Read the summary and the most important questions on Week 4 Strategy Consulting MCM

• 1 Introduction

• Why did diversion eventually not work for General Electric, thus what led them to have to convert? Shortly discuss the 2 reasons

  1. Start ups, with disruptive strategies, focus on specific segments.
     
  2. Updating capabilities and resources for every market, difficult due to all the investments necessary for so many market segments. 

• What does the converting approach entail?

  To select specific market segments to focus on and split up the company in separate divisions that will be run by specific parts of the C-suite.

• What 3 components of an organisation are important when assessing the current situation of a client organisation?

  1. Costs
     
  2. Resources and capabilities
  3. Markets

• What 4 separate steps can be identified in an analytical process when assessing an organisation?

  1. Determine focus (cost, differentiation, growth)
     
  2. Determine segments (profitability, customer needs)
  3. Analyse and match resources and capabilities with segments/customer needs
  4. Assess attractiveness of segments (barriers, power)
  5. Invest accordingly (resources, capabilities, industry barriers)

• 2 Gottfredson et al., 2008

• 2.1 The Starting Point

• Why is it important to assess the situation of an organisation?

  Assessing an organisation's strengths and weaknesses and unique combination of threats and opportunities, determines what goals are reasonable and where management should focus its performance improvement efforts.

• What are considered to be the 4 steps that are needed to asses an organisation's status quo (current situation)?

  1. Analyse costs and prices (almost always decline)
     
  2. Evaluate competitive position (determines your options) 
  3. Understand the industry profit pool (don't stand still)
  4. Gauge unnecessary complexity in the organisation (simplicity gets results)

• 2.1.1 Costs and Prices

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• As stated earlier, costs and prices always decline, what has this been based on?

  Experience curves, a graph showing the decline in a company's or industry's costs or prices as a function of accumulated experience.

• How does the experience curve work? If for every doubling of total units produced in a company, your per-unit cost in dollars drops by 20% what is the "slope" of the experience curve?

  The slope of the experience curve here is 80%.

• As the principle of the experience curve holds true for all of your competitors, and thus the entire industry, what does the curve allow you to estimate?

  Where costs or prices are likely to be in the future.

• 2.1.1.1 Comparing Slopes

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• With the knowledge that we gained in the previous section, what two slopes must be compared to determine whether a company will stay competitive in the future?

  By comparing our company's cost slope/curve with the industry cost/price slope/curve, we can determine whether our costs are declining at the rate necessary for our company to stay competitive.