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Chapter 6Chapter 6
Business DefinitionBusiness DefinitionChapter 6Chapter 6
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Exhibit 6.1:Exhibit 6.1: Model of Model of Strategic ManagementStrategic ManagementExhibit 6.1:Exhibit 6.1: Model of Model of Strategic ManagementStrategic Management
Business Definition Business Definition as a Creative Processas a Creative ProcessBusiness Definition Business Definition as a Creative Processas a Creative Process
Five characteristics of the business definition process:1. It is fundamentally a creative process.
• Few business schools offer courses in creativity.– Business world seeks to quantify everything.
– Creative process is not well-understood.
• Rollo May: “Need for creativity is in direct proportion to degree of change the profession is undergoing.”
Business Definition Business Definition as a Creative Process as a Creative Process (cont.)(cont.)
Business Definition Business Definition as a Creative Process as a Creative Process (cont.)(cont.)
3. Effective business definition will not only answer the Who, What, and How questions, but it will also be much more creative and unique than any corporate mission statement.
• Truly distinctive definitions unlikely to emerge from committees.
– Usually the inspiration of a key entrepreneurial thinker.
Business Definition and Business Definition and Competitive AdvantageCompetitive AdvantageBusiness Definition and Business Definition and Competitive AdvantageCompetitive Advantage
Business definition “positions” a firm or business in its competitive space or industry environment. Almost all industries have various strategic groups --
groups of firms pursuing similar strategies.• In brewing industry, Anheuser-Busch, Miller, and
Coors all pursue national strategies.– Microbreweries serve only small, local markets.
Examples of effective definition and positioning: Smucker jams and jellies, and Gerber baby food.
Business Definition and Business Definition and Competitive AdvantageCompetitive Advantage (cont.)(cont.)
Business Definition and Business Definition and Competitive AdvantageCompetitive Advantage (cont.)(cont.)
Business definition helps to focus management attention on the firm’s key objectives, the firm’s most significant strategic issues, and the firm’s most important rivals. Where are we now? Where are we taking the
business? How are we going to position our business vis-à-vis
General Motors in 1921 Had 7 different car lines that lacked clear identities
and vigorously competed against each other.• CEO Sloan decided that each GM car line should
serve different, but overlapping price points (see illustration on following slide).
Illustrations of Effective Illustrations of Effective Business DefinitionsBusiness DefinitionsIllustrations of Effective Illustrations of Effective Business DefinitionsBusiness Definitions
Exhibit 6.6:Exhibit 6.6: Monsanto’s Monsanto’s Investments in BiotechnologyInvestments in BiotechnologyExhibit 6.6:Exhibit 6.6: Monsanto’s Monsanto’s Investments in BiotechnologyInvestments in Biotechnology
June, 1995 Acquires 49.9% of Calgene, a biotechnology company.
November, 1995 Pays $25-million for rights to Ecogen’s plant gene technology.
February, 1996 Acquires large stake in Dekalb Genetics, a corn seed producer.
April, 1996 Pays $150-million for Agracetus, a company that pioneered use of “gene gun” technology.
September, 1996 Acquires Asgrow Seed, a major producer of soybean seeds.
December, 1996 Announces that it will spin-off chemicals business.
May, 1998 Agrees to acquire Dekalb Genetics and Delta Pine & Land, a cotton seed producer.
Key Points Introduced Key Points Introduced in in Chapter 6Chapter 6 (cont.)(cont.)
Key Points Introduced Key Points Introduced in in Chapter 6Chapter 6 (cont.)(cont.)
An effective business definition can help to focus management attention on a firm’s key objectives, its most strategic issues, and its most important rivals.
An effective business definition does not answer other strategic questions, but it does make those questions more obvious and should improve strategic decision making and the implementation of strategies.
An effective business definition provides managers and employees with a sense of meaning and purpose which can be very motivational.
Key Points Introduced Key Points Introduced in in Chapter 6Chapter 6 (cont.)(cont.)
Key Points Introduced Key Points Introduced in in Chapter 6Chapter 6 (cont.)(cont.)
Firms that are defined and then continuously redefined are much more likely to keep pace with changes in their competitive environments and they are also much more likely to have clearer understandings of how resources should be allocated.
Yet redefinition poses many challenges. Firms must frequently make significant investments
in new markets and technologies without clear evidence that those investments will “pay-off.”
Key Points Introduced Key Points Introduced in in Chapter 6Chapter 6 (cont.)(cont.)
Key Points Introduced Key Points Introduced in in Chapter 6Chapter 6 (cont.)(cont.)
They are timely and appropriate given the industry environments in which companies are competing.
They are clear and really understandable by customers, as well as employees, suppliers, and other constituencies.
Business definition can contribute to the development of competitive advantage in at least 4 ways: An effective business definition can uniquely position a