Generating GrowthUsing the company you have selected for your Strategy Development Project, describe one idea to generate substantial top line revenue growt
Generating GrowthUsing the company you have selected for your Strategy Development Project, describe one idea to generate substantial top line revenue growth. As you describe and assess this potential move, refer specifically to Figure 4.1 (p. 77) in Chapter 4 of Sherman and to the other readings from this week to support your response.
- Do you predict your idea will generate short-term growth, long-term sustainable growth, or both?
- How can you keep your competitors from easily copying your strategy?
- What costs, systems, or capabilities are necessary for this growth to occur?
Post your initial response by Wednesday, midnight of your time zone, and reply to at least 2 of your classmates' initial posts by Sunday, midnight of your
1st person to respond to
Brad
RE: Week 3 DiscussionCOLLAPSE
Hello Dr G and fellow classmates-
Using the company you have selected for your Strategy Development Project, describe one idea to generate substantial top line revenue growth. As you describe and assess this potential move, refer specifically to Figure 4.1 (p. 77) in Chapter 4 of Sherman and to the other readings from this week to support your response.
One revenue-generating idea our team is working on for the 2023 Baseball/Softball season is to focus on a list of key items we are calling our never-out list. The plan is to go deep in inventory on some key items and instill confidence in our customers that these items will always be available. We are focused on items in our top 5% of revenue and margin $ as well items our customers expect us to always have in stock like black helmets. These items fall in line with Leonard Sherman’s focus in his book, If You’re in a Dogfight, Become a Cat!, that they will drive operating margin, ROIC, and ultimately bottom-line profitability (1). By focusing on margin and not just revenue we will ensure we are executing on items that drive both top and bottom-line results, not just top-line. This strategy will require an inventory investment that will affect short-term cash flow and could add to Days on Hand (DOH) for inventory levels. While this may hurt short financials it should have a long-term payoff in driving revenue and building confidence with our customers in our core products (JWMI 540, 2).
Do you predict your idea will generate short-term growth, long-term sustainable growth, or both?
With the key-item focus strategy, I believe we will generate both short-term and long-term growth assuming our products keep us with consumer trends and needs plus we are picking the correct items. Reviewing the TOWS analysis article this week an organization must find its weaknesses and turn them into opportunities (3). One of Rawlings and Easton’s weaknesses over the year has been maximizing their inventory and running out of key, high-demand items while having too much inventory in slower-moving items.
How can you keep your competitors from easily copying your strategy?
There is nothing we can do to keep our competitors from following our key item strategy. The defense in this area is executing a strong offense by ensuring our key products are superior in performance and in meeting consumer demands.
What costs, systems, or capabilities are necessary for this growth to occur?
There are several areas we need to align to be able to execute this strategy. The first area of focus is ensuring our suppliers can execute and have the capacity for the volume we will need to ensure we can have enough units in inventory. We also need to work with our CFO and finance team to ensure we can afford the inbound receipts and cash flow necessary to drive the desired inventory levels. Our team will also need to monitor and report weekly how these items are performing and work quickly to address any inventory concerns.
References:
- Leonard Sherman. 2017. If You’re in a Dogfight, become a cat!
- JWMI 540 Week 3 Lecture Notes.
- TOWS Analysis. https://online.visual-paradigm.com/knowledge/strategic-analysis/tows-analysis-guide/
2nd person to respond 2
Chad
Hello Dr. G. and Class,
Leonard Sherman teaches us that in order to create an ongoing stream of meaningfully differentiated products and services, continuous innovation is an absolute must (1). In addition, business alignment of all resources, departments, and processes need to be rock-solid in order to support a company’s strategic intent (1). Top Line growth is defined as increasing revenue through selling more products or services (JWI, 2). I have chosen Netflix for my Strategy Development Project. One idea to generate substantial top-line revenue growth is to create different tiers of subscription models. The company is already trialing a similar strategy where it is charging a $2-$3 additional fee for added account profiles or password sharing (Variety, 3). This is expected to add $1.6 Billion to Netflix’s top line (Variety, 3). What if the company took that model one step further with tiered platforms for the full Netflix package which includes all streaming content options, and a lighter version for Netflix only branded content which carries a smaller monthly subscription fee of $9.99 versus the $15 per month current fee. This strategy would fall under the pricing/account management, channel management, and operating efficiency business levers as they are ways to improve margins and increase the return on invested capital (Sherman, 2). I would also argue that it could be considered an organic growth strategy as it is really a way to market differently using the same content with the goal of reaching new markets (Sherman, 2).
Do you predict your idea will generate short-term growth, long-term sustainable growth, or both?
Mary Hart stresses the importance of knowing your customer as well as your competition when it comes to increasing top-line growth. Netflix understands the streaming content market is becoming increasingly saturated with lower monthly subscription rates (Disney+ and Amazon Prime). Competitors are eating away at profits and creating exceptional content that is stealing subscribers (Forbes, 5). By creating an additional revenue stream at a lower price point, it can potentially capture and keep subscribers looking for a lower price point, but also wanting Netflix-only branded content. This could generate both short-term growth and long-term sustainable growth by offering options to consumers in a deeply saturated market. Short-term growth could result in new subscribers opting to try the service out at a lower price point. Long-term growth could result in organically growing the subscription base by adding new customers and keeping existing ones that may want to decrease their streaming spend, or allow them to diversify with other options but not cancel completely.
How can you keep your competitors from easily copying your strategy?
Unfortunately, no. Competitors can easily introduce this type of pricing model, however, the key differentiator is Netflix’s in-house content. That is something no other competitor can touch, so by continuing to produce quality content desired by consumers, Netflix can stay ahead of the curve and keep competitors out of their subscription base (or at least partially). This also speaks to Mary Hart’s argument about the importance of knowing your brand. Netflix was one of the pioneers in this space and has been creating more and more in-house content unavailable anywhere else. Know your customers, what they want in terms of content, and continue to produce it with high-quality results (3).
What costs, systems, or capabilities are necessary for this growth to occur?
The initial cost to implement this growth system would be to create a new subscriber base model. That would require an investment into the infrastructure of Netflix and how the subscriber base model works. It would also require back-end development to create a Netflix Light style of interface. Yet, the streaming provider is already doing this with its various categories, one being, Netflix only branded content. So the growth strategy should be relatively seamless from an implementation standpoint. The continued costs will be in investing in unparalleled production values, stories, and content. Forbes lists Netflix with the highest monthly subscription rate (5), so the company must continue to invest in content to make the subscription rate worthwhile to consumers.
Regards,
Chad
Source List:
- Leonard Sherman. 2017. If You’re in a Dogfight, Become a Cat!
- JWI 540. 2022. Week Three Lecture Notes.
- Mary Hart. 2020. Learn Hub. 16 Ways to Grow Your Top Line and Bottom Line Revenue.
- Todd Spangler. 2022. Variety. Netflix Could Reap $1.6 Billion per Year by Charging Password-Sharing Users Extra Fees, Analysts Say. https://variety.com/2022/digital/news/netflix-charge-fee-password-sharing-revenue-1235212426/
- David Trainer. 2022. Forbes. Netflix Is Still Overvalued By At Least $114 Billion. https://www.forbes.com/sites/greatspeculations/2022/01/27/netflix-is-still-overvalued-by-at-least-114-billion/?sh=2202d6b16fc3
I have also attached the assignment name for my assginment
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JWI 540 – Lecture Notes (1214) Page 1 of 12
JWI 540: Strategy
Week Three Lecture Notes
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JWI 540 – Lecture Notes (1214) Page 2 of 12
PURSUING THE RIGHT KIND OF GROWTH
What It Means
The ultimate goal of a strategy is to grow your business. You can achieve growth through many different
means, but not all of these are equally suited to all situations. A winning strategy is one that focuses on
leveraging the best pathway to that growth. To determine this, it’s essential that you know your
competitors’ strengths and weaknesses. Understanding their talent pool, progress, and missteps will
clarify the direction your strategy should take.
Why It Matters
• Identifying current competitors and new entrants helps you further define the scope of your product and service offerings.
• A candid assessment of the competition can provide clues to your own strengths and weaknesses. Your strategy for growth should, in part, be dictated by the recent performance of rival companies.
• Assessing competitors’ strengths and weaknesses can reveal areas that are not wise for you to compete with head-on and uncover areas of vulnerability where your organization could swoop in and grab market share.
“As a leader, growth of your business
has to be first and foremost
in your thinking.”
“Corner stores have learned that survival
depends on finding a strategic position
where no one can beat them. Big
companies have the same challenge.”
Jack Welch
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JWI 540 – Lecture Notes (1214) Page 3 of 12
YOUR STARTING POINT
1. Who are your biggest competitors? What are the most obvious strengths and weaknesses of
each competitor?
2. What have your competitors done in the past year to change the playing field? Has anyone
introduced game-changing new products or a new distribution channel?
3. Are there any new entrants into the market and, if so, what have they been up to in the past
year?
4. Does your organization employ the same scrutiny in its self-evaluation as it does when
analyzing the industry or competitors? Is it part of your corporate culture to be willing to hit the
“refresh” button and change practices that have been in place for a long time?
5. Do you have a process to measure the rate of change in the industry (e.g., growth, innovation,
new sales channels) and compare it to your internal rate of change? If so, what is that process
telling you about how agile your organization is?
6. Give specific examples of business or functional units in your organization that are ahead of (or
behind) industry trends.
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JWI 540 – Lecture Notes (1214) Page 4 of 12
HOW DO WE GENERATE GOOD GROWTH? Growth is the linchpin of business – indeed, of capitalism itself – and it informs most company strategy. At
the same time, we all know that growth is not always positive.
Companies often find that growth, with all that it brings (e.g., increased revenue, a bigger geographic
footprint, the acquisition of a rival), does not always improve their performance. In fact, it may undermine
profitability or shareholder value. The key is to create a strategy that drives the right kind of growth.
THE DIFFERENT TYPES OF GROWTH Often, a company says right up front that it expects to grow. It wants to grow faster than the market, or
faster than people expect it to grow. Of course, there are advantages that come with scale. A company’s
large orders can allow it to negotiate favorable deals with suppliers. Growing companies can often pursue
new kinds of opportunities as they expand their workforce and operating capacity.
Growth can provide a competitive advantage over rivals, but it also comes in different flavors. In setting
strategy, companies need to decide what kind of growth they want to pursue: fast or slow? Low-risk or
high-risk? An expansion of current operations or a move into new markets?
But the most important distinction is between top line and bottom-line growth. Top line growth means
increasing your revenue, usually by selling more products or services. Bottom line growth means
increasing your profits, often by reducing the costs associated with generating revenue. Strategists
frequently forget that top-line growth can reduce profitability due to the added cost of generating new
sales.
To be fair, top-line growth achieved at the expense of bottom-line growth does make strategic sense
sometimes. A company may be willing to endure a period of losses while it establishes itself in a high-
potential new market. Alternatively, it may choose to temporarily sacrifice profit margins in order to
increase sales of strategically important products in existing markets. But a sustained period of
unprofitable growth represents a hollow strategic victory.
SOURCES OF GROWTH Whichever type of growth managers seek, it will typically be generated in one of three ways. Successful
companies seek a combination of the three because each has its advantages and disadvantages.
• Organic Growth is generated from a company’s existing resources – its brands, employees,
capabilities, systems, and processes. It includes market-share growth (getting a bigger piece of
the pie in your existing market), share-of-wallet growth (getting a bigger portion of a customer’s
total spending), and growth through expansion (generating new revenue by moving into new
markets or customer segments).
The Swedish home furnishings retailer IKEA pursued a strategy of organic growth when it sought
more sales of the home-furnishing products it already carried, added items to its product line, and
expanded its operations into new countries. This strategy required expanding manufacturing
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JWI 540 – Lecture Notes (1214) Page 5 of 12
capacity, hiring more salespeople, and developing new products in related areas, such as
bedding.
• Mergers and Acquisitions (M&A) usually provide a quicker path to increased scale than organic
growth. M&A can be a way to immediately jump into an attractive industry, obtain a technology or
brand that opens up new markets, or increase the share of an existing market. Some companies,
including IKEA, value their unique culture or brand; they are hesitant to consider M&A as a
primary growth lever. Note, too, that because of the challenges involved in integrating separate
businesses, mergers and acquisitions often destroy shareholder value, even though aggregate
revenue and profit are sometimes higher as a result of the combination.
• Industry Growth occurs because an entire industry is expanding. Since “a rising tide lifts all
boats,” companies in fast-growing industries like home healthcare services can enjoy healthy
growth even if they’re not beating their rivals and increasing their market share. Identifying and
targeting high-growth industries, and exiting those that are stagnant or declining, is a vital
strategic leadership skill.
WHICH GROWTH OPPORTUNITIES SHOULD WE PURSUE? When you spot a growth opportunity with a potentially big upside, it can be difficult to walk away from it.
It’s natural to be attracted to hot new ideas or exciting emergent industries. But while a growth opportunity
may be great for one company, it may not make sense for yours. Your strengths, your current portfolio of
projects and products, and your resource limitations could all undermine growth. Your decision to move
into an unrelated business may confuse customers and employees. And making such a move may
distract you from commitments you have already made to partners, suppliers, and customers.
You need guidelines to help you determine whether a growth opportunity makes strategic sense. Start
with an industry analysis. Because industry growth can be such a strong driver of company performance,
this is often the first step in deciding whether to pursue an opportunity. Using tools like Porter’s Five
Forces model, you can start to figure out where an industry is headed. Is it so easy to enter this market
that competitors will continuously drive down prices and profits? Are new technologies poised to upset the
status quo? How strong is the projected demand? Your analysis may help you to reject an opportunity out
of hand. For example, if the industry fundamentals are weak, entering with a plain-vanilla strategy of
organic growth is unlikely to pay off. But don’t dismiss an “unattractive” industry before doing a strategic
advantage analysis.
Consider whether this is an opportunity that your company is uniquely positioned to exploit. What can you
create that is valuable and rare? Does your company have distinct assets and capabilities that can set it
apart and generate above-average returns? The furniture-retail industry didn’t seem attractive on its face,
but IKEA had a unique, assemble-it-yourself, low-price approach that an underserved customer segment
valued.
The pros and cons of a growth opportunity may be difficult to quantify precisely. Still, you need to
estimate projected costs and returns. It is often helpful to do a quantitative analysis, using a model such
as net present value (NPV). NPV calculates the value today of an investment's future cash flows, minus
the initial investment. Such tools help to verify and clarify the insights gained from qualitative frameworks
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JWI 540 – Lecture Notes (1214) Page 6 of 12
like The Five Forces. Where exact numbers aren’t available, we can use ranges of values.
Also, keep in mind that strategic growth opportunities should never be analyzed in isolation and
pronounced “good” or “bad.” They are never one or the other. You need to do a comparative analysis of
different growth options, weighing their relative positives and negatives.
READY, SET, GROW
In addition to looking at the industry, your strategic advantage, the expected economic value, and
comparable options, you’ll want to look in the mirror. Where and how has your company grown in the
past? If past acquisitions have lost money and destroyed morale, is the next acquisition likely to be any
different, even if the numbers look great? If you’ve had problems getting products out of the R&D lab and
into the hands of customers, will your next product-based growth strategy be similarly flawed?
Companies that can execute growth strategies well are realistic about whether they are up to the task.
Some call this “earning the right to grow.” Expanding an inefficient operation doesn’t suddenly make it
efficient. In fact, bulking up may, counterintuitively, slow you down.
Managers often overlook past growth challenges. The excitement of the next big opportunity seizes their
imaginations. As a counterbalance to your analysis of the opportunities, you’ll also need to analyze
potential roadblocks.
After taking all these steps, if you ultimately decide your company is ready to grow, give it all you’ve got.
Most growth initiatives begin small and are somewhat experimental. Because of that, they’re often
starved for resources. Inexperienced people are handed the reins and then forgotten until senior
management checks back in and second-guesses their decisions.
As Jack liked to say, if you truly want a growth initiative to succeed, spend plenty of money up front. Put
the best, hungriest, and most passionate people in leadership roles. Have senior managers make a big
fuss about the new venture’s potential and importance and be sure they grant it the freedom to innovate
and succeed. Do not doom your fledgling efforts to failure before they even get started. (For more on this
topic, see Winning, pp. 206–212.)
EVERYONE IS RESPONSIBLE FOR GROWTH
The CEO may have a vision for growth. The shareholders may be clamoring for growth. Customers may
be awaiting your next product. But ultimately, the managers of a company are critical to how, when, and
where growth occurs. No one area singlehandedly drives success, but a single area can be the weak link
that undermines an otherwise brilliant move.
Great analysis and visionary leadership may produce plans with tremendous potential. But their success
ultimately lies in the hands of your people. Operations managers must ensure sufficient manufacturing
capacity, rigorous quality controls, and clear-eyed inventory and cost management. Marketing managers
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JWI 540 – Lecture Notes (1214) Page 7 of 12
must create powerful branding. Talent managers must acquire, adjust, and retain the right human capital
for the job. Essential financial, legal, IT, sourcing, and distribution activities must also be coordinated and
completed.
Moving from developing a growth strategy to executing one is never easy. As in any complex project, the
importance of goal clarity (what are we trying to accomplish?) and role clarity (who calls which shots?) are
crucially important. But if everything comes together, the payoff can be huge.
GROWING THE PIE OR GETTING A LARGER SLICE
Most companies battle for market share – a bigger piece of the pie. But sometimes, the focus shifts to
increasing overall demand for an entire market’s products and services, increasing the size of the pie. As
a result, everyone gets a bigger piece even if companies’ relative market shares don’t change. Chilean
winemakers, for instance, compete fiercely in their home markets, but they collaborate abroad to increase
consumer awareness about their relatively inexpensive wine. Together, they grow the overall size of the
U.S. market for Chilean wine.
Robust competition is a natural boon, not only for society, but also for individual competitors. When
competition is weak, managers tend to become overly focused on their organization, spending time on
matters that customers don’t care about. Tough competitors keep the pressure on a company to drive
down costs and come up with new ways to win and keep customers.
FACE THE COMPETITION
As you assess your competitive landscape, you need to understand the different types of competitors out
there. Knowing what to look for can help you compete against a particular rival and help you spot
competitors you did not even know existed.
Traditional competitors are the ones you know best. They are already active in your markets and provide
similar products and services. By watching your traditional competitors, you can keep up with their
strategic moves and anticipate how they will react to yours. Say your competition improves its packaging.
You can decide whether it makes sense to also improve your packaging, or instead shift your focus to
something else that will create value for customers. A candy company might, for example, invest in novel
flavors rather than improving its packaging. Your competitor then would have to decide whether to follow
your lead and add new flavors.
These back-and-forth decisions are primarily tactical, even though they should be based on strategic
objectives. They do not affect the handful of big strategic decisions that drive a company’s success or
failure. Compare the strategies of two candy makers. Ajax Candy, with a strategy aimed at improving the
customer experience, might introduce packaging improvements that make eating candy less messy, or
offer smaller portions for people trying to watch their weight. Best Candy, with a strategy based on low
costs, might introduce packaging improvements which make its products cheaper to ship or allow
customers to buy in bulk.
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JWI 540 – Lecture Notes (1214) Page 8 of 12
Latent competitors are companies that can enter your market from somewhere else in the industry value
chain. Think again of our candy makers. A latent competitor could be Disney or another entertainment
franchise that enters the confection market to exploit its brand recognition. It could also be a company
with a cost advantage in innovative packaging, such as putting sweets in biodegradable packages and
marketing itself as a green candy alternative.
Alert companies should be able to spot these likely rivals; they will often signal to customers, suppliers, or
distributors their intentions to enter your market. But too often, businesses miss seeing and reacting to
latent competition early in the game. That’s because people are busy, for one. One of the scarcest
resources of
any company is the attention of its managers. They’re focused on current operations. Spending the time
and energy to identify potential competitors and figure out what they may be up to is often towards the
bottom of their to-do list. Then, there’s denial. Even when potential competitors are identified, their threat
is typically underestimated or ignored. Incumbent auction houses and antique shops were initially
unconcerned as eBay grew. On the other hand, once the threat was obvious, many companies
overreacted and declared – mistakenly – the demise of traditional auction houses.
As you scan the horizon for potential competitors and assess how they impact your growth choices,
scrutinize companies whose businesses overlap with your own in some way. You might focus your
thinking by running through your where-to-compete decisions involving scope. At one point, for example,
DHL operated in most places in the world except the United States, while FedEx operated only in the U.S.
While they both provided overnight deliveries and related services, they were not yet direct competitors. It
was no surprise that they invaded each other’s territories. To some extent, both companies anticipated
the move and accommodated it in their strategies.
Oblique competitors attack with little warning and are particularly difficult to compete against. These rivals
enter your market from an apparently unrelated field, often deploying a new technology or exploiting an
emerging consumer preference to damage your competitive position. For years, doctors expected
patients to come in on a regular basis for checkups, particularly if they had a chronic condition or were on
medication. Not long ago, major drugstore chains began to offer services that had been exclusively
available in doctors’ offices. For example, patrons could check their blood pressure while they waited in
line for a prescription refill, thus creating sudden competition in healthcare services that few doctors had
anticipated.
Some oblique competitors surprise existing market leaders because they win over customers with an
apparently inferior product. It’s a phenomenon known as disruptive innovation and has been studied by
Harvard Business School Professor Clayton Christensen (1997). For example, until the late-1970s, the
Big Three automakers were notoriously unconcerned about the threat that small, imported cars posed
because they were sure Americans would consider them inferior.
The list of seemingly inferior products successfully challenging more sophisticated, existing products is a
long one. Desktop publishing didn’t offer the traditional distribution channels of traditional publishing.
Online retailing didn’t allow consumers to touch and try on clothes before purchase. Internet telephone
service lacked the voice quality of traditional landline service. In many situations like these, traditional
competitors keep adding increasingly sophisticated features to meet perceived customer needs while
ignoring an underserved – and much larger – market of consumers who are hungry for a simpler, cheaper
solution.
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JWI 540 – Lecture Notes (1214) Page 9 of 12
SPOT RIVALS BEFORE THEY SPOT YOU
A variety of methods exist for identifying competitive threats. The following techniques are a sample.
Value mapping is a sophisticated methodology that helps you to target your most profitable customers,
focus your business’s efforts on creating value, and deliver what your customers want. One of the tools of
value mapping involves a simple graph with perceived price ranging from low to high on the vertical axis,
perceived value on the horizontal axis, and a value equivalence line running diagonally across the graph,
connecting all the points where the price and value are perceived to be equal. Viewed this way, two very
different products could fall along this line. For example, Volkswagen and BMW could both be on the line
if VW sedans were perceived to have middle-of-the-road value and mid-level pricing, while BMW sedans
were perceived to be high-value and priced accordingly.
One way to use this graph is to locate your own products and services along this price-value continuum,
then do the same with your competitors' offerings. When companies fall below this line, they usually gain
market share since the prices of their products seem low compared to their value. Honda and Toyota
enjoyed this perception in the 1990s. When companies are above this line, they typically lose share
because the prices of their offerings seem too high for the quality of the product. Strategic options about
how to modify your product or how to change its price or perceived value can be generated with a value
map.
Dimensional analysis can help you dissect the ways in which your competitors provide value to
customers. In the fast food industry, for instance, a company might first compare rivals on price. Some
players focus on low price, building many delivery outlets in order to gain economies of scale and keep
costs low. Alternatively, they might offer value based on the variety of their menu items, the taste of their
food, or the speed of their delivery. A dimensional analysis first identifies the important competitive
dimensions – the ones that affect how customers choose between competitors – and then assesses how
each competitor measures up in these areas.
Even a simple analysis such as this can reveal what competitors are up to and provide warnings of
upcoming shifts in the marketplace. If one competitor adds healthy choices to its menu while another
begins advertising quick delivery, the strategic implications will help you determine your own moves.
Benchmarking employs a variety of quantitative and qualitative metrics that allow you to compare your
performance to your competitors’. For example, analysis of planned store openings, same-store sales, or
plant capacity can help you track and anticipate competitors’ strategic moves. More difficult, but just as
important, is the comparison of intangible assets such as intellectual property, employee talent, customer
loyalty, and reputation.
Beyond these specific tools, it’s important to constantly seek competitive intelligence about your rivals as
you assess the steps you should take to pursue the right kind of growth. Find out everything you can,
from a variety of sources, about their strategies, their limitations, and their investments. This ongoing
research should include possible latent or oblique competitors if you can identify them. Monitoring
competitors in this way helps you to understand their motives, anticipate their actions, and accurately
predict their reactions to your moves.
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JWI 540 – Lecture Notes (1214) Page 10 of 12
ABOUT SHAREHOLDER VALUE
One way to look at a bigger piece of the pie is to look at it strictly from the perspective of shareholder
value. This isn’t the only metric for growing the pie. Certainly, private companies find ways to expand
revenues, customers, and market share every day without being responsible to shareholders. Similarly,
Not-For Profit organizations may consider shareholders as community-members and consumers of
services—not investors. For publicly traded companies, however, many consider maximizing shareholder
value is a specific way to grow the pie.
Leonard Sherman, in Chapter 3 of the text, If You’re in a Dogfight, Become a Cat! explains the concept
of Maximizing Shareholder Value (MSV). Sherman described Jack Welch as being an outspoken and
powerful proponent of the MSV doctrine while at GE. Jack believed that divesting underperforming
business divisions and aggressively cutting costs to deliver consistent profit would outstrip global
economic growth. For twenty years of being CEO of GE, Jack demonstrated this doctrine in action.
However, Sherman noted Jack’s change of position a few years after his retirement. He shared Jack’s
change of position when Jack shared the following: “On the face of it, shareholder value is the dumbest
idea in the world. Shareholder value is a result, not a strategy…Your main constituencies are your
employees, your customers, and your products.” (p. 55). Therefore, growth needs to be focused on
more than just one part of the pie – it involves deliberate care and attention to each component part.
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JWI 540 – Lecture Notes (1214) Page 11 of 12
SUCCEEDING BEYOND THE COURSE
As you read the materials and participate in class activities, stay focused on the key learning outcomes
for the week and how they can be applied to your job.
• Identify the type of growth that creates sustainable competitive advantage
While there is no sure-fire strategy that will work forever, it is important that your team thinks
about what type of growth is the “right” kind: the kind that is sustainable
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