Competition and Firm Strategy презентация

Engineering
School of Engineering

cee@stanford.edu

How to be a Monopoly 101
(building a company Warren Buffett would invest in)

3
5-10 minutes

firm as efficiently as possible

vs. P&G\
Baidu ? Google
Whirlpool ? Qingdao Haier
Hanergy ? Traditional Energy - solar overcapacity
Guangxi Wuzhou Zhongheng Group vs. Pharma firms
YY vs. Google Hangouts
BYD?
Apple vs. Xiaomi
Brand vs. low-cost

capital – quote about profits being all the inventory/equipment vs. cash

sources of competitive advantage
Low cost labor
Protected markets
Government ties (anti-corruption campaign)

intensive industry
Brand (Coca-Cola)
Network effects (Microsoft Office)
2-sided networks (Ebay, Facebook, Google, Media companies)

price than a fair business at a wonderful price.
Warren Buffett

competitive advantages
Superior technology
Patents
Larger scale + declining marginal costs
Special access to information

all good?
Airlines
Automobiles
Banking

Avoiding competition that leaves every participant worse off is an especially enlightened choice – one that deserves to be called “strategic”.

not necessary
All strategy is local
Focus on Niche-markets – difficult to dominate global markets

Services-based, retail – focus on one geography
Wal-mart, Grocery stores, Universities
Manufacturing-based – focus on one niche product
Cannot dominate global automobiles in general
Intel – only chips
Nokia ? Apple ? Xiaomi?

competitors (TV/Radio)
New industry competitors
AT&T ? VOIP
Hotels ? Airbnb
Taxi ? Uber
Newspapers/TV ?Social Media)

contiguous markets, expand only at the edges
Example of over-expansion ? Wal-Mart

product, same market
Not a bad idea to date before marriage
Internal venturing (intra-preneurship)
Corporate Venture Capital
Joint Venture
Alliances
Investments in VC
Acquisitions

performance
Geography
Wal-mart, Verizon
Product
Apple, Microsoft, Intel
Mode of entrepreneurship/investment
If you have no experience with joint ventures or acquisitions, tread slowly with the first few

sometimes

is so important

It is also difficult to change

of deserved trust – not much procedure, just totally reliable people correctly trusting one another… In your own life what you want is a seamless web of deserved trust. And if your proposed marriage contract has forty-seven pages, I suggest you not enter.”
Charlie Munger (Wesco Financial annual meeting, 2008)

with foreign companies (experience)
Step below an acquisition
Step above an alliance
Other party must bring something to the table
Rotating leadership works best

dating before marriage

lose money (only the top 25% make money)
Can be a better idea than CVC
More independence
Might not wind up strategically related

you understand.
Buy businesses for less than they are worth.

for “synergy”
Thrill of an acquisition/enhanced size
Paying in stock - "buyer sells part of itself to acquire seller"
More successful when:
Within circle of competence - Related industry
Experience with acquisitions
Business can raise prices easily and has a high return on capital
Target is either left alone or thoughtfully integrated

to activities about which it could not make useful predictions.
(2) Its top company would do almost all business through separately incorporated subsidiaries whose CEOs would operate with very extreme autonomy.
(3) There would be almost nothing at conglomerate headquarters except a tiny office suite containing a Chairman, a CFO, and a few assistants who mostly helped the CFO with auditing, internal control, etc.
(4) Berkshire subsidiaries would always prominently include casualty insurers. Those insurers as a group would be expected to produce, in due course, dependable underwriting gains while also producing substantial “float” (from unpaid insurance liabilities) for investment.
(5) There would be no significant system-wide personnel system, stock option system, other incentive system, retirement system, or the like, because the subsidiaries would have their own systems, often different.
(6) Berkshire’s Chairman would reserve only a few activities for himself.
Then names several activities that Buffett does, mostly limited to managing investments, a lot of reading, and CEO replacements when necessary.

issued stock.
(8) Berkshire would not pay dividends so long as more than one dollar of market value for shareholders was being created by each dollar of retained earnings.
(9) In buying a new subsidiary, Berkshire would seek to pay a fair price for a good business that the Chairman could pretty well understand. Berkshire would also want a good CEO in place, one expected to remain for a long time and to manage well without need for help from headquarters.
(10) In choosing CEOs of subsidiaries, Berkshire would try to secure trustworthiness, skill, energy, and love for the business and circumstances the CEO was in.
(11) As an important matter of preferred conduct, Berkshire would almost never sell a subsidiary.
(12) Berkshire would almost never transfer a subsidiary’s CEO to another unrelated subsidiary.
(13) Berkshire would never force the CEO of a subsidiary to retire on account of mere age.
(14) Berkshire would have little debt outstanding as it tried to maintain (i) virtually perfect creditworthiness under all conditions and (ii) easy availability of cash and credit for deployment in times presenting unusual opportunities.
(15) Berkshire would always be user-friendly to a prospective seller of a large business. An offer of such a business would get prompt attention. No one but the Chairman and one or two others at Berkshire would ever know about the offer if it did not lead to a transaction. And they would never tell outsiders about it.

of the competitive advantage/moat in academia?
Is this threatened by MOOCs?
Christensen vs. Porter
Debate: Disrupt your own business or use tech to extend your competitive advantage?

(e.g. a business) will resist any change to its current direction
Innovation is a dirty term in organizations
Behavior of peer companies will be mindlessly imitated
Corporate projects will materialize to soak up time (just as work expands to fill available time)

reducing margins)
Pet projects (risky R&D)
First mover advantage
Everyone else is doing it…

source of the moat?)
What price is worth paying to be in that business?

Valley.
Charlie Munger (Warran Buffett’s business partner)

Is this true?

Imperative
Values

2007

Engineering
School of Engineering

cee@stanford.edu

How to be a Monopoly 101
(building a company Warren Buffett would invest in)