKH\ LQLWLDOO\
DSSHDU$QHZHQWUDQWFDQOHDVHROGSODQHVUDWKHUWKDQEX\LQJQHZ
RQHV ,Q DGGLWLRQ HQWUDQWV GRQ¶W KDYH WR ¿JKW IRU VORWV DW ODUJH
H[SHQVLYH DLUSRUWV EXW FDQ HDVLO\ JDLQ DFFHVV WR UHJLRQDO DLUSRUWV
ZKHUH VWDWHV DQG FRXQWLHV DUH WU\LQJ WR GUDZ WUDI¿F IRU HFRQRPLF
GHYHORSPHQWDQGWRXULVP
%
+RZHYHU EX\HU SRZHU LQ WKH DLUOLQH LQGXVWU\ LV KLJK &XVWRPHUV
GRQ¶W VHH PXFK GLIIHUHQWLDWLRQ LQ DLUOLQHV DQG DUHQ¶W SDUWLFXODUO\
OR\DO0RUHRYHUDLUWUDYHOFXVWRPHUVDUHKLJKO\SULFHVHQVLWLYHDQG
WKH\FDQORRNIRUEDUJDLQVRQWUDYHOZHEVLWHVZKLFKRIIHUSHUIHFW
SULFHWUDQVSDUHQF\
%
6XSSOLHUSRZHULVDOVRKLJK$LUEXVDQG%RHLQJSURYLGHMXPERMHWV
DQGDIHZRWKHUSOD\HUVSURYLGHUHJLRQDOMHWVEXWWKHUHDUHQ¶WPDQ\
DOWHUQDWLYHVZKHQLWFRPHVWREX\LQJSODQHV$VIRUODERUDLUOLQHV
KDYH WR QHJRWLDWH ZLWK SRZHUIXO XQLRQV$QG WKH SULFH RI IXHO LV
GULYHQE\23(&
%
7KHVH GD\V WKHUH DUH DOVR QXPHURXV VXEVWLWXWHV IRU DLU WUDYHO
LQFOXGLQJ RWKHU IRUPV RI WUDQVSRUWDWLRQ VXFK DV FDUV RU WUDLQV
DQG WHFKQRORJ\ VXFK DV YLGHR FRQIHUHQFLQJ ZKLFK DOORZV
EXVLQHVVSHRSOHWRDYRLGWUDYHOLQJWRPHHWLQJV
%
)LQDOO\WKHDLUOLQHEXVLQHVVKDVDXQLTXHFKDUDFWHULVWLFWKDWGULYHV
LQWHQVH SULFH FRPSHWLWLRQ7KH EXVLQHVV KDV YHU\ KLJK ¿[HG FRVWV
DQGYLUWXDOO\QRYDULDEOHRUPDUJLQDOFRVWV
11
*HWWLQJ WKH SODQH LQ WKH VN\ LQYROYHV DOO ¿[HG FRVWV WKHUH
LV YHU\ OLWWOH H[SHQVH WKDW YDULHV GHSHQGLQJ RQ KRZ PDQ\
SDVVHQJHUVDUHRQWKHSODQH
ż
,Q WKDW VLWXDWLRQ DQ\WKLQJ DQ DLUOLQH UHFHLYHV DERYH ]HUR LV
ZKDW¶V FDOOHG FRQWULEXWLRQ PDUJLQ²GROODUV WKDW FRXOG JR
WRZDUGFRYHULQJ¿[HGFRVWVRUWRZDUGSUR¿WDELOLW\7KXVWKHUH
LVLQWHQVHSULFHFRPSHWLWLRQWRWU\WR¿OOVHDWV
$V \RX FDQ VHH WKH ¿YH
forces
framework
is
XVHIXO IRU H[DPLQLQJ WKH
FRPSHWLWLYH HQYLURQPHQW
in a systematic fashion.
,IIRUH[DPSOHFRQVXPHU
tastes or technology are
changing in a substantial
way,
the
framework
FDQ EH XVHG WR KHOS
XQGHUVWDQG WKH SRWHQWLDO
LPSDFW RI WKRVH FKDQJHV
RQSUR¿WDELOLW\
ż You can also use
the framework to :LWKWKHGULYHWRUHGXFHREHVLW\¿WQHVV
think about how you centers have been seen as an attractive
business, but in fact, overall, this
PLJKW SRVLWLRQ \RXU LQGXVWU\KDVQ¶WJHQHUDWHGPXFKSUR¿W
FRPSDQ\ WR GHDO
ZLWKWKUHDWV,QDWRXJKLQGXVWU\FDQ\RX¿QGDVHJPHQWWKDW
LVSHUKDSVDOLWWOHPRUHSUR¿WDEOHDOORZLQJ\RXUEXVLQHVVWR
WKULYHZKHQRWKHUVDUHORVLQJPRQH\"
/HFWXUH+RZ$SSOH5DLVHV&RPSHWLWLYH%DUULHUV
‹<DQ/HYL6WRFN7KLQNVWRFN
%
ż
ż
12
)LQDOO\\RXPLJKWEHDEOHWRWKLQNDERXWKRZ\RXU¿UPDVD
OHDGLQJFRPSDQ\LQWKHLQGXVWU\PLJKWVKDSHDPRUHIDYRUDEOH
LQGXVWU\ VWUXFWXUH &DQ \RX SHUKDSV UDLVH EDUULHUV WR HQWU\
WKHUHE\ LQFUHDVLQJ \RXU RZQ SUR¿WDELOLW\ DQG PDNLQJ WKH
HQYLURQPHQWEHWWHUIRUDOO"
The Spectrum of Competition
% (FRQRPLVWV VXFK DV 3RUWHU W\SLFDOO\ H[DPLQH WKH EHKDYLRU RI
¿UPV LQ WKH HFRQRP\ E\ EXLOGLQJ PRGHOV RI SHUIHFW FRPSHWLWLRQ
7KHVHPRGHOVXVXDOO\HQFRPSDVVWKHIROORZLQJDVVXPSWLRQV7KHUH
LVIUHHHQWU\DQGH[LWLQWRWKHEXVLQHVVWKHUHDUHPDQ\EX\HUVDQG
VHOOHUVDOORIZKLFKDUHUHODWLYHO\VPDOODQGHTXDOLQVL]HFRPSOHWH
LQIRUPDWLRQ LV DYDLODEOH DERXW WKH JRRGV DQG VHUYLFHV WKH JRRGV
DUH KRPRJHQHRXV DQG HDFK ¿UP LV WU\LQJ WR PD[LPL]H SUR¿WV
(FRQRPLVWVDUJXHWKDWWKHUHVXOWRISHUIHFWFRPSHWLWLRQLVPD[LPXP
social welfare.
ż (FRQRPLFSUR¿WVLQWKLVZRUOGRISHUIHFWFRPSHWLWLRQHTXDO]HUR
DOWKRXJKWKDW¶VQRWWRVD\WKDW¿UPVPDNHQRDFFRXQWLQJSUR¿WV
ż
$FFRXQWLQJ SUR¿WV GR QRW LQFOXGH RSSRUWXQLW\ FRVWV IRU
WKH ODERU DQG WKH FDSLWDO WKDW DUH GHSOR\HG LQ D ¿UP ZKLOH
HFRQRPLFSUR¿WVDFFRXQWIRURSSRUWXQLW\FRVWV
%
,QWKHSDVWHFRQRPLVWVZKRVWXGLHGLQGXVWULDORUJDQL]DWLRQWHQGHG
WR H[DPLQH PDUNHWV FKDUDFWHUL]HG E\ LPSHUIHFW FRPSHWLWLRQ IURP
WKH SHUVSHFWLYH RI WKH FRQVXPHU 7KH\ ZHUH ORRNLQJ IRU DQWLWUXVW
LVVXHV:HUHWKHUHLQVWDQFHVRILPSHUIHFWFRPSHWLWLRQZKHUH¿UPV
PLJKWEHHQJDJLQJLQEHKDYLRUWKDWKDUPVFRQVXPHUVRUGLPLQLVKHV
VRFLDOZHOIDUH"
%
3RUWHU KRZHYHU ORRNHG DW PDUNHWV IURP WKH SHUVSHFWLYH RI D
FRPSDQ\ DQG IRXQG WKDW EXVLQHVVHV ZDQW LPSHUIHFW FRPSHWLWLRQ
7KH\ GRQ¶W ZDQW HFRQRPLF SUR¿WV WR EH ]HUR EXW WKH\ DOVR GRQ¶W
ZDQWWRFUHDWHDQWLWUXVWFRQFHUQV7KXVKHUHYHUVHGWKHDVVXPSWLRQV
RISHUIHFWFRPSHWLWLRQ
%
$FFRUGLQJ WR 3RUWHU &(2V VKRXOG ORRN IRU EXVLQHVVHV ZKHUH
WKHUH DUH EDUULHUV WR HQWU\ DQG H[LW )XUWKHU WKH JRRGV VKRXOG QRW
EH KRPRJHQHRXV EXW GLIIHUHQWLDWHG 7KRVH ZKR FDQ ¿QG WKHVH
LPSHUIHFWLRQV LQ DQ LQGXVWU\²RU KHOS VKDSH WKHP²FDQ GULYH
HFRQRPLFSUR¿WVKLJKHU$QGWKDW¶VZKDW\RX¶UHORRNLQJIRUDV\RX
VKDSHVWUDWHJ\
%
2I FRXUVH ZKDW ZH¶UH WKLQNLQJ DERXW KHUH LV UHDOO\ D VSHFWUXP
RI FRPSHWLWLRQ 2Q RQH HQG ZH KDYH PDQ\ EX\HUV DQG VHOOHUV
KRPRJHQHRXV JRRGV DQG QR EDUULHUV WR HQWU\ 2Q WKH RWKHU HQG
ZHKDYHRQH¿UPZLWKPDUNHWVKDUH,QEHWZHHQZHPLJKW
KDYH D QXPEHU RI VLWXDWLRQV LQFOXGLQJ IUDJPHQWHG PDUNHWV ZLWK
EX\HUVDQGVHOOHUVRIGLIIHUHQWVL]HVDQROLJRSRO\ZLWKWKUHHRUIRXU
GRPLQDQWSOD\HUVLQDQLQGXVWU\DQGVRRQ
/HFWXUH+RZ$SSOH5DLVHV&RPSHWLWLYH%DUULHUV
Steps in a Five Forces Analysis
% 7KH¿UVWVWHSLQD¿YHIRUFHVDQDO\VLVLVWRGH¿QHWKHLQGXVWU\\RX
ZLVKWRDQDO\]H
%
7KH QH[W VWHS LV WR LGHQWLI\ WKH SOD\HUV LQFOXGLQJ WKH EX\HUV
VXSSOLHUVDQGULYDOV:KHQ\RX¶UHORRNLQJDWEX\HUVUHPHPEHUWR
WKLQNDERXWDOOWKHEX\HUVQRWMXVWWKHHQGXVHUEXWWKHGLVWULEXWRU
UHWDLOHUDQGRWKHUVDORQJWKHVXSSO\FKDLQ
%
1H[W\RXVKRXOGDVVHVVWKHVWUHQJWKRIHDFKIRUFHXVLQJTXDQWLWDWLYH
HYLGHQFH/RRNDWWKHSUR¿WDELOLW\RIRWKHUFRPSDQLHVLQWKHEXVLQHVV
%
)LQDOO\ \RX FDQ¶W ORRN WR WKH SDVW RQO\ \RX PXVW ORRN IRUZDUG
WU\LQJWRXQGHUVWDQGWKHFULWLFDOWUHQGVZLWKLQWKHEXVLQHVV+RZFDQ
\RXSURMHFWEDVHGRQ\RXUDVVHVVPHQWRIWKHHQYLURQPHQWZKHUH
HDFKRIWKHIRUFHVZLOOEHLQWKH\HDUVDKHDG"
Crafting Strategy with the Five Forces
% 2QHRIWKHDSSOLFDWLRQVIRUWKH¿YHIRUFHVIUDPHZRUNLVWRFUDIWD
VWUDWHJ\WKDWPLWLJDWHVWKHQHJDWLYHIRUFHVLQDQLQGXVWU\&RQVLGHU
IRU H[DPSOH $SSOH ZKLFK LV LQ DQ LQGXVWU\ ZLWK ORZ EDUULHUV
WR HQWU\ KLJK EX\HU DQG VXSSOLHU SRZHU LQWHQVH ULYDOU\ DQG
PXOWLSOHVXEVWLWXWHV
%
2QHZD\$SSOHPLWLJDWHGWKHVHQHJDWLYHIRUFHVZDVWRFRQVWUXFWLWV
RZQRSHUDWLQJV\VWHP7KLVVWHSPDGHLWGLI¿FXOWIRURWKHUVWRHQWHU
$SSOH¶VPDUNHWDQGEHFRPHGLUHFWFRPSHWLWRUV
%
)XUWKHU WKH $SSOH RSHUDWLQJ V\VWHP IXQGDPHQWDOO\ GLIIHUHQWLDWHV
WKH FRPSDQ\¶V SURGXFWV PDNLQJ WKH SURGXFWV HDVLHU WR XVH $QG
WKHRSHUDWLQJV\VWHPPLWLJDWHVWKHSRZHURI0LFURVRIW$SSOHLVQRW
GHSHQGHQWRQEX\LQJ:LQGRZVDVRWKHU3&PDNHUVDUH
%
$SSOHDOVRHVWDEOLVKHGLWVRZQVWRUHVZKLFKPLWLJDWHVWKHSRZHURI
WKHELJER[UHWDLOFKDLQVDQGRQOLQHUHWDLOHUV
%
$V IRU VXEVWLWXWHV$SSOH KDV EHHQ ZLOOLQJ WR FDQQLEDOL]H LWVHOI²
WREXLOGWDEOHWVDQGVPDUWSKRQHV7KHFRPSDQ\KDVJRWWHQLQWRWKH
VXEVWLWXWH EXVLQHVV IRU LWV RZQ SURGXFWV UDWKHU WKDQ OHWWLQJ RWKHUV
GRVR
Common Mistakes with the Framework
% 2QH FRPPRQ PLVWDNH LQ ¿YH IRUFHV DQDO\VLV LV WR DSSO\ WKH
IUDPHZRUN WR D FRPSDQ\ UDWKHU WKDQ DQ LQGXVWU\ ,Q DGGLWLRQ
PDQDJHPHQWWHDPVPD\QRWGH¿QHWKHLQGXVWU\FOHDUO\ZKHQWKH\
EHJLQWRGRWKHLUDQDO\VLV
%
,W¶V DOVR FRPPRQ IRU PDQDJHUV WR VSHQG WRR PXFK WLPH ORRNLQJ
EDFNUDWKHUWKDQWU\LQJWRXQGHUVWDQGWKHWUHQGVWKDWPLJKWDIIHFW
the future. Some managers might also ignore the full range
of substitutes.
%
1RWH WRR WKDW \RX FDQ¶W JLYH HTXDO ZHLJKW WR DOO ¿YH IRUFHV
WKLQNLQJWKDWLIIRXURIWKH¿YHDUHLQ\RXUIDYRU\RXUEXVLQHVVLVLQ
JRRGVKDSH(YHQRQHQHJDWLYHIRUFHFDQFDXVHKDUP
%
$VZHVDLG\RXFDQ¶WSUHVXPHWKDWLQGXVWU\VWUXFWXUHLVWKHVDPH
DURXQGWKHZRUOG)RUH[DPSOHLQ$XVWUDOLDVHYHUDO¿UPVGRPLQDWH
the wine business, while in France, there are more than 200,000
LQGHSHQGHQWZLQHULHV,WZRXOGEHGLI¿FXOWWRGRDVLQJOH¿YHIRUFHV
DQDO\VLVIRUWKHJOREDOZLQHLQGXVWU\
/HFWXUH+RZ$SSOH5DLVHV&RPSHWLWLYH%DUULHUV
%
)LQDOO\ LW¶V LPSRUWDQW WR WDNH LQWR DFFRXQW WKH OLPLWDWLRQV RI WKH
IUDPHZRUN ,W ZRUNV SULPDULO\ IRU LQGXVWULHV ZKHUH WKHUH DUH
FOHDU ERXQGDULHV LW SURYLGHV OLPLWHG WRROV DQG WHFKQLTXHV IRU
XQGHUVWDQGLQJ WKH QDWXUH RI ULYDOU\ DQG LW GRHVQ¶W DGGUHVV WKH
LVVXHRIFRPSOHPHQWV²DSURGXFWRUVHUYLFHWKDWDGGVYDOXHWRWKH
RULJLQDOSURGXFWRIIHULQJZKHQWKHWZRDUHXVHGWRJHWKHU
ż *LOOHWWH SLRQHHUHG WKH EXVLQHVV PRGHO RI FRPSOHPHQWV 7KH
FRPSDQ\ VHOOV UD]RUV DW D ORZ FRVW EHFDXVH LW NQRZV WKDW LI
FXVWRPHUVOLNHWKHUD]RUWKH\¶OOEX\EODGHVIRUHYHU
ż
$SSOHWXUQHGWKLVWUDGLWLRQDOUD]RUVDQGEODGHVVWUDWHJ\DURXQG
ZKHQLWHQWHUHGWKHL3RGL3KRQHDQGL3DGPDUNHW
ż
%HIRUH WKH L3KRQH SHRSOH SDLG YHU\ OLWWOH IRU SKRQHV +RZ
WKHQ KDV$SSOH LQGXFHG FXVWRPHUV WR SD\ RU PRUH IRU
SKRQHV"$VN\RXUVHOI+RZGR\RXJHWSHRSOHWREX\H[SHQVLYH
SHDQXW EXWWHU" %\ JLYLQJ WKHP ORWV RI FKHDS MHOO\$QG WKDW¶V
ZKDW$SSOHKDVGRQHZLWKLWVIUHHDQGORZFRVWDSSV
Suggested Reading
%UDQGHQEXUJHUDQG1DOHEXIICo-opetition.
Porter, Competitive Strategy.
Questions to Consider
1. :K\GRVRPHLQGXVWULHVJHQHUDWHPXFKKLJKHUSUR¿WVWKDQRWKHUV"
2. :KDW W\SHV RI VWUDWHJLHV FDQ ¿UPV XVH WR PLWLJDWH QHJDWLYH DVSHFWV RI
LQGXVWU\VWUXFWXUH"
3. :KDWDUHVRPHH[DPSOHVRI¿UPVIRUZKLFKFRPSOHPHQWVDUHDFUXFLDO
HOHPHQWRIVWUDWHJ\"
16
The Danger of Straddling
Lecture 3
:
KDW¶VGLIIHUHQWDERXWWKHFRPSHWLWLYHVWUDWHJLHVRI'HOO0HUFHGHV
DQG-&3HQQH\"'HOOWULHVWREHWKHORZFRVWSOD\HULQWKHSHUVRQDO
FRPSXWHU PDUNHW ZKLOH 0HUFHGHV WULHV WR EH D GLIIHUHQWLDWHG
SOD\HULQWKHDXWRPRELOHPDUNHW-&3HQQH\VHHPVWREHVWXFNLQWKHPLGGOH²
DFKLHYLQJQHLWKHUDORZFRVWVWUDWHJ\QRUDGLIIHUHQWLDWLRQVWUDWHJ\$VZH¶YH
GLVFXVVHG VWUDWHJ\ LQYROYHV XQGHUVWDQGLQJ \RXU FRPSHWLWLYH HQYLURQPHQW
WKHQSRVLWLRQLQJ\RXUVHOIIRUVXFFHVVLQWKDWHQYLURQPHQW,QWKHODVWOHFWXUH
ZH VDZ KRZ WR XQGHUVWDQG WKH HQYLURQPHQW E\ FRQGXFWLQJ D ¿YH IRUFHV
DQDO\VLV,QWKLVOHFWXUHZH¶OOWU\WRXQGHUVWDQGWKHUHVRXUFHVDQGFDSDELOLWLHV
WKDWZLOOHQDEOH\RXWRVXFFHHGLQWKDWHQYLURQPHQW
Creating Economic Value
% 3URIHVVRU 5REHUW *UDQW ZURWH WKDW VWUDWHJ\ LV FRQFHUQHG ZLWK
PDWFKLQJ D ¿UP¶V UHVRXUFHV DQG FDSDELOLWLHV WR WKH RSSRUWXQLWLHV
WKDWDULVHLQWKHH[WHUQDOHQYLURQPHQW$V\RXGRWKLV²DV\RXSORW
\RXUVWUDWHJ\DQGWU\WRSRVLWLRQ\RXUVHOI²\RX¶UHWU\LQJWRFUHDWHD
FRPSHWLWLYHDGYDQWDJHUHODWLYHWR\RXUULYDOV7RGRWKDW\RXPXVW
create more economic value than your rivals.
%
:KDW GRHV LW PHDQ WR FUHDWH HFRQRPLF YDOXH":KHQ \RX SURGXFH
DQGVHOODJRRGRUVHUYLFHFXVWRPHUVKDYHDFHUWDLQSHUFHLYHGYDOXH
IRUWKDWJRRGDQGVHUYLFH7KHUHLVDOVRDFRVWRIFRXUVHIRU\RXWR
GHOLYHU WKDW SURGXFW RU VHUYLFH WR FXVWRPHUV 7KH SHUFHLYHG YDOXH
OHVVWKHWRWDOFRVWHTXDOVWKHHFRQRPLFYDOXHFUHDWHG
%
2IFRXUVHWKHFRPSDQ\WKDWSURYLGHVDJRRGGRHVQ¶WJHWDOORIWKH
HFRQRPLF YDOXH FUHDWHG7KDW YDOXH LV VSOLW EHWZHHQ WKH FRPSDQ\
DQGWKHFRQVXPHU
ż $Q\WKLQJFRQVXPHUVSD\WKDW¶VOHVVWKDQZKDWWKH\¶UHZLOOLQJ
WR SD\²OHVV WKDQ ZKDW WKH\ SHUFHLYH DV WKH YDOXH IRU WKDW
JRRG²LV VXUSOXV WR WKHP 7KDW¶V SDUW RI WKH HFRQRPLF YDOXH
that they get.
17
ż
$Q\ SULFH RU UHYHQXH WKDW WKH FRPSDQ\ FDQ DFKLHYH WKDW¶V
KLJKHU WKDQ WKH FRVW RI SURGXFLQJ DQG GHOLYHULQJ WKH JRRG LV
VXUSOXV RU SUR¿W$QG WKH JRDO RI D ¿UP LV WR JHQHUDWH PRUH
HFRQRPLFYDOXHWKDQWKHFRPSHWLWLRQ7KDW¶VZKDWZHPHDQE\
DFKLHYLQJFRPSHWLWLYHDGYDQWDJH
Fundamental Strategy Choices
% 7KHUHDUHWKUHHEDVLFW\SHVRIFRPSHWLWLYHDGYDQWDJHWKDW¿UPVFDQ
VWULYHWRDFKLHYHORZFRVWGLIIHUHQWLDWHGRUGXDO
%
,Q DGGLWLRQ FRPSHWLWLYH VFRSH FDQ EH FDWHJRUL]HG LQWR WZR
EDVLFW\SHV
ż $ ¿UP PLJKW EH D QLFKH FRPSHWLWRU FRPSHWLQJ ZLWK D IDLUO\
QDUURZ SURGXFW OLQH DQG IRFXVLQJ RQ D SDUWLFXODU JHRJUDSK\
DQGDVPDOOWDUJHWPDUNHW
ż
Lecture 3: The Danger of Straddling
%
$¿UPPLJKWDOVRFKRRVHWREHDEURDGFRPSHWLWRU, offering a
ZLGHDUUD\RISURGXFWVFRPSHWLQJLQDQH[SDQVLYHJHRJUDSKLFDO
VHWWLQJDQGVHUYLQJDZLGHUWDUJHWPDUNHW
7KHVH DUH WKH IXQGDPHQWDO FKRLFHV WKDW ¿UPV PXVW PDNH DV WKH\
FKRRVH VWUDWHJ\:KDW W\SH RI DGYDQWDJH GRHV WKH ¿UP VHHN DQG
KRZ IRFXVHG RU EURDG ZLOO LW EH LQ WHUPV RI SURGXFW JHRJUDSK\
DQGFXVWRPHU"
Competitive Advantage
% ,QWKLQNLQJDERXWFRPSHWLWLYHDGYDQWDJHZHVWDUWZLWKWKHDYHUDJH
FRPSHWLWRULQDQLQGXVWU\DQGWKHDPRXQWRIHFRQRPLFYDOXHLWFUHDWHV
:KDWLVWKHJDSEHWZHHQWKHZLOOLQJQHVVWRSD\IRUWKLVFRPSHWLWRU¶V
SURGXFWDQGWKHFRVWWRGHOLYHUWKDWSURGXFWWRFXVWRPHUV",QWU\LQJ
WRDFKLHYHFRPSHWLWLYHDGYDQWDJH\RXZDQWWRJHQHUDWHDODUJHUJDS
EHWZHHQZLOOLQJQHVVWRSD\DQGFRVWWKDQ\RXUFRPSHWLWLRQ
%
18
)RUH[DPSOH0HUFHGHVWULHVWRJHQHUDWHPXFKKLJKHUZLOOLQJQHVV
WR SD\ WKDQ &KHYUROHW 2I FRXUVH FRVWV IRU 0HUFHGHV DUH KLJKHU
WKDQ WKH\ DUH IRU WKH ¿UP¶V FRPSHWLWLRQ ,I 0HUFHGHV ZDQWV WR
EH D VXFFHVVIXO GLIIHUHQWLDWHG SOD\HU LW ZLOO VHHN D PXFK KLJKHU
ZLOOLQJQHVV WR SD\ EXW RQO\ VOLJKWO\ KLJKHU FRVWV VR WKDW WKH
JDS EHWZHHQ ZLOOLQJQHVV WR SD\ DQG FRVW LV KLJKHU WKDQ LW LV IRU
WKHFRPSHWLWLRQ
%
$VXFFHVVIXOORZFRVWSOD\HUWULHVWRGULYHLWVFRVWVPXFKORZHUWKDQ
WKRVHRILWVULYDOV,QWKHSURFHVVWKHORZFRVWSOD\HUVDFUL¿FHVDELW
RIZLOOLQJQHVVWRSD\
%
$WKLUGZD\WRDFKLHYHFRPSHWLWLYHDGYDQWDJHLVWKHGXDOVWUDWHJ\
ZLWK ERWK D KLJKHU SHUFHLYHG YDOXH DQG D ORZHU FRVW VWUXFWXUH
WKDQ WKH FRPSHWLWLRQ 7KLV GXDO DGYDQWDJH LV H[WUHPHO\ GLI¿FXOW
to achieve.
ż $ ¿UP WKDW¶V WU\LQJ WR DFKLHYH KLJKHU ZLOOLQJQHVV WR SD\ DQG
FUHDWH PRUH SHUFHLYHG YDOXH ZLOO KDYH KLJKHU FRVWV ,W ZLOO WR
KDYHWRLQYHVWLQUHVHDUFKDQGGHYHORSPHQWEUDQGLQJDQGKLJK
TXDOLW\FRPSRQHQWV,W¶VGLI¿FXOWWRKDYHPXFKORZHUFRVWVWKDQ
WKHFRPSHWLWLRQLI\RX¶UHWU\LQJWRFUHDWHDSUHPLXPSURGXFW
/LNHZLVH LI \RX¶UH WU\LQJ WR EULQJ \RXU FRVWV GRZQ
VLJQL¿FDQWO\ LW PD\ EH GLI¿FXOW WR FRPPDQG WKH VDPH EUDQG
LPDJH DQG SRVLWLRQ LQ WKH PDUNHW DQG EH DEOH WR DFKLHYH WKH
VDPHSULFLQJ
ż
:LWK D GXDO VWUDWHJ\
SOD\HUV WKDW DUH IRFXVHG
RQ HLWKHU GLIIHUHQWLDWLRQ
or low cost may be able to
DWWDFN \RX ,I \RX¶UH WU\LQJ
to sell a vehicle at a high
SULFH \HW \RX¶UH WU\LQJ WR
achieve lower costs than the
FRPSHWLWLRQ 0HUFHGHV PD\
FULWLTXH WKH TXDOLW\ RI \RXU
vehicles. Similarly, another
SOD\HU PD\ KDYH D VWURQJ
FRVW SRVLWLRQ DQG EH DEOH WR
XQGHUFXW\RXRQSULFH
‹¿SKRWRL6WRFN7KLQNVWRFN
ż
A high-end clothing store might
generate high gross margins,
have higher expenses, and
DFFHSWORZHULQYHQWRU\WXUQRYHU
than a more mainstream retailer.
19
%
,QWHUHVWLQJO\ D ¿UP¶V ¿QDQFLDOV RIWHQ WHOO XV ZKDW W\SH RI
FRPSHWLWLYHDGYDQWDJHLW¶VWU\LQJWRDFKLHYH)RUH[DPSOHFRQVLGHU
WKH¿QDQFLDOVRI:DOPDUWUHODWLYHWR7DUJHW
ż :DOPDUW KDV PXFK ORZHU JURVV PDUJLQV WKDQ 7DUJHW ORZHU
RYHUKHDGFRVWVDQGORZHUVHOOLQJJHQHUDODQGDGPLQLVWUDWLYH
H[SHQVHVEXWLWKDVPXFKKLJKHUDVVHWWXUQRYHUWKDQ7DUJHW
ż
7DUJHW¶VKLJKJURVVPDUJLQVDQGORZHUWXUQVSDLQWDSLFWXUHRI
D W\SLFDO GLIIHUHQWLDWLRQ VWUDWHJ\ 7DUJHW KDV KLJKHU PDUJLQV
EHFDXVH LW KDV FKRVHQ WR VHOO VOLJKWO\ KLJKHUTXDOLW\ JRRGV²
PRUH IDVKLRQDEOH LWHPV²DQG VHWV KLJKHU SULFHV LQ VRPH
categories. Target has lower inventory turns because it sells
IHZHURIWKHEDVLFVWKDQ:DOPDUW
Lecture 3: The Danger of Straddling
Competitive Strategies
% 7KXV IDU ZH FDQ VHH WKDW WKHUH DUH IRXU JHQHULF FRPSHWLWLYH
strategies:
ż %URDG GLIIHUHQWLDWHG XVHG E\ 6WDUEXFNV IRU H[DPSOH +HUH
ZH VHH D ¿UP ZLWK D ZLGH WDUJHW PDUNHW FRPSHWLQJ LQ PDQ\
JHRJUDSKLHVZLWKDSUHPLXPSULFHG GLIIHUHQWLDWHG SURGXFW
%
20
ż
)RFXVHG GLIIHUHQWLDWHG XVHG E\ WKH PRWRUF\FOH PDQXIDFWXUHU
'XFDWL7KLV,WDOLDQ¿UPVHUYHVDQDUURZWDUJHWPDUNHWZLWKD
OLPLWHGVHOHFWLRQRISURGXFWV
ż
%URDGORZFRVWXVHGE\:DOPDUWZKLFKVHUYHVDZLGHUDQJH
RI FXVWRPHUV LQ PDQ\ JHRJUDSKLHV ZLWK PDQ\ SURGXFWV
DQGVHUYLFHV
ż
)RFXVHGORZFRVWXVHGE\WKH,ULVKDLUOLQH5\DQDLU7KLVFDUULHU
VHUYHVFHUWDLQJHRJUDSKLHVZLWKDZHOOGH¿QHGSURGXFWVHWDQG
a much narrower target market than major airlines.
1RQH RI WKHVH VWUDWHJLHV LV ³WKH EHVW´ WKH PLVWDNH ¿UPV PDNH
LQ FKRRVLQJ VWUDWHJLHV LV WR EH XQFOHDU DERXW ZKHUH WKH ¿UP LV
VLWXDWHG²WREHVWXFNLQWKHPLGGOH7KLVVLWXDWLRQFDQRFFXUZKHQ
¿UPVIDLOWRFKRRVHDVWUDWHJ\WU\WRVKLIWVWUDWHJ\EXWGRQ¶WPDNH
WKHVKLIWVXFFHVVIXOO\RUUHDFWLQDSSURSULDWHO\WRWKHHPHUJHQFHRID
QHZFRPSHWLWRU
Competitive Advantage as a System
% :H QHHG WR WKLQN RI FRPSHWLWLYH DGYDQWDJH DV DQ LQWHJUDWHG VHOI
UHLQIRUFLQJV\VWHPRIFDSDELOLWLHVUHVRXUFHVDQGFKRLFHV:LWKWKLV
PLQGVHW FUDIWLQJ DQ HIIHFWLYH VWUDWHJ\ PHDQV WKDW \RXU ¿UP PXVW
EHGLIIHUHQW\RXFDQ¶WVLPSO\FRS\WKHDVVRUWPHQWRIUHVRXUFHVDQG
FDSDELOLWLHVWKDW\RXUULYDOVKDYHDFKLHYHG
%
7KHLGHDEHKLQGWKLQNLQJRIFRPSHWLWLYHDGYDQWDJHDVDV\VWHPLV
WKDWRQHFKRLFH\RXPDNHHQKDQFHVWKHYDOXHRIRWKHUFKRLFHVDQG
RQHFDSDELOLW\\RXGHYHORSFUHDWHVVWURQJHUFDSDELOLWLHVHOVHZKHUH
,IWKHVHFDSDELOLWLHVDQGFKRLFHV¿WWRJHWKHUZHOOQRWRQO\FDQ\RX
FUHDWHDSRZHUIXODGYDQWDJHEXWLWFDQDOVREHGLI¿FXOWIRURWKHUVWR
FRS\\RXUV\VWHP
%
&RQVLGHUIRUH[DPSOHVRPHRIWKHHDUO\FKRLFHVPDGHE\:DOPDUW
DQHYHU\GD\ORZSULFHVWUDWHJ\OLWWOHQDWLRQDODGYHUWLVLQJDIRFXVRQ
UXUDOORFDWLRQVDQHWZRUNRIVWRUHVEXLOWDURXQGGLVWULEXWLRQFHQWHUV
IUXJDOWUDYHOSROLFLHVDQGQRUHJLRQDORI¿FHV(DFKRIWKHVHFKRLFHV
UHLQIRUFHG RWKHU FKRLFHV )RU H[DPSOH KDYLQJ DQ HYHU\GD\ ORZ
SULFHVWUDWHJ\¿WVZHOOZLWKQRWGRLQJPXFKQDWLRQDODGYHUWLVLQJ
%
&RPSHWLWRUVRIWHQORRNDWZKDWWKH\WKLQND¿UPGRHVEHVWDQGWU\
WRHPXODWHWKDWRQHSDUWRIWKHV\VWHP)RUH[DPSOHDFRPSHWLWRU
PLJKWWU\WRHPXODWH:DOPDUW¶VVXSSO\FKDLQRUORJLVWLFVEXWWKHUH
DUHWZRPLVWDNHVLQKHUHQWLQWKLVDSSURDFK
ż )LUVWLWLVQ¶WRQHWKLQJWKDW:DOPDUWGRHVWKDW¶VDVLOYHUEXOOHW
,W¶VKRZ:DOPDUW¶VORJLVWLFVSODQDQGV\VWHP¿WZLWKHYHU\WKLQJ
HOVHLWGRHVWKDWFUHDWHVDGYDQWDJH
ż
6HFRQG DQ\ SRWHQWLDO FRPSHWLWRU KDV LWV RZQ V\VWHP RI
DFWLYLWLHV WKDW¶V TXLWH GLIIHUHQW WKDQ :DOPDUW¶V &KRRVLQJ RQH
HOHPHQWRI:DOPDUW¶VV\VWHPDQGWU\LQJWRGURSLWLQWRDQRWKHU
V\VWHPZRQ¶WDFKLHYHWKHVDPHDGYDQWDJH
21
Lecture 3: The Danger of Straddling
%
(YHQ D ¿UP ZLWK D ZHOOLQWHJUDWHG VXFFHVVIXO V\VWHP PD\ IDFH
GLI¿FXOWLHV LI LW WULHV WR PRYH LQWR D QHZ VHJPHQW 7KLV KDV EHHQ
WKH FDVH ZLWK :DOPDUW¶V DWWHPSW WR PRYH LQWR WKH ZKROHVDOH FOXE
EXVLQHVV ZLWK 6DP¶V &OXE $OWKRXJK 6DP¶V &OXE LV SUR¿WDEOH LW
LV RXWSHUIRUPHG E\ &RVWFR EHFDXVH 6DP¶V &OXE LV WRR WLHG WR WKH
OHJDF\RI:DOPDUWWRWUXO\VHUYHWKHGLIIHUHQWVHWRIFXVWRPHUVZKR
VKRSDWZKROHVDOHFOXEV
%
$QRWKHUSUREOHP¿UPVIDFHZKHQWKH\KDYHVXFFHVVIXOO\WDLORUHG
WKHLU DFWLYLWLHV WR D SDUWLFXODU HQYLURQPHQW LV ULJLGLW\ 7KH\
EHFRPH FRPPLWWHG WR SDVW FKRLFHV DQG XQDEOH WR DGDSW LI WKH
environment changes.
ż %HFDXVHFRUHFDSDELOLWLHVFDQEHFRPHULJLGVXFFHVVIXOHQWUDQWV
WRDQLQGXVWU\DUHRIWHQDEOHWRXVHWKHLQFXPEHQW¶VVWUHQJWKV
DJDLQVWLW'HOOXVHGWKLVjudo strategyZKHQLWWRRNRQ,%0
ż
,%0KDGWUHPHQGRXVPDQXIDFWXULQJFDSDELOLW\WRSURGXFHKLJK
YROXPHV RI LWV VWDQGDUGL]HG SURGXFWV DW ORZ FRVW ,W DOVR KDG
ZHOOGHYHORSHG UHODWLRQVKLSV ZLWK LWV GLVWULEXWLRQ FKDQQHO²
UHWDLOHUVZKROHVDOHUVDQGYDOXHDGGHGUHVHOOHUV
ż
'HOO EXLOW LWV VWUDWHJ\ LQ VXFK D ZD\ WKDW WKHVH VWUHQJWKV RI
,%0EHFDPHOLDELOLWLHV,%0FRXOGQ¶WJRGLUHFWDQGVHOORQOLQH
EHFDXVHLILWGLGLWZRXOGDOLHQDWHPDQ\RILWVZKROHVDOHUVDQG
UHWDLOHUV)XUWKHU,%0¶VIDFWRULHVZHUHQ¶WFRQ¿JXUHGWREXLOG
FXVWRPL]HGSURGXFWV
Threats to Competitive Advantage
% 7KH DELOLW\ WR EH VXFFHVVIXO DV D ¿UP WR EH PRUH SUR¿WDEOH WKDQ
\RXUULYDOVLVDERXWQRWMXVWDFKLHYLQJDGYDQWDJHEXWVXVWDLQLQJLW
$QGWRVXVWDLQDGYDQWDJH\RXKDYHWRDGGUHVVWKUHHPDMRUH[WHUQDO
WKUHDWV LPLWDWLRQ VXEVWLWXWLRQ DQG KROGXS JDLQLQJ OHYHUDJH E\
EX\HUVDQGVXSSOLHUV
22
%
,QWHUQDOO\ ¿UPV IDFH WKH WKUHDW RI QRW SHUFHLYLQJ DQG UHDFWLQJ
DGHTXDWHO\ WR WKUHDWV ,QFXPEHQW SOD\HUV VRPHWLPHV GRQ¶W VHH D
WKUHDWHDUO\HQRXJKGRQ¶WNQRZKRZWRUHVSRQGRUFDQ¶WPRWLYDWH
WKHLURUJDQL]DWLRQVWRUHVSRQGTXLFNO\HQRXJKZKHQWKUHDWVHPHUJH
%
2QH¿QDOWKUHDWLVWKHULVNRIHQJDJLQJLQKHUGEHKDYLRU,QPDQ\
PDUNHWVFRPSDQLHVDUHQ¶WWU\LQJWREHDVGLIIHUHQWDVWKH\FRXOGEH
7KLVVWHPVIURPULVNDYHUVLRQRQWKHSDUWRIH[HFXWLYHV,IVWUDWHJ\
LVDERXWLGHQWLI\LQJGLIIHUHQWDFWLYLWLHVDQGGLIIHUHQWSRVLWLRQVLQWKH
PDUNHWSODFHKHUGEHKDYLRULVWKHDQWLWKHVLVRIJUHDWVWUDWHJ\
Suggested Reading
*KHPDZDWDQG5LYNLQ³&UHDWLQJ&RPSHWLWLYH$GYDQWDJH´
Montgomery, The Strategist.
Porter, Competitive Advantage.
<RI¿HDQG.ZDNJudo Strategy.
Questions to Consider
1. +RZ DQG ZK\ GR ¿UPV HQG XS ³VWXFN LQ WKH PLGGOH´ LQ WHUPV RI
FRPSHWLWLYHSRVLWLRQLQJ"
2. :K\LVLWVRGLI¿FXOWIRUULYDOVWRFRS\VXFKD¿UPDV,.($"
3. :K\ GR VXFFHVVIXO ¿UPV VRPHWLPHV VWUXJJOH ZKHQ WKH\ PRYH LQWR
DGMDFHQWPDUNHWV"
What Trader Joe’s Doesn’t Do
Lecture 4
S
Lecture 4: What Trader Joe’s Doesn’t Do
XSSRVH WKDW VHYHUDO GHFDGHV DJR D 6WDQIRUG 0%$ QDPHG -RH
&RXORPEHDVNHG\RXWRLQYHVWLQKLVQHZJURFHU\UHWDLOHU+HSODQQHG
WRRSHQVPDOOVWRUHVLQORZUHQWVWULSPDOOVRIIHUDOLPLWHGVHOHFWLRQ
RIJRRGVDQGGRYHU\OLWWOHDGYHUWLVLQJ<RXSUREDEO\ZRXOGKDYHPDGHWKH
PLVWDNHRIWXUQLQJGRZQWKDWLQYHVWPHQWDVPDQ\RWKHUVGLG%XW&RXORPEH
ZHQW RQ WR RSHQ D FKDLQ FDOOHG 7UDGHU -RH¶V WKDW EHFDPH RQH RI WKH PRVW
VXFFHVVIXO JURFHU\ UHWDLOHUV LQ WKH ODVW IHZ GHFDGHV ,Q WKLV OHFWXUH ZH¶OO
H[SORUH KRZ &RXORPEH FUHDWHG D EXVLQHVV ZKHUH SHRSOH ZDQW WR ZRUN
FXVWRPHUVZDQWWRVKRSDQGLQYHVWRUVZDQWWRSXWWKHLUPRQH\
The Importance of Trade-Offs
% 8QOLNHPRVWRWKHUJURFHU\VWRUHV7UDGHU-RH¶VGRHVQ¶WRIIHUPDQ\
EUDQGHG SURGXFWV DOPRVW DOO RI LWV SURGXFWV DUH SULYDWH ODEHO ,WV
VWRUHVGRQ¶WKDYHODUJHSDUNLQJORWVRUZLGHDLVOHV,WGRHVQ¶WRIIHU
VHOIFKHFNRXW DFFHSW FRXSRQV RU KDYH D OR\DOW\ FDUG ,W GRHVQ¶W
UHDOO\ UXQ VDOHV GRHVQ¶W DGYHUWLVH RQ WHOHYLVLRQ DQG GRHVQ¶W KDYH
DODUJHVHOHFWLRQRILWHPV)LQDOO\WKHUHLVQRVWDEOHSURGXFWOLQHDW
7UDGHU-RH¶V
%
$V0LFKDHO3RUWHURQFHZURWH³7KHHVVHQFHRIVWUDWHJ\LVFKRRVLQJ
ZKDWQRWWRGR´<RXFDQ¶WEHDOOWKLQJVWRDOOSHRSOHZKLFKPHDQV
WKDW \RX KDYH WR FKRRVH QRW MXVW ZKDW \RX ZLOO GR EXW ZKDW \RX
ZRQ¶W GR <RX QHHG WR KDYH D FOHDU XQGHUVWDQGLQJ RI WKH WKLQJV
\RXUULYDOVRIIHUWKDW\RXFKRRVHQRWWRRIIHU6XFKWUDGHRIIVPDNH
\RXU¿UPGLVWLQFWIURP\RXUFRPSHWLWRUVPDNHLWKDUGIRUH[LVWLQJ
SOD\HUVWRLPLWDWH\RXDQGFDQKHOS\RXPLWLJDWHWKHQHJDWLYHIRUFHV
LQ\RXULQGXVWU\
%
6RPHRIWKHOHDGLQJ¿UPVLQSDVWGHFDGHVKDYHDFKLHYHGVXFFHVVE\
PDNLQJ¿UPFKRLFHVDERXWZKDWWKH\ZRXOGQRWGRDQGHPSKDVL]LQJ
WKRVHWUDGHRIIV
ż
6RXWKZHVW$LUOLQHVIRUH[DPSOHGRHVQ¶WRIIHUDVVLJQHGVHDWV
XVHVVPDOOHUUHJLRQDODLUSRUWVKDVRQO\RQHNLQGRISODQHLQLWV
ÀHHWGRHVQ¶WDOORZFXVWRPHUVWRWUDQVIHUEDJVWRRWKHUDLUOLQHV
DQG GRHVQ¶W RSHUDWH D KXEDQGVSRNH V\VWHP 6RXWKZHVW KDV
FKRVHQQRWWRGRZKDWPDQ\PDMRUDLUOLQHVKDYHGRQH
ż
/LNHZLVH 3ODQHW )LWQHVV KDV SRVLWLRQHG LWVHOI DV D J\P IRU
SHRSOH ZKR DUHQ¶W ¿WQHVV QXWV DQG LW HPSKDVL]HV WKLV WUDGH
RII DSSURDFK LQ LWV DGYHUWLVLQJ %\ GRLQJ VR WKH ¿UP KRSHV
WR DWWUDFW FXVWRPHUV ZKR DUH PRUH FDVXDO DERXW WKHLU ¿WQHVV
UHJLPHVWKRVHZKRZDQWWRORVHDIHZSRXQGVEXWGRQ¶WZDQW
WREHLQWLPLGDWHGE\ERG\EXLOGHUV
Preventing Imitation
% %HFDXVH RI WKH WUDGHRIIV LW KDV PDGH 7UDGHU -RH¶V KDV PDGH LW
GLI¿FXOW IRU RWKHU JURFHU\ UHWDLOHUV WR EHFRPH LPLWDWRUV &RQVLGHU
.URJHUIRUH[DPSOHDODUJHVXSHUPDUNHWFKDLQ.URJHUKDVPDGH
KLVWRULFDO FRPPLWPHQWV WKDW DUH ULJLG ,W DOUHDG\ KDV ODUJH VWRUHV
ZLWK ZLGH DLVOHV DQG LW FDQ¶W FKDQJH WKDW IRUPDW WR PLPLF7UDGHU
-RH¶V .URJHU DOVR KDV PDQ\ EUDQGHG JRRGV DQG RIIHUV VDOHV HDFK
ZHHN ,W FRXOGQ¶W HDVLO\ VKLIW WR HYHU\GD\ ORZ SULFLQJ 7R VRPH
H[WHQW.URJHULVVWXFNZLWKWKHFKRLFHVLWKDVPDGH
%
0RUHRYHUWKHPLQGVHWRISHRSOHRSHUDWLQJDW\SLFDOJURFHU\VWRUHLV
TXLWHGLIIHUHQWWKDQWKHPLQGVHWRI7UDGHU-RH¶VOHDGHUVKLSDQGLW¶V
GLI¿FXOWWRFKDQJHPLQGVHWDVZHOO7HVFRD%ULWLVKUHWDLOHUWULHGWR
VHWXSDVHSDUDWHVXEVLGLDU\WREXLOGDFKDLQRIVPDOOHUIRUPDWVWRUHV
WRFRPSHWHGLUHFWO\ZLWK7UDGHU-RH¶V%XW7HVFRHQGHGXSVWXFNLQ
WKHPLGGOH²FUHDWLQJVRPHWKLQJWKDWZDVQHLWKHUDVJRRGDV7UDGHU
-RH¶VQRUDVHIIHFWLYHDVLWVPDLQEXVLQHVV
Mitigating Negative Forces
% 7UDGHU-RH¶VVWUDWHJ\RIPDNLQJWUDGHRIIVKDVDOVRKHOSHGWKHVWRUH
PLWLJDWHQHJDWLYHIRUFHVLQWHUPVRILQGXVWU\VWUXFWXUH
Lecture 4: What Trader Joe’s Doesn’t Do
%
7KH XQLTXH DUUD\ RI SULYDWHODEHO SURGXFWV WKDW DUH XQDYDLODEOH DW
RWKHUUHWDLOHUVGLPLQLVKHVERWKEX\HUSRZHUDQGFRPSHWLWLYHULYDOU\
:KHQ\RX¶UHQRWVHOOLQJWKHVDPHJRRGVWKDWRWKHUVWRUHVVHOOSHRSOH
FDQ¶WFRPSDUHSULFHVDQG\RXGRQ¶WJHWGUDJJHGLQWRSULFHZDUV
%
7KH GLVWLQFWLYH LQVWRUH H[SHULHQFH DW 7UDGHU -RH¶V PLWLJDWHV ERWK
EX\HU SRZHU DQG ULYDOU\ DQG LW KHOSV WR FRXQWHU WKH WKUHDW RI
VXEVWLWXWLRQVIURPRWKHUUHWDLOIRUPDWVLQFOXGLQJHFRPPHUFH7KH
HYHU\GD\ ORZ SULFLQJ VWUDWHJ\ DOVR PLQLPL]HV SULFH ULYDOU\ DQG
EX\HUSRZHU
%
,Q DGGLWLRQ 7UDGHU -RH¶V ZLOOLQJQHVV WR DOWHU LWV SURGXFW PL[
IUHTXHQWO\PLWLJDWHVVXSSOLHUSRZHU7KHVWRUHPDLQWDLQVDFUHGLEOH
WKUHDW ZLWK UHJDUG WR GLVFRQWLQXLQJ SURGXFWV %HFDXVH FXVWRPHUV
GRQ¶WNQRZZKRPDNHVWKHSULYDWHODEHOLWHPVIRU7UDGHU-RH¶VWKH
¿UPFDQDOVRUHDGLO\FKDQJHLWVVXSSOLHUVWRJHWDEHWWHUSULFH
%
)LQDOO\ORFDWLQJVWRUHVLQROGHUVWULSPDOOVRIIVHWVWKHSRZHURIUHDO
HVWDWH¿UPVDQGODQGORUGVWKDWFKDUJHKLJKUHQWVWRPDQ\UHWDLOHUV
The Growth Trap
% The growth trap LV D SULPDU\ UHDVRQ WKDW RWKHU ¿UPV GRQ¶W PDNH
WUDGHRIIV&(2VZDQWWRJURZUHYHQXHDQGWKH\EHOLHYHWKDWWUDGH
RIIV FRXOG FRQVWUDLQ JURZWK 2EYLRXVO\ DV \RX PDNH WUDGHRIIV
\RX QDUURZ \RXU WDUJHW PDUNHW ZKLFK PDNHV LW GLI¿FXOW WR JURZ
sales aggressively.
26
%
3XEOLFO\ WUDGHG ¿UPV GH¿QLWHO\ IHHO SUHVVXUH WR PHHW :DOO 6WUHHW
H[SHFWDWLRQV%XWLW¶VDOVRWUXHWKDWODUJH¿UPVJHWPRUHSXEOLFLW\
DQGWKHLUH[HFXWLYHVRIWHQUHFHLYHKLJKHUFRPSHQVDWLRQ7KXVWKHUH
DUH VRPH SHUVRQDO LQWHUHVWV GULYLQJ WKH REVHVVLRQ ZLWK JURZWK IRU
PDQ\FRPSDQLHV
%
7KHUH¶V DOVR D UHDO FKDOOHQJH ZKHQ &(2V VHW DJJUHVVLYH JURZWK
WDUJHWV:KDWGRHVLWPHDQLID&(2VHWVDWDUJHWRIRU
JURZWKSHU\HDU"
ż
0DWKHPDWLFLDQVKDYHDUXOHRIWKDWKHOSVXVWKLQNDERXWWKH
JURZWKRIDQ\QXPEHU,IZHGLYLGHE\WKHJURZWKUDWHWKDWD
¿UPDVSLUHVWRDFKLHYHZHJHWWKHQXPEHURI\HDUVLWZLOOWDNH
IRUWKDW¿UPWRUHDFKLWVWDUJHW
ż
,ID¿UPLVWU\LQJWRJURZDWSHU\HDULWZLOOWDNHDERXW
\HDUV IRU WKDW ¿UP WR UHDFK LWV WDUJHW +RZ LV D ¿UP WKDW
PLJKW KDYH EHHQ DURXQG IRU RU \HDUV JRLQJ WR DFKLHYH
JURZWKLQVXFKDVKRUWSHULRGRIWLPH",QPDQ\FDVHVLW
GRHVVRE\YLRODWLQJNH\WUDGHRIIVLWRULJLQDOO\PDGH
ż
$ ¿UP PLJKW KDYH VWDUWHG ZLWK D ORQJ OLVW RI WKLQJV LW GLGQ¶W
SODQ WR GR²WKLQJV WKDW PDGH LW GLVWLQFW EXW FUHDWH D QDUURZ
WDUJHW PDUNHW 7R JR EH\RQG WKDW PDUNHW WKH ¿UP EHJLQV WR
HOLPLQDWHDIHZRIWKHWUDGHRIIV
A Dual Advantage Strategy?
% 6RPHREVHUYHUVKDYHSRLQWHGWR7UDGHU-RH¶VDVDQH[DPSOHRID¿UP
SXUVXLQJ D GXDO DGYDQWDJH VWUDWHJ\ DFKLHYLQJ ERWK GLIIHUHQWLDWLRQ
DQGORZFRVWV+RZHYHUWKHUHIHUHQFHSRLQWKHUHLVFUXFLDO
%
,IZHFRPSDUH7UDGHU-RH¶VWRDW\SLFDOVXSHUPDUNHWLWPLJKWVHHP
WRKDYHVOLJKWO\KLJKHUSULFHVDQGORZHUFRVWV%XWLQFRPSDULVRQWR
RWKHURUJDQLFRUQDWXUDOVWRUHVVXFKDV:KROH)RRGV7UDGHU-RH¶V
SULFHVDUHFOHDUO\ORZHUWKHUHIRUHLW¶VKDUGWRDUJXHWKDWWKHVWRUHLV
DGLIIHUHQWLDWHGSOD\HU
%
7KH ERWWRP OLQH LV WKDW LW¶V GLI¿FXOW WR FRPH WR D GH¿QLWLYH
FRQFOXVLRQ DERXW WKH LVVXH RI GXDO DGYDQWDJH ZLWK 7UDGHU -RH¶V
EHFDXVHLW¶VQRWDSXEOLFO\WUDGHGFRPSDQ\:HGRQ¶WKDYH¿QDQFLDO
GDWD RQ WKH FRPSDQ\ DQG EHFDXVH LW RIIHUV SULYDWHODEHO JRRGV
LW¶VGLI¿FXOWWRHYHQDVVHVVWKHSULFHOHYHODWWKH¿UP:HFDQ¶WWHOO
LI 7UDGHU -RH¶V SULFHV DUH ORZHU WKDQ WKRVH RI D JLYHQ FRPSHWLWRU
EHFDXVHWKHSURGXFWVDUHQRWLGHQWLFDOLQERWKORFDWLRQV
27
%
7KLV LVVXH RI GXDO DGYDQWDJHKLJKOLJKWV WKH IDFW WKDW PDQ\ SHRSOH
confuse the term differentiation with the general notion of being
GLIIHUHQW WKDQ WKH FRPSHWLWLRQ /RZFRVW SOD\HUV FDQ EH KLJKO\
GLVWLQFWLYH EXW WKDW GRHVQ¶W PHDQ WKH\¶UH GLIIHUHQWLDWHG LQ WKH
SUHFLVH ZD\ WKDW 3RUWHU LQLWLDOO\ GH¿QHG WKH WHUP ,Q WKH RULJLQDO
generic strategies framework, differentiation meant creating a larger
ZHGJHEHWZHHQZLOOLQJQHVVWRSD\DQGFRVWVWKDQWKHDYHUDJHULYDO
Lecture 4: What Trader Joe’s Doesn’t Do
Blue Ocean Strategy
% 7KH FRQFHSW RI EOXH RFHDQ VWUDWHJ\ ZDV LQWURGXFHG LQ D ERRN RI
WKH VDPH QDPH ZULWWHQ E\ : &KDQ .LP DQG 5HQpH 0DXERUJQH
7KHVHDXWKRUVDUJXHGWKDWGXDODGYDQWDJHLVQRWRQO\SRVVLEOHEXW
LW¶VPXFKPRUHSUHYDOHQWWKDQ3RUWHUEHOLHYHG.LPDQG0DXERUJQH
FODLPHGWKDWWUXHLQQRYDWRUVDUHDEOHWREUHDNWKHWUDGHRIIEHWZHHQ
ORZFRVWDQGGLIIHUHQWLDWLRQDQGFUHDWHDQHZYDOXHSURSRVLWLRQWKDW
DOORZVWKHPWRGHOLYHUERWK
28
%
$V DQ H[DPSOH WKH DXWKRUV SRLQW WR &LUTXH GX 6ROHLO ZKLFK LV D
K\EULG RI D FLUFXV DQG D %URDGZD\ VKRZ 7KH VKRZ FKDUJHV D
SUHPLXPSULFH\HWWKHDXWKRUVDUJXHWKDWLWKDVORZHUFRVWVWKDQD
W\SLFDOFLUFXV
%
6RXWKZHVW$LUOLQHV LV RIIHUHG DV DQRWKHU H[DPSOH RI D EOXH RFHDQ
FRPSDQ\EXWLWGRHVQ¶WFKDUJHSUHPLXPSULFHV6RXWKZHVWLVDORZ
FRVWSOD\HUWKDW¶VGLIIHUHQWEXWQRWGLIIHUHQWLDWHGLQWKHVHQVHWKDWLW
HQMR\VKLJKHUZLOOLQJQHVVWRSD\WKDQPDQ\RILWVULYDOV
%
$FFRUGLQJWR.LPDQG0DXERUJQHDEOXHRFHDQ¿UPLVFUHDWHGE\
WXUQLQJ DURXQG WKH VWUHQJWKV DQG ZHDNQHVVHV RI D W\SLFDO ¿UP LQ
DQLQGXVWU\&DQDQHZ¿UPEHJUHDWDWWKLQJVWKDWW\SLFDO¿UPVLQ
WKHLQGXVWU\DUHQ¶WGRLQJZHOO"$QGFDQDQHZ¿UPVDFUL¿FHRUFXW
GRZQRQWKLQJVLQZKLFKRWKHU¿UPVLQYHVW"
%
&LUTXH GX 6ROHLO IRU H[DPSOH LQYHVWV LQ FKRUHRJUDSK\ DQG WKH
FRPSRVLWLRQRIEHDXWLIXOPXVLF²WKLQJVWKDWDW\SLFDOFLUFXVGRHVQ¶W
KDYH²EXW LW GRHVQ¶W KDYH DQLPDOV RU VWDU SHUIRUPHUV %\ PDNLQJ
WKRVH NLQGV RI FKRLFHV D QHZ ¿UP FDQ ÀLS WKH LQGXVWU\ RQ LWV
KHDG DQG FUHDWH D GLIIHUHQW FRPSDQ\ RQH WKDW GRHVQ¶W KDYH GLUHFW
FRPSHWLWRUV
%
.LP DQG 0DXERUJQH RIIHU ZKDW WKH\ FDOO WKH IRXU DFWLRQV
IUDPHZRUN WR KHOS SHRSOH WKLQN DERXW KRZ WKH\ PLJKW UHGH¿QH
DQLQGXVWU\DQGFRPHXSZLWKDVWUDWHJ\WKDWVHWVWKHPDSDUWIURP
PDQ\FRPSHWLWRUV7KHNH\TXHVWLRQVWRDVNKHUHDUH :KDWFDQ
\RXHOLPLQDWHWKDWRWKHUVDUHGRLQJ" :KDWFDQ\RXUHGXFH" :KDWFDQ\RXFUHDWH" :KDWFDQ\RXHQKDQFH"
%
,QWHUHVWLQJO\WKLVPRGHODFWXDOO\VHHPVWRKDYHPXFKLQFRPPRQ
ZLWK 3RUWHU¶V ZRUN SDUWLFXODUO\ ZLWK UHJDUG WR WKH LGHD RI WUDGH
RIIV %\ HVFKHZLQJ FHUWDLQ DFWLYLWLHV WKDW DUH FRPPRQSODFH LQ DQ
LQGXVWU\¿UPVFDQFUHDWHDGLVWLQFWLYHSRVLWLRQWKDW¶VKDUGWRLPLWDWH
‹1RHO+HQGULFNVRQ'LJLWDO9LVLRQ7KLQNVWRFN
Homogenization
% ,QEHQFKPDUNLQJD¿UPW\SLFDOO\ORRNVIRUWKLQJVWKDWLW¶VGRLQJOHVV
HIIHFWLYHO\WKDQWKHFRPSHWLWLRQDQGWULHVWRFDWFKXS8QIRUWXQDWHO\
EHQFKPDUNLQJFDQOHDGWRWKHKRPRJHQL]DWLRQRIVWUDWHJLHV7KLVLV
QRWWRVD\WKDW\RXVKRXOGQ¶WVWXG\WKHFRPSHWLWLRQEXW\RXPD\ZDQW
WRDPSOLI\ZKDW\RXGRGLIIHUHQWO\UDWKHUWKDQMXVWWU\LQJWRFDWFKXS
7RGD\ZHRIWHQVHHPDQ\GLIIHUHQWEUDQGVÀDYRUVDQGVL]HVRIFHUWDLQSURGXFWV
but in the end, the products are just commodities; they’re not truly differentiated.
29
%
<RXQJPH0RRQDPDUNHWLQJSURIHVVRUDW+DUYDUG%XVLQHVV6FKRRO
KDVQRWHGWKHSKHQRPHQRQRIFRQYHUJHQFHLQPDQ\LQGXVWULHVZLWK
ULYDOVEHFRPLQJLQFUHDVLQJO\DOLNH,QUHWDLOVWRUHV0RRQVHHVZKDW
VKH FDOOV KHWHURJHQHRXV KRPRJHQL]LQJ ,Q RWKHU ZRUGV WKHUH LV
GLYHUVLW\ RQ WKH VXUIDFH EXW KRPRJHQHLW\ XQGHUQHDWK &RPSDQLHV
DUHVSHQGLQJDJUHDWGHDORIPRQH\WRFUHDWHPDQ\YDULHWLHVRIWKH
VDPHEDVLFSURGXFWV
%
$VZH¶YHVHHQKRZHYHUVWUDWHJ\UHVWVRQXQLTXHDFWLYLWLHV$QGWR
FUHDWH D VXVWDLQDEOH VWUDWHJLF SRVLWLRQ \RX PXVW PDNH WUDGHRIIV
:LWKRXW PDNLQJ WKRVH WUDGHRIIV \RXU LGHDV FDQ EH LPLWDWHG DQG
\RXZRQ¶WEHDEOHWRVXVWDLQ\RXUDGYDQWDJH
Suggested Reading
$JHUDQG5REHUWR³7UDGHU-RH¶V´
.LPDQG0DXERUJQH%OXH2FHDQ6WUDWHJ\.
Moon, Different.
Lecture 4: What Trader Joe’s Doesn’t Do
3RUWHU³:KDW,V6WUDWHJ\"´
Questions to Consider
1. :KDW LV WKH YDOXH RI PDNLQJ D VHULHV RI WUDGHRIIV DV \RX IRUPXODWH D
FRPSHWLWLYHVWUDWHJ\"
2. :K\GR¿UPVKDYHVXFKDKDUGWLPHLPLWDWLQJDFRPSDQ\WKDWKDVPDGH
DQXPEHURIWUDGHRIIV"
3. :K\LVLWVRGLI¿FXOWWRDFKLHYHGXDODGYDQWDJH"
)LUVW0RYHUVYHUVXV)DVW)ROORZHUV
Lecture 5
F
LUVWPRYHU DGYDQWDJH LV WKH FRPSHWLWLYH DGYDQWDJH HVWDEOLVKHG
E\ YLUWXH RI WKH IDFW WKDW D FRPSDQ\ KDV HQWHUHG D PDUNHW ¿UVW DQG
HVWDEOLVKHG D SRVLWLRQ$QG LW¶V WUXH WKDW ¿UVW PRYHUV VRPHWLPHV GR
DFKLHYHWUHPHQGRXVDGYDQWDJHFRQVLGHU*LOOHWWHLQUD]RUVRU&RFD&RODLQ
FDUERQDWHGVRIWGULQNV%XWZHDOVRKDYHSOHQW\RIH[DPSOHVRI¿UVWPRYHUV
WKDWGLGQRWVXFFHHGRUZHUHFRPSOHWHO\HOLPLQDWHGIURPWKHPDUNHW%HIRUH
)DFHERRNIRUH[DPSOHWKHUHZDVDVRFLDOPHGLDFRPSDQ\FDOOHG)ULHQGVWHU
DQGEHIRUH*RRJOHWKHUHZDV1HWVFDSH,QWKLVOHFWXUHZH¶OOFKDOOHQJHWKH
FRPPRQO\KHOGYLHZWKDWEHLQJ¿UVWLVFUXFLDO
Sources of First-Mover Advantage
% )LUVW PRYHUV JDLQ DGYDQWDJH IURP IRXU PDMRU VRXUFHV HFRQRPLHV
RIVFDOHHFRQRPLHVRIVFRSHQHWZRUNHIIHFWVDQGOHDUQLQJHIIHFWV
%
(FRQRPLHV RI VFDOH H[LVW LQ D EXVLQHVV ZKHQ WKH FRVWV SHU XQLW WR
SURGXFH DQG GLVWULEXWH D JRRG IDOO DV WKH EXVLQHVV SURGXFHV PRUH
XQLWV RI WKH JRRG LQ DQ\ JLYHQ WLPH SHULRG ,Q RWKHU ZRUGV WKH
ODUJHU \RX DUH WKH PRUH \RXU FRVWV SHU XQLW FRPH GRZQ 6FDOH
HFRQRPLHV DUH SURQRXQFHG LQ VXFK EXVLQHVVHV DV7R\RWD %DQN RI
$PHULFDDQG)HG([7KHKLJKHUWKHYROXPHIRUDQ\EXVLQHVVZLWK
KLJK¿[HGFRVWVWKHJUHDWHUWKHGHJUHHWRZKLFKWKRVH¿[HGFRVWV
FDQEHDPRUWL]HGRYHUPDQ\XQLWVEULQJLQJWKHFRVWSHUXQLWGRZQ
%
/HDUQLQJHIIHFWVDOVREULQJDERXWIDOOLQJFRVWVSHUXQLW,QWKLVFDVH
however, the lower costs are not the result of more units being
SURGXFHGLQDJLYHQWLPHLQVWHDGWKH\¶UHDWWULEXWHGWRHI¿FLHQFLHV
OHDUQHGIURPSURGXFLQJWKHJRRGRYHUDQH[WHQGHGSHULRG
%
$QRWKHU VRXUFH RI ¿UVWPRYHU DGYDQWDJH LV QHWZRUN HIIHFW ZKLFK
KDV OHVV WR GR ZLWK FRVW DQG PRUH WR GR ZLWK SHUFHLYHG YDOXH RQ
WKH SDUW RI WKH XVHU$ QHWZRUN HIIHFW LV VHHQ ZKHQ WKH YDOXH SHU
XVHU ULVHV DV WKH WRWDO QXPEHU RI XVHUV ULVHV 1HWZRUN HIIHFWV DUH
/HFWXUH)LUVW0RYHUVYHUVXV)DVW)ROORZHUV
LQSOD\LQVXFKEXVLQHVVHVDVH%D\/LQNHG,Q*RRJOHH+DUPRQ\
DQG$PD]RQ)RUH[DPSOHH%D\KDVYDOXHIRUXVHUVEHFDXVHPDQ\
RWKHUEX\HUVDQGVHOOHUVFDQEHIRXQGRQWKHVLWH
ż 3UHVXPDEO\ WKH ¿UVW PRYHU FDQ JDWKHU PDQ\ XVHUV DQG WKXV
LQFUHDVHLWVRZQYDOXHWRHDFKXVHU7KDWFUHDWHVDQDGYDQWDJH
RYHUWKHXSVWDUWZKRFRPHVLQZLWKQRXVHUVDQGKDVYHU\OLWWOH
value to offer.
ż
0DQ\,QWHUQHW¿UPVWKDWDUHLQEXVLQHVVHVZKHUHQHWZRUNHIIHFWV
H[LVWKDYHSXUVXHGWKHVRFDOOHGJHWELJIDVWVWUDWHJ\7KH¿UVW
RUGHURIEXVLQHVVKHUHLVWREXLOGDQHWZRUNHIIHFWDVDGHIHQVH
DJDLQVW RWKHUV ZKR PLJKW FRPH LQ ODWHU DQG WU\ WR FRPSHWH
LW¶VRQO\DIWHUWKH\¶YHEXLOWWKHQHWZRUNWKDWWKHVH¿UPV¿JXUH
RXW KRZ WR PDNH PRQH\ ,Q IDFW WKLV KDV EHHQ D SRZHUIXO
SKHQRPHQRQIRUVXFK¿UPVDV)DFHERRNDQG/LQNHG,Q
ż
,Q PDUNHWV ZLWK QHWZRUN HIIHFWV W\SLFDOO\ WKHUH DUH KLJK
VZLWFKLQJ FRVWV IRU XVHUV ZKLFK UHVXOWV LQ D ORFNLQ HIIHFW
8VHUV DUH LQ HIIHFW VWXFN ZLWK D SDUWLFXODU JRRG VHUYLFH RU
SODWIRUP )URP WKH SHUVSHFWLYH RI WKH XVHU WKDW PD\ QRW EH
LGHDO%XWIURPWKHSHUVSHFWLYHRIDFRPSDQ\RIIHULQJDSURGXFW
RUVHUYLFHVZLWFKLQJFRVWVDUHZRQGHUIXO
ż
,QVRPHPDUNHWVZLWKVWURQJQHWZRUNHIIHFWVQRWRQO\LVWKHUH
D¿UVWPRYHUDGYDQWDJHEXWWKH¿UVWPRYHUFDQDOVRFRPHWREH
WKHGRPLQDQWWHFKQRORJ\RU¿UP²WKHVRFDOOHGVWDQGDUGLQWKH
PDUNHW7KLVLVWUXHRI0LFURVRIW:LQGRZVZKLFKKDVRI
WKHPDUNHWVKDUHLQWKHRSHUDWLQJV\VWHPPDUNHW.HHSLQPLQG
WKRXJKWKDWZLWKFHUWDLQSURGXFWVRUVHUYLFHVWKHUHPD\DOVR
EH KLJK GHPDQG IRU YDULHW\ RQ WKH SDUW RI WKH FXVWRPHU7KLV
LVWKHFDVHIRUH[DPSOHZLWKYLGHRJDPHVZKLFKKDYHDZLGH
array of customers.
Countering Conventional Wisdom
% 7KHVSHHGDWZKLFKDJLYHQPDUNHWRUWHFKQRORJ\HYROYHVFDQKDYH
D VLJQL¿FDQW EHDULQJ RQ ZKHWKHU D GRPLQDQW SOD\HU ZLOO HPHUJH
ZLWKHQGXULQJ¿UVWPRYHUDGYDQWDJH
ż
2QH SURGXFW IRU ZKLFK WKHUH LV IDLUO\ VORZ HYROXWLRQ RI ERWK
WHFKQRORJ\ DQG WKH PDUNHW LV 6FRWFK WDSH 0 FUHDWHG WKLV
SURGXFW LQ D YHU\ VORZPRYLQJ VSDFH DQG KDV EHHQ DEOH WR
DFKLHYHHQGXULQJ¿UVWPRYHUDGYDQWDJH
ż
%XWLQWKHSHUVRQDOFRPSXWHUEXVLQHVVZKHUHZH¶YHVHHQUDSLG
WHFKQRORJLFDOREVROHVFHQFHDQGDJUHDWGHDORIG\QDPLFFKDQJH
RYHUWLPHLW¶VPXFKPRUHGLI¿FXOWWRHVWDEOLVKDQGPDLQWDLQD
¿UVWPRYHUDGYDQWDJH
%
$QRWKHU UHDVRQ WKDW ¿UVW PRYHUV GRQ¶W DOZD\V ZLQ LV WKDW WKHUH
PD\ EH KLJK FRVWV LQYROYHG LQ EOD]LQJ D QHZ WHFKQRORJLFDO WUDLO
Such costs are known as SLRQHHULQJFRVWV,QSDUWLFXODUHGXFDWLQJ
FRQVXPHUV DERXW DQ HQWLUHO\ QHZ SURGXFW FDWHJRU\ PD\ EH
H[SHQVLYH DQG D JUHDW GHDO RI FKDQJH PD\ WDNH SODFH HDUO\ LQ D
WHFKQRORJ\¶VH[LVWHQFHFast followers²WKRVHZKRFRPHLQDIWHUD
¿UVWPRYHU²PD\EHDEOHWRWDNHDGYDQWDJHRIWKHIDFWWKDW\RX¶YH
EOD]HGWKHWUDLOWKHQPRYHTXLFNO\WRVXSHUVHGH\RX
%
7KRVHZKRPRYH¿UVWPD\DOVRKDYHWRPDNHFHUWDLQFRPPLWPHQWV
WKDW FDQ EHFRPH ULJLG DQG GLI¿FXOW WR FKDQJH )LUVW PRYHUV ZKR
KDYH KDG LQLWLDO VXFFHVV PD\ EHFRPH FRPSODFHQW RU H[SHULHQFH
RUJDQL]DWLRQDOLQHUWLDDQGPD\QRWEHDEOHWRFKDQJHDVWKHPDUNHW
begins to evolve.
%
,Q DGGLWLRQ ¿UVW PRYHUV PD\ IDOO LQWR WKH VXQN FRVW WUDS. They
LQYHVWKHDYLO\LQDSDUWLFXODUWHFKQRORJ\RUZD\RIGRLQJEXVLQHVV
DQGHYHQLIWKH\VWDUWWRJHWQHJDWLYHIHHGEDFNWKH\FDQ¶WFXWWKHLU
ORVVHVDQGVKLIWVWUDWHJ\7KH\EHFRPHRYHUFRPPLWWHGWRDQLQLWLDO
FRXUVHRIDFWLRQDQGIDLOWRDGDSWDVPDUNHWVHYROYH
%
%XVLQHVV UHVHDUFKHU *UHJ &DUSHQWHU KDV QRWHG WKDW LQ PDQ\
FDVHV SLRQHHUV LQ D ¿HOG DUH QRW YHU\ ZHOO IXQGHG7KH\ FUHDWH D
FRPSHWLWLYHJDPHEXWWKH\¶UHXQDEOHWRGRPLQDWHLWEHFDXVHWKHLU
UHVRXUFHVDUHVLPSO\WRROLPLWHG
%
'HVSLWH WKH GLVDGYDQWDJHV ¿UVW PRYHUV IDFH WKHUH DUH D QXPEHU
RIVLWXDWLRQVLQZKLFKSLRQHHULQJPD\EHWKHULJKWVWUDWHJ\LIWKH
H[SHFWHGOLIHRIDSURGXFWFDWHJRU\LVYHU\VKRUWLIWKHYDOXHRIWKH
SURGXFWLVKLJKO\VXEMHFWLYHRULQWDQJLEOHLIEUDQGLVLPSRUWDQWDQG
if the cost of imitation is high.
%
&RVWVSHUXQLWFHUWDLQO\IDOORYHUWLPHDVYROXPHLQFUHDVHVLQPDQ\
EXVLQHVVHV EXW DW VRPH SRLQW WKDW FXUYH EHJLQV WR ULVH DJDLQ ,Q
RWKHU ZRUGV WKH FRVWV SHU XQLW HYHQWXDOO\ VWDUW WR ULVH DJDLQ DV D
FRPSDQ\ JHWV WRR ELJ
FRPSOH[DQGEXUHDXFUDWLF
2UJDQL]DWLRQV JURZ WR
D SRLQW DW ZKLFK VRPH
LQHI¿FLHQF\ EHJLQV WR EH
EXLOW LQ DQG VPDOOHU ¿UPV
WKHQJDLQWKHDGYDQWDJH
%
,Q PDQ\ FDVHV ¿UPV
believe that bigger is
better because that has
EHHQ WUXH LQ WKH SDVW
)RU H[DPSOH VFDOH ZDV
D WUHPHQGRXV DGYDQWDJH
IRU *HQHUDO 0RWRUV IRU
much of the 20th century.
%XW HYHQWXDOO\ WKH ¿UP¶V
VL]H EHFDPH D OLDELOLW\
*0 EHFDPH YXOQHUDEOH
EHFDXVH LW ZDVQ¶W DV
ÀH[LEOH DQG QLPEOH DV
RWKHU¿UPV
‹JHUHQPHL6WRFN7KLQNVWRFN
/HFWXUH)LUVW0RYHUVYHUVXV)DVW)ROORZHUV
Economies of Scale
% $OWKRXJK ZH¶YH VDLG WKDW HFRQRPLHV RI VFDOH UHSUHVHQW D VRXUFH
RI¿UVWPRYHUDGYDQWDJHPDQDJHUVRIWHQJURVVO\RYHUHVWLPDWHWKH
LPSRUWDQFHRIWKLVIDFWRU
Large companies may sometimes
overestimate the importance of
economies of scale and fail to realize
the disadvantages they have relative to
start-ups and entrepreneurs.
Learning Curves
% /HDUQLQJ FXUYHV FDQ DOVR EH D VLJQL¿FDQW VRXUFH RI ¿UVWPRYHU
DGYDQWDJHEXWLQVRPHVLWXDWLRQV¿UPVPD\EHXQDEOHWRKROGRQWR
WKHLU OHDUQLQJ RU SURWHFW WKHLU LQWHOOHFWXDO SURSHUW\ 7KH UHVXOW LV
what scholars call VSLOORYHU HIIHFWV²ZKHQ WKH OHDUQLQJ D ¿UP KDV
DFKLHYHG WKURXJK H[SHULHQFH VSLOOV RXW EH\RQG WKH ERXQGDULHV RI
WKH¿UP$VHFRQGPRYHUFDQFDSWXUHWKRVHVSLOORYHUVDQGFDQOHDUQ
IURPWKH¿UVWPRYHU¶VPLVWDNHV
%
7KLVLVVXHLVSDUWLFXODUO\SUREOHPDWLFLQHFRQRPLHVZLWKRXWVWURQJ
LQWHOOHFWXDOSURSHUW\SURWHFWLRQVXFKDV&KLQD,W¶VDOVRFKDOOHQJLQJ
LQVLWXDWLRQVZKHUHODERULVYHU\PRELOHDQGWKHNQRZOHGJHWKDW¶V
EHLQJFUHDWHGFDQQRWEHHDVLO\SURWHFWHGWKURXJKSDWHQWVVXFKZDV
WKHVLWXDWLRQLQ6LOLFRQ9DOOH\IRUH[DPSOH
Network Effects
% ,WVHHPVWKDWLIQHWZRUNHIIHFWVH[LVWLWZRXOGDOZD\VPDNHVHQVH
IRUD¿UPWREH¿UVWDQGJHWELJIDVW%XWWKLQNDERXWVRFLDOPHGLD
,IQHWZRUNHIIHFWVDUHVRFUXFLDOLQWKDWEXVLQHVVWKHQKRZLVWKDW
)DFHERRNZDVDEOHWRVXSSODQWHDUO\SOD\HUVVXFKDV)ULHQGVWHUDQG
0\VSDFH"
%
0LVLHN3LVNRUVNLLVDVFKRODUZKRVWXGLHGVRFLDOPHGLDSODWIRUPV
DQGKHFRQFOXGHGWKDWIRUVRPHFHUWDLQQHWZRUNVFXVWRPHUVDFWXDOO\
SUHIHUDQRQFURZGHGVSDFH7KH\ZDQWPRUHXVHUV²WKHUH¶VYDOXH
DVRWKHUVXVHWKHVLWH²EXWLIWRRPDQ\SHRSOHXVHWKHVLWHWKHYDOXH
starts to turn negative.
%
7KHH[DPSOH3LVNRUVNLJLYHVLVH+DUPRQ\8VHUVZDQWWREHRQD
GDWLQJSODWIRUPZKHUHWKHUHLVDZLGHYDULHW\RISRWHQWLDOSDUWQHUV
EXWWKH\GRQ¶WZDQWWRRPDQ\RWKHUSHRSOHRQWKHSODWIRUPEHFDXVH
WKDWHYHQWXDOO\FDXVHVFRPSHWLWLRQ
%
)HOL[ 2EHUKRO]HU*HH DW +DUYDUG KDV DOVR ORRNHG DW SRVVLEOH
GRZQVLGHVWRWKHQHWZRUNHIIHFW,QVRFLDOPHGLDWKHHDUO\FRPSDQ\
)ULHQGVWHUSXUVXHGDJHWELJIDVWVWUDWHJ\WU\LQJWRJHWFXVWRPHUVLQ
ERWK$VLDDQG1RUWK$PHULFD
/HFWXUH)LUVW0RYHUVYHUVXV)DVW)ROORZHUV
ż
%XWWKH$VLDQXVHUVJHQHUDOO\ZHUHQ¶WLQWHUHVWHGLQLQWHUDFWLQJ
ZLWK $PHULFDQ XVHUV DQG YLFH YHUVD 7KXV VSHQGLQJ PRQH\
WR EXLOG WZR JLDQW VHWV RI LQGLYLGXDOV RQ WKH QHWZRUN RQ WZR
GLIIHUHQWFRQWLQHQWVGLGQ¶WDFWXDOO\DGGDORWRIYDOXH
ż
)ULHQGVWHU PLJKW KDYH GRQH EHWWHU LI LW KDG IRFXVHG RQ
EXLOGLQJWKHQHWZRUNLQRQO\RQHUHJLRQUDWKHUWKDQWU\LQJWR
H[SHQG LWV UHVRXUFHV WR JHW ELJ IDVW DFURVV WZR UHJLRQV 7KDW
ZDVWHRIUHVRXUFHVPDGHWKHFRPSDQ\YXOQHUDEOHWRRWKHUV²
VSHFL¿FDOO\ )DFHERRN²ZKLFK EXLOW D EHWWHU SODWIRUP ZLWK D
PRUHIRFXVHGVWUDWHJ\
ż
1RW RQO\ GLG )DFHERRN IRFXV RQ RQO\ RQH UHJLRQ EXW LW
DOVR IRFXVHG LQLWLDOO\ RQ RQO\ RQH FXVWRPHU VHJPHQW²
FROOHJHVWXGHQWV7KLVIRFXVFUHDWHGQHWZRUNHIIHFWVEXWLQD
ERXQGHGZD\
Diminishing First-Mover Advantage?
% 0LJKW WKHUH EH OHVV ¿UVWPRYHU DGYDQWDJH WRGD\ WKDQ WKHUH ZDV
VHYHUDOGHFDGHVDJRLQEXVLQHVV"$VZH¶YHVHHQLQFXPEHQWVVHHP
WR JHW WRSSOHG PXFK PRUH UHDGLO\ DQG ¿UPV IDFH PXFK VKRUWHU
SHULRGVRIWLPHGXULQJZKLFKWKH\¶UHDEOHWRDFKLHYHDGYDQWDJHDQG
KROGRQWRLW
%
6RPH VFKRODUV KDYH ORRNHG DW SODWIRUPV ZKHUH XVHUV FDQ VLJQ RQ
DFURVVPXOWLSOHSODWIRUPVDQGPRYHWKHLUFRQWDFWVHDVLO\7KH\KDYH
RQH SUR¿OH WKDW WKH\ FDQ XVH RQ PXOWLSOH QHWZRUNV DQG FDQ PRYH
ZLWKWKHLUIULHQGVHQPDVVHIURPRQHSODWIRUPWRDQRWKHU,QWKHVH
VLWXDWLRQVXVHUVDUHQRWDVORFNHGLQDVWKH\ZHUHSUHYLRXVO\ZKLFK
PHDQVWKDW¿UVWPRYHUVKDYHOHVVRIDQDGYDQWDJH
%
2QHVWUDWHJ\IRUGHDOLQJZLWKVLWXDWLRQVZKHUHQHWZRUNHIIHFWVH[LVW
KDV EHHQ GHVFULEHG DV WKH freemium business model +HUH D ¿UP
PLJKWJLYHDZD\DSURGXFWIRUIUHHEXWDOVRKDYHDSUHPLXPRIIHULQJ
WKDWUHTXLUHPHQWVSD\PHQW7KLVPRGHOLVXVHGE\/LQNHG,QZKLFK
KDVWZROHYHOVRIPHPEHUVKLS7KHPRGHOPDNHVVHQVHIRUD¿UP
WKDW¶VWU\LQJWREXLOGDQHWZRUNTXLFNO\DQGLIWKHUHDUHORZPDUJLQDO
FRVWVIRUDGGLQJQHZXVHUV
%
,W¶V LPSRUWDQW WR WKLQN FDUHIXOO\ DERXW WKH SOXVHV DQG PLQXVHV RI
SLRQHHULQJYHUVXVEHLQJDIDVWIROORZHU8QGHUVWDQGWKHVRXUFHVRI
¿UVWPRYHU DGYDQWDJH DQG WKH OLPLWDWLRQV RI WKRVH DGYDQWDJHV$V
DQHQWUDQWRUDIROORZHUH[SORLWWKHZHDNQHVVHVLQDSLRQHHU¶V¿UVW
PRYHUVWDWXV,QVKRUWGRQ¶WEX\WKHFRQYHQWLRQDOZLVGRP%HLQJ
¿UVWLVQRWDOZD\VDVDGYDQWDJHRXVDVZHWKLQNLWLV
Suggested Reading
$QGHUVRQFree.
&RXJKODQ³/HDGHU¶V 'LV $GYDQWDJH´
6KDQNDUDQG&DUSHQWHU³/DWH0RYHU6WUDWHJ\´
6KDSLURDQG9DULDQInformation Rules.
6XDUH]DQG/DQ]ROOD³7KH+DOI7UXWKRI)LUVW0RYHU$GYDQWDJH´
Questions to Consider
1. :KDWDUHWKHSURVDQGFRQVRIEHLQJWKH¿UVWPRYHU"
2. :K\GR¿UVWPRYHUVQRWDOZD\VVXFFHHGHYHQZKHQOHDUQLQJFXUYHVDQG
QHWZRUNHIIHFWVH[LVW"
3. :KDW DUH VRPH H[DPSOHV RI ¿UPV WKDW KDYH XVHG QHWZRUN HIIHFWV WR
DFKLHYHFRPSHWLWLYHDGYDQWDJH"
:KHQ1HWÀL[0HW%ORFNEXVWHU
Lecture 6
,
/HFWXUH:KHQ1HWÀL[0HW%ORFNEXVWHU
QWKLVOHFWXUHZH¶OOJREDFNWRDQGWDNHDORRNDWWKHUHWDLOFKDLQ
%ORFNEXVWHU ZKLFK VROG DQG UHQWHG YLGHRV$W WKH WLPH %ORFNEXVWHU¶V
PDLQVWUHDPFXVWRPHUVZHUHWR\HDUROGVRFFHUPRPVOLYLQJLQWKH
VXEXUEVZLWKWKHLUIDPLOLHVDQGORRNLQJWRUHQWQHZPRYLHUHOHDVHVRQ9+6
WDSHV ,Q WKH VDPH \HDU 1HWÀL[ EHJDQ RIIHULQJ LWV VHUYLFH ZKLFK DOORZHG
SHRSOH WR UHQW PRYLHV WKURXJK WKH PDLO E\ VXEVFULSWLRQ ,WV PDLQVWUHDP
FXVWRPHUV ZHUH WR \HDUROG PDOHV ZKR ZDWFKHG '9'V UDWKHU WKDQ
WDSHV DQG ZHUH LQWHUHVWHG LQ FXOW FODVVLFV DQG LQGHSHQGHQW ¿OPV ,Q WKLV
OHFWXUHZH¶OOORRNDWKRZ%ORFNEXVWHUUHDFWHGWRWKHGLVUXSWLYHLQQRYDWLRQLQ
WKHLQGXVWU\SUHVHQWHGE\1HWÀL[
Disruptive versus Incremental Innovation
% ,Q %ORFNEXVWHU¶V PDUNHW UHVHDUFK SUREDEO\ UHYHDOHG WKDW LWV
FXVWRPHUV ZDQWHG PRUH FRSLHV RI KLW PRYLHV WR EH DYDLODEOH LQ
VWRUHV ,Q UHVSRQVH WKH FRPSDQ\ EHJDQ WR JXDUDQWHH MXVW WKDW²
WKDWLWVVWRUHVZRXOGKDYHQHZUHOHDVHVRQKDQGWRUHQW7KH³QHZ
UHOHDVH´VHFWLRQRIWKHVWRUHVFKDQJHGIURPDVPDOODUHDWRDQHQWLUH
ZDOODQGODWHUWRWKHHQWLUHSHULPHWHURIWKHVWRUH
%
+RZHYHU WKH SRWHQWLDO 1HWÀL[ FXVWRPHU²WKH \RXQJ PHQ ZKR
OLNHG FXOW FODVVLFV²ZHUH GLVVDWLV¿HG ZLWK WKLV FKDQJH7KHUH ZDV
QR URRP RQ WKH VKHOYHV IRU ROG PRYLHV EHFDXVH QHZ UHOHDVHV KDG
FURZGHG WKHP RXW )XUWKHU WKHVH FXVWRPHUV GLVOLNHG ODWH IHHV
EHFDXVH WKH\ GLGQ¶W KDYH PXFK PRQH\ DQG EHFDXVH WKH\ OLNHG WR
NHHSPRYLHVORQJHUDQGZDWFKWKHPPXOWLSOHWLPHV
%
,QPDNLQJWKHFKDQJH%ORFNEXVWHUSXUVXHGLQFUHPHQWDOLQQRYDWLRQ.
7KH FRPSDQ\ FRQGXFWHG IRFXV JURXSV DQG VXUYH\V DPRQJ LWV
PDLQVWUHDPFXVWRPHUVDQGLQUHVSRQVHWRWKHLUVXJJHVWLRQVRIIHUHG
DVPDOOLPSURYHPHQWLQLWVVHUYLFH%XW1HWÀL[SUHVHQWHGDdisruptive
innovation²DIXQGDPHQWDOO\GLIIHUHQWSURGXFWVHUYLFHRUEXVLQHVV
PRGHO²WKDWXQGHUPLQHG%ORFNEXVWHU¶VFRPSHWLWLYHDGYDQWDJH
%
$VZH¶YHVDLGWKHUHDUHWKUHHPDLQH[WHUQDOWKUHDWVWRFRPSHWLWLYH
DGYDQWDJH LPLWDWLRQ VXEVWLWXWLRQ DQG KROGXS ,Q PDQ\ ZD\V
VXEVWLWXWLRQ LV WKH PRVW VHULRXV RI WKHVH DQG WKDW¶V WKH WKUHDW WKDW
1HWÀL[SUHVHQWHG6XEVWLWXWLRQLVRIWHQKDUGWRIRUHVHHDQGSHUKDSV
HYHQKDUGHUWRUHVSRQGWR
%
0DQ\ \HDUV DJR WKH HFRQRPLVW -RVHSK 6FKXPSHWHU ZURWH DERXW
WKH QHHG WR ORRN EH\RQG \RXU GLUHFW ULYDOV ZKHQ WKLQNLQJ DERXW
WKH SULQFLSDO WKUHDW WR \RXU FRPSHWLWLYH DGYDQWDJH +H VDLG WKDW
DWWHQWLRQLVRIWHQIRFXVHGH[FOXVLYHO\RQFRPSHWLWLRQZLWKLQDULJLG
SDWWHUQ RI LQYDULDQW FRQGLWLRQV PHWKRGV RI SURGXFWLRQ DQG IRUPV
RILQGXVWULDORUJDQL]DWLRQ%XWLQUHDOLW\WKDWNLQGRIFRPSHWLWLRQLV
QRWDVWKUHDWHQLQJDVWKHFRPSHWLWLRQIURPDQHZFRPPRGLW\QHZ
WHFKQRORJ\RUQHZW\SHRIRUJDQL]DWLRQ
%
(DUOLHULQKLVDFDGHPLFFDUHHU+DUYDUG%XVLQHVV6FKRROSURIHVVRU
&OD\ &KULVWHQVHQ WUDFHG WKH HYROXWLRQ RI WKH GLVN GULYH LQGXVWU\
from 1976 through 1992, watching as a series of technological
LQQRYDWLRQV FDPH WR PDUNHW DQG REVHUYLQJ ZKDW KDSSHQHG WR WKH
SOD\HUVLQWKDWPDUNHW
ż )URP D WHFKQRORJLFDO SHUVSHFWLYH WKH SK\VLFDO VL]H RI WKH
GLVN GULYH VKUDQN GUDPDWLFDOO\ GXULQJ WKDW WLPH 0RUHRYHU
WKHFRVWSHUPHJDE\WHRIVWRUDJHGURSSHGVXEVWDQWLDOO\,QWKLV
VLWXDWLRQ &KULVWHQVHQ REVHUYHG WKDW WKH LQFXPEHQW OHDGHUV LQ
one generation of technology often were not able to maintain
WKHLUOHDGHUVKLSLQWKHQH[WWHFKQRORJLFDOJHQHUDWLRQ
ż
&KULVWHQVHQDUJXHGWKDWWKHLQFXPEHQWSOD\HUVZHUHLQWHQWRQ
SXUVXLQJ LQFUHPHQWDO LQQRYDWLRQ²PLQRU LPSURYHPHQWV WR
WKH DWWULEXWHV WKDW PDLQVWUHDP FXVWRPHUV YDOXHG ,Q FRQWUDVW
GLVUXSWLYH LQQRYDWRUV LQWURGXFHG D GLIIHUHQW SDFNDJH RI
DWWULEXWHV IURP WKH RQHV WKDW PDLQVWUHDP FXVWRPHUV W\SLFDOO\
YDOXHG ,QGHHG GLVUXSWLYH LQQRYDWRUV RIWHQ SHUIRUPHG
VLJQL¿FDQWO\ ZRUVH RQ FHUWDLQ DWWULEXWHV WKDW PDLQVWUHDP
FXVWRPHUVYDOXHGKLJKO\EXWWKHLUSHUIRUPDQFHWUDMHFWRU\ZDV
VWHHSIRUWKHGLVUXSWLYHLQQRYDWLRQV
ż
,QRXUH[DPSOH1HWÀL[ZDVQ¶WIRFXVHGRQVXFKDWWULEXWHVDVLQ
VWRUHH[SHULHQFHRUDYDLODELOLW\RIQHZUHOHDVHV,QIDFW1HWÀL[
SHUIRUPHGVLJQL¿FDQWO\ZRUVHRQVRPHRIWKHVHDWWULEXWHV%XW
1HWÀL[ ZDV IRFXVHG RQ UHQWLQJ ROGHU PRYLHV DQG LW FDPH XS
ZLWK D QHZ ZD\ RI GRLQJ EXVLQHVV IRU WKDW SXUSRVH ,QLWLDOO\
1HWÀL[ GLGQ¶W SHUIRUP ZHOO EXW WKH FRPSDQ\ LPSURYHG DW D
UDSLGUDWH
%
2I FRXUVH WUDGLWLRQDO PDUNHW
research focuses on gathering
IHHGEDFN IURP FXVWRPHUV %XW
FXVWRPHUVWHQGWRWKLQNLQWHUPV
RILQFUHPHQWDOLPSURYHPHQW²
PLQRUDGMXVWPHQWVD¿UPPLJKW
make to increase customer
VDWLVIDFWLRQ &XVWRPHUV GRQ¶W
think in terms of totally new
ZD\VRIGRLQJEXVLQHVV
%
,Q DGGLWLRQ LQFXPEHQW ¿UPV
WHQGWRKDYHULJRURXV¿QDQFLDO As Blockbuster learned,
criteria for allocating their conducting market research
ZLWKW\SLFDOFXVWRPHUVWHQGVWR
LQYHVWPHQWGROODUV,IVRPHRQH result in incremental innovation;
KDVDQHZLGHDWKH¿UPORRNV it doesn’t help you foresee
WR FRVWEHQH¿W DQDO\VLV RU disruptive innovation.
UHWXUQRQLQYHVWPHQW ¿JXUHV
WR GHWHUPLQH ZKHWKHU WKH LGHD PDNHV HFRQRPLF VHQVH :LWK DQ
LGHD WKDW¶V FRPSOHWHO\ QHZ RU LQYROYHV FXWWLQJHGJH WHFKQRORJ\
LW¶VGLI¿FXOWWRFRPHXSZLWKSUHFLVH¿QDQFLDOPRGHOV/DUJH¿UPV
DOVR RIWHQ IHDU WKDW D QHZ SURGXFW RU VHUYLFH ZLOO FDQQLEDOL]H DQ
H[LVWLQJRQH
‹6WRFNE\WH7KLQNVWRFN
/HFWXUH:KHQ1HWÀL[0HW%ORFNEXVWHU
Challenges in the Face of Disruption
% ,QWKHIDFHRIGLVUXSWLYHLQQRYDWLRQLQFXPEHQW¿UPVRIWHQVWUXJJOH
D JUHDW GHDO $FFRUGLQJ WR &KULVWHQVHQ DQG KLV FRDXWKRU -RVHSK
%RZHUWKHVRXUFHVRILQFXPEHQWV¶SUREOHPVDUHWUDGLWLRQDOPDUNHW
UHVHDUFKDQGWUDGLWLRQDOUHVRXUFHDOORFDWLRQSURFHVVHV
%
$QRWKHU UHDVRQ WKDW LQFXPEHQW ¿UPV VWUXJJOH VR PXFK ZLWK
GLVUXSWLYHLQQRYDWLRQLVPHQWDOORFNLQ6XFK¿UPVJHWVWXFNLQD
SDUWLFXODU PHQWDO PRGHO RI KRZ WR PDNH PRQH\ LQ WKHLU PDUNHWV
DQG GRQ¶W FRQVLGHU DOWHUQDWLYHV WKDW PD\ EH LQWURGXFHG E\
GLVUXSWLYHLQQRYDWLRQV
ż )RUH[DPSOH3RODURLGZDVEXLOWRQDGHHSO\LPEHGGHGUD]RUV
DQGEODGHVEXVLQHVVPRGHO6HOOFDPHUDVWRSHRSOHDWUHODWLYHO\
ORZ FRVW DQG WKH\ ZLOO EX\ ¿OP IRU PDQ\ \HDUV WR FRPH ,Q
IDFW3RODURLGPDGHPRVWRILWVPRQH\RQ¿OP
ż
0DQ\SHRSOHEHOLHYHWKDW3RODURLGVLPSO\IDLOHGWRUHFRJQL]H
WKH UHYROXWLRQ LQ GLJLWDO SKRWRJUDSK\ EXW WKDW¶V QRW WKH FDVH
6XEVWDQWLDO UHVHDUFK DQG GHYHORSPHQW DFWLYLW\ LQ GLJLWDO
WHFKQRORJ\WRRNSODFHDW3RODURLGEXWVHQLRUH[HFXWLYHVZHUH
strongly resistant to giving this new technology the resources
QHHGHGWRJRWRPDUNHWEHFDXVHWKH\ZHUHZHGGHGWRWKHROG
EXVLQHVVPRGHO
The Long Tail
% The long tailLVDQLGHDSXWIRUWKE\&KULV$QGHUVRQWKHIRUPHUHGLWRU
of WiredPDJD]LQH$QGHUVRQORRNHGDWWKHODUJHVWEULFNDQGPRUWDU
PXVLFUHWDLOHULQWKH8QLWHG6WDWHV:DOPDUWZKLFKDWWKHWLPHRIKLV
VWXG\FDUULHGDERXWXQLTXH&'WLWOHVRUDERXWVRQJV
%
0RVWRIWKHDFWLYLW\LQWKHPXVLFVHFWLRQRI:DOPDUWVWRUHVFHQWHUHG
RQ WKH KLWV7KH WRS DOEXPV²DERXW RI WKH DOEXPV LQ WKH
VHFWLRQ²DFFRXQWHGIRURI:DOPDUW¶VPXVLFVDOHVDWDQ\JLYHQ
SRLQWLQWLPH,QWKLV:DOPDUW¶VPXVLFEXVLQHVVH[KLELWHGWKHXVXDO
SDWWHUQIRXQGLQKLWGULYHQEXVLQHVVHV ERRNVPRYLHVDQGPXVLF EHIRUHWKH,QWHUQHW
%
%XW$QGHUVRQQRWLFHGVRPHWKLQJGLIIHUHQWZKHQKHORRNHGDWVRPH
RIWKHHPHUJLQJWHFKQRORJLHVRIHQWHUWDLQPHQWVXFKDV5KDSVRG\
D GLJLWDO PXVLF VHUYLFH 5KDSVRG\ FDUULHG PRUH WKDQ PLOOLRQ
VRQJVDQGDELJFKXQNRILWVVDOHVDOVRFDPHIURPKLWVRQJV%XW
5KDSVRG\DOVRUHSRUWHGWKDWVRQJVUDQNHGDVORZDVRQLWV
SRSXODULW\FKDUWVZHUHVWUHDPHGDWOHDVWRQFHSHUTXDUWHU
/HFWXUH:KHQ1HWÀL[0HW%ORFNEXVWHU
%
$QGHUVRQ QRWLFHG WKH VDPH SKHQRPHQRQ LQ RWKHU QHZ HFRQRP\
¿UPV RI 1HWÀL[¶V UHYHQXH ZDV JHQHUDWHG IURP PRYLHV QRW
DYDLODEOHDW%ORFNEXVWHURI5KDSVRG\¶VUHYHQXHZDVJHQHUDWHG
IURPPXVLFQRWDYDLODEOHDW:DOPDUWDQGRI$PD]RQ¶VERRN
EXVLQHVV ZDV JHQHUDWHG IURP ERRNV QRW DYDLODEOH LQ EULFNDQG
PRUWDUVWRUHV7KHORQJWDLOLVWKHLGHDWKDWDJUHDWGHDORIUHYHQXH
FDQEHJHQHUDWHGIURPSURGXFWVWKDWDUHORZLQSRSXODULW\
%
$FFRUGLQJ WR $QGHUVRQ WUDGLWLRQDO HQWHUWDLQPHQW UHWDLOHUV PDGH
DOO WKHLU PRQH\ IURP WKH KLWV +\EULG UHWDLOHUV VHOOLQJ SK\VLFDO
JRRGV WKURXJK FDWDORJV RU RQOLQH VLWHV FRXOG PDNH PRQH\ IURP
PDQ\ PRUH LWHPV EHFDXVH WKH\ FRXOG VWRFN PRUH RI WKRVH LWHPV
LQDGLVWULEXWLRQFHQWHUWKDQLQDSK\VLFDOVWRUH$QGSXUHO\GLJLWDO
UHWDLOHUV FRXOG PDNH PRQH\ RQ DQ HYHQ ZLGHU DUUD\ RI SURGXFWV
1RPDWWHUKRZORZLQSRSXODULW\DQLWHPLVWKHFRVWWRDGGLWWR
DGLJLWDOOLEUDU\LVVRORZWKDWDGLJLWDOUHWDLOHUFDQPDNHYLUWXDOO\
any song or movie available even if there is only one customer
who wants it.
%
$QGHUVRQ DOVR QRWHG WKDW VRFLDO QHWZRUNLQJ FXVWRPHU UHYLHZV
SOD\OLVWVEORJVDQGRWKHUIRUPVRIVRFLDOPHGLDGULYHGHPDQGIRU
WKHVH QLFKH SURGXFWV UDWKHU WKDQ PDVV PDUNHWLQJ %H\RQG WKDW
GLJLWDOUHWDLOHUVFDQFROOHFWLQIRUPDWLRQDERXWFXVWRPHUVDQGEXLOG
VRSKLVWLFDWHG DOJRULWKPV WR FUHDWH FXVWRPL]HG UHFRPPHQGDWLRQV
IRU WKHP 1HWÀL[ IRU H[DPSOH EXLOW D KXJH FXVWRPHU GDWDEDVH
DQG WKH SUHGLFWLYH SRZHU RI LWV DOJRULWKPV ZDV TXLWH KLJK :KHQ
%ORFNEXVWHU WULHG WR FDWFK XS LW ZDVQ¶W DEOH WR FDSLWDOL]H RQ WKH
same network effect.
Reacting to Disruptive Innovation
% ,Q KLV ZRUN RQ GLVUXSWLYH LQQRYDWLRQ &OD\ &KULVWHQVHQ DUJXHG
WKDW LQFXPEHQW ¿UPV PXVW FUHDWH D VHSDUDWH XQLW RU VXEVLGLDU\ WR
UHDFWWRDQXSVWDUWHQWU\DQGZDOOWKLVXQLWRIIIURPWKHPDLQVWUHDP
EXVLQHVV 7KLV VHSDUDWLRQ LV QHFHVVDU\ EHFDXVH ZLWKRXW LW WKH
PDLQVWUHDP EXVLQHVV ZLOO VTXDVK WKH LQQRYDWLRQ LQ DQ HIIRUW WR
SURWHFWLWVSUR¿WPDUJLQV
%
6RPHKDYHFULWLTXHG&KULVWHQVHQ¶VWKHRU\RIGLVUXSWLYHLQQRYDWLRQ
DQGLQIDFWLWPD\EHDQRYHUXVHGFRQFHSW,W¶VDJRRGGHVFULSWLYH
WRRO EXW QRW QHFHVVDULO\ D JRRG SUHGLFWLYH RQH ,Q DGGLWLRQ
&KULVWHQVHQ IRFXVHV RQ WKH LGHD RI LQFXPEHQW ¿UPV PLVVLQJ D
GLVUXSWLYHWKUHDWEXWKHGRHVQ¶WDGGUHVVWKHPLVJXLGHGLQYHVWPHQWV
¿UPVFDQPDNHZKHQWKH\PLVSHUFHLYHDWKUHDW&UHDWLQJDQHZXQLW
WRFRSHZLWKDWKUHDWPD\QRWDOZD\VEHZLVH
%
,W¶VDOVRLPSRUWDQWWRFRQVLGHUWKHFRPSHWLWLYHDGYDQWDJHWKDWFRPHV
IURPDQLQWHJUDWHGV\VWHPRIDFWLYLWLHV,ID¿UPFUHDWHVDVHSDUDWH
XQLWWRJRDIWHUDQHZLGHDZLOOLWVWLOOKDYHDQLQWHJUDWHGV\VWHPRI
DFWLYLWLHVRUZLOOWKH¿UPEHFRPHGLVMRLQWHG"
Suggested Reading
$QGHUVRQThe Long Tail.
Christensen, The Innovator’s Dilemma.
/HSRUH³7KH'LVUXSWLRQ0DFKLQH´
Questions to Consider
1. +RZ GR UHVRXUFH DOORFDWLRQ SURFHVVHV LQ ODUJH RUJDQL]DWLRQV VWLÀH
UDGLFDOLQQRYDWLRQ"
2. +RZKDYHPDQ\LQQRYDWRUVFDSLWDOL]HGRQWKHORQJWDLOSKHQRPHQRQWR
EXLOGVXFFHVVIXOEXVLQHVVHV"
3. :K\KDVWKHWKHRU\RIGLVUXSWLYHLQQRYDWLRQEHFRPHVRZLGHO\HPEUDFHG
DQGSHUKDSVPLVXVHGDWWLPHV"
Anticipating Your Rival’s Response
Lecture 7
,
Lecture 7: Anticipating Your Rival’s Response
Q WKLV OHFWXUH ZH¶OO WU\ WR XQGHUVWDQG FRPSHWLWLYH G\QDPLFV LQ PRUH
GHWDLO$V ZH¶OO VHH VXFFHVVIXO ¿UPV DUH DEOH WR SXW WKHPVHOYHV LQ WKH
VKRHV RI WKHLU ULYDOV DQWLFLSDWH KRZ WKRVH FRPSHWLWRUV ZLOO UHDFW DQG
XVH WKDW LQIRUPDWLRQ WR KHOS SORW PRUH HIIHFWLYH VWUDWHJLHV ,Q SDUWLFXODU
ZH¶OOORRNDWWKUHHZHOONQRZQKLVWRULFDOH[DPSOHVRIFRPSHWLWLYHG\QDPLFV
LQ WKH EXVLQHVV ZRUOG WKH VWRU\ RI 1XWUD6ZHHW DQG LWV UHDFWLRQ WR D QHZ
HQWUDQW LQ WKH PDUNHW IRU DUWL¿FLDO VZHHWHQHUV WKH FDVH RI WKH XSVWDUW ,ULVK
DLUOLQH5\DQDLUWKDWFRPSHWHGDJDLQVWWZRGRPLQDQWLQFXPEHQWSOD\HUVDQG
%ORFNEXVWHU¶VUHDFWLRQWR1HWÀL[
Analyzing Competitors
% $QDO\]LQJ FRPSHWLWRUV LV D PXOWLIDFHWHG WDVN WKDW VWDUWV ZLWK
ORRNLQJ DW WKHLU SDVW DQG FXUUHQW VWUDWHJLHV XQGHUVWDQGLQJ ZKDW
WKH\¶UHWU\LQJWRDFFRPSOLVKDQGLGHQWLI\LQJKRZWKH\¶UHWU\LQJWR
SRVLWLRQ WKHPVHOYHV LQ WKH PDUNHWSODFH ,W DOVR LQYROYHV WU\LQJ WR
XQGHUVWDQGWKHLUJRDOV:KDWVSHFL¿F¿QDQFLDOWDUJHWVDQGPDUNHW
VKDUH JRDOV DUH WKH\ WU\LQJ WR DFKLHYH" +RZ DUH WKH\ WU\LQJ WR
DGYDQFHWKHREMHFWLYHVRIWKHLUVKDUHKROGHUVVDWLVI\WKHLUFXVWRPHUV
PRUHHIIHFWLYHO\DQGNHHSWKHLUHPSOR\HHVPRWLYDWHGDQGHQJDJHG"
%
,W¶VDOVRLPSRUWDQWWRXQGHUVWDQG\RXUFRPSHWLWRUV¶FDSDELOLWLHVDQG
ZHDNQHVVHV:KDWLVZRUOGFODVVDERXWWKHLUSURGXFWLRQGLVWULEXWLRQ
DQGUHVHDUFKDQGGHYHORSPHQWDQGZKHUHGRWKH\ODJEHKLQG"
%
3HUKDSV PRVW LPSRUWDQWO\ \RX QHHG WR WU\ WR JHW LQVLGH WKH KHDGV
RI WKH H[HFXWLYHV LQ D ULYDO ¿UP :KDW LQGXVWULHV DUH WKH\ IURP
ZKDW FRPSDQLHV GLG WKH\ ZRUN IRU LQ WKH SDVW DQG KRZ PLJKW
WKRVH H[SHULHQFHV VKDSH WKHLU GHFLVLRQ PDNLQJ" :KHUH KDYH WKH\
VXFFHHGHGLQWKHSDVWDQGZKHUHKDYHWKH\IDLOHG",VWKHUHDFHUWDLQ
IRUPXODWKDWKDVZRUNHGIRUWKHPLQWKHSDVWWKDWWKH\DUHOLNHO\WR
JRWRDJDLQLQKRSHVRIDFKLHYLQJDQRWKHUVXFFHVV"
%
$QWLFLSDWLQJDFRPSHWLWRU¶VDFWLRQVDQGSRWHQWLDOUHVSRQVHVWR\RXU
DFWLRQVPHDQVXQGHUVWDQGLQJIRXUIDFWRUV
ż )LUVW \RX PXVW XQGHUVWDQG WKH HFRQRPLF DQG ¿QDQFLDO
LQFHQWLYHV RI \RXU FRPSHWLWRUV²WKH FRVWV DQG EHQH¿WV RI D
SDUWLFXODUDFWLRQ
ż
6HFRQG \RX PXVW ORRN DW WKH FRPSHWLWRU¶V QRQHFRQRPLF
PRWLYHVVXFKDVPDNLQJLWVHOIDPRUHDWWUDFWLYHZRUNSODFHRU
SHUKDSVIRUVDNLQJSUR¿WVLQWKHVKRUWWHUPWRDFKLHYHDPRUH
GRPLQDQWSRVLWLRQLQWKHPDUNHWSODFH
ż
7KH WKLUG IDFWRU WR XQGHUVWDQG LV WKH ELDVHV WKDW PD\ DIIHFW
\RXUULYDO¶VEHKDYLRU)RUH[DPSOHLV\RXUFRPSHWLWRUIDOOLQJ
LQWRWKHVXQNFRVWWUDSWKDWLVHVFDODWLQJLWVFRPPLWPHQWWRD
FRXUVHRIDFWLRQHYHQLIWKDWDFWLRQLVIDLOLQJ"
ż
)LQDOO\ \RX QHHG WR XQGHUVWDQG WKH EURDGHU FRQWH[W LQ ZKLFK
\RXU ULYDO RSHUDWHV:KDW SROLWLFDO DQG KLVWRULFDO IDFWRUV PD\
DIIHFWWKHULYDO¿UP¶VUHVSRQVHVRUVKDSHLWVDFWLRQV"
Economic Motives
% 7RXQGHUVWDQGDULYDO¶VHFRQRPLFPRWLYHVDVLPSOHDSSOLFDWLRQRI
JDPH WKHRU\ PD\ EH KHOSIXO ,Q JDPH WKHRU\ RQH SOD\HU WULHV WR
SUHGLFW ZKDW DQ RSSRQHQW PLJKW GR LQ YDULRXV FLUFXPVWDQFHV DQG
EDVHVKLVRUKHUVWUDWHJ\RQWKDWSUHGLFWLRQ
%
0DQ\ UHVHDUFKHUV KDYH DSSOLHG JDPH WKHRU\ WR WKH VFHQDULR RI
DQ HQWUHSUHQHXU PRYLQJ LQWR D QHZ PDUNHW DQG FRQIURQWLQJ DQ
LQFXPEHQWSOD\HU+HUHWKHHQWUDQWIDFHVDVLPSOHFKRLFHZKHWKHU
to move into the market or not. The incumbent also faces a choice:
ZKHWKHU WR UHVSRQG DJJUHVVLYHO\ RU WR DFFRPPRGDWH SHUKDSV
HYHQ UHOLQTXLVKLQJ D VPDOO DPRXQW RI PDUNHW VKDUH LQ KRSHV RI
PDLQWDLQLQJLWVFXUUHQWSULFLQJPDUNHWLQJVSHQGDQGVRRQ
%
$SSO\LQJJDPHWKHRU\DQHZSOD\HUFRPLQJLQWRDPDUNHWPLJKW
DQWLFLSDWH WKDW WKH LQFXPEHQW ZRXOG EH UHOXFWDQW WR ¿JKW D SULFH
ZDU ZKLFK ZRXOG PHDQ VDFUL¿FLQJ SUR¿W E\ FXWWLQJ UHYHQXH
Lecture 7: Anticipating Your Rival’s Response
GUDPDWLFDOO\ DQG SHUKDSV VDYLQJ RQO\ D VPDOO DPRXQW RI PDUNHW
VKDUH7KHEHWWHUFRXUVHIRUWKHLQFXPEHQWZRXOGEHWRJLYHXSD
VPDOO SLHFH RI WKH PDUNHW LQ H[FKDQJH IRU PDLQWDLQLQJ LWV FXUUHQW
SULFHV,QWKLVVLWXDWLRQWKHQHZHQWUDQWPLJKWFRQFOXGHWKDWHQWHULQJ
WKHPDUNHWLVDJRRGPRYH,QFRQWUDVWLIWKHHQWUDQWEHOLHYHVWKDW
the incumbent will retaliate aggressively, then entering the market
PLJKWQRWEHDIIRUGDEOH
%
7KHLGHDKHUHLVWRORRNIRUZDUGDQGUHDVRQEDFN*DPHWKHRULVWV
FDOO WKLV W\SH RI WKLQNLQJ EDFNZDUG LQGXFWLRQ. Ask yourself what
\RXUULYDOVZLOOGRLQWKHIXWXUHEDVHGRQ\RXUDFWLRQVQRZ)URP
WKHDQVZHUWRWKDWTXHVWLRQ\RXGHFLGHZKDWWRGRWRGD\
%
*DPH WKHRU\ FDQ EH KHOSIXO IRU WKLQNLQJ DERXW WKH SRWHQWLDO
UHVSRQVHVRIFRPSHWLWRUVWR\RXUFKRLFHVEXWLW¶VOLPLWHGLQVRPH
ZD\V 7KH UHDO ZRUOG LV GLIIHUHQW WKDQ WKH UHDOP RI JDPH WKHRU\
EHFDXVHWKHDFWRUVPD\QRWEHFRPSOHWHO\UDWLRQDO²WKH\PD\QRW
FDUHRQO\DERXWPD[LPL]LQJHFRQRPLFSUR¿WV
1HWÀL[DQG%ORFNEXVWHU
% ,Q 1HWÀL[ HQWHUHG WKH PRYLH UHQWDO PDUNHW FRQIURQWLQJ WKH
LQFXPEHQW %ORFNEXVWHU ,Q UHVSRQVH %ORFNEXVWHU KDG D FKRLFH
ZKHWKHUWR¿JKWWKHQHZSOD\HURUDFFRPPRGDWH
%
5HFDOO WKDW 1HWÀL[ FDPH LQWR WKH PDUNHW ZLWK D GLIIHUHQW SULFLQJ
PRGHO WKDQ %ORFNEXVWHU 1HWÀL[ FKDUJHG D PRQWKO\ VXEVFULSWLRQ
IHH UDWKHU WKDQ SHU PRYLH DQG LW GLGQ¶W FKDUJH ODWH IHHV 7KXV
RQHLPSRUWDQWGHFLVLRQWKDW%ORFNEXVWHUKDGWRPDNHHDUO\RQZDV
ZKHWKHUWRFXWLWVODWHIHHVZKLFKJHQHUDWHGDWOHDVWPLOOLRQ
SHU\HDUIRUWKHFRPSDQ\
ż .HHSLQPLQGWKDWLQLWV¿UVWIHZ\HDUV1HWÀL[KDGRQO\DIHZ
KXQGUHGWKRXVDQGVXEVFULEHUVZKLOH%ORFNEXVWHUKDGPLOOLRQV
of customers.
ż
%
)RU %ORFNEXVWHU FXWWLQJ ODWH IHHV ZRXOG GHVWUR\ WKH HQWLUH
SUR¿WDELOLW\RIWKH¿UPZKLOHVDYLQJRQO\DWLQ\VOLFHRIPDUNHW
VKDUH ,Q WKLV VLWXDWLRQ %ORFNEXVWHU FKRVH WR DFFRPPRGDWH
NHHSLQJ LWV ODWH IHHV DQG SUHVHUYLQJ LWV SUR¿WDELOLW\ ZKLOH
FHGLQJVRPHFXVWRPHUVWR1HWÀL[
,QPDNLQJWKLVGHFLVLRQ%ORFNEXVWHU¶VSURMHFWLRQZDVWKDW1HWÀL[
ZDV D QLFKH SOD\HU WKDW ZRXOG QHYHU EHFRPH PDLQVWUHDP 2I
FRXUVH%ORFNEXVWHUZDVZURQJ7KHFRPSDQ\HYHQWXDOO\KDGWRFXW
ODWHIHHVEXWLWWRRN\HDUVWRUHDFKWKDWGHFLVLRQ
Rynair and British Airways
% ,QWKHVZKHQ5\DQDLUHQWHUHGWKH(XURSHDQDLUOLQHLQGXVWU\
LW SUREDEO\ EHOLHYHG WKDW %ULWLVK$LUZD\V ZRXOG QRW FXW LWV SULFHV
EHFDXVHGRLQJVRZRXOGUHVXOWLQDVLJQL¿FDQWKLWWRWKHLQFXPEHQW¶V
SUR¿WV $W WKH WLPH %ULWLVK $LUZD\V FKDUJHG ,5 IRU WKH
/RQGRQ'XEOLQ WLFNHW ZKLOH 5\DQDLU SODQQHG WR FKDUJH ,5 $
SULFHZDUZRXOGPHDQDVXEVWDQWLDOGURSLQUHYHQXHDQGSUR¿WDELOLW\
for the incumbent.
%
.HHSLQPLQGWRRWKDWWKHVOLFHRIWKHPDUNHW5\DQDLUVRXJKWZDV
WLQ\ ,Q IDFW WKH FRPSDQ\ RULJLQDOO\ KDG RQO\ D IHZ VPDOO SODQHV
DQGSODQQHGWRPDNHMXVWIRXUURXQGWULSVSHUGD\EHWZHHQ/RQGRQ
DQG'XEOLQ
%
%ULWLVK$LUZD\V IDFHG WKH FKRLFH RI GHVWUR\LQJ LWV SUR¿WDELOLW\ E\
FXWWLQJ SULFHV GUDPDWLFDOO\ IRU WKDW URXWH RU JLYLQJ D IHZ VHDWV WR
5\DQDLUDQGPDLQWDLQLQJLWVSULFLQJ%XW%ULWLVK$LUZD\VDOVRKDG
WR WKLQN DERXW WKH HQWUDQW¶V LQWHQWLRQV :LOO 5\QDLU JURZ" :LOO LW
DGG FDSDFLW\ DQG LI VR ZKDW HIIHFW ZLOO WKDW KDYH RQ WKH PDUNHW"
)XUWKHU LI %ULWLVK $LUZD\V DFFRPPRGDWHG 5\DQDLU ZRXOG RWKHU
QHZSOD\HUVWU\WRFRPHLQWRWKHLQGXVWU\"
ż
<RX VKRXOG DOVR FRQVLGHU WKH VLJQDOV \RX VHQG E\ \RXU
UHVSRQVHV WR QHZ HQWUDQWV 3HUKDSV ¿JKWLQJ DJJUHVVLYHO\ ZLOO
GHWHURWKHUHQWUHSUHQHXUVIURPHQWHULQJ\RXUVHJPHQW
ż
)LQDOO\\RXVKRXOGWKLQNDERXWKRZIDVWHQWUDQWVPD\JURZ
,VWKLVXSVWDUWDQLFKHSOD\HURULVLWIRFXVHGRQWDNLQJRYHU
WKHPDUNHW"
‹5\DQ0F9D\3KRWRGLVF7KLQNVWRFN
Lecture 7: Anticipating Your Rival’s Response
/HVVRQVIRU,QFXPEHQWVDQG(QWUDQWV
% ,QFXPEHQWV FDQ OHDUQ D QXPEHU RI LPSRUWDQW OHVVRQV IURP
such situations.
ż )LUVW \RX GRQ¶W ZDQW WR UXLQ WKH ZKROH PDUNHW MXVW WR VDYH D
VPDOOVOLFH%XWLW¶VDOVRWUXHWKDW\RXPD\EHDEOHWRLGHQWLI\
DQG IRFXV RQ WKH FXVWRPHUV ZKR DUH PRVW OLNHO\ WR GHIHFW WR
WKHQHZHQWU\,QWKDWVLWXDWLRQ\RXFRXOGFXWSULFHVRUPDUNHW
aggressively to one segment of customers but maintain higher
SULFHV IRU RWKHUV 6XFK D VWUDWHJ\ ZRXOG DOORZ \RX WR DWWDFN
ZLWKRXWGHVWUR\LQJ\RXURZQSUR¿WDELOLW\
$VPDUWZD\WRDQDO\]HWKHFRPSHWLWLRQLVWRDVN\RXUPDQDJHPHQWWHDPWRUROH
SOD\KRZDFRPSHWLWRUPLJKWUHVSRQGWR\RXU¿UP¶VDFWLRQV
%
3RWHQWLDO HQWUDQWV VKRXOG DOVR WKLQN DERXW D UDQJH RI IDFWRUV WKDW
PLJKWSURPSWLQFXPEHQWVWRPDNHDJJUHVVLYHPRYHV
ż ,VWKLVDVORZJURZWKPDUNHW",IVRWKHLQFXPEHQWPLJKW¿JKW
KDUGWRSUHVHUYHLWVFXVWRPHUV
ż
,V WKLV D FRPPRGLW\ SURGXFW" ,I D SURGXFW LV QRW KLJKO\
GLIIHUHQWLDWHG DQ LQFXPEHQW PLJKW UHVRUW WR SULFH DV LWV RQO\
FRPSHWLWLYHZHDSRQ
ż
'RHVWKHLQFXPEHQWKDYHKLJK¿[HGFRVWVUHODWLYHWRPDUJLQDO
FRVWV" ,I VR LW PLJKW UHVSRQG DJJUHVVLYHO\ VLPSO\ WR NHHS LWV
FDSDFLW\XWLOL]DWLRQKLJKWRFRYHU¿[HGFRVWV
ż
:KDW NLQG RI UHVRXUFHV GRHV WKH LQFXPEHQW KDYH WR ZDJH
DEDWWOH"
ż
+RZ KDV WKH LQFXPEHQW UHDFWHG ZKHQ RWKHU FRPSDQLHV KDYH
HQWHUHGWKHPDUNHW"
ż
&DQ WKH LQFXPEHQW WDUJHW LWV ¿JKW" :LOO LW KDYH WR FXW SULFHV
DFURVVWKHERDUGRUFDQLWORZHUSULFHVRQO\IRUDVHJPHQWRI
FXVWRPHUVZKRDUHPRVWOLNHO\WRGHIHFW"
NutraSweet and Holland Sweetener
% ,QWKHV1XWUD6ZHHWZDVWKHGRPLQDQWSOD\HULQWKHDUWL¿FLDO
VZHHWHQHUPDUNHWEXWWKHFRPSDQ\¶VSDWHQWVZHUHDERXWWRH[SLUH
DQGRWKHUVZHUHORRNLQJWRHQWHUWKHPDUNHW
%
$ SRWHQWLDO QHZ HQWUDQW +ROODQG 6ZHHWHQHU PDGH WKH PLVWDNH RI
QRWXQGHUVWDQGLQJ1XWUD6ZHHW¶VSRZHUIXOFRVWDGYDQWDJH,QRWKHU
ZRUGV WKH DUWL¿FLDO VZHHWHQHU LQGXVWU\ ZDV KLJKO\ LQÀXHQFHG E\
HFRQRPLHVRIVFDOHDQGDVXEVWDQWLDOOHDUQLQJFXUYHDQG1XWUD6ZHHW
KDG WKH DGYDQWDJH LQ WKHVH IDFWRUV )RU +ROODQG 6ZHHWHQHU WKDW
PHDQW WKDW 1XWUD6ZHHW FRXOG ¿JKW DJJUHVVLYHO\ FXWWLQJ LWV SULFHV
VLJQL¿FDQWO\ZKLOHVWLOOPDNLQJPRQH\
%
+ROODQG6ZHHWHQHUDOVRIDLOHGWRDSSO\JDPHWKHRU\WRXQGHUVWDQG
1XWUD6ZHHW¶V UHODWLRQVKLS ZLWK LWV WZR ODUJHVW FXVWRPHUV &RFD
&RODDQG3HSVL
ż +ROODQG ¿JXUHG WKDW &RNH DQG 3HSVL ZRXOGQ¶W ZDQW WR EH
HQWLUHO\ GHSHQGHQW RQ 1XWUD6ZHHW DQG ZRXOG VKLIW VRPH RI
WKHLUYROXPHRYHUWRDQHZHQWUDQWLQWKHPDUNHWHVSHFLDOO\LI
WKH\ZHUHRIIHUHGDQDWWUDFWLYHSULFH
ż
%XW &RNH DQG 3HSVL ZHUH FDXJKW LQ JDPH WKHRU\¶V FODVVLF
SULVRQHU¶V GLOHPPD ,W ZRXOG KDYH EHHQ LQ HDFK FRPSDQ\¶V
LQWHUHVW WR VZLWFK VRPH YROXPH DQG JHW D EHWWHU SULFH IURP
+ROODQG EXW QHLWKHU ZDQWHG WR PRYH ¿UVW (DFK FRPSDQ\
EHOLHYHGWKDWLILWFKDQJHGDQLQJUHGLHQWLWVULYDOZRXOGDUJXH
WRFXVWRPHUVWKDWWKHWDVWHRIWKHSURGXFWKDGFKDQJHG
ż
)RUWKLVUHDVRQ1XWUD6ZHHWZDVDEOHWRUHWDLQLWVFXVWRPHUVDQG
+ROODQGQHYHUPDGHPRQH\LQWKHDUWL¿FLDOVZHHWHQHUPDUNHW
Lecture 7: Anticipating Your Rival’s Response
Suggested Reading
&RXJKODQ)UHLHUDQG.DLKR³&RPSHWLWRU$QDO\VLV´
'L[LWDQG1DOHEXIIThe Art of Strategy.
5LYNLQ³'RJ¿JKWRYHU(XURSH´
Questions to Consider
1. :K\LVJDPHWKHRU\XVHIXOLQFRQGXFWLQJFRPSHWLWRUDQDO\VLV"
2. :K\GRZHKDYHWRJREH\RQGWKLQNLQJDERXWWKHVKRUWWHUPHFRQRPLF
PRWLYHVRIRXUULYDOV"
3. :K\PLJKWLQFXPEHQW¿UPVUHWDOLDWHDJJUHVVLYHO\DJDLQVWDQHZHQWUDQW
HYHQDWDVLJQL¿FDQWVKRUWWHUP¿QDQFLDOFRVW"
Why Did Disney Buy Pixar?
Lecture 8
T
KH :DOW 'LVQH\ &RPSDQ\ FRPSHWHV LQ D QXPEHU RI EXVLQHVVHV
LQFOXGLQJWKHPHSDUNVD¿OPVWXGLRFDEOHWHOHYLVLRQFKDQQHOVKRWHOV
UHWDLOVWRUHVFRQVXPHUSURGXFWVDQGPRUH'LVQH\LVDPXOWL±EXVLQHVV
XQLW FRUSRUDWLRQ DQG HDFK RI LWV EXVLQHVV XQLWV FRPSHWHV LQ D GLIIHUHQW
SURGXFW PDUNHW 7KXV IDU ZH¶YH EHHQ GLVFXVVLQJ VWUDWHJ\ RQ WKH EXVLQHVV
XQLWOHYHO+RZGRHVDFRPSDQ\JDLQDGYDQWDJHRYHULWVULYDOVLQDSDUWLFXODU
SURGXFW PDUNHW" ,Q WKLV OHFWXUH KRZHYHU ZH¶OO WXUQ WR FRUSRUDWH VWUDWHJ\
DVNLQJWKHTXHVWLRQ,QZKDWPDUNHWVGRHVDFRPSDQ\FKRRVHWRFRPSHWH"
:LWKDPXOWL±EXVLQHVVXQLWFRUSRUDWLRQVXFKDVWKH:DOW'LVQH\&RPSDQ\
ZK\KDVWKH¿UPFKRVHQWREXLOGDSDUWLFXODUSRUWIROLRRIEXVLQHVVHV"
Horizontal and Vertical Integration
% :LWK KRUL]RQWDO LQWHJUDWLRQ D FRPSDQ\ FKRRVHV WR FRPSHWH
LQ PXOWLSOH SURGXFW PDUNHWV LQ WKH KRSHV RI DFKLHYLQJ VRPH
LQWHJUDWLRQRUV\QHUJ\DFURVVWKRVHEXVLQHVV+RUL]RQWDOLQWHJUDWLRQ
FDQ EH GLYLGHG LQWR WZR FDWHJRULHV UHODWHG GLYHUVL¿FDWLRQ DQG
XQUHODWHGGLYHUVL¿FDWLRQ
ż 2I FRXUVH UHODWHG GLYHUVL¿FDWLRQ DSSOLHV ZKHQ D FRPSDQ\
DSSHDUV WR EH FRPSHWLQJ LQ UHODWHG SURGXFW PDUNHWV ZKHUH
WKHUH DUH DSSDUHQW V\QHUJLVWLF SRVVLELOLWLHV ([DPSOHV LQFOXGH
'LVQH\DQG3URFWHU *DPEOH
ż
%
8QUHODWHG GLYHUVL¿FDWLRQ refers to a situation in which a
FRPSDQ\DSSHDUVWREHFRPSHWLQJLQPDUNHWVWKDWGRQ¶WKDYH
PXFKWRGRZLWKRQHDQRWKHU([DPSOHVKHUHLQFOXGH*HQHUDO
(OHFWULFDQGWKH9LUJLQ*URXS
:LWKYHUWLFDOLQWHJUDWLRQWKHFRPSDQ\LVQ¶WFRPSHWLQJLQPXOWLSOH
SURGXFW PDUNHWV ,QVWHDG LW IRFXVHV RQ RQH SDUWLFXODU SURGXFW
PDUNHW DQG FRPSHWHV DORQJ PXOWLSOH OLQNV RI WKH VXSSO\ FKDLQ
9HUWLFDO LQWHJUDWLRQ FDQ DOVR EH GLYLGHG LQWR WZR W\SHV IRUZDUG
LQWHJUDWLRQDQGEDFNZDUGLQWHJUDWLRQ
%DFNZDUG LQWHJUDWLRQ UHIHUV WR D FRPSDQ\ WKDW SURGXFHV LWV
RZQFRPSRQHQWVRUUDZPDWHULDOV
ż
Forward integrationUHIHUVWRDFRPSDQ\WKDWRSHUDWHVLWVRZQ
GLVWULEXWLRQRUUHWDLOVWRUHQHWZRUN
,QHYDOXDWLQJFRUSRUDWHVWUDWHJ\ZHDVNWZRIXQGDPHQWDOTXHVWLRQV
DERXWHDFKRIWKHEXVLQHVVHVWKDWDUHSDUWRID¿UP¶VSRUWIROLR ,VHDFKEXVLQHVVEHWWHURIIDVSDUWRIWKHFRUSRUDWLRQWKDQLWZRXOG
EH E\ LWVHOI" 'RHV HDFK EXVLQHVV XQLW ZLWKLQ WKH FRUSRUDWLRQ
RXWSHUIRUPFRPSDUDEOHIRFXVHGFRPSDQLHV²WKRVHWKDWFRPSHWHLQ
RQO\RQHSURGXFWPDUNHW"
5HODWHG'LYHUVL¿FDWLRQ
% 5HODWHG GLYHUVL¿FDWLRQ LV IRFXVHG RQ WKH LGHD RI V\QHUJ\ RU ZKDW
economists call VFRSH HFRQRPLHV 7KH UHODWHG GLYHUVL¿FDWLRQ
VWUDWHJ\ WULHV WR DFKLHYH VFRSH HFRQRPLHV DPRQJ EXVLQHVVHV
FRPSHWLQJ LQ VLPLODU SURGXFW PDUNHWV 3XW DQRWKHU ZD\ ZLWK D
UHODWHG GLYHUVL¿FDWLRQ VWUDWHJ\ WKH ¿UP WULHV WR VKDUH UHVRXUFHV RU
FDSDELOLWLHVDFURVVPXOWLSOHEXVLQHVVHVZKHWKHUWKRVHUHVRXUFHVDUH
GLVWULEXWLRQ FKDQQHOV VDOHV
IRUFHV 5 ' IDFLOLWLHV RU
IDFWRULHV,Q'LVQH\¶VFDVHWKH
FRPSDQ\ VKDUHV LWV FKDUDFWHUV
DFURVV PXOWLSOH EXVLQHVVHV
leveraging them to enhance
the value of its television
VKRZV WKHPH SDUNV DQG
FRQVXPHUSURGXFWV
%
Put another way, economies
RI VFRSH H[LVW ZKHQ HDFK
business unit enjoys either a
VWURQJHU ZLOOLQJQHVV WR SD\
or lower costs because of its
FRRSHUDWLRQ ZLWK VLVWHU XQLWV
7KH UHODWHG GLYHUVL¿FDWLRQ
‹'LJLWDO9LVLRQ7KLQNVWRFN
Lecture 8: Why Did Disney Buy Pixar?
%
ż
Disney believes that its theme
SDUNVDUHVRPHKRZPRUHYDOXDEOH
as part of the Disney family than
WKH\ZRXOGEHDVDQLQGHSHQGHQW
company.
VWUDWHJ\ LV DOO DERXW VWUHQJWKHQLQJ WKH FRPSHWLWLYH DGYDQWDJH RI
HDFKRIWKHEXVLQHVVXQLWVPDNLQJLWEHWWHURIIWKDQLWZRXOGEHRQ
its own.
%
'LVQH\¶VWKHPHSDUNVIRUH[DPSOHVHHPWRHQMR\KLJKHUZLOOLQJQHVV
WR SD\ WKDQ FRPSHWLQJ WKHPH SDUNV ODUJHO\ EHFDXVH 'LVQH\¶V
FKDUDFWHUVDUHLQFRUSRUDWHGLQWRWKHWKHPHSDUNVLQPXOWLSOHZD\V
6SHFLDOL]HGYHUVXV)XQJLEOH5HVRXUFHV
% 'LVQH\LVDSRZHUIXOH[DPSOHRIDFRPSDQ\WKDWKDVOHYHUDJHGDVHW
RIUHVRXUFHVDQGFDSDELOLWLHVLQWRDQXPEHURIGLIIHUHQWEXVLQHVVHV
,Q SDUWLFXODU 'LVQH\¶V FKDUDFWHUV DUH YDOXDEOH UHVRXUFHV EHFDXVH
WKH\ DUH KLJKO\ GXUDEOH DQG GLI¿FXOW WR LPLWDWH +RZ FDQ D ¿UP
OHYHUDJH VXFK YDOXDEOH UHVRXUFHV DFURVV PXOWLSOH EXVLQHVV XQLWV"
7RDQVZHUWKDWTXHVWLRQZHQHHGWRWKLQNDERXWVSHFLDOL]HGYHUVXV
IXQJLEOH JHQHUDO UHVRXUFHV
%
([DPSOHV RI KLJKO\ IXQJLEOH UHVRXUFHV RU FDSDELOLWLHV LQFOXGH
EUDQGPDQDJHPHQWH[SHUWLVHLQQRYDWLRQDQGULVNPDQDJHPHQW²
IDLUO\ JHQHULF FDSDELOLWLHV WKDW FRXOG DSSO\ ZLGHO\ DFURVV
D UDQJH RI EXVLQHVVHV $ KLJKO\ VSHFLDOL]HG FDSDELOLW\ PLJKW EH
DSDWHQWHGSURGXFWIRUPXODRUVSHFL¿FHQJLQHHULQJH[SHUWLVHLQD
QDUURZGLVFLSOLQH
%
$ IXQJLEOH FDSDELOLW\ FDQ EH WUDQVIHUUHG HDVLO\ DFURVV OLQHV RI
EXVLQHVV %XW LI LW¶V WRR JHQHUDO LW ZRQ¶W SURYLGH VXEVWDQWLDO
FRPSHWLWLYH DGYDQWDJH +LJKO\ VSHFLDOL]HG FDSDELOLWLHV FDQ
FRQYH\ SRZHUIXO FRPSHWLWLYH DGYDQWDJH EXW WKH\ PD\ QRW EH DV
ZLGHO\DSSOLFDEOH
%
,Q WKH V ZKHQ 0LFKDHO (LVQHU DUULYHG DW 'LVQH\ WKH
FRPSDQ\¶V FRUH FDSDELOLWLHV UHYROYHG DURXQG DQLPDWHG FKDUDFWHU
GHYHORSPHQWDQGGHSOR\PHQW²KLJKO\VSHFLDOL]HGFDSDELOLWLHVWKDW
FRQVWUDLQHGJURZWKLQVRPHZD\V%XW(LVQHUUHGH¿QHG'LVQH\¶V
FRUH FDSDELOLWLHV PRUH EURDGO\²DV FUHDWLYLW\ PDQDJHPHQW 7KLV
GH¿QLWLRQ HQDEOHG KLP WR MXVWLI\ WKH PRYH LQWR D EURDGHU UDQJH
of businesses.
ż
,QWHUHVWLQJO\ LQ (LVQHU¶V ¿UVW GHFDGH DW 'LVQH\ ZKHQ KH
ZDV IRFXVHG RQ OHYHUDJLQJ WKH FKDUDFWHUV WKH FRPSDQ\ GLG
LQFUHGLEO\ ZHOO %XW DV KH VWUHWFKHG WKH GH¿QLWLRQ RI ZKDW
'LVQH\ ZDV JRRG DW²PRYLQJ IDUWKHU DZD\ IURP LWV FRUH
EXVLQHVV LQWR VSRUWV WHDPV ¿OPV IRU DGXOWV DQG VR RQ²
SHUIRUPDQFHVWDUWHGWRVXIIHU
ż
%RE ,JHU WKH FKLHI H[HFXWLYH ZKR WRRN RYHU IURP (LVQHU
DSSHDUVWRKDYHUHWXUQHGWRWKHIRUPXODRIOHYHUDJLQJFKDUDFWHUV
DQGKDVKDGJUHDWVXFFHVV¿QDQFLDOO\
Transaction Costs
% Just looking at synergy alone is not enough in thinking about
ZKHWKHU PXOWLSOH EXVLQHVVHV VKRXOG EH XQGHU RQH URRI ,W¶V DOVR
LPSRUWDQW WR DVN ZKHWKHU WKH EXVLQHVVHV VKRXOG EH PHUJHG RU FDQ
DFWDVSDUWQHUV
Lecture 8: Why Did Disney Buy Pixar?
%
7KHUH LV VRPH FRVW WR EULQJLQJ WZR FRPSDQLHV WRJHWKHU XQGHU
RQH URRI²FRVWV UHODWHG WR DGGLWLRQDO EXUHDXFUDF\ FRVWV RI JRLQJ
WKURXJKDPHUJHUDQGVRRQ,QVRPHFDVHVLWPD\EHZLVHUWRNHHS
WKHFRPSDQLHVLQGHSHQGHQWEXWFRRSHUDWHDQGDFKLHYHHFRQRPLHVRI
VFRSH&RQVLGHUWKLVLVVXHLVWHUPVRI'LVQH\¶VKRWHODQGFRQVXPHU
SURGXFWVEXVLQHVVHV
ż 'LVQH\RZQVPDQ\KRWHOVQHDULWVWKHPHSDUNVEXWLWRXWVRXUFHV
SURGXFWLRQRILWVFRQVXPHUSURGXFWVVXFKDVWR\VDQGJDPHV
&RQVXPHUSURGXFWVDUHV\QHUJLVWLFZLWKWKHUHVWRIWKH'LVQH\
IDPLO\EXWWKHFRPSDQ\KDVFKRVHQQRWWRPDQXIDFWXUHWKRVH
SURGXFWV LQ KRXVH :KDW¶V WKH GLIIHUHQFH EHWZHHQ WKH KRWHO
EXVLQHVVDQGFRQVXPHUSURGXFWV"
ż
2QH PDMRU GLIIHUHQFH LV WKDW WKH KRWHO EXVLQHVV RIIHUV PRUH
RI DQ LQGH¿QDEOH H[SHULHQFH WKDW¶V FUHDWHG E\ 'LVQH\ ZKLOH
FRQVXPHUSURGXFWVOHQGWKHPVHOYHVWRDFOHDUGHVLJQWKDWFDQ
EHFRPPXQLFDWHGWRDQRXWVLGHPDQXIDFWXUHU
%
%
7KLV LVVXH UHODWHV WR D TXHVWLRQ DVNHG E\ 1RYHO 3UL]H ZLQQHU
5RQDOG &RDVH LQ D SDSHU FDOOHG ³7KH 1DWXUH RI WKH )LUP´ :K\
GR ¿UPV H[LVW" ,I PDUNHWV DUH VXFK D JUHDW ZD\ WR FRRUGLQDWH
HFRQRPLF DFWLYLW\ ZK\ LV QRW DOO DFWLYLW\ FRQGXFWHG WKURXJK WKH
PDUNHWSODFH ZLWK VPDOO ¿UPV UXQ E\ HQWUHSUHQHXUV" :K\ GR ZH
QHHGODUJHRUJDQL]DWLRQV"
ż &RDVH UH¿QHG WKH TXHVWLRQV DV IROORZV 6KRXOG HFRQRPLF
DFWLYLW\ EH FRRUGLQDWHG E\ WKH PDUNHW PHFKDQLVP RU E\
LQWUD¿UP RUJDQL]DWLRQDO VWUXFWXUHV DQG SURFHVVHV" ,Q RWKHU
ZRUGV VKRXOG \RX FRQWUDFW ZLWK DQ RXWVLGH VXSSOLHU WR PDNH
FRPSRQHQWVRUVKRXOG\RXEXLOGDQGUXQ\RXURZQIDFWRU\"
ż
&RDVH¶VDQVZHUZDVWKDWLW¶VQHFHVVDU\WRORRNDWWKHWUDQVDFWLRQ
FRVWV DVVRFLDWHG ZLWK RUJDQL]LQJ FHUWDLQ HFRQRPLF DFWLYLWLHV
)RU D FRPSDQ\ GHFLGLQJ ZKHWKHU WR FRQWUDFW ZLWK DQ RXWVLGH
PDQXIDFWXUHU RU KDQGOH LWV RZQ PDQXIDFWXULQJ WKH TXHVWLRQ
EHFRPHV8QGHUZKLFKDUUDQJHPHQWZLOOWKHWUDQVDFWLRQFRVWV
EHORZHU"
ż
)RU 'LVQH\ LW ZRXOG EH GLI¿FXOW WR WUDLQ SHUVRQQHO IURP DQ
RXWVLGHKRWHOFKDLQWRFUHDWHWKHJXHVWH[SHULHQFHWKDW'LVQH\
VHHNV WKXV WKH ¿UP RZQV LWV RZQ KRWHOV DQG PRQLWRUV WKH
LQWHUDFWLRQ EHWZHHQ HPSOR\HHV DQG JXHVWV FORVHO\ %XW
FRQVXPHUSURGXFWVFDQEHPRQLWRUHGIURPDIDUZKLFKPHDQV
WKDW WKH FRPSDQ\ FDQ RXWVRXUFH PDQXIDFWXULQJ WR JHW WKH
EHVWSULFH
7KUHH IDFWRUV GULYH WUDQVDFWLRQ FRVWV XQFHUWDLQW\ IUHTXHQF\ DQG
DVVHWVSHFL¿FLW\
ż 0DUNHWFRRUGLQDWLRQEHFRPHVYHU\GLI¿FXOWDQGFRVWO\ZKHQWKH
SRWHQWLDO DULVHV IRU RSSRUWXQLVWLF EHKDYLRU DQG VXFK SRWHQWLDO
H[LVWV ZKHQ HFRQRPLF DFWRUV LQYHVW KHDYLO\ LQ WUDQVDFWLRQ
VSHFL¿FDVVHWV²LQRWKHUZRUGVZKHQIDFWRUVRISURGXFWLRQDUH
KLJKO\VSHFL¿FWRWKHRWKHUSDUW\
Lecture 8: Why Did Disney Buy Pixar?
ż
,PDJLQHDQRLOUH¿QHU\WKDWKDVRQO\RQHZD\WRSXPSLWVRLO
WR FXVWRPHUV²IURP D SLSHOLQH DWWDFKHG WR WKH UH¿QHU\ 7KH
SLSHOLQHKDVRQO\RQHXVH²WRSXPSWKHRLOIURPWKDWSDUWLFXODU
UH¿QHU\ &RXOG WKH UH¿QHU\ DQG WKH SLSHOLQH EH LQGHSHQGHQW
FRPSDQLHVDQGFRQWUDFWZLWKHDFKRWKHU"7KHDQVZHULVQR
ż
(DFKDVVHWLVFRPSOHWHO\VSHFL¿FWRLWVSDUWQHUDVVHWWKHUHIRUH
WKH WZR DUH WRWDOO\ GHSHQGHQW RQ HDFK RWKHU 3UREOHPV FRXOG
DULVHLIRQHSDUWQHUUHQHJHGRQWKHFRQWUDFWRUWULHGWRJHWDEHWWHU
SULFHIURPWKHRWKHU7KHLUFRGHSHQGHQFHPDNHVLWGLI¿FXOWIRU
WKHP WR RSHUDWH SHDFHIXOO\ WKURXJK WKH PDUNHWSODFH IRU WKLV
UHDVRQWKHWZRVKRXOGRSHUDWHDVRQH¿UP
%
2IFRXUVHWKHFKRLFHLVQHYHUVLPSO\WRRZQRUWRFRQWUDFWZLWKDQ
RXWVLGH VXSSOLHU7KHUH LV D VSHFWUXP RI FKRLFHV LQ EHWZHHQ WKRVH
WZR RSWLRQV VXFK DV D MRLQW YHQWXUH VWUDWHJLF DOOLDQFH IUDQFKLVH
RUOLFHQVLQJDUUDQJHPHQWDQGVRRQ7ZRFRPSDQLHVWKDWKDYHWKH
DELOLW\WRFRRSHUDWHDQGDFKLHYHV\QHUJ\PD\GRVRDVLQGHSHQGHQW
FRPSDQLHVWKURXJKVRPHNLQGRIDOOLDQFHRUWKURXJKDPHUJHU
%
7R FORVH WKLV OHFWXUH OHW¶V WKLQN DERXW DVVHW VSHFL¿FLW\ DQG
FRGHSHQGHQFHLQWKHFRQWH[WRI'LVQH\DQGLWVDFTXLVLWLRQRI3L[DU
ż :KHQ3L[DUZDVPDNLQJLWV¿UVWIHDWXUH¿OPToy StoryWKH¿UP
DSSURDFKHG'LVQH\WRDFWDVGLVWULEXWRUIRUWKHPRYLH'LVQH\
DJUHHGXQGHU WKH FRQGLWLRQWKDW LW ZRXOG UHWDLQWKH FKDUDFWHUV
WKDW3L[DUGHYHORSHGDQGEHDEOHWRXVHWKHPLQVHTXHOVLQWKH
WKHPH SDUNV DQG VR RQ HYHQ LI 3L[DU HYHQWXDOO\ ZHQW RQ WR
ZRUNZLWKDQRWKHUVWXGLR
ż
$ GHFDGH ODWHU 3L[DU KDG DFKLHYHG UHPDUNDEOH VXFFHVV EXW
'LVQH\ $QLPDWLRQ ZDV VWUXJJOLQJ 3L[DU WKUHDWHQHG WR JR
WR DQRWKHU VWXGLR EXW XOWLPDWHO\ GLGQ¶W EHFDXVH RI WKH HDUOLHU
DJUHHPHQWWKDW'LVQH\ZRXOGUHWDLQWKHFKDUDFWHUV
ż
,Q WKH HQG 'LVQH\ DFTXLUHG 3L[DU EHFDXVH WKH WZR ¿UPV KDG
EHFRPH FRGHSHQGHQW 7KH\ FRXOGQ¶W ZRUN WRJHWKHU WKURXJK
WKH PDUNHW WR DFKLHYH V\QHUJ\ WKH\ KDG WR FRPH WRJHWKHU
LQ D PHUJHU 7RGD\ WKH 3L[DU FKDUDFWHUV DUH OHYHUDJHG LQ WKH
VDPH ZD\ WKDW RWKHU 'LVQH\ FKDUDFWHUV DUH DFURVV D UDQJH RI
EXVLQHVVHV 3L[DU ZDV PRUH YDOXDEOH DV SDUW RI WKH 'LVQH\
IDPLO\ EHFDXVH 'LVQH\ FRXOG IXOO\ H[SORLW WKH YDOXH RI WKRVH
FKDUDFWHUVLQDZD\WKDWIHZRWKHU¿UPVFRXOGGR
Suggested Reading
&RDVH³7KH1DWXUHRIWKH)LUP´
&ROOLVDQG0RQWJRPHU\Corporate Strategy.
:LOOLDPVRQ0DUNHWVDQG+LHUDUFKLHV.
Questions to Consider
1. :K\ GR ¿UPV GLYHUVLI\ SXWWLQJ PXOWLSOH EXVLQHVV XQLWV XQGHU RQH
FRUSRUDWHSDUHQW"
2. :KDWDOWHUQDWLYHVH[LVWWRKRUL]RQWDODQGYHUWLFDOLQWHJUDWLRQ"
3. :K\ PXVW ZH FRQVLGHU WUDQVDFWLRQ FRVWV ZKHQ GHWHUPLQLQJ WKH
DSSURSULDWHFRUSRUDWHVWUDWHJ\"
7KH'LYHUVL¿FDWLRQ'LVFRXQW
Lecture 9
C
RQVLGHUWZRKLVWRULFDOFRUSRUDWLRQVWKDWXVHGWREHYHU\VXFFHVVIXO
)RUWXQH%UDQGVDQG6DUD/HH)RUWXQH%UDQGVZDVDODUJHGLYHUVL¿HG
¿UP WKDW FRPSHWHG LQ WKUHH VHJPHQWV JROI OLTXRU DQG KRPH
KDUGZDUH,QDGGLWLRQWRSURGXFLQJEDNHGJRRGV6DUD/HHRZQHGDFKDLQRI
VXSHUPDUNHWVWKH&RDFKKDQGEDJFRPSDQ\-LPP\'HDQPHDWVDQGRWKHU
EXVLQHVVHV$VZHVDZLQWKHODVWOHFWXUH'LVQH\LVDUHODWHGGLYHUVL¿HG¿UP
VHHNLQJ WR SXUVXH V\QHUJLHV DFURVV SURGXFW PDUNHWV ,Q FRQWUDVW )RUWXQH
%UDQGVDQG6DUD/HHDUHWZRFODVVLFH[DPSOHVRIXQUHODWHGGLYHUVL¿FDWLRQ
,QWKLVOHFWXUHZH¶OOORRNDWZK\WKHVH¿UPVDVVHPEOHGWKHSRUWIROLRVWKH\
GLGDQGZK\WKH\ODWHUVROGRIIWKHVHGLYLVLRQVDQGEHFDPHPXFKQDUURZHU
in focus.
/HFWXUH7KH'LYHUVL¿FDWLRQ'LVFRXQW
$QDO\]LQJ'LYHUVL¿HG)LUPV
% :KHQORRNLQJDWDGLYHUVL¿HG¿UPDQDO\VWVDQGLQYHVWRUVFRPSDUH
its market value to its breakup value²WKDWLVWKHDPRXQWHDFKRI
WKH¿UP¶VGLYLVLRQVZRXOGEHZRUWKLQGHSHQGHQWO\$QDO\VWVWU\WR
OHDUQZKHWKHUWKHVXPRIWKRVHDPRXQWVZRXOGEHPRUHRUOHVVWKDQ
WKHYDOXHRIWKHZKROHFRPSDQ\
%
A GLYHUVL¿FDWLRQGLVFRXQW results when the whole is worth less than
WKHSURSRVHGVXPRIWKHSDUWV8QIRUWXQDWHO\IRUPDQ\GLYHUVL¿HG
¿UPV SDUWLFXODUO\ XQUHODWHG GLYHUVL¿HUV LQ WKH 8QLWHG 6WDWHV LW¶V
RIWHQWKHFDVHWKDWWKHZKROHLVZRUWKOHVVWKDQSDUWVZKLFKLVZK\
ZH¶YHVHHQPDQ\FRUSRUDWHEUHDNXSVLQWKHODVWIHZ\HDUV
%
5HVHDUFK IURP DFDGHPLFV KDV DOVR GHPRQVWUDWHG WKDW ¿UPV WKDW
IRFXVRQRQHSURGXFWPDUNHWWHQGWRGRZHOOLQWKH8QLWHG6WDWHV
6WXGLHVKDYHVKRZQWKDWLQFUHDVHVLQIRFXVWHQGWREHIROORZHGE\
VWRFN SULFH LQFUHDVHV DQG GHFUHDVHV LQ IRFXV DUH RIWHQ IROORZHG
E\ VWRFN SULFH GHFUHDVHV )XUWKHU ERWK VSLQRIIV DQG WKHLU RULJLQDO
SDUHQWFRPSDQLHVWHQGWRRXWSHUIRUPWKHRYHUDOOVWRFNPDUNHWDIWHU
WKHVHSDUDWLRQRIWKHWZR
%
$OO WKLV ¿QDQFLDO HYLGHQFH KDV SURYHQ WR EH D SRZHUIXO UDWLRQDOH
IRUFRPSDQLHVWRVOLPGRZQDQGIRUIHZHUFRPSDQLHVWRSXUVXHD
VWUDWHJ\ RI XQUHODWHG GLYHUVL¿FDWLRQ +RZHYHU LW¶V DOVR LPSRUWDQW
WR ORRN DW HDFK FRPSDQ\ LQGLYLGXDOO\ WR XQGHUVWDQG LWV VWUDWHJ\
,QVRPHFDVHVDFRPSDQ\¶VPDQDJHPHQWPD\DUJXHWKDWWKH¿UP
LV SXUVXLQJ D UHODWHG GLYHUVL¿FDWLRQ VWUDWHJ\ ZKLOH LQYHVWRUV DQG
DQDO\VWVPD\WKLQNWKDWLWVEXVLQHVVXQLWVDUHXQUHODWHG
5LVNVRI8QUHODWHG'LYHUVL¿FDWLRQ
% 7KHUHDUHIRXULQYDOLGUHDVRQVIRUGLYHUVL¿FDWLRQ
ż 7KH ¿UVW RI WKHVH LV WR GLYHUVLI\ ULVN 0DQDJHPHQW PD\ SODQ
WR KDYH VRPH EXVLQHVVHV LQ D ¿UP¶V SRUWIROLR WKDW WHQG WR GR
ZHOOLQDVWURQJHFRQRP\DQGRWKHUVWKDWDUHFRXQWHUF\FOLFDO
:KHQ RQH RI WKHVH EXVLQHVVHV LV GRLQJ ZHOO WKH LGHD LV WKDW
LW ZRXOG RIIVHW RWKHUV WKDW DUH H[SHULHQFLQJ GLI¿FXOWLHV %XW
GLYHUVLI\LQJULVNLVDQLQYDOLGUHDVRQIRUDFRPSDQ\WRSXUVXHD
GLYHUVL¿FDWLRQVWUDWHJ\
%
ż
$ VHFRQG LQYDOLG UHDVRQ IRU GLYHUVL¿FDWLRQ LV NQRZQ DV
FURVVVXEVLGL]DWLRQ²WKDW LV KDYLQJ D SRUWIROLR RI VHHPLQJO\
XQUHODWHG EXVLQHVVHV DW GLIIHUHQW VWDJHV RI WKH EXVLQHVV OLIH
F\FOH%XVLQHVVHVXVLQJWKLVVWUDWHJ\DUHWDNLQJWKHFDVKWKDW¶V
EHLQJJHQHUDWHGE\SUR¿WDEOHEXWPDWXUHEXVLQHVVHVDQGXVLQJ
LWWRIXQGJURZWKLQQHZHUKLJKJURZWKLQGXVWULHV
ż
%XVLQHVVHV DOVR VRPHWLPHV SXUVXH XQUHODWHG GLYHUVL¿FDWLRQ
ZKHQWKH\DUHORRNLQJIRUUHYHQXHDQGSUR¿WJURZWKEHFDXVHRI
SUREOHPVLQWKHFRUHEXVLQHVV
ż
)LQDOO\VRPHFRPSDQLHVORRNWRXQUHODWHGGLYHUVL¿FDWLRQLQDQ
HIIRUWWRPDQLSXODWHWKHVWRFNPDUNHWV7KH\WU\WRHQKDQFHWKH
YDOXDWLRQRIDEXVLQHVVWKDWLVSHUKDSVPDWXUHDQGQRWJURZLQJ
E\DFTXLULQJDQHZHUKLJKHUJURZWKEXVLQHVV
$V LQGLYLGXDOV ZH NQRZ LW PDNHV JRRG VHQVH WR GLYHUVLI\ RXU
LQYHVWPHQW SRUWIROLRV EXW LQGLYLGXDOV FDQ GLYHUVLI\ PXFK PRUH
HIIHFWLYHO\ DQG LQH[SHQVLYHO\ WKDQ FRPSDQLHV FDQ 7KH H[WHUQDO
FDSLWDOPDUNHWGRHVDPXFKEHWWHUMRERIPRYLQJUHVRXUFHVDURXQG
DQGYDOXLQJRSSRUWXQLWLHVWKDQWKHLQWHUQDOPDUNHW,QDVHQVHZH
FDQ VD\²DQG UHVHDUFK FRQ¿UPV²WKDW D PDQDJHU DW WKH WRS RI D
FRUSRUDWLRQLVQRWDVVPDUWDVWKHFURZG²WKHHQWLUHH[WHUQDOPDUNHW
/HFWXUH7KH'LYHUVL¿FDWLRQ'LVFRXQW
%
60
&URVVVXEVLGL]DWLRQ²WDNLQJ PRQH\ IURP PDWXUH EXVLQHVVHV DQG
IXQGLQJ QHZ RSSRUWXQLWLHV²FDPH IURP D FRQFHSW LQWURGXFHG E\
WKH%RVWRQ&RQVXOWLQJ*URXSPDQ\\HDUVDJRWKHVRFDOOHG%&*
0DWUL[7KHEDVLFPDWUL[LVVKRZQEHORZ
Low Market Share
High Market Share
Slow Growth
Dog
Cash Cow
Fast Growth
Question Mark
Star
ż
%&* DUJXHG WKDW DQ XQUHODWHG FRUSRUDWLRQ FRXOG HIIHFWLYHO\
classify its business units by looking at two basic measures:
:KDWNLQGRIPDUNHWVKDUHGRHVWKHSDUWLFXODUEXVLQHVVKDYH
KLJKRUORZ"$QGKRZIDVWLVWKHSDUWLFXODULQGXVWU\JURZLQJ"
ż
,QWKHPDWUL[DXQLWWKDWLVLQDVORZPRYLQJLQGXVWU\DQGKDV
ORZ PDUNHW VKDUH LV D GRJ$ XQLW LQ D VORZPRYLQJ LQGXVWU\
ZLWKKLJKPDUNHWVKDUHLVDFDVKFRZLWJHQHUDWHVDJUHDWGHDO
RI FDVK DQG GRHVQ¶W KDYH PDQ\ RSSRUWXQLWLHV WR UHLQYHVW WKH
PRQH\LQWKHEXVLQHVV$XQLWZLWKDORZVKDUHLQDKLJKJURZWK
LQGXVWU\LVDTXHVWLRQPDUNLWPD\RUPD\QRWWXUQRXWWREH
SUR¿WDEOH )LQDOO\ D XQLW ZLWK D KLJK VKDUH LQ D KLJKJURZWK
LQGXVWU\LVDVWDU
ż
7KHLGHDRIWKHPDWUL[ZDVWRGLYHVWWKHGRJVDQGPLONWKHFDVK
FRZV7DNH WKH H[FHVV FDVK IURP VORZPRYLQJ LQGXVWULHV DQG
LQYHVWLQWKHTXHVWLRQPDUNVHYHQLIWKH\ZHUHXQUHODWHGWRWKH
mainstream business.
ż
$JDLQ WKLV VWUDWHJ\ SUHVXPHV WKDW PDQDJHUV LQVLGH WKH ¿UP
FDQ DOORFDWH UHVRXUFHV EHWWHU WKDQ WKH H[WHUQDO PDUNHW²WKDW
WKH\ NQRZ ZKHUH WKH EHVW QHZ RSSRUWXQLW\ LV DQG WKH\ FDQ
EHDW WKH PDUNHW EXW WKLV LV YHU\ GLI¿FXOW WR GR 7KH ZLVHU
FRXUVH LV RIWHQ WR JLYH WKH H[FHVV FDVK EDFN WR WKH LQYHVWRUV
DQGDOORZWKHPWR¿QGWKHQH[WRSSRUWXQLW\/HWWKHTXHVWLRQ
PDUNV JHW WKHLU IXQGLQJ IURP YHQWXUH FDSLWDOLVWV DQJHO
LQYHVWRUVRUSULYDWHHTXLW\¿UPVUDWKHUWKDQODUJHFRPSOH[
DQGPDWXUHFRUSRUDWLRQV
Governance Economies
% $FRPSDQ\LVSXUVXLQJXQUHODWHGGLYHUVL¿FDWLRQZKHQLWLVRSHUDWLQJ
YDULRXV EXVLQHVVHV LQGHSHQGHQWO\ ,QVWHDG RI WU\LQJ WR DGG YDOXH WR
HDFK RI LWV EXVLQHVVHV WKURXJK WKH UHDOL]DWLRQ RI V\QHUJLHV²DV ZH
VDZ ZLWK UHODWHG GLYHUVL¿FDWLRQ²WKH LGHD KHUH LV WR DGG YDOXH E\
using a common management system across all the businesses. The
SUHPLVHLVWKDWE\KDYLQJDVLQJOHFRPSDQ\FRQWUROOLQJRSHUDWLRQVDQG
E\WUDQVIHUULQJNQRZOHGJHDQGEHVWSUDFWLFHVDPRQJWKHEXVLQHVVHV
DOO WKH EXVLQHVVHV DUH PDQDJHG EHWWHU WRJHWKHU WKDQ WKH\ FRXOG EH
PDQDJHGRQWKHLURZQ²DQGWKH\DFKLHYHJRYHUQDQFHHFRQRPLHV
%
,QWKLVVWUDWHJ\LW¶VSXUHO\PDQDJHPHQWVNLOOWKDWLVEHLQJOHYHUDJHG
DFURVV EXVLQHVVHV QRW WDQJLEOH UHVRXUFHV DQG FDSDELOLWLHV VXFK DV
FRPPRQ GLVWULEXWLRQ FKDQQHOV FRPPRQ SURGXFWLRQ IDFLOLWLHV DQG
so on.
%
7KH FODVVLF H[DPSOH RI D ¿UP WKDW KDV SXUVXHG JRYHUQDQFH
HFRQRPLHVLV*HQHUDO(OHFWULF7KURXJKRXWWKHthFHQWXU\*(ZDV
DKLJKSHUIRUPLQJVWRFN,WZDVDOVRFOHDUO\DQXQUHODWHGGLYHUVL¿HU
RSHUDWLQJDWHOHYLVLRQEURDGFDVWLQJQHWZRUNDMHWHQJLQHEXVLQHVV
DQDSSOLDQFHEXVLQHVVDOLJKWLQJEXVLQHVVDQGRWKHUV+RZHYHU*(
KDGDPDQDJHPHQWV\VWHPWKDWVSUHDGDFURVVWKHEXVLQHVVHV
%
$FKLHYLQJJRYHUQDQFHHFRQRPLHVLVHDVLHUWRSXOORIIZKHQWKHUH¶VD
FOHDUGRPLQDQWORJLFRUFRPPRQWKHPHDFURVVPDQ\EXVLQHVVHV)RU
PDQ\\HDUV(PHUVRQ(OHFWULFZDVDVXFFHVVIXOXQUHODWHGGLYHUVL¿HU
but each of its businesses was in manufacturing, each was in a fairly
PDWXUHVHFWRUHDFKSXUVXHGDORZFRVWVWUDWHJ\DQGHDFKLQYROYHG
DIDLUO\PDWXUHWHFKQRORJ\7KXVWKHUHZHUHFRPPRQWKUHDGVHYHQ
WKRXJKWKHSURGXFWPDUNHWVZHUHVHHPLQJO\XQUHODWHG
61
%
7RGD\ VRPH KDYH EHJXQ WR TXHVWLRQ ZKHWKHU *( LV VWLOO DV
SRZHUIXODVLWRQFHZDVLQLWVH[HUFLVHDQGH[HFXWLRQRIJRYHUQDQFH
HFRQRPLHV 7KH VSUHDG RI NQRZOHGJH LV HDV\ DQG FRVWOHVV LQ
WRGD\¶VHFRQRP\ZKLFKPHDQVWKDWRWKHUFRPSDQLHVKDYHDGRSWHG
*(¶V EHVW SUDFWLFHV DQG WKH FRPSDQ\ PD\ QR ORQJHU DFKLHYH WKH
JRYHUQDQFHHFRQRPLHVLWRQFHGLG
/HFWXUH7KH'LYHUVL¿FDWLRQ'LVFRXQW
8QUHODWHG'LYHUVL¿FDWLRQDURXQGWKH:RUOG
% 5HVHDUFK E\ 3URIHVVRU 7DUXQ .KDQQD KDV VKRZQ WKDW DOWKRXJK
XQUHODWHG GLYHUVL¿FDWLRQ PD\ QR ORQJHU PDNH VHQVH LQ GHYHORSHG
HFRQRPLHVVXFKDVWKH8QLWHG.LQJGRPRUWKH8QLWHG6WDWHVWKH
SLFWXUHPD\EHGLIIHUHQWLQHPHUJLQJPDUNHWVVXFKDV,QGLD
%
7RH[SODLQWKLVGLIIHUHQFH.KDQQDSRLQWHGWRWKHLGHDRIinstitutional
voids +H DUJXHG WKDW D FDSLWDOLVW HFRQRPLF V\VWHP UHTXLUHV WKH
HIIHFWLYH IXQFWLRQLQJ RI FHUWDLQ LQVWLWXWLRQV WKDW HQDEOH SDUWLHV WR
HQWHUYROXQWDULO\LQWRPXWXDOO\EHQH¿FLDOWUDQVDFWLRQV,QVWLWXWLRQDO
YRLGVRFFXUZKHQVSHFLDOL]HGLQWHUPHGLDULHVDUHDEVHQW
%
Intermediaries are economic entities that insert themselves between
DSRWHQWLDOEX\HUDQGDVHOOHULQDQDWWHPSWWREULQJWKHPWRJHWKHU
DQGKHOSWKHPHQJDJHLQDPXWXDOO\EHQH¿FLDOWUDQVDFWLRQ
ż &RQVLGHUIRULQVWDQFHD¿UPSXUVXLQJDGLIIHUHQWLDWLRQVWUDWHJ\
LQDQHIIRUWWRDFKLHYHKLJKZLOOLQJQHVVWRSD\
ż
%
62
&HUWDLQLQWHUPHGLDULHVVXFKDVConsumer Reports, may enable
SRWHQWLDOEX\HUVWRFRQ¿UPWKHTXDOLW\RIWKH¿UP¶VSURGXFWV
2WKHU LQWHUPHGLDULHV VXFK DV D PDUNHW UHVHDUFK ¿UP PD\
KHOS WKH FRPSDQ\ DVVHVV FRQVXPHU WDVWHV $QG VWLOO RWKHU
LQWHUPHGLDULHV VXFK DV JRYHUQPHQW UHJXODWRU\ DJHQFLHV PD\
FHUWLI\KLJKTXDOLW\
7KHUH DUH PDQ\ LQWHUPHGLDULHV WKDW KHOS PDNH WUDQVDFWLRQV ZRUN
LQ GHYHORSHG HFRQRPLHV VXFK DV WKDW LQ WKH 8QLWHG 6WDWHV ,Q WKH
FDSLWDOPDUNHWVWKHUHDUHDXGLWRUVZKRYHULI\¿QDQFLDOVWDWHPHQWV
,Q WKH ODERU PDUNHWV WKHUH DUH KHDGKXQWLQJ ¿UPV FHUWL¿FDWLRQ
DJHQFLHV DQG EXVLQHVV VFKRROV WKDW KHOS PDWFK FDQGLGDWHV ZLWK
MRERSSRUWXQLWLHV$QGWKURXJKDOOWKHPDUNHWVWKHUHLVDMXGLFLDU\
V\VWHPWKDWRSHUDWHVWRHQIRUFHWKHUXOHRIODZDQGSURSHUW\ULJKWV
%
%XWWKHVHLQWHUPHGLDULHVPD\QRWH[LVWWRWKHVDPHH[WHQWLQHPHUJLQJ
PDUNHWV $QG D ODUJH FRUSRUDWLRQ²DQ XQUHODWHG GLYHUVL¿HU²PD\
VWHSLQWRWKDWLQVWLWXWLRQDOYRLGWRSURYLGHWKDWYDOXH
%
.KDQQD KDV VKRZQ WKDW WKH GLYHUVL¿FDWLRQ GLVFRXQW ZH VHH LQ WKH
8QLWHG6WDWHVGRHVQRWH[LVWLQIRUH[DPSOH,QGLD)DPLO\EXVLQHVV
JURXSVWKDWDUHLQXQUHODWHGEXVLQHVVHVDUHXELTXLWRXVLQ,QGLDZKLOH
ZH QR ORQJHU VHH PDQ\ XQUHODWHG GLYHUVL¿HUV LQ WKH 8QLWHG 6WDWHV
$QG WKH SHUFHQWDJH RI FRQJORPHUDWHV WUDGLQJ DW GLVFRXQW LV EHORZ
LQ,QGLDZKLOHLW¶VPXFKKLJKHUWKDQLQWKH8QLWHG6WDWHV
%
7KH+RXVHRI7DWDRU7DWD*URXSLQ,QGLDFRPSULVHVPRUHWKDQ
FRPSDQLHVLQVHYHQEXVLQHVVVHFWRUVDQGLWVHUYHVDVDVSHFLDOL]HG
LQWHUPHGLDU\LQDQXPEHURIZD\V
ż )RU H[DPSOH LQ DQ HFRQRP\ ZKHUH WKHUH DUHQ¶W FOHDU ZD\V
WR FHUWLI\ WKH TXDOLW\ RI JRRGV DQG VHUYLFHV 7DWD SXWWLQJ LWV
QDPHRQDSURGXFWJLYHVWKH,QGLDQSHRSOHFRQ¿GHQFHWKDWWKH
SURGXFWLVRIKLJKTXDOLW\
%
ż
)RU FRPSDQLHV WKDW DUH SDUW RI WKH 7DWD IDPLO\ WDOHQW IRU D
QHZEXVLQHVVFDQEHUHDOORFDWHGIURPDQHVWDEOLVKHGEXVLQHVV
&DSLWDO FDQ DOVR EH PRYHG IURP D VXFFHVVIXO EXVLQHVV LQWR
HPHUJLQJRSSRUWXQLWLHV
ż
%\ VHUYLQJ DV DQ LQWHUPHGLDU\ LQ WKHVH ZD\V 7DWD PDNHV XS
IRULQHI¿FLHQFLHVLQWKHPDUNHWWKHUHIRUHLWDGGVYDOXHWRWKH
EXVLQHVVHVLQLWVSRUWIROLRLQDZD\WKDWDQXQUHODWHGGLYHUVL¿HU
FRXOGQRWLQWKH8QLWHG6WDWHV
,QWKH8QLWHG6WDWHVWRGD\PDQ\RIWKHXQUHODWHGGLYHUVL¿HUVWKDW
ZHUH VXFFHVVIXO WKUHH RU IRXU GHFDGHV DJR KDYH EHHQ EURNHQ XS
7KH UHDVRQ IRU WKLV LV WKDW SURGXFW ODERU DQG FDSLWDO PDUNHWV LQ
WKH8QLWHG6WDWHVKDYHEHFRPHPXFKPRUHHI¿FLHQW,QWKHV
the U.S. economy bore a closer resemblance to an emerging
PDUNHW ZLWK LQVWLWXWLRQDO YRLGV DQG WKH RSSRUWXQLW\ IRU XQUHODWHG
GLYHUVL¿HUV WR ¿OO WKHP 7RGD\ ZLWK IDU IHZHU LQVWLWXWLRQDO YRLGV
ZHVHHIDUIHZHUXQUHODWHGGLYHUVL¿HUV
Suggested Reading
+LWW+RVNLVVRQDQG,UHODQGCompeting for Advantage.
.KDQQDDQG3DOHSXWinning in Emerging Markets.
Stewart, The Quest for Value.
Questions to Consider
1. :KDWDUHVRPHÀDZHGUHDVRQVIRUHQJDJLQJLQXQUHODWHGGLYHUVL¿FDWLRQ"
2. :K\ PLJKW XQUHODWHG GLYHUVL¿FDWLRQ PDNH VHQVH LQ FHUWDLQ HPHUJLQJ
PDUNHWV"
3. :KDWDUHWKHOLPLWDWLRQVDQGGH¿FLHQFLHVRIWKH%&*PRGHORISRUWIROLR
/HFWXUH7KH'LYHUVL¿FDWLRQ'LVFRXQW
PDQDJHPHQW"
)RUZDUGDQG%DFNZDUG,QWHJUDWLRQ
Lecture 10
C
RQVLGHU D ¿UP WKDW SURGXFHV WUDFWRUV VQRZ EORZHUV DQG RWKHU
ODZQ DQG JDUGHQ HTXLSPHQW 7UDGLWLRQDOO\ WKLV FRPSDQ\ KDV
GLVWULEXWHG DQG VROG LWV HTXLSPHQW WKURXJK ELJER[ VWRUHV EXW
QRZ PDQDJHPHQW LV SRQGHULQJ D VKLIW LQ VWUDWHJ\ 6KRXOG WKH FRPSDQ\
RSHQ LWV RZQ FKDLQ RI UHWDLO VWRUHV WR H[FOXVLYHO\ VHOO LWV RZQ SURGXFWV"
7KH UDWLRQDOH EHKLQG WKLV VKLIW LV WKDW RSHQLQJ VWRUHV ZLOO DOORZ WKH
FRPSDQ\WRFDSWXUHWKHSUR¿WPDUJLQFXUUHQWO\EHLQJJHQHUDWHGE\RXWVLGH
UHWDLOHUV %XW WKH ¿UP FDQ¶W FDSWXUH WKH PDUJLQ ZLWKRXW VSHQGLQJ D JUHDW
GHDORIPRQH\WRH[HFXWHWKHQHZVWUDWHJ\$VZH¶OOVHHLQWKLVOHFWXUHD
FRPSDQ\ PXVW FRQVLGHU ZKHWKHU IRUZDUG RU EDFNZDUG LQWHJUDWLRQ PDNHV
economic sense.
Types of Vertical Integration
% 9HUWLFDO LQWHJUDWLRQ FRPHV LQ WZR IRUPV EDFNZDUG LQWHJUDWLRQ
ZKLFK PHDQV WKDW D ¿UP SURGXFHV LWV RZQ UDZ PDWHULDOV RU
FRPSRQHQWV DQG IRUZDUG LQWHJUDWLRQ ZKLFK PHDQV WKDW D ¿UP
GLVWULEXWHVLWVRZQSURGXFWV
%
$SSOHDQGLWVVWRUHQHWZRUNUHSUHVHQWDFODVVLFH[DPSOHRIIRUZDUG
LQWHJUDWLRQ2WKHUFRPSDQLHVWKDWXVHWKLVVWUDWHJ\LQFOXGH'XFDWL
DQ,WDOLDQPRWRUF\FOHFRPSDQ\'LVQH\DQG)UHVHQLXVDFRPSDQ\
WKDWPDNHVGLDO\VLVHTXLSPHQW
%
$SSOHDOVRHQJDJHVLQEDFNZDUGLQWHJUDWLRQE\GHVLJQLQJEXLOGLQJ
DQG VHOOLQJ LWV RZQ RSHUDWLQJ V\VWHP :H\HUKDHXVHU LV DQRWKHU
FRPSDQ\SXUVXLQJDVWUDWHJ\RIEDFNZDUGLQWHJUDWLRQWKHFRPSDQ\
PDQXIDFWXUHVSDSHUSURGXFWVDQGRZQVLWVRZQIRUHVWV
/HFWXUH)RUZDUGDQG%DFNZDUG,QWHJUDWLRQ
Disney’s Integration Decision
% 7KH VWRU\ RI 'LVQH\¶V UHWDLO VWRUHV LOOXVWUDWHV D VLWXDWLRQ LQ ZKLFK
D VWUDWHJ\ RI YHUWLFDO LQWHJUDWLRQ PD\ KDYH PDGH VHQVH DW RQH
WLPH EXW SHUKDSV EHFDPH PRUH TXHVWLRQDEOH DV GLIIHUHQW SOD\HUV
HPHUJHGLQWKHWR\UHWDLOLQJEXVLQHVV
66
%
'XULQJ WKH V 'LVQH\ ODXQFKHG UHWDLO VWRUHV WKDW LQLWLDOO\
SURVSHUHG EXW DURXQG WKH EHJLQQLQJ RI WKH st century, the chain
EHJDQWRVWUXJJOH¿QDQFLDOO\8OWLPDWHO\'LVQH\VWUXFNDGHDOZLWK
&KLOGUHQ¶V 3ODFH D FKLOGUHQ¶V DSSDUHO UHWDLOHU WR WDNH RYHU WKH
RSHUDWLRQRI'LVQH\VWRUHV$IWHUVHYHUDO\HDUVKRZHYHU&KLOGUHQ¶V
3ODFH FKRVH WR WHUPLQDWH WKH DJUHHPHQW DQG WXUQ WKH VWRUHV EDFN
RYHUWR'LVQH\
%
'LVQH\QRZIDFHGDQLPSRUWDQWFKRLFH6KRXOGLWWU\WRRSHUDWHDQG
PDQDJH WKH VWRUHV RU VKXW WKHP GRZQ" 7LPHV KDG FKDQJHG VLQFH
'LVQH\EHJDQLWVIRUZDUGLQWHJUDWLRQVWUDWHJ\3HRSOHQRZERXJKW
WR\VRQWKH,QWHUQHWRUIURPODUJHUHWDLOHUVUDWKHUWKDQLQGHSHQGHQW
WR\VWRUHV'LVQH\GHFLGHGWRNHHSWKHVWRUHVSXWWLQJ-LP)LHOGLQJ
LQFKDUJHRIWKHHIIRUW+HODXQFKHGDUHGHVLJQRIWKHVWRUHVZLWK
WKH JRDO RI PDNLQJ WKHP PRUH RI DQ H[SHULHQFH WKDW PLJKW UDLVH
ZLOOLQJQHVVWRSD\
%
'LVQH\¶V PRGHO KHUH ZDV WKH $PHULFDQ *LUO VWRUHV ZKLFK DUH
GHHSO\H[SHULHQWLDO*LUOVJRWRWKHVWRUHVQRWRQO\WREX\GROOVEXW
DOVR WR JHW GROOV ¿[HG LQ WKH ³KRVSLWDO´ LI WKH\¶UH EURNHQ WR KDYH
OXQFKZLWKWKHLU GROOVWRJHWWKHLUGROOV¶ KDLUGRQHDQGVR RQ2I
FRXUVH VXFK DQ H[SHULHQFH UHTXLUHV D JUHDW GHDO RI LQYHVWPHQW$
¿UPPXVWFRQVLGHUZKHWKHULWFDQJHQHUDWHHQRXJKQHZUHYHQXHWR
MXVWLI\WKHH[SHQVH
%
,Q'LVQH\¶VFDVHWKHFRPSDQ\DOVRKDGWRZDOND¿QHOLQHEHWZHHQ
FUHDWLQJ WRR PXFK RI DQ H[SHULHQFH ZKLFK PLJKW VWHHU FXVWRPHUV
DZD\IURPLWVWKHPHSDUNVDQGWRROLWWOHRIDQH[SHULHQFHZKLFK
PLJKWGULYHFXVWRPHUVEDFNWRUHWDLOHUVZKHUHWKH\FRXOGEX\WR\V
OHVVH[SHQVLYHO\
%
2QHKDSS\PHGLXPWKDWVRPHFRPSDQLHVKDYHFKRVHQLQWHUPVRI
YHUWLFDOLQWHJUDWLRQLVWRRSHUDWHÀDJVKLSVWRUHV:LWKWKLVDSSURDFK
DFRPSDQ\PLJKWRSHQRQO\DIHZVWRUHVLQVHOHFWHGORFDWLRQV7KH
VWRUHV KHOS EXLOG WKH EUDQG DQG UDLVH ZLOOLQJQHVV WR SD\ IRU WKH
SURGXFWVEXWWKHFRPSDQ\GRHVQRWUHWDLOLWVSURGXFWVH[FOXVLYHO\LQ
WKRVHVWRUHVRUVHHNWRRSHUDWHDVWRUHLQHYHU\PDOOLQWKHFRXQWU\
Rationale for Vertical Integration
% 2QHUHDVRQIRUSXUVXLQJDVWUDWHJ\RIYHUWLFDOLQWHJUDWLRQLVWRFRXQWHU
KROGXS5HFDOOWKHRLOUH¿QHU\DQGWKHSLSHOLQH7KH\PLJKWYHUWLFDOO\
LQWHJUDWHEHFDXVHHDFKLVVRGHSHQGHQWRQWKHRWKHUWKDWWKH\FDQ¶W
KROG WR D FRQWUDFWXDO DJUHHPHQW LQ DQ HIIHFWLYH PDQQHU (DFK LV
FRQFHUQHGDERXWWKHRSSRUWXQLVWLFEHKDYLRURIWKHRWKHUSDUW\
%
$QRWKHU UHDVRQ WR SXUVXH YHUWLFDO LQWHJUDWLRQ LV WKDW WKHUH¶V VRPH
V\QHUJ\ EHWZHHQ EXVLQHVVHV DW GLIIHUHQW SRLQWV LQ WKH VXSSO\
FKDLQ²SHUKDSVHFRQRPLHVRIVFDOHRUVFRSH
%
,QDGGLWLRQDFRPSDQ\PLJKWEDFNZDUGLQWHJUDWHWRVHFXUHDFFHVV
WRDFUXFLDOLQSXW2UDFRPSDQ\PLJKWSXUVXHYHUWLFDOLQWHJUDWLRQ
WRIRUHFORVHDFFHVVRQWKHSDUWRIFRPSHWLWRUV²WRVWRSWKHPIURP
KDYLQJHDV\DFFHVVWRDVFDUFHLQSXW
%
$ ¿UP PD\ DOVR EDFNZDUG RU IRUZDUG LQWHJUDWH WR RIIVHW WKH
EDUJDLQLQJ SRZHU RI VXSSOLHUV RU EX\HUV RU WR HOHYDWH EDUULHUV WR
HQWU\7KHPRUHYHUWLFDOO\LQWHJUDWHGD¿UPLVWKHPRUHH[SHQVLYHLW
LVIRUHQWUHSUHQHXUVWRUHSOLFDWHWKDWVWUDWHJ\
%
<HW DQRWKHU UHDVRQ IRU SXUVXLQJ YHUWLFDO LQWHJUDWLRQ LV WR HQKDQFH
WKHDELOLW\WRGLIIHUHQWLDWHSURGXFWVLQWKHPDUNHW
%
)LQDOO\ YHUWLFDO LQWHJUDWLRQ DOORZV ¿UPV WR DFTXLUH LPSRUWDQW
information that they might otherwise not have access to, such as
FXVWRPHUIHHGEDFN
67
/HFWXUH)RUZDUGDQG%DFNZDUG,QWHJUDWLRQ
Costs of Vertical Integration
% 2QH RI WKH PDMRU FRVWV VXUURXQGLQJ YHUWLFDO LQWHJUDWLRQ LV GXOOHG
LQFHQWLYHV :LWK D EXLOWLQ FXVWRPHU D YHUWLFDOO\ LQWHJUDWHG
PDQXIDFWXUHUPD\QRWKDYHDVJUHDWDQLQFHQWLYHWRSHUIRUPZHOODV
DQLQGHSHQGHQWHQWUHSUHQHXU
%
,Q DGGLWLRQ FRQÀLFWV RI LQWHUHVW PD\ DULVH $ FRPSDQ\ WKDW KDV
IRUZDUGLQWHJUDWHGPD\WKHQFRPSHWHZLWKLWVRZQFXVWRPHUV7KLV
LV WKH FDVH WR VRPH GHJUHH ZLWK$SSOH 7KH ¿UP FRPSHWHV ZLWK
%HVW%X\\HW%HVW%X\LVDQLPSRUWDQW$SSOHFXVWRPHU
%
9HUWLFDOLQWHJUDWLRQUHGXFHVD¿UP¶VÀH[LELOLW\WRFKDQJHVXSSOLHUV
7KHUH DUH DOVR KLJKHU ¿[HG FRVWV DQG PDQDJHPHQW FRVWV IRU
YHUWLFDOO\ LQWHJUDWHG EXVLQHVVHV ([LW EDUULHUV ULVH VLJQL¿FDQWO\ IRU
YHUWLFDOO\LQWHJUDWHGEXVLQHVVHV)LQDOO\DYHUWLFDOO\LQWHJUDWHG¿UP
PD\ H[SHULHQFH LQWHUQDO FRQÀLFWV HVSHFLDOO\ DURXQG WKH LVVXH RI
SULFHVFKDUJHGE\RQHFRPSRQHQWRIWKHEXVLQHVVWRDQRWKHU
Partial Integration
% $V DQ DOWHUQDWLYH WR IXOO YHUWLFDO LQWHJUDWLRQ VRPH ¿UPV KDYH
chosen tapered or partial integration,QWKLVVLWXDWLRQD¿UPPLJKW
XVH ERWK RXWVLGH UHWDLOHUV DQG LWV RZQ VWRUHV RU LW PLJKW XVH ERWK
RXWVLGHVXSSOLHUVDQGLWVRZQIDFWRULHV
68
%
2QH EHQH¿W RI WKLV DSSURDFK LV WKDW LW H[SRVHV LQKRXVH XQLWV
WR RXWVLGH FRPSHWLWLRQ LQFUHDVLQJ LQFHQWLYHV WR PD[LPL]H
SHUIRUPDQFH 3DUWLDO LQWHJUDWLRQ DOVR JLYHV D ¿UP PRUH ÀH[LELOLW\
DQG HQKDQFHV OHDUQLQJ EHFDXVH NQRZOHGJH FDQ EH WUDQVIHUUHG
TXLFNO\IURPRXWVLGHSDUWLHVWRLQWHUQDOXQLWVDQGYLFHYHUVD
%
6WUDWHJLF RXWVRXUFLQJ PLJKW EH FRQVLGHUHG RQH IRUP RI SDUWLDO
LQWHJUDWLRQ ,Q PDQ\ FDVHV RXWVRXUFLQJ DUUDQJHPHQWV DOORZ ¿UPV
WRGHYHORSGHHSUHODWLRQVKLSVFXOWLYDWLQJORQJWHUPSDUWQHUVEXWQRW
SXUVXLQJIXOOYHUWLFDOLQWHJUDWLRQ
Declining Trends in Integration
% ,Q UHFHQW \HDUV WKHUH KDV EHHQ D GUDPDWLF GHFOLQH LQ YHUWLFDO
LQWHJUDWLRQSDUWLFXODUO\LQGHYHORSHGQDWLRQVLQVXFKLQGXVWULHVDV
FRPSXWHUV DQG DXWRPRELOHV 7KH UHDVRQV IRU WKLV GHFOLQH FDQ EH
WUDFHGE\WRWKHWUDQVDFWLRQFRVWWKHRU\RI&RDVHDQG:LOOLDPVRQ
%
7KH WUDQVDFWLRQ FRVWV DVVRFLDWHG ZLWK XVLQJ WKH PDUNHW KDYH
GHFUHDVHGVLJQL¿FDQWO\,QRWKHUZRUGVD¿UPFDQRXWVRXUFHPXFK
PRUHHDVLO\WRGD\WKDQLWFRXOG\HDUVDJR7KHZHEDQGHDVLHU
WUDYHODQGFRPPXQLFDWLRQDURXQGWKHZRUOGKDYHHQDEOHG¿UPVWR
SDUWQHUZLWKRWKHUVZKRPD\EHTXLWHGLVWDQW
Case Study: Zara
% $6SDQLVKUHWDLOHUQDPHG=DUDKDVEHHQZLOGO\VXFFHVVIXOLQUHFHQW
\HDUV ZKLOH SXUVXLQJ DQ LQWHUHVWLQJ YHUWLFDO LQWHJUDWLRQ VWUDWHJ\
=DUD SURGXFHV D VLJQL¿FDQW SRUWLRQ RI LWV FORWKLQJ LQ IDFWRULHV
LW RZQV LQ 1RUWK $IULFD DQG :HVWHUQ (XURSH 7KLV DSSURDFK LV
GLIIHUHQW WKDQ =DUD¶V FRPSHWLWRUV VXFK DV + 0 DQG *DS ZKLFK
GRQ¶WSURGXFHDQ\RIWKHLURZQSURGXFWV7KHVHUHWDLOHUVRXWVRXUFH
DOOPDQXIDFWXULQJWRORZFRVWSOD\HUVLQ$VLDRU/DWLQ$PHULFD
%
=DUD KDV SXUVXHG D VWUDWHJ\ RI IROORZLQJ WKH JUHDW OX[XU\ DSSDUHO
FRPSDQLHV $IWHU QHZ IDVKLRQV IURP WKHVH FRPSDQLHV KLW WKH
UXQZD\V =DUD SURGXFHV LWV RZQ VLPLODU GHVLJQV TXLFNO\ DQG LQ
small batches for its stores.
%
,QWHUHVWLQJO\ =DUD KDV XVHG D SDUWLDO LQWHJUDWLRQ VWUDWHJ\ ,W
RXWVRXUFHVIDVKLRQEDVLFVVXFKDVWVKLUWVWRORZFRVWPDQXIDFWXUHUV
LQ$VLDZKLOHSURGXFLQJRWKHUIDVKLRQVWKDWLWZDQWVWREHDEOHWR
FKDQJHTXLFNO\LQKRXVH
%
=DUD UHDOL]HV D QXPEHU RI EHQH¿WV IURP WKLV YHUWLFDO LQWHJUDWLRQ
VWUDWHJ\ ,W GRHVQ¶W HQG XS ZLWK H[FHVV LQYHQWRU\ LI LW PDNHV D
ZURQJEHWRQDSDUWLFXODUIDVKLRQWUHQG7KHFRPSDQ\LVDOVRDEOHWR
FKDQJHLWVSURGXFWPL[TXLFNO\,WGRHVQ¶WKDYHWRFRPPLWWREX\LQJ
ODUJHTXDQWLWLHVRIFORWKLQJDQGDVDUHVXOWKDVIHZHUPDUNGRZQV
69
‹N]HQRQL6WRFN7KLQNVWRFN
/HFWXUH)RUZDUGDQG%DFNZDUG,QWHJUDWLRQ
&DSWXULQJWKHPDUJLQLVQRWDYDOLGUHDVRQWRSXUVXHLQWHJUDWLRQD¿UPPXVWEH
DEOHWRDGGYDOXHE\RZQLQJGLIIHUHQWSDUWVRIWKHVXSSO\FKDLQ
70
%
2I FRXUVH =DUD¶V ODERU FRVWV DUH PXFK KLJKHU WKDQ WKRVH RI LWV
ULYDOVEXWWKH¿UP¶VDELOLW\WRKDYHIHZHUDQGVPDOOHUPDUNGRZQV
RIIVHWV WKH ODERU FRVW GLVDGYDQWDJH 7KHUH DUH DOVR WUHPHQGRXV
¿[HG FRVWV DVVRFLDWHG ZLWK EXLOGLQJ DQG RSHUDWLQJ IDFWRULHV DV
ZHOO DV VLJQL¿FDQW H[LW EDUULHUV $W WLPHV =DUD KDV KDG WR WDNH
RQ GHEW LQ RUGHU WR IXQG WKH EXLOGLQJ RI LWV IDFWRULHV )LQDOO\
WKH FRPSDQ\ KDV KDG WR DFFHSW ORZHU DVVHW WXUQRYHU ,W GRHV QRW
JHQHUDWHWKHVDPHXVHRIDVVHWVDQGHI¿FLHQF\DVDFRPSDQ\WKDW
RXWVRXUFHVFRPSOHWHO\
%
=DUD KDV QRW SXUVXHG WKH VDPH VWUDWHJ\ HYHU\ZKHUH DURXQG WKH
JOREH7KHFRPSDQ\RZQVLWVRZQVWRUHVLQ:HVWHUQ(XURSHEXW
LQ VRPH FRXQWULHV LW KDV VHW XS MRLQW YHQWXUHV RU IUDQFKLVHV WR
RSHUDWHVWRUHV
%
,Q ZULWLQJ DERXW =DUD WKH MRXUQDOLVW -DPHV 6XURZLHFNL DUWLFXODWHV
PDQ\ RI WKH SKLORVRSKLHV RI VWUDWHJ\ ZH¶YH GLVFXVVHG WKURXJKRXW
WKHVH OHFWXUHV RQ VWUDWHJ\ ,Q SDUWLFXODU KH QRWHV WKDW LPLWDWLRQ RI
=DUDZRXOGEHGLI¿FXOWEHFDXVHLW¶VDQLQWHJUDWHGV\VWHPQRWMXVWD
FROOHFWLRQRISDUWV
Suggested Reading
*KHPDZDWDQG1XHQR³=DUD´
Harrigan, 9HUWLFDO,QWHJUDWLRQ2XWVRXUFLQJDQG&RUSRUDWH6WUDWHJ\.
Questions to Consider
1. :KDWLVDQH[DPSOHRIÀDZHGORJLFXVHGWRMXVWLI\YHUWLFDOLQWHJUDWLRQ"
2. +RZ GR VRPH ¿UPV DFKLHYH VWURQJHU FRPSHWLWLYH DGYDQWDJH WKURXJK
YHUWLFDOLQWHJUDWLRQ"
3. :KDWDUHVRPHRIWKHSURVDQGFRQVRISXUVXLQJDYHUWLFDOLQWHJUDWLRQ
VWUDWHJ\"
71
Mergers and Acquisitions—The Winner’s Curse
Lecture 11
M
Lecture 11: Mergers and Acquisitions—The Winner’s Curse
HUJHUV DQG DFTXLVLWLRQV DUH SDUW RI GDLO\ OLIH LQ WKH EXVLQHVV
ZRUOG ,W VHHPV WKDW DOPRVW HYHU\ GD\ ZH KHDU RI D ODUJH
FRPSDQ\ DFTXLULQJ D VPDOO RQH ZLWK DQ H[FLWLQJ QHZ SURGXFW
RU WZR JLDQW ¿UPV FRPELQLQJ LQ D PHUJHU RI HTXDOV 8QIRUWXQDWHO\ WKHUH
DUHPDQ\LQVWDQFHVZKHQWKHVHGHDOVGRQRWZRUNRXWLQVRPHLQVWDQFHV
WKH\ HYHQ SURGXFH GLVDVWURXV UHVXOWV ,Q WKLV OHFWXUH ZH¶OO ORRN DW WKH
VWUDWHJLF ORJLF EHKLQG PHUJHUV DQG DFTXLVLWLRQV WKH VLWXDWLRQV LQ ZKLFK
WKH\PDNHVHQVHDQGWKHVLWXDWLRQVLQZKLFKWKH\PLJKWDFWXDOO\GHFUHDVH
VKDUHKROGHUYDOXH
Overview of Mergers and Acquisitions (M&A)
% $PHUJHUWDNHVSODFHZKHQWZR¿UPVFRPHWRJHWKHUWRIRUPDQHZ
FRPELQHG HQWLW\ $Q DFTXLVLWLRQ WDNHV SODFH ZKHQ RQH FRPSDQ\
SXUFKDVHV DQRWKHU DQG WDNHV FKDUJH ,Q VRPH FDVHV WZR ODUJH
FRPSDQLHVFRPHWRJHWKHULQZKDWWKH\WHUPDPHUJHURIHTXDOVEXW
LQ UHDOLW\ WKHUH LV QR VXFK WKLQJ DV D PHUJHU RI HTXDOV ,Q DOPRVW
HYHU\ FDVH RQH PDQDJHPHQW WHDP WDNHV FKDUJH DQG DVVHUWV LWV
DXWKRULW\RYHUWKHPDQDJHUVLQWKHRWKHUFRPSDQ\
72
%
7KHUH LV DOVR DQ LPSRUWDQW GLVWLQFWLRQ EHWZHHQ IULHQGO\ DQG
XQIULHQGO\ GHDOV 2I FRXUVH D IULHQGO\ GHDO WDNHV SODFH ZKHQ
RQH FRPSDQ\ DFTXLUHV DQRWKHU DQG WKH VHOOLQJ SDUW\ LV DFFHSWLQJ
RI WKH GHDO ,Q D KRVWLOH WDNHRYHU KRZHYHU WKH WDUJHW ¿UP LV QRW
FRRSHUDWLYH LQ WKH DFTXLVLWLRQ 7KH DFTXLULQJ ¿UP JRHV GLUHFWO\
WR WKH VKDUHKROGHUV DQG WULHV WR FRQYLQFH WKHP WR VHOO HYHQ LI
PDQDJHPHQWDQGWKHERDUGRIGLUHFWRUVDUHDJDLQVWWKHVDOH
%
7RXQGHUVWDQGKRZWKHVHGHDOVZRUNVXSSRVHWKDWWKHVWRFNSULFH
RI D WDUJHW ¿UP LV ; SHU VKDUH 7KH DFTXLULQJ ¿UP WHQGV WR SD\
DVLJQL¿FDQWSUHPLXPRYHU;SHUVKDUHVRPHWLPHVWR
PRUHWKDQWKHVKDUHVDUHFXUUHQWO\WUDGLQJDWLQWKHPDUNHW
ż
*LYHQ WKDW SUHPLXP WKH DFTXLULQJ ¿UP PXVW EHOLHYH WKDW
VRPHKRZWKHWDUJHW¿UPZLOOEHPRUHYDOXDEOHDVSDUWRIWKH
FRUSRUDWLRQWKDQLWZDVDVDQLQGHSHQGHQWHQWLW\
ż
,QRWKHUZRUGVWKHDFTXLULQJ¿UPPXVWEHOLHYHWKDWHFRQRPLHV
RIVFRSHH[LVWDQGLWKDVYDOXHGWKRVHV\QHUJLHVDWWKHPD[LPXP
SUHPLXPWKDWLWLVZLOOLQJWRSD\IRUWKHWDUJHWFRPSDQ\
%
$FTXLVLWLRQVUHVXOWLQKLJKUHWXUQVIRUWKHWDUJHW¿UP¶VVKDUHKROGHUV
EXW LQ PDQ\ FDVHV WKH VKDUH SULFH RI WKH DFTXLULQJ ¿UP GHFOLQHV
VOLJKWO\ 7KLV GHFOLQH UHSUHVHQWV VNHSWLFLVP DPRQJ LQYHVWRUV WKDW
WKH¿UPFDQUHDOL]HWKHV\QHUJLHV.HHSLQPLQGWKDWDQDFTXLULQJ
¿UP PXVW UHDOL]H V\QHUJLHV LQ H[FHVV RI WKH SUHPLXP SDLG WR JHW
FRQWURORIWKHWDUJHW¿UPDQGWKDWLVDGLI¿FXOWFKDOOHQJH
%
0DQ\GHDOVGRQ¶WOHDGWRORQJUXQLQFUHDVHVLQVKDUHKROGHUYDOXH
7KHV\QHUJLHVWKDWDUHSURGXFHGGRQRWH[FHHGWKHSUHPLXPWKDWWKH
DFTXLULQJ¿UPKDGWRSD\3DUWRIWKHUHDVRQIRUWKLVLVWKDWWKHWDUJHW
¿UPLVDOVRHVWLPDWLQJWKHV\QHUJLHV7KHWDUJHWWULHVWRXQGHUVWDQG
WKH DGGHG YDOXH WKDW ZLOO EH FUHDWHG LI LW EHFRPHV SDUW RI D QHZ
HQWLW\ DQG LW WULHV WR FDSWXUH PRVW RI WKH YDOXH RI WKRVH V\QHUJLHV
LQWKHSULFHLWUHFHLYHVIRUVHOOLQJWKHFRPSDQ\,QPDQ\FDVHVWKH
UHVXOWLVWKDWWKHDFTXLULQJ¿UPHQGVXSRYHUSD\LQJ
Valuing Target Firms
% $Q DFTXLULQJ ¿UP FDQ XVH D GLVFRXQWHG FDVK ÀRZ WHFKQLTXH WR
YDOXHDSRWHQWLDOWDUJHW²HVWLPDWLQJWKHWDUJHW¶VFDVKÀRZVPRYLQJ
IRUZDUGWKHQGLVFRXQWLQJWKRVHEDFNWRWRGD\¶VGROODUV$VSDUWRI
WKDW SURFHVV WKH DFTXLULQJ ¿UP LV QRW RQO\ HVWLPDWLQJ WKH WDUJHW¶V
FXUUHQW ¿QDQFLDOV EXW DOVR WU\LQJ WR SURMHFW WKH V\QHUJLHV LQWR WKH
FDVKÀRZVJRLQJIRUZDUG
%
7KHUH DUH DOVR RWKHU PHWKRGRORJLHV IRU YDOXLQJ D SRWHQWLDO WDUJHW
EXW WKH FKDOOHQJH ZLWK DQ\ RI WKHVH WHFKQLTXHV LV WKDW WKH\ RIWHQ
LQFOXGH PDQ\ DVVXPSWLRQV WKDW FDQ YDU\ ZLGHO\ GHSHQGLQJ RQ
ZKRFRQGXFWWKHDQDO\VLV7KHFRQFOXVLRQVRIDQDQDO\VLVDUHDOVR
KLJKO\VHQVLWLYHWRMXVWDIHZFRUHDVVXPSWLRQVVXFKDVWKRVHDERXW
H[SHFWHGUHYHQXHJURZWKRSHUDWLQJPDUJLQVDQGWKHFKDOOHQJHVRI
UHDOL]LQJFHUWDLQV\QHUJLHV
$QRWKHU SUREOHP ZLWK WKHVH DQDO\VHV LV WKDW QRW HQRXJK DWWHQWLRQ
LV SDLG WR WKH FRVWV LQYROYHG LQ DFKLHYLQJ WKH H[SHFWHG V\QHUJLHV
3RO\FRPDFRPSDQ\WKDWFRPSHWHVLQWKHWHOHFRPPXQLFDWLRQVDQG
YLGHRFRQIHUHQFLQJ EXVLQHVV WULHV WR HVWLPDWH DQWLV\QHUJLHV LQ LWV
SRWHQWLDO DFTXLVLWLRQV²VRPHWKLQJ PRVW ¿UPV GRQ¶W GR 3RO\FRP
ORRNVDWWKHORVVHVLWPLJKWLQFXUDVLWWULHVWREULQJWZR¿UPVWRJHWKHU
The Winner’s Curse
% 5LFKDUG 7KDOHU DW WKH 8QLYHUVLW\ RI &KLFDJR KDV WULHG WR H[SODLQ
ZK\ ELGGHUV VRPHWLPHV SD\ WRR PXFK ZLWK DQ LGHD KH FDOOV WKH
ZLQQHU¶VFXUVH
ż $WDQDXFWLRQELGGHUVKDYHVRPHYDOXHLQPLQGIRUDQREMHFW
EXWWKH\GRQ¶WNQRZWKHYDOXHWKDWRWKHUVKDYHSODFHGRQWKDW
REMHFW7KH DVVXPSWLRQ DW DQ DXFWLRQ LV WKDW WKH UHDO YDOXH RI
WKHREMHFWLVFORVHVWWRWKHDYHUDJHELG
‹)XVH7KLQNVWRFN
Lecture 11: Mergers and Acquisitions—The Winner’s Curse
%
7KHZLQQHU¶VFXUVHLVWKHLGHDWKDWDQ\ZLQQLQJELGGHU²DWDQDXFWLRQRULQWKH
acquisition of a business—inevitably pays more than the underlying real value
of the asset up for sale.
ż
%
2I FRXUVH WKH KLJKHVW ELGGHU ZLQV WKH DXFWLRQ EXW LI WKH
XQGHUO\LQJUHDOYDOXHRIWKHREMHFWLVHTXDOWRWKHDYHUDJHELG
WKHZLQQHUKDVRYHUSDLG7KDW¶VWKHZLQQHU¶VFXUVH
,Q WKH EXVLQHVV ZRUOG WKH ZLQQHU DFTXLUHV D FRPSDQ\ EXW LW KDV
SDLG PRUH WKDQ WKH DFWXDO YDOXH IRU WKH FRPSDQ\ 7KH ZLQQHU¶V
FXUVH LV 7KDOHU¶V H[SODQDWLRQ IRU WKH IDFW WKDW PDQ\ GHDOV GRQ¶W
JHQHUDWHSRVLWLYHUHWXUQVIRUVKDUHKROGHUV
Cost versus Revenue Synergies
% ([HFXWLYHV FRQVLGHULQJ DQ DFTXLVLWLRQ W\SLFDOO\ IRFXV PRUH
RQ FRVW V\QHUJLHV WKDQ UHYHQXH V\QHUJLHV ,Q RWKHU ZRUGV WKH\
ORRN DW WKH ZD\V LQ ZKLFK H[SHQVHV ZLOO EH UHGXFHG LQVWHDG RI
WKLQNLQJDERXWRSSRUWXQLWLHVWRJHQHUDWHQHZVDOHVLIWZR¿UPVDUH
brought together.
%
2I FRXUVH LW¶V PXFK HDVLHU WR EH H[SOLFLW DERXW FRVW V\QHUJLHV
([HFXWLYHV FDQ SRLQW WR VSHFL¿F OD\RIIV SODQW FORVLQJV RU
FRQVROLGDWLRQVWKDWZLOOEHH[HFXWHG5HYHQXHV\QHUJLHVWHQGWREH
PRUHQHEXORXV+RZFDQ\RXSURYHIRUH[DPSOHWKDWDPHUJHUZLOO
RSHQXSQHZVDOHVRSSRUWXQLWLHVLQDVSHFL¿FUHJLRQ"
7KH3ULQFLSDO$JHQW3UREOHP
% 7\SLFDOO\ LQ D ODUJH SXEOLFO\ WUDGHG FRUSRUDWLRQ RZQHUVKLS
DQG FRQWURO DUH VHSDUDWHG 2ZQHUVKLS LV GLYLGHG XS DPRQJ PDQ\
VKDUHKROGHUV SULQFLSDOV DOO RI ZKRP RZQ WLQ\ VKDUHV LQ WKH
FRPSDQ\$W WKH VDPH WLPH FRQWURO UHVWV LQ WKH KDQGV RI D FKLHI
H[HFXWLYHDQGKLVRUKHUWHDP DJHQWV %
'R WKH SULQFLSDOV DQG DJHQWV KDYH WKH VDPH LQWHUHVWV" 7KH
VKDUHKROGHUVZDQWRSWLPDOSUR¿WVWRPD[LPL]HWKHYDOXHRIWKHLU
VKDUHV 7KH DJHQW LV DOVR LQWHUHVWHG LQ SUR¿WV EXW KH RU VKH²
OLNH DOO LQGLYLGXDOV²DOVR VHHNV WR PD[LPL]H SHUVRQDO XWLOLW\
DQG VDWLVIDFWLRQ 7KLV PLJKW FRPH LQ WKH IRUP RI PRQHWDU\
FRPSHQVDWLRQ H[HFXWLYH SHUNV SRZHU SXEOLFLW\ DQG VR RQ
7KXVH[HFXWLYHVDUHLQWHUHVWHGLQDQXPEHURIWKLQJVWKDWGRQRW
FRQFHUQVKDUHKROGHUV
%
7KH LQWHUHVWV RI WKH SULQFLSDOV DQG DJHQWV FDQ EH DOLJQHG WKURXJK
LQFHQWLYHVDQGPRQLWRULQJ
ż )RU H[DPSOH D FRPSDQ\ PLJKW JLYH PDQDJHUV VWRFN RSWLRQV
WRPDNHWKHPSDUWRZQHUVRIWKHFRPSDQ\RUPDQDJHUVPLJKW
EH UHZDUGHG ZLWK ERQXVHV IRU LQFUHDVLQJ SUR¿WDELOLW\ IRU
VKDUHKROGHUV$W WKH VDPH WLPH VKDUHKROGHUV XVXDOO\ LQVWLWXWH
DPRQLWRULQJPHFKDQLVPLQWKHIRUPRIDERDUGRIGLUHFWRUV
ż
Lecture 11: Mergers and Acquisitions—The Winner’s Curse
%
%XW QHLWKHU LQFHQWLYHV QRU WKH ERDUG DV D FRQWURO PHFKDQLVP
LV SHUIHFW $JHQF\ FRVWV DUH WKH UHVXOWLQJ PLVDOLJQPHQW WKDW
UHPDLQV HYHQ DIWHU JRRG LQFHQWLYH V\VWHPV DQG PRQLWRULQJ
GHYLFHVDUHSXWLQSODFH
+RZ GR DJHQF\ FRVWV DQG WKH SULQFLSDODJHQW SUREOHP H[SODLQ
LQHI¿FLHQW 0 $ DFWLYLW\" 0DQ\ H[HFXWLYHV PD\ EH LQWHUHVWHG LQ
HPSLUH EXLOGLQJ QRW MXVW PD[LPL]LQJ VKDUHKROGHU YDOXH$QG WKH
ERDUG PD\ QRW EH LQ D SRVLWLRQ WR HIIHFWLYHO\ TXHVWLRQ WKH &(2¶V
MXGJPHQWRUWKH&(2PD\KDYHFRQWURORIWKHERDUG
Herd Behavior
% $QRWKHUH[SODQDWLRQIRU0 $VWKDWJREDGLVKHUGEHKDYLRU,QDQ
HIIRUWWRDYRLGEHLQJ¿UHGD&(2PLJKWWDNHDULVNDYHUVHDSSURDFK
WRPDQDJLQJWKHFRPSDQ\²DQDSSURDFKWKDWHQWDLOVFRS\LQJRWKHU
OHDGLQJFRPSHWLWRUV7KHWKLQNLQJKHUHLVDVIROORZV,IRWKHUVDUH
YHUWLFDOO\ LQWHJUDWHG DQG \RX GRQ¶W SXUVXH WKDW VWUDWHJ\ \RX UXQ
WKHULVNRIORRNLQJVWXSLGLIWKHVWUDWHJ\SURYHVWREHEHQH¿FLDOWR
VKDUHKROGHUVDWULYDO¿UPV%XWLIIROORZLQJWKHKHUGGRHVQ¶WZRUN
RXW\RXFDQSRLQWWRWKHIDFWWKDWDOORI\RXUULYDOVGLGWKHVDPH
%
76
7KHODWHVVDZDZDYHRIGHDOVLQWKHHQWHUWDLQPHQWLQGXVWU\
%XW LW VHHPV XQOLNHO\ WKDW WKHVH GHDOV RFFXUUHG EHFDXVH HDFK ¿UP
LQYROYHG LQGHSHQGHQWO\ FRQFOXGHG WKDW YHUWLFDO LQWHJUDWLRQ PDGH
VHQVHLQWKHLQGXVWU\,WZDVSUREDEO\WKHFDVHWKDWHDFKH[HFXWLYH
WHDP VDZ RWKHUV LQ WKH LQGXVWU\ SXUVXLQJ YHUWLFDO LQWHJUDWLRQ DQG
GHFLGHGWRIROORZVXLW
%
,Q WKH HDUO\ V WKH DOFRKROLF EHYHUDJH LQGXVWU\ ZDV DOVR
LQYROYHGLQDZDYHRIDFTXLVLWLRQV,QWHUHVWLQJO\LQFDVHVZKHUHWZR
EHHUFRPSDQLHVRUWZRVSLULWVFRPSDQLHVFDPHWRJHWKHUWKHGHDOV
ZRUNHGRXWZLWKERWKFRPSDQLHVEHQH¿WLQJIURPFOHDUHFRQRPLHV
RI VFDOH DQG VFRSH %XW LQ GHDOV WKDW EURXJKW WRJHWKHU EHHU ZLQH
DQGVSLULWVWKHHFRQRPLHVRIVFRSHZHUHQRWDVFOHDUDQGWKHGHDOV
GLGQ¶WZRUN+HUGEHKDYLRUZDVDODUJHSDUWRIWKHUHDVRQWKDWWKH
GHDOVZHUHODXQFKHGLQWKH¿UVWSODFH
'LI¿FXOWLHVLQ,QWHJUDWLRQ
% 2QH RI WKH FKDOOHQJHV ZLWK DQ\ GHDO LV WKDW LW¶V RIWHQ GLI¿FXOW WR
LQWHJUDWHWZRRUPRUHFRPSDQLHV7KHUHPD\EHREYLRXVV\QHUJLHV
ZLWKWKH¿UPVEXWUHDOL]LQJWKRVHV\QHUJLHVPD\EHGLI¿FXOW7ZR
VFKRODUV 3KLOLSSH +DVSHVODJK DQG 'DYLG -HPLVRQ KDYH GRQH DQ
LQWHUHVWLQJVWXG\RIWKLVSKHQRPHQRQ
%
+DVSHVODJKDQG-HPLVRQFRQFOXGHGWKDWKRZD¿UPJRHVDERXWWKH
DFTXLVLWLRQ GHFLVLRQPDNLQJ SURFHVV KRZ LW GRHV GXH GLOLJHQFH
DQGKRZLWDSSURDFKHVWKHRWKHU¿UPDOOKDYHDVLJQL¿FDQWLPSDFW
RQWKHDELOLW\WRLQWHJUDWHDFRPSDQ\
%
7RRRIWHQZHVHHFXOWXUHFODVKHVDQGRWKHUIULFWLRQWKDWSUHYHQWVWKH
DFTXLUHU IURP UHDOL]LQJ H[SHFWHG V\QHUJLHV 6RPHWLPHV SUREOHPV
DOVRDULVHZKHQD¿UPWKDWKDVKDGDJUHDWGHDORIH[SHULHQFHEX\LQJ
VPDOOFRPSDQLHVVXGGHQO\WULHVWRDFTXLUHDODUJHRQH
*OREDO0HJD'HDOV
% 6FKRODU 3DQNDM *KHPDZDW DQ H[SHUW LQ LQWHUQDWLRQDO VWUDWHJLHV
KDVQRWHGWKDWDUXOHRIWKUHHVHHPVWRKDYHEHFRPHFRQYHQWLRQDO
ZLVGRP LQ PDQ\ LQGXVWULHV ([HFXWLYHV FRPH WR EHOLHYH WKDW
XOWLPDWHO\DFHUWDLQLQGXVWU\PD\LQYROYHRQO\WKUHHELJSOD\HUV
,I FRQVROLGDWLRQ LV LQHYLWDEOH WKH H[HFXWLYHV VHHN WR H[HFXWH D
PHUJHURUDFTXLVLWLRQWRVHFXUHDSRVLWLRQIRUWKHLU¿UPDVRQHRI
those three.
77
%
$FFRUGLQJWR*KHPDZDWWKHDVVXPSWLRQWKDWWKHJOREDOHFRQRP\
LV D ZLQQHUWDNHDOO HFRQRP\ KDV EHFRPH FRPPRQ ZLVGRP EXW
WKHUH¶V QR HYLGHQFH WR VXSSRUW WKDW SUHPLVH 7KH WKHRUHWLFDO OLQNV
EHWZHHQ WKH JOREDOL]DWLRQ RI DQ LQGXVWU\ DQG WKH FRQFHQWUDWLRQ RI
WKDWLQGXVWU\DUHZHDN
%
([HFXWLYHV WKHQ QHHG WR EUHDN IUHH RI WKH ELDVHV WKDW OHDG WKHP
WRSXUVXHODUJHUDQGODUJHUGHDOV7KHUHDUHEHWWHUPRUHSUR¿WDEOH
VWUDWHJLHVIRUGHDOLQJZLWKJOREDOL]DWLRQWKDQUHOHQWOHVVH[SDQVLRQ
Suggested Reading
Bruner, Deals from Hell.
*KHPDZDWDQG*KDGDU³7KH'XELRXV/RJLFRI*OREDO0HJDPHUJHUV´
Lecture 11: Mergers and Acquisitions—The Winner’s Curse
*XSWDDQG*RYLQGDUDMDQ³0DQDJLQJ*OREDO([SDQVLRQ´
Thaler, The Winner’s Curse.
Questions to Consider
1. :K\GRPDQ\0 $VIDLOWRGHOLYHULQFUHDVHGVKDUHKROGHUYDOXH"
2. :K\ GR H[HFXWLYHV FRQWLQXH WR SXUVXH VR PDQ\ 0 $V GHVSLWH WKH
VSRWW\UHFRUGRISDVWSHUIRUPDQFHIRUVXFKGHDOV"
3. :KDWDOWHUQDWLYHVWR0 $VPLJKWD¿UPSXUVXHDQGZKDWDUHWKHSURV
DQGFRQVIRUWKHVHRWKHURSWLRQV"
78
Launching a Lean Start-Up
Lecture 12
M
DQ\SHRSOHKDYHLGHDVIRUQHZSURGXFWVRUVHUYLFHVDQGZRXOGOLNH
WRWU\HQWUHSUHQHXUVKLSDWVRPHSRLQWLQWKHLUFDUHHUV,QWKLV¿QDO
OHFWXUHRQFRPSHWLWLYHVWUDWHJ\ZH¶OOWDNHDORRNDWWKHFKDOOHQJH
RI ODXQFKLQJ \RXU RZQ EXVLQHVV +RZ FDQ \RX DSSO\ WKH LGHDV IURP WKHVH
OHFWXUHVRQVWUDWHJ\WREXLOGLQJDQGUXQQLQJDVXFFHVVIXOYHQWXUH"$QGKRZ
LVHQWUHSUHQHXUVKLSGLIIHUHQWWKDQOHDGLQJDODUJHFRPSOH[RUJDQL]DWLRQ"
The Marshmallow Challenge
% 7KHPDUVKPDOORZFKDOOHQJHLVDQH[HUFLVHLQZKLFKJURXSVFRPSHWH
WR EXLOG WKH WDOOHVW IUHHVWDQGLQJ VWUXFWXUH XVLQJ RQO\ XQFRRNHG
VSDJKHWWL WDSH VWULQJ DQG D VLQJOH PDUVKPDOORZ 7KLV H[HUFLVH
KDVEHHQUXQZLWKPDQ\JURXSVRISHRSOHIURPGLIIHUHQW¿HOGVDQG
\LHOGVVRPHLQWHUHVWLQJUHVXOWV
%
5HFHQWJUDGXDWHVRIEXVLQHVVVFKRROVXQGHUSHUIRUPWKHDYHUDJHRQ
WKLVFKDOOHQJHDVGRODZ\HUVDQG&(2V(QJLQHHUVDUFKLWHFWVDQG
NLQGHUJDUWHQVWXGHQWVH[FHODWWKHFKDOOHQJH
ż ,Q EXVLQHVV VFKRRO VWXGHQWV DUH WDXJKW WR SODQ WKHQ H[HFXWH
7KH\OHDUQWRVHWRXWJRDOVDQGWKHPHDQVRIDFKLHYLQJWKRVH
JRDOV LQ DV PXFK GHWDLO DV SRVVLEOH ,Q WKH PDUVKPDOORZ
FKDOOHQJH WKDW PHDQV FRPLQJ XS ZLWK WKH SHUIHFW GHVLJQ
RQ SDSHU EHIRUH WU\LQJ WR EXLOG WKH VWUXFWXUH 0DQ\ EXVLQHVV
VFKRROJUDGXDWHVGRQ¶WHYHQWRXFKWKHPDUVKPDOORZXQWLOQHDU
WKHHQGRIWKHWLPHDOORZHGIRUWKHFKDOOHQJH
ż
,Q FRQWUDVW NLQGHUJDUWHQ VWXGHQWV WHQG WR SLFN XS WKH
PDUVKPDOORZ HDUO\ RQ DQG VWDUW WR SOD\ ZLWK LW ,Q EXLOGLQJ
WKHLU VWUXFWXUHV WKH\ HQJDJH LQ WULDO DQG HUURU ,QVWHDG RI D
OLQHDUSODQH[HFXWHSURFHVVWKHNLQGHUJDUWHQVWXGHQWVGRZKDW
JUHDW GHVLJQHUV DQG HQWUHSUHQHXUV GR 7KH\ WHVW H[SHULPHQW
DQGSURWRW\SH
79
ż
%
7RP:XMHFDGHVLJQHUZKRIUHTXHQWO\UXQVWKLVFKDOOHQJHKDV
DOVRIRXQGWKDW&(2VGREHWWHUZKHQDQDGPLQLVWUDWLYHDVVLVWDQW
MRLQV WKHLU WHDP:XMHF DUJXHV WKDW EHFDXVH WKH DVVLVWDQWV DUH
JRRG DW IDFLOLWDWLQJ ZRUN SURFHVVHV WKH\ HQDEOH WKH WHDP WR
ZRUNWRJHWKHUPRUHHIIHFWLYHO\WKHDVVLVWDQWVKHOSRWKHUWHDP
PHPEHUVWKURXJKDWHVWLQJDQGSURWRW\SLQJSURFHVVWKDWOHDGV
to a taller structure.
Peter Skillman, the creator of the marshmallow challenge, once
VDLG³(QOLJKWHQHGWULDODQGHUURUVXFFHHGVRYHUWKHSODQQLQJRIORQH
JHQLXV´7KLVLVWUXHQRWMXVWLQEXLOGLQJPDUVKPDOORZVWUXFWXUHVEXW
in launching new ventures, as well.
Lecture 12: Launching a Lean Start-Up
The Lean Start-Up
% ,Q WKH SDVW WKH DSSURDFK WR ODXQFKLQJ DQ HQWUHSUHQHXULDO YHQWXUH
ZDVWRFRQGXFWH[WHQVLYHPDUNHWUHVHDUFKZULWHDGHWDLOHGEXVLQHVV
SODQ DQG FRQVWUXFW SUR IRUPD ¿QDQFLDO VWDWHPHQWV ,Q UHFHQW
\HDUVKRZHYHUWKHUHKDVEHHQDPRYHPHQWWRZDUGDQHZZD\RI
ODXQFKLQJDYHQWXUHWKHOHDQVWDUWXSPRGHO7KLVDSSURDFKLVPRUH
LWHUDWLYHDQGOHVVOLQHDUWKDQWKHROGRQHLWLQYROYHVPRUHOHDUQLQJ
DQGDGDSWDWLRQ
80
%
(ULF5LHVLVRQHRIWKHSLRQHHUVRIWKHOHDQVWDUWXSPHWKRGRORJ\
$FFRUGLQJ WR KLP HYHU\ VWDUWXS LV D JUDQG H[SHULPHQW WKDW
DWWHPSWV WR DQVZHU D TXHVWLRQ %XW WKDW TXHVWLRQ LV QRW &DQ WKLV
SURGXFWEHEXLOW",QVWHDGLW¶V6KRXOGWKLVSURGXFWEHEXLOWDQGFDQ
DVXVWDLQDEOHEXVLQHVVEHEXLOWDURXQGLW"
%
7KLV H[SHULPHQW 5LHV VD\V LV PRUH WKDQ MXVW WKHRUHWLFDO LQTXLU\
LW¶VD¿UVWSURGXFW,ILW¶VVXFFHVVIXOLWDOORZVWKHHQWUHSUHQHXUWRJHW
VWDUWHG ZLWK KLV RU KHU FDPSDLJQ HQOLVWLQJ HDUO\ DGRSWHUV DGGLQJ
HPSOR\HHVWRHDFKIXUWKHUH[SHULPHQWRULWHUDWLRQDQGHYHQWXDOO\
VWDUWLQJWREXLOGSURGXFWV
%
1RWLFHWKDWWKHUH¶VDQLPSRUWDQWGLVWLQFWLRQEHWZHHQWKLVDSSURDFK
DQG WKH H[SHULHQFH RI PDQ\ HQWUHSUHQHXUV $Q HQWUHSUHQHXU PD\
KDYHDJUHDWSURGXFWLQPLQGEXW5LHVSRLQWVRXWWKDWDJUHDWSURGXFW
FRQFHSW LV QRW D EXVLQHVV $ EXVLQHVV QHHGV D EXVLQHVV PRGHO
LQFOXGLQJ DQ XQGHUVWDQGLQJ RI ZKLFK FXVWRPHUV DFWXDOO\ QHHG WKH
SURGXFW DQG ZKDW WKH\ QHHG WR JHW RXW RI LW 0HHWLQJ WKRVH QHHGV
LQYROYHVDGDSWDWLRQZKLFKFDQEHGLI¿FXOWIRUPDQ\HQWUHSUHQHXUV
LIWKH\IDOOLQORYHZLWKWKHLURZQSURGXFWV
%
5LHV DUWLFXODWHV WKH QRWLRQ RI D PLQLPXP YLDEOH SURGXFW 093 <RX VWDUW E\ ¿JXULQJ RXW ZKDW SUREOHP QHHGV WR EH VROYHG:KDW
SDLQ SRLQW LV WKH FXVWRPHU H[SHULHQFLQJ"7KH VWDUWLQJ SRLQW LV QRW
\RXU JUHDW LGHD IRU D QHZ WHFKQRORJ\ EXW WKH FXVWRPHUV¶ QHHGV
EDVHGRQWKHIUXVWUDWLRQVWKH\¶UHH[SHULHQFLQJZLWKFXUUHQWSURGXFWV
DQGVHUYLFHV
%
)URPWKHUH\RXGHYHORSDQ093ZKLFKLVWKDWYHUVLRQRIDQHZ
SURGXFW RU VHUYLFH WKDW DOORZV D WHDP WR FROOHFW WKH PD[LPXP
DPRXQWRIYDOLGDWHGOHDUQLQJZLWKWKHOHDVWHIIRUW7KHLGHDKHUHLV
EHJLQWROHDUQDVVRRQDVSRVVLEOHWKHQDGDSWRU³SLYRW´VKLIWLQJ
\RXULGHDEDVHGRQWKHOHDUQLQJWKDWWDNHVSODFH
%
+HUH LW¶V FUXFLDO QRW WR EHODERU WKH SODQQLQJ SURFHVV EXW WR JHW
WR WKDW OHDUQLQJ DV VRRQ DV SRVVLEOH ,Q RWKHU ZRUGV SLFN XS WKH
PDUVKPDOORZ HDUO\ *HW DQ LQLWLDO FRQFHSW SURWRW\SH RU SURGXFW
LQWRFXVWRPHUV¶KDQGVDQGFROOHFWIHHGEDFN
%
7KHJRDORIWKH093LVWRWHVWFHUWDLQK\SRWKHVHVRUSURSRVLWLRQV
UHODWHG WR ZKDW DWWULEXWHV FXVWRPHUV FDUH DERXW KRZ WKH\ GH¿QH
TXDOLW\DQGZKHWKHURUQRWWKH\DUHZLOOLQJWRSD\DFHUWDLQDPRXQW
IRUWKHSURGXFWRUVHUYLFH7KHVHGDWDDOORZ\RXWRGHWHUPLQHIRU
H[DPSOH ZKHWKHU \RX FDQ FRPPDQG D SULFH WKDW LV VXI¿FLHQW WR
FRYHU\RXUH[SHQVHV
%
,W¶VLPSRUWDQWIRUHQWUHSUHQHXUVWRJHWFRPIRUWDEOHZLWKWKHLGHDRI
³JRRGHQRXJK´LQRUGHUWRJHWWKHSURWRW\SHLQWRFXVWRPHUV¶KDQGV
DV VRRQ DV SRVVLEOH DQG WR OLVWHQ WR WKH IHHGEDFN WKH\ UHFHLYH
<RXPXVWEHZLOOLQJWRSXWRXWDSURGXFWWKDWPD\QRWEHSHUIHFW
DQGDEOHWROLVWHQWRSHRSOHZKHQWKH\WHOO\RXZKDW¶VQRWSHUIHFW
about it.
81
The MVP Strategy in Large Firms
% ,W VHHPV WKDW PDQ\ ODUJH RUJDQL]DWLRQV FDQQRW SXUVXH DQ 093
VWUDWHJ\ EHFDXVH LW¶V GLI¿FXOW IRU WKHP WR SXW D ³JRRG HQRXJK´
SURGXFW LQWR WKH PDUNHWSODFH 3HRSOH ZKR ZRUN LQ ODUJH
RUJDQL]DWLRQV DUH WUDLQHG WR KDYH KLJK TXDOLW\ VWDQGDUGV DQG WKH
RUJDQL]DWLRQV WKHPVHOYHV DUH LQWHQW RQ SURWHFWLQJ WKHLU EUDQGV
7KXVWRSXWRXWDSURGXFWWKDW¶VOHVVWKDQSHUIHFWUXQVWKHULVNRI
KDUPLQJWKHEUDQGDQGGDPDJLQJD¿UP¶VUHSXWDWLRQIRUTXDOLW\
%
'DYLG .HOOH\ IRXQGHU RI WKH OHDGLQJ SURGXFW GHVLJQ ¿UP ,'(2
XVHV WKH LGHD RI ³IDLOLQJ RIWHQ WR VXFFHHG VRRQHU´ WR GULYH WKH
LQQRYDWLRQ SURFHVV DW KLV ¿UP 7KLV QRWLRQ LV DOVR FUXFLDO LQ WKH
FRQWH[W RI HQWUHSUHQHXUVKLS (QWUHSUHQHXUV PXVW EH ZLOOLQJ WR SXW
VRPHWKLQJRXWLQWKHPDUNHWWKDWLVD³IDLOXUH´WKH\PXVWEHDEOHWR
OLVWHQWRQHJDWLYHIHHGEDFNDQGDGDSW
ż $JDLQZHFDQVHHZK\ODUJHFRPSDQLHVKDYHDSUREOHPZLWK
WKLV ,I \RX¶UH D PDQDJHU DW D ODUJH FRPSDQ\ DQG \RXU LQLWLDO
DWWHPSW DW JHWWLQJ D QHZ SURGXFW LQWR WKH PDUNHWSODFH LV
D IDLOXUH \RX UXQ WKH ULVN RI GDPDJLQJ \RXU FDUHHU )RU WKLV
UHDVRQPDQDJHUVLQODUJHURUJDQL]DWLRQVWHQGWREHULVNDYHUVH
Lecture 12: Launching a Lean Start-Up
ż
%
)XUWKHUWKHFXOWXUHRIODUJHRUJDQL]DWLRQVLVVXFKWKDWWKH\¶UH
QRWWROHUDQWRIHDUO\IDLOXUHVWKDWDUHVLPSO\SDUWRIWKHFUHDWLRQ
SURFHVVIRUQHZYHQWXUHV
,W¶V LPSRUWDQW WR QRWH KRZHYHU WKDW QRW DOO IDLOXUH LV DFFHSWDEOH
(QWUHSUHQHXUV DQG ODUJH FRPSDQLHV VKRXOG QRW VSHQG LQRUGLQDWH
VXPV WR ODXQFK QHZ YHQWXUHV LQVWHDG DLP IRU VPDOO H[SHULPHQWV
DQGLQH[SHQVLYHSURWRW\SHVWKDWHQDEOH\RXWRJHWIHHGEDFNTXLFNO\
DQGLPSURYH
Lean Start-Ups in Today’s Environment
% 7KHUH¶V DQ DUJXPHQW WR EH PDGH WKDW LW¶V HDVLHU WR EXLOG DQG WHVW
DQ093WRGD\WKDQPLJKWKDYHEHHQSRVVLEOH\HDUVDJR7KHFRVW
RI FRPSXWHU SURFHVVLQJ SRZHU KDV FRPH GRZQ GUDPDWLFDOO\ DQG
82
%
‹PLFKDHOMXQJL6WRFN7KLQNVWRFN
RSHQVRXUFH VRIWZDUH LV QRZ
DYDLODEOH WKDW FDQ KHOS \RX
launch your business. Further,
DFFHVV WR FDSLWDO DQG WDOHQW
has generally become easier.
7KH VFKRODU 9LYHN :DGKZD
KDV GRQH VRPH LQWHUHVWLQJ
research over the years on
VWDUWXSV ORRNLQJ DW PDQ\
RI WKHP LQ 6LOLFRQ 9DOOH\
LQSDUWLFXODU
ż +HKDVQRWHGWKDWWRGD\¶V Yelp pivoted from its initial
ODSWRSV KDYH WKH VDPH incarnation as a system for emailing
recommendation requests to
SURFHVVLQJ SRZHU DV IULHQGVWRDQRQOLQHUHYLHZV\VWHP
PDQ\FRPSXWHUVWKDWFRVW of restaurants and local businesses.
PLOOLRQVRIGROODUVLQWKH
V)RUVWRUDJH\RXRQFHQHHGHGVHUYHUIDUPVDQGUDFNVRI
KDUG GLVNV EXW WRGD\ ZH KDYH LQH[SHQVLYH FORXG FRPSXWLQJ
DQGFORXGVWRUDJH
ż
%
,QVKRUWLW¶VHDVLHUWRUXQDQH[SHULPHQWWRGD\<RXFDQODXQFK
DQHZYHQWXUHZLWKRXWWKHQHHGIRUDJUHDWGHDORIFDSLWDO$V
HQWUHSUHQHXUV OLNH WR VD\ \RX FDQ UHO\ RQ IRROV IULHQGV DQG
IDPLO\WRJHWPRQH\DQGJHWDEXVLQHVVRIIWKHJURXQG
7KHUH KDV DOVR EHHQ DQ H[SORVLRQ LQ WKH QXPEHU RI startXS DFFHOHUDWRUV WKHVH DUH W\SLFDOO\ JURXSV RI H[SHULHQFHG
HQWUHSUHQHXUV RU YHQWXUH FDSLWDOLVWV ZKR FRDFK HQWUHSUHQHXUV LQ
launching new ventures.
ż 6WDUWXSDFFHOHUDWRUVWDNHDSSOLFDWLRQVDQGDFFHSWQHZYHQWXUHV
LQWRDFRKRUWEDVHGUHVLGHQWLDOSURJUDP7KHHQWUHSUHQHXUVOLYH
DQGZRUNDWWKHORFDWLRQRIWKHVWDUWXSDFFHOHUDWRUIRUDERXW
ZHHNV ZKHUH WKH\ JHW DVVLVWDQFH FRXQVHOLQJ DQG VRPH VHHG
IXQGLQJ,QUHWXUQWKH\W\SLFDOO\JLYHXSDHTXLW\VWDNHWR
WKHRZQHUVRIWKHVWDUWXSDFFHOHUDWRU
ż
7KH ZHHN SURJUDP FXOPLQDWHV LQ D GHPR GD\ ZKHUH
SRWHQWLDOLQYHVWRUVDUHDVVHPEOHGDQGWKHHQWUHSUHQHXUVJHWD
FKDQFHWRSLWFKWKHLULGHDVWRUDLVHIXQGLQJ
Lecture 12: Launching a Lean Start-Up
Gaining Investors
% 9HQWXUH FDSLWDOLVWV RIWHQ VD\ WKDW WKH\ LQYHVW LQ WKH WHDP QRW MXVW
WKHSURGXFWRUWKHLGHD,QYHVWRUVXQGHUVWDQGWKDWPRVWYHQWXUHVZLOO
KDYHWRSLYRWPXOWLSOHWLPHVLQWKHHDUO\GD\V²WKHLGHDZRQ¶WEH
ULJKW DW ¿UVW 7KXV WKH\ WU\ WR ¿QG HQWUHSUHQHXULDO WHDPV WKDW DUH
RSHQWRQHZLGHDVZLOOOLVWHQWRIHHGEDFNDQGDUHZLOOLQJWRDGDSW
%
,QVHHNLQJLQYHVWRUVHQWUHSUHQHXUVPXVWDOVRKDYHDEXVLQHVVPRGHO
QRW MXVW D SURGXFW $V ZH¶YH VHHQ LQ WKHVH OHFWXUHV FRPSHWLWLYH
DGYDQWDJH GRHVQ¶W FRPH IURP KDYLQJ WKH EHVW WHFKQRORJ\ RU
EHLQJWKH¿UVWPRYHULQWKHPDUNHWSODFH,WFRPHVIURPKDYLQJDQ
LQWHJUDWHGV\VWHPRIDFWLYLWLHVWKDWGHOLYHUVYDOXHWRWKHFXVWRPHU
7KDW YDOXH PXVW EH HQRXJK WR JHQHUDWH UHWXUQV IRU LQYHVWRUV DQG
SURYLGH FRQVXPHUV ZLWK VRPH VXUSOXV VRPH YDOXH EH\RQG ZKDW
WKH\SDLGIRUWKHSURGXFW
%
$V DQ HQWUHSUHQHXU \RX PXVW DVN \RXUVHOI D QXPEHU RI TXHVWLRQV
DERXWODXQFKLQJDQHZYHQWXUH:KDWFXVWRPHUSDLQSRLQWDUH\RX
WU\LQJWRDOOHYLDWH":KDWLV\RXUEXVLQHVVPRGHO":KRLVRQ\RXU
WHDP"$UH \RX ZLOOLQJ WR DGDSW DQG SLYRW"$QG SHUKDSV WKH PRVW
LPSRUWDQW TXHVWLRQ LV WKLV :KDW PDNHV \RX GLIIHUHQW DQG FDQ
\RX VXVWDLQ WKDW SRVLWLRQ" :LWK WKH LGHDV \RX¶YH OHDUQHG LQ WKHVH
OHFWXUHV\RXVKRXOGEHUHDG\WREXLOGRQWKDWDGYDQWDJHDQGGHIHQG
LWDJDLQVWSRWHQWLDOULYDOV
Suggested Reading
%RVVLG\DQG&KDUDQ([HFXWLRQ.
%XUJVWRQHDQG0XUSK\-UBreakthrough Entrepreneurship.
Ries, The Lean Startup.
:XMHF³%XLOGD7RZHU%XLOGD7HDP´
Questions to Consider
1. :KDW TXHVWLRQV VKRXOG DQ HQWUHSUHQHXU FRQVLGHU EHIRUH ODXQFKLQJ D
QHZYHQWXUH"
2. :KDW DGYDQWDJHV GRHV D OHDQ VWDUWXS DSSURDFK KDYH RYHU WUDGLWLRQDO
EXVLQHVVSODQQLQJIRUQHZYHQWXUHV"
3. :KHUH PLJKW HQWUHSUHQHXUV VHHN DVVLVWDQFH DV WKH\ WU\ WR ODXQFK D
QHZYHQWXUH"
Critical Business Skills:
Operations
Thomas J. Goldsby, Ph.D.
Critical Business Skills: Operations
Scope:
T
KH ZRUOG LV IXOO RI JUHDW EXVLQHVV LGHDV²SURGXFWV DQG VHUYLFH
FRQFHSWVWKDWKROGLPPHQVHSURPLVHIRUEXVLQHVVHVDQGWKHFXVWRPHUV
WKH\VHUYH<HWZKDWLVWKHYDOXHRIDJUHDWLGHD",WDPRXQWVWROLWWOH
LI D EXVLQHVV FDQQRW H[HFXWH²WKDW LV SURGXFH WKH SURGXFW RU VHUYLFH LQ
FRQIRUPDQFHZLWKFXVWRPHUH[SHFWDWLRQVLQVXFKDZD\WKDWFXVWRPHUVIHHO
JUHDW DERXW EX\LQJ LW ,Q WKH EHVW FDVH FXVWRPHUV HYHQ WDNH SULGH LQ WKHLU
DVVRFLDWLRQ ZLWK SURGXFWV DQG VHUYLFHV WKH\ EX\ $QG WKDW¶V WKH JRDO RI
DQ\FRPSDQ\WRGHYHORSDEDQGRIOR\DOSDWURQV²RUHYHQIDQV²ZKRQRW
RQO\EX\WKHSURGXFWVEXWFRQYLQFHRWKHUVWREX\WKHPWRR<RXNQRZWKH
FRPSDQLHVWKDWHQMR\WKLVNLQGRIIROORZLQJ$PD]RQ$SSOH&RVWFR1LNH
6RXWKZHVW$LUOLQHVDQG6WDUEXFNVDPRQJRWKHUV
7KHVHDUHVRPHRIWKHFRPSDQLHVZH¶OOH[DPLQHLQWKLVVHFWLRQRIWKHFRXUVH
H[SORULQJ WKH ZD\V LQ ZKLFK WKHVH ¿UPV WDNH JUHDW LGHDV IURP FRQFHSW WR
UHDOLW\E\ZD\RIRSHUDWLRQDOH[FHOOHQFH2SHUDWLRQVLVWKHEXVLQHVVDFWLYLW\
WKDWHQDEOHVFRPSDQLHVWRNHHSWKHSURPLVHVWKH\PDNHWRWKHLUFXVWRPHUV,W
LQFOXGHVWKHVRXUFLQJRIPDWHULDOVDQGJRRGVWKHFRQYHUVLRQRIWKRVHLQSXWV
LQWRVRPHWKLQJWKDWVRPHRQHZDQWVWREX\DQGWKHGHOLYHU\RIWKRVHJRRGV
4XLWHVLPSO\LW¶VKRZJUHDWLGHDVJHWWXUQHGLQWRJUHDWSURGXFWVDQGVHUYLFHV
WKDWDFXVWRPHUFDQSXUFKDVH$QGRSHUDWLRQVPDQDJHPHQWLVWKHGLVFLSOLQH
RIJHWWLQJWKHPRVWRXWRIDFRPSDQ\¶VSHRSOHSURFHVVHVDQGWHFKQRORJLHV
:H¶OOH[SORUHWKHIXQGDPHQWDODVSHFWVRIRSHUDWLRQVWKDWRUJDQL]DWLRQVXVHWR
WUDQVODWHJRRGLGHDVLQWRZLQQLQJEXVLQHVVHVFRYHULQJVXFKHVVHQWLDOWRSLFV
DV LQYHQWRU\ PDQDJHPHQW VXSSO\ PDQDJHPHQW GLVWULEXWLRQ DQG ORJLVWLFV
DQG SHUIRUPDQFH PHDVXUHPHQW:H¶OO WDNH D FORVH ORRN DW KRZ FRPSDQLHV
DUH FRPSHWLQJ WKURXJK VXSSO\ FKDLQ PDQDJHPHQW DQG H[DPLQH WKH ODWHVW
WUHQGV DQG UHVHDUFK RQ EXVLQHVV VWUDWHJLHV WKDW HQKDQFH DJLOLW\ UHVLOLHQFH
DQG VXVWDLQDELOLW\$PRQJ WKH PRVW VWUDWHJLF RI DOO RSHUDWLRQV GHFLVLRQV LV
WKH GHWHUPLQDWLRQ RI ZKHWKHU WR PDNH RU EX\²WR LQVRXUFH RU RXWVRXUFH
EXVLQHVVDFWLYLWLHV7KLVGHWHUPLQDWLRQLVDPXOWLIDFHWHGRQHVXEMHFWWRWKH
89
RUJDQL]DWLRQ¶V SURFOLYLW\ IRU FRQWURO DQG LWV DSSHWLWH IRU ÀH[LELOLW\ :H¶OO
FRQVLGHUKRZFRPSDQLHVFDQOHYHUDJHERWKLQWHUQDODQGH[WHUQDOUHVRXUFHVWR
H[WHQGWKHLUUHDFKLQWKHPDUNHWDQGHQVXUHSUR¿WDELOLW\
,Q OLJKW RI WRGD\¶V K\SHUFRPSHWLWLYH PDUNHW HQYLURQPHQW RUJDQL]DWLRQV RI
DOO NLQGV DUH VHHNLQJ WR LPSOHPHQW SURFHVVHV WKDW FUHDWH WKH JUHDWHVW YDOXH
IRU WKH EXVLQHVV DQG WKH FXVWRPHUV LW VHUYHV &RPSDQLHV DUH HPXODWLQJWKH
VXFFHVV RI OHJHQGDU\ RSHUDWLRQV FRPSDQLHV VXFK DV 7R\RWD DQG LWV IDPHG
SURGXFWLRQ V\VWHP LQ RUGHU WR PD[LPL]H YDOXH DQG ULG WKHPVHOYHV RI
DFWLYLWLHVWKDWZDVWHUHVRXUFHVDQGGLVWUDFWWKHEXVLQHVVIURPLWVFXVWRPHUV
:H¶OOH[SORUHKRZRUJDQL]DWLRQVRIDOONLQGVFDQDFKLHYHRSWLPDORXWFRPHV
WKURXJKLPSOHPHQWDWLRQRIPDQDJHPHQWPHWKRGVEDVHGRQ/HDQ7KLQNLQJ
:HZLOODOVRFRQVLGHUWKH6L[6LJPDPHWKRGIRUFRQWLQXRXVLPSURYHPHQW
GHYLVHG E\ 0RWRUROD LQ WKDW FRPSDQ\¶V SXUVXLW RI YDULDWLRQ UHGXFWLRQ LQ
LWV RSHUDWLRQV 7KHVH FRQWLQXRXV LPSURYHPHQW PHWKRGV FDQ EH DSSOLHG
DQ\ZKHUHWKDWZRUNLVSHUIRUPHG
:H¶OO DOVR H[SORUH WKH ODWHVW WHFKQRORJLFDO GHYHORSPHQWV WKDW SURPLVH WR
UHYROXWLRQL]H ERWK RSHUDWLRQV DQG EXVLQHVV LWVHOI &DQ \RX LPDJLQH KDYLQJ
WKHDELOLW\WRSLFNRXWDSURGXFWRQOLQHGRZQORDGWKHEOXHSULQWDQGKDYHLW
PDQLIHVWEHIRUH\RXUH\HV"7KDW¶VWKHSURPLVHRIWKUHHGLPHQVLRQDOSULQWLQJ
DQGFRPSDQLHVDUHSXWWLQJWKLVWHFKQRORJ\WRZRUNWRGD\*HQHUDO(OHFWULF¶V
DYLDWLRQEXVLQHVVLVSURGXFLQJFULWLFDOSDUWVIRUDLUFUDIWWXUELQHVWKURXJKWKLV
QHZWRWKHZRUOG DGGLWLYH PDQXIDFWXULQJ PHWKRG 0LQGV LQ WKH EXVLQHVV
ZRUOGDUHUDFLQJZLWKWKHSRWHQWLDORIVXFKWHFKQRORJLHV
Scope
7KURXJKWKHVHOHFWXUHVZH¶OOVHHWKDWRSHUDWLRQVDUHLQVWUXPHQWDODVDYDOXH
JHQHUDWRUDQGFRPSHWLWLYHGLIIHUHQWLDWRULQHYHU\EXVLQHVVHQVXULQJWKDWWKH
ULJKW SURGXFWV DQG VHUYLFHV DUH DYDLODEOH LQ WKH ULJKW IRUP DQG TXDQWLW\ DW
WKHULJKWSODFHDQGWLPH²DQGDWDFRPSHWLWLYHSULFH:H¶OOFRPHWRUHDOL]H
WKDW RSHUDWLRQV PDQDJHPHQW WRXFKHV YLUWXDOO\ HYHU\ IDFHW RI RXU HYHU\GD\
H[LVWHQFHDQGHQVXUHVRXUTXDOLW\RIOLIHŶ
90
7KH3RZHURI6XSHULRU2SHUDWLRQV
Lecture 13
2
SHUDWLRQVLVWKHEXVLQHVVDFWLYLW\WKDWHQDEOHVFRPSDQLHVWRNHHSWKH
SURPLVHV WKH\ PDNH WR FXVWRPHUV ,W LQFOXGHV VRXUFLQJ PDWHULDOV
DQG JRRGV FRQYHUWLQJ WKRVH LQSXWV LQWR SURGXFWV WKDW FXVWRPHUV
ZDQW WR EX\ DQG GHOLYHULQJ WKH SURGXFWV 2SHUDWLRQV PDQDJHPHQW LV WKH
GLVFLSOLQH RI JHWWLQJ WKH PRVW RXW RI D FRPSDQ\¶V SHRSOH SURFHVVHV DQG
WHFKQRORJLHV,QWKHVHOHFWXUHVZH¶OOH[SORUHWKHIXQGDPHQWDODVSHFWVRIERWK
WKHVHDFWLYLWLHV:H¶OOFRYHUVXFKHVVHQWLDOWRSLFVDVLQYHQWRU\PDQDJHPHQW
VXSSO\PDQDJHPHQWGLVWULEXWLRQDQGSHUIRUPDQFHPHDVXUHPHQW:H¶OOORRN
DWKRZFRPSDQLHVFRPSHWHWKURXJKVXSSO\FKDLQPDQDJHPHQWDQGH[DPLQH
WKHODWHVWUHVHDUFKRQEXVLQHVVVWUDWHJLHVWKDWHQKDQFHDJLOLW\UHVLOLHQFHDQG
VXVWDLQDELOLW\)LQDOO\ZH¶OOFRQVLGHUKRZFRPSDQLHVFDQOHYHUDJHLQWHUQDO
DQGH[WHUQDOUHVRXUFHVWRVXUYLYHDQGWKULYH
Vision and Market Strategy
% 7R XQGHUVWDQG WKH UROH RI RSHUDWLRQV LQ DQ RUJDQL]DWLRQ ZH QHHG
WR NQRZ ZKHUH LW ¿WV LQWR WKH ELJ SLFWXUH RI EXVLQHVV GHFLVLRQ
PDNLQJ0RVWFRPSDQLHVEHJLQZLWKDQRYHUDOOYLVLRQWKDWGULYHVDOO
WKHLU IXQFWLRQDO VWUDWHJLHV LQFOXGLQJ RSHUDWLRQV 7KH YLVLRQ LV WKH
VWDWHPHQW RI KRZ WKH FRPSDQ\ ZDQWV WR EH NQRZQ DQG VRXJKW LQ
WKH PDUNHWSODFH )XQFWLRQDO VWUDWHJLHV HVWDEOLVK KRZ WKH FRPSDQ\
LQWHQGVWROLYHXSWRWKHSURPLVHRILWVYLVLRQ
%
7KH¿UVWWKLQJFRPSDQLHVW\SLFDOO\GRDIWHUHVWDEOLVKLQJDYLVLRQLV
WRGHYLVHDPDUNHWVWUDWHJ\FRQVLVWLQJRIWKHLPDJHWREHSRUWUD\HG
LQWKHPDUNHW,QWXUQRSHUDWLRQVVWUDWHJ\LVXVXDOO\UHJDUGHGDVD
VXSSRUWHURIWKHPDUNHWLQJVWUDWHJ\'HSHQGLQJRQKRZDFRPSDQ\
ZDQWVWREHYLHZHGLQWKHPDUNHWSODFHLWZLOOIRUPXODWHRSHUDWLRQV
WRVXSSRUWWKDWYLVLRQ
%
+DUYDUG SURIHVVRU 0LFKDHO3RUWHU KDV LGHQWL¿HGWKUHHFRPSHWLWLYH
market strategies from which a business might choose: low cost,
YDOXHGGLIIHUHQWLDWLRQDQGDFRPELQDWLRQRIWKHVHWZR
91
&RPSDQLHVXVLQJDORZFRVWVWUDWHJ\VHHNWRZLQEXVLQHVVE\
KDYLQJ SURGXFWV DQG VHUYLFHV WKDW UHÀHFW D SULFH DGYDQWDJH
7KHVHSURGXFWVDQGVHUYLFHVDUHFRQVLGHUHGRIVXI¿FLHQWTXDOLW\
WR ZDUUDQW FRQVLGHUDWLRQ EXW DUH XOWLPDWHO\ FKRVHQ EHFDXVH
WKH\UHSUHVHQWJRRGYDOXHLQWKHH\HVRIFXVWRPHUV
ż
:LWK D GLIIHUHQWLDWLRQ VWUDWHJ\ FRPSDQLHV VHHN WR GLVWLQJXLVK
WKHPVHOYHV RQ PHULWV RWKHU WKDQ ORZ SULFH ,Q IDFW WKH\ WU\
WR JDUQHU SUHPLXP SULFHV LQ OLJKW RI WKH XQLTXHQHVV RI WKHLU
SURGXFWVDQGVHUYLFHV'LIIHUHQWLDWLRQLVXVXDOO\SUHIHUUHGRYHU
D ORZFRVW VWUDWHJ\ EHFDXVH LW WHQGV WR UHVXOW LQ KHDOWKLHU DQG
PRUH VXVWDLQDEOH PDUJLQV DQG \LHOGV FXVWRPHUV ZKR DUH OHVV
OLNHO\WREHVZD\HGE\FRPSHWLWRUVWKDWRIIHUDORZHUSULFH
ż
7KH WKLUG PDUNHW VWUDWHJ\ LGHQWL¿HG LV D FRPELQDWLRQ RI WKH
¿UVWWZR7KLVDSSURDFKLVUDUHWKRXJKLWFRXOGEHDUJXHGWKDW
6RXWKZHVW$LUOLQHVLPSOHPHQWVLWTXLWHZHOO6RXWKZHVWRIIHUV
ORZSULFHVRQDLUWUDYHO\HWSHUIRUPVKLJKRQNH\RSHUDWLRQDO
PHDVXUHVVXFKDVRQWLPHVHUYLFHDQGFXVWRPHUFDUH
‹$QGULL,XUORY+HPHUD7KLQNVWRFN
/HFWXUH7KH3RZHURI6XSHULRU2SHUDWLRQV
ż
Some high-end carmakers employ a differentiation strategy, seeking to distance
themselves from competitors based on higher levels of comfort, performance,
and aesthetics.
92
Operations Strategy
% 2QFH D FRPSDQ\ FKRRVHV RQH RI WKH WKUHH FRPSHWLWLYH PDUNHW
VWUDWHJLHVLWPXVWWKHQGHFLGHKRZWRH[HFXWHGHYLVLQJDQRSHUDWLRQV
VWUDWHJ\ WKDW VXSSRUWV WKH YLVLRQ DQG PDUNHW VWUDWHJ\ $JDLQ LW¶V
LPSRUWDQW IRU WKH RSHUDWLRQV VWUDWHJ\ WR PDWFK WKH FRPSHWLWLYH
PDUNHW VWUDWHJ\ %X\LQJ SUHPLXP VXSSOLHV RU LQYHVWLQJ KHDYLO\ LQ
RSHUDWLRQV JHDUHG WRZDUG XQLTXH FXVWRPHU RXWFRPHV ZKLOH WU\LQJ
WRFRPSHWHRQSULFHZRQ¶WZRUNQRUZLOOXVLQJORZFRVWVWDQGDUG
FRPPRGLW\PDWHULDOVZKLOHWU\LQJWRSHUVXDGHFXVWRPHUVWRSD\IRU
DFXVWRPL]HGH[SHULHQFH
%
$QRWKHUFRQVLGHUDWLRQLQWKHVHOHFWLRQRIRSHUDWLRQVVWUDWHJ\LVWKH
age of the business. Businesses in their infancy usually start with
D VLQJOH RU D OLPLWHG QXPEHU RI SURGXFWV DQG VHUYLFHV 7KH VL]H
DQG JHRJUDSK\ RI WKH PDUNHW LV XVXDOO\ VPDOO DW WKH RXWVHW RI WKH
EXVLQHVVDVZHOO)RUFRPSDQLHVDWWKLVVWDJHDVLQJOHRSHUDWLRQV
VWUDWHJ\XVXDOO\VXI¿FHV%XWRQFHWKHEXVLQHVVJURZVLQVL]HDQG
FRPSOH[LW\PXOWLSOHVWUDWHJLHVPD\EHXVHGDWRQFHDQGWKH\PD\
QHHGWRFKDQJHRYHUWLPH
%
:KDW DUH WKH RSHUDWLRQDO GLIIHUHQFHV EHWZHHQ D FRPSDQ\ XVLQJ D
ORZFRVWVWUDWHJ\DQGRQHWKDWFRPSHWHVRQGLIIHUHQWLDWHGSURGXFWV"
/HW¶V¿UVWFRQVLGHUWKHORZFRVWVFHQDULR
ż ,Q FRPSHWLWLYH PDUNHWV ORZ FRVW XVXDOO\ WUDQVODWHV LQWR ORZ
SULFHV DQG ORZFRVW FRPSHWLWRUV RIWHQ ¿QG WKHPVHOYHV LQ D
³UDFH WR WKH ERWWRP´7KH FRPELQDWLRQ RI JOREDO FRPSHWLWLRQ
DQG WKH ,QWHUQHW KDV VSHG XS WKLV UDFH E\ SURYLGLQJ D JUHDWHU
DUUD\ RI FRPSHWLQJ RSWLRQV DQG WUDQVSDUHQF\ RQ SULFHV IRU
JRRGV DQG VHUYLFHV LQ GLIIHUHQW PDUNHWV 7KLV PDNHV SULFH
DGYDQWDJHVÀHHWLQJ
ż
:KHQ FRPSHWLQJ EDVHG RQ SULFH DORQH &KDUOHV 'DUZLQ¶V
WKHRULHVRISRSXODWLRQHFRORJ\FRPHWRPLQG2QO\WKHVWURQJ
DQGDGDSWDEOHVXUYLYH,I\RXOD\GRZQWKHFKDOOHQJHRISULFH
FRPSHWLWLYHQHVV \RX HVVHQWLDOO\ WU\ WR NLOO RII HYHU\RQH HOVH
LQ WKH PDUNHW DQG \RX EHFRPH WKH WDUJHW WKDW RWKHU ORZFRVW
SURYLGHUVVHHNWRNLOO
%
$VPHQWLRQHGHDUOLHURQHDOWHUQDWLYHLVWRSXUVXHDK\EULGVWUDWHJ\
FRPSHWLQJRQDFRPELQDWLRQRIYDOXHGGLIIHUHQWLDWLRQDQGORZFRVW
2QH IDFWRU WKDW DOORZV 6RXWKZHVW $LUOLQHV WR GR WKLV LV WKDW WKH
FRPSDQ\GRHVQ¶WSURYLGHVHUYLFHHYHU\ZKHUHLQWKH8QLWHG6WDWHV
,QVWHDG6RXWKZHVWLVVHOHFWLYHFLWLHVDFWXDOO\PDUNHWWKHPVHOYHVWR
6RXWKZHVWLQKRSHVRIODQGLQJLWVVHUYLFHV
ż 6RXWKZHVW DOVR NHHSV FRVWV LQ FKHFN WKURXJK VWUDWHJLF
RSHUDWLRQV)RULQVWDQFHLWXVHVDVLQJOHPRGHORIDLUFUDIWIRU
DOO LWV ÀLJKWV DOORZLQJ IRU VWDQGDUGL]DWLRQ LQ VSDUH SDUWV DQG
PDLQWHQDQFH)XUWKHUQR¿UVWFODVVVHUYLFHLVRIIHUHG
/HFWXUH7KH3RZHURI6XSHULRU2SHUDWLRQV
ż
7KH SLFWXUH RI GLIIHUHQWLDWLRQ KHUH LV QRW DFKLHYHG WKURXJK
IDQFLIXO RIIHULQJV RU XQLTXH DSSURDFKHV ,W FRPHV E\ ZD\ RI
OLPLWLQJWKHFRPSDQ\¶VIRFXVDQGH[HFXWLQJZHOO
2SHUDWLRQDO&DSDELOLW\3URFHVVHV
% 2SHUDWLRQDO FDSDELOLW\ LV WKH FRPSRVLWH RI SURFHVVHV SHRSOH DQG
WHFKQRORJ\XVHGWRH[HFXWHDQRSHUDWLRQVVWUDWHJ\3URFHVVHVGH¿QH
³ZKDW\RXGR´$OOZRUNLVFRQGXFWHGLQSURFHVVHVDQGWRGD\ZH
VSHQGDJUHDWGHDORIWLPHVWXG\LQJSURFHVVHVZLWKWHFKQLTXHVRIIHUHG
E\LPSURYHPHQWPHWKRGVVXFKDV/HDQ7KLQNLQJDQG6L[6LJPD
%
/HDQ7KLQNLQJLVGHGLFDWHGWRPDSSLQJDQGHOLPLQDWLQJZDVWHIURP
SURFHVVHV 0DSSLQJ SURFHVVHV HQDEOHV FRPSDQLHV WR FDSWXUH WKH
VWHSVLQYROYHGLQGRLQJZRUN6RPHVWHSVDUHYDOXHDGGHGPHDQLQJ
WKDW WKH FXVWRPHU FDUHV DERXW WKHVH DFWLYLWLHV DQG LV ZLOOLQJ WR SD\
IRU WKHVH DVSHFWV RI WKH ZRUN 9DOXHDGGHG VWHSV XVXDOO\ FKDQJH
WKHDSSHDUDQFHRIDSURGXFWRULWVSHUIRUPDQFHLQVRPHZD\WKDW¶V
QRWLFHDEOHWRWKHFXVWRPHU$OORWKHUVWHSVDUHFRQVLGHUHGQRQ±YDOXH
DGGHGDQGVKRXOGEHUHGXFHGRUHYHQHOLPLQDWHGIURPWKHSURFHVV
%
6L[ 6LJPD LV GHGLFDWHG WR UHGXFLQJ YDULDWLRQ LQ SURFHVVHV :KHQ
YDULDWLRQLQLQSXWVRULQZRUNSHUIRUPDQFHH[LVWV\RXFDQH[SHFW
YDULDWLRQ LQ WKH RXWSXWV RI WKH SURFHVV 8QZHOFRPH YDULDWLRQV DUH
FDOOHGGHIHFWVZKLFKDUHWKHHQHP\RIFRQVLVWHQWTXDOLW\DQGOHDGWR
DGYHUVHFXVWRPHUH[SHULHQFHV
ż
,Q VWDWLVWLFV VLJPD ™ LV WKH *UHHN QRWDWLRQ IRU VWDQGDUG
GHYLDWLRQWKHPDWKHPDWLFDOPHDVXUHRIYDULDWLRQ7RFDOFXODWH
WKH FDSDELOLW\ IRU D SURFHVV LQ WHUPV RI YDULDWLRQ LW¶V ¿UVW
QHFHVVDU\WRFDOFXODWHWKHGHIHFWVSHUPLOOLRQRSSRUWXQLWLHV$
GHIHFWRSSRUWXQLW\LVDQ\DFWLRQWKDWVWUD\VIURPWKHDFFHSWHG
VWDQGDUGIRUGHOLYHU\RIDSHUIHFWSURGXFWRUVHUYLFH
ż
7KLV GHIHFW FDOFXODWLRQ WKHQ FRQYHUWV LQWR D OHYHO RI VLJPD
SHUIRUPDQFH 7KH PRUH VLJPDV WKH QDUURZHU WKH YDULDWLRQ
EDQG IRU WKH SURFHVV PHDQLQJ WKDW WKH SURFHVV LV RSHUDWLQJ
ZLWKLQ YHU\ QDUURZ WROHUDQFHV ZLWK OHVV REVHUYHG YDULDWLRQ²
DQGWKDW¶VWKHJRDO
2SHUDWLRQDO&DSDELOLW\3HRSOH
% 2EYLRXVO\ WKH SHRSOH FRPSRQHQW RI FDSDELOLW\ VSHDNV WR ZKR
GRHV WKH ZRUN 7KLV VRFDOOHG VRIW VLGH RI RSHUDWLRQV LV RIWHQ WKH
³KDUG VWXII´ WR ¿JXUH RXW +XPDQV DUH FRPSOH[ FUHDWXUHV DQG
XQGHUVWDQGLQJ ZKDW PLJKW PRWLYDWH RQH SHUVRQ OHW DORQH ODUJH
JURXSVRISHRSOHLVH[WUHPHO\GLI¿FXOW
%
2QH FRQVLGHUDWLRQ WKDW IDFWRUV LQWR WKH FULWLFDO UROH RI SHRSOH LQ
RSHUDWLRQVLVDXWRPDWLRQZKLFKFRQWLQXHVWREHRQWKHULVHLQPDQ\
VHWWLQJV %XW QRW DOO ZRUN OHQGV LWVHOI WR DXWRPDWLRQ 6SHFL¿FDOO\
DXWRPDWLRQVWUXJJOHVZLWKQRQVWDQGDUGWDVNVRUVLWXDWLRQV)XUWKHU
LQ VRPH FLUFXPVWDQFHV FXVWRPHUV SUHIHU LQWHUDFWLQJ ZLWK DQRWKHU
SHUVRQDVRSSRVHGWRDFRPSXWHUVFUHHQ
%
,WVHHPVWKDWDWOHDVWIRUWKHIRUHVHHDEOHIXWXUHZHZLOOFRQWLQXHWR
UHO\RQSHRSOHWRSHUIRUPPDQ\FULWLFDOWDVNV%XWDIXQGDPHQWDO
TXHVWLRQWKDWFRPSDQLHVPXVWDVNZKHQH[HFXWLQJDQRSHUDWLRQDO
VWUDWHJ\LVZKHWKHUWKH\ZLOOGRWKHZRUNWKHPVHOYHV LQVRXUFLQJ RU ZKHWKHU WKH\ ZLOO KLUH RWKHUV WR GR WKH ZRUN RQ WKHLU
behalf (RXWVRXUFLQJ /HFWXUH7KH3RZHURI6XSHULRU2SHUDWLRQV
2SHUDWLRQDO&DSDELOLW\7HFKQRORJ\
% 7KH ¿QDO FRPSRQHQW RI RSHUDWLRQDO FDSDELOLW\ LV WHFKQRORJ\
VSHFL¿FDOO\ WKH DVVLVWDQFH UHFHLYHG IURP ERWK HTXLSPHQW DQG
LQIRUPDWLRQ WHFKQRORJ\ WR HQDEOH KLJKHUSHUIRUPLQJ SURFHVVHV
7HFKQRORJ\ OHQGV JUHDW FRQYHQLHQFH DQG HQKDQFHG FDSDELOLWLHV WR
ZRUN DQG HYHU\GD\ OLIH EXW LW VKRXOG QRW GULYH VWUDWHJ\ %XVLQHVV
VWUDWHJLHVWKDWUHO\¿UVWRQWHFKQRORJ\FDQEHWRRHDVLO\GXSOLFDWHG
E\FRPSHWLWRUV²DQGOHDSIURJJHGZKHQDEHWWHUWHFKQRORJ\FRPHV
DORQJ&RPSHWLWLYHDGYDQWDJHDFKLHYHGWKURXJKWKHRWKHUDVSHFWVRI
FDSDELOLW\²SURFHVVHVDQGSHRSOH²FDQEHPRUHGLI¿FXOWWRFRS\
96
%
7KHLGHDRIWHFKQRORJ\DVDQHQDEOHURISURFHVVUHIHUVWRWKHXVHRI
WHFKQRORJ\WRKHOSPDNHVHQVHRIFRPSOH[VLWXDWLRQVRUWKRVHODGHQ
ZLWKGDWDDQGLQIRUPDWLRQ'HFLVLRQVXSSRUWWRROVVXFKDVVWDWLVWLFDO
VRIWZDUH DQG EXVLQHVV DQDO\WLFV FDQ KHOS ZLWK WKHVH SUREOHPV ,Q
DGGLWLRQ GDWD FDSWXUH DQG FRPPXQLFDWLYH WHFKQRORJLHV FDQ KHOS
ZKHQDFRPSDQ\LVXQDEOHWR³VHH´DSURFHVVDQGLWVSHUIRUPDQFH
*36 IRU LQVWDQFH LV ZRQGHUIXO WHFKQRORJ\ IRU LOOXPLQDWLQJ DQ
RWKHUZLVHKDUGWRVHHSURFHVVIURPDIDU
%
)LQDOO\ DQ\ SK\VLFDO HTXLSPHQW WKDW PLJKW EH XVHG WR OLJKWHQ WKH
ORDGRUVSHHGXSWKHZRUNDOVRUHSUHVHQWVWHFKQRORJ\&RPSDQLHV
VKRXOGHPEUDFHHTXLSPHQWWHFKQRORJ\ZKHQLWDGYDQFHVSURFHVVHV
DQGDOORZVWKHPWRDYRLGVHQGLQJSHRSOHLQWRKD]DUGRXVVLWXDWLRQV
%
7KH FKDOOHQJH RI RSHUDWLRQV PDQDJHPHQW LV WR XVH RSHUDWLRQDO
VWUDWHJ\ WR JXLGH WKH SURFHVVHV SHRSOH DQG WHFKQRORJ\ WKDW
FRQVWLWXWHRSHUDWLRQDOFDSDELOLW\WRDFKLHYHEXVLQHVVVXFFHVV7KLV
LVQ¶WDTXLFNRUHDV\WDVNDQGRQFH\RXWKLQN\RX¶YHJRWLW¿JXUHG
RXWLW¶VSUREDEO\WLPHWRUHYLVLWWKHGHFLVLRQV$OORUJDQL]DWLRQV²
IURP VWDUWXSV WR PXOWLQDWLRQDO FRUSRUDWLRQV²PXVW DGDSW WR VWD\
UHOHYDQWWRFXVWRPHUVDQGDGDSWLQJWKHFRPSDQ\¶VRSHUDWLRQVLVD
FULWLFDOSDUWRIWKDWSURFHVV
Suggested Reading
%URZQLQJDQG6DQGHUV³&DQ,QQRYDWLRQ%H/HDQ"´
'DYHQSRUW 0XOH DQG /XFNHU ³.QRZ:KDW<RXU &XVWRPHUV:DQW %HIRUH
7KH\'R´
6FKURHGHU*ROGVWHLQDQG5XQJWXVDQDWKDPOperations Management in the
Supply Chain.
6LPFKL/HYLOperations Rules.
Questions to Consider
1. :K\ LV LW LPSRUWDQW WR OLQN D FRPSDQ\¶V RSHUDWLRQV VWUDWHJ\ WR WKH
RYHUDOOEXVLQHVVVWUDWHJ\"
2. +RZFDQDQRSHUDWLRQVVWUDWHJ\SURYLGHLGHQWLW\IRUDFRPSDQ\"
3. &DQ \RX WKLQN RI H[DPSOHV RI FRPSDQLHV WKDW ZLQ LQ WKH PDUNHWSODFH
WKURXJKGLVWLQFWLYHRSHUDWLRQVVWUDWHJLHVRUZHOOH[HFXWHGRSHUDWLRQV"
97
Leaner, Meaner Production
Lecture 14
A
VZHVDZLQWKHODVWOHFWXUHRSHUDWLRQVLVWKHEXVLQHVVDFWLYLW\WKDW
IXO¿OOV WKH SURPLVHV WKDW FRPSDQLHV PDNH WR WKHLU FXVWRPHUV ,W
LQFOXGHVVRXUFLQJPDWHULDOVDQGJRRGVFRQYHUWLQJWKRVHLQSXWVLQWR
VRPHWKLQJWKDWFXVWRPHUVZDQWWREX\DQGGHOLYHULQJWKHJRRGV3URGXFWLRQ
RSHUDWLRQVDUHWKRVHWKDWLQYROYHWKHSURYLVLRQRIDFWXDOJRRGVDVRSSRVHG
WRVHUYLFHV3URGXFWLRQRSHUDWLRQVIRUSK\VLFDOJRRGVDUHDOVRUHIHUUHGWRDV
PDQXIDFWXULQJRSHUDWLRQVDQGKDYHWKHSULPDU\IXQFWLRQRIFRQYHUWLQJLQSXWV
LQWRGHVLUHGRXWSXWVIRUFXVWRPHUV7KH\UHSUHVHQWWKHJUHDWHVWYDOXHDGGLQJ
activity in all of business, transforming the useless into the useful.
Lecture 14: Leaner, Meaner Production
The “Make-vs.-Buy” Decision
% 2QHRIWKHPRVWIXQGDPHQWDOGHFLVLRQVWKDWDQ\FRPSDQ\LQWHUHVWHG
LQ VHOOLQJ SURGXFWV PXVW PDNH LV ZKHWKHU WR SURGXFH WKH SURGXFW
LQKRXVHRUWRKLUHDQRXWVLGHFRPSDQ\WRPDQXIDFWXUHWKHSURGXFW
RQLWVEHKDOI7KLVGHWHUPLQDWLRQRILQVRXUFLQJYHUVXVRXWVRXUFLQJ
LV RIWHQ FDOOHG WKH ³PDNHYVEX\´ GHFLVLRQ %RWK RSWLRQV DUH
FRQVLGHUHGSDUWRISURGXFWLRQRSHUDWLRQVEXWWKH\LQYROYHGLIIHUHQW
RUJDQL]DWLRQDODUUDQJHPHQWV
%
,QPDNLQJWKLVGHFLVLRQWKHSODFHWRVWDUWLVZLWKVLPSOHHFRQRPLFV
GHWHUPLQLQJ ZKDW LW ZRXOG FRVW \RXU FRPSDQ\ WR SURGXFH WKH
SURGXFW²WDNLQJ LQWR DFFRXQW ¿[HG FDSLWDO FRVWV DQG WKH FRVWV RI
UXQQLQJWKHRSHUDWLRQ²YHUVXVZKDWDFRQWUDFWPDQXIDFWXUHUZRXOG
charge for its services.
ż &RPSOLFDWLQJ WKLV DQDO\VLV LV WKH H[SHFWDWLRQ RI IXWXUH VDOHV
,I WKH SURGXFW LV D ELJ KLW \RX FRXOG FRYHU \RXU ¿[HGFRVW
investments with the increasing sales volume, but you might
DOVRKDYHWRH[SDQGRSHUDWLRQVLQDKXUU\
ż
98
$QRWKHU FRPSOLFDWLRQ FDQ DULVH ZKHQ FXVWRPHUV DVN IRU
GLIIHUHQWLWHPVRUXQLTXHSDFNDJLQJ-XVWDVZHFRQVXPHUVVHHN
XQLTXHGLIIHUHQWLDWHGSURGXFWVVRWRRGREXVLQHVVFXVWRPHUV
/DUJHUHWDLOHUVDQGGLVWULEXWRUVZDQWWREHDEOHWRRIIHUSURGXFW
DVVRUWPHQWVWKDWFDQ¶WEHIRXQGDQ\ZKHUHHOVH7KDWFDQFUHDWH
DSUREOHPLI\RXVHOOWRDQGWKURXJKPDQ\GLIIHUHQWUHWDLOHUV
&RQWUDFW PDQXIDFWXUHUV H[FHO DW PDNLQJ DGDSWDWLRQV EHFDXVH
PDQXIDFWXULQJLVWKHLUFRUHFRPSHWHQF\7KH\WHQGWRKDYHVNLOOVLQ
GHYHORSLQJSURSHUWRROLQJDQGTXLFNFKDQJHRYHUVIURPRQHSURGXFW
WR DQRWKHU 7KH\ FDQ DOVR RIIHU HFRQRPLF DGYDQWDJHV EHFDXVH WKH
SURGXFWLRQ IDFLOLW\ LV VKDUHG ZLWK PXOWLSOH FOLHQWV DQG FRVWV DUH
VSUHDGDFURVVWKHVHFOLHQWV
%
)RUWKHVHUHDVRQVPDQ\\RXQJFRPSDQLHVWKDWDUHEULQJLQJSURGXFWV
WR PDUNHW IRU WKH ¿UVW WLPH FKRRVH RXWVRXUFLQJ RYHU LQVRXUFLQJ
7KH\ FDQ JHW LQWR EXVLQHVV ZLWKRXW KDYLQJ WR EXLOG D IDFWRU\ DQG
LQYHVWLQPDQXIDFWXULQJHTXLSPHQWDQGDWUDLQHGZRUNIRUFH
%
+RZHYHU WKHUH DUH DOVR GLVDGYDQWDJHV WR RXWVRXUFLQJ WKH PRVW
VLJQL¿FDQW RI ZKLFK LV FRQWURO<RX WDNH WKH ULVN WKDW WKH FRQWUDFW
PDQXIDFWXUHU ZRQ¶W KDYH \RXU EHVW LQWHUHVWV DW KHDUW ZKHQ
SURGXFLQJ \RXU JRRGV 7KHUH¶V HYHQ WKH ULVN WKDW D FRPSDQ\ WKDW
OHDUQVKRZWRPDNH\RXUSURGXFWFRXOGVWHDOLW
‹JHUHQPHL6WRFN7KLQNVWRFN
%
It’s estimated that the global market for contract manufacturing in electronics is
more than $450 billion.
99
%
)RUWKDWUHDVRQ\RXQHHGWRDQDO\]HWKHWUDQVDFWLRQFRVWVDVVRFLDWHG
ZLWKKLULQJDQRXWVLGHSDUW\7UDQVDFWLRQFRVWDQDO\VLV 7&$ LVD
GLVWLQFWEUDQFKRIHFRQRPLFVWKDWH[DPLQHVWKHFRVWVRIPRQLWRULQJ
DQRWKHUSDUW\WRDFWRQ\RXUEHKDOI
Lecture 14: Leaner, Meaner Production
Outsourcing Considerations
% &RPSDQLHV WKDW RXWVRXUFH RIWHQ RSW IRU VXSSOLHUV LQ FRXQWULHV
ZKHUHZDJHVIRUODERUDUHORZHUWKDQLQGHYHORSHGHFRQRPLHV²D
SUDFWLFHNQRZQDVoffshoring+RZHYHUVRPHFRPSDQLHVKDYHODWHU
UHWUDFWHGWKLVGHFLVLRQZKHQWKH\¿QGWKDWWKH\¶YHXQGHUHVWLPDWHG
WKH WUDQVDFWLRQ FRVWV DQG WKH DPRXQW RI RYHUVLJKW UHTXLUHG
ZLWK RIIVKRUH PDQXIDFWXULQJ 7KLV LV SDUWLFXODUO\ WUXH ZKHQ
PDQXIDFWXULQJSUREOHPVPDNHSURGXFWUHFDOOVQHFHVVDU\
%
$QRWKHU FLUFXPVWDQFH WKDW ZRXOG ZDUUDQW UHFRQVLGHUDWLRQ RI
RXWVRXUFLQJLVWKHGLVFRYHU\RIODERUDEXVHVDWFRQWUDFWPDQXIDFWXULQJ
ORFDWLRQV3XEOLFSUHVVXUHVDQGLQFUHDVLQJO\JRYHUQPHQWUHJXODWLRQV
DUHIRUFLQJFRPSDQLHVWREHPRUHWUDQVSDUHQWDERXWZKRWKH\KLUH
ZKHUHVXSSOLHUVDUHORFDWHGDQGWKHVWDQGDUGVLQSODFHWRHQVXUHWKDW
ZRUNSUDFWLFHVDUHFRQVLVWHQWZLWK:HVWHUQQRUPV
%
,I \RX VWLOO HOHFW WR KLUH DQ RXWVLGH PDQXIDFWXUHU²GHVSLWH WKHVH
FDXWLRQV²ZRUN ZLWK DQ DWWRUQH\ ZKR LV VHDVRQHG LQ QHJRWLDWLQJ
VXFKGHDOV7KLVLVHVSHFLDOO\LPSRUWDQWZKHQGRLQJEXVLQHVVDFURVV
QDWLRQDOERXQGDULHV
Manufacturing Strategies
% ,I\RXGHFLGHWKDW\RX¶UHEHWWHURIIPDNLQJ\RXUSURGXFW\RXUVHOI
\RX¿UVWQHHGWRGHFLGHZKDWPDQXIDFWXULQJVWUDWHJ\\RXZLOOXVH
7KHUHDUH¿YHSULPDU\VWUDWHJLHVWRFRQVLGHU
%
100
7KH ¿UVW VWUDWHJ\ LV FDOOHG VKLSWRVWRFN, or a IXOO DQWLFLSDWRU\
strategy 8QGHU WKLV VWUDWHJ\ FRPSDQLHV SXW FRPSOHWH IDLWK LQ
WKHLU VDOHV IRUHFDVWV XVLQJ WKRVH QXPEHUV WR GULYH SXUFKDVLQJ
SURGXFWLRQ DQG GLVWULEXWLRQ ,Q RWKHU ZRUGV D FRPSDQ\ EXLOGV
DQG GLVWULEXWHV SURGXFWV LQ DGYDQFH RI GHPDQG DQG KRSHV WKDW LW
KDVHVWLPDWHGFRUUHFWO\
%
ż
&RPSDQLHV XVH WKLV VWUDWHJ\ LQ VLWXDWLRQV ZKHUH FXVWRPHUV
H[SHFW WR ¿QG WKH SURGXFW RQ WKH VKHOI EX\ LW DQG PDNH XVH
RI LW LPPHGLDWHO\ 7KXV WKLV VWUDWHJ\ LV XVHG IRU YLUWXDOO\
HYHU\WKLQJVROGLQIRUH[DPSOHJURFHU\VWRUHV
ż
2IFRXUVHZLWKWKLVVWUDWHJ\ZKHQ\RXXQGHUHVWLPDWHGHPDQG
\RX DUH OHIW ZLWK GLVDSSRLQWHG FXVWRPHUV $QG ZKHQ \RX
RYHUHVWLPDWHGHPDQG\RX¶UHOHIWZLWKH[WUDLQYHQWRU\WKDW\RX
PD\QHHGWRPDUNGRZQRUHYHQZULWHRII
2QH VWHS DZD\ IURP VKLSWRVWRFN LV WKH PDNHWRVWRFN VWUDWHJ\.
,QWKLVFDVHFRPSDQLHVEX\PDWHULDOVLQDGYDQFHDQGPDQXIDFWXUH
SURGXFWVLQDFFRUGDQFHZLWKVDOHVIRUHFDVWVEXWWKH\GRQRWDOORFDWH
WKH JRRGV WR GLVWULEXWLRQ ORFDWLRQV XQWLO WKH\ UHFHLYH FXVWRPHU
RUGHUVDQGNQRZH[DFWO\ZKHUHWRVKLS
ż 7KLV GHOD\LQJ RI WKH GHOLYHU\ VWHS DOORZV FRPSDQLHV WR KROG
LQYHQWRU\FHQWUDOO\IRUDOOGLVWULEXWLRQORFDWLRQVDQGWKXVJHW
by with lower inventories.
ż
%
%XW KROGLQJ LQYHQWRU\ FHQWUDOO\ DQG SRVWSRQLQJ GHOLYHU\ XQWLO
RUGHUVDUHLQKDQGPHDQVWKDWFXVWRPHUVKDYHWRZDLWIRUGHOLYHU\
7KH QH[W VWUDWHJ\ LV FDOOHG assemble-to-order, FRQ¿JXUHWRRUGHU,
or PDVVFXVWRPL]DWLRQ:LWKWKLVVWUDWHJ\PDWHULDOVDUHSURFXUHGLQ
DGYDQFHRIGHPDQGDQGSURGXFWVDUHPDGHRQO\WRDVHPL¿QLVKHG
VWDWH 7KH ¿QLVKHG SURGXFW GRHVQ¶W WDNH VKDSH XQWLO WKH FRPSDQ\
OHDUQV H[DFWO\ ZKDW WKH FXVWRPHU ZDQWV7KLV VWUDWHJ\ LV LGHDO IRU
EDVLFSURGXFWVWKDWFDQEHVROGZLWKVPDOOGLIIHUHQFHV
ż 7KLVVWUDWHJ\DOORZVDSRRORIFRPPRQLQYHQWRU\WRFRYHUWKH
QHHGV RI FXVWRPHUV ZKR DUH ORRNLQJ IRU VRPHWKLQJ VOLJKWO\
GLIIHUHQWDJDLQUHGXFLQJLQYHQWRU\UHTXLUHPHQWVEXWUHTXLULQJ
DGGLWLRQDOWLPHWRSHUIRUPWKH¿QDOWRXFKHVRQWKHJRRGVDQG
GHOLYHUWKHP
ż
7R\RWD SURYLGHV DQ H[FHOOHQW H[DPSOH RI PDVV FXVWRPL]DWLRQ
ZLWK LWV 6FLRQ EUDQG RI FDUV 7KH FDUV DUH PDQXIDFWXUHG WR D
JHQHULF VWDWH LQ -DSDQ EXW KHOG LQ ODUJH VXSSOLHV E\ PDMRU
101
86GLVWULEXWRUV&XVWRPHUVVHOHFWRSWLRQVIURPWKHFRPSDQ\
ZHEVLWHDQGZKHQDQRUGHULVFRQ¿UPHGWKHFORVHVWGLVWULEXWRU
DOWHUVWKHEDVHPRGHODFFRUGLQJWRWKHFXVWRPHU¶VUHTXHVWV
Lecture 14: Leaner, Meaner Production
ż
102
7KURXJK WKLV DVVHPEOHWRRUGHU VWUDWHJ\ 7R\RWD LV DEOH WR
SURYLGH FXVWRPHUV ZLWK VHHPLQJO\ OLPLWOHVV FKRLFHV \HW ZLWK
PXFKOHVVLQYHQWRU\WKDQLIWKHFRPSDQ\SUHEXLOWFDUVWRFDWHU
WRFXVWRPHUGHPDQGV+RZHYHUXQGHUWKLVV\VWHPFXVWRPHUV
KDYHWRZDLWDIHZGD\VRUDIHZZHHNVWRWDNHSRVVHVVLRQRI
their cars.
%
The fourth manufacturing strategy is the make-to-order strategy.
,Q WKLV VFHQDULR WKH PDQXIDFWXUHU KDV WKH UDZ PDWHULDOV RQ KDQG
EXWGRHVQRWFRPPLWWRDVVHPEOLQJWKHPXQWLOUHFHLYLQJDFXVWRPHU
RUGHU,QGHOD\LQJWKHDVVHPEO\SURFHVVWKHPDQXIDFWXUHUKDVHYHQ
PRUH ÀH[LELOLW\ WR DFFRPPRGDWH GLYHUVH FXVWRPHU SUHIHUHQFHV
UHODWHGWRSURGXFWIRUPDQGIXQFWLRQ6XFKDVWUDWHJ\PLJKWEHXVHG
IRUDKLJKO\FXVWRPL]HGOX[XU\YHKLFOH
%
7KH ¿IWK VWUDWHJ\ LV WKH OHDVW VSHFXODWLYH RI DOO IRU WKH SURGXFHU
the buy-to-order strategy +HUH WKH SURGXFHU DZDLWV WKH FXVWRPHU
RUGHU EHIRUH HYHQ SXUFKDVLQJ WKH UDZ PDWHULDOV 7KLV DOORZV IRU
SURGXFWVWREHWUXO\FXVWRPEXLOWEXWFXVWRPHUVPXVWH[SHFWORQJHU
ZDLW WLPHV XQGHU WKLV V\VWHP 6XFK DUUDQJHPHQWV DUH VRPHWLPHV
XVHGLQWKHSURYLVLRQRIODUJHLQGXVWULDOSURGXFWVVXFKDVDLUFUDIWRU
VDWHOOLWHVRULQKRPHEXLOGLQJ
%
/DUJHPDQXIDFWXUHUVRIWHQXVHPXOWLSOHVWUDWHJLHVWRDFFRPPRGDWH
WKHLU YDULHWLHV RI SURGXFWV 6PDOOHU FRPSDQLHV JHQHUDOO\ VWDUW RII
ZLWK RQH RI WKH OHVV ULVN\ DQG OHVV VSHFXODWLYH VWUDWHJLHV VXFK DV
EX\WRRUGHU RU PDNHWRRUGHU VR WKDW WKH\ FDQ FRQVHUYH FDVK IRU
investments other than inventory.
%
/HDQ7KLQNLQJKDVKDGDVLJQL¿FDQWLQÀXHQFHRQWKHPDQDJHPHQW
RILQYHQWRU\DVLWUHODWHVWRSURGXFWLRQVWUDWHJLHV
ż
7UDGLWLRQDOO\ FRPSDQLHV UHOLHG RQ LQYHQWRU\ WR GHDO ZLWK D
YDULHW\ RI SUREOHPV )RU H[DPSOH WKH SUREOHP RI LQDFFXUDWH
VDOHV IRUHFDVWV RU XQUHOLDEOH VXSSOLHUV FDQ EH VROYHG MXVW E\
having more than enough inventory to cover any shortfalls or
ODWHVKLSPHQWV
ż
/HDQ7KLQNLQJKRZHYHUHQFRXUDJHVFRPSDQLHVQRWWRUHO\RQ
LQYHQWRU\ ,QVWHDG FRPSDQLHV VKRXOG LPSURYH WKHLU IRUHFDVWV
RUGHVLJQÀH[LEOHRSHUDWLRQVWKDWPDNHWKHPOHVVGHSHQGHQWRQ
IRUHFDVWV DQG PRUH UHVSRQVLYH WR DFWXDO GHPDQG &RPSDQLHV
DUHDOVRHQFRXUDJHGWRZRUNRQO\ZLWKUHOLDEOHVXSSOLHUVRUWR
KHOSH[LVWLQJVXSSOLHUVGHOLYHUEHWWHUPDWHULDOVPRUHUHOLDEO\
Developments in Production Operations
% $GYDQFHG WHFKQRORJLHV DUH PDNLQJ VLJQL¿FDQW FKDQJHV LQ WKH
ZRUOG RI SURGXFWLRQ RSHUDWLRQV ,Q IDFW RQH PDMRU GHYHORSPHQW
LVWKUHDWHQLQJWKHHQWLUHV\VWHPRIIDFWRU\EDVHGPDVVSURGXFWLRQ
WKDW ZH KDYH NQRZQ RYHU WKH SDVW FHQWXU\7KLV UHYROXWLRQ LV WKH
DGYHQW RI WKUHHGLPHQVLRQDO SULQWLQJ FUHDWLQJ ZKDW¶V NQRZQ DV
form-on-the-spot.
ż 7KLVWHFKQRORJ\KDVIRXQGXVHLQWKHSURGXFWLRQRIPRGHOVDQG
SURWRW\SHV LQ UHFHQW \HDUV EXW WKH SURVSHFWV IRU XVLQJ IRUP
RQWKHVSRWSURGXFWLRQKDYHVHWPLQGVUDFLQJLQWKHRSHUDWLRQV
¿HOG -XVW DV ZH QRZ GRZQORDG PXVLF DQG ERRNV IURP WKH
,QWHUQHW LPDJLQH GRZQORDGLQJ WKUHHGLPHQVLRQDO EOXHSULQWV
KLWWLQJ WKH SULQW EXWWRQ DQG ZDWFKLQJ SK\VLFDO JRRGV WDNH
VKDSHULJKWEHIRUH\RXUH\HV
ż
7R GDWH WKUHHGLPHQVLRQDO SULQWLQJ LV OLPLWHG WR VLPSOH
SURGXFWV ZLWK VLPSOH PDWHULDOV 7KDW VLWXDWLRQ LV FKDQJLQJ
TXLFNO\ WKRXJK VXFK FRPSDQLHV DV *HQHUDO (OHFWULF DUH
PDNLQJVLJQL¿FDQWLQYHVWPHQWVLQDGYDQFLQJWKHPDQXIDFWXULQJ
FDSDELOLWLHVRIWKHSULQWLQJHTXLSPHQW
%
$QRWKHU GHYHORSPHQW WR ZDWFK LV WKH ULVH RI nearshoring DQG
reshoring$OWKRXJKVRPHFRPSDQLHVFRQWLQXHWRIDYRURXWVRXUFLQJ
RI PDQXIDFWXULQJ RSHUDWLRQV WR VXSSOLHUV LQ ORZFRVW FRXQWULHV
WKHUHLVDOVRDWUHQGLQWKHRSSRVLWHGLUHFWLRQ
ż &RPSDQLHVKDYHOHDUQHGWKDWLW¶VGLI¿FXOWWRDQWLFLSDWHDOOWKH
WKLQJV WKDW FDQ JR ZURQJ ZLWK RIIVKRULQJ VXFK DV IUHTXHQW
SRZHU RXWDJHV KLJK ODERU WXUQRYHU DQG VR RQ ,Q UHDFWLRQ WR
WKLV UHDOLW\ PDQ\ FRPSDQLHV WKDW RQFH RIIVKRUHG WR ORZFRVW
FRXQWULHV DUH UHJLRQDOL]LQJ WKHLU VXSSO\ FKDLQV PHDQLQJ WKDW
WKH\DUHVHHNLQJWRSURGXFHFORVHUWRWKHPDUNHWVWKH\¶UHWU\LQJ
to serve.
Lecture 14: Leaner, Meaner Production
ż
Nearshoring UHIHUV WR WKH SUDFWLFH RI SURGXFLQJ FORVH WR WKH
IRFDOPDUNHWSUREDEO\LQDORFDWLRQWKDWVWLOORIIHUVVRPHFRVW
DGYDQWDJH EXW ZLWK OHVV XQFHUWDLQW\ WKDQ IDURII ORFDWLRQV
Reshoring UHIHUV WR EULQJLQJ RQFHRIIVKRUHG PDQXIDFWXULQJ
back home.
%
)LQDOO\ WKH QH[W VLJQL¿FDQW ZDYH RI LQQRYDWLRQ LQ SURGXFWLRQ
RSHUDWLRQVPD\FRPHZLWK WKH IRFXV RQ VXVWDLQDELOLW\ 2XU DELOLW\
WR VHUYH D JURZLQJ SRSXODWLRQ LQ D PRUH VXVWDLQDEOH IDVKLRQ ZLOO
EH DW WKH IRUHIURQW RI FRUSRUDWH GHFLVLRQV DQG QDWLRQDO SROLF\ LQ
WKH FRPLQJ \HDUV 7KLV FRXOG PHDQ FKRRVLQJ GLIIHUHQW PDWHULDOV
DQG FUHDWLQJ SURGXFWV XVLQJ PDQXIDFWXULQJ SURFHVVHV DQG HQHUJ\
VRXUFHVWKDWGRQ¶WSROOXWHWKHDLUODQGRUZDWHU
%
3URGXFWLRQ RSHUDWLRQV LV D NH\ IDFWRU LQ DOO WKHVH GHYHORSPHQWV
:KHWKHULWGULYHVWKHPRUVLPSO\LQFRUSRUDWHVDQGDGDSWVWRWKHP
LWZLOOEHFHQWUDOLQWKH\HDUVDKHDGWRVRPHRIWKHPRVWGUDPDWLF
FKDQJHVLQKRZZHOLYHKRZZHFUHDWHDQGKRZZHLQWHUDFWZLWK
RXUSODQHW
Suggested Reading
.D]PHU³0DQXIDFWXULQJ2XWVRXUFLQJ2QVKRULQJDQG*OREDO(TXLOLEULXP´
6KLK³:KDW,W7DNHVWR5HVKRUH0DQXIDFWXULQJ6XFFHVVIXOO\´
6LPFKL/HYL3HUXYDQNDO0XODQL5HDGDQG)HUUHLUD³,V,W7LPHWR5HWKLQN
<RXU0DQXIDFWXULQJ6WUDWHJ\"´
:LOOLDPVRQ³2XWVRXUFLQJ´
Questions to Consider
1. :K\ZRXOGDFRPSDQ\HOHFWWRRXWVRXUFHWKHSURGXFWLRQRISURGXFWV
EHDULQJ WKH FRPSDQ\¶V EUDQG QDPH" :KDW DUH WKH ULVNV LQKHUHQW
LQRXWVRXUFLQJ"
2. +RZGR\RXVHOHFWWKHULJKWPDQXIDFWXULQJVWUDWHJ\IRUDSURGXFW":KDW
PDNHVLWWKH³ULJKWVWUDWHJ\´"
3. +RZ GRHV WKH SXUVXLW RI VXVWDLQDELOLW\ DIIHFW GHFLVLRQ PDNLQJ LQ
SURGXFWLRQRSHUDWLRQV"
5H¿QLQJ6HUYLFH2SHUDWLRQV
Lecture 15
2
/HFWXUH5H¿QLQJ6HUYLFH2SHUDWLRQV
YHU WKH SDVW VHYHUDO GHFDGHV WKH 8QLWHG 6WDWHV KDV VHHQ D PDMRU
VKLIW LQ LWV HFRQRP\²IURP EHLQJ GRPLQDWHG E\ PDQXIDFWXULQJ WR
IRFXVLQJ PRUH RQ VHUYLFHV 7KLV VKLIW LV UHÀHFWHG LQ WKH IDFW WKDW
WRGD\¶VVHUYLFHVVHFWRUUHSUHVHQWVQHDUO\RIWKHQDWLRQ¶VJURVVGRPHVWLF
SURGXFW,QDGGLWLRQVL[RXWRIVHYHQSHRSOHLQWKHZRUNIRUFHDUHHPSOR\HG
LQ VHUYLFHV ,Q WKLV OHFWXUH ZH ZLOO H[DPLQH WKH HVVHQWLDOV RI PDQDJLQJ
VXFFHVVIXO VHUYLFHRSHUDWLRQVWDNLQJLQWRDFFRXQWWKHFRPSOH[SV\FKRORJ\
LQYROYHGLQZLQQLQJRYHUFXVWRPHUVWKURXJKJUHDWH[SHULHQFHV$VZH¶OOVHH
WKHUH DUH VLJQL¿FDQW GLIIHUHQFHV EHWZHHQ VHUYLFH RSHUDWLRQV DQG SURGXFW
RULHQWHGRSHUDWLRQV\HWVHUYLFHRSHUDWLRQVFDQVWLOOERUURZVRPHLPSRUWDQW
FRQFHSWVIURPWKHVFLHQFHRIWKHSURGXFWLRQZRUOG
'H¿QLQJServices
% The term VHUYLFHV UHIHUV WR D ZLGH YDULHW\ RI DFWLYLWLHV IURP
FRQVXPHU VHUYLFHV VXFK DV KHDOWK FDUH UHVWDXUDQWV UHWDLO DQG
EDQNLQJWRLQGXVWULDODQGSURIHVVLRQDOVHUYLFHVVXFKDVDGYHUWLVLQJ
WUDQVSRUWDWLRQDQGOHJDOVHUYLFHVWRJRYHUQPHQWDQGFLYLOVHUYLFHV
LQFOXGLQJVFKRROVHPHUJHQF\VHUYLFHVDQGSRVWDOGHOLYHU\
%
3HUKDSV WKH PRVW IXQGDPHQWDO GLIIHUHQFH EHWZHHQ SURGXFWLRQ
RSHUDWLRQVDQGVHUYLFHRSHUDWLRQVLVWKHLQWDQJLELOLW\RIVHUYLFHVDV
DGHOLYHUDEOH
ż $OWKRXJKVHUYLFHRSHUDWLRQVPD\VRPHWLPHVKDYHVRPHRIWKH
DWWULEXWHVRISK\VLFDOSURGXFWVWKHGHOLYHUDEOHLQVHUYLFHVLVDQ
RXWFRPHRUH[SHULHQFHIRUWKHFXVWRPHU
ż
106
,QVRPHZD\VWKLVFDQPDNHWKHPDQDJHPHQWRIVHUYLFHVPRUH
FRPSOLFDWHGDQGFKDOOHQJLQJWKDQPDNLQJDSK\VLFDOSURGXFW
ZKHUH WKH VSHFL¿FDWLRQV DQG UHTXLUHPHQWV WHQG WR EH PRUH
concrete.
Assessing Services
% 2QH RI WKH PRVW VLJQL¿FDQW GHYHORSPHQWV LQ PRGHUQ VHUYLFH
RSHUDWLRQV KDV EHHQ WKH HVWDEOLVKPHQW RI WKH VHUYLFH TXDOLW\
VFDOH 6(5948$/ 'HYLVHG E\ DFDGHPLFV 6(5948$/ LV D
PHDVXUHPHQW V\VWHP GHGLFDWHG WR DVVHVVLQJ FXVWRPHU VDWLVIDFWLRQ
ZLWKVHUYLFHV,WKDVUHYROXWLRQL]HGKRZZHWKLQNDERXWDQGDVVHVV
VHUYLFHGHOLYHU\
%
6(5948$/¶V EDVLF SUHPLVH IRU GLVFHUQLQJ FXVWRPHU VDWLVIDFWLRQ
LVVLPSOH,WFRPSDUHVWKHFXVWRPHU¶VSHUFHSWLRQRIWKHVHUYLFHDV
LWZDVDFWXDOO\UHQGHUHGDJDLQVWWKHH[SHFWDWLRQVWKHFXVWRPHUKDG
JRLQJ LQWR WKH VHUYLFH DUUDQJHPHQW ,I WKH SHUFHLYHG SHUIRUPDQFH
H[FHHGVH[SHFWDWLRQVWKHQWKHFXVWRPHULVVDWLV¿HG,IH[SHFWDWLRQV
DUHQRWPHWWKHFXVWRPHULVVDLGWREHGLVVDWLV¿HG
%
6(5948$/ DVVHVVHV VHUYLFH TXDOLW\ E\ FRPSDULQJ H[SHFWDWLRQV
DQGSHUFHSWLRQVRISHUIRUPDQFHDFURVV¿YHLPSRUWDQWGLPHQVLRQV
7KHVHGLPHQVLRQVOLVWHGEHORZIRUPWKHDFURQ\P5$7(5
ż 5HVSRQVLYHQHVV KRZ SURPSWO\ WKH VHUYLFH SURYLGHU UHVSRQGV
WRWKHQHHGVRIWKHFXVWRPHU
ż
$VVXUDQFHWKHOHYHORIWKHFXVWRPHU¶VHDVHWKDWWKHVHUYLFHZLOO
EHFRQGXFWHGLQDFFRUGDQFHZLWKKLVRUKHUZLVKHV
ż
7DQJLEOHV WKH SK\VLFDO DVSHFWV RI WKH VHUYLFH SURYLVLRQ
LQFOXGLQJ WKH IDFLOLWLHV HTXLSPHQW DQG SHUVRQQHO WKDW ZLOO
VKDSHWKHFXVWRPHU¶VH[SHULHQFH
ż
(PSDWK\ WKH VHQVH RI FDULQJ DQG XQGHUVWDQGLQJ H[WHQGHG E\
WKHVHUYLFHSURYLGHUWRWKHFXVWRPHU
ż
5HOLDELOLW\WKHDELOLW\WRSHUIRUPWKHVHUYLFHRQDGHSHQGDEOH
DQGDFFXUDWHEDVLVFRPSDUHGWRZKDWLVSURPLVHG
107
‹PRQNH\EXVLQHVVLPDJHVL6WRFN7KLQNVWRFN
Arguably, building relationships is of much greater importance in service
LQGXVWULHVWKDQLQSURGXFWLRQEXVLQHVVHVEHFDXVHVHUYLFHFRPHVGRZQWR
WUXVW²WUXVWLQJWKDWWKHRXWFRPHZLOOEHZKDWWKHFXVWRPHULVVHHNLQJ
/HFWXUH5H¿QLQJ6HUYLFH2SHUDWLRQV
%
,QDGGLWLRQWRSURYLGLQJDVFDOHRIVHUYLFHTXDOLW\6(5948$/DOVR
LGHQWL¿HVVHYHUDOVHUYLFHJDSVWKDWFDQLUULWDWHRUUHSHOFXVWRPHUV
7KHVHLQFOXGHDQLQDELOLW\WRPDWFKSHUIRUPDQFHZLWKH[SHFWDWLRQV
GLIIHUHQFHVLQH[SHFWDWLRQVEHWZHHQWKHSURYLGHUDQGWKHFXVWRPHU
DQGWKHSHUFHSWLRQRISHUIRUPDQFH
Process Improvement: Lean Thinking
% %HFDXVH HIIHFWLYH VHUYLFH LV VR LPSRUWDQW WR PHHWLQJ FXVWRPHU
GHPDQGV D ¿HOG RI VWXG\ NQRZQ DV SURFHVV LPSURYHPHQW has
GHYHORSHG IRU UH¿QLQJ VHUYLFH RSHUDWLRQV 7KLV GLVFLSOLQH FRPHV
IURPSURGXFWLRQRSHUDWLRQV
%
108
$OO ZRUN²ZKHWKHU LW¶V PDQXIDFWXULQJ ZLGJHWV RU PDNLQJ
HVSUHVVRV²LV FRPSOHWHG LQ SURFHVVHV DQG HDFK SURFHVV LQYROYHV
D VHULHV RI VWHSV LQ ZKLFK LQSXWV DUH FRQYHUWHG LQWR RXWSXWV
IRU D FXVWRPHU 7KH WZR PRVW LQÀXHQWLDO PHWKRGV IRU SURFHVV
LPSURYHPHQW DUH DOUHDG\ IDPLOLDU WR XV IURP WKH SURGXFWLRQ
RSHUDWLRQV FRQWH[W /HDQ 7KLQNLQJ DQG 6L[ 6LJPD 7KH SUHPLVH
RIERWKWKHVHPHWKRGVLVWKDWDOOSURFHVVHVFDQEHLPSURYHG7KLV
UHDVRQLQJ LV SDUWLFXODUO\ WUXH LQ VHUYLFHV EHFDXVH WKH\ UHO\ RQ
SHRSOHZKRDUHSURQHWRHUURUV
%
2QHSULQFLSOHRISURFHVVLPSURYHPHQWWKDWFDQKHOSDFKLHYHKLJK
SHUIRUPLQJVHUYLFHVLVWKHFRQFHSWRIstandard work. This involves
¿QGLQJWKHEHVWZD\WRFRPSOHWHDZRUNWDVNGRFXPHQWLQJLWDQG
WHDFKLQJLWWRRWKHUV7KLVLVDVLPSOHLGHDEXWLW¶VKDUGWRDFKLHYH
LQVHUYLFHHQYLURQPHQWVZKHUHRSHUDWRUVWHQGWRGHYHORSLQGLYLGXDO
SDWWHUQVRIEHKDYLRU$QGZKHQQRVWDQGDUGVH[LVWIRUZRUN\RXFDQ
H[SHFWGLIIHUHQWTXDOLWLHVLQWKHRXWFRPH7KHFKDOOHQJHIRUVHUYLFHV
LVWRSURYLGHFRQVLVWHQWO\JRRGRXWFRPHVIRUFXVWRPHUV
ż ,Q 6WDUEXFNV VHW RXW WR DGGUHVV WKLV SUREOHP E\ VHWWLQJ
XSLWV/HDQ,QQRYDWLRQ/DE7KHJRDOZDVWRGHYHORSDQGWHVW
GLIIHUHQW ZD\V WR SHUIRUP VWRUH URXWLQHV LQ VHDUFK RI WKH EHVW
ZD\ WR SHUIRUP DOO YDULHWLHV RI ZRUN LQFOXGLQJ FOHDQLQJ XS
UHVWRFNLQJGLVSOD\VDQGSUHSDULQJFRIIHH
ż
%
7KH LQLWLDWLYH KDG QXPHURXV EHQH¿WV %\ ¿QGLQJ DQG
VWDQGDUGL]LQJ LWV EHVW SUDFWLFHV 6WDUEXFNV HQVXUHG D FOHDQHU
DQGPRUHDSSHDOLQJVLWWLQJDUHDDQGUHGXFHGWKHDPRXQWRIWLPH
DQG ZDVWHG PRWLRQ LQYROYHG LQ EUHZLQJ DQG VHUYLQJ FRIIHH
&UHDWLQJVWDQGDUGZRUNURXWLQHVUHVXOWHGLQDFKLHYLQJSRVLWLYH
FXVWRPHUH[SHULHQFHVPRUHFRQVLVWHQWO\ZKLFKKDVIXHOHGWRS
OLQHJURZWKDQGUHGXFHGFRVWV
$QRWKHUYDOXDEOHZD\WRDSSO\OHDQSULQFLSOHVLQVHUYLFHVHWWLQJVLV
WRFRPSDUHSURFHVVWLPHZLWKtakt time. TaktLVD*HUPDQWHUPWKDW
UHIHUV WR WKH WDUJHWHG RU JRDO WLPH IRU DQ DFWLYLW\²WKH DPRXQW RI
WLPHLQZKLFKDQDFWLYLW\PXVWEHFRPSOHWHGLQRUGHUWRNHHSSDFH
ZLWKGHPDQG,QFRQWUDVWSURFHVVWLPH refers to the amount of time
UHTXLUHGWRDFWXDOO\FRPSOHWHWKHDFWLYLW\
ż &RQVLGHUIRUH[DPSOHDPHQ¶VJURRPLQJVDORQ7KHRZQHURI
WKHVDORQZRXOGOLNHWRDFKLHYHDVPXFKWKURXJKSXWDVSRVVLEOH
LQ WKH VKRS 0DQ\ RI WKH FRVWV DVVRFLDWHG ZLWK WKH VKRS DUH
¿[HGWKXVWKHPRUHFXVWRPHUVVHUYHGWKHPRUHUHYHQXHDQG
SUR¿WFDQEHDFKLHYHG
109
/HFWXUH5H¿QLQJ6HUYLFH2SHUDWLRQV
110
ż
/HW¶V VD\ WKDW RQ DYHUDJH LW WDNHV PLQXWHV IRU D VW\OLVW WR
JLYH D VLPSOH KDLUFXW 7KLV LV WKH SURFHVV WLPH IRU WKH ZRUN
2YHU WKH FRXUVH RI DQ KRXU GD\ D VW\OLVW FRXOG VHUYH FXVWRPHUVRUSHUKRXU%XWZKDWLIWKHVKRSKDVGHPDQGIRU
KDLUFXWVDGD\"&OHDUO\WKDWGHPDQGFDQQRWEHPHWZLWKRQH
VW\OLVWEHFDXVHLWWUDQVODWHVWRҀKRXUVRIZRUN
ż
7KHWDNWWLPHWRNHHSSDFHZLWKWKLVGHPDQGLVGHWHUPLQHGE\
GLYLGLQJ KRXUV PLQXWHV E\ FXVWRPHUV WKH UHVXOW
LV PLQXWHV %XW WKH SURFHVV WLPH LV PRUH WKDQ WKUHH WLPHV
WKDW&OHDUO\WKHRZQHUZLOOQHHGPRUHUHVRXUFHVWRVHUYH
customers in 8 hours.
ż
7KLVFRPSDULVRQRISURFHVVWLPHDQGWDNWWLPHFDQEHKHOSIXOLQ
GHWHUPLQLQJWKHDPRXQWRIUHVRXUFHVQHHGHGWRJHWDMREGRQH
LQDQDOORWWHGDPRXQWRIWLPH%XWWKHUHDOOHVVRQKHUHLVQRWWR
VLPSO\WDNHWKHVHQXPEHUVDVDJLYHQ%\¿QGLQJWKHEHVWZD\
WR SHUIRUP WKH ZRUN FRPSDQLHV FDQ UHGXFH WKH SURFHVV WLPH
UHTXLUHGWRVHUYHWKHLUFXVWRPHUVPDNLQJWKHPEHWWHUDEOHWR
PHHWJUHDWHUGHPDQG
%
$QRWKHU YDULDEOH WKDW FRPSDQLHV VRPHWLPHV RYHUORRN ZKHQ
PDQDJLQJ WKH VXSSO\GHPDQG HTXDWLRQ LV WKHLU DELOLW\ WR DOWHU
GHPDQG WKURXJK SULFLQJ 7KDW¶V QRW D VHUYLFH RSHUDWLRQV GHFLVLRQ
SHU VH EXW LW FDQ KDYH D VLJQL¿FDQW LPSDFW RQ WKH SURYLVLRQ RI
VHUYLFHV)RUH[DPSOH'HOOKDVORQJXVHGD³VHOOZKDW\RXKDYH´
VWUDWHJ\ WKDW GULYHV FXVWRPHUV WR WKH SURGXFWV WKH FRPSDQ\ KDV
KLJKLQLQYHQWRU\DQGDZD\IURPLWHPVWKDWDUHDWULVNRIJRLQJLQWR
EDFNRUGHU7KLVLVDFFRPSOLVKHGE\VLPSO\FKDQJLQJWKHSULFHIRU
WKHVHLWHPVLQDG\QDPLFPDQQHU
%
5HODWHGWRWKHSDFHRIGHPDQGVRPHWKLQJWKDWDQ\RQHZRUNLQJLQ
services knows is that if you have to staff a business at all times
WR KDQGOH XQH[SHFWHG SHDNV LQ GHPDQG \RX¶OO KDYH VLJQL¿FDQW
GRZQWLPH 7R DGGUHVV WKLV SUREOHP /HDQ 7KLQNLQJ VHWV IRUWK WKH
FRQFHSW RI heijunka D -DSDQHVH WHUP WKDW UHIHUV WR WKH VPRRWKLQJ
RXW RI GHPDQG 6XFK VPRRWKLQJ RXW FDQ EH DFFRPSOLVKHG E\
RIIHULQJGLVFRXQWVRURWKHUSURPRWLRQVWRGULYHEXVLQHVVWRRIISHDN
WLPHVDQGDYRLGWKHSUREOHPRISD\LQJVWDIIWRVLWLGOH
3URFHVV,PSURYHPHQW6L[6LJPD
% 7KH6L[6LJPDDSSURDFKFDQDOVREHDSSOLHGWRVHUYLFHHQYLURQPHQWV
$VPHQWLRQHGHDUOLHUWKHWHUPUHODWHVWRWKHVWDQGDUGGHYLDWLRQLQD
SURFHVV6WDQGDUGGHYLDWLRQLVDPHDVXUHRIYDULDWLRQ:KHQWKHUHLV
YDULDWLRQLQLQSXWVRUYDULDWLRQLQKRZZRUNLVSHUIRUPHGWKHUHVXOW
will be variation in outcomes.
%
6L[6LJPDHQFRXUDJHVEXVLQHVVHVWRURRWRXWWKHVRXUFHVRIYDULDWLRQ
DQG HVWDEOLVK JUHDWHU SUHFLVLRQ LQ KRZ ZRUN LV FRQGXFWHG 7KLV
DSSURDFKUHIXVHVWRDFFHSWWKHLGHDWKDWWR³HUULVKXPDQ´DQGVHHNV
WR HOLPLQDWH WKH VRXUFHV RI HUURU²QRW WKH SHRSOH EXW WKH DFWLRQV
WKH\SHUIRUPWKDWOHDGWRHUURUDQGGHIHFWV
%
%\ GH¿QLWLRQ 6L[6LJPD SHUIRUPDQFH LV DFKLHYHG ZKHQ GHIHFWV
QXPEHU IHZHU WKDQ SHU PLOOLRQ RSSRUWXQLWLHV IRU GHIHFW
$FKLHYLQJ WKDW OHYHO RI GHIHFWIUHH SHUIRUPDQFH LV SUREDEO\ QRW
DWWDLQDEOHLQKXPDQGULYHQSURFHVVHVVXFKDVWKRVHIRXQGLQPRVW
VHUYLFHV %XW ZKHWKHU DQ RUJDQL]DWLRQ DFKLHYHV VLJPD VLJPD
RU VLJPD LV QRW ZKDW UHDOO\ PDWWHUV :KDW PDWWHUV LV ZKHWKHU
WKH FRPSDQ\ DQG LWV SURFHVVHV DUH LPSURYLQJ$QG LI WKH ¿UP LV
LPSURYLQJIDVWHUWKDQLWVFRPSHWLWLRQWKDWERGHVZHOOIRUWKHIXWXUH
Service-Dominant Logic (SDL)
% 2QHEXVLQHVVWKHRU\WKDWKDVGUDZQDJRRGGHDORIDWWHQWLRQUHFHQWO\
is VHUYLFHGRPLQDQW ORJLF 6'/ ZKLFK WR VRPH GHJUHH XQLWHV WKH
SULQFLSOHV RI VHUYLFH RSHUDWLRQV DQG SURGXFWLRQ RSHUDWLRQV 6'/
VXJJHVWV WKDW EXVLQHVVHV PRYH DZD\ IURP PDUNHWLQJ JRRGV WR D
QRWLRQRIFRFUHDWLRQRIYDOXH7KHLGHDLVWKDWLQDSXUFKDVHVLWXDWLRQ
FXVWRPHUVDUHEX\LQJPRUHWKDQMXVWDSURGXFWWKH\¶UHEX\LQJWKH
DELOLW\ WR XVH WKH SURGXFW LQ WKH SXUVXLW RI HQMR\PHQW7KHUH LV DQ
RQJRLQJUHODWLRQVKLSEHWZHHQWKHFXVWRPHUDQGWKHSURGXFWDQGWKDW
FUHDWHVQHZEXVLQHVVRSSRUWXQLWLHVIRUWKHSURYLGHU
111
%
7KLV LV D IXQGDPHQWDOO\ GLIIHUHQW ZD\ WR YLHZ D SURGXFW DQG LQ
WXUQ WR VHOO WKH SURGXFW ,W LV QRW DQ HQG LQ LWV RZQ ULJKW EXW SDUW
RI D VROXWLRQ :H VHH VLPLODU WUDQVLWLRQV WR D VROXWLRQ RULHQWDWLRQ
RFFXUULQJLQPDQ\LQGXVWULHV;HUR[IRUH[DPSOHKDVPRYHGDZD\
IURP VHOOLQJ FRSLHUV WR EXVLQHVV FXVWRPHUV ,QVWHDG LW LQVWDOOV D
PXOWLIXQFWLRQFRSLHULQDQRI¿FHDQGWKHFXVWRPHULVFKDUJHGIRU
LWVXVHEDVHGRQSDJHVFRSLHGDQGGRFXPHQWVVFDQQHGSULQWHGDQG
PDLOHG7KLVVKLIWLQRULHQWDWLRQKDVWXUQHGZKDWPLJKWKDYHEHHQ
RQHWLPHVDOHVLQWROXFUDWLYHRQJRLQJUHYHQXHVWUHDPV
%
1RWLFHWKDWWKHUHLVDSK\VLFDOSURGXFWDWWKHFHQWHURIWKHVHUYLFHV
WKDW ;HUR[ SURYLGHV 7KH QHZ IRFXV KRZHYHU LV RQ D FUHDWLYH
VROXWLRQWKDWGRHVQ¶WLQYROYHGXPSLQJWKHSURGXFWLQWKHODSRIWKH
FXVWRPHU WKHQ ZDONLQJ DZD\ 5DWKHU LW LQYROYHV HVWDEOLVKLQJ DQG
PDLQWDLQLQJ D UHODWLRQVKLS ZLWK WKH FXVWRPHU ,W EHFRPHV PXFK
PRUH GLI¿FXOW IRU FRPSHWLWRUV WR VZD\ FXVWRPHUV ZLWK JUDQGLRVH
SURPLVHV ZKHQ FXVWRPHUV WUXVW \RXU FRPSDQ\ WR GHOLYHU GHVLUHG
outcomes reliably.
Suggested Reading
/HFWXUH5H¿QLQJ6HUYLFH2SHUDWLRQV
*HRUJHDQG*HRUJH/HDQ6L[6LJPDIRU6HUYLFH.
+VLHK³=DSSRV¶V&(2RQ*RLQJWR([WUHPHVIRU&XVWRPHUV´
.DVWDOOL 9DQ /RR\ DQG 1HHO\ ³6WHHULQJ 0DQXIDFWXULQJ )LUPV WRZDUGV
6HUYLFH%XVLQHVV0RGHO,QQRYDWLRQ´
5DPGDV7HLVEHUJDQG7XFNHU³)RXU:D\VWR5HLQYHQW6HUYLFH'HOLYHU\´
5DZVRQ'XQFDQDQG-RQHV³7KH7UXWKDERXW&XVWRPHU([SHULHQFH´
=HLWKDPO3DUDVXUDPDQDQG%HUU\'HOLYHULQJ4XDOLW\6HUYLFH.
112
Questions to Consider
1. :KDW PDNHV WKH SURYLVLRQ RI VHUYLFHV GLIIHUHQW IURP SURGXFWLRQ
RSHUDWLRQV",VLWHDVLHULQVRPHZD\VDQGKDUGHULQRWKHUV"
2. 1DPH D VHUYLFH FRPSDQ\ WKDW \RX ZRXOG FRQVLGHU JUHDW:KDW PDNHV
WKLVFRPSDQ\JUHDW"
3. +RZGRWKHSULQFLSOHVRIRSHUDWLRQDOH[FHOOHQFHIRXQGLQ/HDQ7KLQNLQJ
DQG6L[6LJPDKHOSDVHUYLFHEXVLQHVVWRFRPSHWHPRUHHIIHFWLYHO\"
Matching Supply and Demand
Lecture 16
S
DOHVDQGRSHUDWLRQVSODQQLQJ 6 23 LVDSURYHQPHWKRGIRU¿QGLQJ
WKH EDODQFH EHWZHHQ SURPLVH PDNLQJ DQG SURPLVH NHHSLQJ 7KH
SURFHVV FRQVLVWV RI WKH LQWHJUDWLRQ RI D FRPSDQ\¶V VDOHV IRUHFDVWV
ZLWK WKH RSHUDWLRQV SODQV IURP WKH SXUFKDVLQJ SURGXFWLRQ DQG ORJLVWLFV
GHSDUWPHQWV ,Q WKLV OHFWXUH ZH¶OO H[DPLQH WKH VSHFL¿F LQSXWV DQG
RUJDQL]DWLRQDOUHTXLUHPHQWVQHHGHGWRDFKLHYHWKLVEDODQFH
Lecture 16: Matching Supply and Demand
Background on Sales and Operations Planning (S&OP)
% 0RVW EXVLQHVVHV DUH FRPSRVHG RI GLIIHUHQW GHSDUWPHQWV VXFK DV
VDOHV PDUNHWLQJ DFFRXQWLQJ SXUFKDVLQJ SURGXFWLRQ ORJLVWLFV
5 ' DQG +5 7KH UHDVRQ IRU WKLV LV WKDW KXPDQV GHDO ZLWK
FRPSOH[LW\ E\ EHFRPLQJ VSHFLDOL]HG GHYHORSLQJ NQRZOHGJH DQG
VNLOOVHWVWKDWDOORZXVWRSHUIRUPVSHFL¿FIXQFWLRQV
%
$IXQFWLRQDORULHQWDWLRQKHOSVXVHQVXUHWKDWZH³FRYHUDOOWKHEDVHV´
LQDQRUJDQL]DWLRQEXWLW¶VVRPHWLPHVGLI¿FXOWWRHVWDEOLVKEDODQFH
DQG FRRUGLQDWLRQ DFURVV WKH GHSDUWPHQWV 7KLV LV SDUWLFXODUO\ WUXH
ZKHQ WKH GHSDUWPHQWV DUH LQ FRQÀLFW ZLWK RQH DQRWKHU7KHUH LV D
QDWXUDOWHQGHQF\LQWLPHVRIFRQÀLFWWRGHIHQGRXUWXUIUDWKHUWKDQ
WR JLYH LQ DQG SXUVXH RXWFRPHV WKDW PLJKW EHQH¿W WKH FROOHFWLYH
JRRG)XUWKHUFRPSDQLHVRIWHQKDYHPHDVXUHPHQWV\VWHPVLQSODFH
WKDWUHLQIRUFH³IXQFWLRQDOVLORV´DQGWXUIZDUV
%
3HUKDSV WKH JUHDWHVW GLYLGH IRXQG LQ RUJDQL]DWLRQV LV WKH RQH
EHWZHHQ WKH GHPDQG DQG VXSSO\ VLGHV RI WKH EXVLQHVV 7KH
FXVWRPHUIDFLQJGHSDUWPHQWVUHVSRQVLEOHIRUJHQHUDWLQJGHPDQG²
QDPHO\ VDOHV DQG PDUNHWLQJ²DUH KHOG DFFRXQWDEOH IRU WRSOLQH
UHYHQXH0HDQZKLOHWKHVXSSO\VLGHRSHUDWLRQVGHSDUWPHQWVVXFK
DVSXUFKDVLQJSURGXFWLRQDQGORJLVWLFVKDYHWKHUHVSRQVLELOLW\RI
GHOLYHULQJRQWKDWGHPDQGEXWGRLQJVRDWWKHORZHVWSRVVLEOHFRVW
WRHQVXUHWKDWWKHFRPSDQ\QHWVPDUJLQVDQGSUR¿WV
7KHVH WZR IRUFHV RIWHQ ¿QG WKHPVHOYHV DW RGGV 7KH SURPLVH
PDNHUV LQ VDOHV DQG PDUNHWLQJ EODPH RSHUDWLRQV IRU DQ LQDELOLW\
WRVDWLVI\WKHGHPDQGWKH\¶YHZRUNHGWRFUHDWH$WWKHVDPHWLPH
WKHRSHUDWLRQVSHUVRQQHOWDNHRIIHQVHDWZKDWWKH\VHHDVVDOHVDQG
PDUNHWLQJ¶V FDVXDO DSSURDFK WR PDNLQJ SURPLVHV WKDW SUREDEO\
VKRXOGQ¶WKDYHEHHQPDGHLQWKH¿UVWSODFH
%
,W¶VLPSRUWDQWWRJHWSURPLVHPDNHUVDQGSURPLVHNHHSHUVRQWKHVDPH
SDJHEHFDXVHIDLOLQJWRGHOLYHURQFXVWRPHURUGHUVRUEHLQJIRUFHGWR
WHPSHUGHPDQGDIIHFWVWKHFRPSDQ\¶VFUHGLELOLW\LQWKHPDUNHWSODFH
DQG FUHDWHV RSSRUWXQLWLHV IRU FRPSHWLWRUV 8QGHUVXSSO\ RSHQV WKH
GRRU IRU WKH FRPSHWLWLRQ DQG RYHUVXSSO\ OHDYHV H[FHVV LQYHQWRU\
WKDWPXVWHLWKHUEHPDUNHGGRZQRUZULWWHQRII6DOHVDQGRSHUDWLRQV
SODQQLQJ 6 23 ZDVGHVLJQHGWRDGGUHVVWKHVHSUREOHPV
%
)XQGDPHQWDOO\6 23LVDERXWJDWKHULQJDQGVKDULQJLQIRUPDWLRQ
7KXVWKH¿UVWVWHSLVWRIRUPDQ6 23WHDPRIVHQLRUGHSDUWPHQWDO
UHSUHVHQWDWLYHV IURP ZLWKLQ \RXU FRPSDQ\ DQG JDLQ WKH EX\LQ RI
WKHSDUWLHVLQYROYHG$VWKHWHUPS&OP suggests, the key function
RIWKLVWHDPLVSODQQLQJ
‹-DFRE:DFNHUKDXVHQL6WRFN7KLQNVWRFN
%
The goal of the monthly S&OP team meeting is for all parties to arrive at
DFRPPRQYLVLRQRIZKDW¶VH[SHFWHGLQWKHFRPLQJPRQWKDQGWRVKDUHD
FRPPLWPHQWWRGRLQJWKHLUSDUWWRIXO¿OOWKDWYLVLRQ
ż
7KHVDOHVDQGPDUNHWLQJUHSUHVHQWDWLYHVVKRXOGZRUNWRJHWKHU
WREULQJIRUZDUGWKHVDOHVSLFWXUHIRUWKHFRPLQJPRQWKV
ż
7KHSXUFKDVLQJSURGXFWLRQDQGORJLVWLFVUHSVSUHSDUHFDSDFLW\
SODQVZLWKUHDG\H[SODQDWLRQVIRUDQ\DQWLFLSDWHGFKDQJHVLQ
RSHUDWLQJFDSDFLW\
ż
)LQDQFH DQG +5 SOD\ FRQVXOWDWLYH UROHV UHODWHG WR WKH
GHSOR\PHQWRI¿QDQFLDODQGKXPDQUHVRXUFHV
ż
1HZSURGXFWGHYHORSPHQWVSHDNVWRWKHUHDGLQHVVDQGWLPLQJ
RI SURGXFW ODXQFKHV WKDW FDQ EH H[SHFWHG WR VLSKRQ UHVRXUFHV
IURPH[LVWLQJSURGXFWV
Lecture 16: Matching Supply and Demand
Sales Forecasting
% &RQVLGHUDEOHZRUNWDNHVSODFHZLWKLQHDFKGHSDUWPHQWOHDGLQJXS
WR WKH PRQWKO\ PHHWLQJ RI WKH 6 23 WHDP 6DOHV DQG PDUNHWLQJ
VKRXOG FROODERUDWH WR FRRUGLQDWH SURPRWLRQV DQG RWKHU VWUDWHJLHV
WKDW PLJKW EH LQ SODFH WR EROVWHU VDOHV 7KHVH WHDP PHPEHUV DOVR
JHQHUDWH VKRUWWHUP VDOHV IRUHFDVWV W\SLFDOO\ FRYHULQJ D SHULRG RI
one to three months. Sales forecasts come in one of two varieties:
TXDOLWDWLYHRUTXDQWLWDWLYH
%
116
4XDOLWDWLYH IRUHFDVWV DUH HVVHQWLDOO\ EHVW JXHVVHV²IRUHFDVWV PDGH
ZLWKRXW QHFHVVDU\ GDWD KRZHYHU WKHVH IRUHFDVWV DUH QRW VKRWV
LQ WKH GDUN7KH\ UHO\ RQ WKH RSLQLRQV RI H[SHUWV ZKR DUH FORVHVW
WR WKH PDUNHW²¿HOG VDOHV UHSUHVHQWDWLYHV DQG KHDGTXDUWHUV
PDUNHWLQJ PDQDJHUV 7KHVH H[SHUWV EDVH WKHLU MXGJPHQWV RQ
PDUNHW LQWHOOLJHQFH LQFOXGLQJ WUHQGV IRU VDOHV RI UHODWHG LWHPV
GHPRJUDSKLFFKDQJHVDQGUHVSRQVHVWRPDUNHWLQTXLULHVDQG¿HOG
WHVWLQJRISURGXFWVRUVHUYLFHV,QWKHDEVHQFHRIVDOHVKLVWRU\²DV
ZLWKFRPSOHWHO\QHZSURGXFWV²TXDOLWDWLYHHVWLPDWHVDUHRIWHQWKH
EHVWRSWLRQVDYDLODEOH
%
%
4XDQWLWDWLYH IRUHFDVWLQJ PHWKRGV FRPH LQ PDQ\ GLIIHUHQW IRUPV
,GHDOO\WKH\UHO\RQGDWDIURPSDVWVDOHVRIWKHVDPHLWHP,QWKH
absence of this information, they might use historical sales of
VLPLODURUFRPSOHPHQWDU\LWHPV
ż 7KHHDVLHVWEXWOHDVWLQIRUPHGTXDQWLWDWLYHIRUHFDVWLVDsimple
average +HUH D FRPSDQ\ GLYLGHV WKH DYHUDJH VDOHV RYHU DQ
HQWLUH\HDUE\PRQWKVDQGPDNHVLWVSODQVZLWKWKHH[SHFWDWLRQ
RIVHOOLQJDSSUR[LPDWHO\WKHVDPHYROXPHHDFKPRQWK
ż
The moving averageWHFKQLTXHORRNVDWUHFHQWKLVWRU\RQO\²
SHUKDSVWKHODVW PRQWKV²WRJDXJHWKHDQWLFLSDWHGVDOHVIRU
WKHPRQWKDKHDG
ż
Exponential smoothing ORRNV DW WKH SUHYLRXV PRQWK¶V VDOHV
IRUHFDVWDQGWKHDFWXDOVDOHVIURPWKDWVDPHPRQWK$Qalpha
value, or VPRRWKLQJ IDFWRU LV WKHQ DSSOLHG WKDW JRYHUQV KRZ
PXFK HPSKDVLV LV SODFHG RQ HDFK IDFWRU 7KH VXP RI DFWXDO
VDOHVPXOWLSOLHGE\DOSKDDQGIRUHFDVWHGVDOHVPXOWLSOLHGE\í
DOSKD \LHOGV WKH IRUHFDVWHG YDOXH IRU WKH FRPLQJ PRQWK7KLV
DSSURDFK LV LQWHQGHG WR WDNH VRPH RI WKH HPRWLRQ RXW RI WKH
IRUHFDVWZKLOHVWLOOUHO\LQJRQUHFHQWGDWD
ż
The regression analysisPHWKRGRIIHUVDSUHGLFWLYHPRGHOWKDW
DOORZV PDQ\ IDFWRUV WR EH FRQVLGHUHG DW RQFH LQFOXGLQJ WKH
XQLTXH LQÀXHQFH RI WUHQGV VHDVRQV DQG F\FOLFDO LQÀXHQFHV
7KLV PHWKRG LV XVHG IRU SURGXFWV WKDW KDYH EHHQ LQ H[LVWHQFH
IRUVRPHWLPHDQGIRUZKLFKH[WHQVLYHVDOHVGDWDDUHDYDLODEOH
0RVWFRPSDQLHVXVHDFRPELQDWLRQRITXDQWLWDWLYHDQGTXDOLWDWLYH
IRUHFDVWLQJPHWKRGV7KHLGHDODSSURDFKLVWRJHQHUDWHDTXDQWLWDWLYH
IRUHFDVWDVDEDVHOLQHWKHQKDYHH[SHUWVZHLJKLQRQWKRVHQXPEHUV
:HUHWKHUHXQXVXDORFFXUUHQFHVLQUHFHQWPRQWKVWKDWDIIHFWHGWKH
KLVWRULFDO GDWD" $UH WKHUH DQ\ H[SHFWHG RFFXUUHQFHV LQ WKH QHDU
IXWXUHWKDWFRXOGDIIHFWWKHIRUHFDVW"%OHQGLQJKLVWRULFDOGDWDZLWK
H[SHUWRSLQLRQEULQJVWRJHWKHUWKHEHVWRIERWKZRUOGV
117
Lecture 16: Matching Supply and Demand
Capacity Planning
% 7KH RWKHU VLGH RI WKH 6 23 HTXDWLRQ LV FDSDFLW\ SODQQLQJ
VSHFL¿FDOO\ SODQQLQJ IRU VXSSO\ SURGXFWLRQ DQG WKH FRPELQDWLRQ
RIORJLVWLFVDQGGLVWULEXWLRQ/LPLWVLQDQ\RIWKHVHFDQLPSDLUWKH
FRPSDQ\¶VDELOLW\WRDFFRPPRGDWHWKHH[SHFWHGGHPDQGIRXQGLQ
the sales forecast.
118
%
6XSSO\ FDSDFLW\ SUREDEO\ UHVWV EH\RQG WKH GLUHFW FRQWURO RI \RXU
¿UP ,W¶V GHSHQGHQW RQ WKH FDSDFLW\ RI \RXU VXSSOLHUV DQG \RXU
DELOLW\ WR H[WUDFW VXSSOLHV IURP WKHP 7\SLFDOO\ FRPSDQLHV KDYH
VRPHVXSSOLHUVWKDWVHHPWREHDEOHWRRIIHUOLPLWOHVVVXSSOLHVDQG
RWKHUV WKDW SUHVHQW FRQVWUDLQWV 7KH FRQVWUDLQWV PD\ EH DEVROXWH
PHDQLQJWKDWWKHUHDUHOLPLWVWRWKHVHVXSSOLHUV¶DELOLW\WRVHUYH\RX
RUWKHDGGHGYROXPHPD\VLPSO\FRPHDWDSULFH&RPSDQLHVQHHG
WRXQGHUVWDQGERWKRIWKHVHEHFDXVHWKH\FDQLQÀXHQFHWKHYROXPH
DQGSULFHRIVXSSOLHVWKDWFDQEHDFTXLUHG
%
6XSSO\ DQG SURGXFWLRQ FDSDFLW\ FRPH WRJHWKHU LQ WKH PDWHULDOV
UHTXLUHPHQWVSODQ 053 ZKLFKH[SUHVVHVWKHTXDQWLW\DQGWLPLQJ
RIVXSSOLHVUHTXLUHGWRIHHGSURGXFWLRQ7KH053LVXVXDOO\GULYHQ
E\ WKH SURGXFWLRQ IRUHFDVW RU WKH PDVWHU SURGXFWLRQ VFKHGXOH
036 7KLV VFKHGXOH LOOXVWUDWHV ZKDW WKH FRPSDQ\ H[SHFWV WR
SURGXFH RYHU D SHULRG RI WLPH RIWHQ D PRQWK DQG FDQ EH EURNHQ
GRZQLQWRZHHNO\RUHYHQGDLO\SODQVIRUSURGXFWLRQ&OHDUO\WKH
VDOHVIRUHFDVWVKRXOGLQÀXHQFHWKLVSURGXFWLRQIRUHFDVW
%
7KH WKLUG FDSDFLW\ SODQ QHFHVVDU\ IRU 6 23 LV RQH IRU ORJLVWLFV
DQG GLVWULEXWLRQ +HUH WKHUH PD\ EH FDSDFLW\ FRQVWUDLQWV RQ KRZ
PXFKSURGXFWFDQEHVWRUHGDQGPRYHGRYHUDSHULRGRIWLPH7KDW
FDSDFLW\ PD\ EH OLPLWHG E\ ZDUHKRXVH VSDFH DYDLODEOH WKH VL]H
RI VWRUHURRPV RU WKH QXPEHU RI WUDQVSRUWDWLRQ YHKLFOHV DYDLODEOH
<RXU FRPSDQ\ PD\ RZQ WKHVH FDSDFLWLHV RU LW PD\ KLUH RXWVLGH
FRPSDQLHVWRSURYLGHWKHUHTXLUHGVSDFHDQGWUDQVSRUW
)OH[LELOLW\LQ6 23
% :LWK WKH FRPSLODWLRQ RI WKH VDOHV IRUHFDVW DQG FDSDFLW\ SODQV IRU
VXSSO\ SURGXFWLRQ DQG ORJLVWLFV DQG GLVWULEXWLRQ \RX KDYH ZKDW
\RX QHHG WR PDNH GHFLVLRQV DW WKH 6 23 SODQQLQJ PHHWLQJ 7KH
JRDORIWKHPHHWLQJLVWRFRPHXSZLWKDVLQJOHVHWRIQXPEHUVWKDW
HYHU\RQHZLOOZRUNWRZDUGLQWKHFRPLQJSHULRG
%
+RZHYHU WKH 6 23 SURFHVV GRHVQ¶W HQG ZLWK DJUHHPHQW RQ D
FRPPRQVHWRIQXPEHUV2QFHWKHPRQWKEHJLQVDQGVDOHVVWDUWWR
WULFNOHLQHYHU\RQHQHHGVWRFRPPXQLFDWHDERXWSRWHQWLDOSUREOHPV
ZLWKWKHIRUHFDVW7KHVDPHLVWUXHIRURSHUDWLRQVSODQV&RXQWOHVV
IRUFHVFRXOGEHDWZRUNWKUHDWHQLQJWRDOWHU\RXUEHVWODLGSODQVIRU
PHHWLQJGHPDQG
%
7KHRIWHQIRUJRWWHQFRPSRQHQWRI6 23LVÀH[LELOLW\ZKLFKPXVW
EH EXLOW LQWR RSHUDWLRQV WR DFFRPPRGDWH WKH XQH[SHFWHG 7KH
PRUHÀH[LEOH\RXURSHUDWLRQVWKHPRUHYDULDWLRQ\RXUV\VWHPFDQ
DFFRPPRGDWHDQGWKHOHVVOLNHO\\RXUFXVWRPHUVDUHWRH[SHULHQFH
DQ\ QHJDWLYH FRQVHTXHQFH DV D UHVXOW RI IDOOLEOH SODQQLQJ 6KRXOG
\RXQRWEHDEOHWRDFFRPPRGDWHFXVWRPHUQHHGV\RXPXVWGHYLVH
SULRULWLHVWRGHWHUPLQHZKLFKFXVWRPHUVWRVHUYHZLWK\RXUOLPLWHG
VXSSOLHV
Integrated S&OP
% 7KHVH VDPH SULQFLSOHV IRU PDQDJLQJ VXSSO\ DQG GHPDQG ZLWKLQ D
FRPSDQ\FDQDOVREHDSSOLHGDFURVVFRPSDQLHVLQWKHVXSSO\FKDLQ,
PHDQLQJ WKH HQWLUH V\VWHP RI LQSXWV RXWSXWV DQG GLVWULEXWLRQ
7KDWLVFRPSDQLHVFDQFROODERUDWHZLWKVXSSOLHUVDQGFXVWRPHUVWR
UHDOL]HDFRPPRQYLVLRQRIWKHEXVLQHVVWKH\ZLOOFRQGXFWWRJHWKHU
%
7RXQGHUVWDQGWKLVLGHDLPDJLQHDVHHVDZ2QRQHHQGLVDODUJH
ER[ ODEHOHG Demand 2Q WKH RWKHU HQG DUH WZR VPDOOHU ER[HV
ODEHOHG&DSDFLW\DQGInventory3RVLWLRQHGLQWKHPLGGOHRIWKHVHH
VDZLVWKHIXOFUXPRQZKLFKLWUHVWVODEHOHGPlan.
119
Demand
Capacity
Plan
Inventory
Lecture 16: Matching Supply and Demand
7KHVHHVDZDQDORJ\FDSWXUHVWKHEHQH¿WVRILQWHJUDWHGEXVLQHVV
planning; in the event of increases in Demand, moving the Plan closer to
WKH'HPDQGVLGHDOORZVFRPSDQLHVWRJHWPRUHOHYHUDJHIURPH[LVWLQJ
Capacity and Inventory.
120
%
7KH VHHVDZ LV LQ EDODQFH ZKHQ WKH ZHLJKW RI WKH &DSDFLW\ DQG
,QYHQWRU\ WRJHWKHU FRXQWHU WKH ZHLJKW RI 'HPDQG ,I 'HPDQG
ZHUH WR JURZ PRUH ZHLJKW ZRXOG EH QHHGHG LQ &DSDFLW\ DQG
RU ,QYHQWRU\ WR EULQJ WKH VHHVDZ EDFN LQWR EDODQFH <HW WKHUH LV
DQRWKHU SRVVLELOLW\²WKH IXOFUXP :KDW LI \RX ZHUH WR PRYH WKH
3ODQ FORVHU WR WKH 'HPDQG VLGH RI WKH VHHVDZ":LWK WKDW DFWLRQ
\RXJHWLQFUHDVHGOHYHUDJHIURPH[LVWLQJ&DSDFLW\DQG,QYHQWRU\
%
7KHOHVVRQKHUHLVWKDWLI\RXFDQSODQFORVHUWRGHPDQG²WKDWLV
IRUHFDVWGHPDQGPRUHDFFXUDWHO\²WKHQ\RXQHHGOHVVFDSDFLW\DQG
LQYHQWRU\WRIXO¿OOGHPDQG7KHDQVZHULVVKDULQJLQIRUPDWLRQDQG
FROODERUDWLQJZLWKLQFRPSDQLHVWR¿QGWKHEDODQFHEHWZHHQGHPDQG
DQGVXSSO\
%
1RZ LPDJLQH OLQLQJ XS PXOWLSOH VHHVDZV VLGH E\ VLGH DQG
ZRUNLQJ ZLWK SHRSOH DW HDFK RQH WR ¿QG WKH ULJKW EDODQFH IRU
HDFKRIWKHVHHVDZVLQWDQGHP7KDWZRXOGUHSUHVHQWWKHQRWLRQ
of integrated business planning DFURVV FRPSDQLHV LQ WKH VXSSO\
FKDLQ1RGRXEWLW¶VDFKDOOHQJHEXWLW¶VRQHWKDW\LHOGVVLJQL¿FDQW
EHQH¿WVIRUWKHSOD\HUV
Suggested Reading
BR[-HQNLQVDQG5HLQVHOTime Series Analysis.
.DKQ³6ROYLQJWKH3UREOHPVRI1HZ3URGXFW)RUHFDVWLQJ´
0X]XPGDUDQG)RQWDQHOOD³7KH6HFUHWVWR6 236XFFHVV´
6WDKODQG:DOODFH³6 233ULQFLSOHV´
:DOODFHDQG6WDKOSales and Operations Planning.
Questions to Consider
1. +RZ GRHV WKH VWUXJJOH EHWZHHQ SURPLVH PDNLQJ DQG SURPLVH NHHSLQJ
VKRUWFKDQJH RU FKDOOHQJH WKH SHUIRUPDQFH RI D FRPSDQ\" :K\ LV LW
LPSRUWDQWWRNHHSWKHVHWZRLQEDODQFH"
2. :H NQRZ WKDW IRUHFDVWV ZLOO QRW EH SHUIHFWO\ DFFXUDWH :KDW DUH WKH
LPSOLFDWLRQV RI WKLV IDFW IRU RXU FDSDFLW\ SODQV" ,V LW ZLVH WR EXLOG LQ
H[WUDFDSDFLW\WRGHDOZLWKSHDNGHPDQG"
121
Rightsizing Inventory
Lecture 17
,
QYHQWRU\ FDQ EH DPRQJ WKH PRVW YDOXDEOH DVVHWV IRU D FRPSDQ\²DQG
LW FHUWDLQO\ VHHPV WKDW ZD\ ZKHQ \RX GRQ¶W KDYH HQRXJK WR IHHG \RXU
EXVLQHVV RU VHUYH \RXU FXVWRPHUV %XW KDYLQJ WRR PXFK LQYHQWRU\ FDQ
EHDEDGWKLQJWRR(YHQLILW¶VMXVWLQVWRUDJHLQYHQWRU\FDQFRQVXPHPDQ\
UHVRXUFHVLQ\RXUEXVLQHVV²UHVRXUFHVWKDWFRXOGEHSXWWRPRUHSURGXFWLYH
XVHHOVHZKHUH,QWKLVOHFWXUHZH¶OOH[SORUHWKHIXQGDPHQWDOVRIULJKWVL]LQJ
LQYHQWRU\ WKURXJK LQYHQWRU\ PDQDJHPHQW 7KH SULPDU\ JRDO RI LQYHQWRU\
PDQDJHPHQW LV WR GHWHUPLQH ZKDW WR LQYHQWRU\ DQG LQ ZKDW TXDQWLWLHV WR
PDLQWDLQMXVWWKHULJKWDPRXQWRILQYHQWRU\²QRPRUHDQGQROHVV
Lecture 17: Rightsizing Inventory
Inventory Management Metrics
% &RPSDQLHV KROG LQYHQWRU\ LQ WKH KRSHV RI JHQHUDWLQJ PRUH VDOHV
DQGLQIHDURIIDFLQJDVWRFNRXW²DODFNRILQYHQWRU\²UHVXOWLQJLQ
WKHLQDELOLW\WRVHUYHFXVWRPHUV%XWKROGLQJLQYHQWRU\LVH[SHQVLYH
7KH¿QDQFLDOLPSDFWRIKROGLQJLQYHQWRU\LVPHDVXUHGLQWKHIRUP
of LQYHQWRU\FDUU\LQJFRVWV, or KROGLQJFRVWV. The more inventory a
EXVLQHVVKROGVWKHKLJKHUWKHVHFDUU\LQJFRVWVDUH
122
%
7KHSULPDU\FRPSRQHQWRILQYHQWRU\FDUU\LQJFRVWLVWKHRSSRUWXQLW\
FRVWRIFDSLWDOWKDWLVWKHFRVWRIKDYLQJPRQH\WLHGXSLQLQYHQWRU\
WKDWFRXOGEHSXWWRXVHHOVHZKHUHLQWKHEXVLQHVVSHUKDSVLQQHZ
WHFKQRORJ\ RU VWDII WUDLQLQJ ,Q DGGLWLRQ WR WKH RSSRUWXQLW\ FRVW
RI FDSLWDO WKH LQYHQWRU\ FDUU\LQJ FRVW FDOFXODWLRQ DOVR LQFOXGHV
LQVXUDQFH DQG WD[HV DVVRFLDWHG ZLWK KROGLQJ LQYHQWRU\$QG WKHUH
DUHULVNVWRKROGLQJLQYHQWRU\LQFOXGLQJWKHULVNVRIWKHLQYHQWRU\
EHFRPLQJGDPDJHGVWROHQREVROHWHVSRLOHGRURXWRIGDWH
%
$VLGH IURP LQYHQWRU\ FDUU\LQJ FRVW D NH\ PHWULF RI LQYHQWRU\
PDQDJHPHQWSHUIRUPDQFHLVinventory turns. This measure can be
FDOFXODWHGRQDQLWHPE\LWHPEDVLVRUDFURVVDFRPSDQ\IRUDOOLWV
LWHPV 7KH DJJUHJDWH FDOFXODWLRQ SURYLGHV DQ RYHUDOO PHDVXUH RI
LQYHQWRU\ HI¿FLHQF\ ,W¶V FDOFXODWHG E\ GLYLGLQJ WKH FRVW RI JRRGV
VROGE\WKHGROODUYDOXHRIDYHUDJHLQYHQWRU\$FRPSDQ\WKDWFDQ
generate more sales on lower inventory has a higher number of
WXUQVVXJJHVWLQJDPRUHHI¿FLHQWRSHUDWLRQ
ż 7KH LWHPVSHFL¿F PHDVXUH RI LQYHQWRU\ WXUQV SURYLGHV D
JRRG UHDG RQ WKH FRPSDQ\¶V HI¿FLHQF\ ZLWK UHVSHFW WR DQ
LQGLYLGXDOLWHP
ż
%
)RULQVWDQFHDQLWHPWKDWJHQHUDWHVWXUQVD\HDUFRPSDUHG
WRDQRWKHUWKDWJHQHUDWHVRQO\LVIRXUWLPHVDVHI¿FLHQWIURP
DQLQYHQWRU\VWDQGSRLQW7KHWXUQLWHPPLJKWEHODEHOHGD
³IDVW PRYHU´ DQG WKH WXUQ LWHP PLJKW EH D ³VORZ PRYHU´
)DVW DQG VORZPRYLQJ LWHPV FDQ EH PDQDJHG GLIIHUHQWO\ LQ
OLJKWRIWKHGLIIHUHQWEXUGHQVWKH\LPSRVHRQWKHEXVLQHVV
,QFUHDVLQJO\ FRPSDQLHV DUH XVLQJ LQYHQWRU\ WXUQRYHU QRW RQO\
DV D PHDQV RI VHOIHYDOXDWLRQ EXW DOVR DV D ZD\ WR HYDOXDWH WKHLU
VXSSOLHUV0DQ\ODUJHUHWDLOHUVIRULQVWDQFHXVHDPHDVXUHNQRZQ
as gross margin return on inventory *052, WR HYDOXDWH WKH
DWWUDFWLYHQHVVRIDVXSSOLHU¶VJRRGV7KLVLVDK\EULGPHDVXUHWKDW
FRPELQHVJURVVPDUJLQDQGLQYHQWRU\WXUQVLQDVLQJOHPHWULF
ż /HW¶VVD\WKDWDQLWHPHQMR\VDPDUJLQIRUWKHUHWDLOVWRUH
EXW WXUQV RQO\ WKUHH WLPHV SHU \HDU 7KH *052, ZRXOG EH
î 6RPHVRXUFHVFODLPWKDWDQLWHPPXVWDFKLHYHD
*052,WREUHDNHYHQEXWWKDW¶VDEURDGJXLGHOLQH
ż
*052,RIIHUVDJRRGZD\WRFRPSDUHGLIIHUHQWLWHPVZLWKLQD
SURGXFWFDWHJRU\DQGFDQKHOSUHWDLOHUVGHFLGHZKLFKLWHPVWR
VWRFNDQGZKHUHWRVWRFNWKHP
Product Proliferation
% 3URGXFW SUROLIHUDWLRQ RU WKH JURZWK LQ WKH QXPEHU RI LWHPV D
FRPSDQ\VWRFNVLVDPRQJWKHJUHDWHVWFKDOOHQJHVIDFLQJEXVLQHVVHV
WRGD\&RPSDQLHVDUHHDJHUWRLQWURGXFHQHZLWHPVEHOLHYLQJWKDW
GRLQJVRGULYHVVDOHVJURZWKDQGWKDW¶VRIWHQWUXH%XWFRPSDQLHV
DUHDOVRUHOXFWDQWWRHOLPLQDWHLWHPV7KHUHVXOWLVDQHYHUJURZLQJ
DVVRUWPHQWRILWHPVWKDWDGGFRVWDQGFRPSOH[LW\
%
6PDOO EXVLQHVVHV DUH HVSHFLDOO\ SURQH WR WKLV SUREOHP :KHQ D
EXVLQHVVLVVPDOODQGWU\LQJWRJURZLWZDQWVWRSURPLVHWKHZRUOG
WRLWVFXVWRPHUVEXWWKHZHLJKWRILQYHQWRU\WRIXO¿OOWKDWSURPLVH
LVVLPSO\WRRKHDY\%HOLHYHLWRUQRWSRRUFDVKÀRZUHVXOWLQJIURP
KROGLQJWRRPXFKLQYHQWRU\FDQEHEODPHGIRUPRUHIDLOXUHVDPRQJ
VPDOOEXVLQHVVHVWKDQDOPRVWDQ\RWKHUFXOSULW
%
+DYLQJRQO\RQHRUDIHZEUDQGVZLWKLQDSURGXFWFDWHJRU\LVWKH
GULYLQJVWUDWHJ\RIVXFKJURFHU\UHWDLOHUVDV6DYHD/RW$/',DQG
7UDGHU-RH¶V%\FDUU\LQJRQO\RQHLWHPLQPRVWSURGXFWFDWHJRULHV
WKHVHVWRUHVPDQDJHWKHLULQYHQWRU\PXFKPRUHHI¿FLHQWO\DQGLQ
WXUQRIIHUPRUHFRPSHWLWLYHSULFHVIRUWKHLUSURGXFWV
‹PRQNH\EXVLQHVVLPDJHVL6WRFN7KLQNVWRFN
Lecture 17: Rightsizing Inventory
Inventory Management Strategies
% There are four basic inventory management strategies. These
VWUDWHJLHV FDQ EH GLVWLQJXLVKHG EDVHG RQ KRZ D EXVLQHVV LQWHUDFWV
ZLWKLWVVXSSOLHUVLQFKRRVLQJKRZPXFKDQGKRZRIWHQWRRUGHU
With today’s inventory-tracking technologies, many companies monitor
inventory at all times and manage accordingly.
%
7KH VLPSOHVW RSWLRQ LV D ¿[HG TXDQWLW\±¿[HG IUHTXHQF\ VWUDWHJ\.
:LWK WKLV VWUDWHJ\ D EXVLQHVV RUGHUV WKH VDPH TXDQWLW\ HYHU\
WLPHDQLWHPQHHGVWREHUHSOHQLVKHGDQGWKHRUGHULVSODFHGRQD
VFKHGXOHGEDVLV
%
7KH QH[W VWUDWHJ\ LV WKH SHULRGLF UHYLHZ PHWKRG, or P-system,
where P VWDQGV IRU D ¿[HG period of review. This strategy is also
VRPHWLPHVUHIHUUHGWRDVDPLQPD[DSSURDFK.
ż 2QFHDQLQYHQWRU\FRXQWLVWDNHQ SHUKDSVHYHU\GD\V DQG
LW¶VUHDOL]HGWKDWDUHRUGHUSRLQWKDVSDVVHGPDQDJHUVRUGHUXS
WR D PD[LPXP OHYHO IRU WKDW LWHP²D SUHGHWHUPLQHG TXDQWLW\
WKDW WKH FRPSDQ\ LV ZLOOLQJ WR KROG 7KH SHULRGLF PHWKRG RI
LQYHQWRU\PDQDJHPHQWLVYDULDEOHLQWHUPVRITXDQWLW\RUGHUHG
EXW¿[HGLQWHUPVRIWLPLQJ
ż
&RPSDQLHV XVLQJ WKLV PHWKRG HVWDEOLVK UHRUGHU SRLQWV WKDW
DUH D OLWWOH KLJKHU WKDQ WKRVH XVHG E\ FRPSDQLHV WKDW PRQLWRU
LQYHQWRU\ FRQVWDQWO\ $V D UHVXOW XQGHU WKH 3V\VWHP
FRPSDQLHV WHQG WR FDUU\ D OLWWOH PRUH LQYHQWRU\ 7KH\ DOVR
UXQWKHULVNKRZHYHURILQFXUULQJSURORQJHGVWRFNRXWVZKHQ
WKH\¶UHQRWRQWRSRIUXQVRQLQYHQWRU\
%
2I WKH RWKHU WZR DVQHHGHG LQYHQWRU\ VWUDWHJLHV RQH LQYROYHV
RUGHULQJ LQ ¿[HG TXDQWLWLHV DQG WKH RWKHU DOORZV IRU YDULDEOH
TXDQWLWLHV8VLQJWKH¿[HGTXDQWLW\VWUDWHJ\NQRZQDVDQ-system,
D FRPSDQ\ PLJKW RUGHU DV QHHGHG LQ PLQLPXP RUGHU TXDQWLWLHV
LPSRVHG E\ WKH VXSSOLHU RU WKH FRPSDQ\ PLJKW GHWHUPLQH WKH
TXDQWLWLHVQHHGHGIRULWVHOI2QHFRPPRQ¿[HGTXDQWLW\DSSURDFK
is known as the HFRQRPLF RUGHU TXDQWLW\ (24 7KLV DSSURDFK
EDODQFHV WKH DQQXDO FRVW RI KROGLQJ LQYHQWRU\ DQG WKH DQQXDO
DGPLQLVWUDWLYHFRVWRISURFHVVLQJRUGHUV
%
2UGHULQJ LQ ¿[HG TXDQWLWLHV WKRXJK GRHV QRW WDNH DGYDQWDJH RI
WKH ÀH[LELOLW\ WKDW FRPSDQLHV VHHN WRGD\ 7KDW¶V ZK\ PDQ\ KDYH
DGYDQFHGWRWKHIRXUWKVWUDWHJ\ZKHUHQHLWKHUWKHRUGHUTXDQWLW\QRU
WKHWLPLQJRIRUGHUVLV¿[HG7KLVLVDjust-in-time -,7 strategy.
ż
5DWKHU WKDQ FRXQWLQJ RQ ODUJH ORWV DQG LQIUHTXHQW RUGHULQJ
-,7FRPSDQLHVUHVRUWWRVPDOORUGHUVL]HVDQGKLJKIUHTXHQF\
:KHQ GHPDQG LV EULVN WKH\ LQFUHDVH HLWKHU WKH EDWFK VL]H RU
WKH IUHTXHQF\ GHSHQGLQJ RQ FRVWV +RZHYHU WKH IRFXV LV RQ
NHHSLQJLQYHQWRULHVORZDQGUHSOHQLVKLQJRQO\ZKDW¶VGHSOHWHG
ZKHQLW¶VGHSOHWHG
ż
&RPSDQLHV RIWHQ HPSOR\ D kanban ³VLJQERDUG´ V\VWHP WR
VLJQDOGHPDQGDQGWKHQHHGIRUUHSOHQLVKPHQW7KHHOHFWURQLF
versions of these systems are known as e-kanbans.
Choosing the Best Strategy
% $VQRWHGSUHYLRXVO\PRVWFRPSDQLHVGRQ¶WPDQDJHDVLQJOHSURGXFW
EXW VHYHUDO GLIIHUHQW RQHV 7KH ODUJHVW FRPSDQLHV PLJKW KDYH
PRUHWKDQDPLOOLRQLWHPVWRWUDFNDQGPDQDJHDQGHYHQDVLPSOH
EXVLQHVVFDQKDYHDQLQYHQWRU\RIVHYHUDOKXQGUHGLWHPV&OHDUO\
WKLVDGGVWRWKHFRPSOH[LW\RIPDQDJLQJLQYHQWRU\DQGRIWHQWKH
QHHGWRLPSOHPHQWPXOWLSOHLQYHQWRU\VWUDWHJLHV
Lecture 17: Rightsizing Inventory
%
7R DGGUHVV WKLV FRPSOH[LW\ PRVW FRPSDQLHV XVH VRPH IRUP RI
JURXSLQJIRUWKHLULQYHQWRU\VXFKDVDQ$%&FODVVL¿FDWLRQVFKHPH
ż 8QGHU VXFK D VFKHPH $ LWHPV DUH WKRVH WKDW VHOO LQ KLJK
YROXPHHDUQKLJKPDUJLQVRUDUHVROGWRWKHFRPSDQ\¶VEHVW
FXVWRPHUVQHZSURGXFWVPLJKWDOVREHODEHOHG$LWHPV7KHVH
LWHPVDUHWKHRQHVIRUZKLFKWKHFRPSDQ\WULHVWRHQVXUHUHDG\
DYDLODELOLW\7KHFRPSDQ\PD\EHZLOOLQJWRWDNHRQDJUHDWHU
VXSSO\RI$LWHPVWREHFHUWDLQWKDWWKH\¶UHDYDLODEOHDVWRFNRXW
RQWKHVHLWHPVFRXOGEHGHWULPHQWDOWRWKHFRPSDQ\
ż
126
% LWHPV DUH RI D VRPHZKDW ORZHU SULRULW\ DQG JHQHUDOO\
UHTXLUH D FORVHU ORRN WR GHWHUPLQH H[DFWO\ KRZ WR PDQDJH
WKHP,IWKH\¶UHUHODWLYHO\QHZ³RQWKHULVH´RUQRWH[SHQVLYH
IURP D KROGLQJFRVW VWDQGSRLQW WKHQ D FRPSDQ\ PLJKW EH
ZLOOLQJ WR WDNH RQ D JUHDWHU VXSSO\ +RZHYHU LI WKHVH LWHPV
DUHIDGLQJLQSRSXODULW\HDVLO\VXEVWLWXWHGRURUGHUHGE\OHVV
LPSRUWDQWFXVWRPHUVWKHQKDYLQJDORZHUVXSSO\LQLQYHQWRU\
ZRXOGEHRSWLPDO
ż
%
Finally, C items are those that are on their way out. They
PD\ EH XQSUR¿WDEOH LWHPV FRVWO\ WR NHHS RU RQ WKHLU ZD\ WR
becoming GHDGVWRFN.
&OHDUO\FRPSDQLHVFDQFUHDWHPRUHFRPSOH[FODVVL¿FDWLRQVFKHPHV
E\ VLPSO\ DGGLQJ OHWWHUV WR SURYLGH JUHDWHU JUDQXODULW\ $OVR D
PXOWLOHWWHUVFKHPHPLJKWEHXVHGWRFDSWXUHGLIIHUHQWGLPHQVLRQV
)RU H[DPSOH D &%& LWHP PLJKW EH VORZ PRYLQJ PDUJLQDOO\
SUR¿WDEOHDQGVROGWROHVVYDOXDEOHFXVWRPHUVWKDQDWULSOH$LWHP
Innovations in Inventory Management
% ,Q OLJKW RI WKH LQWHQVH IRFXV RQ LQYHQWRU\ PDQDJHPHQW LQ UHFHQW
\HDUV LQQRYDWLRQV SUHVHQW WKHPVHOYHV IUHTXHQWO\ 2QH VXFK
LQQRYDWLRQ LV WKH XVH RI UDGLR IUHTXHQF\ LGHQWL¿FDWLRQ 5),' WR WUDFN LQYHQWRU\ DV LW ÀRZV WKURXJK WKH VXSSO\ FKDLQ 5),'
WHFKQRORJ\FRPHVLQWZREDVLFW\SHV
ż $FWLYH5),'LQYROYHVDWWDFKLQJDVPDOOGHYLFHWRHDFKSURGXFW
7KH GHYLFH KDV LWV RZQ SRZHU VRXUFH DQG HPLWV D VLJQDO WR
LQGLFDWH LWV ORFDWLRQ HQDEOLQJ WKH SURGXFW WR EH WUDFNHG7KLV
WHFKQRORJ\LVXVHGLQWKHWUDQVSRUWRIYHU\ODUJHLWHPVVXFKDV
PLOLWDU\DUPDPHQWVDQGVKLSSLQJFRQWDLQHUV
ż
:LWK SDVVLYH 5),' WKH 5),' WDJ FDQ KROG PXFK PRUH GDWD
WKDQ WKH WUDGLWLRQDO EDUFRGH SURYLGLQJ D XQLTXH LGHQWL¿HU IRU
WKDW VSHFL¿F LWHP DQG XQLW:LWK WKH DGGHG PHPRU\ FDSDFLW\
FRPSDQLHVFDQWUDFNQRWRQO\WKHXQLTXHLGHQWL¿HUIRUWKDWXQLW
EXWDOVRWKHSURGXFWLRQGDWHORWQXPEHUDQGVSHFLDOGDWDVXFK
DVZKHWKHUWKHJRRGLVKD]DUGRXVRUUHF\FODEOH
ż
(OHFWURQLF UHDGHUV SRVLWLRQHG DW WKH LQERXQG DQG RXWERXQG
GRRUV RI IDFLOLWLHV VHQG HQHUJ\ WR WKH SDVVLYH 5),' WDJ 7KLV
HQHUJ\DFWLYDWHVWKHWDJZKLFKVHQGVDVLJQDOEDFNWRWKHUHDGHU
ZLWK DOO RI WKH GDWD HQFRGHG LQ WKH WDJ %HFDXVH WKH ZKROH
SURFHVV LV DXWRPDWHG KXQGUHGV RI LWHPV FDQ EH UHDG DW RQFH
7KLVFRPSDUHVIDYRUDEO\WRWUDGLWLRQDOEDUFRGHVZKLFKFDQEH
UHDGRQO\RQHDWDWLPHDQGRIWHQUHO\RQSHRSOHZLWKKDQGKHOG
VFDQQHUVWRFRUUHFWO\VFDQHDFKXQLWLQDQGRXWRILQYHQWRU\
127
%
$QRWKHU WHFKQRORJLFDO LQQRYDWLRQ WKDW FRXOG DIIHFW LQYHQWRU\
PDQDJHPHQW GUDPDWLFDOO\ LV WKUHHGLPHQVLRQDO SULQWLQJ %HLQJ
DEOH WR FUHDWH IRUPRQWKHVSRW KDV WUHPHQGRXV LPSOLFDWLRQV IRU
ZKDWFRPSDQLHVVWRFNLQLQYHQWRU\DQGZKHUHWKH\VWRFNLW$PRQJ
WKH PRUH H[FLWLQJ GHYHORSPHQWV LV WKH SURVSHFWLYH XVH RI WKLV
WHFKQRORJ\ LQ WKH SURGXFWLRQ RI RQGHPDQG PHGLFDO GHYLFHV DQG
DUWL¿FLDO ERG\ SDUWV 7KUHHGLPHQVLRQDO SULQWLQJ FRXOG DOWHU RXU
EXVLQHVVHVFUHDWHQHZRSSRUWXQLWLHVDQGFKDQJHWKHZD\ZHWKLQN
about inventory.
Suggested Reading
&DOOLRQL GH 0RQWJURV 6ODJPXOGHU 9DQ :DVVHQKRYH DQG :ULJKW
³,QYHQWRU\'ULYHQ&RVWV´
*UXHQDQG&RUVWHQ³6WRFN2XWV&DXVH:DONRXWV´
6KHSDUGRFID.
6SHDUDQG%RZHQ³'HFRGLQJWKH'1$RIWKH7R\RWD3URGXFWLRQ6\VWHP´
:DOOHUDQG(VSHU7KH'H¿QLWLYH*XLGHWR,QYHQWRU\0DQDJHPHQW.
Questions to Consider
1. :KDW LQÀXHQFHV ZKHWKHU WKH KROGLQJ RI LQYHQWRU\ LV D EOHVVLQJ RU
Lecture 17: Rightsizing Inventory
DFXUVH"
2. :KDWDUHWKHSUREOHPVUDLVHGE\DVWRFNRXW"
3. +RZGR\RXULJKWVL]HLQYHQWRU\²WKDWLVGHWHUPLQHWKHULJKWDPRXQW
RILQYHQWRU\WRKROG",VWKHULJKWVL]HGLQYHQWRU\DPRYLQJWDUJHW"$UH
WKHUH WLPHV DQG FLUFXPVWDQFHV ZKHQ \RX PLJKW EH ZLOOLQJ WR KROG
PRUHLQYHQWRU\"
4. :K\ GR FRPSDQLHV WU\ WR OLJKWHQ WKHLU EDODQFH VKHHWV RI LQYHQWRU\
WRZDUGWKHHQGRIUHSRUWLQJSHULRGV HJTXDUWHUV¿VFDO\HDUV "
128
Managing Supply and Suppliers
Lecture 18
:
KHQ PRVW SHRSOH WKLQN RI SXUFKDVLQJ SURFXUHPHQW RU VXSSO\
PDQDJHPHQWWKH\WKLQNRIWKHGHSDUWPHQWUHVSRQVLEOHIRUEX\LQJ
WKH ³VWXII´²UDZ PDWHULDOV VSDUH SDUWV DQG VR RQ²WKDW IHHGV
WKH EXVLQHVV 7KLV IXQFWLRQ GRHVQ¶W VRXQG HVSHFLDOO\ LQWHUHVWLQJ XQWLO ZH
FRQVLGHUWKHIDFWWKDWVXSSO\PDQDJHPHQWFDQUHQGHUWKHFRPSDQ\SUR¿WDEOH
RUXQSUR¿WDEOHEDVHGRQWKHWHUPVQHJRWLDWHGZLWKVXSSOLHUVLWDOVRVHUYHV
DV WKH JDWHNHHSHU RI TXDOLW\ ,Q WKLV OHFWXUH ZH¶OO H[SORUH KRZ HIIHFWLYH
VXSSO\PDQDJHPHQWSUDFWLFHVFDQEHOHYHUDJHGQRWRQO\WRNHHSWKHEXVLQHVV
UXQQLQJ EXW DOVR WR VHW LW DSDUW IURP RWKHUV :H¶OO H[DPLQH IXQGDPHQWDO
TXHVWLRQVVXUURXQGLQJZKDWWREX\KRZWRVHOHFWVXSSOLHUVDQGKRZWRPDNH
JRRGVXSSOLHUVH[FLWHGWRJHW\RXUFRPSDQ\¶VEXVLQHVV
The Evolution of Supply Management
% 7KHWUDGLWLRQDOUROHRIWKHSXUFKDVLQJGHSDUWPHQWLQDQRUJDQL]DWLRQ
ZDV WR DFTXLUH WKH QHFHVVDU\ PDWHULDOV JRRGV DQG VHUYLFHV WR
IHHGWKHRSHUDWLRQDQGWRGRVRDWWKHORZHVWSRVVLEOHSULFHV2YHU
WLPH SXUFKDVLQJ HYROYHG LQWR SURFXUHPHQW ZKLFK H[SDQGHG WKH
VHWRISXUFKDVLQJDFWLYLWLHVDQGHOHYDWHGWKHVWUDWHJLFIRFXVRIWKH
WDVNV %H\RQG PHUHO\ ³EX\LQJ VWXII´ SURFXUHPHQW SURIHVVLRQDOV
DVVHVVHGWKHTXDOLW\RIFRPSHWLQJVXSSOLHUVDQGHVWDEOLVKHGVXSSOLHU
TXDOL¿FDWLRQVDQGPDWHULDOVSHFL¿FDWLRQV
%
2YHUWKHSDVWWZRGHFDGHVSURFXUHPHQWKDVJLYHQZD\WRPRGHUQ
VXSSO\PDQDJHPHQWZKLFKLVHYHQPRUHVWUDWHJLFIRUWKHEXVLQHVV
DQG FROODERUDWLYH ZLWK VXSSOLHUV 6XSSO\ PDQDJHPHQW VHHNV WR
DFKLHYHFRPSHWLWLYHDGYDQWDJHE\ZRUNLQJHIIHFWLYHO\ZLWKFKRLFH
VXSSOLHUV HYHQ HQJDJLQJ VXSSOLHUV HDUO\ LQ WKH GHYHORSPHQW RI
QHZ SURGXFWV DQG VHUYLFHV 7KHVH GD\V VXSSO\ PDQDJHPHQW QRW
RQO\ FRQWUROV D FRQVLGHUDEOH VKDUH RI WKH FRPSDQ\¶V EXGJHW EXW
LW LQÀXHQFHV WKH FRPSHWLWLYHQHVV RI WKH FRPSDQ\ WKURXJK LWV
FRQQHFWLRQZLWKRWKHUEXVLQHVVVWUDWHJLHVDQGGHSDUWPHQWV
129
Lecture 18: Managing Supply and Suppliers
%
2QH LQGXVWU\ SKHQRPHQRQ WKDW KDV DFFHOHUDWHG WKH LQÀXHQFH RI
VXSSO\ PDQDJHPHQW LV WKH UDPSDQW DGRSWLRQ RI RXWVRXUFLQJ RYHU
WKH SDVW WKUHH GHFDGHV$V ZH¶YH VHHQ FRPSDQLHV DUH HOHFWLQJ WR
outsource activities that they no longer view as their strengths,
DQG ZLWK WKLV GHFLVLRQ WKH UROH RI VXSSO\ PDQDJHPHQW H[SDQGV
6XSSO\ PDQDJHPHQW XVXDOO\ DVVXPHV UHVSRQVLELOLW\ IRU VHOHFWLQJ
WKHRXWVLGHVXSSOLHUVQHJRWLDWLQJWKHDUUDQJHPHQWVDQGPRQLWRULQJ
WKHSURYLVLRQRIVHUYLFHV
Centralized and Decentralized Supply Management
% 2QFH D FRPSDQ\ GHWHUPLQHV ZKDW LW ZLOO EX\ WKH VXSSO\
PDQDJHPHQW RUJDQL]DWLRQ FDQ WDNH VKDSH &ULWLFDO WR IRUPLQJ WKH
RUJDQL]DWLRQLVXQGHUVWDQGLQJWKHVFRSHRIWKHZRUNUHTXLUHG,IWKH
FRPSDQ\RSHUDWHVIURPPXOWLSOHORFDWLRQVKRZPXFKUHVSRQVLELOLW\
ZLOO UHVW ZLWK D FHQWUDO SXUFKDVLQJ RUJDQL]DWLRQ DQG KRZ PXFK
ZLOO UHVW ZLWK EX\HUV DW HDFK ORFDWLRQ" 2UJDQL]DWLRQV RSWLQJ IRU
FHQWUDOL]HG FRQWURO GHFLGH ZKDW WR EX\ VHOHFW WKH VXSSOLHUV DQG
LQLWLDWHWKHRUGHUVDOOIURPKHDGTXDUWHUV)LHOGSHUVRQQHOYHULI\WKDW
WKH TXDQWLW\ DQG TXDOLW\ RI VXSSOLHV PHHW H[SHFWDWLRQV EXW GR QRW
PDNHVWUDWHJLFGHFLVLRQV
ż 7KHEHQH¿WVRIVXFKDV\VWHPLQFOXGHFRQVROLGDWLQJWKHVSHQG
DQG HQVXULQJ WKDW WKH FRPSDQ\ DFKLHYHV YROXPH GLVFRXQWV
IURPVXSSOLHUVDQGKLJKSULRULW\VHUYLFHE\YLUWXHRISXWWLQJ
ODUJHFKXQNVRIWKHEXVLQHVVLQWKHKDQGVRIIHZHUVXSSOLHUV
&HQWUDOL]HG FRQWURO FDQ DOVR VXSSRUW JUHDWHU VWDQGDUGL]DWLRQ
RIVXSSO\DFURVVYDULRXV¿HOGORFDWLRQV7KHGLVDGYDQWDJHRI
D FHQWUDOL]HG V\VWHP LV WKDW LW GRHVQ¶W DOORZ ¿HOG RSHUDWLRQV
WR H[HUW WKHLU LQÀXHQFH RQ VXSSOLHUV RU WR DGGUHVV WKHLU
VSHFL¿FQHHGV
ż
,QFRQWUDVWGHFHQWUDOL]HGFRQWURODOORZVWKH¿HOGORFDWLRQVWR
DFWDXWRQRPRXVO\WRIUHHO\FKRRVHVXSSOLHUVDQGWRQHJRWLDWH
GLUHFWO\ ZLWK WKHP $OWKRXJK WKH LQGLYLGXDO QHHGV RI WKH
ORFDWLRQVFDQEHDGGUHVVHGLQWKHVHDUUDQJHPHQWVWKHYROXPH
RIWKHVSHQGPD\QRWEHVXI¿FLHQWO\ODUJHWRZDUUDQWWKHPRVW
FRPSHWLWLYHSULFHRUKLJKHVWSULRULW\VHUYLFHIURPVXSSOLHUV
%
0RVW JRRGVL]HG FRPSDQLHV SXUVXH D EOHQGHG VWUDWHJ\ ZKLFK
LQYROYHVKHDGTXDUWHUVFHQWUDOL]LQJWKHSODQQLQJRIVXSSO\DQG¿HOG
locations controlling the buying actions. Such arrangements try
WR DFKLHYH EDODQFH EHWZHHQ WKH FRQWURO RI FHQWUDOL]DWLRQ DQG WKH
ÀH[LELOLW\ RI GHFHQWUDOL]DWLRQ WKRXJK VWUDWHJLF GHFLVLRQV DUH OHIW
ZLWKKHDGTXDUWHUV
Supplier Relationship Strategies
% $FRPSDQ\¶VVWUDWHJ\IRUHQJDJLQJVXSSOLHUVLVEDVHGLQODUJHSDUW
RQ ZKDW LV SXUFKDVHG 0RVW FRPSDQLHV PXVW DFTXLUH ³PLVVLRQ
FULWLFDO´VXSSOLHV²LWHPVWKDWLQÀXHQFHWKHTXDOLW\RIWKHSURGXFWV
DQGVHUYLFHVWKHFRPSDQ\SURYLGHVRUWKDWDUHYLVLEOHWRFXVWRPHUV
7KH RSSRVLWH RI WKHVH YLVLEOH DQG PLVVLRQFULWLFDO LWHPV DUH WKH
LQYLVLEOH FRPPRGLW\ LWHPV :KHUHDV D ¿UP PLJKW HPSKDVL]H
TXDOLW\ ZLWK PLVVLRQFULWLFDO LWHPV SULFH PLJKW EH WKH KLJKHVW
SULRULW\ZLWKFRPPRGLW\LWHPV
%
7KHDPRXQWRIDWWHQWLRQGLUHFWHGWRZDUGVXSSOLHUUHODWLRQVKLSVDOVR
GHSHQGV RQ KRZ FULWLFDOWKH VXSSOLHV DUH WR D FRPSDQ\¶V SURGXFWV
DQG VHUYLFHV $ VXSSOLHU RI PDLQWHQDQFH UHSDLU DQG RSHUDWLQJ
VXSSOLHV WKDW GRQ¶W JR GLUHFWO\ LQWR D SURGXFW W\SLFDOO\ GRHVQ¶W
ZDUUDQW WKH VDPH DWWHQWLRQ DV D VXSSOLHU WKDW FDQ KHOS D FRPSDQ\
ZLQRUORVHLQWKHPDUNHWSODFH
%
+RZPDQ\VXSSOLHUVRIDJLYHQLQSXWLVLGHDO"&RPSHWLQJWKHRULHV
ZHLJKLQRQWKLVTXHVWLRQ
ż 6RPHEHOLHYHWKDWIHZHUVXSSOLHUVLVEHWWHUHYHQJRLQJVRIDU
DV WR UHFRPPHQG VROH VRXUFLQJ 7KH EHQH¿W RI WKLV DSSURDFK
LV WKDW WKH VSHQG LV FRQFHQWUDWHG LQ RQH SODFH ZKLFK VKRXOG
HOHYDWH WKH YROXPH GLVFRXQW ,W¶V DOVR HDVLHU WR PDQDJH RQH
VXSSOLHUWKDQVHYHUDO
ż
+RZHYHU WKH GHSHQGHQF\ LQKHUHQW LQ VROHVRXUFLQJ
DUUDQJHPHQWV GULYHV PDQ\ VXSSO\ SURIHVVLRQDOV DZD\ IURP
SXUVXLQJ WKHP 3ODFLQJ DOO RI D FRPSDQ\¶V EXVLQHVV IRU D
JLYHQLQSXWLQWKHKDQGVRIDVLQJOHVXSSOLHUPD\HOLPLQDWHWKH
SRVLWLYHLQÀXHQFHVRIFRPSHWLWLRQRQSULFHDQGTXDOLW\
Lecture 18: Managing Supply and Suppliers
%
$QRWKHUVFKRRORIWKRXJKWRQWKHLGHDOQXPEHURIVXSSOLHUVVHHNV
WR LQFLWH D IHHGLQJ IUHQ]\ DPRQJ PXOWLSOH VXSSOLHUV7KH EHOLHI LV
WKDWWKLVVLWXDWLRQLQWHQVL¿HVFRPSHWLWLRQDQGHQFRXUDJHVVXSSOLHUV
WRFXWSULFHVWRWKHERQH7KLVLVXVXDOO\DVKRUWWHUPSURSRVLWLRQ
KRZHYHU EHFDXVH VXSSOLHUV DUH LQWHUHVWHG LQ ODUJH FKXQNV RI
EXVLQHVV WKDW DUH UHSHWLWLYH DOORZLQJ WKHP WR VPRRWK WKHLU RZQ
RSHUDWLRQVDQGUHGXFHWUDQVDFWLRQFRVWV
%
2IWHQ D ³PLGGOHJURXQG´ VWUDWHJ\ LV SUHIHUUHG 0RVW SURJUHVVLYH
FRPSDQLHV DYRLG VROH VRXUFLQJ ZKHUH SRVVLEOH \HW WKH\¶UH QRW
FRQVWDQWO\RQWKHSURZOIRUQHZVXSSOLHUV5DWKHUWKH\H[DPLQHWKH
SRUWIROLRRILWHPVDQGVHUYLFHVWKH\EX\DQGORRNIRURSSRUWXQLWLHVWR
FRQVROLGDWHWKHVSHQGZKLFKZLOOSURYLGHOHYHUDJHLQQHJRWLDWLRQV
7KH\ DOVR ORRN IRU RSSRUWXQLWLHV WR FROODERUDWH ZLWK VXSSOLHUV RI
FULWLFDOSDUWV
Selecting Suppliers
% ,WKDVEHFRPHFRPPRQIRUODUJHVXSSO\PDQDJHPHQWRUJDQL]DWLRQV
WR VSHQG D SUHSRQGHUDQFH RI WKHLU WLPH TXDOLI\LQJ VXSSOLHUV WKDW
LVHVWDEOLVKLQJVWDQGDUGVIRUGRLQJEXVLQHVVZLWKWKHFRPSDQ\,Q
OLJKWRIWKHYDVWLQWHUHVWLQVHUYLQJODUJHFRPSDQLHVFRUSRUDWLRQV
XVH TXDOL¿FDWLRQ DV D ZD\ WR ¿OWHU WKH LQWHUHVW UHTXLULQJ
SURVSHFWLYHVXSSOLHUVWRPHHWVWDQGDUGVLQTXDOLW\FDSDFLW\VDIHW\
DQGHWKLFDOSHUIRUPDQFH
%
2QFH WKH TXDOL¿FDWLRQV DUH LQ SODFH D FRPSDQ\ FDQ DSSURDFK
WKH VXSSO\ PDUNHW 2I FRXUVH WKH PHWKRG RI DSSURDFK GHSHQGV
RQ ERWK WKH FRPSDQ\¶V VLWXDWLRQ DQG ZKDW LW LV EX\LQJ 6HDVRQHG
EX\HUVRIWHQNQRZZKRWRFRQWDFW¿UVW²ZKLFKVXSSOLHUVKDYHWKH
FDSDELOLWLHVFDSDFLW\DQGSULFLQJWREHFRPSHWLWLYH,QVRPHFDVHV
DFRPSDQ\PLJKWVHWXSDUHYHUVHDXFWLRQLQYLWLQJVHOHFWSOD\HUVWR
FRPSHWHLQUHDOWLPHIRUWKHEXVLQHVVDQGFKRRVLQJWKHVXSSOLHUWKDW
EULQJVIRUZDUGWKHORZHVWSULFH
%
,I VLPSO\ SXWWLQJ WKH EXVLQHVV RXW WR ELG DQG VKRSSLQJ IRU ORZ
SULFH LV QRW WKH DQVZHU WKHQ FRPSDQLHV PD\ KDYH WR WDNH DQ
LQWHUPHGLDWHVWHSWRVHHZKDWSURVSHFWLYHVXSSOLHUVKDYHWRRIIHU
7KLVSURFHVVLQYROYHV³LQWHUYLHZLQJ´VXSSOLHUVWKURXJKDUHTXHVW
IRULQIRUPDWLRQ 5), DUHTXHVWIRUTXRWH 5)4 RUDUHTXHVWIRU
SURSRVDO 5)3 Total Cost of Ownership
% ,Q PDNLQJ VXSSOLHU VHOHFWLRQV PRVW FRPSDQLHV WRGD\ DUH ORRNLQJ
EH\RQG SXUFKDVH SULFH ,QVWHDG WKH\¶UH FRQVLGHULQJ ZKDW¶V
known as the WRWDO FRVW RI RZQHUVKLS 7&2 DVVRFLDWHG ZLWK WKH
SXUFKDVH7KLVLVDZD\RIEULQJLQJDOLIHF\FOHSHUVSHFWLYHLQWRWKH
SURFXUHPHQWRIJRRGVDQGVHUYLFHV
%
7KHOLIHF\FOHSHUVSHFWLYHPDNHVVHQVHEHFDXVH7&2FRQVLGHUVQRW
RQO\WKHSXUFKDVHSULFHEXWDOOWKHFRVWVDVVRFLDWHGZLWKDFTXLVLWLRQ
VXFK DV WKH FRVWV RI ¿QDQFLQJ WKH SXUFKDVH DQG SUHSDULQJ WKH
EXVLQHVV WR XVH WKH PDWHULDOV RU SURGXFWV 7R WKDW HQG 7&2 DOVR
IDFWRUVLQWKHFRVWVRIXVHLQFOXGLQJWKHFRVWRIFDUU\LQJLQYHQWRU\
%
%XW LW¶V LQ WKH GHWHUPLQDWLRQ RI D SURGXFW¶V SRVWXVH IDFWRUV WKDW
WKH OLIHF\FOH SHUVSHFWLYH RI 7&2 FDQ DOWHU WKH ODQGVFDSH RI WKH
SXUFKDVLQJ GHFLVLRQ 7KHVH SRVWXVH IDFWRUV LQFOXGH WKH FRVWV RI
GLVVDWLV¿HG FXVWRPHUV VXFK DV ZDUUDQW\ UHFDOO RU OLDELOLW\ FRVWV
DV ZHOO DV WKH HQYLURQPHQWDO LPSDFWV RI SURGXFWV DQG SDFNDJLQJ
PDWHULDOLQWKHSRVWXVHSKDVH
%
,QVXPWKHOLIHF\FOHSHUVSHFWLYHHVSRXVHGLQ7&2UHYROXWLRQL]HV
WKHDFWRIEX\LQJ,W¶VDGHJHHWXUQIURPWUDGLWLRQDOSXUFKDVLQJ
SUDFWLFH DQG UHTXLUHV PXFK GHHSHU WKRXJKW WKDQ VLPSO\ VKRSSLQJ
IRUSULFHVDQGVSHFVHYHUDFFRPPRGDWHG
Keeping Suppliers Engaged
% 2QH WLS IRU NHHSLQJ VXSSOLHUV HQJDJHG DQG ZRUNLQJ KDUG IRU
\RXU ¿UP LV WR PDLQWDLQ RSHQ FRPPXQLFDWLRQV HVSHFLDOO\ ZLWK
VXSSOLHUVWKDWDUHFULWLFDOWR\RXUEXVLQHVV,QYLWHVXSSOLHUVWRWRXU
\RXUIDFLOLWLHVDQGUHTXHVWDWRXURIWKHLUV6HHLQJWKHSURGXFWVDQG
VHUYLFHVLQXVHFDQLQVSLUHGLVFXVVLRQDQGLOOXPLQDWHRSSRUWXQLWLHV
IRULPSURYHPHQW
Lecture 18: Managing Supply and Suppliers
<RX VKRXOG DOVR SURYLGH
UHJXODUIHHGEDFNWRDOOVWUDWHJLF
VXSSOLHUV ,VVXH D PRQWKO\
VXSSOLHUVFRUHFDUGIRULQVWDQFH
WR UDWH SHUIRUPDQFH RQ D IHZ
PHWULFV WKDW DUH LPSRUWDQW WR
\RXU EXVLQHVV DQG H[SODLQ LQ
JHQHUDO KRZ WKH VXSSOLHU LV
GRLQJ 7KH EDVLF GLPHQVLRQV
RI SHUIRUPDQFH XVXDOO\ LQFOXGH
TXDOLW\FRVWDQGGHOLYHU\
%
3URJUHVVLYH FRPSDQLHV DOVR
WXUQ WKH PLUURU DURXQG DQG DVN
VXSSOLHUV KRZ VDWLV¿HG WKH\
DUH ZLWK WKH IRFDO ¿UP DV D
customer. Such assessments
XVXDOO\ H[DPLQH WKH HDVH
RI GRLQJ EXVLQHVV ZLWK WKH
FXVWRPHU DQG DUH JHQHUDOO\
FRQGXFWHGE\WKLUGSDUWLHV
‹.DWDU]\QD%LDODVLHZLF]L6WRFN7KLQNVWRFN
%
Providing a scorecard for
supplier performance should
serve as a conversation starter,
enabling both parties to see the
potential for improvement and
WRGHYHORSDPXWXDOO\EHQH¿FLDO
relationship.
%
/HDGLQJHGJH FRPSDQLHV DUH
DOVR PRYLQJ WRZDUG supply
FKDLQ FRPSHWLWLRQ &RPSDQLHV QR ORQJHU FRPSHWH PHUHO\ KHDG
WR KHDG EXW DOVR VXSSO\ FKDLQ WR VXSSO\ FKDLQ SLWWLQJ WKHLU HQWLUH
LQSXWWRGHOLYHUHGRXWSXW V\VWHPV DJDLQVW WKRVH RI WKHLU ULYDOV
:LWKWKDWLQPLQGWKHUH¶VDUDFHWRZLQWKHEHVWPRVWLQQRYDWLYH
VXSSOLHUV7KHVH DUH WKH VXSSOLHUV WKDW SRVVHVV XQLTXH LQWHOOHFWXDO
SURSHUW\ SURFHVVLQJ FDSDELOLWLHV DQG EUDQGLQJ WR EROVWHU \RXU
SURGXFWVDQGVHUYLFHV
%
%H\RQG ZRUNLQJ ZLWK VXSSOLHUV \RX ZDQW WR HQOLVW WKHP WR KHOS
\RXFRPSHWH7KLVFDQWDNHWKHIRUPRIHDUO\VXSSOLHULQYROYHPHQW
ZKHUHVXSSOLHUVKHOSWRGHYLVHWKHQH[WJHQHUDWLRQRISURGXFWVDQG
VHUYLFHV ,W PD\ UHVXOW LQ MRLQWYHQWXUH RSSRUWXQLWLHV RU OLFHQVLQJ
DUUDQJHPHQWV ZKHQ WKH PDUNHW SURYHV SURPLVLQJ$W D PLQLPXP
WKHLQYROYHPHQWRIVXSSOLHUVHDUO\LQWKHQHZSURGXFWGHYHORSPHQW
SURFHVV FDQ KLJKOLJKW WKH OLPLWDWLRQV RU FKDOOHQJHV WKDW \RX¶OO
HQFRXQWHUVKRXOG\RXHOHFWWRSURFHHGZLWKDEROGQHZWHFKQRORJ\
Suggested Reading
(OOUDPDQG.UDXVH³5REXVW6XSSOLHU5HODWLRQVKLSV´
(OOUDP DQG 6LIHUG ³3XUFKDVLQJ 7KH &RUQHUVWRQH RI WKH 7RWDO &RVW RI
2ZQHUVKLS&RQFHSW´
0RQF]ND +DQG¿HOG *LXQLSHUR DQG 3DWWHUVRQ 3XUFKDVLQJ DQG 6XSSO\
Chain Management.
Tate, 7KH'H¿QLWLYH*XLGHWR6XSSO\0DQDJHPHQWDQG3URFXUHPHQW.
Questions to Consider
1. +RZKDVVXSSO\PDQDJHPHQWSURJUHVVHGEH\RQGWKHWDFWLFDODFWLYLW\RI
EX\LQJ"
2. :K\ LV LW LPSRUWDQW WR HQJDJH RWKHU EXVLQHVV IXQFWLRQV LQ VWUDWHJLF
FRQYHUVDWLRQVZLWKVXSSOLHUV"
3. :KDW DUH WKH ULVNV RI KDYLQJ WRR IHZ DQG WRR PDQ\ VXSSOLHUV RI D
FULWLFDOLQSXW"
4. +RZGRHVWKHOLIHF\FOHSHUVSHFWLYHRI7&2FKDQJHWKHRULHQWDWLRQRID
EX\LQJRUJDQL]DWLRQ"
The Long Reach of Logistics
Lecture 19
L
'LVWULEXWLRQ6WUDWHJLHV
% Distribution UHIHUV WR WKH VSUHDGLQJ RI SURGXFW WKURXJKRXW WKH
PDUNHWSODFH VR WKDW D ODUJH QXPEHU RI SHRSOH FDQ EX\ LW ,W
HQFRPSDVVHV WKH ZDUHKRXVLQJ WUDQVSRUWDWLRQ DQG WUDFNLQJ RI
JRRGV LQWR WKH PDUNHWSODFH DOO RI ZKLFK UHTXLUHV VWUDWHJ\ :H¶OO
EHJLQ E\ FRQVLGHULQJ WKUHH GLVWULEXWLRQ VWUDWHJLHV LQWHQVLYH
H[FOXVLYHDQGVHOHFWLYH
‹ORJRERRPL6WRFN7KLQNVWRFN
Lecture 19: The Long Reach of Logistics
RJLVWLFV LV WKH EXVLQHVV IXQFWLRQ UHVSRQVLEOH IRU HQVXULQJ WKDW WKH
ULJKWSURGXFWVDUHDYDLODEOHLQWKHULJKWTXDQWLWLHVDWWKHULJKWSODFH
DQG WLPH WR PHHW FXVWRPHU H[SHFWDWLRQV 7KH ¿HOG RI ORJLVWLFV
HPEUDFHVWKHWUDQVSRUWDWLRQDQGGLVWULEXWLRQRISURGXFWVEXWLW¶VVRPHWKLQJ
PRUH,W¶VWKHRYHUDUFKLQJSODQQLQJWLPLQJRSWLPL]DWLRQDQGFRRUGLQDWLRQ
LQYROYHG LQ JHWWLQJ SURGXFWV ZKHUH WKH\ QHHG WR EH ZKHQ WKH\ QHHG WR EH
WKHUH,QWKLVOHFWXUHZH¶OOH[DPLQHWKUHHNH\DVSHFWVRIORJLVWLFVWKHUROH
RI ORJLVWLFV LQ SURYLGLQJ WKH FRPSDQ\¶V ³UHDFK´ LQ WKH PDUNHW WKURXJK LWV
FKRVHQ GLVWULEXWLRQ VWUDWHJ\ WKH ORJLVWLFV QHWZRUN UHTXLUHG WR VXSSRUW WKH
GLVWULEXWLRQVWUDWHJ\DQGWKHRSHUDWLRQDODVSHFWVRIORJLVWLFV²WKHPRYHPHQW
VWRUDJHDQGWHFKQRORJ\XVHGWRPHHWFXVWRPHUUHTXLUHPHQWV
The business of logistics is substantial: About $1.4 trillion is spent each year in
the United States alone to support the storage and transportation of goods.
%
6RPH EXVLQHVVHV VXFK DV &RFD&ROD RU *HQHUDO 0LOOV DVSLUH
WR KDYH WKHLU SURGXFWV LQ WKH KDQGV RI HYHU\ FXVWRPHU LQ D UHJLRQ
RU PDUNHW 7KLV LV FDOOHG intensive distribution ,Q RUGHU IRU WKHVH
FRPSDQLHV WR HDUQ VL]HDEOH SUR¿WV RQ WKHLU QDUURZ PDUJLQV WKH\
PXVWVHOOWUHPHQGRXVYROXPHVRIWKHLUSURGXFWV,QHVVHQFHWKH\XVH
LQWHQVLYHGLVWULEXWLRQWR³EODQNHWWKHPDUNHW´ZLWKWKHLUSURGXFWV
%
$W WKH RSSRVLWH H[WUHPH IURP LQWHQVLYH GLVWULEXWLRQ LV H[FOXVLYH
distribution7KLVVWUDWHJ\LQYROYHVJHWWLQJSURGXFWVLQWKHKDQGVRID
OLPLWHGQXPEHURISHRSOHEXWRIIHULQJD³KLJKWRXFK´RUFXVWRPL]HG
EX\LQJ H[SHULHQFH 7KLV DSSURDFK LV RIWHQ DVVRFLDWHG ZLWK KLJK
SULFHG OX[XU\ JRRGV VXFK DV MHZHOU\ IDVKLRQ PHUFKDQGLVH DQG
VSRUWV FDUV 0DQXIDFWXUHUV WKDW XVH H[FOXVLYH GLVWULEXWLRQ WLJKWO\
FRQWUROSURGXFWLRQDQGGLVWULEXWLRQ7KH\HLWKHUGLVWULEXWHWKHJRRGV
WKHPVHOYHVRUDOLJQZLWKDOLPLWHGQXPEHURIGLVWULEXWRUVDQGUHWDLOHUV
%
7KH WKLUG VWUDWHJ\ VHOHFWLYH GLVWULEXWLRQ ¿WV VRPHZKHUH EHWZHHQ
WKH LQWHQVLYH DQG H[FOXVLYH GLVWULEXWLRQ DSSURDFKHV &RPSDQLHV
SXUVXLQJVHOHFWLYHGLVWULEXWLRQKDYHPRUHFXVWRPHUVWKDQH[FOXVLYH
SURYLGHUVDQGIHZHUWKDQLQWHQVLYHFRPSHWLWRUV'LVWULEXWLRQPLJKW
EHVHOHFWLYHLQWHUPVRIWKHQXPEHUDQGW\SHVRIFXVWRPHUVUHDFKHG
RULQWHUPVRIWKHORFDWLRQVVHUYHG
%
'HSHQGLQJRQWKHGHVLUHGLQWHQVLW\RIWKHPDUNHWFRYHUDJHDQ\RQH
RIWKHVHWKUHHDOWHUQDWLYHVPLJKWVXSSRUWDFRPSDQ\¶VFRPSHWLWLYH
EDVLV²KRZLWLQWHQGVWR³ZLQ´LQWKHPDUNHW$QGPDQ\FRPSDQLHV
HPSOR\PXOWLSOHGLVWULEXWLRQVWUDWHJLHVXVLQJGLIIHUHQWDSSURDFKHV
IRUGLIIHUHQWEUDQGVXQGHUWKHFRPSDQ\¶VXPEUHOOD
Logistics Networks
% The term ORJLVWLFV QHWZRUNV refers to the locations from which a
EXVLQHVVRSHUDWHVDQGWKHIXQFWLRQVRUSXUSRVHVRIWKRVHORFDWLRQV
(YHU\ EXVLQHVV PXVW FRQVLGHU WKH QHWZRUN RYHU ZKLFK LW ZDQWV
WR FRQGXFW EXVLQHVV VXFK WKDW LW UHDFKHV FXVWRPHUV ZLWK LWV
SURGXFWV DQG FDQ DFFHVV NH\ VRXUFHV RI SURGXFW VXSSO\ ,W¶V
KHUH ZH UHDOL]H WKDW ORJLVWLFV LV LQYROYHG LQ ERWK WKH LQERXQG DQG
RXWERXQGVLGHVRIWKHEXVLQHVV
%
)LQGLQJWKHULJKWQXPEHUDQGSODFHPHQWRIORFDWLRQVLQYROYHVQRW
just science but art.
ż 7KH DUW FRPHV LQ WKH VHQVH RI LPSRUWDQFH WKDW LV LPSDUWHG
to customers by establishing a store or warehouse location
QHDU WKHP RU E\ VHWWLQJ XS D FRQYHQLHQW FDWDORJ RU ZHEVLWH
RUGHULQJV\VWHP
ż
%
7KH VFLHQFH RI ORJLVWLFV KDV LWV RULJLQV LQ PLOLWDU\ VFLHQFH DQG
FRPPHUFLDO HQWHUSULVHV KDYH ERUURZHG WKH LGHD RI WKH FHQWHU RI
gravity from military strategists.
ż ,Q WKH PLOLWDU\ WKH FHQWHU RI JUDYLW\ RI DQ HQHP\ LV LWV
FRQFHQWUDWLRQ RI IRUFHV LQ D FRQÀLFW LW UHSUHVHQWV D VRXUFH
of vulnerability.
Lecture 19: The Long Reach of Logistics
ż
<HW LW¶V LPSRVVLEOH WR EH ORFDWHG FORVH WR DOO FXVWRPHUV ZKHQ
WKH\¶UHVFDWWHUHGDERXWDODUJHJHRJUDSKLFDUHD7KLVLVZKHUH
FRPSDQLHV UHO\ RQ VFLHQFH WR ¿JXUH RXW KRZ WR DFKLHYH WKH
greatest reach with the fewest facilities. The goal here is the
RSWLPDOEOHQGRIPDUNHWDFFHVVDQGFRVWFRQWDLQPHQW
,Q EXVLQHVV WKH FHQWHU RI JUDYLW\ UHSUHVHQWV WKH EHVW SODFH
WR ORFDWH D GLVWULEXWLRQ SRLQW JLYHQ WKH LQERXQG VXSSO\ DQG
RXWERXQGGLVWULEXWLRQORFDWLRQV,W¶VWKHRSWLPDOSRLQWDWZKLFK
WKHWRWDOGLVWDQFHWKDWPXVWEHFRYHUHGLQIURPVXSSO\ORFDWLRQV
DQG RXW WR GHPDQG ORFDWLRQV LV PLQLPL]HG 7R VHUYH ODUJH
PDUNHWVPRVWEXVLQHVVHVHOHFWWRRSHUDWHIURPVHYHUDOORFDWLRQV
%
&RPSHWLWLRQ FDQ DOVR IXHO WKH QHHG WR LQFUHDVH WKH QXPEHU RI
GLVWULEXWLRQDQGVWRUHORFDWLRQV:KHQDULYDOHVWDEOLVKHVDSUHVHQFHLQ
DPDUNHWLWFUHDWHVDQHHGWRPDWFKWKHFRPSHWLWRU¶VVWUDWHJLFPRYH
5HVWDXUDQWFKDLQVDQGUHWDLOHUVURXWLQHO\GHPRQVWUDWHWKLVEHKDYLRU
%
2I FRXUVH WKHUH DUH D IHZ FKHFNV RQ WKH ORJLF RI DGGLQJ PRUH
locations to a logistics network. For instance, more facilities means
DKLJKHUZDUHKRXVHDQGUHDOHVWDWHLQYHVWPHQWDQGDFRPSDQ\FDQ
H[SHFWWRLQYHVWPRUHLQLQYHQWRU\DVLWDGGVGLVWULEXWLRQSRLQWVLQ
its network.
%
ż
,WKDVEHHQSURYHQWKDWDFRPSDQ\ZLOOQHHGPRUHVDIHW\VWRFN
LQYHQWRU\ ZKHQ LW DGGV ORFDWLRQV WR LWV QHWZRUN 6DIHW\ VWRFN
LVWKHLQYHQWRU\KHOGMXVWLQFDVHWKHUH¶VDQLQFUHDVHLQGHPDQG
RUDGHOD\LQVXSSO\7KLVLVRSSRVHGWRF\FOHVWRFN, which is
LQYHQWRU\ D FRPSDQ\ PDLQWDLQV WR FRYHU LWVHOI IRU IRUHFDVWHG
VDOHVDQGQRUPDOVXSSO\OHDGWLPHV7KHJUHDWHUWKHXQFHUWDLQW\
DFRPSDQ\IDFHVWKHPRUHVDIHW\VWRFNLWUHTXLUHV
ż
The VTXDUH URRW UXOH SUHGLFWV WKDW WKH DPRXQW RI VDIHW\ VWRFN
D FRPSDQ\ KROGV ZLOO GRXEOH ZKHQ WKH QXPEHU RI ORFDWLRQV
TXDGUXSOHV,QRWKHUZRUGVLIDUHWDLOHULQFUHDVHVLWVVWRUHFRXQW
IURPRQHORFDWLRQWRIRXUWKHVDIHW\VWRFNLQYHQWRU\KHOGDFURVV
WKHIRXUVWRUHVZLOOEHWZLFHDVPXFKDVZKHQWKHFRPSDQ\KDGD
VLQJOHORFDWLRQ7KLVH[SHFWHGLQFUHDVHLQLQYHQWRU\GLVFRXUDJHV
FRPSDQLHVIURPDGGLQJWRRPDQ\IDFLOLWLHVWRWKHLUQHWZRUNV
ż
7UDQVSRUWDWLRQ FRVWV FDQ DOVR PDNH DGGLQJ WRR PDQ\
GLVWULEXWLRQSRLQWVXQDWWUDFWLYH$GGLQJORFDWLRQVPHDQVWKDWD
FRPSDQ\DOVRKDVWRVKLSWRWKRVHORFDWLRQV(YHQWKRXJKWKH
FRPSDQ\JHWVFORVHUWRFXVWRPHUVRQWKHRXWERXQGVLGHRIWKH
EXVLQHVVLQERXQGWUDQVSRUWDWLRQFRVWVFDQEHSURKLELWLYH
ż
7KH¿QDOFKHFNRQWKHORJLFRIDGGLQJORFDWLRQVWREHWWHUVHUYH
a market is FDQQLEDOL]DWLRQ:KHQVDOHVÀDWWHQDQGVDWXUDWLRQ
LV DFKLHYHG LQ WKH PDUNHW DQ\ VDOHV JDLQ IRU RQH ORFDWLRQ LV
DFFRPSOLVKHG DW D ORVV WR DQRWKHU ORFDWLRQ 2EYLRXVO\ ZKHQ
WKHJDLQFRPHVDWWKHH[SHQVHRIDFRPSHWLWRUWKDW¶VJRRG%XW
ZKHQLWFRPHVDWWKHH[SHQVHRIDFRPSDQ\¶VSDUWQHUORFDWLRQV
WKHUHPD\EHOLWWOHRUQREHQH¿W
'HWHUPLQLQJ WKH ³ULJKW´ QXPEHU RI ORFDWLRQV LV VRPHWKLQJ RI D
PRYLQJ WDUJHW IRU PDQ\ FRPSDQLHV EHFDXVH PDUNHWV DUH G\QDPLF
DQG ORJLVWLFV QHWZRUNV DUH IDLUO\ SHUPDQHQW RU DW OHDVW FRVWO\ WR
FKDQJH 7R KHOS DFFRPPRGDWH WKH QHHG WR H[SDQG DQG FRQWUDFW
ORJLVWLFV QHWZRUNV VRPH EXVLQHVVHV VHHN WKH KHOS RI WKLUGSDUW\
ORJLVWLFVSURYLGHUV 3/V ZKLFKRZQZDUHKRXVHDQGWUDQVSRUWDWLRQ
DVVHWVWRKHOSWKHLUFOLHQWVH[SDQGDQGFRQWUDFWDVQHHGHG
%
,QOLHXRIRXWVRXUFLQJVRPHFRPSDQLHVZRUNZLWKGLVWULEXWRUVDQG
ZKROHVDOHUV WR DFKLHYH EURDGHU FRYHUDJH LQ D ODUJHU PDUNHW WKDQ
WKH\ FRXOG DWWDLQ RQ WKHLU RZQ 7KLV SUDFWLFH LV NQRZQ DV XVLQJ
LQGLUHFWFKDQQHOVRIGLVWULEXWLRQ
ż 7KH REYLRXV GLVDGYDQWDJH WR VXFK DUUDQJHPHQWV LV WKDW WKH
FRPSDQ\ ORVHV GLUHFW WRXFK ZLWK WKH HQG FXVWRPHU ZKR QRZ
EX\VIURPWKHLQWHUPHGLDU\
Lecture 19: The Long Reach of Logistics
ż
,Q DGGLWLRQ WKH LQWHUPHGLDU\ LV OLNHO\ WR DOVR VHOO SURGXFWV
RIIHUHG E\ FRPSHWLWRUV &RQVHTXHQWO\ WKH PDQXIDFWXUHU PXVW
WU\ WR DSSHDO QRW RQO\ WR WKH HQG FXVWRPHUV EXW DOVR WR WKH
LQWHUPHGLDULHVLQWKHKRSHVWKDWWKH\¶OOVWRFNDQGDFWLYHO\VHOO
WKH¿UP¶VSURGXFWV
Operational Factors
% 2QFHDFRPSDQ\KDVLWVGLVWULEXWLRQVWUDWHJ\DQGORJLVWLFVQHWZRUN
LQSODFHLWPXVWWXUQWRWKHRSHUDWLRQDOVLGHRIORJLVWLFVGHOLYHULQJ
to customers or store locations. Here, the focus is on the RUGHUF\FOH,
or lead time ZKLFK LV WKH DPRXQW RI WLPH IURP RUGHU UHFHLSW WR
GHOLYHU\0XFKRIWKHH[HFXWLRQLQWKLVVWDJHRIWKHORJLVWLFVSURFHVV
UHVWVZLWKWUDQVSRUWDWLRQZKLFKUHSUHVHQWVZKDWLVRIWHQFDOOHGWKH
³ODVW PLOH´ VHJPHQW RI WKH RUGHU F\FOH WKH SK\VLFDO GHOLYHU\ RI
JRRGVRQWLPHDQGVDIHO\WRFXVWRPHUV
%
&KRRVLQJ WKH ULJKW PHDQV RI WUDQVSRUWLQJ JRRGV FDQ KDYH PDMRU
FRVWDQGVHUYLFHLPSOLFDWLRQVIRUDFRPSDQ\1DWXUDOO\VSHHGDQG
GHSHQGDELOLW\ XVXDOO\ FRPH DW D KLJKHU SULFH ,W PD\ FRVW PRUHWRVKLSDSURGXFWWKHQH[WGD\WRDFXVWRPHUWKDQWRXVHWZR
GD\ GHOLYHU\ 7KHUH DUH ¿YH EDVLF PRGHV RI WUDQVSRUWDWLRQ HDFK
ZLWK LWV RZQ FRVW DQG VHUYLFH LPSOLFDWLRQV WUXFN UDLO DLU ZDWHU
DQGSLSHOLQH
ż 7UXFN WUDQVSRUWDWLRQ LV WKH PRVW FRPPRQ PHDQV XVHG WRGD\
JLYHQWKDWLWLVVRUHDGLO\DYDLODEOHDQGLVJHQHUDOO\UHJDUGHGDV
IDVWDQGUHOLDEOH
ż
$LU WUDQVSRUWDWLRQ WHQGV WR EH SUHIHUUHG IRU WLPHFULWLFDO
GHOLYHULHVWKDWPXVWFRYHUORQJGLVWDQFHVVXFKDVXUJHQWFURVV
FRXQWU\ RU LQWHUQDWLRQDO VKLSPHQWV +LJKYDOXH JRRGV VXFK
DV FRQVXPHU HOHFWURQLFV DQG SKDUPDFHXWLFDOV RIWHQ PRYH E\
SODQHDVGRKLJKO\SHULVKDEOHLWHPV HJIUHVKFXWÀRZHUV RU
SURGXFWVZLWKVKRUWPDUNHWOLIHF\FOHV HJIDVKLRQDSSDUHO ż
7UDQVSRUWDWLRQE\UDLOURDGLVSRSXODUIRUVKLSPHQWVWKDWDOORZ
IRUORQJHUWUDQVLWWLPHVRYHUORQJHUGLVWDQFHVVXFKDVKDXOLQJ
JUDLQV IURP ,RZD WR 1HZ <RUN RU FRDO IURP :HVW 9LUJLQLD
WR$UL]RQD
ż
7UDQVSRUWDWLRQ E\ ZDWHU LQFOXGLQJ ULYHUV JUHDW ODNHV DQG
RFHDQV LV SUHIHUUHG IRU WKH WUDQVSRUW RI PDVVLYH TXDQWLWLHV
RI JRRGV ZKHQ WLPH LV QRW FULWLFDO DQG QDYLJDEOH ZDWHUZD\V
FRQQHFWWKHRULJLQDQGGHVWLQDWLRQSRLQWV
ż
)LQDOO\ SLSHOLQH WUDQVSRUWDWLRQ LV FXUUHQWO\ OLPLWHG WR
FRPPRGLWLHVWKDWDUHÀXLGLQQDWXUHVXFKDVRLODQGJDV
%
6RPHWLPHV WKH EHVW WUDQVSRUWDWLRQ VROXWLRQ LQYROYHV FRPELQLQJ
PRGHVIRUVKLSPHQWLQZKDW¶VNQRZQDVintermodal transportation.
$OWKRXJK PRVW LWHPV ZLOO PRYH E\ WUXFN DW VRPH SRLQW LQ WKHLU
GLVWULEXWLRQWKLV PRGHRI WUDQVSRUWDWLRQFDQ EH H[SHQVLYHHQHUJ\
LQWHQVLYH DQG HQYLURQPHQWDOO\ XQVRXQG )RU WKHVH UHDVRQV UDLO
PD\EHXVHGPRUHRIWHQLQWKHIXWXUH
%
7KHIXWXUHFRXOGDOVREHPDUNHGE\QHZPRGHVRIWUDQVSRUWDWLRQ
VXFK DV WKH XQPDQQHG DHULDO GURQHV²VPDOO SURJUDPPDEOH
KHOLFRSWHUV²WKDW $PD]RQ LV H[SHULPHQWLQJ ZLWK IRU KRPH
GHOLYHULHV IURP RUGHU IXO¿OOPHQW FHQWHUV ([SHULPHQWV DUH DOVR LQ
SODFH WR WHVW XQGHUJURXQG SLSHOLQHV IRU VKLSSLQJ QRQOLTXLG FDUJR
DQGEOLPSVIRUPRYLQJODUJHFDUJRRYHURFHDQV
%
$GYDQFHGWHFKQRORJLHVLQLQIRUPDWLRQV\VWHPVDUHDOVRLQÀXHQFLQJ
ORJLVWLFV DFWLYLWLHV 7KHVH WHFKQRORJLHV LQFOXGH WUDQVSRUWDWLRQ
DQG ZDUHKRXVH PDQDJHPHQW V\VWHPV DV ZHOO DV FRPPXQLFDWLYH
WHFKQRORJLHV VXFK DV WKH ,QWHUQHW *36 DQG 5),' XVHG WR OLQN
FRPSDQLHV HQKDQFH LQIRUPDWLRQ H[FKDQJH DQG LPSURYH YLVLELOLW\
RIVXSSO\DQGGHPDQGDFURVVFRPSDQLHV,QVXPWKHUHLVLPPHQVH
FKDQJH DOWHULQJ WKH ORJLVWLFV ODQGVFDSH DQG WKH PHDQV E\ ZKLFK
FRPSDQLHVDFKLHYH³UHDFK´LQWKHPDUNHW
Suggested Reading
$UYLV6DVODYVN\2MDOD6KHSKHUG%XVFKDQG5DM&RQQHFWLQJWR&RPSHWH
2014.
*ROGVE\,\HQJDUDQG5DR7KH'H¿QLWLYH*XLGHWR7UDQVSRUWDWLRQ.
0F*ROGULFNDQG%DUWRQ³+LJK7HFK:D\VWR.HHS&XSERDUGV)XOO´
0XUSK\DQG.QHPH\HU&RQWHPSRUDU\/RJLVWLFV.
Questions to Consider
Lecture 19: The Long Reach of Logistics
1. +RZ GRHV HIIHFWLYH ORJLVWLFV PDQDJHPHQW DIIHFW D FRPSDQ\¶V DELOLW\
WRFRPSHWH"
2. ,V ORJLVWLFV EHFRPLQJ PRUH RU OHVV LPSRUWDQW LQ WRGD\¶V PDUNHWSODFH"
:K\"
3. &DQ \RX WKLQN RI DQ H[DPSOH ZKHUH SRRU ORJLVWLFV H[HFXWLRQ UXLQHG
\RXUGD\"
Rethinking Your Business Processes
Lecture 20
9
LUWXDOO\ HYHU\WKLQJ ZH GR LQYROYHV D SURFHVV ZKHWKHU LW¶V ¿OLQJ D
OHJDO EULHI SHUIRUPLQJ D VXUJLFDO SURFHGXUH RU PDNLQJ D SURGXFW
%XW HYHQ WKRXJK WKH\ JR RQ DOO DURXQG XV ZH WHQG QRW WR WKLQN
GHHSO\ DERXW SURFHVVHV RU HYHQ QRWLFH WKHP ,Q EXVLQHVV KRZHYHU ¿QGLQJ
ZD\VWRLPSURYHSURFHVVHVKDVEHFRPHLQGLVSHQVDEOHWRVXFFHVV&RPSDQLHV
use SURFHVV WKLQNLQJ WR GHWHUPLQH ZKDW ZRUN UHDOO\ QHHGV WR JHW GRQH DQG
KRZWRJHWWKHPRVWRIWKHLUDYDLODEOHWLPHDQGUHVRXUFHV7KLVSHUVSHFWLYH
IRFXVHV FRPSDQ\ HIIRUWV RQ WKH RXWFRPHV WKDW FUHDWH defensible value ,Q
WKLV OHFWXUH ZH¶OO H[SORUH WKLV FRQFHSW DQG ORRN DW VRPH VLPSOH WRROV IRU
LPSURYLQJWKHSURFHVVHVWKDWPDWWHUWR\RXURUJDQL]DWLRQ
The Voice of the Customer and the Voice of Business
% ,W¶V RIWHQ VDLG WKDW WKHUH DUH WZR YRLFHV ZH VKRXOG OLVWHQ WR ZKHQ
PDNLQJ DQ\ EXVLQHVV GHFLVLRQ WKH YRLFH RI WKH FXVWRPHU DQG WKH
voice of the business. The voice of the customer tells us what
FXVWRPHUV DUH VHHNLQJ LQ WKH ZD\ RI SURGXFW RU VHUYLFH DWWULEXWHV
DQG PRUH LPSRUWDQWO\ WKH RXWFRPHV WKH\ ZDQW WR KDYH IXO¿OOHG
WKURXJKWKHSURGXFWVDQGVHUYLFHVWKH\EX\7KRVHRXWFRPHVJLYHQ
DSULFHWKHFXVWRPHUVSD\IRUWKHPUHQGHUDQDVVHVVPHQWRIYDOXH
therefore, valueLVGH¿QHGDV³TXDOLW\JLYHQWKHSULFHSDLG´
%
2XWFRPHV VSHDN WR WKH TXHVWLRQ 'RHV WKH SURGXFW XVH RU VHUYLFH
H[SHULHQFHVDWLVI\²RUEHWWHU\HW²GHOLJKWWKHFXVWRPHU"7RDGGUHVV
RXWFRPHV LW¶V XVHIXO WR WDNH WKH WLPH WR OLVWHQ WR FXVWRPHUV DQG
XQGHUVWDQGWKHLUQHHGVEHIRUHHQJDJLQJLQDVHULHVRIKLWDQGPLVV
³LPSURYHPHQWV´WKDWPLJKWPLVVWKHPDUN
%
7KH YRLFHRIWKHFXVWRPHU FRQFHSW UHPLQGV XV WKDW WKH ³ULJKW
WKLQJV´ IRU D EXVLQHVV WR GR VKRXOG EH LQ OLQH ZLWK SURYLGLQJ
RXWFRPHVWKDWFXVWRPHUVZDQWDQGDUHZLOOLQJWRSD\IRU7KLVODVW
SLHFH²WKH³SD\LQJIRU´²EULQJVLQWKHYRLFHRIWKHEXVLQHVV
ż
7KLV YRLFH GLUHFWV RXU DWWHQWLRQ WR VXFK QHHGV DV UHYHQXH
SUR¿WDELOLW\ JURZWK LPDJH DQG VWDWXUH PHDQLQJIXO MREV IRU
HPSOR\HHV DQG VR RQ ,Q RUGHU IRU D EXVLQHVV WR VXUYLYH DQG
WKULYHLWPXVWORRNDIWHUWKHVHQHHGV
ż
7KXV WKH ³ULJKW WKLQJV´ IRU WKH EXVLQHVV WR SXUVXH DUH WKRVH
WKDWJHQHUDWHYDOXHLQWKHH\HVRIFXVWRPHUVDQGJHQHUDWHWKH
EXVLQHVVRXWFRPHVWKHRUJDQL]DWLRQQHHGV
Process Mapping
% 2QFH \RX¶YH ¿JXUHG RXW ZKDW RXWFRPHV WR SXUVXH²WKH ³ULJKW
WKLQJV´²WKH QH[W ORJLFDO TXHVWLRQ LV KRZ WR GR WKHVH WKLQJV
³ULJKW´WKDWLVKRZWRDFKLHYHHI¿FLHQF\DQGHIIHFWLYHQHVVLQWKH
ZRUNSURFHVVHVSHUIRUPHG7KH¿UVWVWHSKHUHLVWRXQGHUVWDQGWKH
FXUUHQWVWDWHRI\RXUSURFHVVHVVWDUWLQJZLWKWKRVHWKDWDUHLQFOHDU
QHHGRIKHOS
Lecture 20: Rethinking Your Business Processes
%
7KHQH[WVWHSLVWRPDNHWKHFKRVHQSURFHVVYLVXDOE\FDSWXULQJLWLQ
a SURFHVVPDS<RXFDQPDNHWKLVGLDJUDPXVLQJVRIWZDUHRUGUDZ
LWRXWRQDODUJHVKHHWRISDSHURUSRVWHUERDUG,W¶VKHOSIXOWRJHWWKH
YDULRXVSHRSOHLQYROYHGLQWKHSURFHVVWRKHOS\RXGHYLVHWKHPDS
7KHH[DPSOHRQWKHIROORZLQJSDJHLVDSURFHVVPDSIRUWDNLQJD
WULSE\FRPPHUFLDODLUOLQH
ż 7KH H[SHULHQFH RI WDNLQJ DQ DLUOLQH ÀLJKW LV FDSWXUHG KHUH LQ
HLJKW VWHSV UHVHDUFKLQJ WKH WLFNHW EX\LQJ WKH WLFNHW
JHWWLQJWKHERDUGLQJSDVV FOHDULQJVHFXULW\ ZDONLQJ
WR WKH JDWH ERDUGLQJ WKH SODQH ULGLQJ RXW WKH ÀLJKW
DQG DQG FROOHFWLQJ OXJJDJH /LPLWLQJ WKH SURFHVV PDS WR
EHWZHHQDQGVWHSVLVXVXDOO\JRRGHQRXJKIRUD¿UVWSDVV
\RXFDQDOZD\VDGGPRUHGHWDLOODWHULI\RX¿QGDWURXEOHVSRW
UHTXLULQJGHHSHUDQDO\VLV
ż
1RWH WKDW VWHS DFTXLULQJ WKH ERDUGLQJ SDVV DQG FKHFNLQJ
OXJJDJH LQYROYHV DQRWKHU SDUW\ WKH DLUOLQH WLFNHW DJHQW 7KH
LQYROYHPHQW RI RWKHU DFWRUV RU ORFDWLRQV LQ WKH SURFHVV LV
GHOLQHDWHG LQ D swim lane DQ DGGLWLRQDO OLQH RI DFWLRQV WKDW
Customer
Ticket Counter
Research
c
Ticket
Buy
Ticket
PT: 10 min
WT: 2 days
FTQ:
80%
Avail.: 98%
Value:
NO
PT: 10 min
WT:
3 wks
FTQ:
95%
Avail.: 99%
Value:
NO
Get
Luggage
PT:
1 min
WT: 0–30 min
FTQ:
98%
Avail.: 98%
Value: YES
Prepare
and Pack
Get Boarding
Pass
PT:
5 min
WT:
0–1 hr
FTQ:
98%
Avail.:
95%
Value:
NO
Boarding Gate
Concourse
Security
Clear
Security
PT:
2 min
WT: 0–1 hr
FTQ:
95%
Avail.: 95%
Value:
NO
Walk
to Gate
PT:
10 min
WT: 0–2 hr
FTQ:
99%
Avail.: 95%
Value:
NO
Board
Plane
Fly to
D
Destination
PT:
3 min
WT: 0–30 min
FTQ: 99.9%
Avail.: 99%
Value:
NO
PT:
2 hr
WT:
0
FTQ: 100%
Avail.: 99%
Value: YES
UXQVSDUDOOHOWRWKHPDLQOLQH(DFKDFWRULQWKHSURFHVVKDVKLV
RU KHU RZQ VZLP ODQH DV GRHV HDFK SK\VLFDO ORFDWLRQ:KHQ
WKHSURFHVVPRYHVIURPRQHDFWRUWRDQRWKHUWKHWUDQVLWLRQLV
VKRZQE\GUDZLQJDOLQHIURPRQHVZLPODQHWRDQRWKHU
%
7KH ¿UVW SDVV DW WKH SURFHVV PDS GRHV QRW PDUN WKH HQG RI WKH
UHYLHZ EXW UDWKHU WKH EHJLQQLQJ 7R WKH H[WHQW WKDW RWKHUV DUH
LQYROYHG LQ WKH SURFHVV \RX VKRXOG FRQIHU ZLWK WKHP WR VHH LI
WKHLU YHUVLRQ RI WKH SURFHVV MLEHV ZLWK \RXUV DQG WR GLVFXVV DQG
UHVROYH GLVFUHSDQFLHV 7KLV GLVFXVVLRQ PD\ UHYHDO LPSRUWDQW
PLVXQGHUVWDQGLQJV RU FRQÀLFWV WKDW VWDQG LQ WKH ZD\ RI
SURFHVVLPSURYHPHQW
Lecture 20: Rethinking Your Business Processes
Process Time, Wait Time, and Cycle Time
% 2QFHDJUHHPHQWLVUHDFKHGRQWKH¿UVWSDVVPDSLW¶VDJRRGWLPH
WR UHÀHFW RQ WKH SURFHVV DV D ZKROH DVNLQJ ZKHWKHU DQ\ VWHSV RU
HYHQWKHZKROHSURFHVVFRXOGEHHOLPLQDWHG,I\RXGHWHUPLQHWKDW
WKHSURFHVVUHPDLQVHVVHQWLDOLW¶VWLPHWRGRDGHHSHUDQDO\VLVE\
SRSXODWLQJ WKH EDVLF ZRUN VWHSV ZLWK DGGLWLRQDO GDWD VXFK DV WKH
DPRXQWRIWLPHUHTXLUHGWRFRPSOHWHHDFKVWHS SURFHVVWLPH <RX
FDQDOVRHVWLPDWHWKHDPRXQWRIWLPHVSHQWZDLWLQJZLWKLQHDFKVWHS
DQGEHWZHHQWKHYDULRXVVWHSV
%
,QRXUDLUWUDYHOH[DPSOHWKHVXPRIWKHSURFHVVWLPHVDFURVVWKH
HLJKW VWHSV LV PLQXWHV 5HPHPEHU WKLV LV WKH DFWXDO DPRXQW
RI WLPH LQ ZKLFK WKH DFWRUV LQ WKH SURFHVV DUH HQJDJHG LQ ZRUN
DVVRFLDWHG ZLWK ERRNLQJ WKH ÀLJKW UHDFKLQJ WKH SODQH WDNLQJ
WKH ÀLJKW DQG FROOHFWLQJ OXJJDJH 2I WKHVH PLQXWHV DUH
DVVRFLDWHG ZLWK WKH ÀLJKW LWVHOI 7KH WRWDO ZDLW WLPH DFURVV WKH
SURFHVVLVGD\VDQGKRXUV
%
7KH VXP RI WKH SURFHVV DQG ZDLW WLPHV LV WKH F\FOH WLPH for
WKH SURFHVV²WKH WRWDO WLPH HODSVHG IURP SURFHVV LQLWLDWLRQ WR
FRQFOXVLRQ,QRXUH[DPSOHWKHF\FOHWLPHLVPLQXWHV1RWH
WKDW WKH YDVW PDMRULW\ RI F\FOH WLPH LV DVVRFLDWHG ZLWK WKH WKUHH
ZHHNSHULRGWKDWHODSVHGEHWZHHQEX\LQJWKHWLFNHWDQGWDNLQJWKH
WULS 2I WKH PRUH WKDQ PLQXWHV RQO\ LQYROYH DFWXDO
ZRUNSHUIRUPHGE\WKHNH\DFWRUVLQWKHSURFHVV7KLVDPRXQWVWR
MXVWXQGHURIWKHWRWDOF\FOHWLPH
%
7KH ZDLW WLPH IRU D ÀLJKW PLJKW VWULNH \RX DV QRUPDO EXW \RX
PLJKWEHVXUSULVHGWROHDUQWKDWVXFKDORZOHYHORIWLPHHI¿FLHQF\
LVFRPPRQLQERWKSHUVRQDODQGEXVLQHVVZRUNSURFHVVHV,QIDFW
LW¶VUDUHWR¿QGDPHDVXUHRIWLPHHI¿FLHQF\JUHDWHUWKDQ7KLV
VSHDNV WR WKH FRQVLGHUDEOH VODFN WLPH IRXQG LQ PRVW SURFHVVHV$
SURFHVVPDSKHOSVWRLOOXPLQDWHVXFKZDVWHGWLPH
)LUVW7LPH4XDOLW\DQG5HVRXUFH$YDLODELOLW\
% 7ZRRWKHULPSRUWDQWIDFWRUVWRFRQVLGHUZKHQDQDO\]LQJSURFHVVHV
DUH ¿UVWWLPH TXDOLW\ )74 DQG UHVRXUFH DYDLODELOLW\ FTQ refers
WR WKH SHUFHQWDJH RI WLPH WKDW D JLYHQ ZRUN VWHS LV FRPSOHWHG
VXFFHVVIXOO\ RQ WKH ¿UVW WU\ 5HVRXUFH DYDLODELOLW\ refers to the
SHUFHQWDJHRIWLPHWKDWWKHYDULRXVUHVRXUFHVUHTXLUHGWRSHUIRUPD
ZRUNVWHSDUHDYDLODEOH
%
7KH)74DQGDYDLODELOLW\OHYHOVIRUWKHZKROHSURFHVVDUHFDOFXODWHG
E\PXOWLSO\LQJWRJHWKHUDOOWKHSHUFHQWDJHVIRUHDFKIDFWRU
ż ,Q RXU VFHQDULR WKH )74 IRU WKH SURFHVV LV ,Q RWKHU
ZRUGV DERXW RI WKH WLPH HYHU\WKLQJ DERXW WKH ÀLJKW
SURFHVV JRHV DFFRUGLQJ WR SODQ 7KH RWKHU RI WKH WLPH
VRPHWKLQJJRHVZURQJVRPHZKHUHLQWKHSURFHVV
ż
0XOWLSO\LQJWKHDYDLODELOLW\SHUFHQWDJHVDFURVVWKHHLJKWVWHSV
\LHOGVDWRWDODYDLODELOLW\IRUWKHSURFHVVRI
%
:LWK WKH FDOFXODWHG WRWDOV IRU )74 DQG DYDLODELOLW\ LQ KDQG ORRN
IRUWKHFXOSULWVWKDWFRXOGDIIHFWWKHVHWZRRXWFRPHVWRWKHJUHDWHVW
H[WHQW ,Q WKH FDVH RI )74 LQ RXU VFHQDULR UHVHDUFKLQJ WKH WLFNHW
)74 LV D PDMRU FRQWULEXWRU WR TXDOLW\ IDLOXUH 0HDQZKLOH
availability suffers somewhat at the ticket counter, the security
FKHFNSRLQWDQGWKHGHSDUWXUHJDWH²DOOORFDWLRQVZKHUHOLQHVIRUP
DQGWUDYHOHUVPXVWZDLW
%
%HDULQPLQGWKDW\LHOGVIRU)74DQGDYDLODELOLW\ZLOORQO\GHFOLQH
RUDWEHVWVXVWDLQRYHUDOOSHUIRUPDQFHZKHQPRUHZRUNVWHSVDUH
LGHQWL¿HG LQ D SURFHVV 7KLV LV QRW RQO\ D PDWKHPDWLFDO UHDOLW\ RI
PXOWLSO\LQJ WKHLU YDOXHV EXW DOVR DQ RSHUDWLRQDO UHDOLW\7KH PRUH
FRPSOLFDWHG D SURFHVV EHFRPHV WKH PRUH RSSRUWXQLWLHV IRU HUURU
GHOD\DQGGLVUXSWLRQDUHLQWURGXFHG:LWKWKDWLQPLQGLW¶VZLVHWR
WU\WRVLPSOLI\SURFHVVHVE\UHGXFLQJWKHQXPEHURIVWHSVLQYROYHG
7KLVLQIDFWLVDSULQFLSOHRI/HDQ7KLQNLQJ
Lecture 20: Rethinking Your Business Processes
/DEHOLQJ:RUN6WHSV
% 7RKHOSLQLGHQWLI\LQJZKLFKVWHSVWRHOLPLQDWHIURPDSURFHVV/HDQ
7KLQNLQJ UHFRPPHQGV DVVLJQLQJ D VXEMHFWLYH ODEHO WR HDFK ZRUN
VWHS 7KDW VXEMHFWLYH ODEHO LV ZKHWKHU RU QRW WKH VWHS LV D YDOXH
DGGHGRQH,QRWKHUZRUGVGRHVWKHVWHSFRQWULEXWHGHIHQVLEOHYDOXH
WRWKHSURFHVV"
%
,IWKHHOLPLQDWLRQRIDVWHSZRXOGGLPLQLVKWKHYDOXHRIWKHSURFHVV
RXWFRPHLQDQ\ZD\LWVKRXOGEHODEHOHG³YDOXHDGGHG´DQGVKRXOG
UHPDLQ LQWDFW LQ WKH SURFHVV ,Q IDFW \RX PLJKW H[SORUH ZD\V LQ
ZKLFK\RXFDQDGGHYHQPRUHYDOXHWKURXJKVXFKDVWHS%XWLI\RX
FDQHOLPLQDWHDVWHSZLWKRXWLQWHUIHULQJZLWKWKHSURFHVVLWVKRXOG
EHODEHOHG³QRQ±YDOXHDGGHG´
%
1RWH WKDW VRPH VWHSV LQ WKH SURFHVV PD\ EH QRQ±YDOXH DGGHG EXW
VWLOOQHFHVVDU\VXFKDVREVHUYLQJODZVDQGVDIHW\PHDVXUHV7KHVH
VWHSVVKRXOGEHODEHOHG³HVVHQWLDO RUQHFHVVDU\ QRQ±YDOXHDGGHG´
6WLOO\RXVKRXOGORRNIRUZD\VWRUHGXFHWKHWLPHLQYHVWHGLQWKHVH
ZRUNVWHSV
%
,QRXUH[DPSOHZHPLJKWLGHQWLI\RQO\WZRVWHSVDVYDOXHDGGHG
WKHDLUWUDYHOLWVHOIDQGFROOHFWLQJWKHOXJJDJHDWWKHGHVWLQDWLRQ,Q
RWKHU ZRUGV WUDYHOHUV ZDQW WR UHDFK WKHLU GHVWLQDWLRQV VDIHO\ DQG
¿QGWKHLUVXLWFDVHVRQWKHEDJJDJHFDURXVHOHYHU\WKLQJHOVHLQWKH
SURFHVVPHUHO\DVVLVWVLQPDNLQJWKRVHRXWFRPHVSRVVLEOH
ż 7KHVHWZRYDOXHDGGHGVWHSVDFFRXQWIRURQO\RIWKHPRUH
WKDQPLQXWHVRIWKHSURFHVVWKXVWKHYDOXHDGGHGWLPH
DFFRXQWVIRURQO\RIWKHWRWDOF\FOHWLPH7KLVORZYDOXH
is not out of the norm for such an analysis.
ż
8QIRUWXQDWHO\ WKH VL[ QRQ±YDOXHDGGHG VWHSV DUH HVVHQWLDO
WR WDNLQJ WKH WULS EXW DPSOH RSSRUWXQLWLHV IRU LPSURYHG
HI¿FLHQF\PLJKWVWLOOEH IRXQG )RU H[DPSOHDWUDYHOHUFRXOG
XVH D VPDUWSKRQH WR FKHFN LQ IRU WKH ÀLJKW VWUHDPOLQLQJ WKH
FROOHFWLRQ RI WKH ERDUGLQJ SDVV 7KH SRLQW KHUH LV WKDW DOO
WKH VWHSV LQ WKH SURFHVV VKRXOG EH VFUXWLQL]HG IRU SRWHQWLDO
LPSURYHPHQWV
%
$GGLQJWKH³YDOXHDGGHG´DQG³QRQ±YDOXHDGGHG´ODEHOVFRQYHUWV
WKHSURFHVVPDSWRDvalue stream map7KLVLQGHSWKDVVHVVPHQWRI
WKHFXUUHQWVWDWHRIWKHSURFHVVDOORZV\RXWRLGHQWLI\WURXEOHVSRWV
RUXQQHFHVVDU\VWHSVLQWKHSURFHVV<RXPLJKWDOVRJRDVWHSIXUWKHU
DQG FUHDWH D future state map WKDW DGMXVWV WKH SURFHVV WR ¿W \RXU
YLVLRQ,IWKHRXWFRPHVDUHFRPPHQVXUDWHZLWKRUH[FHHGWKHYDOXH
RI WKH WLPH HIIRUW DQG UHVRXUFHV LQYHVWHG WKHQ \RX FDQ UHGH¿QH
KRZWKHZRUNVKRXOGEHFRQGXFWHGLQWKHIXWXUH
Suggested Reading
'HQQLV/HDQ3URGXFWLRQ6LPSOL¿HG.
*DUYLQ³7KH3URFHVVHVRI2UJDQL]DWLRQDQG0DQDJHPHQW´
Martichenko, Everything I Know about Lean I Learned in First Grade.
5RWKHUDQG6KRRNLearning to See.
6WDDWVDQG8SWRQ³/HDQ.QRZOHGJH:RUN´
Questions to Consider
1. :KDWLVWKHYDOXHRIYLVXDOL]LQJDSURFHVVE\PDSSLQJLW"
2. :KDW VKRXOG \RX WDNH DZD\ IURP D SURFHVV PDS WKDW UHYHDOV WKDW D
SURFHVV LV SHUIRUPLQJ DW D WKURXJKSXW HI¿FLHQF\ UDWLR RI YDOXHDGGHG
WLPHWRWRWDOF\FOHWLPH RIOHVVWKDQ"
3. +RZVKRXOGPDQDJHPHQWDGGUHVVDVLWXDWLRQZKHUHPRVWRIDSHUVRQ¶V
ZRUNWLPHLVGHYRWHGWRQRQ±YDOXHDGGHGZRUN"
Measuring Operational Performance
Lecture 21
A
Lecture 21: Measuring Operational Performance
SHUIRUPDQFHPHDVXUHLVDQH[SUHVVLRQRIWKHKHDOWKRUYLWDOLW\RIDQ
DFWLYLW\RUSURFHVVSHUIRUPHGE\DQLQGLYLGXDODWHDPRUDQHQWLUH
RUJDQL]DWLRQ 6LPLODU WR PHDVXUHV RI KHDOWK IRU SHRSOH VXFK DV
ERG\ WHPSHUDWXUH RU SXOVH UDWH EXVLQHVV PHDVXUHV VKRXOG EH TXDQWL¿DEOH²
H[SUHVVHGLQQXPEHUV0HWULFVVKRXOGDOVREHSUHFLVHDQGUHOLDEOHWZRSHRSOH
PRQLWRULQJ WKH VDPH DWWULEXWH VKRXOG EH DEOH WR DUULYH DW WKH VDPH UHDGLQJ
)LQDOO\PHWULFVVKRXOGEHHDV\WRFROOHFWDQGXQGHUVWDQGERWKHIIHFWLYHDQG
HI¿FLHQWLQWKHLQIRUPDWLRQWKH\FRQYH\,QWKLVOHFWXUHZH¶OOORRNDWVRPHRI
WKHPRVWPHDQLQJIXOPHDVXUHVWRWUDFNLQRUGHUWRVXSSRUW\RXUEXVLQHVV
The Balanced Scorecard
% 3HUIRUPDQFH PHDVXUHV H[SUHVV WKH SULRULWLHV RI WKH RUJDQL]DWLRQ
DQG SURYLGH SUDFWLFDO JXLGDQFH IRU WKH ZRUN SHUIRUPHG HYHU\ GD\
5HZDUGVDQGSXQLVKPHQWVDUHRIWHQEDVHGRQKRZLQGLYLGXDOVSHUIRUP
DJDLQVW HVWDEOLVKHG FRPPXQLFDWHG VWDQGDUGV$ JRRG SODFH WR VWDUW
ZKHQ GHYLVLQJ D SHUIRUPDQFH PHDVXUHPHQW VFKHPH LV WR UHÀHFW RQ
\RXURUJDQL]DWLRQ¶VYLVLRQDQGVXSSRUWLQJVWUDWHJLHV:KDWLVLWWKDW
\RX¶UH WU\LQJ WR DFFRPSOLVK":KDW RXWFRPHV DUH \RX VHHNLQJ DQG
ZKDWEHKDYLRUVGR\RXQHHGIURPSHRSOHWRDFKLHYHWKHP"
%
,QWKHV5REHUW.DSODQDQG'DYLG1RUWRQGHYLVHGDIUDPHZRUN
IRU SHUIRUPDQFH PHDVXUHPHQW FDOOHG WKH EDODQFHG VFRUHFDUG that
OD\VRXWIRXUDUHDVZLWKZKLFKDFRPSDQ\VKRXOGFRQFHUQLWVHOIIRU
ORQJWHUP JURZWK DQG VXFFHVV ¿QDQFLDO SHUIRUPDQFH FXVWRPHU
DVVHVVPHQW LQWHUQDO EXVLQHVV SURFHVVHV DQG OHDUQLQJ DQG JURZWK
$OO IRXU GLPHQVLRQV RI WKH EDODQFHG VFRUHFDUG DUH IRFXVHG RQ WKH
RUJDQL]DWLRQ¶VYLVLRQDQGVWUDWHJ\
Financial Performance
% )LQDQFLDOPHDVXUHVDUHDEVROXWHO\HVVHQWLDOIRUDQ\EXVLQHVVDQGDOO
FRPSDQLHVXVHVHYHUDORIWKHP$PRQJWKHPRVWLPSRUWDQW¿QDQFLDO
PHWULFV DUH PHDVXUHV RI SUR¿WDELOLW\ LQFOXGLQJ SUR¿W PDUJLQ
DQG RSHUDWLQJ PDUJLQ 2WKHUV LQFOXGH PHDVXUHV RI PDQDJHPHQW
HIIHFWLYHQHVV DQG PHDVXUHV WDNHQ IURP WKH FRPSDQ\¶V LQFRPH
VWDWHPHQW EDODQFH VKHHW DQG FDVK ÀRZ VWDWHPHQW 7KHVH PHWULFV
SURYLGH PHDQLQJIXO LQVLJKWV IURP WKH SHUVSHFWLYH RI VKDUHKROGHUV
DQGRWKHUVZLWKD¿QDQFLDOLQWHUHVWLQWKHFRPSDQ\
)URPDQRSHUDWLRQDOVWDQGSRLQWLW¶VLPSRUWDQWWRWDNHDGHHSHUORRN
DW WKH ¿QDQFLDOV DQG WU\ WR LQWHUSUHW ZKHUH \RXU FRPSDQ\ PD\ EH
RYHUH[WHQGHGRUODFNLQJFRYHUDJHLQLWVRSHUDWLRQV
ż )RU LQVWDQFH \RX FDQ GLYLGH WKH UHYHQXH ¿JXUH IURP WKH
LQFRPHVWDWHPHQWE\WKHLQYHQWRU\¿JXUHIRXQGRQWKHEDODQFH
VKHHW$VZHOHDUQHGSUHYLRXVO\WKLVJLYHV\RXLQYHQWRU\WXUQV
DPHDVXUHRIWKHHI¿FLHQF\RI\RXURSHUDWLRQV
ż
,I \RX JHQHUDWH LQ VDOHV DQG \RX KROG ZRUWK RI LQYHQWRU\ RQ DYHUDJH \RX DFKLHYH LQYHQWRU\ WXUQV
,I\RXFDQJHQHUDWHWKHVDPHLQVDOHV
ZLWKRQO\ZRUWK
of inventory, on average,
then you achieve 10
WXUQVDQGFDQFODLPWREH
WZLFH DV HI¿FLHQW IURP
DQLQYHQWRU\VWDQGSRLQW
ż
*HWWLQJ E\ ZLWK OHVV
inventory while still
serving the customer
well allows you to
IUHH XS FDVK WKDW FDQ
EH XVHG LQ RWKHU ZD\V :KHQXVHGLQFRPELQDWLRQZLWKRWKHU
in the business. Retail GDWDSRLQWV¿QDQFLDOVFDQRIIHUULFK
insights, both for those outside and
RUJDQL]DWLRQV RIWHQ XVH inside a business.
a similar measure for
WKHHI¿FLHQF\RIWKHFRPSDQ\¶VVDOHVIRUFHE\GLYLGLQJVDOHVE\
WKH QXPEHU RI HPSOR\HHV WR JHW D VDOHVSHUHPSOR\HH PHWULF
$JDLQWKHPRUHVDOHV\RXFDQJHQHUDWHZLWKIHZHUHPSOR\HHV
WKHPRUHHI¿FLHQW\RXUEXVLQHVV
‹UREUR[WRQL6WRFN7KLQNVWRFN
%
%
)LQDOO\IRUSXEOLFO\WUDGHGFRPSDQLHVWKHVKDUHSULFHLVFRQVLGHUHG
WREHWKHPRVWHI¿FLHQWPHDVXUHRI¿QDQFLDOKHDOWK7KHVKDUHSULFH
UHÀHFWVWKHQHWSUHVHQWYDOXHRIDOOIXWXUHFDVKÀRZVRQDSHUVKDUH
EDVLVDQGVHUYHVDVDFRPSUHKHQVLYHPHDVXUHRISDVWSUHVHQWDQG
DQWLFLSDWHGIXWXUHUHVXOWV
Lecture 21: Measuring Operational Performance
Customer Assessment
% Customer satisfaction is the most common measure for the
FXVWRPHU SHUVSHFWLYH RI D EXVLQHVV 7R JDXJH LW PDUNHWHUV
HPEUDFHDWKHRU\FDOOHGWKHH[SHFWDQF\GLVFRQ¿UPDWLRQSDUDGLJP.
$FFRUGLQJ WR WKLV WKHRU\ FXVWRPHU VDWLVIDFWLRQ LV D UHVXOW RI WKH
GHJUHH WR ZKLFK FRQVXPHU H[SHFWDWLRQV DUH HLWKHU FRQ¿UPHG RU
GLVFRQ¿UPHG E\ DFWXDO H[SHULHQFHV ZLWK D SURGXFW RU VHUYLFH
:KHQWKHSHUFHLYHGSHUIRUPDQFHRIDSURGXFWRUVHUYLFHPHHWVRU
H[FHHGVFXVWRPHUH[SHFWDWLRQVWKHFXVWRPHULVVDLGWREHVDWLV¿HG
:KHQ SHUFHLYHG SHUIRUPDQFH IDOOV VKRUW RI H[SHFWDWLRQV WKH
FXVWRPHULVGLVVDWLV¿HG
%
6DWLV¿HGFXVWRPHUVDUHEHOLHYHGWREHFRPHOR\DOFXVWRPHUVZKR
DUHRIWHQWKHPRVWSUR¿WDEOHVHJPHQWIRUDQ\EXVLQHVV0DUNHWLQJ
WROR\DOFXVWRPHUVFRVWVOHVVEHFDXVHWKH\DOUHDG\NQRZDQGOLNH
\RXU FRPSDQ\ DQG LWV SURGXFWV DQG VHUYLFHV OR\DO FXVWRPHUV
WHQG WR EH UHVLVWDQW WR WKH FRXQWHUFODLPV RI \RXU FRPSHWLWRUV
WKH\¶UH RIWHQ ZLOOLQJ WR EH HDUO\ DGRSWHUV RI QHZ SURGXFWV DQG
VHUYLFHV DQG WKH\ RIIHU SRVLWLYH ZRUGRIPRXWK HQGRUVHPHQWV
to others.
%
&RPSDQLHV PHDVXUH FXVWRPHU VDWLVIDFWLRQ LQ GLIIHUHQW ZD\V EXW
these measures almost always involve asking the customer how
WKH EXVLQHVV SHUIRUPHG XVXDOO\ IROORZLQJ D VSHFL¿F WUDQVDFWLRQ
0DUNHWLQJ UHVHDUFKHUV KDYH OHDUQHG WKDW D VLQJOH TXHVWLRQ RIIHUV
D JRRG UHDG RQ VDWLVIDFWLRQ ³+RZ VDWLV¿HG ZHUH \RX ZLWK \RXU
UHFHQW H[SHULHQFH"´ 0RUH TXHVWLRQV PD\ EH DGGHG WR OHDUQ
DERXW VSHFL¿F DVSHFWV RI WKH WUDQVDFWLRQ $QVZHUV DUH XVXDOO\
VFRUHGRQDSRLQWRUSRLQWVFDOHWRDVVHVVWKHUHODWLYHGHJUHH
of satisfaction.
%
$ PHWULF FDOOHG WKH QHW SURPRWHU VFRUH 136 LV JDLQLQJ D JUHDW
GHDORILQWHUHVWWKHVHGD\VDVDPHDQLQJIXOPHDVXUHRIVDWLVIDFWLRQ
+HUHDJDLQRQHTXHVWLRQLVXVHG³+RZOLNHO\LVLWWKDW\RXZRXOG
UHFRPPHQG >RXU FRPSDQ\@ WR D IULHQG RU FROOHDJXH"´ &XVWRPHUV
UHVSRQGRQDVFDOHRIWRDQGWKH136LVFDOFXODWHGE\VXEWUDFWLQJ
WKHSHUFHQWDJHRIGHWUDFWRUV UHVSRQGHQWVVKRZLQJVFRUHVRIWR IURPWKHSHUFHQWDJHRISURPRWHUV WKRVHZLWKVFRUHVRIRU %
&XVWRPHU OR\DOW\ DV RSSRVHG WR FXVWRPHU VDWLVIDFWLRQ LV EHVW
PHDVXUHG WKURXJK DFWLRQV UDWKHU WKDQ VHQWLPHQWV 0RVW WHOOLQJ LV
WKHSHUFHQWDJHRIUHSHDWFXVWRPHUVWKDW\RXUEXVLQHVVHQMR\V6WLOO
LW¶V LPSRUWDQW WR FRQWLQXH DVNLQJ FXVWRPHUV DERXW WKHLU OHYHOV RI
VDWLVIDFWLRQ DQG WR NHHS PRQLWRULQJ EHKDYLRU EHFDXVH FXVWRPHUV¶
WDVWHVDQGFRPSHWLWRUV¶RIIHULQJVFDQFKDQJHRYHUWLPH
%
,QWHUHVWLQJO\ PDQ\ FRPSDQLHV WRGD\ DUH WU\LQJ WR GHWHUPLQH WKH
FRVWRISRRUVHUYLFHDOVRNQRZQDVWKHFRVWRISRRUTXDOLW\ &234 7KLVPHWULFWHHWHUVRQWKH¿QDQFLDOVLGHRIWKHEDODQFHGVFRUHFDUG
EXW LV VTXDUHO\ IRFXVHG RQ WKH FRVW RI GLVDSSRLQWLQJ FXVWRPHUV ,W
DVNV:KDWLVWKHORVWUHYHQXHLIZHGLVDSSRLQWDFXVWRPHUDQGKHRU
VKHUHWXUQVRUFDQFHOVDQRUGHU"
Internal Business Processes
% 7KH WUDGLWLRQDO PHWULFV IRU EXVLQHVV SURFHVVHV H[DPLQH WKHLU
SURGXFWLYLW\ DQG HI¿FLHQF\ 3URGXFWLYLW\ FDQ EH HTXDWHG WR WKH
\LHOGRIDSURFHVV$SURFHVVWKDWJHQHUDWHVDJUHDWGHDORIRXWSXW
LV VDLG WR EH D SURGXFWLYH SURFHVV (I¿FLHQF\ LQ FRQWUDVW ORRNV
DWWKHDPRXQWRIRXWSXWJLYHQVRPHOHYHORILQSXW$SURFHVVWKDW
JHQHUDWHV WKH VDPH RXWSXW DV DQRWKHU EXW ZLWK IHZHU LQSXWV LV
UHJDUGHGDVPRUHHI¿FLHQW
%
0RUH UHFHQWO\ WKH RSHUDWLRQDO H[FHOOHQFH SKLORVRSKLHV RI /HDQ
7KLQNLQJ DQG 6L[ 6LJPD DUH \LHOGLQJ YDOXDEOH LQVLJKWV RQ WKH
PDQDJHPHQW RI EXVLQHVV SURFHVVHV ,Q IDFW WKH\ GHHPSKDVL]H WKH
WUDGLWLRQDO IRFXV RQ SURGXFWLYLW\ DQG HI¿FLHQF\ LQ IDYRU RI ZDVWH
HOLPLQDWLRQDQGYDULDWLRQUHGXFWLRQ
Lecture 21: Measuring Operational Performance
%
$V ZH¶YH VDLG /HDQ 7KLQNLQJ LV WKH PDQDJHPHQW SKLORVRSK\
that seeks to eliminate waste in its various forms throughout the
EXVLQHVV 7KH VHYHQ IRUPV RI ZDVWH DUH FDSWXUHG LQ WKH DFURQ\P
7,0 :22' ZKLFK VWDQGV IRU WUDQVSRUWDWLRQ LQYHQWRU\ PRWLRQ
ZDLWLQJRYHUSURGXFWLRQRYHUSURFHVVLQJDQGGHIHFWV
%
$VZH¶YHDOVRVHHQ6L[6LJPDVHHNVWRUHGXFHYDULDWLRQ,WUHOLHVRQ
D¿YHVWHSSURFHGXUHIRULGHQWLI\LQJLPSURYHPHQWRSSRUWXQLWLHVDQG
VHHLQJWKHPWKURXJKWRLPSOHPHQWDWLRQDQGVXVWDLQHGSHUIRUPDQFH
7KH SURFHGXUH LV FDOOHG WKH DMAIC method IRU GH¿QH PHDVXUH
DQDO\]H LPSURYH DQG FRQWURO 7KH VHFRQG SKDVH RI WKLV PHWKRG
measure XQGHUVFRUHV WKH LPSRUWDQFH RI DVVHVVLQJ D SURFHVV LQ
LWV FXUUHQW VWDWH DV LW XQGHUJRHV LPSURYHPHQW DQG LQ VXVWDLQLQJ
LPSURYHGSHUIRUPDQFH
ż $SULPDU\PHDVXUHLQWKH6L[6LJPDDVVHVVPHQWLVGHIHFWVSHU
million opportunities '302 $ GHIHFW LV D ZRUN VWHS WKDW
IDOOVRXWVLGHRIHVWDEOLVKHGWROHUDQFHV
ż
6L[ 6LJPD SHUIRUPDQFH GLFWDWHV DQ H[WUHPHO\ ORZ OHYHO RI
GHIHFWV '302 7KH PRUH GHIHFWV IRXQG LQ D SURFHVV
WKH ORZHU WKH VLJPD OHYHO $ SURFHVV SHUIRUPLQJ DW VLJPD IRU LQVWDQFH DOORZV PRUH WKDQ GHIHFWV SHU
PLOOLRQRSSRUWXQLWLHV
ż
+LJKO\ DXWRPDWHG PDQXIDFWXULQJ SURFHVVHV VWDQG WKH EHVW
FKDQFH RI DFKLHYLQJ 6L[ 6LJPD±OHYHO TXDOLW\ 3URFHVVHV WKDW
UHO\PRUHRQKXPDQHIIRUWWHQGWRKDYHORZHUWKUHVKROGV
Learning and Growth
% 7KH ¿QDO GLPHQVLRQ RI WKH EDODQFHG VFRUHFDUG IUDPHZRUN LV
OHDUQLQJ DQG JURZWK 7KLV SHUVSHFWLYH IRFXVHV RQ WKH NQRZOHGJH
DQG FDSDELOLWLHV RI WKH SHRSOH WKDW PDNH XS WKH EXVLQHVV 7KLV
VHHPVWREHWKHOHDVWGHYHORSHGDVSHFWRIWKHIUDPHZRUNDOWKRXJK
FRQFHUWHGHIIRUWKDVEHHQPDGHLQUHFHQW\HDUVWREHWWHUXQGHUVWDQG
ZKDW GULYHV DQ HPSOR\HH DQG WR DOLJQ HPSOR\HHV¶ LQWHUHVWV DQG
VNLOOVZLWKWKHQHHGVRIWKHRUJDQL]DWLRQ
%
7KHWUDGLWLRQDOIRFXVRI+5GHSDUWPHQWVZDVUHFUXLWLQJQHZSHRSOH
LQWR WKH RUJDQL]DWLRQ DQG LQFOXGHG VXFK PHWULFV DV UHFUXLWPHQW
\LHOG UDWLR DYHUDJH WLPH WR ¿OO D MRE YDFDQF\ FRVW SHU KLUH DQG
HPSOR\HHWXUQRYHUUDWH,QFUHDVLQJO\KRZHYHU+5GHSDUWPHQWVDUH
EURDGHQLQJWKHLUSXUYLHZWRLQFOXGHUHWHQWLRQDQGWKHGHYHORSPHQW
RIKXPDQFDSLWDO0HDVXUHVLQWKHVHDUHDVPLJKWLQFOXGHYROXQWDU\
DQGLQYROXQWDU\WHUPLQDWLRQUDWHVDQGDYHUDJHWHQXUH
%
0HWULFV IRU HPSOR\HH GHYHORSPHQW LQFOXGH WUDLQLQJ FRVWV RU
LQYHVWPHQW SHU HPSOR\HH KRXUV RI WUDLQLQJ DQG HPSOR\HH
DVVHVVPHQWVRIVDWLVIDFWLRQZLWKWUDLQLQJDQGGHYHORSPHQWDVZHOO
DVDGYDQFHPHQWRSSRUWXQLWLHVZLWKLQWKHRUJDQL]DWLRQ
%
%RWK/HDQ7KLQNLQJDQG6L[6LJPDLQFRUSRUDWHWKHKXPDQHOHPHQW
LQ SURFHVV DFKLHYHPHQW /HDQ 7KLQNLQJ LQ SDUWLFXODU EULQJV D
VWURQJ IRFXV RQ VDIHW\ DQG PRUDOH LQ WKH ZRUNSODFH &RPPRQ
PHWULFV KHUH LQFOXGH GD\V ZRUNHG ZLWKRXW D ORVWWLPH DFFLGHQW
QXPEHU RI UHSRUWDEOH LQFLGHQWV DQG QHDUPLVVHV &ORVHO\ UHODWHG
WR VDIHW\ LV PRUDOH ZKLFK LV RIWHQ PHDVXUHG WKURXJK D VXUYH\
FRQGXFWHGE\DQRXWVLGHSDUW\
6XVWDLQDELOLW\
% $QHZIURQWLHUIRUSHUIRUPDQFHPHDVXUHPHQWLQEXVLQHVVWRGD\LVLQ
WKHDUHDRIVXVWDLQDELOLW\WKHLGHDRIRSHUDWLQJDFRPSDQ\VRWKDWLW
DQGWKHZRUOGDURXQGLWERWKKDYHKHDOWK\IXWXUHV
%
1RWHGDXWKRU-RKQ(ONLQJWRQLQKLVERRNHQWLWOHGCannibals with
Forks SUHVFULEHV D WULSOHERWWRPOLQH DSSURDFK WR PHDVXULQJ
VXVWDLQDEOHEXVLQHVVSHUIRUPDQFH
ż 7KH ¿UVW ERWWRP OLQH LV WKH HFRQRPLF RQH$V ZH¶YH VDLG LQ
RUGHUIRUDQ\RUJDQL]DWLRQWRWKULYHDQGVXUYLYHLWPXVWEHDEOH
to sustain itself economically.
ż
7KH VHFRQG ERWWRP OLQH LV GHGLFDWHG WR WKH HQYLURQPHQW$Q
RUJDQL]DWLRQ WKDW FRQVLGHUV WKH ORQJWHUP HQYLURQPHQWDO
FRQVHTXHQFHV RI LWV DFWLRQV ZLOO EH D EHWWHU FRUSRUDWH FLWL]HQ
DQGDFRPSDQ\WKDWSHRSOHZDQWWREX\IURPDQGLQYHVWLQ
ż
7KHWKLUGERWWRPOLQHLVWKDWDVVRFLDWHGZLWKWKHVRFLHWDOLPSDFW
RI EXVLQHVV DFWLYLW\²WKH TXHVWLRQ RI KRZ YDULRXV SHRSOH DUH
DIIHFWHG E\ EXVLQHVV DFWLYLWLHV7KLV ERWWRP OLQH VHHPV WR ODJ
EHKLQGWKHRWKHUWZREXWLWLVLPSRUWDQWWRGHYLVHDSSURSULDWH
PHWULFVWRJXLGHGHFLVLRQPDNLQJRQWKLVFULWLFDOGLPHQVLRQRI
EXVLQHVVHQGHDYRU
Suggested Reading
(SVWHLQDQG%XKRYDFMaking Sustainability Work.
.DSODQ 1RUWRQ DQG 5XJHOVMRHQ ³0DQDJLQJ $OOLDQFHV ZLWK WKH %DODQFHG
6FRUHFDUG´
.LURQ.UXVFKZLW]+DDQDHVDQGYRQ6WUHQJ9HONHQ³6XVWDLQDELOLW\1HDUVD
7LSSLQJ3RLQW´
3HOR]D /RRFN &HUUXWL DQG 0X\RW ³6XVWDLQDELOLW\ +RZ 6WDNHKROGHU
3HUFHSWLRQV'LIIHUIURP&RUSRUDWH5HDOLW\´
Lecture 21: Measuring Operational Performance
5HLFKKHOG³7KH0LFURHFRQRPLFVRI&XVWRPHU5HODWLRQVKLSV´
Questions to Consider
1. :KDWLVPHDQWE\WKHH[SUHVVLRQ³:KDWJHWVPHDVXUHGJHWVGRQH´"+RZ
GRSHUIRUPDQFHPHDVXUHVLQÀXHQFHEHKDYLRUZLWKLQDQRUJDQL]DWLRQ"
2. +RZ GRHV WKH EDODQFHG VFRUHFDUG DSSURDFK SURYLGH D GHJUHH
DVVHVVPHQWRIEXVLQHVVKHDOWK"$UHWKHUHDQ\DVSHFWVRIEXVLQHVVYLWDOLW\
WKDWWKLVPHDVXUHPHQWIUDPHZRUNIDLOVWRDGGUHVV"
Keeping an Eye on Your Margins
Lecture 22
T
KHJURVVPDUJLQVRIDEXVLQHVVZKLFKVKRZWKHSHUFHQWDJHRIWRWDO
VDOHV WKDW FRQVWLWXWH SUR¿W DUH IDLUO\ HDV\ WR FDOFXODWH XVLQJ WKH
LQFRPH VWDWHPHQW +RZHYHU GHWHUPLQLQJ ZKHUH WKH FRQWULEXWLRQV
WRJURVVPDUJLQFRPHIURP²LQWHUPVRISURGXFWVVHUYLFHVDQGLQGLYLGXDO
FXVWRPHUV²LVDQ\WKLQJEXWURXWLQH,QIDFWSUREDEO\QRPRUHWKDQRI
FRPSDQLHV GHWHUPLQH SUR¿W FRQWULEXWLRQ RQ D FXVWRPHUE\FXVWRPHU EDVLV
,QVWHDGPDQ\MXVWDVVXPHWKDWDOOEXVLQHVVLVJRRG,QWKLVOHFWXUHKRZHYHU
ZH¶OO SLQSRLQW PRUH SUHFLVH QXPEHUV WKDW VKRZ KRZ GLIIHUHQW FXVWRPHUV
DIIHFW\RXUEXVLQHVVDQGIRUFH\RXWRFRQVXPHUHVRXUFHV
&XVWRPHUE\&XVWRPHU&RQWULEXWLRQ$QDO\VLV
% ,Q D VWDUWXS EXVLQHVV WKH UHODWLRQVKLS EHWZHHQ KRZ D EXVLQHVV
H[SHQGV LWV UHVRXUFHV DQG KRZ LW JHQHUDWHV LQFRPH PD\ EH IDLUO\
HDV\WRVHHEXWDVWKHEXVLQHVVJURZVLWPD\QHHGDPRUHDGYDQFHG
OHYHORIPDUJLQDQDO\VLV7KLVDQDO\VLVFDQEHJHQHUDWHGE\SURGXFW
SURGXFWOLQHVHUYLFHRUFXVWRPHU:KHQH[DPLQLQJFXVWRPHUVWKH
IRFXVLVRQWKHSURGXFWVDQGVHUYLFHVWKDWHDFKFXVWRPHUEX\V
%
&RQVXPHU VHUYLFH RUJDQL]DWLRQV UHWDLO EXVLQHVVHV DQG RQOLQH
UHWDLOHUV GRQ¶W JHQHUDOO\ UXQ D XQLTXH DQDO\VLV IRU HDFK FXVWRPHU
,QVWHDG WKH\ ORRN DW W\SHV RI FXVWRPHUV DQG ZKDW WKHVH W\SHV
W\SLFDOO\DVNIRUDQGEX\LQWKHZD\RISURGXFWVDQGVHUYLFHV7KLV
is what marketers call VHJPHQWLQJWKHFXVWRPHUEDVH²EUHDNLQJWKH
PDUNHWXSLQWRVPDOOJURXSLQJVRIFXVWRPHUVWKDWORRNDQGDFWDOLNH
LQWHUPVRIZKDWWKH\GHPDQGDQGEX\
%
:LWKDEXVLQHVVWKDWVHOOVWRRWKHUEXVLQHVVHVKRZHYHUWKHFXVWRPHU
FRXQWLVSUREDEO\PXFKORZHUWKHVH¿UPVVHOOODUJHUYROXPHVWRD
VPDOOHUQXPEHURIFXVWRPHUV%XWYHU\ODUJHEXVLQHVVWREXVLQHVV
marketers may still have a customer count that numbers in the
WKRXVDQGVZKLFKZRXOGDOVRUHTXLUHVRPHVHJPHQWDWLRQ,QHLWKHU
VFHQDULR EXVLQHVVWREXVLQHVV VHOOHUV VKRXOG LVRODWH WKHLU ODUJHVW
FXVWRPHUVDQGVHJPHQWWKHUHPDLQLQJRQHV
Lecture 22: Keeping an Eye on Your Margins
%
)RU PRVW FRPSDQLHV WKH 80-20 rule DSSOLHV 7KLV UXOH VXJJHVWV
WKDW RI D FRPSDQ\¶V UHYHQXHV FRPH IURP RI LWV
FXVWRPHUV,QRWKHUZRUGVDUHODWLYHO\VPDOOQXPEHURIFXVWRPHUV
LV GLVSURSRUWLRQDWHO\ LPSRUWDQW WR WKH EXVLQHVV LQ WHUPV RI KRZ
UHYHQXHV DUH JHQHUDWHG 7KHVH YLWDO IHZ FXVWRPHUV WKDW JHQHUDWH
PDVVLYH VDOHV DUH WKH RQHV WKDW FDOO IRU LQGLYLGXDOL]HG DWWHQWLRQ
.HHSLQPLQGKRZHYHUWKDW\RXUIRFXVKHUHVKRXOGEHRQPDUJLQ
not sales.
Differential Resource Consumption
% :KDW UHDOO\ PDWWHUV LQ D FRQWULEXWLRQ DQDO\VLV LV UHDFKLQJ DQ
XQGHUVWDQGLQJRIGLIIHUHQWLDOUHVRXUFHFRQVXPSWLRQWKDWLV¿JXULQJ
out which customers force a business to consume what resources. To
DSSUHFLDWHWKLVLGHDOHW¶VFRQWUDVWLWZLWKWUDGLWLRQDOFRVWDOORFDWLRQ
PHWKRGVVSHFL¿FDOO\DYHUDJHFRVWLQJ$VLWVQDPHLPSOLHVDYHUDJH
FRVWLQJVLPSO\GLYLGHVDFRVWE\WKHQXPEHURIFXVWRPHUVVHUYHGWR
arrive at an average cost.
ż &RQVLGHU IRU LQVWDQFH WKH FRVW RI DQVZHULQJ D FXVWRPHU¶V
LQTXLU\RYHUWKHSKRQH7KHDYHUDJHFRVWPHWKRGZRXOGVLPSO\
ORRNDWDOOWKHFRVWVDVVRFLDWHGZLWKFXVWRPHUSKRQHLQTXLULHV
LQFOXGLQJ WKH FRVW RI WKH FDOO FHQWHU IDFLOLW\ WKH SKRQH OLQHV
DQG HPSOR\HH WLPH DQG GLYLGH WKLV VXP E\ WKH QXPEHU RI
LQTXLULHVPDGHE\FXVWRPHUV
ż
%XW WKHDYHUDJHFRVWLQJPHWKRGLV VRUHO\ ODFNLQJLQ DFFXUDF\
DQG LQVLJKWV ,W LPSOLHV WKDW DOO FXVWRPHU WUDQVDFWLRQV DUH
HTXDOO\UHVRXUFHLQWHQVLYHDQGRIWHQWKDW¶VQRWWKHFDVHQRWDOO
FXVWRPHUVFRQVXPHUHVRXUFHVHTXDOO\
ż
+RZHYHUZKHQ\RXUHO\RQDYHUDJHFRVWLQJWRGULYHGHFLVLRQV
\RX¶UH PDNLQJ WKDW DVVXPSWLRQ WKDW VHUYLFH SURYLVLRQV
FRQVXPH UHVRXUFHV HTXDOO\ DFURVV FXVWRPHUV $V D UHVXOW
FRPSDQLHV WKDW UHO\ RQ DYHUDJH FRVWLQJ DUH VXEVLGL]LQJ WKHLU
PRVW WD[LQJ FXVWRPHUV ,Q RWKHU ZRUGV FXVWRPHUV WKDW GRQ¶W
DVNIRUPXFKSLFNXSSDUWRIWKHWDEIRUGHPDQGLQJFXVWRPHUV
%
7KLVLVDPDMRUSUREOHPEHFDXVHPRVWFRPSDQLHVDVVXPHWKDWWKHLU
ELJJHVW FXVWRPHUV²WKH RQHV WKDW JHQHUDWH WKH PRVW UHYHQXH²DUH
WKH EHVW FXVWRPHUV LQ WHUPV RI SUR¿W FRQWULEXWLRQ <HW PDQ\ RI
WKHVH ELJ FXVWRPHUV FDQ EH IDLUO\ GHPDQGLQJ WR VHUYH$QG ZKHQ
\RX DSSO\ FKDUJHV IRU WKH UHVRXUFHV WKH\ IRUFH \RX WR FRQVXPH
\RX PLJKW ¿QG WKDW WKHVH ³ELJ VDOHV´ FXVWRPHUV DUH QRW WKH PRVW
SUR¿WDEOHRQHV
%
,QVWHDGZKHQ\RXIRFXVRQZKDWDFWLYLWLHV\RXSHUIRUPIRUZKLFK
FXVWRPHUV\RXJHWDPXFKULFKHUXQGHUVWDQGLQJRIKRZUHVRXUFHV
DUHFRQVXPHG$VDUHVXOW\RXFDQEHPXFKPRUHLQIRUPHGDERXW
KRZWRGHGLFDWH\RXUUHVRXUFHV
Cost-to-Serve Analysis
% $ FRVWWRVHUYH DQDO\VLV LV RQH WKDW H[SUHVVHV WKH FRVW RI VHUYLQJ
VSHFL¿F FXVWRPHUV RU ZKHQ WKDW¶V QRW SRVVLEOH WKH FRVW WR VHUYH
GLIIHUHQW JURXSV RU W\SHV RI FXVWRPHUV ZKR EHKDYH LQ D VLPLODU
IDVKLRQ:KHQ\RXVXEWUDFWWKHFRVWWRVHUYHDFXVWRPHUIURPUHYHQXH
HDUQHGRQWKHEXVLQHVV\RXDUULYHDWWKHFXVWRPHUFRQWULEXWLRQ
%
7KH¿UVWVWHSLQWKLVDQDO\VLVLVWRJHWDKDQGOHRQEXVLQHVVUHVRXUFHV
DQG H[SHQVHV 5HYLHZ WKH EDODQFH VKHHW IRU WKH UHVRXUFHV DQG
H[DPLQH¿QDQFLDOUHSRUWVVXFKDVWKHVWDWHPHQWRIFDVKÀRZVDQG
JHQHUDOOHGJHUWRVHHKRZPRQH\LVVSHQW
%
6HFRQG H[DPLQH WKH DFWLYLWLHV SHUIRUPHG LQ WKH EXVLQHVV ,Q
RSHUDWLRQV WKH IRFXV WHQGV WR EH RQ WKH DFWLYLWLHV IURP RUGHU
SODFHPHQWWKURXJKGHOLYHU\DQGFROOHFWLRQRISD\PHQWVXFKDVRUGHU
SURFHVVLQJ SURGXFWLRQ IXO¿OOPHQW DQG GHOLYHU\ 2I FRXUVH RWKHU
DFWLYLWLHVWKDWWDNHSODFHEHIRUHWKHRUGHUDQGDIWHUSD\PHQWVXFKDV
VDOHVDQGPDUNHWLQJFDQDOVREHLQFRUSRUDWHG7KHSRLQWKHUHLVWR
KRQHLQRQWKHDFWLYLWLHVWKDWDUHXQLTXHRULQYROYHGLIIHUHQWW\SHVRU
OHYHOVRIUHVRXUFHFRQVXPSWLRQDFURVVWKHGLIIHUHQWFXVWRPHUVVHUYHG
%
%\ OLQNLQJ WKH ¿UVW VWHS UHODWHG WR UHVRXUFHV WR WKH VHFRQG VWHS
UHODWHG WR DFWLYLWLHV \RX FDQ GHYLVH D FRVW SHU DFWLYLW\ 7KH
PHWKRG XVHG WR WUDQVODWH UHVRXUFHV WR FRVWV LV ERUURZHG IURP D
WHFKQLTXHFDOOHGDFWLYLW\EDVHGFRVWLQJ $%& $VLWVQDPHLPSOLHV
$%&IRFXVHVRQWKHDFWLYLWLHVDEXVLQHVVSHUIRUPVDQGKRZWKHVH
activities consume resources.
Lecture 22: Keeping an Eye on Your Margins
Activity-Based Costing
% $Q DFWLYLW\EDVHG DQDO\VLV W\SLFDOO\ IRFXVHV RQ RQH RI WZR FRVW
REMHFWVSURGXFWVRUFXVWRPHUV7KXV\RXFDQIRFXVHLWKHURQKRZ
UHVRXUFHVDUHFRQVXPHGWRSURGXFHSURGXFWVDQGVHUYLFHVRURQKRZ
UHVRXUFHVDUHFRQVXPHGRQDFXVWRPHUE\FXVWRPHUEDVLV
160
%
,QOLQNLQJUHVRXUFHVWRDFWLYLWLHVLW¶VKHOSIXOWRJHQHUDWHDSURFHVV
PDSRIWKHDFWLYLWLHV\RXSHUIRUPIRU\RXUFXVWRPHUV<RXFDQWKHQ
OLQNWKHUHVRXUFHV DQGHQVXLQJFRVWV WRHDFKVWHSLQWKHSURFHVV
:KDW SHRSOH DQG PDWHULDOV DUH LQYROYHG DQG KRZ PXFK RI HDFK
JRHVLQWRGHOLYHULQJWKHRXWFRPHRIWKHDFWLYLW\"
%
2QHZD\WRVLPSOLI\WKLVDQDO\VLVLVWRIRFXVRQDVLQJOHFRVWGULYHU
IRUHDFKDFWLYLW\²VRPHWKLQJWKDWVWURQJO\LQÀXHQFHVWKHDFWLYLW\¶V
FRVW$VWKHGULYHUDFWLYLW\LQFUHDVHVRUGHFUHDVHVWKHDFWLYLW\FRVW
follows suit.
ż &RQVLGHUWKHDFWLYLW\RIGHOLYHULQJJRRGVWRFXVWRPHUV,I\RXU
FRPSDQ\ GHOLYHUV RYHU ORQJ GLVWDQFHV VXFK DV DFURVV VWDWHV
WKHQGLVWDQFHPD\DJRRGFRVWGULYHU%XWLI\RXGHOLYHUORFDOO\
RULQDVPDOOUHJLRQ WKHQWLPHPLJKWEHDEHWWHUFRVWGULYHU
ż
7KH GHWHUPLQDWLRQ RI WKH SURSHU RU EHVW GULYHU LV D MXGJPHQW
FDOODQGQRWDOZD\VREYLRXV7KHJRDOLVWRVWULYHIRUFRQVHQVXV
UDWKHUWKDQSHUIHFWLRQLQGHWHUPLQLQJFRVWGULYHUV
ż
/HW¶V VD\ WKDW \RXU FRPSDQ\ VSHQW RQ FXVWRPHU
GHOLYHULHV ODVW PRQWK LQFOXGLQJ WKH FRVW RI IXHO HTXLSPHQW
PDLQWHQDQFH DQG SHUVRQQHO FRVWV DQG FRYHUHG PLOHV
/HW¶VDOVRVD\WKDWWKHFRVWGULYHUFKRVHQIRUGHOLYHU\H[SHQVH
LV PLOHDJH 'LYLGLQJ WKH GHOLYHU\ H[SHQVH E\ \LHOGVDVWDQGDUGFRVWRISHUPLOHIRUHDFKGHOLYHU\
ż
%
)LQDOO\ ZH DUULYH DW WKH WKLUG VWHS LQ WKH DQDO\VLV GHWHUPLQLQJ
WKH FRVW WR VHUYH HDFK RI WKH FXVWRPHUV DQG VHJPHQWV +HUH \RX
QHHG UHIHU WR H[LVWLQJ UHFRUGV RI KRZ PXFK DFWLYLW\ JRHV WRZDUG
HDFKFXVWRPHU:KDW\RX¶OO¿QGLVWKDWGLIIHUHQWFXVWRPHUVGHPDQG
GLIIHUHQW OHYHOV RI DFWLYLW\ (DFK FXVWRPHU VKRXOG EH DVVLJQHG
FRVWV RQO\ IRU WKH DFWLYLWLHV SHUIRUPHG IRU WKDW FXVWRPHU 7KLV
LV D GHSDUWXUH IURP DYHUDJH FRVWLQJ ZKHUH FRVWV DUH DVVLJQHG
WR FXVWRPHUV LUUHVSHFWLYH RI WKH VSHFL¿F VHUYLFH SURYLVLRQ DQG
DFWLYLWLHVSHUIRUPHG
ż 6XSSRVH\RXGHOLYHUWRDFXVWRPHUORFDWHGPLOHVDZD\ PLOHVURXQGWULS $SSO\LQJWKHSHUPLOHFDOFXODWHGHDUOLHU
HDFK GHOLYHU\ WR WKDW FXVWRPHU FRVWV ,Q FRQWUDVW D
FXVWRPHUZKRSLFNVXSDQRUGHUDW\RXUZDUHKRXVHLQFXUVQR
GHOLYHU\FRVWV
ż
%
<RX ZRXOG PDNH VLPLODU FDOFXODWLRQV IRU WKH YDULHW\ RI
DFWLYLWLHVSHUIRUPHGLQFXVWRPHUWUDQVDFWLRQVWRDUULYHDWDFRVW
IRUHDFKDFWLYLW\VXFKDVFRVWSHURUGHUDFTXLVLWLRQSURGXFWLRQ
LQYRLFLQJDQGVRRQ
%\ PDUU\LQJ WKH FRVW SHU DFWLYLW\ DQG DFWLYLW\ OHYHO IRU HDFK
FXVWRPHU \RX JHW WKH FRVW SHU DFWLYLW\ IRU HDFK FXVWRPHU
<RX FDQ WKHQ VXP XS WKH FRVWV DFURVV WKH YDULRXV DFWLYLWLHV
SHUIRUPHGIRUHDFKFXVWRPHUWRDUULYHDWWKHWRWDOFRVWWRVHUYH
WKDWFXVWRPHUSHUWUDQVDFWLRQ
7ZR LPSRUWDQW SRLQWV WR NHHS LQ PLQG LQ FRQGXFWLQJ WKH FRVWWR
VHUYHDQDO\VLVDUHWKHVH 'RQ¶WTXLEEOHDERXWHYHU\SHQQ\LQWKH
DQDO\VLVDQG LQFOXGHRQO\WKHFRVWVWKDWZRXOGEHHOLPLQDWHGLI
the cost object went away.
161
*RLQJEDFNWRWKHGHOLYHU\H[DPSOHZRXOG\RXVKXWGRZQWKH
ZDUHKRXVHRUUHGXFHWKHVL]HRIWKHSURGXFWLRQIDFLOLW\LI\RX
ORVW D VSHFL¿F FXVWRPHU" 7KH DQVZHU LV SUREDEO\ QRW 'RQ¶W
ZRUU\DERXWKRZWRVSOLWXSWKH¿[HGFRVWVRIWKHIDFLOLW\ZKHQ
GRLQJWKLVDQDO\VLV
ż
,Q HVVHQFH ZKDW WKDW PHDQV LV WKDW \RX¶UH FRQGXFWLQJ D
FRQWULEXWLRQ DQDO\VLV LQVWHDG RI D IXOO\ ORDGHG SUR¿WDQGORVV
DQDO\VLV <RX ZLOO VWLOO KDYH WR FRQVLGHU KRZ WR FRYHU \RXU
IDFLOLW\DQGRWKHU¿[HGFRVWVEXWWKHFRQWULEXWLRQDQDO\VLVZLOO
KHOS \RX XQGHUVWDQG ZKLFK FXVWRPHUV DUH FRQWULEXWLQJ WR WKH
FRYHUDJHRIWKHVH¿[HGFRVWV
Using the Analysis
% :LWK WKLV LQLWLDO DQDO\VLV
\RXFDQVWDUWWRXQGHUVWDQG
where your business is
³ZLQQLQJ´ DQG ³ORVLQJ´
RQDFXVWRPHUE\FXVWRPHU
EDVLV :KDW ZRXOG \RX
GR IRU LQVWDQFH LI \RX
GLVFRYHUHG WKDW D VDOHV
transaction for which you
FKDUJH D FXVWRPHU SHURUGHUDFWXDOO\FRVWV\RX
WRIXO¿OO"
%
162
‹3XUHVWRFN7KLQNVWRFN
Lecture 22: Keeping an Eye on Your Margins
ż
2QH DQVZHU LV WR HOLPLQDWH
XQSUR¿WDEOH
FXVWRPHUV
EXW WKDW¶V QRW DGYLVDEOH
unless you have other 5HZDUGVSURJUDPVDQGVWRUHOR\DOW\
memberships represent one approach
KLJKO\ SUR¿WDEOH FXVWRPHUV to offering differential pricing in
waiting in the wings. A business-to-consumer marketing.
better solution is to make
WKH XQGHUSHUIRUPLQJ FXVWRPHUV SUR¿WDEOH 7KH ¿UVW RSWLRQ KHUH
PLJKWEHWRPDNHLQWHUQDOFKDQJHVWKDWZRXOGDOORZ\RXWRSHUIRUP
the service more cost effectively.
%
$QRWKHURSWLRQRIFRXUVHLVWRUDLVHSULFHVWRJDLQPDUJLQVRUWR
DGMXVW WKH SURGXFW RU VHUYLFH<RX FRXOG WDNH WKHVH DFWLRQV DFURVV
WKH ERDUG DIIHFWLQJ DOO FXVWRPHUV RU \RX FRXOG RIIHU GLIIHUHQW
SURGXFWVVHUYLFHVDQGRUSULFHVWRGLIIHUHQWFXVWRPHUV7KLVLVDQ
DJHROGSUDFWLFHLQEXVLQHVVWREXVLQHVVPDUNHWLQJZKHUHWKHUHLV
ORZWUDQVSDUHQF\LQWKHPDUNHWLQWHUPVRIZKDWGLIIHUHQWFXVWRPHUV
UHFHLYHDQGDWZKDWSULFH
%
7KH LQVLJKW \RX JDLQ E\ FRPSDULQJ FXVWRPHU GHPDQGV DQG
UHVRXUFH FRQVXPSWLRQ FDQ DOORZ \RX WR PRYH WR D PRUH PHQX
EDVHG DUUDQJHPHQW IRU \RXU SURGXFWV DQG VHUYLFHV 7KDW VKRXOG
HQVXUH WKDW HYHU\ RQH RI \RXU EXVLQHVV¶V WUDQVDFWLRQV KDV D IDLU
VKRWDWSUR¿WDELOLW\
Suggested Reading
&HVSHGHV'RXJKHUW\DQG6NLQQHU³+RZWR,GHQWLI\WKH%HVW&XVWRPHUVIRU
<RXU%XVLQHVV´
&RRSHUDQG.DSODQ³0HDVXUH&RVWV5LJKW´
²²²³3UR¿W3ULRULWLHVIURP$FWLYLW\%DVHG&RVWLQJ´
*DUULVRQ1RUHHQDQG%UHZHU0DQDJHULDO$FFRXQWLQJ.
.DSODQDQG$QGHUVRQ7LPH'ULYHQ$FWLYLW\%DVHG&RVWLQJ.
Questions to Consider
1. ,V LW SRVVLEOH IRU \RXU ELJJHVW FXVWRPHUV LQ WHUPV RI VDOHV QRW WR EH
\RXUEHVWFXVWRPHUV"+RZVR"
2. +RZGRHVDFWLYLW\EDVHGFRVWLQJGLIIHUIURPWUDGLWLRQDODYHUDJHFRVWLQJ"
,QSDUWLFXODUKRZDUHWKHDVVXPSWLRQVGLIIHUHQW"
Leveraging Your Supply Chain
Lecture 23
A
Lecture 23: Leveraging Your Supply Chain
PRQJWKHPRVWSHUYDVLYHGHYHORSPHQWVLQEXVLQHVVRYHUWKHSDVWIHZ
GHFDGHVLVWKHHPHUJHQFHRIVXSSO\FKDLQPDQDJHPHQW 6&0 EXW
WKHUHLVPXFKFRQIXVLRQVXUURXQGLQJWKHH[DFWPHDQLQJRIWKLVWHUP
,W DSSHDUV WR LQYROYH D JUHDW GHDO RI DFWLRQ²ZDUHKRXVHV PRYLQJ SURGXFWV
DORQJ KLJKVSHHG FRQYH\RUV JLDQW FDUJR VKLSV FUXLVLQJ WKH RFHDQ²DQG
H[WHQVLYHDUUD\VRILQIRUPDWLRQWHFKQRORJLHV7KDWLPSUHVVLRQLVQ¶WHQWLUHO\
ZURQJ EXW D PRUH FRPSOHWH XQGHUVWDQGLQJ RI 6&0 FDQ LOOXPLQDWH ZK\
HYHU\RUJDQL]DWLRQQHHGVWRDVVHVVLWVVXSSO\FKDLQVWROHYHUDJHWKHSRWHQWLDO
IRUFRPSHWLWLYHDGYDQWDJH,QWKLVOHFWXUHZH¶OOORRNDWWKHGLVWLQFWGLVFLSOLQH
RI6&0DVDKLJKHURUGHURIRSHUDWLRQVPDQDJHPHQW
Supply Chain Management as a Team Sport
% $V \RX¶OO UHFDOO D VXSSO\ FKDLQ LV WKH QHWZRUN RI FRPSDQLHV
WKDW ZRUNV WRJHWKHU WR SURYLGH D JRRG RU VHUYLFH IRU WKH HQGXVH
PDUNHW²LQGLYLGXDO FRQVXPHUV RU EXVLQHVVHV DQG LQVWLWXWLRQV
6&0 LV WKH GLVFLSOLQH RI PDQDJLQJ WKH QHWZRUN RI VXSSOLHUV DQG
FXVWRPHUV WR DFKLHYH WKH JUHDWHVW SRVVLEOH HIIHFWLYHQHVV IRU WKH
EHQH¿WRI\RXURUJDQL]DWLRQ
%
,WVKRXOGEHFOHDUWKDWIRU\RXURUJDQL]DWLRQWR³ZLQ´LQWKHORQJ
WHUP LW¶V HVVHQWLDO WR ZRUN ZLWK VWURQJ VXSSOLHUV DQG FXVWRPHUV
%XW LW¶V DOVR HVVHQWLDO WKDW WKRVH RXWVLGH SDUWLHV EHQH¿W IURP
DUUDQJHPHQWVZLWK\RXURUJDQL]DWLRQ,QWKLVVHQVH6&0VKRXOGEH
FRQVLGHUHGDWHDPVSRUW
%
2QH H[DPSOH RI WKLV DSSURDFK FDQ EH IRXQG LQ WKH HIIRUWV RI
&RFD&ROD DQG 3HSVL WR GHYHORS DQ DOWHUQDWLYH WR FRUQ V\UXS DV D
VZHHWHQHUIRUWKHLUVRIWGULQNV
ż &RFD&RODZRUNHGFORVHO\ZLWKDPDMRUVXSSOLHURIFRUQV\UXS
&DUJLOO WR GHYHORS7UXYLD D VZHHWHQHU PDGH IURP WKH VWHYLD
SODQW3HSVLZDVDOVRLQWHUHVWHGLQWKHVWHYLDSODQWEXWEHFDXVH
&DUJLOO ZDV DOUHDG\ VSRNHQ IRU 3HSVL KDG WR ¿QG DQRWKHU
SDUWQHU $V D UHVXOW LWV FRPSHWLQJ SURGXFW 3XUH9LD GLGQ¶W
reach the market until almost two years after Truvia.
ż
:KDW¶V LQWHUHVWLQJ DERXW WKLV H[DPSOH LV WKDW LW¶V QRW MXVW D
VWRU\ DERXW FRPSHWLWLRQ EHWZHHQ WZR FRPSDQLHV EXW DERXW
FRPSHWLWLRQEHWZHHQWKHLUVXSSO\FKDLQV
%
(YHQ :DOO 6WUHHW LV FDWFKLQJ RQ WR WKH LPSRUWDQFH RI 6&0 $
FRPSDQ\¶V YDOXH LV QR ORQJHU WLHG PHUHO\ WR SDVW SHUIRUPDQFH
DQG H[SHFWDWLRQV IRU WKH IXWXUH LQ WHUPV RI QHZ SURGXFWV RQ WKH
KRUL]RQ7KHUHODWLRQVKLSVWKDWWKHFRPSDQ\IRUPVZLWKLWVVWUDWHJLF
FXVWRPHUVDQGVXSSOLHUVDOVRIDFWRULQWRLWVZRUWK$FRPSDQ\ZLWK
DEHWWHUSRUWIROLRRIFXVWRPHUVRUIDYRUDEOHUHODWLRQVZLWKWKHEHVW
VXSSOLHUVZLOOEHYDOXHGPRUHKLJKO\WKDQLWVFRPSHWLWLRQ
%
:KHQ \RX DFFHSW WKDW 6&0 LV D WHDP VSRUW \RX¶YH DGRSWHG
ZKDW¶VFDOOHGDVXSSO\FKDLQRULHQWDWLRQ$FRPSDQ\ZLWKDVXSSO\
FKDLQ RULHQWDWLRQ ORRNV WR OHYHUDJH WKH FDSDELOLWLHV DQG UHVRXUFH
DGYDQWDJHVRIIHUHGE\LWVRXWVLGHSDUWQHUVLQWKHVXSSO\FKDLQ
Understanding the Network Structure
% 7KH ¿UVW VWHS LQ OHYHUDJLQJ \RXU FRPSDQ\¶V VXSSO\ FKDLQ LV WR
XQGHUVWDQGLWVQHWZRUNVWUXFWXUH)URPZKRPGR\RXEX\IURPDQG
WRZKRPGR\RXVHOO"7KHDQVZHUVWRWKHVHTXHVWLRQVUHSUHVHQW\RXU
WLHURULPPHGLDWHVXSSOLHUVDQGFXVWRPHUV$JRRGLGHDLVWRPDS
RXWWKLVVHULHVRIXSVWUHDPDQGGRZQVWUHDPUHODWLRQVKLSV
%
%HJLQ ZLWK \RXU GRZQVWUHDP FXVWRPHU UHODWLRQV$UH WKHUH VRPH
FXVWRPHUV WKDW DUH PRUH LPSRUWDQW WR \RXU EXVLQHVV" :KDW VKDUH
RI\RXUEXVLQHVVJRHVWRZDUGWKHVHFXVWRPHUV"$VZH¶YHVHHQLW¶V
TXLWHFRPPRQIRURIDFRPSDQ\¶VUHYHQXHVWRFRPHIURP
of its customers.
ż 2QFH\RXXQGHUVWDQGZKR\RXUFXVWRPHUVDUHDQGWKHYROXPH
DQGQDWXUHRIWKHEXVLQHVV\RXGRZLWKWKHP\RXVKRXOGVWHS
EDFN DQG WKLQN DERXW KRZ FRPIRUWDEOH²RU XQFRPIRUWDEOH²
WKDWSRUWIROLRRIFXVWRPHUUHODWLRQVKLSVPDNHV\RXIHHO
ż
%
:LWK UHJDUG WR WKRVH UHODWLRQVKLSV RQ ZKLFK \RX IHHO RYHUO\
GHSHQGHQW D VLPSOH \HW SRZHUIXO H[SUHVVLRQ FRPHV LQWR SOD\
PAB 'BA LQ ZKLFK 3 LV SRZHU ' LV GHSHQGHQFH DQG$ DQG %
DUH WZR LQGHSHQGHQW SDUWLHV $FFRUGLQJ WR WKLV H[SUHVVLRQ WKH
SRZHU WKDW $ KDV RYHU % LV D IXQFWLRQ RI KRZ GHSHQGHQW % LV
XSRQ$
ż :KHQ RQH FRPSDQ\ LV YHU\ GHSHQGHQW RQ DQRWKHU²LQ RXU
HTXDWLRQ%LVYHU\GHSHQGHQWRQ$²WKHQ$FDQH[HUWDJUHDW
GHDO RI SRZHU LQ LWV GHDOLQJV ZLWK % 7KLV FDQ PDQLIHVW LQ
PDQ\ZD\VSULFLQJDQGVDOHVWHUPVGHOLYHU\RSWLRQVDQGVR
RQ,QH[WUHPHVLWXDWLRQVWKHSRZHULPEDODQFHFDQERUGHURQ
DEXVLYH UHODWLRQV IRU H[DPSOH D SRZHUIXO FXVWRPHU PLJKW
GHPDQGSULFLQJFRQFHVVLRQVXQLTXHVHUYLFHVDQGKLJKOHYHOV
RIUHODWLRQVKLSVSHFL¿FUHVRXUFHV
Lecture 23: Leveraging Your Supply Chain
ż
%
166
$UHWKHUHFXVWRPHUVRQZKRP\RXIHHORYHUO\GHSHQGHQW"$UH
WKHUHRSSRUWXQLWLHVWKDWDSSHDUWREHOHIWRQWKHWDEOH"7KHVHDUH
WKHUHODWLRQVKLSVWKDWFDOOIRUPRUHDWWHQWLRQ
,Q WKHVH FLUFXPVWDQFHV LW¶V HVVHQWLDO IRU D FRPSDQ\ WR
XQGHUVWDQG LWV FRVW RI GRLQJ EXVLQHVV DQG WR NQRZ ZKHQ LW
PXVWSXVKEDFNDJDLQVWDFXVWRPHU%H\RQGPHUHUHVLVWDQFHWR
HJUHJLRXVFXVWRPHUGHPDQGVWKHFRPSDQ\FDQDOVRVWHSEDFN
DQGWKLQNFUHDWLYHO\DERXWKRZVRPHVHQVHRISRZHUEDODQFH
FDQ EH DFKLHYHG LQ WKH UHODWLRQVKLS &DQ WKH FRPSDQ\ PDNH
LWVHOI LQGLVSHQVDEOH WR WKH FXVWRPHU LQ DW OHDVW RQH FDWHJRU\
LQZKLFKLWFRPSHWHVIRUWKHFXVWRPHU¶VLQWHUHVW"0DQ\VPDOO
¿UPVKDYHEHHQVXFFHVVIXOZLWKWKLVWDFWLF
7KLVHTXDWLRQRISRZHUDQGGHSHQGHQFHDOVRDSSOLHVWRUHODWLRQVKLSV
ZLWK VXSSOLHUV <RXU FRPSDQ\ VKRXOG DVVHVV LWV UHODWLYH SRVLWLRQ
ZLWK VXSSOLHUV GHWHUPLQH ZKLFK VXSSOLHUV DUH PRVW LPSRUWDQW IRU
WKHEXVLQHVVDQG¿JXUHRXWKRZWREHFRPHWKHSUHIHUUHGFXVWRPHU
WRWKHVHFULWLFDOVXSSOLHUV
%
5HVHDUFKVKRZVWKDWWKHKLJKHVWSHUIRUPLQJEXVLQHVVUHODWLRQVKLSV
DUH WKRVH LQ ZKLFK WKHUH LV D OHYHO RI FRGHSHQGHQFH :KHQ WKH
GHSHQGHQFHJRHVRQO\RQHZD\WKHQWKHSRZHUIXOSDUW\ZLOOXVXDOO\
H[WUDFWHYHU\WKLQJLWFDQIURPWKHUHODWLRQVKLSDQGWKHZHDNHUSDUW\
ZLOOEHUHJDUGHGDVGLVSHQVDEOH
Forming Strategic Relationships
% ,WLVQ¶WSRVVLEOH²RUDGYLVDEOH²WRIRUPVWUDWHJLFUHODWLRQVKLSVZLWK
HDFK RI \RXU FXVWRPHUV DQG VXSSOLHUV EHFDXVH VXFK UHODWLRQVKLSV
UHTXLUHDJUHDWGHDORILQYHVWPHQW)RUPLQJDVWUDWHJLFUHODWLRQVKLS
PLJKWLQYROYHGHGLFDWLQJDWHDPRISHRSOHZLWKVSHFL¿FVNLOOVHWVWR
DQLPSRUWDQWDFFRXQWRUGHGLFDWLQJDFXVWRPHUVHUYLFHOLQHIRUWKH
H[FOXVLYHXVHRIYDOXDEOHFXVWRPHUV&HUWDLQO\QRWHYHU\FXVWRPHU
ZDUUDQWV VXFK DQ LQYHVWPHQW7KH VROXWLRQ KHUH FRPHV GRZQ WR D
IXQGDPHQWDOHFRQRPLFTXHVWLRQ+RZFDQ\RXEHVWHPSOR\OLPLWHG
UHVRXUFHVIRUWKHJUHDWHVWEHQH¿W"
%
:KHQH[WHQVLYHLQYHVWPHQWLVQRWSRVVLEOHRUGHHPHGZRUWKZKLOH
\RXPLJKWGHGLFDWHDVLQJOHLQGLYLGXDOWRWKHDFFRXQWDQGEHZLOOLQJ
WR RIIHU VRPH XQLTXH SURGXFWV DQG VHUYLFHV )RU \RXU UHPDLQLQJ
FXVWRPHUV\RXVKRXOGWU\WREHHDV\WRGREXVLQHVVZLWKRIIHULQJ
FRQYHQLHQW VWRUH KRXUV DQ RQOLQH SUHVHQFH DQG FXVWRPHU VHUYLFH
SHUVRQQHO EXW \RX SURYLGH OLWWOH LQ WKH ZD\ RI FXVWRPL]DWLRQ RU
XQLTXHUHVRXUFHLQYHVWPHQW
%
%H HVSHFLDOO\ FDUHIXO ZKHQ DVVHVVLQJ WKH YDOXH RI D FXVWRPHU
UHODWLRQVKLS ,I \RX UHO\ VROHO\ RQ SDVW VDOHV \RX PLJKW RYHUORRN
WRPRUURZ¶VVWDUV:KHQWKH6ROR&XS&RPSDQ\¿UVWKDGWRGHFLGH
whether to work with Starbucks, the coffee giant was a small, local
RSHUDWLRQ ZLWK RQO\ VHYHQ VWRUHV +DG 6ROR SDVVHG RQ 6WDUEXFNV¶
EXVLQHVV DW WKH WLPH LW PLJKW QRW EH WKH SULPDU\ SURYLGHU WR WKH
PRUHWKDQ6WDUEXFNVORFDWLRQVWRGD\
%
8VH VLPLODU WKLQNLQJ ZKHQ FRQVLGHULQJ VXSSOLHU UHODWLRQV 6RPH
VXSSOLHUVDUHPRUHLPSRUWDQWWKDQRWKHUVDQGGHVHUYHH[WUDDWWHQWLRQ
7KHVHPLJKWEHVXSSOLHUVWKDWSURYLGHXQLTXHPDWHULDOVRIIHUKLJKHU
167
TXDOLW\RUEHWWHUYDOXHRUSRVVHVVLQWDQJLEOHVVXFKDVLQQRYDWLRQLQ
SURGXFWVDQGSURFHVVHV7KHUHPD\DOVREHWURXEOHGVXSSOLHUVWKDW
DUHHVVHQWLDOWR\RXUEXVLQHVV\HWDUHVWUXJJOLQJZLWKTXDOLW\FRVW
RUGHOLYHU\7KHVHVXSSOLHUVPD\GHVHUYHH[WUDDWWHQWLRQWRR7KH
PDQDJHPHQWRIVXSSOLHUUHODWLRQVKLSVUHTXLUHVDQXQGHUVWDQGLQJRI
ZKLFKRXWVLGHHQWLWLHVDUHSRLVHGWRKHOS\RXPRVW²QRWRQO\WRGD\
but into the future.
,QWHUQDODQG([WHUQDO,QWHJUDWLRQ
% 7KH *OREDO 6XSSO\ &KDLQ )RUP DW 2KLR 6WDWH 8QLYHUVLW\ KDV
KHOSHGWRGH¿QHWKH¿HOGRI6&0ZLWKDIUDPHZRUNEXLOWRQHLJKW
NH\EXVLQHVVSURFHVVHV7KH¿UVWWZRSURFHVVHVLQWKLVIUDPHZRUN
IRFXVRQULJKWVL]LQJFXVWRPHUDQGVXSSOLHUUHODWLRQVKLSVFXVWRPHU
UHODWLRQVKLS PDQDJHPHQW &50 DQG VXSSOLHU UHODWLRQVKLS
PDQDJHPHQW 650 ż 7KHVL[DGGLWLRQDOSURFHVVHVDUHFXVWRPHUVHUYLFHPDQDJHPHQW
GHPDQGPDQDJHPHQWPDQXIDFWXULQJÀRZPDQDJHPHQWRUGHU
IXO¿OOPHQW SURGXFW GHYHORSPHQW DQG FRPPHUFLDOL]DWLRQ DQG
returns management.
Lecture 23: Leveraging Your Supply Chain
ż
%
168
$OWKRXJK &50 DQG 650 UHSUHVHQW WKH NH\ OLQNDJHV LQ WKH
VXSSO\ FKDLQ WKH RWKHU VL[ SURFHVVHV UHSUHVHQW WKH ZRUN WKDW
PXVW WDNH SODFH DFURVV IXQFWLRQV WR FUHDWH DQG WUDQVIHU YDOXH
WKURXJK HQJDJHPHQW LQ WKH VXSSO\ FKDLQ QHWZRUN HVSHFLDOO\
ZLWKVHOHFWVXSSOLHUVDQGFKRLFHFXVWRPHUVLQWKHQHWZRUN
,QFDVHLW¶VQRWDOUHDG\REYLRXV6&0VKRXOGQRWEHWKHZRUNRI
DVLQJOHGHSDUWPHQWLQDFRPSDQ\HYHQWKRXJKDFRPSDQ\PLJKW
KDYHDGHSDUWPHQWWKDWKDV³VXSSO\FKDLQ´LQLWVQDPH7KH*OREDO
6XSSO\ &KDLQ )RUXP EHOLHYHV VWURQJO\ WKDW 6&0 UHTXLUHV WKH
involvement of all business functions if an SCM team is to make
WKH ULJKW GHFLVLRQV IRU D EXVLQHVV GHWHUPLQH KRZ WR FRPSHWH
DQG SURGXFH WKH JUHDWHVW SRVVLEOH UHWXUQV IRU WKH FRPSDQ\ DQG
LWVVKDUHKROGHUV
,Q WKLV ZD\ 6&0 LV UHDOO\ D WHDP VSRUW RQ WZR OHYHOV WKURXJK
LQWHUQDO LQWHJUDWLRQ ZKLFK UHTXLUHV FRRUGLQDWLQJ DOO WKH IXQFWLRQV
ZLWKLQWKHFRPSDQ\DQGWKURXJKH[WHUQDOLQWHJUDWLRQZKLFKPHDQV
OHYHUDJLQJEXVLQHVVUHODWLRQVKLSVZLWKFKRLFHFXVWRPHUVDQGVHOHFW
VXSSOLHUV²¿JXULQJRXWKRZWRJRWRPDUNHWWRJHWKHU
%
6PDOO EXVLQHVVHV KDYH VRPH DGYDQWDJH ZKHQ LW FRPHV WR LQWHUQDO
LQWHJUDWLRQ7KH\FDQXVXDOO\DOLJQWKHPVHOYHVEHWWHUDQGIDVWHUWKDQ
WKHLUODUJHUPRUHFRPSOH[FRPSHWLWRUV'HFLVLRQPDNLQJLVXVXDOO\
PRUH FRQFHQWUDWHG LQ VPDOOHU ¿UPV DQG DUJXDEO\ HPSOR\HHV
GHPRQVWUDWHDJUHDWHUFRQFHUQIRUWKHVXFFHVVRIWKHEXVLQHVV:KHUH
WKHUHLVEHWWHULQWHUQDOLQWHJUDWLRQWKHFRPSDQ\LVSRLVHGWRUHDOL]H
WKHJUHDWHVWEHQH¿WVRILQWHJUDWLRQZLWKH[WHUQDOSDUWQHUV
%
,QFRQWUDVWODUJHFRPSDQLHVDUHRIWHQODGHQZLWKEXUHDXFUDF\WKDW
makes internal integration more challenging. However, they may
¿QGLWHDVLHUWRFROODERUDWHZLWKRXWVLGHFRPSDQLHVEHFDXVHRIWKHLU
HFRQRPLFSRZHUDQGVL]H/DUJHFRPSDQLHVDUHDOVRPRUHOLNHO\WR
LQYHVWLQLQWHJUDWLYHWHFKQRORJLHVDQGWRGHGLFDWHWHDPVRISHRSOHWR
LPSRUWDQW EXVLQHVV UHODWLRQVKLSV
that warrant the investment.
%
(YHQWKRXJK\RXUFRPSDQ\PD\
QRWKDYHIXOO\GHGLFDWHGVXSSOLHUV
RUFXVWRPHUVWKDWSURPLVHQRWWR
EX\IURP\RXUFRPSHWLWRUV6&0
DQGWKHWHDPZRUNLWLQYROYHVFDQ
VWLOO EH EHQH¿FLDO 7KH OLQNDJHV
LQ WKH VXSSO\ FKDLQ QHWZRUN
FRQYH\ PXFK PRUH WKDQ SURGXFW
ÀRZLQJ IURP RQH FRPSDQ\ WR
DQRWKHU DQG FDVK ÀRZLQJ LQ WKH
UHYHUVHGLUHFWLRQ,QVRPHVHQVH
SDUWLFLSDQWV LQ WKHVH QHWZRUNV
DUH ERXQG WRJHWKHU DQG VKDUH D
FRPPRQLGHQWLW\«DVLIWKH\¶UH
SOD\LQJRQWKHVDPHWHDP
‹&+$,:$73+2726L6WRFN7KLQNVWRFN
%
7KHUHZDUGVIRUIRUPLQJ
PXWXDOO\EHQH¿FLDOUHODWLRQVKLSV
ZLWKWKHEHVWVXSSOLHUVDQG
customers include improved
economic returns, innovation,
DGDSWDELOLW\DQGJURZWK
169
Suggested Reading
)LVKHU³:KDW,VWKH5LJKW6XSSO\&KDLQIRU<RXU3URGXFW"´
Lambert, Supply Chain Management.
/DPEHUWDQG.QHPH\HU³:H¶UHLQ7KLV7RJHWKHU´
/HH³7KH7ULSOH$6XSSO\&KDLQ´
6LPFKL/HYL&OD\WRQDQG5DYHQ³:KHQ2QH6L]H'RHV1RW)LW$OO´
Questions to Consider
1. :K\ LV LW LPSRUWDQW IRU D FRPSDQ\ WR XQGHUVWDQG WKH VXSSO\ FKDLQ
QHWZRUNLQZKLFKLWRSHUDWHV"
2. :KDWGRHVLWPHDQWRVD\WKDWWKHUHLVHTXLW\LQVXSSO\FKDLQUHODWLRQV"
3. +RZFDQ\RXUUHVWRUHEDODQFHLQDVXSSO\FKDLQUHODWLRQVKLSZKHQWKH
Lecture 23: Leveraging Your Supply Chain
OHYHORIGHSHQGHQFHLVQRWLQ\RXUIDYRU"
170
Reducing Risk, Building Resilience
Lecture 24
A
PRQJ WKH KRWWHVW WRSLFV LQ EXVLQHVV WRGD\ LV ULVN PDQDJHPHQW
5LVNV DUH IRXQG LQ VLWXDWLRQV ZLWK XQFHUWDLQ RXWFRPHV DQG
JLYHQ WKH UDWH RI FKDQJH LQ WKH ZRUOG WRGD\ RXU EXVLQHVVHV DUH
ODGHQ ZLWK XQFHUWDLQW\ 7KH PHGLD LV IXOO RI H[DPSOHV RI FRPSDQLHV WKDW
IDLO WR WDNH VRPHWKLQJ LQWR FRQVLGHUDWLRQ²VRPHWKLQJ IRU ZKLFK WKH\ DUH
KHOG DFFRXQWDEOH RU VRPHWKLQJ WKDW JRHV VHULRXVO\ ZURQJ RQ WKHLU ZDWFK
)XUWKHUVWXGLHVKDYHVKRZQWKDWD³EDGGD\´IRUDEXVLQHVVVXFKDVDGHOD\
LQ SURGXFWLRQ RU GHOLYHU\ FDQ UHVXOW LQ D GURS LQ WKH ¿UP¶V VWRFN SULFH
RQ DYHUDJH RI ,Q WKLV OHFWXUH ZH¶OO ORRN DW DSSURDFKHV IRU DW OHDVW
GDPSHQLQJWKHHIIHFWVRISRWHQWLDOO\SHULORXVVLWXDWLRQV
Internal Risks
% 7KH¿UVWVWHSLQULVNPDQDJHPHQWLVWRFRQGXFWDGHJUHHVFDQ
RI \RXU RUJDQL]DWLRQRU HQYLURQPHQW,Q FRQGXFWLQJVXFK VXUYH\V
business strategists often use a SWOT analysisH[DPLQLQJVWUHQJWKV
ZHDNQHVVHV RSSRUWXQLWLHV DQG WKUHDWV 6WUHQJWKV DQG ZHDNQHVVHV
DUHDVVHVVPHQWVRIWKHLQWHUQDOFRQGLWLRQRIWKHRUJDQL]DWLRQZKLOH
RSSRUWXQLWLHVDQGWKUHDWVDUHH[WHUQDOWRWKHFRPSDQ\
%
:HDNQHVVHV UHSUHVHQW WKH LQWHUQDO ULVNV LPSRVHG RQ WKH EXVLQHVV
PDQ\ RI ZKLFK ZH¶YH DOUHDG\ H[SORUHG GHSDUWPHQWDO FRQÀLFW DQ
LQDWWHQWLYHQHVVWRPLVVLRQWKHLQDELOLW\WRFKDQJHDQGFRPSODFHQF\
,QWHUQDOZHDNQHVVHVFDQEHDPRQJWKHPRVWGLI¿FXOWWRLGHQWLI\DQG
PHDVXUH 6\PSWRPV PD\ SHUVLVW IRU TXLWH VRPH WLPH EHIRUH WKH\
UHVXOWLQDQRWLFHDEOHSUREOHP
ż 7R DLG LQ WKH UHFRJQLWLRQ RI V\PSWRPV EHIRUH WKH\ EHFRPH
SUREOHPV PDQ\ FRPSDQLHV WRGD\ XVH D WRRO FDOOHG failure
PRGHDQGHIIHFWVDQDO\VLV )0($ ZKLFKKHOSVWRLGHQWLI\DQG
SULRULWL]HULVNV
171
Lecture 24: Reducing Risk, Building Resilience
ż
,QWKLVW\SHRIDQDO\VLVDfailure modeLVDQ\WKLQJWKDWFRXOGJR
ZURQJLQDEXVLQHVV²VRPHWKLQJWKDWIDOOVVKRUWRIH[SHFWDWLRQV
RU SHUIRUPDQFH VWDQGDUGV $ IDLOXUH HIIHFW is an outcome or
FRQVHTXHQFHRIWKHIDLOXUHPRGH
ż
)0($ SURYLGHV D VFRULQJ V\VWHP IRU SULRULWL]LQJ WKH ULVN
factors that call for the greatest attention.
%
7KH ¿UVW VWHS LQ WKH )0($ SURFHVV LV WR EUDLQVWRUP DFURVV WKH
UDQJHRIIDLOXUHPRGHV7KHUDQJHFDQUXQWKHJDPXWIURPHYHU\GD\
RFFXUUHQFHVWRWKHVHHPLQJO\RXWODQGLVK7KHLGHDLVWRFDSWXUHDOO
WKHSRVVLELOLWLHVZKLFKZLOOEHHYDOXDWHGLQWKHQH[WVWHS
%
$IWHU D IDLOXUH PRGH LV LGHQWL¿HG FRQFHUQ LV IRFXVHG RQ WKUHH
DWWULEXWHV DVVRFLDWHG ZLWK LW SUREDELOLW\ RI RFFXUUHQFH VHYHULW\ ZLWK RFFXUUHQFH DQG DELOLW\ WR GHWHFW RFFXUUHQFH $
VLPSOH VXEMHFWLYH VFRULQJ V\VWHP UDQJLQJ IURP WR LV XVXDOO\
VXI¿FLHQWIRUHYDOXDWLQJWKHVHWKUHHDWWULEXWHV7KHFRPSRVLWHRIWKH
three scores is the risk priority number 531 ż ,PDJLQHWKDWDFHUWDLQULVNUDWHVDFURVVWKHERDUGPHDQLQJ
WKDW LW¶V KLJKO\ SUREDEOH SHUKDSV LQHYLWDEOH LV H[WUHPHO\
VHYHUH ZKHQ LW RFFXUV SHUKDSV UHVXOWLQJ LQ IDWDOLWLHV DQG LV
YHU\GLI¿FXOWWRGHWHFWDWWKHWLPHRIRFFXUUHQFH7KH531LV
WKLVFDVHZRXOGEHîî ż
%
172
7KHKLJKHUWKH531WKHPRUHWKHLVVXHFDOOVIRULPPHGLDWH
DWWHQWLRQ .HHS LQ PLQG WKDW WKH REMHFWLYH LV QRW WR DFKLHYH
DFFXUDF\ EXW WR VKLQH D OLJKW RQ WKH PRVW VLJQL¿FDQW
risk factors.
,Q DGGLWLRQ WR FRQGXFWLQJ )0($ \RXU RUJDQL]DWLRQ FDQ WDNH
DGGLWLRQDO LQWHUQDO VWHSV WR PDNH LWVHOI PRUH DJLOH DQG UHVLOLHQW
)RU H[DPSOH \RX FDQ LPSOHPHQW LQIRUPDWLRQ WHFKQRORJLHV WKDW
PDNH\RXDZDUHRILQWHUQDODQGH[WHUQDOFLUFXPVWDQFHVFDOOLQJIRU
DWWHQWLRQ<RXVKRXOGDOVRHVWDEOLVKDKLJKOHYHORIFRPPXQLFDWLRQ
DFURVVGHSDUWPHQWVDQGIXQFWLRQVWRIDFLOLWDWHLQIRUPDWLRQVKDULQJ
<RXFDQFURVVWUDLQ\RXUHPSOR\HHVWRWDNHRQGLIIHUHQWUROHVDQG
WDVNV VR WKDW WKH\¶UH DZDUH RI HDFK RWKHU¶V SULRULWLHV DQG FDQ ¿OO
LQ IRU HDFK RWKHU LQ FDVH RI D FULVLV 6XFK VWHSV FDQ HOHYDWH \RXU
FRPSDQ\¶VDELOLW\WRVHQVHDQGUHVSRQGWRFKDOOHQJHV
([WHUQDO5LVNV
% 2QH RI WKH PRVW FRPPRQ VRXUFHV RI H[WHUQDO ULVN LV WKH VXSSO\
FKDLQ$V\RXUHFDOOWKHVXSSO\FKDLQLVWKHQHWZRUNRIFRPSDQLHV
WKDW ZRUN WRJHWKHU WR SURYLGH D JRRG RU VHUYLFH IRU WKH HQGXVH
PDUNHW9LUWXDOO\HYHU\FRPSDQ\H[LVWVZLWKLQDQGGHSHQGVRQD
QHWZRUNRIFRPSDQLHVWRFUHDWHDQGGHOLYHUYDOXHLQWKHPDUNHW:H
DOOH[LVWZLWKLQWKLVHFRV\VWHPRIVXSSO\FKDLQV
%
$OWKRXJK RXWVRXUFLQJ LV FRPPRQ LQ PDQ\ LQGXVWULHV WRGD\
ZH¶YHVHHQWKDWLWLVQRWDQHIIHFWLYHVWUDWHJ\IRUSXVKLQJRIIULVN
HVSHFLDOO\ LI LW¶V \RXU EUDQG RQ WKH SURGXFW RU LI \RX VHOO GLUHFWO\
WRHQGFXVWRPHUV<RXUFRPSDQ\ZLOOEHKHOGDFFRXQWDEOH²LIQRW
LQWKHMXGLFLDOV\VWHPWKHQLQWKHFRXUWRISXEOLFRSLQLRQ²IRUDQ\
HJUHJLRXVDFWSHUSHWUDWHGLQWKHSURYLVLRQRIWKHSURGXFW
%
:KHQ DVVHVVLQJ RSSRUWXQLWLHV DQG WKUHDWV LQ OLJKW RI WKLV QHWZRUN
RULHQWDWLRQLW¶VZLVHWRPDSWKHQHWZRUNMXVWDV\RXZRXOGGRLQ
DQDO\]LQJ\RXUFRPSDQ\¶VLQWHUQDOSURFHVVHV 6HHEHORZ
Supplier A
Supplier 1
Customer 1
Supplier B
Customer 2
Supplier A
Customer 3
Supplier 2
Your
Organization
Supplier 3
Customer A
Customer B
Customer 4
Customer 5
Customer A
Customer B
Customer 6
Supplier A
Supplier B
Supplier C
Supplier 4
Customer 7
Customer A
Lecture 24: Reducing Risk, Building Resilience
%
ż
7KH ¿UVW SDVV RI WKH VXSSO\ FKDLQ PDS LV GHGLFDWHG WR VLPSO\
LGHQWLI\LQJZKRPDNHVXSWKHFKDLQIRFXVLQJRQDVLQJOHSURGXFW
RUVHUYLFHRIIHUHGE\\RXURUJDQL]DWLRQ6XSSOLHUVWKDWSURYLGH
PDWHULDO LQSXWV WR VXSSRUW WKLV RIIHULQJ DUH \RXU LPPHGLDWH RU
WLHUVXSSOLHUV:KHUH\RXPLJKWKDYHPDQ\GLIIHUHQWVXSSOLHUV
RIDJLYHQLQSXWJURXSWKHPWRJHWKHU$OWHUQDWLYHO\\RXPLJKW
KDYHRQHVXSSOLHUWKDWSURYLGHVPDQ\GLIIHUHQWLQSXWV
ż
2QFH \RX KDYH D VDWLVIDFWRU\ GLDJUDP RI WLHU VXSSOLHUV DGG
\RXUWLHUFXVWRPHUVWKRVHZKREX\WKLVSURGXFWRUVHUYLFHIURP
\RX<RXPD\ZDQWWROLVWLPSRUWDQWFXVWRPHUVLQGLYLGXDOO\
ż
1H[WVHHLI\RXFDQLGHQWLI\WLHUVXSSOLHUVWKRVHZKRVXSSRUW
\RXUWLHUVXSSOLHUV7KH\PD\EHGLI¿FXOWWRLGHQWLI\XQOHVV
WKH\ EUDQG WKHLU FRPSRQHQWV RU SURGXFWV &RQQHFW WKH WLHU
VXSSOLHUV WR WKH DSSURSULDWH WLHUV WKDW WKH\ VHUYH )RU WKRVH
\RX FDQQRW LGHQWLI\ WU\ WR OLVW WKH LQJUHGLHQW FRPSRQHQW RU
LQSXWWKDWIHHGV\RXUVXSSOLHUVDWWKHWLHUOHYHO
ż
1H[W OLVW \RXU WLHU FXVWRPHUV 6LPLODU WR WLHU VXSSOLHUV
WKHVH FRPSDQLHV DUH OLNHO\ WR EH PRUH GLI¿FXOW WR LGHQWLI\
HVSHFLDOO\LIWKH\¶UHPDVVPDUNHWFRQVXPHUV
2QFH \RX KDYH WKH PDS GUDZQ RXW VWHS EDFN DQG WDNH D FULWLFDO
ORRNDWLW:KRDUH\RXUPRVWFULWLFDOVXSSOLHUVDQGPRVWYDOXDEOH
FXVWRPHUV":KHUHDUH\RXPRVWGHSHQGHQWLQ\RXUUHODWLRQVKLSVRU
HYHQRYHUO\GHSHQGHQW"
ż <RX PLJKW ¿QG \RXUVHOI RYHUO\ GHSHQGHQW RQ RQH RU D IHZ
NH\ FXVWRPHUV ,I RQH FXVWRPHU UHSUHVHQWV PRUH WKDQ RU
RI\RXUVDOHVWKDW¶VDVLJQWKDW\RXVKRXOGGLYHUVLI\\RXU
FXVWRPHUSRUWIROLR
ż
<RX ZDQW WR EH DEOH WR GLUHFW \RXU FDSDFLW\ WRZDUG WKH
EHVWSD\LQJ RSSRUWXQLWLHV EXW \RX GRQ¶W ZDQW WR EH RYHUO\
GHSHQGHQWRQRQHRUDIHZNH\FXVWRPHUV7KDWVLWXDWLRQSXWV
\RXLQDZHDNEDUJDLQLQJSRVLWLRQ$WDPLQLPXP\RXZDQWWR
HQJHQGHUDOHYHORIFRGHSHQGHQF\LQWKHVHDUUDQJHPHQWV
%
%
/LNHZLVH\RXPD\EHRYHUO\GHSHQGHQWRQRQHRUPRUHVXSSOLHUV
RQ LQGLYLGXDO LQJUHGLHQWV WKDW JR LQWR \RXU SURGXFWV RU RQ WKH
ORFDWLRQVWKDWVXSSO\WKHP
ż &RQVLGHUWKHFDVHRIUDUHHDUWKPLQHUDOVPHWDOVWKDWDUHXVHG
H[WHQVLYHO\LQDGYDQFHGFRQVXPHUDQGLQGXVWULDOWHFKQRORJLHV
7KHVHPLQHUDOVDUHGLI¿FXOWWRH[WUDFWIURPWKHHDUWKDQGUDWKHU
GLUW\ DQG FRVWO\ WR SURFHVV (QYLURQPHQWDO UHJXODWLRQV LQ WKH
8QLWHG 6WDWHV KDYH PDGH LW HFRQRPLFDOO\ XQYLDEOH WR PLQH
these materials here.
ż
$V D UHVXOW WKH ZRUOG KDV EHFRPH GHSHQGHQW RQ VXSSOLHUV
in China, where environmental laws are not so stringently
HQIRUFHG ,W¶V HVWLPDWHG WKDW HYHQ WKRXJK &KLQD LV HQGRZHG
ZLWK DERXW KDOI RI WKH ZRUOG¶V QDWXUDO VXSSO\ RI WKHVH UDUH
HDUWK PLQHUDOV &KLQHVH FRPSDQLHV VXSSO\ DERXW RI WKH
ZRUOGPDUNHW
ż
7KLV UHDOL]DWLRQ SXWV PDQXIDFWXUHUV RI WHFKQRORJLFDO SURGXFWV
LOODWHDVH'RWKH\ZDQWWREHVRGHSHQGHQWRQRQHQDWLRQIRU
VXSSO\" 7KLV FDQ EH HVSHFLDOO\ SUREOHPDWLF ZKHQ D IRUHLJQ
JRYHUQPHQW HOHFWV WR LPSRVH WDULIIV DQG TXRWDV GUDPDWLFDOO\
DOWHULQJ WKH DYDLODELOLW\ DQG SULFH RI VXSSO\$OHUW FRPSDQLHV
DUH GHWHUPLQHG WR HQJLQHHU WKHVH PDWHULDOV RXW RI WKHLU
SURGXFWV &OHDUO\ WKLV FDOOV IRU D FURVVIXQFWLRQDO WHDP WR
LGHQWLI\GLIIHUHQWPDWHULDOVWKDWPLJKWVHUYHWKHSXUSRVHRIWKH
RULJLQDOLQJUHGLHQW
2WKHU LQVWDQFHV FDOOLQJ IRU DZDUHQHVV RI WKH UHDFK RI VXSSO\
FKDLQVFDQFRPHIURPVWDWHQDWLRQDODQGLQWHUQDWLRQDOUHJXODWRU\
UHTXLUHPHQWV)RUH[DPSOHWKH&DOLIRUQLD7UDQVSDUHQF\LQ6XSSO\
&KDLQV$FWRIUHTXLUHVODUJHUHWDLOHUVDQGPDQXIDFWXUHUVGRLQJ
EXVLQHVVLQ&DOLIRUQLDWRGLVFORVHWKHLUHIIRUWVWRHUDGLFDWHVODYHU\
DQG KXPDQ WUDI¿FNLQJ IURP WKHLU GLUHFW VXSSO\ FKDLQV IRU DOO WKH
JRRGVWKH\RIIHUIRUVDOH
%
:KHUH\RXKDYHGLI¿FXOW\PDSSLQJFULWLFDOVXSSOLHVDQGFXVWRPHUV
LW LOOXPLQDWHV D QHHG IRU XQGHUVWDQGLQJ DQG SRVVLEO\ JUHDWHU
FRQWUROV)RUH[DPSOHRQH¿QGLQJWKDWLVTXLWHFRPPRQLQVXSSO\
FKDLQPDSSLQJLVWKHUHYHODWLRQRIFRPPRQVRXUFHVRIVXSSO\DWWKH
WLHUOHYHO
ż ,Q DQ HIIRUW WR DYRLG RYHUGHSHQGHQFH DW WKH WLHU OHYHO \RX
PLJKWEX\IURPWZRRUPRUHWLHUSURYLGHUVRIWKHVDPHLQSXW
<HWZKHQPDSSHGEH\RQGWLHUWKHVXSSO\FKDLQPLJKWVKRZ
WKDW\RXUWLHUVXSSOLHUVDUHEX\LQJIURPWKHVDPHVXSSOLHUDW
tier 2.
Lecture 24: Reducing Risk, Building Resilience
ż
7KHUHIRUH LI GLVUXSWLRQ RFFXUV ZLWK WKH WLHU VXSSOLHU DOO
\RXU WLHU VXSSOLHUV RI WKLV LWHP FRXOG EH SDUDO\]HG PDNLQJ
\RXDVYXOQHUDEOHDVLI\RXKDGRQO\RQHWLHUVXSSOLHU7KLV
FLUFXPVWDQFH LV XQFRYHUHG RQO\ LI \RX FDQ PDS \RXU VXSSO\
FKDLQEH\RQGWKHWLHUOHYHO
Environmental Risks
% $ORQJ ZLWK PDSSLQJ \RXU VXSSO\ FKDLQ LW¶V D JRRG LGHD WR GR D
GHJUHHVFDQRI\RXUHQYLURQPHQWWRLGHQWLI\ULVNIDFWRUVRWKHU
WKDQWKRVHUHVLGLQJZLWKVXSSOLHUVDQGFXVWRPHUV7KHVHLQFOXGHWKH
ULVNV WKDW FRPSHWLWRUV FDQ SUHVHQW ULVNV IRXQG LQ WKH PDUNHWV DQG
HFRQRPLHVLQZKLFK\RXRSHUDWHRUULVNVWKDWPD\EHLQWURGXFHGE\
VRFLDOFKDQJHRUJRYHUQPHQWDFWLRQV7KH)0($WRROFDQEHKHOSIXO
LQFRQGXFWLQJWKLVH[WHUQDODVVHVVPHQWDQGSULRULWL]DWLRQRIULVNV
%
176
%\ EUDLQVWRUPLQJ \RX FDQ LGHQWLI\ D GLYHUVH DUUD\ RI ULVNV
HYHU\WKLQJ IURP HYHU\GD\ RFFXUUHQFHV WR WKH H[WUHPHO\ UDUH 7KH
PLOLWDU\ FKDUDFWHUL]DWLRQ RI HYHQWV DV NQRZQNQRZQV NQRZQ
XQNQRZQV DQG XQNQRZQXQNQRZQV FDQ EH KHOSIXO KHUH .QRZQ
NQRZQV DUH HYHQWV WKDW KDYH VRPH SUHFHGHQW DQG PLJKW HYHQ EH
H[SODLQHGRUSUHGLFWHG.QRZQXQNQRZQVDUHHYHQWVWKDWKDYHEHHQ
LGHQWL¿HGEXWKDSSHQUDUHO\DQGKHQFHKDYHOLWWOHVXSSRUWLQJGDWD
8QNQRZQXQNQRZQVDUHHYHQWVWKDWFDQRQO\EHLPDJLQHGKDYLQJ
QRUHFRUGHGKLVWRU\
%
:KHQ \RX EUDLQVWRUP DERXW \RXU FRPSDQ\¶V ULVNV \RX PD\
GLVFRYHUVRPHWKDWDUHLQWHUGHSHQGHQW<RXPLJKW¿QGIRULQVWDQFH
WKDWE\HOLPLQDWLQJRQHULVN\RXHOHYDWHRULQWURGXFHDQRWKHU2QH
ULVNFRPPRQWRDOOEXVLQHVVHVLVDVWRFNRXWDQGRQHZD\WRDGGUHVV
WKLV ULVN LV WR KROG ODUJH TXDQWLWLHV RI LQYHQWRU\ <HW LQYHQWRU\
FRPHVZLWKDFRVWWKXVE\UHGXFLQJRQHULVN\RXHOHYDWHDQRWKHU
The name of the game in risk management is usually to offset an
XQDFFHSWDEOHULVNZLWKDPRUHDFFHSWDEOHRQH
%
2QFH \RX KDYH D VWUDWHJ\ IRU HPEUDFLQJ FKDOOHQJHV WU\ WR IRUP
VWUDWHJLF UHODWLRQV ZLWK \RXU PRVW FULWLFDO VXSSOLHUV DQG SUL]HG
FXVWRPHUV6XFKFRQQHFWLRQVHQDEOH\RXWRPLWLJDWHULVNVDQGPDNH
LW GLI¿FXOW IRU FRPSHWLWRUV WR HPXODWH \RXU VXFFHVV LQ JRRG WLPHV
DQGEDG
Suggested Reading
'ULVFROO³:K\&RPSDQLHV.HHS*HWWLQJ%OLQG6LGHGE\5LVN´
*DUGQHUDQG&RRSHU³6WUDWHJLF6XSSO\&KDLQ0DSSLQJ$SSURDFKHV´
5HHYHVDQG'HLPOHU³$GDSWDELOLW\´
6iHQ]DQG5HYLOOD³&UHDWLQJ0RUH5HVLOLHQW6XSSO\&KDLQV´
6KHI¿DQG5LFH-U³$6XSSO\&KDLQ9LHZRIWKH5HVLOLHQW(QWHUSULVH´
6LPFKL/HYL6FKPLGWDQG:HL³)URP6XSHUVWRUPVWR)DFWRU\)LUHV´
Questions to Consider
1. ,VLWSRVVLEOHWRHOLPLQDWHWKHULVNVWKDWDEXVLQHVVIDFHV"
2. :KDW LV D IDLOXUH PRGH" +RZ FDQ )0($ EH XVHG WR PDQDJH ULVNV LQ
EXVLQHVV"
3. :KDW FDQ D FRPSDQ\ H[SHFW WR OHDUQ IURP D VXSSO\ FKDLQ PDS DV LW
UHODWHVWRYXOQHUDELOLWLHVDQGULVNV"
177
Critical Business Skills:
Finance and Accounting
Eric Sussman, M.B.A.
Critical Business Skills: Finance and Accounting
Scope:
A
FFRXQWLQJDQG¿QDQFHDUHWZRRIWKHFRUQHUVWRQHVRIDQ\EXVLQHVV
VFKRROFXUULFXOXP²DQGIRUJRRGUHDVRQ$FFRXQWLQJRIWHQFDOOHG
WKHODQJXDJHRIEXVLQHVVSURYLGHVWKHPHDQVE\ZKLFKRUJDQL]DWLRQV
FRPPXQLFDWH²LQIDFWVDQG¿JXUHV²KRZHIIHFWLYHO\WKH\DUHIXO¿OOLQJWKHLU
VWUDWHJLFPLVVLRQVDQGRSHUDWLQJREMHFWLYHVE\SURYLGLQJFULWLFDOLQIRUPDWLRQ
WR FXUUHQW DQG SURVSHFWLYH LQYHVWRUV FUHGLWRUV DQG UHJXODWRUV$FFRXQWLQJ
UXOHVDQGVWDQGDUGVSURYLGHWKHIUDPHZRUNE\ZKLFKLQGLYLGXDOWUDQVDFWLRQV
DUHUHFRUGHGLQ¿QDQFLDOUHFRUGVDQGFRQVROLGDWHGLQWR¿QDQFLDOVWDWHPHQWV
LQFOXGLQJWKHLQFRPHVWDWHPHQWEDODQFHVKHHWDQGVWDWHPHQWRIFDVKÀRZV
)LQDQFH LV DOO DERXW GHFLVLRQ PDNLQJ²KRZ DFFRXQWLQJ LQIRUPDWLRQ
¿QDQFLDO VWDWHPHQWV DQG HFRQRPLF GDWD DUH XVHG E\ LQGLYLGXDO LQYHVWRUV
EXVLQHVV RZQHUV DQG FRUSRUDWH ¿QDQFH SHUVRQQHO WR GHFLGH ZKHWKHU WR
PDNHDSDUWLFXODULQYHVWPHQWKRZWRUDLVHFDSLWDOQHHGHGWRUXQRUH[SDQG
RSHUDWLRQV DQG WKH WUDGHRIIV RI HDFK KRZ WR YDOXH VWRFNV ERQGV RU RWKHU
FDVKSURGXFLQJDVVHWVDQGRSWLPDOO\SODFHWKHPLQDGLYHUVL¿HGSRUWIROLRDQG
KRZWRPRUHDSSURSULDWHO\DVVHVVWKHUHODWLRQVKLSEHWZHHQULVNDQGUHWXUQ
7KHVH OHFWXUHV DUH GHVLJQHG WR VXPPDUL]H DQG SUHVHQW FULWLFDO WKHRULHV
YRFDEXODU\ DQG UHDOZRUOG DSSOLFDWLRQV IURP ERWK GLVFLSOLQHV 7KH RYHUDOO
JRDO RI WKLV VHFWLRQ RI WKH FRXUVH LV WR KHOS \RX PDNH EHWWHU DQG PRUH
LQIRUPHG LQYHVWPHQW GHFLVLRQV ZKHWKHU \RX DUH DQ LQGLYLGXDO LQYHVWRU
VHHNLQJWRXQGHUVWDQGKRZWKHFRPSDQLHV\RX¶UHLQWHUHVWHGLQDUHSHUIRUPLQJ
DEXVLQHVVRZQHUVHHNLQJWRLPSURYH\RXUDFFRXQWLQJDQG¿QDQFHVNLOOVHWRU
WRPRUHHIIHFWLYHO\LQWHUDFWZLWKDQGPDQDJHDFFRXQWLQJDQG¿QDQFHVWDIIRU
VLPSO\VRPHRQHZKRZDQWVWRIXUWKHUKLVRUKHUEXVLQHVVHGXFDWLRQ
7KLV VHFWLRQ RI WKH FRXUVH LV VWUXFWXUHG LQ WZR SDUWV 7KH ¿UVW VL[ OHFWXUHV
IRFXVRQNH\LVVXHVLQDFFRXQWLQJWRHQDEOH\RXWREHFRPHDPRUHLQIRUPHG
UHDGHU RI ¿QDQFLDO VWDWHPHQWV DQG DFFRXQWLQJ LQIRUPDWLRQ UHOHDVHG E\
FRPSDQLHVLQZKLFK\RXPLJKWKDYHDQLQWHUHVW,Q/HFWXUHZHLQWURGXFH
181
JHQHUDOO\DFFHSWHGDFFRXQWLQJSULQFLSOHVWKHSULPDU\VWDQGDUGVXQGHUZKLFK
PRVW86FRPSDQLHVDFFRXQWIRUUHFRUGDQGFRQVROLGDWHWUDQVDFWLRQVLQWR
WKHLU¿QDQFLDOVWDWHPHQWV
,Q /HFWXUHV WKURXJK ZH DQDO\]H WKH LQFRPH VWDWHPHQW EDODQFH
VKHHW DQG VWDWHPHQW RI FDVK ÀRZV LQ GHSWK LQWURGXFLQJ NH\ DFFRXQWLQJ
GH¿QLWLRQVDORQJWKHZD\,Q/HFWXUHZHGLVFXVVUDWLRDQDO\VLVDXVHIXO
WRROWKDWDOORZVXVWRXVH¿QDQFLDOVWDWHPHQWVWRHYDOXDWHDQRUJDQL]DWLRQ¶V
SUR¿WDELOLW\ HI¿FLHQF\ OLTXLGLW\ DQG ULVN ZKLOH DOORZLQJ FRPSDULVRQV WR
RWKHURUJDQL]DWLRQVLQFOXGLQJFRPSHWLWRUV)LQDOO\LQ/HFWXUHZHGLVFXVV
EUHDNHYHQDQDO\VLVDQGLQWURGXFHWKHFRQFHSWRIFRQWULEXWLRQPDUJLQ
7KH VHFRQG VL[ OHFWXUHV IRFXV RQ NH\ FRQFHSWV LQ ¿QDQFH WKH WLPH YDOXH
RI PRQH\ DQG KRZ WR GLVFRXQW IXWXUH FDVK ÀRZV WR WKHLU SUHVHQWYDOXH
HTXLYDOHQWV KRZ WR WKLQN PRUH IRUPDOO\ DERXW WKH UHODWLRQVKLS EHWZHHQ
ULVNDQGUHWXUQDQGWKHWUDGHRIIVIRU¿UPVGHFLGLQJZKHWKHUWRXVHGHEWRU
VWRFNWR¿QDQFHWKHLUEXVLQHVVHV$ORQJWKHZD\ZHZLOOLQWURGXFHLPSRUWDQW
¿QDQFH WHUPV VXFK DV QHW SUHVHQW YDOXH DQG WKH LQWHUQDO UDWH RI UHWXUQ
FRPPRQ PHDVXUHV XVHG WR HYDOXDWH LQYHVWPHQW RSSRUWXQLWLHV )LQDOO\ ZH
ZLOOGLVFXVVKRZWRYDOXHVWRFNV
Scope
7KHVH OHFWXUHV DUH GHVLJQHG QRW RQO\ WR LQWURGXFH \RX WR WKH WKHRUHWLFDO
FRQFHSWVLQERWKDFFRXQWLQJDQG¿QDQFHEXWWRSURYLGHSUDFWLFDODQGFRQFUHWH
H[DPSOHVIRUDSSO\LQJERWKGLVFLSOLQHVLQ\RXUHYHU\GD\OLIHŶ
182
Accounting and Finance—Decision-Making Tools
Lecture 25
T
KH \HDU ZDV RQH PRVW LQYHVWRUV ZRXOG OLNH WR IRUJHW 7KH
LQYHVWPHQW EDQN %HDU 6WHDUQV ZDV VROG DW D ¿UHVDOH SULFH WR -3
0RUJDQLQ0DUFK7KHQ/HKPDQ%URWKHUV¿OHGIRUWKHODUJHVW
EDQNUXSWF\ LQ 86 KLVWRU\ 7KH FRXQWU\ IDFHG LWV JUHDWHVW ¿QDQFLDO FULVLV
VLQFH WKH *UHDW 'HSUHVVLRQ 0DQ\ SHRSOH KDYH VLQFH DVNHG ZKHWKHU WKHVH
HYHQWVZHUHIRUHVHHDEOHDQGDQH[DPLQDWLRQRI/HKPDQ%URWKHUV¶¿QDQFLDO
VWDWHPHQWVIURPFOHDUO\UHÀHFWVWKHOLNHOLKRRGWKDWWKHFRPSDQ\ZRXOG
IDLO 2QH OHVVRQ ZH FDQ OHDUQ IURP WKHVH IDLOXUHV LV WKDW LW LV RXU MRE WR
XQGHUVWDQGWKHDFFRXQWLQJDQG¿QDQFLDOUHSRUWLQJLVVXHVRIWKHFRPSDQLHVLQ
ZKLFKZHLQYHVW,QWKLVVHFWLRQRIWKHFRXUVHZHZLOOWDFNOHWKDWWDVN
'H¿QLQJ7HUPV
% $FFRXQWLQJ LV WKH ODQJXDJH RI EXVLQHVV ,W¶V DQ LPSRUWDQW PHDQV
E\ZKLFKRUJDQL]DWLRQVFRPPXQLFDWHWRNH\FRQVWLWXHQWV²LQIDFWV
DQG¿JXUHV²KRZWKH\DUHSHUIRUPLQJDQGKRZHIIHFWLYHO\WKH\DUH
IXO¿OOLQJWKHLUVWUDWHJLFJRDOVDQGREMHFWLYHV
ż 7KH NH\ FRQVWLWXHQWV ZLWKLQ DQG H[WHUQDO WR DQ\ RUJDQL]DWLRQ
LQFOXGH HPSOR\HHV PDQDJHPHQW FOLHQWV DQG FXVWRPHUV
VKDUHKROGHUV OHQGHUV DQG FUHGLWRUV PHPEHUV RI WKH ERDUG RI
GLUHFWRUV DQG HYHQ WD[LQJ DXWKRULWLHV $OO WKHVH FRQVWLWXHQWV
KDYHDQLQWHUHVWLQWKH¿QDQFLDOSHUIRUPDQFHRIRUJDQL]DWLRQV
ZLWKZKLFKWKH\DUHLQYHVWHGRULQYROYHG
ż
(PSOR\HHVPDQDJHUVDQGH[HFXWLYHVQHHGWRSODQDQGFRQWURO
RSHUDWLRQVPDQDJHUHVRXUFHVHYDOXDWHFDSLWDOQHHGVDQGPDNH
LPSRUWDQWVWUDWHJLFGHFLVLRQV,QYHVWRUVDQGFUHGLWRUVLQFOXGLQJ
WUDGH VXSSOLHUV DQG OHQGHUV PXVW HYDOXDWH WKH FRPSDQ\¶V
¿QDQFLDOVWUHQJWKDQGSHUIRUPDQFHWRNQRZZKHWKHUWROHQGRU
LQYHVWFDSLWDOLQWKHRUJDQL]DWLRQ
ż
Lecture 25: Accounting and Finance—Decision-Making Tools
%
+RZ GR WKHVH FRQVWLWXHQWV PDNH WKHLU GHFLVLRQV DQG
HYDOXDWLRQV"7KHDQVZHULVWKURXJKDFFRXQWLQJGDWD7KHVHGDWD
WHOOVWRULHVWKDWDUHFUXFLDOWRXQGHUVWDQGLQJWKHRYHUDOO¿WQHVV
RIDFRPSDQ\,QIDFWLI\RXUHYLHZWKH¿QDQFLDOVWDWHPHQWVRI
DQ\RUJDQL]DWLRQ\RXVKRXOGEHDEOHWRGLVFHUQDWUHPHQGRXV
DPRXQWRILQIRUPDWLRQDERXWLWLQFOXGLQJLWVSUR¿WDELOLW\WKH
HIIHFWLYHQHVV RI LWV DVVHW PDQDJHPHQW KRZ LW LV IXQGHG DQG
more.
)LQDQFH SXWV WKH ODQJXDJH²WKH VWRULHV²RI DFFRXQWLQJ WR
SUDFWLFDO XVH ,W IRFXVHV RQ KRZ DFFRXQWLQJ LQIRUPDWLRQ LV XVHG
WRPDNHFHUWDLQGHFLVLRQV7KHVHGHFLVLRQVPLJKWLQFOXGHZKHWKHU
D SDUWLFXODU LQYHVWPHQW RSSRUWXQLW\ PDNHV VHQVH DQG VKRXOG
EH SXUVXHG KRZ EHVW WR UDLVH FDSLWDO QHHGHG WR UXQ RU H[SDQG
RSHUDWLRQV KRZ WR YDOXH VWRFNV ERQGV RU FDVKÀRZSURGXFLQJ
LQYHVWPHQWVDQGVRRQ
Standard Accounting Disclosures
% &RPSDQLHVDUHUHTXLUHGWRSURYLGHDQQXDOUHSRUWVWRVKDUHKROGHUV
DQGLQWKH8QLWHG6WDWHVWKH\¿OHWKHHTXLYDOHQWD)RUP.ZLWK
WKH6HFXULWLHVDQG([FKDQJH&RPPLVVLRQ 6(& JHQHUDOO\ZLWKLQ
WRGD\VDIWHUWKHHQGRIWKH¿VFDO\HDU$QQXDOUHSRUWVPXVW
LQFOXGH DQ RYHUYLHZ RI WKH FRPSDQ\¶V EXVLQHVV DQG RSHUDWLRQV
GLVFXVVLRQ DQG DQDO\VLV RI ¿QDQFLDO UHVXOWV ¿QDQFLDO VWDWHPHQWV
DQG UHODWHG IRRWQRWHV DQ LQGHSHQGHQW DXGLW UHSRUW DQG VHYHUDO
RWKHUGLVFORVXUHV7KHIRXU¿QDQFLDOVWDWHPHQWVGLVFORVHGLQDQQXDO
UHSRUWVDUHWKHEDODQFHVKHHWLQFRPHVWDWHPHQWVWDWHPHQWRIFDVK
ÀRZVDQGVWDWHPHQWRIVKDUHKROGHUV¶HTXLW\
%
7KHEDODQFHVKHHWLVRIWHQFDOOHGWKHVWDWHPHQWRI¿QDQFLDOSRVLWLRQ
LW GHWDLOV ZKDW DQ RUJDQL]DWLRQ RZQV²LWV DVVHWV²DQG ZKDW LW
RZHV²LWVOLDELOLWLHVDQGGHEWV$OOWKHLQIRUPDWLRQRQWKHEDODQFH
VKHHWLVDVRIDSDUWLFXODUSRLQWLQWLPHW\SLFDOO\WKHHQGRID¿VFDO
TXDUWHURU\HDU
ż ,IDVVHWVH[FHHGOLDELOLWLHVRQWKHEDODQFHVKHHWWKHGLIIHUHQFH
LV FDOOHG VKDUHKROGHUV¶ HTXLW\ ,I OLDELOLWLHV H[FHHG DVVHWV WKH
GLIIHUHQFHLVFDOOHGDVKDUHKROGHUGH¿FLW.
‹$OH[DQGU'XERYLWVNL\L6WRFN7KLQNVWRFN
In addition to public companies, many other organizations, including
PXQLFLSDOLWLHVQRQSUR¿WVDQGVRPHSULYDWH¿UPVPXVWDOVRSUHSDUHDQQXDO
DQGDXGLWHG¿QDQFLDOVWDWHPHQWV
ż
%
7KHEDODQFHVKHHWKHOSVWHOOXVKRZOLTXLGDQRUJDQL]DWLRQLV
KRZ PXFK LW KDV LQYHVWHG LQ ZRUNLQJ FDSLWDO IRU H[DPSOH
LQYHQWRU\DQGDFFRXQWVUHFHLYDEOH KRZPXFKGHEWLWKDVDQG
WKHUHIRUHKRZOHYHUDJHGRUULVN\LWDSSHDUVWREH
7KHVHFRQG¿QDQFLDOVWDWHPHQWLVWKHLQFRPHVWDWHPHQWRIWHQFDOOHG
WKH VWDWHPHQW RI RSHUDWLRQV WKH SUR¿W DQG ORVV VWDWHPHQW RU WKH
VWDWHPHQWRIUHYHQXHVDQGH[SHQVHV,WLQFOXGHVVXFKNH\PHWULFVDV
UHYHQXHVQHWLQFRPHDQGHDUQLQJVSHUVKDUH
ż 8QOLNHWKHEDODQFHVKHHWZKLFKLVSUHSDUHGDVRIDSDUWLFXODU
SRLQWLQWLPHWKHLQFRPHVWDWHPHQWUHÀHFWVRSHUDWLRQVGXULQJ
D SDUWLFXODU SHULRG RI WLPH W\SLFDOO\ D TXDUWHU RU D \HDU ,W
VWDUWV ZLWK UHYHQXHV VXEWUDFWV FRVWV DQG H[SHQVHV DQG HQGV
ZLWKQHWLQFRPHRUORVV RUQHWVXUSOXVRUGH¿FLWIRUQRQSUR¿W
RUJDQL]DWLRQV 7KH LQFRPH VWDWHPHQW LV WKH DFFRXQWDQW¶V
EHVW HIIRUW DW PHDVXULQJ WKH HFRQRPLF SHUIRUPDQFH RI DQ
RUJDQL]DWLRQGXULQJDJLYHQSHULRGRIWLPH
Lecture 25: Accounting and Finance—Decision-Making Tools
%
ż
Although the income statement tells us about an
RUJDQL]DWLRQ¶V SUR¿W RU ORVVHV LW GRHV QRW WHOO XV DERXW WKH
RUJDQL]DWLRQ¶V DFWXDO FDVK ÀRZV 7KDW LV ZH FDQQRW ORRN DW
DQRUJDQL]DWLRQ¶VLQFRPHVWDWHPHQWDQGGLVFHUQZKHWKHULWLV
JHQHUDWLQJRUEOHHGLQJFDVK7KHUHDVRQWKHLQFRPHVWDWHPHQW
GRHVQ¶W JLYH XV WKDW LQIRUPDWLRQ LV WKDW LW LV UHTXLUHG WR EH
SUHSDUHGXVLQJWKHPHWKRGRIDFFUXDODFFRXQWLQJUDWKHUWKDQ
FDVKEDVHGDFFRXQWLQJ
ż
8QGHU WKH UXOHV RI DFFUXDO DFFRXQWLQJ D FRPSDQ\ LV DOORZHG
WR UHFRJQL]H UHYHQXH IURP D VDOH DV VRRQ DV LW GHOLYHUV LWV
SURGXFWV WR D FXVWRPHU ZKHWKHU RU QRW WKH FRPSDQ\ DFWXDOO\
UHFHLYHVFDVKIURPWKHVDOHDWWKHWLPHRIGHOLYHU\7KXVDQ\
FRPSDQ\ WKDW FRPSOLHV ZLWK JHQHUDOO\ DFFHSWHG DFFRXQWLQJ
SULQFLSOHV *$$3 ZLOO UHSRUW SUR¿WV RU ORVVHV RQ LWV LQFRPH
VWDWHPHQWWKDWGLIIHUIURPFDVKÀRZVDQGWKHVHGLIIHUHQFHVFDQ
be material.
$V D UHVXOW RUJDQL]DWLRQV PXVW DOVR SURYLGH DQRWKHU NLQG RI
¿QDQFLDO VWDWHPHQW WKH VWDWHPHQW RI FDVK ÀRZV 7KLV VWDWHPHQW
UHSRUWVIRUDFHUWDLQSHULRGRIWLPHWKHDPRXQWRIDFWXDOFDVKHLWKHU
JHQHUDWHGRUFRQVXPHGE\DQRUJDQL]DWLRQ$VZHZLOOGLVFXVVWKH
VWDWHPHQWRIFDVKÀRZVSURYLGHVWZRNH\SLHFHVRIGDWDIRUXVHUVRI
¿QDQFLDOVWDWHPHQWV
ż )LUVW LW OD\V RXW WKH GLIIHUHQFHV EHWZHHQ UHSRUWHG SUR¿WV RU
ORVVHVXQGHUDFFUXDODFFRXQWLQJDQGWKHDFWXDOFDVKLQÀRZVRU
RXWÀRZVRIWKHRUJDQL]DWLRQGXULQJWKDWVDPHSHULRG6HFRQG
LW VHJPHQWV WKH FDVK ÀRZV LQWR WKUHH GLVWLQFW FDWHJRULHV
WKRVH IURP RSHUDWLQJ DFWLYLWLHV LQYHVWLQJ DFWLYLWLHV DQG
¿QDQFLQJDFWLYLWLHV
ż
186
2SHUDWLQJ DFWLYLWLHV DUH VXSSRVHG WR UHÀHFW FDVK LQÀRZV RU
RXWÀRZV IURP QRUPDO DQG UHFXUULQJ RSHUDWLRQV ,QYHVWLQJ
DFWLYLWLHV VKRXOG FDSWXUH WKH FDVK LQÀRZV RU RXWÀRZV IURP D
FRPSDQ\PDNLQJQRQUHFXUULQJLQYHVWPHQWGHFLVLRQVLQFOXGLQJ
WKH SXUFKDVH RI SURSHUW\ SODQW RU HTXLSPHQW PHUJHUV DQG
DFTXLVLWLRQVRUHYHQWKHLQYHVWPHQWRIH[FHVVFDVKLQWRVWRFNV
DQG ERQGV )LQDQFLQJ DFWLYLWLHV VKRXOG UHÀHFW FDVK LQÀRZV
DQGRXWÀRZVIURPWUDQVDFWLRQVLQYROYLQJDFRPSDQ\¶VOHQGHUV
DQG VKDUHKROGHUV VXFK DV WKH LVVXDQFH RI VWRFN RU ERQGV WKH
SD\PHQWRIGLYLGHQGVRUWKHUHSXUFKDVHRIFRPSDQ\VWRFN
ż
7KHVWDWHPHQWRIFDVKÀRZVLVH[WUHPHO\LPSRUWDQWEHFDXVHLW
WHQGV WR EH WKH PRVW REMHFWLYH RI WKH ¿QDQFLDO VWDWHPHQWV ,W
also serves as a crucial link to valuation.
Accounting Myths
% 0DQ\SHRSOHVHHPWREHOLHYHWKDWEHFDXVHDFFRXQWLQJLQYROYHVVR
PDQ\ QXPEHUV DQG ¿JXUHV DQG LV UXOH EDVHG LW PXVW EH VFLHQWL¿F
DQGREMHFWLYH8QIRUWXQDWHO\WKDWLVQ¶WWKHFDVH,QIDFWWKHUHDUHD
QXPEHU RI HVWLPDWHV WKDW SHUYDGH ¿QDQFLDO VWDWHPHQWV DQG SOHQW\
RI MXGJPHQW DQG VXEMHFWLYLW\ DUH LQYROYHG LQ DSSO\LQJ SDUWLFXODU
accounting rules.
%
,Q DGGLWLRQ SHRSOH RIWHQ DVVXPH WKDW WKHUH LV RQH PRVW LPSRUWDQW
¿JXUH²UHYHQXHVQHWLQFRPHRUVRPHRWKHUPHWULF²WKDWLQYHVWRUV
DQG RWKHUV VKRXOG ORRN DW WR HYDOXDWH ¿QDQFLDO SHUIRUPDQFH
Unfortunately, there is no single measure that allows an overall
DVVHVVPHQW RI ¿QDQFLDO SHUIRUPDQFH 6RPH PHWULFV RU GLVFORVXUHV
PLJKW EH PRUH LPSRUWDQW WKDQ RWKHUV EXW LW LV FUXFLDO WR WDNH D
KROLVWLFDSSURDFKWRDQDO\]LQJ¿QDQFLDOVWDWHPHQWV
%
$QRWKHUP\WKUHJDUGLQJDFFRXQWLQJLVWKDWFRPSDQLHVVKRXOGKDYH
RQO\ RQH VHW RI DFFRXQWLQJ UHFRUGV +DYLQJ PRUH WKDQ RQH VHW RI
ERRNVPLJKWVRXQGOLNHIUDXGEXWLQIDFWLW¶VEXVLQHVVDVXVXDO)RU
H[DPSOH PRVW RUJDQL]DWLRQV KDYH DW OHDVW WZR VHWV RI DFFRXQWLQJ
UHFRUGVRQHIRUFUHGLWRUVOHQGHUVDQGVKDUHKROGHUVDQGWKHRWKHU
IRUWD[DXWKRULWLHV
ż 7KH UXOHV FRQFHUQLQJ KRZ WUDQVDFWLRQV DUH UHSRUWHG WR
VKDUHKROGHUVDQGKRZWKH\DUHUHSRUWHGLQWD[UHWXUQVDUHQRW
WKH VDPH )RU H[DPSOH ¿UPV FDQ UHSRUW RQH VHW RI SUR¿WV WR
VKDUHKROGHUV DQG DQRWKHU PXFK ORZHU VHW WR WD[ DXWKRULWLHV
7KLV PD\ QRW EH VXUSULVLQJ JLYHQ WKDW WD[ DXWKRULWLHV DQG
DFFRXQWLQJUHJXODWRUVGRQRWKDYHLGHQWLFDOREMHFWLYHV
187
Lecture 25: Accounting and Finance—Decision-Making Tools
%
ż
)RULQVWDQFHLQ$SSOHUHSRUWHGSUHWD[HDUQLQJVRI
ELOOLRQ WR VKDUHKROGHUV RQ WKDW OHYHO RI HDUQLQJV$SSOH SDLG
ELOOLRQ LQ WD[HV 7KDW UHSUHVHQWV RQO\ RI SUHWD[
SUR¿WVIDUORZHUWKDQWKHWRSIHGHUDOWD[UDWHRI
ż
7KH FRPSDQ\ REYLRXVO\ WRRN DGYDQWDJH RI YDULRXV WD[
ORRSKROHV DQG UXOHV WR DYRLG SD\LQJ VRPH WD[HV 7KHUH LV
DEVROXWHO\ QRWKLQJ LQKHUHQWO\ LOOHJDO RU LPSURSHU DERXW WKDW
DQGLQIDFW$SSOH¶V&(27LPRWK\&RRNKDVWHVWL¿HGEHIRUH
&RQJUHVVRQWKLVLVVXHVWDWLQJWKDWWKHFRPSDQ\ZDVFRPSO\LQJ
ZLWKWD[ODZVDQGWDNLQJDGYDQWDJHRIWKHUXOHVDVZULWWHQ7KH
LPSRUWDQW WKLQJ IRU XV WR NHHS LQ PLQG LV WKDW WKH )LQDQFLDO
$FFRXQWLQJ6WDQGDUGV%RDUGDQGWKH,QWHUQDO5HYHQXH6HUYLFH
RIWHQGRQRWVHHH\HWRH\H
)LQDOO\LW¶VQRWWUXHWKDWWKH¿QDQFLDOVWDWHPHQWVWHOOXVKRZPXFK
D FRPSDQ\ RU RUJDQL]DWLRQ LV DFWXDOO\ ZRUWK )RU H[DPSOH WKH
EDODQFH VKHHW PD\ LQGLFDWH ZKDW D ¿UP RZQV DQG RZHV EXW PRVW
DVVHWV DUH QRW UHSRUWHG DW WKHLU IDLU PDUNHW YDOXHV )XUWKHU VRPH
YDOXDEOH DVVHWV²SDUWLFXODUO\ LQWDQJLEOH DVVHWV VXFK DV SDWHQWV
WUDGHPDUNV DQG FRS\ULJKWV²PLJKW EH RPLWWHG IURP WKH EDODQFH
sheet entirely.
ż &RQVLGHU IRU LQVWDQFH WKH $SSOH ORJR WKH &RFD&ROD EUDQG
QDPHRU0LFNH\0RXVH2EYLRXVO\WKHVHDUHWKUHHRIWKHPRVW
YDOXDEOHLQWDQJLEOHDVVHWVLQWKHZRUOGHDFKZRUWKELOOLRQVRI
GROODUV7KHLURZQHUVJHQHUDWHVLJQL¿FDQWSUR¿WVDQGFDVKÀRZV
IURP WKHP EXW WKHVH DVVHWV DUH QRW UHFRUGHG RQ WKH ¿QDQFLDO
VWDWHPHQWVRIWKHFRPSDQLHVWKDWRZQWKHP
ż
188
7KHSUREOHPKHUHLVWKDWWKHUHLVQRWUXO\REMHFWLYHPHDQVRI
YDOXLQJ WKHVH LQWDQJLEOH DVVHWV IRU WKLV UHDVRQ DFFRXQWDQWV
KDYH GHFLGHG QRW WR UHFRUG WKHP RQ ¿QDQFLDO VWDWHPHQWV
7KXV WR HVWLPDWH WKH YDOXH RI D FRPSDQ\ ZH QHHG WR XVH
WKH DYDLODEOH DFFRXQWLQJ LQIRUPDWLRQ DQG PDNH DSSURSULDWH
DVVXPSWLRQVDQGDGMXVWPHQWV
%
$V ZH PRYH IRUZDUG LQ WKHVH OHFWXUHV ZH¶OO H[SORUH HYHQ PRUH
RI WKH LQWHUHVWLQJ DQG LQIRUPDWLYH DQDO\VHV ZH FDQ SHUIRUP E\
DSSO\LQJVRPHIXQGDPHQWDOOHVVRQVLQDFFRXQWLQJDQG¿QDQFHZLWK
WKHJRDORILPSURYLQJRXU¿QDQFLDOGHFLVLRQPDNLQJLQEXVLQHVVDQG
in life.
Suggested Reading
&ROOLQV-RKQVRQ0LWWHOVWDHGW5HYVLQHDQG6RIIHU)LQDQFLDO5HSRUWLQJDQG
AnalysisFKDSWHUV±
(DVWRQ0F$QDOO\6RPPHUVDQG=KDQJ)LQDQFLDO6WDWHPHQW$QDO\VLVDQG
ValuationFKDSWHU
Questions to Consider
1. :K\ GR \RX WKLQN WKH UHJXODWRUV LQFOXGLQJ WKH 6(& DQG WKH )HGHUDO
5HVHUYH PLVVHG WKH FOHDU LQGLFDWLRQV RI ULVN HYLGHQW LQ WKH ¿QDQFLDO
VWDWHPHQWVRI/HKPDQ%URWKHUV%HDU6WHDUQVDQG$,*"
2. 3LFNDSXEOLFO\KHOGFRPSDQ\\RXFXUUHQWO\RZQVWRFNLQKDYHRZQHG
VWRFN LQ VRPHWLPH LQ WKH SDVW RU DUH FRQWHPSODWLQJ LQYHVWLQJ LQ
VRPHWLPH LQ WKH QHDU IXWXUH )LQG WKH FRPSDQ\¶V PRVW UHFHQW DQQXDO
UHSRUWRU)RUP.RQLWVZHEVLWH JHQHUDOO\LQWKHLQYHVWRUUHODWLRQV
VHFWLRQ 2SHQXSWKHGRFXPHQWDQGVHHLI\RXFDQ¿QGWKHFRPSDQ\¶V
¿YH ¿QDQFLDO VWDWHPHQWV 7DNH D ORRN DW WKH LQFRPH VWDWHPHQW DQG
GHWHUPLQHZKHWKHUWKHFRPSDQ\UHSRUWHGDQHWSUR¿WRUORVVLQWKHPRVW
recent year.
189
+RZWR,QWHUSUHWD%DODQFH6KHHW
Lecture 26
,
Balance Sheet Overview
% $V PRVW RI XV NQRZ ,QWHO LV D PDQXIDFWXUHU RI PLFURSURFHVVRUV
FKLSVDQGRWKHUSURGXFWVXVHGLQYDULRXVWHFKQRORJ\DSSOLFDWLRQV
,WV FRQVROLGDWHG EDODQFH VKHHW DORQJ ZLWK LWV RWKHU ¿QDQFLDO
statements,
can
be
IRXQG RQ WKH FRPSDQ\¶V
website, in the investor
relations section.
%
190
,QWHO¶VEDODQFHVKHHW
SUHVHQWV WZR UHSRUWLQJ
SHULRGV RQH HQGLQJ
'HFHPEHU DQG RQH
HQGLQJ 'HFHPEHU 7KLV LV W\SLFDO IRU DOO
RUJDQL]DWLRQV DQG OHWV
XV FRPSDUH QXPEHUV
RYHU WLPH 1RWH WRR
WKDW DOO WKH ¿JXUHV RQ
,QWHO¶V EDODQFH VKHHW DUH
SUHVHQWHGLQPLOOLRQV
‹6LUL6WDIIRUG'LJLWDO9LVLRQ7KLQNVWRFN
/HFWXUH+RZWR,QWHUSUHWD%DODQFH6KHHW
Q WKHODVWOHFWXUHZH LQWURGXFHGVRPHNH\FRQFHSWVLQDFFRXQWLQJDQG
¿QDQFH DQG H[SODLQHG ZK\ WKHVH GLVFLSOLQHV DUH FULWLFDOO\ LPSRUWDQW
WRSLFV WKDW DOO LQYHVWRUV DQG EXVLQHVVSHRSOH VKRXOG XQGHUVWDQG ,Q WKLV
OHFWXUH ZH ZLOO WDNH D GHHSHU GLYH LQWR WKH EDODQFH VKHHW WKH ¿QDQFLDO
VWDWHPHQW WKDW GHWDLOV ZKDW DQ RUJDQL]DWLRQ RZQV DQG ZKDW LW RZHV DV RI D
SDUWLFXODUSRLQWLQWLPHW\SLFDOO\WKHHQGRIDTXDUWHURU\HDU7KHEDODQFH
VKHHWLVLPSRUWDQWEHFDXVHLWSURYLGHVFOXHVDERXWDQRUJDQL]DWLRQ¶V¿QDQFLDO
VWDELOLW\ LWV ULVN DQG LWV OLTXLGLW\ WKDW LV LWV DELOLW\ WR PHHW LWV VKRUW DQG
ORQJWHUP¿QDQFLDOREOLJDWLRQV
Even individual households should have
a sense of their assets and debts to
RSWLPDOO\PDQDJHWKHLU¿QDQFHVLQYHVW
appropriately, and plan for the future.
%
2Q WKH EDODQFH VKHHW ,QWHO¶V DVVHWV DUH OLVWHG ¿UVW IROORZHG E\
OLDELOLWLHV DQG VWRFNKROGHUV¶ HTXLW\ 5HPHPEHU WKDW VWRFNKROGHUV¶
HTXLW\LVWKHGLIIHUHQFHEHWZHHQWKHWRWDODPRXQWRIDVVHWVDQGWKH
WRWDO DPRXQW RI OLDELOLWLHV %\ GH¿QLWLRQ WKHUHIRUH DVVHWV PXVW
HTXDOWKHVXPRIOLDELOLWLHVDQGVKDUHKROGHUV¶HTXLW\7KHUHODWLYHO\
VLPSOH IRUPXOD$VVHWV /LDELOLWLHV (TXLW\ LV VRPHWLPHV FDOOHG
the EDVLFDFFRXQWLQJHTXDWLRQ.
%
)LQDOO\ QRWH WKDW WKH DVVHWV DQG OLDELOLWLHV DUH GLYLGHG LQWR WZR
GLVWLQFW FDWHJRULHV FXUUHQW DQG QRQFXUUHQW 7KH GLYLGLQJ OLQH
EHWZHHQFXUUHQWDQGQRQFXUUHQWRQDQ\EDODQFHVKHHWLVPRQWKV
ż 7KXV D FXUUHQW DVVHW LV VRPHWKLQJ WKDW LV OLTXLG VRPHWKLQJ
WKDW FDQ RU ZLOO EH XVHG ZLWKLQ PRQWKV 2Q ,QWHO¶V EDODQFH VKHHW WKH FXUUHQW DFFRXQWV UHFHLYDEOH LV ELOOLRQ 7KDW¶V WKH DPRXQW RZHG E\ ,QWHO¶V FXVWRPHUV WKDW LV
H[SHFWHGWREHFROOHFWHGZLWKLQPRQWKVIROORZLQJWKHGDWH
of the balance sheet.
ż
6LPLODUO\WKHFXUUHQWOLDELOLWLHVDUHDPRXQWVWKDW,QWHOH[SHFWHG
WRSD\WRRWKHUVGXULQJWKHPRQWKVIROORZLQJ'HFHPEHU
6SHFL¿FDOO\,QWHORZHGELOOLRQWRLWVYHQGRUVDQG
VXSSOLHUVDVRIWKHHQGRIZKLFKLWH[SHFWHGWRSD\EHIRUH
WKHHQGRI
ż
%\GH¿QLWLRQWKHQDQ\LWHPVEHORZ³&XUUHQWDVVHWV´DUHWKLQJV
WKDW DUH H[SHFWHG WR ODVW ORQJHU WKDQ D \HDU DQG LWHPV EHORZ
³&XUUHQWOLDELOLWLHV´DUHDPRXQWVH[SHFWHGWREHSDLGDIWHUD\HDU
([DPSOHV RI QRQFXUUHQW DVVHWV ZRXOG LQFOXGH SURSHUW\ SODQW
DQGHTXLSPHQW²WKH¿[HGDVVHWVRIDQ\RUJDQL]DWLRQ²ZKLOHDQ
H[DPSOHRIDQRQFXUUHQWOLDELOLW\ZRXOGEHORQJWHUPGHEW
Current Assets
% 2QWKHDVVHWVLGHRIWKHEDODQFHVKHHWDVVHWVDUHRUGHUHGIURPWKH
PRVWOLTXLGWRWKHOHDVWOLTXLGVWDUWLQJZLWKFXUUHQWDVVHWV7KXVRQ
DOPRVWHYHU\EDODQFHVKHHWWKH¿UVWDVVHWWRDSSHDUXQGHU³&XUUHQW
DVVHWV´LVFDVKDQGFDVKHTXLYDOHQWV
191
/HFWXUH+RZWR,QWHUSUHWD%DODQFH6KHHW
192
ż
&DVK HTXLYDOHQWV DUH HVVHQWLDOO\ DQ\ ULVNIUHH VHFXULWLHV ZLWK
DPDWXULW\GDWHRIOHVVWKDQGD\V([DPSOHVPLJKWLQFOXGH
PRQH\ PDUNHW DFFRXQWV D WKUHHPRQWK FHUWL¿FDWH RI GHSRVLW
from a bank, or a U.S. treasury bill.
ż
&OHDUO\ WKH FDVK EDODQFH LV LPSRUWDQW EHFDXVH LW JLYHV XV D
VHQVHRIKRZPXFKFDVKWKHRUJDQL]DWLRQKDVDWWKHHQGRIWKH
UHSRUWLQJSHULRGDQGRIFRXUVHKRZWKDWEDODQFHFRPSDUHVWR
WKHSULRU\HDU
%
2WKHU DVVHWV WKDW W\SLFDOO\ PDNH XS FXUUHQW DVVHWV LQFOXGH
PDUNHWDEOH VHFXULWLHV²DQ\ VWRFNV ERQGV RU RWKHU OLTXLG
LQYHVWPHQWVWKHRUJDQL]DWLRQPLJKWRZQ7KHVXPRIWKHFDVKFDVK
HTXLYDOHQWVDQGPDUNHWDEOHVHFXULWLHVJLYHVDVHQVHRIWKHOLTXLGLW\
RI DQ RUJDQL]DWLRQ 'LIIHUHQW RUJDQL]DWLRQV ODEHO WKHVH PDUNHWDEOH
VHFXULWLHV GLIIHUHQWO\ LQ WKHLU EDODQFH VKHHWV ,QWHO IRU H[DPSOH
UHIHUVWRWKHPDV³6KRUWWHUPLQYHVWPHQWV´
%
$FFRXQWV UHFHLYDEOH²DPRXQWV RZHG WR WKH FRPSDQ\ E\ LWV
FXVWRPHUV²W\SLFDOO\ IROORZ PDUNHWDEOH VHFXULWLHV RQ WKH EDODQFH
sheet.
ż $VPHQWLRQHG,QWHO¶VEDODQFHRIDFFRXQWVUHFHLYDEOHDWWKHHQG
RIZDVDERXWELOOLRQ2QWKHFRPSDQ\¶VEDODQFHVKHHW
DQRWHDERXWWKLVDPRXQWUHDGV³QHWRIDQDOORZDQFHIRUGRXEWIXO
DFFRXQWV´RIPLOOLRQ7KLVLVDQLPSRUWDQWGLVFORVXUH
ż
,WPDNHVVHQVHWKDWVRPHFXVWRPHUVWKDWRZH,QWHOPRQH\PD\
QRW SD\ ,Q IDFW WKHUH DUH YHU\ IHZ ¿UPV²SHUKDSV QRQH²
WKDW FROOHFW DOO DPRXQWV WKH\ DUH RZHG IURP WKHLU FXVWRPHUV
7KHUHIRUHXQGHU*$$3RUJDQL]DWLRQVPXVWPDNHDQHVWLPDWH
RIKRZPXFKRIWKHWRWDOUHFHLYDEOHVWKH\DUHRZHGWKDWZLOOQRW
EHFROOHFWHG,QWHOHVWLPDWHVWKDWLWZLOOQRWFROOHFWPLOOLRQ
RQVRPHELOOLRQRIUHFHLYDEOHVDOLWWOHPRUHWKDQ
ż
7KLVDOORZDQFHIRUGRXEWIXODFFRXQWVLVDVXEMHFWLYHHVWLPDWH
3UHVXPDEO\ WKH FRPSDQ\ KDV ORRNHG DW LWV FROOHFWLRQ KLVWRU\
DQG WKH GHWDLOV RI LWV UHFHLYDEOHV²ZKR RZHV ZKDW DQG KRZ
ORQJ WKH UHFHLYDEOHV KDYH EHHQ RXWVWDQGLQJ²WR GHWHUPLQH
ZKDWLWEHOLHYHVVKRXOGEHWKHDOORZDQFHIRUGRXEWIXODFFRXQWV
EXWWKLVDPRXQWLVRQO\DQHVWLPDWHPDGHE\PDQDJHPHQW
ż
%
%
,QVRPHFDVHVPDQDJHPHQWPLJKWEHPRWLYDWHGWRPLVVWDWHWKH
DOORZDQFH IRU GRXEWIXO DFFRXQWV )RU H[DPSOH LI D FRPSDQ\
XQGHUVWDWHGWKLVDOORZDQFHLWVUHSRUWHGSUR¿WVRUHDUQLQJVDQG
LWVUHSRUWHGHDUQLQJVSHUVKDUHZRXOGEHRYHUVWDWHG7KXVZH
QHHGWRWDNHDFORVHORRNDWWKLVHVWLPDWHIRUDOOUHSRUWHGSHULRGV
WREHVXUHWKDWWKH¿JXUHVDSSHDUFRQVLVWHQW
,W¶V DOVR LPSRUWDQW WR ORRN FORVHO\ DW WKH FKDQJH LQ DFFRXQWV
UHFHLYDEOHIURPRQH\HDUWRWKHQH[W
ż 5HPHPEHUWKDWDFFRXQWVUHFHLYDEOHUHSUHVHQWVDOHVRISURGXFWV
RUVHUYLFHVIRUZKLFKWKHRUJDQL]DWLRQKDVUHSRUWHGWKHUHYHQXH
LQFRPHDQGHDUQLQJVEXWKDVQRW\HWUHFHLYHGWKHFDVK
ż
,PDJLQHDVLWXDWLRQLQZKLFKDFRPSDQ\LVYHU\OLEHUDOZLWKLWV
FUHGLW WHUPV DOORZLQJ FXVWRPHUV WR WDNH GHOLYHU\ RI SURGXFWV
DQGWRPDNHLQVWDOOPHQWSD\PHQWVRYHUDQH[WHQGHGSHULRGRI
WLPH2EYLRXVO\WKLVFRXOGFUHDWHDSUREOHPLIWKHFXVWRPHUV
XOWLPDWHO\ GRQ¶W PDNH WKH SD\PHQWV ,Q VKRUW DFFRXQWV
UHFHLYDEOHDUHYDOXDEOHRQO\LIDFRPSDQ\FROOHFWVWKHP
ż
7KXVZHQHHGWRSD\FORVHDWWHQWLRQWRWKHDFFRXQWVUHFHLYDEOH
EDODQFHFKDQJHVLQWKHEDODQFHVRYHUWKH\HDUVSUHVHQWHGDQG
WKHDOORZDQFHIRUGRXEWIXODFFRXQWVWKHFRPSDQ\KDVUHFRUGHG
as a reserve against those receivables.
7\SLFDOO\WKHODVWFXUUHQWDVVHWOLVWHGRQDEDODQFHVKHHWLV³2WKHU
DVVHWV´7R¿QGRXWZKDWWKHVHRWKHUDVVHWVDUHZHJHQHUDOO\QHHGWR
ORRNDWWKHDFFRPSDQ\LQJIRRWQRWHV
Long-Term Assets
% 7KH FDWHJRU\ ³3URSHUW\ SODQW DQG HTXLSPHQW´ XVXDOO\ PDNHV XS
WKH EXON RI D FRPSDQ\¶V ORQJHUWHUP RU QRQFXUUHQW DVVHWV ,QWHO¶V
EDODQFHRI¿[HGDVVHWVLVPRUHWKDQELOOLRQ
%
7KHSULQFLSDOLVVXHVZLWKUHVSHFWWRDQ\RUJDQL]DWLRQV¶¿[HGDVVHWV
DUH WKUHHIROG )LUVW ZKDW VKRXOG EH FRQVLGHUHG D ¿[HG DVVHW²
VRPHWKLQJWKDWVKRXOGEHUHSRUWHGDVDQDVVHWRQWKHEDODQFHVKHHW
DVRSSRVHGWRMXVWDFFRXQWHGIRUDVDQRUPDODQGUHFXUULQJH[SHQVH"
ż )RUH[DPSOHLI\RXUHSDLUDOHDNLQWKHURRIRIDEXLOGLQJLV
WKDWURXWLQHPDLQWHQDQFHWKDWVKRXOGEHH[SHQVHGLPPHGLDWHO\
RU VKRXOG LW EH FRQVLGHUHG SDUW RI WKH EXLOGLQJ DQG UHFRUGHG
RQ WKH EDODQFH VKHHW DV DQ DVVHW" 2EYLRXVO\ WKHUH LV VRPH
MXGJPHQWLQYROYHGKHUHDERXWZKHWKHUDSDUWLFXODUUHSDLUUHDOO\
DGGVWRWKHXVHIXOOLIHRIDQDVVHWRUQRW
ż
/HFWXUH+RZWR,QWHUSUHWD%DODQFH6KHHW
%
$VHFRQGTXHVWLRQUHODWHGWRDQRUJDQL]DWLRQ¶V¿[HGDVVHWVLV+RZ
DUHWKH\YDOXHGRQWKHEDODQFHVKHHW",VWKHYDOXHEDVHGRQZKDWWKH
FRPSDQ\ SDLG WR SXUFKDVH WKHP WKHLU ZRUWK DV RI WKH GDWH RI WKH
EDODQFHVKHHWRUVRPHWKLQJHOVH"
ż $OO¿[HGDVVHWVDUHDFFRXQWHGIRULQDXQLTXHPDQQHU7KH\DUH
UHFRUGHGRQWKHEDODQFHVKHHWDWWKHLURULJLQDORUKLVWRULFDOFRVW
WKHQGHSUHFLDWHGRYHUWLPH7KLVLVWUXHZKHWKHUWKH¿[HGDVVHW
LVDFWXDOO\VRPHWKLQJWKDWGHSUHFLDWHVVXFKDVPDFKLQHU\DQG
HTXLSPHQWRUWKHFRPSDQ\KHDGTXDUWHUVRURWKHUSLHFHVRIUHDO
HVWDWHWKDWWKHRUJDQL]DWLRQPLJKWRZQZKLFKZRXOGJHQHUDOO\
EHH[SHFWHGWRLQFUHDVHLQYDOXHRYHUWLPH
ż
+RZHYHUWKLVVLPSOHFRQFHSWZDVSDUWRIWKHODUJHVWDFFRXQWLQJ
IUDXGLQKLVWRU\RQHSHUSHWUDWHGE\0&,:RUOG&RPLQZKLFK
WKH FRPSDQ\ LPSURSHUO\ WUHDWHG VRPH ELOOLRQ RI QRUPDO
DQG UHFXUULQJ H[SHQVHV DV ¿[HG DVVHWV RQ LWV EDODQFH VKHHW
7KH UHVXOW ZDV D VLJQL¿FDQW RYHUVWDWHPHQW RI UHSRUWHG SUR¿WV
DQGDVVHWVRQWKHEDODQFHVKHHW7KHFRPSDQ\XOWLPDWHO\¿OHG
IRU EDQNUXSWF\ DQG LWV WRS WZR H[HFXWLYHV ZHQW WR MDLO IRU
DFFRXQWLQJDQGVKDUHKROGHUIUDXG
,Q IDFW VRPH RUJDQL]DWLRQV RZQ D JUHDW GHDO RI UHDO HVWDWH
DQG EHFDXVH RI WKH GHSUHFLDWLRQ UXOHV WKHVH DVVHWV PD\ EH
VLJQL¿FDQWO\XQGHUYDOXHGRQWKHLUEDODQFHVKHHWV
%
7KH ¿QDO FRQVLGHUDWLRQ UHJDUGLQJ ¿[HG DVVHWV LV KRZ PXFK
RQ DYHUDJH WKH RUJDQL]DWLRQ VSHQGV HDFK \HDU RQ ¿[HG DVVHWV
FRPPRQO\FDOOHGFDSLWDOH[SHQGLWXUHV &$3(;V $VZH¶OOVHHLQD
ODWHUOHFWXUH&$3(;HVWLPDWHVDUHLPSRUWDQWWRLQYHVWRUVZKRZDQW
WRYDOXHFRPSDQLHVDQGVWRFNV
%
8QOLNH ¿[HG DVVHWV ZKLFK DUH FOHDUO\ WDQJLEOH LQWDQJLEOH DVVHWV
GR QRW KDYH DQ\ SK\VLFDO FKDUDFWHULVWLFV 7KHVH DVVHWV LQFOXGH
JRRGZLOO EUDQG QDPHV WUDGHPDUNV FRS\ULJKWV DQG SDWHQWV
*HQHUDOO\VSHDNLQJRUJDQL]DWLRQVUHSRUWRQO\WKHLQWDQJLEOHDVVHWV
WKH\KDYHDFTXLUHGIURPDQRWKHU¿UPXVXDOO\DVSDUWRIPHUJHURU
DFTXLVLWLRQDFWLYLW\
/LDELOLWLHV
% &XUUHQW OLDELOLWLHV LQFOXGH DQ\ DPRXQWV WKH RUJDQL]DWLRQ H[SHFWV
WR SD\ ZLWKLQ WKH QH[W PRQWKV 2QH TXLFN WHVW WR DVVHVV DQ
RUJDQL]DWLRQ¶VOLTXLGLW\LVWRFKHFNWKDWWKHEDODQFHRIFXUUHQWDVVHWV
is greater than current liabilities.
%
+RZHYHU LQ RUGHU WR EHWWHU JDXJH DQ RUJDQL]DWLRQ¶V ULVN RI
LQVROYHQF\ ZH DOVR QHHG WR FORVHO\ H[DPLQH ORQJWHUP GHEW WKDW
LVWKHDPRXQWWKHFRPSDQ\KDVERUURZHGWKDWLVGXHWREHUHSDLG
EH\RQGPRQWKV1RWHWKDWZHGRQ¶WNQRZWKHH[DFWPDWXULW\GDWH
IRUORQJWHUPGHEWDQGWKLVFDQPDNHDVLJQL¿FDQWGLIIHUHQFHLQWKH
VRXQGQHVVRIDQRUJDQL]DWLRQ¶V¿QDQFHV
ż )RUH[DPSOHDWWKHHQGRI$PHULFDQ$LUOLQHVKDGDERXW
ELOOLRQRIORQJWHUPGHEWVRPHELOOLRQRIZKLFKZDV
GXH EHIRUH WKH HQG RI ²QRW YHU\ ORQJWHUP 2EYLRXVO\
WKH ¿QDQFLDO FULVLV RI KLW WKH DLUOLQHV KDUG $PHULFDQ
$LUOLQHVFRXOGQRWUHSD\RUUH¿QDQFHDOOLWVGHEWDQG¿OHGIRU
EDQNUXSWF\LQODWH
ż
,WLVLPSHUDWLYHWRUHYLHZWKHIRRWQRWHLQWKH¿QDQFLDOVWDWHPHQWV
WKDWGHDOVZLWKORQJWHUPGHEW7KLVIRRWQRWHZLOOJLYHDFOHDUHU
SLFWXUHDERXWZKHQWKHORQJWHUPGHEWDFWXDOO\FRPHVGXH
%
)LQDOO\ZHVKRXOGQRWHWKDWVRPHGHEWDFRPSDQ\KDVPLJKWQRWEH
OLVWHGRQWKHEDODQFHVKHHWDWDOO7KHPRVWFRPPRQH[DPSOHRIWKLV
RII±EDODQFH VKHHW GHEW LV RSHUDWLQJ OHDVHV &RPSDQLHV WKDW OHDVH
PRVWRIWKHLUVWRUHVGRQ¶WOLVWWKHYDOXHRIWKHVHORQJWHUPOHDVHVRQ
WKHLU EDODQFH VKHHWV DV ORQJWHUP GHEW:H¶OO UHYLVLW WKLV IDFW ODWHU
ZKHQZHGLVFXVVYDOXDWLRQ
Suggested Reading
&ROOLQV-RKQVRQ0LWWHOVWDHGW5HYVLQHDQG6RIIHU)LQDQFLDO5HSRUWLQJDQG
AnalysisFKDSWHU
(DVWRQ0F$QDOO\6RPPHUVDQG=KDQJ)LQDQFLDO6WDWHPHQW$QDO\VLVDQG
ValuationFKDSWHUV
.LHVR:H\JDQGWDQG:DU¿HOG,QWHUPHGLDWH$FFRXQWLQJFKDSWHU
Questions to Consider
/HFWXUH+RZWR,QWHUSUHWD%DODQFH6KHHW
1. 8VLQJWKHEDODQFHVKHHWIURPWKHFRPSDQ\\RXVHOHFWHGDWWKHHQGRIWKH
ODVWOHFWXUHGHWHUPLQHWKHDPRXQWRIWRWDOFXUUHQWDVVHWVRZQHGE\WKH
FRPSDQ\DWWKHHQGRIWKHPRVWUHFHQW¿VFDO\HDU+RZGRHVLWFRPSDUH
WRWKHEDODQFHRIFXUUHQWOLDELOLWLHV":KDWLVWKHGLIIHUHQFH"
2. $JDLQXVLQJWKDWVDPHFRPSDQ\EDODQFHVKHHWZKDWLVWKHWRWDOEDODQFH
RIORQJWHUPGHEWLIDQ\"+RZKDVWKHEDODQFHFKDQJHGIURPRQH\HDU
WR WKH QH[W" )LQDOO\ UHYLHZ WKH ORQJWHUP GHEW IRRWQRWH IROORZLQJ WKH
¿QDQFLDOVWDWHPHQWVDQGGHWHUPLQHZKHQWKHFRPSDQ\¶VORQJWHUPGHEW
LVGXH+RZPXFKLVGXHLQWKHQH[WWKUHH\HDUV"+RZPXFKWKHUHDIWHU"
196
Consolidated Balance Sheet: Intel
December 28, 2013 and December 29, 2012
(In Millions, Except Par Value)
2013
2012
Assets
Current assets:
Cash and cash equivalents
$
Short-term investments
5,674
$
8,478
5,972
3,999
3,582
3,833
…
$FFRXQWVUHFHLYDEOHQHWRIDOORZDQFHIRUGRXEWIXO
accounts of $38 ($38 in 2012)
…
1,649
2,512
Total current assets
Other current assets
32,084
31,358
Property, plant and equipment, net
31,428
27,983
…
*RRGZLOO
,GHQWL¿HGLQWDQJLEOHDVVHWVQHW
Other long-term assets
Total assets
10,513
9,710
5,150
6,235
5,489
$
4,148
92,358
$
281
$
84,351
Liabilities and stockholders’ equity
&XUUHQWOLDELOLWLHV
6KRUWWHUPGHEW
$
$FFRXQWVSD\DEOH
2,969
312
3,023
…
Total current liabilities
13,568
12,898
Long-term debt
13,165
13,136
…
Stockholders’ equity:
…
Retained earnings
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
35,477
32,138
58,256
51,203
92,358
$
84,351
6RXUFHKWWSVZZZVHFJRY$UFKLYHVHGJDUGDWDDNGRFXPHQWKWP
Intel’s consolidated balance sheet combines all of the company’s operations
IURPDURXQGWKHZRUOG
197
Why the Income Statement Matters
Lecture 27
2
Lecture 27: Why the Income Statement Matters
I WKH IRXU EDVLF ¿QDQFLDO VWDWHPHQWV WKH LQFRPH VWDWHPHQW LV WKH
RQH PRVW ZLGHO\ IROORZHG DQG FLWHG E\ WKH PHGLD DQG LQYHVWPHQW
FRPPXQLW\,QIDFWLI\RXIROORZWKHEXVLQHVVQHZVGXULQJFHUWDLQ
WLPHV RI WKH \HDU WKH KHDGOLQHV DUH GRPLQDWHG E\ FRPSDQ\ HDUQLQJV
announcements that often focus on a few key metrics: revenue, gross margin,
QHWSUR¿WVHDUQLQJVSHUGLOXWHGVKDUHDQGLQWHUQDWLRQDOVDOHV(DFKRIWKHVH
PHWULFV LV HLWKHU H[SOLFLWO\ GLVFORVHG RQ RU GHULYHG IURP WKH FRPSDQ\¶V
LQFRPH VWDWHPHQW ,Q WKLV OHFWXUH ZH¶OO ¿QG RXW ZK\ ERWK FRPSDQLHV DQG
¿QDQFLDOPDUNHWVFRQVLGHUWKHVHPHWULFVWREHRISDUDPRXQWLPSRUWDQFH
Measuring Income
% 7KHLQFRPHVWDWHPHQWGHWDLOVDFRPSDQ\¶VUHYHQXHH[SHQVHVDQG
SUR¿WV GXULQJ D SDUWLFXODU SHULRG RI WLPH JHQHUDOO\ D TXDUWHU RU
D \HDU$V ZH KDYH GLVFXVVHG *$$3 UHTXLUHV WKH XVH RI DFFUXDO
accounting in generating income statements. As a result, the
UHFRJQLWLRQ RI ERWK UHYHQXHV DQG H[SHQVHV DQG WKHUHIRUH SUR¿WV
GRHVQRWQHFHVVDULO\RFFXUZKHQFDVKLVHLWKHUUHFHLYHGRUSDLGRXW
5HYHQXHVDUHJHQHUDOO\UHFRJQL]HGDVLQFRPHZKHQWKH\KDYHEHHQ
HDUQHGWKURXJKVXEVWDQWLDOFRPSOHWLRQRIWKHDFWLYLWLHVLQYROYHGLQ
WKHHDUQLQJVSURFHVV
%
3XWLQPRUHVLPSOHWHUPVUHYHQXHVDUHFRQVLGHUHGHDUQHGZKHQWKH
FRPSDQ\KDVHVVHQWLDOO\GRQHZKDWLWSURPLVHGDFXVWRPHULWZRXOG
GRDQGWKHFXVWRPHUKDVSURYLGHGHLWKHUSD\PHQWRUDSURPLVHRI
SD\PHQW²DQDFFRXQWV UHFHLYDEOH²WRWKH FRPSDQ\7KH6(& KDV
DGGHGLWVRZQJXLGDQFHDERXWZKHQLWLVDSSURSULDWHIRUFRPSDQLHV
WRUHFRJQL]HUHYHQXH$FFRUGLQJWRWKH6(&¿UPVPD\UHFRJQL]H
revenue when:
ż (YLGHQFHH[LVWVRIDQDUUDQJHPHQWEHWZHHQEX\HUDQGVHOOHU
ż
198
7KHSURGXFWKDVEHHQGHOLYHUHGRUVHUYLFHUHQGHUHG
ż
7KHVDOHVSULFHKDVEHHQGHWHUPLQHGRULVGHWHUPLQDEOH
ż
7KHVHOOHULVUHDVRQDEO\VXUHLWZLOOFROOHFWWKHVDOHVSULFH
%
,Q SULQFLSOH WKHUH DUH PDQ\ FRPSOH[LWLHV LQYROYHG LQ UHYHQXH
UHFRJQLWLRQ )RU H[DPSOH LQVXUDQFH FRPSDQLHV DQG FRPSDQLHV
LQYROYHG LQ VHOOLQJ VXEVFULSWLRQV RU OLFHQVHV PD\ UHFRJQL]H
UHYHQXH DIWHU FDVK LV UHFHLYHG %XW LQ PDQ\ RWKHU FDVHV UHYHQXH
LVUHFRJQL]HGEHIRUHFDVKLVUHFHLYHGZKHQDFRPSDQ\SURYLGHVD
SURGXFWRUVHUYLFHWRDFXVWRPHULQH[FKDQJHIRUSD\PHQWDWVRPH
later time.
%
6LPLODUO\ H[SHQVHV FDQ EH UHFRJQL]HG LQ GLIIHUHQW ZD\V DQG DW
GLIIHUHQW WLPHV GHSHQGLQJ RQ FLUFXPVWDQFHV *HQHUDOO\ VSHDNLQJ
H[SHQVHVDUH³PDWFKHG´ZLWKWKHLUXQGHUO\LQJUHYHQXHVWRSURYLGH
DVDFFXUDWHDSUR¿WSLFWXUHDVSRVVLEOH)RUH[DPSOHFRVWRIJRRGV
VROG &2*6 VKLSSLQJFRVWVDQGFRPPLVVLRQVVKRXOGEHDOORFDWHG
RUPDWFKHGWRWKHUHYHQXHVWRZKLFKWKH\UHODWH
ż 2WKHUH[SHQVHVFDQEHV\VWHPDWLFDOO\DQGUDWLRQDOO\DOORFDWHG
RYHU WLPH )RU H[DPSOH WKH FRVW RI EXLOGLQJV DQG HTXLSPHQW
LV H[SHQVHG RU GHSUHFLDWHG RYHU WKH HVWLPDWHG SHULRG GXULQJ
ZKLFKWKH\ZLOOEHLQXVH$QGWKHFRVWRISDWHQWVLVDPRUWL]HG
RYHUWKHSHULRGRIWLPHWKHSDWHQWODVWV
ż
%
)LQDOO\ VRPH H[SHQVHV QRW WLHG WR VSHFL¿F UHYHQXHV DUH
LPPHGLDWHO\ UHFRJQL]HG 7KHVH LQFOXGH PRVW DGPLQLVWUDWLYH
FRVWVVDODULHVXWLOLWLHVDQGVHOOLQJPDUNHWLQJDQGDGYHUWLVLQJ
H[SHQVHV2QHRWKHUH[DPSOHLQWKH8QLWHG6WDWHVLVUHVHDUFK
DQG GHYHORSPHQW FRVWV VLPSO\ EHFDXVH WKH IXWXUH EHQH¿W
RI VXFK H[SHQGLWXUHV LV KLJKO\ XQFHUWDLQ DQG WKXV WKH PRUH
FRQVHUYDWLYHWUHDWPHQWLVWRH[SHQVHWKHPLPPHGLDWHO\
7KH LPSRUWDQW SRLQW KHUH LV WKDW UHYHQXH DQG H[SHQVHV FDQ EH
UHFRJQL]HGDWGLIIHUHQWWLPHVGHSHQGLQJRQFLUFXPVWDQFHVDQGWKH\
PD\RUPD\QRWEHFORVHO\WLHGWRWKHDFWXDOUHFHLSWRUSD\PHQWRI
FDVK%XWRXUGLVFXVVLRQVRIDUUHYHDOVVRPHLPSRUWDQWJXLGHOLQHV
199
IRU DFFRXQWDQWV 5HYHQXHV PXVW EH HDUQHG DQG UHDOL]HG H[SHQVHV
PXVWEHPDWFKHGZLWKUHYHQXHVDQGZKHQLQGRXEWEHFRQVHUYDWLYH
LQUHFRJQL]LQJUHYHQXHRULQFRPH
Lecture 27: Why the Income Statement Matters
Organization and Structure of Income Statements
% %URDGO\ VSHDNLQJ LQFRPH VWDWHPHQWV GHWDLO WZR FDWHJRULHV
RI LQFRPH LQFRPH IURP FRQWLQXLQJ RSHUDWLRQV DQG LUUHJXODU
QRQUHFXUULQJ RU H[WUDRUGLQDU\ LQFRPH LWHPV ,QFRPH IURP
FRQWLQXLQJ RSHUDWLRQV LQFOXGHV DOO UHYHQXHV DQG H[SHQVHV DV ZHOO
DVDOOJDLQVDQGORVVHVDULVLQJIURPWKHRQJRLQJRSHUDWLRQVRIWKH
¿UP7KLVFDWHJRU\JHQHUDOO\LQFOXGHVVL[FRPSRQHQWV
ż Revenues
200
ż
&2*6
ż
2SHUDWLQJH[SHQVHV
ż
2WKHULQFRPH
ż
2WKHUH[SHQVHV
ż
,QFRPHWD[HV
%
7KHVWDUWLQJSRLQWIRUDQ\LQFRPHVWDWHPHQWLVUHYHQXHWKDWLVWKH
DPRXQW RI VDOHV JHQHUDWHG GXULQJ WKH ¿QDQFLDO UHSRUWLQJ SHULRG
UHGXFHGE\DQ\VDOHVUHWXUQVRURWKHUGLVFRXQWV
%
1H[WDW\SLFDOLQFRPHVWDWHPHQWSURYLGHVFRVWRIVDOHVRU&2*6
7KUHH LWHPV PDNH XS &2*6 GLUHFW ODERU GLUHFW PDWHULDOV DQG
PDQXIDFWXULQJRYHUKHDG
ż 'LUHFW ODERU LV ODERU XVHG LQ WKH SURFHVV RI PDQXIDFWXULQJ D
FRPSDQ\¶V SURGXFWV RU IRU D VHUYLFH SURYLGHU WKH FRVW RI
SHUVRQQHO GLUHFWO\ LQYROYHG LQ WKH GHOLYHU\ RI VHUYLFHV WR
FXVWRPHUV'LUHFWPDWHULDOVDUHWKHFRVWVRIWKHUDZPDWHULDOV
LQFOXGHG LQ WKH JRRGV VROG 0DQXIDFWXULQJ RYHUKHDG LQFOXGHV
FHUWDLQLQGLUHFWFRVWVWKDWDUHDOORFDWHGWRWKHSURGXFWVVROGVXFK
DV UHQW LQVXUDQFH DQG XWLOLWLHV UHODWHG WR WKH PDQXIDFWXULQJ
SODQWZKHUHDFRPSDQ\¶VSURGXFWVDUHPDGH
ż
6XEWUDFWLQJ&2*6IURPVDOHVSURYLGHVWKH¿UVWLPSRUWDQWDQG
FRPPRQO\FLWHGVXEWRWDOLQLQFRPHVWDWHPHQWVJURVVSUR¿WRU
JURVVPDUJLQ7KHJURVVSUR¿WSHUFHQWDJH JURVVSUR¿WGLYLGHG
E\VDOHV LVDZLGHO\FLWHGPHDVXUHRISUR¿WDELOLW\DQGDOORZV
IRU VLPSOH FRPSDULVRQV EHWZHHQ WZR \HDUV RI RSHUDWLRQV DQG
EHWZHHQGLIIHUHQWFRPSDQLHV
%
)ROORZLQJ JURVV SUR¿W ¿UPV GHGXFW RWKHU FRVWV DQG H[SHQVHV
JHQHUDOO\ NQRZQ DV RSHUDWLQJ H[SHQVHV 7KHVH LQFOXGH DOPRVW DOO
RWKHU FRVWV DQG H[SHQVHV QRW LQFOXGHG LQ &2*6 VXFK DV VHOOLQJ
DQG PDUNHWLQJ FRVWV GHOLYHU\ H[SHQVHV PRVW GHSUHFLDWLRQ DQG
H[SHQGLWXUHV RQ UHVHDUFK DQG GHYHORSPHQW 7KHVH H[SHQVHV
JHQHUDOO\ UDQJH IURP WR RI UHYHQXHV GHSHQGLQJ RQ WKH
SDUWLFXODUFRPSDQ\RURUJDQL]DWLRQ
%
7KH QH[W VXEWRWDO RQ D W\SLFDO LQFRPH VWDWHPHQW LV RSHUDWLQJ
LQFRPH ZKLFK LV WKH UHVXOW RI GHGXFWLQJ WKH RSHUDWLQJ H[SHQVHV
IURPJURVVSUR¿W7KLV¿JXUHLVRIWHQUHIHUUHGWRDVearnings before
interest and tax expense (%,7 DQG PD\ EH FRQVLGHUHG WKH PRVW
VLJQL¿FDQW GLVFORVXUH RQ WKH LQFRPH VWDWHPHQW (%,7 VKRZV WKH
DPRXQWRILQFRPHRUORVVDQRUJDQL]DWLRQDFWXDOO\JHQHUDWHVIURP
LWVQRUPDODQGUHFXUULQJDFWLYLWLHV
%
)ROORZLQJRSHUDWLQJLQFRPHDQLQFRPHVWDWHPHQWXVXDOO\GLVFORVHV
RWKHU QRQRSHUDWLQJ LQFRPH RU H[SHQVHV VXFK DV LQWHUHVW LQFRPH
HDUQHGRQLQYHVWPHQWVRULQWHUHVWH[SHQVHLQFXUUHGRQRXWVWDQGLQJ
GHEW2IWHQ¿UPVDGGWKHLQWHUHVWLQFRPHDQGLQWHUHVWH[SHQVHDQG
UHSRUWWKHQHWUHVXOWDVDVLQJOH¿JXUHRQWKHLQFRPHVWDWHPHQW
%
7KHQH[WLWHPRQWKHLQFRPHVWDWHPHQWLVLQFRPHWD[H[SHQVHRUWKH
SURYLVLRQIRULQFRPHWD[HV
201
Lecture 27: Why the Income Statement Matters
ż
1RWH WKDW WKLV H[SHQVH LV QRW HTXDO WR WKH WD[HV SDLG GXULQJ
WKH \HDU -XVW DV FRPSDQLHV PXVW XVH DFFUXDO DFFRXQWLQJ IRU
DOO RWKHU UHYHQXHV DQG H[SHQVHV LQFRPH WD[HV DUH EDVHG QRW
RQO\RQWKHFXUUHQWDPRXQWVSD\DEOHEXWDOVRRQWKHDQWLFLSDWHG
IXWXUHWD[LPSOLFDWLRQVRIFXUUHQWWUDQVDFWLRQV
ż
1RWH WRR WKDW WKLV LWHP FDSWXUHV DOO RI DQ RUJDQL]DWLRQ¶V
LQFRPHWD[HVIHGHUDOVWDWHORFDODQGLQWHUQDWLRQDO
ż
)LQDOO\ LW LV SRVVLEOH WKDW LQFRPH WD[HV FRXOG EH D SRVLWLYH
¿JXUHWKDWLVDQLQFRPHWD[EHQH¿WDVRSSRVHGWRDQH[SHQVH
%
2QFH WD[HV DUH GHGXFWHG IURP WKH LQFRPH EHIRUH WD[HV WKH UHVXOW
LV QHW LQFRPH$OWKRXJK WKLV ³ERWWRP OLQH´ LV FHUWDLQO\ LPSRUWDQW
LW PLJKW LQFOXGH RQHWLPH LQFRPH RU H[SHQVHV WKDW DUH QRW SDUW
RI UHFXUULQJ RSHUDWLQJ UHVXOWV ZKLFK DUH ZKDW ZH UHDOO\ ZDQW WR
XQGHUVWDQGDQGHYDOXDWH
%
7KH¿QDOGLVFORVXUHRQWKHLQFRPHVWDWHPHQWLVHDUQLQJVSHUVKDUH
ZKLFKLVWKHQHWLQFRPHGLYLGHGE\WKHZHLJKWHGDYHUDJHQXPEHU
RI VKDUHV RI FRPPRQ VWRFN RXWVWDQGLQJ GXULQJ WKH SHULRG$JDLQ
HDUQLQJVSHUVKDUHLVZLGHO\FLWHGDVDVLPSOHEDURPHWHURI¿QDQFLDO
SHUIRUPDQFH XVXDOO\ FRPSDUHG WR RU EHQFKPDUNHG DJDLQVW :DOO
6WUHHWH[SHFWDWLRQV
ż (DUQLQJV SHU VKDUH LV GLYLGHG LQWR WZR FDWHJRULHV EDVLF
DQG GLOXWHG %DVLF HDUQLQJV SHU VKDUH LQFOXGHV WKH VKDUHV RI
FRPPRQ VWRFN WKDW DUH FXUUHQWO\ LVVXHG DQG RXWVWDQGLQJ
'LOXWHG HDUQLQJV SHU VKDUH WULHV WR FDSWXUH WKH HVWLPDWHG
LPSDFW RI DQ\ VWRFN RSWLRQV WKH FRPSDQ\ PD\ KDYH LVVXHG
DVZHOODVWKHLPSDFWRIDQ\VHFXULWLHVWKHFRPSDQ\PD\KDYH
WKDW DUH SRWHQWLDOO\ FRQYHUWLEOH LQWR FRPPRQ VWRFN DW VRPH
SRLQWLQWKHIXWXUH
ż
202
%\GH¿QLWLRQGLOXWHGHDUQLQJVSHUVKDUHPXVWEHOHVVWKDQRU
HTXDO WR EDVLF HDUQLQJV SHU VKDUH 'LOXWHG HDUQLQJV SHU VKDUH
LV WKH FDWHJRU\ PRVW FORVHO\ ZDWFKHG E\ LQYHVWRUV DQG :DOO
Street analysts.
Key Questions
% 7KHUH DUH IRXU NH\ TXHVWLRQV ZH VKRXOG DVN DERXW DQ\ LQFRPH
VWDWHPHQW)LUVWLVWKHFRPSDQ\SUR¿WDEOHRUQRW"
%
6HFRQGZKDWLVWKHFRPSDQ\¶VJURVVSUR¿WRUORVVDQGKRZGRHV
WKHJURVVSUR¿WFRPSDUHWRERWKWKHRSHUDWLQJLQFRPHRUORVVDQG
WKHERWWRPOLQH"
%
7KLUGKRZGRWKHUHVXOWVFRPSDUHWRWKHSULRUSHULRG"
%
)LQDOO\GRWKHUHSRUWHGUHVXOWVVKRZDQ\FRQVLVWHQWDQGSHUVLVWHQW
WUHQGV"%HFDXVHZHXVXDOO\HYDOXDWHKLVWRULFDO¿QDQFLDOUHVXOWVDQG
DFFRXQWLQJGLVFORVXUHVWRSUHGLFWWKHIXWXUHLWLVLPSRUWDQWWRJHWD
VHQVHRIKRZFRQVLVWHQWSDVWUHVXOWVKDYHEHHQ
EBITDA
% From the numbers on the income statement, we are able to calculate
D VLJQL¿FDQW DQG FRPPRQ PHDVXUH NQRZQ DV earnings before
LQWHUHVWWD[HVGHSUHFLDWLRQDQGDPRUWL]DWLRQ (%,7'$ %
:K\GRZHQHHGWRFRPSXWHDQ\PHWULFVEH\RQGWKRVHWKDWDOUHDG\
DSSHDU RQ WKH LQFRPH VWDWHPHQW" 5HPHPEHU WKDW WKH LQFRPH
VWDWHPHQWUHÀHFWVQRWRQO\QRUPDODQGUHFXUULQJRSHUDWLQJH[SHQVHV
EXWDOVRWKHLPSDFWRIDFRPSDQ\¶V¿QDQFLQJFKRLFHV
ż )RU H[DPSOH ZKDW LI \RX ZHUH FRPSDULQJ WZR FRPSDQLHV
WKDW KDG WKH VDPH VDOHV DQG RSHUDWLQJ H[SHQVHV EXW RQH KDG
¿QDQFHG LWV EXVLQHVV HQWLUHO\ ZLWK GHEW DQG WKH RWKHU VROHO\
ZLWKLQYHVWRUHTXLW\"
ż
7KH RQH WKDW ZDV IXQGHG ZLWK GHEW ZRXOG VKRZ VLJQL¿FDQW
LQWHUHVW H[SHQVHV DQG WKXV PXFK ORZHU LQFRPH EHIRUH WD[HV
DQGORZHUQHWLQFRPH6KRXOGWKDWFRPSDQ\EHZRUWKOHVVDVD
ZKROHWKDQWKHFRPSDQ\IXQGHGHQWLUHO\ZLWKVWRFN"
ż
-XVWDVWKHYDOXHRI\RXUKRPHGRHVQRWGHSHQGRQWKHDPRXQW
of your mortgage, the answer here is generally no. This is an
LPSRUWDQW FRQFHSW WKDW ZH ZLOO UHWXUQ WR LQ D IXWXUH OHFWXUH
)RU QRZ ZH VKRXOG VLPSO\ DSSUHFLDWH WKH IDFW WKDW D ¿UP LV
QRW ZRUWK OHVV DV D ZKROH EHFDXVH LW KDV GHFLGHG WR IXQG LWV
EXVLQHVVGLIIHUHQWO\
%
7KHRWKHUUHDVRQ(%,7'$LVZLGHO\XVHGLVWKDWLWLVVXSSRVHGWREH
DSUR[\IRUWKHDFWXDOFDVKÀRZVJHQHUDWHGE\WKH¿UP$VDUHVXOW
RIDFFUXDODFFRXQWLQJZHFDQQRWVLPSO\FRQFOXGHWKDWDFRPSDQ\¶V
UHSRUWHGSUR¿WVWHOOXVPXFKDERXWLWVDFWXDOFDVKÀRZV%\DGGLQJ
EDFNLQWHUHVWLQFRPHWD[HVDQGFHUWDLQQRQFDVKH[SHQVHVVXFKDV
GHSUHFLDWLRQ DQG DPRUWL]DWLRQ (%,7'$ SURYLGHV XV ZLWK D PRUH
UHDVRQDEOHDSSUR[LPDWLRQRIDFRPSDQ\¶VFDVKÀRZV
%
7KH EDVLF ZD\ WR FDOFXODWH (%,7'$ LV DV IROORZV
(%,7'$ 2SHUDWLQJ LQFRPH RU ORVV 'HSUHFLDWLRQ DQG
DPRUWL]DWLRQH[SHQVH'HSUHFLDWLRQDQGDPRUWL]DWLRQH[SHQVHVDUH
VHSDUDWHO\GLVFORVHGLQWKHVWDWHPHQWRIFDVKÀRZVZKLFKZHZLOO
GLVFXVVLQWKHQH[WOHFWXUH
Lecture 27: Why the Income Statement Matters
Suggested Reading
&ROOLQV-RKQVRQ0LWWHOVWDHGW5HYVLQHDQG6RIIHU)LQDQFLDO5HSRUWLQJDQG
AnalysisFKDSWHUV±
(DVWRQ0F$QDOO\6RPPHUVDQG=KDQJ)LQDQFLDO6WDWHPHQW$QDO\VLVDQG
ValuationFKDSWHUV±
.LHVR:H\JDQGWDQG:DU¿HOG,QWHUPHGLDWH$FFRXQWLQJFKDSWHUV
Questions to Consider
1. 8VLQJ WKH DQQXDO UHSRUW DQG )RUP . IRU7LPH:DUQHU &DEOH
KWWSLUWLPHZDUQHUFDEOHFRP¿OHVGRFB¿QDQFLDOV$QQXDO5HSRUWV
WZFDUSGI UHYLHZ WKH GHVFULSWLRQ RI KRZ WKH FRPSDQ\
UHFRJQL]HV UHYHQXHV DQG FRVWV LQ HDFK RI LWV EXVLQHVVHV DQG EXVLQHVV
XQLWV VWDUWLQJ RQ SDJH 'RHV WKH GHVFULSWLRQ PDNH VHQVH DQG
VHHP FRQVLVWHQW ZLWK WKH XQGHUO\LQJ QDWXUH RI WKH SDUWLFXODU EXVLQHVV
DQGRUWUDQVDFWLRQV"
2. 5HYLHZ WKH LQFRPH VWDWHPHQW FRQVROLGDWHG VWDWHPHQW RI
HDUQLQJV IRU %HUNVKLUH +DWKDZD\ KWWSZZZEHUNVKLUHKDWKDZD\
FRPDUDUSGI SDJH +RZ GRHV WKH FRPSDQ\ LGHQWLI\ LWV
WKUHHEXVLQHVVXQLWV":KLFKRQHUHSRUWHGWKHPRVWSUHWD[SUR¿WVLQ"
Income Statement: Apple Inc.
7ZHOYH0RQWKV(QGHG
Net sales
September 28,
2013
September 29,
2012
$
$
107,910
156,508
Cost of sales (1)
106,606
87,846
Gross margin
64,304
68,662
2SHUDWLQJH[SHQVHV
Research and development (1)
4,475
3,381
10,830
10,040
15,305
13,421
48,999
55,241
1,156
522
,QFRPHEHIRUHSURYLVLRQIRULQFRPHWD[HV
50,155
55,763
3URYLVLRQIRULQFRPHWD[HV
13,118
14,030
Selling, general and administrative (1)
7RWDORSHUDWLQJH[SHQVHV
Operating income
2WKHULQFRPH H[SHQVH QHW
Net income
$
37,037
$
41,733
Basic
$
40.03
$
44.64
Diluted
$
39.75
$
44.15
Earnings per share:
6RXUFHKWWSVZZZVHFJRY$UFKLYHVHGJDUGDWDGGNKWP
$QH[FHUSWIURP$SSOH¶VLQFRPHVWDWHPHQWVKRZVWKHW\SLFDOVWUXFWXUHRIWKLV
type of disclosure.
+RZWR$QDO\]HD&DVK)ORZ6WDWHPHQW
Lecture 28
T
/HFWXUH+RZWR$QDO\]HD&DVK)ORZ6WDWHPHQW
KHVWDWHPHQWRIFDVKÀRZVDOORZVXVWRUHFRQFLOHDFFUXDODFFRXQWLQJ
DQGLWVLPSDFWRQUHSRUWHGUHYHQXHVDQGSUR¿WVZLWKDFWXDOFDVKÀRZV
7KLV VWDWHPHQW LV LPSRUWDQW LQ YDOXDWLRQ EHFDXVH WKH YDOXH RI DQ\
DVVHW²VWRFNVERQGVRULQFRPHSURGXFLQJUHDOHVWDWH²LVWKHFXUUHQWYDOXH
RI WKH FDVK ÀRZV WKDW DVVHW LV H[SHFWHG WR JHQHUDWH LQ WKH IXWXUH ,Q RWKHU
ZRUGVWKHYDOXHRIDFRPSDQ\¶VVWRFNWRGD\VKRXOGEHWKHYDOXH²LQWRGD\¶V
GROODUV²RIWKHVKDUHKROGHUOHYHOFDVKÀRZVWKHFRPSDQ\LVH[SHFWHGWRHDUQ
RYHUWLPH1RWLFHWKDWZHUHIHUWRYDOXDWLRQLQWKHFRQWH[WRIFDVKÀRZVQRW
UHYHQXHVRUQHWLQFRPH$OWKRXJKUHYHQXHVDQGSUR¿WVDUHLPSRUWDQWFDVK
really is king in valuation.
'LIIHUHQFHVLQ5HYHQXHV3UR¿WVDQG&DVK)ORZV
% $V \RX UHFDOO RUJDQL]DWLRQV WKDW IROORZ *$$3 W\SLFDOO\ UHFRUG
UHYHQXHV RQ WKH GHOLYHU\ RI WKH SURGXFW RU VHUYLFH WR FXVWRPHUV
$OWKRXJKFROOHFWDELOLW\RIDQ\DPRXQWVRZHGPXVWEHUHDVRQDEO\
FHUWDLQ FXVWRPHUV PD\ RU PD\ QRW XOWLPDWHO\ PDNH JRRG RQ
DPRXQWV WKH\ RZH LI WKH\ GR QRW PDNH SD\PHQW DW WKH WLPH RI
the sale.
206
%
)RU H[DPSOH LPDJLQH WKDW &LVFR WKH ODUJH WHOHFRPPXQLFDWLRQV
DQG QHWZRUNLQJ HTXLSPHQW PDQXIDFWXUHU VHOOV PLOOLRQV RI GROODUV
RI HTXLSPHQW WR D VWDUWXS $V ORQJ DV &LVFR KDV GHOLYHUHG WKH
HTXLSPHQW WR WKH FXVWRPHU DQG WKH FXVWRPHU SURPLVHV WR SD\ IRU
LW &LVFR FDQ UHFRUG WKH UHYHQXHV DQG SUR¿WV UHODWHG WR WKDW VDOH
although the actual cash from the sale will come later. But what if
WKHVWDUWXSJRHVRXWRIEXVLQHVVEHIRUHLWKDVSDLGWKHIXOODPRXQW
LWRZHVWR&LVFR"
%
0RVW FRPSDQLHV UHTXLUH WKDW FXVWRPHUV SD\ WKHLU UHFHLYDEOHV
ZLWKLQ WR GD\V IROORZLQJ D VDOH 3URFWHU *DPEOH WKH
PXOWLQDWLRQDO FRQVXPHU SURGXFWV FRPSDQ\ FROOHFWV UHFHLYDEOHV
IURP LWV FXVWRPHUV²:DOPDUW &RVWFR 7DUJHW DQG VR RQ²
RQ DYHUDJH LQ DERXW D PRQWK 2Q WKH RWKHU H[WUHPH ¿QDQFH
FRPSDQLHVZKLFKPDNHEXVLQHVVRUKRPHORDQVPDNHWDNH\HDUV
to collect their receivables.
%
,QVLPSOHHFRQRPLFWHUPVFRPSDQLHVJHQHUDOO\UHSRUWDQGUHFRUG
UHYHQXHVDQGSUR¿WVEHIRUHWKH\FROOHFWWKHFDVK,IWKHWLPHODJLV
RQO\DIHZPRQWKVWKDWPLJKWQRWEHDSUREOHP%XWZKDWLILWWDNHV
ORQJHURUWKHFXVWRPHUVXOWLPDWHO\GRQ¶WSD\"<RXFDQLPDJLQHKRZ
VXFKFRPSDQLHVDV&LVFRSHUIRUPHGGXULQJWKHGRWFRPEXEEOHLQ
WKH ODWH V RU KRZ KRPHEXLOGHUV DQG EDQNV SHUIRUPHG LQ WKH
PLGV ,QLWLDOO\ WKH\ UHSRUWHG IDQWDVWLF UHYHQXHV SUR¿WV DQG
HDUQLQJV SHU VKDUH EXW XOWLPDWHO\ WKH\ WRRN ODUJH ORVVHV ZKHQ
FXVWRPHUVGLGQRWSD\DVH[SHFWHG
%
,Q *UHHQ 0RXQWDLQ &RIIHH UHSRUWHG WUHPHQGRXV JURZWK LQ
UHYHQXHVDQGSUR¿WVEXWIDUORZHUFDVKÀRZV,W¶VHDV\WRLPDJLQH
KRZ WKLV GLIIHUHQFH RFFXUUHG 7KH FRPSDQ\ VHOOV LWV FRIIHH
PDNHUV WR GHSDUWPHQW VWRUHV DQG RWKHU UHWDLOHUV SURYLGLQJ OLEHUDO
FUHGLW WHUPV WKDW DOORZ WKHVH FXVWRPHUV WR SD\ RII WKH UHFHLYDEOHV
RYHU DQ H[WHQGHG SHULRG RI WLPH $V ORQJ DV *UHHQ 0RXQWDLQ
XOWLPDWHO\ H[SHFWV WR JHW SDLG LW FDQ UHFRUG WKH UHYHQXH DQG WKH
SUR¿WV LPPHGLDWHO\ %XW WKHUH ZRXOG WKHQ EH SRWHQWLDOO\ ODUJH
GLVFUHSDQFLHV EHWZHHQ WKHVH SUR¿WV DQG WKH DFWXDO RSHUDWLQJ FDVK
ÀRZVRIWKHFRPSDQ\DWOHDVWLQWKHVKRUWUXQ
%
,QFRQWUDVWLQ$SSOHUHSRUWHGFDVKÀRZVWKDWZHUHKLJKHUWKDQ
QHWSUR¿WV7KLVGLIIHUHQFHFDQEHDWWULEXWHGWRWZRFRQVLGHUDWLRQV
)LUVW $SSOH W\SLFDOO\ UHFHLYHV FDVK LPPHGLDWHO\ ZKHQ LW VHOOV
LWV SURGXFWV 6HFRQG EHFDXVH $SSOH KDV VR PDQ\ VWRUHV WKH
FRPSDQ\ UHSRUWV D IDLU DPRXQW RI GHSUHFLDWLRQ H[SHQVH ZKLFK
UHGXFHV UHSRUWHG SUR¿WV EXW KDV QR LPSDFW RQ FDVK ÀRZV 7KXV
IRUFRPSDQLHVZLWKKLJKQRQFDVKH[SHQVHVDFWXDORSHUDWLQJFDVK
ÀRZVFDQEHKLJKHUWKDQUHSRUWHGSUR¿WV
%
)RU WKHVH UHDVRQV LQ HYDOXDWLQJ ¿QDQFLDO VWDWHPHQWV ZH ZDQW WR
FRPSDUHUHSRUWHGDFFUXDOEDVHGSUR¿WVDQGFDVKÀRZVORRNLQJIRU
DFORVHUHODWLRQVKLSEHWZHHQWKHWZR
207
/HFWXUH+RZWR$QDO\]HD&DVK)ORZ6WDWHPHQW
Operating Cash Flow
% 2YHUDOOWKHVWDWHPHQWRIFDVKÀRZVOD\VRXWERWKWKHVRXUFHVDQG
WKH XVHV RI FDVK GXULQJ D SDUWLFXODU SHULRG RI WLPH JHQHUDOO\ D
TXDUWHURU\HDUWKHVDPHSHULRGFRYHUHGE\WKHLQFRPHVWDWHPHQW
7KHVWDWHPHQWRIFDVKÀRZVLVGLYLGHGLQWRWKUHHVHFWLRQVRSHUDWLQJ
LQYHVWLQJDQG¿QDQFLQJ7KHWRWDORIWKRVHWKUHHFDVKÀRZV\LHOGV
WKHWRWDOFKDQJHLQFDVKIRUWKHSHULRG
208
%
7KH RSHUDWLQJ VHFWLRQ RI WKH FDVK ÀRZ VWDWHPHQW GLVFORVHV WKH
DFWXDOFDVKHLWKHUJHQHUDWHGRUXVHGE\WKHFRPSDQ\LQWKHQRUPDO
UHFXUULQJDQGURXWLQHFRXUVHRIEXVLQHVV+HUH¿UPVVWDUWZLWKWKH
QHWLQFRPHUHSRUWHGRQWKHLULQFRPHVWDWHPHQWVE\PDNLQJFHUWDLQ
DGGLWLRQVDQGGHGXFWLRQVWRUHFRQFLOHWKHUHSRUWHGLQFRPHWRFDVK
ÀRZVWKH\WKHQGHULYHWKHDFWXDORSHUDWLQJFDVKÀRZV
%
$V D VWDUWLQJ SRLQW ¿UPV DGG EDFN DQ\ QRQFDVK H[SHQVHV WKH\
PD\KDYHUHFRUGHGLQWKHLQFRPHVWDWHPHQWVVXFKDVGHSUHFLDWLRQ
DQG DPRUWL]DWLRQ H[SHQVH RU FRPSHQVDWLRQ H[SHQVH IURP VWRFN
RSWLRQVDOORIZKLFKUHTXLUHQRRXWOD\RIFDVK7KHQWRWKHH[WHQW
WKH\ UHSRUWHG YDULRXV UHYHQXHV DQGRU H[SHQVHV HLWKHU JUHDWHU RU
OHVV WKDQ WKH DFWXDO FDVK UHFHLYHG RU VSHQW WKH\ DGG RU VXEWUDFW
WKRVHGLIIHUHQFHV
%
)RUH[DPSOHLID¿UPVROGPRUHSURGXFWRQFUHGLWWKDQLWFROOHFWHG
LQFDVKZHZRXOGVHHRIFRXUVHDQHWLQFUHDVHLQWKHFRPSDQ\¶V
DFFRXQWVUHFHLYDEOHRQWKHEDODQFHVKHHW2QWKHVWDWHPHQWRIFDVK
ÀRZVWKLVQHWLQFUHDVHLQUHFHLYDEOHVZRXOGEHVXEWUDFWHGIURPQHW
LQFRPHWRFRPSXWHDFWXDORSHUDWLQJFDVKÀRZV
%
7KH RSHUDWLQJ VHFWLRQ RI WKH VWDWHPHQW RI FDVK ÀRZV PD\ EH WKH
PRVW LPSRUWDQW VHFWLRQ RI D TXDUWHUO\ RU DQQXDO UHSRUW EHFDXVH LW
DOORZV XV WR VHH ZKHWKHU D ¿UP LV JHQHUDWLQJ RU EOHHGLQJ FDVK ,W
DOVR VKRZV XV KRZ FORVHO\ FDVK ÀRZV WUDFN QHW LQFRPH $V ZH
ZRXOGH[SHFWPRVWPDWXUHFRPSDQLHVJHQHUDWHSRVLWLYHFDVKÀRZV
IURP RSHUDWLRQV ZKLOH VWDUWXS FRPSDQLHV FHUWDLQ WHFKQRORJ\
FRPSDQLHVDQGVHDVRQDOEXVLQHVVHVPLJKWQRW
%
$V PHQWLRQHG LQ WKH ODVW OHFWXUH (%,7'$ LV D PHWULF WKDW LV
ZLGHO\XVHGLQ¿QDQFHDQGYDOXDWLRQ7KHPRVWFRPPRQPHWKRG
IRUFDOFXODWLQJ(%,7'$LVWRVWDUWZLWKWKHRSHUDWLQJHDUQLQJVRU
ORVV IURP WKH LQFRPH VWDWHPHQW WKHQ DGG EDFN GHSUHFLDWLRQ DQG
DPRUWL]DWLRQ H[SHQVHV ZKLFK DUH GLVFORVHG LQ WKH VWDWHPHQW RI
FDVKÀRZV
‹'LJLWDO9LVLRQ3KRWRGLVF7KLQNVWRFN
Investing Cash Flow
% 7KH LQYHVWLQJ VHFWLRQ RI WKH VWDWHPHQW RI FDVK ÀRZV OD\V RXW WKH
FDVK ÀRZV IURP YDULRXV QRQUHFXUULQJ QRQRSHUDWLQJ DFWLYLWLHV
RI WKH ¿UP 7KHVH PD\ LQFOXGH LQYHVWPHQWV LQ SURSHUW\ SODQW RU
HTXLSPHQW PHUJHUV DQG DFTXLVLWLRQV RU LQYHVWPHQWV LQ VWRFNV
DQG ERQGV ,QYHVWLQJ FDVK ÀRZV DUH XVXDOO\ QHJDWLYH EHFDXVH DOO
RUJDQL]DWLRQV HYHQ WKRVH WKDW DUH ORVLQJ PRQH\ WHQG WR PDNH DW
OHDVWVRPHLQYHVWPHQWVHYHQLIRQO\WRUHSODFHRXWGDWHGFRPSXWHUV
DQGHTXLSPHQW
All companies need to make some investment in capital expenditures, such as
QHZSURSHUW\RUHTXLSPHQWWRUHSODFHREVROHWHPDFKLQHU\DQGWRJURZ
209
/HFWXUH+RZWR$QDO\]HD&DVK)ORZ6WDWHPHQW
210
%
7KHPRVWLPSRUWDQW¿JXUHLQWKLVVHFWLRQLVFDSLWDOH[SHQGLWXUHV²
DGGLWLRQV WR SURSHUW\ SODQW DQG HTXLSPHQW $OO ¿UPV QHHG WR
reinvest at least some amount of cash into the business to maintain
WKHLU FXUUHQW OHYHO RI RSHUDWLRQV DV PDFKLQHU\ ZHDUV RXW DQG
FRPSXWHUVDQGRWKHUHTXLSPHQWEHFRPHREVROHWH7KHQFRPSDQLHV
QHHGWRLQYHVWLIWKH\LQWHQGWRJURZ
%
7KXV WKH GLIIHUHQFH EHWZHHQ RSHUDWLQJ FDVK ÀRZV²WKH FDVK
JHQHUDWHGE\RUXVHGLQQRUPDOEXVLQHVVRSHUDWLRQV²DQGDPRXQWV
H[SHQGHG RQ FDSLWDO H[SHQGLWXUHV LV RIWHQ UHIHUUHG WR DV IUHH FDVK
ÀRZ7KDW¶VWKHOHIWRYHUFDVKWKDW¿UPVFDQVSHQGRQDFTXLVLWLRQV
GLYLGHQGVVWRFNUHSXUFKDVHVUHGXFWLRQVLQGHEWVWRFNVDQGERQGV
DQGVRRQ
%
,Q IDFW IUHH FDVK ÀRZV DUH DUJXDEO\ WKH PRVW LPSRUWDQW OLQN
EHWZHHQ DFFRXQWLQJ DQG ¿QDQFH FHUWDLQO\ ZKHQ LW FRPHV WR WKH
valuation of stocks.
ż :KHQ\RXEX\VKDUHVRIVWRFNLQDFRPSDQ\\RXDUHEDVLFDOO\
SXUFKDVLQJDVKDUHRIWKHIUHHFDVKÀRZVWKDWWKHFRPSDQ\LV
H[SHFWHGWRJHQHUDWHLQWKHIXWXUHDQGWKDW\RXDVDVKDUHKROGHU
own a right to or an interest in.
ż
$V PHQWLRQHG WKH KLVWRULFDO UHVXOWV RI WKH FRPSDQ\ DUH
LPSRUWDQW EXW RQO\ LQDVPXFK DV WKH\ SURYLGH LQIRUPDWLRQ WR
KHOSSUHGLFWRUDQWLFLSDWHWKHIXWXUH7KHUHIRUHLQDFFRXQWLQJ
DQG¿QDQFHWHUPVZHVD\WKDWWKHSULFHRIDQ\VWRFNVKRXOGEH
WKHSUHVHQWYDOXHRIDFRPSDQ\¶VH[SHFWHGIUHHFDVKÀRZVWREH
HDUQHGE\VKDUHKROGHUVRYHUWLPH
ż
)UHH FDVK ÀRZV UHSUHVHQW WKH FDVK WKDW D FRPSDQ\ RU
RUJDQL]DWLRQ LV DEOH WR JHQHUDWH IURP LWV FRUH RSHUDWLRQV OHVV
DQ\H[SHQGLWXUHVLWPXVWPDNHWRPDLQWDLQLWVDVVHWEDVH)UHH
FDVKÀRZLVLPSRUWDQWEHFDXVHLWDOORZVDFRPSDQ\WRSXUVXH
RSSRUWXQLWLHVWKDWHQKDQFHDQGJURZVKDUHKROGHUYDOXH
%
2QHZD\WRFDOFXODWHIUHHFDVKÀRZLVZLWKWKH³H\HEDOOPHWKRG´
KHUH \RX VLPSO\ VWDUW ZLWK WKH FDVK ÀRZV IURP RSHUDWLRQV DQG
VXEWUDFW WKH FDSLWDO H[SHQGLWXUHV 7KH RQO\ VKRUWFRPLQJ RI WKLV
PHWULFLVWKDWLWLQFOXGHVLQWHUHVWH[SHQVHZKLFKLVXVXDOO\LJQRUHG
LQ YDOXDWLRQ ,Q D ODWHU OHFWXUH ZH ZLOO ORRN DW D PRUH SUHFLVH
PHDVXUHRIIUHHFDVKÀRZVWKDWLVIUHHIURPWKHLPSDFWVRIOHYHUDJH
DQGLQWHUHVWH[SHQVH
Financing Cash Flow
% )LQDQFLQJ DFWLYLWLHV LQFOXGH DQ\ FDVK WUDQVDFWLRQV LQYROYLQJ DQ
RUJDQL]DWLRQ¶V GHEW RU ERUURZLQJV DV ZHOO DV LWV HTXLW\ RU VWRFN
7KHVH WUDQVDFWLRQV PD\ LQFOXGH ERUURZLQJ WKDW LV LVVXLQJ ERQGV
RU WDNLQJ RXW D ORDQ IURP D EDQN SD\LQJ EDFN VXFK GHEW LVVXLQJ
RU UHSXUFKDVLQJ VWRFN RU SD\LQJ GLYLGHQGV 1RW VXUSULVLQJO\
WKHVH DFWLYLWLHV DUH GLUHFWO\ WLHG WR RSHUDWLQJ DQG IUHH FDVK ÀRZV
&RPSDQLHVZLWKVLJQL¿FDQWIUHHFDVKÀRZVFDQJHQHUDOO\SD\GRZQ
WKHLUGHEWDQGSD\GLYLGHQGV
%
0RUH WKDQ RI 86 FRPSDQLHV JHQHUDWH SRVLWLYH FDVK ÀRZV
IURPRSHUDWLRQVDQGPRUHWKDQJHQHUDWHQHJDWLYHFDVKÀRZV
IURP LQYHVWLQJ DFWLYLWLHV +RZHYHU ZH FDQQRW JHQHUDOL]H DERXW
FDVK ÀRZV IURP ¿QDQFLQJ DFWLYLWLHV EHFDXVH HYHQ VXFFHVVIXO
FRPSDQLHVZLWKVLJQL¿FDQWIUHHFDVKÀRZVPD\LVVXHVWRFNRUGHEW
WRIXQGJURZWKRUDFTXLVLWLRQVRUWRWDNHDGYDQWDJHRIRSSRUWXQLWLHV
in the market.
Reviewing the Statement of Cash Flows
% ,Q UHYLHZLQJ D FRPSDQ\¶V VWDWHPHQW RI FDVK ÀRZV ¿UVW ZH ZDQW
WR UHYLHZ WKH WRWDO DPRXQW RI RSHUDWLQJ FDVK ÀRZV JHQHUDWHG IRU
WKH\HDUWRORRNIRUQRWLFHDEOHWUHQGVRYHUUHFHQW\HDUV&OHDUO\ZH
ZRXOG OLNH WR VHH SRVLWLYH RSHUDWLQJ FDVK ÀRZV WKDW DUH JURZLQJ
from year to year.
%
6HFRQGZHZDQWWRFRPSDUHWKHUHSRUWHGRSHUDWLQJFDVKÀRZVWR
QHW LQFRPH ,I WKHUH DUH ODUJH GLIIHUHQFHV ZH VKRXOG LQYHVWLJDWH
ZKDW PLJKW EH GULYLQJ WKHP ,V WKH FRPSDQ\ QRW FROOHFWLQJ LWV
211
UHFHLYDEOHV"'RHVWKHFRPSDQ\KDYHVLJQL¿FDQWQRQFDVKLQFRPH"
%HFDXVH WKH RSHUDWLQJ VHFWLRQ RI WKH VWDWHPHQW RI FDVK ÀRZV
UHTXLUHV¿UPVWRUHFRQFLOHQHWLQFRPHWRRSHUDWLQJFDVKÀRZVZH
FDQJHQHUDOO\VHHZKDWLVGULYLQJWKHGLIIHUHQFH
%
)LQDOO\ ZH ZDQW WR VHH ZKDW WKH FRPSDQ\ DFWXDOO\ GLG ZLWK WKH
PRQH\LWPDGH2ULIWKHRSHUDWLQJFDVKÀRZVDUHQHJDWLYHZHZDQW
WRNQRZKRZWKHFRPSDQ\GHDOWZLWKWKDWVKRUWIDOO'LGWKH¿UPVHOO
DVVHWVLVVXHVWRFNERUURZPRQH\RUXVHFDVKUHVHUYHV"
Suggested Reading
&ROOLQV-RKQVRQ0LWWHOVWDHGW5HYVLQHDQG6RIIHU)LQDQFLDO5HSRUWLQJDQG
AnalysisFKDSWHU
(DVWRQ0F$QDOO\6RPPHUVDQG=KDQJ)LQDQFLDO6WDWHPHQW$QDO\VLVDQG
ValuationFKDSWHU
/HFWXUH+RZWR$QDO\]HD&DVK)ORZ6WDWHPHQW
.LHVR:H\JDQGWDQG:DU¿HOG,QWHUPHGLDWH$FFRXQWLQJFKDSWHUV
Questions to Consider
1. ,IDQRUJDQL]DWLRQ¶VFDVKÀRZIURPRSHUDWLRQVLVQHJDWLYHZKDWDUHWKH
SRWHQWLDOVRXUFHVRIFDVKIRUWKHRUJDQL]DWLRQWRUHPDLQLQEXVLQHVV"
2. :KLFK LQGXVWULHV ZRXOG \RX H[SHFW WR KDYH HVSHFLDOO\ VHDVRQDO FDVK
ÀRZV GXULQJ WKH \HDU" ([DPLQH VHYHUDO FDVK ÀRZ VWDWHPHQWV IRU D
FRPSDQ\RUFRPSDQ\LQWKDWLQGXVWU\ZLWKLQDJLYHQ\HDU$UHWKHFDVK
ÀRZVWDWHPHQWVFRQVLVWHQWZLWKZKDW\RXDQWLFLSDWHGVHHLQJ"
212
Common Size, Trend, and Ratio Analysis
Lecture 29
,
QWKLVOHFWXUHZHZLOOJHWDQRYHUYLHZRIWKUHH¿QDQFLDODQDO\VLVWRROV
FRPPRQVL]HDQDO\VLVWUHQGDQDO\VLVDQGUDWLRDQDO\VLV(DFKRIWKHVH
WRROV FDQ EH XVHG WR DQDO\]H D FRPSDQ\¶V KLVWRULFDO SHUIRUPDQFH WR
PDNH FRPSDULVRQV EHWZHHQ ¿UPV DQG WR SUHGLFW IXWXUH UHVXOWV $QG DOO
RI WKHP UHO\ RQ WKH ¿QDQFLDO VWDWHPHQWV ZH¶YH DOUHDG\ GLVFXVVHG WKH
LQFRPHVWDWHPHQWEDODQFHVKHHWDQGVWDWHPHQWRIFDVKÀRZV7RPDNHRXU
GLVFXVVLRQRIWKHWRROVFRQFUHWHZHZLOOXVH3URFWHU *DPEOH 3 * DVRXU
VWDUWLQJSRLQW3 *LVWKHZRUOG¶VODUJHVWFRQVXPHUSURGXFWVFRPSDQ\ZLWK
QHDUO\ELOOLRQLQVDOHVDQGGLIIHUHQWELOOLRQGROODUEUDQGVLQFOXGLQJ
VXFKKRXVHKROGQDPHVDV7LGH&UHVW&KDUPLQDQG%RXQW\
Common Size Analysis
% $TXLFNUHYLHZRI3 *¶VLQFRPHVWDWHPHQWVKRZVUHYHQXHV
RIELOOLRQRSHUDWLQJLQFRPHRIELOOLRQDQGQHWLQFRPH
RIELOOLRQ2EYLRXVO\3 *LVDODUJHDQGSUR¿WDEOH¿UPEXW
KRZVKRXOGZHHYDOXDWHLWV¿QDQFLDOSHUIRUPDQFH",VWKHFRPSDQ\
JURZLQJ",VLWGRLQJEHWWHURUZRUVHWKDQLWVFRPSHWLWRUV":HQHHG
VRPHDQDO\WLFDOWRROVWRKHOSDQVZHUWKHVHTXHVWLRQV
%
7KH ¿UVW WRRO ZH QHHG LV FRPPRQ VL]H DQDO\VLV 7KLV DQDO\VLV
LQYROYHV FRQYHUWLQJ DOO WKH DEVROXWH ¿JXUHV RQ WKH FRPSDQ\¶V
¿QDQFLDO VWDWHPHQWV WR SHUFHQWDJHV %\ GRLQJ WKLV FRQYHUVLRQ ZH
ZLOOEHEHWWHUDEOHWRFRPSDUH3 *¶VSHUIRUPDQFHRYHUWLPHDQGWR
LWVFRPSHWLWLRQ
%
,Q D FRPPRQ VL]H LQFRPH VWDWHPHQW ZH VLPSO\ FRPSDUH DOO OLQH
LWHPVWRVDOHVRUUHYHQXHVVHWWLQJVDOHVRUUHYHQXHVHTXDOWR
DVVKRZQRQWKHIROORZLQJSDJH
Reported
in 2013
Line Item
Converted
to Percentage
Revenues
$ 84.2 B
100.0%
COGS
$ 42.4 B
50.4%*
Operating income (operating margin)
$ 14.5 B
17.2%
Net income (net margin)
$ 11.3 B
13.4%
6XEWUDFWLQJWKH&2*6SHUFHQWDJHIURPWKHUHYHQXHSHUFHQWDJH\LHOGVDJURVVSUR¿WSHUFHQWDJH
RUJURVVPDUJLQ RI
%
7KH PDWK LV QRW WKDW FRPSOLFDWHG EXW WKH UHVXOWV DUH SRZHUIXO
,Q D IHZ TXLFN VWHSV ZH FDQ FRPSXWH3 *¶V JURVV PDUJLQ
RSHUDWLQJ PDUJLQ DQG QHW PDUJLQ :H FDQ WKHQ FRPSDUH WKRVH
¿JXUHV WR SULRU \HDUV DQG WR FRPSHWLWRUV DV VKRZQ EHORZ 7R
WKH H[WHQW WKDW WKH UHVXOWV DUH JUHDWHU RU OHVV WKDQ H[SHFWDWLRQV RU
EXGJHWVSULRU\HDUUHVXOWVRUFRPSHWLWRUV¶¿JXUHVPDQDJHPHQWFDQ
SHUIRUPIXUWKHUDQDO\VHVDQGSHUKDSVPDNHVWUDWHJLFFKDQJHV
Lecture 29: Common Size, Trend, and Ratio Analysis
Line Item
%
P&G 2013
P&G 2012
ColgatePalmolive 2013
Gross margin
49.6%
49.3%
58.6%
Operating margin
17.2%
15.9%
20.4%
Net margin
13.4%
12.9%
12.9%
&RPPRQ VL]H DQDO\VLV DOVR WHOOV XV DERXW D ¿UP¶V operating
leverage7KLVWHUPUHIHUVWRDQHQWLW\¶VFRVWVWUXFWXUHDQGZKHWKHU
it mostly consists of ¿[HG FRVWV²WKRVH WKDW GRQ¶W FKDQJH ZLWK
LQFUHDVHVLQVDOHVYROXPHVXFKDVUHQW²RUYDULDEOHFRVWV²WKRVH
WKDW FKDQJH SURSRUWLRQDWHO\ DV VDOHV YROXPH LQFUHDVHV VXFK DV
sales commissions.
Trend Analysis
% :HFDQJDXJHRSHUDWLQJOHYHUDJHDQGSHUIRUPDQFHRYHUWLPHWKURXJK
WUHQGDQDO\VLV+HUHZH¿UVWFKRRVHDSDUWLFXODUEDVH\HDUDQGVHW
HYHU\¿JXUHLQWKDW\HDU¶V¿QDQFLDOVWDWHPHQWVHTXDOWR7KHQ
ZH ORRN DW VXEVHTXHQW \HDUV FRPSDULQJ HDFK OLQH LQ WKH ¿QDQFLDO
VWDWHPHQWVWRWKHEDVH\HDU DJDLQFRQYHUWLQJWRSHUFHQWDJHV WRVHH
KRZWKH¿QDQFLDOVWDWHPHQWOLQHVDUHWUHQGLQJ
%
,Q 3 * UHSRUWHG UHYHQXHV RI ELOOLRQ ,I ZH VHW WKLV
¿JXUH HTXDO WR ZH FDQ WKHQ FRPSDUH WKH DQG UHYHQXHV WR WKH ¿JXUH DQG JDXJH WKH UHVXOWLQJ WUHQGV )RU
H[DPSOH 3 * UHSRUWHG DQG UHYHQXHV RI DQG
ELOOLRQUHVSHFWLYHO\,IZHGLYLGHWKRVHUHYHQXHVE\WKHEDVH
UHYHQXHRIELOOLRQZHVHHWKDWUHYHQXHVJUHZE\IURP
WR EXW WKH UHFHQW WUHQG LV PXFK ORZHU UHYHQXHV
JUHZRQO\FRPSDUHGWRUHYHQXHVLQ
%
0RUHWURXEOLQJZH¿QGWKDWRSHUDWLQJLQFRPHZDVOHVVWKDQ
RIOHYHOV$OWKRXJKRSHUDWLQJLQFRPHZDVRI
OHYHOVWKHWUHQGZDVVWLOOGRZQRYHUWKHSDVWFRXSOHRI\HDUV
$QG QHW LQFRPH VKRZV VLPLODU WUHQGV 2SHUDWLQJ OHYHUDJH ZDV
WKHUHIRUHQHJDWLYHEHFDXVHLQFUHDVHVLQUHYHQXHVGLGQRWWUDQVODWH
WRKLJKHUSUR¿WV
%
<RX ZRXOG SUREDEO\ QRW EH VXUSULVHG WR OHDUQ WKDW 3 * PDGH
VXEVWDQWLDO FKDQJHV LQ LQFOXGLQJ UHSODFLQJ WKH FRPSDQ\¶V
&(2 6DOHV UHYHQXHV LQFUHDVHG PRGHVWO\ HDFK \HDU EXW WUHQG
DQDO\VLV UHYHDOHG WKDW WKH FRPSDQ\¶V SUR¿WDELOLW\ ZDV ZDQLQJ
because costs were growing faster than sales revenue.
Applying Analyses to Other Financial Statements
% 7KH DSSURDFK WR FRPPRQ VL]H DQG WUHQG DQDO\VLV IRU ERWK WKH
EDODQFHVKHHWDQGWKHVWDWHPHQWRIFDVKÀRZVLVVLPLODUWRWKDWXVHG
ZLWK WKH LQFRPH VWDWHPHQW 7UHQG DQDO\VLV LV VWUDLJKWIRUZDUG :H
VHOHFWWKHEDVH\HDUZKLFKVKRXOGEHWKHVDPH\HDUDVWKDWVHWIRU
WKHLQFRPHVWDWHPHQWWUHQGDQDO\VLVDQGFRPSDUHWKDW\HDUWRODWHU
\HDUVRQWKHEDODQFHVKHHWRUVWDWHPHQWRIFDVKÀRZV
%
)RUFRPPRQVL]HDQDO\VLVZHQHHGWRFKRRVHWKHGHQRPLQDWRURU
WKHSDUWLFXODUOLQHRQWKHEDODQFHVKHHWRUFDVKÀRZVWDWHPHQWWKDW
ZLOOEHVHWHTXDOWR
ż )RUWKHEDODQFHVKHHWFRPPRQVL]HDQDO\VLVZHXVHWRWDODVVHWV
DV WKH GHQRPLQDWRU 7KXV DW WKH HQG RI 3 * UHSRUWHG
WRWDO DVVHWV RI ELOOLRQ :H WKHQ FRPSDUH HYHU\ RWKHU
EDODQFH VKHHW OLQH LWHP WR WKLV ¿JXUH SXWWLQJ WKH UHVXOWV LQ
Lecture 29: Common Size, Trend, and Ratio Analysis
SHUFHQWDJHWHUPV)RUH[DPSOHWRWDOORQJWHUPGHEWIRU3 *
LQ ZDV ELOOLRQ:H GLYLGH WKDW QXPEHU E\ ELOOLRQDQGVHHWKDWORQJWHUPGHEWZDVRIWRWDODVVHWV
ż
7RSHUIRUPDFRPPRQVL]HDQDO\VLVIRUWKHVWDWHPHQWRIFDVK
ÀRZV WKH W\SLFDO DSSURDFK LV WR FRPSDUH HDFK RI WKH OLQH
LWHPVWRWRWDOVDOHVUHYHQXHZKLFKLVGUDZQIURPWKHLQFRPH
VWDWHPHQW:HFDQDOVRJDLQLQWHUHVWLQJLQVLJKWVE\FRPSDULQJ
HDFK RI WKH OLQH LWHPV WR FDVK ÀRZV IURP RSHUDWLRQV )RU
H[DPSOH LQ 3 *¶V QHW LQFRPH IURP WKH VWDWHPHQW RI
FDVKÀRZVZDVELOOLRQQHDUO\RIWKHRSHUDWLQJFDVK
ÀRZRIELOOLRQ%XWLQWKDWVDPH¿JXUHGHFOLQHGWR
OHVVWKDQ:K\"
ż
,W DSSHDUV WKDW 3 * VROG VRPH EXVLQHVVHV UHSRUWLQJ JDLQV
RQ WKH LQFRPH VWDWHPHQW DQG LPSURYLQJ WKH ERWWRP OLQH EXW
QRW LPSURYLQJ RSHUDWLQJ FDVK ÀRZV +RZHYHU 3 *¶V RSHUDWLQJ FDVK ÀRZV ZHUH ELOOLRQ FRPSDUHG WR billion in 2011, an increase of about 12%.
/LTXLGLW\DQG(I¿FLHQF\5DWLRV
% /LNHFRPPRQVL]HDQGWUHQGDQDO\VLVUDWLRDQDO\VLVFDQEHXVHGWR
DQDO\]HPDQ\DVSHFWVRIDFRPSDQ\¶V¿QDQFLDOSHUIRUPDQFH7KHUH
DUH¿YHFDWHJRULHVRIUDWLRVWRFRQVLGHU
ż /LTXLGLW\UDWLRV.
216
ż
3UR¿WDELOLW\UDWLRV.
ż
(I¿FLHQF\ or DFWLYLW\ UDWLRV (turnover ratios ZKLFK PHDVXUH
KRZHI¿FLHQWDQRUJDQL]DWLRQLVLQPDQDJLQJLWVZRUNLQJFDSLWDO
ż
Leverage or VROYHQF\ UDWLRV, measuring the overall riskiness
RI DQ RUJDQL]DWLRQ DQG LWV DELOLW\ WR VHUYLFH LWV ORQJHUWHUP
obligations.
ż
Market ratios, which serve as a link between accounting
GLVFORVXUHVDQGYDOXDWLRQ
%
7KH PRVW FRPPRQ UDWLR WR PHDVXUH RUJDQL]DWLRQDO OLTXLGLW\ LV
WR GLYLGH WKH WRWDO FXUUHQW DVVHWV E\ WKH FXUUHQW OLDELOLWLHV DW DQ\
EDODQFH VKHHW GDWH 7KLV \LHOGV WKH FXUUHQW UDWLR *HQHUDOO\ ZH
ZDQW WR VHH FXUUHQW UDWLRV RI DW OHDVW LQGLFDWLQJ WKDW FXUUHQW
DVVHWVDWOHDVWFRYHUFXUUHQWOLDELOLWLHV(YHQEHWWHUZH¶GOLNHWRVHH
FXUUHQWUDWLRVRILQGLFDWLQJWKDWFXUUHQWDVVHWVDUHDWOHDVWWZLFH
current liabilities.
%
2QHHI¿FLHQF\UDWLRLVWKHDFFRXQWVUHFHLYDEOHWXUQRYHUUDWLR, which
PHDVXUHVKRZTXLFNO\RQDYHUDJHDFRPSDQ\LVDEOHWRFROOHFWLWV
receivables from customers.
ż 7KHIRUPXODIRUWKLVUDWLRLVVDOHVUHYHQXHGLYLGHGE\DYHUDJH
DFFRXQWV UHFHLYDEOH IRU D GH¿QHG SHULRG 7R ¿QG WKH DYHUDJH
DFFRXQWVUHFHLYDEOHDGGWKHEDODQFHRIUHFHLYDEOHV IURPWKH
EDODQFHVKHHW DWWKHVWDUWRIWKHSHULRGWRWKHEDODQFHDWWKHHQG
RIWKHSHULRGDQGGLYLGHWKDWVXPE\
ż
'LYLGLQJUHYHQXHVE\WKDWDYHUDJHEDODQFHUHYHDOVKRZPDQ\
WLPHVRQDYHUDJHWKHFRPSDQ\FROOHFWHGLWVUHFHLYDEOHVGXULQJ
WKHSHULRG:HWKHQGLYLGHWKDWUHVXOWLQWRGD\VWRVHHKRZ
ORQJDW\SLFDOUHFHLYDEOHLVRXWVWDQGLQJEHIRUHLWLVFROOHFWHG
%
The inventory turnover ratio PHDVXUHV KRZ TXLFNO\ D FRPSDQ\
turns over or sells its inventory. The formula is similar to that for
WKHDFFRXQWVUHFHLYDEOHWXUQRYHUUDWLRH[FHSWWKDWLQVWHDGRIVDOHV
UHYHQXHLQWKHQXPHUDWRUZHXVH&2*6DQGGLYLGHE\WKHDYHUDJH
LQYHQWRU\EDODQFHGXULQJWKHSHULRG
%
The DFFRXQWV SD\DEOH WXUQRYHU UDWLR XVHV WKH VDPH DSSURDFK
GLYLGLQJ&2*6E\WKHDYHUDJHDFFRXQWVSD\DEOHEDODQFH
3UR¿WDELOLW\5DWLRV
% :H¶YH DOUHDG\ HQFRXQWHUHG VRPH SUR¿WDELOLW\ UDWLRV²VSHFL¿FDOO\
WKH JURVV RSHUDWLQJ DQG QHW PDUJLQ SHUFHQWDJHV GHULYHG IURP
FRPPRQVL]HDQDO\VLV7KHRWKHUVHWRISUR¿WDELOLW\UDWLRVDUHreturn
on investment 52, PHWULFVLQFOXGLQJreturn on assets 52$ DQG
UHWXUQRQHTXLW\ 52( 217
%
52$LVFDOFXODWHGE\GLYLGLQJDFRPSDQ\¶VHDUQLQJVEHIRUHLQWHUHVW
H[SHQVH GXULQJ D FHUWDLQ SHULRG E\ WKH DYHUDJH WRWDO DVVHWV WKH
FRPSDQ\KDVRXWVWDQGLQJGXULQJWKDWVDPHSHULRG7RFRPSXWHWKH
QXPHUDWRU²HDUQLQJVEHIRUHLQWHUHVW²ZHVWDUWZLWKWKHUHSRUWHGQHW
LQFRPH DGG EDFN WKH LQWHUHVW H[SHQVH LQFXUUHG GXULQJ WKH SHULRG
DGGLQJ EDFN DQ\ WD[HV VDYHG IURP WKH LQWHUHVW H[SHQVH WKHQ
GLYLGHWKDWUHVXOWE\WKHDYHUDJHDVVHWVFRPSXWHGDVWKHEHJLQQLQJ
WRWDODVVHWVDQGWKHHQGLQJDVVHWVGLYLGHGE\
ż 52$ LV HVVHQWLDOO\ D FRPELQDWLRQ RI WZR HOHPHQWV SUR¿W
PDUJLQVDQGDVVHWHI¿FLHQF\
ż
Lecture 29: Common Size, Trend, and Ratio Analysis
%
,I DQ RUJDQL]DWLRQ LV ERWK SUR¿WDEOH DQG PDQDJHV LWV DVVHWV
HI¿FLHQWO\52$LVPD[LPL]HG
52(LVFDOFXODWHGE\GLYLGLQJQHWLQFRPHE\DYHUDJHVKDUHKROGHUV¶
HTXLW\ 52( LV D FRPELQDWLRQ RI WKUHH HOHPHQWV SUR¿W PDUJLQV
DVVHW HI¿FLHQF\ DQG OHYHUDJH²WKH DPRXQW RI ORQJWHUP GHEW DQ
RUJDQL]DWLRQKDV
ż ,WPDNHVVHQVHWKDWDFRPSDQ\FDQLPSURYHLWV52(E\EHLQJ
PRUHSUR¿WDEOHDQGHI¿FLHQWEXWLWPD\QRWEHLQWXLWLYHWKDWLW
FDQLPSURYH52(E\LQFUHDVLQJLWVGHEWDOOHOVHHTXDO
ż
(VVHQWLDOO\WKHFRVWRIGHEWLVFKHDSHUWKDQWKHFRVWRIHTXLW\
7KDWLVWKHUHWXUQWKDWOHQGHUVJHWZKHQZHERUURZLVOHVVWKDQ
WKHUHWXUQZHH[SHFWIURPFDSLWDO
Leverage and Market Ratios
% /HYHUDJH RU VROYHQF\ UDWLRV DUH DGGLWLRQDO PHDVXUHV WR GHWHUPLQH
WKHULVNDVVRFLDWHGZLWKD¿UPDQGZKHWKHULWZLOOEHDEOHWRPHHWLWV
ORQJHUWHUPREOLJDWLRQV/HYHUDJHUDWLRVLQFOXGHWKHUDWLRRID¿UP¶V
ORQJWHUP GHEW WR WRWDO DVVHWV VKDUHKROGHUV¶ HTXLW\ WR WRWDO DVVHWV
DQGRSHUDWLQJLQFRPHWRLQWHUHVWH[SHQVH LQWHUHVWFRYHUDJHUDWLR 218
%
0DUNHWUDWLRVDOORZXVWREULGJHDFFRXQWLQJGLVFORVXUHVDQGPDUNHW
YDOXDWLRQ$FRPPRQH[DPSOHLVWKHSULFHHDUQLQJVUDWLR, which is
FDOFXODWHGE\GLYLGLQJDFRPSDQ\¶VVWRFNSULFHE\LWVHDUQLQJVSHU
VKDUH2WKHUH[DPSOHVLQFOXGHWKHUDWLRRIDFRPSDQ\¶VWRWDOVWRFN
market value to total revenues, known as the SULFHWRVDOHV UDWLR.
:H¶OOUHWXUQWRWKHVHUDWLRVLQDODWHUOHFWXUH
Suggested Reading
$OYDUH]DQG)ULGVRQ)LQDQFLDO6WDWHPHQW$QDO\VLVFKDSWHU
&ROOLQV-RKQVRQ0LWWHOVWDHGW5HYVLQHDQG6RIIHU)LQDQFLDO5HSRUWLQJDQG
AnalysisFKDSWHU
Questions to Consider
1. ,Q WKH ODVW VHYHUDO \HDUV LQWHUHVW UDWHV KDYH GHFOLQHG VLJQL¿FDQWO\
FDXVLQJ¿UPVWRERUURZVLJQL¿FDQWVXPVLQWKHIRUPRIERQGLVVXDQFHV
DQGEDQNORDQV0DQ\WLPHV¿UPVXVHWKHVHIXQGVWRUHSXUFKDVHVKDUHV
RIVWRFN+RZZRXOGWKHVHWUDQVDFWLRQVLQFUHDVHD¿UP¶VOHYHUDJHDQG
UHWXUQRQHTXLW\UDWLRVDQGZK\"
2. :DUHKRXVH FOXEV VXFK DV &RVWFR 6DP¶V &OXE DQG %-¶V :KROHVDOH
&OXE DQG HYHQ FHUWDLQ ODUJH UHWDLOHUV VXFK DV :DOPDUW KDYH FXUUHQW
UDWLRVRIOHVVWKDQ([SODLQKRZWKLVFDQRFFXU
219
&RVW9ROXPH3UR¿W$QDO\VLV
Lecture 30
B
/HFWXUH&RVW9ROXPH3UR¿W$QDO\VLV
UHDNHYHQ DQDO\VLV LV D PDQDJHULDO DFFRXQWLQJ WRRO ZLWK ZLGHVSUHDG
DSSOLFDWLRQ :KHQHYHU D ¿UP LV FRQVLGHULQJ LQWURGXFLQJ D SURGXFW
or offering a new service, managers must ask: How many units of
WKHSURGXFWGRZHQHHGWRVHOORUKRZPDQ\FOLHQWKRXUVGRZHQHHGWRELOO
WREUHDNHYHQ"%UHDNHYHQDQDO\VLVLVPRUHIRUPDOO\NQRZQDVFRVWYROXPH
SUR¿W DQDO\VLV because the goal of any business is not just to break even,
RIFRXUVHEXWWRJHQHUDWHHQRXJKSUR¿WRQWKHFDSLWDOLQYHVWPHQWUHTXLUHG
WR SURGXFH PDUNHW DQG GLVWULEXWH WKH QHZ EUDQG RU RIIHU WKH QHZ VHUYLFH
JLYHQWKHFRVWVLQYROYHG7KHUHIRUHRQFHZHLQWURGXFHWKHEDVLFEUHDNHYHQ
PRGHOZHZLOOFRPSOLFDWHLWVRWKDWLWFDQEHXVHGWRSURYLGHSUR¿WIRUHFDVWV
DVVLVWDQFHLQEXGJHWLQJDQGDQVZHUVWRPDQ\³ZKDWLI´TXHVWLRQV
Types of Costs
% 7KH ¿UVW VWHS LQ FRVWYROXPHSUR¿W DQDO\VLV LV WR UHVWDWH WKH
WUDGLWLRQDO ¿QDQFLDO DFFRXQWLQJ SUR¿W IRUPXOD$V \RX UHFDOO WKLV
IRUPXOD VWDUWV ZLWK VDOHV WKHQ GHGXFWV &2*6 YDULRXV RSHUDWLQJ
H[SHQVHVDQGLQFRPHWD[HVLQRUGHUWRFRPSXWHQHWLQFRPHRUORVV
ż ,Q FRVWYROXPHSUR¿W DQDO\VLV ZH DOVR VWDUW ZLWK UHYHQXHV
EXW LQVWHDG RI OXPSLQJ DOO H[SHQVHV WRJHWKHU DV VHOOLQJ
JHQHUDO RU DGPLQLVWUDWLYH ZH EUHDN GRZQ DOO H[SHQVHV LQWR
WZR FDWHJRULHV ¿[HG RU YDULDEOH 5HPHPEHU WKDW WUDGLWLRQDO
¿QDQFLDO DFFRXQWLQJ LV FRQFHUQHG RQO\ ZLWK ZKHWKHU
DQ H[SHQVH LV RSHUDWLQJ²UHODWHG WR FRUH DQG UHFXUULQJ
RSHUDWLRQV²RU QRW ,Q PDQDJHULDO DFFRXQWLQJ KRZHYHU ZH
ZDQWWRNQRZKRZDSDUWLFXODUFRVWRUH[SHQVHEHKDYHVRYHU
changing levels of activity.
ż
220
)L[HG FRVWV VXFK DV UHQW RU LQVXUDQFH UHPDLQ WKH VDPH
UHJDUGOHVV RI KRZ ZHOO RU SRRUO\ D ¿UP LV GRLQJ ,Q FRQWUDVW
YDULDEOH FRVWV VXFK DV VDOHV FRPPLVVLRQV YDU\ GLUHFWO\ ZLWK
WKHYROXPHRIEXVLQHVVWKH¿UPJHQHUDWHV
%
ż
0L[HG RU VHPLYDULDEOH FRVWV DUH D FRPELQDWLRQ RI WKHVH
WZR 0RVW XWLOLWLHV IRU H[DPSOH KDYH D ¿[HG FRPSRQHQW D
PLQLPXPDPRXQWZHKDYHWRSD\HDFKPRQWKDQGDQDPRXQW
RQWRSRIWKHPLQLPXPEDVHGRQWKHDFWXDOHOHFWULFLW\JDVRU
ZDWHUXVHG,QVXFKFDVHVWKH¿[HGSRUWLRQRIWKHFRVWVFDQEH
VHSDUDWHGIURPWKHYDULDEOHSRUWLRQ
ż
)LQDOO\ LW¶V LPSRUWDQW WR QRWH WKDW DOO FRVWV YDU\ LQ WKH ORQJ
UXQ)RUH[DPSOHLI\RXUEXVLQHVVLVGRLQJZHOODQGH[SDQGLQJ
UDSLGO\ \RX PD\ QHHG WR RSHQ D VHFRQG ORFDWLRQ LQ RUGHU WR
LQFUHDVHFDSDFLW\ZKLFKZRXOGDGGDOD\HURIDGGLWLRQDO¿[HG
FRVWV 7KXV ZH FDQ WKLQN RI FRVWV DV EHLQJ ¿[HG RYHU VRPH
OHYHORIYROXPHRUDFWLYLW\WKHQMXPSLQJXSWRDQRWKHUOHYHORI
¿[HGFRVWVDQGVRRQ
7KHLPSRUWDQWSRLQWKHUHLVWKDWLI\RXZDQWWRPDNHNH\EXVLQHVV
GHFLVLRQV\RXQHHGWRXQGHUVWDQGDQGGLVWLQJXLVKDPRQJWKHW\SHV
RI FRVWV \RXU EXVLQHVV LQFXUV 7UDGLWLRQDO ¿QDQFLDO DFFRXQWLQJ
FDWHJRULHVVXFKDVVHOOLQJJHQHUDODQGDGPLQLVWUDWLYHH[SHQVHVRU
UHVHDUFKDQGGHYHORSPHQWFRVWVDUHVLPSO\LQDGHTXDWHIRUWKLVWDVN
0DQDJHULDO$FFRXQWLQJ3UR¿W)RUPXOD
% 7R UHVWDWH WKH EDVLF SUR¿W IRUPXOD LQ PDQDJHULDO WHUPV ZH VWDUW
ZLWKUHYHQXHVWKHQVXEWUDFWWRWDOYDULDEOHFRVWVIROORZHGE\WRWDO
¿[HGFRVWVWRGHULYHSUR¿WRUORVV
5HYHQXHV í 7RWDO YDULDEOH FRVWV í 7RWDO ¿[HG FRVWV 3UR¿W
or loss
%
7KH QH[W VWHS LV WR EUHDN WKLV IRUPXOD GRZQ LQWR VPDOOHU
FRPSRQHQWVVRWKDWZHFDQFRPSXWHWKHEUHDNHYHQSRLQWDQGUXQ
QXPHURXVZKDWLIVFHQDULRV
ż 5HYHQXHVDUHPDGHXSRIWZRFRPSRQHQWVWKHDYHUDJHVHOOLQJ
SULFH IRU WKH SURGXFWV RU VHUYLFHV PXOWLSOLHG E\ WKH YROXPH
RI SURGXFWV RU VHUYLFHV VROG²EDVLFDOO\ SULFH PXOWLSOLHG
E\TXDQWLW\
221
ż
6LPLODUO\ WKH WRWDO YDULDEOH FRVWV DOVR KDYH WZR FRPSRQHQWV
WKH TXDQWLW\ RI SURGXFW RU VHUYLFHV VROG PXOWLSOLHG E\ WKH
DYHUDJHYDULDEOHFRVWVLQFXUUHGLQHDFKWUDQVDFWLRQ
ż
)L[HGFRVWVDUHDFRQVWDQW
%
:HQRZKDYHDPRUHGHWDLOHGHTXDWLRQ5HYHQXHEURNHQGRZQE\
VDOHV YROXPH DQG DYHUDJH VDOHV SULFHV PLQXV WRWDO YDULDEOH FRVWV
DOVREURNHQGRZQE\DYHUDJHYDULDEOHFRVWVDQGYROXPHPLQXVWKH
¿[HGFRVWVFRQVWDQW1RWHWKDWRQHRIWKHYDULDEOHVLQERWKUHYHQXHV
DQGWRWDOYDULDEOHFRVWVLVVDOHVYROXPH²WKHQXPEHURIXQLWVVROG
%
%HFDXVHRXULQLWLDOREMHFWLYHLVWRVROYHIRUWKHEUHDNHYHQSRLQWZH
ZLOOVHWWKLVHQWLUHHTXDWLRQHTXDOWR]HUR7KHUHIRUHWKHEUHDNHYHQ
formula is:
$YHUDJH VDOHV SULFH SHU XQLW î 1XPEHU RI XQLWV VROG í
$YHUDJH YDULDEOH FRVWV SHU XQLW î 1XPEHU RI XQLWV VROG í
)L[HGFRVWV /HFWXUH&RVW9ROXPH3UR¿W$QDO\VLV
%
:HWKHQVROYHIRUWKHEUHDNHYHQTXDQWLW\DVIROORZV
%UHDNHYHQ TXDQWLW\ 7RWDO ¿[HG FRVWV GXULQJ WKH SHULRG
$YHUDJHVDOHVSULFHSHUXQLWí$YHUDJHYDULDEOHFRVWSHUXQLW
8QLW&RQWULEXWLRQ0DUJLQ
% 7KH GHQRPLQDWRU LQ WKH EUHDNHYHQ IRUPXOD²DYHUDJH VDOHV SULFH
PLQXV DYHUDJH YDULDEOH FRVW²LV NQRZQ DV WKH XQLW FRQWULEXWLRQ
margin&RQWULEXWLRQPDUJLQKHOSVEXVLQHVVRZQHUVDQGPDQDJHUV
QRWRQO\ZLWKEXGJHWLQJDQGIRUHFDVWLQJEXWDOVRLQPDNLQJVDOHV
PDUNHWLQJDQGSULFLQJGHFLVLRQVSURYLGLQJGDWDRQWKHLQFUHPHQWDO
contributions that every sale makes.
ż ,PDJLQH WKDW \RX RZQ D 6XEZD\ VDQGZLFK VKRS DQG \RX¶UH
FRQVLGHULQJ RSHQLQJ D QHZ ORFDWLRQ <RX HVWLPDWH WKDW WKH
WRWDO¿[HGRYHUKHDGHDFKPRQWKFRQVLVWLQJRIUHQWLQVXUDQFH
XWLOLWLHVDQGVRIRUWKLV<RXIXUWKHUDVVXPHWKDWWKH
222
DYHUDJH FXVWRPHU VSHQGV SHU YLVLW DQG WKDW WKH DYHUDJH
YDULDEOHFRVWVIRUWKDWPHDODUHFRQVLVWLQJSULQFLSDOO\RI
IRRGFRVWVDQGUR\DOWLHV
%
ż
,I \RX SOXJ WKHVH DVVXPSWLRQV LQWR WKH EUHDNHYHQ IRUPXOD
\RX JHW GLYLGHG E\ D XQLW FRQWULEXWLRQ PDUJLQ RI
í 'RLQJ WKH PDWK \RX ¿QG WKDW WKH
EUHDNHYHQ QXPEHU RI FXVWRPHUV LV <RX FRXOG WKHQ
DQDO\]H ZKHWKHU \RX H[SHFW HQRXJK WUDI¿F WR JHQHUDWH WKDW
much business each month.
ż
1RWH WKDW LQ WKLV H[DPSOH HDFK FXVWRPHU YLVLW DQG PHDO VROG
FRQWULEXWHV RQ DYHUDJH WR FRYHU WKH ¿[HG FRVWV RI WKH
EXVLQHVV7KHVWDUWLQJSRLQWDQGLQLWLDOREMHFWLYHRIWKHEXVLQHVV
LV WR VHOO HQRXJK VDQGZLFKHV²WR JHQHUDWH HQRXJK FXVWRPHU
YLVLWV²WREUHDNHYHQ$IWHUWKDWWKHREMHFWLYHLVWRJHQHUDWHD
UHWXUQDERYHEUHDNHYHQHQRXJKWRFRPSHQVDWHIRUWKHULVNDQG
FDSLWDOLQYHVWHGLQWKHEXVLQHVV
:KDW RWKHU GHFLVLRQPDNLQJ LPSOLFDWLRQV GRHV WKH FRQWULEXWLRQ
PDUJLQ FRQFHSW KDYH" ,PDJLQH WKDW \RX RZQ D KRWHO DQG RQH
night, you have some available rooms. A traveler walks in, asks
WKH SULFH RI D URRP DQG WKHQ DVNV LI \RX FDQ UHGXFH WKH SULFH
6KRXOG\RXQHJRWLDWH"
ż $VWKHSURSULHWRU\RXNQRZWKHYDULDEOHFRVWVRISURYLGLQJWKH
URRPIRUWKHQLJKW²SULQFLSDOO\KRXVHNHHSLQJOLQHQFOHDQLQJ
XWLOLWLHVDQGWRLOHWULHV,QWKHRU\LI\RXFKDUJHDQ\WKLQJDERYH
WKRVH YDULDEOH FRVWV WKHQ WKH GLIIHUHQFH FRQWULEXWHV WR FRYHU
WKH¿[HGFRVWVRIWKHKRWHOZKLFKWHQGWREHYHU\KLJK$QRWKHU
ZD\RIWKLQNLQJDERXWWKLVTXHVWLRQLVWKDWWKHRSSRUWXQLW\FRVW
RIKDYLQJDKRWHOURRPVLWHPSW\LVVLJQL¿FDQW
ż
7KHUHIRUH WKH FRQFHSW RI FRQWULEXWLRQ PDUJLQ KDV VSHFLDO
VLJQL¿FDQFHWRWKRVHEXVLQHVVHVZLWKKLJKRSHUDWLQJOHYHUDJHV
VXFK DV DLUOLQHV KRWHOV DQG XQLYHUVLWLHV 7KLQN DERXW WKH
FRQWULEXWLRQ PDUJLQ RI HDFK WLFNHW VROG RQ DQ DLUSODQH 7KH
‹5REHUW&KXUFKLOOL6WRFN7KLQNVWRFN
/HFWXUH&RVW9ROXPH3UR¿W$QDO\VLV
5HFHQWEDQNUXSWFLHVLQWKHDLUOLQHLQGXVWU\UHÀHFWWKHHFRQRPLFUHDOLWLHVRIKLJK
¿[HGFRVWEXVLQHVVHVGXULQJWRXJKHFRQRPLFWLPHV
LQFUHPHQWDO RU YDULDEOH FRVWV DVVRFLDWHG ZLWK WKLV DGGLWLRQDO
WUDYHOHU DUH UHODWLYHO\ PLQRU FRPSDUHG WR WKH SULFH RI D
WLFNHW EXW WKH FRQVHTXHQFHV RI VHUYLQJ DQ H[WUD WUDYHOHU DUH
PHDQLQJIXO7KHUHYHQXHJHQHUDWHGFRQWULEXWHVVXEVWDQWLDOO\WR
WKHKLJK¿[HGFRVWVDQGIDOOVULJKWWRWKHERWWRPOLQH
ż
8QIRUWXQDWHO\WKHÀLSVLGHLVDOVRWUXH7KHRSSRUWXQLW\FRVW
RI DQ XQVROG VHDW LV YHU\ KLJK 7KH SUR¿WV RI EXVLQHVVHV
WKDW KDYH KLJK ¿[HG FRVWV WHQG WR EH YRODWLOH DQG F\FOLFDO
PRYLQJXSRUGRZQVKDUSO\DORQJZLWKFKDQJHVLQXQGHUO\LQJ
HFRQRPLFFRQGLWLRQV
%
7KH FRQWULEXWLRQ PDUJLQ FRQFHSW FDQ DOVR KHOS D EXVLQHVV WKDW
SURGXFHV GLIIHUHQW SURGXFWV GHFLGH ZKLFK RQH WR SURPRWH RU
HPSKDVL]HLISURGXFWLRQFDSDFLW\LVFRQVWUDLQHG7KHDQVZHULQWKLV
FDVH ZRXOG EH WKH SURGXFW ZLWK WKH KLJKHVW FRQWULEXWLRQ PDUJLQ
EHFDXVHIRUDQ\OHYHORIFDSDFLW\PD[LPL]LQJFRQWULEXWLRQPDUJLQ
PD[LPL]HV SUR¿WV ,Q RWKHU ZRUGV IRU DQ\ OHYHO RI ¿[HG FRVWV LI
\RXPD[LPL]HWKHGLIIHUHQFHEHWZHHQUHYHQXHVDQGYDULDEOHFRVWV
\RXPD[LPL]HSUR¿W
6ROYLQJIRU7DUJHW3UR¿W
% 2EYLRXVO\ WKH JRDO RI DQ\ EXVLQHVV LV QRW WR EUHDN HYHQ EXW WR
JHQHUDWHDSUR¿WRUVXUSOXV+RZFDQZHXVHWKHEDVLFEUHDNHYHQ
IRUPXODWRVROYHIRUDWDUJHWOHYHORISUR¿W"/HW¶VVD\WKDWDFRPSDQ\
VHWV D SDUWLFXODU WDUJHW SUR¿W SHUKDSV EHFDXVH RI GHPDQGV IURP
VKDUHKROGHUVRZQHUVRU:DOO6WUHHW7KHQWKHEUHDNHYHQTXHVWLRQ
LV UHRULHQWHG +RZ PDQ\ XQLWV GRHV WKH FRPSDQ\ QHHG WR VHOO RU
KRZPDQ\KRXUVGRHVLWQHHGWRELOOWRDFKLHYHWKHWDUJHWSUR¿W"
%
7RDQVZHUWKDWTXHVWLRQZHQHHGWRWZHDNWKHEUHDNHYHQIRUPXOD
:H QHHG WR DGG WKH DIWHUWD[ WDUJHW DPRXQW RI SUR¿W ZH ZLVK WR
JHQHUDWH DIWHU FRQYHUWLQJ LW WR D SUHWD[ ¿JXUH DQG LQVWHDG RI
FRPSXWLQJIRUWKHEUHDNHYHQSRLQWZHFDOFXODWHWKHWDUJHWOHYHORI
YROXPHQHHGHGWRDFKLHYHWKHGHVLUHGUHVXOWV
%
)RU H[DPSOHLI ZH DVVXPH WKDW WKH WDUJHW SUR¿W LV DIWHU
WD[HVDQGWKHWRWDOWD[UDWHLVH[SHFWHGWREHZH¿UVWQHHGWR
FRQYHUWWKHDIWHUWD[SUR¿WWDUJHWWRDSUHWD[¿JXUH7KHQZHVLPSO\
DGGWKLVUHVXOWWRWKH¿[HGFRVWVLQWKHEUHDNHYHQIRUPXOD
ż )RUH[DPSOHLIWKHSURPRWHURID5ROOLQJ6WRQHVFRQFHUWZDQWV
WR JHQHUDWH DQ DIWHUWD[ SUR¿W RI DQG KDV D WD[ UDWH
RIWKHFRQFHUWZLOOQHHGWRJHQHUDWHRISUHWD[
SUR¿WV 7R GHULYH WKLV UHVXOW ZH VLPSO\ GLYLGH WKH DIWHUWD[
SUR¿W WDUJHW RI E\ í WKH WD[ UDWH RU ż
2QFHZHKDYHWKHSUHWD[SUR¿WFRPSXWHGZHVLPSO\DGGLWWR
WKH ¿[HG FRVWV DQG UHFRPSXWH WKH EUHDNHYHQ SRLQW DOWKRXJK
QRZLWLVQRWDEUHDNHYHQSRLQWEXWDWDUJHWYROXPH
ż
Recall the breakeven formula:
%UHDNHYHQTXDQWLW\ 7RWDO¿[HGFRVWVGXULQJWKHSHULRG
$YHUDJH VDOHV SULFH SHU XQLW í $YHUDJH YDULDEOH FRVW
SHUXQLW
7KH RULJLQDO ¿[HG FRVWV RI WKH FRQFHUW ZHUH PLOOLRQ WR
WKDWZHDGGWRJHWDQXPHUDWRURI,IZH
DVVXPHDQDYHUDJHWLFNHWSULFHRIDQGVXEWUDFWWKHDYHUDJH
YDULDEOHFRVWVSHUWLFNHWRIZHJHWDGHQRPLQDWRURUXQLW
FRQWULEXWLRQPDUJLQ RI 1H[W ZH GLYLGH E\
ZKLFKWHOOVXVWKDWWKHQXPEHURIWLFNHWVZHQHHGWRVHOO
WRJHQHUDWHWKHWDUJHWSUR¿WLV
/HFWXUH&RVW9ROXPH3UR¿W$QDO\VLV
%
8SWRWKLVSRLQWZHKDYHFRPSXWHGWKHRYHUDOOYROXPHQHHGHGWR
HLWKHUEUHDNHYHQRUJHQHUDWHDWDUJHWSUHWD[SUR¿WEXWZHKDYHQRW
FRQVLGHUHGKRZWKLVWUDQVODWHVLQWRVDOHVRILQGLYLGXDOSURGXFWVRU
VHUYLFHVIRU¿UPVWKDWVHOOPRUHWKDQRQHWKLQJ
ż )RUH[DPSOHLQRXU5ROOLQJ6WRQHVH[DPSOHZHFRPSXWHGWKH
target ticket sales at about 8,200 fans, but we know that concert
YHQXHV KDYH GLIIHUHQW W\SHV RI VHDWV IRU ZKLFK WKH\ FKDUJH
GLIIHUHQWSULFHV
ż
7KXV LW¶V LPSRUWDQW WR NHHS LQ PLQG WKDW ZKHQ ZH DUH
FRPSXWLQJ WKH EUHDNHYHQ SRLQW RU WKH WDUJHW YROXPH ZH DUH
WDNLQJDZHLJKWHGDYHUDJHFRQWULEXWLRQPDUJLQ
Suggested Reading
&DIIHUN\DQG:HQWZRUWKBreakeven Analysis.
(OGHQEXUJDQG:ROFRWWCost ManagementFKDSWHU
226
Questions to Consider
1. &RQVLGHU WZR LQGXVWULHV ZLWK KLJK RSHUDWLQJ OHYHUDJH FKDUDFWHUL]HG
E\ HVSHFLDOO\ KLJK ¿[HG FRVWV +RZ GR \RX H[SHFW WKHVH LQGXVWULHV WR
SHUIRUPGXULQJHFRQRPLFUHFHVVLRQV":K\"
2. ,QWKHODVWIHZ\HDUVDLUOLQHVKDYHEHJXQWRFKDUJHFRDFKSDVVHQJHUVIRU
MXVW DERXW HYHU\WKLQJ LQFOXGLQJ FKHFNHG EDJV IRRG DQG KHDGSKRQHV
+RZ GRHV WKLV SROLF\ DIIHFW WKH DLUOLQHV¶ FRQWULEXWLRQ PDUJLQ DQG
EUHDNHYHQSRLQWVUHVSHFWLYHO\"
227
Understanding the Time Value of Money
Lecture 31
2
Lecture 31: Understanding the Time Value of Money
YHUWKHSDVWVL[OHFWXUHVZH¶YHH[SORUHGVHYHUDOHVVHQWLDOWRSLFVLQ
WKH¿HOGRIDFFRXQWLQJ:LWKWKDWIRXQGDWLRQODLGZH¶OOQRZPRYH
LQWR WKH ¿QDQFH OHFWXUHV VWDUWLQJ ZLWK SHUKDSV WKH PRVW LPSRUWDQW
FRQFHSW LQ ¿QDQFH WKH WLPH YDOXH RI PRQH\ 7KLV FRQFHSW KDV EURDG
DSSOLFDWLRQVDFURVVDQDUUD\RI¿QDQFLDOGHFLVLRQVVXFKDVZKDWLQYHVWPHQWV
ZHVKRXOGFRQVLGHUKRZPXFKDVWRFNERQGRUSLHFHRIUHDOHVWDWHPLJKW
EH ZRUWK ZKHQ ZH VKRXOG UHWLUH RU ZKHWKHU D PXQLFLSDOLW\ VKRXOG RIIHU
WD[ LQFHQWLYHV WR EXVLQHVVHV WR UHORFDWH ,Q IDFW QRW D VLQJOH ¿QDQFLDO RU
LQYHVWPHQWGHFLVLRQGRHVQRWLQYROYHWKHEDVLFLGHDVEHKLQGWKHWLPHYDOXHRI
PRQH\SULQFLSOHVZHZLOOGLVFXVVLQWKLVOHFWXUH
A Dollar Today versus a Dollar Tomorrow
% 0RVWRIXVKDYHDQLQWXLWLYHVHQVHWKDWDGROODULQRXUSRFNHWVWRGD\
LVZRUWKPRUHWKDQWKDWVDPHGROODUWRPRUURZ7KHSULPDU\UHDVRQ
WKLVLVWUXHLVWKDWZHDUHDEOHWRLQYHVWPRQH\ZHKDYHWRGD\DQGHDUQ
VRPHUHWXUQRQLW$QGZHDOOSUHIHUFXUUHQWFRQVXPSWLRQRYHUIXWXUH
FRQVXPSWLRQDOOHOVHHTXDOWKXVZHPXVWEHFRPSHQVDWHGLQVRPH
ZD\WRJLYHXSFXUUHQWFRQVXPSWLRQIRUVRPHWKLQJLQWKHIXWXUH
228
%
7KH RWKHU ZD\ WR WKLQN DERXW WKLV EDVLF FRQFHSW LV UHODWHG WR
LQÀDWLRQ SULFH LQFUHDVHV PHDQ WKDW ZH FDQ SXUFKDVH OHVV LQ WKH
IXWXUHZLWKWKHVDPHPRQH\ZHKDYHWRGD\$JDLQPRVWRIXVFDQ
LQWXLWLYHO\XQGHUVWDQGWKDWLQWKHHYHQWRIKLJKHULQÀDWLRQWKHYDOXH
RIPRQH\LQRXUSRFNHWVGHFUHDVHV
%
:HDOVRKDYHWRFRQVLGHUULVN)XWXUHFDVKÀRZVLQYROYHWKHULVNWKDW
IRUVRPHUHDVRQRUDQRWKHUZHPLJKWQRWJHWWKHFDVKZHH[SHFW
%
)RUDOOWKHVHUHDVRQVWLPHPRVWGH¿QLWHO\LVPRQH\EXWWKHTXHVWLRQ
LV+RZPXFK"+RZPXFKPRUHLV\RXUPRQH\ZRUWKWRGD\YHUVXV
WRPRUURZ RU QH[W \HDU RU \HDUV IURP QRZ" 7R DQVZHU WKDW
TXHVWLRQZHQHHGWRLQWURGXFHWZRUHODWHGWHUPVGLVFRXQWLQJDQG
GLVFRXQWUDWH'LVFRXQWLQJLVWKHSURFHVVE\ZKLFKIXWXUHFDVKÀRZV
DUHDGMXVWHGWRVRPHHTXLYDOHQWDPRXQWWRGD\7KHGLVFRXQWUDWHLV
WKHLQWHUHVWUDWHXVHGWRFDSWXUHLQÀDWLRQULVNDQGRXUSUHIHUHQFH
IRUFXUUHQWFRQVXPSWLRQRYHUIXWXUHFRQVXPSWLRQ
Compounding
% /HW¶V VWDUW ZLWK D UHODWLYHO\ VLPSOH H[DPSOH WR KLJKOLJKW VRPH
PHFKDQLFVRIWKHWLPHYDOXHRIPRQH\$VVXPH\RXLQYHVWWRGD\
DQGHDUQHDFK\HDURQWKDWLQYHVWPHQWDIWHUWD[HV%\WKHHQGRI
WKH¿UVW\HDU\RX¶OOKDYH$WWKHHQGRIWKHVHFRQG\HDU\RX¶OO
KDYHDQGDWWKHHQGRIWKHWKLUG\HDU\RX¶OOKDYH
%
7KLV H[DPSOH UHSUHVHQWV WKH UHODWLYHO\ VLPSO\ EXW SRZHUIXO
FRQFHSW RI FRPSRXQGLQJ WKH LGHD WKDW \RX HDUQ UHWXUQV QRW MXVW
on your original investment but on any return that investment has
SUHYLRXVO\JHQHUDWHG,WPD\QRWVHHPOLNHPXFKEXWRYHUDORQJHU
WHUPLQYHVWPHQWKRUL]RQWKHDGGLWLRQDOPRQH\FDQDGGXS
%
:LWKRXWTXHVWLRQFRPSRXQGLQJLVDFULWLFDOFRPSRQHQWRIWKHWLPH
YDOXHRIPRQH\EXWLWDOVRKDVDÀLSVLGH/HW¶VVD\\RXSODQWRNHHS
XQGHU \RXU PDWWUHVV /HW¶V DOVR DVVXPH WKDW LQÀDWLRQ LV D
\HDU,QWKLVVFHQDULR\RXORVHVLJQL¿FDQWSXUFKDVLQJSRZHUDIWHUWZR
\HDUVEHFDXVH\RXUFDQQRWEX\WKHVDPHDPRXQWRIJURFHULHV
RUJDVWKDWLWFRXOGSUHYLRXVO\,QDGGLWLRQ\RXUORVVRISXUFKDVLQJ
SRZHUFRPSRXQGVRYHUWLPH(DFK\HDU\RXFDQDIIRUGOHVV
%
$WWKLVSRLQWOHW¶VLQWURGXFHWZRPRUHLPSRUWDQWWHUPVLQ¿QDQFH
present value DQG future value 3UHVHQW YDOXH UHSUHVHQWV WKH YDOXH
RIDIXWXUHFDVKÀRZZHH[SHFWWRUHFHLYHLQWRGD\¶VGROODUV7KDW
LVLI\RXH[SHFWWRUHFHLYHLQWKUHH\HDUVKRZPXFKLVWKDW
ZRUWKWRGD\")XWXUHYDOXHLVHVVHQWLDOO\WKHRSSRVLWHLWUHSUHVHQWV
WKHYDOXHLQWKHIXWXUHRIVRPHDPRXQWLQYHVWHGWRGD\
%
,QRXUSUHYLRXVH[DPSOHZHZRXOGVD\WKDWWKHIXWXUHYDOXHRI
LQYHVWHG IRU WZR \HDUV DW FRPSRXQGHG DQQXDOO\ LV &RQYHUVHO\ ZH ZRXOG VD\ WKDW WKH SUHVHQW YDOXH RI UHFHLYHGLQWZR\HDUVDWDGLVFRXQWUDWHRILV
229
Lecture 31: Understanding the Time Value of Money
Single Cash Flows
% 7KHUH DUH ¿YH W\SHV RI FDVK ÀRZV ZH QHHG WR GLVFXVV WR OLQN WKH
WLPHYDOXHRIPRQH\FRQFHSWWRUHDOZRUOG¿QDQFHDQGLQYHVWPHQW
H[DPSOHV VLQJOH FDVK ÀRZV RU OXPS VXPV DQQXLWLHV JURZLQJ
DQQXLWLHV SHUSHWXLWLHV DQG JURZLQJ SHUSHWXLWLHV :H¶OO VWDUW ZLWK
VLQJOHFDVKÀRZV
%
$VLQJOHFDVKÀRZUHSUHVHQWVDVSHFL¿FDQG¿[HGDPRXQWRIFDVK
WKDW ZLOO EH UHFHLYHG RU SDLG LQ WKH IXWXUH SHUKDSV D OXPS VXP
SD\PHQWIURPDUHWLUHPHQWSODQRUWKHFDVKH[SHFWHGIURPWKHIXWXUH
VDOHRIDKRPH:HFDQGLVFRXQWWKRVHH[SHFWHGIXWXUHFDVKÀRZVWR
WKHSUHVHQWXVLQJDGLVFRXQWUDWHWKDWUHÀHFWVWKHXQFHUWDLQW\RIWKH
FDVKÀRZ
%
7KH SUHVHQW YDOXH RI D VLQJOH IXWXUH FDVK ÀRZ LV FDOFXODWHG DV
follows:
7KHOXPSVXPRIFDVKDWVRPHVSHFL¿FWLPHLQWKHIXWXUHLVGHQRWHG
by CFWKHGLVFRXQWUDWHLVGHQRWHGE\iDQGWKHQXPEHURI\HDUV
LQ WKH IXWXUH ZKHQ WKH OXPS VXP LV H[SHFWHG WR EH UHFHLYHG LV
GHQRWHGE\t.
%
6XSSRVH \RX H[SHFW WR UHFHLYH IURP WKH VDOH RI \RXU
KRXVHLQ\HDUVDQGDVVXPHWKDWWKHGLVFRXQWUDWHLV,IZH
SOXJWKHQXPEHUVLQWRWKHIRUPXODZHJHW
7KDW LV UHFHLYLQJ LQ \HDUV DW D GLVFRXQW UDWH RI LV WKH VDPH WKLQJ DV UHFHLYLQJ WRGD\ ,Q RWKHU ZRUGV
LVWKHSUHVHQWYDOXHRIWKDWIXWXUHFDVKÀRZ
%
1RWHWKDWWKHIXUWKHURXWtLV²WKHORQJHU\RXKDYHWRZDLWWRUHFHLYH
WKHFDVK²WKHOHVVYDOXDEOHWKHSD\PHQWLVLQSUHVHQWYDOXHWHUPV
$OVRQRWLFHWKDWDVWKHGLVFRXQWUDWHLQFUHDVHVWKHSUHVHQWYDOXHRI
IXWXUHFDVKÀRZVGHFUHDVHV7KDWPDNHVVHQVHEHFDXVHLILQÀDWLRQLV
KLJKHUWKHYDOXHRI\RXUPRQH\GHFUHDVHV
ż %XWWKHGLVFRXQWUDWHPXVWDOVRFDSWXUHWKHULVNLQHVVRIIXWXUH
FDVK ÀRZV ,Q RWKHU ZRUGV KLJKHUULVN LQYHVWPHQWV ZLWK
PRUH XQFHUWDLQ FDVK ÀRZV PXVW EH GLVFRXQWHG DW D KLJKHU
UDWH7KDW PHDQV ZH VKRXOG EH ZLOOLQJ WR SD\ OHVV IRU WKRVH
LQYHVWPHQWVWRGD\
ż
)RU H[DPSOH D SD\PHQW WR EH UHFHLYHG LQ \HDUV
LVDERXWDWDGLVFRXQWUDWHDQGOHVVWKDQ
DW D GLVFRXQW UDWH $V WKH GLVFRXQW UDWH LQFUHDVHV DQG
HYHU\WKLQJHOVHVWD\VWKHVDPHWKHSUHVHQWYDOXHRIWKHPRQH\
GURSVFRQVLGHUDEO\
Annuities
% $QDQQXLW\LVDFRQVWDQWFDVKÀRZWKDWRFFXUVDWUHJXODULQWHUYDOV
GXULQJD¿[HGSHULRGRIWLPH)RUH[DPSOHSD\RXWVIURPUHWLUHPHQW
SODQVRULQVXUDQFHSROLFLHVDUHURXWLQHO\VWUXFWXUHGDVDQQXLWLHV
%
7KHSUHVHQWYDOXHRIDQDQQXLW\FDQEHFDOFXODWHGE\WDNLQJHDFK
LQGLYLGXDO IXWXUH FDVK ÀRZ GLVFRXQWLQJ LW EDFN WR WKH SUHVHQW
WKURXJKWKHSUHVHQWYDOXHIRUPXODWKHQDGGLQJXSDOOWKHLQGLYLGXDO
SUHVHQW YDOXHV$QRWKHU PHWKRG LV WR PXOWLSO\ WKH DPRXQW RI WKH
DQQXLW\SD\PHQWRUUHFHLSWE\DIRUPXODWKDWFDSWXUHVWKHVXPRI
DOO WKH LQGLYLGXDO SUHVHQW YDOXHV 7KLV DQQXLW\ IDFWRU formula is
shown below:
3UHVHQWYDOXHRIDQQXLW\ Amount of annuity ×
%
7KLV IRUPXOD FDQ EH XVHG LQ VHYHUDO UHDOZRUOG DSSOLFDWLRQV )RU
H[DPSOH OHW¶V FRPSXWH WKH PRQWKO\ PRUWJDJH SD\PHQW RQ D \HDUORDQRIZLWKDQLQWHUHVWUDWHRI
ż 7KH SUHVHQW YDOXH RI WKH PRUWJDJH LV WKH DPRXQW \RX SODQ WR
ERUURZ 7KH PRQWKO\ LQWHUHVW UDWH LV GLYLGHG
E\RUDQGWKHWRWDOQXPEHURISD\PHQWVLV
ż
%
,IZHVXEVWLWXWHWKHYDULDEOHVLQWRWKHDQQXLW\HTXDWLRQZH¿QG
WKDWWKHPRQWKO\SD\PHQWZLOOEHDOLWWOHPRUHWKDQ
:HFDQDOVRPRGLI\WKHDQQXLW\SUHVHQWYDOXHIRUPXODIDLUO\HDVLO\
WRFRPSXWHWKHIXWXUHYDOXHRIDQDQQXLW\7KLVIRUPXODLVXVHIXOIRU
HVWLPDWLQJKRZPXFKPRQH\\RX¶OOKDYHDWUHWLUHPHQWLI\RXVDYH
consistently over time. The formula is:
)XWXUHYDOXHRIDQQXLW\ $PRXQWRIDQQXLW\î
Lecture 31: Understanding the Time Value of Money
Growing Annuities
%
$ JURZLQJ DQQXLW\ LV DQ LQYHVWPHQW WKDW SURYLGHV JURZLQJ FDVK
ÀRZVRUUHWXUQVRYHUWLPHUDWKHUWKDQUHWXUQVWKDWUHPDLQFRQVWDQW
%
,PDJLQH D KRVSLWDO FRQVLGHULQJ DQ LQYHVWPHQW LQ D QHZ DQG
H[SHQVLYH VXUJLFDO URERW 7KLV HTXLSPHQW UHTXLUHV DQ XSIURQW
LQYHVWPHQWRIVRPHWRPLOOLRQWKXVDQ\KRVSLWDOSXUFKDVLQJ
RQH ZRXOG H[SHFW LWV LQYHVWPHQW WR JHQHUDWH VLJQL¿FDQW DQG
SUHVXPDEO\ LQFUHDVLQJ FDVK ÀRZV RYHU WKH URERW¶V H[SHFWHG
useful life.
%
/HW¶VDVVXPHWKDWRQHVXUJLFDOURERWFRXOGSHUIRUPSURFHGXUHV
HDFK\HDUJHQHUDWLQJLQH[SHFWHGSUR¿WVLQLWV¿UVW\HDURI
XVH/HW¶VIXUWKHUDVVXPHWKDWWKLVSUR¿WLVH[SHFWHGWRJURZE\
HDFK\HDUEHFDXVHWKHSULFHVFKDUJHGIRUYDULRXVVXUJLFDOSURFHGXUHV
LQHYLWDEO\LQFUHDVHDQGPRUHGRFWRUVXVHWKHP)LQDOO\DVVXPHWKDW
WKHURERWZLOOODVW¿YH\HDUVEHIRUHLWPXVWEHUHSODFHG
%
8QGHUWKHVHDVVXPSWLRQVZKDWLVWKHSUHVHQWYDOXHRIWKLVJURZLQJ
DQQXLW\"7KHJURZLQJDQQXLW\IDFWRU formula is shown below:
3UHVHQWYDOXHRIDJURZLQJDQQXLW\ >$QQXLW\î g @î
7KH IRUPXOD ORRNV IDLUO\ FRPSOH[ EXW LW KDV MXVW IRXU
YDULDEOHV WKHDPRXQWRIWKHLQLWLDODQQXLW\KHUH
WKH H[SHFWHG JURZWK UDWH LQ WKH DQQXLW\ g KHUH WKHDPRXQWRIWLPHWKHDQQXLW\ZLOOODVWtKHUH\HDUVDQG
WKHGLVFRXQWUDWHiDVVXPHGKHUHWREH,IZHSOXJLQ
the numbers, we get:
3UHVHQWYDOXHRIDJURZLQJDQQXLW\ (1+ .05)5 >î @î 1
(1+ .1)5 (0.10.05)
%
*LYHQRXUDVVXPSWLRQVWKHSUHVHQWYDOXHRIWKLVJURZLQJDQQXLW\
LV 1RWH WKDW DV ORQJ DV WKH URERW FRVWV OHVV WKDQ WKH
SUHVHQWYDOXHRIWKHH[SHFWHGIXWXUHFDVKÀRZVWKHKRVSLWDOVKRXOG
make the investment.
Perpetuities and Growing Perpetuities
% $ SHUSHWXLW\ LV DQ DQQXLW\ RI D FRQVWDQW FDVK ÀRZ²LQÀRZ RU
RXWÀRZ²WKDW ODVWV IRUHYHU 2QH H[DPSOH LV D W\SH RI ERQG ¿UVW
LVVXHG E\ WKH %ULWLVK JRYHUQPHQW LQ WKH th century known as a
FRQVROERQG%\GH¿QLWLRQWKHVHERQGVQHYHUPDWXUHVLQFH
WKH\ KDYH \LHOGHG RQO\ EXW WKH\ ZLOO SD\ LQWHUHVW WR WKHLU
owners forever.
ż
7KHSUHVHQWYDOXHRIDSHUSHWXLW\LVDUHODWLYHO\VLPSOHIRUPXOD
ż
%
3UHVHQWYDOXHRISHUSHWXLW\ Amount of constant annuity
i
)RU D FRQVRO ERQG ZLWK D IDFH YDOXH RI SD\LQJ LQWHUHVW RQFH D \HDU DQG D GLVFRXQW UDWH RI WKH SUHVHQW
YDOXHZRXOGEH
$ JURZLQJ SHUSHWXLW\ LV D FDVK ÀRZ WKDW LV H[SHFWHG WR JURZ DW D
FRQVWDQWUDWHIRUHYHU,WLVRIWHQXVHGWRKHOSYDOXHVWRFNVIRUFHUWDLQ
FRPSDQLHVVXFKDV,%0RU'LVQH\WKDWDUHOLNHO\WREHLQEXVLQHVV
LQGH¿QLWHO\DQGVKRXOGJURZDWDIDLUO\FRQVWDQWUDWHRYHUWLPH
ż 7KH SUHVHQW YDOXH RI D JURZLQJ SHUSHWXLW\ FDQ EH FDOFXODWHG
E\ GLYLGLQJ WKH DPRXQW RI WKH SHUSHWXLW\ H[SHFWHG QH[W \HDU
GHQRWHG DV CF1 E\ WKH GLIIHUHQFH EHWZHHQ WKH GLVFRXQW UDWH
DQGWKHJURZWKUDWH
‹3KLOLS/DQJHL6WRFN7KLQNVWRFN
Lecture 31: Understanding the Time Value of Money
.
A piece of real estate that is likely to stay fully leased in perpetuity, such as an
RI¿FHEXLOGLQJLQ0DQKDWWDQLVDQH[DPSOHRIDJURZLQJSHUSHWXLW\
ż
,PDJLQH WKDW DQ DSDUWPHQW EXLOGLQJ QHDU WKH 8&/$ FDPSXV
KDVFXUUHQWFDVKÀRZV WKHGLIIHUHQFHEHWZHHQDOOUHQWVDQGDOO
H[SHQVHV HTXDOWR7KHVHFDVKÀRZVDUHH[SHFWHGWR
JURZHDFK\HDULQSHUSHWXLW\DQGWKHGLVFRXQWUDWHIRUVXFK
an asset is 8%.
ż
:H VWDUW E\ FRPSXWLQJ QH[W \HDU¶V H[SHFWHG FDVK ÀRZV
ZKLFKLQWKLVFDVHZRXOGEHWKHFXUUHQWO\
EHLQJHDUQHGSOXVWKHJURZWKUDWH:HWKHQGLYLGHE\WKH
GLIIHUHQFHEHWZHHQWKHGLVFRXQWUDWHRIDQGWKHJURZWK
UDWH 7KH UHVXOW LV PLOOLRQ ZKLFK LV WKH
SUHVHQWYDOXHRIWKLVVWDEOHZHOOORFDWHGDSDUWPHQWDVVHW
Suggested Reading
%HUNDQG'H0DU]R&RUSRUDWH)LQDQFH, FKDSWHU
%UHDOH\0\HUVDQG$OOHQ3ULQFLSOHVRI&RUSRUDWH)LQDQFH, FKDSWHU
.LHVR:H\JDQGWDQG:DU¿HOG,QWHUPHGLDWH$FFRXQWLQJFKDSWHU
Questions to Consider
1. $VLQWHUHVWUDWHVGHFOLQHVWRFNDQGERQGSULFHVJHQHUDOO\LQFUHDVH:K\"
2. 6RPHRQHOHDYHV\RXDQRGGLQKHULWDQFHSURPLVLQJWRSD\\RXUDQG\RXU
KHLUV HDFK \HDU XQWLO WKH HQG RI WLPH +RZ PXFK ZRXOG VXFK D
SHUSHWXLW\EHZRUWKLQWRGD\¶VGROODUV"
7KH7UDGH2IIEHWZHHQ5LVNDQG5HWXUQ
Lecture 32
A
/HFWXUH7KH7UDGH2IIEHWZHHQ5LVNDQG5HWXUQ
Q\ DVVHW¶V H[SHFWHG UHWXUQ LV EDVHG RQ KLVWRULFDO UHWXUQV ZKLFK
SURYLGHVRPHEDVLVIRUSUHGLFWLQJOLNHO\IXWXUHUHVXOWVDWOHDVWRYHU
H[WHQGHGSHULRGVRIWLPH%XWLW¶VDOVRWUXHWKDWDFWXDOUHVXOWVPD\
YDU\ FHUWDLQO\ RYHU VKRUWHU LQYHVWPHQW SHULRGV ,Q DGGLWLRQ DOWKRXJK ZH
PD\H[SHFWWRHDUQKLJKHUUHWXUQVZLWKKLJKHUULVNZHFDQQRWDQGVKRXOGQRW
H[SHFWWREHFRPSHQVDWHGZLWKDGGLWLRQDOUHWXUQVIRUWKDWSRUWLRQRIULVNWKDW
LVVWRFNVSHFL¿FDQGFDQEHGLYHUVL¿HGDZD\,QWKLVOHFWXUHZH¶OOORRNDWWKH
FDSLWDO DVVHW SULFLQJ PRGHO &$30 ZKLFK SURYLGHV D SRZHUIXO PHDQV RI
IRUPDOO\XQLI\LQJDQDVVHW¶VH[SHFWHGUHWXUQDQGULVNGH¿QLQJULVNSULPDULO\
LQWHUPVRIKRZDQDVVHWÀXFWXDWHVLQFRPSDULVRQWRWKHRYHUDOOPDUNHWV
Historical Asset Performance Data
% :KHQ ZH SXUVXH LQYHVWPHQW RSSRUWXQLWLHV ZKHWKHU WKH\ DUH
VWRFNV ERQGV UHDO HVWDWH RU DOWHUQDWLYH LQYHVWPHQWV ZH VKRXOG
KDYH VRPH LGHD RI WKH UHWXUQV ZH H[SHFW WR UHFHLYH *HQHUDOO\
WKHVH H[SHFWDWLRQV DUH EDVHG RQ KLVWRU\²KRZ WKHVH DVVHWV KDYH
SHUIRUPHGDQGWKHUHWXUQVWKH\KDYHJHQHUDWHGLQWKHSDVW
%
)RU VRPH DVVHWV ZH KDYH JRRG KLVWRULFDO SHUIRUPDQFH GDWD )RU
RWKHUV WKH KLVWRULFDO GDWD DUH OHVV UREXVW )RU H[DPSOH ZH KDYH
H[WHQVLYHGDWDRQUHWXUQVIURPWKHHTXLW\DQGERQGPDUNHWVRYHUDQ
H[WHQGHGSHULRGRIWLPH 6HHEHORZ Equity and Bond Market Returns, 1926–2013
Asset Class
Average
Annual Return
Standard Deviation
of Returns
Large-cap domestic stocks
12.1%
20.2%
Small-cap domestic stocks
16.9%
32.3%
/RQJWHUPFRUSRUDWHERQGV
6.3%
8.4%
/RQJWHUP86JRYHUQPHQWERQGV
5.9%
9.8%
86WUHDVXU\ELOOV
3.5%
3.1%
,QÀDWLRQ
3.0%
4.1%
%
2YHU WLPH VWRFNV VLJQL¿FDQWO\ RXWSHUIRUP ERQGV DQG ERWK
VLJQL¿FDQWO\ RXWSHUIRUP LQÀDWLRQ +RZHYHU ZLWKLQ HDFK FDWHJRU\
RILQYHVWPHQWWKHPRUHULVNWKDW¶VLQYROYHGWKHJUHDWHUWKHUHWXUQ
)RU H[DPSOH VPDOO VWRFNV KDYH HDUQHG RQ DYHUDJH HDFK
\HDU VLQFH &RPSDUH WKLV WR WKH UHWXUQ WKDW ODUJHU
FRPSDQLHVKDYHHDUQHG
%
7KHUHDVRQZHFRQVLGHUORQJWHUPUDWHVRIUHWXUQLVWKDWWKHVKRUW
WHUPFDQEHYRODWLOH,IZHORRNDWUHVXOWVRYHUORQJHUWLPHSHULRGV
VKRUWWHUPEOLSVVKRXOGEHHYHQHGRXW
%
9RODWLOLW\ LQ DVVHW SULFHV LV PHDVXUHG VWDWLVWLFDOO\ E\ WKH VWDQGDUG
GHYLDWLRQRIKLVWRULFDOUHWXUQV²KRZPXFKDSDUWLFXODU\HDU¶VUHWXUQ
YDULHV LQ UHODWLRQ WR ORQJWHUP DYHUDJHV$JDLQ LI ZH ORRN DW WKH
KLVWRULFDO GDWD IRU VWRFNV DQG ERQGV ZH VHH WKDW VPDOOFDS VWRFNV
KDYH HDUQHG DQ DYHUDJH RI SHU \HDU VLQFH +RZHYHU
WKHLUVWDQGDUGGHYLDWLRQLVRYHUVXEVWDQWLDOO\KLJKHUWKDQDQ\
other category of investment.
%
7KH LPSRUWDQW SRLQW WR UHPHPEHU KHUH LV WKDW DVVHW DQG SRUWIROLR
UHWXUQVDUHEDVHGRQH[SHFWDWLRQVDQGWKRVHH[SHFWDWLRQVLQWXUQ
VKRXOGEHEDVHGRQORQJWHUPKLVWRULFDOREVHUYDWLRQV
'LYHUVL¿DEOH5LVN
% $OWKRXJK KLJKHU H[SHFWHG UHWXUQV DUH SRVLWLYHO\ FRUUHODWHG ZLWK
higher risk, the fact that you assume greater risk in an investment
GRHV QRW QHFHVVDULO\ PHDQ WKDW \RX ZLOO EH FRPSHQVDWHG IRU LW LQ
WHUPVRIKLJKHUH[SHFWHGUHWXUQV
%
7KH GDWD RQ KLVWRULFDO UHWXUQV IRU VWRFNV DQG ERQGV VKRZ WKDW
RYHUWKHSDVW\HDUVODUJHFDSLWDOL]DWLRQVWRFNVKDGDQDYHUDJH
DQQXDOUHWXUQRI%XWWKDW¶VDPHDVXUHIRUHQWLUHSRUWIROLRV
RI VHFXULWLHV 6XSSRVH WKDW \RX LQYHVWHG DOO \RXU PRQH\ LQ RQO\
RQH VXFFHVVIXO ODUJHFDS FRPSDQ\ VXFK DV *HQHUDO (OHFWULF RU
$SSOH6KRXOG\RXH[SHFWWRHDUQRQ\RXULQYHVWPHQW"7KH
answer is no.
/HFWXUH7KH7UDGH2IIEHWZHHQ5LVNDQG5HWXUQ
%
,WPDNHVFRPPRQVHQVHWKDWLI\RXSXWDOO\RXUHJJVLQRQHEDVNHW
\RXDUHDVVXPLQJDWUHPHQGRXVDPRXQWRIYHU\VSHFL¿FULVN²WKH
ULVN WKDW RQH FRPSDQ\ ZLOO GR YHU\ ZHOO RU YHU\ SRRUO\$QG DQ\
VLQJOHFRPSDQ\ZLOOH[SHULHQFHORQJSHULRGVRIWLPHZKHQLWHLWKHU
VLJQL¿FDQWO\RXWSHUIRUPVRUVLJQL¿FDQWO\XQGHUSHUIRUPVWKHPDUNHW
%
7KLVVRUWRIFRPSDQ\OHYHOULVNLVRIWHQFDOOHGGLYHUVL¿DEOHULVN.
ż ,PDJLQH WKDW LQVWHDG RI SXWWLQJ DOO RI \RXU PRQH\ LQ $SSOH
VWRFN\RXSXWRQO\KDOILQ$SSOHDQGWKHRWKHUKDOILQ*HQHUDO
(OHFWULF:LWKWKLVVWUDWHJ\\RXKDYHUHGXFHGDWOHDVWLQSDUW
\RXU LQYHVWPHQW ULVN %XW \RX KDYH QRW UHGXFHG WKH RYHUDOO
H[SHFWHGUHWXUQRI\RXUSRUWIROLRLIKLVWRULFDOUHWXUQVIRUODUJH
FDSLWDOL]DWLRQVWRFNVSURYHDFFXUDWHLQWKHIXWXUH
%
ż
7KH VLJQL¿FDQFH RI WKLV VHHPLQJO\ VWUDLJKWIRUZDUG SRLQW
FDQQRWEHRYHUVWDWHG<RXFDQGLYHUVLI\DZD\VSHFL¿FULVN²
WKHULVNWKDWDQ\RQHFRPSDQ\ZLOOSHUIRUPSDUWLFXODUO\ZHOO
RUSDUWLFXODUO\SRRUO\7KLVLVRSSRVHGWRPDUNHWRUV\VWHPDWLF
ULVNZKLFKDIIHFWVDOOVWRFNVDQGDOOFRPSDQLHVDQGLVUHODWHG
WR VXFK IDFWRUV DV LQWHUHVW UDWHV HPSOR\PHQW OHYHOV DQG
WD[SROLF\
ż
7KXV ZKHQ PDQ\ VWRFNV²DW OHDVW WR LQ GLIIHUHQW
LQGXVWULHV²DUH FRPELQHG LQ D VLQJOH SRUWIROLR WKH ¿UP
VSHFL¿F ULVNV IRU HDFK VWRFN DUH DYHUDJHG RXW DQG GLYHUVL¿HG
DZD\<RXU SRUWIROLR ZLOO VWLOO EH VXEMHFW WR PDUNHW ULVN²WKH
ULVNWKDWWKHRYHUDOOPDUNHWPLJKWJRGRZQ²EXWWKHLPSDFWRI
DQ\RQHVWRFNZLOOEHWHPSHUHGE\WKHLQÀXHQFHRIRWKHUVWRFNV
LQ\RXUSRUWIROLR
%HFDXVHYRODWLOLW\FDQEHUHGXFHGIDLUO\HDVLO\E\DGGLQJGLIIHUHQW
VWRFNVWRDSRUWIROLRLQYHVWRUVVKRXOGQRWH[SHFWWREHFRPSHQVDWHG
ZLWKDGGLWLRQDOUHWXUQVIRUWKDWSRUWLRQRIYRODWLOLW\WKDWLVVWRFN
RU FRPSDQ\VSHFL¿F ,QYHVWRUV VKRXOG H[SHFW WR EH FRPSHQVDWHG
RQO\IRUWKHULVNVWKDWFDQQRWEHGLYHUVL¿HGDZD\²V\VWHPDWLFRU
market risk.
Beta
%
%
Beta (ȕ PHDVXUHV KRZ D SDUWLFXODU VHFXULW\ KDV KLVWRULFDOO\ FR
YDULHGZLWKWKHRYHUDOOPDUNHWXVXDOO\PHDVXUHGE\DEURDGEDVHG
VWRFNLQGH[VXFKDVWKH6 3RU5XVVHOO
ż ,PDJLQHWKDWRYHUDQH[WHQGHGSHULRGRIWLPHWKHVWRFNPDUNHW
JRHVXSRUGRZQE\DSDUWLFXODUDPRXQWZKLOHDSDUWLFXODUVWRFN
JRHVXSRUGRZQRQDYHUDJHE\KDOIWKDWDPRXQW7KDWLVLI
WKHVWRFNPDUNHWJRHVXSE\RQDQ\RQHGD\WKLVSDUWLFXODU
FRPSDQ\¶V VWRFN JRHV XS E\ 7KDW VWRFN LV WKHQ VDLG WR
have a ȕ ż
2ULPDJLQHDPRUHYRODWLOHVWRFNZKHQWKHPDUNHWJRHVXSRU
GRZQ E\ x WKLV VWRFN YDULHV E\ GRXEOH WKDW DPRXQW ,W KDV D
ȕ ż
2IFRXUVHLI\RXRZQDQHTXDOVKDUHRIDOOVWRFNVLQWKHPDUNHW
\RXUH[SHFWHGUHWXUQZRXOGEHWKDWRIWKHRYHUDOOPDUNHWDQG
\RXUSRUWIROLRZRXOGKDYHDȕ %HWD LV D XVHIXO DQG SRZHUIXO WRRO EHFDXVH LW DOORZV XV WR WKLQN
DERXW KRZ LQGLYLGXDO DVVHWV DUH H[SHFWHG WR PRYH LQ UHODWLRQ WR
WKH RYHUDOO PDUNHW ZKLFK FDQ KHOS XV FUDIW DQ DSSURSULDWHO\
GLYHUVL¿HG SRUWIROLR %HWD DOVR KHOSV XV XQGHUVWDQG WKH ULVNV WKDW
DUHDVVRFLDWHGZLWKDQ\LQGLYLGXDOFRPSDQ\*LYHQZKDWZHNQRZ
about the historical returns of the overall market, we can estimate
WKH IXWXUH UHWXUQV DVVRFLDWHG ZLWK LQGLYLGXDO VWRFNV ZLWKLQ D
GLYHUVL¿HGSRUWIROLR
Capital Asset Pricing Model
% 4XDQWLI\LQJ WKH UHODWLRQVKLS EHWZHHQ KLVWRULFDO DQG IXWXUH UHWXUQV
ZDVDWUHPHQGRXVDGYDQFHLQ¿QDQFHDQGPRGHUQSRUWIROLRWKHRU\
DQGOHGWRDQH[WUHPHO\LPSRUWDQWPRGHOLQ¿QDQFHWKHFDSLWDODVVHW
SULFLQJPRGHO &$30 %
7RGHYHORSDQLQWXLWLRQIRU&$30OHW¶VLPDJLQHWKUHHVHFXULWLHV
/HFWXUH7KH7UDGH2IIEHWZHHQ5LVNDQG5HWXUQ
ż
7KH¿UVWKDVQRYRODWLOLW\DWDOOWKHUHLVQRUHODWLRQVKLSEHWZHHQ
WKH ZD\ WKLV VHFXULW\ PRYHV DQG WKH RYHUDOO SHUIRUPDQFH RI
WKHPDUNHW7KLVLQYHVWPHQWPLJKWUHSUHVHQWIRUH[DPSOHWKH
PRQH\LQDQLQVXUHGEDQNDFFRXQW&OHDUO\WKHUHWXUQRQVXFK
DQ LQYHVWPHQW KDV QRWKLQJ WR GR ZLWK KRZ WKH VWRFN PDUNHW
SHUIRUPV:HZRXOGWKHUHIRUHVD\WKDWWKLVVHFXULW\KDVDȕ DQGDQH[SHFWHGUHWXUQRIWKHULVNIUHHUDWH7KDWUHWXUQZLOOEH
IDLUO\ORZEXWVXFKLVWKHWUDGHRIIIRUDVVXPLQJVXFKORZULVN
ż
7KHVHFRQGVHFXULW\PRYHVLQSHUIHFWORFNVWHSZLWKWKHPDUNHW
,WKDVDȕ DQGLWVH[SHFWHGUHWXUQZRXOGHTXDOWKDWRIWKH
overall market.
ż
7KHWKLUGVHFXULW\PRYHVXSRUGRZQDWDUDWHWZLFHWKDWRIWKH
overall market, which means it has a ȕ :HZRXOGH[SHFW
WKLV VHFXULW\ WR HDUQ UHWXUQV VXSHULRU WR WKRVH RI WKH RYHUDOO
PDUNHWWRFRPSHQVDWHXVIRUWDNLQJRQWKHDGGLWLRQDOULVNRID
VLJQL¿FDQWORVVRQRXULQYHVWPHQW
%
,IZHSXWWKHVHWKUHHGDWDSRLQWVLQWRDPDWKHPDWLFDOIRUPXODWKH
UHVXOW LV &$30 ZKLFK FRQFOXGHV WKDW WKH H[SHFWHG UHWXUQ RI DQ\
LQYHVWPHQW LQ D ZHOOGLYHUVL¿HG SRUWIROLR LV HTXDO WR 5LVNIUHH
UDWHȕ ([SHFWHGPDUNHWUHWXUQí5LVNIUHHUDWH %
(VVHQWLDOO\&$30VD\VWKDWDQ\DVVHWVKRXOGEHH[SHFWHGWRHDUQ
DWDPLQLPXPWKHULVNIUHHUDWHDQGVRPHSUHPLXPIRUDVVXPLQJ
DGGLWLRQDOULVN7KLVDGGLWLRQDOULVNLVPDGHXSRIWZRIDFWRUVWKH
DVVHW¶VEHWDDQGWKHHTXLW\ULVNSUHPLXPZKLFKLVWKHDPRXQWWKDW
WKHRYHUDOOPDUNHWLVH[SHFWHGWRHDUQDERYHWKHULVNIUHHUDWH
ż ,I\RXSXWDFHUWDLQDPRXQWRIPRQH\LQWRDGLYHUVL¿HGSRUWIROLR
RI VD\ VWRFNV LQ GLIIHUHQW LQGXVWULHV \RX NQRZ WKDW WKLV
SRUWIROLRDOWKRXJKGLYHUVL¿HGLVVWLOOPRUHULVN\WKDQRZQLQJ
D ULVNIUHH 86 WUHDVXU\ ERQG$QG \RX VKRXOG H[SHFW WR EH
FRPSHQVDWHGIRUWDNLQJRQWKDWDGGLWLRQDOULVN$JDLQ\RXPD\
RU PD\ QRW UHFHLYH WKDW FRPSHQVDWLRQ EHFDXVH WKHUH LV VWLOO
VRPHPDUNHWULVNLQVXFKDSRUWIROLREXW\RXVKRXOGH[SHFWWR
HDUQVRPHSUHPLXP7KLVLVNQRZQDVWKHHTXLW\ULVNSUHPLXP.
ż
%
$FDGHPLFV KDYH GHEDWHG WKH DPRXQW RI WKH HTXLW\ ULVN
SUHPLXP EXW WRGD\ PRVW H[SHUWV DJUHH WKDW LW LV EHWZHHQ
DQG7KDWLVLI\RXLQYHVWLQDSRUWIROLRRIGLYHUVL¿HG
VWRFNV \RX VKRXOG H[SHFW WR HDUQ WKH ULVNIUHH UDWH SOXV or 6%.
$VVXPH\RXDUHFRQVLGHULQJDGGLQJDVWRFNZLWKDȕ WR\RXU
DOUHDG\ GLYHUVL¿HG SRUWIROLR ,I WKH LQWHUHVW UDWH RQ \HDU 86
WUHDVXU\ERQGVLVDERXWDQGWKHHTXLW\ULVNSUHPLXPLV
\RXZRXOGFDOFXODWHWKHH[SHFWHGUHWXUQIURPWKLVVWRFNDVIROORZV
Using CAPM
% 7KHUHDUHWZREURDGW\SHVRILQYHVWLQJDFWLYHDQGSDVVLYH3DVVLYH
investors try to match the market, not beat it, while active investors
WU\WR³EHDWWKHPDUNHW´E\SLFNLQJZLQQHUV:LWK&$30ZHFDQ
H[DPLQHDQDFWLYHIXQGPDQDJHU¶VSRUWIROLRGHWHUPLQHWKHULVNWKDW
KH RU VKH WRRN DV PHDVXUHG E\ EHWD DQG XVH WKDW EHWD WR SUHGLFW
KRZWKHPDQDJHUVKRXOGKDYHGRQHUHODWLYHWRWKHPDUNHW
%
/HW¶VVD\WKDWDSDUWLFXODUIXQGPDQDJHU¶VSRUWIROLRKDGDZHLJKWHG
DYHUDJHEHWDRIGXULQJDSDUWLFXODU\HDU
ż :H ZRXOG H[SHFW WKLV IXQG WR PRYH E\ PRUH WKDQ WKH
RYHUDOOPDUNHWLQHLWKHUGLUHFWLRQ7KDWLVLIWKHRYHUDOOVWRFN
PDUNHWZHQWXSE\GXULQJWKH\HDUZHZRXOGH[SHFWWKLV
IXQGWRKDYHJRQHXSE\
ż
%
,I WKH IXQG PDQDJHU¶V SRUWIROLR ZHQW XS E\ ZH ZRXOG
FRQFOXGH WKDW WKLV PDQDJHU DGGHG DGGLWLRQDO YDOXH IURP KLV
RU KHU VHOHFWLRQ RI VWRFNV²DQ DGGLWLRQDO 7KDW DGGLWLRQDO
YDOXHLVFDOOHGalpha.
,QUHFHQW\HDUVDJUHDWGHDORIUHVHDUFKKDVJRQHLQWRWKHSUHGLFWLYH
DELOLW\RI&$30:KHQDFWXDOO\UHDOL]HGUHWXUQVDUHFRPSDUHGWR
ZKDW&$30ZRXOGKDYHSUHGLFWHGZH¿QGWKDWWKHPRGHOLVDEOH
WR DFFRXQW IRU DERXW WR RI WKH SULFH PRYHPHQWV WKDW
KLVWRULFDOEHWDVZRXOGKDYHDQWLFLSDWHG$FDGHPLFVLQ¿QDQFHDQG
/HFWXUH7KH7UDGH2IIEHWZHHQ5LVNDQG5HWXUQ
HFRQRPLFVKDYHDOVRVSHQWFRQVLGHUDEOHWLPHWU\LQJWRUH¿QH&$30
DQGLPSURYHLWVSUHGLFWLYHDELOLWLHVE\DGGLQJYDULDEOHVDQGWHVWLQJ
ZKHWKHUWKH\DGGWRWKHPRGHO¶VSUHGLFWLYHSRZHU
ż 3HUKDSVWKHPRVWZHOONQRZQRIWKHVHPRGHOVLVWKH)DPDDQG
)UHQFK WKUHHIDFWRU PRGHO ,Q DGGLWLRQ WR WKH EHWD IDFWRU WKH
UHQRZQHGUHVHDUFKHUV(XJHQH)DPDDQG.HQ)UHQFKIRXQGWZR
PRUHIDFWRUVWKDWLPSURYHG&$30¶VSUHGLFWLYHFDSDELOLWLHVD
VWRFN¶VvalueDQGWKHsizeRIWKHFRPSDQ\
ż
9DOXHLVGHWHUPLQHGE\FRPSDULQJDFRPSDQ\¶VVKDUHKROGHUV¶
HTXLW\ WR LWV PDUNHW FDSLWDOL]DWLRQ HVVHQWLDOO\ WKH FRPSDQ\¶V
YDOXH RQ WKH VWRFN PDUNHW 7KH VL]H RI WKH FRPSDQ\ LV
UHSUHVHQWHGE\LWVPDUNHWFDSLWDOL]DWLRQ
ż
)RUH[DPSOHLIDVWRFNKDVDERRNYDOXHRUVKDUHKROGHUV¶HTXLW\
RI ELOOLRQ DQG D PDUNHW FDSLWDOL]DWLRQ RI PLOOLRQ LW
ZRXOGDSSHDUWREHDJRRGYDOXHDEX\HULVSD\LQJDGLVFRXQW
IRUWKHFRPSDQ\¶VUHSRUWHGQHWDVVHWV
ż
)DPD DQG )UHQFK GHWHUPLQHG WKDW WKHUH ZDV D SRVLWLYH
UHODWLRQVKLS EHWZHHQ H[SHFWHG UHWXUQV DQG WKLV YDOXH IDFWRU
7KLVVHHPVLQWXLWLYH,I\RXDUHEX\LQJDVWRFNDWZKDWDSSHDUV
WR EH D GLVFRXQWHG SULFH \RX VKRXOG LQ WXUQ H[SHFW D KLJKHU
UHWXUQ $QG WKH RSSRVLWH LV DOVR WUXH ,I WKH VWRFN PDUNHW LV
YDOXLQJ D FRPSDQ\ DW PXOWLSOHV RI ZKDW LW LV UHSRUWLQJ DV
DVVHWV RQ LWV EDODQFH VKHHW LW DSSHDUV WKDW \RX DUH EX\LQJ LQ
DWDSUHPLXPWKHUHIRUH\RXUH[SHFWHGUHWXUQORRNLQJIRUZDUG
VKRXOGEHORZHU
Suggested Reading
%UHDOH\0\HUVDQG$OOHQ3ULQFLSOHVRI&RUSRUDWH)LQDQFH, FKDSWHUV±
(DVWRQ0F$QDOO\6RPPHUVDQG=KDQJ)LQDQFLDO6WDWHPHQW$QDO\VLVDQG
ValuationFKDSWHU
Questions to Consider
1. 0RVW¿QDQFLDODGYLVRUVUHFRPPHQGWKDW\RXQJHULQGLYLGXDOVSXWPRVWLI
QRWDOORIWKHLUUHWLUHPHQWDVVHWVLQWRVWRFNVWKHQUHGXFHWKHLUH[SRVXUH
WRVWRFNVDVWKH\QHDUUHWLUHPHQW:K\"
2. $VVXPH WKDW WKH ULVNIUHH UDWH WKH \LHOG RQ \HDU WUHDVXU\ ERQGV LV
DQG\RXLQYHVWVRPHRI\RXUZHOOGLYHUVL¿HGVWRFNSRUWIROLRLQWRD
FRPSDQ\ZLWKDEHWDRI$VVXPLQJWKDWWKHHTXLW\ULVNSUHPLXP²
WKH DPRXQW E\ ZKLFK WKH VWRFN PDUNHW LV H[SHFWHG WR RXWSHUIRUP
ULVNIUHH UDWHV²LV ZKDW LV WKH UHWXUQ \RX DQWLFLSDWH IURP WKLV
LQYHVWPHQWDFFRUGLQJWR&$30"
+RZ,QYHVWRUV8VH1HW3UHVHQW9DOXH
Lecture 33
,
/HFWXUH+RZ,QYHVWRUV8VH1HW3UHVHQW9DOXH
Q WKLV OHFWXUH ZH ZLOO GLVFXVV VHYHUDO DSSURDFKHV XVHG IRU HYDOXDWLQJ
LQYHVWPHQW RSSRUWXQLWLHV WKH SD\EDFN PHWKRG WKH DFFRXQWLQJ RU ERRN
UDWHRIUHWXUQDQGQHWSUHVHQWYDOXH 139 $ORQJZLWK&$30ZKLFKZH
LQWURGXFHGLQWKHODVWOHFWXUH139PD\EHWKHPRVWLPSRUWDQWPDWKHPDWLFDO
IRUPXODLQ¿QDQFH,WFRPELQHVVHYHUDORIWKHFRQFHSWVZHKDYHGLVFXVVHG
WKXV IDU LQFOXGLQJ WKH WLPH YDOXH RI PRQH\ H[SHFWHG UDWHV RI UHWXUQ DQG
ULVN$V ZH¶OO VHH 139 LQWHJUDWHV WKHVH LGHDV LQWR D SRZHUIXO LQYHVWPHQW
GHFLVLRQPDNLQJWRROZLWKZLGHVSUHDGDSSOLFDWLRQV
Structure of Investment Opportunities
% $OOLQYHVWPHQWRSSRUWXQLWLHVDUHHVVHQWLDOO\VWUXFWXUHGLQWKHVDPH
ZD\$QXSIURQWLQYHVWPHQWLVPDGHWRGD\LQDQWLFLSDWLRQRIVRPH
XQFHUWDLQFDVKÀRZVRUUHWXUQVLQWKHIXWXUH7KLVLVWUXHRID¿UP
PDNLQJ D FDSLWDO EXGJHWLQJ GHFLVLRQ D FKDULWDEOH RUJDQL]DWLRQ
GHFLGLQJ KRZ WR VSHQG LWV OLPLWHG UHVRXUFHV RU DQ LQGLYLGXDO
LQYHVWRUGHFLGLQJZKHWKHUWRSXUFKDVHDSDUWLFXODUVWRFN
%
7R PDNH VPDUW DQG YDOXHFUHDWLQJ LQYHVWPHQW GHFLVLRQV WKH
IXWXUHUHWXUQVRUFDVKÀRZVZKLFKDUHZRUWKOHVVWKDQWKHGROODUV
H[SHQGHG WRGD\ PXVW H[FHHG WKH DPRXQW LQYHVWHG 7KDW LV WKH
SUHVHQWYDOXHRIWKHSURMHFWHGIXWXUHLQÀRZVPXVWEHJUHDWHUWKDQ
WKHSUHVHQWYDOXHRIWKHRXWÀRZV7KLVLVHVVHQWLDOO\WKHGH¿QLWLRQ
of net present value 139 3D\EDFN0HWKRG
% %HIRUH ZH GHOYH IXUWKHU LQWR 139 OHW¶V VWDUW ZLWK D FRPPRQ
DSSURDFKWRLQYHVWPHQWGHFLVLRQPDNLQJWKHSD\EDFNPHWKRG7KLV
DSSURDFKHVVHQWLDOO\DQVZHUVWKHIROORZLQJTXHVWLRQ,I\RXPDNH
DQLQYHVWPHQWRIXWRGD\KRZORQJGR\RXKDYHWRZDLWXQWLO\RX
UHFRXS\RXULQYHVWPHQW"
%
)RUH[DPSOHLI\RXLQYHVWDQG\RXH[SHFWWKHLQYHVWPHQW
WRUHWXUQHDFK\HDUDIWHUWD[HVWKHSD\EDFNSHULRGZRXOGEH
\HDUV$LQYHVWPHQWWKDWUHWXUQVHDFK\HDURQ
DYHUDJHZRXOGKDYHD¿YH\HDUSD\EDFN$OOHOVHHTXDOWKHVKRUWHU
WKH SD\EDFN SHULRG WKH EHWWHU WKH LQYHVWPHQW RSSRUWXQLW\ 6RPH
¿UPVHVWDEOLVKPD[LPXPDOORZDEOHSD\EDFNSHULRGVDJDLQVWZKLFK
LQYHVWPHQWVVKRXOGEHFRPSDUHG
%
7KHSD\EDFNDSSURDFKLVZLGHO\XVHGIRUVHYHUDOUHDVRQV,WLVIDLUO\
VLPSOH HDV\ WR DSSO\ DQG UHODWLYHO\ LQWXLWLYH :H DOO XQGHUVWDQG
WKDWLIZHLQYHVWLQVRPHWKLQJDSD\EDFNZLWKLQDIHZ\HDUVZRXOG
generally make sense.
%
+RZHYHU WKHUH DUH DOVR VRPH VHULRXV GH¿FLHQFLHV WR WKH SD\EDFN
DSSURDFK$IWHU DOO WKH JRDO RI DQ\ LQYHVWPHQW LV QRW MXVW WR JHW
\RXUPRQH\EDFNEXWWRPDNHDSUR¿W7KHSD\EDFNPHWKRGLJQRUHV
FDVK ÀRZV DIWHU WKH SD\EDFN SHULRG DQG LJQRUHV WKH WLPH YDOXH
RI PRQH\ 0RUHRYHU WKH PD[LPXP DFFHSWDEOH SD\EDFN SHULRG LV
XVXDOO\DUELWUDU\UHÀHFWLQJVRPHSROLF\GHFLVLRQHVWDEOLVKHGLQWKH
SDVW 7KXV WKH SD\EDFN PHWKRG LV QRW DQ HIIHFWLYH ZD\ WR DVVHVV
LQYHVWPHQWRSSRUWXQLWLHV
Accounting or Book Rate of Return
% $QRWKHUPHWKRGIRUHYDOXDWLQJLQYHVWPHQWRSSRUWXQLWLHVLVNQRZQ
DVWKHDFFRXQWLQJRUERRNUDWHRIUHWXUQ$VZH¶YHGLVFXVVHGZKHQ
FRPSDQLHV UHSRUW WR VKDUHKROGHUV PXFK RI WKH IRFXV LV RQ WKH
LQFRPHVWDWHPHQWHVSHFLDOO\UHYHQXHVQHWLQFRPHDQGHDUQLQJV
SHU VKDUH &DVK ÀRZV DOWKRXJK FHUWDLQO\ LPSRUWDQW DUH XVXDOO\
QRW JLYHQ DV PXFK HPSKDVLV LQ TXDUWHUO\ DQG DQQXDO HDUQLQJV
UHOHDVHV $V D UHVXOW VRPH ¿QDQFLDO PDQDJHUV PLJKW XVH ERRN
DFFRXQWLQJ GDWD WR DVVHVV DQG HYDOXDWH LQYHVWPHQW RSSRUWXQLWLHV
LQVWHDGRIFDVKÀRZVFRQWUDU\WRZKDW¿QDQFHWKHRU\WHOOVXVWKH\
VKRXOGEHGRLQJ
/HFWXUH+RZ,QYHVWRUV8VH1HW3UHVHQW9DOXH
%
)RU H[DPSOH LPDJLQH D FRPSDQ\ RSHUDWLQJ DW FDSDFLW\ WKDW LV
FRQVLGHULQJ D PLOOLRQ LQYHVWPHQW LQ QHZ PDFKLQHU\ WKDW
ZRXOG LQFUHDVH SURGXFWLYLW\ DQG FUHDWH YDOXH IRU WKH FRPSDQ\
DQGLWVVKDUHKROGHUV7KHFXUUHQWPDFKLQHU\DOWKRXJKRXWGDWHGLV
VWLOO IXQFWLRQDO DQG LQ XVH EXW LW KDV EHHQ IXOO\ GHSUHFLDWHG DQG
WKHUHIRUHKDVQRYDOXHRQWKHFRPSDQ\¶VEDODQFHVKHHW,IWKH&)2
ZHUHVWULFWO\ORRNLQJDWDQDFFRXQWLQJ52,DQ\UHWXUQWKDWWKHROG
PDFKLQHVSURGXFHZRXOGDSSHDUWREHLQ¿QLWH7KDWLVWKHLQFRPH
JHQHUDWHG E\ WKH PDFKLQHV ZRXOG EH PDGH RQ VRPHWKLQJ ZLWK QR
DFFRXQWLQJYDOXH²WKHGHSUHFLDWHGPDFKLQHV$Q\SRVLWLYHLQFRPH
GLYLGHGE\]HURZLOOORRNJUHDW
%
+RZHYHUWKLVLVDÀDZHGDSSURDFKEHFDXVHLWLVEDVHGRQ¿QDQFLDO
DFFRXQWLQJPHWULFVZKLFKLQFOXGHQRQFDVKGHSUHFLDWLRQH[SHQVH
7KLV KDV FDXVHG D VLJQL¿FDQW GLIIHUHQFH EHWZHHQ WKH DFFRXQWLQJ
YDOXHRIWKHHTXLSPHQWXQGHU*$$3DQGLWVWUXHHFRQRPLFYDOXH
ZKLFKVKRXOGEHEDVHGRQDFWXDOFDVKÀRZVDQGWUXHPDUNHWYDOXHV
7KHUHIRUHLWLVLPSHUDWLYHWKDWZHORRNDWFDVKÀRZVQRW¿QDQFLDO
DFFRXQWLQJ PHWULFV WR GHWHUPLQH ZKHWKHU DQ LQYHVWPHQW PLJKW EH
YDOXHFUHDWLQJ
NPV Formula
% $ PRUH UREXVW UHOLDEOH DQG HIIHFWLYH PHDQV RI HYDOXDWLQJ
LQYHVWPHQW RSSRUWXQLWLHV WKDQ WKH SD\EDFN RU DFFRXQWLQJ UDWH RI
UHWXUQDSSURDFKHVLV1397KH139LVWKHVXPRIDOOWKHLQGLYLGXDO
RXWÀRZVDQGRULQÀRZVUHODWHGWRDQ\LQYHVWPHQWZLWKHDFKRIWKH
LQGLYLGXDOFDVKÀRZVGLVFRXQWHGWRLWVSUHVHQWYDOXH
%
5HFDOOWKDWLQRUGHUWRSXWIXWXUHFDVKÀRZVLQWRWRGD\¶VGROODUVZH
PXVWGLVFRXQWWKHPZKLFKUHTXLUHVWKUHHLQSXWV WKHDPRXQWRI
WKHFDVKÀRZ WKHUHOHYDQWLQWHUHVWRUGLVFRXQWUDWHDQG WKH
WLPHSHULRGRYHUZKLFKWKHGLVFRXQWLQJLVWRWDNHSODFH$OVRUHFDOO
WKHEDVLFSUHVHQWYDOXHIRUPXODIRUDQLQGLYLGXDOOXPSVXP
%
$VDQH[DPSOHVXSSRVHWKDW\RXH[SHFWWRUHFHLYHWZR\HDUV
IURPWRGD\DWDGLVFRXQWUDWHRI:KDW¶VWKHSUHVHQWYDOXHRIWKDW
"3OXJJLQJLQWKHQXPEHUVZHJHW
.
%
:HWKHQSOXJWKHSUHVHQWYDOXHRIIXWXUHFDVKÀRZVLQWRWKH139
formula:
139 3UHVHQW YDOXH RI IXWXUH FDVK ÀRZV CFt í ,QLWLDO
LQYHVWPHQWUHTXLUHG CF0
Assessing an Investment
% /HW¶V ZDON WKURXJK DQ H[DPSOH WRJHWKHU $VVXPH WKDW D VPDOO
UHJLRQDO KRVSLWDO LV FRQVLGHULQJ WKUHH PXWXDOO\ H[FOXVLYH
LQYHVWPHQWV LQ GLIIHUHQW W\SHV RI PHGLFDO HTXLSPHQW D VXUJLFDO
URERWDQ05,PDFKLQHDQGDGLDO\VLVPDFKLQH(DFKRIWKHVHZLOO
UHTXLUHDQXSIURQWLQYHVWPHQWRIPLOOLRQDQGHDFKLVRIHTXDO
LPSRUWDQFHWRWKHKRVSLWDO¶VVWUDWHJ\
ż %DVHGRQLQSXWIURPNH\SHUVRQQHOWKHFKLHI¿QDQFLDORI¿FHU
&)2 RIWKHKRVSLWDOKDVFUHDWHGDWDEOHWKDWSURMHFWV\HDUHQG
FDVKÀRZVIRUHDFKRIWKHSRWHQWLDOLQYHVWPHQWV
Year
0
Robot
($1,500,000)
MRI
($1,500,000)
Dialysis
($1,500,000)
1
$200,000
$300,000
$500,000
2
$300,000
$400,000
$500,000
3
$400,000
$600,000
$500,000
4
$500,000
$650,000
$500,000
5
$650,000
$750,000
$500,000
/HFWXUH+RZ,QYHVWRUV8VH1HW3UHVHQW9DOXH
%
ż
(DFK RI WKH WKUHH RSSRUWXQLWLHV ZLOO FRVW WKH VDPH DPRXQW
XSIURQWHDFKKDVGLIIHUHQWSURMHFWHGFDVKÀRZVRYHUWLPHDQG
HDFKKDVQRH[SHFWHGYDOXHDIWHU¿YH\HDUV
ż
$VVXPHWKDWWKHKRVSLWDOUHTXLUHVDUHWXUQRQZKLFKHYHU
LQYHVWPHQWLWGHFLGHVWRPDNH
)RUDOOWKUHHRSSRUWXQLWLHVWKHLQLWLDOFDVKRXWÀRZLVPLOOLRQ
%HFDXVHLWLVDQRXWÀRZLWLVDQHJDWLYHYDOXHLQWKH139IRUPXOD
ż 6WDUWLQJZLWKWKHVXUJLFDOURERWWKH&)2¶VWDEOHLQGLFDWHVWKDWWKH
DQWLFLSDWHGIXWXUHFDVKÀRZVDUHLQ\HDUZLWKVRPH
VWHDG\ LQFUHDVHV RYHU WLPH WR DQG%XWZHNQRZWKDWWKHYDOXHRILQ\HDU
LVIDUOHVVWKDQLQWRGD\¶VGROODUVEHFDXVHLWZRQ¶W
EHUHDOL]HGXQWLO¿YH\HDUVRXWDQGEHFDXVHRIWKHGLVFRXQW
UDWH²WKHUDWHZHZDQWWRHDUQRQWKHLQYHVWPHQW
ż
,IZHSOXJLQWRWKHSUHVHQWYDOXHIRUPXODWKHUHVXOW
LV7KDW¶VZKDWWKRVH\HDUFDVKÀRZVDUHZRUWKLQ
WRGD\¶VGROODUV
ż
7KH IROORZLQJ WDEOH VKRZV WKH SUHVHQW YDOXH RI HDFK RI WKH
SURMHFWHGFDVKÀRZVIRUWKHURERW
Year
Surgical Robot
0
1
2
3
4
5
<HDUHQGFDVKÀRZ
($1,500,000) $200,000 $300,000 $400,000 $500,000 $650,000
Present value @ 10%
($1,500,000) $181,818 $247,934 $300,526 $341,507 $403,599
NPV
($24,616)
ż
$V \RX FDQ VHH LI ZH DGG XS WKH SUHVHQW YDOXHV RI HDFK RI
WKH LQGLYLGXDO FDVK ÀRZV LQFOXGLQJ WKH XSIURQW PLOOLRQ
LQYHVWPHQW ZH JHW D QHJDWLYH UHVXOW í 7KH VXUJLFDO
URERWLQYHVWPHQWKDVDQHJDWLYHSURMHFWHG139,IWKHKRVSLWDO
UHTXLUHVDUDWHRIUHWXUQLWVKRXOGQRWLQYHVWLQWKHURERW
%
7KHIROORZLQJWDEOHVVKRZWKH139IRUWKH05,PDFKLQHDQGWKH
GLDO\VLVPDFKLQH
Year
MRI
0
1
2
3
4
5
<HDUHQGFDVKÀRZ
($1,500,000) $300,000 $400,000 $600,000 $650,000 $700,000
Present value @ 10%
($1,500,000) $272,727 $330,579 $450,789 $443,959 $434,645
NPV
($432,698)
Year
Dialysis
0
1
2
3
4
5
<HDUHQGFDVKÀRZ
($1,500,000) $500,000 $500,000 $500,000 $500,000 $500,000
Present value @ 10%
($1,500,000) $454,545 $413,223 $375,657 $341,507 $310,461
NPV
$395,393
%
,IDQLQYHVWPHQWRSSRUWXQLW\KDVDSRVLWLYH139LWLVDQLQYHVWPHQW
ZRUWKPDNLQJ,WLVRQHWKDWLVH[SHFWHGWRFUHDWHYDOXHEHFDXVHLQ
VLPSOHVWWHUPVWKHSUHVHQWYDOXHRIH[SHFWHGFDVKLQÀRZVH[FHHGV
WKHH[SHFWHGFRVWRIWKHLQYHVWPHQW,IRQWKHRWKHUKDQGWKH139
is less than 0, the investment is not worth making because it will
GHVWUR\YDOXHZLWKH[SHFWHGIXWXUHFDVKÀRZVWKDWGRQRWSURYLGH
DGHTXDWHFRPSHQVDWLRQIRUWKHRULJLQDOFRVWRIWKHLQYHVWPHQWDQG
WKHULVNLQYROYHG
%
%RWKWKH05,DQGWKHGLDO\VLVPDFKLQHVKDYHSRVLWLYH139VEXW
WKH05,LVWKHEHWWHULQYHVWPHQWEHFDXVHLWKDVWKHKLJKHU139
Rules for Calculating NPV
% 7KHUHDUHVHYHUDOJHQHUDOUXOHVWRNHHSLQPLQGZKHQFDOFXODWLQJWKH
139RIDQ\LQYHVWPHQWRSSRUWXQLW\7KH¿UVWRIWKHVHUXOHVLVWKDW
VHQVLWLYLW\DQDO\VLVLVLPSRUWDQW$Q\TXDQWLWDWLYHPRGHO¶VRXWSXWLV
RQO\DVJRRGDVLWVLQSXWV
%
7KHVHFRQGUXOHLVWKDWDIWHUWD[FDVKÀRZVDUHQRUPDOO\WKHUHOHYDQW
LWHPWRGLVFRXQWIRUPRVWRUJDQL]DWLRQV
%
7KHWKLUGUXOHLVWKDWWKHVHFRQFHSWVFDQDSSO\WRWKRVHHQWLWLHVVXFK
DV SKLODQWKURSLF RUJDQL]DWLRQV WKDW DUH FRQFHUQHG ZLWK RXWFRPHV
RWKHUWKDQFDVKÀRZVJHQHUDWHG
%
7KHIRXUWKUXOHLVWKDWZKHQDSSO\LQJWKH139IRUPXODZHVKRXOG
FRQVLGHURQO\LQFUHPHQWDOFDVKÀRZVLQWKHQXPHUDWRURIWKHIRUPXOD
ż )RU H[DPSOH DVVXPH WKDW D FRPSDQ\ ZLWK VHYHUDO RSHUDWLRQV
LQ WKH VRXWKHDVW LV FRQVLGHULQJ RSHQLQJ D QHZ IDFLOLW\ LQ
&DOLIRUQLDEXWZLOOFRQWLQXHRSHUDWLQJLWVRWKHUEXVLQHVVXQLWV
:KLFKFDVKÀRZVVKRXOGEHFRQVLGHUHGLQHYDOXDWLQJWKHQHZ
EXVLQHVVSURSRVLWLRQ"
ż
/HFWXUH+RZ,QYHVWRUV8VH1HW3UHVHQW9DOXH
%
7KHDQVZHULVRQO\WKHLQFUHPHQWDOFDVKÀRZVWKHDPRXQWWR
EHLQYHVWHGLQWKHQHZRSHUDWLRQVDQGWKHDGGLWLRQDOQHWFDVK
LQÀRZVWKDWDUHH[SHFWHGWREHHDUQHGIURPWKHQHZORFDWLRQ
)LQDOO\ZHPXVWWUHDWLQÀDWLRQFRQVLVWHQWO\7KDWLVRXUSURMHFWHG
FDVK ÀRZV VKRXOG EH QRPLQDO QRW GLVFRXQWHG IRU LQÀDWLRQ$IWHU
DOOWKDWLVWKHSRLQWRIGLVFRXQWLQJWRSXWIXWXUHQRPLQDOFDVKÀRZV
LQWRWRGD\¶VGROODUV,IZHSXWIXWXUHFDVKÀRZVLQWRWRGD\¶VGROODUV
WKHQ GLVFRXQWHG WKHP IRU LQÀDWLRQ HVVHQWLDOO\ ZH ZRXOG KDYH
GRXEOHFRXQWHG
Suggested Reading
%UHDOH\0\HUVDQG$OOHQ3ULQFLSOHVRI&RUSRUDWH)LQDQFH, FKDSWHUV±
Mayo, %DVLF)LQDQFHFKDSWHU
Questions to Consider
1. )ROORZLQJ WKH ¿QDQFLDO FULVLV WKH 86 )HGHUDO 5HVHUYH PDGH D
FRQVFLRXV GHFLVLRQ WR UHGXFH LQWHUHVW UDWHV WR VSXU WKH HFRQRP\ DQG
SURPRWHUHFRYHU\.HHSLQJWKH139IRUPXODLQPLQGKRZ ZRXOGWKH
)HG¶VSROLF\DFWLRQVSURPRWHLWVHFRQRPLFREMHFWLYHV"
2. ,PDJLQHWKDW\RXKDYHWKHRSSRUWXQLW\WRLQYHVWLQDVLQJOHIDPLO\KRPH
LQ \RXU QHLJKERUKRRG WKDW LV LQ QHHG RI VRPH UHQRYDWLRQ<RX EHOLHYH
WKDW\RXFRXOGSXUFKDVHWKHKRPHIRUEXWZRXOGQHHGWRLQYHVW
LQ UHSDLUV DQG XSJUDGHV WR WKH KRXVH LQFOXGLQJ DGGLQJ D
VHFRQGVWRU\<RXWKLQNWKDWWKHFRQVWUXFWLRQZLOOWDNHWZR\HDUVDQGWKDW
WKHLQFRVWVZRXOGEHVSHQWHYHQO\RYHUWKDWSHULRGRIWLPH
<RXDOVREHOLHYHWKDW\RXZLOOEHDEOHWRVHOOWKHKRPHIRUDW
WKHHQGRIWKHWZR\HDUVQHWRIUHDOHVWDWHFRPPLVVLRQVDQGRWKHUVDOHV
FRVWV,VWKLVDSRVLWLYH139SURMHFWDWDGLVFRXQWUDWHRI":RXOG
\RXUDQVZHUFKDQJHLIWKHGLVFRXQWUDWHZHUH"
Steps for Applying the NPV Formula
1. (VWLPDWH WKH WRWDO XSIURQW FRVWV RI WKH LQYHVWPHQW XVXDOO\
FRQVLVWLQJRIWKHSXUFKDVHSULFHFRPPLVVLRQVWD[HVDQGWKHOLNH
2. (VWLPDWH WKH IXWXUH FDVK ÀRZV H[SHFWHG WR EH GHULYHG IURP WKH
LQYHVWPHQWRYHUWKHUHOHYDQWWLPHSHULRG,IWKHLQYHVWPHQWKDVD
¿QLWHOLIHVXFKDVDSLHFHRIPDFKLQHU\RUHTXLSPHQWHVWLPDWHWKH
FDVK ÀRZV RYHU WKDW SDUWLFXODU SHULRG RI WLPH ,I WKH LQYHVWPHQW
LVFRQVLGHUHGWREHDSHUSHWXLW\VXFKDVDQLQYHVWPHQWLQDQHZ
EXVLQHVVDSLHFHRIUHDOHVWDWHRUDVWRFNHVWLPDWHZKDW\RXWKLQN
LWZLOOEHZRUWKDWVRPHIXWXUHSRLQWLQWLPHVD\LQRU\HDUV
3. $VVHVVWKHULVNLQHVVRIWKHFDVKÀRZV
4. 'HWHUPLQHWKHDSSURSULDWHGLVFRXQWUDWHDQGFRPSXWHWKH139,I
WKHUHVXOWLVQHJDWLYHLW¶VSUREDEO\ZLVHWRDYRLGWKHLQYHVWPHQW
5. 6HQVLWL]HWKHNH\LQSXWV²WKHSURMHFWHGFDVKÀRZVDQGWKHGLVFRXQW
UDWH²WRFRQVWUXFWEDVHFDVHEHVWFDVHDQGZRUVWFDVHVFHQDULRV
6. 0DNHWKHLQYHVWPHQWGHFLVLRQ
Alternatives to Net Present Value
Lecture 34
,
Lecture 34: Alternatives to Net Present Value
Q WKLV OHFWXUH ZH ZLOO GLVFXVV VHYHUDO RWKHU PHWULFV IRU HYDOXDWLQJ
LQYHVWPHQWRSSRUWXQLWLHVLQWHUQDOUDWHRIUHWXUQ ,55 WKHSUR¿WDELOLW\
LQGH[ 3, DQG HTXLW\ PXOWLSOHV$OWKRXJK 139 LV FHUWDLQO\ WKH PRVW
UREXVWPHWKRGIRUFRQGXFWLQJVXFKHYDOXDWLRQVLWLVQRWDVZLGHO\XVHGLQ
WKH UHDO ZRUOG DV WKH ,55 RU HTXLW\ PXOWLSOHV ERWK RI ZKLFK DUH HDVLHU WR
XQGHUVWDQG +RZHYHU DV ZH ZLOO VHH WKHVH RWKHU DSSURDFKHV VKRXOG QRW
WDNH WKH SODFH RI WKH PRUH DQDO\WLFDO 139 DSSURDFK7KH ZLVHVW FRXUVH LQ
HYDOXDWLQJ LQYHVWPHQWV LV WR FRPSXWH WKH 139V RQ SURMHFWHG FDVK ÀRZV
DORQJZLWKWKHDSSURSULDWHGLVFRXQWUDWHWKDWLVWKHUDWHRIUHWXUQ\RXWKLQN
VKRXOGFRPSHQVDWH\RXIRUWKHULVN\RXDUHWDNLQJ
NPV and IRR
% $VZHVDZLQWKHODVWOHFWXUH139LVWKHVXPRIWKHSUHVHQWYDOXHV
RIDQ\FDVKRXWÀRZVUHTXLUHGIRUDSDUWLFXODULQYHVWPHQWSOXVWKH
SUHVHQW YDOXH RI IXWXUH FDVK LQÀRZV VXFK DV GLYLGHQGV LQWHUHVW
UHQWV RU RWKHU LQFRPH$JDLQ DOO WKH DQWLFLSDWHG FDVK ÀRZV RYHU
WLPH ERWK LQ DQG RXW DUH UHVWDWHG LQ WRGD\¶V HTXLYDOHQW GROODUV
XVLQJDGLVFRXQWUDWHZKLFKLVDQLQWHUHVWUDWHEDVHGLQSDUWRQWKH
ULVNLQHVV RI WKH SDUWLFXODU LQYHVWPHQW ,I WKH 139 LV JUHDWHU WKDQ
WKH LQYHVWPHQW ZLOO FUHDWH YDOXH ,I WKH 139 LV QHJDWLYH WKH
LQYHVWPHQWFDQEHH[SHFWHGWRGHVWUR\YDOXH
%
$VXVHIXODWRRODV139LVIRUHYDOXDWLQJLQYHVWPHQWRSSRUWXQLWLHV
LW KDV VRPH SUDFWLFDO OLPLWDWLRQV DQG FKDOOHQJHV ZKHQ DSSOLHG LQ
WKH UHDO ZRUOG 2QH RI WKH GLI¿FXOWLHV LV GHWHUPLQLQJ WKH SURSHU
GLVFRXQWUDWHWRXVHZKHQFRPSXWLQJWKHSUHVHQWYDOXHVIRUWKHFDVK
ÀRZV DQ LQYHVWPHQW LV H[SHFWHG WR JHQHUDWH RYHU WLPH )XUWKHU LW
LVGLI¿FXOWWRLQWHUSUHWZKDW139PHDQVEH\RQGWHOOLQJXVZKHWKHU
ZH VKRXOG RU VKRXOG QRW PDNH D SDUWLFXODU LQYHVWPHQW ,QYHVWRUV
XVXDOO\ZDQWPRUHLQIRUPDWLRQLQFOXGLQJWKHUDWHRIUHWXUQRQWKH
SRWHQWLDOLQYHVWPHQW
%
$V D UHVXOW RI WKHVH VKRUWFRPLQJV VRPH LQGXVWULHV XVH D UHWXUQ
PHDVXUH NQRZQ DV LQWHUQDO UDWH RI UHWXUQ ,55 0DWKHPDWLFDOO\
,55LVWKHGLVFRXQWUDWHDWZKLFKWKH139LVHTXDOWR²VRUWRID
EUHDNHYHQGLVFRXQWUDWH
ż $VZH¶YHGLVFXVVHG139LV
139 3UHVHQWYDOXHRIIXWXUHFDVKÀRZV CFt í,QLWLDO
LQYHVWPHQWUHTXLUHG CF0
ż
7R¿QGWKH,55ZHVHWWKH139HTXDWLRQHTXDOWRDQGVROYH
for the missing variable, i.
Calculating IRR
% ,PDJLQH WKDW \RX¶YH EHHQ RIIHUHG WKH FKDQFH WR LQYHVW ZLWK VRPH
SDUWQHUV LQ D SLHFH RI LQFRPHSURGXFLQJ UHDO HVWDWH SHUKDSV D
GXSOH[WKDWQHHGVWREHUHQRYDWHGDQGUHVROG
ż 7KHLQLWLDOGRZQSD\PHQWUHTXLUHGLVZKLFKLQFOXGHV
WKHEXGJHWIRUUHQRYDWLRQV\RXZLOOERUURZIURPD
EDQNWRFRPSOHWHWKHSXUFKDVH
ż
%
You estimate that the investment will generate net income
EHIRUHWD[HVRILQHDFKRIWKHQH[WWKUHH\HDUVLQFOXGLQJ
LQWHUHVWSD\PHQWVWRWKHEDQN$WWKHHQGRIWKHWKUHH\HDUV\RX
WKLQN WKH LQYHVWPHQW ZLOO EH ZRUWK DW ZKLFK SRLQW
\RX ZLOO SD\ EDFN WKH ORDQ RI OHDYLQJ WR
GLVWULEXWHWRWKHSDUWQHUV
:LWKDGLVFRXQWUDWHRIWKH139RIWKLVLQYHVWPHQWZRXOGEH
FDOFXODWHGDVIROORZV
139 %
7KHUHVXOWLVFOHDUO\SRVLWLYHWKXV\RXFDQDQWLFLSDWHWKDWWKLVZLOO
EHDJRRGLQYHVWPHQWRQHWKDWZLOOHDUQRYHU%XWZKDWLI\RX
DUH XQVXUH DERXW WKH GLVFRXQW UDWH WR XVH DQG ZDQW WR NQRZ WKH
DFWXDOUDWHRIUHWXUQRQWKHLQYHVWPHQW"7RDGGUHVVWKRVHTXHVWLRQV
\RX QHHG WR FDOFXODWH ,55 )RU WKLV FDOFXODWLRQ DJDLQ \RX¶UH
VROYLQJ IRU D SDUWLFXODU GLVFRXQW UDWH LQ WKH 139 HTXDWLRQ WR GR
WKDW\RXVHW139HTXDOWR
Lecture 34: Alternatives to Net Present Value
7KHXQNQRZQGLVFRXQWUDWHLVDERXW
%
$VDUXOHLIWKH,55IURPDQLQYHVWPHQWRSSRUWXQLW\LVJUHDWHUWKDQ
WKHUDWHRIUHWXUQ\RXUHTXLUHRQWKHLQYHVWPHQW\RXVKRXOGSURFHHG
ZLWK WKH RSSRUWXQLW\ ,I WKH ,55 LV OHVV WKDQ WKH UHTXLUHG UDWH RI
UHWXUQ \RX UHMHFW LW )RU H[DPSOH LI \RX GHWHUPLQH WKDW D SURMHFW
KDVDQ,55RI 139 DWDGLVFRXQWUDWH \RXPDNHWKH
LQYHVWPHQW VR ORQJ DV \RX UHTXLUH OHVV WKDQ D UHWXUQ IRU WKDW
SDUWLFXODURSSRUWXQLW\
%
8QIRUWXQDWHO\IRULQYHVWPHQWRSSRUWXQLWLHVODVWLQJPRUHWKDQWZR
SHULRGVLWLVQRWSRVVLEOHWRVROYHDOJHEUDLFDOO\IRUWKH,55XVLQJ
WKHGLVFRXQWHGFDVKÀRZHTXDWLRQ$VDUHVXOWWKHUHDUHWKUHHZD\V
WRFDOFXODWH,55
ż 7ULDO DQG HUURU 6LPSO\ WU\ GLIIHUHQW GLVFRXQW UDWHV XQWLO RQH
\LHOGVDQ139HTXDOWR
ż
*UDSK WKH IXQFWLRQ &DOFXODWH WKH ¿UVW IHZ JXHVVHV RI D WULDO
DQGHUURU DSSURDFK *UDSK WKHVH WKHQ H[WUDSRODWH WR WKH
SRLQW ZKHUH WKH JUDSK FURVVHV WKH 139 OLQH WR \LHOG DQ
DSSUR[LPDWH,55
ż
8VHD¿QDQFLDOFDOFXODWRURUFRPSXWHUVSUHDGVKHHW
Limitations of IRR
% $OWKRXJK ,55 LV ZLGHO\ XVHG DQG FLWHG LW KDV VRPH VLJQL¿FDQW
GUDZEDFNVRQHRIZKLFKLVWKHVL]HSUREOHP
ż &RQVLGHU IRU H[DPSOH DQ LQYHVWPHQW RSSRUWXQLW\ ZLWK D
,557KDWVRXQGVZRQGHUIXOEXWZKDWLIWKHLQYHVWPHQW
UHTXLUHVRQO\",W¶VVWLOODJRRGGHDOEXWQRWPDQ\LQYHVWRUV
ZLOOJHWH[FLWHGDERXWLW
%
ż
:RXOG \RX UDWKHU LQYHVW DQG JHW EDFN RU LQYHVW
DQGJHWEDFN"7KHODWWHUKDVDORZHU,55²D
PHUH FRPSDUHG WR LQ WKH ¿UVW RSSRUWXQLW\²EXW
PRVWRIXVZRXOGEHIDUPRUHLQWHUHVWHGLQWKHODWWHULQYHVWPHQW
than the former.
ż
:LWK 139 ZH GRQ¶W KDYH WKLV SUREOHP EHFDXVH LW WDNHV LQWR
DFFRXQWWKHDFWXDODPRXQWVRIFDVKLQÀRZVDQGRXWÀRZV
$QRWKHUVKRUWFRPLQJRI,55LVDELWPRUHFRPSOH[7RXQGHUVWDQG
LWFRQVLGHUWKLVTXHVWLRQ:KLFKLQYHVWPHQWZRXOG\RXSUHIHURQH
WKDWHDUQVDQGODVWVIRURQH\HDURURQHWKDWHDUQVHDFK\HDU
IRUDWRWDORIIRXU\HDUV"
ż /RQJHUWHUP FDVK ÀRZV PD\ KDYH ORZHU ,55V EXW PDQ\
RI XV ZRXOG SUHIHU WR PDNH VXFK LQYHVWPHQWV WR DYRLG
reinvestment risk.
ż
%
%HFDXVH WKH ,55 LV H[SUHVVHG RQO\ DV D SHUFHQWDJH LW VD\V
QRWKLQJDERXWWKHGXUDWLRQRIWKHLQYHVWPHQW
<HW DQRWKHU VKRUWFRPLQJ RI WKH ,55 KDV WR GR ZLWK PDWKHPDWLFV
6RPHLQYHVWPHQWVHVSHFLDOO\LQDFRUSRUDWHFRQWH[WKDYHQHJDWLYH
FDVK ÀRZV IRU ORQJ SHULRGV RI WLPH 7KH\ PLJKW UHTXLUH UHVHDUFK
DQGGHYHORSPHQWIRUH[DPSOHRUH[WHQVLYHFRQVWUXFWLRQ,QRWKHU
FDVHV \RX PD\ KDYH DQ LQYHVWPHQW WKDW JHQHUDWHV FDVK ÀRZV DW
VRPH WLPHV DQG UHTXLUHV LQYHVWPHQW RI FDVK DW RWKHU WLPHV 7KH
SUREOHPLQWKHVHVLWXDWLRQVLVWKDW\RXPD\JHWPXOWLSOHDQVZHUVWR
WKH,55HTXDWLRQ
Lecture 34: Alternatives to Net Present Value
%
ż
:KHQ \RX UHFHLYH FDVK ÀRZV IURP DQ LQYHVWPHQW \RX JHW WR
UHLQYHVWWKHPRIFRXUVH7KH,55DSSURDFKDVVXPHVWKDW\RX
FDQ UHLQYHVW WKHVH FDVK ÀRZV LQ RWKHU SURMHFWV HDUQLQJ WKH
VDPHUDWHVRIUHWXUQDVWKHFXUUHQWSURMHFWZKLFKPD\RUPD\
QRW EH WUXH +RZHYHU ZKHQ \RX KDYH WR VSHQG PRQH\ RQ DQ
LQYHVWPHQW\RXDOUHDG\KDYH\RXDUHHVVHQWLDOO\OHQGLQJPRQH\
WRWKHSURMHFW$OWKRXJKWKH139IRUPXODFDQKDQGOHSURMHFWV
WKDWERWKWKURZRIIDQGUHTXLUHFDVKWKH,55IRUPXODFDQQRW
ż
7KLV PDNHV ,55 D SRSXODU DQG FRPPRQ PHWKRG IRU
DQDO\]LQJ YHQWXUH FDSLWDO DQG SULYDWH HTXLW\ LQYHVWPHQWV
7KHVH LQYHVWPHQW VWUDWHJLHV XVXDOO\ UHTXLUH FDVK LQYHVWPHQWV
WKURXJKRXWWKHLUOLYHVEXWRQO\RQHFDVKLQÀRZDWWKHHQGRIWKH
SURMHFWSHUKDSVDQLQLWLDOSXEOLFRIIHULQJRUDVDOHRIWKHDVVHW
WRDQRWKHULQYHVWRURU¿UP
)LQDOO\ ,55 GRHV QRW KHOS XV FRPSDUH WZR PXWXDOO\ H[FOXVLYH
LQYHVWPHQWRSSRUWXQLWLHV
ż &RQVLGHU WZR SRWHQWLDO SURMHFWV 7KH ¿UVW UHTXLUHV DQ
LQYHVWPHQW RI DQG LV H[SHFWHG WR UHWXUQ LQ
D \HDU 7KH VHFRQG UHTXLUHV DQ LQYHVWPHQW RI DQG LV
H[SHFWHG WR UHWXUQ LQ D \HDU 7KH ¿UVW KDV DQ ,55 RI
DQG WKH VHFRQG DQ ,55 RI 6KRXOG \RX MXPS RQ
WKHVHFRQGRSSRUWXQLW\"7KHDQVZHULVQREHFDXVHWKH¿UVWKDV
DKLJKHU139HTXDOWRYHUVXVWKHVHFRQGZKLFKKDVDQ
139HTXDOWR
ż
7KH ,55 OHDGV WR WKH ZURQJ GHFLVLRQ KHUH EHFDXVH LW GRHV
QRW WDNH LQWR DFFRXQW WKH GLIIHUHQW VFDOHV RI WKH SURMHFWV7KH
ODUJHUSURMHFWKDVDVPDOOHUSHUFHQWDJHUHWXUQEXWDODUJHUGROODU
UHWXUQ7KH139IRUPXODSLFNVWKLVGLIIHUHQFHXSEXWWKH,55
GRHVQRW
3UR¿WDELOLW\,QGH[
% 7KHSUR¿WDELOLW\LQGH[ 3, LVGH¿QHGDVWKH139RIDQLQYHVWPHQW
RSSRUWXQLW\GLYLGHGE\WKHDPRXQWRIWKHLQLWLDOLQYHVWPHQW:HFDQ
WKLQNRILWDVWKH³EDQJIRUWKHEXFN´PHWULF$VD&)2ZHLJKLQJ
LQYHVWPHQWRSWLRQVIRU\RXUFRPSDQ\\RXPLJKWXVHWKH3,WRUDQN
YDULRXV DOWHUQDWLYHV XQGHU FRQVLGHUDWLRQ 7KHQ ZRUNLQJ IURP WKH
KLJKHVWUDQNHG RSSRUWXQLW\ WR WKH ORZHVW \RX FDQ LQYHVW LQ RQH
SURMHFWDIWHUDQRWKHUXQWLODOOWKHDYDLODEOHIXQGVDUHH[SHQGHG
%
%
/HW¶VZRUNWKURXJKDQH[DPSOH,PDJLQHWKDWDFHUWDLQRUJDQL]DWLRQ
KDVDEXGJHWIRUFDSLWDOSURMHFWVRIPLOOLRQWKLV\HDUDQGWKH&)2
KDV ¿YH SRWHQWLDO SURMHFWV LQ ZKLFK WR LQYHVW 7KH 139 UHTXLUHG
LQYHVWPHQWDQG3,IRUHDFKRIWKHSURMHFWVLVVKRZQEHORZ
Investment
Required
Project
NPV
A
$90,000
$900,000
PI
B
$125,000
$1,100,000
0.114
C
$65,000
$500,000
0.130
D
$25,000
$500,000
0.050
E
$60,000
$400,000
0.150
0.100
5DQNHGE\3,WKHVHSURMHFWVZRXOGIDOOLQWRWKHIROORZLQJRUGHU(
&%$DQG'7KXVWKH&)2FRXOGVWDUWZLWK(ZKLFKUHTXLUHVDQ
LQYHVWPHQWRIDQGZRXOGOHDYHPLOOLRQOHIWWRVSHQG
1H[W ZRXOG EH SURMHFW & ZKLFK UHTXLUHV DQG OHDYHV
PLOOLRQ 3URMHFW % ZRXOG XVH XS WKH UHPDLQLQJ PLOOLRQ
RI LQYHVWPHQW FDSLWDO ZKLOH SURMHFWV $ DQG ' ZRXOG KDYH WR EH
UHFRQVLGHUHGDWVRPHIXWXUHSRLQWLQWLPH
Equity Multiples
% 7KH HTXLW\ PXOWLSOH LV FRPPRQO\ XVHG LQ SULYDWH HTXLW\ DQG
YHQWXUH FDSLWDO LQYHVWPHQWV ,W LV FDOFXODWHG E\ GLYLGLQJ WKH
FXPXODWLYHDPRXQWRIUHWXUQVSDLGWRDQLQYHVWRURYHUWLPHE\WKH
FDSLWDOLQYHVWHG
%
$VVXPHWKDW\RXLQYHVWLQDYHQWXUHFDSLWDOIXQGDQGRYHU
WKH ¿YH\HDU OLIH RI WKH IXQG \RX UHFHLYH D WRWDO RI LQ
GLVWULEXWLRQV7KXVWKHHTXLW\PXOWLSOHLV %
2EYLRXVO\WKHWLPHYDOXHRIPRQH\LVLJQRUHGXQGHUWKLVDSSURDFK
ZKLFK GLIIHUHQWLDWHV WKH HTXLW\ PXOWLSOH IURP RWKHU YDOXDWLRQ
PHWKRGV %XW WKH PHWKRG LV VLPSOH DQG IRU FHUWDLQ W\SHV RI
LQYHVWPHQWV WKDW DUH UHODWLYHO\ VKRUW LQ GXUDWLRQ VXFK DV SULYDWH
HTXLW\RUYHQWXUHIXQGVLWFDQEHDUHDVRQDEOHZD\RIFRPSDULQJ
GLIIHUHQWIXQGVRUIXQGVSRQVRUV
Suggested Reading
%UHDOH\ 0\HUV DQG$OOHQ 3ULQFLSOHV RI &RUSRUDWH )LQDQFH, FKDSWHUV ±
&ROOLQV-RKQVRQ0LWWHOVWDHGW5HYVLQHDQG6RIIHU)LQDQFLDO5HSRUWLQJDQG
AnalysisFKDSWHU
(DVWRQ0F$QDOO\6RPPHUVDQG=KDQJ)LQDQFLDO6WDWHPHQW$QDO\VLVDQG
ValuationFKDSWHU
Questions to Consider
1. 8VLQJ WULDO DQG HUURU FDQ \RX DSSUR[LPDWH WKH ,55 IRU D WKUHH\HDU
Lecture 34: Alternatives to Net Present Value
LQYHVWPHQWZLWKWKHIROORZLQJHVWLPDWHG\HDUHQGDIWHUWD[FDVKÀRZV
Initial
Investment
Year 1
Year 2
Year 3
$25,000
$2,000
$3,000
$27,000
2. $ ¿UP VSHFLDOL]LQJ LQ PHUJHUV DQG DFTXLVLWLRQV SXUFKDVHV D SULYDWHO\
KHOG FRPSDQ\ IRU PLOOLRQ ,Q WKH WKUHH \HDUV IROORZLQJ WKH
DFTXLVLWLRQWKH FRPSDQ\ LV DEOH WR SD\ GLYLGHQGV RI PLOOLRQ
PLOOLRQ DQG PLOOLRQ WR WKH EX\RXW ¿UP $W WKH HQG RI WKH WKUHH
\HDUVWKHEX\RXW¿UPVHOOVWKHFRPSDQ\WRDODUJHULQGXVWU\SOD\HUIRU
PLOOLRQ:KDWLVWKHHTXLW\PXOWLSOHIRUWKLVWUDQVDFWLRQ"
Weighing the Costs of Debt and Equity
Lecture 35
,
QRUGHUWRIXQGRSHUDWLRQVDQGQHFHVVDU\FDSLWDOH[SHQGLWXUHV¿UPVWXUQ
WRDQ\QXPEHURISRWHQWLDOVRXUFHVLQFOXGLQJERUURZLQJPRQH\IURPD
EDQN RU RWKHU ¿QDQFLDO LQVWLWXWLRQ LVVXLQJ QRWHV RU ERQGV WR LQYHVWRUV
DQGVHOOLQJVKDUHVRIVWRFNLQWKH¿UP6RPH¿UPVLVVXHFRQYHUWLEOHERQGV
D K\EULG VHFXULW\ WKDW LV D FRPELQDWLRQ RI D ERQG WKDW SD\V LQWHUHVW DORQJ
ZLWK D VRFDOOHG ³HTXLW\ NLFNHU´ D SRWHQWLDO RU FRQWLQJHQW LQWHUHVW LQ WKH
LVVXHU¶V VWRFN 0DQ\ ¿UPV XVH D FRPELQDWLRQ RI DOO WKHVH DSSURDFKHV WR
UDLVH QHFHVVDU\ IXQGV ,Q WKLV OHFWXUH ZH¶OO ORRN DW WKH WUDGHRIIV EHWZHHQ
LVVXLQJGHEWYHUVXVHTXLW\DQGH[SORUHWKHDFFRXQWLQJ¿QDQFHDQGYDOXDWLRQ
LPSOLFDWLRQVRIVXFKGHFLVLRQV
'HEWYHUVXV(TXLW\
% ,Q WZR DFDGHPLF UHVHDUFKHUV 0HUWRQ 0LOOHU DQG )UDQFR
0RGLJOLDQL SXEOLVKHG D SDSHU HQWLWOHG ³7KH &RVW RI &DSLWDO
&RUSRUDWLRQ)LQDQFHDQGWKH7KHRU\RI,QYHVWPHQW´7KHSUHPLVH
RIWKHLUZRUNZDVWKDWWKHYDOXHRIDQ\¿UPLVLQGHSHQGHQWRIKRZ
LW¿QDQFHVLWVEXVLQHVV7KDWLVZKHWKHUD¿UP¿QDQFHVLWVEXVLQHVV
HQWLUHO\ZLWKGHEWHQWLUHO\ZLWKHTXLW\RUZLWKVRPHFRPELQDWLRQ
RIWKHWZRLVLUUHOHYDQWLQWKDWWKHYDOXHRIWKDW¿UPZLOOQRWFKDQJH
ż $OWKRXJK WKLV WKHRUHP VRXQGV VLPSOH LW LV FRQVLGHUHG D
FRUQHUVWRQH RI FRUSRUDWH ¿QDQFH DQG KDV VSDZQHG VLJQL¿FDQW
DGGLWLRQDOUHVHDUFK
ż
%
'HVSLWHWKHWKHRU\KRZHYHUWKHGHFLVLRQWRLVVXHGHEWVWRFN
or a combination of the two can, in fact, affect the overall value
RID¿UP%\FKDQJLQJWKHFDSLWDOVWUXFWXUHRID¿UPLWVYDOXH
PD\LQFUHDVHRUGHFUHDVHGHSHQGLQJRQFLUFXPVWDQFHV
$ IXQGDPHQWDO FRQFHSW LQ ¿QDQFH LV WKLV 7KH FRVW RI GHEW LV
FKHDSHU WKDQ WKH FRVW RI HTXLW\ ,QYHVWRUV LQ D FRPSDQ\¶V ERQGV
H[SHFWDORZHUUHWXUQWKDQLQYHVWRUVZKRSXUFKDVHVWRFNLQWKHVDPH
FRPSDQ\DOOHOVHHTXDO
Lecture 35: Weighing the Costs of Debt and Equity
%
*HQHUDOO\ VSHDNLQJ ZKHQ LQYHVWRUV SXUFKDVH D FRPSDQ\¶V ERQG
WKH\ DQWLFLSDWH UHFHLYLQJ SHULRGLF SD\PHQWV RI LQWHUHVW DQG D
UHSD\PHQWRIWKHERQG¶VSULQFLSDOZKHQLWPDWXUHV)RUH[DPSOHLQ
$SSOHLVVXHG\HDUVWDQGDUGERQGV$Q\RQHZKRSXUFKDVHG
RQHRIWKRVHERQGVH[SHFWHGWRUHFHLYHLQLQWHUHVWHDFK\HDU
LQ DGGLWLRQ WR WKH SULQFLSDO DPRXQW RI WKH ERQG ZKHQ LW PDWXUHV
7KHUHLVQRDGGLWLRQDOUHWXUQWRWKLVLQYHVWPHQW
%
,Q FRQWUDVW LQYHVWRUV ZKR SXUFKDVH D FRPSDQ\¶V FRPPRQ VWRFN
XQGHUVWDQGWKDWWKHUHZLOOEHPXFKPRUHYDULDELOLW\LQWKHXOWLPDWH
RXWFRPH$QGEHFDXVHRIWKLVDGGLWLRQDOULVNLQYHVWRUVH[SHFWWREH
DSSURSULDWHO\FRPSHQVDWHG
ż $OWKRXJK GHEW DOPRVW DOZD\V UHTXLUHV SHULRGLF SD\PHQWV RI
LQWHUHVWGLYLGHQGVRQVWRFNDUHQRWPDQGDWRU\WKH\DUHLVVXHG
DWWKHGLVFUHWLRQRIDFRPSDQ\¶VERDUGRIGLUHFWRUV%XWEHFDXVH
D VKDUH RI FRPPRQ VWRFN UHSUHVHQWV DQ DFWXDO RZQHUVKLS
LQWHUHVWLQWKHFRPSDQ\WKHUHLVQRFHLOLQJRQWKHUHWXUQWKDWDQ
investor might earn.
ż
%
260
,I $SSOH VWRFN JRHV XS WKLV \HDU DQG FRQWLQXHV WR SD\
GLYLGHQGV WKH FRPSDQ\¶V VWRFN RZQHUV ZLOO KDYH GRQH PXFK
EHWWHU¿QDQFLDOO\WKDQWKHERQGRZQHUV2IFRXUVHWKHÀLSVLGH
LV DOVR WUXH 7KXV VWRFNV DUH PRUH ULVN\ WKDQ ERQGV DQG
LQYHVWRUVH[SHFWDKLJKHUUHWXUQIRURZQLQJWKHP
0RUHRYHU LQ WKH HYHQW RI WKH LQVROYHQF\ RI D ¿UP GHEW KDV
SUHIHUHQFH RYHU HTXLW\ LQ EDQNUXSWF\ SURFHHGLQJV ,Q VXFK
FDVHV VWRFNKROGHUV XVXDOO\ ORVH DOO WKHLU LQYHVWPHQWV LQ WKH
¿UP $OWKRXJK ERQGKROGHUV PD\ DOVR JHW KXUW E\ WKHVH HYHQWV
WKHLU ORVVHV DUH VRPHZKDW EXIIHUHG E\ WKH IDFW WKDW WKH\ UHFHLYH
SUHIHUHQWLDOWUHDWPHQW7KXVERQGKROGHUVUHFHLYHORZHUH[SHFWHG
UHWXUQVWKDQVWRFNRUHTXLW\KROGHUVVLPSO\EHFDXVHWKH\DVVXPH
less risk.
2WKHU'HEWDQG(TXLW\&RQVLGHUDWLRQV
% $ VHFRQG VLJQL¿FDQW GLIIHUHQFH EHWZHHQ GHEW DQG HTXLW\ LV
WKDW LQWHUHVW SD\PHQWV WR ERQGKROGHUV DUH WD[ GHGXFWLEOH ZKLOH
GLYLGHQGVSDLGWRVKDUHKROGHUVDUHQRW2XUJRYHUQPHQWVXEVLGL]HV
WKH LVVXDQFH RI GHEW E\ SURYLGLQJ ¿UPV ZLWK D WD[ GHGXFWLRQ IRU
LQWHUHVWH[SHQVH7KLVHFRQRPLFFDUURWFDQEHTXLWHVLJQL¿FDQWDQG
GH¿QLWHO\HQFRXUDJHVLQFUHDVHGERUURZLQJDQGOHYHUDJH
ż )RUH[DPSOHFRQVLGHUD¿UPZLWKDFRPELQHGVWDWHDQG
IHGHUDOWD[UDWHWKDWLVVXHVERQGVWKHFRPSDQ\FDQGHGXFW
RIWKHWRWDODPRXQWLWSD\VRQWKRVHERQGV7KHDIWHUWD[
FRVWRIWKHERQGVLVDFWXDOO\RIWKHUDWHRU7KLV
LVQRWDQLQVLJQL¿FDQWGLIIHUHQFH
ż
7KXVDWWKHPDUJLQLID¿UPLVGHFLGLQJZKHWKHUWRLVVXHGHEW
RUVWRFNWKHYDOXHRIWKH¿UPFDQEHDIIHFWHGE\WKHYDOXHRI
WKHWD[VKLHOGGHULYHGIURPWKHLQWHUHVWGHGXFWLRQVRYHUWLPH
%
,IGHEWLVFKHDSHUWKDQHTXLW\DQGLVWD[IDYRUHGZK\GRQ¶W¿UPVMXVW
LVVXHGHEWLQVWHDGRIVWRFNWKHUHE\LQFUHDVLQJWKHYDOXHRIWKH¿UP"
2QHDQVZHULVWKDWXQOLNHHTXLW\GHEWKDVDPDWXULW\GDWHDQGPXVWEH
UHSDLG'HEWDOVRW\SLFDOO\UHTXLUHVSHULRGLFSD\PHQWVRILQWHUHVW$V
¿UPVFRQWLQXHWRSLOHRQGHEWWKHULVNVUHODWHGWRWKH¿UP¶VSRWHQWLDO
LQVROYHQF\RXWZHLJKWKHEHQH¿WVRIWKHDGGLWLRQDOGHEW
%
$QRWKHU IXQGDPHQWDO GLIIHUHQFH EHWZHHQ GHEW DQG HTXLW\ UHODWHV
WR FRUSRUDWH JRYHUQDQFH DQG FRQWURO 6KDUHKROGHUV FDQ HOHFW
D FRPSDQ\¶V GLUHFWRUV DQG DSSURYH FHUWDLQ PDWWHUV UHJDUGLQJ
H[HFXWLYH FRPSHQVDWLRQ PHUJHUV DQG DFTXLVLWLRQV DQG VR IRUWK
5HWDLO VKDUHKROGHUV GR QRW XVXDOO\ KROG HQRXJK VKDUHV WR VZD\
HOHFWLRQV EXW WKH\ VWLOO JHW WR YRWH ZKLOH ERQGKROGHUV W\SLFDOO\
GR QRW 8VXDOO\ WKLV ZRXOG QRW KDYH DQ LPSDFW RQ YDOXDWLRQ EXW
LWPLJKWLIDVLJQL¿FDQWQXPEHURIYRWLQJVKDUHVLQDFRUSRUDWLRQLV
KHOGE\RQHRUDIHZLQGLYLGXDOV
261
&RVWVRI'HEWDQG(TXLW\
% $VZHQRWHGGHEWJHQHUDOO\UHTXLUHVSHULRGLFWD[GHGXFWLEOHLQWHUHVW
SD\PHQWV 7KH FRVW RI GHEW Kd LV FDOFXODWHG ZLWK WKH IROORZLQJ
formula: Kd i ít ZKHUHiLVWKHLQWHUHVWUDWHRQWKHGHEWDQGt
LVWKHWD[UDWH
%
7KH FRVW RI HTXLW\ RU Ke LV WULFNLHU EHFDXVH LW LV HTXDO WR WKH
H[SHFWHG UHWXUQ WKDW DQ HTXLW\ LQYHVWRU DQWLFLSDWHV IURP RZQLQJ
VWRFNDQGWKLVH[SHFWHGUHWXUQLVLQWXUQGHULYHGIURPDVVHWSULFLQJ
PRGHOVVXFKDV&$30
ż $V \RX UHFDOO WKH &$30 IRUPXOD LV ([SHFWHG DVVHW
UHWXUQ 5LVNIUHHUDWHȕ ([SHFWHGPDUNHWUHWXUQí5LVNIUHH
UDWH ,QGLVFXVVLQJWKHFRVWRIHTXLW\WKHIRUPXODLVZULWWHQDV
follows: Ke Rf ȕî(TXLW\ULVNSUHPLXP $VVXPHIRUH[DPSOHWKDWWKH\HDUWUHDVXU\\LHOGLV
D FRPSDQ\¶V EHWD LV DQG WKH HTXLW\ ULVN SUHPLXP LV ,Q WKLV VFHQDULR WKH FRPSDQ\¶V FRVW RI HTXLW\ ZRXOG EH
î Weighted Average Cost of Capital
% 0RVW FDSLWDO SURMHFWV RU LQYHVWPHQWV DUH ¿QDQFHG ZLWK D
FRPELQDWLRQRIGHEWDQGHTXLW\7RFRPSXWHWKHLUFRVWVZHXVHWKH
ZHLJKWHG DYHUDJH FRVW RI
FDSLWDO :$&& %
262
$V DQ H[DPSOH DVVXPH
WKDW \RX SODQ WR SXUFKDVH
DKRPHIRU\RX
ZLOO SXW GRZQ
DQGERUURZWKHUHPDLQGHU
7KH mortgage has an interest
UDWH RI EHIRUH WD[HV
7R IXQG WKH GRZQ SD\PHQW \RX VROG
some stocks, which you
‹PRQNH\EXVLQHVVLPDJHVL6WRFN7KLQNVWRFN
Lecture 35: Weighing the Costs of Debt and Equity
ż
%RUURZLQJPRQH\LVRIWHQSDUWRIDQ
investment decision, both in business
and in our personal lives.
HVWLPDWHZRXOGKDYHFRQWLQXHGWRHDUQDIWHUWD[HVLI\RXKDGQ¶W
VROGWKHP<RXUFRPELQHGVWDWHDQGIHGHUDOWD[UDWHLV:KDWLV
\RXU:$&&IRUWKLVWUDQVDFWLRQ"
ż <RXWRRNRXWDORDQIRURIWKHKRPH¶VSXUFKDVHSULFH
EXWUHPHPEHUWKDWWKHLQWHUHVWLVWD[GHGXFWLEOH7KXVWKH
DIWHUWD[FRVWRIGHEWLVDFWXDOO\î í RU
%
ż
0HDQZKLOH WKH FRVW RI HTXLW\ LV WKH RSSRUWXQLW\ FRVW UHODWHG
WRKDYLQJPRQH\WLHGXSLQWKHKRXVHDVRSSRVHGWRWKHVWRFN
PDUNHW<RXHVWLPDWHGWKDWWREHDIWHUWD[HV
ż
&OHDUO\WKHFRVWRIWKHPRUWJDJHGHEWLVFKHDSHUWKDQWKHFRVW
RI WKH GRZQ SD\PHQW RU HTXLW\ ,I \RX KDG VROG ZRUWK RI VWRFN WR PDNH WKH SXUFKDVH LJQRULQJ DQ\ SRVVLEOH
FDSLWDO JDLQV WR EH SDLG WKH DIWHUWD[ FRVW RI WKH WUDQVDFWLRQ
ZRXOG EH WKXV WKH UHOHYDQW FRVW RI HTXLW\ ZRXOG EH
,QFRQWUDVWLI\RXKDGERUURZHGRIWKHSXUFKDVH
SULFH RI WKH KRXVH WKH UHOHYDQW FRVW RI FDSLWDO ZRXOG EH
MXVW
ż
+RZHYHU DV PHQWLRQHG ZH QRUPDOO\ SXUFKDVH KRXVHV
XVLQJ ERWK GHEW DQG HTXLW\ HDFK ZLWK LWV RZQ XQLTXH FRVW
7KHUHIRUHZHQHHGWRFRPSXWHWKH:$&&IRUIXQGVXVHGLQ
such transactions.
ż
,QWKHFDVHRIWKHKRPHSXUFKDVHWKH:$&&ZRXOG
VLPSO\EHîIRUWKHGHEWFRPSRQHQWSOXVî
IRUWKHHTXLW\FRPSRQHQWWKDW\LHOGV 7KH :$&& LV LPSRUWDQW IRU WKUHH UHDVRQV ,W KLJKOLJKWV WKH
GLIIHUHQWFRVWVRIGHEWDQGHTXLW\WDNLQJWD[HVLQWRDFFRXQW LW
UHÀHFWV WKH UHDOLW\ WKDW FDSLWDO LQYHVWPHQWV XVXDOO\ HPSOR\ D PL[
RIGHEWDQGHTXLW\DQG LWSURYLGHVWKHDSSURSULDWHGLVFRXQWUDWH
WREHXVHGLQFRPSXWLQJ139VWRHYDOXDWHFDSLWDOSURMHFWV7KDWLV
IRUDQ\FDSLWDOSURMHFWWRFUHDWHYDOXHLWPXVWHDUQPRUHWKDQWKH
:$&&XVHGWRPDNHWKHLQYHVWPHQW
%
7KHIRUPXODIRU:$&&LVDVIROORZV
:KHUH
Lecture 35: Weighing the Costs of Debt and Equity
Ke = FRVWRIHTXLW\
Kd FRVWRIGHEW
E PDUNHWYDOXHRI¿UP¶VHTXLW\
D PDUNHWYDOXHRI¿UP¶VGHEW
V E + D
t FRUSRUDWHWD[UDWH
Using WACC
% :HFDQXVHWKH:$&&IRUPXODWRHVWLPDWHWKHFRVWRIFDSLWDOIRU
DQ HQWLUH FRPSDQ\ )RU H[DPSOH EHORZ DUH VRPH VDOLHQW ¿JXUHV
UHJDUGLQJ,%0 XVLQJGDWD ż 7KH FRPSDQ\ KDV ORQJWHUP GHEW RXWVWDQGLQJ RI DERXW
ELOOLRQ
%
ż
%DVHG RQ LWV PRVW UHFHQW GHEW RIIHULQJ ,%0¶V SUHWD[ FRVW RI
GHEWLV
ż
7KHFRPSDQ\¶VRYHUDOOWD[UDWHLV
ż
,%0¶VVWRFNPDUNHWFDSLWDOL]DWLRQLVDERXWELOOLRQ
ż
)LQDOO\,%0¶VEHWDLV
7KH ODVW WZR SLHFHV RI LQIRUPDWLRQ ZH QHHG DUH WKH ULVNIUHH UDWH
ZKLFKLVWKH\LHOGRQ\HDUWUHDVXU\ERQGVDQGWKHRYHUDOOHTXLW\
ULVNSUHPLXPZKLFKLVWKHDPRXQWZHH[SHFWWKHVWRFNPDUNHWWR
RXWSHUIRUP ULVNIUHH LQYHVWPHQWV /HW¶V DVVXPH D ULVNIUHH UDWH RI
DQGDQHTXLW\ULVNSUHPLXPRI
%
7R FRPSXWH ,%0¶V RYHUDOO :$&& ZH EHJLQ E\ FRPSXWLQJ WKH
FRPSDQ\¶VDIWHUWD[FRVWRIGHEWî í %
7RFRPSXWHWKHHVWLPDWHGFRVWRIHTXLW\ZHXVH&$30:HVWDUW
ZLWKWKHULVNIUHHUDWHKHUHDQGDGGWRLWWKHEHWDZHLJKWHG
HTXLW\ULVNSUHPLXPKHUHHTXDOWRPXOWLSOLHGE\7KXVWKH
FRVWRIHTXLW\LVHVWLPDWHGWREH î %
)LQDOO\RQFHZHKDYHHVWLPDWHGWKHFRVWVRIERWKWKHGHEWDQGWKH
HTXLW\ZHFDQFRPSXWHWKH:$&&EDVHGRQWKHUHODWLYHYDOXHVRI
HDFKWKDW,%0KDVLQLWVFXUUHQWFDSLWDOVWUXFWXUH
ż )LUVW ZH DGG WKH FRPSDQ\¶V GHEW ELOOLRQ DQG WKH
PDUNHW YDOXH RI LWV FRPPRQ VWRFN ELOOLRQ7KH WRWDO LV
ELOOLRQ
ż
'LYLGLQJ ELOOLRQ E\ ELOOLRQ ZH VHH WKDW HTXLW\
UHSUHVHQWVRIWKHFRPSDQ\¶VFDSLWDOVWUXFWXUH7KHUHIRUH
GHEWUHSUHVHQWVRI,%0¶VFDSLWDOVWUXFWXUH
ż
7KH:$&&LVWKXVî WKHFRVWRIHTXLW\ î WKH DIWHUWD[ FRVW RI GHEW 7KH UHVXOW LV DERXW 7KLV ZRXOG EH WKH DSSURSULDWH GLVFRXQW UDWH ,%0 PLJKW XVH
WRGD\ LI LW ZDV IXQGLQJ D FDSLWDO SURMHFW XVLQJ ERWK \HDU
ERQGVDQGVRPHHTXLW\LQDERXWSURSRUWLRQV
Suggested Reading
%UHDOH\0\HUVDQG$OOHQ3ULQFLSOHVRI&RUSRUDWH)LQDQFH, FKDSWHU
Mayo, %DVLF)LQDQFHFKDSWHU
Questions to Consider
1. $VWKHRZQHURIDVXFFHVVIXOIDVWIRRGIUDQFKLVH\RXKDYHEHHQRIIHUHG
WKHRSSRUWXQLW\WRRSHQDVHFRQGORFDWLRQLQDQHLJKERULQJFRPPXQLW\
+RZHYHU RSHQLQJ WKH VHFRQG VWRUH ZLOO QRW EH LQH[SHQVLYH \RX
HVWLPDWHWKHWRWDOFDSLWDOFRPPLWPHQWWREH<RXUORFDOEDQN
KDVRIIHUHGWRORDQ\RXIRU¿YH\HDUVDWDFRVWRIHDFK
\HDU<RXZRXOGQHHGWRVHOOVRPHVWRFNDQGERUURZDJDLQVW\RXUOLIH
LQVXUDQFH SROLF\ IRU WKH UHPDLQLQJ QHHGHG DQG KLVWRULFDOO\
WKHVH RWKHU LQYHVWPHQWV KDYH LQFUHDVHG E\ HDFK \HDU<RX H[SHFW
WKDW\RXUFRPELQHGIHGHUDODQGVWDWHWD[UDWHZLOODYHUDJHRYHUWKH
QH[WVHYHUDO\HDUV:KDWLVWKH:$&&IRUWKLVLQYHVWPHQW"
2. 8VLQJ WKH :$&& FRPSXWHG DERYH DVVXPH WKDW \RX H[SHFW WKH QHZ
Lecture 35: Weighing the Costs of Debt and Equity
ORFDWLRQ WR JHQHUDWH DIWHUWD[ FDVK ÀRZV RI SHU \HDU IRU HDFK
RIWKHQH[W¿YH\HDUV DWWKHHQGRIHDFK\HDU DQGWKDWWKHORFDWLRQZLOO
EHZRUWKDWWKHHQGRIWKH¿YH\HDUV:KDWLVWKH139RIWKH
LQYHVWPHQW"6KRXOG\RXRSHQXSWKLVQHZORFDWLRQ"
266
+RZWR9DOXHD&RPSDQ\¶V6WRFN
Lecture 36
A
V ZH¶YH VDLG WKURXJKRXW WKHVH OHFWXUHV LQYHVWRUV VKRXOG VWULYH WR
PDNHYDOXHFUHDWLQJLQYHVWPHQWGHFLVLRQV,Q¿QDQFHWHUPVZH¶YH
GHVFULEHG D YDOXHFUHDWLQJ LQYHVWPHQW DV RQH WKDW KDV D SRVLWLYH
139ZKHUHWKHEHQH¿WVUHFHLYHGIURPWKHLQYHVWPHQWRYHUWLPHH[FHHGWKH
DPRXQWLQYHVWHGDOOYLHZHGLQWRGD\¶VGROODUV:KHQLQYHVWRUVDQGFDSLWDO
SURYLGHUV ORVH VLJKW RI WKLV IXQGDPHQWDO SULQFLSOH HFRQRPLF FDWDVWURSKH
PD\HQVXH7KXVLQRXU¿QDOOHFWXUHRQ¿QDQFHDQGDFFRXQWLQJZH¶OONHHSD
FORVHH\HRQWKHIXQGDPHQWDOV,QSDUWLFXODUZH¶OOVHHKRZPDQ\RIWKHWRROV
ZH¶YH DOUHDG\ GLVFXVVHG FDQ KHOS XV GHWHUPLQH ZKHWKHU D SDUWLFXODU VWRFN
PLJKWEHXQGHURURYHUYDOXHG
Reviewing Terms
% /HW¶V EHJLQ E\ UHYLHZLQJ VRPH GH¿QLWLRQV VWDUWLQJ ZLWK
(%,7'$ 7KLV PHWULF LV PRVW HDVLO\ FDOFXODWHG E\ VWDUWLQJ ZLWK
DFRPSDQ\¶VRSHUDWLQJLQFRPHDQGDGGLQJEDFNGHSUHFLDWLRQDQG
DPRUWL]DWLRQH[SHQVH
%
$VHFRQGLPSRUWDQWWHUPLVIUHHFDVKÀRZVWKDWLVWKHFDVKÀRZV
JHQHUDWHGIURPD¿UP¶VQRUPDODQGUHFXUULQJRSHUDWLRQVOHVVZKDW
LWVSHQGVRQFDSLWDOH[SHQGLWXUHV
ż 7KLV GH¿QLWLRQ LV SHUKDSV WKH PRVW FULWLFDO RQH IRU VWRFN
YDOXDWLRQEHFDXVHWKHUHVLGXDOFDVKWKDWD¿UPJHQHUDWHVDIWHU
LQYHVWLQJ LQ LWV RZQ EXVLQHVV VKRXOG VXSSRUW LWV VWRFN SULFH
7KDWLVZKHQ\RXSXUFKDVHDVWRFN\RXDUHUHDOO\SXUFKDVLQJD
VKDUHRIDFRPSDQ\¶VIXWXUHIUHHFDVKÀRZV
ż
2QH NH\ DWWULEXWH RI IUHH FDVK ÀRZV LV WKDW WKH\ VKRXOG EH
XQOHYHUHGIUHHRIWKHLPSDFWRIDQ\GHEWRUOHYHUDJHDFRPSDQ\
might have.
267
/HFWXUH+RZWR9DOXHD&RPSDQ\¶V6WRFN
%
7KHWKLUGGH¿QLWLRQZHQHHGWRUHYLHZLVPDUNHWFDSLWDOL]DWLRQWKH
WRWDOVWRFNPDUNHWYDOXHIRUDSDUWLFXODUFRPSDQ\,WLVFDOFXODWHGE\
PXOWLSO\LQJWKHWRWDOQXPEHURIVKDUHVRIRXWVWDQGLQJVWRFNE\WKH
VWRFNSULFH
%
7KHODVWGH¿QLWLRQZHQHHGLVHQWHUSULVHYDOXH7KLVLVWKHVXPRI
WKHPDUNHWYDOXHRIDFRPSDQ\¶VHTXLW\DQGWKHPDUNHWYDOXHRIWKH
FRPSDQ\¶VQHWGHEW²LWVORQJWHUPGHEWOHVVLWVFDVK,IDFRPSDQ\
KDV PLOOLRQ RI ORQJWHUP GHEW RXWVWDQGLQJ DQG FDVK LQ WKH
EDQNRIPLOOLRQLWVQHWGHEWLVPLOOLRQ,IDFRPSDQ\KDVD
PDUNHWFDSLWDOL]DWLRQRIPLOOLRQDQGQHWGHEWRIPLOOLRQ
LWV HQWHUSULVH YDOXH LV PLOOLRQ (QWHUSULVH YDOXH UHÀHFWV WKH
WRWDOPDUNHWYDOXHRID¿UP²WKHPLQLPXPDPRXQWDEX\HUZRXOG
KDYHWRSD\WRSXUFKDVHWKH¿UP
Fundamental Analysis
% 7KH JHQHUDO DSSURDFK WR YDOXLQJ VWRFNV LV NQRZQ DV fundamental
analysisZKLFKHQWDLOVDQH[DPLQDWLRQRITXDQWLWDWLYHDQGTXDOLWDWLYH
IDFWRUV WKDW PLJKW DIIHFW D FRPSDQ\¶V YDOXH 7KHVH PLJKW LQFOXGH
WKH FRPSDQ\¶V ¿QDQFLDO VWDWHPHQWV DQG UDWLRV LWV SURMHFWHG IUHH
FDVK ÀRZV LWV PDQDJHPHQW WHDP VWUDWHJ\ DQG FRPSHWLWLRQ DQG
HYHQPDFURHFRQRPLFIDFWRUV²DOOHYDOXDWHGLQWKHFRQWH[WRIZKDWD
FRPSDQ\LVVHOOLQJIRULQWKHPDUNHWSODFH7KHJRDORIIXQGDPHQWDO
DQDO\VLVLVWRGHWHUPLQHZKHWKHUDVWRFNLVXQGHUYDOXHGRURYHUYDOXHG
268
%
)RU YDOXDWLRQ LW¶V LPSRUWDQW WR UHYLHZ D FRPSDQ\¶V PDUNHW
FDSLWDOL]DWLRQDQGHQWHUSULVHYDOXHFRPSDUHGWRDFFRXQWLQJGDWDRU
an accounting metric. Some common valuation metrics involve the
SULFHHDUQLQJVUDWLRDVZHOODVSULFHWRVDOHVDQGSULFHWR(%,7'$
UDWLRV2QFHWKHVHUDWLRVDUHFDOFXODWHGIRURQHFRPSDQ\WKH\DUH
FRPSDUHGWRWKHUDWLRVRIRWKHUFRPSDQLHVLQWKHVDPHLQGXVWU\
%
/HW¶V ZDON WKURXJK DQ H[DPSOH XVLQJ $SSOH $V RI PLG
$SSOHKDGDERXWELOOLRQVKDUHVRXWVWDQGLQJDQGDVWRFNSULFHRI
DERXWDVKDUH,WVPDUNHWFDSLWDOL]DWLRQZDVWKHUHIRUHDERXW
ELOOLRQ$SSOH DOVR KDG GHEW RXWVWDQGLQJ RI ELOOLRQ DQG
FDVKDQGOLTXLGVHFXULWLHVRIQHDUO\ELOOLRQ
ż
*LYHQ WKHVH PHWULFV $SSOH¶V HQWHUSULVH YDOXH LV ELOOLRQELOOLRQ íELOOLRQ ELOOLRQ
ż
7R FDOFXODWH$SSOH¶V SULFHHDUQLQJV UDWLR ZH GLYLGH LWV VWRFN
SULFHE\LWVHDUQLQJVSHUVKDUH ż
7RFRPSXWHWKHSULFHWR(%,7'$UDWLRZHGLYLGHWKHPDUNHW
FDSLWDOL]DWLRQE\(%,7'$ELOOLRQELOOLRQ ż
:H WKHQ ZRXOG FRPSDUH WKHVH UDWLRV WR WKH UDWLRV RI
FRPSHWLWRUVWREURDGPDUNHWLQGLFHVVXFKDVWKH6 3DQG
WRKLVWRU\&ROOHFWLYHO\WKHVHFRPSDULVRQVZRXOGHQDEOHXVWR
PDNH VRPH MXGJPHQWV DERXW ZKHWKHU $SSOH¶V VWRFN DSSHDUV
XQGHURURYHUYDOXHG
Discounted Cash Flow Analysis
% 3HUKDSV WKH PRVW LPSRUWDQW IXQGDPHQWDO DQDO\VLV XVHG WR YDOXH
VWRFNVLQYROYHVGLVFRXQWHGFDVKÀRZPRGHOVZKLFKLQWHJUDWHVXFK
FRQFHSWVDVIUHHFDVKÀRZVWKHWLPHYDOXHRIPRQH\GLVFRXQWUDWHV
DQGWKHFRVWRID¿UP¶VFDSLWDO
%
$WWKHPRVWEDVLFOHYHODQ\FRPSDQ\VKRXOGEHZRUWKWKH139RI
LWVH[SHFWHGIXWXUHIUHHFDVKÀRZV$IWHUDOOZKHQZHEX\DVWRFN
ZHDUHSXUFKDVLQJDSURUDWDVKDUHLQDOORIWKHIXWXUHHDUQLQJVDQG
FDVK ÀRZV WKDW FRPSDQ\ PLJKW JHQHUDWH +RZHYHU ZH NQRZ WKDW
IXWXUHFDVKÀRZVDUHZRUWKOHVVWKDQFXUUHQWRQHVDQGWKDWWKHUHLV
LQKHUHQW XQFHUWDLQW\ DQG ULVN LQ IXWXUH FDVK ÀRZV7KXV ZH QHHG
WR WKLQN DERXW KRZ WR DSSURSULDWHO\ GLVFRXQW WKHP WR SXW WKRVH
SURMHFWHGIXWXUHFDVKÀRZVLQWRWKHLUFXUUHQWHTXLYDOHQWV
%
'LVFRXQWHG HTXLW\ RU VWRFN YDOXDWLRQ PRGHOV LQYROYH VHYHUDO
VWHSV 7KH ¿UVW VWHS LV WR FRPSXWH WKH FRPSDQ\¶V IUHH FDVK ÀRZV
IRUWKHSDVWIHZ\HDUVE\H[DPLQLQJKLVWRULFDO¿QDQFLDOVWDWHPHQWV
SULPDULO\WKHVWDWHPHQWRIFDVKÀRZV7KHVHFRQGVWHSLVWRSURMHFW
IXWXUHIUHHFDVKÀRZVEDVHGRQKLVWRULFDODQDO\VLVDQGLQWXLWLRQ
269
‹VHUYLFNX]L6WRFN7KLQNVWRFN
/HFWXUH+RZWR9DOXHD&RPSDQ\¶V6WRFN
3UHGLFWLQJIXWXUHFDVKÀRZVLVHVSHFLDOO\FKDOOHQJLQJIRUWHFKQRORJ\¿UPV
ZKHUHQHZSURGXFWVDUHFRQVWDQWO\EHLQJLQWURGXFHGDQGQHZFRPSHWLWRUV
routinely emerge.
270
ż
,QWKHORQJUXQZHH[SHFWFRPSDQLHVWRJURZDWVRPHVWHDG\
UDWHRQFHWKH\KLWDFHUWDLQVL]HRUOHYHORIVDOHV0RVWDQDO\VWV
DQGHFRQRPLVWVFRQVLGHUDJURZWKUDWHRIWRD\HDUWREH
UHDVRQDEOHRQFHDFRPSDQ\UHDFKHVDFHUWDLQVL]H
ż
+RZHYHU IRU VRPH ¿UPV HVSHFLDOO\ WKRVH LQ WHFKQRORJ\ ZH
DVVXPH VWURQJHU JURZWK UDWHV IRU D SHULRG IROORZHG E\ PRUH
QRUPDO DQG PRGHVW JURZWK UDWHV 2I FRXUVH WKLV GHSHQGV RQ
WKHVSHFL¿FFRPSDQ\DQGWKHLQGXVWU\LQZKLFKLWRSHUDWHV
%
2QFHZHKDYHSUHGLFWHGWKHFRPSDQ\¶VIXWXUHIUHHFDVKÀRZVZH
PXVWGLVFRXQWWKHPWRSUHVHQWYDOXHHTXLYDOHQWV7RGRWKLVZHXVH
WKH¿UP¶V:$&&
%
$WWKLVSRLQWZHZLOOKDYHRXUEHVWHVWLPDWHRIWKHSUHVHQWYDOXH
RI WKH FRPSDQ\¶V H[SHFWHG IXWXUH IUHH FDVK ÀRZV ZKLFK LV LQ
HVVHQFHDQHVWLPDWHRILWVRYHUDOOYDOXH:HFDQWKHQFRPSDUHWKLV
UHVXOWWRWKHDFWXDOHQWHUSULVHYDOXHRIWKH¿UPDQGPDNHDQLQLWLDO
LQYHVWPHQW FRQFOXVLRQ DERXW ZKHWKHU WKH FRPSDQ\ DSSHDUV RYHU
RUXQGHUYDOXHG
%
%HIRUH UHDFKLQJ D ¿QDO FRQFOXVLRQ ZH VKRXOG DOVR VWHS EDFN DQG
UHÀHFW RQ RXU DQDO\VLV DQG DVVXPSWLRQV 3HUKDSV RXU SURMHFWHG
IXWXUHFDVKÀRZVDUHDJJUHVVLYHRURYHUO\FRQVHUYDWLYH:HPLJKW
PRGLI\ RXU DVVXPSWLRQV DQG SURMHFWHG JURZWK UDWHV WR VHH KRZ
WKRVHDGMXVWPHQWVFKDQJHRXUFRQFOXVLRQV
Dividend Discount Model
% /HW¶V DSSO\ WKH VWHSV LQ GLVFRXQWHG FDVK ÀRZ DQDO\VLV WR D UHDO
ZRUOG HQWHUSULVH DQ HOHFWULF XWLOLW\ FDOOHG 6RXWKHUQ &RPSDQ\$V
RILWVFRPPRQVWRFNVROGIRUDERXWDVKDUHDQGLWSDLG
DQDQQXDOGLYLGHQGRISHUVKDUH,QWKHVHYHUDO\HDUVSULRUWR
6RXWKHUQ &RPSDQ\ LQFUHDVHG WKH GLYLGHQG E\ DERXW WR
HDFK\HDU
%
$V D UHJXODWHG XWLOLW\ FRPSDQ\ 6RXWKHUQ &RPSDQ\¶V IXWXUH
JURZWKZLOOOLNHO\EHPRGHVWLQOLQHZLWKWKHRYHUDOOJURZWKLQWKH
HFRQRP\0XFKRILWVUHWXUQWRVKDUHKROGHUVZLOOOLNHO\FRPHLQWKH
IRUPRIFDVKGLYLGHQGV
%
:KDWLV6RXWKHUQ&RPSDQ\¶VVWRFNZRUWK"/HW¶VDVVXPHWKDWQH[W
\HDU¶VGLYLGHQGZLOOLQFUHDVHWRDERXWDVKDUH/HW¶VIXUWKHU
DVVXPHD:$&&RIDQGWKDWIXWXUHGLYLGHQGVZLOOFRQWLQXHWR
LQFUHDVHE\MXVWHDFK\HDU*LYHQWKHVHDVVXPSWLRQVFDQZHXVH
DGLVFRXQWPRGHOWRHVWLPDWHDYDOXHIRU6RXWKHUQ&RPSDQ\"
%
6RXWKHUQ&RPSDQ\VWRFNDOPRVWVRXQGVOLNHDJURZLQJSHUSHWXLW\DQ
LQYHVWPHQWSD\LQJDGLYLGHQGWKDWLVH[SHFWHGWRLQFUHDVHHDFK\HDU
7KHVKRUWFXWIRUFDOFXODWLQJWKHSUHVHQWYDOXHRIDJURZLQJSHUSHWXLW\
LVWRGLYLGHWKHFDVKÀRZSURMHFWHGIRUWKHQH[W\HDUE\WKHGLIIHUHQFH
EHWZHHQWKHGLVFRXQWUDWHDQGWKHH[SHFWHGIXWXUHJURZWKUDWH
271
Plugging in the numbers, we get:
7KLVYDOXDWLRQDSSURDFKLVNQRZQDVWKHGLYLGHQGGLVFRXQWPRGHO.
/HFWXUH+RZWR9DOXHD&RPSDQ\¶V6WRFN
%
7KHSUREOHPZLWKWKHGLYLGHQGGLVFRXQWPRGHOLVWKDWPDQ\¿UPV
SD\ RQO\ PRGHVW GLYLGHQGV RU QR GLYLGHQGV DW DOO 7KHUHIRUH ZH
QHHG D PRUH UREXVW GLVFRXQW PRGHO RQH EDVHG RQ WKH FRPSDQ\¶V
RYHUDOO SURMHFWHG IUHH FDVK ÀRZV GLVFRXQWHG WR SUHVHQW YDOXH
%HFDXVH WKLV DSSURDFK SURYLGHV DQ RYHUDOO HQWHUSULVH YDOXH ZH
ZLOOWKHQQHHGWREDFNLQWRZKDWRXUPRGHOPLJKWWHOOXVDERXWWKH
FRPSDQ\¶VVWRFNSULFH
Computing Free Cash Flows
% ,QDQHDUOLHUOHFWXUHZHGLVFXVVHGDVKRUWFXWPHDVXUHRIFDOFXODWLQJ
IUHHFDVKÀRZVVXEWUDFWLQJ&$3(;VIURPD¿UP¶VRSHUDWLQJFDVK
ÀRZV:H DOVR VDZ WKDW WKLV PHWULF UHÀHFWV WKH ¿UP¶V OHYHUDJH RU
GHEW DQG WKDW ZH PXVW XQOHYHU WKH RSHUDWLQJ FDVK ÀRZV DV D ¿UVW
VWHS7RGRWKLVZHDGGEDFNWRRSHUDWLQJFDVKÀRZVWKHDPRXQWRI
LQWHUHVWWKHFRPSDQ\SDLGGXULQJWKH\HDUDIWHUWD[HV
%
272
/HW¶V ZDON WKURXJK DQ H[DPSOH XVLQJ 1LNH WKH JOREDO DWKOHWLF
DSSDUHOFRPSDQ\)RUWKH¿VFDO\HDU1LNHUHSRUWHGFDVKÀRZV
IURP RSHUDWLRQV RI ELOOLRQ &$3(;V RI PLOOLRQ LQWHUHVW
SDLGRIPLOOLRQDQGDWD[UDWHRI
ż 7R FRPSXWH IUHH FDVK ÀRZV ZH VWDUW ZLWK FDVK ÀRZV IURP
RSHUDWLRQV DQG DGG EDFN WKH DIWHUWD[ FRVW RI LQWHUHVW 1LNH
LQFXUUHG GXULQJ WKH \HDU %HFDXVH 1LNH SDLG PLOOLRQ
LQ LQWHUHVW EHIRUH WD[HV DQG EHFDXVH LQWHUHVW FRVWV DUH WD[
GHGXFWLEOH ZH FDQ HVWLPDWH WKDW 1LNH¶V DIWHUWD[ LQWHUHVW FRVW
ZDVDERXWPLOOLRQRUPLOOLRQî í ż
%
7KXV1LNH¶VDQQXDOIUHHFDVKÀRZVZHUHELOOLRQ
FDOFXODWHG DV IROORZV ELOOLRQ PLOOLRQ í PLOOLRQ$JDLQWKLV¿JXUHUHSUHVHQWVWKHDPRXQWRIFDVK1LNH
JHQHUDWHG IURP RSHUDWLQJ DQG LQYHVWLQJ LQ LWV FRUH EXVLQHVV
DVVXPLQJWKHFRPSDQ\KDGQRGHEWDWDOO
/HW¶V QRZ GR D GLVFRXQWHG FDVK ÀRZ DQDO\VLV WR DGGUHVV WKH
TXHVWLRQ+RZPXFKVKRXOG1LNH¶VVWRFNVHOOIRU"
ż %HFDXVH1LNHLVDODUJHHVWDEOLVKHGFRPSDQ\ZHFDQDVVXPH
that it will continue to grow at a rate in line with the overall
JOREDOHFRQRP\VD\DQQXDOO\7KXVZHZRXOGDVVXPHWKDW
1LNH¶V¿VFDOIUHHFDVKÀRZVZRXOGEHELOOLRQ²
KLJKHUWKDQIUHHFDVKÀRZV
ż
7RYDOXH1LNHRYHUDOOZHQHHGWRFRPSXWHWKLVHVWLPDWHG
IUHHFDVKÀRZDVDJURZLQJSHUSHWXLW\
Here, g RU WKH SUHGLFWHG DQQXDO JURZWK UDWH LV ,I ZH
DVVXPH1LNH¶V:$&&WREHWKHFRPSDQ\ZRXOGEHZRUWK
ELOOLRQ
%
9DOXLQJ VWRFNV LQWHJUDWHV PDQ\ RI WKH FRQFHSWV ZH KDYH FRYHUHG
LQ WKHVH OHFWXUHV :H VWDUW ZLWK IUHH FDVK ÀRZV GHULYHG IURP
DFFRXQWLQJ GLVFORVXUHV :H WKHQ FRQVLGHU WKH FRPSDQ\¶V FRVW RI
FDSLWDODQGLQSXWLWVDQWLFLSDWHGIXWXUHJURZWKUDWH)RUVWDEOHDQG
ZHOOHVWDEOLVKHGFRPSDQLHVWKLVH[HUFLVHLVIDLUO\VWUDLJKWIRUZDUG
)RU FRPSDQLHV WKDW DUH VWLOO JURZLQJ UDSLGO\ VXFK DV 7HVOD RU
1HWÀL[ZHZRXOGQHHGWRSURMHFWIXWXUHFDVKÀRZVHDFK\HDUXQWLO
WKH\VWDELOL]HWKHQGLVFRXQWDOOIXWXUHFDVKÀRZVDFFRUGLQJO\
Suggested Reading
%UHDOH\0\HUVDQG$OOHQ3ULQFLSOHVRI&RUSRUDWH)LQDQFH, FKDSWHUV
&ROOLQV-RKQVRQ0LWWHOVWDHGW5HYVLQHDQG6RIIHU)LQDQFLDO5HSRUWLQJDQG
AnalysisFKDSWHU
'DPDGRUDQThe Little Book of Valuation.
(DVWRQ0F$QDOO\6RPPHUVDQG=KDQJ)LQDQFLDO6WDWHPHQW$QDO\VLVDQG
ValuationFKDSWHUV±
Questions to Consider
1. <RXDUHFRQVLGHULQJLQYHVWLQJLQ+RPH'HSRWVWRFNEXWZRXOGOLNHWR
FRPSDUHWKHFRPSDQ\¶VUHFHQWRSHUDWLQJSHUIRUPDQFHWRLWVFRPSHWLWRUV
:KDWDUHVRPHFRPSDQLHVWKDWFRPSHWHDJDLQVW+RPH'HSRWWKDW\RX
FRXOGXVHIRUFRPSDULVRQ"
2. $VVXPH WKH IROORZLQJ IRU D SRWHQWLDO FRPSDQ\ \RX DUH FRQVLGHULQJ
/HFWXUH+RZWR9DOXHD&RPSDQ\¶V6WRFN
LQYHVWLQJLQ)XUWKHUDVVXPHWKDWWKHFRPSDQ\KDVEHHQLQEXVLQHVVIRU
VRPHSHULRGRIWLPHDQGRSHUDWHVLQDIDLUO\VWDEOHLQGXVWU\
%
0RVWUHFHQWDQQXDOFDVKÀRZVIURPRSHUDWLRQVPLOOLRQ
%
,QWHUHVWH[SHQVHLQPRVWUHFHQW¿VFDO\HDUPLOOLRQ
%
3URMHFWHGDQQXDOJURZWKUDWHLQFDVKÀRZV
%
7D[UDWH
%
$QQXDODQWLFLSDWHGIXWXUHFDSLWDOH[SHQGLWXUHVPLOOLRQ
%
:$&&
%DVHGRQWKLVLQIRUPDWLRQZKDWLVWKHFRPSDQ\¶VHVWLPDWHGHQWHUSULVH
YDOXH RYHUDOO YDOXH " +RZ GRHV WKH YDOXH FKDQJH DV WKH FRPSDQ\¶V
H[SHFWHGIXWXUHFDVKÀRZVLQFUHDVH"+RZGRHVLWFKDQJHLIWKHWD[UDWH
GHFUHDVHV"+RZGRHVLWFKDQJHLIWKHFRPSDQ\¶V:$&&LQFUHDVHV"
Critical Business Skills:
Organizational Behavior
Clinton O. Longenecker, Ph.D.
Critical Business Skills: Organizational Behavior
Scope:
:
H DOO ZRUN LQ DOO W\SHV RI RUJDQL]DWLRQV VPDOO ODUJH KLJKWHFK
QRWIRUSUR¿WIDPLO\EXVLQHVVHVHQWUHSUHQHXULDOVWDUWXSVSXEOLF
DQG JRYHUQPHQW VHFWRU²MXVW WR PHQWLRQ D IHZ :KDW PDNHV
ZRUNLQJLQRUJDQL]DWLRQVDQLQWHUHVWLQJDQGDWWLPHVFKDOOHQJLQJSURSRVLWLRQ
LV WKH IDFW WKDW WKHVH HQWHUSULVHV DUH PDGH XS RI KXPDQ EHLQJV $QG RI
FRXUVHHDFKRIWKHVHKXPDQEHLQJVKDVKLVRUKHURZQXQLTXHSHUVRQDOLW\
WDOHQWVPRWLYHVFRPPXQLFDWLRQVW\OHVDQGSHUVRQDOLGLRV\QFUDVLHVWKDWFDQ
make going to work a blessing or a curse.
+XPDQEHLQJVDUHVRFLDOFUHDWXUHVDQGKXPDQEHKDYLRUZLWKLQRUJDQL]DWLRQV
WHQGV WR IROORZ FHUWDLQ UHFRJQL]DEOH SDWWHUQV 7KH ¿HOG RI RUJDQL]DWLRQDO
EHKDYLRU ZDV HVWDEOLVKHG WR VWXG\ WKRVH SDWWHUQV DQG WR GHYHORS SUDFWLFHV
IRUEULQJLQJRXWWKHEHVWLQSHRSOHLQWKHZRUNSODFH1RERG\WHOOV\RXDERXW
PRVW RI WKRVH SUDFWLFHV ZKHQ \RX MRLQ DQ RUJDQL]DWLRQ DQG RQFH \RX DUH
ZRUNLQJDZD\DWDGHPDQGLQJMRELW¶VHDV\WRORVHWUDFNRIZKDW\RXUHDOO\
QHHGWREHGRLQJWRVXFFHHGLQ\RXUSRVLWLRQ²DQGWROHDGRWKHUVWRGRWKH
VDPH,QWKLVVHFWLRQRIWKHFRXUVHWKHQZHZLOOOHDUQWKHSUDFWLFHVWKDWDUH
PRVW LPSRUWDQW IRU RUJDQL]DWLRQDO VXFFHVV ZLWKLQ \RXU HQWHUSULVH²ERWK DV
DQHPSOR\HHDQGDVDOHDGHURUSRWHQWLDOOHDGHU
2XUVWXG\RIRUJDQL]DWLRQDOEHKDYLRUZLOODWWHPSWWRGRWZRFULWLFDOWKLQJV
)LUVWLWZLOOKHOSXVXQGHUVWDQGZK\SHRSOHEHKDYHWKHZD\WKH\GRDWZRUN
6HFRQG LW ZLOO KHOS XV GLVFRYHU ZKDW OHDGHUV DQG SURIHVVLRQDOV FDQ DQG
VKRXOG GR WR EULQJ RXW WKH YHU\ EHVW LQ WKH SHRSOH WKDW ZRUN ZLWKLQ WKHLU
RUJDQL]DWLRQV :H ZLOO ORRN DW WKH FULWLFDO FRQFHSWV DQG VWUDWHJLHV WKDW ZH
FDQ DOO XVH WR PD[LPL]H WKH SHUIRUPDQFH DQG MRE VDWLVIDFWLRQ RI HYHU\RQH
LQYROYHGLQPDNLQJDQRUJDQL]DWLRQVXFFHVVIXO
,Q VKRUW XQGHUVWDQGLQJ RUJDQL]DWLRQDO EHKDYLRU LV UHDOO\ DOO DERXW OHDUQLQJ
KRZWRFUHDWH³SHRSOHSRZHU´LQWKHZRUNSODFH:HZLOOORRNDWWKHVFLHQFHRI
KXPDQEHKDYLRUDQGXVLQJWKRVH¿QGLQJVZHZLOOGHYHORSWRROVWRKHOSSXW
SHRSOHLQWKHEHVWSRVLWLRQWRVXFFHHG$VZH¶OOVHHDWKRURXJKXQGHUVWDQGLQJ
279
RI RUJDQL]DWLRQDO EHKDYLRU FDQ KHOS DOO RI XV FUHDWH FRPSHWLWLYH DGYDQWDJH
ZLWKSHRSOH²DQGWKDW¶VDFULWLFDODQGYLWDOVNLOOIRURUJDQL]DWLRQDOVXFFHVVLQ
the 21st century.
,QWKHVHOHFWXUHVZHZLOOH[SORUHVXFKWRSLFVDVFDUHHUVXFFHVVDQGVXUYLYDO
WKHFULWLFDOQDWXUHRIOHDGHUVKLSWKHLPSRUWDQFHRIJUHDWLQWHUSHUVRQDOVNLOOV
DQG HPRWLRQDO LQWHOOLJHQFH DQG HIIHFWLYH FRPPXQLFDWLRQ ZLWK FRZRUNHUV
DQGHPSOR\HHV,QDGGLWLRQZHZLOOOHDUQKRZWRFUHDWHDQRUJDQL]DWLRQDO
FOLPDWH WKDW PD[LPL]HV KXPDQ SHUIRUPDQFH LQ WKH ZRUNSODFH KRZ WR
FUHDWH DQG IRVWHU WHDPZRUN ZLWK WKH SHRSOH DURXQG XV DQG KRZ HIIHFWLYH
FRDFKLQJ DQG IHHGEDFN FDQ QXUWXUH JUHDW SHUIRUPDQFH 2WKHU WRSLFV
LQFOXGH XQGHUVWDQGLQJ SRZHU DQG LQÀXHQFH DW ZRUN PDQDJLQJ \RXU ERVV
XQGHUVWDQGLQJDQGUHVROYLQJFRQÀLFWDQGDSSUHFLDWLQJWKHHWKLFDOFKDOOHQJHV
DVVRFLDWHGZLWKVXFFHVV)LQDOO\ZHZLOOORRNDWKRZWROHDGDQGIDFLOLWDWH
WKHSURFHVVRIRUJDQL]DWLRQDOFKDQJHDQGKRZWRGHYHORSRXUVHOYHVWRPHHW
WKHFKDQJLQJGHPDQGVRIRXUMREV7KURXJKRXWWKLVVHFWLRQRIWKHFRXUVHWKH
OHFWXUHVZLOOFKDOOHQJH\RXUWKLQNLQJDVN\RXWRORRNLQWKHPLUURUDQGJLYH
\RXVSHFL¿FDFWLRQDVVLJQPHQWVWRHQVXUHWKDW\RXNQRZQRWRQO\ZKDWWRGR
EXWKRZWRGRLW
Scope
,Q D QXWVKHOO WKHVH OHFWXUHV ZLOO EHWWHU HTXLS \RX WR EH VXFFHVVIXO LQ \RXU
MRE GHOLYHU EHWWHU UHVXOWV IRU \RXU HPSOR\HU DQG FUHDWH D WUDFN UHFRUG RI
SHUIRUPDQFHWKDWZLOOOHDGWRFDUHHUVXFFHVVŶ
280
Achieving Results in Your Organization
Lecture 37
H
XPDQ EHLQJV DUH VRFLDO FUHDWXUHV DQG KXPDQ EHKDYLRU ZLWKLQ
RUJDQL]DWLRQVWHQGVWRIROORZFHUWDLQUHFRJQL]DEOHSDWWHUQV7KH¿HOG
RI RUJDQL]DWLRQDO EHKDYLRU ZDV HVWDEOLVKHG WR VWXG\ WKRVH SDWWHUQV
DQGWRGHYHORSSUDFWLFHVIRUEULQJLQJRXWWKHEHVWLQSHRSOHLQWKHZRUNSODFH
7KLVOHFWXUHZLOOLQWURGXFH\RXWRWKDW¿HOGDQGJLYH\RXDQLPSRUWDQWWRRO
IRUDQDO\]LQJDQGLPSURYLQJ\RXURZQZRUNSODFHEHKDYLRUV
The Field of Organizational Behavior
% 7KHVWXG\RIRUJDQL]DWLRQDOEHKDYLRUDWWHPSWVWRGRWZRFULWLFDOO\
LPSRUWDQWWKLQJV)LUVWLWKHOSVXVXQGHUVWDQGZK\SHRSOHEHKDYH
WKH ZD\ WKH\ GR DW ZRUN VSHFL¿FDOO\ IRFXVLQJ RQ LQWHQWLRQDO
EHKDYLRUVWKDWFRQWULEXWHWREXVLQHVVVXFFHVVDQGEXVLQHVVIDLOXUH
6HFRQG VWXG\LQJ RUJDQL]DWLRQDO EHKDYLRU KHOSV XV GLVFRYHU ZKDW
OHDGHUVDQGSURIHVVLRQDOVFDQDQGVKRXOGGRWREULQJRXWWKHYHU\
EHVWLQWKHSHRSOHWKDWZRUNLQWKHLURUJDQL]DWLRQV
%
,Q VKRUW WKHQ XQGHUVWDQGLQJ RUJDQL]DWLRQDO EHKDYLRU LV UHDOO\
DERXW FUHDWLQJ ³SHRSOH SRZHU´ 2UJDQL]DWLRQDO EHKDYLRU FDQ KHOS
DOHDGHUFUHDWHFRPSHWLWLYHDGYDQWDJHZLWKSHRSOH²DYLWDOVNLOOIRU
RUJDQL]DWLRQDOVXFFHVVLQWKHst century.
The Busyness Continuum
% ,QDVWXG\RIEXVLQHVVSURIHVVLRQDOVWKHJUHDWPDMRULW\VDLG
WKDW WKH PRVW LPSRUWDQW IDFWRU LQ FDUHHU VXFFHVV ZDV GHYHORSLQJ
D VWURQJ WUDFN UHFRUG RI GHOLYHULQJ UHVXOWV %XW WKH PLQXWLDH WKDW
SHUPHDWH RXU MREV RQ DQ HYHU\GD\ EDVLV FDQ GLVWUDFW XV IURP WKDW
JRDO:HQHHGWRXQGHUVWDQGZKDWDOOWKRVHGLVWUDFWLRQVDUHGRLQJWR
XVLIZH¶UHJRLQJWRSXWRXUIRFXVEDFNZKHUHLWEHORQJV
%
9LVXDOL]H D FRQWLQXXP PHDVXULQJ KRZ EXV\ \RX DUH RQ D W\SLFDO
GD\)URPOHVVWRPRUHEXV\ZHKDYHWKHIROORZLQJFDWHJRULHV
ż 1RW%XV\²OLYLQJDTXLHWOLIHZLWKDPLQLPXPRIDFWLYLW\
281
%XV\²EHLQJDFWLYHO\DQGDWWHQWLYHO\HQJDJHGOLYLQJDOLIHIXOO
RIDFWLYLW\UHVSRQVLELOLWLHVDQGFRPPLWPHQWV
ż
5HDOO\ %XV\²EHLQJ HQJDJHG LQ FRQVWDQW FKDOOHQJLQJ DQG
ongoing activity
ż
7RR%XV\²¿QGLQJ\RXUVHOIRYHUFRPPLWWHGEHLQJLQDVWDWHRI
FRQVWDQWO\ KDYLQJ PRUH WKLQJV WR GR WKDQ FDQ EH UHDOLVWLFDOO\
DFFRPSOLVKHG
%
,I\RX¶UHOLNHPRVWSURIHVVLRQDOVLQWKHstFHQWXU\\RXSUREDEO\
¿QG \RXUVHOI LQ WKH 5HDOO\ %XV\ FDWHJRU\ $OWKRXJK WKDW¶V D
FKDOOHQJLQJ VSRW WR EH LQ LW¶V XQIRUWXQDWHO\ MXVW D IDFW RI OLIH LQ
WRGD\¶VEXVLQHVVZRUOG
%
%XW D JURZLQJ SHUFHQWDJH RI ZRUNLQJ SURIHVVLRQDOV UHJXODUO\ ¿QG
WKHPVHOYHVLQWKH7RR%XV\FDWHJRU\,QIDFWLW¶VQRWXQFRPPRQWR
FRQGXFW D PDQDJHPHQW GHYHORSPHQW SURJUDP DQG ¿QG WKDW PRUH
WKDQRIWKHSDUWLFLSDQWVIHHOWKH\¶UHWRREXV\
‹$QGUH\3RSRYL6WRFN7KLQNVWRFN
Lecture 37: Achieving Results in Your Organization
ż
,I\RXKDYHDGHPDQGLQJMRELW¶VYHU\HDV\WRORVHWUDFNRIZKDW\RXUHDOO\QHHG
to be doing to succeed in your position.
282
%
:KHQZH¶UHWRREXV\RXUDELOLW\WRFRPPXQLFDWHEUHDNVGRZQDQG
RXU OLVWHQLQJ VNLOOV GLPLQLVK :H WHQG WR ORVH IRFXV DQG DWWHQWLRQ
WR GHWDLO 3UREOHPV WKDW QHHG RXU DWWHQWLRQ DUH OHIW XQUHVROYHG RU
WKH\¶UHVLPSO\LJQRUHGDOWRJHWKHU%XV\QHVVFDQGDPDJHRXUDELOLW\
WRIRFXVRXUWLPHDQGWDOHQWRQGRLQJWKHWKLQJVWKDWOHDGWRJHWWLQJ
GHVLUHGUHVXOWV
S.T.O.P. Being So Busy
% :KHQ WKLQJV LQ WKH ZRUNSODFH EHFRPH LQFUHDVLQJO\ SUHVVXUL]HG
IDVWSDFHGDQGWXUEXOHQWLW¶VRQO\ORJLFDOWRUHVSRQGE\WU\LQJWRGR
WKH VDPH ZRUN WKDW \RX¶YH EHHQ GRLQJ TXLFNHU RU WR GHYHORS PRUH
VRSKLVWLFDWHG DQG FRPSOH[ VROXWLRQV WR WKH ORJLVWLFDO FKDOOHQJHV
\RX IDFH %XW LQ IDFW ZKHQ WKLQJV LQ WKH ZRUNSODFH JHW FUD]\ LW LV
LPSHUDWLYH WKDW ZH VORZ GRZQ DQG H[HUFLVH VHOIOHDGHUVKLS DQG
OHDGHUVKLSRIRWKHUVZLWKJUHDWHUSUHFLVLRQSDVVLRQDQGSHUVLVWHQFH
%
$QHIIHFWLYHZD\WRDFKLHYHWKLVLVWKURXJKDPRGHOFDOOHG6723
ZKLFK VWDQGV IRU 6LW 7KLQN 2UJDQL]H DQG 3HUIRUP 6723 LV
WKH SURFHVV RI VORZLQJ GRZQ DQG EHFRPLQJ PRUH LQWHQWLRQDO DQG
PLQGIXOLQWKHZD\\RXDSSURDFK\RXUZRUNDQGOLIH7KHSURFHVVLV
YHU\VWUDLJKWIRUZDUG
ż SLWTXLHWO\VRPHSODFHZKHUH\RXZRQ¶WEHGLVWXUEHG
ż
TKLQNDERXWZKDW\RXUHDOO\QHHGWRDFFRPSOLVKDVRSSRVHGWR
HYHU\WKLQJHOVH\RX¶UHVXSSRVHGWRGRWKDWPD\EHOHVVLPSRUWDQW
ż
OUJDQL]H \RXUVHOI WR SODFH WRS SULRULW\ RQ WKH UHVXOWV WKDW
really matter.
ż
PHUIRUPEDVHGRQ\RXUSULRULW\V\VWHPFKHFNLQJ\RXUUHVXOWV
to make sure that you are meeting your goals.
Strategic S.T.O.P.
% $ VWUDWHJLF 6723 UHTXLUHV WKDW \RX KDYH D PRQWKO\ TXDUWHUO\
RU VHPLDQQXDO ³VWUDWHJLF SODQQLQJ UHWUHDW´ ZLWK \RXUVHOI WR WKLQN
WKURXJK DQG DQVZHU WKH IROORZLQJ FULWLFDOO\ LPSRUWDQW TXHVWLRQV
:KDWVSHFL¿FUHVXOWVGR,QHHGWRGHOLYHULQRUGHUWREHVXFFHVVIXO"
Lecture 37: Achieving Results in Your Organization
:KDW VSHFL¿F DFWLYLWLHV DQG SUDFWLFHV GR , QHHG WR HQJDJH LQ WR
GHOLYHUGHVLUHGUHVXOWV"$P,FXUUHQWO\LQYHVWLQJP\WLPHDWZRUN
RQWKHDFWLYLWLHVWKDWGHOLYHUWKHUHVXOWVZHQHHG"<RXUDQVZHUVWR
WKHVHTXHVWLRQVZLOOKHOS\RXFUHDWHUHDOIRFXVDURXQGZKDW\RXDUH
EHLQJSDLGWRGHOLYHULQ\RXUFXUUHQWSRVLWLRQ
%
2QFH\RX¶UHHVWDEOLVKHGWKDWIRFXVKHUHDUHWKUHHPRUHTXHVWLRQV
\RX QHHG WR DQVZHU LI \RX ZDQW WR GHOLYHU WKH UHVXOWV WKDW \RX¶YH
LGHQWL¿HG$UHP\ZRUNLQJUHODWLRQVKLSVZKHUHWKH\QHHGWREHWR
GHOLYHUVXSHULRUSHUIRUPDQFHDQGUHVXOWV",VWKHUHDWDOHQWRUVNLOO
WKDW , QHHG WR ZRUN RQ WR LPSURYH P\ SHUIRUPDQFH" ,V WKHUH D
SUREOHPRUEDUULHUWKDWLVJHWWLQJLQWKHZD\RIP\SHUIRUPDQFHWKDW
,QHHGWR¿[LPPHGLDWHO\"
%
)LQDOO\FRPHXSZLWKDSODQWRPHDVXUH\RXURQJRLQJSHUIRUPDQFH
DWZRUNWRHQVXUHWKDW\RXVWD\RQWUDFN'RQ¶WXQGHUHVWLPDWHWKH
LPSRUWDQFH RI WKLV ODVW VWUDWHJLF 6723 FRPSRQHQW EHFDXVH LW
LV LPSHUDWLYH WKDW DOO RI XV EHFRPH SUR¿FLHQW DW VHOIOHDGHUVKLS
WR PDNH VXUH ZH DUH JHWWLQJ UHVXOWV (VWDEOLVK DQG PDLQWDLQ D
VFRUHERDUG IRU \RXUVHOI WR WUDFN WKH NH\ SHUIRUPDQFH PHWULFV WKDW
DUHPRVWLPSRUWDQWIRU\RXUVXFFHVV
%
2QFH\RX¶YHDQVZHUHGWKHVWUDWHJLF6723TXHVWLRQVIRU\RXUVHOI
LW¶VWLPHWRVLWGRZQZLWK\RXUERVVDQGVKDUH\RXUSODQ7KLVZLOO
DOORZ\RXWRPDNHVXUHWKDWWKHWZRRI\RXDUHRQWKHVDPHSDJHDV
\RX VHHN \RXU ERVV¶V LQSXW FUHDWHSURSHU DOLJQPHQWDQG RSHQ XS
critical channels of communication with him or her. Most bosses
DUHUHDOO\EXV\DQGWKH\ZLOODSSUHFLDWHWKHIDFWWKDW\RXDUHWU\LQJ
WRKHOSWKHPIRFXVRQGHOLYHULQJEHWWHUSHUIRUPDQFH
Daily S.T.O.P.
% ,Q HVVHQFH D GDLO\ 6723 LV MXVW D PRUH GHWDLOHG VKRUWHUWHUP
YHUVLRQRIWKHVWUDWHJLF6723²EXWSD\LQJDWWHQWLRQWRLWVGHWDLOV
ZLOOSD\ELJGLYLGHQGV$VZLWKWKHVWUDWHJLF6723WKH¿UVWVWHS
LV VLPSO\ WR VLW 6WDUW HDFK GD\ E\ VORZLQJ GRZQ EHLQJ VWLOO DQG
¿QGLQJDTXLHWDQGLVRODWHGSODFHZKHUH\RXZLOOQRWEHGLVWXUEHG
5HVHDUFK VKRZV WKDW VLWWLQJ DQG UHOD[LQJ LQ WKLV IDVKLRQ FDXVHV
YDULRXVSDWKZD\VLQWKHEUDLQWRRSHQXSDQGGRLQJWKLVGDLO\JLYHV
XVEHWWHUDFFHVVWRLPSRUWDQWVWRUHGLQIRUPDWLRQWKDWZHFDQXVHIRU
KDQGOLQJHDFKGD\¶VFKDOOHQJHV
%
<RX QHHG DW OHDVW PLQXWHV WR UHIRFXV \RXU WKRXJKWV IURP WKH
XUJHQW SUHVVLQJ LVVXHV RI WKH PRPHQW WR WKH NH\ DFWLYLWLHV RI WKH
GD\DQGWKHWKLQJV\RXUHDOO\QHHGWRJHWGRQH:UDS\RXUWKLQNLQJ
DURXQG WKHVH TXHVWLRQV :KDW VSHFL¿F UHVXOWV DP , EHLQJ SDLG WR
GHOLYHU":KDWDFWLYLWLHVZLOOJHWPHWKHUHWRGD\"
%
7KH WKLUG VWHS DJDLQ LV WR RUJDQL]H ,W LV LPSHUDWLYH WKDW \RX
RUJDQL]H \RXU WKLQNLQJ WR GHYHORS D SHUIRUPDQFH VFULSW IRU WKH
GD\ ,GHQWLI\ D UHDOLVWLF OLVW RI VSHFL¿F UHVXOWV DQG DFWLYLWLHV WKDW
\RX PXVW DFFRPSOLVK RQ WKLV GD\ 2QFH \RX KDYH WKH DFWLYLWLHV
PDSSHGRXWUHDOLVWLFDOO\HVWLPDWHWKHDPRXQWRIWLPH\RX¶OOQHHG
WRFRPSOHWHHDFKRQH
%
1H[W GHWHUPLQH ZKR \RX ZLOO QHHG WR LQFOXGH LQ HDFK DFWLYLW\
0DNHVXUH\RXSXOONH\SHRSOHLQWRWKLVWKRXJKWSURFHVVGRLQJVR
FDQPDNHDUHDOGLIIHUHQFHLQWKHRXWFRPH2QFH\RXUDFWLYLWLHVDUH
SODQQHG\RXNQRZURXJKO\KRZORQJHDFKRQHVKRXOGWDNH\RXDQG
\RX¶YH¿JXUHGRXWWKHNH\SHRSOH\RX¶OOQHHGWRLQYROYHGHWHUPLQH
what activities you can take off your list.
%
)LQDOO\ SULRULWL]H WKH UHPDLQLQJ LWHPV RQ \RXU OLVW DQG GHYHORS
D ZULWWHQ SODQ RI DWWDFN 7KH SURGXFW RI WKLV SURFHVV LV \RXU
SHUIRUPDQFH VFULSW IRU WKH GD\ 1RZ \RX¶UH UHDG\ WR PRYH WR WKH
¿QDOVWHSRIWKHGDLO\6723H[HUFLVH3HUIRUP
%
$V\RXUGD\XQIROGVDQG\RXLPSOHPHQW\RXUSODQRIDWWDFNWDNH
¿YHPLQXWHVKDOIZD\WKURXJKWKHGD\WRUHYLHZ\RXUSODQDQGPDNH
DGMXVWPHQWV$WWKHHQGRIWKHGD\WDNHDQRWKHU¿YHPLQXWHVWRGR
DEULHIUHYLHZRIZKDW\RXGLGDQGGLGQ¶WDFFRPSOLVK7KRVH¿YH
PLQXWHDVVHVVPHQWVZLOOEHLQYDOXDEOHLQKHOSLQJ\RXGHYHORS\RXU
SODQIRUWKHQH[WGD\
Lecture 37: Achieving Results in Your Organization
Make Planning Routine
% 7DNH WKH WLPH RQ D UHJXODU EDVLV WR ¿JXUH RXW H[DFWO\ ZKDW \RXU
ERVVUHDOO\QHHGVDQGZDQWVIURP\RXDQGKRZWRXVH\RXUWLPHLQ
WKHEHVWZD\WRSURGXFHWKRVHUHVXOWV7KHUHDUHQRPDJLFEXOOHWVRU
VHFUHWHOL[LUVIRULPSURYLQJSHUIRUPDQFH7KHRQO\UHDOZD\WRJR
DERXWLWLVZLWKFDUHIXOWKRXJKWSODQQLQJDQGIROORZWKURXJK
%
%XWE\VSHQGLQJMXVWPLQXWHVDGD\RQWKRVHDFWLYLWLHV\RXFDQ
DFKLHYHZRQGHUV.HHSLQPLQGWKDWPLQXWHVRXWRIDQLQHKRXU
ZRUNGD\LQRQO\RI\RXUGD\
%
5HVHDUFKRQKLJKSHUIRUPDQFHOHDGHUVVKRZVWKDWZKHQSHRSOHXVH
WKDWVPDOOSHUFHQWDJHRIHDFKGD\WR6723WKH\DUHUHZDUGHGZLWK
JUHDWHU MRE VDWLVIDFWLRQ LPSURYHG ZRUNLQJ UHODWLRQVKLSV UHGXFHG
VWUHVVOHYHOVDQGVLJQL¿FDQWLPSURYHPHQWVLQERWKWKHTXDOLW\DQG
TXDQWLW\ RI WKHLU SHUIRUPDQFH ,Q IDFW UHVHDUFK KDV IRXQG WKDW E\
LQYHVWLQJ OHVV WKDQ RI \RXU ZRUNGD\ LQ WKH 6723 SURFHVV
\RXFDQLPSURYH\RXUSHUIRUPDQFHE\DQ\ZKHUHIURPWRPRUH
WKDQ²DJUHDWUHWXUQRQ\RXULQYHVWPHQW
%
7KHEHDXW\RIVWXG\LQJRUJDQL]DWLRQDOEHKDYLRULVWKDWWKHOHVVRQV
ZH OHDUQ FDQ EH DSSOLHG LQ DOPRVW DQ\ RUJDQL]DWLRQ RU VLWXDWLRQ
LQ ZKLFK SHRSOH QHHG WR ZRUN WRJHWKHU ,I \RX FDQ OHDUQ WR OHDG
\RXUVHOIDQGRWKHUVWRFRQVLVWHQWO\DFKLHYHWKHUHVXOWVWKDW\RXUMRE
UHTXLUHV\RX¶OOEHDKLJKO\YDOXHGSDUWRI\RXURUJDQL]DWLRQ
Suggested Reading
Lencioni, The Advantage.
/RQJHQHFNHUDQG6LPRQHWWLGetting Results.
286
Questions to Consider
1. :K\ LV XQGHUVWDQGLQJ RUJDQL]DWLRQDO EHKDYLRU LPSRUWDQW IRU \RXU
FDUHHUVXFFHVV"
2. :KDWVSHFL¿FUHVXOWVDUH\RXEHLQJSDLGWRGHOLYHUIRU\RXURUJDQL]DWLRQ"
$UH\RXDQG\RXUERVVRQWKHVDPHSDJHZLWKUHJDUGWRWKLVTXHVWLRQ"
3. +DYH \RX LGHQWL¿HG WKH VSHFL¿F ZRUNSODFH EHKDYLRUV DQG DFWLRQV WKDW
DUHQHFHVVDU\IRU\RXWRDFKLHYHWKHUHVXOWVH[SHFWHGRI\RX"
4. 'R\RXFRQVLVWHQWO\XVH\RXUWLPHDQGWDOHQWWRGRWKHWKLQJVWKDWZLOO
GHOLYHUGHVLUHGUHVXOWVIRU\RXURUJDQL]DWLRQ"
287
The Value of Great Leadership
Lecture 38
(
IIHFWLYH OHDGHUVKLS LV HVVHQWLDO LQ DQ\ RUJDQL]DWLRQ ,W¶V D VNLOO IRU
ZKLFKVRPHSHRSOHKDYHQDWXUDOWDOHQWEXWLW¶VDOVRDQDELOLW\WKDWFDQ
EHFXOWLYDWHG*UHDWOHDGHUV²IURPVXFKZDUWLPH¿JXUHVDV*HQHUDO
'ZLJKW'(LVHQKRZHUWRVXFKEXVLQHVVLQQRYDWRUVDV'DYLG3DFNDUG²WHQG
WRXVHDYHU\VSHFL¿FVHWRIVNLOOVDQGSUDFWLFHVWRJHWJUHDWUHVXOWVIURPWKH
SHRSOHWKH\ZRUNZLWK$QGRQFH\RXXQGHUVWDQGWKRVHVNLOOVDQGSUDFWLFHV
\RXFDQPDNH\RXUVHOILQWRDQHIIHFWLYHOHDGHUWRR
Lecture 38: The Value of Great Leadership
The Importance of Leadership
% 7KH SUDFWLFH RI OHDGHUVKLS LV EHFRPLQJ LQFUHDVLQJO\ LPSRUWDQW
LQ RXU XOWUDFRPSHWLWLYH PDUNHWSODFH EHFDXVH HIIHFWLYH OHDGHUV
FDQ GUDPDWLFDOO\ LPSDFW D ZLGH UDQJH RI FULWLFDOO\ LPSRUWDQW
RUJDQL]DWLRQDO SHUIRUPDQFH YDULDEOHV /HDGHUVKLS FDQ DIIHFW
LQQRYDWLRQ WUDQVIRUPDWLRQ SURGXFWLYLW\ HI¿FLHQF\ HPSOR\HH
WXUQRYHUZRUNIRUFHPRWLYDWLRQDQGMREVDWLVIDFWLRQ
288
%
*RRGOHDGHUVWHQGWREULQJRXWWKHEHVWLQDOORIXVDQGWKH\W\SLFDOO\
PDNHJRRGWKLQJVKDSSHQ0HDQZKLOHSRRUDQGLQHIIHFWLYHOHDGHUV
WHQG WR PDNH RXU ZRUN OLYHV SUREOHPDWLF ZKHQ WKLQJV DUH DOUHDG\
FKDOOHQJLQJHQRXJK,QIDFWWKH\FDQPDNHLWWRXJKWRJHWRXWRIEHG
FRPHWRZRUNNHHSDSRVLWLYHDWWLWXGHDQGDFWXDOO\JHWZRUNGRQH
%
,GHDOO\ D OHDGHU LV VRPHRQH ZKR KDV WKH WDOHQW DQG FKDUDFWHU WR
LQÀXHQFH RWKHUV LQ SURGXFWLYH DQG SRVLWLYH ZD\V²DOWKRXJK ZH
GRQRWKDYHWRORRNWRRIDULQWRKLVWRU\RUWKHQHZVSDSHUVWR¿QG
SOHQW\ RI OHDGHUV ZKR XVHG WKHLU WDOHQWV IRU GHVWUXFWLYH DQG HYHQ
HYLOSXUSRVHV
%
/HDGHUVKLSLVDOODERXWFRQQHFWLQJZLWKSHRSOHDQGGRLQJWKHWKLQJV
WKDW IROORZHUV QHHG VR WKDW WKH\ FDQ EH VXFFHVVIXO 5HPHPEHU
VXFFHVVIXOO\GHOLYHULQJGHVLUHGUHVXOWVLVWKHNH\WRFDUHHUVXFFHVV
DQGVXUYLYDO
Two Components of Effective Leadership
% $WLWVFRUHHIIHFWLYHOHDGHUVKLSLVDOZD\VEDVHGRQWKHLQWHUDFWLRQ
RIWZRFULWLFDOO\LPSRUWDQWIDFWRUVFRPSHWHQF\DQGFKDUDFWHU
%
$ OHDGHU LV FRPSHWHQW ZKHQ KH RU VKH SRVVHVVHV WKH UHTXLVLWH
VNLOOV DQG WDOHQWV QHFHVVDU\ WR VXFFHVVIXOO\ KHOS SHRSOH DFKLHYH
GHVLUHGUHVXOWVLQDJLYHQVLWXDWLRQ3XWVLPSO\OHDGHUVNQRZZKDW
WKH\¶UHGRLQJ
%
/HDGHUV KDYH FKDUDFWHU ZKHQ WKH\ SRVVHVV WKH PRUDO DQG HWKLFDO
XQGHUSLQQLQJVQHFHVVDU\WRGRWKHULJKWWKLQJDQGOHDGWKHLUSHRSOH
LQ D SULQFLSOHG IDVKLRQ :KHQ OHDGHUV KDYH FKDUDFWHU LW PHDQV
WKDW WKHLU SHRSOH FDQ FRXQW RQ WKHP WR GR WKH ULJKW WKLQJ$ ERVV
ZKR ODFNV FKDUDFWHU DQG D VWURQJ PRUDO FRPSDVV FDQ WXUQ D ZRUN
HQYLURQPHQWLQWRDGLVWXUELQJGLVWUHVVLQJDQGGLVWUXVWIXOSODFH
%
7DNHQ WRJHWKHU FRPSHWHQF\ DQG FKDUDFWHU FUHDWH D OHDGHU¶V
WUXVWZRUWKLQHVV:KHQSHRSOHWUXVWWKHLUOHDGHUJRRGWKLQJVKDSSHQ
$ OHDGHU¶V FRPSHWHQF\ DQG FKDUDFWHU FDQ KDYH D SRZHUIXO LPSDFW
RQWKHOHDGHU¶VIROORZHUVFDXVLQJWKHPWREHPRWLYDWHGVXSSRUWLYH
DQGOR\DOWRWKHLUERVVDQGWKHRUJDQL]DWLRQ
%
&RQYHUVHO\ZKHQZH¿QGRXUVHOYHVZRUNLQJIRUDOHDGHUZHGHHP
XQWUXVWZRUWK\ EHFDXVH RI D ODFN RI FRPSHWHQF\ RU FKDUDFWHU RXU
IRFXVVKLIWVIURPGRLQJRXUMREDQGJHWWLQJUHVXOWVWR¿QGLQJZD\V
WRPDNHXSIRURXUERVV¶VVKRUWFRPLQJV
6L[6FKRROVRI/HDGHUVKLS
% 6L[OHDGHUVKLSVFKRROVRIWKRXJKWFDQPDNHDUHDOGLIIHUHQFHLQ\RXU
XQGHUVWDQGLQJ RI OHDGHUVKLS7KHVH VFKRROV SURYLGH XV ZLWK VRPH
NH\OHDGHUVKLSWDNHDZD\V
%
7KH WUDLW OHDGHUVKLS VFKRRO 7KLV OLQH RI WKLQNLQJ KROGV WKDW LW
LV FULWLFDOO\ LPSRUWDQW IRU DOO RI XV WR NQRZ RXU VWUHQJWKV DQG
ZHDNQHVVHV DV OHDGHUV ,I ZH DUH VHULRXV DERXW EHLQJ VXFFHVVIXO
DV OHDGHUV ZH QHHG WR GHYHORS WKH QHFHVVDU\ WDOHQWV VNLOOV DQG
SHUVRQDIRUDQ\JLYHQSRVLWLRQ
289
Lecture 38: The Value of Great Leadership
290
%
7KHEHKDYLRUDOOHDGHUVKLSVFKRRO7KLVVFKRROSURIHVVHVWKDWOHDGHUV
FDQDQGPXVWGHPRQVWUDWHDUHDOFRQFHUQIRUSHRSOH7KH\QHHGWR
balance their concern for the task of getting results with a genuine
FRQFHUQIRUWKHLUHPSOR\HHV
%
7KHFRQWLQJHQF\RUVLWXDWLRQDOOHDGHUVKLSVFKRRO,QWKLVWKHRUHWLFDO
FDPS HIIHFWLYH OHDGHUV DUH WKRVH ZKR WDNH LQWR DFFRXQW WKH
FLUFXPVWDQFHVXQGHUZKLFKWKH\DUHDVNHGWROHDGWKHQGHYHORSDQ
DSSURSULDWHOHDGHUVKLSVW\OHWRPHHWWKHGHPDQGVRIWKDWVLWXDWLRQ
/HDGHUVPXVWGLDJQRVHDQGFOHDUO\XQGHUVWDQGWKHG\QDPLFVRIWKH
JURXSWKDWWKH\DUHEHLQJDVNHGWROHDGDQGWKHFLUFXPVWDQFHVXQGHU
ZKLFKWKH\DUHEHLQJDVNHGWRRSHUDWH
%
7KH WUDQVIRUPDWLRQDOFKDULVPDWLF OHDGHUVKLS VFKRRO 7KLV VFKRRO
PDNHVDFRPSHOOLQJFDVHWKDWFHUWDLQOHDGHUVFDQKDYHDSRZHUIXO
DQGODVWLQJLPSDFWRQIROORZHUVEHFDXVHRIWKHLUSDVVLRQDQGWKHLU
FKDULVPDWLF SHUVRQDOLWLHV *UHDW OHDGHUV XVH WKHLU YLHZ RI WKH
IXWXUH DQG WKHLU SHUVRQDOLWLHV LQ SRVLWLYH DQG SRZHUIXO ZD\V WR
affect their followers.
%
7KH UHVXOWVEDVHG OHDGHUVKLS VFKRRO This school embraces the
DSSURDFKUHFRPPHQGHGE\6WHSKHQ&RYH\WKHDXWKRURIThe Seven
+DELWVRI+LJKO\(IIHFWLYH3HRSOH6WDUWZLWKWKHHQGLQPLQG7KLV
JURZLQJ OHDGHUVKLS VW\OH ZRUNV LQ UHYHUVH E\ ¿UVW LGHQWLI\LQJ WKH
GHVLUHGJRDOVDQGRXWFRPHVWKDWOHDGHUVPXVWDFKLHYHIRUVXFFHVV
WKHQFXOWLYDWLQJWKHVSHFL¿FEHKDYLRUVDQGSUDFWLFHVWKDWZLOOHQDEOH
WKHPWRPRYHWKHLUIROORZHUVLQWKDWGLUHFWLRQ
%
7KHSV\FKRORJLFDORUHPRWLRQDOLQWHOOLJHQFHOHDGHUVKLSVFKRRO This
school cites a JURZLQJERG\RIUHVHDUFKWKDWPDNHVDVWURQJFDVHIRU
DOHDGHU¶VHPRWLRQDOLQWHOOLJHQFHDVYLWDOWRKLVRUKHUVXFFHVV$VD
OHDGHULWLVLPSHUDWLYHWKDW\RXNQRZDQGXQGHUVWDQGKRZWRZRUN
DQGFRQQHFWZLWKDOONLQGVRISHRSOH
‹*RRGVKRRW7KLQNVWRFN
(IIHFWLYHOHDGHUVPDNHVXUHWKHLUWHDPPHPEHUVNQRZZKDW¶VH[SHFWHGRIWKHP
DQGKRZWRDFKLHYHLW
Focusing on the Mission and Results
% $OHDGHUVKLSVWXG\WKDWHQJDJHGPRUHWKDQPDQDJHUVLQPRUH
WKDQ IRFXV JURXSV LGHQWL¿HG VHYHUDO FRPPRQ DWWULEXWHV RI
JUHDWOHDGHUV
%
*UHDWOHDGHUVUHDOL]HWKDWWKH¿UVWDQGPRVWLPSRUWDQWMRERIDQ\OHDGHU
LVWRFUHDWHIRFXVDQGDFOHDUVHQVHRISXUSRVHIRUWKHLUIROORZHUV
ż :KHWKHU LW¶V$EUDKDP /LQFROQ¶V XQUHOHQWLQJ IRFXV RQ VDYLQJ
WKH8QLRQRU+HQU\)RUG¶VJRDOWREXLOGDQDIIRUGDEOHFDUIRU
WKH PDVVHV JUHDW OHDGHUV FUHDWH D YLVLRQ WKDW WKHLU IROORZHUV
NQRZXQGHUVWDQGDQGFDQEHOLHYHLQ
ż
'XULQJWKH6HFRQG:RUOG:DU*HQHUDO'ZLJKW'(LVHQKRZHU
ZDVUHQRZQHGIRUKLVDELOLW\WRPDQDJHKXJHSURMHFWVVXFKDV
WKH''D\ODQGLQJV+HKDGDQXQFDQQ\WDOHQWIRUHIIHFWLYHO\
GHOHJDWLQJZRUNDQGOHWWLQJHDFKSHUVRQNQRZH[DFWO\ZKDWKH
RUVKHQHHGHGWRGRIRUWKHHIIRUWWREHDVXFFHVV
291
Lecture 38: The Value of Great Leadership
%
0RVW VWXG\ SDUWLFLSDQWV VDLG WKDW JUHDW OHDGHUV KDYH WKH DELOLW\ WR
EDODQFH FRQFHUQ IRU WKH WDVN DQG JHWWLQJ WKLQJV GRQH ZLWK JUHDW
FRQFHUQ IRU WKHLU SHRSOH -RKQ &KDPEHUV WKH ORQJWLPH &(2 RI
&LVFR 6\VWHPV LV IDPRXV IRU KLV HPRWLRQDO LQWHOOLJHQFH DQG KLV
SDVVLRQ IRU FRQQHFWLQJ ZLWK HYHU\RQH LQ KLV RUJDQL]DWLRQ +LV
RUJDQL]DWLRQPDNHVLWDSULRULW\WRKLUHDQGGHYHORSOHDGHUVZKRGR
WKH VDPH EHFDXVH VXFK OHDGHUV XQGHUVWDQG WKDW PRWLYDWHG SHRSOH
DQGSXUSRVHIXOVRFLDOQHWZRUNVDUHNH\WRVXFFHVV
%
*UHDWOHDGHUVDUHDOVRUHFRJQL]HGIRUWKHLUSURZHVVLQNQRZLQJKRZ
WRJHWRWKHUVWRFRPHWRJHWKHUDQGZRUNDVDWHDP&KDUOHV&RI¿Q
WKH IRXQGHU DQG &(2 RI *HQHUDO (OHFWULF EHJDQ KLV FDUHHU LQ WKH
shoe business. But because of his uncanny ability to get scientists to
ZRUNWRJHWKHUDQGFRRSHUDWHLQUHVHDUFKODERUDWRULHVKHLVFUHGLWHG
ZLWKFUHDWLQJRQHRIWKHPRVWHQGXULQJDQGZLGHO\HPXODWHGKLJK
WHFKHQWHUSULVHVLQWKHZRUOG
Preparing Followers
% 7KH EHVW OHDGHUV IUHTXHQWO\ UHFHLYH JUHDW DFFODLP IRU WKHLU
ZLOOLQJQHVVWRSURSHUO\HTXLSDQGSUHSDUHWKHLUSHRSOHIRUVXFFHVV
7KHVH OHDGHUV WDNH WKH WLPH WR SODQ DQG HIIHFWLYHO\ FRPPXQLFDWH
VWUDWHJLHVWRWKHLUSHRSOHERWKWRFUHDWHDVHQVHRIRZQHUVKLSDQGVR
that everyone knows what is coming.
292
%
7KH DXWRPRWLYH JHQLXV +HQU\ )RUG ZDV D SLRQHHU LQ WUDLQLQJ DQG
SURSHUO\ HTXLSSLQJ KLV ZRUNIRUFHV WR WKH\ EXLOG FDUV TXLFNO\ DQG
FKHDSO\0RUHRYHUKHEHOLHYHGLQWU\LQJWR¿QGZD\VWRKHOSSHRSOH
GRWKHLUZRUNZLWKRXWGLI¿FXOW\ZKLFKZDVXQKHDUGRIEDFNLQWKH
late 19thDQGHDUO\th centuries.
%
2QHRIWKHPRUHLQWHUHVWLQJDWWULEXWHVRIJUHDWOHDGHUVLVWKHIDFWWKDW
WKH\KDYHWKHKDELWRIPDNLQJLWHDVLHUIRUSHRSOHWRJHWWKHLUZRUN
GRQH7KH\GRWKLVWKURXJKUDSLGSUREOHPVROYLQJRQJRLQJSURFHVV
LPSURYHPHQWHIIHFWLYHDQGWLPHO\GHFLVLRQPDNLQJDQGWKHDELOLW\
WRTXLFNO\UHPRYHSHUIRUPDQFHEDUULHUV
Integrity and Transparency
% ,QWKHOHDGHUVKLSVWXG\JUHDWOHDGHUVZHUHFRQVLVWHQWO\GHVFULEHGDV
KDYLQJFKDUDFWHUDQGLQWHJULW\6WXG\UHVSRQGHQWVVDLGWKDWWKHYHU\
EHVW OHDGHUV DUH WUXVWZRUWK\ LQ WKDW WKH\ GHPRQVWUDWH SULQFLSOHG
EHKDYLRUHYHQZKHQQRRQHLVZDWFKLQJDQGWKH\VKRZWKDWWKHLU
ZRUGLVDOZD\VUHOLDEOHDQGGHSHQGDEOH
%
7KHFRIRXQGHURI+HZOHWW3DFNDUG'DYLG3DFNDUGZDVUHFRJQL]HG
DVRQHRIWKHWRS&(2VRIDOOWLPH²QRWMXVWEHFDXVHRIKLVEXVLQHVV
SURZHVV EXW EHFDXVH RI KLV SDVVLRQDWH EHOLHI LQ WKH GLJQLW\ RI
SHRSOHDQGWKHKLJKHWKLFDOVWDQGDUGVKHVHWIRUKLPVHOIDQGIRUWKH
PHPEHUVRIKLVHQWLUHRUJDQL]DWLRQ
%
:H DOO ZDQW WR IROORZ DQG ZRUN IRU SHRSOH WKDW ZH FDQ UHVSHFW
ZKHWKHULW¶VWKH&(2RIRXUFRPSDQ\RURXULPPHGLDWHVXSHUYLVRU
The Work-Life Balance, Passion, and Mojo
% 2QH RI WKH OHDGHUVKLS VWXG\¶V PRUH SURYRFDWLYH ¿QGLQJV ZDV
WKDW JUHDW OHDGHUV ZHUH FUHGLWHG ZLWK QRW ZDVWLQJ WLPH DQG ZLWK
RSHUDWLQJLQDIDVKLRQWKDWKHOSHGWKHPFUHDWHDQGPDLQWDLQDZRUN
OLIH EDODQFH IRU WKHPVHOYHV ,PSRUWDQWO\ WKH\ GLG WKH VDPH IRU
WKHLUHPSOR\HHVLQVSLWHRIWKHIDFWWKDWWKH\ZHUHLQH[FHSWLRQDOO\
GHPDQGLQJSRVLWLRQV
%
7KH YHU\ EHVW OHDGHUV ZRUN KDUG WR PDLQWDLQ WKLV ³WLJKWURSH´
EDODQFHDQGWKH\HQFRXUDJHWKHSHRSOHZKRZRUNIRUWKHPWRGR
WKHVDPH7KLVEDODQFHLVFULWLFDOO\LPSRUWDQWIRUORQJWHUPVXFFHVV
LQEXVLQHVVDQGLQOLIH
%
*UHDWOHDGHUVGHPRQVWUDWHSDVVLRQHQHUJ\H[FLWHPHQWHQWKXVLDVP
JXVWR DQG ³PRMR´ IRU ZKDW WKH\ DUH GRLQJ 7KH\ JR DERXW WKHLU
EXVLQHVV LQ D KLJKO\ PRWLYDWHG IDVKLRQ ZLWK YLWDOLW\ WKDW FUHDWHV
PRPHQWXPDQGGULYHIRUWKHSHRSOHZKRIROORZWKHP
%
:KHQSHRSOHWDONDERXWVXFKOHDGHUVDV6DP:DOWRQ%LOO*DWHV
RU 0LFKDHO 'HOO WKH\ LQHYLWDEO\ GHVFULEH WKHP DV WUXO\ H[FLWHG
DQGSDVVLRQDWHDERXWWKHLUPLVVLRQWKHLUZRUNDQGWKHOLYHVWKH\
are changing.
Suggested Reading
'UXFNHUManaging for Results.
8OULFK=HQJHUDQG6PDOOZRRGResults-Based Leadership.
Questions to Consider
1. ,I \RX DUH D OHDGHU DW ZRUN FDQ \RX H[SODLQ WKH VSHFL¿F UHDVRQV WKDW
SHRSOHZLOOZDQWWRIROORZ\RX"
2. ,I\RXDUHFXUUHQWO\LQDOHDGHUVKLSSRVLWLRQGR\RXSRVVHVVWKHVSHFL¿F
VNLOOVDQGFRPSHWHQFLHVQHFHVVDU\WREULQJRXWWKHEHVWLQRWKHUV",IQRW
ZKDWDUH\RXGRLQJWRLPSURYH"
Lecture 38: The Value of Great Leadership
3. 'R \RX OHDG E\ H[DPSOH DQG GHPRQVWUDWH FKDUDFWHU DQG SULQFLSOHG
EHKDYLRULQHYHU\WKLQJ\RXGR",IQRWZK\QRWDQGZKDWDUHWKHFRVWV
RIQRWGRLQJVR"
4. ,I\RXDUHLQDOHDGHUVKLSSRVLWLRQDUH\RXGRLQJWKHWKLQJVWKDWHQDEOH
\RXUSHRSOHWRSHUIRUPLQDQRSWLPDOIDVKLRQ"
Emotional Intelligence in the Workplace
Lecture 39
:
RUNSODFH UHODWLRQVKLSV KDYH WKH SRWHQWLDO WR FUHDWH UHDO GUDPD
SUREOHPV DQG HYHQ SDLQ EHFDXVH VRPH SHRSOH GRQ¶W NQRZ RU
GRQ¶W FDUH WR WKLQN DERXW KRZ WR ZRUN HIIHFWLYHO\ ZLWK RWKHUV
6XFK GLVUXSWLRQV FDQ PDNH \RXU SURIHVVLRQDO JRDOV H[WUHPHO\ GLI¿FXOW WR
UHDFK7R FRXQWHU WKDW WKLV OHFWXUH ZLOO H[DPLQH WKH LPSRUWDQFH RI KDYLQJ
GHJUHH ZRUNLQJ UHODWLRQVKLSV DQG ZKDW WKHVH UHODWLRQVKLSV ORRN OLNH
:H¶OODOVRGLVFXVVWKHLPSRUWDQFHRIGHYHORSLQJ\RXUHPRWLRQDOLQWHOOLJHQFH
ZKLFKFDQKDYHDUHDOLPSDFWRQ\RXUDELOLW\WRZRUNZHOOZLWKRWKHUV
‹PRQNH\EXVLQHVVLPDJHVL6WRFN7KLQNVWRFN
The Importance of Good Relationships
% 7REHVXFFHVVIXOLQPRGHUQRUJDQL]DWLRQVZHQHHGWKHKHOSRIRWKHU
SHRSOH+DYLQJJUHDWZRUNLQJUHODWLRQVKLSVLVDFULWLFDOJDWHZD\WR
JHWWLQJWKHKHOSZHQHHG7KHVWDWHPHQW³1RPDQRUZRPDQLVDQ
LVODQG´LVHVSHFLDOO\WUXHDWZRUN
:KHQZHJHWDORQJZLWKSHRSOHDWZRUNVWUHVVOHYHOVJRGRZQDQGWKHUHLVIDU
OHVVGUDPDLQWKHZRUNSODFH
%
:KHQZHJHWDORQJZLWKWKHSHRSOHDWZRUNWKHUHLVDOPRVWDOZD\VD
EHWWHUÀRZRILQIRUPDWLRQDQGVWURQJHUFRPPXQLFDWLRQV:HNQRZ
WKDWSHRSOHDUHPRUHZLOOLQJWRKHOSRQHDQRWKHUVKDUHNQRZOHGJH
DQG H[SHULHQFH WR SURPRWH OHDUQLQJ DQG ZRUN WRJHWKHU WR VROYH
SUREOHPVDQGDFKLHYHJRDOV
%
,QDGGLWLRQWKHSHRSOHZHZRUNZLWKFDQKDYHDVLJQL¿FDQWLPSDFW
RQ RXU ZLOOLQJQHVV WR FRPH WR ZRUN RXU DWWLWXGHV ZKHQ ZH JHW
WKHUHDQGRXUZLOOLQJQHVVWRVWD\ZLWKRXUFXUUHQWHPSOR\HU*UHDW
ZRUNLQJ UHODWLRQVKLSV FDQ EH D WUHPHQGRXV VRXUFH RI PRWLYDWLRQ
HQFRXUDJHPHQWDQGVDWLVIDFWLRQ
Lecture 39: Emotional Intelligence in the Workplace
Organizational Networking
% 2UJDQL]DWLRQV WRGD\ DUH FRPSOH[ SODFHV DQG WKH JUHDWHU WKH
FRPSOH[LW\ WKH PRUH GLI¿FXOW LW FDQ EH WR JHW WKLQJV GRQH %XW
\RX FDQ KDQGOH WKDW FRPSOH[LW\ E\ EXLOGLQJ D QHWZRUN RI KXPDQ
FRQQHFWLRQVDQGJUHDWUHODWLRQVKLSVZLWKLQLW
%
7KH RUJDQL]DWLRQDO FKDUW RI \RXU RZQ HQWHUSULVH FDQ DSSHDU
GDXQWLQJ %XW LW ORRNV D ORW OHVV VR LI \RX FDQ VD\ ³2K , NQRZ
&LQG\RYHULQ,7´RU³6KDQQRQLQ+5FDQKHOSXV´RU³,EHWWKDW
/DUU\LQ2SHUDWLRQVZLOONQRZ´
%
,W LV FULWLFDOO\ LPSRUWDQW WR LGHQWLI\ WKH NH\ SHRSOH LQ \RXU
RUJDQL]DWLRQ ZLWK ZKRP \RX QHHG WR GHYHORS PXWXDOO\ EHQH¿FLDO
ZRUNLQJ UHODWLRQVKLSV DQG WR WDNH SURDFWLYH VWHSV WR IRVWHU DQG
QXUWXUHWKHVHKXPDQFRQQHFWLRQV7KLVUHTXLUHVJUHDWSHRSOHVNLOOV
SURSHUIRFXVDQGWLPH
Effective 360-Degree Working Relationships
% ,WLVDFDUHHULPSHUDWLYHWKDWZHIRUJHHIIHFWLYH 360-degree working
relationshipsZLWKSHRSOHDERYHXVRXUSHHUVDQGFRZRUNHUVDQG
LI\RX¶UHLQDOHDGHUVKLSSRVLWLRQWKHSHRSOHWKDWUHSRUWWR\RX$Q
HIIHFWLYH ZRUNLQJ UHODWLRQVKLS LV RQH WKDW IRVWHUV RQJRLQJ VXSSRUW
DQG SRVLWLYH LQWHUDFWLRQV WKDW IDFLOLWDWH WKH DELOLW\ WR JHW UHVXOWV LQ
a healthy, sustainable way. The 360-degreeFRPSRQHQWPHDQVWKDW
\RXQHHGHIIHFWLYHUHODWLRQVKLSVZLWKHYHU\RQH\RXZRUNZLWK
296
%
,Q EXVLQHVV SXEOLFDWLRQV LW LV QRW XQFRPPRQ WR UHDG SURYRFDWLYH
DFFRXQWV RI ERDUGURRP EUDZOV ELWWHU GLVSXWHV DPRQJ UHVHDUFK
VFLHQWLVWV RU ZRUNJURXSV DW ZDU 2UJDQL]DWLRQV RIWHQ VWUXJJOH
EHFDXVHRIWKHLQDELOLW\RISHRSOHWRFRPHWRJHWKHUZRUNWRJHWKHU
DQGOHYHUDJHWKHLUFROOHFWLYHWDOHQWV&RQYHUVHO\ZKHQSHRSOHPDNH
ZRUNLQJUHODWLRQVKLSVDUHDOSULRULW\DQGZRUNKDUGWRGHYHORSWKHLU
SHRSOHVNLOOVJUHDWWKLQJVFDQKDSSHQ
%
Research for the book Getting Results IRXQG VRPH UHRFFXUULQJ
WKHPHV RI JUHDW ZRUNLQJ UHODWLRQVKLSV WKDW DUH LPSRUWDQW WR NHHS
LQPLQG
ż First, there is the relationship SDUW RI WKH HTXDWLRQ (IIHFWLYH
ZRUNLQJ UHODWLRQVKLSV DUH EDVHG RQ HDFK SDUW\ GHPRQVWUDWLQJ
PXWXDO UHVSHFW IRU WKH RWKHU HQJDJLQJ LQ DFWV RI FRPPRQ
FRXUWHV\EHKDYLQJDSSURSULDWHO\DQGVKRZLQJWUXVW
ż
6HFRQG WKHUH LV WKH working SDUW RI WKH HTXDWLRQ (IIHFWLYH
ZRUNLQJ UHODWLRQVKLSV DUH EDVHG RQ PXWXDOO\ XQGHUVWRRG
SHUIRUPDQFHH[SHFWDWLRQVDQGQHHGVDVZHOODVDVKDUHGVHQVH
RIUHVSRQVLELOLW\DQGRZQHUVKLSIRUWKHZRUNWREHGRQH
Analyzing Your Work Relationships
% 1RZWKDW\RXNQRZZKDWJRRGZRUNLQJUHODWLRQVKLSORRNOLNHKRZ
GR\RXJRDERXWGHYHORSLQJWKHPZLWKWKHSHRSOHZLWKZKRP\RX
QHHGWRZRUNWREHVXFFHVVIXO"7KHIROORZLQJH[HUFLVHFDQJHW\RX
WKLQNLQJDERXWZKRWKRVHSHRSOHDUH
%
2QDVKHHWRISDSHUOLVWDOOWKHSHRSOHWKDW\RXFRXQWRQWRJHW\RXU
ZRUNGRQH7KHQSULRULWL]H\RXUOLVWLQRUGHURILPSRUWDQFHDQGWKH
LPSDFWWKDWHDFKRIWKHVHSHRSOHKDVRQ\RXUDELOLW\WRGHOLYHU1H[W
FDQGLGO\ UDWH WKH TXDOLW\ RI HDFK RI WKHVH ZRUNLQJ UHODWLRQVKLSV
using the following categories:
ż Non-working relationships DUH EURNHQ FRQQHFWLRQV 7KH\¶UH
UHODWLRQVKLSVLQZKLFKZHUHDOO\VWUXJJOHWRLQWHUDFWHIIHFWLYHO\
DQGZRUNZLWKSHRSOH
297
Lecture 39: Emotional Intelligence in the Workplace
298
ż
Strained working relationships DUHUHODWLRQVKLSVLQZKLFKZH
FDQ ZRUN ZLWK SHRSOH EXW GRQ¶W HQMR\ GRLQJ VR 7KHVH RIWHQ
LQYROYHUHFXUULQJWHQVLRQDQGXQSOHDVDQWXQGHUFXUUHQWV
ż
Positive working relationships involve folks we get along
ZLWKTXLWHQLFHO\7KHVHUHODWLRQVKLSVDUHSURGXFWLYHSOHDVDQW
DQGFRRSHUDWLYH
ż
Great working relationships are strong connections where we
NQRZWKHSHRSOHZH¶UHZRUNLQJZLWKTXLWHZHOODQGWKH\NQRZ
XV:H NQRZ ZKDW ZH DUH WU\LQJ WR JHW GRQH DQG ZH KDYH D
VKDUHGVHQVHRISXUSRVHDQGUHVSRQVLELOLW\
%
,QWKH¿UVWWZRFDWHJRULHV\RXUZRUNLQJUHODWLRQVKLSVDUHQRWZKHUH
WKH\QHHGWREH:KHWKHU\RXDUHZLOOLQJWRDGPLWLWRUQRWWKHVH
UHODWLRQVKLSVKXUWDQGKLQGHU\RXUDELOLW\WRGHOLYHUGHVLUHGUHVXOWV
DQG HQMR\ ZRUN ,Q D QXWVKHOO WKHVH DUH SHUIRUPDQFHGDPDJLQJ
UHODWLRQVKLSVWKDWQHHGVRPHUHDODWWHQWLRQ
%
,I DQ\ UHODWLRQVKLS LV QRW ZRUNLQJ \RX VKRXOG UHVSRQG WR WKH
VLWXDWLRQDV\RXZRXOGDQ\RWKHUSHUIRUPDQFHSUREOHP<RXQHHGWR
DQDO\]HWKHVLWXDWLRQLGHQWLI\WKHURRWFDXVHRIWKHSUREOHPVHOHFW
DSSURSULDWHDFWLRQDQGLPSOHPHQWWKHQHFHVVDU\FKDQJHV
%
,I \RX KDYH SHUIRUPDQFHGDPDJLQJ UHODWLRQVKLSV WKDW DUH KROGLQJ
\RX EDFN LW¶V \RXU UHVSRQVLELOLW\ WR WDNH DFWLRQ 'RQ¶W DVVXPH
WKDW WLPH ZLOO KHDO RU ¿[ UHDO SUREOHPV WKDW SUHYHQW SHRSOH IURP
working together.
%
2FFDVLRQDOO\ SHRSOH ZKR QHHG HDFK RWKHU WR JHW WKLQJV GRQH
VLPSO\GRQ¶WOLNHHDFKRWKHU2UWKH\JHWRIIWRDEDGVWDUWWKDWLVWKH
beginning of something that only gets uglier. More often, though,
VWUDLQHG ZRUNLQJ UHODWLRQVKLSV GHJHQHUDWH RYHU GLVDJUHHPHQWV
SUREOHPVRUIUXVWUDWLRQVFRQFHUQLQJLVVXHVRIVXEVWDQFHWKDWQHYHU
JHWGLVFXVVHGRUDSSURSULDWHO\UHVROYHG
%
7KH VHFRQG WZR FDWHJRULHV²SRVLWLYH DQG JUHDW ZRUNLQJ
UHODWLRQVKLSV²FDQ EH FODVVL¿HG DV SHUIRUPDQFHHQKDQFLQJ
UHODWLRQVKLSV7KHVHUHODWLRQVKLSVQHHGWREHSURWHFWHGDQGQXUWXUHG
E\FRQWLQXLQJWRGRWKHWKLQJVWKDWPDGHWKHUHODWLRQVKLSZRUNLQ
WKH¿UVWSODFH
%
&HUWDLQO\ LI ZH QHJOHFW WKH UHODWLRQVKLSV VWRS FRPPXQLFDWLQJ RU
FHDVH GHPRQVWUDWLQJ FRQFHUQ DQG HPSDWK\ IRU WKH SHRSOH LQ RXU
SHUIRUPDQFHHQKDQFLQJUHODWLRQVKLSVWKH\FDQGHJHQHUDWHMXVWDVD
QHJOHFWHGPDUULDJHRUGDWLQJUHODWLRQVKLSPLJKW
Developing Emotional Intelligence
% 7KHSULPDU\ZD\\RXFDQKHOSKHDOEURNHQZRUNLQJUHODWLRQVKLSVLV
WKURXJK GHYHORSLQJ HPRWLRQDO LQWHOOLJHQFH 3XW VLPSO\ HPRWLRQDO
LQWHOOLJHQFH LV WKH DELOLW\ WR UHFRJQL]H DQG PDQDJH \RXU RZQ
HPRWLRQVDQGWKRVHRISHRSOHDURXQG\RX
%
,Q +DUYDUG SV\FKRORJLVW 'DQLHO *ROHPDQ ZURWH D
EUHDNWKURXJK ERRN HQWLWOHG :RUNLQJ ZLWK (PRWLRQDO ,QWHOOLJHQFH.
,W KDG DOZD\V EHHQ DVVXPHG WKDW LI SHRSOH KDG JUHDW FRJQLWLYH
LQWHOOLJHQFH RU D KLJK ,4 WKHQ WKH\ ZRXOG EH VXFFHVVIXO LQ WKHLU
FDUHHUV%XW'U*ROHPDQ¶VUHVHDUFKIRXQGWKDWDSHUVRQ¶VHPRWLRQDO
LQWHOOLJHQFH RU (4 DFWXDOO\ SOD\V D PRUH FUXFLDO UROH WKDQ ,4 LQ
WHUPVRIORQJWHUPFDUHHUVXFFHVV
%
6RPH SHRSOH VHHP WR KDYH JUHDWHU QDWXUDO DELOLW\ WR HPSDWKL]H
WKDQ RWKHUV %XW WKHUH DUH IRXU SDUWLFXODUO\ VLJQL¿FDQW DVSHFWV RI
HPRWLRQDO LQWHOOLJHQFH WKDW \RX FDQ GHYHORS VHOIDZDUHQHVV VHOI
PDQDJHPHQWVRFLDODZDUHQHVVDQGUHODWLRQVKLSPDQDJHPHQWVNLOOV
Dimension 1: Self-Awareness
% 3HRSOH ZLWK KLJK VHOIDZDUHQHVV UHFRJQL]H DQG XQGHUVWDQG KRZ
WKHLU HPRWLRQV DIIHFW WKHLU EHKDYLRU DQG WKLQNLQJ 7KH\ DOVR KDYH
DQ DFFXUDWH DVVHVVPHQW RI WKHLU VWUHQJWKV DQG ZHDNQHVVHV ZKLFK
HQKDQFHV WKHLU VHOIFRQ¿GHQFH $QG WKH\ XQGHUVWDQG WKDW WKHLU
HPRWLRQVDQGEHKDYLRUFDQKDYHDSRZHUIXOLPSDFWRQWKHSHRSOH
DURXQGWKHP
299
%
3HRSOH ZLWK KLJK VHOIDZDUHQHVV DUH JRRG DW QRW OHWWLQJ WKHLU
HPRWLRQVKDYHDQHJDWLYHLPSDFWRQWKHLUUHODWLRQVKLSVZLWKRWKHU
SHRSOHDQGWKH\DUHRSHQWRUHFHLYLQJIHHGEDFNIURPRWKHUV
%
,QFRQWUDVWSHRSOHZKRODFNVHOIDZDUHQHVVRIWHQFDQ¶WFRQWUROWKHLU
HPRWLRQVRUPDNHQRHIIRUWWRFRQWUROWKHP,WLVLPSRUWDQWWRQRWH
WKDWKLJKO\HIIHFWLYHSHRSOHW\SLFDOO\KDYHJUHDWVHOIDZDUHQHVVDQG
¿QGZD\VWRFRQWUROWKHLUHPRWLRQV
Lecture 39: Emotional Intelligence in the Workplace
Dimension 2: Self-Management
% 7KH VHFRQG GLPHQVLRQ RI HPRWLRQDO LQWHOOLJHQFH LV VHOI
PDQDJHPHQWZKLFKDOORZVKLJKO\HIIHFWLYHSHRSOHWRVWD\IRFXVHG
LQ RUGHU WR DFKLHYH D GHVLUHG JRDO 3HRSOH ZLWK WKLV GLPHQVLRQ
GHPRQVWUDWH VHOIFRQWURO WUDQVSDUHQF\ DQG FDQGRU DQG RSWLPLVP
DQGSHUVLVWHQFHLQSXUVXLQJJRDOV
%
3HRSOH ZKR KDYH VWURQJ VHOIPDQDJHPHQW FDSDELOLWLHV WHQG WR
EH VHOIPRWLYDWHG DQG VHW FKDOOHQJLQJ JRDOV IRU WKHPVHOYHV DQG
RWKHUV7KH\DUHZLOOLQJWRZRUNKDUGDQGGHPRQVWUDWHÀH[LELOLW\LQ
DGDSWLQJWRFKDQJLQJVLWXDWLRQVRUGHDOLQJZLWKSUREOHPV
%
,QDQXWVKHOOSHRSOHKLJKRQWKLVGLPHQVLRQNQRZZKDWWKH\ZDQW
DQGPDQDJHWKHPVHOYHVLQDIDVKLRQWKDWLQFUHDVHVWKHOLNHOLKRRG
of success.
Dimension 3: Social Awareness
% 7KH QH[W WZR GLPHQVLRQV RI HPRWLRQDO LQWHOOLJHQFH VKLIW IURP
XQGHUVWDQGLQJ DQG PDQDJLQJ RQHVHOI WR IRFXVLQJ RQ RWKHU SHRSOH
6RFLDODZDUHQHVVLVWKHFDSDFLW\WRVHQVHDQGXQGHUVWDQGKRZRWKHUV
IHHOZDQWDQGQHHGDQGWRWDNHDQDFWLYHLQWHUHVWLQWKHFRQFHUQVRI
RWKHUSHRSOHLQDJLYHQVLWXDWLRQ
%
3HRSOHZLWKJUHDWVRFLDODZDUHQHVVDUHJRRGDWUHDGLQJDQGWXQLQJ
LQ WR WKH VLWXDWLRQV LQ ZKLFK WKH\ ¿QG WKHPVHOYHV 7KH\ VHHN WR
XQGHUVWDQGWKHRUJDQL]DWLRQDOFRQWH[WWRKHOSWKHPPDNHVHQVHRI
WKHWKLQJVJRLQJRQDURXQGWKHP
%
7KLV VRFLDO HPSDWK\ KHOSV SHRSOH GHPRQVWUDWH VHQVLWLYLW\ WRZDUG
RWKHUV ZKLFK LQ WXUQ DOORZV WKHP WR UHFRJQL]H RWKHU SHRSOH¶V
DFFRPSOLVKPHQWVDQGRIIHUDGYLFHDQGIHHGEDFNLQZD\VWKDWGRQ¶W
RIIHQGSHRSOH
Dimension 4: Relationship Management Skills
% 7KH¿QDOGLPHQVLRQRIHPRWLRQDOLQWHOOLJHQFHLVSRVVHVVLQJVWURQJ
UHODWLRQVKLSPDQDJHPHQWVNLOOV7KHVHVNLOOVDOORZDQLQGLYLGXDOWR
LQÀXHQFHWKHHPRWLRQDOWRQHRIDJURXSWRDUWLFXODWHDGLUHFWLRQRU
YLVLRQDQGWRLQÀXHQFHWKHEHKDYLRURIRWKHUSHRSOHLQSRVLWLYHDQG
sustainable ways.
%
3HRSOH ZKR DUH VWURQJ LQ WKLV DUHD DUH JRRG DW JHWWLQJ SHRSOH WR
XQLWHDURXQGWKHWKLQJVWKDWDUHLPSRUWDQWDQGDWGLUHFWLQJWKHPWR
ZKHUHWKHJURXSQHHGVWRJRWREHVXFFHVVIXO7KH\W\SLFDOO\OHDG
E\H[DPSOHDQGSRVVHVVWKHDELOLW\WRGHDOZLWKGLI¿FXOWSHRSOHLQ
FRQ¿GHQWDQGVWUDLJKWIRUZDUGZD\V
%
3HRSOH ZKR KDYH HIIHFWLYH UHODWLRQVKLS PDQDJHPHQW VNLOOV DUH
ZLOOLQJ WR SXW HQHUJ\ LQWR GHYHORSLQJ RWKHUV WKH\¶UH TXLFN WR
UHVROYHFRQÀLFWVDQGGLVDJUHHPHQWVWKH\¶UHWHDPRULHQWHGDQGWKH\
ORRNIRUZD\VWRLQVSLUHRWKHUVDQGLQLWLDWHQHHGHGFKDQJH
%
,W LV FULWLFDOO\ LPSRUWDQW IRU DOO RI XV WR LQYHVW WLPH DQG HQHUJ\
LQ RXU ZRUNLQJ UHODWLRQVKLSV DQG WR ORRN IRU ZD\V WR PDLQWDLQ
PRWLYDWH DQG HQFRXUDJH RWKHUV WR H[SHULHQFH WKH EHQH¿WV RI
working together.
Suggested Reading
*ROHPDQ%R\DW]LVDQG0F.HHPrimal Leadership.
/RQJHQHFNHUDQG)LQN³)L[LQJ0DQDJHPHQW¶V)DWDO)ODZV´
Questions to Consider
1. ,IZHDVNHG\RXUFRZRUNHUVWRGHVFULEHZKDWLVOLNHWRZRUNZLWK\RX
ZKDWZRXOGWKH\KDYHWRVD\":RXOGWKH\VD\\RXDUHHDV\WRZRUNZLWK"
2. +DYH \RX WDNHQ WKH WLPH WR FOHDUO\ LGHQWLI\ WKH SHRSOH WKDW \RX
DEVROXWHO\SRVLWLYHO\QHHGWRKDYHJUHDWZRUNLQJUHODWLRQVKLSVZLWKLQ
RUGHUWRGR\RXUMREHIIHFWLYHO\"
3. 'R \RX LQYHVW WKH WLPH DQG HQHUJ\ QHFHVVDU\ WR EXLOG DQG PDLQWDLQ
TXDOLW\ZRUNLQJUHODWLRQVKLSVZLWKWKHSHRSOHDURXQG\RX"
4. 'R\RXKDYHDSODQWRLPSURYH\RXUUHODWLRQVKLSVE\GHYHORSLQJ\RXU
Lecture 39: Emotional Intelligence in the Workplace
³SHRSOHVNLOOV´DQGEHFRPLQJPRUHHPRWLRQDOO\LQWHOOLJHQW"
The Art of Effective Communications
Lecture 40
L
DQJXDJHDQGFRPPXQLFDWLRQWHFKQLTXHVDUHYLWDOEXWWKHIRXQGDWLRQ
RIHIIHFWLYHFRPPXQLFDWLRQVLVZDQWLQJWREHXQGHUVWRRGE\WKHRWKHU
SDUW\²DQG GHVLULQJ WR XQGHUVWDQG ZKDW WKH RWKHU SDUW\ LV WU\LQJ WR
FRPPXQLFDWH WR \RX (IIHFWLYH FRPPXQLFDWLRQ LV DOO DERXW WKH PRWLYDWLRQ
EHKLQG WKH SUHVHQWDWLRQ RI LQIRUPDWLRQ ,I ZH UHDOO\ QHHG WR JHW DQ LGHD
DFURVVWRVRPHRQHZHFDQDOZD\V¿QGDZD\WRPDNHRXUVHOYHVXQGHUVWRRG
,QWKLVOHFWXUHZH¶OOORRNDWZK\HIIHFWLYHFRPPXQLFDWLRQSUDFWLFHVDUHVR
LPSRUWDQWDQGKRZWRLPSOHPHQWWKHPLQ\RXURUJDQL]DWLRQ
&RPPXQLFDWLRQ3UREOHPV
% ,Q RUJDQL]DWLRQV OHDGHUV IUHTXHQWO\ ODFN WKH PRWLYDWLRQ WR OHDUQ
HIIHFWLYH FRPPXQLFDWLRQ PHWKRGV HLWKHU EHFDXVH WKH\ GRQ¶W
XQGHUVWDQG WKHLU LPSRUWDQFH RU EHFDXVH WKH\ RYHUHVWLPDWH WKHLU
RZQ FRPPXQLFDWLRQ VNLOOV $QG SHRSOH ZLWKLQ WKH RUJDQL]DWLRQ
ZKR DUH VWURQJO\ PRWLYDWHG WR FRPPXQLFDWH DUH RIWHQ JLYHQ WKH
PHVVDJHWKDWZKDWWKH\KDYHWRVD\LVQ¶WYDOXHG$VDUHVXOWWKH\
VRPHWLPHVORVHWKHLUPRWLYDWLRQWRFRPPXQLFDWHDQGXOWLPDWHO\WR
work altogether.
%
$W WKH KHDUW RI WKH FRPPXQLFDWLRQ SUREOHPV ZLWKLQ PDQ\
RUJDQL]DWLRQV LV D PLVXQGHUVWDQGLQJ RI WKH QDWXUH RI HIIHFWLYH
FRPPXQLFDWLRQV &RPPXQLFDWLQJ HVSHFLDOO\ LQ WKH ZRUNSODFH LV
QRWVLPSO\DERXWVKDULQJLQIRUPDWLRQ
%
:HOONQRZQ &KLFDJR MRXUQDOLVW 6\GQH\ +DUULV FDSWXUHG WKH
HVVHQFH RI WKLV LPSRUWDQW SRLQW ³7KH WZR ZRUGV LQIRUPDWLRQ DQG
FRPPXQLFDWLRQ DUH RIWHQ XVHG LQWHUFKDQJHDEO\ EXW WKH\ VLJQLI\
TXLWHGLIIHUHQWWKLQJV,QIRUPDWLRQLVJLYLQJRXWFRPPXQLFDWLRQLV
JHWWLQJWKURXJK´
%
ż
6HFRQGZHDOOQHHGWREHLQIRUPHGDERXWWKHWKLQJVJRLQJRQ
DURXQGXVWKDWDIIHFWRXUIXWXUH7KLVLQFOXGHVVXFKLQIRUPDWLRQ
DV FXUUHQW RSHUDWLQJ SHUIRUPDQFH QHZ DQG IXWXUH PDUNHW
RSSRUWXQLWLHVSHUVRQQHOFKDQJHVDQGQHZWHFKQRORJLHV
ż
7KLUGZHQHHGWKHPHDQVDQGRSSRUWXQLWLHVWRPDNHRXUYRLFHV
KHDUGZKHQZHZDQWWRUDLVHDFRQFHUQJHWDTXHVWLRQDQVZHUHG
LGHQWLI\ D EXVLQHVV RSSRUWXQLW\ VKDUH D QHZ LGHD PDNH D
VXJJHVWLRQ RU RIIHU LQSXW
RQDQLPSRUWDQWLVVXH
.QRZLQJWKDWZHKDYHDYRLFH
DQG WKDW RWKHUV DUH ZLOOLQJ WR
OLVWHQ KDV D SRZHUIXO LPSDFW
on our job satisfaction,
PRWLYDWLRQ DQG FRPPLWPHQW
WRDQRUJDQL]DWLRQ%XWOHDYLQJ
any of these three basic
FRPPXQLFDWLRQ QHHGV XQPHW
FDXVHV SHRSOH WR GLYHUW WKHLU
focus from getting things
GRQH ,QVWHDG WKH\ WXUQ WR
seeking out the information
WKH\ ZDQW DQG QHHG²RU WKH\
VSHQG WLPH WU\LQJ WR ¿QG
someone who will listen to
their concerns.
‹/LWWOH%HHL6WRFN7KLQNVWRFN
Lecture 40: The Art of Effective Communications
Getting Through
% 3HRSOHLQRUJDQL]DWLRQVW\SLFDOO\KDYHWKUHHEXUQLQJFRPPXQLFDWLRQ
QHHGV
ż )LUVW ZH DOO QHHG WKH LQIRUPDWLRQ WKDW LV QHFHVVDU\ WR GR RXU
ZRUNHI¿FLHQWO\DQGHIIHFWLYHO\7KLVFDQLQFOXGHNQRZLQJDQG
XQGHUVWDQGLQJ VXFK LQIRUPDWLRQ DV FXUUHQW MRE DVVLJQPHQWV
DQG UHVSRQVLELOLWLHV LQVWUXFWLRQV DQG XSGDWHV RQ SURMHFWV
SHUIRUPDQFHIHHGEDFNWDFWLFDOSODQVRUSHUKDSVVRPHWKLQJDV
VLPSOHDVWKHGHDGOLQHIRUDUHSRUW
Ironically, the sheer number of
communication technologies
available today can make it more
GLI¿FXOWWRFRPPXQLFDWHHIIHFWLYHO\
%
:K\GRHVWKLVKDSSHQ"&RQVLGHUWKHVHSRVVLEOHIDFWRUV
ż )LUVW RUJDQL]DWLRQV RIWHQ KDYH D JUHDW GHDO RI LQIRUPDWLRQ
VZLUOLQJ DURXQG LQVLGH WKHP WKDW LV QRW SURSHUO\ SDFNDJHG WR
VDWLVI\SHRSOH¶VQHHGV
ż
6HFRQG LQ WRGD\¶V HQYLURQPHQW ZH DUH DOO ZUHVWOLQJ ZLWK DQ
XQSUHFHGHQWHGYROXPHRIGDWDDQGRWKHULQIRUPDWLRQ,URQLFDOO\
WKLV SUREOHP LV FDXVHG E\ DOO RI RXU QHZ FRPPXQLFDWLRQ
WHFKQRORJLHVVXFKDVHPDLOLQVWDQWPHVVDJLQJWH[WPHVVDJHV
DQGVRFLDOPHGLD:HFDQHDVLO\¿QGRXUVHOYHVRSHUDWLQJRQWKH
HGJHRILQIRUPDWLRQRYHUORDG
ż
7KLUGRXUZRUNSODFHVDUHPXFKPRUHGLYHUVHWKDQLQWKHSDVW
ZKLFKDGGVDQRWKHUGHJUHHRIFRPSOH[LW\WRWKHFRPPXQLFDWLRQ
SURFHVV WKDW ZH DOO QHHG WR WDNH LQWR DFFRXQW 6XFK IDFWRUV
DV JHQHUDWLRQDO GLIIHUHQFHV FXOWXUH DQG HGXFDWLRQDO DQG
VRFLRHFRQRPLF EDFNJURXQGV FDQ DIIHFW RXU DELOLW\ WR
communicate effectively with one another.
7RROVIRU)L[LQJ%URNHQ&RPPXQLFDWLRQV
% 3HRSOHLQDQ\RUJDQL]DWLRQZDQWDQRYHUDOOFRPPXQLFDWLRQSURFHVV
WKDW LV RQJRLQJ RUJDQL]HG V\VWHPDWLF DQG GHVLJQHG WR PHHW WKHLU
QHHGVUDWKHUWKDQVRPHWKLQJWKDWLVSHOOPHOODGKRFRUFULVLVGULYHQ
%
7KHOHDGHURIDQRUJDQL]DWLRQGRHVQ¶WQHHGWREHDFRPPXQLFDWLRQ
genius to establish a highly effective communication system.
0XFK RI ZKDW OHDGHUV QHHG WR NQRZ DERXW HVWDEOLVKLQJ JRRG
FRPPXQLFDWLRQV ZLWKLQ WKHLU RUJDQL]DWLRQ LV UHDGLO\ DYDLODEOH
WR WKHP LI WKH\¶UH ZLOOLQJ WR DVN WKHLU HPSOR\HHV IRU LQSXW DQG
VXJJHVWLRQVDQGOLVWHQDWWHQWLYHO\WRWKHDQVZHUV
%
'R \RX DQG \RXU FRZRUNHUV DQG HPSOR\HHV KDYH D V\VWHPDWLF
DSSURDFK WR HQVXULQJ WKDW SHRSOH KDYH WKH ULJKW LQIRUPDWLRQ DW
WKHULJKWWLPHDWWKHULJKWSODFHDQGLQWKHULJKWIRUPWREHDEOHWR
JHWWKHLUZRUNGRQH",IQRWLWPD\EHWLPHWRORRNDWWKHW\SHVRI
LQIRUPDWLRQ WKDW WKH SHRSOH LQ \RXU RUJDQL]DWLRQ QHHG WR EH PRUH
HIIHFWLYHWKHQEXLOGRXWWKHSUDFWLFHVWKDWFDQKHOSPHHWWKHVHQHHGV
Lecture 40: The Art of Effective Communications
%
%
9DOXDEOHWRROVDGGUHVVWKHFRPPXQLFDWLRQQHHGVZH¶YHLGHQWL¿HG
7KH ¿UVW QHHG LV IRU UHDO FRPPXQLFDWLRQV WKDW SXW SHRSOH LQ D
VLWXDWLRQZKHUHWKH\FDQVXFFHVVIXOO\SHUIRUPWKHLUMREV+HUHDUH
VRPHFRPPXQLFDWLRQSUDFWLFHV\RXFDQXVHWRKHOSPHHWWKDWQHHG
ż &RQGXFWUHJXODURQHRQRQHSHUIRUPDQFHSODQQLQJVHVVLRQVWR
FODULI\SHUIRUPDQFHH[SHFWDWLRQV
ż
3URYLGHZULWWHQLQVWUXFWLRQVSROLFLHVDQGZRUNSURFHGXUHVWKDW
SHRSOHFDQDFFHVVHDVLO\
ż
,PSOHPHQWRQJRLQJRQHRQRQHIHHGEDFNDQGFRDFKLQJPHHWLQJV
ż
'HYHORS RUJDQL]DWLRQDO FXOWXUHV WKDW HQFRXUDJH UHJXODU
LQWHUDFWLRQVZLWKVXSHULRUVDQGFRZRUNHUV
ż
8VHWHDPPHHWLQJVWRVKDUHQHZLQIRUPDWLRQDQGSHUIRUPDQFH
IHHGEDFN
ż
3URYLGH LQIRUPDWLRQ WR SHRSOH RQ DQ RQJRLQJ DQG V\VWHPDWLF
EDVLVDERXWWKHVWDWXVRIFXUUHQWSURMHFWVDQGLPSRUWDQWSURJUDPV
ż
(PSOR\ HOHFWURQLF DQG ZHEEDVHG LQIRUPDWLRQ SRUWDOV WR
SURYLGHSHRSOHZLWKFXUUHQWSHUIRUPDQFHGDWDDQGLQIRUPDWLRQ
7KH VHFRQG QHHG ZH GLVFXVVHG ZDV WKDW RI EHLQJ LQ WKH ORRS²
WKH LPSRUWDQFH RI JLYLQJ SHRSOH LQ \RXU RUJDQL]DWLRQ D FOHDU
XQGHUVWDQGLQJRIZKDWLVJRLQJRQDURXQGWKHP&RPPXQLFDWLRQVRI
WKLVVRUWDUHGHVLJQHGWRJLYHSHRSOHWKHFRQWH[WWREHWWHUXQGHUVWDQG
WKH³ELJSLFWXUH´RIWKHHQWHUSULVHDQGZKHUHWKH\¿WZLWKLQLW+HUH
DUHVRPHWRROV\RXFDQXVHIRUWKDWSXUSRVH
ż 5XQHIIHFWLYHDQGWLPHVHQVLWLYHVWDIIPHHWLQJV
ż
&RQGXFW WRZQ KDOO PHHWLQJV ZKHUH OHDGHUV DQG ZRUNHUV VKDUH
LPSRUWDQWLQIRUPDWLRQDERXWZKDWLVJRLQJRQLQWKHRUJDQL]DWLRQ
ż
%XLOGZHESDJHVIRULQWHUQDOXVHWKDWSURYLGHHPSOR\HHVZLWK
information they want
%
ż
8VHRUJDQL]DWLRQZLGHYRLFHPDLOEODVWVWRFRPPXQLFDWHDERXW
ELJHYHQWVEUHDNWKURXJKVDQGVXFFHVVHV
ż
(PSOR\WHOHFRQIHUHQFHVDQGZHEEDVHGLQIRUPDWLRQDOPHHWLQJV
WRNHHSSHRSOHLQIRUPHGZLWKRXWWLPHFRQVXPLQJWUDYHO
ż
&UHDWH HOHFWURQLF DQG ZKLWHERDUG LQIRUPDWLRQ SRVWLQJV WR
SURYLGHXSWRGDWHLQIRUPDWLRQDERXWLPSRUWDQWLVVXHV
ż
6HQGRXWLQIRUPDWLRQDOXSGDWHHPDLOEODVWV
ż
3URGXFHLQIRUPDWLRQDOYLGHRVWKDWGHOLYHUDFFXUDWHLQIRUPDWLRQ
LQDG\QDPLFIDVKLRQ
7KLUGZHGLVFXVVHGWKHLPSRUWDQFHRISURYLGLQJHPSOR\HHVZLWKD
YRLFHDQGDQRSSRUWXQLW\WRH[SUHVVWKHLUFRQFHUQVRIIHULQSXWDQG
KDYHWKHLUTXHVWLRQVDQVZHUHG<RXFDQPDNHWKDWSRVVLEOHZLWKD
QXPEHURISURYHQSUDFWLFHVLQFOXGLQJWKHIROORZLQJ
ż *HW OHDGHUV WR HQJDJH DQG HPSRZHU ZRUNHUV WR WDNH JUHDWHU
FRQWURORYHUWKHLUZRUNWKURXJKSDUWLFLSDWLYHOHDGHUVKLS
ż
+ROG EUDLQVWRUPLQJ PHHWLQJV DQG LQSXW VHVVLRQV ZLWK VPDOO
JURXSVRURQDRQHRQRQHEDVLVZLWKOHDGHUVDQGHPSOR\HHV
ż
8VH WHDPEDVHG SUREOHP VROYLQJ WR VROLFLW HPSOR\HHV¶ LGHDV
DERXWKRZWRGHDOZLWKRUJDQL]DWLRQDOSUREOHPVDQGSHUIRUPDQFH
ż
,PSOHPHQWFRQWLQXRXVLPSURYHPHQWSURFHVVHV
ż
0DNH XVH RI HPSOR\HH VXUYH\V VXJJHVWLRQ V\VWHPV DQG
KRWOLQHVIRUJDWKHULQJDGGLWLRQDOHPSOR\HHLQSXW
ż
&RQGXFWUHJXODUHIIHFWLYHVWDIIPHHWLQJVZKHUHHPSOR\HHVFDQ
H[SUHVV FRQFHUQV VKDUH LGHDV DQG YRLFH WKHLU RSLQLRQV ZLWK
WKHLULPPHGLDWHVXSHUYLVRUV
Lessons for Effective Communication
% (IIHFWLYH FRPPXQLFDWLRQ SUDFWLFHV DUH HVVHQWLDO IRU D ZHOO
IXQFWLRQLQJ RUJDQL]DWLRQ %XW LW¶V LPSRUWDQW WR UHFRJQL]H WKDW WKH\
GRQ¶WQHFHVVDULO\HQVXUHVXFFHVVXQOHVVWKHSHRSOHZKRDUHGRLQJWKH
FRPPXQLFDWLQJDUHYLHZHGDVWUXVWHGVRXUFHVRILQIRUPDWLRQ/HDGHUV
QHHGWREHDEOHWRGHOLYHUDQGUHFHLYHLQIRUPDWLRQLQDKLJKO\HIIHFWLYH
IDVKLRQ 7KDW¶V ZK\ OHDGHUV DQG HPSOR\HHV QHHG WR HQJDJH LQ DOO
FRPPXQLFDWLRQUHODWHGSUDFWLFHVZLWKERWKFKDUDFWHUDQGFRPSHWHQF\
Lecture 40: The Art of Effective Communications
%
&RPPXQLFDWLQJ HIIHFWLYHO\ GRHVQ¶W FRPH QDWXUDOO\ WR HYHU\RQH
$OWKRXJK LW¶V HDV\ WR FULWLFL]H WKH FRPPXQLFDWLRQ IDLOLQJV RI
RWKHUVLWFDQEHGLI¿FXOWWRVHHWKHÀDZVLQRXURZQFRPPXQLFDWLRQ
VNLOOV%HORZDUHVL[OHVVRQVWKDWFDQLPSURYH\RXUHIIHFWLYHQHVV
as a communicator:
ż 7DNH HYHU\ FRPPXQLFDWLRQV RSSRUWXQLW\ VHULRXVO\ .QRZ
WKDW HDFK DQG HYHU\ RSSRUWXQLW\ WR FRPPXQLFDWH LQ DQ
RUJDQL]DWLRQDOVHWWLQJLVHLWKHUDSUREOHPVROYLQJH[SHULHQFHRU
DSUREOHPFUHDWLQJH[SHULHQFHEDVHGRQRXUDFWLRQV
ż
<RXUFUHGLELOLW\LVNH\1HYHUXQGHUHVWLPDWHWKHLPSRUWDQFHRI
WKH FUHGLELOLW\ RI WKH FRPPXQLFDWRU ,I \RX JLYH RWKHU SHRSOH
LQFRQVLVWHQWLQIRUPDWLRQRUPDNHWKHPDSURPLVHWKDW\RXIDLO
WRNHHSSHRSOHZLOOOHDUQTXLFNO\WKDW\RXUZRUGVDUHQ¶WZRUWK
WKHLUWLPHDQGDWWHQWLRQ
ż
%H VHOIDZDUH 6HOIDZDUHQHVV HQFRXUDJHV XV WR NQRZ RXU
VWUHQJWKVDQGZHDNQHVVHVDVFRPPXQLFDWRUVDQGWRXQGHUVWDQG
KRZRXUHPRWLRQVFDQDIIHFWRXUH[FKDQJHVZLWKRWKHUV
ż
%H VRFLDOO\ DZDUH DQG HPSDWKHWLF ,W¶V LPSRUWDQW WR GHYHORS
\RXU VRFLDO DZDUHQHVV DQG HPSDWK\ LQ RUGHU WR WDLORU \RXU
PHVVDJHWRPHHWWKHQHHGVRI\RXUDXGLHQFH
ż
([HUFLVHVHOIPDQDJHPHQW6HOIPDQDJHPHQWFDQSOD\DFULWLFDO
UROHLQKHOSLQJ\RXLPSURYHDVDFRPPXQLFDWRU<RXQHHGWRKDYH
WKHDELOLW\WRPRQLWRU\RXURZQVSHDNLQJDQGOLVWHQLQJSUDFWLFHV
DQGWDNHFRUUHFWLYHDFWLRQZKHQ\RXGLVFRYHUWKHPODFNLQJ
ż
%
/LVWHQ 7KH FRUQHUVWRQH RI HYHU\ UHODWLRQVKLS LV RXU DELOLW\
WR FRPPXQLFDWH DQG OLVWHQLQJ LV DQ HVVHQWLDO SDUW RI LW 7KDW
PHDQV\RXQHHGWRGHYHORSDQGUH¿QH\RXUOLVWHQLQJVNLOOVZLWK
everyone you work with, from your boss, to your colleagues,
WR \RXU HPSOR\HHV WR WKH SHUVRQ IURP ,7 ZKR ¿[HV \RXU
FRPSXWHU ,I \RX FDQ¶W OLVWHQ WR ZKDW¶V RQ SHRSOH¶V PLQGV
\RXZRQ¶WEHDEOHWRKHOSWKHPJHWWKHLUZRUNGRQHDQG\RX
SUREDEO\ZRQ¶WEHDEOHWRJHWWKHLUKHOSLQFRPSOHWLQJ\RXUV
5HPHPEHU HIIHFWLYH FRPPXQLFDWLRQ LV DERXW VSHDNLQJ VR WKDW
RWKHUSHRSOHDUHZLOOLQJWROLVWHQDQGOLVWHQLQJVRWKDWRWKHUSHRSOH
ZLOO EH ZLOOLQJ WR VSHDN:KHWKHU \RX¶UH D ERVV RU DQ HQWU\OHYHO
HPSOR\HH PDNH VXUH WKDW \RXU FRPPXQLFDWLRQV ZLWK WKH SHRSOH
\RX ZRUN ZLWK GRQ¶W ÀRZ RQO\ LQ RQH GLUHFWLRQ ([SUHVV \RXUVHOI
FOHDUO\ EXW DOZD\V EH ZLOOLQJ WR OLVWHQ DQG HQFRXUDJH DQ RSHQ
H[FKDQJHRILGHDV
Suggested Reading
Carnegie, +RZWR:LQ)ULHQGVDQG,QÀXHQFH3HRSOH.
+DXGHQThe Art of Engagement.
Questions to Consider
1. ,Q \RXU ZRUNSODFH ZKDW DUH WKH SUREOHPV FUHDWHG E\ LQHIIHFWLYH
FRPPXQLFDWLRQV"
2. 'R\RXNQRZH[DFWO\ZKDWLQIRUPDWLRQ\RXDQG\RXUFRZRUNHUVQHHGWR
EHHIIHFWLYHLQ\RXUMREV"
3. $UH\RXHIIHFWLYHLQNHHSLQJSHRSOHLQIRUPHGDERXWZKDWLVJRLQJRQLQ
WKHZRUNSODFHDQGZK\LW¶VLPSRUWDQW"
4. $UH\RXFDUHIXOWROLVWHQWRZKDWSHRSOHDUHVKDULQJZLWK\RXDQGGR\RX
KDYHDSUDFWLFHLQSODFHWRVROLFLWRQJRLQJIHHGEDFNIURP\RXUHPSOR\HHV
DERXWWKLQJV\RXQHHGWRNQRZDQGXQGHUVWDQGWREHHIIHFWLYH"
The Motivation-Performance Connection
Lecture 41
M
Lecture 41: The Motivation-Performance Connection
RWLYDWLRQ DQG SHUIRUPDQFH LPSURYHPHQW DUH WZR RI WKH PRVW
UHVHDUFKHG SRSXODU DQG ZULWWHQDERXW VXEMHFWV LQ WKH GRPDLQ
RI RUJDQL]DWLRQDO EHKDYLRU (YHU\ FRPSDQ\ QHHGV WR RSHUDWH
DW SHDN HI¿FLHQF\ LQ RUGHU WR VXUYLYH DQG WKULYH 7KHUH¶V VLPSO\ QR URRP
IRU XQPRWLYDWHG HPSOR\HHV RU VXESDU SHUIRUPDQFH DQG DQ\ FRPSDQ\
WKDW DFFHSWV SRRU RU HYHQ PHGLRFUH HPSOR\HH SHUIRUPDQFH LV XQOLNHO\ WR
EH DURXQG IRU ORQJ ,I \RX KRSH WR OHDG SHRSOH LQ WKH EXVLQHVV ZRUOG LW¶V
FULWLFDOO\LPSRUWDQWWKDW\RXKDYHDWKRURXJKXQGHUVWDQGLQJRIKRZWRFUHDWH
DZRUNSODFHHQYLURQPHQWWKDWEULQJVRXWWKHEHVWLQHYHU\RQH
The Importance of Motivation
% &RPSDQ\OHDGHUVDUHZHOOVHUYHGZKHQWKH\IRFXVVHULRXVDWWHQWLRQ
RQ FUHDWLQJ D SURGXFWLYH ZRUNSODFH WKDW NHHSV WKHLU HPSOR\HHV
PRWLYDWHG,QIDFWWKHUH¶VZLGHVSUHDGUHFRJQLWLRQDPRQJPDQDJHUV
WKDW HPSOR\HH PRWLYDWLRQ LV D FULWLFDOO\ LPSRUWDQW LVVXH 6HYHUDO
\HDUVDJRDVXUYH\RIDODUJHVDPSOHRI86PDQDJHUVRQWKDWYHU\
VXEMHFWIRXQGWKDW
ż (LJKW\¿YHSHUFHQWRIPDQDJHUVEHOLHYHGWKDWDQHPSOR\HH¶V
OHYHO RI PRWLYDWLRQ KDV D VLJQL¿FDQW LPSDFW RQ KLV RU
KHUSHUIRUPDQFH
ż
6HYHQW\QLQH SHUFHQW RI PDQDJHUV EHOLHYHG WKDW PRWLYDWLQJ
HPSOR\HHVLVRQHRIWKHPRVWLPSRUWDQWIXQFWLRQVWKH\SHUIRUP
DVOHDGHUV
ż
1LQHW\IRXUSHUFHQWRIPDQDJHUVEHOLHYHGZRUNIRUFHPRWLYDWLRQ
ZDVWUXO\LPSRUWDQWWRWKHVXFFHVVRIWKHRYHUDOORSHUDWLRQ
ż
(LJKW\WZR SHUFHQW RI PDQDJHUV EHOLHYHG WKDW WKHLU EHKDYLRU
KDGDVLJQL¿FDQWLPSDFWRQWKHLUHPSOR\HHV¶OHYHORIPRWLYDWLRQ
ż
7ZRWKLUGV RI PDQDJHUV EHOLHYHG WKDW LW LV JHWWLQJ WRXJKHU WR
PRWLYDWHWKHLUHPSOR\HHV
%
7KHVH¿QGLQJVVXJJHVWWKDWDOWKRXJKPDQDJHUVNQRZWKH\QHHGWR
PRWLYDWH WKHLU ZRUNIRUFHV D VLJQL¿FDQW SHUFHQWDJH RI OHDGHUV DUH
VWUXJJOLQJWR¿JXUHRXWKRZWRGRLW
%
,WKHOSVWRKDYHDVWUDLJKWIRUZDUGGH¿QLWLRQRIWKHZRUGmotivation:
³WKHOHYHORILQQHUGULYHDQGHQHUJ\DSHUVRQLVZLOOLQJWRH[SHQG
RQDJLYHQDFWLYLW\WRVDWLVI\DQXQPHWQHHG´$QLPSRUWDQWQRWHLV
WKDWRXULQQHUGULYHFDQEHJUHDWO\DIIHFWHGDQGVKDSHGE\WKHWKLQJV
JRLQJRQDURXQGXVDQGWKHFRQWH[WLQZKLFKZHRSHUDWH
%
,W¶VFRPPRQWRWKLQNRIPRWLYDWLRQDVDIDFWRUWKDWFDQEHLQÀXHQFHG
LQLVRODWLRQ*LYHVRPHRQHWKHULJKWLQFHQWLYHWKHWKLQNLQJJRHVDQG
KHRUVKHZLOOEHPRWLYDWHG,W¶VDOVRFRPPRQWRWKLQNRIPRWLYDWLRQ
DV JRYHUQLQJ SHUIRUPDQFH 2Q D JXW OHYHO ZH DOO WHQG WR EHOLHYH
WKDWLISHRSOHDUHPRWLYDWHGWKH\ZLOOZRUNKDUGHUDQGWKDWZKHQ
SHRSOHZRUNKDUGHUWKH\SHUIRUPEHWWHUDQGGHOLYHUEHWWHUUHVXOWV
$OOWKRVHEHOLHIVDUHDFFXUDWHWRDSRLQWEXWWKH\RYHUVLPSOLI\ZKDW
LVDFWXDOO\DPXFKPRUHFRPSOLFDWHGG\QDPLF
Key Motivational Practices
% 6HYHUDO \HDUV DJR D ODUJHVFDOH VWXG\ RI KLJKSHUIRUPDQFH
RUJDQL]DWLRQVUHYHDOHGDSDWWHUQRINH\SUDFWLFHV
%
)LUVWHDFKRIWKHFRPSDQLHVLQWKHVWXG\WRRNJUHDWFDUHWRPDNHVXUH
WKDWLWVHPSOR\HHVKDGWKHUHTXLVLWHWDOHQWWRFRPSHWHVXFFHVVIXOO\
7DOHQWPD\LQFOXGHLQQDWHDELOLW\EXWLQWKHZRUNSODFHDWDOHQWHG
HPSOR\HH LV VRPHRQH ZKR EULQJV YDOXDEOH NQRZOHGJH DQG VNLOO
WR D MRE 7KDW¶V LPSRUWDQW EHFDXVH NQRZOHGJH DQG VNLOO FDQ EH
FXOWLYDWHG 7KH RUJDQL]DWLRQV IRFXVHG RQ PDNLQJ VXUH WKDW WKHLU
HPSOR\HHVZHUHZHOOVXLWHGWRWKHLUMREVDQGWKH\PDGHV\VWHPDWLF
WUDLQLQJDQGGHYHORSPHQWDODUJHSDUWRIWKHLUFRUSRUDWHFXOWXUHV
Lecture 41: The Motivation-Performance Connection
%
6HFRQG WKH FRPSDQLHV IRFXVHG RQ PRWLYDWLQJ WKHLU HPSOR\HHV
LQ D PHWKRGLFDO DQG KROLVWLF ZD\ 7KH\ JRW WKHLU HPSOR\HHV WR
XQGHUVWDQG WKHLU PLVVLRQV DQG WKH QHHGV RI WKHLU FXVWRPHUV VR
WKH HPSOR\HHV ZRXOG VHH WKH LPSRUWDQFH RI SHUIRUPLQJ WR D KLJK
VWDQGDUG7KH\ HVWDEOLVKHG FOHDU JRDOV DQG SHUIRUPDQFH VWDQGDUGV
IRU HYHU\RQH VR WKH HPSOR\HHV XQGHUVWRRG ZKDW ZDV H[SHFWHG RI
WKHP7KHVHFRPSDQLHVGHVLJQHGHDFKMRELQDIDVKLRQWKDWIRVWHUHG
HPSOR\HH GHFLVLRQ PDNLQJ SDUWLFLSDWLRQ DQG HPSRZHUPHQW WR
HQVXUHWKDWDOOHPSOR\HHVIHOWUHVSHFWHGYDOXHGDQGLQYHVWHGLQWKH
RUJDQL]DWLRQ¶VVXFFHVV
%
)LQDOO\ WKHVH RUJDQL]DWLRQV SURYLGHG DSSURSULDWH VXSSRUW IRU WKHLU
ZRUNIRUFHV,WZDVUHDGLO\DSSDUHQWWKDWWKH\ZRUNHGKDUGWRNHHS
WKHLUHPSOR\HHVLQWKHFRPPXQLFDWLRQORRS7KH\DOVRVHWXSV\VWHPV
WRUHPRYHSHUIRUPDQFHEDUULHUVTXLFNO\DQGWRVROYHSUREOHPVWKDW
FRXOGGHUDLOSHUIRUPDQFH,QDQXWVKHOOWKHVHFRPSDQLHVGLGQ¶WMXVW
IRFXVRQHPSOR\HHPRWLYDWLRQWKH\FUHDWHGRUJDQL]DWLRQDOFOLPDWHV
DQGFXOWXUHVWKDWEURXJKWRXWWKHEHVWLQSHRSOH
The Performance Equation
% 7KH DSSURDFK WDNHQ E\ WKHVH VXFFHVVIXO RUJDQL]DWLRQV ZDV VR
FRQVLVWHQW WKDW LW FRXOG EH H[SUHVVHG PDWKHPDWLFDOO\ 7KDW OHG
VRPHWKLQJ WKDW FDOOHG WKH SHUIRUPDQFH HTXDWLRQ, which is:
SHUIRUPDQFH f WDOHQWîPRWLYDWLRQîVXSSRUW %
:KDWWKDWPHDQVLVWKDWSHUIRUPDQFHLVDIXQFWLRQRUE\SURGXFWRI
WKHLQWHUDFWLRQRIWDOHQWPRWLYDWLRQDQGVXSSRUW$OOWKUHHSDUWVRI
WKH SHUIRUPDQFH HTXDWLRQ PXVW EH LQ SODFH WR DYRLG GHPRWLYDWLQJ
SHRSOHZKRDUHWU\LQJWRJHWWKLQJVGRQHDWZRUN
%
:KDWLIDQHPSOR\HHKDVWDOHQWDQGLVKLJKO\PRWLYDWHGEXWGRHVQ¶W
UHFHLYHWKHVXSSRUWVKHQHHGV",QDIDLUO\VKRUWSHULRGRIWLPHVKH
ZLOO EHFRPH IUXVWUDWHG DQG GHPRWLYDWHGEHFDXVH VKH GRHVQ¶W KDYH
WKHLQIRUPDWLRQDQGWRROVUHTXLUHGWRSHUIRUPKHUMRE
%
:KDWLIDQHPSOR\HHWKHWDOHQWWRGRWKHMREEXWLVKLJKO\PRWLYDWHG
DQG KDV VROLG VXSSRUW" 7KLV HPSOR\HH PLJKW ZRUN KDUG HYHQ
HQWKXVLDVWLFDOO\%XWZKLOHGRLQJVRKHPLJKWGDPDJHDPDFKLQH
HUDVH D GDWDEDVH RIIHU FOLHQWV EDG DGYLFH RU GHVWUR\ D FXVWRPHU
UHODWLRQVKLSVLPSO\EHFDXVHKHLVQRWVXUHZKDWWRGR
%
:KDW LI DQ HPSOR\HH KDV WKH DSSURSULDWH OHYHO RI WDOHQW DQG WKH
VXSSRUWVKHQHHGVWREHHIIHFWLYHEXWLVQRWPRWLYDWHGWRZRUNDQGGR
DJRRGMRE"2QFHPRUHSHUIRUPDQFHZLOOVXIIHU,QWHQVLYHFRDFKLQJ
DQGIHHGEDFNDUHSUREDEO\LQRUGHU%XWWKHFRPSDQ\VKRXOGDOVR
FRQVLGHUZKHWKHULWVZRUNHQYLURQPHQWLVUHDOO\DVVXSSRUWLYHDVLW
VHHPVQRWHYHU\HPSOR\HHLVPRWLYDWHGE\WKHVDPHWKLQJV
Strategies for Workplace Motivation
% :KDW FDQ \RX GR WR FUHDWH D PRUH PRWLYDWLQJ KLJKSHUIRUPDQFH
ZRUNSODFH"&RQVLGHUWKHIROORZLQJVWUDWHJLHV
ż 6WDUWE\FODULI\LQJDQGFRPPXQLFDWLQJ\RXUPLVVLRQDQGZKDW
\RX VWDQG IRU ,I \RX UHDOO\ ZDQW WR PRWLYDWH SHRSOH KHOS
WKHP XQGHUVWDQG WKH ELJJHU SLFWXUH RI ZKDW \RX DUH WU\LQJ WR
DFFRPSOLVK(PSOR\HHVQHHGWRXQGHUVWDQGWKH³ZK\´EHKLQG
WKH³ZKDW´WKDWWKH\DUHDVNHGWRGR
ż
0DNHJHWWLQJWRNQRZ\RXUHPSOR\HHVDSULRULW\8QGHUVWDQGLQJ
WKHLU VWUHQJWKV DQG ZHDNQHVVHV WKHLU ZDQWV DQG QHHGV DQG
WKHLUSHUVRQDOLWLHVDQGDWWLWXGHVFDQEHDUHDOKHOSLQGHYHORSLQJ
WDLORUPDGH PRWLYDWLRQDO VWUDWHJLHV WKDW EULQJ RXW WKH EHVW LQ
HDFKSHUVRQ
ż
&ODULI\ SHUIRUPDQFH H[SHFWDWLRQV IRU HYHU\RQH 1HDUO\ DOO
FXUUHQWWKHRULHVDQGPRGHOVRIPRWLYDWLRQPDNHDVWURQJFDVH
IRUFODULI\LQJIRFXVDQGJLYLQJSHRSOHDVHQVHRIDFKLHYHPHQW
DQGUHFRJQLWLRQ<RXQHHGWRFUHDWHIRFXVE\KHOSLQJHPSOR\HHV
LGHQWLI\ WKH JRDOV DQG DFWLYLWLHV WKDW DUH PRVW LPSRUWDQW IRU
WKHLUVXFFHVVDQGWKDWRI\RXUHQWHUSULVH
3URSHUO\HTXLSSHRSOHZLWKWKHVXSSRUWWKH\QHHGIRUVXFFHVV
,I \RX ZDQW D KLJKSHUIRUPDQFH ZRUNIRUFH UHPHPEHU
WKDW D VWDUWLQJ SRLQW LV SURYLGLQJ \RXU HPSOR\HHV ZLWK WKH
IXQGDPHQWDOV QHFHVVDU\ IRU VXFFHVV :KHQ HPSOR\HHV GRQ¶W
KDYH WKH WKLQJV WKH\ QHHG WR FRPSHWH \RX DUH DXWRPDWLFDOO\
EXLOGLQJ LQ ZRUNSODFH IUXVWUDWLRQ DQG DQJHU DQG FUHDWLQJ
SUREOHPVWKDWGLVWUDFWSHRSOHIURPGHOLYHULQJUHVXOWV
ż
(PSRZHU HPSOR\HHV WR PDNH GHFLVLRQV DQG VKDUH RZQHUVKLS
RYHUZKDW\RXDUHWU\LQJWRDFFRPSOLVKDQGKRZ\RXDUHWU\LQJ
WR GR LW ,W¶V ZHOO NQRZQ WKDW ZKHQ SHRSOH RZQ VRPHWKLQJ
they treat it much better than if it belongs to someone else.
<RXZRXOGEHZHOOVHUYHGWRJLYH\RXUHPSOR\HHVDVHQVHRI
RZQHUVKLS LQ \RXU RUJDQL]DWLRQ¶V SODQV E\ HQJDJLQJ WKHP LQ
SODQQLQJRUJDQL]LQJDQGGHFLVLRQPDNLQJULJKWRXWRIWKHJDWH
ż
3URPRWH WHDPZRUN DQG PDNH ZRUN PRUH LQWHUHVWLQJ DQG IXQ
)URPWKHVWDUWEXLOGDVROLGOHDGHUVKLSWHDPDURXQG\RXZLWKD
VKDUHGYLVLRQWKHQORRNIRUZD\VWRSURPRWHFRRSHUDWLRQDQG
teamwork throughout your
RUJDQL]DWLRQ ,Q GRLQJ VR
you not only create a climate
for effective motivation,
but you also increase the
VXSSRUW FRPSRQHQW RI WKH
SHUIRUPDQFHHTXDWLRQ
ż
'HYHORS WKH OLQN EHWZHHQ
SHUIRUPDQFH DQG RXWFRPHV
2UJDQL]DWLRQV WKDW GR D
great job of clarifying goals
DQG H[SHFWDWLRQV KDYH WKH
EXLOWLQ EHQH¿W RI D VROLG
EDVLV IRU UHZDUGLQJ JRRG
SHUIRUPDQFHDQGDGGUHVVLQJ
SHUIRUPDQFHGH¿FLHQFLHV
‹$EOHVWRFNFRP7KLQNVWRFN
Lecture 41: The Motivation-Performance Connection
ż
One of the hallmarks of highperformance organizations is
WKDWOHDGHUVDQGFRZRUNHUV
promote and encourage
WHDPZRUNDQGFRRSHUDWLRQ
%
ż
3URYLGH RQJRLQJ DQG EDODQFHG SHUIRUPDQFH IHHGEDFN DQG
FRDFKLQJ WR HYHU\RQH 2QFH \RX¶YH HVWDEOLVKHG ZKDW SHRSOH
ZLOOEHKHOGDFFRXQWDEOHIRULWLVFULWLFDOO\LPSRUWDQWWKDW\RX
DQG \RXU IHOORZ OHDGHUV PDNH FRDFKLQJ D ELJ SDUW RI \RXU
RSHUDWLRQ )HHGEDFN LV D SRZHUIXO PRWLYDWRU DQG SUDLVH FDQ
UHLQIRUFHGHVLUHGEHKDYLRUV$WWKHVDPHWLPHZKHQSHRSOHDUH
QRWSHUIRUPLQJZHOOWKH\QHHGWREHWROGVRLQDFRQVWUXFWLYH
ZD\ZLWKDJDPHSODQWRKHOSWKHPJHWEHWWHU
ż
%HIDLUIRUWKULJKWDQGHWKLFDOLQHYHU\WKLQJWKDW\RXGR$V
\RX VWULYH WR LPSURYH WKH SHUIRUPDQFH RI \RXU RSHUDWLRQ
ZRUN KDUG WR HQVXUH WKDW IDLUQHVV DQG WUDQVSDUHQF\ DUH
FRUQHUVWRQHV RI \RXU DSSURDFK 3HRSOH ZDQW WR VHH IDLUQHVV
DQGHTXLW\DSSOLHGWRHYHU\SDUWRI\RXURSHUDWLRQLQFOXGLQJ
ZRUNORDG GLVWULEXWLRQ RI UHVRXUFHV HQIRUFHPHQW RI
ZRUNSODFHSROLFLHVDQGUXOHVDQGRIFRXUVHWKHUHZDUGVWKDW
\RXGLVWULEXWH
$ ¿QDO SLHFH RI DGYLFH *R WR \RXU FRPSXWHU SLFN D VHDUFK
HQJLQHDQGW\SHLQ³%HVWSODFHVWRZRUNLQ$PHULFD´6SHQGVRPH
WLPH ORRNLQJ DW WKHVH JUHDW DQG SURGXFWLYH SODFHV WR ZRUN DQG
XVHWKHPWRGHYHORS\RXUYLVLRQIRUZKHUH\RXZDQWWRWDNH\RXU
RZQRUJDQL]DWLRQ<RX¶OO¿QGDZHDOWKRIFUHDWLYHDQGLQQRYDWLYH
SUDFWLFHV WR KHOS JHW \RX WKHUH .HHS WKH SHUIRUPDQFH HTXDWLRQ
LQ PLQG DV \RX PDNH SODQV IRU \RXU RUJDQL]DWLRQ DQG DV \RX
WDFNOH WKH SHUIRUPDQFH SUREOHPV WKDW LQHYLWDEO\ FURS XS DORQJ
the way.
Suggested Reading
/RQJHQHFNHU 'Z\HU DQG 6WDQV¿HOG ³7KH +XPDQ 6LGH RI 0DQXIDFWXULQJ
,PSURYHPHQW´
1HOVRQ1001 Ways to Reward Employees.
Questions to Consider
1. ,Q \RXU RSLQLRQ ZKDW DUH WKH WKLQJV WKDW WUXO\ PRWLYDWH SHRSOH WR GR
WKHLUEHVWZRUN"
2. &RQYHUVHO\ZKDWDUHWKHVSHFL¿FWKLQJVWKDWGHPRWLYDWHSHRSOHDWZRUN"
3. :KDWDUHWKHVSHFL¿FIDFWRUVWKDWDIIHFWDSHUVRQ¶VSRWHQWLDOIRUDFKLHYLQJ
VXSHULRUSHUIRUPDQFH"
4. :KDW QHHGV WR KDSSHQ DW \RXU SODFH RI HPSOR\PHQW WR FUHDWH D PRUH
Lecture 41: The Motivation-Performance Connection
SURGXFWLYHZRUNSODFH"
:LQQLQJZLWK7HDPZRUN
Lecture 42
,
W¶VDSUHPLVHRIPDQ\HFRQRPLFWKHRULHVWKDWSHRSOHVHHNWRPD[LPL]H
WKHLU RZQ LQWHUHVWV LQ DQ\ JLYHQ VLWXDWLRQ DQG WKDW PD\ ZHOO EH WUXH
8QIRUWXQDWHO\ WKRXJK SHRSOH RIWHQ IDLO WR UHFRJQL]H WKDW WKH\ FDQ
VHUYHWKHLURZQLQWHUHVWVEHVWE\FRRSHUDWLQJZLWKRQHDQRWKHU7HDPZRUN
DQGFRRSHUDWLRQDUHDEVROXWHO\HVVHQWLDOLQMXVWDERXWDQ\ZRUNVLWXDWLRQ
ZLWK UDUH H[FHSWLRQV 7KLV OHFWXUH ZLOO H[DPLQH WKH SRZHU RI WHDPZRUN
DQGFRRSHUDWLRQLQDQRUJDQL]DWLRQ²DQGKRZ\RXFDQIRVWHUWKHPLQ\RXU
RZQZRUNSODFH
Cooperation and Teamwork
% 7KHZRUGFRRSHUDWLRQKDVEHHQGH¿QHGDV³DZLOOLQJQHVVWRZRUNRU
DFWWRJHWKHUIRUDFRPPRQSXUSRVHRUEHQH¿W´1RWLFHWZRFULWLFDO
HOHPHQWVLQWKDWGH¿QLWLRQZLOOLQJQHVVDQGFRPPRQSXUSRVH:KHQ
SHRSOH FRRSHUDWH ZLWK RQH DQRWKHU WKH\ GHPRQVWUDWH QRW RQO\ DQ
XQGHUVWDQGLQJ WKDW WKH\ VKDUH WKH VDPH JRDO EXW D ZLOOLQJQHVV WR
work together to get there.
%
7KHZRUGteamworkZKLFKGDWHVEDFNWRWKHVLVVRPHWLPHV
XVHG LQWHUFKDQJHDEO\ ZLWK FRRSHUDWLRQ EXW LW¶V DFWXDOO\ D ELW
GLIIHUHQW ,W KDV EHHQ GH¿QHG DV ³D FRRSHUDWLYH DQG FRRUGLQDWHG
HIIRUWRQWKHSDUWRISHRSOHZRUNLQJWRJHWKHUZLWKDXQLI\LQJFDXVH
RUJRDO´
%
7RKDYHWHDPZRUN\RXPXVWKDYHFRRSHUDWLRQ%XWWKHGH¿QLWLRQ
PDNHV LW FOHDU WKDW WKH JURXS¶V DFWLYLW\ LV FRRUGLQDWHG DQG WKDW
WKHJURXSPHPEHUVDUHXQL¿HGE\WKHLUFRPPRQJRDO7HDPZRUN
WDNHV FRRSHUDWLRQ XS D QRWFK LQVWHDG RI MXVW KHOSLQJ HDFK RWKHU
RXW UDQGRPO\ RU ZKHQ QHHGHG SHRSOH ZKR DUH HQJDJHG LQ
WHDPZRUN ZRUN WRJHWKHU LQ D FRRUGLQDWHG IDVKLRQ DQG KHOS HDFK
RWKHU RQ DQ RQJRLQJ EDVLV WR DFFRPSOLVK D JRDO WKDW ELQGV WKHLU
interests together.
‹$QGUHZ;L6WRFN7KLQNVWRFN
/HFWXUH:LQQLQJZLWK7HDPZRUN
/LNHWKHSLHFHVRIDFKHVVVHWDQHIIHFWLYHWHDPKDVLQGLYLGXDOVZKRVHVNLOOV
complement each other’s.
%
The term teamworkRIFRXUVHLVEDVHGRQ team, which just might
EHRQHRIWKHPRVWRYHUXVHGZRUGVLQRUJDQL]DWLRQDO$PHULFD:H
IUHTXHQWO\ UHIHU WR JURXSV RI SHRSOH LQ RXU ZRUNSODFHV DV WHDPV
XVLQJ VXFK SKUDVHV DV ³RXU H[HFXWLYH WHDP´ ³RXU RI¿FH WHDP´
³ZH¶YH JRW D VWURQJ VDOHV WHDP´ RU ³RXU UHVHDUFK WHDP LV YHU\
SURGXFWLYH´ %XW VLPSO\ FDOOLQJ D JURXS RI SHRSOH D WHDP GRHVQ¶W
make them one.
%
$ WHDP LV D JURXS RI LQGLYLGXDOV ZLWK FRPSOHPHQWDU\ VNLOOV DQG
UROHVZKRDUHFRPPLWWHGWRDFRPPRQSXUSRVHDQGDUHDFFRXQWDEOH
WR RQH DQRWKHU 7KH ZRUG GDWHV EDFN WR WKH th century, when the
(QJOLVKZRUGtemePHDQLQJ³VHWRIGUDIWEHDVWV´ZDVFRQMXJDWHG
ZLWKWKH'XWFKZRUGtoomPHDQLQJ³EULGOH´RU³UHLQV´$WHDPLVD
JURXSRISHRSOHZKRVHHIIRUWVDQGHQHUJLHVDUHSURSHUO\IRFXVHGDQG
GLUHFWHGDQGZKRKROGRQHDQRWKHUUHVSRQVLEOHIRUWKHLULQGLYLGXDO
HIIRUWV DV WKH\ SXUVXH D FROOHFWLYH JRDO RU RXWFRPH 1RWH WKDW WKH
ZRUGteamDOVRLPSOLHVOHDGHUVKLSVRPHRQHPXVWIRFXVRUEULGOH
WKHWHDPWRGLUHFWLWWRZDUGLWVREMHFWLYH
%XLOGLQJ7HDPZRUNLQ'LI¿FXOW&LUFXPVWDQFHV
% :KHQ D ZRUN XQLW LV PDGH XS RI LQGLYLGXDOV ZKR KDYH VWURQJ
ZRUNLQJUHODWLRQVKLSVZLWKWKHSHRSOHWKH\QHHGLQRUGHUWRGHOLYHU
UHVXOWVFRRSHUDWLRQDQGWHDPZRUNEHFRPHSDUWRIWKHRUJDQL]DWLRQ¶V
FXOWXUH 0RUHRYHU LQ VXFK DQ HQYLURQPHQW XQZDQWHG HPSOR\HH
turnover is lower, commitment to fellow workers is greater,
SURGXFWLYLW\LVKLJKHUDQGRYHUDOOUHVXOWVDUHEHWWHU
%
7KH IDFW UHPDLQV KRZHYHU WKDW LW FDQ EH H[WUHPHO\ KDUG WR JHW
SHRSOH ZLWK FRQÀLFWLQJ LQWHUHVWV WR RYHUORRN WKHLU GLIIHUHQFHV DQG
ZRUN WRJHWKHU WRZDUG D VKDUHG JRDO %XW WKLV KDV FKDOOHQJH EHHQ
DFFRPSOLVKHG²DQG XQGHU WKH PRVW WU\LQJ FLUFXPVWDQFHV 7KHUH¶V
QR EHWWHU H[DPSOH WKDQ WKDW RI WKH th SUHVLGHQW RI WKH 8QLWHG
States, Abraham Lincoln.
%
,QKHUUHPDUNDEOHERRNA Team of RivalsKLVWRULDQ'RULV.HDUQV
*RRGZLQSURYLGHVXVZLWKDQDPD]LQJSLFWXUHRIKRZ/LQFROQDQG
KLVFKLHISROLWLFDODGYHUVDULHVFDPHWRJHWKHUWREHFRPHDQHIIHFWLYH
OHDGHUVKLSWHDPWKDWZRXOGODWHUEHUHFRJQL]HGIRUVDYLQJWKH8QLRQ
GXULQJWKH$PHULFDQ&LYLO:DU
%
2Q 0D\ IRXU ULYDOV²1HZ <RUN VHQDWRU :LOOLDP +
6HZDUGIRUPHU2KLRVHQDWRUDQGJRYHUQRU6DOPRQ3&KDVHIRUPHU
0LVVRXULFRQJUHVVPDQ(GZDUG%DWHVDQG/LQFROQ²ZDLWHGIRUWKH
UHVXOWV RI WKH 5HSXEOLFDQ 1DWLRQDO &RQYHQWLRQ 7KLV FRQYHQWLRQ
ZRXOG GHWHUPLQH ZKR ZRXOG UHSUHVHQW WKH SDUW\ LQ WKH XSFRPLQJ
SUHVLGHQWLDOHOHFWLRQ
%
:KHQ/LQFROQUHFHLYHGWKH5HSXEOLFDQQRPLQDWLRQKLVWKUHHULYDOV
ZHUH GLVWUHVVHG GLVPD\HG DQG DQJU\ EHFDXVH HDFK RI WKHP KDG
YLJRURXVO\ DQG DPELWLRXVO\ VRXJKW WKH SUHVLGHQF\ %XW WKH QHZ
SUHVLGHQW IURP YHU\ KXPEOH EHJLQQLQJV KLPVHOI KDG DQ XQFDQQ\
NQDFNIRUEULQJLQJSHRSOHWRJHWKHUDQGJHWWLQJWKHPWRVHHKLVYLVLRQ
RIWKHIXWXUH3HUKDSVWKHEHVWLOOXVWUDWLRQRIKLVOHDGHUVKLSVNLOOVZDV
KLVFULWLFDODQGXQSUHFHGHQWHGGHFLVLRQDIWHUZLQQLQJWKHSUHVLGHQF\
WRPDNHKLVWKUHHHPLQHQWSROLWLFDOULYDOVSDUWRIKLVFDELQHW
/HFWXUH:LQQLQJZLWK7HDPZRUN
%
6HZDUGEHFDPHWKHVHFUHWDU\RIVWDWH%DWHVWKHDWWRUQH\JHQHUDO
DQG&KDVHWKHVHFUHWDU\RIWKHWUHDVXU\7RFRPSOHWHKLVVHOHFWLRQV
/LQFROQ RIIHUHG WKH WKUHH UHPDLQLQJ FDELQHW VHDWV WR IRUPHU
'HPRFUDWV²WKDWLVSHRSOHRIWKHSDUW\WKDWRSSRVHGKLVHOHFWLRQ
7KHVHPHQZHUHSRZHUIXOFRPSHWLWRUVWR/LQFROQDQGVRPHHYHQ
LQLWLDOO\ GLVSOD\HG RSHQ GLVGDLQ IRU WKHLU QHZ ERVV <HW LQ IDLUO\
VKRUW RUGHU /LQFROQ¶V VNLOO DV DQ HPRWLRQDOO\ LQWHOOLJHQW OHDGHU
ZRXOGZLQWKHLUUHVSHFW
%
*RRGZLQ¶V DFFRXQW RI /LQFROQ¶V SUHVLGHQF\ SURYLGHV XV ZLWK DQ
RXWVWDQGLQJ FDVH VWXG\ LQ WKH VNLOOV OHDGHUV QHHG WR IRUJH D JURXS
RILQGLYLGXDOVLQWRDQHIIHFWLYHWHDP/LQFROQSRVVHVVHGWKHDELOLW\
WRVHHWKHELJJHUSLFWXUHDQGKHOSRWKHUVVKDUHWKDWYLVLRQ+HKDG
WKHFDSDFLW\WRIRFXVRQERWKWKHSODQDQGWKHGHVLUHGRXWFRPHDQG
WKHSHUVLVWHQFHWRSUHVVRQZDUGHYHQLQWKHIDFHRIGLVDJUHHPHQWV
VHWEDFNVDQGSHUVRQDOWUDJHGLHVGUDZLQJXSRQKLVFDELQHWPHPEHUV
IRUJXLGDQFHDWHYHU\WXUQ
%
/LQFROQ KDG WKH DELOLW\ WR IRUP IULHQGVKLSV DQG JUHDW ZRUNLQJ
UHODWLRQVKLSV ZLWK WKH PHQ ZKR KDG SUHYLRXVO\ GLVOLNHG DQG
RSSRVHGKLP+HWRRNUHVSRQVLELOLW\IRUIDLOXUHVVKDUHGFUHGLWZKHQ
WKLQJVZHQWZHOODQGZDVTXLFNWROHDUQIURPKLVPLVWDNHV)LQDOO\
/LQFROQKDGWKHDELOLW\WRGHDOZLWKVWURQJHJRVZLWKGHFHQF\DQG
PRUDOLW\DQGKHFRPPXQLFDWHGZLWKFRPSDVVLRQKRQHVW\KXPRU
DQG HPSDWK\ IRU KLV OLVWHQHUV %\ GRLQJ WKHVH WKLQJV /LQFROQ
ZDV DEOH WR WDS LQWR DQG OHYHUDJH WKH PDQLIROG WDOHQWV QHWZRUNV
SROLWLFDOVDYY\DQGSURGLJLRXVLQWHOOHFWVRIKLVWHDPRIULYDOV
Critical Gateways to Cooperation and Teamwork
% $ VHW RI SUDFWLFHV FDOOHG WKH FULWLFDO JDWHZD\V WR FRRSHUDWLRQ DQG
WHDPZRUN FDQ KHOS \RX HQKDQFH WKHVH DUHDV LQ \RXU RUJDQL]DWLRQ
7KHVH SUDFWLFHV GRQ¶W FRVW PXFK PRQH\ EXW WKH\ UHTXLUH SDWLHQW
DQGSHUVLVWHQWOHDGHUVKLS
%
)LUVWLI\RXDUHVHULRXVDERXWLQFUHDVLQJZRUNSODFHFRRSHUDWLRQDQG
WHDPZRUNWRDFKLHYHEHWWHUSHUIRUPDQFHLWLVLPSHUDWLYHWKDW\RX
OHDGE\H[DPSOH<RXPXVWGHPRQVWUDWHWKHEHKDYLRUVWKDWZLOOKHOS
\RXEHFRPHNQRZQDVDWHDPSOD\HU.HHSLQPLQGWKDWLI\RX¶UH
QRWDWHDPSOD\HU\RXUVHOILWZLOOEHH[FHSWLRQDOO\GLI¿FXOWIRU\RX
WREXLOGDQHIIHFWLYHWHDP
%
6HFRQG FODULI\ \RXU PLVVLRQ 7KH TXLFNHVW ZD\ WR JHW D JURXS
RI SHRSOH WR SXOO WRJHWKHU LV WR GHYHORS FRQVHQVXV DURXQG \RXU
RYHUDUFKLQJYLVLRQ\RXUPLVVLRQDQGNH\JRDOVWKDWDUHQHFHVVDU\
IRUVXFFHVV)RUH[DPSOH3UHVLGHQW/LQFROQXVHGWKHFOHDUO\GH¿QHG
PLVVLRQRIVDYLQJWKH8QLRQDVDUDOO\LQJFU\WRKHOSKLVSHRSOHVWD\
IRFXVHGRQWKHELJSLFWXUH
%
1H[WLW¶VFULWLFDOO\LPSRUWDQWWKDWSHRSOHXQGHUVWDQGWKHLUUROHVDQG
ZKDWWKH\QHHGWRGRWRPDNHWKHZRUNJURXSVXFFHVVIXO,I\RXDUH
DIRRWEDOOGHYRWHH\RXNQRZWKDWVXFFHVVIXOSOD\VGHSHQGRQHYHU\
SHUVRQ SHUIRUPLQJ KLV MRE FRUUHFWO\ DQG NQRZLQJ HYHU\RQH HOVH¶V
job, as well.
%
&ULWLFDO EHKDYLRUV DQG WHDPEDVHG QRUPV DUH DOVR HVVHQWLDO IRU D
ZRUNJURXS WR EHFRPH D IXOO\ IXQFWLRQDO WHDP :H VKRXOG H[SHFW
SHRSOH WR FRRSHUDWH DV D PLQLPXP UHTXLUHPHQW WR ZRUN LQ DQ\
RUJDQL]DWLRQ %XW RQFH SHRSOH FRRSHUDWH ZH FDQ EXLOG RQ WKHLU
FRRSHUDWLYH VSLULW ,Q /LQFROQ¶V FDELQHW LW ZDV DFFHSWDEOH WR
GLVDJUHHRUWRRIIHUDGLIIHUHQWSRLQWRIYLHZ,WZDVQRWDFFHSWDEOH
WRORVH\RXUWHPSHURUGLVUHVSHFWRWKHUV
%
$QRWKHU HOHPHQW RI EXLOGLQJ DQ HIIHFWLYH WHDP LV LQFUHDVLQJ WKH
OHYHORIZRUNSODFHSDUWLFLSDWLRQDQGHPSRZHUPHQWZLWKWKHSHRSOH
LQ \RXU ZRUNJURXS 7KLV KHOSV SHRSOH EHJLQ WR WDNH RZQHUVKLS
RYHUWKHWKLQJVWKDWDUHJRLQJRQLQDQRSHUDWLRQ$VRZQHUVKLSRI
DFWLYLWLHVLQFUHDVHVVRGRWHDPZRUNDQGFRPPLWPHQWWRERWKZKDW
\RX¶UHWU\LQJWRGRDQGKRZ\RX¶UHWU\LQJWRGRLW
%
6DYY\ OHDGHUV DOVR WDNH DGYDQWDJH RI WHDPEXLOGLQJ DFWLYLWLHV
7KHUHDUHPDQ\PRGHOVIRUWHDPGHYHORSPHQW<RXFDQIRVWHUWHDP
WKLQNLQJWKURXJKVXFKHYHQWVDVRIIVLWHWHDPEXLOGLQJUHWUHDWVZKHUH
team members learn how to communicate more effectively with one
DQRWKHU DQG GHYHORS DFWLRQ SODQV IRU SHUIRUPDQFH LPSURYHPHQW
$QRWKHURSWLRQLVWHDPEDVHGWUDLQLQJZKHUHHYHU\PHPEHURIWKH
WHDPLVH[SRVHGWRWKHVDPHFRQFHSWVDQGFXUULFXOXPZKLFKJLYHV
SHRSOHFRPPRQNQRZOHGJHDQGDFRPPRQODQJXDJH
%
)LQDOO\ LW LV LPSRUWDQW WR LPSOHPHQW WHDPEDVHG SHUIRUPDQFH
PHDVXUHPHQWIHHGEDFNDQGUHZDUGV\VWHPV:KHQWKHSHUIRUPDQFH
RI D ZRUNJURXS RU WHDP LV PHDVXUHG DQG WKLV LQIRUPDWLRQ LV IHG
EDFNWRWKHJURXSRQDQRQJRLQJEDVLVWKHSURFHVVQRWRQO\XQLWHV
LQGLYLGXDOVEXWLPSURYHVJURXSFRKHVLYHQHVVDQGSHUIRUPDQFH
ż :LWKUHJDUGWRUHZDUGVPDNHDSRLQWRIUHZDUGLQJWHDPVUDWKHU
WKDQ MXVW WKH LQGLYLGXDOV RQ WKH WHDPV$ VXEVWDQWLDO ERG\ RI
UHVHDUFK PDNHV LW YHU\ FOHDU WKDW WHDPEDVHG UHZDUGV FDQ JR
D ORQJ ZD\ WRZDUG IRUJLQJ VWURQJHU OHYHOV RI FRPPLWPHQW
FRRSHUDWLRQDQGWHDPZRUN
ż
)XUWKHU LI \RXU RUJDQL]DWLRQ PHDVXUHV WHDP SHUIRUPDQFH
LW EHFRPHV HDV\ DQG QDWXUDO WR FHOHEUDWH WHDP VXFFHVV²DQG
FHOHEUDWLQJWHDPVXFFHVVLVDVXUH¿UHZD\WRJHWSHRSOHPRUH
H[FLWHGDERXWZRUNLQJWRJHWKHU
Suggested Reading
/HFWXUH:LQQLQJZLWK7HDPZRUN
*RRGZLQTeam of Rivals.
Lencioni, 7KH)LYH'\VIXQFWLRQVRID7HDP.
Questions to Consider
1. 7KLQN RI D WLPH LQ \RXU OLIH ZKHQ \RX IHOW DV LI \RX ZHUH SDUW RI D
WHDPWKDWZDVJHWWLQJJUHDWUHVXOWV:KDWZDVLWWKDWPDGHWKLVWHDPVR
HIIHFWLYHDQGZKDWDUHWKHOHVVRQV\RXOHDUQHGIURPWKLVH[SHULHQFH"
2. &RQYHUVHO\WKLQNRIDWLPHLQ\RXUOLIHZKHQ\RXZHUHSDUWRIDJURXS
WKDW QHYHU EHFDPH D WHDP DQG WKDW VWUXJJOHG ZLWK SHUIRUPDQFH :KDW
ZDVLWWKDWPDGHWKLVJURXSVRLQHIIHFWLYHDQGZKDWDUHWKHOHVVRQVIURP
WKLVH[SHULHQFH"
3. :KDWVSHFL¿FWKLQJVGR\RXEHOLHYHQHHGWRKDSSHQWRLPSURYHWKHOHYHO
RIWHDPZRUNDQGFRRSHUDWLRQDPRQJWKHSHRSOH\RXZRUNZLWK"
4. $UH \RX YLHZHG DV D WHDP SOD\HU E\ WKH SHRSOH \RX ZRUN ZLWK"
,I QRW ZKDW DUH WKH FRVWV DVVRFLDWHG ZLWK QRW ZRUNLQJ ZHOO LQ D
WHDPHQYLURQPHQW"
Coaching—From Gridiron to Boardroom
Lecture 43
:
Lecture 43: Coaching—From Gridiron to Boardroom
KHQ OHDGHUV LQ DQ\ RUJDQL]DWLRQ WDNH FRDFKLQJ VHULRXVO\ JRRG
UHVXOWVLQHYLWDEO\IROORZ&RDFKLQJFDQKHOSSHRSOHJHWDQGVWD\
IRFXVHGOHDUQDQGGHYHORSPRUHTXLFNO\DQGLQFUHDVHWKHLUOHYHO
RI HIIRUW %XW LW¶V LPSRUWDQW WR NHHS LQ PLQG WKDW QRW DOO FRDFKLQJ LV JRRG
FRDFKLQJ²FHUWDLQ SUDFWLFHV FDQ EH FRXQWHUSURGXFWLYH LI WKH\ DOLHQDWH RU
GLVFRXUDJHHPSOR\HHV7KLVOHFWXUHZLOOPDNHDFDVHIRUWKHLPSRUWDQFHRI
JRRGFRDFKLQJSURYLGHH[DPSOHVRIJRRGFRDFKLQJDQGGLVFXVVWKHUHDVRQV
WKDWWDLORUPDGHFRDFKLQJLQSDUWLFXODUZRUNV
3DW¶V3UREOHP
% 7RXQGHUVWDQGWKHLPSRUWDQFHRIFRDFKLQJOHW¶VORRNDWDFDVHVWXG\
ZLWKDPDQDJHUQDPHG3DWZKRZDVFRQIURQWHGZLWKDVLJQL¿FDQW
SHUIRUPDQFHFKDOOHQJH3DW¶VERVVKDGZDUQHGKLPWKDWSHUIRUPDQFH
JRDOVIRUWKHQH[W\HDUZHUHEHLQJFUDQNHGXS²ZLWKQRDGGLWLRQDO
UHVRXUFHVWRKHOS
%
3DWNQHZWKDWKLWWLQJDJJUHVVLYHJRDOVZDVJRLQJWREHWRXJKDQGKH
IHOWRYHUZKHOPHG+HKDGDOUHDG\XVHGDFRPSXWHUXSJUDGHDQGD
SURFHVVLPSURYHPHQWWRJHWEHWWHUSHUIRUPDQFHIURPKLVHPSOR\HHV
GXULQJWKHSUHYLRXVWZR\HDUV
%
$IWHU GRLQJ VRPH UHVHDUFK 3DW FRQFOXGHG WKDW SHUIRUPDQFH
LPSURYHPHQW FRXOG FRPH IURP FRDFKLQJ:KHQ 3DW ORRNHG DW KLV
GHSDUWPHQW¶V URVWHU ZLWK D FULWLFDO H\H DQG VDZ WKDW D QXPEHU RI
SHRSOHQHHGHGWRVWHSXSWKHLUSHUIRUPDQFHKHUHDOL]HGKHQHHGHG
WRPDNHGHYHORSLQJKLVVWDIIDSULRULW\
Effective Coaching
% Research shows that Pat was on to something: A survey of U.S.
EXVLQHVV OHDGHUV UHYHDOHG WKDW WKH\ RYHUZKHOPLQJO\ UHDOL]H WKH
LPSRUWDQFH RI FRDFKLQJ (LJKW\WZR SHUFHQW RI WKH VDPSOH VWDWHG
that effective coaching was critical to their success. An even larger
SRUWLRQRIWKHVDPSOHIXOO\RIWKHSDUWLFLSDQWVEHOLHYHGWKDW
HPSOR\HHVZDQWHGDQGQHHGHGFRDFKLQJ)XUWKHUPRUHDVVHUWHG
WKDWPRVWHPSOR\HHVGRQRWJHWHQRXJKIHHGEDFNDQGFRDFKLQJ
%
7KHEXVLQHVVOHDGHUVGHPRQVWUDWHGVRPHVHQVLWLYLW\WRWKHGHPDQGVRI
JRRGFRDFKLQJRIWKHPEHOLHYHGWKDWLWZDVFULWLFDOO\LPSRUWDQW
WR NQRZ WKHLU HPSOR\HHV DQG EHOLHYHG WKDW LW ZDV H[WUHPHO\
LPSRUWDQWWRXQGHUVWDQGDQHPSOR\HH¶VDELOLW\DQGPRWLYDWLRQ
%
But the most telling result of the survey was the following: 80% of
WKHEXVLQHVVOHDGHUVLQWKHVDPSOHEHOLHYHGWKDWWKHLUFRDFKLQJVNLOOV
QHHGHGLPSURYHPHQWDQGDIXOOVWDWHGWKDWWKH\VWUXJJOHGWR
make the time for coaching.
Pat’s Solution
% /HW¶VZDONWKURXJKWKHFRDFKLQJSURFHVVWKDW3DWXVHGWRLPSURYH
WKHSHUIRUPDQFHRIKLVZRUNJURXS7RVWDUWZLWK3DWGLGDFRXSOH
RIRQOLQHDVVHVVPHQWVUHDGDVHULHVRIFRDFKLQJDUWLFOHVDQGZHQW
WRDRQHGD\FRDFKLQJVHPLQDU+HDOVRVLJQHGXSIRURQFHDZHHN
coaching sessions with a consultant. Pat was smart enough to
UHDOL]HWKDWKHQHHGHGRQJRLQJIHHGEDFNDQGDFFRXQWDELOLW\WRKHOS
change his own behavior.
%
3DW LGHQWL¿HG VSHFL¿F EHKDYLRUV WKDW KH QHHGHG WR PRGHO IRU KLV
WHDPWROHWKLVHPSOR\HHVNQRZWKDWKHZDVVHULRXVDERXWFKDQJH
+HUHDOL]HGWKDWKHQHHGHGWRZRUNRQKLVSXQFWXDOLW\NHHSKLVGHVN
DOLWWOHPRUHRUJDQL]HGDQGIROORZXSRQYHUEDOFRPPLWPHQWV+H
DOVRQHHGHGWRUXQEHWWHUPHHWLQJV
%
1H[W3DWFOHDUO\GH¿QHGwinningIRUKLVWHDP2QFHKLVFRPSDQ\¶V
JRDOV IRU WKH XSFRPLQJ \HDU KDG EHHQ ¿QDOL]HG 3DW LGHQWL¿HG D
VFRUHFDUGRIVSHFL¿FSHUIRUPDQFHPHWULFVDJDLQVWZKLFKGHSDUWPHQW
SHUIRUPDQFHZRXOGEHPHDVXUHG3DW¶VGHSDUWPHQWKDGDOZD\VKDG
JRDOVEXWLQWKHSDVW3DWKDGIRUPDOO\VKDUHGWKHPRQO\ZLWKWKH
SHRSOH LQ KLV LPPHGLDWH ZRUNJURXS 1RZ HYHU\RQH LQ WKH HQWLUH
GHSDUWPHQWZRXOGNQRZH[DFWO\ZKDWZDVH[SHFWHGRIWKHJURXSDV
a work unit.
Lecture 43: Coaching—From Gridiron to Boardroom
%
$W WKLV SRLQW 3DW GHFLGHG WKDW KLV WHDP JRDOV QHHGHG WR EH
WUDQVODWHGLQWRLQGLYLGXDOJRDOVWKXVKHZHQWWKURXJKDIRUPDOL]HG
SHUIRUPDQFHSODQQLQJF\FOHZLWKHDFKRIKLVHPSOR\HHV3DWDVNHG
KLVHPSOR\HHVWRSUHSDUHGHVFULSWLRQVRIWKHLUNH\UHVSRQVLELOLWLHV
DQG DFWLYLWLHV DQG WR WDNH D ¿UVW VKRW DW VHWWLQJ JRDOV LQ HDFK RI
WKHLUSHUIRUPDQFHDUHDV+HWKHQPHWRQHRQRQHZLWKHDFKRIKLV
HPSOR\HHV DQG GLVFXVVHG DQG IRUPDOL]HG HDFK HPSOR\HH¶V DFWXDO
UROH JRDOV DQG YDOXHDGGHG UHVSRQVLELOLWLHV IRU WKH XSFRPLQJ
SHUIRUPDQFHSHULRG
%
7KHPHHWLQJVFODUL¿HGIRUHYHU\RQHWKHH[SHFWDWLRQVDQGVWDQGDUGV
WKH\QHHGHGWRPHHWDQGJDYH3DWDFKDQFHWRGHVFULEHZKDWVXFFHVV
ZRXOGORRNOLNHIRUERWKWKHGHSDUWPHQWDQGIRUWKHHPSOR\HHVDV
LQGLYLGXDOV7KH UHVXOW ZDV WKDW KLV HPSOR\HHV FDPH DZD\ ZLWK D
IXOOXQGHUVWDQGLQJRIZKDWWKH\QHHGHGWRGRWRPHHWWKHLUQHZDQG
PRUHGHPDQGLQJGHSDUWPHQWDOJRDOV
%
,QWKH¿QDOSLHFHRIKLVSHUIRUPDQFHSODQQLQJSURFHVV3DWIRFXVHG
RQWKHLPSRUWDQWLVVXHRIVXSSRUW+HDVNHGKLVGLUHFWUHSRUWVZKDW
WKH\QHHGHGIURPKLPWREHVXFFHVVIXO3DWZDVDFWXDOO\XVLQJWKH
SHUIRUPDQFH HTXDWLRQ²SHUIRUPDQFH f(talent × motivation ×
VXSSRUW ²WR PDNH VXUH WKDW HDFK RI KLV HPSOR\HHV ZDV HTXLSSHG
WRVXFFHHG
Going Forward
% $WWKHHQGRIWKHSHUIRUPDQFHSODQQLQJSURFHVV3DWDQGKLVVWDII
ZHUHPRUHFOHDUO\IRFXVHGRQZKDWWKH\KDGWRGRERWKDVDJURXS
DQG LQGLYLGXDOO\ LQ RUGHU WR EH VXFFHVVIXO %XW RQFH 3DW DQG KLV
GLUHFW UHSRUWV DJUHHG RQ SHUIRUPDQFH H[SHFWDWLRQV DQG WKH QHZ
SHUIRUPDQFHSHULRGEHJDQLWZDVFULWLFDOO\LPSRUWDQWIRU3DWWRWDNH
WKHWLPHWRPRQLWRUDQGWUDFNWKHRQJRLQJSHUIRUPDQFHRIHDFKRI
KLVHPSOR\HHV
%
5HVXOWVRULHQWHGOHDGHUVNQRZWKDWZLWKRXWDFFXUDWHDQGXSWRGDWH
LQIRUPDWLRQRQDQHPSOR\HH¶VDFWXDOFRQWULEXWLRQWRWKHRUJDQL]DWLRQ
FRDFKLQJ FDQ EHFRPH LOOLQIRUPHG JXHVVZRUN WKDW GRHVQ¶W DFKLHYH
YDOXDEOHUHVXOWVDQGPD\HYHQKDUPDQHPSOR\HH¶VSHUIRUPDQFH
‹$QGUH\3RSRYL6WRFN7KLQNVWRFN
If you don’t understand an employee’s role in an organization, coaching can
EHFRPHLOOLQIRUPHGJXHVVZRUN
%
3DWVSHQWWLPHREVHUYLQJDQGPRQLWRULQJKLVHPSOR\HHV¶DFWLYLWLHV
DV ZHOO DV WKHLU RXWSXW 3DW¶V DFWLRQV KHOSHG KLV HPSOR\HHV
PDLQWDLQWKHLUIRFXV$WWKHVDPHWLPHKHUHLQIRUFHGDSSURSULDWH
EHKDYLRUDQGZDVDEOHWRWDNHFRUUHFWLYHDFWLRQZKHQWKLQJVZHUH
not going well.
%
3DW ZDV FDUHIXO WR REVHUYH ERWK KLV HPSOR\HHV¶ EHKDYLRU DQG WKHLU
SHUIRUPDQFHDWWKHLQGLYLGXDODQGJURXSOHYHO$QGKHPDGHDSRLQW
RIPDQDJLQJE\ZDONLQJDURXQGWRVWD\FRQQHFWHGWRKLVHPSOR\HHV
DQGREVHUYHWKHLULQWHUDFWLRQVZLWKFXVWRPHUVDQGRWKHUVWDNHKROGHUV
Coaching on the Individual Level
% $WUXO\HIIHFWLYHFRDFKQHHGVWREHFRPHSUR¿FLHQWDWWDLORUPDNLQJ
D IHHGEDFN DQG VXSSRUW VWUDWHJ\ IRU HDFK VSHFL¿F HPSOR\HH 7KH
ZD\WRGRWKDWLVWRXQGHUVWDQGHDFKHPSOR\HH¶VOHYHORIWDOHQWDQG
PRWLYDWLRQ%DVHGRQWKHLQWHUDFWLRQRIWKHVHWZRLPSRUWDQWIDFWRUV
UHVHDUFK KDV LGHQWL¿HG IRXU GLIIHUHQW NLQGV RI HPSOR\HHV GUHDP
HPSOR\HHVXSDQGFRPLQJHPSOR\HHVXQGHUDFKLHYLQJHPSOR\HHV
DQGFKDQJHRUJRHPSOR\HHV
Lecture 43: Coaching—From Gridiron to Boardroom
%
'UHDP HPSOR\HHV DUH KLJKO\ VNLOOHG DQG KLJKO\ PRWLYDWHG WKH\
DUHRQHRIDQ\RSHUDWLRQ¶VEHVWUHVRXUFHVIRUJHWWLQJEHWWHUUHVXOWV
,I\RX¶UHZRUNLQJZLWKGUHDPHPSOR\HHV\RXQHHGWRWKLQNDERXW
your coaching role as being that of a nurturer. That is to say, as a
OHDGHU\RXQHHGWRLGHQWLI\QHZDQGFKDOOHQJLQJMREDVVLJQPHQWV
IRU \RXU GUHDP HPSOR\HHV SURYLGH WKHP ZLWK UHJXODU GRVHV RI
SUDLVHDQGUHFRJQLWLRQRIIHUDGGLWLRQDOUHVSRQVLELOLW\DQGHPSRZHU
WKHPZLWKDGGLWLRQDOGHFLVLRQPDNLQJDXWKRULW\
%
8SDQGFRPLQJHPSOR\HHVDUHZLOOLQJWRZRUNKDUGEXWPD\ODFN
VRPH RI WKH VSHFL¿F VNLOOV DQG WDOHQWV WKH\ QHHG 7R EH HIIHFWLYH
LQFRDFKLQJWKHP\RXQHHGWREHERWKDWHDFKHUDQGDWUDLQHU<RX
QHHG WR REVHUYH WKHLU SHUIRUPDQFH WR LGHQWLI\ WKH VSHFL¿F VNLOOV
JDSVWKDWWKH\KDYHWKHQFUHDWHPHDQLQJIXOWUDLQLQJSODQVWRKHOS
WKHP DFTXLUH WKH WDOHQW WKH\ QHHG IRU VXFFHVV 7KH JRDO LV WR GR
ZKDWHYHULWWDNHVWRKHOSWKHVHHPSOR\HHVEHFRPHPRUHSUR¿FLHQW
LQWKHVNLOOVWKH\QHHGIRUEHWWHUSHUIRUPDQFHDVTXLFNO\DVSRVVLEOH
%
7KH QH[W FDWHJRU\ XQGHUDFKLHYLQJ HPSOR\HHV ZLOO SXW \RXU
FRDFKLQJ VNLOOV WR WKH WHVW (PSOR\HHV LQ WKLV FDWHJRU\ W\SLFDOO\
KDYHWKHVNLOOVH[SHUWLVHDQGWKHWDOHQWWKH\QHHGWRGRJRRGZRUN
EXW WKH\¶UH ORZ RQ PRWLYDWLRQ WKDW GH¿FLW WHQGV WR SUHYHQW WKHP
IURPSURGXFLQJEHWWHUUHVXOWV7RFRDFKWKHVHHPSOR\HHV\RXQHHG
WR EH D PRWLYDWRU <RX QHHG WR WDNH HYHQ JUHDWHU FDUH WR FOHDUO\
HVWDEOLVKSHUIRUPDQFHJRDOVDQGVWDQGDUGVWRFUHDWHDJUHDWHUVHQVH
RIHPSOR\HHSHUIRUPDQFHRZQHUVKLS:KHQ\RXVHHXQGHUDFKLHYHUV
HQJDJLQJLQGHVLUHGEHKDYLRUEHVXUHWRUHLQIRUFHLW%XWEHZLOOLQJ
WR XVH FRQVWUXFWLYH FULWLFLVP UHSULPDQGV DQG HYHQ QHJDWLYH
FRQVHTXHQFHVWRPRYHWKHLUSHUIRUPDQFHLQWKHULJKWGLUHFWLRQ
%
&KDQJHRUJRHPSOR\HHVDUHWKHWRXJKHVWFDWHJRU\7KH\QRWRQO\
ODFNPRWLYDWLRQEXWWKH\GRQ¶WKDYHWKHDELOLW\RUUHTXLVLWHVNLOOVWR
GRWKHLUMREV&RDFKLQJHPSOR\HHVRIWKLVNLQGUHTXLUHVUHYLHZLQJ
WKHLUHPSOR\PHQWUHFRUGVWUDFNLQJWKHLUSHUIRUPDQFHDQGHQVXULQJ
WKDWWKH\KDYHWKHSURSHUWRROVDQGVXSSRUWWREHVXFFHVVIXO7KHQ
LW¶VLPSHUDWLYHWRFOHDUO\GH¿QHLQZULWLQJDOOSHUIRUPDQFHFKDQJHV
WKDWWKHHPSOR\HHPXVWPDNH<RXQHHGWRJLYHWKHHPSOR\HHHYHU\
RSSRUWXQLW\WRVXFFHHGZKLOHPDNLQJLWFOHDUWKDWDIDLOXUHWRGRVR
means termination.
ż 2QFHWKLVSODQLVLQSODFHEHVXUHWRPRQLWRUWKHHPSOR\HH¶V
SHUIRUPDQFHRQDGDLO\EDVLVSURYLGLQJRQJRLQJIHHGEDFNDQG
GRFXPHQWLQJWKHHPSOR\HH¶VDFWXDOFRQWULEXWLRQ
ż
,W¶V LPSRUWDQW WR NHHS LQ PLQG WKDW FKDQJHRUJR HPSOR\HHV
DUH FDSDEOH RI WXUQDURXQGV ZKHQ WKH\¶UH SURSHUO\ FRDFKHG
DQG ZKHQ WKH\¶UH FRQIURQWHG ZLWK WKH KDUVK FRQVHTXHQFHV
RI QRQSHUIRUPDQFH DQG IDLOXUH WR LPSURYH %XW ZKHQ WKH
HPSOR\HHLVQRWUHVSRQGLQJWRDWWHPSWVWRIRVWHULPSURYHPHQW
\RXU UROH DV FRDFK QHHGV WR VKLIW WR WKDW RI D GLVFLSOLQDULDQ
DQG GRFXPHQWHU<RX QHHG WR IRUPDOO\ SUHSDUH IRU HPSOR\HH
GHPRWLRQRUWHUPLQDWLRQ
ż
$OWKRXJKLW¶VDOZD\VSDLQIXOWRVHHVRPHRQHORVHKLVRUKHUMRE
LIHPSOR\HHVLQ\RXURSHUDWLRQDUHXQGHUSHUIRUPLQJ\RXKDYH
DPRUDODQGVRFLDOUHVSRQVLELOLW\WRVWURQJO\DGGUHVVWKHLVVXH
0DNH VXUH \RXU KXPDQ UHVRXUFHV GHSDUWPHQW LV D SDUWQHU LQ
this action.
Pat’s Conclusion
% /HW¶VUHWXUQWR3DW¶VVWRU\DQGVHHKRZKHGLGLQFRDFKLQJKLVRZQ
SHRSOH3DWPDGHPRQWKO\RQHRQRQHPHHWLQJVSDUWRIKLVFRDFKLQJ
PRGXVRSHUDQGLZLWKJUHDWVXFFHVV7KHFROOHFWLYHSHUIRUPDQFHRI
KLVGHSDUWPHQWLPSURYHGDQG3DW¶VWHDPPHWWKHFRPSDQ\¶VJRDOV
%
+HUH¶V D ORRN EDFN DW ZKDW 3DW GLG WR LPSURYH SHUIRUPDQFH LQ
KLVGHSDUWPHQW
ż )LUVWKHUHDOL]HGWKHLPSRUWDQFHRIFRDFKLQJDQGIHHGEDFNLQ
GHYHORSLQJKLVHPSOR\HHV¶WDOHQWV
ż
1H[W KH DVVHVVHG KLV RZQ VWUHQJWKV DQG ZHDNQHVVHV DQG
WRRNVWHSVWRDFTXLUHWKHVNLOOVDQGVXSSRUWKHQHHGHGWREHD
successful coach.
%
ż
7KHQKHFOHDUO\GH¿QHGZLQQLQJIRUKLVWHDPEXWHTXDOO\DV
LPSRUWDQW KH XVHG D SHUIRUPDQFH SODQQLQJ SURFHVV WR GH¿QH
ZKDWHDFKSHUVRQQHHGHGWRGRIRUWKHWHDPWREHVXFFHVVIXO
ż
)LQDOO\ 3DW GHYHORSHG D WDLORUPDGH FRDFKLQJ VWUDWHJ\ IRU
HDFK RI KLV HPSOR\HHV WR SURYLGH WKH IHHGEDFN PRWLYDWLRQ
GHYHORSPHQW H[SHULHQFHV DQG DFFRXQWDELOLW\ WR PD[LPL]H
LQGLYLGXDOSHUIRUPDQFH
,Q PRQWKV 3DW EHFDPH D EHWWHU OHDGHU DQG D JUHDW FRDFK ,W
DOO KDSSHQHG VLPSO\ EHFDXVH KH QHHGHG WR JHW EHWWHU UHVXOWV DQG
ZDV ZLOOLQJ WR WDNH UHDO DFWLRQ WR GR VR ,Q WKH HQG 3DW ZDV YHU\
FRDFKDEOHKLPVHOI²DQGWKDWPDGHHYHU\WKLQJHOVHSRVVLEOH
Suggested Reading
/RQJHQHFNHU³&RDFKLQJIRU%HWWHU5HVXOWV´
Lecture 43: Coaching—From Gridiron to Boardroom
/RQJHQHFNHUDQG1HXEHUW³7KH3UDFWLFHVRI(IIHFWLYH0DQDJHULDO&RDFKHV´
Questions to Consider
1. ,I \RX DUH LQ D OHDGHUVKLS SRVLWLRQ DUH \RX FRPIRUWDEOH SURYLGLQJ
RQJRLQJDQGEDODQFHGSHUIRUPDQFHIHHGEDFNWR\RXUHPSOR\HHV"
2. 'R \RX WDLORUPDNH \RXU FRDFKLQJ VWUDWHJ\ WR WKH QHHGV RI HDFK
LQGLYLGXDOHPSOR\HHDQGKLVRUKHUFXUUHQWOHYHORISHUIRUPDQFH"
3. 'R\RXWDNHVXI¿FLHQWWLPHRQDUHJXODUEDVLVWRPHHWZLWK\RXUHPSOR\HHV
RQDQLQGLYLGXDOEDVLVWRUHLQIRUFHHIIHFWLYHDQGGHVLUHGEHKDYLRUV"
4. 'R \RX WDNH VXI¿FLHQW WLPH RQ D UHJXODU EDVLV WR PHHW ZLWK \RXU
HPSOR\HHVZKRPLJKWEHVWUXJJOLQJRUZKRQHHGFRUUHFWLYHDFWLRQWRJHW
WKHLUSHUIRUPDQFHEDFNRQWUDFN"
8QGHUVWDQGLQJ3RZHU5HODWLRQVKLSV
Lecture 44
:
RUNSODFH SRZHU DXWKRULW\ DQG LQÀXHQFH VKDSH WKH ODQGVFDSH RI
YLUWXDOO\HYHU\RUJDQL]DWLRQRQWKHSODQHW<HWZKHQLWFRPHVWR
WKHVH IDFWRUV SHRSOH PDNH WKUHH FRPPRQ PLVWDNHV IDLOLQJ
WR XQGHUVWDQG WKH IRUPDO DXWKRULW\ DQG SRZHU DWWDFKHG WR WKHLU FXUUHQW
SRVLWLRQVDWZRUN IDLOLQJWRWDNHSURDFWLYHVWHSVWRLQFUHDVHWKHLUSHUVRQDO
LQÀXHQFHDQG IDLOLQJWRHIIHFWLYHO\PDQDJHWKHLUZRUNLQJUHODWLRQVKLSV
ZLWKWKHLUVXSHUYLVRUV,QWKLVOHFWXUHZHZLOOH[DPLQHWKHVHLVVXHVWRHQDEOH
\RXWRDYRLGWKHVHNLQGVRIPLVWDNHV
3RZHUDQG,QÀXHQFH
% 3RZHUKDVPDQ\GH¿QLWLRQVEXWDSHUVRQRUJURXSKDVSRZHUZKHQ
WKH\ SRVVHVV WKH FDSDFLW\ WR H[HUW LQÀXHQFH RU FRQWURO RYHU WKH
DFWLRQV RI RWKHUV7KH\ W\SLFDOO\ SRVVHVV VRPHWKLQJ WKDW VRPHRQH
HOVHGHVLUHV
:KHQZHWKLQNDERXWSRZHUZHIUHTXHQWO\WKLQNDERXWSUHVLGHQWV
NLQJV &(2V PLOLWDU\ OHDGHUV DQG WKH OLNH %XW WKH WUXWK RI WKH
PDWWHULVWKDWZHDOOSRVVHVVVRPHGHJUHHRISRZHUWKDWLVDWWDFKHG
WRRXUFXUUHQWSRVLWLRQ
%
,QÀXHQFH LQ FRQWUDVW
LV SRZHU LQ DFWLRQ
,QÀXHQFHLVWKHHIIHFWWKDW
D SHUVRQ RU ZRUNJURXS¶V
actions have on the
DFWXDO DWWLWXGHV EHOLHIV
DQGDFWLRQVRIRWKHUV
%
$OWKRXJK SRZHU LV WKH
FDSDFLW\WRDIIHFWRWKHUV
LQÀXHQFHFDQEHWKRXJKW
RIDVWKHH[WHQWWRZKLFK
‹0DUFLQ%DOFHU]DNL6WRFN7KLQNVWRFN
%
A high-ranking executive might have
JUHDWSRZHUEXWLILW¶VQRWXVHGHIIHFWLYHO\
KLVRUKHULQÀXHQFHZLOOEHOLPLWHG
SRZHULVDFWXDOO\EHLQJSXWLQWRXVHWRDIIHFWVRWKHUV)RUH[DPSOH
DOWKRXJKWKHSUHVLGHQWRIDQRUJDQL]DWLRQPD\KDYHDJUHDWGHDORI
SRZHUKLVRUKHUDELOLW\WRLQÀXHQFHDSDUWLFXODUHPSOR\HH¶VGDLO\
EHKDYLRUPLJKWDFWXDOO\EHTXLWHOLPLWHG
%
3RZHU DQG LQÀXHQFH DUH FULWLFDO WR DQ\ VWXG\ RI RUJDQL]DWLRQDO
EHKDYLRU$QGPRVWSHRSOHDUHDEVROXWHO\IDVFLQDWHGE\WKLVWRSLF²
LW¶VKXPDQQDWXUH
/HFWXUH8QGHUVWDQGLQJ3RZHU5HODWLRQVKLSV
Types of Power
% ,QUHVHDUFKHUV-RKQ)UHQFK-UDQG%HUWUDQG5DYHQGHYHORSHG
D FODVVL¿FDWLRQ RI WKH EDVHV RI SRZHU 7KH\ LGHQWL¿HG ¿YH EDVLF
W\SHVRISRZHUOHJLWLPDWHUHZDUGFRHUFLYHH[SHUWDQGUHIHUHQW
ż /HJLWLPDWH SRZHU LV WKH IRUPDO DXWKRULW\ JUDQWHG WR SHRSOH
E\ WKHLU RUJDQL]DWLRQV EHFDXVH RI WKHLU IRUPDO SRVLWLRQV 2XU
VXSHUYLVRUV KDYH OHJLWLPDWH DXWKRULW\ RYHU XV WR DVVLJQ ZRUN
UHYLHZ RXU SHUIRUPDQFH JUDQW XV GHFLVLRQPDNLQJ SRZHU
DQGHQIRUFHFRPSDQ\SROLFLHVEHFDXVHRIWKHLUSRVLWLRQLQRXU
RUJDQL]DWLRQ¶V FKDLQ RI FRPPDQG 7KHUH LV DOVR OHJLWLPDWH
SRZHUDWWDFKHGWRWKHSRVLWLRQWKDW\RXKROG
ż
5HZDUG SRZHU LV D SHUVRQ¶V DELOLW\ WR SURYLGH RWKHUV ZLWK
UHZDUGVLQFHQWLYHVRULQGXFHPHQWVWRLQÀXHQFHWKHLUEHKDYLRU
$ OHDGHU¶V FRQWURO RI EXGJHWV SD\ UDLVHV ERQXVHV DQG
SURPRWLRQDORSSRUWXQLWLHVFDQKDYHDSRZHUIXOLPSDFWRQWKH
EHKDYLRURIRWKHUVZKHQSURSHUO\DSSOLHG
ż
&RHUFLYHSRZHULVWKHRSSRVLWHRIUHZDUGSRZHU3HRSOHZKR
SRVVHVVFRHUFLYHSRZHULQWKHZRUNSODFHFDQLQÀXHQFHRWKHUV
WKURXJKWKHXVHRIVDQFWLRQVSXQLVKPHQWDQGUHSULPDQGVRUE\
UHPRYLQJEHQH¿WVRUUHVRXUFHV
ż
([SHUWSRZHUUHVXOWVIURPDSHUVRQ¶VVSHFLDONQRZOHGJHRUVNLOO
WKDWLVSUL]HGDQGQHHGHGE\RWKHUV,I\RX¶UHDQH[SHUWSHRSOH
ZLOOEHZLOOLQJWRIROORZ\RXUOHDGEHFDXVHRIWKHNQRZOHGJH
\RXSRVVHVV\RXUDELOLW\WRVROYHSUREOHPVDQG\RXUDELOLW\WR
PDNHVRXQGGHFLVLRQV
ż
%
%
5HIHUHQW SRZHU UHIHUV WR WKH SRWHQWLDO LQÀXHQFH WKDW D SHUVRQ
FDQKDYHRYHURWKHUVWKURXJKVWUHQJWKRISHUVRQDOLW\,WGHULYHV
IURPRXUDELOLW\WRFRQQHFWZLWKSHRSOHDQGWRIRUJHVWURQJDQG
HIIHFWLYHZRUNLQJUHODWLRQVKLSVZLWKWKHP
7KH ¿UVW WKUHH VRXUFHV RI SRZHU²OHJLWLPDWH UHZDUG DQG
FRHUFLYH²DUHFROOHFWLYHO\NQRZQDVposition power, because they
DUHFOHDUO\WLHGWRWKHSRVLWLRQWKDWDSHUVRQKROGVLQDQHQWHUSULVH
/HW¶V DSSO\ WKDW LQIRUPDWLRQ WR WU\ WR DYRLG WKH ¿UVW FRPPRQ
ZRUNSODFHPLVWDNHGHVFULEHGHDUOLHU²QRWXQGHUVWDQGLQJWKHIRUPDO
SRZHURI\RXUFXUUHQWSRVLWLRQ&RQVLGHUWKHVHTXHVWLRQV
ż +DYH\RXWDNHQWKHWLPHWRDVVHVVKRZPXFKOHJLWLPDWHSRZHU
DQGDXWKRULW\DUHDWWDFKHGWR\RXUSRVLWLRQ"
ż
+DYH\RXGHWHUPLQHGWKHWKLQJV\RXFRQWUROWKHGHFLVLRQV\RX
FDQPDNHDQGWKHDFWLRQV\RXFDQWDNHRI\RXURZQDFFRUG"
ż
,I\RXDUHLQDOHDGHUVKLSSRVLWLRQDUH\RXPDNLQJIXOOXVHRI
WKH UHZDUGV DQG UHVRXUFHV \RX SRVVHVV WKDW FDQ LQÀXHQFH WKH
EHKDYLRURIRWKHUVLQSRVLWLYHZD\V"
ż
+DYH\RXWDNHQVWRFNRIWKHSRWHQWLDOVDQFWLRQV\RXKDYHDW
\RXU GLVSRVDO WR VKDSH WKH EHKDYLRU RI WKH SHRSOH UHSRUWLQJ
WR\RX"
7KH ODVW WZR EDVHV RI SRZHU²H[SHUW DQG UHIHUHQW²IDOO XQGHU WKH
category of personal power 3HUVRQDO SRZHU LV SRZHU WKDW LV WLHG
EDFN WR ZKDW \RX NQRZ DQG ZKR \RX UHDOO\ DUH DV D SHUVRQ$Q
XQGHUVWDQGLQJ RI SHUVRQDO SRZHU FDQ KHOS \RX DYRLG WKH VHFRQG
FRPPRQ ZRUNSODFH PLVWDNH IDLOLQJ WR WDNH SURDFWLYH VWHSV WR
LQFUHDVHWKLVW\SHRISRZHU
Increasing Your Power
% $VPHQWLRQHGLW¶VLPSRUWDQWWRNQRZDQGXQGHUVWDQGWKHSRVLWLRQ
SRZHU WKDW \RX SRVVHVV LQ \RXU FXUUHQW MRE <RX QHHG WR NQRZ
ZKDW \RX KDYH WR ZRUN ZLWK DQG WKH ERXQGDULHV WKDW \RX PXVW
RSHUDWHZLWKLQ
/HFWXUH8QGHUVWDQGLQJ3RZHU5HODWLRQVKLSV
%
+RZHYHU EH FDUHIXO QRW WR PDNH \RXU SRVLWLRQ SRZHU WKH VROH
EDVLVIRUJHWWLQJZRUNGRQHEHFDXVHSHRSOHZLOOVRRQORVHUHVSHFW
IRUVRPHRQHZKRKDVQREDVLVIRUSRZHURWKHUWKDQKLVRUKHUWLWOH
6LPLODUO\WKHXVHRIUHZDUGDQGFRHUFLYHSRZHUFDQPDNHSHRSOH
FRPSOLDQW EXW LW GRHVQ¶W QHFHVVDULO\ WUDQVODWH LQWR SHRSOH EHLQJ
FRPPLWWHGWRZKDW\RXDUHWU\LQJWRDFFRPSOLVK
%
7KDW¶V ZK\ LW¶V LPSHUDWLYH WR GHYHORS \RXU SURIHVVLRQDO DQG
WHFKQLFDO H[SHUWLVH 3HRSOH DFTXLUH SRZHU ZKHQ WKH\ SRVVHVV
QHHGHGVNLOOVDQGLQIRUPDWLRQ%HFRPLQJDQH[SHUWLQDUHDVWKDWDUH
FULWLFDOWR\RXURUJDQL]DWLRQ¶VVXFFHVVLVDVXUH¿UHZD\WRLQFUHDVH
\RXURUJDQL]DWLRQDOLQÀXHQFH
%
&RQQHFWLRQV KHOS DV ZHOO <RX FDQ LQFUHDVH \RXU SRZHU E\
GHYHORSLQJ GHJUHH ZRUNLQJ UHODWLRQVKLSV EXLOGLQJ VWURQJ
WHDPV DQG FUHDWLQJ VWURQJ VRFLDO QHWZRUNV ERWK ZLWKLQ \RXU
RUJDQL]DWLRQDQGDFURVV\RXULQGXVWU\
%
&UHDWLQJ DQG EXLOGLQJ RQ D UHIHUHQW SRZHU EDVH LV VRPHWKLQJ WKDW
PRVWSHRSOHFDQGRLIWKH\DUHZLOOLQJWRPDNHLWDSULRULW\6LPSOH
\HW SRZHUIXO SHRSOH SUDFWLFHV VXFK DV PDNLQJ VXUH WR OHDUQ DQG
UHPHPEHUSHRSOH¶VQDPHVFDQJRIDU
Understanding Your Boss
% /HW¶V GLVFXVV WKH WKLUG FRPPRQ ZRUNSODFH PLVWDNH IDLOLQJ WR
HIIHFWLYHO\ LQÀXHQFH DQG PDQDJH \RXU UHODWLRQVKLS ZLWK \RXU
VXSHUYLVRU5HVHDUFKVKRZVWKDWSHRSOHDUHJHQHUDOO\TXLFNWRDVVHVV
ZRUNLQJ UHODWLRQVKLSV ZLWK WKHLU SHHUV DQG VXERUGLQDWHV EXW WKH\
RIWHQ IDLO WR VHH WKH YDOXH LQ DVVHVVLQJ WKHLU ZRUNLQJ UHODWLRQVKLS
with the boss.
%
7DNLQJWKHWLPHWRXQGHUVWDQGZKDWLVZRUNLQJZHOODQGZKDWQHHGV
ZRUNLVDQLPSRUWDQW¿UVWVWHSWRZDUGEHWWHUPDQDJLQJ\RXUERVV
+HUHDUHVRPHLPSRUWDQWTXHVWLRQVWRJXLGH\RXUDVVHVVPHQW
ż :KDWGRHV\RXUERVVGRWKDWKHOSV\RXUSURGXFWLYLW\"
%
%
ż
:KDWGRHV\RXUERVVGRWKDWKXUWV\RXUSURGXFWLYLW\"
ż
:KDWGR\RXQHHGIURP\RXUERVVWKDW\RXDUHQRWJHWWLQJ"
ż
:KDWVSHFL¿FWKLQJVDUHQHHGHGWRLPSURYHWKHRYHUDOOTXDOLW\
RI\RXUZRUNLQJUHODWLRQVKLS"
$QVZHULQJ WKHVH TXHVWLRQV ZLOO JLYH \RX D VWDUWLQJ SRLQW IRU
GHYHORSLQJ \RXU LPSURYHPHQW SODQ WR EHWWHU LQÀXHQFH \RXU ERVV
1H[WZRUNKDUGWRJHWWRNQRZDQGXQGHUVWDQG\RXUERVV7KHWZR
RI \RX DUH OLQNHG WRJHWKHU²ZKHWKHU \RX OLNH LW RU QRW WKXV LW¶V
LPSRUWDQWWRSD\DWWHQWLRQWRKRZKHRUVKHRSHUDWHV7KLQNDERXW
VXFKTXHVWLRQVDV
ż :KDWPRWLYDWHV\RXUERVV"
ż
:KDWDUH\RXUERVV¶VOLNHVDQGGLVOLNHV"
ż
+RZHPRWLRQDOO\LQWHOOLJHQWLV\RXUERVV"
1H[W WU\ WR SXW \RXUVHOI LQ \RXU ERVV¶V VKRHV )LQG RXW KLV RU
KHU SHUIRUPDQFH JRDOV DQG RUJDQL]DWLRQDO H[SHFWDWLRQV :KHQ
you know that your boss has overly aggressive goals to meet, an
RYHUZKHOPLQJZRUNORDGUHVRXUFHVKRUWDJHVXQUHDOLVWLFWLPHOLQHV
RU SHUKDSV HYHQ KLV RU KHU RZQ EDG ERVV \RX FDQ EH PRUH
HPSDWKHWLFDQGRIIHUWKHULJKWNLQGRIKHOS
Managing Your Boss
% 2QFH \RX EHWWHU XQGHUVWDQG \RXU ERVV VHYHUDO SUDFWLFHV FDQ KHOS
\RX LPSURYH WKH UHODWLRQVKLS 2QH VXFK SUDFWLFH LV WR XQGHU
SURPLVH DQG RYHUGHOLYHU 0RVW ERVVHV DSSUHFLDWH ZKHQ WKHLU
HPSOR\HHVH[FHHGH[SHFWDWLRQV:KHQ \RXGHOLYHUZKDW\RXUERVV
H[SHFWV RQ DQ RQJRLQJ EDVLV²RU EHWWHU \HW HYHQ PRUH WKDQ \RXU
ERVVH[SHFWV²\RXHVWDEOLVK\RXUFUHGLELOLW\DVVRPHRQH\RXUERVV
FDQGHSHQGRQ
/HFWXUH8QGHUVWDQGLQJ3RZHU5HODWLRQVKLSV
%
,W LV DOVR LPSRUWDQW WR OHDUQ KRZ WR FRPPXQLFDWH HIIHFWLYHO\ ZLWK
\RXU ERVV 0RVW ERVVHV KDYH D SUHIHUUHG VW\OH RI FRPPXQLFDWLRQ
6RPH GR DOO WKH WDONLQJ RWKHUV OLVWHQ DQG RWKHUV SUHIHU UHDGLQJ
0RVWERVVHVDOVRKDYHDSUHIHUUHGFKDQQHOIRUFRPPXQLFDWLQJ7KH
LPSRUWDQWSRLQWLVWKDW\RXXQGHUVWDQGKRZWRSURDFWLYHO\LQWHUDFW
ZLWK\RXUERVVLQDIDVKLRQWKDWKHRUVKHSUHIHUV
%
Take the initiative to make alignment sessions with your boss a
UHJXODURFFXUUHQFHERWKWRKHOS\RXVWD\RQWUDFNDQGWRPDLQWDLQ
\RXUERVV¶VFRDFKLQJ6FKHGXOHVKRUWPLQXWHPHHWLQJVZLWK\RXU
ERVVRQFHRUWZLFHDPRQWKWRNHHSWKHFKDQQHOVRIFRPPXQLFDWLRQ
RSHQ8VHWKHVHVVLRQVWRGLVFXVV\RXUSHUIRUPDQFHDQGZKDW\RX
DUHZRUNLQJRQDQGWRVROLFLW\RXUERVV¶VLQSXW
%
1HYHULGHQWLI\DSUREOHPRUEULQJDFRPSODLQWWR\RXUERVVZLWKRXW
KDYLQJDSRWHQWLDOVROXWLRQLQKDQG0RVWRIRXUERVVHVKDYHDIDLU
QXPEHURISUREOHPVDQGLVVXHVRQWKHLUSODWHVRQDQ\JLYHQGD\VR
GRQ¶WEHVXUSULVHGLI\RXJHWDOHVVWKDQZDUPUHFHSWLRQZKHQ\RX
JRWR\RXUERVVZLWK\HWDQRWKHUSUREOHPRUGLI¿FXOW\,IWKHUHLVDQ
LVVXHWKDW\RXQHHGWREULQJWR\RXUERVV¶VDWWHQWLRQPDNHVXUHWKDW
\RXSURSHUO\IUDPHLWDQGJHWDOOWKHIDFWV7KHQWDNHWKHWLPHWR
RIIHUXS\RXULGHDVRU\RXUSRWHQWLDOVROXWLRQWRWKHGLI¿FXOW\
%
)LQDOO\LWLVLPSRUWDQWWRDOZD\VVKRZUHVSHFWIRU\RXUERVV'RQ¶W
HQJDJH LQ JRVVLS RU EDFNELWLQJ 2WKHU SHRSOH DUH ZDWFKLQJ DQG
OLVWHQLQJ :KHQ ZRUG RI EDGPDQQHUHG EHKDYLRU JHWV EDFN WR WKH
ERVVLWFDQVSHOOFDUHHUGLVDVWHUIRUWKHEDFNVWDEEHU,WDOVRFDXVHV
RWKHUSHRSOHWRZRQGHUZKDW\RXPLJKWVD\DERXWWKHPZKHQWKH\
DUHQRWDURXQG
%
,QVSLWHRIDOOWKLVDGYLFHUHPHPEHUWKDWDVDVXERUGLQDWHWKHUH¶V
RQO\VRPXFK\RXFDQGRWRFKDQJH\RXUERVV,I\RXUERVVSXWV\RX
LQDSODFHZKHUHFRPLQJWRZRUNLVPRUHVWUHVVIXODQGXQSURGXFWLYH
WKDQLWVKRXOGEHWKHQLWPLJKWEHWLPHWRFRQVLGHUOHDYLQJ%XWIRU
PRVW RI XV WDNLQJ SURDFWLYH VWHSV WR KHOS RXU ERVVHV KHOS XV LV D
JRRGPRYH
Suggested Reading
&URVVDQG3DUNHU7KH+LGGHQ3RZHURI6RFLDO1HWZRUNV.
*UHHQEHUJDQG%DURQBehavior in Organizations.
Questions to Consider
1. +DYH\RXWDNHQWKHWLPHWRGHWHUPLQHKRZPXFKLQÀXHQFH\RXDFWXDOO\
KDYHDWZRUN"
2. 'R\RXXQGHUVWDQGWKHVSHFL¿FWKLQJV\RXFDQGRWRLQFUHDVH\RXUSRZHU
DQGLQÀXHQFHDWZRUN"
3. +DYH\RXWDNHQWKHWLPHWRLGHQWLI\WKHVSHFL¿FEHKDYLRUVDQGSUDFWLFHV
WKDWUHSUHVHQW³SURIHVVLRQDOLVP´LQ\RXUFXUUHQWSRVLWLRQ"
4. +DYH \RX WKRXJKW WKURXJK DQG GHYHORSHG D SODQ WR DSSURSULDWHO\
LQÀXHQFH\RXUERVVLQZD\VWKDWZLOOKHOS\RXJHW\RXUZRUNGRQH"
+DQGOLQJ:RUNSODFH&RQÀLFW
Lecture 45
:
KHWKHU ZH OLNH LW RU QRW FRQÀLFW LV DQ LQHYLWDEOH SDUW RI
RUJDQL]DWLRQDO OLIH ,I \RX¶UH LQ D OHDGHUVKLS SRVLWLRQ RU LI \RX
DVSLUH WR D OHDGHUVKLS UROH D JUHDW GHDO RI \RXU VXFFHVV ZLOO
GHSHQGRQKRZZHOO\RXUHVSRQGWRDQGPDQDJHFRQÀLFWDPRQJWKHSHRSOH
\RXZRUNZLWK7KLVOHFWXUHZLOOGLVFXVVZKHUHFRQÀLFWFRPHVIURPDQGWKH
DUHDVLQZKLFKLWPDQLIHVWVLWVHOI7KHQZH¶OOFRQFOXGHE\ORRNLQJDWDPRGHO
WRKHOSGHDOZLWKFRQÀLFW
/HFWXUH+DQGOLQJ:RUNSODFH&RQÀLFW
5LVLQJ:RUNSODFH&RQÀLFW
% ,Q D UHFHQW VXUYH\ RI $PHULFDQ EXVLQHVV OHDGHUV DQG RWKHU
SURIHVVLRQDOVQHDUO\RIWKHUHVSRQGHQWVVDLGWKH\EHOLHYHWKDW
FRQÀLFWLQWKHZRUNSODFHLVRQWKHULVH7KHUHVSRQGHQWVLGHQWL¿HG
several reasons for this increase.
%
)LUVW WKHUH¶V WKH SUHVVXUH IDFWRU $V RUJDQL]DWLRQV H[SHULHQFH
JUHDWHU FRPSHWLWLYH SUHVVXUH WKH UHVSRQGHQWV VDLG WKDW WKH\ DUH
FRQVWDQWO\ EHLQJ DVNHG WR FKDQJH WR GR PRUH ZLWK OHVV DQG WR
GRHYHU\WKLQJIDVWHU$VMREVFKDQJHZRUNORDGVLQFUHDVHDQGWKH
SDFHVRISHRSOH¶VSHUVRQDOOLYHVDFFHOHUDWHWKH\KDYHPRUHSUHVVXUH
DQGVWUHVV:LWKPRUHSUHVVXUHDQGVWUHVVRXUFRPPXQLFDWLRQDQG
FRSLQJVNLOOVFDQEUHDNGRZQPDNLQJXVEDGWHPSHUHG
%
7KHQ WKHUH¶V WKH FRPSOH[LW\ DQG FKDQJH IDFWRU$V RUJDQL]DWLRQV
JURZ LQ VL]H WKH\ LQFUHDVH LQ FRPSOH[LW\ 7KH UHVSRQGHQWV VDLG
WKDWLW¶VEHFRPLQJDJUHDWHUFKDOOHQJHWRKDYHDVKDUHGYLVLRQDQG
VWUDWHJ\XQGHUVWRRGE\DOOFOHDUO\GH¿QHGUROHVDQGUHVSRQVLELOLWLHV
DQGKLJKOHYHOVRIWHDPZRUNDQGFRRSHUDWLRQ
%
$QRWKHU PDMRU VRXUFH RI FRQÀLFW LV WKH FRPSHWLWLRQ IDFWRU 7KH
UHVSRQGHQWV VDLG WKDW DV WKHLU RUJDQL]DWLRQV H[SHULHQFH ULVLQJ
H[WHUQDO FRPSHWLWLYH SUHVVXUH WKH\ DOVR H[SHULHQFH DQ LQFUHDVH
LQ LQWHUQDO FRPSHWLWLRQ :KHQ SHRSOH DUH FRPSHWLQJ IRU VFDUFH
UHVRXUFHV VXFK DV EXGJHW DOORFDWLRQV UHZDUGV DQG SURPRWLRQV
KHDOWK\FRPSHWLWLRQFDQHDVLO\GHJHQHUDWHLQWRRSHQFRQÀLFW
%
7KH OHDGHUVKLS IDFWRU DOVR SOD\V D UROH LQ FRQÀLFW $V WKHLU
RUJDQL]DWLRQV EHFRPH PRUH FRPSOH[ DQG FRPSHWLWLYH WKH
UHVSRQGHQWVUHSRUWHGWKHUHLVDULVLQJQHHGIRUG\QDPLFOHDGHUVWR
VWHSXSDQGUHDOLJQWKHLUOHDGHUVKLSVNLOOVWRPHHWWKHFKDOOHQJH%XW
PDQ\LQGLYLGXDOVDUHQRWSUDFWLFLQJWKHIXQGDPHQWDOVRIOHDGHUVKLS
LQ WKHLU UDSLGO\ FKDQJLQJ RUJDQL]DWLRQV DQG WKH QDWXUDO UHVXOW LV
XQQHFHVVDU\DQGFRXQWHUSURGXFWLYHFRQÀLFW
%
)LQDOO\WKHUHLVWKHVRFLDOIDFWRU7KHUHVSRQGHQWVUHSRUWHGDJUHDWHU
UDQJHRIZRUNSODFHDWWLWXGHVYDOXHVDQGSHUVRQDOLWLHVWKDWLQFUHDVH
WKHOLNHOLKRRGRILQWHUSHUVRQDOWHQVLRQDQGFRQÀLFWDWZRUN6RFLHW\
LVFKDQJLQJDQGLW¶VLQHYLWDEOHWKDWWKHZRUNSODFHZLOOFKDQJHZLWK
LW ,I WKRVH FKDQJHV SURGXFH WHQVLRQV LQ VRFLHW\ DW ODUJH WKH\ ZLOO
XQGRXEWHGO\DSSHDUWKHZRUNSODFHDVZHOO
7\SHVDQG/HYHOVRI&RQÀLFW
% 7KHUHDUHWZRSULPDU\W\SHVRIFRQÀLFWVXEVWDQWLYHRUWDVNEDVHG
FRQÀLFWDQGHPRWLRQDORUDIIHFWLYHFRQÀLFW
%
6XEVWDQWLYH RU WDVNEDVHG FRQÀLFW H[LVWV ZKHQ LQGLYLGXDOV DQG
JURXSV KDYH GLIIHUHQFHV RI RSLQLRQ 7KH\ PD\ GLIIHU RYHU VXFK
LVVXHV DV IDFWV JRDOV VWUDWHJLHV SODQV SROLFLHV SURFHVVHV UROHV
UHVRXUFH DOORFDWLRQ RU GHFLVLRQ PDNLQJ $ FRQÀLFW LV VXEVWDQWLYH
ZKHQWKHLVVXHVGULYLQJWKHGLVDJUHHPHQWDUHWDQJLEOHPDWHULDODQG
UHDVRQDEO\FRQFUHWH6HOHFWLQJDQHZVRIWZDUHYHQGRURUGHYHORSLQJ
WKHEXGJHWIRUDSURMHFWDUHERWKVXEVWDQWLYHLVVXHV
%
6RPHVXEVWDQWLYHFRQÀLFWPD\EHLQHYLWDEOHDWWLPHV7KHVHW\SHVRI
FRQÀLFWFDQEHEHQH¿FLDOLISHRSOHDUHIRFXVHGRQVKDULQJWKHLULGHDV
DQGRSLQLRQVVRWKDWWKH\FDQJHWDWERWKWKHWUXWKDQGWKHEHVWVROXWLRQ
WRDSUREOHPRUGLVDJUHHPHQW%XWWKHVHGLIIHUHQFHVRIRSLQLRQFDQ
%
+DQGOLQJ VXEVWDQWLYH FRQÀLFW LV DOO WKH PRUH FKDOOHQJLQJ EHFDXVH
RI WKH RWKHU NLQG RI FRQÀLFW HPRWLRQDO RU DIIHFWLYH FRQÀLFW7KLV
W\SHRIFRQÀLFWH[LVWVZKHQWKHUHLVWHQVLRQEHWZHHQSHRSOHEHFDXVH
RI SHUVRQDOLW\ GLIIHUHQFHV RU D EUHDNGRZQ LQ DQ LQWHUSHUVRQDO
UHODWLRQVKLS ,W¶V MXVW DV LQHYLWDEOH DV VXEVWDQWLYH FRQÀLFW EXW LW¶V
PXFKPRUHYRODWLOH<RXQHHGWRWDNHVSHFLDOFDUHWRLGHQWLI\LWDQG
WDNHDFWLRQWRPLQLPL]HLW
%
7R PDNH PDWWHUV HYHQ PRUH FRPSOLFDWHG FRQÀLFW ZLWKLQ DQ\
RUJDQL]DWLRQ FDQ EUHDN RXW DW VHYHUDO GLIIHUHQW OHYHOV LQWHUJURXS
LQWUDJURXSDQGLQWHUSHUVRQDO
ż ,QWHUJURXSFRQÀLFWH[LVWVZKHQDVWUXJJOHWDNHVSODFHEHWZHHQ
JURXSVWHDPVGHSDUWPHQWVRUHYHQGLIIHUHQWRSHUDWLRQVZLWKLQ
WKHVDPHRUJDQL]DWLRQ
%
ż
,QWUDJURXS FRQÀLFW H[LVWV ZKHQ WKHUH LV FRQÀLFW ZLWKLQ D
ZRUNJURXSRUWHDP,WLVQRWXQFRPPRQWRVHHDZRUNJURXSRU
WHDPIUDFWXUHDQGVSOLWXSLQWRVXEJURXSV
ż
,QWHUSHUVRQDOFRQÀLFWH[LVWV
ZKHQWZRSHRSOHDUHFDXJKW
XS LQ D VNLUPLVK RYHU ZRUN
RU HYHQ RYHU D QRQZRUN
UHODWHG LVVXH 7KLV W\SH RI
FRQÀLFW LV RIWHQ DW WKH URRW
RIRWKHUIRUPVRIFRQÀLFW
,WLVLPSRUWDQWWRUHPHPEHUWKDW
FRQÀLFWV FDQ EH VXEVWDQWLYH
emotional, or both at all three
of these levels, with each
OHYHO SUHVHQWLQJ LWV RZQ VHW
of challenges.
‹267,//L6WRFN7KLQNVWRFN
/HFWXUH+DQGOLQJ:RUNSODFH&RQÀLFW
HVFDODWH LQWR WHQVH DUJXPHQWV LI QRW SURSHUO\ PDQDJHG :KHQ WKLV
KDSSHQV XQFKHFNHG FRQÀLFW RYHU LVVXHV RI VXEVWDQFH FDQ GDPDJH
DQGHYHQGHVWUR\ZRUNLQJUHODWLRQVKLSVWHDPZRUNDQGFDUHHUV
,QWHUSHUVRQDOFRQÀLFWRFFXUV
EHWZHHQWZRSHRSOHDQGFDQ
KDSSHQIRUZRUNUHODWHGRUQRQ
ZRUNUHODWHGUHDVRQV
3UHYHQWLQJDQG+DQGOLQJ&RQÀLFW
% :LWKRXW HIIHFWLYH OHDGHUVKLS YLUWXDOO\ DQ\ VXEVWDQWLYH LVVXH LQ DQ
RUJDQL]DWLRQFDQEHFRPHDFRQÀLFW:KDWVWHSVFDQ\RXWDNHWRDYRLG
XQQHFHVVDU\ZRUNSODFHFRQÀLFWDQGEHWWHUKDQGOHLWZKHQLWRFFXUV"
%
)LUVWLW¶VLPSHUDWLYHWRFUHDWHLQGLYLGXDOUROHFODULW\WRHQVXUHWKDW
DOO HPSOR\HHV XQGHUVWDQG WKHLU MRE UHVSRQVLELOLWLHV DQG DXWKRULW\
DQGZKRWKH\UHSRUWWRLQWKHRUJDQL]DWLRQVWUXFWXUH7KLVFODULW\FDQ
JRDORQJZD\WRKHOSSUHYHQWFRQÀLFWVRYHUWKHVHLPSRUWDQWLVVXHV
DQGFDQKDYHDSRZHUIXOLPSDFWRQPRWLYDWLRQDQGWHDPZRUN
%
1H[WPDNHLWDFFHSWDEOHIRUSHRSOHWRKDYHDQGH[SUHVVOHJLWLPDWH
GLIIHUHQFHV RI RSLQLRQ HVSHFLDOO\ ZKHQ GLVFXVVLQJ VXEVWDQWLYH
LVVXHVLQWKHZRUNSODFH(QFRXUDJHSHRSOHWREHRSHQDQGFDQGLG
ZKHQ WKH\¶UH WDONLQJ DERXW VHWWLQJ JRDOV GHYHORSLQJ SODQV
LPSURYLQJSURFHVVHVVROYLQJSUREOHPVRUGLVFXVVLQJDQ\LVVXHWKDW
LVLPSRUWDQWWR\RXURSHUDWLRQ¶VVXFFHVV
%
<RXDOVRQHHGWRZRUNKDUGWRNQRZXQGHUVWDQGDQGDGGUHVVWKH
SUREOHPV WKDW FRQIURQW \RXU ZRUNJURXS EHFDXVH RI RUJDQL]DWLRQDO
SROLFLHV SURFHGXUHV DQG SUDFWLFHV ,Q PDQ\ RUJDQL]DWLRQV
LQHIIHFWLYH DQG RXWGDWHG PRGHV RI RSHUDWLRQ FDQ FUHDWH UHDO
GLI¿FXOW\IRUSHRSOHWU\LQJWRJHWWKHLUZRUNGRQH
%
$QRWKHUHVVHQWLDOWDVNLVWRWUDLQ\RXUVHOIDQGWKHSHRSOH\RXZRUN
ZLWKWRGHYHORSJRRGSUREOHPVROYLQJDQGFRQÀLFWUHVROXWLRQVNLOOV
,WLVXVHIXOZKHQPHPEHUVRIDZRUNJURXSRUWHDPKDYHDQDJUHHG
XSRQ SUREOHPVROYLQJ SURFHVV DQG FRQÀLFW UHVROXWLRQ PRGHO WKDW
WKH\FDQDOOXVHZKHQQHHGHG
%
)LQDOO\LWLVFULWLFDOO\LPSRUWDQWWKDW\RXNQRZ\RXUVHOIDQGKRZ\RX
KDQGOH DQG ZRUN WR UHVROYH FRQÀLFW 'R \RX NQRZ \RXU VWUHQJWKV
DQG ZHDNQHVVHV LQ KDQGOLQJ ZRUNSODFH FRQÀLFW" 'R \RX NQRZ
DQGXQGHUVWDQGKRZ\RXUDFWLRQVFDQDIIHFWRWKHUVZKHQUHVROYLQJ
FRQÀLFW" 'R \RX NQRZ \RXU SUHIHUUHG VW\OH RI UHVROYLQJ FRQÀLFW"
<RXQHHGWKDWNLQGRIVHOIDZDUHQHVVLI\RXDUHWRVXFFHVVIXOO\WXUQ
ZRUNSODFHGLVDJUHHPHQWVLQWRSRVLWLYHRXWFRPHV
/HFWXUH+DQGOLQJ:RUNSODFH&RQÀLFW
7KH7KRPDV.LOPDQQ&RQÀLFW5HVROXWLRQ0RGHO
% 6LQFH WKH 7KRPDV.LOPDQQ FRQÀLFW UHVROXWLRQ PRGHO KDV
KHOSHG PDQ\ SHRSOH XQGHUVWDQG WKH YDULRXV VWUDWHJLHV WKDW FDQ EH
XVHG WR UHVROYH FRQÀLFWV²ZKHWKHU WKH\ DUH SDUWLHV WR D FRQÀLFW
WKHPVHOYHVRUREVHUYHUVWU\LQJWRUHVROYHDFRQÀLFWDPRQJRWKHUV
%
'HYHORSHGE\PDQDJHPHQWSURIHVVRUV.HQQHWK7KRPDVDQG5DOSK
.LOPDQQ WKH PRGHO IRFXVHV RQ WKH LQWHUDFWLRQ RI WZR FULWLFDO
EHKDYLRUV DVVHUWLYHQHVV DQG FRRSHUDWLRQ $VVHUWLYHQHVV FDQ EH
GHVFULEHGDVWKHVWUHQJWKRIDSHUVRQ¶VGHVLUHWRVDWLVI\KLVRUKHURZQ
FRQFHUQV DQG QHHGV LQ SXUVXLQJ D GHVLUHG RXWFRPH &RRSHUDWLRQ
LQ FRQWUDVW LV D SHUVRQ¶V ZLOOLQJQHVV WR VDWLVI\ WKH FRQFHUQV DQG
QHHGVRIRWKHUVLQYROYHGLQWKHFRQÀLFWZKRDUHSXUVXLQJWKHLURZQ
GHVLUHGRXWFRPHV
%
7KHLQWHUDFWLRQRIWKHVHWZRYDULDEOHVFUHDWHV¿YHFRQÀLFWUHVROXWLRQ
VWUDWHJLHV FRPSHWLWLRQ DFFRPPRGDWLRQ DYRLGDQFH FRPSURPLVH
DQGFROODERUDWLRQ
ż 7KHFRPSHWLWLRQDSSURDFKLVKLJKRQDVVHUWLYHQHVVDQGORZRQ
FRRSHUDWLRQ:LWKWKLVVWUDWHJ\DSHUVRQLQDFRQÀLFWSXUVXHV
KLVRUKHURZQFRQFHUQVLQDIDLUO\DJJUHVVLYHIDVKLRQDQGRIWHQ
GRHVVRDWWKHH[SHQVHRIRWKHUSHRSOHLQYROYHGLQWKHFRQÀLFW
7KHSUREOHPZLWKXVLQJWKHFRPSHWLWLRQRUIRUFLQJDSSURDFKLV
WKDWWKHFRQÀLFWUHVXOWVLQDZLQQHUDQGDORVHU
ż
,Q FRQWUDVW DFFRPPRGDWLRQ LV D VW\OH LQ ZKLFK D SHUVRQ
LV XQDVVHUWLYH DQG ZLOOLQJ WR EH KLJKO\ FRRSHUDWLYH +HUH
LQGLYLGXDOVJLYHORZHUSULRULW\WRWKHLURZQQHHGVDQGFRQFHUQV
WR VDWLVI\ WKH QHHGV DQG FRQFHUQV RI RWKHUV %XW RYHU WLPH
KDYLQJXQPHWQHHGVKDVDGHJUDGLQJHIIHFWRQSHUIRUPDQFHMRE
VDWLVIDFWLRQDQGDWWLWXGH
ż
$QDYRLGDQFHVWUDWHJ\PHDQVWKDWDSHUVRQLVERWKXQDVVHUWLYH
DQG XQFRRSHUDWLYH ZKHQ LW FRPHV WR DWWHPSWLQJ WR UHVROYH D
FRQÀLFW7KHDYRLGDQFHDSSURDFKVXJJHVWVWKDWDSHUVRQVKXQV
FRQÀLFWDWDOOFRVWVDQGLVZLOOLQJWRLJQRUHRUGLVHQJDJHIURP
DQLVVXHUHJDUGOHVVRILWVLPSRUWDQFH7KHZDUQLQJDWWDFKHGWR
DQ DYRLGDQFH VWUDWHJ\ JRHV EDFN WR WKH VLPSOH IDFW WKDW PRVW
SUREOHPVFRQÀLFWVDQGFULVHVGRQRWJRDZD\ZLWKRXWDFWLRQ
%
ż
$ FRPSURPLVLQJ VWUDWHJ\ WDNHV D PRGHUDWH SRVLWLRQ RQ WKH
LVVXHV RI DVVHUWLYHQHVV DQG FRRSHUDWLRQ :KHQ SHRSOH WDNH D
FRPSURPLVLQJDSSURDFKLWPHDQVWKDWWKH\DUHZLOOLQJWRWDNH
VWHSV WR ¿QG D PXWXDOO\ DFFHSWDEOH VROXWLRQ %XW WKH ZDUQLQJ
KHUHHVSHFLDOO\LQWKHFDVHRIDVXEVWDQWLYHEXVLQHVVFRQÀLFW
LVWKDWDFRPSURPLVHVROXWLRQWRDSUREOHPPLJKWQRWEHDUHDO
VROXWLRQ DW DOO ,W PD\ MXVW SXW RII WKH XQGHUO\LQJ FRQÀLFW IRU
DQRWKHUGD\
ż
)LQDOO\ WKHUH¶V WKH FROODERUDWLRQ VWUDWHJ\ ZKLFK PDNHV D
WUHPHQGRXVDPRXQWRIVHQVHLQPRVWEXVLQHVVVFHQDULRV:KHQ
SHRSOHFROODERUDWHWRUHVROYHDFRQÀLFWWKH\H[SORUHWKHDFWXDO
GLVDJUHHPHQW WR VROLFLW LQVLJKW IURP RQH DQRWKHU &OHDUO\
LI \RX¶UH WU\LQJ WR UHVROYH D FRQÀLFW EHWZHHQ RWKHUV WKLV LV
WKH LGHDO VFHQDULR %XW WKLV VWUDWHJ\ WDNHV PRUH WLPH PRUH
SDWLHQFHDQGPRUHHIIRUWWKDQDOORIWKHRWKHUWDFWLFV²ZKLFK
can be challenging in some situations.
7KHUHDOEHQH¿WRIWKH7KRPDV.LOPDQQPRGHOLVWKDW\RXFDQXVH
LWV¿YHDSSURDFKHVWRDQDO\]HDQ\ZRUNSODFHFRQÀLFW\RXVHHRUDUH
LQYROYHGLQWKHQGHFLGHKRZ\RXFDQEHVWUHVSRQGWRLW7KHQH[W
WLPH D ZRUNSODFH FRQÀLFW RFFXUV VWDUW E\ GHWHUPLQLQJ ZKHWKHU LW
LVVXEVWDQWLYHRUHPRWLRQDODQGDWZKDWOHYHOWKHFRQÀLFWLVWDNLQJ
SODFH LQWHUJURXS LQWUDJURXS RU LQWHUSHUVRQDO 7KHQ GHWHUPLQH
WKHOHYHOVRIFRRSHUDWLRQDQGDVVHUWLYHQHVVRIWKHSDUWLHV<RXFDQ
WKHQ XVH WKH ¿YH UHVROXWLRQ VWUDWHJLHV WR GHWHUPLQH KRZ \RX ZLOO
DSSURDFKWKHFRQÀLFW
Suggested Reading
%D]HUPDQDQG1HLOHNegotiating Rationally.
<RXUGRQ'HDWK0DUFK.
Questions to Consider
1. :KDW DUH WKH SULPDU\ FDXVHV RI WKH FRQÀLFWV WKDW \RX H[SHULHQFH
DWZRUN"
2. +RZGRHVZRUNSODFHFRQÀLFWDIIHFW\RXUDELOLW\WRJHW\RXUZRUNGRQH"
3. :KHQ\RXDUHFRQIURQWHGZLWKDFRQÀLFWDWZRUNKRZGR\RXUHVSRQG"
'R\RXXQGHUVWDQG\RXUVWUHQJWKVDQGZHDNQHVVHVLQUHVROYLQJFRQÀLFW"
4. :KHQ \RX DUH FRQIURQWHG ZLWK D FRQÀLFW GR \RX KDYH D V\VWHPDWLF
/HFWXUH+DQGOLQJ:RUNSODFH&RQÀLFW
DSSURDFKWRUHVROYHRUDOOHYLDWHLW"
Ethics and the Bathsheba Syndrome
Lecture 46
(
QURQ7\FR,QWHUQDWLRQDO$UWKXU$QGHUVRQ*OREDO&URVVLQJ$GHOSKL
&RPPXQLFDWLRQV%HDU6WHDUQV²WKHVHFRPSDQ\QDPHVKDYHEHFRPH
V\QRQ\PRXVZLWKVFDQGDO,QHDFKRIWKHVHFDVHVFRUSRUDWHOHDGHUV
FUHDWHG FRPSDQ\ FXOWXUHV WKDW ZHUH GULYHQ E\ H[FHSWLRQDOO\ XQHWKLFDO
EHKDYLRU 1HZV KHDGOLQHV WRGD\ UHYHDO XQHWKLFDO EXVLQHVV EHKDYLRU VWLOO
JRHV RQ HQ PDVVH (YHQ LQ RUJDQL]DWLRQV ZLWK VWURQJ HWKLFDO JXLGHOLQHV
WHPSWDWLRQV FDQ OHDG HPSOR\HHV WR LPPRUDO GHFLVLRQV 7KLV OHFWXUH ZLOO
H[DPLQHZKHUHWKRVHWHPSWDWLRQVFRPHIURPDQGFORVHZLWKVRPHVWUDWHJLHV
WRSURWHFW\RXUVHOIDQG\RXUFRZRUNHUVIURPWKHP
The Practicality of Ethics
% %XVLQHVV VFKRRO GLVFXVVLRQV RI HWKLFV KDYH D ZD\ RI EHFRPLQJ
DEVWUDFW DQG SKLORVRSKLFDO %XW LQ WKH EXVLQHVV ZRUOG HWKLFV DUH
UHDOLVWLF DQG SUDFWLFDO EHFDXVH JRRG HWKLFV DUH JRRG IRU EXVLQHVV
DQGIRU\RXUFDUHHU
%
7KHUH LV D ZHOOHVWDEOLVKHG OLQN EHWZHHQ DQ RUJDQL]DWLRQ¶V HWKLFDO
EHKDYLRU DQG LWV ¿QDQFLDO SHUIRUPDQFH $OWKRXJK WKHUH PLJKW EH
VKRUWWHUP¿QDQFLDOJDLQWREHKDGE\FKHDWLQJRYHUWKHORQJUXQ
HWKLFDOEHKDYLRUGHOLYHUVEHWWHU¿QDQFLDOV
%
+DYLQJDUHSXWDWLRQDVDQHWKLFDOO\UHVSRQVLEOHHQWHUSULVHPDNHVLW
HDVLHUWRUHWDLQDQGDWWUDFWFXVWRPHUVEHFDXVHPRVWSHRSOHZDQWWR
GREXVLQHVVZLWKDQRUJDQL]DWLRQWKDWWKH\FDQWUXVWDQGEHOLHYHLQ
%
2UJDQL]DWLRQV WKDW FUHDWH HWKLFDO DQG WUXVWLQJ FXOWXUHV KDYH KLJKHU
OHYHOVRIWHDPZRUNDQGPRUHHIIHFWLYHFRPPXQLFDWLRQV7KLVPDNHV
LWHDVLHUDQGIDVWHUWRGULYHRUJDQL]DWLRQDOFKDQJHDQGWUDQVIRUPDWLRQ
ZKLFKFDQEHDUHDOFRPSHWLWLYHDGYDQWDJHLQPRVWLQGXVWULHV
%
,Q WKH FXUUHQW WDOHQW ZDUV RUJDQL]DWLRQV WKDW DFW LQ VRFLDOO\
DQG HWKLFDOO\ UHVSRQVLEOH ZD\V KDYH D OHJ XS RQ DWWUDFWLQJ DQG
UHWDLQLQJWRSWDOHQW2UJDQL]DWLRQVWKDWIUHTXHQWO\VKRZXSRQOLVWV
RI$PHULFD¶V PRVW HWKLFDO FRPSDQLHV DUH QRW RQO\ GRLQJ WKH ULJKW
WKLQJEXWWKH\DUHJUHDWSODFHVWRZRUNDQGYHU\SUR¿WDEOHKLJK
SHUIRUPDQFHRSHUDWLRQV
Lecture 46: Ethics and the Bathsheba Syndrome
The Origins of Ethics
% 7KHVWDUWLQJSRLQWIRUHWKLFDOGHFLVLRQPDNLQJLVRXUPRUDOYDOXHV
WKDW LV RXU IXQGDPHQWDO EHOLHIV FRQFHUQLQJ ZKDW LV JRRG RU EDG
ULJKWRUZURQJDQGDFFHSWDEOHRUXQDFFHSWDEOH2XUPRUDOYDOXHV
DUHPROGHGWRDJUHDWH[WHQWE\RXUUHOLJLRXVEHOLHIVRXUWUDLQLQJ
DQGWKHLQÀXHQFHRIRXUIDPLOLHVDQGKRPHHQYLURQPHQWHVSHFLDOO\
GXULQJRXUGHYHORSPHQWDO\HDUV
%
0RUDOYDOXHVDUHFULWLFDOO\LPSRUWDQWEHFDXVHWKH\EHFRPHWKHEDVLV
IRURXUSHUVRQDOHWKLFVZKLFKDUHWKHVWDQGDUGVRUFRGHVRIFRQGXFW
WKDW JXLGH RXU GHFLVLRQ PDNLQJ DQG EHKDYLRU 6WDWHG GLIIHUHQWO\
RXUHWKLFVUHSUHVHQWRXUSHUVRQDOEHOLHIVDERXWZKHWKHUDQDFWLRQRU
GHFLVLRQLVULJKWRUZURQJ
%
<RXU SHUVRQDO HWKLFV PLJKW DGGUHVV VXFK LVVXHV DV \RXU VWDQFH RQ
KRQHVW\DQGO\LQJWKHXVHRIFRQ¿GHQWLDOLQIRUPDWLRQDQGZKHWKHU
LW¶VDFFHSWDEOHWRXVHDOFRKRORUGUXJV
Dealing with Ethical Issues
% :KHQHWKLFDOLVVXHVDUHLQSOD\\RXU¿UVWDFWLRQVKRXOGEHWRVWRS
DQGWKLQN7KHQJDWKHUUHOHYDQWLQIRUPDWLRQDQGIDFWVVRWKDW\RX
IXOO\XQGHUVWDQGERWKWKHVLWXDWLRQDQGWKHFRQWH[WRIWKHGHFLVLRQ
WKDWQHHGVWREHPDGH
%
1H[WPDNHDOLVWIRU\RXUVHOIRIWKHRSWLRQVWKDWDUHRSHQWR\RX
$VN,VWKHUHUHDOO\QRDOWHUQDWLYHRWKHUWKDQPDNLQJDTXHVWLRQDEOH
FKRLFH"+DYH\RXFRQVLGHUHGHYHU\SRVVLEOHFRXUVHRIDFWLRQ"
7KHQ\RXQHHGWRFOHDUO\LGHQWLI\WKHOHJDODQGHWKLFDOLPSOLFDWLRQV
RI HDFK FRXUVH RI DFWLRQ LQ \RXU GHFLVLRQPDNLQJ RSWLRQV 7KLV
UHTXLUHVWKDW\RXFRQVLGHUDOOWKHVWDNHKROGHUVWKDWDUHDIIHFWHGE\
HDFKDOWHUQDWLYHDQGWKHFRQVHTXHQFHVRIWKHYDULRXVRSWLRQV
%
<RX DOVR QHHG WR PDNH VXUH WKDW \RX FRQVLGHU XQLQWHQGHG
FRQVHTXHQFHV LQ \RXU GHOLEHUDWLRQ :KDW LI \RXU GHFLVLRQV GRQ¶W
WXUQRXWDVSODQQHG"
%
,WLVHVVHQWLDOWRDVNWKHIROORZLQJTXHVWLRQVZKHQPDNLQJGHFLVLRQV
ż ,VWKLVGHFLVLRQOHJDO"
ż
,V WKLV GHFLVLRQ LQ OLQH ZLWK
P\RUJDQL]DWLRQ¶VYDOXHV"
ż
,V WKLV GHFLVLRQ LQ OLQH ZLWK
P\RZQYDOXHV"
ż
+RZZLOOWKLVGHFLVLRQDIIHFW
WKHVWDNHKROGHUV"
ż
:KDW DUH WKH XSVLGH DQG
GRZQVLGHRIWKLVGHFLVLRQ"
‹,QJUDP3XEOLVKLQJ7KLQNVWRFN
%
%
%HDU LQ PLQG WKDW WKH DQVZHU WR
DQ HWKLFDO GLOHPPD PLJKW KDYH
One test to see if an action is
DOUHDG\EHHQPDGHIRU\RX,I\RX ethical is to consider its legality.
ORRN DW \RXU RUJDQL]DWLRQ¶V FRGH
RI FRQGXFW XQLRQ FRQWUDFW RU SROLF\ PDQXDO \RX PD\ ¿QG WKDW
VRPHGHFLVLRQVKDYHDOUHDG\EHHQSUHSURJUDPPHG
%
1H[W VHHN ZLVH FRXQVHO DQG WKH LQSXW RI NQRZOHGJHDEOH DQG
H[SHULHQFHG SHRSOH ZKRP \RX WUXVW ZKHQ PDNLQJ GHFLVLRQV
LQYROYLQJHWKLFDOLVVXHV7KHUHLVQRVXEVWLWXWHIRUJHWWLQJDVHFRQG
RSLQLRQ WR WHVW \RXU WKLQNLQJ DQG DSSURDFK LQ PDNLQJ D GHFLVLRQ
ZLWKVHULRXVHWKLFDOFRQVHTXHQFHV
%
)LQDOO\ ZKHQ PDNLQJ D GHFLVLRQ ZLWK HWKLFDO LPSOLFDWLRQV DVN
\RXUVHOI:KDW ZRXOG RXU ERDUG RI GLUHFWRUV RU P\ PRP KDYH WR
VD\DERXWWKLVGHFLVLRQZKHQWKH\¿QGRXWDERXWLW"3D\DWWHQWLRQWR
your instincts.
Lecture 46: Ethics and the Bathsheba Syndrome
“I Don’t Know What I Was Thinking”
% 7KRXJKLW¶VHDV\WRRXWOLQHDJXLGHIRUWKLQNLQJ\RXUZD\WKURXJK
HWKLFDO GHFLVLRQ PDNLQJ LQ WKH PRPHQW LW PD\ QRW EH VR VLPSOH
7KLQN DERXW KRZ RIWHQ \RX VHH SHRSOH LQ WKH QHZV ZKR¶YH EHHQ
FDXJKW EHKDYLQJ XQHWKLFDOO\ DQG FRQVLGHU KRZ RIWHQ \RX KHDU
WKHPVD\³,GRQ¶WNQRZZKDW,ZDVWKLQNLQJ´7KLQNLQJ\RXUZD\
WKURXJKDQHWKLFDOGLOHPPDLVQ¶WDOZD\VHDV\DQGWKHWHPSWDWLRQV
WRFURVVWKHOLQHFDQEHVXUSULVLQJO\VWURQJ
%
$VDJHQHUDOUXOHRUJDQL]DWLRQVZRUNKDUGWRKLUHSULQFLSOHGSHRSOH
DQGPRVWSHRSOHZKRZRUNLQRUJDQL]DWLRQDO$PHULFDDUHEDVLFDOO\
HWKLFDO SHRSOH %XW WKH XQVHWWOLQJ IDFW UHPDLQV WKDW DQ\ RQH RI XV
FRXOG JHW FDXJKW XS LQ GRLQJ ZURQJIXO XQHWKLFDO LPPRUDO DQG
even illegal things if we are not vigilant.
%
7KLVVWDWHPHQWLVH[HPSOL¿HGE\VRPHWKLQJFDOOHGWKHBathsheba
syndrome 7R XQGHUVWDQG WKLV SULQFLSOH ZH PXVW JR EDFN WR
DQWLTXLW\ DQG WDNH D ORRN LQWR WKH OLIH RI ,VUDHO¶V .LQJ 'DYLG
DQ LPSRUWDQW ¿JXUH WR PHPEHUV RI WKH -HZLVK &KULVWLDQ DQG
,VODPLFIDLWKV
ż 'DYLGKDGHDUO\VXFFHVVDQGHQMR\HGDFDUHHURIH[FHSWLRQDO
SULQFLSOHGIDLWKEDVHGEHKDYLRU
ż
%XWKHHYHQWXDOO\PDGHXQHWKLFDOGHFLVLRQV)LUVWKHVWD\HGDW
KRPHGXULQJDWLPHRIZDUDQGVHFRQGKHFRPPLWWHGDGXOWHU\
ZLWK%DWKVKHED7KLVFRVWKLPGHDUO\
ż
%DWKVKHED EHFDPH SUHJQDQW DQG WKRXJK 'DYLG DWWHPSWHG
D FRYHUXS KLV DFWLRQV ZHUH HYHQWXDOO\ PDGH NQRZQ E\ D
ZKLVWOHEORZHUQDPHG1DWKDQ7KHQDVHULHVRIWURXEOLQJHYHQWV
URFNHGERWK.LQJ'DYLG¶VSHUVRQDOZRUOGDQGKLVNLQJGRP
%
'DYLGWRRNKLVH\HRIIKLVMREDQGPDGHGHFLVLRQVEDVHGRQZKDWKH
ZDQWHGQRWZKDWZDVEHVWIRUKLVNLQJGRP+HVKRXOGKDYHEHHQDW
WKHIURQWZLWKKLVDUP\QRWOLYLQJDFRPIRUWDEOHOLIHDWWKHSDODFH+LV
SRVLWLRQDVNLQJH[SRVHGKLPWRWHPSWDWLRQDQGHQDEOHGKLPWRDFWRQ
LWLQDZD\WKDWRWKHUZLVHZRXOGQRWKDYHEHHQDYDLODEOHWRKLP
%
$GGLWLRQDOO\ 'DYLG PLVWDNHQO\EHOLHYHGWKDWKH KDG WKH SRZHU WR
FRYHUXSKLVZURQJGRLQJ²MXVWDVWKHH[HFXWLYHVDW(QURQ*OREDO
&URVVLQJDQG%HDU6WHUQVEHOLHYHG
%
(YHU\ SRVLWLRQ ZH HYHU KROG RYHU WKH FRXUVH RI RXU FDUHHUV ZLOO
EULQJZLWKLWVSHFL¿FWHPSWDWLRQV²VSHFL¿F%DWKVKHEDV:HQHHGWR
KDQGOHWKHPDSSURSULDWHO\LIZHDUHWRDYRLGHWKLFDOIDLOXUH
Protecting Your Ethics
% 7KRXJK WHPSWDWLRQV DERXQG UHVHDUFK ZLWK IRFXV JURXSV KDV
UHYHDOHGVRPHVSHFL¿FDFWLRQV\RXFDQWDNHWRVWD\RQVROLGHWKLFDO
JURXQG <RX FDQ XVH WKHVH IRU \RXUVHOI EXW \RX FRXOG XQGHUWDNH
PRVWRIWKHPIRUDGHSDUWPHQWRUWHDPDVZHOO
%
7R VWDUW GHYHORS D OLVW RI WKH YDULRXV HWKLFDO WHPSWDWLRQV WKDW
\RX IDFH LQ \RXU FXUUHQW ZRUN SRVLWLRQ 7KLV SURFHVV LV FDOOHG
temptation mapping ZKLFK PHDQV WDNLQJ WKH WLPH WR VSHFL¿FDOO\
LGHQWLI\WKH%DWKVKHEDVWKDWFRQIURQW\RXLQ\RXUFXUUHQWSRVLWLRQ
7HPSWDWLRQPDSSLQJ H[HUFLVHV ZLWK EXVLQHVV OHDGHUV FRQVLVWHQWO\
XQFRYHUFRPPRQZRUNSODFHWHPSWDWLRQVLQFOXGLQJIDOVLI\LQJGDWD
DEXVLQJ DQ H[SHQVH DFFRXQW RU FRUSRUDWH FUHGLW FDUG HQJDJLQJ
LQ LQDSSURSULDWH VH[XDO UHODWLRQVKLSV VWHDOLQJ DQG RIIHULQJ RU
DFFHSWLQJEULEHV
%
2QFH \RX NQRZ ZKDW \RX¶UH XS DJDLQVW GHYHORS \RXU VLWXDWLRQDO
DZDUHQHVV7KHSXUSRVHRIWKLVVWHSLVWRDYRLGSXWWLQJ\RXUVHOILQ
FLUFXPVWDQFHV ZKHUH \RX ZLOO EH H[SRVHG WR KDUPIXO WHPSWDWLRQV
DQGSURQHWRDFWRQWKHP,I.LQJ'DYLGKDGKDGEHWWHUVLWXDWLRQDO
DZDUHQHVV UHJDUGLQJ KLV WHPSWDWLRQV KH PLJKW QRW KDYH VWD\HG LQ
KLVSDODFHZKLOHKLVDUP\ZDVRIIDWZDU²DQGKHFHUWDLQO\ZRXOGQ¶W
KDYHLQYLWHG%DWKVKHEDWRVWRSE\IRUDYLVLW
Lecture 46: Ethics and the Bathsheba Syndrome
%
$QRWKHU LPSRUWDQW JXLGHOLQH LV WR PDNH \RXUVHOI DFFRXQWDEOH ,W
LV FULWLFDOO\ LPSRUWDQW WR IRVWHU ERWK SHUVRQDO DQG SURIHVVLRQDO
DFFRXQWDELOLW\ZLWKDSHUVRQVWURQJDQGKRQHVWHQRXJKWREH\RXU
PHQWRU IULHQG DQG ZDWFKGRJ 0DQ\ SHRSOH HVSHFLDOO\ VHQLRU
OHDGHUV JHW FDXJKW XS LQ ZURQJGRLQJ DW D WLPH LQ WKHLU OLYHV RU
FDUHHUV ZKHQ WKH\ DUH H[SHULHQFLQJ D VHQVH RI LVRODWLRQ DQG ODFN
UHDOIULHQGVWKDWWKH\FDQFRXQWRQ:KHQFRQIURQWHGZLWKDQHWKLFDO
WULDORUGLOHPPDLPPHGLDWHO\WHOODWUXVWHGFRQ¿GDQWH
%
$QRWKHULPSRUWDQWZD\RISURWHFWLQJ\RXUVHOIIURPWKHWHPSWDWLRQ
WR EHKDYH XQHWKLFDOO\ LV WR NHHS \RXU ¿QDQFLDO SK\VLFDO DQG
HPRWLRQDOKRXVHVLQRUGHU'RLQJVRZLOOPDNH\RXOHVVVXVFHSWLEOH
WRWKHOXUHVRIJUHHGMHDORXV\DGGLFWLRQRUOXVW
%
+HUH¶V DQRWKHU WLS %HZDUH RI WKH WUDS RI EHLQJ HPRWLRQDOO\
H[SDQVLYH$ JRRG SV\FKRORJLVW ZLOO WHOO \RX WKDW SHRSOH ZKR DUH
HPRWLRQDOO\H[SDQVLYHIHHOWKDWZKDWHYHUWKH\KDYHLVQHYHUJRRG
HQRXJK7KH\DOZD\VZDQWPRUHRIHYHU\WKLQJZLWKRXWDSSUHFLDWLQJ
ZKDWWKH\DOUHDG\KDYH:HFDQDOOUHODWHWRWKLVWRVRPHGHJUHHRQ
DQ\JLYHQGD\ZHPD\ZLVKZHKDGDQHZFDUDSURPRWLRQRUD
EHWWHUKRPH%XWLIZHWKLQNWKLVZD\DOOWKHWLPHZHDUHGHVWLQHGWR
EHLQDFRQVWDQWVWDWHRIIUXVWUDWLRQRYHUZKDWZHGRQ¶WKDYHLQVWHDG
RIEHLQJWKDQNIXODQGDSSUHFLDWLYHIRUZKDWZHGRKDYH
%
)LQDOO\ZKHQPDNLQJDGHFLVLRQDERXWZKHWKHUWRGRVRPHWKLQJ\RX
FRQVLGHUWREHLQDJUD\DUHDTXHVWLRQDEOHRUHYHQÀDWRXWZURQJ
DVN\RXUVHOIWKLVFULWLFDOO\LPSRUWDQWTXHVWLRQ:KDWDUHWKHORQJ
WHUP FRQVHTXHQFHV RI WKLV GHFLVLRQ WR P\ FKDUDFWHU SURIHVVLRQ
FDUHHUDQGIDPLO\ZKHQRWKHUV¿QGRXWDERXWP\DFWLRQV"7KHRGGV
DUHWKDWSHRSOHZLOO¿QGRXW
Suggested Reading
%ODQFKDUGLeading at a Higher Level.
/XGZLJDQG/RQJHQHFNHU³7KH%DWKVKHED6\QGURPH´
Questions to Consider
1. 7KLQNRIDVXFFHVVIXOOHDGHU\RXKDYHZRUNHGZLWKGXULQJ\RXUFDUHHU
ZKRKDGDPDMRUHWKLFDOIDLOXUH:KDWZDVWKHIDLOXUHKRZGLGLWDIIHFW
WKHOHDGHU¶VFDUHHUKRZGLGLWDIIHFW\RXUYLHZRIWKLVSHUVRQDVDOHDGHU
DQGZKDWGR\RXEHOLHYHZDVWKHFDXVHRIWKHIDLOXUH"
2. +DYH\RXWDNHQWKHWLPHWRLGHQWLI\WKHVSHFL¿FHWKLFDOPRUDODQGOHJDO
WHPSWDWLRQVWKDWDUHDWWDFKHGWKHFXUUHQWSRVLWLRQ\RXKROG"
3. +DYH \RX GHYHORSHG SHUVRQDO JXLGHOLQHV WKDW ZLOO SUHYHQW \RX IURP
JHWWLQJFDXJKWXSLQWKHVHWHPSWDWLRQV"
4. :KDW VSHFL¿F WKLQJV GR \RX EHOLHYH \RX QHHG WR GR WR PDLQWDLQ \RXU
HWKLFDOFRPSDVV"
Leading Real Organizational Change
Lecture 47
M
Lecture 47: Leading Real Organizational Change
DQ\RUJDQL]DWLRQVIDFHGZLWKJUDYHWKUHDWVNHHSEHKDYLQJWKHVDPH
ZD\WKDWSURGXFHGWKHLUSUREOHPVLQWKH¿UVWSODFH7KH\MXVWNHHS
GRLQJ ZKDW WKH\¶YH EHHQ GRLQJ KRSLQJ WKDW WKHLU SUREOHPV ZLOO
JR DZD\ %XW FKDQJH ZLWKLQ DQ RUJDQL]DWLRQ LV XQDYRLGDEOH DQG HVVHQWLDO
$Q\RQH ZKR KROGV D OHDGHUVKLS SRVLWLRQ LQ DQ RUJDQL]DWLRQ RU KRSHV WR
VRPHGD\ KROG RQH DEVROXWHO\ PXVW OHDUQ KRZ WR JHW SHRSOH WR FKDQJH WKH
ZD\ WKH\ GR WKLQJV ,Q WKLV OHFWXUH ZH¶OO ORRN DW VRPH UHVHDUFK DQG LGHDV
DERXWRUJDQL]DWLRQDOFKDQJHWKDWZLOOKHOS\RXPDNHLWKDSSHQ
Drivers of Change
% 7RGD\ RUJDQL]DWLRQDO FKDQJH LV GULYHQ E\ VXFK IDFWRUV DV QHZ
JURZWK VWUDWHJLHV LQWHUQDWLRQDO H[SDQVLRQV EXVLQHVV GRZQWXUQV
PHUJHUV DQG DFTXLVLWLRQV DQG UHWUHQFKPHQW VWUDWHJLHV 7KHVH
VWUDWHJLFFKRLFHVDQGHYHQWVFDQUHTXLUHDZLGHYDULHW\RIFKDQJHV
LQFOXGLQJPDMRUUHVWUXFWXULQJVZRUNIRUFHUHGXFWLRQVQHZUHSRUWLQJ
UHODWLRQVKLSVWKHRSHQLQJDQGFORVLQJRIIDFLOLWLHVPRUHDJJUHVVLYH
JRDOVDQGFRVWFRQWDLQPHQWLQLWLDWLYHV
%
7HFKQRORJLFDODGYDQFHVDUHDOVRDWUHPHQGRXVGULYHURIFKDQJH$V
QHZVSHHG\WHFKQRORJLHVPDNHHYHQQHZHUVSHHGLHUWHFKQRORJLHV
SRVVLEOH FRPSDQLHV QHHG WR UHRUJDQL]H WKHPVHOYHV FRQVWDQWO\ WR
UHDFWRUWDNHDGYDQWDJHRIQHZRSSRUWXQLWLHV
%
$V VRRQ DV \RXU FRPSDQ\ FKDQJHV LWV FRPSHWLWRUV ZLOO DGDSW LQ
RUGHU WR NHHS XS ZKLFK ZLOO IRUFH \RXU FRPSDQ\ WR FKDQJH \HW
DJDLQ 7RGD\¶V EXVLQHVV HQYLURQPHQW LV UHOHQWOHVVO\ G\QDPLF DQG
WKDWUHTXLUHVRXURUJDQL]DWLRQVWRFRQVWDQWO\UHDOLJQWKHLUVWUDWHJLHV
DQGVWUXFWXUHVWREHVXFFHVVIXO
2EVWDFOHVWR&KDQJH
% ,I FKDQJH LV VR LPSRUWDQW ZKDW PDNHV DFKLHYLQJ LW ZLWKLQ DQ
RUJDQL]DWLRQ VR GLI¿FXOW" ,Q WKH ZRUGV RI 'U -RKQ .RWWHU RI WKH
+DUYDUG %XVLQHVV 6FKRRO ³(YLGHQFH LV RYHUZKHOPLQJ WKDW WKH
central challenge of change is not strategy or systems or culture. The
IXQGDPHQWDOSUREOHPLVFKDQJLQJWKHEHKDYLRURISHRSOH´,QRWKHU
ZRUGVLQGLYLGXDOEHKDYLRUFKDQJHVDUHHVVHQWLDOIRURUJDQL]DWLRQDO
EHKDYLRUFKDQJHV<HWSHRSOHLQRUJDQL]DWLRQVRIWHQUHVLVWFKDQJH
7KDWUHVLVWDQFHKDVPDQ\FDXVHVDQGFDQWDNHPDQ\IRUPV
%
&KDQJHFDQEULQJZLWKLWJUHDWHFRQRPLFLQVHFXULW\FDXVLQJSHRSOH
WR ZRUU\ DERXW ORVLQJ WKHLU MREV DQG OLYHOLKRRGV :H RIWHQ GRQ¶W
ZDQWWRFKDQJHEHFDXVHZH¶UHDIUDLGRIZKDWLWPLJKWPHDQIRUXV
¿QDQFLDOO\2WKHUIHDUVHPHUJHDVZHOOIHDURIWKHXQNQRZQIHDU
RI IDLOXUH IHDU RI EHFRPLQJ REVROHWH DQG IHDU RI ORVLQJ SRZHU
FRQWURODQGZRUNSODFHIULHQGVKLSV
%
7R PDNH PDWWHUV ZRUVH SHRSOH ZLWKLQ DQ RUJDQL]DWLRQ DUH QRW
DOZD\VWROGZK\FKDQJHVDUHQHFHVVDU\RUJLYHQDQRSSRUWXQLW\WR
DVNTXHVWLRQVDERXWKRZWKHFKDQJHSURFHVVZLOOZRUN7KH\PD\
QRWKDYHPXFKFRQ¿GHQFHRUWUXVWLQWKHLUOHDGHUVWREHJLQZLWKDVD
UHVXOWRIIDLOHGFKDQJHLQLWLDWLYHVLQWKHSDVW/DFNLQJJRRGUHDVRQV
DQG XQFHUWDLQ RI WKH RXWFRPH WKH\¶UH QDWXUDOO\ OHVV WKDQ HDJHU WR
GLVUXSWWKHLUOLYHV
ż ,OOXVWUDWLQJWKLVSRLQWDPLGVL]HGVHUYLFHRUJDQL]DWLRQUHFHQWO\
LPSOHPHQWHG D QHZ FRPSHQVDWLRQ V\VWHP WKDW ZDV UHFHLYHG
ZLWKJUHDWUHVLVWDQFHDQGDQJVWE\WKHHPSOR\HHV
ż
7KH JRDO RI WKH QHZ FRPSHQVDWLRQ V\VWHP ZDV WR LQFUHDVH
ZDJHV WR PDNH WKH FRPSDQ\ PRUH DWWUDFWLYH LQ WKH UHFUXLWLQJ
SURFHVVDQGPRUHFDSDEOHRIUHWDLQLQJHPSOR\HHV
ż
7KH FRPSDQ\ ZDQWHG WR SXW PRUH PRQH\ LQ LWV HPSOR\HHV¶
SRFNHWV\HWLWIDLOHGWRSXWDFUHGLEOHOHDGHULQFKDUJHDQGWDNH
WKHWLPHWRIXOO\H[SODLQWKHUHDVRQLQJEHKLQGWKHFKDQJH
Lecture 47: Leading Real Organizational Change
,QDGGLWLRQQRRQHH[SODLQHGWRWKHHPSOR\HHVKRZWKHQHZ
V\VWHP ZRXOG RSHUDWH RU DQVZHUHG WKHLU TXHVWLRQV SULRU WR
the rollout.
ż
,Q WKLV VLWXDWLRQ SHRSOH
UHVLVWHG WKH RSSRUWXQLW\ WR
make more money because
RISDVWSUDFWLFHVDQGKRZWKH
FKDQJH ZDV SUHVHQWHG WR WKH
workforce.
‹3KRWLFN)UHGHULF&LURX7KLQNVWRFN
%
ż
0LG DQG ORZOHYHO HPSOR\HHV
DUHQ¶W WKH RQO\ VRXUFH RI
resistance to change, however.
7KHOHDGHUVKLSRIDQRUJDQL]DWLRQ
FDQ EH MXVW DV UHOXFWDQW WR DGDSW
Employees confused by a
,Q +DUYDUG KLVWRULDQ 'U change may become resistant
$OIUHG'X3RQW&KDQGOHUZURWHDQ to it.
RXWVWDQGLQJERRNHQWLWOHGStrategy
DQG6WUXFWXUH&KDQGOHUIRXQGWKDWRUJDQL]DWLRQDOOHDGHUVWHQGHGWR
DOORZWKHVWDWXVTXRWRUXOHXQWLOWKH\ZHUHIRUFHGWRFKDQJHRXWRI
QHFHVVLW\%XVLQHVVHVWRRNDFWLRQRQO\ZKHQWKH\ZHUHFRQIURQWHG
ZLWKWKHKDUVKUHDOLW\WKDWWKHLUFXUUHQWVWUDWHJLHVIRUGRLQJEXVLQHVV
ZHUHQRORQJHUZRUNLQJLQWKHFKDQJLQJPDUNHWSODFH
Driving Meaningful Change
% 0HDQLQJIXO FKDQJH LQ DQ\ RUJDQL]DWLRQ²ZKHWKHU LW LV VWUDWHJLF
WDFWLFDO RU RSHUDWLRQDO FKDQJH²UHTXLUHV HIIHFWLYH OHDGHUVKLS
:KHQ FKDQJH LV QHHGHG PDQ\ RUJDQL]DWLRQDO OHDGHUV UHDFK IRU D
IRUPDO RUJDQL]DWLRQDO LPSURYHPHQW SURFHVV 7KHVH DUH SRSXODU
LQ WKH EXVLQHVV ZRUOG WRGD\ DQG LQFOXGH VXFK VWUDWHJLHV DV /HDQ
7KLQNLQJ6L[6LJPD)RUG¶VTXDOLW\RSHUDWLQJV\VWHPkaizenDQG
WRWDOTXDOLW\PDQDJHPHQW
%
2WKHU OHDGHUV XVH OHVV IRUPDO PHWKRGV VRPH RI ZKLFK FDQ
EH DJJUHVVLYH HYHQ FRQIURQWDWLRQDO 7KH\ VHQG RXW IRUFHIXO
GHPDQGLQJ HPDLOV JLYH SDVVLRQDWH EXUQLQJ SODWIRUP SHS WDONV
HQJDJHLQVFUHDPLQJ¿VWSRXQGLQJDQGIHDUPRQJHULQJRUVLPSO\
LVVXH PDQGDWHV IURP RQ KLJK $OO WKHVH PHWKRGV DUH FDSDEOH
RI FUHDWLQJ D ÀXUU\ RI DFWLYLW\ EXW XQOHVV WKH\¶UH DSSOLHG LQ DQ
HIIHFWLYHDQGSHUFHSWLYHZD\WKH\DUHXQOLNHO\WRSURGXFHGHVLUHG
DQGVXVWDLQDEOHFKDQJH
%
,Q IDFW LW KDV EHHQ HVWLPDWHG WKDW RQO\ DURXQG RI DOO
RUJDQL]DWLRQDO FKDQJH LQLWLDWLYHV DFKLHYH WKHLU GHVLUHG RXWFRPHV
which is a sobering thought. That means that 80% of the time,
LQVWHDGRIFKDQJLQJOHDGHUVZKRDUHWU\LQJWRDFKLHYHFKDQJHDUH
DFWXDOO\ ZDVWLQJ WLPH IUXVWUDWLQJ SHRSOH ORVLQJ FUHGLELOLW\ DQG
EXUQLQJSUHFLRXVRUJDQL]DWLRQDOUHVRXUFHV
%
,QVSLUHG E\ KLV UHSRUWLQJ RQ KHDOWK FDUH ZULWHU$ODQ 'HXWVFKPDQ
FKURQLFOHG UHVHDUFK ¿QGLQJV DQG REVHUYDWLRQV RQ FKDQJH LQ D
ERRN HQWLWOHG Change or Die +H IRXQG WKDW IDFWV IHDU DQG IRUFH
DORQH GRQ¶W GULYH UHDO DQG VXVWDLQDEOH FKDQJH LQ SHRSOH¶V OLYHV
'HXWVFKPDQ LQWURGXFHG WKUHH G\QDPLFV WKDW PXVW EH LQ SODFH IRU
UHDOFKDQJHWRWDNHSODFHUHODWLRQVKLSVUHSHWLWLRQDQGUHIUDPLQJ
ż $FFRUGLQJWR'HXWVFKPDQLIZHDUHWRFKDQJHZHPXVWKDYHD
VWURQJUHODWLRQVKLSZLWKVRPHRQHWKDWFDQJLYHXVKRSHWKDWWKH
FKDQJHZHQHHGWRPDNHLVSRVVLEOH
%
ż
:HDOVRQHHGUHSHWLWLRQ:LWKGLUHFWLRQIURPWKHSHUVRQZKRLV
JXLGLQJXVWKURXJKWKHFKDQJHZHQHHGWROHDUQSUDFWLFHDQG
PDVWHUWKHDFWLYLWLHVDQGDFWLRQVWKDWZLOODOORZWKHFKDQJHVZH
are trying to make.
ż
%\ UHIUDPLQJ 'HXWVFKPDQ PHDQV WKDW WKH SHUVRQ KHOSLQJ XV
WKRXJK WKH FKDQJH PXVW KHOS XV IRUP QHZ ZD\V RI WKLQNLQJ
DERXW DQG XQGHUVWDQGLQJ RXU VLWXDWLRQ 5HIUDPLQJ LV QHHGHG
WR KHOS SHRSOH PRYH IURP WKLQNLQJ DQG VD\LQJ ³, KDWH WKLV
FKDQJH´WR³7KLVFKDQJHLVJRLQJWRSXWXVLQDEHWWHUSRVLWLRQ´
'HXWVFKPDQ¶VDSSURDFKWDNHVPRUHWLPHHIIRUWDQGHQHUJ\%XWWKH
FKDQJHLWFUHDWHVLVUHDODQGVXVWDLQDEOHZKLFKVKRXOGEHWKHJRDO
RIHYHU\RUJDQL]DWLRQDODQGLQGLYLGXDOFKDQJHHIIRUWZHHQJDJHLQ
Lecture 47: Leading Real Organizational Change
A Study on Change Initiatives
% ,QWKHERRNThe Two-Minute DrillUHVHDUFKHUVDQDO\]HGPRUHWKDQ
VXFFHVVIXO DQG XQVXFFHVVIXO FKDQJH LQLWLDWLYHV DQG IRXQG
VRPH LQWHUHVWLQJ SDWWHUQV ,Q WKLV UHVHDUFK VWXG\ WKH SHRSOH ZKR
SDUWLFLSDWHG ZHUH D FURVVVHFWLRQ RI H[HFXWLYHV PLGGOH PDQDJHUV
DQGIURQWOLQHOHDGHUV7KHSDUWLFLSDQWVLGHQWL¿HGERWKDVXFFHVVIXO
DQG DQ XQVXFFHVVIXO FKDQJH LQLWLDWLYH WKDW WKH\ KDG EHHQ SDUW RI
GXULQJWKHLUFDUHHUV
%
7KH ¿UVW VWDQGRXW ¿QGLQJ ZDV WKH IDFW WKDW WKH OHDGHUV PDGH
SUREOHPVROYLQJWKHIRFXVRIFKDQJH2UJDQL]DWLRQVPXVWGRWKLQJV
GLIIHUHQWO\ ZKHQ WKHLU FXUUHQW DFWLYLWLHV DUH QRW ZRUNLQJ ZKHWKHU
WKH\¶UH H[SHULHQFLQJ D UHYHQXH VKRUWIDOO H[SORGLQJ FRVWV SRRU
FXVWRPHU VHUYLFH RU ODFN RI TXDOLW\ $OWKRXJK DOO WKHVH LVVXHV
UHTXLUHFKDQJHWKHUHDOLVVXHLVVROYLQJWKHSUREOHP
%
7KH VHFRQG LPSRUWDQW ¿QGLQJ ZDV WKDW DOWKRXJK OHDGHUVKLS LV
HVVHQWLDOWRDFKLHYLQJRUJDQL]DWLRQDOFKDQJHQRWMXVWDQ\OHDGHUVKLS
ZLOO GR 5HDO DQG UDSLG FKDQJH RU SUREOHP VROYLQJ UHTXLUHV
OHDGHUVKLSWKDWLVHIIHFWLYHWUXVWZRUWK\DQGKDQGVRQ7KHOHDGHUV
RI VXFFHVVIXO FKDQJH LQLWLDWLYHV ZHUH IRFXVHG HQHUJL]HG VNLOOHG
DQG SDVVLRQDWH DERXW DFWXDOO\ PDNLQJ WKLQJV EHWWHU &RQYHUVHO\
IDLOHGFKDQJHHIIRUWVZHUHDOPRVWDOZD\VSRRUO\OHGZLWKWKHSHUVRQ
in charge often just going through the motions of the change effort.
%
6XFFHVVIXOFKDQJHLQLWLDWLYHVDOVRDOZD\VKDGWZRRWKHULPSRUWDQW
TXDOLWLHVDVHQVHRIXUJHQF\DQGVSHHG$VHQVHRIXUJHQF\FRQYH\V
WR SHRSOH WKH LPSRUWDQFH RI WKH HIIRUW ,W FDQ HDVLO\ EH WUDQVODWHG
LQWRWKHQHHGIRUVSHHGZKLFKJLYHVWKHHIIRUWIRUZDUGPRPHQWXP
%
$QRWKHU ¿QGLQJ UHSUHVHQWHG VRPH QHZ WKLQNLQJ RQ WKH VXEMHFW RI
DFKLHYLQJ RUJDQL]DWLRQDO FKDQJH /HDGHUV RI VXFFHVVIXO FKDQJH
HIIRUWV WDNH WKH WLPH WR NQRZ DQG XQGHUVWDQG ZKDW WKH\¶UH XS
DJDLQVWZKHQHPEDUNLQJRQDQ\FKDQJHLQLWLDWLYH7KH\GHWHUPLQH
KRZ ZHOO WKHLU VNLOO VHWV DQG WKH VNLOO VHWV RI WKHLU WHDPV VWDFN XS
against the challenge.
%
Still more vital elements of a successful change initiative are
WHDPZRUN DQG WDOHQW :KHQ \RX WKLQN DERXW WKH SUREOHPVROYLQJ
DFWLYLWLHV QHHGHG WR GULYH FKDQJH LW PDNHV VHQVH WKDW \RX QHHG
PRWLYDWHGSHRSOHZKRDUHDEOHWRZRUNWRJHWKHUDQGZKRKDYHWKH
UHTXLVLWHVNLOOVHWVIRUWKHQHHGVRI\RXUSURMHFW$PRQJRWKHUWKLQJV
\RXSUREDEO\QHHGSHRSOHZLWKJRRG,7VNLOOVRWKHUVZKRDUHJRRG
DQDO\VWVDQGSHRSOHZKRKDYHJRRGWUDLQLQJDQGIDFLOLWDWLRQVNLOOV
%
7KHUHVHDUFKHUVDOVRIRXQGWKDWVXFFHVVIXOSODQVLQYDULDEO\LQYROYH
FDUHIXO PRQLWRULQJ /HDGHUV RI VXFFHVVIXO FKDQJH REVHUYH DQG
PHDVXUH ERWK LQGLYLGXDO DQG WHDP SHUIRUPDQFH WR HQVXUH WKDW
WKH ULJKW DFWLYLWLHV DUH WDNLQJ SODFH WR PRYH WKH FKDQJH IRUZDUG
.QRZLQJ WKDW WKH\ DUH EHLQJ KHOG DFFRXQWDEOH IRU WKHLU EHKDYLRU
DQG SHUIRUPDQFH HQFRXUDJHV SHRSOH WR JLYH WKH FKDQJH LQLWLDWLYH
their best efforts.
%
)LQDOO\ WKH UHVHDUFKHUV IRXQG WKDW VXFFHVVIXO OHDGHUV RI
RUJDQL]DWLRQDOFKDQJHSURYLGHIHHGEDFNFRDFKLQJDQGUHZDUGVWR
VKDSHDQGUHLQIRUFHWKHDFWLRQVDQGEHKDYLRUVWKDWDUHGULYLQJWKH
FKDQJH&DUHIXOPRQLWRULQJHQDEOHVOHDGHUVWRNQRZZKHQGHVLUHG
UHVXOWV DUH EHLQJ DFKLHYHG DQG WR FDOO DWWHQWLRQ WR WKHP ZKLFK
SURGXFHVMXVWL¿DEOHSULGHDQGVDWLVIDFWLRQLQWKHSHRSOHZKRVHKDUG
ZRUNPDGHWKHFKDQJHSRVVLEOH
Suggested Reading
.RWWHULeading Change.
/RQJHQHFNHU6WDQV¿HOGDQG3DSSThe Two-Minute Drill.
Questions to Consider
1. 7KLQN RI VXFFHVVIXO FKDQJH WKDW \RX ZHUH SDUW RI DW ZRUN :KDW
ZDV LW WKDW PDGH LW VR VXFFHVVIXO" :KDW OHVVRQV FDQ \RX GUDZ IURP
WKLVH[SHULHQFH"
2. 'R\RXDSSURDFKFKDQJHZLWKDSUREOHPVROYLQJPLQGVHW"
3. 'R \RX NQRZ \RXU RZQ VWUHQJWKV DQG ZHDNQHVVHV DV D FKDQJH DJHQW
OHDGHU"
4. ,VWKHUHDSUREOHPDWZRUNULJKWQRZWKDW\RXQHHGWRVROYH":KDWZLOO
Lecture 47: Leading Real Organizational Change
EH\RXU SODQRIDWWDFNWRPDNHUHDOFKDQJHKDSSHQVRRQHU UDWKHUWKDQ
ODWHU"
Lifelong Learning for Career Success
Lecture 48
T
KRXJK WKH PRVW LPSRUWDQW LQJUHGLHQW IRU FDUHHU VXFFHVV LV D WUDFN
UHFRUG RI GHOLYHULQJ GHVLUHG UHVXOWV DQRWKHU FULWLFDO IDFWRU LV \RXU
DELOLW\ WR GHYHORS \RXU VNLOOV DQG WDOHQWV WR PHHW WKH FKDQJLQJ
GHPDQGVRI\RXUMRE)XUWKHUPRUHWREHRIDQ\UHDOYDOXHRXUNQRZOHGJH
RI RUJDQL]DWLRQDO EHKDYLRU QHHGV WR LQÀXHQFH ERWK RXU WKRXJKW SURFHVVHV
DQG WKH ZD\ ZH EHKDYH7R WKDW HQG WKLV OHFWXUH ZLOO GLVFXVV WKH EDUULHUV
WKDWJHWLQWKHZD\RIRXUDELOLW\WRFKDQJHOHDUQDQGGHYHORSDQGKRZWR
overcome them.
The Essentiality of Learning
% ,QRXUGDWDGULYHQZRUOGLQIRUPDWLRQGRXEOHVHYHU\¿YH\HDUVDQG
RUJDQL]DWLRQV UDSLGO\ FKDQJH WR NHHS XS ZLWK WKH K\SHUG\QDPLF
PDUNHWSODFH 3HUIRUPDQFH H[SHFWDWLRQV NHHS ULVLQJ DQG WKH
DYHUDJHZRUNHUZLOOFKDQJHMREVEHWZHHQDQGWLPHVGXULQJKLV
or her career.
%
,W VKRXOG WKHUHIRUH FRPH DV QR VXUSULVH WKDW ZH PXVW DOO PDNH
OLIHORQJOHDUQLQJDQGSURIHVVLRQDOGHYHORSPHQWDUHDOSULRULW\7KH
RQXVIRUGHYHORSLQJ\RXUVHOIIDOOVVTXDUHO\RQ\RXUVKRXOGHUV
%
$OWKRXJK \RXU ERVV DQG RUJDQL]DWLRQ FDQ KHOS JXLGH \RX DQG
SURYLGH LPSRUWDQW LQSXW DQG UHVRXUFHV SURIHVVLRQDO GHYHORSPHQW
FRPHV GRZQ WR \RXU ZLOOLQJQHVV WR WDNH FRQWURO RI WKLV LPSRUWDQW
SDUWRI\RXUZRUNOLIH5HPHPEHUWKDWGHOLYHULQJEHWWHUUHVXOWVIRU
\RXURUJDQL]DWLRQUHTXLUHVLPSURYLQJ\RXUWDOHQW
%
6XFFHVVIXO SHRSOH DFURVV YLUWXDOO\ HYHU\ GLVFLSOLQH WHQG WR EH
OLIHORQJOHDUQHUVZKRSODFHDUHDOSULRULW\RQWKHLULQWHOOHFWXDODQG
SURIHVVLRQDOGHYHORSPHQW
Lecture 48: Lifelong Learning for Career Success
%
7KRVHLQYROYHGLQKXPDQUHVRXUFHVDQGWUDLQLQJIUHTXHQWO\DVN:K\
GRQ¶W SHRSOH WDNH WKHLU SURIHVVLRQDO GHYHORSPHQW PRUH VHULRXVO\"
6RPHDQVZHUVGHULYHGIURPVXUYH\VLQFOXGHWKHIROORZLQJ
ż ([WUHPH WLPH SUHVVXUHV EDG ERVVHV DQG WKH IDFW WKDW PDQ\
SHRSOHUHFHLYHOLWWOHRUQRSHUIRUPDQFHIHHGEDFN
ż
2UJDQL]DWLRQDO FXOWXUHV WKDW GR QRW SURPRWH RU HQFRXUDJH
HPSOR\HHGHYHORSPHQW
ż
2UJDQL]DWLRQV WKDW GHPRQVWUDWH D ZLOOLQJQHVV WR DFFHSW SRRU
SHUIRUPDQFHDQGWKHVWDWXVTXR
ż
&RPSDQLHVWKDWIDLOWRLQYHVWUHVRXUFHVDQGFUHDWHSURFHVVHVWR
SURPRWHOHDUQLQJ
ż
3HRSOH ZKR GRQ¶W WDNH WKH WLPH IRU VHOIUHÀHFWLRQ DQG
VHOIDSSUDLVDO
ż
2XWRIFRQWURO HJRV WKDW SUHYHQW SHRSOH IURP UHDOL]LQJ WKDW
WKH\DUHLQQHHGRIVRPHZRUN
Breaking through with Learning
% :HDOOIDFHEDUULHUVWKDWFDQJHWLQWKHZD\RIDFTXLULQJQHZVNLOOV
WR PHHW WKH GHPDQGV RI RXU MREV UH¿QLQJ RXU H[LVWLQJ WDOHQWV RU
GHYHORSLQJJUHDWHUH[SHUWLVHLQDQDUHQDWKDWFDQKHOSDGYDQFHRXU
FDUHHUV2QHZD\WRFRXQWHUWKLVLVWRPDNHDKDELWRIHQJDJLQJLQ
RQJRLQJOHDUQLQJWKURXJKD¿YHSDUWSURFHVV
%
)LUVWLW¶VLPSHUDWLYHWKDWZHWDNHWLPHHYHU\GD\WRUHÀHFWRQZKDW
ZH¶UH GRLQJ DQG KRZ ZHOO ZH¶UH GRLQJ LW 7KLV PHDQV WKDW ZH
EHFRPH PRUH VHOIPRQLWRULQJ DQG DZDUH RI RXU EHKDYLRU ZKLFK
LVDFRUQHUVWRQHRIEHLQJDQHPRWLRQDOO\LQWHOOLJHQWSHUVRQ,QWKLV
UHJDUGLW¶VLPSRUWDQWWRFRQGXFWDGDLO\6723LQRUGHUWRVSHQG
VXI¿FLHQWWLPHSODQQLQJDQGGHYHORSLQJDSHUIRUPDQFHVFULSWIRU
HDFKGD\
%
6HFRQGLW¶VDOVRLPSHUDWLYHWKDWZHVHHNRXWDQGUHFHLYHRQJRLQJ
IHHGEDFN IURP SHRSOH ZKR DUH LQ D SRVLWLRQ WR KHOS XV LPSURYH
RXU VNLOOV 5HVHDUFK WHOOV XV WKDW PDQ\ SURIHVVLRQDOV GR QRW JHW
VXI¿FLHQW IHHGEDFN DQG FRDFKLQJ RQ WKHLU SHUIRUPDQFH WKXV ZH
QHHGWREHFRPHPRUHSURDFWLYHLQWKLVUHJDUG,I\RXURUJDQL]DWLRQ
GRHVQRWSURYLGH\RXZLWKVDWLVIDFWRU\IHHGEDFN\RXQHHGWRFUHDWH
\RXURZQIHHGEDFNPHFKDQLVPV7DNHWKHWLPHWREXLOGGHJUHH
ZRUNLQJUHODWLRQVKLSVWRLQFUHDVH\RXURSSRUWXQLWLHVWRJHWDFFXUDWH
DQGFDQGLGIHHGEDFN
%
7KLUGZH QHHGWROHDUQIURPRXU PLVWDNHVDQGQRWDOORZWKHPWR
EHFRPH KDELWV RU OLIHVW\OHV ,Q WKH ZRUGV RI JUHDW$PHULFDQ ¿OP
DFWRU-RKQ:D\QH³/LIHLVWRXJKEXWLW¶VWRXJKHULI\RX¶UHVWXSLG´
$SHUVRQZKRLVLJQRUDQWGRHVQ¶WNQRZZKDWWRGREXWDSHUVRQLV
EHLQJVWXSLGZKHQKHRU VKHNQRZV ZKDWWRGRDQGIRU ZKDWHYHU
UHDVRQ GRHVQ¶W GR LW :KHQ ZH ¿QG RXUVHOYHV PDNLQJ WKH VDPH
PLVWDNHWLPHDQGWLPHDJDLQZHGDPDJHRXURZQSHUIRUPDQFHDQG
UXQWKHULVNWKDWWKHPLVWDNHFDQEHFRPHDGHHSURRWHGKDELW
%
)RXUWK RQJRLQJ OHDUQLQJ FDQ WDNH SODFH ZKHQ ZH PDNH VHHNLQJ
RXWQHZDQGEHWWHUZD\VRIGRLQJWKLQJVSDUWRIRXUGDLO\DSSURDFK
to work.
ż 7KHUH LV PXFK WR OHDUQ E\ DVNLQJ JRRG TXHVWLRQV DQG E\
VKDUSHQLQJRXUOLVWHQLQJVNLOOV
ż
:RUNLQJ FORVHO\ ZLWK WDOHQWHG SHRSOH DQG OHDUQLQJ KRZ WR
HPXODWHWKHLUWKLQNLQJDQGEHKDYLRUFDQKHOS\RXDEVRUEJRRG
VNLOOVDQGKDELWV
ż
1HZVSDSHUV DQG SHULRGLFDOV FDQ SURYLGH XV ZLWK LQIRUPDWLRQ
DERXW FXUUHQW LQGXVWU\ WUHQGV DQG EHVW SUDFWLFHV WKDW DUH
relevant to our jobs.
ż
:KHQ ZH KDYH JUHDW ZRUNLQJ UHODWLRQVKLSV ZH FDQ GUDZ
RQ WKHP ZKHQ ZH KDYH D TXHVWLRQ QHHG LQSXW LQ VROYLQJ D
SUREOHP RU VLPSO\ QHHG D VRXQGLQJ ERDUG RQ DQ LPSRUWDQW
GHFLVLRQZH¶UHDERXWWRPDNH
%
)LQDOO\ OHDGHUV DQG SURIHVVLRQDOV ZKR DUH VHULRXV DERXW RQJRLQJ
OHDUQLQJ ZLOO FUHDWH DFFRXQWDELOLW\ V\VWHPV WKDW PRWLYDWH DQG
HQFRXUDJH WKHP WR HQJDJH LQ PDQ\ RI WKH SUDFWLFHV ZH¶YH
GLVFXVVHG LQ WKHVH OHFWXUHV 7KH\ ZLOO KDYH UHJXODU FRQWDFW ZLWK
DQDFFRXQWDELOLW\SDUWQHURUWKH\PD\HYHQJRVRIDUDVWRVHWXS
WKHLURZQSHUVRQDOERDUGRIGLUHFWRUV6XFKV\VWHPVDUHXVHIXOIRU
GLVFXVVLQJZKDWZHQHHGWRNHHSGRLQJVWRSGRLQJDQGVWDUWGRLQJ
WRLPSURYHRXUSHUIRUPDQFH
Lecture 48: Lifelong Learning for Career Success
Breaking through with Professional Practices
% 7KHVHFRQGPDMRUVWHSWRNHHS\RXUVHOIJURZLQJLQ\RXUFDUHHULVWR
DGRSW VPDUW SURIHVVLRQDO GHYHORSPHQW SUDFWLFHV WKDW ZLOO LPSURYH
\RXUWDOHQW$OWKRXJK\RXURQJRLQJOHDUQLQJSUDFWLFHVFDQJRDORQJ
ZD\WRLPSURYLQJ\RXUSHUIRUPDQFHIURPWLPHWRWLPHZHDOOQHHG
WR FRQGXFW D VWUDWHJLF 6723 WR DVVHVV ZKHWKHU RXU WDOHQW EDVH
LV ZKHUH LW QHHGV WR EH ,I LW LV QRW ZH QHHG WR ¿JXUH RXW KRZ WR
DGGUHVVWKHLVVXH
%
)LUVW LW¶V LPSRUWDQW WR FRQGXFW D QHHGV DVVHVVPHQW RI \RXUVHOI
WR GHWHUPLQH \RXU OHYHO RI SUR¿FLHQF\ LQ WKH VNLOOV WKDW DUH PRVW
LPSRUWDQW IRU VXFFHVV LQ \RXU FXUUHQW SRVLWLRQ 7KHUH¶V D JRRG
FKDQFH WKDW ZKHQ \RX KDG \RXU PRVW UHFHQW IRUPDO SHUIRUPDQFH
DSSUDLVDO\RXUERVVLGHQWL¿HGDQDUHDRUWZRWKDWFRXOGXVHVRPH
ZRUN2QFHDGH¿FLHQF\KDVEHHQLGHQWL¿HGVHWDVSHFL¿FOHDUQLQJ
REMHFWLYHIRUWKDWSDUWLFXODUVNLOO7KHPRUHVSHFL¿FWKHEHWWHU
%
$V VRRQ DV \RX¶YH VHW D OHDUQLQJ REMHFWLYH LW¶V WLPH WR FUHDWH DQ
LPSURYHPHQW SODQ WR KHOS \RX GHYHORS WKH VNLOOV \RX QHHG WR EH
PRUHVXFFHVVIXO+LJKSHUIRUPDQFHSURIHVVLRQDOVFUDIWGHYHORSPHQW
SODQVWKDWDUHVSHFL¿FWRWKHVNLOOVWKH\DUHWU\LQJWRSHUIHFW
%
,QGHYHORSLQJ\RXUSODQ\RXPLJKWZDQWWRVHHNRXWIRUPDOWUDLQLQJ
DQGHGXFDWLRQSURJUDPVDURXQGWKHSDUWLFXODUVNLOOWKDWQHHGVZRUN
6WDUWE\IDPLOLDUL]LQJ\RXUVHOIZLWKWKHRUJDQL]DWLRQDOWUDLQLQJDQG
GHYHORSPHQW SURJUDPV WKDW \RXU FRPSDQ\ RIIHUV<RX PLJKW DOVR
EHDEOHWR¿QGDVHPLQDURUZRUNVKRSRIIHUHGE\DORFDOFRQVXOWLQJ
JURXSXQLYHUVLW\RUFRPPXQLW\FROOHJH
$IWHUFRPSOHWLQJDIRUPDOHGXFDWLRQSURJUDPPDNHVXUH\RXWDNH
VWHSV WR LQFUHDVH \RXU DELOLW\ WR UHWDLQ DQG DSSO\ WKH LQIRUPDWLRQ
\RX OHDUQHG ,QFOXGH VRPH VSHFL¿F DFWLRQV IURP WKH WUDLQLQJ WKDW
\RXFDQPDNHSDUWRI\RXU6723SURFHVV
%
:LWKLQ \RXU RUJDQL]DWLRQ VXFK DFWLYLWLHV DV FURVVWUDLQLQJ WDNLQJ
RQ DVVLJQPHQWV WR VHUYH RQ LPSURYHPHQW WHDPV DQG SDUWLFLSDWLQJ
LQ RQWKHMRE WUDLQLQJ SURJUDPV PLJKW SURYLGH H[FHOOHQW OHDUQLQJ
RSSRUWXQLWLHV ,Q DGGLWLRQ RUJDQL]DWLRQVSRQVRUHG FRPPXQLW\
VHUYLFHRXWUHDFKSURJUDPVDQGYROXQWHHUHIIRUWVLQWKHFRPPXQLW\
FDQEHDPD]LQJVNLOOGHYHORSPHQWRSSRUWXQLWLHV
%
Just as in the case of your ongoing learning, once you have taken
WKHWLPHWRFUHDWHDSURIHVVLRQDOGHYHORSPHQWSODQLWLVLPSRUWDQW
WKDW \RX FUHDWH DFFRXQWDELOLW\ DURXQG LW +HUH LV ZKHUH KDYLQJ D
JUHDWZRUNLQJUHODWLRQVKLSZLWK\RXUERVVKDYLQJDQDFFRXQWDELOLW\
SDUWQHURUKDYLQJDSHUVRQDOERDUGRIGLUHFWRUVFDQFRPHLQKDQG\
\HWDJDLQ)RU\RXUGHYHORSPHQWSODQWRZRUNWKHUHPXVWEHVSHFL¿F
‹&DWKHULQH<HXOHWL6WRFN7KLQNVWRFN
%
9ROXQWHHULQJLVDQRIWHQRYHUORRNHGZD\WRGHYHORS\RXUVNLOOVDQGWDOHQWV
DFWLRQRQJRLQJIHHGEDFNDQGUHLQIRUFHPHQWDQGDFFRXQWDELOLW\IRU
DFWLRQ2WKHUZLVHWKHKXVWOHDQGEXVWOHRIGDLO\ZRUNZLOOVTXHH]H
RXWWKHVHLPSRUWDQWOHDUQLQJRSSRUWXQLWLHV
Lecture 48: Lifelong Learning for Career Success
Mentoring
% 1HYHU XQGHUHVWLPDWH WKH SRZHU RI KDYLQJ D PHQWRU DQG EHLQJ
D PHQWRU 6XFFHVVIXO SHRSOH DOPRVW DOZD\V KDYH D QHWZRUN RI
PHQWRUVWRKHOSWKHPPDNHJRRGGHFLVLRQVSODQPRUHHIIHFWLYHO\
DQG FUHDWH DQG PDLQWDLQ SURIHVVLRQDO QHWZRUNV 6XFFHVVIXO SHRSOH
NQRZWKDWPHQWRULQJRWKHUSHRSOHKHOSVWKHPNHHSWKHLUIHHW¿UPO\
RQ WKH JURXQG FDXVHV WKHP WR VWD\ KXPEOH DQG KHOSV WKHP VWD\
FRQQHFWHGWRWKHWKLQJVJRLQJRQDURXQGWKHP
%
$V ZH PRYH WKURXJK OLIH SXUVXLQJ RXU FDUHHUV LW LV FULWLFDOO\
LPSRUWDQW WR UHPHPEHU WKDW UHODWLRQVKLSV DUH WKH FRUQHUVWRQH RI
RXUFDUHHUVDQGWKHIRXQGDWLRQRIOLIH(DFKRQHRIXVQHHGVWRWDNH
UHVSRQVLELOLW\ IRU EHLQJ DQ HIIHFWLYH PHQWRU WR WKH SHRSOH DURXQG
XV SHRSOH ZKR DUH OHVV IRUWXQDWH WKDQ XV DQG SHRSOH ZKR KDYH
VRPHWKLQJ WR JDLQ E\ KDYLQJ DFFHVV WR RXU H[SHULHQFH FRXQVHO
VXSSRUWDQGQHWZRUN$WWKHVDPHWLPHHDFKRIXVQHHGVWRKDYHD
mentor in our lives for the same reasons.
%
:KHWKHU LW¶V LPSURYLQJ \RXU OHDGHUVKLS VNLOOV GHYHORSLQJ
\RXU HPRWLRQDO LQWHOOLJHQFH ERRVWLQJ \RXU FRDFKLQJ RU WHDP
EXLOGLQJ DELOLWLHV RU GHYHORSLQJ DQ\ RI WKH RWKHU VNLOOV WKDW ZH
KDYH GLVFXVVHG PDNH XVH RI WKDW VSHFLDO PHQWRULQJ UHODWLRQVKLS
WR GHYHORS WKH NQRZOHGJH DQG WDOHQWV WKDW DUH PRVW FULWLFDO WR
your success.
Suggested Reading
Blauner, &RDFK.
*RUGRQTraining Camp.
Questions to Consider
1. :KDW VSHFL¿F SUDFWLFHV GRHV \RXU RUJDQL]DWLRQ KDYH LQ SODFH WR KHOS
IDFLOLWDWHHPSOR\HHGHYHORSPHQW"
2. 'R\RXKDYHDSODQIRU\RXUGHYHORSPHQWDURXQGVSHFL¿FQHHGVDQGDUH
\RX WDNLQJ DGYDQWDJH RI WKH GHYHORSPHQW WRROV WKDW \RXU RUJDQL]DWLRQ
SURYLGHV"
3. 'R \RX WDNH WLPH RQ D GDLO\ EDVLV WR UHÀHFW DQG OHDUQ IURP WKH
H[SHULHQFHVRIHDFKGD\"
4. 'R\RXKDYHDPHQWRUDQGDUH\RXPHQWRULQJRWKHUVLQ\RXURUJDQL]DWLRQ
WRKHOSWKHPEHVXFFHVVIXO"
Critical Business Skills:
Marketing
Ryan Hamilton, Ph.D.
Critical Business Skills: Marketing
Scope:
T
R WKH FDVXDO REVHUYHU PDUNHWLQJ FDQ UHVHPEOH D VHULHV RI UDQGRP
DQG GLVFRQQHFWHG DFWLRQV :K\ GLG D ¿UP FKRRVH WR VHOO WKURXJK
D SDUWLFXODU FKDQQHO" 6SRQVRU D SDUWLFXODU HYHQW" &DVW WKDW DFWRU
LQ LWV FRPPHUFLDOV" /RFDWH LWV VWRUHV DW D SDUWLFXODU ORFDWLRQ" 3ULFH DW D
SDUWLFXODU OHYHO" %XQGOH LWV RIIHULQJV ZLWK RWKHU SURGXFWV RU VHUYLFHV" ,I LW
LV EHZLOGHULQJ WR ZDWFK KRZ HVWDEOLVKHG FRPSDQLHV ZLWK ORQJ KLVWRULHV RI
VXFFHVV PDNH VXFK GHFLVLRQV ZKDW FKDQFH GRHV WKH VPDOO EXVLQHVV RZQHU
KDYHRIGHYHORSLQJDQGIROORZLQJWKURXJKRQDFRKHUHQWPDUNHWLQJSODQ"
:KHQYLHZHGWKURXJKWKHSURSHUOHQVKRZHYHUWKLVFDFRSKRQ\RIVHHPLQJO\
GLVFRQQHFWHG GHFLVLRQV FRPHV LQWR IRFXV$V LW WXUQV RXW WKHUH LV D SURSHU
VHTXHQFHLQZKLFKPDUNHWLQJGHFLVLRQVVKRXOGEHPDGH²DQRUGHUWKDWFDQ
EHLPSRVHGRQDOOWKHFKRLFHVPDUNHWLQJPDQDJHUVPXVWPDNH
$OO PDUNHWLQJ GHFLVLRQV FDQ EH GLYLGHG LQWR WZR JURXSV WKRVH WKDW DIIHFW
WKH¿UP¶VPDUNHWLQJVWUDWHJ\DQGWKRVHWKDWFRQFHUQWKHWDFWLFVLWZLOOXVHWR
LPSOHPHQWWKLVVWUDWHJ\7KHVHWZRW\SHVRIGHFLVLRQVDUHQRWHTXDO6WUDWHJ\
WDNHVSUHFHGHQFHRYHUWDFWLFVDQGWKXVPXVWDOZD\VEHGHFLGHG¿UVW
7KLV VHFWLRQ RI WKH FRXUVH LV VWUXFWXUHG DURXQG WKLV GLVWLQFWLRQ ,Q WKH
¿UVW OHFWXUHV ZH ZLOO GLVFXVV KRZ WR GHYHORS D PDUNHWLQJ VWUDWHJ\ E\
WKRXJKWIXOO\ DQVZHULQJ WKUHH EDVLF TXHVWLRQV :KR DUH \RXU FXVWRPHUV"
:KDW GR WKH\ YDOXH" +RZ FDQ \RX JLYH WKHP ZKDW WKH\ YDOXH EHWWHU WKDQ
WKHFRPSHWLWLRQ",I\RXXQGHUVWDQGWKHDQVZHUVWRWKRVHWKUHHTXHVWLRQV\RX
have a marketing strategy.
:H ZLOO FRYHU D QXPEHU RI WRSLFV RQ RXU ZD\ WR DQVZHULQJ WKH WKUHH DOO
LPSRUWDQWTXHVWLRQVVHJPHQWDWLRQWDUJHWLQJSRVLWLRQLQJVRXUFHVRIYDOXHIRU
WKHFXVWRPHUKRZWRJURZDPDUNHWDQGVRXUFHVRIYDOXHIRUWKHFRPSDQ\
$IWHU ZH KDYH GLVFXVVHG PDUNHWLQJ VWUDWHJ\ ZH ZLOO GLYH LQWR PDUNHWLQJ
WDFWLFV 7KHVH WRSLFV LQFOXGH SURGXFWV DQG VHUYLFHV EUDQGLQJ SULFLQJ DQG
FRPPXQLFDWLRQVLQFOXGLQJDGYHUWLVLQJVRFLDOPHGLDDQGZRUGRIPRXWK
$W WKH FRQFOXVLRQ RI WKHVH OHFWXUHV ZH ZLOO GLVFXVV WKH EDVLFV RI PDUNHW
UHVHDUFK,QSDUWLFXODU\RXZLOOOHDUQWKHPDQ\GLIIHUHQWW\SHVRIPHWKRGVDQG
GDWD\RXKDYHDW\RXUGLVSRVDOIRUJHWWLQJLQVLJKWVLQWRZKR\RXUFXVWRPHUV
DUHZKDWWKH\YDOXHDQGKRZWKH\PDNHGHFLVLRQV7KURXJKRXWWKHOHFWXUHV
WKHVH SULQFLSOHV DUH LOOXVWUDWHG ZLWK H[DPSOHV IURP LQGXVWU\ DQG IURP
DFDGHPLFUHVHDUFKLQPDUNHWLQJSV\FKRORJ\DQGEHKDYLRUDOHFRQRPLFV
Scope
0DUNHWLQJGRQHZHOOLVWKHEDVLVRQZKLFKFRPSDQLHVJURZLQQRYDWHDQG
IHQGRIIFRPSHWLWLRQ0DUNHWLQJGRQHSRRUO\KRZHYHULVKDUGWRGLVWLQJXLVK
IURPWKURZLQJPRQH\RXWDZLQGRZ7KLVVHFWLRQRIWKHFRXUVHLVGHVLJQHG
WRSURYLGH\RXZLWKWKHWRROV\RXQHHGWRXQGHUVWDQGPDUNHWLQJDQGPDNH
VRXQGPDUNHWLQJGHFLVLRQVŶ
What Is Marketing?
Lecture 49
T
he term marketing LV RIWHQ GH¿QHG WRR QDUURZO\ 0DQ\ SHRSOH IRU
H[DPSOH WUHDW PDUNHWLQJ DV LI LW ZHUH MXVW DGYHUWLVLQJ²VRPHWKLQJ
WKDW¶V GRQH DIWHU DOO WKH RWKHU LPSRUWDQW GHFLVLRQV DERXW D SURGXFW
KDYH EHHQ PDGH 2WKHUV VHH PDUNHWLQJ DV V\QRQ\PRXV ZLWK VDOHV$JDLQ
DFFRUGLQJ WR WKLV YLHZ DOO WKH LPSRUWDQW GHFLVLRQV DUH PDGH ¿UVW WKHQ
PDUNHWLQJLVEURXJKWLQWRSXVKWKHRIIHULQJVRQWRFXVWRPHUV%XWPDUNHWLQJ
LVPXFKEURDGHUWKDQHLWKHUDGYHUWLVLQJRUVDOHV0DUNHWLQJLVWKHSURFHVVRI
IDFLOLWDWLQJH[FKDQJHVWKDWFUHDWHYDOXHIRUFXVWRPHUVFROODERUDWRUVDQGWKH
FRPSDQ\$QGPDUNHWLQJFUHDWHVWKLVYDOXHE\GHYHORSLQJDQXQGHUVWDQGLQJ
RIZKDWFXVWRPHUVZDQWDQGQHHG,QWKLVOHFWXUHZH¶OOH[SORUHWKHW\SHVRI
value that customers seek.
'H¿QLQJMarketing
% 7KHGH¿QLWLRQRImarketing as the function of a business that creates
YDOXHIRUFXVWRPHUVDQGWKHFRPSDQ\LVQRWXQLYHUVDOO\DFFHSWHG
0DQ\SHRSOH²HYHQEXVLQHVVH[SHUWV²EHOLHYHWKDWYDOXHLVFUHDWHG
E\LQQRYDWLRQVLQRWKHUZRUGVYDOXHLQDSURGXFWLVSURGXFHGE\
VFLHQWLVWVDQGHQJLQHHUVZRUNLQJLQDODE
%
7KLV GLVDJUHHPHQW LV URRWHG LQ D GLIIHUHQFH RI RSLQLRQ RYHU ZKDW
FRQVWLWXWHV YDOXH IURP D EXVLQHVV SHUVSHFWLYH 6RPH SHRSOH YLHZ
YDOXH DV VRPHWKLQJ LQWULQVLF WR WKH RIIHULQJ ,Q WKLV YLHZ LI D
FRPSDQ\ DGGV IHDWXUHV WR DQ RIIHULQJ²JLYHV LW D IDVWHU SURFHVVRU
RU PDNHV LW PRUH IXHO HI¿FLHQW²WKHQWKH YDOXH RI WKDW RIIHULQJLV
LQFUHDVHG+RZHYHUDGGLQJDQHZIHDWXUHLQFUHDVHVWKHYDOXHRID
SURGXFWRQO\LIFXVWRPHUVGHFLGHWKDWWKH\YDOXHWKHLPSURYHPHQW
%
,QRWKHUZRUGVDQRIIHULQJ¶VYDOXHVKRXOGEHGHWHUPLQHGRQO\IURP
WKHSHUVSHFWLYHRIWKHFXVWRPHUVZKRDUHZLOOLQJWREX\LW
ż ,I ZH XVH WKLV FXVWRPHUFHQWULF GH¿QLWLRQ RI YDOXH WKHQ
ZH XQGHUVWDQG WKDW LQQRYDWLRQV GHYHORSHG LQ D ODE DUH QRW
LQWULQVLFDOO\ YDOXDEOH$Q LQQRYDWLRQ PXVW EH PDWFKHG ZLWK D
VHWRIFXVWRPHUVZKRZLOODSSUHFLDWHLWLWPXVWEHH[SODLQHGWR
WKRVHFXVWRPHUVLQDZD\WKDWWKH\ZLOOXQGHUVWDQGLWPXVWEH
SULFHGLQVXFKDZD\WKDWFXVWRPHUVZLOOEHZLOOLQJWRSD\IRU
LWDQGVRRQ7KRVHDUHDOOIXQFWLRQVRIPDUNHWLQJ
ż
,W¶VWUXHWKDWRFFDVLRQDOO\DQLQQRYDWLRQFRPHVDORQJWKDWHVVHQWLDOO\
VHOOV LWVHOI LW¶V VR JUHDW WKDW SHRSOH ÀRFN WR LW %XW LW LV DOVR
GLVWUHVVLQJO\ FRPPRQ IRU
JURXQGEUHDNLQJ LQQRYDWLRQV
WR IDLO WKH ¿UVW WLPH LQ WKH
PDUNHW RQO\ WR EH UHSODFHG
ODWHU E\ D EHWWHUPDUNHWHG
imitation. The success of the
3DOP3LORWRYHUHDUOLHUGLJLWDO
DVVLVWDQWV FUHDWHG E\ $SSOH
DQG 0RWRUROD VHUYHV DV
DQH[DPSOH
Lecture 49: What Is Marketing?
‹%DQDQD6WRFN7KLQNVWRFN
%
0DUNHWLQJ LV ZKDW WXUQV VRPHWKLQJ ZLWK WKH SRWHQWLDO IRU
creating value into something that actually creates value for the
FXVWRPHUDQGWKHFRPSDQ\
Types of Value
% ,W¶V D PLVWDNH WR DVVXPH The manufacturer of the PalmPilot
WKDW LI \RX OLNH D SURGXFW ZDVH[WUDRUGLQDULO\VXFFHVVIXO
ZLWKDGHYLFHWKDWZDVDFWXDOO\OHVV
your customers will, too. complex than other personal digital
7KH IDFW LV WKDW SHRSOH DUH assistants on the market at the time.
GLIIHUHQW DQG WKH SHRSOH
ZKR PDNH PDUNHWLQJ GHFLVLRQV DERXW SURGXFWV DQG VHUYLFHV DUH
OLNHO\WREHGLIIHUHQWIURPWKHLUFXVWRPHUV,I\RX¶UHJRLQJWREH
VXFFHVVIXOLQPDUNHWLQJ\RXQHHGWRUHVSHFWDQGWU\WRXQGHUVWDQG
WKRVHGLIIHUHQFHV
%
,QVWHDGRIEDVLQJPDUNHWLQJGHFLVLRQVRQ\RXURZQSUHIHUHQFHVLW¶V
LPSRUWDQW WR UHFRJQL]H WKDW WKHUH DUH GLIIHUHQW W\SHV RI YDOXH WKDW
FXVWRPHUVPD\JHWIURPDQRIIHULQJ,QSDUWLFXODUZHFDQLGHQWLI\
IRXUW\SHVRIYDOXHIXQFWLRQDOPRQHWDU\VRFLDODQGSV\FKRORJLFDO
%
ż
)XQFWLRQDO YDOXH LV WKH GHJUHH WR ZKLFK DQ RIIHULQJ IXO¿OOV
LWV SXUSRVH RU VROYHV D FXVWRPHU¶V SUREOHP )RU H[DPSOH
WKHIXQFWLRQDOYDOXHRIERWWOHGZDWHULVWKDWLWTXHQFKHVWKLUVW
DQG K\GUDWHV 3URGXFWV DQG VHUYLFHV GLIIHU LQ WHUPV RI WKHLU
IXQFWLRQDO YDOXH WR WKH H[WHQW WKDW WKH\ DUH EHWWHU DW IXO¿OOLQJ
WKHLUIXQFWLRQDOSXUSRVH
ż
0RQHWDU\YDOXHLVDIXQFWLRQRIWKHSULFHSDLGIRUDQRIIHULQJ
UHODWLYH WR LWV SHUFHLYHG RYHUDOO ZRUWK WR WKH FXVWRPHU $V
VXFKPRQHWDU\YDOXHLVQRWFRPSOHWHO\GLVWLQFWIURPWKHRWKHU
VRXUFHVRIYDOXHEXWUDWKHULQYLWHVDWUDGHRIIEHWZHHQWKRVH
RWKHUW\SHVRIYDOXHDQGPRQHWDU\FRVWV0RQHWDU\YDOXHFDQ
SURYLGHDFRPSHOOLQJUHDVRQIRUFKRLFH
ż
6RFLDOYDOXHLVWKHH[WHQWWRZKLFKRZQLQJDSDUWLFXODUSURGXFW
allows consumers to connect with others.
ż
3V\FKRORJLFDOYDOXHLVWKHH[WHQWWRZKLFKRZQLQJDSURGXFW
DOORZVFXVWRPHUVWRH[SUHVVWKHPVHOYHVRUPDNHWKHPVHOYHV
feel better. Sometimes, all customers are looking for from
DQ H[FKDQJH LV WR IHHO DSSUHFLDWHG UHVSHFWHG FRPIRUWHG
RUKRSHIXO
7KHNH\LQVLJKWKHUHLVQRWMXVWWKDWSHRSOHGHULYHYDOXHIURPWKHVH
IRXU VRXUFHV EXW WKDW WKHVH VRXUFHV RI YDOXH DUH QRW DOO HTXDOO\
LPSRUWDQW,QIDFWWKHLPSRUWDQFHRIHDFKVRXUFHRIYDOXHGHSHQGV
RQ WKH FXVWRPHU )RU VRPH SHRSOH RQH RI WKHVH VRXUFHV RI YDOXH
VXFKDVPRQHWDU\RUIXQFWLRQDOLVQHDUO\DOZD\VSDUDPRXQW
Understanding Customers
% 2QH ZD\ IRU PDUNHWHUV WR XVH WKHVH IRXU VRXUFHV RI YDOXH LV WR
FRQVLGHU ZKHWKHU WKHLU WDUJHW FXVWRPHUV DUH RQ DYHUDJH PRUH
PRWLYDWHG E\ IXQFWLRQDO PRQHWDU\ VRFLDO RU SV\FKRORJLFDO YDOXH
ZKHQWKH\VKRS6RPHSHRSOHKDYHDSULPDU\PRWLYDWLRQDQG\RXU
target customers may be among them.
Lecture 49: What Is Marketing?
%
,W LV PXFK PRUH FRPPRQ KRZHYHU IRU DQ\ SDUWLFXODU FXVWRPHU
WR JLYH WKHVH GLIIHUHQW VRXUFHV RI YDOXH JUHDWHU RU OHVVHU ZHLJKW
GHSHQGLQJRQWKHSXUFKDVH:KHQVKRSSLQJIRUDZDVKLQJPDFKLQH
IRUH[DPSOH\RXPLJKWVHHNIXQFWLRQDOYDOXH\RXZDQWDPDFKLQH
WKDW LV HQHUJ\ HI¿FLHQW DQG UHOLDEOH:KHQ EX\LQJ RI¿FH VXSSOLHV
\RX PLJKW EH SULPDULO\ GULYHQ E\ PRQHWDU\ YDOXH <RX PD\ QRW
QHFHVVDULO\ EX\ WKH ORZHVWSULFHG RIIHULQJ EXW \RX ZDQW WR PDNH
VXUH\RXJHWDJRRGSULFH
%
7KH NH\ IRU PDUNHWHUV LV WR GHWHUPLQH ZKLFK VRXUFH RI YDOXH
WKHLU FXVWRPHUV DUH VHHNLQJ LQ D SDUWLFXODU WUDQVDFWLRQ ,I \RX
DUH PLVWDNHQ LQ WKLV GHWHUPLQDWLRQ \RX PD\ EH ZDVWLQJ \RXU
marketing efforts.
%
<RXVKRXOGQ¶WQHFHVVDULO\DVVXPHWKDW\RXUFXVWRPHUVDUHSULPDULO\
PRWLYDWHG E\ PRQHWDU\ RU HYHQ IXQFWLRQDO YDOXH ,Q PDQ\ FDVHV
WKHVHVRXUFHVRIYDOXHPD\EHWKHPRVWLPSRUWDQWIDFWRUVFXVWRPHUV
FRQVLGHUEXWQRWLQDOOFDVHV
ż ,QUHFHQW\HDUVVRPHODUJHKRVSLWDOV\VWHPVKDYHPRYHGDZD\
IURPDSROLF\RIQHYHUDGPLWWLQJPLVWDNHVWRSDWLHQWVIRUIHDU
RIODZVXLWVWRDSROLF\RIEHLQJRSHQDQGKRQHVWZLWKSDWLHQWV
ZKHQPLVWDNHVDUHPDGH
ż
7KLV VKLIW UHFRJQL]HV WKDW VRPH PDOSUDFWLFH VXLWV PLJKW EH
PRWLYDWHG E\ D GHVLUH IRU SV\FKRORJLFDO YDOXH UDWKHU WKDQ
PRQHWDU\ FRQFHUQV 8QGHU D IXOOGLVFORVXUH SROLF\ KRVSLWDOV
SURYLGHWKLVYDOXHWRSDWLHQWVE\DGPLWWLQJPLVWDNHVVLQFHUHO\
DSRORJL]LQJDQGNHHSLQJSDWLHQWVIXOO\LQIRUPHG7KHUHVXOWLV
WKDWPDOSUDFWLFHVXLWVKDYHGURSSHGGUDPDWLFDOO\
ż
)RU H[DPSOH LQ WKHUH ZHUH ODZVXLWV DJDLQVW WKH
8QLYHUVLW\ RI 0LFKLJDQ +HDOWK 6\VWHP EHIRUH LW DGRSWHG
D SROLF\ FKDQJH %\ DIWHU WKH FKDQJH WKH QXPEHU RI
ODZVXLWVGURSSHGWR
%
8QGHUVWDQGLQJ\RXUFXVWRPHUV¶SULPDU\VRXUFHRIYDOXHDOVRDOORZV
\RX WR SRVLWLRQ \RXU RIIHULQJ LQ D ZD\ WKDW SURYLGHV WKHP ZLWK D
UHDVRQ IRU FKRRVLQJ \RXU SURGXFW 6RPH SURGXFW DWWULEXWHV DUH
naturally consonant with certain sources of value.
ż )RU H[DPSOH LI \RXU RIIHULQJ LV WKH ORZSULFHG OHDGHU LQ WKH
PDUNHWWKHQLWLVHVSHFLDOO\OLNHO\WRDSSHDOWRFXVWRPHUVZKR
seek monetary value.
ż
%
%XWPDQ\SURGXFWDWWULEXWHVFDQEHFRPPXQLFDWHGLQZD\VWKDW
HPSKDVL]HHDFKRIWKHVRXUFHVRIYDOXH)RUH[DPSOHDWUXFN
ZLWK D SRZHUIXO HQJLQH FDQ EH SRVLWLRQHG WR DSSHDO WR WKRVH
VHHNLQJIXQFWLRQDOSV\FKRORJLFDORUVRFLDOYDOXH
)RUDJLYHQSURGXFWDWWULEXWHWKHUHLVRIWHQDSRVLWLRQLQJGHFLVLRQWR
EHPDGH+RZGR\RXFRPPXQLFDWHWKHDGYDQWDJHVRIWKDWDWWULEXWH
WRWKHFXVWRPHU"7RDQVZHUWKDWTXHVWLRQ\RXVKRXOGNQRZWKHVRXUFH
RIYDOXHWKDWLVPRVWOLNHO\WRGULYHFKRLFHIRU\RXUWDUJHWFXVWRPHU
,ILW¶VVRFLDOYDOXHWKHQFRPPXQLFDWLRQVHPSKDVL]LQJSV\FKRORJLFDO
EHQH¿WVPD\IDOOÀDW7KHNH\LVWRWUDQVODWHWKHYDOXHRIIHUHGLQWRWKH
reasons the customer is likely to generate for his or her choice.
Key Marketing Questions
% :H QRZ KDYH D FOHDU GH¿QLWLRQ RI RXU WRSLF 0DUNHWLQJ LV WKH
EXVLQHVVIXQFWLRQWKDWFUHDWHVYDOXHIRUFXVWRPHUVDQGWKHFRPSDQ\
:LWKWKDWGH¿QLWLRQLQPLQGZHFDQEHJLQWRDGGUHVVVRPHFUXFLDO
PDUNHWLQJ SUREOHPV +RZ GR \RX FUHDWH D EUDQG" +RZ VKRXOG
\RXSULFHDSURGXFWRUVHUYLFH":KHUHVKRXOG\RXVHOOLW²DQGWR
ZKRP" :KDW W\SH RI DGYHUWLVLQJ VKRXOG \RX XVH" :KDW EHQH¿WV
VKRXOG \RX FRPPXQLFDWH" 7KLV OLVW RI TXHVWLRQV FDQ TXLFNO\
become overwhelming.
%
%XWDVZH¶OOVHHRYHUWKHFRXUVHRIWKHQH[WVHYHUDOOHFWXUHVQRWDOO
PDUNHWLQJSUREOHPVDUHHTXDO6RPHDUHPRUHLPSRUWDQWWKDQRWKHUV
DQGPXVWEHVROYHG¿UVW7REHJLQWKHQOHW¶VLGHQWLI\WKHWKUHHNH\
TXHVWLRQVWKDW\RXPXVWDQVZHUEHIRUH\RXDGGUHVVDQ\RWKHUV
ż :KRDUH\RXUFXVWRPHUV"
%
ż
:KDWGRWKH\YDOXH"
ż
How can you give them what they value better than
WKHFRPSHWLWLRQ"
,I \RX FDQ DQVZHU WKRVH WKUHH TXHVWLRQV WKHQ \RX KDYH WKH EDVLV
IRU D PDUNHWLQJ VWUDWHJ\$QG \RX PXVW KDYH D GH¿QHG PDUNHWLQJ
VWUDWHJ\ EHIRUH \RX WU\ WR ¿JXUH RXW WKH EHVW WDFWLFV WR XVH WR
DFFRPSOLVKLW,QRXU¿UVWVL[OHFWXUHVZH¶OOOHDUQKRZWRGHYHORSD
PDUNHWLQJVWUDWHJ\E\DQVZHULQJWKHVHWKUHHIXQGDPHQWDOTXHVWLRQV
,Q WKH VHFRQG VL[ ZH¶OO LQYHVWLJDWH PDUNHWLQJ WDFWLFV DGGUHVVLQJ
VXFKLVVXHVDVEUDQGLQJSULFLQJDQGFRPPXQLFDWLRQ
Suggested Reading
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHUV±
Questions to Consider
Lecture 49: What Is Marketing?
1. 3LFN D SURGXFW RU VHUYLFH ZLWK ZKLFK \RX DUH IDPLOLDU DQG FRQGXFW D
UHDVRQEDVHGFKRLFHDQDO\VLVRIWKDWRIIHULQJ&RQVLGHUWKHIRXUSRWHQWLDO
VRXUFHV RI YDOXH D FXVWRPHU FRXOG JHW IURP WKDW RIIHULQJ IXQFWLRQDO
PRQHWDU\ VRFLDO DQG SV\FKRORJLFDO :KDW UHDVRQV PLJKW FRQVXPHUV
KDYHIRUFKRRVLQJWKLVRIIHULQJRYHULWVFRPSHWLWLRQLQHDFKRIWKRVHIRXU
GRPDLQV"+RZPLJKWWKDWRIIHULQJEHLPSURYHGE\LQFUHDVLQJRQHW\SH
RIYDOXH"
2. 3LFNDQDWWULEXWHRQZKLFKDSURGXFWRUVHUYLFHFRXOGGLIIHUHQWLDWHLWVHOI
HJ WKH PRVW SRZHUIXO HQJLQH LQ LWV FODVV 7UDQVODWH WKH EHQH¿WV RI
WKDWDWWULEXWHLQWRDUHDVRQLQHDFKRIWKHIRXUYDOXHGRPDLQVIXQFWLRQDO
PRQHWDU\VRFLDODQGSV\FKRORJLFDO
+RZWR6HJPHQWD0DUNHW
Lecture 50
:
H¶YHDOUHDG\VHHQWKDWWKH¿UVWTXHVWLRQLQGHYHORSLQJDPDUNHWLQJ
VWUDWHJ\ LV :KR LV WKH FXVWRPHU" 6HJPHQWDWLRQ LV KRZ \RX
EHJLQWRDQVZHUWKDWTXHVWLRQ,QIDFWVHJPHQWDWLRQLVKRZ\RX
DQVZHU DQ HYHQ PRUH EDVLF TXHVWLRQ:KR DUH WKH SRVVLEOH FXVWRPHUV \RX
FRXOGVHUYH"6HJPHQWDWLRQLVVLPSO\WKHSURFHVVRIJURXSLQJSHRSOHWRJHWKHU
DFFRUGLQJWRZKDWPDNHVWKHPVLPLODU7RPDNHWKLVSURFHVVDVHIIHFWLYHDV
SRVVLEOH \RX VKRXOG VWDUW ZLWK WKH XQLYHUVH RI DOO SRWHQWLDO FXVWRPHUV IRU
\RXU SURGXFW RU VHUYLFH ,Q WKLV OHFWXUH ZH¶OO ORRN DW WKUHH DSSURDFKHV WR
segmentation analysis, each of which results in a list of customer segments
ZLWKDULFKGHVFULSWLRQRIWKHLUSUHIHUHQFHVWUXFWXUHV
Principles of Segmentation Analysis
% 7KH¿UVWSULQFLSOHRIVHJPHQWDWLRQDQDO\VLVLVWKDWWKHUHLVQRVLQJOH
³ULJKW´ZD\WRVHJPHQWDPDUNHW'LIIHUHQWEUDQGVFDQVXFFHVVIXOO\
VHJPHQWH[DFWO\WKHVDPHPDUNHWLQUDGLFDOO\GLIIHUHQWZD\V
%
,W¶V DOVR LPSRUWDQW WR XQGHUVWDQG WKDW VHJPHQWDWLRQ LV QRW D RQH
WLPHSURVSHFW0DUNHWVDUHÀXLG1HZFXVWRPHUVFRPHLQH[LVWLQJ
FXVWRPHUVPRYHRXWFRPSHWLWRUVFRPHDQGJRDQGJDLQDQGORVH
PDUNHWVKDUH,WLVQRWHQRXJKWRVHJPHQWDPDUNHWRQFHDQGQHYHU
UHWXUQWRLWDJDLQ<RXVKRXOGUHVHJPHQWWKHPDUNHWSHULRGLFDOO\
GRLQJ VR LV D JUHDW ZD\ WR LGHQWLI\ QHZ RSSRUWXQLWLHV RU ¿[
H[LVWLQJSUREOHPV
%
:KHQ \RX FRQGXFW VHJPHQWDWLRQ DQDO\VLV WKH VHJPHQWV VKRXOG
EH ERWK FROOHFWLYHO\ H[KDXVWLYH DQG PXWXDOO\ H[FOXVLYH ,Q RWKHU
ZRUGV HYHU\RQH LQ WKH PDUNHW VKRXOG EH LQ D VHJPHQW DQG HDFK
VHJPHQWVKRXOGEHGLVWLQFWDQGWRWKHH[WHQWSRVVLEOHQRWRYHUODS
with any others.
/HFWXUH+RZWR6HJPHQWD0DUNHW
%
%
3HUKDSVWKHPRVWLPSRUWDQWSULQFLSOHRIVHJPHQWDWLRQLVWKLV7KH
VHJPHQWV\RXIRUPVKRXOGEHEDVHGRQZKDWSHRSOHYDOXHQRWRQ
GLIIHUHQFHV LQ GHPRJUDSKLF FKDUDFWHULVWLFV VXFK DV DJH JHQGHU
JHRJUDSK\ DQG VR RQ <RX ZLOO HYHQWXDOO\ FUHDWH GHPRJUDSKLF
SUR¿OHV RI \RXU VHJPHQWV EXW LW LV XVXDOO\ QRW KHOSIXO WR VWDUW
ZLWKGHPRJUDSKLFV
ż 7KHLGHDRIVHJPHQWLQJE\YDOXHUDWKHUWKDQGHPRJUDSKLFVLV
FRXQWHULQWXLWLYH :KHQ \RX DVN VRPHRQH WR GLYLGH SRWHQWLDO
FXVWRPHUVLQWRJURXSVLWLVRQO\QDWXUDOWRVWDUWE\SXWWLQJPHQ
DQGZRPHQLQWRGLIIHUHQWJURXSVRUSXWWLQJSHRSOHRIGLIIHUHQW
DJHVRULQFRPHVLQWRGLIIHUHQWJURXSV
ż
)XUWKHU PDUNHWHUV RIWHQ SURYLGH GHVFULSWLRQV RI WKHLU WDUJHW
FXVWRPHUV EDVHG RQ GHPRJUDSKLFV 6XFK D GHVFULSWLRQ PLJKW
UHDG ³\RXQJ PHQ DJHV WR IURP XSSHUPLGGOHFODVV
KRXVHKROGVOLYLQJLQVXEXUEDQQHLJKERUKRRGVZLWKPRGHUDWH
OHYHOVRIGLVSRVDEOHLQFRPH´
ż
7KDWVRXQGVOLNHDVSHFL¿FWDUJHWEXWWKLQNRIWKHGLYHUVLW\RI
LGHQWLWLHV PRWLYDWLRQV GHVLUHV DQG YDOXHV FRQWDLQHG ZLWKLQ
MXVW WKDW RQH IDLUO\ VSHFL¿F GHPRJUDSKLF VHJPHQW 7KRVH
\RXQJ PHQ FRXOG EH FRRO NLGV RU RXWVLGHUV FRQIRUPLVWV RU
QRQFRQIRUPLVWV DQG VR RQ 7KH\ FHUWDLQO\ GRQ¶W DOO ZDQW WKH
VDPH WKLQJV EX\ WKH VDPH EUDQGV RU WU\ WR SURMHFW WKH VDPH
LPDJHWRWKHZRUOG
ż
6HJPHQWLQJSHRSOHE\GHPRJUDSKLFGHVFULSWRUVDORQHZLOOQRW
WHOO \RX DQ\WKLQJ DERXW WKH XQGHUO\LQJ YDOXHV WKDW GULYH WKHLU
GHFLVLRQ PDNLQJ ,I \RX FUHDWH VHJPHQWV EDVHG RQ VXUIDFH
GLIIHUHQFHVRQO\\RXZRQ¶WNQRZZKDWWRGRZLWKWKHVHJPHQWV
ZKHQ\RX¶UHGRQH
7KH DOWHUQDWLYH WR GHPRJUDSKLF SUR¿OLQJ LV WR GLYLGH \RXU PDUNHW
LQWRSV\FKRJUDSKLFVHJPHQWVJURXSLQJSHRSOHEDVHGRQVLPLODULWLHV
LQWKHLUSV\FKRORJLFDOQHHGVDQGGHVLUHV
Case Study in Psychographic Segmentation
% $ PDMRU FDEOH WHOHYLVLRQ SURYLGHU IRXQG WKDW LWV FXVWRPHUV ZHUH
XQVXEVFULELQJDQGHLWKHUVZLWFKLQJWRDQRWKHUSURYLGHURUFXWWLQJRII
WKHLUFDEOHVHUYLFHFRPSOHWHO\7RDGGUHVVWKLVSUREOHPWKHFRPSDQ\
GHFLGHG WR GR D VHJPHQWDWLRQ DQDO\VLV WR LGHQWLI\ WKRVH FXVWRPHUV
ZKRZHUHPRVWOLNHO\WRGHIHFWDQGWDNHVWHSVWROLPLWGHIHFWLRQV
%
7KHFRPSDQ\XVHGLWVH[WHQVLYHFXVWRPHUGDWDEDVHWRFUHDWHVHYHUDO
GLVWLQFW FXVWRPHU JURXSV DQG LGHQWL¿HG RQH JURXS WKDW ZDV ERWK
SDUWLFXODUO\ SUR¿WDEOH DQG SDUWLFXODUO\ OLNHO\ WR OHDYH 7KH WDVN
WKHQZDVWRHVWDEOLVKDSODQWRUHGXFHGHIHFWLRQUDWHVLQWKLVJURXS
2SWLRQV LQFOXGHG ORZHULQJ SULFHV IRU WKLV JURXS RI FXVWRPHUV
RIIHULQJ D GLVFRXQW RQ VSHFL¿F VHUYLFHV XSJUDGLQJ VHUYLFHV LQ
SDUWLFXODUDUHDVDQGVRRQ
%
%XW EHFDXVH WKLV FXVWRPHU VHJPHQW ZDV FUHDWHG E\ ORRNLQJ DW
GHPRJUDSKLF VLPLODULWLHV UDWKHU WKDQ YDOXHEDVHG VLPLODULWLHV WKH
FRPSDQ\KDGQRZD\RINQRZLQJZKLFKSODQZRXOGZRUNWRUHWDLQ
FXVWRPHUV,WNQHZWKDWWKLVJURXSZDVLQGDQJHURIGHIHFWLQJEXW
WKHVHJPHQWDWLRQGLGQ¶WH[SODLQZK\WKHFXVWRPHUVZHUHOHDYLQJ
%
,QVWHDG RI VHJPHQWLQJ E\ RXWZDUG VLPLODULWLHV VXSSRVH WKH
FRPSDQ\KDGLQYHVWLJDWHGWKHUHDVRQVSHRSOHKDYHIRUVXEVFULELQJ
WR FDEOH LQ WKH ¿UVW SODFH 7KLV DSSURDFK PLJKW KDYH LGHQWL¿HG
GLIIHUHQWFXVWRPHUJURXSVVXFKDV3ULFH6HQVLWLYHV6SRUWV-XQNLHV
7HFKQRORJ\/RYHUVDQGVRRQ
%
7KLV NLQG RI VHJPHQWDWLRQ LV PRUH GLI¿FXOW WKDQ GHPRJUDSKLF
VHJPHQWDWLRQRIWHQEHFDXVHLWUHTXLUHVDGGLWLRQDOPDUNHWUHVHDUFK
%XW VXFK D YDOXHEDVHG SV\FKRJUDSKLF VHJPHQWDWLRQ LV LQ¿QLWHO\
PRUHXVHIXOWKDQDGHPRJUDSKLFRQH
ż )RU H[DPSOH ZKDW LI DIWHU FRQGXFWLQJ SV\FKRJUDSKLF
VHJPHQWDWLRQWKHFRPSDQ\GLVFRYHUHGWKDW7HFKQRORJ\/RYHUV
ZHUHERWKHVSHFLDOO\SUR¿WDEOHDQGHVSHFLDOO\OLNHO\WRFDQFHO
WKHLUVHUYLFH"
ż
,QWKDWFDVHWKHFRPSDQ\ZRXOGKDYHDFOHDUSDWKIRUZDUGWR
UHWDLQ WKHVH FXVWRPHUV ,QYHVW LQ QHZ WHFKQRORJ\ LQWURGXFH
WHFKQRORJLFDO LQQRYDWLRQV DQG WUXPSHW WHFKQRORJ\ LQ
LWVDGYHUWLVLQJ
ż
2IIHULQJ ORZHU SULFHV WR WKLV JURXS SUREDEO\ ZRXOGQ¶W KDOW
GHIHFWLRQV EHFDXVH WKHVH FXVWRPHUV ZHUHQ¶W OHDYLQJ WR VHHN D
EHWWHU SULFH ,W¶V HYHQ SRVVLEOH WKDW ORZHU SULFHV FRXOG PDNH
WKHVHFXVWRPHUVWKLQNWKDWWKHFRPSDQ\LVDEDUJDLQEDVHPHQW
SURYLGHUDQGFDXVHWKHPWROHDYHHYHQIDVWHU
Approaches to Segmentation
% 7KHUHDUHWKUHHDSSURDFKHVWRFRQGXFWLQJDVHJPHQWDWLRQDQDO\VLV
XVHU EDVHG EHQH¿WV EDVHG DQG RFFDVLRQ EDVHG (DFK RI WKHVH
DSSURDFKHVVKRXOGOHDGWRWKHVDPHRXWFRPHDPXWXDOO\H[FOXVLYH
DQG FROOHFWLYHO\ H[KDXVWLYH VHW RI FXVWRPHU VHJPHQWV JURXSHG
EDVHGRQVLPLODULWLHVLQWKHLUXQGHUO\LQJYDOXHV
/HFWXUH+RZWR6HJPHQWD0DUNHW
%
$XVHUEDVHGDQDO\VLVLQYROYHVFUHDWLQJDOLVWRIWKHGLIIHUHQWW\SHV
RU FODVVHV RI SHRSOH ZKR PLJKW XVH \RXU SURGXFW RU VHUYLFH )RU
H[DPSOH ZH FRXOG LGHQWLI\ D QXPEHU RI JURXSV RI SHRSOH ZKR
PLJKW XVH VDWHOOLWH SKRQHV PLOLWDU\ SHUVRQQHO LQWHUQDWLRQDO
MRXUQDOLVWV QRQJRYHUQPHQWDO RUJDQL]DWLRQV 1*2V LQWHUQDWLRQDO
EXVLQHVVWUDYHOHUVDQG¿UVWUHVSRQGHUV
ż 7KH QH[W VWHS LV WR GHWHUPLQH LPSRUWDQW IHDWXUHV IRU HDFK RI
WKHVH JURXSV ZKHQ WKH\ DUH FRQVLGHULQJ D VDWHOOLWH SKRQH
SXUFKDVH 0LOLWDU\ SHUVRQQHO IRU H[DPSOH PLJKW YDOXH
UXJJHGQHVVDQGHDVHRIUHSDLULQWKH¿HOG,QWHUQDWLRQDOEXVLQHVV
WUDYHOHUVPLJKWEHPRUHIRFXVHGRQVPDOOVL]HDQGHDVHRIXVH
ż
7KH HQG UHVXOW RI WKLV H[HUFLVH VKRXOG EH D OLVW RI FXVWRPHU
VHJPHQWV ZLWK D ULFK GHVFULSWLRQ RI WKH SUHIHUHQFH VWUXFWXUHV
IRUHDFKJURXS7KHPRUHGHWDLOHGDQGVSHFL¿F\RXFDQJHWLQ
GHVFULELQJ ZKDW HDFK JURXS ZRXOG ZDQW IURP WKH SURGXFW RU
VHUYLFHWKHEHWWHURII\RXZLOOEHZKHQLWFRPHVWLPHWRSLFND
WDUJHWDQGSRVLWLRQ\RXURIIHULQJ
ż
%
%
2QFH\RXKDYHFUHDWHGDGHWDLOHGOLVWRIVHJPHQWVWKHQH[WVWHS
LV WR VHH LI DQ\ RI WKH JURXSV RYHUODS LQ WHUPV RI ZKDW WKH\
YDOXH ,I WZR JURXSV ZDQW DOPRVW H[DFWO\ WKH VDPH IHDWXUHV
LQ DQ RIIHULQJ \RX VKRXOG SUREDEO\ FRPELQH WKHP LQ RQH
VHJPHQW<RX PLJKW DOVR ¿QG WKDW WKH LQLWLDO XVHU JURXSV \RX
GH¿QHGVKRXOGEHEURNHQLQWRVXEVHJPHQWV)RUH[DPSOHDIWHU
IXUWKHUUHVHDUFK\RXPLJKWOHDUQWKDWGLIIHUHQWW\SHVRI1*2V
YDOXHGLIIHUHQWIHDWXUHVLQVDWHOOLWHSKRQHV
:LWKWKHVHFRQGDSSURDFKWRVHJPHQWDWLRQEHQH¿WVEDVHGDQDO\VLV
you start with the offering itself rather than the customers. Think of
WKHGLIIHUHQWW\SHVRIEHQH¿WVDFXVWRPHUPLJKWGHULYHIURPXVLQJ
\RXUSURGXFWRUVHUYLFHWKHQGHWHUPLQHWKHVHJPHQWVDFFRUGLQJO\
$VN\RXUVHOI:KDWEHQH¿WVDUHPRVWOLNHO\WRGULYHDSXUFKDVHLQ
WKLVFDWHJRU\"
ż )RU H[DPSOH FRQVLGHU WKH EHQH¿WV RI EUHDNIDVW FHUHDO ,W¶V
VZHHWPDNHVDQLQH[SHQVLYHPHDOLVIDVWDQGHDV\WRSUHSDUH
LVKHDUWKHDOWK\DQGPDNHVDJUHDWVQDFN
ż
7KH QH[W VWHS LV WR GHWHUPLQH ZKLFK JURXSV RI SHRSOH ZRXOG
DSSUHFLDWH HDFK SDUWLFXODU EHQH¿W )DPLOLHV ZLWK VFKRRODJHG
FKLOGUHQIRUH[DPSOHPLJKWDSSUHFLDWHWKHIDFWWKDWFROGFHUHDO
LVIDVWDQGHDV\WRSUHSDUH
ż
$VZLWKXVHUEDVHGVHJPHQWDWLRQWKHHQGUHVXOWRIDEHQH¿WV
EDVHGVHJPHQWDWLRQVKRXOGEHDOLVWRIFXVWRPHUVHJPHQWVZLWK
DULFKGHVFULSWLRQRISUHIHUHQFHVWUXFWXUHV
7KH WKLUG DSSURDFK RFFDVLRQEDVHG VHJPHQWDWLRQ GLIIHUV IURP
WKH RWKHU WZR LQ WKDW LW GRHVQ¶W VWDUW ZLWK WKH SUHPLVH WKDW HDFK
SHUVRQ RU KRXVHKROG VKRXOG EH DVVLJQHG WR D GLIIHUHQW VHJPHQW
,QVWHDG LW UHFRJQL]HV WKDW WKH VDPH SHUVRQ PD\ KDYH GLIIHUHQW
QHHGVGHSHQGLQJRQWKHRFFDVLRQIRUXVLQJWKHRIIHULQJ7KXVWKLV
DSSURDFKVWDUWVE\DVNLQJWKHTXHVWLRQ:KHQZRXOGFRQVXPHUVEX\
RUXVHWKLVSURGXFWRUVHUYLFH"
)RUH[DPSOHVRPHRQHPLJKWEX\ZLQHWRDFFRPSDQ\DPHDO
WR KDYH RQ KDQG IRU D SDUW\ WR JLYH DV D JLIW IRU SHUVRQDO
FRQVXPSWLRQLQWKHHYHQLQJRUWRXVHLQDUHOLJLRXVFHUHPRQ\
8QOLNH D XVHUEDVHG VHJPHQWDWLRQ DQ\ SDUWLFXODU FXVWRPHU
PLJKW¿WLQWRDQ\RUDOORIWKHVHRFFDVLRQEDVHGVHJPHQWV
ż
$IWHU\RXKDYHDOLVWRIRFFDVLRQVWKHQH[WVWHSLVWRJHQHUDWH
DOLVWRIWKHWKLQJVSHRSOHZRXOGYDOXHLQWKHRIIHULQJLQHDFK
RIWKRVHVLWXDWLRQV)RUH[DPSOHZKDWIHDWXUHVZRXOGVRPHRQH
ORRNIRULQEX\LQJZLQHWRDFFRPSDQ\DPHDOYHUVXVWRJLYHDV
DJLIW"
%
7KHGLIIHUHQFHDPRQJWKHVHWKUHHVHJPHQWDWLRQDSSURDFKHV²XVHU
EDVHG EHQH¿WV EDVHG DQG RFFDVLRQ EDVHG²LV LQ SURYLGLQJ \RX
ZLWK GLIIHUHQW SODFHV WR VWDUW WKH SURFHVV²GLIIHUHQW DQJOHV IRU
ORRNLQJ DW WKH VDPH PDUNHW %XW DOO WKH DSSURDFKHV VKRXOG OHDG
WRWKHVDPHUHVXOWDOLVWRIFXVWRPHUVHJPHQWVWKDWGLIIHULQWKHLU
SUHIHUHQFHVWUXFWXUHV
%
9DOXHEDVHGVHJPHQWVDUHXVHIXOEHFDXVHWKH\WHOO\RXZKDWW\SHV
RI PDUNHWLQJ DFWLRQV ZLOO DSSHDO WR FHUWDLQ JURXSV RI SHRSOH EXW
WKH\ GRQ¶W KHOS \RX LGHQWLI\ DQG FRPPXQLFDWH ZLWK WKRVH SHRSOH
‹<DKRU3LDVNRXVNLL6WRFN7KLQNVWRFN
/HFWXUH+RZWR6HJPHQWD0DUNHW
ż
.QRZLQJZKDWWKHLUWDUJHWVHJPHQWVYDOXHHQDEOHVUHWDLOHUVWRFXVWRPL]HWKHLU
stores to better serve these segments.
VSHFL¿FDOO\ 7KLQNLQJ EDFN WR RXU FDEOH FRPSDQ\ H[DPSOH \RX
ZRXOGQ¶WEHDEOHWRGLVWLQJXLVKD7HFKQRORJ\/RYHUIURPD6SRUWV
-XQNLHLQDFURZG
ż )RUWKLVUHDVRQLWLVXVXDOO\QHFHVVDU\WROD\HUDGHPRJUDSKLF
GHVFULSWLRQRQWRSRI\RXUYDOXHEDVHGVHJPHQWV
ż
.HHS LQ PLQG WKRXJK WKDW LW¶V VWLOO LPSRUWDQW WR FRQGXFW
SV\FKRJUDSKLF VHJPHQWDWLRQ ¿UVW ,W LV PXFK PRUH XVHIXO WR
GHWHUPLQH WKDW D VHJPHQW RI FXVWRPHUV YDOXHV \RXU SURGXFW
EHFDXVH LW PHHWV VRPH VSHFL¿F VHW RI QHHGV WKDQ LW LV WR
GHWHUPLQHWKHDJHVRUDGGUHVVHVRI\RXUFXVWRPHUV
Suggested Reading
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHU
<DQNHORYLFKDQG0HHU³5HGLVFRYHULQJ0DUNHW6HJPHQWDWLRQ´
Questions to Consider
1. &KRRVH D PDUNHW IRU D SDUWLFXODU SURGXFW RU VHUYLFH VXFK DV ÀRZHUV
UHQWDO FDUV SDSHU WRZHOV RU WD[ SUHSDUDWLRQ DQG WU\ VHJPHQWLQJ WKH
PDUNHW WKUHH WLPHV XVLQJ HDFK RI WKH WKUHH PHWKRGV GLVFXVVHG LQ WKH
OHFWXUH 'LG HDFK RI WKH PHWKRGV UHVXOW LQ GLIIHUHQW VHJPHQWV RU ZHUH
WKH VHJPHQWV ODUJHO\ WKH VDPH" (LWKHU LV SRVVLEOH GHSHQGLQJ RQ WKH
PDUNHW\RXVHOHFW ,I\RXUVHJPHQWDWLRQVWUDWHJLHVUHVXOWHGLQGLIIHUHQW
segments, is there a way to combine insights from these segmentation
SURFHVVHVLQWRDQHZVHJPHQWDWLRQRIWKHPDUNHW"
2. &KRRVH D VHJPHQW \RX LGHQWL¿HG LQ WKH SUHYLRXV H[HUFLVH RU RQH \RXU
HPSOR\HU FXUUHQWO\ VHUYHV 'HYHORS DQ DUFKHW\SH RI WKDW VHJPHQW²D
ULFK GHVFULSWLRQ RI D ¿FWLRQDO FKDUDFWHU WKDW HPERGLHV WKH VHJPHQW¶V
LPSRUWDQW SV\FKRJUDSKLF DQG GHPRJUDSKLF FKDUDFWHULVWLFV &UHDWH D
PLQL±PDUNHWLQJ SODQ IRU WKH VHJPHQW :KHUH ZRXOG \RX DGYHUWLVH
WR UHDFK \RXU DUFKHW\SH" :KLFK VDOHV SLWFKHV DUH OLNHO\ WR EH PRVW
HIIHFWLYH" :KLFK FRPSHWLWRUV¶ SURGXFWV DUH PHPEHUV RI WKLV VHJPHQW
PRVWOLNHO\WREX\"
Targeting a Market Segment
Lecture 51
,
QWKHODVWOHFWXUHZHVDZKRZWRJURXSSRWHQWLDOFXVWRPHUVLQWRVHJPHQWV
EDVHG RQ VLPLODULWLHV LQ ZKDW WKH\ YDOXH ,Q WKLV OHFWXUH ZH¶OO GLVFXVV
WDUJHWLQJWKDWLVGHFLGLQJZKLFKRIWKRVHVHJPHQWV\RXZLOOVHUYHDQG
ZKLFKRQHV\RXZLOOQRW6RPHFRPSDQLHVXVHVHJPHQWDWLRQWRLGHQWLI\DOO
WKHJURXSVRISHRSOHWKH\ZLOOVHOOWRWKHQSXUVXHDOOWKRVHJURXSVZLWKWKH
VDPHRIIHULQJ%XWWKDWDSSURDFKLVDOLWWOHOLNHVHSDUDWLQJ\RXUODXQGU\WKHQ
WKURZLQJDOO\RXUFORWKHVLQWKHZDVKHUDWRQFH$VZH¶OOVHHLQWKLVOHFWXUH
WR JHW WKH PRVW RXW RI VHJPHQWDWLRQ \RX PXVW GHFLGH ZKLFK JURXSV DUH D
JRRGPDWFKIRU\RXURIIHULQJVRWKHUZLVH\RXUPDUNHWLQJZLOOIDLO
Lecture 51: Targeting a Market Segment
Selecting a Single Target
% 7DUJHWLQJLVWKHSURFHVVRIGHFLGLQJZKLFKFXVWRPHUVHJPHQWV\RX
ZLOOVHUYHDQGZKLFKRQHV\RXZLOOQRW7KHNH\KHUHLVWRUHFRJQL]H
that by creating value for one segment, you will almost certainly
PDNH\RXURIIHULQJOHVVDWWUDFWLYHWRRWKHUVHJPHQWV,W¶VLPSRUWDQW
WR NQRZ ZKR \RXU FXVWRPHU LV DQG²MXVW DV LPSRUWDQW²WR NQRZ
who your customer is not.
%
)RU PDQ\ EXVLQHVVSHRSOH LW¶V GLI¿FXOW WR IDFH WKH IDFW WKDW VRPH
SRWHQWLDO FXVWRPHUV H[LVW ZKR ZLOO QRW VSHQG PRQH\ WR EX\ WKHLU
SURGXFWV DQG VHUYLFHV 7KDW NQRZOHGJH LV SDLQIXO WKXV WKHVH
EXVLQHVVSHRSOHDUHWHPSWHGWRJRDIWHUHYHU\RQHEXWWKDW¶VDPLVWDNH
%
8QOHVV \RX UXQ D PRQRSRO\ VXFK DV D SRZHU FRPSDQ\ \RXU
FXVWRPHUFDQ¶WEHHYHU\RQH<RXPXVWSLFNDWDUJHWDQGWU\WRPHHW
WKH VSHFL¿F QHHGV RI WKDW VHJPHQW ,I \RX WU\ WR FUHDWH VRPHWKLQJ
WKDW ZLOO DSSHDO WR HYHU\RQH \RX ZLOO SUREDEO\ HQG XS FUHDWLQJ
VRPHWKLQJWKDWDSSHDOVWRQRRQH
ż 6XSSRVH\RX¶YHGRQHDYDOXHEDVHGVHJPHQWDWLRQDQDO\VLVDQG
\RX¶YHGLVFRYHUHGWKDWWKHUHDUHRQO\WZRW\SHVRIFXVWRPHUV
LQDFHUWDLQPDUNHWWKRVHWKDWSUHIHUEOXHDQGWKRVHWKDWSUHIHU
UHG$VDPDQXIDFWXUHU\RXFDQFKRRVHWRSDLQW\RXURIIHULQJ
EOXHWRWDUJHWWKHEOXHFXVWRPHUJURXSRU\RXFDQSDLQWLWUHG
DQG DSSHDO WR WKH UHG FXVWRPHU JURXS %XW ZKDW LI \RX SDLQW
\RXUSURGXFWSXUSOHDQGDVNERWKJURXSVWRPHHW\RXKDOIZD\"
ż
,I \RX DUH D PRQRSROLVW WKDW DSSURDFK PD\ ZRUN 1HLWKHU
segment gets what it wants, but the customers have nowhere
HOVH WR JR %RWK JURXSV EX\ WKH SXUSOH RSWLRQ UDWKHU WKDQ JR
ZLWKRXWDQG\RXJHWDOOWKHFXVWRPHUV
ż
However, if other manufacturers come along that are willing
WR SURYLGH RIIHULQJV WKDW DUH MXVW UHG RU MXVW EOXH \RXU
FRPSURPLVH VROXWLRQ ZLOO EHFRPH D VHFRQGEHVW RSWLRQ IRU
DOOFXVWRPHUVLQWKHPDUNHW:LWKRXWDVSHFL¿FWDUJHWLQPLQG
\RXUFRPSHWLWLRQZLOORXWÀDQN\RXE\SURYLGLQJHDFKFXVWRPHU
VHJPHQWZLWKVRPHWKLQJPXFKFORVHUWRZKDWLWZDQWVDQG\RX
will lose everyone.
%
2I FRXUVH LQ WKH UHDO ZRUOG FXVWRPHU VHJPHQWV DUHQ¶W DV HDV\
WR LGHQWLI\ DV EOXH ORYHUV DQG UHG ORYHUV EXW WKH EDVLF SULQFLSOH
remains the same: You must have one target. Targeting is at least
DV PXFK DERXW GH¿QLQJ ZKR \RXU FXVWRPHU LV not as it is about
GHFLGLQJZKR\RXUFXVWRPHULV
%
(YHQZLWKSURGXFWVWKDWDUHERXJKWE\RQHSHUVRQEXWFRQVXPHGE\
RWKHUVVXFKDVSURGXFWVIRUFKLOGUHQLW¶VVWLOOLPSRUWDQWWRLGHQWLI\
RQH WDUJHW &RQVLGHU IRU H[DPSOH EUDQGV RI \RJXUW WKDW VHHP WR
WDUJHWERWKSDUHQWVDQGFKLOGUHQ
ż +RUL]RQ 2UJDQLF EUDQG \RJXUW VHHPV WR WDUJHW FKLOGUHQ ZLWK D
ORJRRIDFDUWRRQFRZULGLQJRQDVQRZERDUG%XWWKHFRS\RQWKH
SDFNDJLQJIRUWKLV\RJXUWHPSKDVL]HVWKHIDFWWKDWLWLVRUJDQLF
DQG ORZ IDW DQG WKDW QR DQWLELRWLFV SHVWLFLGHV RU KRUPRQHV
ZHUHXVHGLQLWVPDQXIDFWXUH7KLVLVD\RJXUWWKDWDSDUWLFXODU
VHJPHQWRISDUHQWVZRXOGORYHIRUWKHLUFKLOGUHQWRHDW
ż
%XWLIWKLVRIIHULQJLVWDUJHWHGWRSDUHQWVZK\GRHVWKHFRPSDQ\
XVHDFDUWRRQFRZIRULWVORJR"7KHDQVZHULVWKDWSDUWRIWKH
YDOXHWKDWSDUHQWVJHWIURPWKLV\RJXUWLVWKDWWKHLUFKLOGUHQZLOO
Lecture 51: Targeting a Market Segment
HDW LW ,Q RWKHU ZRUGV WDUJHWLQJ RQH JURXS RI FXVWRPHUV²LQ
WKLVFDVHSDUHQWV²GRHVQRWPHDQLJQRULQJWKHSUHIHUHQFHVRI
RWKHU JURXSV LQYROYHG LQ WKH DFTXLVLWLRQ DQG FRQVXPSWLRQ RI
the offering.
ż
2WKHU \RJXUWV IRU FKLOGUHQ DOVR XVH FDUWRRQ FKDUDFWHUV RQ
WKHLU SDFNDJLQJ EXW WKHVH FKDUDFWHUV DUH RIWHQ IURP SRSXODU
WHOHYLVLRQ VKRZV 6XFK RIIHULQJV DUH FOHDUO\ WDUJHWHG WR WKRVH
ZKR WHQG WR KDYH VWURQJ DWWDFKPHQWV WR FDUWRRQ FKDUDFWHUV²
WKDWLVFKLOGUHQ+RZHYHUPDQ\RIWKHVHEUDQGVDOVRHPSKDVL]H
WKDWWKH\RJXUWLVORZIDWRUDJRRGVRXUFHRIFDOFLXPWRVKRZ
WKDWWKH\DUHQ¶WVLPSO\LJQRULQJWKHFRQFHUQVRISDUHQWV
ż
:K\ GRQ¶W ZH ¿QG DQ RIIHULQJ GHVLJQHG WR DSSHDO WR ERWK
FKLOGUHQ DQG SDUHQWV" %HFDXVH LW LV XVXDOO\ RQH JURXS RU
WKH RWKHU WKDW GULYHV WKH GHFLVLRQ PDNLQJ LQ WKLV FDWHJRU\$
PLGGOHRIWKHURDGRSWLRQZRXOGEHRXWÀDQNHGE\WKH\RJXUWV
WDUJHWHG WR FKLOGUHQ ZKHQ FKLOGUHQ FKRRVH DQG E\ +RUL]RQ
2UJDQLFZKHQSDUHQWVFKRRVH%\WU\LQJWRWDUJHWERWKJURXSV
DPDQXIDFWXUHUZRXOGSUREDEO\PLVVERWK
Making an Offering with Value
% 2QHFRPPRQPLVWDNH¿UPVPDNHLVWRWDUJHWDVHJPHQWMXVWEHFDXVH
WKDW VHJPHQW LV DWWUDFWLYH WR WKH FRPSDQ\ 3HUKDSV PHPEHUV RI D
FHUWDLQVHJPHQWKDYHDJUHDWGHDORIGLVSRVDEOHLQFRPHRUSHUKDSV
WKH\¶UHRSLQLRQOHDGHUVDQGFRXOGLPSURYHWKHEUDQG¶VLPDJHLIWKH\
VWDUWXVLQJWKHSURGXFW%XWWKHYDOXHWKDWWKHFXVWRPHUSURYLGHVWR
WKHFRPSDQ\LVRQO\KDOIRIWKHHTXDWLRQ<RXDOVRPXVWFRQVLGHU
ZKHWKHU WKH FRPSDQ\ LV FDSDEOH RI FUHDWLQJ DQ RIIHULQJ WKDW WKH
target customer actually wants.
%
)RUH[DPSOHLQWKHHDUO\VWKHZHVWHUQZHDUFRPSDQ\/HYL¶V
FRQGXFWHGH[WHQVLYHUHVHDUFKWRUHVHJPHQWLWVPDUNHWDQGORRNIRU
RSSRUWXQLWLHVIRUJURZWK7KHUHVXOWVRIWKHUHVHDUFKVKRZHGWKDWRQH
VPDOOVHJPHQWRIWKHPDUNHWDFFRXQWHGIRUDYDVWO\GLVSURSRUWLRQDWH
VKDUHRIVSHQGLQJRQPHQ¶VFORWKLQJ7KHVH³&ODVVLF,QGHSHQGHQWV´
ORYHG WR EX\ KLJKHQG FORWKHV SDUWLFXODUO\ WKUHHSLHFH VXLWV DQG
KDGVRPHZKDWFRQVHUYDWLYHWDVWHV
ż /HYL¶VUHDVRQHGWKDWFDSWXULQJMXVWDSRUWLRQRIWKHPRQH\WKLV
VHJPHQW VSHQW RQ FORWKHV ZRXOG GULYH UHDO UHYHQXH JURZWK
IRUWKHFRPSDQ\7KXVWKH¿UPGHYHORSHGDOLQHRIKLJKHQG
VXLWVLQFRQVHUYDWLYHFXWVDQGFRORUV7KHTXDOLW\RIWKHVXLWV
ZDV ¿QH EXW QRQH RI WKH DFFRPSDQ\LQJ PDUNHWLQJ FKRLFHV
PDGH E\ /HYL¶V FUHDWHG DQ\ DGGLWLRQDO YDOXH IRU WKH &ODVVLF
,QGHSHQGHQWVHJPHQW
ż
%
7KH FRPSDQ\ VROG WKH VXLWV WKURXJK UHWDLOHUV ZLWK ZKLFK LW
DOUHDG\ KDG D UHODWLRQVKLS VXFK DV 6HDUV EXW RI FRXUVH WKH
&ODVVLF,QGHSHQGHQWVHJPHQWZRXOGQHYHUJRWR6HDUVWREX\
D VXLW )XUWKHU WKH VXLWV ZHUH WRR H[SHQVLYH IRU WKH VWRUHV
ZKHUH WKH\ ZHUH VROG EXW WRR LQH[SHQVLYH FRPSDUHG WR ZKDW
WKH&ODVVLF,QGHSHQGHQWVXVXDOO\SDLGIRUVXLWV(YHQWKH/HYL¶V
FODVVLFEUDQGZDVDOLDELOLW\EHFDXVHLWZDVQRWDVVRFLDWHGZLWK
KLJKHQGPHQVZHDU
,W LV FHUWDLQO\ QHFHVVDU\ IRU D VHJPHQW WR EH DWWUDFWLYH WR \RXU
FRPSDQ\ EXW LW¶V QRW VXI¿FLHQW &XVWRPHUV LQ WKDW VHJPHQW PXVW
DOVR ¿QG \RXU RIIHULQJ DWWUDFWLYH ,Q RWKHU ZRUGV \RX PXVW EH LQ
DSRVLWLRQWRVHOODQRIIHULQJWKDWZLOOFUHDWHYDOXHIRUWKHVHJPHQW
\RXWDUJHW%RWKSDUWLHVPXVWFRPHDZD\IURPWKHWUDQVDFWLRQEHWWHU
RIIRUWKHWUDQVDFWLRQZRQ¶WWDNHSODFH
7KH$WWULEXWHE\6HJPHQW0DWUL[
% $YDOXDEOHWRROWRXVHLQFKRRVLQJDWDUJHWLVWKHDWWULEXWHE\VHJPHQW
PDWUL[ 7R FUHDWH WKLV PDWUL[ \RX PXVW NQRZ WKUHH IDFWRUV WKH
SRVVLEOHVHJPHQWV\RXFRXOGWDUJHWWKHDWWULEXWHVWKDWDUHLPSRUWDQW
LQ\RXUSURGXFWFDWHJRU\DQGWKHSHUIRUPDQFHRI\RXURIIHULQJDQG
WKHRIIHULQJVRI\RXUFRPSHWLWRUVRQWKRVHDWWULEXWHV:H¶OOFRQVWUXFW
D PDWUL[ XVLQJ WKUHH RIIHULQJV LQ WKH YLGHR JDPH V\VWHP PDUNHW
6RQ\3OD\6WDWLRQ 36 0LFURVRIW;ER[DQG1LQWHQGR:LL
Customer Segments
Competitors/Company
Attributes
Gamers
NonGamers
Xbox
PS3
Wii
Cutting-edge graphics
H
L
H
H
L
Highly involved games
H
L
H
H
L
&RPSOH[VWRU\OLQHV
H
L
H
H
L
High skill levels
H
L
H
H
L
Realistic graphics
H
L
H
H
L
Ease of interface
L
H
L
L
H
Lecture 51: Targeting a Market Segment
An attribute-by-segment matrix is a valuable tool for identifying targets that may
be underserved by current offerings.
%
7R FRQVWUXFW WKH PDWUL[ ¿UVW OLVW WKH DWWULEXWHV WKDW PLJKW EH
LPSRUWDQWIRU\RXUSURGXFWIUDPLQJHDFKDWWULEXWHLQDSRVLWLYHZD\
)RUH[DPSOHIRUDYLGHRJDPLQJV\VWHPDWWULEXWHVPLJKWLQFOXGH
FXWWLQJHGJHJUDSKLFVKLJKO\LQYROYHGJDPHVFRPSOH[VWRU\OLQHV
UHDOLVWLFJUDSKLFVKLJKVNLOOOHYHOVDQGHDVHRILQWHUIDFH
%
7KHQH[WVWHSLVWRPDNHFROXPQVIRUHDFKRIWKHFXVWRPHUVHJPHQWV
)RURXUSXUSRVHVZH¶OOFRQVLGHURQO\WZREURDGVHJPHQWVJDPHUV
WKRVH ZKR KDYH SOD\HG YLGHR JDPHV IRU \HDUV DQG QRQJDPHUV
WKRVHZKRKDYHPXFKOHVVH[SHULHQFHZLWKYLGHRJDPHV %
:H WKHQ GHWHUPLQH KRZ HDFK RI WKHVH VHJPHQWV ZRXOG UDWH WKH
LPSRUWDQFHRIWKHDWWULEXWHVOLVWHG)RUH[DPSOHJDPHUVZRXOGOLNHO\
UDWHDOORIWKHDWWULEXWHVH[FHSWHDVHRILQWHUIDFHDVKLJKO\LPSRUWDQW
ZKLOH QRQJDPHUV ZRXOG SUREDEO\ ¿QG FXWWLQJHGJH JUDSKLFV DQG
FRPSOH[VWRU\OLQHVOHVVLPSRUWDQWWKDQHDVHRILQWHUIDFH
ż 1RWH WKDW LQ WKLV OLVWLQJ WKH JDPHUV DQG QRQJDPHUV KDYH
FRPSOHWHO\ GLIIHUHQW SUHIHUHQFH SUR¿OHV :KDW¶V LPSRUWDQW
WR JDPHUV WHQGV WR EH OHVV LPSRUWDQW WR QRQJDPHUV DQG YLFH
versa. But that may not always be the case.
ż
'HSHQGLQJRQKRZ\RXFRQVWUXFW\RXUPDWUL[WKHUHPD\EH
FHUWDLQDWWULEXWHVWKDWDUHLPSRUWDQWWRDOOVHJPHQWVDQGRWKHUV
WKDWDUHLPSRUWDQWWRQRQH%XWDWWKHHQGRIWKHSURFHVV\RX
VKRXOG QRW KDYH WZR RU PRUH VHJPHQWV WKDW YDOXH H[DFWO\
WKHVDPHWKLQJVDFURVVWKHERDUG,IWKDW¶VWKHFDVHWKHQWKH
WZRVHJPHQWVDUHSUREDEO\WKHVDPHDQGVKRXOGEHFROODSVHG
into one.
%
2QFH \RX¶YH PDSSHG WKH DWWULEXWHV WR FXVWRPHU YDOXHV WKH QH[W
VWHSLVWRORRNDWWKHSHUIRUPDQFHRI\RXUFRPSDQ\DQGWKDWRI\RXU
FRPSHWLWRUV ,Q RXU H[DPSOH WKH ;ER[ DQG 3OD\6WDWLRQ V\VWHPV
SHUIRUPKLJKRQDOOWKHDWWULEXWHVH[FHSWHDVHRILQWHUIDFH
ż ,QWKHHDUO\V1LQWHQGRORRNHGDWWKLVFRPSHWLWLYHVSDFH
DQG UHDOL]HG WKDW LW ZRXOG EH GLI¿FXOW WR FRPSHWH DJDLQVW
3OD\6WDWLRQ DQG ;ER[ LI LW ZHQW DIWHU WKH JDPHU VHJPHQW
*DPHUV DOUHDG\ KDG WZR VWURQJ RSWLRQV WR FKRRVH IURP WKDW
VHHPHG WR PDWFK WKHLU SUHIHUHQFHV H[DFWO\ 7KXV LQVWHDG RI
GLUHFWO\ FRPSHWLQJ DJDLQVW 0LFURVRIW DQG 6RQ\ 1LQWHQGR
FKRVHWRFUHDWHDQRIIHULQJWDUJHWHGWRQRQJDPHUVWKH:LL
ż
$VDJDPLQJV\VWHPWKH:LLZDVZHOOEHKLQGRWKHUFRQVROHV
RQWKHDWWULEXWHVWKDWPDWWHUHGPRVWWRJDPHUVVXFKDVFXWWLQJ
HGJHJUDSKLFVDQGKLJKO\UHDOLVWLFSOD\%XW1LQWHQGRIRFXVHG
LWVHIIRUWVRQFUHDWLQJDVLPSOHDQGLQWXLWLYHZD\RILQWHUDFWLQJ
with the game system, concentrating on the one attribute that
ZDVPRVWLPSRUWDQWWRQRQJDPHUVHDVHRILQWHUIDFH
ż
0DQ\JDPHUVVFRIIHGDWWKH:LLZKHQLWZDV¿UVWLQWURGXFHG
EXW1LQWHQGRZDVQ¶WWU\LQJWRFUHDWHDJDPHFRQVROHWKDWZRXOG
DSSHDO WR WKDW JURXS ,QVWHDG 1LQWHQGR FKRVH D WDUJHW WKDW
ZDV QRW VHUYHG ZHOO E\ 6RQ\ DQG 0LFURVRIW²D VHJPHQW WKDW
LQFOXGHG\RXQJFKLOGUHQROGHUDGXOWVDQGFDVXDOJDPHUVZKR
ZHUHPRVWO\LQWHUHVWHGLQIDPLO\IXQ$QG1LQWHQGRFXVWRPL]HG
its offering to serve that segment.
ż
1LQWHQGRVXFFHHGHGE\IROORZLQJWKHUXOHVRIWDUJHWLQJ'RQ¶W
WU\ WR FUHDWH D PLGGOHRIWKHURDG SURGXFW GHVLJQHG WR DSSHDO
WR HYHU\RQH ,QVWHDG LGHQWLI\ D WDUJHW SUHFLVHO\ DQG FUHDWH D
SURGXFWWKDWPHHWVWKHVSHFL¿FQHHGVRIWKDWWDUJHW
Suggested Reading
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHU
<DQNHORYLFKDQG0HHU³5HGLVFRYHULQJ0DUNHW6HJPHQWDWLRQ´
Questions to Consider
1. &KRRVHDSDUWLFXODUPDUNHWDERXWZKLFK\RXKDYHVRPHH[SHUWLVHRUDUH
ZLOOLQJWRGRVRPHUHVHDUFK)LUVWVHJPHQWWKDWPDUNHW <RXFDQVDYH
VRPHWLPHE\XVLQJWKHVHJPHQWDWLRQ\RXGHYHORSHGLQWKHDVVLJQPHQWV
IRU WKH ODVW OHFWXUH 7KHQ FRQVWUXFW DQ DWWULEXWHE\VHJPHQW PDWUL[
6WDUW E\ JHQHUDWLQJ D OLVW RI WKH DWWULEXWHV WKDW PLJKW EH LPSRUWDQW WR
GLIIHUHQW FRQVXPHUV DQG RQ ZKLFK FRPSHWLWRUV PLJKW GLIIHUHQWLDWH
WKHPVHOYHV 1H[W UDWH WKH OLNHO\ LPSRUWDQFH RI HDFK DWWULEXWH WR HDFK
FXVWRPHUVHJPHQW)LQDOO\UDWHWKHRIIHULQJVRIWKHPDMRUFRPSHWLWRUV
LQ WKH PDUNHW EDVHG RQ KRZ ZHOO WKH\ SHUIRUP LQ UHODWLYH WHUPV RQ
HDFKRIWKHDWWULEXWHV1RZPDWFKWKHRIIHULQJVWRWKHVHJPHQWV'RWKH
RIIHULQJVHDFKPDSZHOORQWRDWDUJHWVHJPHQW"$UHWKHUHDQ\RIIHULQJV
WKDWGRQ¶WVHHPWR¿WZLWKWKHQHHGVRIDQ\SDUWLFXODUVHJPHQW"
2. &RQGXFWDVLPLODUDQDO\VLVRIDSDUWLFXODUPDUNHWEXWWKLVWLPHLQVWHDG
Lecture 51: Targeting a Market Segment
RIMXVWORRNLQJWRGHVFULEHWKHFXUUHQWVWDWHRIWKDWPDUNHWLQDQDWWULEXWH
E\VHJPHQW PDWUL[ ORRN IRU RSSRUWXQLWLHV ,I \RX ZHUH WR LQWURGXFH D
QHZRIIHULQJLQWKLVFDWHJRU\ZKLFKVHJPHQWZRXOG\RXWDUJHWDQGZK\"
,VWKHUHDQLQFXPEHQWEUDQGWKDWVHUYHVFXVWRPHUVLQDWDUJHWVHJPHQW
EXWGRHVQRWPHHWDOOWKHLUQHHGV"$UHWKHUHDQ\VHJPHQWVWKDWORRNDVLI
WKH\DUHQRWFXUUHQWO\EHLQJVHUYHGE\DQ\SDUWLFXODUEUDQGV"
Positioning Your Offering
Lecture 52
A
FFRUGLQJWRZKDWZHPLJKWFDOOWKH³EHWWHUPRXVHWUDS´SKLORVRSK\
RI EXVLQHVV FXVWRPHUV VKRXOG HYDOXDWH WKH RIIHULQJV RI YDULRXV
FRPSDQLHV WKHQ EHDW D SDWK WR WKH GRRU RI WKH ¿UP WKDW GHYHORSV
WKH EHVW PRXVHWUDS 0DQ\ SHRSOH EHOLHYH WKDW WKH EXVLQHVV ZRUOG VKRXOG
ZRUNLQWKLVZD\ZLWKQRSXIIHU\RUVSLQIURPPDUNHWHUV%XWLQIDFWLWLV
PRUH FRPPRQ IRU JUHDW SURGXFWV WR IDLO QRW EHFDXVH RI WKH GHFHSWLRQV RI
marketers, but because the marketers themselves fail to communicate the
WUXHYDOXHRIWKHLURIIHULQJ,QWKLVOHFWXUHWKHQZH¶OOORRNDWSRVLWLRQLQJ²
WKHSURFHVVRIGHWHUPLQLQJZKLFKDVSHFWVRIDQRIIHULQJDUHPRVWLPSRUWDQW
in creating value for the customer, then clearly communicating that value.
The Positioning Process
% 7KHSRVLWLRQLQJSURFHVVLQYROYHVWZRVWHSVDQGWZRFKHFNV)LUVW
ZHVWDUWE\GHYHORSLQJDQRIIHULQJ¶VYDOXHSURSRVLWLRQ6HFRQGZH
VHOHFWWKHRQHRUWZRNH\EHQH¿WVWKDWDQFKRUWKHSRVLWLRQLQJ7KH
WZRFKHFNVWKDWHQVXUHWKHSRVLWLRQLQJDFKLHYHVLWVREMHFWLYHVDUH
'RHV WKH SRVLWLRQLQJ FUHDWH YDOXH IRU WKH WDUJHW FXVWRPHU DQG
GRHVLWGLIIHUHQWLDWHWKHRIIHULQJIURPWKHFRPSHWLWLRQ"
%
7KHYDOXHSURSRVLWLRQLVDQREMHFWLYHDVVHVVPHQWRIDOOWKHEHQH¿WV
RI EX\LQJ RZQLQJ DQG FRQVXPLQJ D SURGXFW RU VHUYLFH ZULWWHQ
IURPWKHFXVWRPHU¶VSHUVSHFWLYH
ż )RU H[DPSOH WKH YDOXH SURSRVLWLRQ IRU 9ROYRV LQ WKH V
PLJKW KDYH LQFOXGHG D QXPEHU RI EHQH¿WV D YDOXHG LPDJH
IRU (XURSHDQ LPSRUWV RYHU GRPHVWLF FDUV KLJK SHUIRUPDQFH
FRPIRUWVDIHW\UHOLDELOLW\DQGOX[XU\
ż
,Q D EHWWHUPRXVHWUDS ZRUOG D PDUNHWHU ZRXOG VLPSO\
FRPPXQLFDWHWKHVHEHQH¿WVWRFXVWRPHUVDQGOHWWKHPGHFLGH
7KLV DSSURDFK ZRXOG VHHP WR PDNH D ORW RI VHQVH$IWHU DOO
WHOOLQJSRWHQWLDOFXVWRPHUVWKDWDFDULVOX[XULRXVVDIHUHOLDEOH
DQG H[FOXVLYH VKRXOG EH PRUH SHUVXDVLYH WKDQ WHOOLQJ WKHP
about just one of those attributes.
Lecture 52: Positioning Your Offering
%
ż
%XW 9ROYR GLGQ¶W WDNH WKH DSSURDFK RI WKURZLQJ WKH NLWFKHQ
VLQN DW LWV SRWHQWLDO FXVWRPHUV ,QVWHDG LW VXFFHVVIXOO\
LPSOHPHQWHG WKH VHFRQG VWHS LQ SRVLWLRQLQJ ZKLFK ZDV WR
FKRRVH MXVW RQH NH\ EHQH¿W WR FRPPXQLFDWH WR FXVWRPHUV
VDIHW\ 7KH PDLQ PHVVDJH RI WKH FDUV¶ VDIHW\ ZDV GHOLYHUHG
UHSHDWHGO\LQ9ROYR¶VDGYHUWLVLQJ
ż
9ROYR ZDV VR VXFFHVVIXO LQ HVWDEOLVKLQJ WKH OLQN EHWZHHQ LWV
EUDQGDQGWKHVDIHW\DWWULEXWHWKDWWKLVSHUFHSWLRQFRQWLQXHVWR
WKLVGD\DOWKRXJK9ROYRQRORQJHUPDNHVWKHVDIHVWFDUVRQWKH
URDG+RZGLG9ROYRFUHDWHVXFKDQHQGXULQJLPSUHVVLRQLQWKH
PLQGVRIFRQVXPHUV",QVWHDGRIRYHUZKHOPLQJFXVWRPHUVZLWK
DOOWKHIHDWXUHVWKDWPDNHD9ROYRJUHDWWKHFRPSDQ\SRVLWLRQHG
WKHEUDQGRQLWVVWURQJHVWDWWULEXWHDQGFUHDWHGVRPHWKLQJWKDW
FXVWRPHUVFRXOGXQGHUVWDQGDQGUHPHPEHU
,Q FRQWUDVW 7L9R WKH ¿UVW FRPSDQ\ WR PDUNHW D GLJLWDO YLGHR
UHFRUGHU '95 VKRXOGKDYHHQMR\HGD¿UVWPRYHUDGYDQWDJHZKHQ
LWLQWURGXFHGDUDGLFDOWHFKQRORJ\WKDWZRXOGIXQGDPHQWDOO\FKDQJH
WKHZD\SHRSOHZDWFKHG79
ż 7KH YDOXH SURSRVLWLRQ IRU 7L9R LQFOXGHG VXFK EHQH¿WV DV
WKH DELOLW\ WR SDXVH OLYH 79 WR ZDWFK D VKRZ RQ GHPDQG WR
SUHVFKHGXOHUHFRUGLQJRIVHOHFWHGVKRZVWRVNLSDGVDQGWRJHW
UHFRPPHQGDWLRQVDERXWRWKHUVKRZVFXVWRPHUVPLJKWHQMR\
ż
7L9R VKRXOG KDYH FKRVHQ WKH RQH EHQH¿W IURP WKDW OLVW
WKDW ZRXOG PRVW OLNHO\ UHVRQDWH ZLWK WKH FRPSDQ\¶V WDUJHW
FXVWRPHU%XWLQVWHDGWKHFRPSDQ\RSWHGWRKLJKOLJKWDOOWKH
SRWHQWLDOEHQH¿WVRIWKHQHZWHFKQRORJ\HVVHQWLDOO\GHOLYHULQJ
WKHPHVVDJH7L9RFDQGRHYHU\WKLQJ
%
ż
'HVSLWH EHLQJ WKH ¿UVW WR PDUNHW ZLWK D SURGXFW WKDW SHRSOH
ORYHG PRQWKV DIWHU ODXQFK 7L9R KDG RQO\ VXEVFULEHUV$QGEHIRUHORQJWKHFRPSHWLWLRQVZHSWLQ$VRI
7L9RKDGFDSWXUHGRQO\DERXWRIWKH'95PDUNHW
%HLQJWKH¿UVWWREXLOGDEHWWHUPRXVHWUDSZDVQRWHQRXJK
ż
7L9R ZDV HYHQWXDOO\ DEOH WR H[SODLQ LWV FRPSOH[ PHVVDJH
DQG HGXFDWH FRQVXPHUV RQ WKH PDQ\ YLUWXHV RI WKH '95
Unfortunately, by that time, many consumers were using their
QHZIRXQG NQRZOHGJH RQ '95 V\VWHPV WKH\ KDG SXUFKDVHG
IURPRWKHUFRPSDQLHV
,W¶VLPSRUWDQWWRUHPHPEHUWKDW\RXUYDOXHSURSRVLWLRQLVQRW\RXU
SRVLWLRQLQJ'RQ¶WWHOO\RXUFXVWRPHUHYHU\WKLQJWKDWLVJUHDWDERXW
\RXU RIIHULQJ DOO DW RQFH .HHS \RXU PHVVDJH VLPSOH9HU\ UDUHO\
DUH FRQVXPHUV VXI¿FLHQWO\ PRWLYDWHG WR SURFHVV DQG XQGHUVWDQG
FRPSOH[ PHVVDJHV $QG ZKHQ FRQVXPHUV GRQ¶W DSSUHFLDWH KRZ
JUHDW\RXURIIHULQJLVVLPSO\JLYLQJWKHPPRUHLQIRUPDWLRQLVQRW
the solution.
Creating Value for the Target Customer
% 7KH ¿UVW FKHFN RQ SRVLWLRQLQJ LV WR DVN 'RHV WKH SRVLWLRQLQJ
FODULI\WKHYDOXHWKDWLVEHLQJSURYLGHGWRWKHWDUJHWFXVWRPHU"2QH
ZD\WRWKLQNDERXWSRVLWLRQLQJLVDVWKHÀLSVLGHRIWDUJHWLQJ$IWHU
DOO \RX FDQ¶W KRSH WR VXFFHVVIXOO\ SRVLWLRQ DQ RIIHULQJ ZLWKRXW
NQRZLQJ IRU ZKRP \RX DUH WU\LQJ WR SRVLWLRQ LW$ JLYHQ EHQH¿W
ZLOOQRWFUHDWHYDOXHIRUHYHU\RQH:KHQFKRRVLQJWKHRQHEHQH¿W
\RX ZDQW WR SRVLWLRQ RQ ORRN WR \RXU WDUJHW FXVWRPHUV:KDW GR
WKH\YDOXHPRVW"
%
,PDJLQH WKDW \RX KDYH EHHQ KLUHG E\ D ODUJH $PHULFDQ FLW\ WR
LPSOHPHQW D ELNHVKDULQJ SURJUDP 7R GHVLJQ WKLV SURJUDP \RX
QHHG WR PDNH D QXPEHU RI GHFLVLRQV :KHUH ZLOO \RX SODFH WKH
WHUPLQDOVZKHUHSHRSOHERUURZRUUHQWELNHV"+RZPXFKZLOO\RX
FKDUJHWRUHQWELNHV":KDWNLQGRIELNHVZLOO\RXXVH",QVKRUWKRZ
ZLOO\RXSRVLWLRQ\RXUQHZELNHVKDULQJSURJUDP"
‹)XVH7KLQNVWRFN
Lecture 52: Positioning Your Offering
3RVLWLRQLQJDFDUDURXQGWKHEHQH¿WRIVDIHW\ZRUNVRQO\LI\RXDUHWDUJHWLQJ
DJURXSRIFXVWRPHUVIRUZKRPVDIHW\LVWKHSULPDU\GULYHURIDXWRPRELOH
purchase decisions, such as parents of young children.
%
$ JRRG ZD\ WR VWDUW ZRXOG EH WR UHFRJQL]H WKDW GLIIHUHQW JURXSV
RI SHRSOH ZDQW GLIIHUHQW IHDWXUHV LQ D ELNHVKDULQJ SURJUDP WKXV
LW¶V LPSRUWDQW WR LGHQWLI\ WKH GLIIHUHQW SRWHQWLDO WDUJHWV IRU \RXU
SURJUDP$OLVWRISRWHQWLDOXVHUVPLJKWLQFOXGHFRPPXWHUVSHRSOH
UXQQLQJHUUDQGVH[HUFLVHUVDQGWRXULVWV
%
$OO RI WKHVH JURXSV ZRXOG YDOXH FRQYHQLHQFH EXW HDFK JURXS
ZRXOG¿QGGLIIHUHQWORFDWLRQVFRQYHQLHQW&RPPXWHUVZRXOGZDQW
ORFDWLRQVFORVHWRERWKKRPHDQGZRUNZKLOHWKRVHUXQQLQJHUUDQGV
ZRXOG ZDQW VSRWV QHDU VKRSSLQJ KXEV (DFK RI WKH JURXSV PLJKW
DOVRSUHIHUGLIIHUHQWNLQGVRIELNHV
%
7KH SRLQW KHUH LV WKDW ZLWKRXW NQRZLQJ ZKR \RXU WDUJHWV DUH LW
LV LPSRVVLEOH WR SRVLWLRQ \RXU RIIHULQJ FRKHUHQWO\ 7KH GR]HQV RI
GHFLVLRQV \RX PXVW PDNH LQ WHUPV RI ZKDW EHQH¿WV WR RIIHU FRXOG
HLWKHUFUHDWHRUGHVWUR\YDOXHIRU\RXUFXVWRPHUGHSHQGLQJRQZKR
your customer is.
%
7KH PLVWDNHV RI WKH 6PDUW%LNH '& SURJUDP LQ :DVKLQJWRQ '&
ODXQFKHGLQXQGHUOLQHWKHOHVVRQWKDWSRVLWLRQLQJFDQPDNHRU
break an offering.
ż %LNHWHUPLQDOVLQWKLVSURJUDPZHUHSODFHGLQLQFRQYHQLHQWDQG
LQDSSURSULDWHORFDWLRQVWKHELNHGHVLJQVZHUHXQDWWUDFWLYHDQG
LPSUDFWLFDO UHVWULFWLRQV ZHUH SODFHG RQ FKHFNRXW WLPHV DQG
XVHUVKDGWRSXUFKDVHDQDQQXDOSDVV,QVKRUW6PDUW%LNHZDV
V\VWHPDWLFDOO\SRVLWLRQHGQRWWRFUHDWHYDOXHIRUDQ\SDUWLFXODU
JURXS RI FXVWRPHUV ZKR PLJKW KDYH KDG UHDVRQ WR XVH WKH
ELNHV7KHSURJUDPZDVWHUPLQDWHGWZR\HDUVDIWHULWVODXQFK
ż
)RUWXQDWHO\ D ODWHU SURJUDP &DSLWDO %LNHVKDUH FRUUHFWHG WKH
PLVWDNHVRI6PDUW%LNHDQGKDVEHHQTXLWHVXFFHVVIXO
Differentiating from the Competition
% 7KHVHFRQGFKHFNRQWKHSRVLWLRQLQJSURFHVVLVWRHQVXUHWKDW\RX
GLIIHUHQWLDWH\RXURIIHULQJIURPWKHFRPSHWLWLRQ$QLPSRUWDQWSDUW
RISRVLWLRQLQJDSURGXFWLVJLYLQJFRQVXPHUVSRLQWVRISDULW\ZLWK
RWKHURIIHULQJV²WKDWLVWHOOLQJSHRSOHZKDW\RXUSURGXFWLVOLNH²
DQG GH¿QLQJ SRLQWV RI GLIIHUHQWLDWLRQ²WKDW LV WHOOLQJ SHRSOH ZK\
\RXURIIHULQJLVGLIIHUHQWIURPDQGVXSHULRUWRRWKHURIIHULQJV
%
7RXQGHUVWDQGWKHVHLGHDVOHW¶VORRNDWDGYHUWLVLQJLQWKHFDWHJRU\
RIPHQ¶VVKRZHUJHOV
ż $ FRPPHUFLDO IRU 8QLOHYHU¶V $[H VKRZHU JHO LGHQWL¿HV WKH
SURGXFW¶V FRPSHWLWLRQ DV ZRPHQ¶V VRDSV 7KH FRPPHUFLDO
WKHQGH¿QHVWKHEUDQG¶VSRLQWRIGLIIHUHQWLDWLRQUHODWLYHWRWKLV
FRPSHWLWLRQDPDVFXOLQHVFHQW
ż
6LPLODUO\ LQ LWV FRPPHUFLDOV 1LYHD IRU 0HQ LGHQWL¿HV LWV
FRPSHWLWLRQ DV$[H DQG LWV SRLQW RI GLIIHUHQWLDWLRQ DV D PRUH
VXEGXHGVFHQW7KHFRPSHWLWLRQIRU'RYH0HQ&DUHLVRWKHU
PHQ¶V ERG\ ZDVKHV DQG LWV GLIIHUHQFH LV WKDW LW LV FOLQLFDOO\
SURYHQ WR ¿JKW VNLQ GU\QHVV )LQDOO\ *LOOHWWH LGHQWL¿HV LWV
FRPSHWLWLRQDV'RYH0HQ&DUHDQGLWVSRLQWRIGLIIHUHQFHDV
LWVDELOLW\WR¿JKWRGRU
Lecture 52: Positioning Your Offering
%
1RWHKHUHWKHGHJUHHRIYDULHW\LQWHUPVRISRVLWLRQLQJDQRIIHULQJ
,Q MXVW RQH UHODWLYHO\ PXQGDQH FDWHJRU\²PHQ¶V ERG\ ZDVK²
GLIIHUHQWEUDQGVHDFKFKRVHXQLTXHDWWULEXWHVRQZKLFKWRSRVLWLRQ
DQGHDFKFKRVHDVOLJKWO\GLIIHUHQWFRPSHWLWRURUVHWRIFRPSHWLWRUV
DJDLQVW ZKLFK WR PDNH LWV FRPSDULVRQV (DFK EUDQG GH¿QHG LWV
FRPSHWLWLRQWKHQFRPPXQLFDWHGWKHRQHZD\LQZKLFKLWZDVEHWWHU
WKDQWKDWFRPSHWLWLRQ
%
1RWHWRRWKDWQRQHRIWKHPHQ¶VERG\ZDVKHVKDVSRVLWLRQHGLWVHOI
DJDLQVWEDUVRDSVLQJHQHUDODOWKRXJK$[HGH¿QHGLWVFRPSHWLWLRQ
DV ZRPHQ¶V VRDSV ,W VHHPV DOPRVW VKRFNLQJ WKDW WKHVH EUDQGV DOO
SRVLWLRQWKHPVHOYHVUHODWLYHWRWKHQDUURZFDWHJRU\RIERG\ZDVK
ZKHQWKHODUJHUVRDSFDWHJRU\VHHPVWRKROGVRPXFKRSSRUWXQLW\
IRUJURZWK7KXVWKHVHFRQGOHVVRQZHFDQOHDUQIURPWKLVH[DPSOH
LVWRWKLQNEURDGO\ZKHQFKRRVLQJ\RXUFRPSHWLWLRQ
%
2QH JRRG ZD\ WR DUWLFXODWH \RXU SRVLWLRQLQJ VWUDWHJ\ LV WR FUDIW D
SRVLWLRQLQJVWDWHPHQWDVLQJOHVHQWHQFHWKDWHQFDSVXODWHVHYHU\WKLQJ
WKDWLVLPSRUWDQWDERXWWKHRIIHULQJ¶VSRVLWLRQLQWKHPDUNHWSODFH
ż Positioning statements are not taglines or slogans. They are
SULPDULO\IRULQWHUQDOFRQVXPSWLRQ²IRUNHHSLQJWKHPDUNHWLQJ
GHSDUWPHQW DQGLGHDOO\WKHFRPSDQ\ IRFXVHGDQGRQPHVVDJH
ż
3RVLWLRQLQJ VWDWHPHQWV FRQWDLQ VHYHUDO LPSRUWDQW SLHFHV
RI LQIRUPDWLRQ D EULHI GHVFULSWLRQ RI WKH WDUJHW FXVWRPHU
LGHQWL¿FDWLRQ RI WKH SURGXFW FDWHJRU\ WKDW VHUYHV DV WKH
FRPSHWLWLRQ WRHVWDEOLVKSRLQWVRISDULW\ DQGDFOHDUDUWLFXODWLRQ
RI WKH SULPDU\ EHQH¿W WKH RIIHULQJ SUHVHQWV WR WKH FXVWRPHU
UHODWLYHWRWKHFRPSHWLWLRQ WKHSRLQWRIGLIIHUHQWLDWLRQ Suggested Reading
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHU
*RXUYLOOH³(DJHU6HOOHUVDQG6WRQ\%X\HUV´
Questions to Consider
1. 3LFNDSURGXFWZLWKZKLFK\RXDUHIDPLOLDU'HYHORSDYDOXHSURSRVLWLRQ
IRU WKDW SURGXFW²D OLVW RI DOO WKH EHQH¿WV DQG FRVWV DVVRFLDWHG ZLWK
EX\LQJDQGRZQLQJLW1RZSLFNRQHDWWULEXWH\RXZRXOGXVHWRSRVLWLRQ
WKDWSURGXFW+RZZRXOG\RXUSRVLWLRQLQJFKDQJHLI\RXFKRVHWRWDUJHW
DGLIIHUHQWVHJPHQW"
2. 3LFN D SURGXFW FDWHJRU\ DQG ZDWFK DV PDQ\ FRPPHUFLDOV DQG UHDG DV
PDQ\ SULQW DGYHUWLVHPHQWV DV \RX FDQ IRU FRPSHWLWRUV LQ WKDW VSDFH
'HWHUPLQH KRZ HDFK RI WKH FRPSHWLQJ EUDQGV KDV SRVLWLRQHG LWVHOI
:KDW DUH WKH SRLQWV RI SDULW\ HDFK EUDQG FODLPV ZLWK LWV FRPSHWLWRUV"
:KDWDUHLWVSRLQWVRIGLIIHUHQWLDWLRQ":KRDUHLWVWDUJHWFXVWRPHUV"
,GHQWLI\LQJ6RXUFHVRI6DOHV*URZWK
Lecture 53
,
/HFWXUH,GHQWLI\LQJ6RXUFHVRI6DOHV*URZWK
Q D PDWKHPDWLFLDQ DQG EXVLQHVV VWUDWHJLVW QDPHG ,JRU $QVRII
SXEOLVKHGDQDUWLFOHLQWKHHarvard Business ReviewDERXWWKHSRWHQWLDO
VRXUFHV RI VDOHV JURZWK7KH IRFXV RI KLV DUWLFOH ZDV GLYHUVL¿FDWLRQ D
WRSLF WKDW ZH¶OO FRYHU LQ WKLV OHFWXUH$OPRVW DV DQ DVLGH$QVRII SURSRVHG
D IUDPHZRUN IRU FODVVLI\LQJ GLIIHUHQW RSSRUWXQLWLHV IRU VDOHV JURZWK 7KLV
WZRE\WZRPDWUL[GLVFXVVHGLQMXVWDIHZSDUDJUDSKVLQDQDUWLFOHWKDWZDV
SULPDULO\DERXWVRPHWKLQJHOVHWXUQHGRXWWREHRQHRIWKHPRVWSRZHUIXO
LGHDVLQPDUNHWLQJ,QWKLVOHFWXUHZH¶OOORRNLQGHWDLODWWKH$QVRIIPDWUL[
DVZHOODVDQRWKHUPDUNHWLQJWRROJDSDQDO\VLV
7KH$QVRII0DWUL[
% 7KH$QVRII PDWUL[ LV D VLPSOH FKDUW DV VKRZQ EHORZ 2Q WKH OHIW
VLGHFXVWRPHUVDUHJURXSHGLQWRWZRFDWHJRULHVFXUUHQWFXVWRPHUV
DQGQHZFXVWRPHUV$FURVVWKHWRSRIWKHFKDUWDUHWZRFODVVHVRI
RIIHULQJVFXUUHQWRIIHULQJVDQGQHZRIIHULQJV7KHLQWHUVHFWLRQRI
FXVWRPHU W\SHV DQG RIIHULQJV FUHDWHV IRXU ER[HV WKDW FDWHJRUL]H
RSSRUWXQLWLHVIRUVDOHVJURZWK
Current Customers
New Customers
Current Offerings
New Offerings
Market Penetration
Product Development
Market Development
'LYHUVL¿FDWLRQ
%
7KH ¿UVW RI WKHVH RSSRUWXQLWLHV LV PDUNHW SHQHWUDWLRQ D VLWXDWLRQ
in which a business sells its current customers more of its current
RIIHULQJV 3URGXFW GHYHORSPHQW WDNHV SODFH ZKHQ D EXVLQHVV
GHYHORSVQHZSURGXFWVWRVHOOWRLWVFXUUHQWFXVWRPHUEDVH0DUNHW
GHYHORSPHQW HQFRPSDVVHV VDOHV RI DQ H[LVWLQJ SURGXFW OLQH WR D
QHZJURXSRIFXVWRPHUVDQGGLYHUVL¿FDWLRQLQFOXGHVVDOHVRIDQHZ
SURGXFWOLQHWRDQHZJURXSRIFXVWRPHUV
%
7KH $QVRII PDWUL[ OD\V RXW IRXU VRXUFHV RI QHZ VDOHV DQG LV D
SRZHUIXOWRROIRULGHQWLI\LQJQHZZD\VWRJURZ\RXUEXVLQHVV
%
‹PRRGERDUG7KLQNVWRFN
Market Penetration
% 0DUNHW SHQHWUDWLRQ XVXDOO\
involves selling more of
\RXU FXUUHQW SURGXFW OLQH WR
your current customers. This
VWUDWHJ\ LV W\SLFDOO\ WKH OHDVW
risky means of increasing
VDOHV DQG VXUSULVLQJO\ WKH
avenue for growth that is
PRVW RIWHQ RYHUORRNHG E\
marketers seeking to increase
sales. Selling a little more
WR SHRSOH ZKR KDYH DOUHDG\
LQGLFDWHG WKDW WKH\ OLNH \RXU
RIIHULQJVKRXOGXVXDOO\EHWKH
DSSURDFK \RX WU\ ¿UVW ZKHQ
ORRNLQJ IRU RSSRUWXQLWLHV WR
increase sales.
:LWKFDVXDO)ULGD\V/HYL¶VLGHQWL¿HG
and exploited a cultural opportunity
to sell more of its current product—
Dockers—to current customers.
2QH VWUDWHJ\ IRU HQWLFLQJ
your current customers to
EX\PRUHRIWKHRIIHULQJVWKH\DOUHDG\EX\LVWRFUHDWHDGGLWLRQDO
RFFDVLRQV IRU WKHP WR XVH WKH SURGXFW RU VHUYLFH /HYL¶V 'RFNHUV
EUDQGXVHGWKLVVWUDWHJ\HIIHFWLYHO\LQWKHHDUO\V
ż 'RFNHUVUHFRJQL]HGWKHWUHQGWRZDUGOHVVFDVXDOEXVLQHVVDWWLUH
IRUPHQ²HVSHFLDOO\WKHLGHDRI³FDXVDO)ULGD\V´DWWKHRI¿FH²
DVDQRSSRUWXQLW\IRULQFUHDVLQJVDOHV7KHFRPSDQ\SURPRWHG
DQGHYHQVKDSHGWKLVWUHQGWKURXJKDSDPSKOHWHQWLWOHG³*XLGH
WR&DVXDO%XVLQHVVZHDU´WKDWZDVPDLOHGRXWWRKXPDQ
UHVRXUFHGLUHFWRUV
ż
0RVW SHRSOH ZKR ZRXOG ZHDU 'RFNHUV WR ZRUN RQFH D ZHHN
SUREDEO\DOUHDG\RZQHG'RFNHUVIRUVRPHRWKHUXVHVXFKDV
ZHHNHQG RXWLQJV ZLWK IULHQGV %\ SURPRWLQJ FDVXDO )ULGD\V
'RFNHUV ZDV QRW LQWURGXFLQJ LWV SURGXFW WR DQ HQWLUHO\ QHZ
JURXSRIFXVWRPHUV,QVWHDGLWSURYLGHGFXUUHQWFXVWRPHUVZLWK
DQHZRSSRUWXQLW\WREX\PRUHRIWKHFXUUHQWSURGXFWOLQH
%
$QRWKHU H[DPSOH RI D ZHOOH[HFXWHG PDUNHW SHQHWUDWLRQ VWUDWHJ\
FRPHVIURP$UP +DPPHUEDNLQJVRGD
ż %DNLQJ VRGD LV D FRPPRGLW\ SURGXFW DQG KLVWRULFDOO\ LW ZDV
XVHGDOPRVWH[FOXVLYHO\IRUEDNLQJDORQH,I$UP +DPPHU
ZDQWHGWRVHOOPRUHRILWVSURGXFWWRLWVFXUUHQWFXVWRPHUVLW
IDFHGWKHGLI¿FXOWWDVNRIWU\LQJWRHQFRXUDJHPRUHEDNLQJ
/HFWXUH,GHQWLI\LQJ6RXUFHVRI6DOHV*URZWK
ż
,QVWHDGWKHPDUNHWHUVDW$UP +DPPHUOHYHUDJHGWKHDELOLW\
RI EDNLQJ VRGD WR FOHDQ DQG GHRGRUL]H DQG LGHQWL¿HG GR]HQV
RI QRQEDNLQJ XVHV IRU WKH SURGXFW VXFK DV IUHVKHQLQJ WKH
UHIULJHUDWRUZKLWHQLQJFORWKHVLQWKHODXQGU\GHRGRUL]LQJWKH
VLQN DQG VR RQ 7KH OLVW RI QHZ UHDVRQV WR XVH WKH SURGXFW
HQFRXUDJHGFXVWRPHUVZKRSUREDEO\DOUHDG\KDGVRPHEDNLQJ
VRGDLQWKHLUSDQWULHVWRJRRXWDQGEX\PRUH
Product Development
% $SURGXFWGHYHORSPHQWVWUDWHJ\LQYROYHVVHUYLQJWKHVDPHFXVWRPHU
EDVH ZLWK QHZ SURGXFWV 7KH DGYDQWDJH RI XVLQJ WKLV VWUDWHJ\ LV
WKDW \RX SUHVXPDEO\ DOUHDG\ KDYH D VROLG XQGHUVWDQGLQJ RI \RXU
FXVWRPHUVDQGVHUYHWKHPZHOOZLWKVRPHRIIHULQJV<RXWKHQXVH
WKDW XQGHUVWDQGLQJ WR VHUYH \RXU FXVWRPHUV WKURXJK DGGLWLRQDO
SURGXFWVRUVHUYLFHV
%
7KHVH QHZ RIIHULQJV GRQ¶W QHFHVVDULO\ KDYH WR EH QHZ WR WKH
PDUNHWSODFHWKRXJKWKH\FDQEH2IWHQWKH\DUHMXVWQHZWR\RXU
FRPSDQ\ 0DQ\ EUDQG H[WHQVLRQV DUH WKH UHVXOW RI IROORZLQJ D
SURGXFWGHYHORSPHQWVWUDWHJ\
%
&RQVLGHU.HOORJJ¶V6SHFLDO.EUDQGRIFHUHDO7KLVSURGXFWVWDUWHG
DVDORZFDORULHDOWHUQDWLYHWRVXJDU\EUHDNIDVWFHUHDOVEXWWKHEUDQG
QRZLQFOXGHVQXPHURXVRWKHUSURGXFWVVXFKDVPHDOUHSODFHPHQW
EDUV VQDFN EDUV IUR]HQ ZDIÀHV EUHDNIDVW VDQGZLFKHV DQG PRUH
$OO RI WKHVH SURGXFWV DUH NQLW WRJHWKHU XQGHU WKH DLP RI KHOSLQJ
SHRSOH²SULPDULO\ZRPHQ²PDQDJHZHLJKW,QWKLVFDVH.HOORJJ¶V
FXVWRPHUEDVHVWD\HGWKHVDPHEXWQHZSURGXFWVZHUHDGGHGWRWKH
PL[WREHWWHUVHUYHWKHFXVWRPHUV
%
7KHIDVWIRRGJLDQW0F'RQDOG¶VDOVRH[HFXWHGDVXFFHVVIXOSURGXFW
GHYHORSPHQWVWUDWHJ\ZLWKWKHLQWURGXFWLRQRIVDODGVWRLWVPHQX
ż ,QHDUO\0F'RQDOG¶VVXIIHUHGLWV¿UVWHYHUTXDUWHUO\ORVV
,QGHHG VRPH VWRUH VDOHV KDG EHHQ GHFOLQLQJ IRU VWUDLJKW
PRQWKV7KHVWUDWHJLHVWKHFRPSDQ\KDGLPSOHPHQWHGWRWXUQ
VDOHV DURXQG ZHUH QRW ZRUNLQJ 6RPH SHRSOH WKRXJKW WKH
VROXWLRQ ZDV IRU 0F'RQDOG¶V WR RIIHU KHDOWKLHU IRRG RSWLRQV
EXWWKHFRPSDQ\KDGQ¶WKDGDVXFFHVVIXOQHZSURGXFWODXQFK
in 20 years.
ż
0F'RQDOG¶V VROYHG LWV SUREOHP DQG SXOOHG RII D UHPDUNDEOH
WXUQDURXQG E\ ORRNLQJ IRU QHZ ZD\V WR VHUYH LWV H[LVWLQJ
FXVWRPHUV 7KH FRPSDQ\ GLVFRYHUHG WKDW PDQ\ SDUHQWV ZKR
EURXJKWWKHLUFKLOGUHQWRWKHUHVWDXUDQWVIRUD+DSS\0HDODOVR
RUGHUHGRQHIRUWKHPVHOYHV)XUWKHU0F'RQDOG¶VUHDOL]HGWKDW
WKHVHDGXOWFXVWRPHUVZHUHQ¶WEHLQJDGHTXDWHO\VHUYHGE\WKH
UHVWDXUDQWV¶RIIHULQJV
ż
,Q UHVSRQVH 0F'RQDOG¶V LQWURGXFHG D QHZ OLQH RI ³SUHPLXP
VDODGV´ VSHFL¿FDOO\ GHVLJQHG WR VHUYH FXVWRPHUV ZKR ZHUH
DOUHDG\ DW WKH UHVWDXUDQWV EHFDXVH RI WKHLU FKLOGUHQ $IWHU
LQWURGXFLQJ WKLV QHZ RSWLRQ WKH DYHUDJH +DSS\ 0HDO RUGHU
LQFUHDVHG IURP DERXW WR DERXW 7KH ³PDJLF´ KHUH ZDV
QRW LQ LQWURGXFLQJ D VDODG EXW LQ NQRZLQJ H[DFWO\ ZKR WKH
FXVWRPHUVZHUHDQGZKDWWKH\YDOXHG
Market Development
% 0DUNHW GHYHORSPHQW LQYROYHV VHHNLQJ RXW QHZ FXVWRPHUV
IRU D FXUUHQW SURGXFW OLQH /LNH SURGXFW GHYHORSPHQW PDUNHW
GHYHORSPHQW LV W\SLFDOO\ PRUH ULVN\ WKDQ PDUNHW SHQHWUDWLRQ
$IWHU DOO \RX DUH JRLQJ DIWHU D QHZ JURXS RI FXVWRPHUV ZKRP
\RX SUREDEO\ GRQ¶W NQRZ DV ZHOO DV \RXU FXUUHQW FXVWRPHUV %XW
WKH VWUHQJWK RI D PDUNHW GHYHORSPHQW VWUDWHJ\ LV WKDW \RX DUH QRW
GHYHORSLQJ UDGLFDOO\ QHZ SURGXFWV 0DUNHW GHYHORSPHQW PHDQV
VHOOLQJHVVHQWLDOO\WKHVDPHRIIHULQJVWRDQHZJURXSRISHRSOH
%
*HRJUDSKLFH[SDQVLRQLVRQHRIWKHPRUHFRPPRQPHDQVRIPDUNHW
GHYHORSPHQW %\ RSHQLQJ D QHZ VWRUH RU RI¿FH LQ D GLIIHUHQW
ORFDWLRQ \RX DUH VHHNLQJ WR VHOO WKH VDPH SURGXFWV RU VHUYLFHV WR
FXVWRPHUVZKRFRXOGQ¶WEX\WKHPEHIRUH
%
2IWHQ QHZ FXVWRPHUV FDQ DOVR EH IRXQG E\ UHVHJPHQWLQJ WKH
PDUNHW 1HZ WDUJHWV PD\ WKHQ EH FKRVHQ DQG VPDOO FKDQJHV FDQ
EHPDGHWRWKHSURGXFWOLQHUHSRVLWLRQLQJWKHH[LVWLQJRIIHULQJVWR
serve new customers.
ż ,Q DQ HDUOLHU OHFWXUH ZH GLVFXVVHG /HYL¶V SXUVXLW RI D
GLYHUVL¿FDWLRQVWUDWHJ\LQWKHVZKHQWKHFRPSDQ\WULHG
WR SURGXFH D QHZ SURGXFW²PHQ¶V VXLWV²IRU D QHZ JURXS RI
FXVWRPHUV²WKH&ODVVLF,QGHSHQGHQWV$VZHVDZWKLVVWUDWHJ\
IDLOHG IRU /HYL¶V PDUNHW GHYHORSPHQW PLJKW KDYH EHHQ D
EHWWHUDSSURDFK
/HFWXUH,GHQWLI\LQJ6RXUFHVRI6DOHV*URZWK
ż
$WDURXQGWKHVDPHWLPHWKDW/HYL¶VZDVGHYHORSLQJLWVVXLWV
WKHPDUNHWIRUFDVXDOMHDQVIRUZRPHQZDVODUJHO\XQWDSSHG
,WZDVDFWXDOO\/HH-HDQVWKDWLVJHQHUDOO\FUHGLWHGZLWKKDYLQJ
³GLVFRYHUHG´ WKLV PDUNHW /HYL¶V ZDV WU\LQJ VR KDUG WR ¿QG
PRUHH[RWLFVRXUFHVRIJURZWKWKDWLWPLVVHGDPDVVLYHORZ
ULVNRSSRUWXQLW\LWZDVSHUIHFWO\SRVLWLRQHGWRJUDVS
'LYHUVL¿FDWLRQ
% 'LYHUVL¿FDWLRQ LQYROYHVWU\LQJWRVHOODQHZSURGXFWWRDQHZJURXS
of customers. This is obviously the riskiest strategy because it
LQYROYHVWZRHQWLUHO\QHZDQGGLIIHUHQWVRXUFHVRIXQFHUWDLQW\
%
7KH XSVLGH RI GLYHUVL¿FDWLRQ LV WKDW ZKHQ GRQH FRUUHFWO\ LW FDQ
YDVWO\H[SDQGDFRPSDQ\¶VUHDFK,GHDOO\VHUYLQJGLIIHUHQWJURXSV
RI FXVWRPHUV RIWHQ LQ GLIIHUHQW PDUNHWV ZLWK D GLYHUVH VHW RI
SURGXFWVRIWHQIURPGLIIHUHQWSULFHTXDOLW\WLHUVDQGVRPHWLPHVLQ
HQWLUHO\ GLIIHUHQW FDWHJRULHV FDQ LQVXODWH D FRPSDQ\ IURP VKRFNV
RU FKDQJHV LQ DQ\ RQH PDUNHW RU SURGXFW FDWHJRU\ $ GLYHUVL¿HG
FRPSDQ\WHQGVWREHDUREXVWFRPSDQ\
%
7KHUDQJHRIKRWHOEUDQGVSURPRWHGE\0DUULRWW,QWHUQDWLRQDOLVWKH
HQGUHVXOWRISXUVXLQJDGLYHUVL¿FDWLRQVWUDWHJ\(DFKEUDQG²IURP
WKHORZHUHQG)DLU¿HOG,QQ 6XLWHVE\0DUULRWWWRWKHKLJKHQG-:
0DUULRWW/X[XU\+RWHOV²LVGLVWLQFWO\SRVLWLRQHGIURPWKHRWKHUVWR
VHUYHDGLIIHUHQWJURXSRIFXVWRPHUV
Gap Analysis
% *DSDQDO\VLVLVDWRROXVHGWRGLDJQRVHWKHVRXUFHRIDVDOHVIDLOXUH
,QRWKHUZRUGVLI\RXKDYHDSURGXFWRUVHUYLFHRQWKHPDUNHWWKDW
LVQRWVHOOLQJ\RXSHUIRUPDJDSDQDO\VLVWRKHOSGHWHUPLQHZK\
%
2QHW\SHRIJDSDQDO\VLVLVSHUIRUPHGWRPDQDJHDGRSWLRQRU¿UVW
WLPH VDOHV7KLV DQDO\VLV VWDUWV ZLWK WKH ODUJHVW JURXS RI SRWHQWLDO
FXVWRPHUV²\RXU HQWLUH WDUJHW VHJPHQW <RX WKHQ FRQGXFW PDUNHW
UHVHDUFKWRZRUNWKURXJKDVHULHVRISRWHQWLDOLPSHGLPHQWVWRVDOHV
DQGGHWHUPLQHZKHUHWKHODUJHVWGURSRIIVDUHRFFXUULQJ7KHVHDUH
WKHJDSVDQGWKH\WHQGWREHZKHUHLWLVPRVWZRUWKZKLOHWRDGGUHVV
your efforts.
ż ,PSHGLPHQWVWRDGRSWLRQPD\LQFOXGHDZDUHQHVVXQGHUVWDQGLQJ
DWWUDFWLYHQHVVDIIRUGDELOLW\DYDLODELOLW\DQGSXUFKDVHLQWHQW
ż
%
,W¶VLPSRUWDQWWRFRQGXFWDJDSDQDO\VLVEHFDXVHHDFKRIWKHVH
LPSHGLPHQWVUHTXLUHVDGLIIHUHQWVROXWLRQ)RUH[DPSOHDQDG
FDPSDLJQ GHVLJQHG WR SURPRWH DZDUHQHVV PXVW EH GLIIHUHQW
IURPDFDPSDLJQWRIRVWHUXQGHUVWDQGLQJ)LQGWKHJDSEHIRUH
SURFHHGLQJZLWKDVWUDWHJ\
7KHRWKHUZD\WRXVHDJDSDQDO\VLVLVWRH[DPLQHUHSXUFKDVH)RU
PDQ\SURGXFWVVXFFHVVLVQRWPHDVXUHGVLPSO\E\WKHQXPEHURI
SHRSOH ZKR EX\ WKH SURGXFW IRU WKH ¿UVW WLPH EXW E\ WKH QXPEHU
ZKRFRQWLQXHWREX\LW)RUWKLVNLQGRIJDSDQDO\VLV\RXVWDUWZLWK
SXUFKDVH ,Q RWKHU ZRUGV WKH ODUJHVW SRVVLEOH FDWHJRU\ LV SHRSOH
ZKR KDYH ERXJKW DW OHDVW RQFH<RX WKHQ ORRN DW LPSHGLPHQWV WR
UHSHDW SXUFKDVLQJ ZKLFK LQFOXGH VDWLVIDFWLRQ XVDJH IUHTXHQF\
XVDJHTXDQWLW\DQGUHSXUFKDVHLQWHQW
Suggested Reading
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHUV±
$QVRII³6WUDWHJLHVIRU'LYHUVL¿FDWLRQ´
Questions to Consider
1. 8VHWKH$QVRIIPDWUL[WRH[SORUHVRPHRSSRUWXQLWLHVIRUVDOHVJURZWK
3LFN RQH FRPSDQ\ LQ D PDUNHW \RX DUH IDPLOLDU ZLWK RU WKDW \RX
ZRXOG OLNH WR EHFRPH IDPLOLDU ZLWK 3UHSDUH D GHWDLOHG VWUDWHJ\ WR
LQFUHDVH VDOHV XVLQJ HDFK RI WKH IRXU FDWHJRULHV LGHQWL¿HG E\$QVRII
PDUNHW SHQHWUDWLRQ PDUNHW GHYHORSPHQW SURGXFW GHYHORSPHQW DQG
GLYHUVL¿FDWLRQ &RQVLGHU WKH SRWHQWLDO ULVNV DQG UHZDUGV RI HDFK RI
your solutions.
2. 3HUIRUP D JDS DQDO\VLV RQ D SURGXFW \RX DUH IDPLOLDU ZLWK ,Q OLHX
/HFWXUH,GHQWLI\LQJ6RXUFHVRI6DOHV*URZWK
RI FRQGXFWLQJ DFWXDO PDUNHW UHVHDUFK XVH \RXU LQWXLWLRQ DQG PDNH
VRPH HGXFDWHG JXHVVHV DERXW ZKLFK LPSHGLPHQWV DUH SUREDEO\ PRVW
VLJQL¿FDQWLQOLPLWLQJERWKSXUFKDVHDQGUHSXUFKDVH
Deriving Value from Your Customers
Lecture 54
A
VZH¶YHVHHQLQHDUOLHUOHFWXUHVERWKWKHFXVWRPHUDQGWKHFRPSDQ\
PXVWJHWVRPHWKLQJRXWRIDQH[FKDQJHLQRUGHUIRULWWREHFRQVLGHUHG
DVXFFHVV,QWKHODVWOHFWXUHIRULQVWDQFHZHWDONHGDERXWWKHGLUHFW
YDOXHFXVWRPHUVFDQSURYLGHWRFRPSDQLHVLQWKHIRUPRIVDOHV%XWLQWKLV
OHFWXUH ZH¶OO WKLQN PRUH EURDGO\ DERXW RWKHU VRXUFHV RI YDOXH D FRPSDQ\
VKRXOG VHHN ,Q SDUWLFXODU ZH¶OO FRYHU WKUHH DGGLWLRQDO NLQGV RI YDOXH WKDW
FXVWRPHUV FDQ FUHDWH IRU FRPSDQLHV OR\DOW\ YDOXH LQIRUPDWLRQ YDOXH DQG
communication value.
Loyalty Value
% &XVWRPHUOR\DOW\LVVHHQDVDNLQGRISKLORVRSKHU¶VVWRQHE\VRPH
SHRSOH LQ PDUNHWLQJ /R\DO FXVWRPHUV DUH ZLGHO\ FRQVLGHUHG WR
FRVWOHVVWRVHUYHDQGWREHOHVVSULFHVHQVLWLYH7KH\WHQGWREX\
PRUHDQGPDNHSXUFKDVHVPRUHRIWHQ7KH\DUHDOVRPRUHOLNHO\WR
IRUJLYHDFRPSDQ\ZKHQLWPDNHVPLVWDNHVDQGWRVHUYHDVEUDQG
DPEDVVDGRUV%XWWKHIDFWLVWKDWPDQ\RIWKHSXUSRUWHGEHQH¿WVRI
FXVWRPHU OR\DOW\ KDYHQ¶W KHOG XS WR HPSLULFDO VFUXWLQ\ 7KH OLQN
EHWZHHQ OR\DOW\ DQG LWV DVVXPHG EHQH¿WV KDV RIWHQ EHHQ GLI¿FXOW
WRSLQGRZQ
%
$SDUWRIWKHSUREOHPIRUUHVHDUFKHUVLQYHVWLJDWLQJOR\DOW\LVWKDWLW
LVRIWHQRSHUDWLRQDOL]HGLQSXUHO\EHKDYLRUDOWHUPV
ż &RPELQJ WKURXJK \RXU GDWDEDVH \RX PLJKW FRQVLGHU D
customer to be loyal if he or she has bought more than a certain
DPRXQWRI\RXUSURGXFWZLWKLQDFHUWDLQWLPHIUDPH2ULI\RX
KDYHUHWDLOHUOHYHOGDWD\RXPLJKWORRNDWWKHSHRSOHZKREX\
DQHVSHFLDOO\KLJKSURSRUWLRQRIRQHEUDQGUHODWLYHWRRWKHUVLQ
DSDUWLFXODUFDWHJRU\
Lecture 54: Deriving Value from Your Customers
%
ż
7R EH VXUH \RX PLJKW JHQHUDOO\ H[SHFW D OR\DO FXVWRPHU WR
EX\ PRUH RI \RXU RIIHULQJ EXW IUHTXHQF\ YROXPH DQG VKDUH
RISXUFKDVHDUHQRWQHFHVVDULO\HYLGHQFHRIOR\DOW\,WFRXOGEH
that someone buys from you out of habit. Behaviorally, habitual
EX\LQJZRXOGORRNVLPLODUWROR\DOW\EXWSV\FKRORJLFDOO\WKH
WZREHKDYLRUVDUHYHU\GLIIHUHQW
ż
+DELWVWHQGWREHXQWKLQNLQJXQFRQVLGHUHGEHKDYLRUVWULJJHUHG
E\H[WHUQDOHQYLURQPHQWDOVWLPXOL3HUKDSVHQWHULQJWKHVQDFN
IRRG DLVOH DW WKH JURFHU\ VWRUH VHUYHV DV D FXH IRU \RX WR EX\
Triscuits. Loyal customers, in contrast, are more likely to view
DQH[FKDQJHZLWKDFRPSDQ\WKURXJKWKHOHQVRIDUHODWLRQVKLS
7KH\GHOLEHUDWHO\FKRRVHWREX\DQRIIHULQJEHFDXVHWKH\OLNHLW
ż
,QWKHQRUPDOFRXUVHRIHYHQWVKDELWDQGOR\DOW\PLJKWORRNWKH
VDPH%XWLIVRPHWKLQJFKDQJHVWRLQWHUUXSWWKHFXHV²DVWRUH
UHDUUDQJHVLWVVKHOYHVRUDFXVWRPHUPRYHVWRDQHZFLW\DQG
IDFHV QHZ HQYLURQPHQWDO FXHV²WKHQ WKH KDELWXDO EHKDYLRU LV
QHYHUWULJJHUHG/R\DOW\LVPRUHUREXVWWKDQKDELW,WLVURRWHG
LQ D IHHOLQJ WKDW RQH RIIHULQJ LV VRPHKRZ VXSHULRU WR RWKHUV
2EYLRXVO\ WKH GLIIHUHQFHV LQ WKHVH W\SHV RI EHKDYLRU FDQ EH
VLJQL¿FDQWIRU\RXUEXVLQHVV
)RUFRPSDQLHVWKDWDUHLQWHUHVWHGLQIRVWHULQJOR\DOW\DPRQJWKHLU
FXVWRPHUVXVLQJWKHEHKDYLRUDOLQGLFDWRUVIRXQGLQWKHLUSXUFKDVH
GDWDEDVHV PD\ QRW EH WKH EHVW SODFH WR VWDUW 6XVDQ )RXUQLHU D
marketing researcher from Boston University, is among a growing
JURXS RI VFKRODUV ZKR VWXG\ OR\DOW\ XVLQJ WKH WRROV SURYLGHG E\
VRFLRORJ\DQGDQWKURSRORJ\LQVWHDGRIWKRVHSURYLGHGE\VWDWLVWLFV
DQGHFRQRPLFV
ż %\ VSHQGLQJ WLPH ZLWK LQGLYLGXDO FRQVXPHUV DQG OLVWHQLQJ
WR WKHP WDON DERXW EUDQGV DW OHQJWK WKHVH UHVHDUFKHUV KDYH
GLVFRYHUHGWKDWFXVWRPHUVXVHGLIIHUHQWODQJXDJHLQGLVFXVVLQJ
WKHEUDQGVWRZKLFKWKH\DUHOR\DO6SHFL¿FDOO\OR\DOFXVWRPHUV
WDONDERXWEUDQGVDVUHODWLRQVKLSSDUWQHUV
ż
7KHQDWXUHRIWKHVHUHODWLRQVKLSVLVLPSRUWDQWEHFDXVHLWDIIHFWV
KRZFXVWRPHUVWKLQNDERXWWKHLUH[FKDQJHVZLWKWKHFRPSDQ\
7KHDQWKURSRORJLVW$ODQ)LVNHQRWHGWKDWSHRSOHIRUPGLIIHUHQW
NLQGVRIUHODWLRQVKLSVDQGWKDWWKHVHGLIIHUHQWUHODWLRQVKLSW\SHV
color the way we engage in economic transactions.
ż
)RUH[DPSOHDPDUNHWSULFLQJRUPDUNHWH[FKDQJHUHODWLRQVKLS
LVIRFXVHGRQPD[LPL]LQJHFRQRPLFYDOXH7KLVPLJKWEHWKH
W\SH RI UHODWLRQVKLS \RX ZRXOG KDYH LQ WKH VDOH RI D FDU WR D
VDOHVSHUVRQDWDXVHGFDUGHDOHUVKLS,QFRQWUDVWDFRPPXQDO
VKDULQJ UHODWLRQVKLS LV IRFXVHG RQ PD[LPL]LQJ IDLUQHVV <RX
PLJKW KDYH WKLV W\SH RI UHODWLRQVKLS LQ WKH VDOH RI D FDU WR D
IULHQGRUDUHODWLYH
%
7KHW\SHVRIUHODWLRQVKLSVSHRSOHIRUPZLWKRWKHUVKDYHSDUDOOHOVLQ
WKHUHODWLRQVKLSVSHRSOHIRUPZLWKEUDQGVDQGFRPSDQLHVDQGPDQ\
RI WKRVH EUDQG UHODWLRQVKLSV DUH EDVHG RQ PDUNHW H[FKDQJH :H
UHFRJQL]HWKHFRPSDQ\DVDQHQWLW\RXWWRPD[LPL]HLWVXWLOLW\DQG
ZHHQWHUWKHH[FKDQJHVHHNLQJWKHVDPH%XWVRPHRIWKHH[FKDQJHV
ZHKDYHZLWKFRPSDQLHVRUEUDQGVVHHPEDVHGWRDJUHDWHUH[WHQW
RQFRPPXQDOVKDULQJ&RQVLGHUIRUH[DPSOHSHRSOHZKRDUHOR\DO
WR$SSOHSURGXFWVDQGWHQGWREODPHDQ\FRPSXWHUSUREOHPVWKH\
KDYHRQVRIWZDUHUDWKHUWKDQWKH$SSOHKDUGZDUH
%
)RUDOOWKHVHUHDVRQVLWLVLPSRUWDQWWRGLVWLQJXLVKEHWZHHQOR\DOW\
DQG LWV SXUHO\ EHKDYLRUDO HTXLYDOHQWV ,Q SDUWLFXODU WKLQN DERXW
³OR\DOW\´SURJUDPVDWPDQ\FRPSDQLHV7KHVHSURJUDPVLQFHQWLYL]H
UHSHDWSXUFKDVHVDQGPDQ\DUHVXFFHVVIXODWGRLQJVREXWDUHWKH\
UHDOO\ JHQHUDWLQJ OR\DOW\" :RXOG SHRSOH FRQWLQXH WR EX\ LI WKH
³OR\DOW\´UHZDUGVZHUHHOLPLQDWHG"
ż 2IFRXUVHFXVWRPHULQFHQWLYHSURJUDPVFDQEHSRZHUIXOWRROV
WR GULYH VDOHV EXW PDQDJHUV VKRXOG QRW IRRO WKHPVHOYHV LQWR
thinking they relate to loyalty.
ż
/R\DOW\ LV GLIIHUHQW WKDQ LQFHQWLYL]HG VDOHV LW LV D SRWHQWLDO
VRXUFH RI YDOXH IRU FRPSDQLHV DQG WKH\ VKRXOG JLYH FDUHIXO
FRQVLGHUDWLRQWRKRZPXFKLWLVZRUWKWRFXOWLYDWHDPRUHOR\DO
customer base.
Lecture 54: Deriving Value from Your Customers
Information Value
% $V PDQ\ VPDUW FRPSDQLHV NQRZ FXVWRPHUV FDQ SURYLGH \RX
ZLWK YDVW DPRXQWV RI YDOXDEOH LQIRUPDWLRQ )RU H[DPSOH VLPSO\
E\ FROOHFWLQJ DJJUHJDWH DQG LQFUHDVLQJO\ LQGLYLGXDOL]HG GDWD RQ
FXVWRPHUSXUFKDVHVFRPSDQLHVFDQJHWSHUVRQDOKHDOWKLQIRUPDWLRQ
RQFXVWRPHUV7KLVLQIRUPDWLRQFDQEHXVHGWRFXVWRPL]HRIIHULQJV
GHYHORSQHZRIIHULQJVDQGPDNHPRUHDFFXUDWHIRUHFDVWV
%
7KH LQIRUPDWLRQ \RX FDQ FROOHFW LV QRW OLPLWHG WR VDOHV GDWD
5HTXHVWV IRU LQIRUPDWLRQ RU QDYLJDWLRQ SDWWHUQV WKURXJK \RXU
ZHEVLWHRUSK\VLFDOVWRUHVFDQDOVRWHDFK\RXVRPHWKLQJDERXW\RXU
FXVWRPHUV 6XFK LQIRUPDWLRQ VKRXOG EH FRQVLGHUHG DV D SRWHQWLDO
VRXUFHRIYDOXHFXVWRPHUVFDQSURYLGH²LQDGGLWLRQWRWKHPRQH\
WKH\JLYH\RXLQDQH[FKDQJH
%
Further, customers can give you valuable information about your
RZQRSHUDWLRQVDQGPDUNHWLQJ$FRPSODLQWIURPDFXVWRPHUPD\
KLJKOLJKW SURFHVV IDLOXUHV FRPPXQLFDWLRQ IDLOXUHV RU LQDGHTXDWH
FRPSDQ\ SROLFLHV DQG SURFHGXUHV ,W¶V D JRRG LGHD WR DVVXPH WKDW
HYHU\ FXVWRPHU EULQJLQJ \RX LQIRUPDWLRQ²ERWK SRVLWLYH DQG
QHJDWLYH²LVVSHDNLQJRQEHKDOIRIVHYHUDORWKHUV
%
,Q PDQ\ FDVHV \RX FDQ KLUH D FRQVXOWDQW WR DXGLW \RXU SURFHVVHV
DQGSURFHGXUHVDQGJLYH\RXJRRGLQVLJKWVDERXWKRZWRLPSURYH
them. But you may also be able to get many of these insights for
IUHHE\VLPSO\OLVWHQLQJWR\RXUFXVWRPHUV²ERWKWKHKDSS\DQGWKH
XQKDSS\RQHV,QRWKHUZRUGVXVH\RXUFXVWRPHUVDVFRQVXOWDQWV
ż 2QH FRPSDQ\ WKDW XVHV LWV FXVWRPHUV LQ WKLV ZD\ LV 6WHZ
/HRQDUG¶V D VPDOO FKDLQ JURFHU\ VWRUH DQG GDLU\ LQ WKH
QRUWKHDVWHUQ 8QLWHG 6WDWHV $OWKRXJK WKH VWRUHV KDYH D
UHODWLYHO\VPDOOLQYHQWRU\FRPSDUHGWRW\SLFDOJURFHU\VWRUHV
WKH FKDLQ KDV EHHQ FDOOHG WKH ³'LVQH\ODQG RI GDLU\ VWRUHV´
&RVWXPHG HQWHUWDLQHUV JUHHW FKLOGUHQ LQ WKH DLVOHV DQG VRPH
ORFDWLRQVHYHQIHDWXUHSHWWLQJ]RRV
ż
%XW ZKDW WUXO\ PDNHV 6WHZ /HRQDUG¶V XQLTXH LV WKH SURFHVV
WKH VWRUH XVHV WR ¿QG WKH LGHDV LW LPSOHPHQWV RQ WKH VDOHV
ÀRRU(YHU\VWRUHFRQWDLQVDQRYHUVL]HGVXJJHVWLRQER[ZKLFK
FXVWRPHUV¿OOHYHU\EXVLQHVVGD\$QGHYHU\PRUQLQJDVWDIIHU
LV DVVLJQHG WR W\SH XS WKH VXJJHVWLRQV DQG FLUFXODWH WKHP WR
WKHYDULRXVGHSDUWPHQWVDURXQGWKHVWRUH%HIRUHOXQFKHYHU\
PHPEHURIWKHVWDIIKDVDOLVWRISRVLWLYHDQGQHJDWLYHIHHGEDFN
LWHPVSURYLGHGE\FXVWRPHUV7KHFRPSDQ\DOVRKROGVUHJXODU
IRFXVJURXSVZLWKFXVWRPHUV
ż
+RZ ZHOO KDV WKLV SKLORVRSK\ RI OLVWHQLQJ WR WKH FXVWRPHU
VHUYHG6WHZ/HRQDUG¶V"7KHFKDLQLVLQWKHGuinness Book of
:RUOG 5HFRUGV DV KDYLQJ ³WKH JUHDWHVW VDOHV SHU XQLW DUHD RI
DQ\VLQJOHIRRGVWRUHLQWKH8QLWHG6WDWHV´,WKDVDOVRHQMR\HG
DFRQVLVWHQWVSRWRQ)RUEHV¶VOLVWRIWKHWRSHPSOR\HUVLQ
the country.
Communication Value
% &RPPXQLFDWLRQYDOXHLVWKHYDOXHWKDWFXVWRPHUVEULQJWRDFRPSDQ\
E\WDONLQJWRRWKHUSRWHQWLDOFXVWRPHUVDERXWWKHEXVLQHVV²LQRWKHU
ZRUGV FXVWRPHU ZRUG RI PRXWK &RPPXQLFDWLRQ YDOXH VWDQGV LQ
FRQWUDVW WR WKH RWKHU W\SHV RI YDOXH ZH¶YH GLVFXVVHG EHFDXVH LW LV
RIWHQFRQFHUQHGZLWKQHJDWLYHYDOXH
%
7KH FRPPXQLFDWLRQ YDOXH RI FXVWRPHUV LV GLI¿FXOW WR DFFRXQW IRU
EHFDXVHLWLVGLI¿FXOWWRPHDVXUHGLUHFWO\%XWHYHQWKRXJKLWLVKDUG
WRNQRZH[DFWO\KRZPXFKZRUGRIPRXWKDIIHFWV\RXUFXVWRPHUV
LWLVUHODWLYHO\HDV\WRGHWHUPLQHLQJHQHUDOWHUPVKRZLPSRUWDQW
ZRUG RI PRXWK LV OLNHO\ WR EH WR \RXU FRPSDQ\<RX FDQ VWDUW E\
DVNLQJ \RXUVHOI VRPH JHQHUDO TXHVWLRQV DERXW WKH W\SH RI PDUNHW
\RXFRPSHWHLQDQGWKHW\SHRIFXVWRPHUV\RXVHUYH
:KHQ GHWHUPLQLQJ KRZ LPSRUWDQW FRPPXQLFDWLRQ YDOXH LV WR
\RXUFRPSDQ\\RXVKRXOG¿UVWGHWHUPLQHWKHVWUXFWXUHRIWKH
PDUNHWLQZKLFK\RXDUHFRPSHWLQJ,VLWDFRPSHWLWLYHPDUNHW
RQHZLWKPDQ\DOWHUQDWLYHVIRUFXVWRPHUVWRFKRRVHDPRQJ",I
LWLVWKHQWKHRSLQLRQVRIFRQVXPHUV²ERWKJRRGDQGEDG²DUH
OLNHO\WRKDYHDVLJQL¿FDQWUHYHQXHLPSDFW
ż
<RXVKRXOGDOVRORRNDWWKHW\SHVRIJRRGVRUVHUYLFHV\RXVHOO
3HRSOHDUHPRUHOLNHO\WRWDONDERXWVRPHW\SHVRISXUFKDVHV
ZLWK WKHLU IULHQGV WKDQ RWKHUV )RU H[DPSOH PRVW SHRSOH GR
UHVHDUFK ZKHQ FRQVLGHULQJ ELJWLFNHW LWHPV DQG WKDW UHVHDUFK
PD\LQYROYHDVNLQJRWKHUSHRSOHWKHLURSLQLRQV/LNHZLVHJRRGV
DQG VHUYLFHV ZKRVH TXDOLW\ LV GLI¿FXOW WR DVVHVV EHIRUHKDQG
VXFKDVWKHZRUNRIGRFWRUV
PHFKDQLFVDQGFRQWUDFWRUV
DUH HVSHFLDOO\ VXVFHSWLEOH
WR WKH HIIHFWV RI ZRUGRI
mouth communications.
ż
1H[WDVN\RXUVHOIDERXWWKH
customers you serve. Some
FXVWRPHUV DUH HVSHFLDOO\
OLNHO\ WR LQÀXHQFH RWKHUV
ZLWK WKHLU RSLQLRQV VXFK
as those who have large
VRFLDOQHWZRUNVDUHOHDGHUV If you sell to teenagers, then you
have many customers
in their communities, or probably
ZLWKODUJHVRFLDOQHWZRUNVDQG
DUH VNLOOHG FRPPXQLFDWRUV VKRXOGEHDZDUHRIWKHLQÀXHQFH
(YHQ LI \RXU WDUJHW PDUNHW RIFXVWRPHUZRUGRIPRXWK
GRHVQ¶W VHHP WR FRQWDLQ D
GLVSURSRUWLRQDWHVKDUHRILQÀXHQFHUV\RXVKRXOGVWLOOFRQVLGHU
WKH VL]H RI \RXU RYHUDOO WDUJHW VHJPHQWV ,Q D ODUJH HQRXJK
JURXS RI FXVWRPHUV VRPH RI WKHP ZLOO KDYH WKH VNLOOV DQG
PRWLYDWLRQWRLQÀXHQFHRWKHUV
‹'LJLWDO9LVLRQ3KRWRGLVF7KLQNVWRFN
Lecture 54: Deriving Value from Your Customers
ż
ż
)LQDOO\ DVN \RXUVHOI DERXW WKH W\SHV RI H[SHULHQFHV \RXU
FXVWRPHUVDUHOLNHO\WRKDYHZLWK\RXURIIHULQJV²ERWKWKHJRRG
H[SHULHQFHV DQG WKH EDG +RZ W\SLFDO DUH WKRVH H[SHULHQFHV"
+RZHDV\LVLWIRURWKHUVWRLGHQWLI\DQGV\PSDWKL]HZLWKWKH
FXVWRPHUZKRKDGDQHVSHFLDOO\JRRGRUEDGH[SHULHQFH"
Suggested Reading
$JDUZDODQG/DUULFN³:KHQ&RQVXPHUV&DUHDERXW%HLQJ7UHDWHG)DLUO\´
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHU
)RXUQLHUDQG<DR³$&DVHIRU/R\DOW\´
Questions to Consider
1. &RQVLGHU WKH GLIIHUHQFHV EHWZHHQ OR\DOW\ DQG KDELW .HHSLQJ LQ PLQG
WKDW WKHVH WZR FXVWRPHU FKDUDFWHULVWLFV DUH RIWHQ LQGLVWLQJXLVKDEOH
XVLQJ SXUFKDVH GDWD DORQH KRZ ZRXOG \RX PHDVXUH OR\DOW\" :KDW
WDFWLFV ZRXOG \RX XVH WR LQFUHDVH FXVWRPHU OR\DOW\" ,Q RUGHU WR PDNH
WKLV H[HUFLVH FRQFUHWH SLFN D VSHFL¿F SURGXFW RU VHUYLFH ZLWK ZKLFK
\RXDUHIDPLOLDUDQGGH¿QHDVSHFL¿FWDUJHWVHJPHQWZKRVHYDOXHV\RX
XQGHUVWDQG:KDWFRXOG\RXGRWRLQFUHDVHWKHOR\DOW\RIWKLVJURXSIRU
WKLVSDUWLFXODURIIHULQJ"+RZZRXOG\RXNQRZLI\RXZHUHVXFFHVVIXOLQ
LQFUHDVLQJOR\DOW\"
2. *LYHVRPHWKRXJKWWRWKHLQIRUPDWLRQYDOXHRIFXVWRPHUV&RQVLGHU\RXU
FRPSDQ\ RUDFRPSDQ\ZLWKZKLFK\RXDUHIDPLOLDU DQGJHQHUDWHDOLVW
RIFRQFUHWHZD\VWKDWFRPSDQ\FRXOGPDNHEHWWHUXVHRIWKHLQIRUPDWLRQ
LWV FXVWRPHUV SURYLGH7KLQN ERWK RI LQIRUPDWLRQ DERXW WKH FXVWRPHUV
WKHPVHOYHV HJ WKURXJK SXUFKDVH KLVWRULHV DQG LQIRUPDWLRQ DERXW
WKH FRPSDQ\ HJ WKURXJK FRPSODLQWV +RZ PLJKW WKLV LQIRUPDWLRQ
EH FROOHFWHG PRUH HI¿FLHQWO\" +RZ PLJKW LW EH DQDO\]HG LQ D WLPHO\
PDQQHU":KDWNLQGVRITXHVWLRQVPLJKWWKLVLQIRUPDWLRQDQVZHU"
Creating Great Customer Experiences
Lecture 55
U
Lecture 55: Creating Great Customer Experiences
SWRWKLVSRLQWZHKDYHIRFXVHGRQPDUNHWLQJVWUDWHJ\,QSDUWLFXODU
ZH¶YHORRNHGDWDQVZHULQJWKUHHDOOLPSRUWDQWPDUNHWLQJTXHVWLRQV
:KRDUH\RXUFXVWRPHUV":KDWGRWKH\YDOXH"+RZFDQ\RXJLYH
FXVWRPHUV ZKDW WKH\ YDOXH EHWWHU WKDQ WKH FRPSHWLWLRQ" :H DQVZHU WKRVH
TXHVWLRQV WKURXJK WKH SURFHVV RI VHJPHQWDWLRQ WDUJHWLQJ DQG SRVLWLRQLQJ
DQG E\ DFFRXQWLQJ IRU WKH YDULRXV VRXUFHV RI YDOXH WKDW FXVWRPHUV DQG
FRPSDQLHVJHWIURPDQLQWHUDFWLRQ7KHVHDUHDOOVWUDWHJLFFRQFHUQVDQGDV
ZH¶YHVDLGVWUDWHJ\PXVWFRPH¿UVW%XWRQFH\RXKDYHDVWUDWHJ\\RXPXVW
VXFFHVVIXOO\LPSOHPHQWLWWKLVLVWKHWRSLFZHZLOOGLVFXVVIRUWKHUHPDLQGHU
RI WKHVH OHFWXUHV WKH PDUNHWLQJ WDFWLFV \RX FDQ XVH WR LPSOHPHQW \RXU
marketing strategy.
7KH3VDQGWKH0DUNHWLQJ0L[
% The most famous framework for remembering all the marketing
WDFWLFV \RX KDYH DW \RXU GLVSRVDO LV WKH 3V SURGXFW SULFH
SURPRWLRQDQGSODFH
ż 3URGXFW UHIHUV WR WKH RIIHULQJ LWVHOI²WKH DWWULEXWHV RI \RXU
SURGXFW RU VHUYLFH ,Q WKLV FRQWH[W SURGXFW LQFOXGHV VXFK
HOHPHQWVDVEUDQGLQJSDFNDJLQJDQGZDUUDQWLHV
ż
3ULFHLVIDLUO\VWUDLJKWIRUZDUGEXWDJDLQLQWKLVFRQWH[WLWDOVR
LQFOXGHVWHPSRUDU\GLVFRXQWVVXFKDVVDOHVDQGFRXSRQVDQG
QRQPRQHWDU\FRVWVWRWKHFRQVXPHUVXFKDVWLPHHQHUJ\DQG
DWWHQWLRQUHTXLUHGWREX\WKHSURGXFW
ż
Promotion UHIHUV WR DOO QRQSULFH IDFWRUV LQYROYHG LQ
LQFHQWLYL]LQJ D SXUFKDVH VXFK DV DGYHUWLVLQJ VSRQVRUVKLSV
VDOHVSHRSOHDQGVRRQ
ż
3ODFH UHIHUV WR GLVWULEXWLRQ +RZ GRHV WKH SURGXFW JHW WR WKH
FXVWRPHU" :KHUH FDQ WKH FXVWRPHU EX\ WKH RIIHULQJ" 3ODFH
LQFOXGHVYLUWXDOORFDWLRQVVXFKDVZHEVLWHV
%
7KH 3V ZHUH GHYHORSHG DV D WDFWLFDO IUDPHZRUN E\ PDUNHWLQJ
SURIHVVRU (GPXQG 0F&DUWK\ LQ DQG KDYH VHUYHG PDUNHWHUV
UHPDUNDEO\ZHOOVLQFHWKDWWLPH+RZHYHU\RXVKRXOGNHHSLQPLQG
WZRZRUGVRIZDUQLQJDERXWWKH3V
ż )LUVW EHFDXVH RI LWV SRSXODULW\ DQG KLVWRU\ VRPH SHRSOH
KDYHFRPHWRWUHDWWKH3VDVLIWKHIUDPHZRUNHQFRPSDVVHV
HYHU\WKLQJ ZH QHHG WR NQRZ WR VROYH PDUNHWLQJ SUREOHPV
7KDW¶V QRW WUXH$OZD\V UHPHPEHU WKDW WKH 3V LV D WDFWLFDO
IUDPHZRUN<RXQHHGDVWUDWHJ\EHIRUH\RXFDQKRSHWRXVHWKH
3VZHOO
ż
%
7KHVHFRQGGDQJHULQXVLQJWKH3VLVUHPHPEHULQJWKDWWKLV
IUDPHZRUNDOVRLQFOXGHVHYHU\WKLQJEHKLQGWKHIRXU3ZRUGV
7R XVH WKH 3V FRUUHFWO\ LW¶V QRW HQRXJK WR UHPHPEHU ZKDW
WKH 3V VWDQG IRU<RX PXVW DOVR UHPHPEHU DOO WKH QRQ3V WKDW
DUH LQFOXGHG LQ WKH IRXU EURDG FDWHJRULHV RI SURGXFW SULFH
SURPRWLRQDQGSODFH
$VOLJKWO\H[SDQGHGWDFWLFDOPRGHOLVEDVHGRQWKHPDUNHWLQJPL[
IUDPHZRUNGHYHORSHGE\$OH[DQGHU&KHUQHYLQKLVERRN6WUDWHJLF
Marketing Management 7KLV IUDPHZRUN LQFOXGHV VHYHQ EDVLF
FODVVHVRIGHFLVLRQVWKDWPDUNHWHUVPXVWPDNHDERXWWKHLURIIHULQJV
SURGXFW VHUYLFH EUDQG SULFH SURPRWLRQV FRPPXQLFDWLRQ DQG
GLVWULEXWLRQ7DNHQWRJHWKHUWKHVHVHYHQYDULDEOHVDUHUHIHUUHGWRDV
the marketing mix.
7KH&XVWRPHU([SHULHQFH
% 7KHUH DUH D IHZ DSSURDFKHV WR PDNLQJ WDFWLFDO GHFLVLRQV DERXW
SURGXFWV DQG VHUYLFHV 2QH WKDW KDV EHFRPH SRSXODU LQYROYHV
GHVLJQLQJ SURGXFWV DQG VHUYLFHV WR SURYLGH WKH EHVW SRVVLEOH
H[SHULHQFH IRU WKH FXVWRPHU 7KH EDVLF LGHD LV WKDW FXVWRPHUV¶
HYDOXDWLRQV RI SURGXFWV DQG VHUYLFHV DUH DFWXDOO\ HYDOXDWLRQV RI
WKHLUH[SHULHQFHVZLWKWKHRIIHULQJV²KRZLWIHHOVWREX\XVHDQG
consume them.
Lecture 55: Creating Great Customer Experiences
%
3URGXFWV DQG VHUYLFHV DUH GLIIHUHQW LQ VRPH LPSRUWDQW ZD\V
SURGXFWV WHQG WR EH WDQJLEOH DQG VHSDUDEOH IURP SURGXFWLRQ IRU
H[DPSOH ZKLOH VHUYLFHV WHQG WR EH LQWDQJLEOH DQG ³FRQVXPHG´
DW WKH VDPH WLPH WKH\ DUH FUHDWHG %XW IRFXVLQJ RQ WKH FXVWRPHU
H[SHULHQFH EOXUV WKRVH GLIIHUHQFHV )URP D FXVWRPHU H[SHULHQFH
VWDQGSRLQW ZKDW PDWWHUV LVQ¶W ZKHWKHU WKH RIIHULQJ LV D SURGXFW
RU D VHUYLFH EXW ZKDW WKH FXVWRPHU WKLQNV DQG IHHOV GXULQJ WKH
LQWHUDFWLRQ ,Q HVVHQFH WKH IRFXV RQ FXVWRPHU H[SHULHQFH PHDQV
treating every offering as if it were a service.
%
7R GHVLJQ SURGXFWV DQG VHUYLFHV DURXQG WKH FXVWRPHU H[SHULHQFH
LW¶V LPSRUWDQW WR XQGHUVWDQG KRZ SHRSOH HYDOXDWH H[SHULHQFHV
&RQVLGHUIRUH[DPSOH\RXUODVWYDFDWLRQ$YDFDWLRQLVPDGHXSRI
WKRXVDQGVRILQGLYLGXDOPRPHQWVLQWLPHEXWZKHQLW¶VRYHU\RX
VRPHKRZ HQG XS ZLWK DQ DJJUHJDWH LPSUHVVLRQ RI WKH HQWLUH WULS
+RZGLG\RXDJJUHJDWHDOOWKRVHLQGLYLGXDOPRPHQWV"
ż 5HVHDUFKHUV KDYH GHWHUPLQHG WKDW WKHUH DUH WZR SRLQWV LQ
WLPH WKDW RYHUZKHOPLQJO\ GHWHUPLQH KRZ ZH HYDOXDWH DQ
H[SHULHQFH ZKHWKHU LW¶V D SKRQH FDOO ZLWK FXVWRPHU VHUYLFH
GLQQHUDWDUHVWDXUDQWRUDWULSWR'LVQH\:RUOG
ż
7KH ¿UVW SRLQW LV WKH SHDN WKDW LV WKH EHVW PRVW HQMR\DEOH
SRLQWRIDJRRGH[SHULHQFHRUWKHZRUVWOHDVWHQMR\DEOHSRLQW
RIDEDGH[SHULHQFH7KHRWKHUSRLQWLQWLPHWKDWPDWWHUVLVWKH
HQG²ZKDW\RXZHUHIHHOLQJDVWKHH[SHULHQFHFDPHWRDFORVH
ż
:KHQSHRSOHORRNEDFNRQDQH[SHULHQFHDQGUDWHKRZWKH\IHOW
DERXW LW²ZKDW SV\FKRORJLVWV FDOO UHWURVSHFWLYH HYDOXDWLRQ²D
VLPSOHDYHUDJHRIWKHSHDNDQGWKHHQGSUHGLFWVKRZWKH\ZLOO
UDWHWKHH[SHULHQFHDVDZKROH
ż
7KLV¿QGLQJLVVRUREXVWWKDWLWKDVFRPHWREHNQRZQDVWKH
peak-end ruleDQGLWOHDGVWRVHYHUDOVSHFL¿FELWVRIDGYLFHIRU
PDQDJLQJFXVWRPHUH[SHULHQFHV
5XOHVIRU0DQDJLQJ&XVWRPHU([SHULHQFHV
% 7KH¿UVWUXOHIRUPDQDJLQJFXVWRPHUH[SHULHQFHVLVWR¿QLVKZHOO²
RUDWOHDVWOHVVEDGO\%HFDXVHWKHHQGLVRQHRIWKHWZRSRLQWVLQ
WLPH WKDW PDWWHU WKH PRVW \RX ZDQW WR PDNH VXUH WKDW LW¶V JUHDW
2ULI\RXFDQDQWLFLSDWHWKDWWKHH[SHULHQFHZLOOEHXQSOHDVDQWIRU
\RXUFXVWRPHU²DFDOOZLWK\RXUVHUYLFHFHQWHUWRUHSRUWDSUREOHP
IRU H[DPSOH²GR ZKDW \RX FDQ WR PDNH VXUH WKDW WKH HQG RI WKH
H[SHULHQFHLVDVJRRGDV\RXFDQUHDVRQDEO\PDNHLW
%
7KHVHFRQGUXOHLVUHODWHGWRWKH¿UVW*HWEDGH[SHULHQFHVRXWRI
WKHZD\HDUO\,IWKHUHLVDQ\SDUWRIWKHLQWHUDFWLRQZLWKDFXVWRPHU
WKDW \RX NQRZ ZLOO EH XQSOHDVDQW JHWWLQJ LW RXW RI WKH ZD\ HDUO\
UHGXFHV WKH OLNHOLKRRG WKDW WKH ZRUVW SDUW RI WKH H[SHULHQFH ZLOO
FRPHDWWKHHQG
ż )RU H[DPSOH PDQ\ ¿UPV DFTXLUH EXVLQHVV E\ SLWFKLQJ WKHLU
VHUYLFHV WR SURVSHFWLYH FOLHQWV $QG LQ PDQ\ RI WKHVH VDOHV
SLWFKPHHWLQJVWKHWHDPH[SODLQVDOOWKHEHQH¿WVRIWKHVHUYLFH
XSIURQWDQGHQGVWKHPHHWLQJE\UHYHDOLQJWKHSULFH
ż
%
%XW WKLQN DERXW WKLV DSSURDFK IURP D FXVWRPHU H[SHULHQFH
VWDQGSRLQW0RVWRIWKHJRRGLQIRUPDWLRQLVFRPPXQLFDWHGLQ
WKHEHJLQQLQJDQGWKHSULFH²ZKLFKLVXVXDOO\WKHFOLHQW¶VOHDVW
IDYRULWHSDUWRIWKHPHHWLQJ²LVVDYHGIRUWKHHQG7KHSHDN
HQGUXOHVXJJHVWVWKDWFOLHQWVPD\UHPHPEHUWKHH[SHULHQFHRI
WKH SLWFK PHHWLQJ PRUH IDYRUDEO\ RYHUDOOLI WKH OHDVWSOHDVDQW
SDUWZHUHWRFRPHHDUOLHULQWKHPHHWLQJ
7KHWKLUGUXOHIRUPDQDJLQJFXVWRPHUH[SHULHQFHLVWRIRFXVRQWKH
SHDNV,I\RXDUHFRQVLGHULQJWZRZD\VRILPSURYLQJ\RXUFXVWRPHU
H[SHULHQFH²RQH WKDW ZLOO LPSURYH WKH DYHUDJH WKURXJKRXW WKH
H[SHULHQFH DQG RQH WKDW ZLOO PDNH WKH EHVW SDUW MXVW D OLWWOH ELW
EHWWHU²\RXVKRXOGFKRRVHWKHVHFRQG,PSURYLQJWKHSHDNLVPRUH
OLNHO\WRGHOLYHUDQRYHUDOOLPSURYHPHQWLQWKHFXVWRPHUH[SHULHQFH
%
7KHIRXUWKUXOHKHUHLVWRFRQVLGHUWKHUHIHUHQFHSRLQWV([SHULHQFH
HYDOXDWLRQVDUHRIWHQPDGHUHODWLYHWRVRPHUHIHUHQFHSRLQW²VRPH
H[SHFWDWLRQRIKRZWKHH[SHULHQFHVKRXOGJR<RXUMREDVDPDUNHWHU
LVWRGHWHUPLQHZKDWUHIHUHQFHSRLQWV\RXUFXVWRPHULVOLNHO\WRKDYH
ZKHQHYDOXDWLQJ\RXUH[SHULHQFHDQGZKHQSRVVLEOHWRLQÀXHQFH
\RXUFXVWRPHUV¶MXGJPHQWVE\SURYLGLQJWKRVHUHIHUHQFHSRLQWV
ż 2QHUHIHUHQFHSRLQWWKDWPDUNHWHUVFDQFRQWUROLVWKDWHVWDEOLVKHG
E\WKHFRPSDQ\¶VRZQFRPPXQLFDWLRQV,IDGYHUWLVLQJVRFLDO
PHGLD FDPSDLJQV DQG SXEOLF UHODWLRQV PHVVDJLQJ DOO SDLQW D
SLFWXUHRIDPDJLFDOH[SHULHQFHFXVWRPHUVZLOOWDNHQRWHDQG
VHWWKHLUH[SHFWDWLRQVDFFRUGLQJO\
&XVWRPHUV GLIIHU LQ WHUPV RI WKH H[SHFWDWLRQV WKH\ EULQJ WR
market transactions. Therefore, one way of tackling the
WULFN\ TXHVWLRQ RI FXVWRPHU UHIHUHQFH SRLQWV LV WR WUHDW LW DV
D VHJPHQWDWLRQ DQG WDUJHWLQJ SUREOHP $UH WKH FXVWRPHUV
‹)XVH7KLQNVWRFN
Lecture 55: Creating Great Customer Experiences
ż
Recognize the level of service your customers are likely to expect based on the
FDWHJRU\LQZKLFK\RXDUHFRPSHWLQJ
\RX VHHN WR VHUYH HVSHFLDOO\ GLVFHUQLQJ RU ZHOO LQIRUPHG"
7KHQ WKH\ DUH OLNHO\ WR KDYH KLJK H[SHFWDWLRQV DQG \RX
VKRXOG SODQ DFFRUGLQJO\ LI \RX ZDQW WR SURYLGH D JUHDW
FXVWRPHUH[SHULHQFH
%
ż
$QRWKHU SODFH WR ORRN IRU KHOS LQ GHWHUPLQLQJ ZKDW \RXU
FRQVXPHUVPD\XVHDVUHIHUHQFHSRLQWVLVWKHFDWHJRU\LQZKLFK
\RX DUH FRPSHWLQJ &XVWRPHUV WHQG WR HYDOXDWH H[SHULHQFHV
UHODWLYH WR WKH HQYLURQPHQW LQ ZKLFK WKH\ ¿QG WKHPVHOYHV
6RPHFDWHJRULHVKDYHDUHSXWDWLRQIRUKLJKSURGXFWTXDOLW\RU
KLJKOHYHOVRIVHUYLFHDQGFXVWRPHUVZLOOWHQGWRH[SHFWPRUH
ż
$ ¿QDO ELW RI DGYLFH RQ XVLQJ FXVWRPHU UHIHUHQFH SRLQWV
WR DQWLFLSDWH FXVWRPHU H[SHULHQFH LV WKDW UHIHUHQFH SRLQWV
UHVHW 3HRSOH WHQG WR DFFOLPDWH WR ZKDW WKH\ KDYH SUHYLRXVO\
H[SHULHQFHGDQGZKDWZDVRXWVWDQGLQJ\HVWHUGD\EHFRPHVWKH
PLQLPXPVWDQGDUGWRGD\
7KH ¿IWK UXOH IRU PDQDJLQJ FXVWRPHU H[SHULHQFH LV WR VHJPHQW
SOHDVXUHVDQGFRPELQHSDLQ
ż 3HRSOH WHQG WR HYDOXDWH GLVFUHWH H[SHULHQFHV LQGLYLGXDOO\
WKXV ZKHQ GHVLJQLQJ SURGXFWV DQG VHUYLFHV \RX VKRXOG VHHN
RSSRUWXQLWLHVWROHW\RXUFXVWRPHUVIHHODVPDQ\GLVFUHWHKDSS\
H[SHULHQFHV DV \RX FDQ )RU H[DPSOH KDYH \RXU VDOHVSHRSOH
LQWURGXFH DQG GHPRQVWUDWH HDFK EHQH¿W RI WKH HTXLSPHQW
\RX¶UH VHOOLQJ RQH DW D WLPH DOORZLQJ SRWHQWLDO FXVWRPHUV WR
DEVRUEWKHLQIRUPDWLRQLQGLVFUHWHH[SHULHQFHV
ż
%
7KHRSSRVLWHDGYLFHKROGVIRUEDGH[SHULHQFHV&RPELQHSDLQV
,I \RX QHHG WR FDOO D FXVWRPHU WR H[SODLQ D GHOD\ RU D UHFDOO
PDNHVXUHWRFRQYH\DOOWKHSRVVLEOHEDGQHZVDWRQHWLPH,I
\RXGULEEOHRXWEDGQHZVRYHUWLPHHDFKQHZGLVDSSRLQWPHQW
will be felt as a fresh injury.
7KHODVWUXOHIRUPDQDJLQJFXVWRPHUH[SHULHQFHVLVWRPRWLYDWHDQG
HPSRZHUHPSOR\HHVZKRZLOOLQWHUDFWZLWK\RXUFXVWRPHUV
ż
2QWKHLQFHQWLYHVIURQWPDNHVXUHWKDWHPSOR\HHVDUHHYDOXDWHG
RQ DQG UHZDUGHG IRU SURYLGLQJ JRRG FXVWRPHU H[SHULHQFHV
7KLV PD\ PHDQ GHYHORSLQJ HPSOR\HH HYDOXDWLRQ WRROV WKDW
LQFRUSRUDWH FXVWRPHU IHHGEDFN DV D PHWULF ,W PD\ DOVR PHDQ
WUDFNLQJSUDLVLQJDQGSXEOLVKLQJLQWHUQDOO\H[DPSOHVRIJUHDW
FXVWRPHUVHUYLFH0DNHSURYLGLQJJUHDWFXVWRPHUH[SHULHQFHV
DVRXUFHRISUHVWLJHZLWKLQWKHRUJDQL]DWLRQ
ż
2QFH D FXOWXUH RI FXVWRPHU VHUYLFH LV HVWDEOLVKHG HPSOR\HHV
ZLOOLQWHUQDOL]HWKDWPRWLYDWLRQ,WZLOOEHFRPHDQLQWULQVLFSDUW
RIKRZ\RXUHPSOR\HHVLQWHUDFWZLWKFXVWRPHUVDOOWKHWLPH
Suggested Reading
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHU
Questions to Consider
Lecture 55: Creating Great Customer Experiences
1. 7KLQN DERXW VRPH UHFHQW SXUFKDVHV \RX KDYH PDGH DQG FDWHJRUL]H
WKHPDVSURGXFWVVHUYLFHVRUVRPHPL[RIERWK7KLQNDERXWKRZ\RX
FRXOG LPSURYH WKH FXVWRPHU H[SHULHQFH DVVRFLDWHG ZLWK WKDW RIIHULQJ
,QSDUWLFXODUDUHWKHUHDQ\ZD\V\RXPLJKWWUHDWWKHSURGXFWVPRUHOLNH
VHUYLFHVE\IRFXVLQJRQWKHFXVWRPHUH[SHULHQFH"
2. 3LFNDSURGXFWRUVHUYLFHZLWKZKLFK\RXDUHIDPLOLDU,VWKHUHDZD\WR
XVHWKHSULQFLSOHVRIUHIHUHQFHSRLQWVWKHSHDNHQGUXOHDQGVHJPHQWLQJ
SOHDVXUHVDQGFRPELQLQJSDLQVWRLPSURYHWKHFXVWRPHUH[SHULHQFH"
The Tactics of Successful Branding
Lecture 56
B
UDQGLQJ\RXURIIHULQJLVDQLPSRUWDQWWDFWLFEXWLW¶VYLWDOWRNHHSLQ
PLQGWKDWEUDQGLQJLVRQO\DWDFWLFDQGGHFLVLRQVDERXWLWVKRXOGEH
DWWHPSWHG RQO\ DIWHU \RX KDYH D VWUDWHJ\ LQ SODFH ,Q RWKHU ZRUGV
\RXVKRXOGQRWWU\WRVHWWOHRQDQ\DVSHFWRI\RXUEUDQGXQWLODIWHU\RXNQRZ
ZKR\RXUFXVWRPHUVDUHZKDWWKH\YDOXHDQGKRZ\RXSODQWRSRVLWLRQWKH
RIIHULQJVRWKDWLWZLOOSURYLGHVXSHULRUYDOXHUHODWLYHWR\RXUFRPSHWLWRUV,Q
WKLVOHFWXUHZH¶OOGH¿QHEUDQGLQJDQGORRNDWKRZEUDQGVSURYLGHYDOXHWR
the customer.
'H¿QLQJD%UDQG
% 2QHGH¿QLWLRQRIDEUDQGLVSUDFWLFDODQGIRFXVHVRQWKHEUDQGLQJ
HOHPHQWV DVVRFLDWHG ZLWK D SDUWLFXODU SURGXFW RU OLQH RI SURGXFWV
%UDQGLQJ HOHPHQWV LQFOXGH VRPH FRQFUHWH IHDWXUHV VXFK DV WKH
SURGXFWQDPHORJRVORJDQRUWDJOLQHDFKDUDFWHURUVSRNHVSHUVRQ
SDFNDJLQJGHVLJQHQGRUVHPHQWVVSRQVRUVKLSVDQGVRRQ%UDQGLQJ
HOHPHQWV FDQ DOVR LQFOXGH PRUH DEVWUDFW FRPSRQHQWV VXFK DV D
GHVLJQDHVWKHWLFRUJXLGLQJSKLORVRSK\
ż 7KLV GH¿QLWLRQ RI D EUDQG WDNHV WKH FRPSDQ\¶V SHUVSHFWLYH
0DQ\ FRPSDQLHVKDYHGHWDLOHGUXOHV DERXWZKDW FDQ EH GRQH
ZLWK EUDQGLQJ HOHPHQWV LQFOXGLQJ DFFHSWDEOH FRORU VFKHPHV
DQGPRGHUDWLRQVWKDWPD\EHPDGHWRORJRV
ż
%
7KLVLVDXVHIXOZD\RIGH¿QLQJDEUDQGDQGHYHU\FRPSDQ\
VKRXOGNQRZ²LQWHUQDOO\²ZKDWHOHPHQWVDUHSDUWRILWVEUDQG
%XWWKLVLQWHUQDOO\IRFXVHGGH¿QLWLRQRIDEUDQGLVQRWVXI¿FLHQW:H
PXVWDOVRFRQVLGHUZKDWDEUDQGLVIURPWKHFXVWRPHU¶VSHUVSHFWLYH
+HUHZHFDQWKLQNRIDEUDQGDVPDGHXSRIVWUXFWXUHVLQPHPRU\
VLPLODUWRDQHWZRUNZLWKPDQ\LQGLYLGXDOQRGHVDQGFRQQHFWLRQV
ż 7KH QRGHV LQ WKLV QHWZRUN DUH PHPRULHV²IHHOLQJV
LQIRUPDWLRQ H[SHULHQFHV WKRXJKWV DQG HYDOXDWLRQV²WKDW DUH
DVVRFLDWHGZLWKWKHEUDQG
ż
Lecture 56: The Tactics of Successful Branding
%
7KHQRGHVFORVHUWRWKHFHQWHUDUHWKRVHWKDWDUHPRUHWLJKWO\
ERXQG WR WKH EUDQG 7KRVH IDUWKHU RXW RQ WKH HGJHV DUH
PHPRULHVWKDWDUHOHVVLQWHJUDODQGPRUHWUDQVLHQW
7KLV GH¿QLWLRQ RI D EUDQG DV D PHPRU\ VWUXFWXUH PDNHV LW FOHDU
WKDW PDQDJLQJ D EUDQG LV UHDOO\ DERXW PDQDJLQJ WKH DVVRFLDWLRQV
FRQVXPHUVVWRUHLQPHPRU\UHODWHGWRWKDWEUDQG7KXVHVWDEOLVKLQJ
DEUDQGJRHVEH\RQGMXVWFKRRVLQJDFOHYHUWDJOLQH,WPHDQVEHLQJ
FRQVLVWHQWDQGUHLQIRUFLQJLPSRUWDQWLGHDVUHSHDWHGO\
Case Studies in Branding
% 2YHU WKH SDVW VHYHUDO \HDUV WKH RI¿FH VXSSO\ EUDQG 6WDSOHV KDV
VRXJKWWRHVWDEOLVKWKHLGHDRIORZSULFHVLQWKHPHPRU\VWUXFWXUHV
RILWVFXVWRPHUV8QIRUWXQDWHO\WKH³(DV\%XWWRQ´FDPSDLJQUXQE\
6WDSOHVHDUOLHUKDVEHHQPRUHORQJODVWLQJLQWKHPLQGVRIFXVWRPHUV
DQGVHHPVLQFRPSDWLEOHZLWKWKHLGHDRIORZSULFHV
ż 7KHSRVLWLRQLQJRI6WDSOHVDVWKHSODFHWRJRWRTXLFNO\VROYH
RI¿FHVXSSO\SUREOHPVZDVDJRRGFKRLFHLQWKHFURZGHGRI¿FH
VXSSO\UHWDLOHUVSDFH7KH³(DV\%XWWRQ´FDPSDLJQFRQYH\HGD
VLPSOH PHVVDJH WKDW SURYLGHG D GLVWLQFW VRXUFH RI YDOXH WR D
SDUWLFXODUJURXSRIFXVWRPHUV
ż
7KH SUREOHP DURVH ZKHQ 6WDSOHV WULHG WR SRVLWLRQ ERWK RQ
EHLQJ HDV\²ZKLFK VXJJHVWV D KLJK OHYHO RI VHUYLFH DQG
FRQYHQLHQFH²DQG RQ KDYLQJ ORZ SULFHV 7KHVH LGHDV DUH LQ
FRQÀLFWIRUPRVWSHRSOH
ż
7R WKH H[WHQW WKDW 6WDSOHV ZDV VXFFHVVIXO LQ HVWDEOLVKLQJ D
QRGH LQ PHPRU\ OLQNLQJ WKH VWRUH WR ³HDV\´ LW DOVR SUREDEO\
LQKLELWHG WKH OLQN EHWZHHQ 6WDSOHV DQG ³ORZ SULFHV´ %\ WKH
VDPHWRNHQLI6WDSOHVLVHYHQWXDOO\VXFFHVVIXOLQHVWDEOLVKLQJ
DPHPRU\VWUXFWXUHOLQNLQJWKHVWRUHWRORZSULFHVLWPD\GR
VRDWWKHH[SHQVHRIWKHHDV\PHVVDJH6RPHOLQNVLQPHPRU\
inhibit others.
%
ż
6WDSOHVKDVDOVRSURPRWHGLWVEUDQGE\VSRQVRULQJWKH6WDSOHV
Center, the basketball arena of the Los Angeles Lakers. This
VSRQVRUVKLSFHUWDLQO\JHWVWKHEUDQGDJUHDWGHDORIDWWHQWLRQ
EXW DJDLQ FXVWRPHUV PD\ DVVRFLDWH WKH /DNHUV ZLWK JOLW] DQG
JODPRXUDQGWKHVHDVVRFLDWLRQVDUHLQFRQVLVWHQWZLWKWKHORZ
SULFHPHVVDJH
ż
7KH6WDSOHVFDVHKLJKOLJKWVWZROHVVRQV %HFRQVLVWHQWDQG
ZKHQ\RXHQFRXUDJHFRQVXPHUVWRIRUPDQDVVRFLDWLRQZLWK
\RXUEUDQGPDNHVXUHWKHDVVRFLDWLRQLVVRPHWKLQJWKH\YDOXH
1(6&$)e WKH ¿UVW EUDQG RI LQVWDQW FRIIHH VHUYHV DV DQRWKHU
H[DPSOH RI PLVWDNHQ EUDQGLQJ :KHQ WKH SURGXFW ZDV ¿UVW
LQWURGXFHGLQWKHVLWZDVDGYHUWLVHGDVDZD\IRU³KRXVHZLYHV´
WRWDNHDEUHDNIURPWKHLUGHPDQGLQJFKRUHVDQGWUHDWWKHPVHOYHV
GXULQJ WKH GD\ 8QIRUWXQDWHO\ ZRPHQ LQ WKH WDUJHW PDUNHW GLGQ¶W
DVVRFLDWHWKHEUDQGZLWKUHOD[DWLRQEXWZLWKVODFNLQJRII
ż $ UHVHDUFK VWXG\ SXEOLVKHG LQ VKRZHG WKDW KRXVHZLYHV
FKDUDFWHUL]HG ZRPHQ ZKR ERXJKW 1(6&$)e DV OD]\ SRRU
SODQQHUVVSHQGWKULIWVDQGHYHQEDGZLYHV
ż
%
1(6&$)eZDVVXFFHVVIXOLQFUHDWLQJWKHPHQWDODVVRFLDWLRQV
LWKDGVHWRXWWRFUHDWHEXWWKRVHZHUHQRWWKHDVVRFLDWLRQVWKDW
DSSHDOHGWRLWVWDUJHWFXVWRPHUV
:KHQPDNLQJEUDQGLQJGHFLVLRQVNHHSLQPLQGWKDW\RXDUHWU\LQJ
WR PDQDJH WKH DVVRFLDWLRQV FRQVXPHUV IRUP ZLWK \RXU EUDQG7U\
WR UHLQIRUFHWKRVH DVVRFLDWLRQV \RX ZDQW WKHP WR KDYH DQG LQKLELW
WKRVHDVVRFLDWLRQV\RXGRQ¶WZDQWWKHPWRKDYH
Branding and Customer Value
% ,Q DQ HDUOLHU OHFWXUH ZH GLVFXVVHG WKH IRXU VRXUFHV RI YDOXH
IRU FXVWRPHUV IXQFWLRQDO PRQHWDU\ VRFLDO DQG SV\FKRORJLFDO
)XQFWLRQDOYDOXHLVDFFUXHGE\YLUWXHRIDQRIIHULQJGRLQJZKDWLW
ZDVGHVLJQHGWRGR%UDQGVFRQWULEXWHWRFRQVXPHUHYDOXDWLRQVRI
IXQFWLRQDOYDOXHE\VHUYLQJDVVLJQDOV,QHFRQRPLFVsignal refers
WR DQ HDVLO\ REVHUYDEOH EXW XQLPSRUWDQW DWWULEXWH WKDW VHUYHV DV D
SUR[\IRUDGLI¿FXOWWRREVHUYHEXWLPSRUWDQWDWWULEXWH
ż ,I\RXDUHEX\LQJDFDU\RXZDQWUHOLDELOLW\EXWWKDWTXDOLW\LV
GLI¿FXOWWRREVHUYHGLUHFWO\EHIRUHSXUFKDVH,QVWHDGZHWHQG
WRXVHEUDQGDVDVLJQDORIUHOLDELOLW\EHFDXVHEUDQGLVDQHDV\
WRLGHQWLI\DWWULEXWH
Lecture 56: The Tactics of Successful Branding
ż
%
0RQHWDU\ YDOXH FDQ DOVR EH LQÀXHQFHG E\ EUDQGLQJ$ EUDQG VHWV
D UHIHUHQFH IUDPH IRU FRQVXPHUV ZKHQ HYDOXDWLQJ SULFHV ,I \RX
ZHUHWRKHDUDERXWD%LFSHQVHOOLQJIRU\RXZRXOGSUREDEO\
EHVKRFNHGE\WKHSULFH%XWLI\RXKHDUGDERXWD0RQW%ODQFSHQ
VHOOLQJIRUWKHSULFHPLJKWVHHPOLNHDEDUJDLQ(YHQWKRXJK
\RXGRQ¶WNQRZDQ\WKLQJDERXWWKHSHQRWKHUWKDQWKHEUDQGQDPH
WKH EUDQG DORQH LQÀXHQFHV \RXU HYDOXDWLRQ RI SULFHV WKHUHE\
DIIHFWLQJWKHPRQHWDU\YDOXH\RXGHULYHIURPWKHRIIHULQJ
%
+RZ FDQ \RX HQVXUH WKDW \RXU EUDQG VHUYHV DV D VLJQDO WR ERRVW
functional value or as a reference frame to boost monetary value for
\RXUFXVWRPHUV"
ż %RWKRIWKHVHVRXUFHVRIEUDQGYDOXHDUHEDVHGRQFRUUHODWLRQVLQ
WKHPLQGVRIFRQVXPHUV:KHQ\RXUEUDQGFRQVLVWHQWO\SURGXFHV
KLJKTXDOLW\ RIIHULQJV RU RIIHUV FRQVLVWHQWO\ ORZ SULFHV WKRVH
OLQNVDUHUHLQIRUFHGLQPHPRU\DQG\RXUEUDQG¶VVLJQDOYDOXH
LVLPSURYHG%XWLI\RXDUHQRWGLVFLSOLQHGDQGFRQVLVWHQWZLWK
PDQDJLQJ WKH EUDQG DVVRFLDWLRQV \RXU FRQVXPHUV IRUP \RXU
EUDQG¶VVLJQDOYDOXHZLOOEHPXFKZHDNHU
ż
:H NQRZ WKDW +RQGD IRU H[DPSOH LV D EUDQG WKDW WHQGV WR
EH FRUUHODWHG ZLWK KLJK UHOLDELOLW\ 7KXV EUDQGV LQÀXHQFH
IXQFWLRQDOYDOXHE\SURYLGLQJVLJQDOV
,QVKRUW\RXUEUDQGPXVWVWDQGIRUVRPHWKLQJ$QGWKHZD\WR
PDNHWKDWKDSSHQLVWKHVORZUHJXODUUHSHWLWLYHFRPPXQLFDWLRQ
of a consistent message.
‹ZLOOLDPL6WRFN7KLQNVWRFN
,I\RX¶YHHYHUERQGHGZLWKVRPHRQHRYHUWKHVSRUWVWHDP\RXERWKORYHWKHQ
you’ve experienced the social value of brands.
%
)RUVRFLDODQGSV\FKRORJLFDOYDOXHEUDQGVGRQ¶WVHUYHDVVLJQDOVRI
RUUHIHUHQFHSRLQWVIRUDQRWKHUVRXUFHRIYDOXH,QVWHDGWKHEUDQGV
WKHPVHOYHVFUHDWHYDOXHIRUFXVWRPHUV%UDQGVSURYLGHVRFLDOYDOXH
E\IDFLOLWDWLQJUHODWLRQVKLSVZLWKRWKHUSHRSOH,QPDQ\VLWXDWLRQV
WKHEUDQGFDQVHUYHDVDNLQGRISDVVNH\WKDWOHWV\RXLQWRDFOLTXH
RU JURXS DV WKH EUDQG +DUOH\'DYLGVRQ GRHV IRU RZQHUV RI WKRVH
PRWRUF\FOHV%UDQGVFDQDOVRSURYLGHDQH[FXVHWRWDONWRVRPHRQH
RUVHUYHDVDWRSLFIRUFRQYHUVDWLRQ
%
%UDQGVFDQSURYLGHWZRW\SHVRISV\FKRORJLFDOYDOXH LQWHUQDO
DIIHFWLQJ KRZ ZH IHHO DERXW RXUVHOYHV DQG H[WHUQDO DIIHFWLQJ
KRZ ZH GH¿QH RXUVHOYHV WR WKH ZRUOG DQG LQÀXHQFH RWKHUV¶
SHUFHSWLRQVRIXV2IWHQSV\FKRORJLFDOEUDQGYDOXHLVUHIHUUHGWRDV
lifestyle branding EUDQGV WKDW SURYLGH SV\FKRORJLFDO YDOXH GH¿QH
DOLIHVW\OHZHDUHDWWHPSWLQJWRFUHDWHDQGFRPPXQLFDWHWRRWKHUV
ż $JDLQ WKH +DUOH\'DYLGVRQ EUDQG SURYLGHV LQWHUQDO
SV\FKRORJLFDO YDOXH WR LWV FXVWRPHUV E\ DOORZLQJ WKHP WR
DGRSWD³WRXJKJX\´LPDJH3HRSOHZKRULGH+DUOH\VDQGZHDU
+DUOH\MDFNHWVIHHOVRPHWKLQJGLIIHUHQWDERXWWKHPVHOYHVWKH\
DFWXDOO\ EHFRPH VRPHRQH HOVH WHPSRUDULO\ E\ DVVRFLDWLQJ
WKHPVHOYHVZLWKDEUDQG
ż
7KH+DUOH\'DYLGVRQEUDQGDOVRSURYLGHVH[WHUQDOSV\FKRORJLFDO
YDOXH 6RPH SHRSOH XVH WKH EUDQG WR FRPPXQLFDWH VRPHWKLQJ
DERXWWKHPVHOYHV²SHUKDSVD³ZLOGVLGH´²WRRWKHUV
Lecture 56: The Tactics of Successful Branding
The Branding Ladder
% There is a common belief among marketing managers that it is
EHWWHU WR EXLOG D EUDQG DURXQG SV\FKRORJLFDO YDOXH WKDQ DURXQG
IXQFWLRQDOYDOXH,QIDFWWKHVRXUFHVRIYDOXHDUHVRPHWLPHVRUGHUHG
IURPWKHPRVWFRQFUHWH²IXQFWLRQDOYDOXH²WKURXJKPRQHWDU\DQG
VRFLDO YDOXH XS WR WKH PRVW DEVWUDFW YDOXH²SV\FKRORJLFDO YDOXH
7KLVFRQFHSWLVNQRZQDVWKHbranding ladder.
%
,W LV QRW GLI¿FXOW WR WKLQN RI VXFFHVVIXO EUDQGV WKDW VWDUWHG DV
IXQFWLRQDOEUDQGVEXWKDYHPRYHGXSWKHODGGHURYHUWLPH3XPD
6ZDWFK 7LPEHUODQG 3DWDJRQLD DQG 1LNH DOO LQLWLDOO\ SRVLWLRQHG
WKHPVHOYHVLQWHUPVRIIXQFWLRQDOVXSHULRULW\UHODWLYHWRFRPSHWLWRUV
EXW RYHU WLPH PRYHG LQWR D VSDFH ZKHUH WKH\ FRXOG VHUYH DV D
VRXUFHRISV\FKRORJLFDOYDOXHIRUFXVWRPHUV
%
,WLVDOVRHDV\WRVHHZK\PDUNHWLQJPDQDJHUVYLHZPRYLQJXSWKH
ODGGHUDVDJRRGWKLQJ)XQFWLRQDODWWULEXWHVDUHPRUHFRQFUHWHDQG
WKXV PRUH RSHQ WR EODWDQW DWWDFNV ZKLOH PRUH DEVWUDFW VRFLDO RU
SV\FKRORJLFDOYDOXHVDUHXVXDOO\KDUGHUWRPDNHVXEVWDQWLYHFODLPV
DJDLQVW %XW LW¶V LPSRUWDQW WR QRWH WKDW OLIHVW\OH EUDQGV DUH QRW DV
unassailable as they might seem.
ż 7R XQGHUVWDQG WKH SRWHQWLDO GRZQVLGH RI EXLOGLQJ D OLIHVW\OH
EUDQGZH¿UVWKDYHWRXQGHUVWDQGZK\FRQVXPHUVZRXOGYDOXH
DEUDQGWKDWSURYLGHVSV\FKRORJLFDOYDOXH7KHDQVZHULVWKDW
OLIHVW\OHEUDQGVMXVWOLNHRWKHUNLQGVRIEUDQGVFUHDWHYDOXHE\
PHHWLQJDFRQVXPHUQHHG,QWKHFDVHRIOLIHVW\OHEUDQGVWKDW
QHHGLVIRUVHOIH[SUHVVLRQ
ż
+RZHYHU WKH QHHG IRU VHOIH[SUHVVLRQ ÀXFWXDWHV RYHU WLPH
DQGFDQEHIXO¿OOHGLQPDQ\ZD\V&XVWRPHUVFDQVHOIH[SUHVV
WKURXJK EUDQGV EXW DOVR WKURXJK SROLWLFV KREELHV DQG VR RQ
)XUWKHU WKH QHHG WR VHOIH[SUHVV LV QRW OLPLWHG WR D SDUWLFXODU
SURGXFW FDWHJRU\ <RX GR QRW KDYH RQH QHHG WR VHOIH[SUHVV
WKURXJK\RXUFDUDVHSDUDWHQHHGWRVHOIH[SUHVVWKURXJK\RXU
FORWKLQJDQGVRRQ7KHQHHGWRVHOIH[SUHVVLVDVLQJOHXQLWDU\
QHHGWKDWFDQEHVDWHGLQDQ\QXPEHURIGLIIHUHQWZD\V
ż
Taken together, these three insights suggest that there are
VRPHGDQJHUVWROLIHVW\OHEUDQGLQJ:KHQPRYLQJDZD\IURP
DIXQFWLRQDOSRVLWLRQLQJIRU\RXUEUDQG\RXDOORZ\RXUVHOIWR
VHUYH D PRUH IXQGDPHQWDO FRQVXPHU QHHG EXW \RX DOVR RSHQ
\RXUVHOIXSWRFURVVFDWHJRU\FRPSHWLWLRQIURPDQ\RWKHUEUDQG
WKDW LV WU\LQJ WR VHUYH WKH VDPH QHHG<RX DUH QR ORQJHU MXVW
¿JKWLQJIRUDVKDUHRIWKHVDOHVLQDSDUWLFXODUFDWHJRU\EXWD
VKDUHRIWKHFRQVXPHU¶VLGHQWLW\
Suggested Reading
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHU
&KHUQHY+DPLOWRQDQG*DO³&RPSHWLQJIRUD&RQVXPHU¶V,GHQWLW\´
+DLUH³3URMHFWLYH7HFKQLTXHVLQ0DUNHWLQJ5HVHDUFK´
Questions to Consider
1. 3LFN D EUDQG WKDW \RX OLNH DQG OLVW DOO WKH EUDQG HOHPHQWV \RX FDQ
LGHQWLI\²WKH ORJR WDJOLQHV FRORU SDOHWWHV VSRNHVSHUVRQ RU FKDUDFWHU
SDFNDJLQJGHVLJQDQGVRRQ7U\WRGHWHUPLQHZKLFKHOHPHQWVDUHPRVW
FHQWUDOWRWKHEUDQG:KLFKHOHPHQWVFRXOGEHFKDQJHGZLWKRXWDIIHFWLQJ
KRZFRQVXPHUVWKRXJKWDERXWWKHEUDQG"
2. 3LFN D EUDQG WKH VDPH EUDQG RU D GLIIHUHQW RQH DQG OLVW DOO WKH
DVVRFLDWLRQV \RX KDYH ZLWK LW *LYH \RXUVHOI VHYHUDO PLQXWHV WR IUHH
DVVRFLDWH :KDW PHPRULHV IHHOLQJV H[SHULHQFHV RU SHRSOH FRPH WR
PLQGZKHQ\RXWKLQNRIWKLVEUDQG"2QFH\RXKDYHFUHDWHGDORQJOLVW
JREDFNWKURXJKDQGUDWHHDFKLWHPLQWHUPVRIKRZFHQWUDOLWLVWRWKH
EUDQG8VXDOO\WKHWKLQJV\RXWKRXJKWRI¿UVWZLOOEHWKRVH\RXFRQVLGHU
PRVW VWURQJO\ DVVRFLDWHG ZLWK WKH EUDQG 7KLV UDWHG OLVW VHUYHV DV D
UHSUHVHQWDWLRQRI\RXUPHPRU\VWUXFWXUHRIWKHEUDQG
Customer-Focused Pricing
Lecture 57
2
QHRIWKHPRVWLPSRUWDQWGHFLVLRQV\RXZLOOPDNHLQPDUNHWLQJLV
KRZWRSULFH\RXUSURGXFWRUVHUYLFH3ULFLQJLVDWDFWLFKRZHYHU
DQGOLNHDOORWKHUWDFWLFVVKRXOGQRWEHGHFLGHGXQWLODIWHU\RXKDYH
VHWWOHGRQDVWUDWHJ\,QRWKHUZRUGV\RXVKRXOGQRWDWWHPSWWRSULFH\RXU
RIIHULQJXQWLODIWHU\RXNQRZZKR\RXUFXVWRPHUVDUHWKHVSHFL¿FVRXUFHV
RIYDOXH\RXVHHNWRSURYLGHWRWKRVHFXVWRPHUVDQGKRZ\RXURIIHULQJZLOO
EH GLIIHUHQWLDWHG IURP WKH FRPSHWLWLRQ $VVXPLQJ WKDW \RX¶YH DGGUHVVHG
WKHVHEDVLFVWUDWHJLFTXHVWLRQV\RXFDQWXUQWRWKHWDFWLFRISULFLQJ,QWKLV
OHFWXUH ZH¶OO ORRN DW VHYHUDO FRQVLGHUDWLRQV UHODWHG WR SULFLQJ SURGXFWV
DQGVHUYLFHV
Lecture 57: Customer-Focused Pricing
Pricing Information
% <RX QHHG WKUHH EDVLF W\SHV RI LQIRUPDWLRQ WR VHW D SULFH WKDW ZLOO
MRLQWO\ PD[LPL]H YDOXH IRU ERWK \RX DQG \RXU FXVWRPHU7KH ¿UVW
SLHFHRILQIRUPDWLRQLVLQWHUQDO:KDWDUHWKHFRVWVDVVRFLDWHGZLWK
PDNLQJ DQG VHOOLQJ WKH RIIHULQJ" &RVW LQIRUPDWLRQ LV LPSRUWDQW
EHFDXVH XQOHVV \RX KDYH FDUHIXOO\ WUDFNHG \RXU FRVWV \RX FRXOG
HQGXSDFFLGHQWDOO\VHOOLQJ\RXUSURGXFWDWDORVV
%
(YHQ WKRXJK FRVW LQIRUPDWLRQ LV LPSRUWDQW ZKHQ \RX FRQVLGHU
HYHU\WKLQJWKDWJRHVLQWRVPDUWSULFLQJGHFLVLRQVFRVWVDUHDFWXDOO\
DPRQJ WKH OHDVW LPSRUWDQW ELWV RI LQIRUPDWLRQ \RX QHHG &RVW
LQIRUPDWLRQVHWVDÀRRURQZKDWSULFHVDUHSRVVLEOHIRU\RXU¿UP
but costs tell you nothing about how your customer will evaluate
\RXUSULFHV7KXVWKHVHFRQGW\SHRILQIRUPDWLRQ\RXQHHGWRSULFH
\RXURIIHULQJLV\RXUFRPSHWLWRUV¶SULFHV
ż .HHS LQ PLQG WKDW WKH UHODWLYH LPSRUWDQFH RI FRPSHWLWRUV¶
SULFHVGHSHQGVRQWKHW\SHRIPDUNHW\RXDUHLQDQGWKHW\SHRI
SURGXFWRUVHUYLFH\RXVHOO,I\RXDUHLQDPDUNHWZLWKPDQ\
FRPSHWLWRUVDQGLW¶VHDV\IRU\RXUFXVWRPHUVWRFRPSDUHSULFHV
WKHQ NHHSLQJ XS ZLWK \RXU FRPSHWLWRUV¶ SULFHV LV H[WUHPHO\
LPSRUWDQWEHFDXVH\RXUFXVWRPHUZLOODOPRVWFHUWDLQO\XVHWKDW
LQIRUPDWLRQWRHYDOXDWH\RXUSULFH
%
ż
,Q FRQWUDVW LI \RX DUH LQ DQ LQGXVWU\ LQ ZKLFK FRPSDULVRQV
DUH GLI¿FXOW RU RIIHULQJV DUH KLJKO\ GLIIHUHQWLDWHG WKHQ XSWR
WKHPLQXWHWUDFNLQJRIFRPSHWLWRUV¶SULFHVLVOHVVLPSRUWDQWLQ
GHWHUPLQLQJ\RXUSULFLQJVWUDWHJ\
ż
:KHQ DQDO\]LQJ \RXU FRPSHWLWRUV¶ SULFHV \RX DOVR QHHG
WR PDNH VXUH WKDW \RX XVH WKH ULJKW VHW RI FRPSHWLWRUV <RXU
FRPSHWLWLYH VHW VKRXOG QRW EH GHWHUPLQHG E\ DQ\ NLQG RI
PDUNHW GHVLJQDWLRQ VXFK DV VXEFRPSDFW FDUV RU OLTXLG KDQG
VRDSV,WVKRXOGQRWVLPSO\EHWKHRWKHUEUDQGVLQ\RXUFDWHJRU\
DVGH¿QHGE\PDMRUUHWDLOHUVRUGLVWULEXWRUV
ż
,QVWHDG\RXUFRPSHWLWLYHVHWVKRXOGDOZD\VEHGH¿QHGE\\RXU
FXVWRPHUV :KDW RWKHU RSWLRQV ZLOO \RXU FXVWRPHUV XVH IRU
FRPSDULVRQZKHQWKH\DUHFRQVLGHULQJ\RXUSURGXFW",IWKHUH
DUH FHUWDLQ EUDQGV LQ WKH VDPH FDWHJRU\ WKDW \RXU FXVWRPHUV
ZRXOG QHYHU FRQVLGHU EX\LQJ WKHQ WKRVH EUDQGV DUH QRW LQ
\RXUFRPSHWLWLYHVHWDQGWKHLUSULFHVDUHLUUHOHYDQW7KLVDOVR
PHDQVWKDW\RXUFRPSHWLWLYHVHWFRXOGVSDQWUDGLWLRQDOFDWHJRU\
PDUNHUVLI\RXUFXVWRPHUVFRQVLGHURSWLRQVDFURVVFDWHJRULHVWR
be substitutes.
7KH WKLUG DQG PRVW LPSRUWDQW W\SH RI LQIRUPDWLRQ WR FRQVLGHU
ZKHQVHWWLQJ\RXUSULFHLVWKHYDOXH\RXUFXVWRPHUVSODFHRQ\RXU
RIIHULQJ&RVWVDQGFRPSHWLWRUV¶SULFHVDUHLPSRUWDQWWRNQRZEXW
XOWLPDWHO\ \RXU JRDO LV WR SULFH \RXU SURGXFWV LQ VXFK D ZD\ WKDW
your customer thinks that what you are selling is worth what you
DUHDVNLQJIRULW7KHPRVWLPSRUWDQWOHVVRQLQSULFLQJWKHQLVWR
NQRZZKR\RXUFXVWRPHUVDUHDQGWRSULFHDFFRUGLQJWRWKHYDOXH
they see in your offering.
Pricing Variations
% $WWLPHV\RXPD\KDYHPRUHWKDQRQHWDUJHWJURXSRIFXVWRPHUV
DQGWKRVHJURXSVPD\YDOXH\RXURIIHULQJGLIIHUHQWO\:KDWGR\RX
GRLIRQHJURXSLVZLOOLQJWRSD\IRU\RXUZLGJHWDQGDQRWKHULV
ZLOOLQJWRSD\RQO\",I\RXZDQWWRVHOOWRERWKJURXSVGR\RX
KDYHWRVHWWKHSULFHDWDQGOHDYHWKHSRWHQWLDOIRUH[WUDPRQH\RQ
WKHWDEOH"
ż 6RPHWLPHVWKHDQVZHUWRWKLVTXHVWLRQLV\HV\RXKDYHWRORVH
RXWRQWKDWH[WUDSRWHQWLDOSUR¿W%XWVRPHWLPHVLWLVSRVVLEOH
WRLGHQWLI\EDUULHUVLQWKHPDUNHWSODFHWKDWGLIIHUHQWLDWHWDUJHW
FXVWRPHUVDFFRUGLQJWRZKHQZKHUHRUKRZWKH\EX\
ż
Lecture 57: Customer-Focused Pricing
%
2QFH\RXKDYHLGHQWL¿HGWKRVHEDUULHUVLWLVRIWHQSRVVLEOHWR
FKDUJHWZRJURXSVGLIIHUHQWSULFHVIRUWKHVDPHRUVXEVWDQWLDOO\
VLPLODU SURGXFWV7KLV SUDFWLFH RI FKDUJLQJ GLIIHUHQW SULFHV WR
GLIIHUHQWJURXSVLVNQRZQDVSULFHGLVFULPLQDWLRQ.
:KHQSULFHGLVFULPLQDWLRQRFFXUVRYHUWLPHLWLVVRPHWLPHVFDOOHG
SULFH VNLPPLQJ (OHFWURQLFV FRPSDQLHV IUHTXHQWO\ HQJDJH LQ WKLV
SUDFWLFH7KH\NQRZWKDWWKHUHLVDVPDOOJURXSRIFXVWRPHUVZKR
ZDQWWREHWKH¿UVWWRKDYHWKHODWHVWWHFKQRORJ\7KXVHOHFWURQLFV
¿UPV FKDUJH WKLV JURXS RI HDUO\ DGRSWHUV D SUHPLXP IRU JHWWLQJ D
QHZJDGJHW¿UVWWKH\WKHQVORZO\GURSWKHSULFHRYHUWLPHWRDSSHDO
WRWKRVHZKRZRXOGOLNHDELJJHU79RUDIDVWHUFRPSXWHUEXWDUH
QRWZLOOLQJWRSD\DKLJKHUSULFHWRJHWLW¿UVW
Competing on Price
% *LYHQWKHLPSRUWDQFHRISULFHLQGULYLQJFRQVXPHUGHFLVLRQPDNLQJ
¿UPVRIWHQKDYHDVWURQJLQFOLQDWLRQWRORZHUSULFHVEXWWKHUHDUH
VHYHUDOGDQJHUVDVVRFLDWHGZLWKFRPSHWLQJRQSULFHLQFOXGLQJWKH
ULVNRILQFLWLQJDSULFHZDU
ż 6RPH SHRSOH VHHP WR EHOLHYH WKDW WKHUH H[LVWV VRPH PDJLF
SULFHSRLQWDWZKLFK\RXUSULFHZLOOEHVXI¿FLHQWO\ORZHUWKDQ
\RXU FRPSHWLWRUV¶ SULFHV WKDW \RXU FXVWRPHUV ZLOO QRWLFH DQG
FKRRVH\RXUSURGXFWEXWQRWVRORZWKDW\RXUFRPSHWLWRUVZLOO
UHDFW DQG ORZHU WKHLU SULFHV7KH IDFW LV WKDW WKLV PDJLF SULFH
GRHVQRWH[LVW,I\RXUORZHUSULFHGULYHVFXVWRPHUVDZD\IURP
\RXUFRPSHWLWRUWR\RX\RXUFRPSHWLWRUZLOOUHDFW$QGRIWHQ
WKHIDVWHVWHDVLHVWUHVSRQVHLVWRVLPSO\ORZHUSULFHVWRPDWFK
\RXUSULFHGURS
ż
2QH RI WKH MXVWL¿FDWLRQV IRU
ORZHULQJ SULFHV LV WR DWWUDFW
new customers, but this
UHSUHVHQWV WKH VHFRQG GDQJHU
RI ORZ SULFHV ,I \RX PXVW
ORZHU \RXU SULFHV WR DWWUDFW
FXVWRPHUV \RX DUH SUREDEO\
failing somewhere else in
(VVHQWLDOO\ZKHQ\RXORZHUSULFHV
your marketing. You may not to attract customers, you are paying
KDYH GRQH \RXU WDUJHWLQJ DQG customers to buy your product.
SRVLWLRQLQJFRUUHFWO\
ż 7KH H[SHULHQFH RI FRPSDQLHV ZKR XVHG *URXSRQV XQGHUOLQHV
WKLVSRLQW:LWKWKH*URXSRQVHUYLFHFXVWRPHUVVLJQXSWRJHW
SHULRGLF RIIHUV IRU VLJQL¿FDQW GLVFRXQWV RQ UHVWDXUDQWV VSD
WUHDWPHQWVDQGVRRQ
‹%LNHZRUOGWUDYHOL6WRFN7KLQNVWRFN
%
ż
%
7KH RQO\ ZD\ WR ZLQ D SULFH ZDU LV LI \RX KDYH WKH ORZHVW
FRVW VWUXFWXUH LQ \RXU FRPSHWLWLYH VHW ,I \RX GR \RX FDQ
VXVWDLQ ORZHU FRVWV RYHU WKH ORQJ KDXO %XW LI \RX GRQ¶W KDYH
VLJQL¿FDQW FRVW DGYDQWDJHV WKHQ WU\LQJ WR ZLQ RQ SULFH LV D
ORVLQJ SURSRVLWLRQ 7U\ GLIIHUHQWLDWLQJ \RXU SURGXFW IRFXVLQJ
RQEUDQGLQJRUFKDQJLQJ\RXUGLVWULEXWLRQEXWGRQ¶WFRPSHWH
RQ SULFH XQOHVV \RX KDYH
DQDGYDQWDJHRQFRVW
,QLWLDOO\ PDQ\ FRPSDQLHV MXPSHG DW WKH FKDQFH WR RIIHU
*URXSRQVDQGJHWQHZFXVWRPHUVWRWU\WKHLUSURGXFWV%XWWKH\
VRRQ GLVFRYHUHG WKDW RQFH FXVWRPHUV WRRN DGYDQWDJH RI WKH
GLVFRXQWVWKH\QHYHUFDPHEDFN
7KH ODVW GDQJHU RI SULFLQJ ORZ LV WKH LQIHUHQFHV FXVWRPHUV PDNH
DERXWTXDOLW\EDVHGRQSULFH7KHIDFWWKDWSHRSOHWHQGWRDVVRFLDWH
ORZHUSULFHG RSWLRQV ZLWK ORZHU TXDOLW\ LV ZHOO NQRZQ EXW QRW
PDQ\ PDUNHWHUV UHDOL]H MXVW KRZ SRZHUIXO WKLV WHQGHQF\ FDQ EH
5HVHDUFKKDVVKRZQWKDWNQRZLQJWKHSULFHRIDQHQHUJ\GULQNFDQ
LQÀXHQFHKRZSHRSOHUDWHDZRUNRXWDIWHUFRQVXPLQJWKHGULQNDQG
HYHQKRZZHOOWKH\SHUIRUPRQPHQWDOWDVNV
%
,W¶V DOVR LPSRUWDQW WR QRWH WKDW FXVWRPHUV DUH RIWHQ QRW QHDUO\ DV
ZHOOLQIRUPHGDERXWSULFHVDVPDQ\PDUNHWHUVDVVXPHWKH\DUH
ż ,QRQHJURXQGEUHDNLQJVWXG\UHVHDUFKHUVDVNHGVKRSSHUVLQD
JURFHU\VWRUHWKHSULFHVRISURGXFWVWKH\KDGMXVWSODFHGLQWKHLU
EDVNHWV 5HPDUNDEO\ HYHQ LPPHGLDWHO\ DIWHU SODFLQJ DQ LWHP
LQWKHLUFDUWVIHZHUWKDQKDOIWKHVKRSSHUVZHUHDEOHWRUHSRUW
DQHYHQVRPHZKDWDFFXUDWHJXHVVDERXWLWVSULFH
Lecture 57: Customer-Focused Pricing
ż
6RPHSHRSOHKDYHLQWHUSUHWHGWKHVHUHVXOWVWRPHDQWKDWSULFH
GRHVQ¶W PDWWHU²WKDW FRQVXPHUV GRQ¶W SD\ DWWHQWLRQ WR RU
FDUHDERXWSULFH7KDW¶VSUREDEO\QRWWUXHEXWWKHUHLVUHDVRQ
WR TXHVWLRQ WKH DVVXPSWLRQ WKDW FRQVXPHUV DUH DOZD\V ZHOO
LQIRUPHGDERXWSULFHV
Evaluating Prices
% &XVWRPHUVKDYHWZRDOWHUQDWLYHSDWKVIRUHYDOXDWLQJSULFHVWKH¿UVW
RI ZKLFK LV WR FRPSDUH WKH SULFHV RI UHODWHG LWHPV )RU H[DPSOH
FXVWRPHUVPD\QRWNQRZH[DFWO\KRZPXFKDEOHQGHUVKRXOGFRVW
EXW E\ FRPSDULQJ WKH SULFHV RI DOO WKH EOHQGHUV RQ WKH VKHOI WKH\
FDQ IRUP DQ LGHD DERXW ZKHWKHU WKH SULFH RI D FHUWDLQ EOHQGHU LV
DWWUDFWLYHRUQRW7KLVLVNQRZQDVXVLQJH[WHUQDOUHIHUHQFHSULFHVRU
WKHORFDOFRQWH[WWRHYDOXDWHSULFHV
ż ,QPDQDJLQJFRQWH[WEDVHGSULFHFRPSDULVRQVPDUNHWHUVQHHG
WREHDZDUHRIWKHJHQHUDOSULQFLSOHRIH[WUHPHQHVVDYHUVLRQ
$V D UXOH FRQVXPHUV WHQG WR DYRLG ERWK WKH PRVW H[SHQVLYH
DQGWKHOHDVWH[SHQVLYHRSWLRQVLQDFDWHJRU\
ż
0DUNHWHUV VKRXOG DOVR EH DZDUH WKDW SHRSOH WHQG WR XVH WKH
FRQWH[WWRJDXJHWKHLUSUHIHUHQFHVUHODWLYHWRRWKHUSHRSOH,Q
RWKHUZRUGVLI\RX¶UHVKRSSLQJIRUELQRFXODUV\RXPLJKWDVN
\RXUVHOIKRZVHULRXV\RXUELUGZDWFKLQJKREE\LVFRPSDUHGWR
WKHHQWLUHSRSXODWLRQRIELUGZDWFKHUV<RXUDQVZHUZLOOEHD
IDFWRULQGHWHUPLQLQJZKLFKSDLURIELQRFXODUV\RXEX\
ż
%
7KLV WHQGHQF\ PDNHV VHQVH EXW UHVHDUFKHUV KDYH IRXQG WKDW
SHRSOHDUHQRWQHFHVVDULO\VHQVLWLYHWRRYHUDOOSULFHVZKHQWKH\
DSSO\WKLVUXOH,QRWKHUZRUGVWKH\DUHRIWHQWRRIRFXVHGRQ
WKHSULFHVRIWKHORFDOVHWWKH\DUHFRQVLGHULQJ
,QHYDOXDWLQJSULFHVFRQVXPHUVDOVRWDNHLQWRDFFRXQWSULFHLPDJH
WKDW LV \RXU UHSXWDWLRQ IRU SULFLQJ 5HVHDUFKHUV KDYH IRXQG WKDW
ZKHQ FRQVXPHUV GRQ¶W KDYH D ZHOOGH¿QHG UHIHUHQFH SULFH IRU
D SDUWLFXODU SURGXFW WKH\ DVVXPH WKDW D SULFH WKH\ HQFRXQWHU LV
FRQVLVWHQWZLWKWKHUHWDLOHU¶VSULFHLPDJH
ż )RU LQVWDQFH ZKHQ WROG WKH SULFH RI D FDUWRQ RI RUDQJH
MXLFH IURP D KLJKHQG JURFHU\ VWRUH DQG IURP D VWRUH ZLWK D
PRGHUDWHSULFH LPDJH SHRSOH HYDOXDWHG WKH SULFH GLIIHUHQWO\
even though it was the same in both cases.
ż
7KHVH UHVXOWV PHDQ WKDW D VWRUH¶V SULFH LPDJH VKRXOG EH
PDQDJHGMXVWOLNHDEUDQGLPDJH,QRWKHUZRUGVSULFHLPDJHV
DUHQRWIRUPHGEDVHGRQO\RQDVWRUH¶VREMHFWLYHSULFHV5DWKHU
FRQVXPHUV XVH PDQ\ QRQSULFH FXHV ZKHQ IRUPLQJ D SULFH
LPDJH LQFOXGLQJ WKH VWRUH¶V GpFRU LWV ORFDWLRQ WKH OHYHO RI
VHUYLFHSURYLGHGDQGVRRQ3ULFHLPDJHVDUHEHVWPDQDJHGQRW
MXVWE\PDQDJLQJSULFHVEXWE\PDQDJLQJDOOWKHSULFHUHODWHG
DVVRFLDWLRQVFRQVXPHUVPLJKWIRUPZLWKDEUDQG
Suggested Reading
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHU
'LFNVRQ DQG 6DZ\HU ³7KH 3ULFH .QRZOHGJH DQG 6HDUFK RI 6XSHUPDUNHW
6KRSSHUV´
'RODQ³+RZ'R<RX.QRZ:KHQWKH3ULFH,V5LJKW"´
6KLY&DUPRQDQG$ULHO\³3ODFHER(IIHFWVRI0DUNHWLQJ$FWLRQV´
Questions to Consider
1. 3LFN D SURGXFW RU VHUYLFH ZLWK ZKLFK \RX DUH IDPLOLDU 7KLQN RI WZR
GLIIHUHQW WDUJHW VHJPHQWV WR ZKLFK WKLV RIIHULQJ PLJKW DSSHDO$VVXPH
WKDW WKHVH WZR VHJPHQWV YDOXH WKH RIIHULQJ GLIIHUHQWO\:KDW DUH VRPH
ZD\V WKDW \RX FRXOG SULFH GLVFULPLQDWH FKDUJLQJ WKHVH VHJPHQWV
GLIIHUHQWSULFHVDFFRUGLQJWRWKHLUGLIIHUHQFHLQZLOOLQJQHVVWRSD\"
2. 7KLQNDERXWWDFWLFV\RXPLJKWXVHWRDYRLGDSULFHZDU,PDJLQH\RXDUH
Lecture 57: Customer-Focused Pricing
PDQDJLQJVRPHSURGXFWRUVHUYLFHDQG\RXUPDMRUFRPSHWLWRUGURSVLWV
SULFH :KDW DUH DOO WKH ZD\V \RX FRXOG UHVSRQG WR WKLV WKUHDW ZLWKRXW
ORZHULQJ \RXU SULFH" +RZ FRXOG \RX NHHS \RXU FXVWRPHUV DQG DWWUDFW
QHZFXVWRPHUVXVLQJRWKHUQRQSULFHWDFWLFVLQWKHPDUNHWLQJPL[",ILW
KHOSVJHWVSHFL¿F7KLQNDERXWDSDUWLFXODUSURGXFWDQGWDUJHWVHJPHQW
with which you are familiar.
Marketing Communications That Work
Lecture 58
S
RPH RI \RX PD\ EH VXUSULVHG WR ¿QG WKDW ZH DUH GLVFXVVLQJ
DGYHUWLVLQJ WKLV ODWH LQ WKH VHFWLRQ RQ PDUNHWLQJ %XW WKH SODFHPHQW
RIRXUGLVFXVVLRQRIDGYHUWLVLQJLVDUHDVRQDEOHSUR[\IRULWVUHODWLYH
LPSRUWDQFHLQPDUNHWLQJGHFLVLRQPDNLQJ%HFDXVHDGYHUWLVLQJLVVRYLVLEOH
PDQ\ SHRSOH PLVWDNHQO\ DVVXPH WKDW LW FRQVWLWXWHV PRVW RI PDUNHWLQJ
EXWWKDW¶VQRWWUXH:KHQPDUNHWLQJLVGRQHULJKWLWVWDUWVZHOOEHIRUHDQ\
SDUWLFXODU FRPPXQLFDWLRQ SURJUDP LV HYHQ FRQFHLYHG ,W LQFRUSRUDWHV
SURGXFWGHVLJQSULFLQJGLVWULEXWLRQDQGLQFHQWLYHV²PXFKPRUHWKDQMXVW
DGYHUWLVLQJ :LWK WKDW VDLG FRPPXQLFDWLRQ LV VWLOO LPSRUWDQW WKXV LQ WKLV
OHFWXUHZH¶OOWDONDERXWVRPHRIWKHSULQFLSOHVLQYROYHGLQGRLQJPDUNHWLQJ
communications well.
‹)XVH7KLQNVWRFN
Case Study: “Got Milk?” Campaign
% 7KH SURFHVV RI FRPPXQLFDWLQJ LV LQWHUHVWLQJ EHFDXVH LW LV D
PLFURFRVP RI WKH PDUNHWLQJ SURFHVV LWVHOI -XVW DV \RX QHHG D
PDUNHWLQJSODQWKDWLQFOXGHVDVSHFL¿FJRDODVWUDWHJ\WRUHDFKWKDW
JRDO DQG D VHW RI WDFWLFV GHVLJQHG WR LPSOHPHQW WKDW VWUDWHJ\ VR
WRR HDFK FRPPXQLFDWLRQ HIIRUW UHTXLUHV LWV RZQ FRPPXQLFDWLRQ
Only after you have a strategy in place does it make sense to start designing an
ad campaign, posting billboards, or sending out direct-mail catalogs.
Lecture 58: Marketing Communications That Work
SODQ FRPSOHWH ZLWK LWV RZQ FRPPXQLFDWLRQ JRDO VWUDWHJ\ DQG
WDFWLFV:H¶OOEHJLQE\ORRNLQJDWWKHVHHOHPHQWVLQRQHVXFFHVVIXO
DG FDPSDLJQ WKH &DOLIRUQLD 0LON 3URFHVVRU %RDUG¶V ³*RW 0LON"´
FDPSDLJQ
%
,Q WKH ODWH V DQG HDUO\ V WKH SHUFDSLWD FRQVXPSWLRQ RI
PLON GHFOLQHG E\ DERXW WZR JDOORQV SHU \HDU ZKLFK WUDQVODWHG WR
DERXWPLOOLRQLQORVWSUR¿WIRUWKHLQGXVWU\$V\RXFDQLPDJLQH
PLONSURGXFHUVZHUHFRQFHUQHGDQGWULHGWRGLDJQRVHWKHSUREOHP
%
0LON¶V DGYHUWLVLQJ LQ WKH ODWH V ZDV WDUJHWHG DW FKLOGUHQ DQG
WHHQDJHUVDQGGHOLYHUHGWKHPHVVDJHWKDWPLONZDVKHDOWK\²JRRG
IRU VWURQJ ERQHV D JUHDW VPLOH DQG EHDXWLIXO VNLQ 7KLV PHVVDJH
VHHPHG WR KDYH JRWWHQ WKURXJK ,Q VXUYH\ UHVHDUFK FRQGXFWHG
E\ WKH 0LON 3URFHVVRU %RDUG RI UHVSRQGHQWV DJUHHG ZLWK
WKH VWDWHPHQW ³0LON LV D KHDOWK\ GULQN´ )XUWKHUPRUH D IXOO UHSRUWHGWKDWWKH\OLNHGWKHWDVWHRIPLON:K\WKHQZHUHSHRSOH
EX\LQJOHVVRILW"
ż 7KLV TXHVWLRQ EULQJV XV WR WKH ¿UVW SDUW RI D FRPPXQLFDWLRQ
SODQ %HIRUH \RX UXQ DQ\ NLQG RI FXVWRPHU FRPPXQLFDWLRQ
LQLWLDWLYH\RXVKRXOGNQRZWKHJRDOVIRU\RXUFRPPXQLFDWLRQV
$UH \RX UXQQLQJ DQ DZDUHQHVV FDPSDLJQ DQ LQIRUPDWLRQ
FDPSDLJQRUDSHUVXDVLYHFDPSDLJQ"
ż
%
7KH JRDO RI \RXU FRPPXQLFDWLRQ FDPSDLJQ VKRXOG EH
FRQVRQDQWZLWKWKHODUJHUJRDORI\RXURYHUDOOPDUNHWLQJSODQ
EXWLWLVXVXDOO\PRUHVSHFL¿FDQGWDUJHWHG
7KH0LON3URFHVVRU%RDUGGLGVRPHPDUNHWUHVHDUFKDQGIRXQGD
QXPEHURISRVVLEOHUHDVRQVIRUWKHGHFOLQHLQPLONFRQVXPSWLRQEXW
LW]HURHGLQRQWKHRQHSUREOHPWKDWLWWKRXJKWFRXOGEHDGGUHVVHG
UDWLRQLQJ%HFDXVHPLONLVXVXDOO\SXUFKDVHGRQHJDOORQDWDWLPH
DQG VKDUHG DFURVV WKH KRXVHKROG FRQVXPSWLRQ LV KLJKO\ VHQVLWLYH
WR KRZ PXFK PLON LV DYDLODEOH RQ KDQG 7KH JRDO RI WKH ERDUG¶V
FDPSDLJQ WKHQ ZDV WR PDQDJH UDWLRQLQJ E\ UHPLQGLQJ SHRSOH WR
SLFNXSPLONHYHU\WLPHWKH\ZHQWWRWKHVWRUH
%
$V ZH VDLG D FDPSDLJQ QHHGV QRW MXVW D JRDO EXW DOVR D VWUDWHJ\
$QG MXVW OLNH WKH ODUJHU PDUNHWLQJ VWUDWHJ\ WKLV LQFOXGHV D WDUJHW
DQG SRVLWLRQLQJ ,Q VRPH FDVHV WKH WDUJHW IRU D FRPPXQLFDWLRQ
FDPSDLJQ ZLOO EH WKH VDPH DV WKH WDUJHW IRU WKH PDUNHWLQJ
strategy, but sometimes, the target is a subsegment of the total
WDUJHW 6RPH SRSXODU SURGXFWV VXFK DV PLON KDYH VHYHUDO WDUJHW
PDUNHWV$FDPSDLJQFRXOGWU\WRUHDFKDOOWKRVHWDUJHWVRULWFRXOG
FRPPXQLFDWHZLWKMXVWRQHRIWKRVHJURXSV,QWKHPLONFDPSDLJQ
WKHWDUJHWZDVSDUHQWV
%
7KHUHZDVDOVRDSRVLWLRQLQJIRUWKH³*RW0LON"´FDPSDLJQLQWKDW
LW SURPRWHG D VLPSOH PHVVDJH KLJKOLJKWLQJ DQ DGYDQWDJH RI PLON
RYHUFRPSHWLWLYHEHYHUDJHV)RUWKLVFDPSDLJQWKH0LON3URFHVVRU
%RDUG VHWWOHG RQ PLON DV WKH SHUIHFW FRPSOHPHQW IRU RWKHU IRRGV
VXFK DV FHUHDOV FDNH FRRNLHV DQG VDQGZLFKHV 7KDW ZDV PLON¶V
YDOXHSURSRVLWLRQ
%
:LWK D JRDO DQG D VWUDWHJ\ LQ SODFH IRU WKH FRPPXQLFDWLRQV
FDPSDLJQ LW ZDV WLPH IRU VRPH WDFWLFDO GHFLVLRQV 7KLV LV WKH
FUHDWLYHTXHVWLRQ+RZFDQZHJHWWKLVPHVVDJHRXWWRRXUWDUJHW"
7KHWDFWLFVKHUHLQFOXGHGDQDZDUGZLQQLQJVHULHVRI³GHSULYDWLRQ
DGV´ ,Q HDFK DG D SHUVRQ ZDV VKRZQ HQMR\LQJ VRPH NLQG RI
GHOLFLRXVIRRGEXWGLVFRYHUHGWRRODWHWKDWKHRUVKHKDGUXQRXWRI
PLON(DFKDGHQGHGZLWKWKHWDJOLQH³*RWPLON"´ZKLFKVHUYHGDVD
warning not to let the same fate befall the viewer.
%
7KHDGVZHUHDWUHPHQGRXVVXFFHVV7KHFDPSDLJQDFWXDOO\EURXJKW
DERXW D LQFUHDVH LQ VDOHV ZKLFK WUDQVODWHG LQWR DERXW PLOOLRQ7KHDGVZHUHVRVXFFHVVIXOLQ&DOLIRUQLDZKHUHWKH\ZHUH
ODXQFKHGWKDWWKH1DWLRQDO0LON3URFHVVRUV%RDUGSLFNHGWKHPXS
DQGUDQWKHPQDWLRQZLGH
%
8QIRUWXQDWHO\ WKH VXFFHVV ZDV VKRUWOLYHG SRVVLEO\ EHFDXVH WKH
FDPSDLJQ ORVW LWV IRFXV ,QVWHDG RI WKH PHVVDJH WKDW FRQVXPHUV
VKRXOG UHPHPEHU WR EX\ PLON ODWHU DGV SURPRWHG WKH KHDOWK DQG
EHDXW\ EHQH¿WV RI PLON UHWXUQLQJ WR WKH PHVVDJH WKDW KDG EHHQ
FRPPXQLFDWHGLQWKHV$QGWKHUHVXOWVZHUHODUJHO\WKHVDPH
3HRSOHEHOLHYHGWKHPHVVDJLQJEXWIDLOHGWREX\WKHSURGXFW
Lecture 58: Marketing Communications That Work
Commanding Attention
% 2QHRIWKHNH\VWRVXFFHVVIXOFRPPXQLFDWLRQVLVWRFRPPDQGWKH
DWWHQWLRQ RI WKRVH ZDWFKLQJ RU OLVWHQLQJ²DQG WR GR VR ZLWKRXW
WXUQLQJWKHPRII$QGRQHZD\WRGRWKLVLVWRDOZD\VKDYHQHZV
,I \RXU FRPPHUFLDOV DOZD\V LQIRUP FXVWRPHUV RI VRPHWKLQJ
LPSRUWDQW²RU DW OHDVW VRPHWKLQJ WKDW VHHPV LPSRUWDQW RQ ¿UVW
JODQFH²WKH\DUHPRUHOLNHO\WRFRPPDQGDWWHQWLRQ
%
To ensure that you always have new information to share, you
might try the strategy of trivial innovation6HYHUDOEHHUFRPSDQLHV
LQFOXGLQJ 0LOOHU&RRUV KDYH SHUIHFWHG WKLV VWUDWHJ\ 7KH\ GRQ¶W
FKDQJHWKHUHFLSHIRUEHHUEXWWKH\FKDQJHRWKHUWKLQJVDERXWWKH
SURGXFWVXFKDVERWWOLQJRUSDFNDJLQJLQRUGHUWRKDYHVRPHELWRI
QHZVWRSURPRWHLQWKHLUDGV
%
%XGZHLVHU JLYHV XV DQ H[DPSOH RI D GLIIHUHQW VWUDWHJ\ IRU JHWWLQJ
FRQVXPHUV¶ DWWHQWLRQ 7KLV FRPSDQ\ WHQGV WR QRW HQJDJH LQ DV
PXFKWULYLDOLQQRYDWLRQIRULWVSURGXFWVDQGSDFNDJLQJLQVWHDGLW
SURGXFHV DGV WKDW DUH GHVWLQDWLRQ HQWHUWDLQPHQW DQG VWLOO SURPRWH
WKH EUDQG ZHOO7KLQN RI 6SXGV 0DF.HQ]LH WKH %XGZHLVHU IURJV
RU WKH :D]]XS" JX\V %XGZHLVHU FUHDWHV FXOWXUDO SKHQRPHQD²
DOZD\VFDUHIXOO\DQGFORVHO\WLHGWRWKHEUDQG²WKDWSHRSOHZDQWWR
ZDWFKDQGVKDUHZLWKWKHLUIULHQGV
Communication Templates
% 2QHODVWWKLQJWRFRQVLGHUDV\RXSODQDFRPPXQLFDWLRQFDPSDLJQ
LVWRJLYH\RXUVHOIURRPIRUHYROXWLRQLIWKHFDPSDLJQJDLQVVRPH
WUDFWLRQ (YHQ WKH EHVWORYHG DGV JHW WLUHVRPH ZLWK VXI¿FLHQW
YLHZLQJ,QRUGHUWRNHHSSHRSOH¶VDWWHQWLRQLWLVRIWHQQHFHVVDU\
WR FKDQJH WKLQJV XS D ELW RU UHIUHVK WKH LGHD 6RPH FDPSDLJQV
DUH ÀH[LEOH HQRXJK WR GR WKLV LQ ZD\V WKDW KROG WUXH WR WKH
RULJLQDO RU FXUUHQW JRDOV DQG DUH VWLOO GLIIHUHQW HQRXJK WR NHHS
FXVWRPHUVHQJDJHG
%
7KH EHVW ZD\ WR DOORZ IRU HYROXWLRQ LV WR HVWDEOLVK D WHPSODWH IRU
FRPPXQLFDWLQJ ZLWK \RXU WDUJHW FXVWRPHUV LQVWHDG RI FUHDWLQJ D
VLQJOH SLHFH RU HYHQ D VLQJOH VHW RI FRPPXQLFDWLRQV 7KLV DGYLFH
KROGVIRUDOOW\SHVRIFRPPXQLFDWLRQVLQFOXGLQJDGYHUWLVLQJHPDLO
FRPPXQLFDWLRQ GLUHFWPDLO FDWDORJV 35 FDPSDLJQV DQG VR RQ
:KHQ \RX HVWDEOLVK WKH WHPSODWH DVN \RXUVHOI :KDW DERXW WKH
PHVVDJLQJLVFRUHDQGVKRXOGUHPDLQLPPXWDEOHDQGZKDWVKRXOG
EHIUHHWRFKDQJHRYHUWLPH"
%
$PRQJ SULQW DGYHUWLVHUV $EVROXW 9RGND LV SHUKDSV WKH EHVW
H[DPSOHRIDFRPSDQ\WKDWGRHVWHPSODWHVZHOO)RU\HDUVLWVSULQW
DGVIHDWXUHGVRPHYLVXDOYDULDWLRQRQWKHLFRQLFERWWOHZKLFKWRRN
XS PRVW RI WKH SDJH 7KH ERWWOH FRXOG EH PDGH RXW RI ÀRZHUV D
VN\VFUDSHURUPRXQWDLQV%HFDXVHWKHIRUPXODDOORZHGIRUHQGOHVV
UHLQYHQWLRQ WKH DGV QHYHU JRW ROG DQG DOZD\V DWWUDFWHG DWWHQWLRQ
while remaining consistent.
%
$QH[DPSOHRIDQDGFDPSDLJQWKDWVHHPVWRKDYHHYROYHGSRRUO\LV
WKH&DSLWDO2QH9LVDFDUGFRPPHUFLDOV
ż 7KH RULJLQDO DGV IHDWXUHG D EDUEDULDQ KRUGH GHVFHQGLQJ RQ
D KDSOHVV FUHGLWFDUG XVHU 7KH FRPPHUFLDOV GHOLYHUHG WKH
PHVVDJH WKDW &DSLWDO 2QH SURWHFWV FRQVXPHUV IURP VXFK
GDQJHUVDVIUDXGLGHQWLI\WKHIWDQGKLJKIHHV
ż
2YHU WLPH KRZHYHU WKH IRFXV RI WKH FDPSDLJQ VKLIWHG
,QVWHDGRIEHLQJV\PEROLFRIWKHGDQJHUVLQKHUHQWLQPRGHUQ
¿QDQFLDO WUDQVDFWLRQV WKH EDUEDULDQV EHFDPH VSRNHVSHRSOH
IRU WKH FDUG 7KH\ FKDUJHG LWHPV WR WKH &DSLWDO 2QH FDUG WR
UDFNXSSRLQWVWRJRRQYDFDWLRQRUFXVWRPL]HGWKHFDUGZLWK
SLFWXUHVRIWKHLUEDUEDULDQFKLOGUHQ1RQHRIWKLVPDGHVHQVH
to the average consumer.
ż
7KH FDPSDLJQ HYROYHG SRRUO\ EHFDXVH LW GLGQ¶W IROORZ D
WHPSODWH ,QVWHDG LW HVWDEOLVKHG D JURXS RI FHQWUDO FKDUDFWHUV
DQGVLPSO\OHWWKHZKHHOVVSLQIURPWKHUH)URPWKHFXVWRPHU¶V
SHUVSHFWLYHWKHUHVXOWZDVFRQIXVLQJ
Lecture 58: Marketing Communications That Work
Summing Up Communications
% 'HVLJQLQJDQGUXQQLQJDPDUNHWLQJFRPPXQLFDWLRQFDPSDLJQFDQ
EH LQWLPLGDWLQJ EXW WKHUH LV DQ HVWDEOLVKHG SURFHVV )LUVW PDNH
sure you have a goal for your communications, whether you are
GHVLJQLQJD6XSHU%RZODGDZHEVLWHRUDÀ\HU$VN\RXUVHOIZKDW
SUREOHP\RXZDQWWRVROYHZLWK\RXUFRPPXQLFDWLRQ
%
<RXUFRPPXQLFDWLRQVVKRXOGDOVRDOZD\VKDYHDWDUJHWDQGDYDOXH
SURSRVLWLRQ 6RPHWLPHV \RX ZLOO DGGUHVV \RXU HQWLUH WDUJHW RU
PXOWLSOHWDUJHWVEXWRIWHQ\RXZLOOUXQDQDGRURWKHUFRPPXQLFDWLRQ
HIIRUWWDUJHWHGDWMXVWDVXEVHJPHQWRI\RXUHQWLUHWDUJHWPDUNHW
%
2QO\DIWHU\RXKDYHDJRDODQGDVWUDWHJ\IRU\RXUFRPPXQLFDWLRQ
HIIRUWVVKRXOG\RXVWDUWWRWKLQNDERXWWKHFUHDWLYH²WKHWDFWLFVIRU
\RXUFRPPXQLFDWLRQV7KHWULFNLHVWSDUWRIWDFWLFDOFRPPXQLFDWLRQV
LVWKHWUDGHRIIEHWZHHQHQWHUWDLQLQJFXVWRPHUVDQGLQIRUPLQJWKHP
,I\RXIDLOWRJUDEVRPHRQH¶VDWWHQWLRQLWUHDOO\GRHVQ¶WPDWWHUZKDW
HOVH \RX WU\ WR GR LQ \RXU FRPPXQLFDWLRQV$V ZH VDLG \RX FDQ
DWWUDFW DWWHQWLRQ E\ DOZD\V VKDULQJ QHZV RU E\ SURYLGLQJ SHRSOH
ZLWKVRFLDOFXUUHQF\²VRPHWKLQJWKH\FDQWDONDERXWZLWKIULHQGV
Suggested Reading
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHU
Questions to Consider
1. :DWFK VRPH FRPPHUFLDOV ,I SRVVLEOH WU\ WR ZDWFK VHYHUDO DGV IURP
WKH VDPH FDPSDLJQ <RX7XEH LV D JRRG VRXUFH IRU WKLV H[HUFLVH 7KHQ UHYHUVHHQJLQHHUWKH GHFLVLRQ SURFHVV XVHG WR FRPHXS ZLWK WKH
FDPSDLJQ:KDWZDVWKHJRDO":KRZHUHWKHWDUJHWFXVWRPHUV"2QZKDW
YDOXHSURSRVLWLRQDUHWKHDGVSRVLWLRQHG"
2. 3LFNDEUDQG\RXNQRZZHOODQGVNHWFKRXWDQHZDGIRUWKDWEUDQG6WDUW
ZLWKDJRDO²DVSHFL¿FSUREOHP\RXKRSHWRVROYHZLWK\RXUDG²DQG
FKRRVHDWDUJHW7KHQGHVFULEHWKHFUHDWLYH\RXZRXOGXVH+RZZRXOG
\RXJUDEDWWHQWLRQZLWKRXWORVLQJFRQWURORIWKHPHVVDJH"
The Promise and Perils of Social Media
Lecture 59
,
Q WKH ODVW OHFWXUH ZH WDONHG DERXW FRPPXQLFDWLRQV DV D WDFWLF 7KH
SULQFLSOHVZHGLVFXVVHGLQWKDWOHFWXUHKROGIRUDOO\RXUFRPPXQLFDWLRQV
HIIRUWV ZKHWKHU WUDGLWLRQDO DGYHUWLVLQJ GLUHFW PDLO RU ZHEVLWH GHVLJQ
<RX VKRXOG DOZD\V NQRZ ZKR \RXU WDUJHW FXVWRPHU LV IRU DQ\ SDUWLFXODU
FRPPXQLFDWLRQHIIRUWDQG\RXVKRXOGFXVWRPL]H\RXUFRPPXQLFDWLRQHIIRUW
WRSURYLGHYDOXHIRUWKDWFXVWRPHU%XWHYHQWKRXJKWKHVHJHQHUDOUXOHVDSSO\
WR DOO IRUPV RI FRPPXQLFDWLRQ ZLWK WKH FXVWRPHU LW¶V DOVR ZRUWK ORRNLQJ
DWVRPHRIWKHQRQWUDGLWLRQDOPHDQVRIFRPPXQLFDWLRQWKDWPDUNHWHUVQRZ
KDYHDWWKHLUGLVSRVDOVRFLDOPHGLDZRUGRIPRXWKFDPSDLJQVYLUDOYLGHRV
DQG VR RQ ,Q WKLV OHFWXUH ZH¶OO H[SORUH VRPH RI WKHVH LQQRYDWLYH ZD\V RI
getting information to consumers.
3XEOLF5HODWLRQV
% 1RQWUDGLWLRQDOFRPPXQLFDWLRQVVXFKDVVRFLDOPHGLDYLUDOYLGHRV
DQG VR RQ W\SLFDOO\ UHDFK FXVWRPHUV RQO\ LQGLUHFWO\²WKURXJK
VRPH LQWHUPHGLDU\ VXFK DV D UHSRUWHU RU D IULHQG $V D UHVXOW
WKHVH QRQWUDGLWLRQDO LQGLUHFW PRGHV RI FRPPXQLFDWLRQ HIIHFWLYHO\
DGG DQRWKHU OD\HU RI ³FXVWRPHUV´ WR EH VHUYHG ,Q WKLV WKH\ DUH
VLPLODU WR RQH RI WKH ROGHVW DQG PRVW ZHOOHVWDEOLVKHG PHDQV RI
QRQDGYHUWLVLQJFRPPXQLFDWLRQVSXEOLFUHODWLRQV
%
1RWVXUSULVLQJO\FRPSDQLHVORYHSXEOLFUHODWLRQV$IWHUDOODVLGH
IURP ZKDWHYHU \RX SD\ \RXU 35 ¿UP RU WKH SHUVRQ ZULWLQJ WKH
SUHVVUHOHDVHVLW¶VIUHH0RVWFRPSDQLHVDWWHPSWWRWDNHDGYDQWDJH
RI 35 E\ PDLOLQJ SUHVV UHOHDVHV WR WKH PHGLD KLJKOLJKWLQJ
FRPSDQ\ DFKLHYHPHQWV DQG LQFOXGLQJ TXRWHV IURP H[HFXWLYHV
or customers.
%
7KH SUREOHP ZLWK WKLV DSSURDFK LV WKDW FRPSDQLHV RIWHQ IRUJHW
ZKR WKH ³FXVWRPHU´ LV IRU WKHLU SUHVV UHOHDVHV ,Q WKH FDVH RI 35
WKH SUHVV LV WKH FXVWRPHU²UHSRUWHUV FDEOH QHZV SURGXFHUV DQG
LQGXVWU\ WUDGH ZULWHUV )DU WRR PDQ\ FRPSDQLHV DUH FRPSOHWHO\
FHQWHUHGRQWKHPVHOYHVZKHQWKH\HQJDJHLQ35HIIRUWV7KH\WU\
WRWHOOUHSRUWHUVZKDWWKHFRPSDQ\LVH[FLWHGDERXWZKLFKGRHVQ¶W
LQWHUHVWWKHQHZVPHGLD
%
,I\RXZDQW\RXU35WRWDNHRII\RXPXVWJLYHUHSRUWHUVVRPHWKLQJ
WKH\ZLOOEHLQWHUHVWHGLQZULWLQJDERXW
ż )RUH[DPSOHLQWKHPLGVWRIDQHFRQRPLFGRZQWXUQUHSRUWHUV
DUH SUREDEO\ ORRNLQJ IRU VWRULHV DERXW ³JUHHQ VKRRWV´ LQ WKH
HFRQRP\²HYLGHQFHWKDWEXVLQHVVPD\EHSLFNLQJXS,QVWHDG
RIVHQGLQJRXWDJHQHULFVWRU\DERXW\RXUQHZSURGXFWODXQFK
FRQWDFWWKRVHUHSRUWHUVZKRZRXOGEHPRVWOLNHO\WRZULWHDERXW
WKHHFRQRP\DQGWHOO\RXUVWRU\IURPWKDWVODQW
ż
Lecture 59: The Promise and Perils of Social Media
%
2QHRIWKHPRVWDVWRXQGLQJVXFFHVVHVLQUHFHQW35KLVWRU\ZDVWKDW
RI$PHULFDQ *LDQW D VPDOO LQGHSHQGHQW VZHDWVKLUW PDNHU LQ 6DQ
)UDQFLVFR ,QVWHDG RI FRQWDFWLQJ IDVKLRQ UHSRUWHUV WKH FRPSDQ\
VHQWDSUHVVUHOHDVHWR)DUKDG0DQMRRDWHFKQRORJ\FROXPQLVWIRU
SlatePDJD]LQH
ż 0DQMRR ZDV LQWULJXHG E\ WKH IDFW WKDW $PHULFDQ *LDQW XVHG
WKH ,QWHUQHW WR VHOO GLUHFWO\ WR FXVWRPHUV IURP WKH IDFWRU\
E\SDVVLQJWKHGLVWULEXWLRQFRVWVIDFHGE\PRVWDSSDUHOPDNHUV
+HDOVROLNHGWKHLGHDWKDWWKHFRPSDQ\KDGKLUHGDQLQGXVWULDO
GHVLJQHUIURP$SSOHWRDVVLVWLQWKHGHVLJQRIWKHVZHDWVKLUWV
,Q 'HFHPEHU RI KH ZURWH D JXVKLQJ WULEXWH WR ERWK WKH
SURGXFW DQG WKH FRPSDQ\ LQ D FROXPQ HQWLWOHG ³7KLV ,V WKH
*UHDWHVW+RRGLH(YHU0DGH´
ż
'LG\RXUQHZSURGXFWODXQFKDOORZ\RXWRKLUHPRUHSHRSOH"
'R \RX SODQ WR RSHQ D QHZ IDFWRU\ WKDW ZLOO FUHDWH MREV"
5HSRUWHUV ZLOO EH LQWHUHVWHG LQ WKRVH NLQGV RI KRRNV DQG DUH
PRUHOLNHO\WRWHOO\RXUVWRU\WRSRWHQWLDOFXVWRPHUV
7KH FROXPQ ZHQW YLUDO DOPRVW LPPHGLDWHO\ ,W ZDV WZHHWHG
HPDLOHG SRVWHG RQ )DFHERRN DQG SLFNHG XS E\ $%& DQG
135 :LWKLQ D YHU\ VKRUW WLPH$PHULFDQ *LDQW VROG DOPRVW
HYHU\WKLQJLWKDGLQLQYHQWRU\LWWKHQWRRNSUHRUGHUVIRUWKUHH
WRVL[PRQWKVLQDGYDQFHRIGHOLYHU\
ż
7KH GLIIHUHQFH EHWZHHQ $PHULFDQ *LDQW¶V DVWRQLVKLQJ 35
VXFFHVVDQGWKHGHDIHQLQJVLOHQFHWKDWPRVW¿UPVUHDSFRPHV
IURP DSSO\LQJ D EDVLF PDUNHWLQJ SULQFLSOH 5HFRJQL]H \RXU
FXVWRPHU )RU 35 FDPSDLJQV WKH UHSRUWHU FROXPQLVW RU
SURGXFHULVWKHFXVWRPHU
Viral Marketing
% 9LUDO PDUNHWLQJ KDV EHHQ D FRPPRQ WDFWLF IRU VHYHUDO \HDUV QRZ
7KH LGHD LV WR FUHDWH VRPHWKLQJ²DQ RQOLQH YLGHR D ZHE JDPH D
FOHYHU WZHHW DQ RSHG RU HYHQ MXVW DQ H[SHULHQFH RU VWRU\²WKDW
SHRSOH ZLOO ¿QG ZRUWK\ RI IRUZDUGLQJ RU WDONLQJ DERXW WR RWKHUV
7KRVH RWKHUV WKHQ SXVK WKH FRQWHQW RQ WR VWLOO RWKHUV DQG WKH
PDUNHWLQJ PHVVDJH VSUHDGV OLNH D YLUXV XQWLO LW KDV LQIHFWHG WKH
whole market.
%
$V\RXFDQLPDJLQHJHWWLQJYLUDOPDUNHWLQJWRZRUNLVHDVLHUVDLG
WKDQ GRQH 0RVW RIWHQ ZKHQ FRPSDQLHV RU DG DJHQFLHV DQQRXQFH
WKHLU LQWHQWLRQV WR VWDUW D YLUDO FDPSDLJQ WKH\¶UH WDONLQJ DERXW D
FRPPXQLFDWLRQHIIRUWWKDWWKH\DUHXQZLOOLQJWRIXQG
%
/LNH VXFFHVVIXO 35 FDPSDLJQV VXFFHVVIXO YLUDO PDUNHWLQJ
FDPSDLJQVPXVWVHUYHWZRFXVWRPHUVRUUDWKHUWZRVHWVRIFXVWRPHU
QHHGV 7KHUH PXVW RI FRXUVH EH WKH PHVVDJH DERXW WKH SURGXFW
VHUYLFH RU EUDQG²WKH PDUNHWLQJ PHVVDJH %XW WKHUH LV DOVR DQ
DGGLWLRQDO VRFLDO QHHG WKDW PXVW EH PHW ZLWK WKH FRPPXQLFDWLRQ
HIIRUW3HRSOHQHHGWRGHULYHVRPHYDOXHIURPVKDULQJWKHPHVVDJH
That value comes from sharing content that is funny, emotionally
PRYLQJSURIRXQGLQVLJKWIXORUMXVWSODLQLQWHUHVWLQJ
%
-XVWDV\RXVKRXOGDQWLFLSDWHWKHYDOXHWKDWDUHSRUWHUPLJKWVHHNWR
JDLQIURPDSUHVVUHOHDVH\RXVKRXOGDOVRNQRZH[DFWO\ZKDWYDOXH
FXVWRPHUV ZRXOG JHW IURP FRPPXQLFDWLQJ \RXU ZRXOGEH YLUDO
PHVVDJHWRRWKHUV2QFHDJDLQWKHPHVVDJHRIWKHFRPSDQ\LVRIWHQ
QRWDWDOOLQWHUHVWLQJWRWKHFXVWRPHUVZKRP\RXZDQWWRVSUHDGWKH
message. The key here is to give customers content that they will
ZDQWWRJLYHDVJLIWVWRWKHLUIULHQGV
Destination Content
% Another change in marketing communication over the last few
\HDUVLVWKHJURZLQJSUHYDOHQFHRIGHVWLQDWLRQFRQWHQW,QFUHDVLQJO\
FRPSDQLHVDUHORRNLQJWRFXWWKURXJKWKHFOXWWHURIDGYHUWLVLQJE\
FUHDWLQJRQPHVVDJHFRQWHQWWKDWSHRSOHDFWXDOO\VHHNRXW
%
2QH YHUVLRQ RI WKLV VWUDWHJ\ LV WR FUHDWH DGYHUWLVHPHQWV WKDW DUH
VR HQWHUWDLQLQJ²IXQQ\ PRYLQJ RU DPD]LQJ²WKDW SHRSOH ZLOO JR
RQOLQHDQGORRNIRUWKHDGVEHFDXVHWKH\KHDURWKHUVWDONLQJDERXW
WKHPRUEHFDXVHWKH\ZDQWWRVHHWKHDGVDJDLQ
ż 2QH SURPLQHQW H[DPSOH ZDV D 9ROYR WUXFN DG WKDW IHDWXUHG
-HDQ&ODXGH9DQ'DPPHVWDQGLQJRQWKHVLGHPLUURUVRIWZR
PRYLQJWUXFNV7KHWUXFNVVORZO\GULIWHGDSDUWXQWLOWKHPRYLH
VWDUZDVGRLQJDSHUIHFWVSOLWEHWZHHQWZRWUXFNVUROOLQJGRZQ
WKHDVSKDOW
Lecture 59: The Promise and Perils of Social Media
ż
%
6XFK GXDOFKDQQHO DGYHUWLVLQJ LV QRW WKH RQO\ ZD\ WR GHYHORS
GHVWLQDWLRQ PDUNHWLQJ FRQWHQW ,QFUHDVLQJO\ ¿UPV DUH FUHDWLQJ
HQWHUWDLQLQJFRQWHQWWKDWLVGHVLJQHGIRURQOLQHYLHZLQJRQO\
ż $SURPLQHQWH[DPSOHKHUHZDVDVHULHVRIVKRUW¿OPVFUHDWHGE\
%0:DQGGLVWULEXWHGRYHUWKH,QWHUQHW7KH¿OPVZHUHZULWWHQ
DQG SURGXFHG E\ WRS +ROO\ZRRG WDOHQW DQG ZHUH SUDLVHG E\
TIMEPDJD]LQHDQGThe New York Times.
ż
,QFDVHVOLNHWKLVRQO\DVPDOOIUDFWLRQRIWKHWRWDOYLHZHUVKLS
FRPHV ZKHQ WKH DGV DLU RQ WHOHYLVLRQ 0RVW RI WKHLU UHDFK
KDSSHQVODWHURQOLQHZKHUHFXVWRPHUVVHHNRXWWKHDGYHUWLVLQJ
FRQWHQWDVGHVWLQDWLRQHQWHUWDLQPHQW
%HFDXVH RI WKH TXDOLW\ WKHVH ¿OPV EHFDPH GHVWLQDWLRQ
HQWHUWDLQPHQW 3HRSOH VRXJKW WKHP RXW ZDWFKHG WKHP DQG
IRUZDUGHG WKHP WR IULHQGV 7KH VKRUWV ZHUH ZDWFKHG PRUH
WKDQ PLOOLRQ WLPHV LQ WKH ¿UVW IRXU PRQWKV DIWHU WKH\
ZHUHODXQFKHG
%
7KH EOHQGHU PDQXIDFWXUHU %OHQGWHF KDV DOVR FUHDWHG GHVWLQDWLRQ
HQWHUWDLQPHQW EXW RQ D YHU\ ORZ EXGJHW ,WV ³:LOO ,W %OHQG"´
ZHELVRGHVIHDWXUHWKHFRPSDQ\¶VIRXQGHUSXWWLQJYDULRXVKRXVHKROG
REMHFWV VXFK DV D ER[ RI OLJKW EXOEV D VL[SDFN RI VRGD RU DQ
L3KRQHLQWRDEOHQGHU
ż 7KH VKRUW ZHELVRGHV DUH EL]DUUH IXQQ\ DQG LQQRYDWLYH$QG
PRVW LPSRUWDQW WKH\ LOOXVWUDWH H[DFWO\ KRZ JRRG %OHQGWHF¶V
SURGXFWVDUHDWEOHQGLQJ
ż
%
:LWKLQ D ZHHN RI WKH ¿UVW SRVWLQJ RQ <RX7XEH %OHQGWHF¶V
YLGHR KDG EHHQ YLHZHG PRUH WKDQ PLOOLRQ WLPHV :LWKLQ
WZR \HDUV VDOHV KDG JRQH XS 7KH FDPSDLJQ ZKLFK
LQYROYHGQRSURIHVVLRQDODGYHUWLVLQJ¿UPDQGKDGSUDFWLFDOO\
QR EXGJHW ZRQ D &OLR DZDUG RQH RI WKH PRVW SUHVWLJLRXV
DZDUGVLQDGYHUWLVLQJ
%RWK %0: DQG %OHQGWHF FUHDWHG YDOXH IRU WKH FXVWRPHU E\
DFWXDOO\ EHLQJ HQWHUWDLQLQJ 7KLV VHHPV EDVLF EXW WUDGLWLRQDO
DGYHUWLVLQJ LV SULPDULO\ DERXW GHOLYHULQJ WKH PHVVDJH 7KDW LV
FRPSOHWHO\ GLIIHUHQW IURP GHVWLQDWLRQ PDUNHWLQJ ZKHUH WKH
HQWHUWDLQPHQW YDOXH RI WKH FRPPXQLFDWLRQ PXVW EH WKH SULPDU\
FRQFHUQ ,I SHRSOH GRQ¶W VHHN RXW \RXU RIIHULQJ DQG WHOO WKHLU
IULHQGV DERXW LW WKHQ LW ZRQ¶W PDWWHU ZKDW WKH PHVVDJH LV <RX
must create something worth seeking out.
ż %XW MXVW DV DQ RQSRLQW PHVVDJH LV XVHOHVV ZLWKRXW WKH
HQWHUWDLQPHQWYDOXHWRGUDZSHRSOHLQFUHDWLQJVRPHWKLQJWKDW
LVHQWHUWDLQLQJZLWKRXWGHOLYHULQJWKHPDUNHWLQJPHVVDJHLVWKH
same as throwing money away.
ż
:KDW PDGH ERWK RI WKHVH FDPSDLJQV VXFFHVVIXO LV WKDW
WKH\ ZHUH DEOH WR HQWHUWDLQ LQ D ZD\ WKDW HPSKDVL]HG WKH
marketing messages.
Lecture 59: The Promise and Perils of Social Media
%
'HVSLWHLWVDGYDQWDJHVKRZHYHU
VRFLDO PHGLD DOVR FDUULHV WKH
SRWHQWLDO IRU FRPSDQLHV WR *HWWLQJFXVWRPHUVWRWZHHWDERXW
PLVXVH LW 2QH RI WKH PRVW your product or post something
about it on Facebook can be
FRPPRQ HUURUV IRU H[DPSOH LV LQÀXHQWLDOWRRWKHUFXVWRPHUV
WKH IDLOXUH WR EDVH VRFLDO PHGLD and costs you very little.
strategy on the larger marketing
JRDOV RI WKH FRPSDQ\ 0DQ\ ¿UPV KLUH VSHFLDOLVWV WR GHVLJQ DQG
LPSOHPHQW WKHLU VRFLDO PHGLD VWUDWHJ\ EXW RIWHQ WKHVH VSHFLDOLVWV
DUH UHPRYHG IURP WKH UHVW RI WKH PDUNHWLQJ HIIRUWV $V D UHVXOW
WKHLUGLJLWDORUVRFLDOPHGLDFDPSDLJQVGRQ¶WDGYDQFHDFRPSDQ\¶V
overall marketing strategy.
ż 7KHFOHDUHVWPDQLIHVWDWLRQRIWKLVSKHQRPHQRQLVWKHREVHVVLRQ
ZLWK QHZ PHWULFV VSHFL¿F WR YDULRXV ZHEVLWHV RU SODWIRUPV
VXFKDVWKH.ORXWVFRUHRUWKHQXPEHURI)DFHERRNOLNHV
ż
‹-XSLWHULPDJHV6WRFNE\WH7KLQNVWRFN
Social Media
% As a communication tactic,
VRFLDO PHGLD KDV VHYHUDO
DGYDQWDJHV LQFOXGLQJ WKH IDFW
WKDW LW¶V LQH[SHQVLYH ,W¶V DOVR
D WZRZD\ FRPPXQLFDWLRQ
FKDQQHO ,I \RX SD\ DWWHQWLRQ
you can learn as much from your
FXVWRPHUVWKURXJKVRFLDOPHGLD
as your customers are learning
IURPHDFKRWKHU,WLVWKXVSDUW
PDUNHWLQJ FRPPXQLFDWLRQV DQG
SDUWPDUNHWLQJUHVHDUFK
7KHUHLVQRWKLQJZURQJZLWKJHWWLQJSHRSOHWROLNH\RXUEUDQG
RQ )DFHERRN LW RSHQV D FKDQQHO IRU IXUWKHU FRPPXQLFDWLRQ
ZLWK WKRVH FXVWRPHUV DQG LQFUHDVHV WKH FKDQFHV WKDW WKHLU
IULHQGVZLOOVHHWKHDVVRFLDWLRQDQGEHFRPHPRUHLQWHUHVWHGLQ
WKHEUDQG%XW)DFHERRNOLNHVDUHQRWDQHQGXQWRWKHPVHOYHV
7KH IDFW WKDW WKH\ DUH HDV\ WR PHDVXUH GRHV QRW PDNH WKHP
DSSURSULDWH PHWULFV IRU D FDPSDLJQ²DQG LV FHUWDLQO\ QRW
MXVWL¿FDWLRQIRUVHHNLQJWKHPRXW
%
$QRWKHU HUURU FRPSDQLHV PDNH ZLWK VRFLDO PHGLD LV EHOLHYLQJ
WKDW WKH\ PXVW EH D SDUW RI HYHU\ QHZ SODWIRUP RU IRUXP IRU
FRPPXQLFDWLRQ 6XFK GHFLVLRQV VKRXOG GHSHQG RQ ZKHWKHU WKH
WDUJHW FXVWRPHUV DFWXDOO\ SDUWLFLSDWH LQ D SDUWLFXODU VRFLDO PHGLD
SODWIRUP DQG ZLOO EH RSHQ WR UHFHLYLQJ FRPSDQ\ PHVVDJLQJ RQ
WKDW SODWIRUP <RX VKRXOG DOZD\V KDYH \RXU H\HV RSHQ IRU QHZ
RSSRUWXQLWLHVDQGLI\RXUFXVWRPHUVDUHFRQJUHJDWLQJLQVRPHUHDO
RUYLUWXDOVSDFH\RXVKRXOGWU\WREHWKHUH%XWYLUWXDOVSDFHVDUH
MXVWOLNHUHDOVSDFHVDQG\RXUEUDQGGRHVQ¶WQHFHVVDULO\EHORQJLQ
all of them.
Suggested Reading
Chernev, 6WUDWHJLF0DUNHWLQJ0DQDJHPHQWFKDSWHU
Questions to Consider
1. &KRRVHDSURGXFWRUVHUYLFHZLWKZKLFK\RXDUHIDPLOLDUDQGWKLQNRI
KRZWKDWRIIHULQJLVSRVLWLRQHG:KDWDUHLWVNH\VHOOLQJSRLQWVUHODWLYH
WRLWVFRPSHWLWLRQ"8VLQJWKDWNH\GLIIHUHQWLDWRUDVDVWDUWLQJSRLQWJHW
FUHDWLYHDQGEUDLQVWRUPVRPHFRQWHQWWKDWLVERWKUHOHYDQWWRWKHEUDQG
DQGOLNHO\WREHVXI¿FLHQWO\HQWHUWDLQLQJWKDWLWZLOOEHVKDUHGDQGWDONHG
about by customers.
2. 3UDFWLFHZULWLQJDSUHVVUHOHDVHWKDWFUHDWHVYDOXHIRUDSDUWLFXODUW\SH
RIUHSRUWHU:KDWDUHWKHQHHGVRIUHSRUWHUVLQWKDW¿HOG"+RZFDQ\RXU
SUHVVUHOHDVHKHOSWKHPPHHWWKHLUQHHGV"
Innovative Marketing Research Techniques
Lecture 60
,
Lecture 60: Innovative Marketing Research Techniques
Q WKHVH OHFWXUHV ZH¶YH WDONHG DERXW VWUDWHJ\²NQRZLQJ ZKR \RXU
FXVWRPHUVDUHDQGZKDWWKH\YDOXH:H¶YHDOVRWDONHGDERXWWDFWLFV²WKH
PL[ RI PDUNHWLQJ YDULDEOHV VXFK DV SULFH EUDQG DQG FRPPXQLFDWLRQ
XVHG WR LPSOHPHQW VWUDWHJ\ $V ZH¶YH VHHQ LQWURVSHFWLRQ DQG ORJLF FDQ
JHW \RX D ORQJ ZD\ WRZDUG FUHDWLQJ D PDUNHWLQJ VWUDWHJ\ DQG GHYHORSLQJ
PDUNHWLQJWDFWLFVEXWLW¶VDOVRWUXHWKDWZKHQHYHUSRVVLEOH\RXVKRXOGEDVH
\RXUGHFLVLRQPDNLQJRQVROLGPDUNHWUHVHDUFK7KHUH¶VVLPSO\QRVXEVWLWXWH
IRUWDONLQJWR\RXUFXVWRPHUVDQGREVHUYLQJWKHPDVWKH\EX\DQGXVH\RXU
SURGXFWV 7KXV ZH¶OO HQG WKH PDUNHWLQJ VHFWLRQ RI WKH FRXUVH ZLWK WKH
DFWLYLW\WKDW\RXZLOOJHQHUDOO\XQGHUWDNH¿UVW²FRQGXFWLQJPDUNHWUHVHDUFK
Qualitative Research
% 4XDOLWDWLYH UHVHDUFK PHWKRGV LQFOXGH FXVWRPHU REVHUYDWLRQV
IRFXV JURXSV HWKQRJUDSKLHV DQG SURMHFWLYH WHFKQLTXHV 7KH GDWD
SURGXFHG IURP TXDOLWDWLYH PHWKRGV DUH PRVW RIWHQ H[SUHVVHG LQ
TXDOLWDWLYH WHUPV VWRULHV DERXW W\SLFDO FXVWRPHU H[SHULHQFHV DQG
UHSUHVHQWDWLYH TXRWHV IURP FXVWRPHUV ,Q JHQHUDO TXDOLWDWLYH
PHWKRGV DUH XVHIXO IRU PDNLQJ QHZ GLVFRYHULHV DQG UHDFKLQJ D
EHWWHUXQGHUVWDQGLQJ of customers.
%
6RPHFRPSDQLHVKDYHDFXOWXUHWKDWHPEUDFHVTXDOLWDWLYHUHVHDUFK
EHFDXVH WKH\ EHOLHYH WKDW WKHVH PHWKRGV SURGXFH XQLTXHO\
XVHIXO LQVLJKWV &RQVLGHU 3URFWHU *DPEOH¶V RI¿FLDO UHVHDUFK
SKLORVRSK\³:HOLYHZLWKRXUFRQVXPHUVDQGWU\WRVHHWKHZRUOG
DQGRSSRUWXQLWLHVIRUQHZSURGXFWVWKURXJKWKHLUH\HV$W3 *WKH
&(2LVQRWWKHERVV²WKHFRQVXPHULV´
ż 7KH LGHD RI ³OLYLQJ ZLWK FRQVXPHUV´ DQG ³VHHLQJ WKH ZRUOG
WKURXJKWKHLUH\HV´LVZKDWTXDOLWDWLYHUHVHDUFKLVDOODERXWDQG
\RX GRQ¶W JHW WKDW E\ FRQGXFWLQJ VRPH VXUYH\V RU ORRNLQJ DW
VDOHVGDWD
ż
7KH JRDO RI TXDOLWDWLYH UHVHDUFK LV WR VKHG DOO WKH EDJJDJH
WKDW FRPHV ZLWK ZRUNLQJ IRU D ¿UP RI EHLQJ LQYROYHG LQ
PDUNHWLQJ D SURGXFW RI XQGHUVWDQGLQJ DOO WKH EHKLQGWKH
VFHQHV GHFLVLRQV WKDW OHDG WR DQ RIIHULQJ FRPLQJ WR PDUNHW
7KHLGHDLVWRSXWDOORIWKDWDVLGHDQGUHGLVFRYHUWKHRIIHULQJ
IURPWKHFXVWRPHU¶VSHUVSHFWLYH
%
1RQH RI WKLV LV WR VD\ WKDW TXDOLWDWLYH UHVHDUFK LV VXSHULRU WR
TXDQWLWDWLYH WHFKQLTXHV 4XDQWLWDWLYH UHVHDUFK DQG TXDOLWDWLYH
UHVHDUFK DQG DUH QRW VXEVWLWXWHV IRU HDFK RWKHU 7KH EHVW VFHQDULR
LVRQHLQZKLFKPDUNHWHUVHPSOR\PDQ\GLIIHUHQWW\SHVRIUHVHDUFK
PHWKRGV DQG XVH WKHP LWHUDWLYHO\ FRQVWDQWO\ ORRNLQJ IRU QHZ
LQVLJKWVDQGWHVWLQJWKRVHLQVLJKWVZLWKDGGLWLRQDOUHVHDUFKEHIRUH
starting over again.
%
7KHJRDORITXDOLWDWLYHUHVHDUFKLVWRGHYHORSDULFKXQGHUVWDQGLQJ
of your customers in situWKDWLVDVWKH\VKRSFRQVXPHDQGWDON
WR RWKHUV DERXW \RXU RIIHULQJ 6RPH PDUNHWHUV UHIHU WR WKH RXWSXW
RITXDOLWDWLYHUHVHDUFKDV³WKLFNGHVFULSWLRQV´ZKLFKRIWHQLQFOXGH
GLUHFWTXRWHVIURPFXVWRPHUV:KDW\RX¶UHVHHNLQJLVDQDFFXUDWH
UHSUHVHQWDWLRQRIWKHH[SHULHQFHRIWKHFRQVXPHU
Focus Groups
% 7KHPRVWFRPPRQTXDOLWDWLYHUHVHDUFKPHWKRGXVHGLQPDUNHWLQJLV
WKHIRFXVJURXS7KLVLVDJDWKHULQJRIFRQVXPHUVXVXDOO\LQJURXSV
RI WR IRU D FDQGLG GLVFXVVLRQ RI VRPH WRSLF SURGXFW LVVXH
RUSROLWLFDOFDQGLGDWH7\SLFDOO\IRFXVJURXSVFRQVLVWRIRQO\WKRVH
customers who are in the target segment.
%
)RFXVJURXSVKDYHDGLVFXVVLRQOHDGHUZKRJXLGHVWKHSDUWLFLSDQWV
WKURXJK D VHULHV RI TXHVWLRQV RU WDVNV ,I WKH JURXS ZDV FRQYHQHG
WR GLVFXVV D SURGXFW WKHUH PD\ EH VDPSOHV IRU WKH SDUWLFLSDQWV
WR H[SHULHQFH DQG UHDFW WR +LVWRULFDOO\ IRFXV JURXSV KDYH EHHQ
KHOG LQ FRQIHUHQFH URRPV RIWHQ ZLWK D RQHZD\ PLUURU WR DOORZ
LQWHUHVWHG SDUWLHV WR ZDWFK WKH SURFHHGLQJV 0RUH UHFHQWO\ LW KDV
EHFRPHFRPPRQWRFRQGXFWWKHVHJURXSVLQOHVVIRUPDOVHWWLQJVRU
HYHQRQOLQHXVLQJYLGHRFRQIHUHQFHVRIWZDUH
‹$QGUH\3RSRYL6WRFN7KLQNVWRFN
Lecture 60: Innovative Marketing Research Techniques
4XDQWLWDWLYHUHVHDUFKPHWKRGVVXFKDVVXUYH\VKDYHZHOOGH¿QHGFULWHULDWKDW
must be met if the data are to be valid, interpretable, and generalizable.
%
)RFXVJURXSVDUHDJRRGPHWKRGIRUVHHNLQJFODUL¿FDWLRQRIVRPH
SDUWLFXODU LGHD RU TXHVWLRQ ,Q WKLV ZD\ WKH\ DUH FRQFHSWXDOO\
VLPLODUWRVXUYH\V,QERWKFDVHVFRQVXPHUVDUHDVNHGDVSHFL¿FVHW
RITXHVWLRQVWRJDLQLQVLJKWLQWRDSDUWLFXODUJURXSRIWRSLFV)RFXV
JURXSV DUH LQIHULRU WR VXUYH\V LQ WKDW WKH UHVXOWV WHQG WR EH OHVV
JHQHUDOL]DEOH EXW WKH\ DOVR DOORZ PDUNHWHUV WR JHW PRUH LQGHSWK
LQIRUPDWLRQIURPSDUWLFLSDQWV
%
%RWK VXUYH\V DQG IRFXV JURXSV DUH OLPLWHG LQ WKDW WKH\ DUH
SULPDULO\ JXLGHG E\ WKH UHVHDUFKHU 7KH PDUNHWHU GHFLGHV ZKDW
TXHVWLRQV WR DVN DQG ZKLFK WRSLFV WR FRYHU ZKLFK PHDQV WKDW
VXUYH\V DQG IRFXV JURXSV WHQG WR EH ERXQG E\ WKH OLPLWV RI WKH
PDUNHWHU¶V LPDJLQDWLRQ ,W FDQ EH GLI¿FXOW WR GLVFRYHU UDGLFDOO\
QHZDQGVXUSULVLQJLQVLJKWVLI\RXKDYHWRGH¿QHDOOWKHTXHVWLRQV
WKDWZLOOEHDVNHGLQDGYDQFH2WKHUTXDOLWDWLYHUHVHDUFKPHWKRGV
DUH GHVLJQHG WR JHW DURXQG WKLV OLPLWDWLRQ E\ EHLQJ PRUH RSHQ
HQGHGDQGOHVVGLUHFWHGE\WKHUHVHDUFKHU
&XVWRPHU2EVHUYDWLRQ
% &XVWRPHU REVHUYDWLRQ LV D IDLUO\ VLPSOH PHWKRG RI FRQGXFWLQJ
TXDOLWDWLYH UHVHDUFK 7KH DGYDQWDJH RI XVLQJ REVHUYDWLRQ RYHU
VXUYH\VRUIRFXVJURXSVLVWKDWSHRSOHDUHQ¶WDOZD\VDZDUHRIWKHLU
EHKDYLRU ,I \RX REVHUYH FXVWRPHUV DV RSSRVHG WR DVNLQJ WKHP
GLUHFWTXHVWLRQV\RXFDQVRPHWLPHVJDLQVXUSULVLQJLQVLJKWV
ż )RU H[DPSOH D EDE\ IRRG FRPSDQ\ KLUHG REVHUYHUV WR
VXUUHSWLWLRXVO\ZDWFKSDUHQWVDVWKH\VHOHFWHGEDE\IRRGLQWKH
JURFHU\VWRUH,QWHUHVWLQJO\WKHREVHUYHUVQRWLFHGWKDWPDQ\RI
WKHSDUHQWVWUHDWHGWKHMDUVRIEDE\IRRGDVLIWKH\ZHUHIUHVK
SURGXFHVTXHH]LQJWKHPSHHULQJDWWKHPWRORRNIRUEUXLVHG
VSRWVDQGHYHQVQLI¿QJWKHP
ż
,I WKH FRPSDQ\ KDG DVNHG WKHVH FXVWRPHUV KRZ WKH\ FKRVH
EDE\ IRRGV WKH\ SUREDEO\ ZRXOG KDYH SURYLGHG DQVZHUV
UHODWHG WR IUHVK LQJUHGLHQWV DQG JRRG QXWULWLRQ 1RQH RI WKH
SDUHQWVZRXOGKDYHDGPLWWHGWKDWWKH\DOVRVTXHH]HWKHMDUVDQG
WU\WRVPHOOWKHFRQWHQWVWKURXJKWKHOLGEHFDXVHWKH\SUREDEO\
ZHUHQ¶WHYHQDZDUHRIWKLVEHKDYLRU
ż
7KH FRPSDQ\ XVHG WKLV TXDOLWDWLYH UHVHDUFK WR UHGHVLJQ LWV
SDFNDJLQJ 7KH MDUV ZHUH PDGH WR ORRN URXQGHU DQG PRUH
RUJDQLFDELWOLNHSOXPVRUDSSOHVDQGWKHODEHOVZHUHPDGH
VPDOOHUWRPDNHLWHDVLHUIRUSDUHQWVWRVHHLQVLGHWKHMDUV
%
2EVHUYDWLRQV FDQ EH GRQH OLYH LQ VWRUHV RU UHVWDXUDQWV RU RQ WKH
IDFWRU\ÀRRU:KHUHYHU\RXUFXVWRPHUVSXUFKDVHRUFRQVXPH\RXU
SURGXFW RU VHUYLFH \RX FDQ REVHUYH WKHP 0DQ\ ¿UPV DOVR DSSO\
REVHUYDWLRQDO WHFKQLTXHV WR UHFRUGLQJV RI FXVWRPHU LQWHUDFWLRQV
)RUH[DPSOHEDQNVXVHUHFRUGLQJVRILQWHUDFWLRQVDW$70VWRWU\WR
LPSURYHFXVWRPHUH[SHULHQFHVZLWKWKHPDFKLQHV
%
2QH RI WKH EHVWNQRZQ SURSRQHQWV RI REVHUYDWLRQDO UHVHDUFK
PHWKRGVLQPDUNHWLQJLV3DFR8QGHUKLOOZKRVHTXDOLWDWLYHUHVHDUFK
KDVUHVXOWHGLQDQXPEHURILQWHUHVWLQJREVHUYDWLRQVDERXWWKHZD\
SHRSOHVKRS
Lecture 60: Innovative Marketing Research Techniques
ż
)RUH[DPSOH8QGHUKLOOIRXQGWKDWFXVWRPHUVJHQHUDOO\UHTXLUH
D ³GHFRPSUHVVLRQ ]RQH´ ZKHQ WKH\ HQWHU D UHWDLO VSDFH
(VVHQWLDOO\FRQVXPHUVDUHFRPSOHWHO\XQDZDUHRIDQ\VLJQDJH
GLVSOD\V RU VSHFLDO RIIHUV WKDW DUH SODFHG ZLWKLQ WKH ¿UVW IHZ
IHHW RI D VWRUH¶V HQWUDQFH 3HRSOH VHHP WR QHHG D VSDFH WR
EHFRPH DFFXVWRPHG WR EHLQJ LQ WKH VWRUH ,I \RX WU\ WR UHDFK
WKHPZKHQWKH\DUHGHFRPSUHVVLQJWKH\ZLOOEHEOLQGDQGGHDI
WR\RXUDSSHDOV
ż
$QRWKHU IDPRXV 8QGHUKLOO ¿QGLQJ LV WKH ³EXWWEUXVK´ HIIHFW
8QGHUKLOO IRXQG²QRW VXUSULVLQJO\²WKDW SHRSOH EHFRPH
XQFRPIRUWDEOH LI RWKHU SHRSOH RU WKLQJV WRXFK WKHLU GHUULqUHV
ZKHQ WKH\ DUH LQ SXEOLF VSDFHV %XW UHWDLOHUV RIWHQ VHW XS
GLVSOD\V LQ KLJKWUDI¿F DUHDV WKDW UHTXLUH FXVWRPHUV WR OHDQ
IRUZDUG WR H[DPLQH WKH PHUFKDQGLVH 2EVHUYDWLRQ SURYHG
WKDWSHRSOHWHQGWRPRYHDZD\IURPWKHVHGLVSOD\VTXLFNO\WR
DYRLGWKHSRVVLELOLW\RI³EXWWEUXVKLQJ´0RYLQJWKHVHGLVSOD\V
RXWRIWKHÀRZRIWUDI¿FDOORZVFXVWRPHUVWREURZVHZLWKRXW
IHHOLQJH[SRVHG
Ethnographies
% $QHYHQPRUHLQWHUDFWLYHIRUPRIREVHUYDWLRQDOTXDOLWDWLYHUHVHDUFK
LV HWKQRJUDSK\ 7KLV LV D UHVHDUFK WRRO GHYHORSHG E\ FXOWXUDO
DQWKURSRORJLVWV WR XQGHUVWDQG WKH FXOWXUHV WUDGLWLRQV EHKDYLRUV
DQGEHOLHIVRIJURXSVRISHRSOH
%
7KHLGHDEHKLQGHWKQRJUDSKLHVLVWKDWZHDUHDOOPHPEHUVRIYDULRXV
FXOWXUHVWKDWDUHDOLHQWRDQGPLVXQGHUVWRRGE\WKRVHRXWVLGHWKDW
FXOWXUH LQFOXGLQJ PDUNHWLQJ PDQDJHUV DQG SURGXFW GHVLJQHUV %\
WUHDWLQJ\RXUFXVWRPHUVDVLIWKH\DUHPHPEHUVRIDQH[RWLFFXOWXUH
\RXDUHIUHHWRDVNDZLGHUDQJHRITXHVWLRQVLQRUGHUWRVHHWKLQJV
in a new light.
%
(WKQRJUDSK\ LV DOVR NQRZQ DV SDUWLFLSDQW REVHUYDWLRQ ,Q RWKHU
ZRUGV \RX DUH QRW PHUHO\ REVHUYLQJ WKH WULEH RI FRQVXPHUV EXW
WU\LQJWREHFRPHSDUWRIWKDWWULEH\RXUVHOI6RPHFRPSDQLHVVXFK
DV 3URFWHU *DPEOH DQG +DUOH\'DYLGVRQ HPEUDFH SDUWLFLSDQW
REVHUYDWLRQIRUWKHLQVLJKWVLWJHQHUDWHV(YHU\\HDUWRSH[HFXWLYHV
DW+DUOH\'DYLGVRQJRRQDWKUHHGD\ULGHZLWK+DUOH\FXVWRPHUV
WU\LQJ WR DFWXDOO\ OLYH WKH H[SHULHQFH RI FXVWRPHUV IRU D VKRUW
SHULRGRIWLPH
Projective Techniques
% ,Q DGGLWLRQ WR FXVWRPHU REVHUYDWLRQV IRFXV JURXSV DQG
HWKQRJUDSKLHVWKHUHDUHDQXPEHURISURMHFWLYHWHFKQLTXHVWKDW¿W
LQWR WKH EURDG FDWHJRU\ RI TXDOLWDWLYH UHVHDUFK 7KH EDVLF WKHRU\
EHKLQGSURMHFWLYHWHFKQLTXHVLVWKDWVRPHWLPHVSHRSOHDUHJXDUGHG
ZKHQDVNHGGLUHFWTXHVWLRQVDERXWDSURGXFWEUDQGRUH[SHULHQFH
$VNLQJ LQGLUHFW TXHVWLRQV PD\ UHYHDO PRUH DERXW VRPHRQH¶V WUXH
WKRXJKWVDQGIHHOLQJV
%
6HOIUHSRUW ELDVHV DUH ZHOOGRFXPHQWHG LQ VWXGLHV WKDW DVN
SHRSOH GLUHFWO\ DERXW WKHLU RZQ SUHIHUHQFHV RU EHKDYLRU 6RPH RI
WKHVH FRQFHUQV FDQ EH UHGXFHG LI \RX DVN SHRSOH WR GHVFULEH WKH
SUHIHUHQFHVRUEHKDYLRURID³W\SLFDO´FRQVXPHU
%
<RX PLJKW DOVR LQYLWH FXVWRPHUV WR FOLS SLFWXUHV IURP PDJD]LQHV
DQG PDNH FROODJHV WKDW UHSUHVHQW D SDUWLFXODU SURGXFW RU EUDQG
<RXWKHQH[DPLQHWKHFROODJHVDQGDVNZKDWWKHLPDJHVPHDQ7KH
FROODJH EHFRPHV D VSULQJERDUG IRU GLVFXVVLQJ LGHDV DQG IHHOLQJV
WKDW WKH FRQVXPHU PD\ QRW RWKHUZLVH EH DEOH WR DUWLFXODWH 'DWD
FROOHFWHG LQ WKLV PDQQHU PD\ EH KDUGHU WR LQWHUSUHW EXW PD\ DOVR
SUHVHQWUDGLFDOO\QHZ¿QGLQJV
%
7KHUHDUHQRUXOHVIRUGHYHORSLQJSURMHFWLYHWHFKQLTXHV7KLVLVDQ
RSSRUWXQLW\WRJHWFUHDWLYH)RUH[DPSOH\RXPLJKWDVNFXVWRPHUVWR
FRPSDUHWKHSURGXFWWRDQDQLPDO7KLQNRIQHZDQGGLIIHUHQWZD\V
RIJHWWLQJSHRSOHWRSURMHFWWKHLURSLQLRQVWKURXJKLQGLUHFWPHDQV
Lecture 60: Innovative Marketing Research Techniques
Companywide Marketing
% 0DQ\ GHFLVLRQV PDGH E\ SHRSOH WKURXJKRXW D FRPSDQ\²IURP
KXPDQ UHVRXUFHV WR DFFRXQWLQJ WR ¿QDQFH WR RSHUDWLRQV²KDYH
WKH SRWHQWLDO WR LQÀXHQFH WKH YDOXH FXVWRPHUV GHULYH IURP WKHLU
LQWHUDFWLRQV ZLWK WKH FRPSDQ\ %XW LI SHRSOH RXWVLGH RI WKH
PDUNHWLQJ GHSDUWPHQW GRQ¶W NQRZ WKH PDUNHWLQJ SODQ ZKDW KRSH
ZLOO WKH\ KDYH RI PDNLQJ VPDUW GHFLVLRQV" 0DUNHWLQJ LQVLJKWV
VKRXOGEHLQIXVHGWKURXJKRXWWKHFRPSDQ\
%
(YHU\RQH LQ DQ RUJDQL]DWLRQ VKRXOG EH DEOH WR DQVZHU WKH WKUHH
TXHVWLRQV ZH¶YH IRFXVHG RQ WKURXJKRXW WKHVH OHFWXUHV :KR LV
WKH FXVWRPHU" :KDW GRHV WKH FXVWRPHU YDOXH"$QG KRZ DUH \RXU
FRPSDQ\¶VRIIHULQJVGLIIHUHQWLDWHGIURPWKRVHRIWKHFRPSHWLWLRQ"
%
7KHFUXFLDOQHHGIRUFRPSDQ\ZLGHPDUNHWLQJZDVVXPPHGXSE\
'DYLG 3DFNDUG FRIRXQGHU RI +HZOHWW3DFNDUG ³0DUNHWLQJ LV WRR
LPSRUWDQWWREHOHIWWRWKHPDUNHWLQJGHSDUWPHQW´
Suggested Reading
0DQ]L8QFRQWUROOHG.
8QGHUKLOOWhy We Buy.
Questions to Consider
1. 3UDFWLFHREVHUYLQJFXVWRPHUV&KRRVHDQLQWHUHVWLQJVLWH DFRIIHHVKRS
DERRNVWRUHDFRQFHUWKDOORUDQDLVOHLQWKHJURFHU\VWRU\ DQGVLPSO\
ZDWFK SHRSOH 6HH KRZ WKH\ LQWHUDFW ZLWK RQH DQRWKHU DQG ZLWK WKHLU
VXUURXQGLQJV /RRN IRU FRPPRQDOLWLHV DPRQJ SHRSOH :KDW DUH VRPH
JHQHUDOL]DEOH LQVLJKWV DERXW FXVWRPHUV LQ WKDW VHWWLQJ" &RXOG \RX XVH
\RXULQVLJKWVWRPDNHDQ\PDUNHWLQJUHFRPPHQGDWLRQV"
2. 3DUWLFLSDWHLQVRPHPDUNHWUHVHDUFK/RRNRQOLQHIRUYDULRXVFRPSDQLHV
WKDWDOORZ\RXWRSDUWLFLSDWHLQRQOLQHVXUYH\VDQGIRFXVJURXSV <RX
PD\HYHQJHWDOLWWOHPRQH\IRUSDUWLFLSDWLQJ <RXUJRDOZKHQWDNLQJ
WKHVHVXUYH\VDQGSDUWLFLSDWLQJLQWKHVHIRFXVJURXSVLVWROHDUQDVPXFK
DERXWWKHPHFKDQLFVRIWKHUHVHDUFKDV\RXFDQ:KDWW\SHVRITXHVWLRQV
DUH DVNHG" +RZ DUH WKH VXUYH\V RU VHVVLRQV RUJDQL]HG":KDW ZDV WKH
OHQJWK"+RZGLGWKHVXUYH\VWDUW":KDWIHDWXUHVRIWKHUHVHDUFKGLG\RX
OLNH"$UHWKHUHWKLQJV\RXZRXOGKDYHGRQHGLIIHUHQWO\"1RZWKDW\RX
KDYHVHHQKRZRWKHU¿UPVGRUHVHDUFKVKDPHOHVVO\VWHDOWKHWHFKQLTXHV
DQGPHWKRGV\RXWKLQNZRUNHGZHOODQGXVHWKHPZKHQGHVLJQLQJ\RXU
own research.
Bibliography
Strategy
$JHU'DYLGDQG0LFKDHO5REHUWR³7UDGHU-RH¶V´+DUYDUG%XVLQHVV6FKRRO
&DVH6WXG\
$QGHUVRQ&KULV)UHH7KH)XWXUHRID5DGLFDO3ULFH1HZ<RUN+\SHULRQ
2009.
²²²The Long Tail: Why the Future of Business Is Selling Less of More.
1HZ<RUN+\SHULRQ
$UEHVPDQ6DPXHO³)RUWXQH7XUQRYHUDQG,WV0HDQLQJ´Wired-XQH
KWWSZZZZLUHGFRPIRUWXQHWXUQRYHUDQGLWVPHDQLQJ
%RVVLG\ /DUU\ DQG 5DP &KDUDQ ([HFXWLRQ 7KH 'LVFLSOLQH RI *HWWLQJ
Things Done1HZ<RUN&URZQ%XVLQHVV
%UDQGHQEXUJHU $GDP DQG %DUU\ 1DOHEXII Co-opetition. 1HZ <RUN
&XUUHQF\'RXEOHGD\
Bruner, Robert. Deals from Hell: M&A Lessons That Rise above the Ashes.
1HZ<RUN:LOH\
%XUJVWRQH -RQ DQG %LOO 0XUSK\ -U Breakthrough Entrepreneurship: The
Proven Framework for Building Brilliant New Ventures. San Francisco:
Farallon Publishing, 2012.
Bibliography
Christensen, Clayton. 7KH ,QQRYDWRU¶V 'LOHPPD :KHQ 1HZ 7HFKQRORJLHV
Cause Great Firms to Fail. %RVWRQ+DUYDUG%XVLQHVV5HYLHZ3UHVV
&RDVH 5RQDOG ³7KH 1DWXUH RI WKH )LUP´ (FRQRPLFD 1RYHPEHU
±
&ROOLV 'DYLG DQG &\QWKLD 0RQWJRPHU\ &RUSRUDWH 6WUDWHJ\$ 5HVRXUFH
%DVHG$SSURDFK1HZ<RUN0F*UDZ+LOO
&RXJKODQ3HWHU³/HDGHU¶V 'LV $GYDQWDJH´+DUYDUG%XVLQHVV6FKRRO1RWH
&RXJKODQ 3HWHU 'HEELH )UHLHU DQG 3DWULFN /HH .DLKR ³&RPSHWLWRU
$QDO\VLV$QWLFLSDWLQJ&RPSHWLWLYH$FWLRQV´+DUYDUG%XVLQHVV6FKRRO1RWH
'L[LW$YLQDVKDQG%DUU\1DOHEXIIThe Art of Strategy: A Game Theorist’s
*XLGHWR6XFFHVVLQ%XVLQHVVDQG/LIH1HZ<RUN::1RUWRQ
*KHPDZDW 3DQNDM DQG )DULERU] *KDGDU ³7KH 'XELRXV /RJLF RI *OREDO
0HJDPHUJHUV´Harvard Business Review -XO\$XJXVW ±
*KHPDZDW 3DQNDM DQG -RVH /XLV 1XHQR ³=DUD )DVW )DVKLRQ´ +DUYDUG
%XVLQHVV6FKRRO&DVH6WXG\
*KHPDZDW 3DQNDM DQG -DQ 5LYNLQ ³&UHDWLQJ &RPSHWLWLYH $GYDQWDJH´
+DUYDUG%XVLQHVV6FKRRO1RWH
*XSWD $QLO DQG 9LMD\ *RYLQGDUDMDQ ³0DQDJLQJ *OREDO ([SDQVLRQ $
&RQFHSWXDO)UDPHZRUN´Business Horizons ±
+DUULJDQ .DWKU\Q 9HUWLFDO ,QWHJUDWLRQ 2XWVRXUFLQJ DQG &RUSRUDWH
Strategy:DVKLQJWRQ'&%HDUG%RRNV
+LWW 0LFKDHO 5REHUW +RVNLVVRQ DQG 'XDQH ,UHODQG Competing for
Advantage&LQFLQQDWL2+,736RXWKZHVWHUQ
.KDQQD 7DUXQ DQG .ULVKQD 3DOHSX Winning in Emerging Markets: A
5RDGPDS IRU 6WUDWHJ\ DQG ([HFXWLRQ %RVWRQ +DUYDUG %XVLQHVV 5HYLHZ
Press, 2010.
.LP:&KDQDQG5HQpH0DXERUJQH%OXH2FHDQ6WUDWHJ\+RZWR&UHDWH
8QFRQWHVWHG 0DUNHW 6SDFH DQG 0DNH &RPSHWLWLRQ ,UUHOHYDQW. Boston:
+DUYDUG%XVLQHVV5HYLHZ3UHVV
/DÀH\$*DQG5RJHU0DUWLQ. Playing to Win: How Strategy Really Works.
%RVWRQ+DUYDUG%XVLQHVV5HYLHZ3UHVV
/HSRUH -LOO ³7KH 'LVUXSWLRQ 0DFKLQH :KDW WKH *RVSHO RI ,QQRYDWLRQ
*HWV:URQJ´The New Yorker-XQHKWWSZZZQHZ\RUNHUFRP
PDJD]LQHWKHGLVUXSWLRQPDFKLQH"FXUUHQW3DJH DOO
0F*UDWK 5LWD The End of Competitive Advantage: How to Keep Your
Strategy Moving as Fast as Your Business. %RVWRQ +DUYDUG %XVLQHVV
5HYLHZ3UHVV
Montgomery, Cynthia. The Strategist: Be the Leader Your Business Needs.
1HZ<RUN+DUSHU%XVLQHVV
Moon, Youngme. 'LIIHUHQW (VFDSLQJ WKH &RPSHWLWLYH +HUG 1HZ <RUN
Crown Business, 2010.
3RUWHU0LFKDHO(Competitive Advantage: Creating and Sustaining Superior
3HUIRUPDQFH1HZ<RUN)UHH3UHVV
²²² &RPSHWLWLYH 6WUDWHJ\ 7HFKQLTXHV IRU $QDO\]LQJ ,QGXVWULHV DQG
Competitors1HZ<RUN)UHH3UHVV
²²² ³:KDW ,V 6WUDWHJ\"´ Harvard Business Review 1RYHPEHU
'HFHPEHU ±
5LHV(ULFThe Lean Startup: How Today’s Entrepreneurs Use Continuous
,QQRYDWLRQ WR &UHDWH 5DGLFDOO\ 6XFFHVVIXO %XVLQHVVHV 1HZ <RUN &URZQ
Business, 2011.
Bibliography
5LYNLQ -DQ : ³'RJ¿JKW RYHU (XURSH 5\DQDLU $ ´ +DUYDUG %XVLQHVV
6FKRRO&DVH6WXG\
6KDQNDU 9HQNDWHVK DQG *UHJRU\ &DUSHQWHU ³/DWH 0RYHU 6WUDWHJ\´ ,Q
Handbook of Marketing Strategy (GLWHG E\9 6KDQNDU DQG * &DUSHQWHU
SS±*ORXFHVWHUVKLUH8.(GZDUG(OJDU3XEOLVKLQJ/WG
6KDSLUR&DUODQG+DO9DULDQ,QIRUPDWLRQ5XOHV$6WUDWHJLF*XLGHWRWKH
1HWZRUN(FRQRP\%RVWRQ+DUYDUG%XVLQHVV5HYLHZ3UHVV
6WHZDUW*%HQQHWWThe Quest for Value.1HZ<RUN+DUSHU&ROOLQV
6XDUH] )HUQDQGR DQG *LDQYLWR /DQ]ROOD ³7KH +DOI7UXWK RI )LUVW 0RYHU
$GYDQWDJH´Harvard Business Review $SULO ±
7KDOHU 5LFKDUG :LQQHU¶V &XUVH 3DUDGR[HV DQG $QRPDOLHV RI (FRQRPLF
Life. 1HZ<RUN)UHH3UHVV
:LOOLDPVRQ 2OLYHU 0DUNHWV DQG +LHUDUFKLHV $QDO\VLV DQG $QWLWUXVW
,PSOLFDWLRQV$6WXG\LQWKH(FRQRPLFVRI,QWHUQDO2UJDQL]DWLRQ1HZ<RUN
)UHH3UHVV
:XMHF 7RP ³%XLOG D 7RZHU %XLOG D 7HDP´ 7(' 7DON )HEUXDU\ KWWSZZZWHGFRPWDONVWRPBZXMHFBEXLOGBDBWRZHU"ODQJXDJH HQ
<RI¿H 'DYLG DQG 0DU\ .ZDN Judo Strategy: Turning Your Competitors’
Strength to Your Advantage. %RVWRQ+DUYDUG%XVLQHVV5HYLHZ3UHVV
Operations
$QGUDVNL -RVHSK & DQG -DFN +DHGLFNH ³&3)5 7LPH IRU WKH
%UHDNWKURXJK"´Supply Chain Management ReviewQR ±
$UYLV-HDQ)UDQoRLV'DQLHO6DVODYVN\/DXUL2MDOD%HQ6KHSKHUG&KULVWLQD
%XVFKDQG$QDVX\D5DM&RQQHFWLQJWR&RPSHWH7UDGH/RJLVWLFVLQ
WKH*OREDO(FRQRP\:DVKLQJWRQ'&7KH:RUOG%DQN
%R[*HRUJH(3*ZLO\P0-HQNLQVDQG*UHJRU\&5HLQVHOTime Series
$QDO\VLV)RUHFDVWLQJDQG&RQWURO1HZ<RUN-RKQ:LOH\ 6RQV
%URZQLQJ 7\VRQ 5 DQG 1DGD 5 6DQGHUV ³&DQ ,QQRYDWLRQ %H /HDQ"´
California Management ReviewQR 6XPPHU ±
&DOOLRQL *LDQSDROR ;DYLHU GH 0RQWJURV 5HJLQH 6ODJPXOGHU /XN 1
9DQ :DVVHQKRYH DQG /LQGD :ULJKW ³,QYHQWRU\'ULYHQ &RVWV´ Harvard
Business ReviewQR ±
&HVSHGHV)UDQN9-DPHV3'RXJKHUW\DQG%HQ66NLQQHU,,,³+RZWR
,GHQWLI\ WKH %HVW &XVWRPHUV IRU <RXU %XVLQHVV´ MIT Sloan Management
ReviewQR ±
&RPSGDWDVXUYH\V³/HDQ3UDFWLFHV$LG0DQXIDFWXUHUVLQ'RLQJ0RUHZLWK
/HVV´$XJXVW KWWSZZZFRPSGDWDVXUYH\VFRPOHDQ
SUDFWLFHVDLGPDQXIDFWXUHUVLQGRLQJPRUHZLWKOHVV
&RRSHU 5RELQ DQG 5REHUW 6 .DSODQ ³0HDVXUH &RVWV 5LJKW 0DNH WKH
5LJKW'HFLVLRQV´Harvard Business ReviewQR ±
²²²³3UR¿W3ULRULWLHVIURP$FWLYLW\%DVHG&RVWLQJ´Harvard Business
ReviewQR ±
'DYHQSRUW7KRPDV + /HDQGUR ' 0XOH DQG -RKQ /XFNHU ³.QRZ:KDW
<RXU&XVWRPHUV:DQWEHIRUH7KH\'R´Harvard Business Review 89, no. 12
±
'HQQLV3DVFDO/HDQ3URGXFWLRQ6LPSOL¿HG. 2QGHG1HZ<RUN3URGXFWLYLW\
Press, 2007.
'LQJHV 7KRPDV ³:KDW :LOO 'ULYH *URZWK LQ &RQWUDFW 0DQXIDFWXULQJ"´
EBN Online 2FWREHU KWWSZZZHEQRQOLQHFRPDXWKRU
DVS"VHFWLRQBLG GRFBLG Bibliography
'ULVFROO 0DU\ ³:K\ &RPSDQLHV .HHS *HWWLQJ %OLQG6LGHG E\ 5LVN´
Harvard Business Review -XO\ (ONLQJWRQ-RKQCannibals with Forks: The Triple Bottom Line of TwentyFirst Century Business0DQNDWR01&DSVWRQH
(OOUDP /LVD 0 DQG 'DQLHO .UDXVH ³5REXVW 6XSSOLHU 5HODWLRQVKLSV .H\
/HVVRQVIURPWKH(FRQRPLF'RZQWXUQ´Business HorizonsQR ±
(OOUDP /LVD 0 DQG 6XH 3HUURWW 6LIHUG ³3XUFKDVLQJ7KH &RUQHUVWRQH RI
WKH 7RWDO &RVW RI 2ZQHUVKLS &RQFHSW´ -RXUQDO RI %XVLQHVV /RJLVWLFV (PHUVRQ 5LFKDUG 0 ³3RZHU'HSHQGHQFH 5HODWLRQV´ $PHULFDQ
6RFLRORJLFDO5HYLHZ ±
(SVWHLQ 0DUF - DQG $GULDQD 5HMF %XKRYDF Making Sustainability
:RUN %HVW 3UDFWLFHV LQ 0DQDJLQJ DQG 0HDVXULQJ &RUSRUDWH 6RFLDO
(QYLURQPHQWDO DQG (FRQRPLF ,PSDFWV 6DQ )UDQFLVFR %HUUHWW.RHKOHU
3XEOLVKHUV
)LVKHU 0DUVKDOO / ³:KDW ,V WKH 5LJKW 6XSSO\ &KDLQ IRU <RXU 3URGXFW"´
Harvard Business Review ±
)RUUHVWHU-D\:³,QGXVWULDO'\QDPLFV$0DMRU%UHDNWKURXJKIRU'HFLVLRQ
0DNHUV´Harvard Business ReviewQR ±
)ULHGPDQ7KRPDVThe World Is Flat: A Brief History of the Twenty-First
Century1HZ<RUN)DUUDU6WUDXVDQG*LURX[
*DUGQHU-RKQ7DQG0DUWKD&&RRSHU³6WUDWHJLF6XSSO\&KDLQ0DSSLQJ
$SSURDFKHV´-RXUQDORI%XVLQHVV/RJLVWLFVQR ±
*DUULVRQ5D\(ULF1RUHHQDQG3HWHU%UHZHU0DQDJHULDO$FFRXQWLQJth
HG&KLFDJR0F*UDZ+LOO,UZLQ
*DUYLQ 'DYLG$ ³7KH 3URFHVVHV RI 2UJDQL]DWLRQ DQG 0DQDJHPHQW´ MIT
Sloan Management Review *HQHUDO (OHFWULF ³$GGLWLYH 0DQXIDFWXULQJ ,V 5HLQYHQWLQJ WKH :D\ :H
:RUN´KWWSZZZJHFRPVWRULHVDGYDQFHGPDQXIDFWXULQJ
*HRUJH 0LFKDHO / DQG 0LNH *HRUJH /HDQ 6L[ 6LJPD IRU 6HUYLFH 1HZ
<RUN0F*UDZ+LOO
*ROGVE\ 7KRPDV - 'HHSDN ,\HQJDU DQG 6KDVKDQN 5DR 7KH 'H¿QLWLYH
*XLGH WR 7UDQVSRUWDWLRQ 3ULQFLSOHV 6WUDWHJLHV DQG 'HFLVLRQV IRU WKH
(IIHFWLYH)ORZRI*RRGVDQG6HUYLFHV1HZ<RUN3HDUVRQ(GXFDWLRQ
*UXHQ7KRPDVDQG'DQLHO&RUVWHQ³6WRFN2XWV&DXVH:DONRXWV´Harvard
Business ReviewQR ±
+RVNH0DUN7³8VH7RWDO&RVWWR-XVWLI\$XWRPDWLRQIRU5HVKRULQJ´Plant
Engineering )HEUXDU\ KWWSZZZSODQWHQJLQHHULQJFRPVLQJOH
DUWLFOHXVHWRWDOFRVWWRMXVWLI\DXWRPDWLRQIRUUHVKRULQJIGD
HHFDIFGEKWPO
+VLHK7RQ\³=DSSRV¶V&(2RQ*RLQJWR([WUHPHVIRU&XVWRPHUV´Harvard
Business ReviewQR ±
+XVWRQ/DUU\DQG1DELO6DNNDE³&RQQHFWDQG'HYHORS,QVLGH3URFWHU *DPEOH¶V1HZ0RGHOIRU,QQRYDWLRQ´Harvard Business ReviewQR
±
.DKQ .HQQHWK % ³6ROYLQJ WKH 3UREOHPV RI 1HZ 3URGXFW )RUHFDVWLQJ´
Business HorizonsQR ±
.DSODQ 5REHUW DQG 6WHYHQ 5 $QGHUVRQ 7LPH'ULYHQ $FWLYLW\%DVHG
&RVWLQJ $ 6LPSOHU DQG 0RUH 3RZHUIXO 3DWK WR +LJKHU 3UR¿WV. Boston:
+DUYDUG%XVLQHVV5HYLHZ3UHVV
Bibliography
.DSODQ5REHUW6DQG'DYLG31RUWRQ7KH%DODQFHG6FRUHFDUG7UDQVODWLQJ
6WUDWHJ\LQWR$FWLRQ%RVWRQ+DUYDUG%XVLQHVV5HYLHZ3UHVV
.DSODQ 5REHUW 6 'DYLG 3 1RUWRQ DQG %MDUQH 5XJHOVMRHQ ³0DQDJLQJ
$OOLDQFHVZLWKWKH%DODQFHG6FRUHFDUG´Harvard Business Review 88, no.
± ±
.DVWDOOL ,YDQND 9LVQMLF %DUW 9DQ /RR\ DQG $QG\ 1HHO\ ³6WHHULQJ
0DQXIDFWXULQJ )LUPV WRZDUGV 6HUYLFH %XVLQHVV 0RGHO ,QQRYDWLRQ´
California Management ReviewQR )DOO ±
.D]PHU'DYLG2ZHQ³0DQXIDFWXULQJ2XWVRXUFLQJ2QVKRULQJDQG*OREDO
(TXLOLEULXP´Business Horizons .LURQ 'DYLG 1LQD .UXVFKZLW] .QXW +DDQDHV DQG ,QJULG YRQ 6WUHQJ
9HONHQ ³6XVWDLQDELOLW\ 1HDUV D 7LSSLQJ 3RLQW´ MIT Sloan Management
ReviewQR ±
/DPEHUW'RXJODV06XSSO\&KDLQ0DQDJHPHQW3URFHVVHV3DUWQHUVKLSV
3HUIRUPDQFH6DUDVRWD)/6XSSO\&KDLQ0DQDJHPHQW,QVWLWXWH
/DPEHUW'RXJODV0DQG$0LFKDHO.QHPH\HU³:H¶UHLQ7KLV7RJHWKHU´
Harvard Business ReviewQR ±
/HH+DX/³7KH7ULSOH$6XSSO\&KDLQ´Harvard Business Review 82, no.
±
0DORQH7KRPDV:The Future of Work: How the New Order of Business
Will Shape Your Organization, Your Management Style, and Your Life.
&DPEULGJH0$+DUYDUG%XVLQHVV6FKRRO3UHVV
Martichenko, Robert. Everything I Know about Lean I Learned in First
Grade&DPEULGJH0$/HDQ(QWHUSULVH,QVWLWXWH
0F*ROGULFN 3HWHU - DQG 3HWHU 0 %DUWRQ ³+LJK7HFK :D\V WR .HHS
&XSERDUGV)XOO´Harvard Business ReviewQR ±
0RQF]ND5REHUW5REHUW+DQG¿HOG/DUU\*LXQLSHURDQG-DPHV3DWWHUVRQ
3XUFKDVLQJ DQG 6XSSO\ &KDLQ 0DQDJHPHQW ,QGHSHQGHQFH .< &HQJDJH
Learning, 2008.
Mukherjee, Amit S. The Spider’s Strategy: Creating Networks to Avert
Crisis, Create Change, and Really Get Ahead1HZ<RUN)73UHVV
0XUSK\3/DQG$0.QHPH\HU&RQWHPSRUDU\/RJLVWLFV. 11thHG8SSHU
6DGGOH5LYHU1-3UHQWLFH+DOO
0X]XPGDU 0DKD DQG -RKQ )RQWDQHOOD ³7KH 6HFUHWV WR 6 23 6XFFHVV´
Supply Chain Management ReviewQR ±
3DUDVXUDPDQ$ 9DODULH$ =HLWKDPO DQG /HRQDUG / %HUU\ ³6HUYTXDO´
Journal of RetailingQR ±
3HOR]D -RKQ 0RULW] /RRFN -DPHV &HUUXWL DQG 0LFKDHO 0X\RW
³6XVWDLQDELOLW\ +RZ 6WDNHKROGHU 3HUFHSWLRQV 'LIIHU IURP &RUSRUDWH
5HDOLW\´California Management ReviewQR )DOO ±
3RUWHU0LFKDHO(Competitive Advantage: Creating and Sustaining Superior
3HUIRUPDQFH1HZ<RUN6LPRQDQG6FKXVWHU
5DPGDV.(7HLVEHUJDQG$/7XFNHU³)RXU:D\VWR5HLQYHQW6HUYLFH
'HOLYHU\´Harvard Business ReviewQR ±
5DZVRQ$OH[(ZDQ'XQFDQDQG&RQRU-RQHV³7KH7UXWKDERXW&XVWRPHU
([SHULHQFH´Harvard Business ReviewQR ±
5HHYHV 0DUWLQ DQG 0LNH 'HLPOHU ³$GDSWDELOLW\ 7KH 1HZ &RPSHWLWLYH
$GYDQWDJH´Harvard Business Review 5HLFKKHOG )UHG ³7KH 0LFURHFRQRPLFV RI &XVWRPHU 5HODWLRQVKLSV´ MIT
Sloan Management ReviewQR Bibliography
5RWKHU 0LNH DQG -RKQ 6KRRN Learning to See: Value-Stream Mapping
to Create Value and Eliminate Muda &DPEULGJH 0$ /HDQ (QWHUSULVH
,QVWLWXWH
6iHQ] 0DUtD -HV~V DQG (OHQD 5HYLOOD ³&UHDWLQJ 0RUH 5HVLOLHQW 6XSSO\
&KDLQV´MIT Sloan Management ReviewQR 6FKURHGHU 5RJHU * 6XVDQ 0H\HU *ROGVWHLQ DQG 0 -RKQQ\
Rungtusanatham. 2SHUDWLRQV 0DQDJHPHQW LQ WKH 6XSSO\ &KDLQ 'HFLVLRQV
and Cases1HZ<RUN0F*UDZ+LOO,UZLQ
6KHI¿<RVVLDQG-DPHV%5LFH-U³$6XSSO\&KDLQ9LHZRIWKH5HVLOLHQW
(QWHUSULVH´MIT Sloan Management ReviewQR 6KHSDUG 6WHYHQ 5),' 5DGLR )UHTXHQF\ ,GHQWL¿FDWLRQ 1HZ <RUN
0F*UDZ+LOO3URIHVVLRQDO
6KLK:LOO\&³:KDW,W7DNHVWR5HVKRUH0DQXIDFWXULQJ6XFFHVVIXOO\´MIT
Sloan Management ReviewQR ±
6LPFKL/HYL'DYLGOperations Rules: Delivering Customer Value through
Flexible Operations&DPEULGJH0$0,73UHVV
6LPFKL/HYL'$&OD\WRQDQG%5DYHQ³:KHQ2QH6L]H'RHV1RW)LW
$OO´MIT Sloan Management ReviewQR ±
6LPFKL/HYL 'DYLG -DPHV 3DXO 3HUXYDQNDO 1DUHQGUD 0XODQL %LOO 5HDG
DQG -RKQ )HUUHLUD ³,V ,W 7LPH WR 5HWKLQN <RXU 0DQXIDFWXULQJ 6WUDWHJ\"´
MIT Sloan Management ReviewQR ±
6LPFKL/HYL'DYLG:LOOLDP6FKPLGWDQG<HKXD:HL³)URP6XSHUVWRUPV
WR )DFWRU\ )LUHV 0DQDJLQJ 8QSUHGLFWDEOH 6XSSO\&KDLQ 'LVUXSWLRQV´
Harvard Business ReviewQR± 6PLWK /DUU\ -RVHSK & $QGUDVNL DQG 6WDQOH\ ( )DZFHWW ³,QWHJUDWHG
%XVLQHVV 3ODQQLQJ$ 5RDGPDS WR /LQNLQJ 6 23 DQG &3)5´ Journal of
%XVLQHVV)RUHFDVWLQJQR 6SHDU 6WHYHQ DQG + .HQW %RZHQ ³'HFRGLQJ WKH '1$ RI WKH 7R\RWD
3URGXFWLRQ6\VWHP´Harvard Business Review ±
6WDDWV%UDGOH\5DQG'DYLG08SWRQ³/HDQ.QRZOHGJH:RUN´Harvard
Business ReviewQR ±
6WDKO5REHUW$DQG7KRPDV):DOODFH³6 233ULQFLSOHV7KH)RXQGDWLRQ
IRU 6XFFHVV´ )RUHVLJKW 7KH ,QWHUQDWLRQDO -RXUQDO RI$SSOLHG )RUHFDVWLQJ
±
7DWH:HQG\7KH'H¿QLWLYH*XLGHWR6XSSO\0DQDJHPHQWDQG3URFXUHPHQW
3ULQFLSOHVDQG6WUDWHJLHVIRU(VWDEOLVKLQJ(I¿FLHQW(IIHFWLYHDQG6XVWDLQDEOH
Supply Management Operations1HZ<RUN3HDUVRQ(GXFDWLRQ
9DUJR 6WHSKHQ / DQG 5REHUW ) /XVFK ³(YROYLQJ WR D 1HZ 'RPLQDQW
/RJLFIRU0DUNHWLQJ´Journal of MarketingQR ±
:DOODFH7KRPDV)DQG5REHUW$6WDKOSales and Operations Planning:
The “How-To” Handbook: How It Works; How To Implement It with Low
Risk and Low Cost; How To Make It Better and Better0RQWJRPHU\2+7
):DOODFH
:DOOHU0DWWKHZ$DQG7HUU\/(VSHU7KH'H¿QLWLYH*XLGHWR,QYHQWRU\
0DQDJHPHQW3ULQFLSOHVDQG6WUDWHJLHVIRUWKH(I¿FLHQW)ORZRI,QYHQWRU\
DFURVVWKH6XSSO\&KDLQ1HZ<RUN3HDUVRQ(GXFDWLRQ
:LJKW2OLYHU³7UDQVLWLRQIURP6 23´KWWSZZZROLYHUZLJKWHDPHFRP
HQ*%LQWHJUDWHGEXVLQHVVSODQQLQJWUDQVLWLRQIURPVRS
:LOOLDPVRQ 2OLYHU ( ³2XWVRXUFLQJ 7UDQVDFWLRQ &RVW (FRQRPLFV DQG
6XSSO\ &KDLQ 0DQDJHPHQW´ Journal of Supply Chain Management $SULO ±
Bibliography
:LOVRQ 5RVDO\Q 25th $QQXDO 6WDWH RI /RJLVWLFV 5HSRUW 5HDG\ IRU D 1HZ
Route /RPEDUG ,/ &RXQFLO RI 6XSSO\ &KDLQ 0DQDJHPHQW 3URIHVVLRQDOV
:RPDFN -DPHV 3 'DQLHO 7 -RQHV DQG 'DQLHO 5RRV 7KH 0DFKLQH 7KDW
Changed the World1HZ<RUN6LPRQDQG6FKXVWHU
=HLWKDPO 9DODULH $ $QDWKDQDUD\DQDQ 3DUDVXUDPDQ DQG /HRQDUG /
Berry. 'HOLYHULQJ 4XDOLW\ 6HUYLFH %DODQFLQJ &XVWRPHU 3HUFHSWLRQV DQG
([SHFWDWLRQV1HZ<RUN6LPRQDQG6FKXVWHU
Finance and Accounting
$OYDUH])DQG0)ULGVRQ)LQDQFLDO6WDWHPHQW$QDO\VLVUGHG1HZ<RUN
-RKQ:LOH\ 6RQV
%HDVOH\0DUN6-RVHSK9&DUFHOOR'DQD5+HUPDQVRQDQG7HUU\/1HDO
³)UDXGXOHQW )LQDQFLDO 5HSRUWLQJ ± $Q $QDO\VLV RI 86 3XEOLF
&RPSDQLHV´KWWSZZZFRVRRUJGRFXPHQWVFRVRIUDXGVWXG\BSGI
%HUN -RQDWKDQ DQG 3HWHU 'H0DU]R ³7KH 7LPH 9DOXH RI 0RQH\´ ,Q
&RUSRUDWH)LQDQFH, 2QGHGFKDSWHU1HZ<RUN3HDUVRQ(GXFDWLRQ
%UHDOH\ 5LFKDUG $ 6WHZDUW & 0\HUV DQG )UDQNOLQ $OOHQ 3ULQFLSOHV RI
&RUSRUDWH)LQDQFH. 10thHG1HZ<RUN0F*UDZ+LOO,UZLQ
&DIIHUN\0DQG-:HQWZRUWK%UHDNHYHQ$QDO\VLV7KH'H¿QLWLYH*XLGHWR
&RVW9ROXPH3UR¿W$QDO\VLV1HZ<RUN%XVLQHVV([SHUW3UHVV
&ROOLQV 'DQLHO:: %UXFH -RKQVRQ / 0LWWHOVWDHGW/DZUHQFH 5HYVLQH
DQG/HRQDUG&6RIIHU)LQDQFLDO5HSRUWLQJDQG$QDO\VLV. UGHG1HZ<RUN
0F*UDZ+LOO,UZLQ
&RPLVNH\ (XJHQH ( DQG &KDUOHV : 0XOIRUG 7KH )LQDQFLDO 1XPEHUV
*DPH'HWHFWLQJ&UHDWLYH$FFRXQWLQJ3UDFWLFHV1HZ<RUN-RKQ:LOH\ Sons, 2002.
'DPDGRUDQ$VZDWKThe Little Book of Valuation: How to Value a Company,
3LFND6WRFNDQG3UR¿W+RERNHQ1--RKQ:LOH\ 6RQV
(DVWRQ 3HWHU ' 0DU\ /HD 0F$QDOO\ *UHJRU\ $ 6RPPHUV DQG ;LDR
-XQ =KDQJ )LQDQFLDO 6WDWHPHQW $QDO\VLV DQG 9DOXDWLRQ. UG HG &KLFDJR
&DPEULGJH%XVLQHVV3XEOLVKLQJ
(OGHQEXUJ / DQG 6:ROFRWW Cost Management: Measuring, Monitoring,
DQG 0RWLYDWLQJ 3HUIRUPDQFH. 2QG HG +RERNHQ 1- -RKQ :LOH\ 6RQV
6HHSDUWLFXODUO\FKDSWHU:LOH\FRPFROOHJHVFHOGHQEXUJFKSGI
(QJOLVK-DPHV$SSOLHG(TXLW\$QDO\VLV1HZ<RUN0F*UDZ+LOO
,WWHOVRQ 7KRPDV 5 )LQDQFLDO 6WDWHPHQWV 5HY HG 1HZ -HUVH\ &DUHHU
Press, 2009.
.LHVR'-:H\JDQGWDQG7:DU¿HOG,QWHUPHGLDWH$FFRXQWLQJ. thHG
1HZ<RUN-RKQ:LOH\ 6RQV
Mayo, Herbert, B. %DVLF)LQDQFH$Q,QWURGXFWLRQWR)LQDQFLDO,QVWLWXWLRQV
Investments, and Management. 10thHG1HZ<RUN&HQJDJH/HDUQLQJ
0HUULOO /\QFK ³+RZ WR 5HDG D )LQDQFLDO 6WDWHPHQW´ KWWSRVSÀRU
VWDQIRUGHGXXSORDGKDQGRXWV0HUULOOB/\QFKSGI
0RGLJOLDQL ) DQG 0 0LOOHU ³&RUSRUDWH ,QFRPH 7D[HV DQG WKH &RVW RI
&DSLWDO$&RUUHFWLRQ´$PHULFDQ(FRQRPLF5HYLHZ ±
²²² ³7KH &RVW RI &DSLWDO &RUSRUDWLRQ )LQDQFH DQG WKH 7KHRU\ RI
,QYHVWPHQW´$PHULFDQ(FRQRPLF5HYLHZ ±
0XOOLQV'DYLG:³'RHVWKH&DSLWDO$VVHW3ULFLQJ0RGHO:RUN"´Harvard
Business Review-DQXDU\±)HEUXDU\±
866HFXULWLHVDQG([FKDQJH&RPPLVVLRQ³%HJLQQHU¶V*XLGHWR)LQDQFLDO
6WDWHPHQWV´KWWSZZZVHFJRYLQYHVWRUSXEVEHJ¿QVWPWJXLGHKWP
Organizational Behavior
%D]HUPDQ 0 DQG 0 + 1HLOH Negotiating Rationally 1HZ <RUN )UHH
Press, 1991.
Bibliography
%ODQFKDUG . /HDGLQJ DW D +LJKHU /HYHO %ODQFKDUG RQ /HDGHUVKLS DQG
Creating High Performing Organizations. 8SSHU6DGGOH5LYHU1-3UHQWLFH
Hall, 2007.
Blauner, A. &RDFK1HZ<RUN:DUQHU%RRNV
&DUQHJLH'+RZWR:LQ)ULHQGVDQG,QÀXHQFH3HRSOH1HZ<RUN6LPRQ
DQG6FKXVWHU
&KDQGOHU$'6WUDWHJ\DQG6WUXFWXUH%RVWRQ+DUYDUG3UHVV
&ROTXLWW -$ -$ /H3LQH DQG 0 - :HVVRQ Organizational Behavior.
1HZ<RUN0F*UDZ+LOO
&URVV 5 DQG$ 3DUNHU 7KH +LGGHQ 3RZHU RI 6RFLDO 1HWZRUNV. Boston:
+DUYDUG%XVLQHVV6FKRRO3UHVV
'HXWVFKPDQ$Change or Die: The Three Keys to Change at Work or in
Life1HZ<RUN+DUSHU%XVLQHVV
'UXFNHU3Managing for Results1HZ<RUN+DUSHU 5RZ
)UHQFK - 5 3 -U DQG % + 5DYHQ ³7KH %DVHV RI 6RFLDO 3RZHU´ ,Q
6WXGLHVLQ6RFLDO3RZHU(GLWHGE\'&DUWULJKW$QQ$UERU0,8QLYHUVLW\
RI0LFKLJDQ,QVWLWXWHIRU6RFLDO5HVHDUFK
*ROHPDQ'5%R\DW]LVDQG$0F.HHPrimal Leadership: Realizing the
3RZHU RI (PRWLRQDO ,QWHOOLJHQFH. %RVWRQ +DUYDUG %XVLQHVV 6FKRRO 3UHVV
2002.
*RRGZLQ'.7HDPRI5LYDOV7KH3ROLWLFDO*HQLXVRI$EUDKDP/LQFROQ,
1HZ<RUN6LPRQDQG6FKXVWHU
*RUGRQ-Training Camp+RERNHQ1--RKQ:LOH\DQG6RQV
*UHHQEHUJ - DQG 5$ %DURQ Behavior in Organizations 8SSHU 6DGGOH
5LYHU1-3HDUVRQ(GXFDWLRQ
+DXGDQ-The Art of Engagement1HZ<RUN0F*UDZ+LOO
.RWWHU-3Leading Change. %RVWRQ+DUYDUG%XVLQHVV6FKRRO3UHVV
Lencioni, P. The Advantage: Why Organizational Health Trumps Everything
Else in Business6DQ)UDQFLVFR-RVVH\%DVV
²²²7KH)LYH'\VIXQFWLRQVRID7HDP6DQ)UDQFLVFR-RVVH\%DVV
/RQJHQHFNHU & 2 ³7KH %HVW 3UDFWLFHV RI *UHDW /HDGHUV´ Industrial
Management -XO\$XJXVW ±
²²²³&DUHHU6XUYLYDODQG6XFFHVVLQWKHst&HQWXU\´Drake Business
Review )DOO ²²²³7KH&KDUDFWHULVWLFVRI5HDOO\%DG%RVVHV´Industrial Management
6HSWHPEHU2FWREHU ±
²²²³&RDFKLQJIRU%HWWHU5HVXOWV.H\3UDFWLFHVRI+LJK3HUIRUPDQFH
/HDGHUV´,QGXVWULDODQG&RPPHUFLDO7UDLQLQJQR ±
²²² ³7KH &RQVHTXHQFHV DQG &DXVHV RI ,QHIIHFWLYH 2UJDQL]DWLRQDO
7UDLQLQJ3UDFWLFHV´The HR Advisor 1RYHPEHU'HFHPEHU ±
²²² ³*HWWLQJ %HWWHU 5HVXOWV 7HQ /HDGHUVKLS ,PSHUDWLYHV´ Drake
Business Review :LQWHU ²²²³+RZWKH%HVW/HDGHUV0RWLYDWH:RUNHUV´Industrial Management
-DQXDU\)HEUXDU\ ±
²²² ³.H\ 3UDFWLFHV IRU &ORVLQJ WKH 0DQDJHPHQW 6NLOOV *DS´ HRM
Review 0D\ ±
²²²³0D[LPL]LQJWKH7UDQVIHURI/HDUQLQJIURP0DQDJHULDO(GXFDWLRQ
3URJUDPV´ Organizational Development and Learning: An International
JournalQR ±
Bibliography
/RQJHQHFNHU & 2 DQG 6 6 $ULVV ³&UHDWLQJ &RPSHWLWLYH $GYDQWDJH
WKURXJK (IIHFWLYH 0DQDJHPHQW (GXFDWLRQ´ Journal of Management
DevelopmentQR ±
²²²³/HDGLQJLQ7U\LQJ(FRQRPLF7LPHV,PSHUDWLYHVIRU+DQGOLQJWKH
+HDW´Industrial Management 6HSWHPEHU2FWREHU ±
/RQJHQHFNHU & 2 ' - 'Z\HU DQG 7 & 6WDQV¿HOG ³%DUULHUV DQG
*DWHZD\V WR :RUNIRUFH 3URGXFWLYLW\ /HVVRQV WR %H /HDUQHG´ Industrial
Management $SULO0DUFK ±
²²² ³7KH +XPDQ 6LGH RI 0DQXIDFWXULQJ ,PSURYHPHQW $ 6WXG\ RI
3URGXFWLYLW\WKURXJK3HRSOH´%XVLQHVV+RUL]RQV 0DUFK$SULO ±
/RQJHQHFNHU & 2 DQG / 6 )LQN ³&ORVLQJ WKH 0DQDJHPHQW 6NLOOV
*DS$ &DOO IRU$FWLRQ´ Development and Learning in Organizations: An
International JournalQR ±
²²² ³'HYHORSLQJ D /HDUQLQJ 2UJDQL]DWLRQ 7KH 7RS 0DQDJHPHQW
/HDGHUVKLS)DFWRU´(IIHFWLYH([HFXWLYH -XQH ±
²²²³)L[LQJ0DQDJHPHQW¶V)DWDO)ODZV´Industrial Management -XO\
$XJXVW ±
²²² ³+RZ 7RS 0DQDJHUV 'HYHORS $ )LHOG 6WXG\´ Organizational
Development and Learning: An International JournalQR ±
²²² ³,PSURYLQJ 0DQDJHPHQW 3HUIRUPDQFH LQ 5DSLGO\ &KDQJLQJ
2UJDQL]DWLRQV´ Journal of Management Development QR ±
²²²³.H\&ULWHULDLQst&HQWXU\0DQDJHPHQW3URPRWLRQDO'HFLVLRQV´
Career Development InternationalQR ±
/RQJHQHFNHU&2DQG'*DWLQV³*DWHZD\VWR0DQDJHPHQW'HYHORSPHQW
LQ 5DSLGO\ &KDQJLQJ 2UJDQL]DWLRQV´ Development and Learning in
Organizations: An International JournalQR ±
/RQJHQHFNHU & 2 DQG $ 0 /HIIDNLV ³6HULRXV DERXW :KLWH &ROODU
3URGXFWLYLW\´Industrial Management 1RYHPEHU'HFHPEHU ±
/RQJHQHFNHU & 2 DQG 0 - 1HXEHUW ³%DUULHUV DQG *DWHZD\V WR
0DQDJHPHQW&RRSHUDWLRQDQG7HDPZRUN´Business Horizons 6HSWHPEHU
2FWREHU ±
²²² ³7KH 0DQDJHPHQW 'HYHORSPHQW 1HHGV RI )URQW/LQH 0DQDJHUV
9RLFHVIURPWKH)LHOG´Career Development InternationalLVVXH ±
²²² ³7KH 3UDFWLFHV RI (IIHFWLYH 0DQDJHULDO &RDFKHV9RLFHV IURP WKH
)LHOG´Business Horizons ±
/RQJHQHFNHU & 2 0 - 1HXEHUW DQG / 6 )LQN ³&DXVHV DQG
&RQVHTXHQFHV RI 0DQDJHULDO )DLOXUH LQ 5DSLGO\ &KDQJLQJ 2UJDQL]DWLRQV´
Business HorizonsQR 0DUFK$SULO ±
/RQJHQHFNHU&2*53DSSDQG766WDQV¿HOG³4XDUWHUEDFNLQJ5HDO
DQG 5DSLG 2UJDQL]DWLRQDO ,PSURYHPHQW´ Leader-to-Leader QR :LQWHU
±
/RQJHQHFNHU & 2 DQG 3 3LQNHO ³&RDFKLQJ WR :LQ DW :RUN´ Manage
-DQXDU\)HEUXDU\ ±
/RQJHQHFNHU&2DQG-/6LPRQHWWLGetting Results: Five Absolutes for
+LJK3HUIRUPDQFH6DQ)UDQFLVFR-RVVH\%DVV
/RQJHQHFNHU & 2 - / 6LPRQHWWL 1 1\NRG\P DQG - $ 6FD]]HUR
³7KLQQLQJWKH+HUG7ZHOYH)DFWRUV$IIHFWLQJ'RZQVL]LQJ'HFLVLRQV´The
H.R. Advisor Journal 0DUFK$SULO ±
/RQJHQHFNHU&2DQG7&6WDQV¿HOG³:K\3ODQW0DQDJHUV)DLO&DXVHV
DQG&RQVHTXHQFHV´Industrial Management -DQXDU\)HEUXDU\ ±
Bibliography
/RQJHQHFNHU & 2 7 & 6WDQV¿HOG DQG ' - 'Z\HU ³7KH +XPDQ 6LGH
RI 0DQXIDFWXULQJ ,PSURYHPHQW´ Business Horizons 0DUFK$SULO ±
/RQJHQHFNHU&27&6WDQV¿HOGDQG*53DSSThe Two-Minute Drill:
/HVVRQV IRU 5DSLG 2UJDQL]DWLRQDO ,PSURYHPHQW IURP $PHULFD¶V *UHDWHVW
Game6DQ)UDQFLVFR-RVVH\%DVV
/RQJHQHFNHU & 2 DQG 5 <RQNHU ³/HDGHUVKLS 'H¿FLHQFLHV LQ 5DSLGO\
&KDQJLQJ 2UJDQL]DWLRQV 0XOWLVRXUFH )HHGEDFN DV D 1HHGV $VVHVVPHQW
7RRO²3DUW,´,QGXVWULDODQG&RPPHUFLDO7UDLQLQJQR ±
²²² ³/HDGHUVKLS 'H¿FLHQFLHV LQ 5DSLGO\ &KDQJLQJ 2UJDQL]DWLRQV
0XOWLVRXUFH)HHGEDFNDVD1HHGV$VVHVVPHQW7RRO²3DUW,,´Industrial and
&RPPHUFLDO7UDLQLQJQR ±
/XGZLJ'HDQ&DQG&OLQWRQ2/RQJHQHFNHU³7KH%DWKVKHED6\QGURPH
7KH(WKLFDO)DLOXUHRI6XFFHVVIXO/HDGHUV´-RXUQDORI%XVLQHVV(WKLFV 12,
QR ±
1DKDYDQGL $ 7KH $UW DQG 6FLHQFH RI /HDGHUVKLS. th HG 8SSHU 6DGGOH
5LYHU1-3UHQWLFH+DOO
1HOVRQ % 1001 Ways to Reward Employees 1HZ <RUN :RUNPDQ
3XEOLVKLQJ
1HXEHUW 0 - DQG & 2 /RQJHQHFNHU ³&UHDWLQJ -RE &ODULW\ +5¶V 5ROH
LQ &UHDWLQJ 2UJDQL]DWLRQDO )RFXV´ The HR Advisor Journal -XQH-XO\
±
3KLOOLSV '7 5XQ WR :LQ 9LQFH /RPEDUGL RQ &RDFKLQJ DQG /HDGHUVKLS
1HZ<RUN6W0DUWLQ¶V3UHVV
5RVHQEDFK:(5/7D\ORUDQG0$<RXQGWContemporary Issues in
Leadership. 7thHG%RXOGHU&2:HVWYLHZ3UHVV
8OULFK'-=HQJHUDQG16PDOOZRRGResults-Based Leadership. Boston:
+DUYDUG%XVLQHVV6FKRRO3UHVV
<RXUGRQ('HDWK0DUFK8SSHU6DGGOH5LYHU1-3UHQWLFH+DOO
Marketing
$JDUZDO 3DQNDM DQG 5LFKDUG 3 /DUULFN ³:KHQ &RQVXPHUV &DUH DERXW
%HLQJ7UHDWHG )DLUO\7KH ,QWHUDFWLRQ RI 5HODWLRQVKLS 1RUPV DQG )DLUQHVV
1RUPV´-RXUQDORI&RQVXPHU3V\FKRORJ\ ±$UHVHDUFK
DUWLFOHLQYHVWLJDWLQJWKHGLIIHUHQWW\SHVRIUHODWLRQVKLSVFRQVXPHUVIRUPZLWK
FRPSDQLHVDQGKRZWKRVHUHODWLRQVKLSW\SHVDIIHFWSHUFHSWLRQVRIIDLUQHVV
$QVRII ,JRU ³6WUDWHJLHV IRU 'LYHUVL¿FDWLRQ´ Harvard Business Review
6HSWHPEHU±2FWREHU ±7KH DUWLFOH WKDW LQWURGXFHG WKH
$QVRII PDWUL[ D IUDPHZRUN DFFRXQWLQJ IRU WKH GLIIHUHQW ZD\V FRPSDQLHV
can increase sales.
&KHUQHY $OH[DQGHU 6WUDWHJLF 0DUNHWLQJ 0DQDJHPHQW, 7th HG &KLFDJR
&HUHEHOOXP3UHVV$QLQWURGXFWRU\PDUNHWLQJWH[WERRN
&KHUQHY $OH[DQGHU 5\DQ +DPLOWRQ DQG 'DYLG *DO ³&RPSHWLQJ IRU D
&RQVXPHU¶V ,GHQWLW\ /LPLWV WR 6HOI([SUHVVLRQ DQG WKH 3HULOV RI /LIHVW\OH
%UDQGLQJ´Journal of Marketing 0D\ ±,QYHVWLJDWHVWKH
UROHRIWUDQVLHQWFKDQJHVLQWKHQHHGIRUVHOIH[SUHVVLRQRQKRZFRQVXPHUV
YDOXHEUDQGV
'LFNVRQ3HWHU5DQG$ODQ*6DZ\HU³7KH3ULFH.QRZOHGJHDQG6HDUFK
RI6XSHUPDUNHW6KRSSHUV´Journal of Marketing -XO\ ±
6XUYH\ UHVHDUFK FRQGXFWHG RQ VKRSSHUV LQ VXSHUPDUNHWV WR GHWHUPLQH KRZ
ZHOOWKH\UHPHPEHUSULFHVRILWHPVLPPHGLDWHO\DIWHUVHOHFWLQJWKHP
Bibliography
'RODQ5REHUW-³+RZ'R<RX.QRZ:KHQWKH3ULFH,V5LJKW"´Harvard
Business Review 6HSWHPEHU±2FWREHU ±/LVWVVRPHRI
WKHSULQFLSOHVIRUSULFLQJZHOO
)RXUQLHU 6XVDQ DQG -XOLH <DR ³$ &DVH IRU /R\DOW\´ +DUYDUG %XVLQHVV
6FKRRO &DVH &DPEULGJH +DUYDUG %XVLQHVV 3UHVV 'LVFXVVHVVRPHRIWKHIRXQGDWLRQVDQGDGYDQWDJHVRIFXVWRPHUOR\DOW\
*RXUYLOOH -RKQ 7 ³(DJHU 6HOOHUV DQG 6WRQ\ %X\HUV´ Harvard Business
Review -XQH ± 5HYLHZV WKH SV\FKRORJLFDO GLIIHUHQFHV
EHWZHHQ EX\HUV FXVWRPHUV DQG VHOOHUV PDUNHWHUV DQG WKH SUREOHPV WKLV
GLVFRQQHFWFDQOHDGWR
+DLUH 0DVRQ ³3URMHFWLYH7HFKQLTXHV LQ 0DUNHWLQJ 5HVHDUFK´ Journal of
Marketing $SULO ±'HWDLOVWKHXVHRISURMHFWLYHUHVHDUFK
WHFKQLTXHVWRUHYHDOFRQVXPHUV¶IHHOLQJVDERXWWKH1(6&$)eEUDQG
+DPLOWRQ 5\DQ DQG $OH[DQGHU &KHUQHY ³/RZ 3ULFHV $UH -XVW WKH
%HJLQQLQJ 3ULFH ,PDJH LQ 5HWDLO 0DQDJHPHQW´ Journal of Marketing
1RYHPEHU ±$Q LQYHVWLJDWLRQ RI SULFH LPDJH D EUDQG¶V
UHSXWDWLRQIRUSULFLQJDQGKRZWRPDQDJHLW
.RWOHU 3KLOLS DQG .HYLQ /DQH .HOOHU Marketing Management th HG
%RVWRQ3UHQWLFH+DOO$QLQWURGXFWRU\PDUNHWLQJWH[WERRN
0DQ]L -LP 8QFRQWUROOHG 7KH 6XUSULVLQJ 3D\RII RI 7ULDODQG(UURU IRU
%XVLQHVV3ROLWLFVDQG6RFLHW\1HZ<RUN%DVLF%RRNV7KHFDVHIRU
XVLQJFRQWUROOHGUDQGRPL]HGH[SHULPHQWVWRPDNHEHWWHUEXVLQHVVGHFLVLRQV
6KLY %DED =LY &DUPRQ DQG 'DQ $ULHO\ ³3ODFHER (IIHFWV RI 0DUNHWLQJ
$FWLRQV &RQVXPHUV 0D\ *HW:KDW7KH\ 3D\ )RU´ Journal of Marketing
5HVHDUFK 1RYHPEHU ± 5HVHDUFK DUWLFOH UHYHDOLQJ D
SULFHSODFHERHIIHFW,WHPVSXUFKDVHGRQVDOHDUHVRPHWLPHVOHVVHI¿FDFLRXV
WKDQWKRVHSXUFKDVHGDWIXOOSULFH
8QGHUKLOO3DFR:K\:H%X\7KH6FLHQFHRI6KRSSLQJ1HZ<RUN6LPRQ
6FKXVWHU ,QWHUHVWLQJ LQVLJKWV DERXW FRQVXPHU EHKDYLRU JOHDQHG
IURPREVHUYDWLRQDOFRQVXPHUUHVHDUFKPHWKRGV
<DQNHORYLFK 'DQLHO DQG 'DYLG 0HHU ³5HGLVFRYHULQJ 0DUNHW
6HJPHQWDWLRQ´Harvard Business Review )HEUXDU\ ±
$UHYLHZRIWKHSULQFLSOHVXQGHUO\LQJJRRGPDUNHWVHJPHQWDWLRQ
Download