Discount Business Strategy How the New Market Leaders are Redefining Business Strategy

by Andersen, Michael Moesgaard; Poulfelt, Flemming

• ISBN13: 9780470033531
• ISBN10: 0470033533
• Edition: 1st
• Format: Hardcover
• Copyright: 2006-10-27
• Publisher: WILEY

Summary

What people are saying about Discount Business Strategy: "Michael Andersen and Flemming Poulfelt provide a provocative discussion of the rapidly growing role of discounters across numerous industries: how they operate; how they create uniqueness; and how they can destroy value for incumbents. Understanding the specific moves and tools that the authors analyze will be valuable for attackers and incumbents alike." -Adrian J. Slywotzky, Director, Mercer Management Consulting USA "This book is very timely, dealing with today's most critical strategic issue: how to provide more value to the consumer through aggressive discounting. Those players in manufacturing and distribution who master this will be the winners; many established firms will fall by the wayside. A similar set of issues are facing many nations today - Europe vs. Asia!" -Peter Lorange, President, IMD, Switzerland "Andersen and Poulfelt have researched one of the most important themes in today's business world - how fundamentally new business models have wiped out establishments not with new products or technologies, but by creating new rules for conventional industries. Read this book and learn how to recognize the disruption of your industry before it is too late!" -Sigurd Liljenfeldt, Senior Partner, Monitor Group, France "This book asks if a firm can have its cake and eat it too - that is, maintain high quality at low prices. My favourite example and shopping place is big box Costco. Ikea is another. A must read for a broad audience concerned about corporate survival!" -Professor Larry E. Greiner, Marshall School of Business, University of Southern California, USA The aspiration to adopt the right strategy still prevails over the business world. But is there a single 'best' strategy for a company? Can an organization create sustainable competitive advantage from an 'off-the-peg' strategy? And are most companies likely to craft a strategy that genuinely creates uncontested market space and makes the competition irrelevant? The answer to all these questions is probably 'No'. And the rising tide of companies like Dell, CostCo, Skype and Linux means that asking them at all may soon be futile. While strategists have foundered in old paradigms, a new breed of competitors has emerged. Value destroyers. Old-style thinking understood value destruction when it was confined to an industry and driven by a new product or technology. But what are the implications when the destruction stems from a new way of thinking - from a strategy that simultaneously creates value? The implications are enormous. Every company in every industry is potentially at risk. This risk - or opportunity - is precisely the reason for this book and its focus on exploring why and how some companies have bridged the gap between differentiator and cost leader strategies to emerge as winners in hypercompetitive markets, and what this entails in terms of value destruction and creation. Discounting organizations are here to stay - are you?

Author Biography

Michael Moesgaard Andersen is CEO of Andersen Advisory Group A/S. He and his team have provided strategy advice to numerous companies and public organizations around the world, and he is also directly involved in business development through his own venture capital company. He has worked as a lecturer at Copenhagen University and as external examiner at Copenhagen Business School, and is a frequent speaker at conferences. He is the author of numerous articles and two books on technology and management issues.

Flemming Poulfelt is Professor of Management and Strategy and Vice Dean at Copenhagen Business School, and Director of LOK Research Center. He is the author of many articles and books on the subjects of strategy, professional service firms, change management, knowledge management and management consulting. His books include The Contemporary Consultant (2004) and Managing Complexity and Change in SMEs (2006). He has served on numerous corporate boards, consults widely and is a frequent speaker at seminars and conferences.

Table of Contents

Foreword	xi
Why are some companies more successful than others?	1	(18)
The real life laboratory	1	(2)
Creating value and simultaneous destruction	3	(3)
The volume game	6	(4)
Simplicity -- the word of the day	10	(2)
Cut to the core	12	(3)
Service? Something we'd rather do ourselves	15	(2)
The black box of strategy turned upside down	17	(2)
The oxymoron of existing strategies: where do we go from here?	19	(16)
Conventional strategic thinking	19	(1)
The generic strategy framework	20	(3)
Porter challenged	23	(3)
Mixed strategies -- the airline industry	26	(9)
When discount strategy becomes important	35	(8)
Hyper competitive markets and traditional strategy	35	(3)
The position of a discount strategy	38	(3)
A single form -- a simple form?	41	(2)
CBB	43	(32)
Cultivating a hyper competitive market by way of a consistent approach to the notion of discount strategy	43	(1)
A contradiction to the bursting of the IT-bubble	43	(1)
The mobile sector - hyper-competition	44	(2)
CBB as the enhanced service provider	46	(1)
The original mission and strategy	47	(1)
Crisis and the filing of a petition for bankruptcy	48	(2)
The discount strategy - not a single quick fix	50	(8)
New management	50	(1)
Reinvention of the IT-systems	51	(1)
A new customer care concept	52	(1)
New brand and branding	53	(1)
Reverse relationship marketing	54	(1)
Political mass marketing	55	(1)
Reorganization of the distribution	56	(1)
Cost cutting programs	57	(1)
Active price, leadership	57	(1)
CBB's discount product - cheaper and better	58	(6)
Product production characteristics	58	(4)
Product marketing characteristics	62	(2)
CBB's use of price as a tactical weapon	64	(4)
The importance of the price vis-a-vis the customers	64	(1)
Active leadership in price wars	65	(3)
Results - best in class	68	(2)
A revolution in the mobile sector?	70	(2)
Perspectives	72	(3)
Lidl	75	(30)
Gaining ground in a hyper competitive market by a consistent discount strategy	75	(1)
The German conquest	75	(1)
The grocery retail sector -- hyper-competition	76	(5)
The original mission and strategy of Lidl	81	(1)
The discount strategy -- all encompassing	82	(14)
Structured to control the impact of external factors	83	(1)
Leadership through continuity	84	(1)
The look and feel of Lidl	84	(3)
High service level with a discount concept	87	(2)
Squeezing the brands	89	(2)
Aggressive go to market strategy	91	(3)
Publicity through secrecy	94	(1)
Active price leadership	95	(1)
Lidl's discount product -- cheaper and better	96	(5)
Product marketing characteristics	99	(1)
The use of price as a tactical weapon	99	(1)
Active leadership in price wars	100	(1)
Results -- top of the class	101	(2)
Perspectives	103	(2)
Ryanair	105	(40)
Reshaping a competitive market through a consistent discount strategy	105	(1)
Flying with the giants	105	(1)
The airline industry -- liberalized to full competition	106	(2)
The early days of deregulation	108	(1)
Towards the liberalized sky with a new strategy	109	(2)
A transformed and polarized industry	111	(3)
Ryanair as the alternative independent carrier	114	(1)
Financial collapse evaded at the 11th hour	115	(1)
The no frills, low fare strategy -- not just one route	116	(16)
New management	116	(3)
Cost cutting programs	119	(1)
Productivity-based compensation schemes	119	(1)
Outsourcing to third parties	120	(1)
Re-organizing sales and distribution	121	(2)
Harmonizing and scrutinizing the fleet	123	(2)
Customer care concept	125	(3)
New brand and branding	128	(1)
Political mass marketing	129	(2)
Active price leadership	131	(1)
Ryanair's discount product -- cheaper and better	132	(7)
Product production characteristics	133	(2)
Product marketing characteristics	135	(1)
The use of price as a tactical weapon	136	(1)
The customers' perception of price	136	(2)
Leading the price wars	138	(1)
Results -- Best in class	139	(2)
Perspectives -- a revolution in the airline industry?	141	(4)
The building blocks of a discount business strategy	145	(14)
Maturity and liberalization in different industries	145	(2)
The building blocks of a `discount strategy'	147	(9)
The product	150	(2)
The brand	152	(1)
The customers	153	(2)
Technology	155	(1)
The four blocks as one discount strategy	156	(3)
The attractiveness of the core product	159	(26)
From peaceful coexistence to disruption	159	(2)
Disruption and the corresponding value destruction	161	(4)
Lean and unbundled nature of the discount product	165	(7)
Self-service an important ingredient	172	(5)
Aggressive pricing	177	(3)
Demand-driven products	180	(2)
Value creation	182	(2)
Back to basics	184	(1)
A good brand is much more than a good brand	185	(26)
The growing importance of `brandr'	185	(2)
`You need to invest money in the establishment of a good brand'	187	(1)
We cannot afford to spend	188	(5)
David against Goliath	193	(6)
The Gorilla image	199	(5)
Branding as a tool-kit in the discount strategy	204	(2)
Low prices as a new corporate social responsibility position	206	(1)
Brand extension and discount	207	(2)
The good brand	209	(2)
The discount customer and social capital	211	(26)
The pivotal role of the customer in a discount strategy	211	(3)
Customers as social capital	214	(7)
Social capital and the discount customers -- the X factor	214	(1)
The social factor in the discount strategy	215	(4)
Social capital and egalitarianism	219	(2)
The dismissal of relationship marketing	221	(3)
Psychology, culture and the discount strategy	224	(1)
The view on discount	224	(1)
Exploitation of the cognitive dissonance	225	(2)
Life-style and satisfaction	227	(1)
The advent of the viral ambassador	228	(2)
The patronizing of customers	230	(1)
The rise and fall of patronizing	230	(1)
Increasing brand promiscuity	231	(2)
Simplicity prevails	233	(1)
How to save costs and increase perceived quality?	234	(1)
The main execution tactics	234	(3)
Finding the suitable technology	237	(20)
Finding technology	241	(3)
The innovator's dilemma and the innovator's solution	244	(2)
The choice of `discount' technology	246	(7)
Proven technology	248	(1)
Scalability	248	(1)
Technology supporting the simple	249	(1)
Impact on back office system	249	(4)
Technological exuberance avoided	253	(4)
Value creation and value destruction	257	(16)
Strategy and war	258	(6)
Strategy revisited	264	(1)
The building blocks of the discount strategy model	265	(4)
The various execution processes	269	(4)
Epilogue	273	(6)
How to reflect thoroughly on the wider repercussions of successful discount business strategies?	273	(6)
Notes	279	(8)
Bibliography	287	(4)
Index	291