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MBA 705: Organizational Strategy and Policies Louisiana State University Shreveport – Dr. Michael D. Meeks Socratic Skill Builder #2: Firm Performance [100 points] Due Date: Sunday February 4th by 11:59pm Maria Soto: Question #1: 1A: From the beginning, Schultz chose the right playing field. He chose to play in a field which was not overly saturated and where a gap existed that he could fill. He defined how he was going to win. He was very focused on the consumer and the consumer experience. In creating a third place for the consumer. Did you know that it is part of their philosophy that if the customer does not like their drink, they have to remake it free of charge? They also require employees to remember “regular’s” names and orders. The consumer is always the priority. Not only that but Starbucks also knew they could not serve everyone. They knew they had to sell Starbuck’s as a luxurious experience to match their pricing. All this ties into Starbuck’s customer loyalty. 1B: Starbucks has competitors but not necessarily ones that is a huge threat in my eyes. I believe one of its biggest competitors could possibly be Dunkin Donuts. Dunkin offers similar drinks to Starbucks for a fraction of the price. They always have specials as well, which then makes the price even lower. However, if you walk into a Dunkin, you do not get the same experience. The employees do not treat you the same way. They are not friendly or welcoming. This is just from personal experience. People do not just pay for the coffee they pay for the experience as well. As for myself, I would rather pay more and get better service. This is also the mentality of all Starbuck’s loyal customers. Which leads me to believe that it can possibly sustain its profit despite the changing world. We see how Starbucks evolves with the world of technology. We saw them create an app that offers rewards. This was not a thing a few years ago. They have shown that they are evolving. Not only that but even with their ingredients they saw the world make a shift in drinking and eating healthier and now they include oat, soy, and almond milk alternatives. 1C: I believe if Starbucks continues to evolve with the ever-changing world that they can be profitable. A big challenge I do see however is how fast they are going. In some stores they cannot keep up with demand. For example, I sometimes order my coffee before I even step out the door of my home. It takes about 15-20 minutes to get to Starbucks and my coffee is not ready. This has made me late a few times to work. Sometimes, its so busy that my coffee does not even come out tasting good. They need to come up with a way to have a more hands-on deck for the sake of their current employees and customers. 1D: I do not think technology is a huge issue for Starbucks, they are changing with technology. They have an app that even works as a bank. They were clever as well with that. So, if you use your bank card on the app you get 1x reward points if reload the Starbucks card and use that to pay you get double the points. If you do not use the entire amount you reload (minimum reloadable amount is $10) the money just sits there until you use it again. Now they also have the option to send someone a digital gift card so they can go to Starbucks a buy a drink. Starbucks is evolving with technology, and they also benefit from their customer loyalty as a result of always keeping the consumer as top priority. 1E: Customer loyalty and forward thinking/innovation. It has been made abundantly clear that Starbucks is huge on keeping its consumers in mind every step their way. In doing so, they earn tons of loyalty from their consumers. Consumers are so loyal that they would rather pay more to enjoy the Starbucks experience than pay less at other shops. Starbucks has thought about the future in ways that it has allowed its business to grow. Its innovation in creating a loyalty program and app that allows mobile ordering and pay. To pay at Starbucks it’s as easy as to scan your phone. You do not need to take out your wallet for cash or card making it easy, fast and convenient. They stay thinking forward and coming up with new and creative strategies. If you haven’t noticed, they always come up with a new seasonal drink that is so “insta worthy” they do not even have to advertise or market products so heavily because its loyal consumers do the job for them. On top of that, the consumers love the fact that not only do they get treated well the employees get a nice environment to work at with nice benefits. To add on, the coffee beans are also ethically and locally sourced which gives coffee drinkers peace of mind knowing that their delicious cup of coffee did not harm anyone. They use reusable cups to be green. Starbucks keeps everyone in mind the people, the planet, and its profits. Question #2: 2A: Intellectual Property Rights: Using intellectual property rights can protect any innovation (new) that the organization or firm can create to make themselves more unique. Without this protection, anyone can copy the idea created. If everyone is doing the same thing how can you have the best performance. Being unique and offering a distinct good or service can be the driver of best performance. Without intellectual property rights anyone can take away from your company’s uniqueness. Take Coca Cola for example, if everyone knew how to make coca cola then a lot of organizations would be able to make coca cola. Therefore, consumers would be able to purchase from different companies. Since coca cola has its recipe protected everyone must purchase from them directly. Which then creates better sales or performance. This kind of ties in with RBV. The coca cola taste is rare, non-substitutable, difficult to imitate and therefore valuable. Pepsi could never taste as good as a can of coca cola. 2B: Value Chain: : I would incorporate the value chain analysis during the planning portion of the strategic management process. Value chain has primary and secondary activities. The primary activities are coming up with creation and distribution of your product or services. So what is our goal, what are we making, what are we selling and how are we going to get there or do it. This is more like what are our winning aspirations, what is our playing field, and how are we going to win. Secondary activity offers support to the primary activities. The way I interpreted this part was more like what capabilities must be in place to win, and what management systems are in place to aid in winning.

Michael Porter’s value chain ties in with the questions the authors of playing to win ask. The ultimate goal for both is success to make profits as well as create value in the company to better serve the consumer. 2C: Transaction Cost Economics: Transaction Cost economics is basically it cheaper to make something in-house or to outsource and buy from someone else. I know it depends is not really a greater answer however, it really does depend on which is cheaper. For example, if I had a clothing line, I would probably buy clothing from a third party. Labor outside of the us is cheaper. It all boils down to which will make the most profit. The book MSM gave the perfect example with the airlines. Most airlines do not make their own airplanes. Just like Starbuck’s does not produce its own coffee beans. In the property management field, some developers only develop multifamily communities and hire someone to manage their assets since it’ll be cheaper to go that route rather than creating your own management company and hiring thousands of employees. On the reverse side, some management companies buy multifamily assets because for them it is easier or cheaper than having to build the asset. I work for a property management company called Woodward mgmt. partners. Woodward mgmt. partners manages Brand Properties’(developers) assets. However, from time-to-time Woodward mgmt. partners will buy assets from Brand Properties. For Woodward, it is cheaper to just buy from the developer than attempt to build their own assets as they are not in the development field. 2D: Vertical Integration: Vertical Integration is taking charge (taking direct ownership) of the various phases of production rather than relying on outside contractors or suppliers. This is a great way to ensure the quality of products or goods sold (this can earn a great reputation for the organization and loyalty from its consumers hence $$). However, it can be more time-consuming. In my experience it would be beneficial. The developers we work for hire a company called Oxford properties to build most if not all their multifamily assets. Oxford then hires third party vendors from plumbers to flooring to landscape, etc. The vendors that are hired 7/10 are not the best. Even though the property I work at Is new we have had so many issues due to vendors or contractors doing a horrible job. From sink holes to pipe burst, to building on an ant farm which causes an ant infestation, to roofing issues, ect. I could go on and on about the issues that arise. One of their assets (not the one I work at), was sold and now the new owners are experiencing a ton of issues therefore for are now suing the developers and now the developers are suing the construction company. If perhaps the developers took charge of the process or even the construction company took control/direct ownership of the process this could have been prevented. Sometimes when there’s too many hands in the pot things just don’t go well. 2E: Environmental Determinism: Environmental determinism is a paradigm in which it states that a firm’s environmental changes can be the cause for failure. In the book it compares firms to animals and how dinosaurs went extinct because they could not adapt to the environmental changes. I do not agree with this view. Since most of my undergrad is science based, we also learned that only those animals with great genetic make up and who are able to adapt and evolve survive extinction. Dinosaurs themselves went instead but birds survived. Birds are dinosaurs. They do not end up looking the same as in the early days but still survive. Therefore, if a company has valuable resources and can adapt to changes of the world it can survive. The company’s strategy will look different than it did 10 or 20 years ago, but it will still survive. Starbucks is a great example; they are a coffee company who was able to adapt with technology. They created an app and now you have the convenience of ordering ahead. 2F: Business-Level Strategies: Business level strategies is that of one (single) organization. There are four generic business level strategies cost leadership, differentiation, focus cost leadership, and focus cost differentiation. It is best to choose one to not get stuck in the middle of all four. If you get stuck in the middle, you are at great risk of failure. I would incorporate business level strategies by narrowing down my focus (not necessarily my audience/consumers) will I be a cost leader or differentiator. Will I have a large focus group or narrow. Having these down will optimize the firm performance and not be all over the place. 2G: Generic Strategies: As mentioned previously, there are four generic strategies cost leadership, differentiation, focus cost leadership, and focus cost differentiation. Cost leadership is an organization that competes based on price. They do not have a narrow audience they have a broad target. Differentiation is when a firm or organization competes based on their uniqueness on a broader scale. “Focus” means narrow therefore, narrow targets with Focus cost leadership and narrow targets with focus differentiation. In my perspective, I would incorporate Differentiation because being unique in my eyes is better than being or doing like everyone else. I believe this attracts more consumers. We live in an age where social media is everything. If you are unique and start a trend you can become viral online and obtain good profits. I believe that is something that helped Starbucks a lot. Being unique and having social media made it such a hot commodity. Question #3: Chapter #4 of the textbook (Managing Firm Resources): 3A: Resource based theory states that a firm’s resources must be valuable, rare, difficult to imitate and non-substitutable to assure sustainability ($ long term). The strategic resource can aid in creating the organizations’ capabilities which then suggests exceptional performance. Resources are things a company owns, and capabilities are what a company can do. Both resources and capabilities add value to an organization and can create a competitive advantage. A form of strategic resource is that of intellectual property. Intellectual property can be patents, trademarks, copy rights, and trade secrets. Then the chapter goes on to talk about the value chain which has primary and support activities. Primary activities are the creation and distribution of goods or services. Support activities aids or supports the primary activities. There are also other theories that include enactment, environmental determinism, institutional theory, and transaction cost economics. The most popular or widely used one is RBV (or resource-based theory). They also talk about SWOT analysis which is strengths (internal), weaknesses (internal), opportunities (external) and threats (external). Swot analysis is an outdated technique that is not used that often in the business field as the focus. This chapter for me personally was a lot I had to re-read a few times to try and comprehend and connect the dots. This chapter focuses a lot on the internal aspects of a firm and organization which are important but should not be the only focus while generating strategies. Environmental determinism is a theory which I do not believe in. I think if a company adapts and environmentally changes it can survive.

3B: I think internal analysis of a firm is important to determine the value it has. Without value, what really sets you apart from your competitors. What value do you bring to your consumers. However, it should be a balance between internal and external analysis. Both play a role in strategic management and the success of an organization. 3C: I do not think RBV is necessarily a better way to evaluate a firm’s strategic positioning and potential. I think it definitely plays a role however, it must be used in combination of other paradigms. To me, not one paradigm alone has all the answers. They each offer different ways to form strategic positioning and potential. RBV focuses on the firm itself and its value. The triple bottom line focuses on the people, the planet, and profits which can also evaluate a firm’s potential. Then there’s the balance scored which aids in strategic planning and management systems. Which evaluates a firm’s performance. Just like one strategy is not enough one paradigm also isn’t. 3D: Resource based view is a good tool to create or discover the value the organization holds. However, the resources won’t last forever as time changes. Resources and capabilities need to change with it. Resource based view needs to re-evaluate to keep up with changes in the world. For example, if you patent something it doesn’t protect your resource forever. Then you need to keep finding a way to make your company different or unique. The developers manage assets to create multifamily housing and now other developers are creating them as well. They had to come up with a unique idea to differentiate themselves. All communities have gyms and pools so now they have decided to implement mini convenience stores within the clubhouse or lobby like hotels. Giving consumers a feel like they are on vacation everyday living a resort style life. This so far has been a hit with our residents. However, once other developers see how popular this idea is they will want to replicate it and now we are back to all being the same. Which then leads the development team to come up with another unique idea to stand out from other firms. Question #4: Chapter #5 of the textbook (Business-Level Strategy): 4A: Chapter 5 goes over genetic business level strategies that are chosen by organizations to compete. The organization must choose how they will gain a competitive advantage over others by deciding if they are competing in the lower cost of the spectrum or more expensive and if they are targeting a large audience or small audience. When the organizations decide these factors, they then will choose their generic strategy which includes cost leadership, differentiation, focused cost leadership, or focused differentiation strategies. Not choosing will make an organization stuck in the middle and that can be their demise. Another strategy that is discussed is the best cost strategy which offers low prices while still being different in regard to the goods or services sold, this can be difficult to achieve. If an organization does not choose a strategy, they do not have any value and do not stand out from other competitors. A great example they gave of being stuck in the middle is Arby’s. Arby’s is not necessarily cheaper and does not have a great tasting sandwich. SO, they fail to be a cost leadership or differentiator. Therefore, there is nothing special about Arby’s that attracts consumers. I have never been inside an Arby’s or had the urge to buy a sandwich. It never really stood out to me or my family. Now it makes sense. 4B: Cost leadership strategy is a strategy that sells products/services at a low price to a broad set of consumers. A very well-known cost leader is Walmart. They have relatively low prices and have a large audience of consumers. They do not target a specific group of consumers. Cost leaders do not spend a hefty amount of money on advertising or research. They also rely on economies of scale which means when an organization can buy a good at a lower per unit price because they buy in large quantities. This allows them to sell at a lower price as well. Differentiation strategy is when a consumer pays premium price for a unique/desirable feature. With cost leadership you are competing on the price and with differentiation you are competing based on the uniqueness. This targets a broad audience. An example is Chanel. Focused cost leadership is the same as cost leadership except this one is focused on a narrow audience or customer base (still based on price). An example is Redbox. Focused differentiation is the same as differentiation strategy except this one is focused on a narrow audience or customer base (still based on paying a premium for uniqueness). An example organization is Wholefoods. Best-cost strategy is an organization who has both low prices and differentiation. A great example is southwest airlines. They are unique in the way that they board their customers, offer free checked bags and they maintain low prices. Offering lower prices does not mean they are the cheapest. This is hard to achieve, however if achieved it can gather big profit margins. In my point of view, if able to achieve the best strategy is best-cost strategy. Amazon is a GREAT example of how it can bring in tons of profit. Their pricing is low and offer a unique service. This goes to show that not one strategy alone works great. A combination of different strategies can help gain higher profits. Second-best would-be differentiation strategy. This strategy brings value to the organization and consumers can appreciate that. Focused strategies I feel have a small audience that there is a possibility it will not attract a lot of customers hence fewer sells hence lower profit margins possibly. With low- cost leadership you can end up in a price battle with a big competitor and go out of business-like Kmart. Question #5: The video that resonated the most with me was the power of purpose. I was left in awe after watching the video and I re watched it a few times. Purpose gives clarity to the organization in their formation of strategy. It allows for innovation to occur. Why even start a business if you do not have a purpose. Purpose also brings value and makes a brand more authentic. It shows how Delta specifically keeps its consumers in mind. It makes an organization stand out or be different. It aids in understanding strategic management because it shows the goals and objectives (purpose) should be seen throughout the organization. Delta is known for its stellar customer service and Sarah demonstrated that. Just how Ashley mentioned in the video, the purpose should be embedded throughout the company so much that it becomes muscle memory. Starbucks also demonstrates this. I go through the drive thru and am greeted with my name is XYZ what is your name and what can I get for you. Ashely also said, “The value the company brings, influences the strategic agenda”. Which really falls in line with a lot that we have been learning about strategic management. It’s the “what are our winning aspirations” and the differentiation, the resource-based theory, because they all focus on the purpose and value of a company or what makes a company unique to stand out from its competitors. Starbucks’ purpose was to create a third place for people while serving delicious coffee. With that purpose, they started their business and developed strategies. My current company I have NO idea what their purpose is. It has never translated down to their onsite teams. I do know my own personal purpose: to treat everyone with kindness because you never know what someone might be going through. And honestly it doesn’t kill you to just be a nice person. Today being

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nice is not a current trend but I am just going off topic now, sorry. One time, I answered the phone at work and had a great conversation with a potential resident and at the end of the conversation she said thank you for treating me with kindness and not just another sale or number. She continued and said everywhere I have called I have been treated with a lot of rude attitudes and little do they or you know that I am homeless now and your kindness brought a smile to my face which I haven’t had in a few days. I have always said that I love being in property management because I love to help people more specifically, I want to help them find their home because our homes are our sanctuaries and safe spaces. And everyone deserves that. Question #6: 6A: Yes, I do agree with the authors that these five questions capture the essence of strategy. All the five questions ask the right things. It gives direction, clarity, and allows one to focus on a narrow scale. What are our winning aspirations allow firms to ask themselves what is our purpose, what are our objectives and goals. Where to play narrows down where the company will “compete” global, local, what category, who are the consumers, etc. How we win will help the company come up with a plan on how they will obtain their goals in the field they selected. What capabilities must be in place gives the company a way of asking themselves what they can do to get to where they want to be. And finally what management systems are required will allow for support and monitoring systems, is the strategy working and are they supporting our end goal. P&G is a great example of how these cascades of questions capture the importance of strategy. They have learned the hard way as well. Not all their ventures were successful, and they recognize which question(s) were not answered or executed properly. 6B: Yes, I do believe Starbucks has answered and implemented the five questions. Their goal was to create a third-place experience for people after their home and work a café culture which did not exist in the states. They knew they could not replicate this idea in Italy because it was already heavily saturated with Cafes that had a similar concept. The states did not have such place therefore the where to play began in the United States. After doing some research, they also noticed that Indian and China did not offer a similar product as Starbucks did, so they widened the playing field to China and India. They were going to win by offering astronomical services to their consumers via their motivated employees. They created a fun, unique, rewarding, and safe work environment which then translated into offering great customer service. Starbucks has innovation, expansion, technology, and customer service as their capabilities in place. They came up with creative drinks/products, they are expanding globally, they created an app that allows customers to pay by scanning as well as collect reward points, and they are offer great customer service all the time. They also source their coffee beans locally and are committed to giving back to the planet. With all this they have earned loyal Starbuck’s customers. Starbucks monitors performance from customer surveys to ensure the uniqueness it offers (this is from a customer service point of view not profits). It also uses the triple bottom line. It Is all over their website, People, planet, and profit. Starbucks has proven to use the cascade of choices and it is very evident in their success throughout different spectrums including its consumers, investors, employees, and the planet. Question #7: Strategic management is valuable in an organization for many reasons. It helps create clarity as to what the organization’s goals (they must be SMART)/objectives/winning aspirations are. It allows for a strategy to be formulated, a strategy to be executed and monitored to make sure the strategy is working. It’s a roadmap to longer term success of an organization. Without strategic management, how will a company know if their strategy is working? It monitors firm performance. It allows us to plan for the future. It is important to note that an organization’s strategy can change over time and that is okay and expected. Just how the world changes so do the strategies. Having a great leader of an organization is also very important because they are responsible for the formulation, implementation, and execution of the strategies. At the end of the day if a company does not perform it boils down to the CEO. When formulating strategies, the consumer must always be kept in mind. It is important to narrow down your playing field (is the industry profitable?) because you cannot serve everyone and everything. It is important to consider internal (resources and capabilities) and external factors (political, economic, environmental, technical, legal) when formulating a strategy. Both play a critical role in the company’s success. The balanced score card is a very useful tool to use in strategic management. It manages four areas financial measures, customer measures, internal business processes measures, and learning and growth measures. This not only measures performance but also makes sure strategies are being implemented and monitored. Taking this course has opened my eyes to the business world and what it takes to potentially be successful. I start to compare the lessons in the books to my employer. If there were strategies in place they should be aligned throughout the company. How is it that I do not know what our goal is? All I have heard is exceeding your expectations. But what are the expectations? And how are we going to exceed expectations? Is it through stellar customer service? Who is our main consumer? The owners of the assets we manage or the tenants we lease to? Or both? Are we renting to lower, middle, or higher end of income populations? What makes us stand out from other property management firms? There are more unknowns and then knowns, and it shows in the disorganization of the company. We can’t win if we do not know what we are trying to win at. I now find myself even comparing my employer’s website to that of other management firms and the difference is just jaw dropping. You can learn so much from a firm just by looking at their website. © 2024 Dr. Michael D. Meeks

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