 Well, hi, everyone, and welcome back to our review of Sailor Academy's Business 501. This is our first review of Unit 5, First Century Strategy. If you haven't watched any of these previous videos, you can find them in the playlist listed below. Of course, as long as you can find the course there as well, because this is supplementary material to the course. But we got a little bit of a late start here, so I'm just going to hand it over to Dr. Laura Portales, and she can take it away for us. All right, thank you. Hi, everybody. I hope all is well with you. I wanted to start off today talking a little bit about the learning objectives since we are just jumping into the last unit now. We've gone through most of the learning objectives through the other material in the course, and our main focus today and in Unit 5 is going to be that last bullet point. We're going to synthesize a lot of the things that we've discussed so far in the course and really pull those together and kind of take that step back and look again at competitive advantage and how that all relates to strategic management theory that we've been working on throughout the past several weeks. So those are our course learning objectives. Let's talk a little bit about our Unit 5 learning objectives. There are three of them. We'll learn how to apply modern strategic management techniques in a globalized environment. We will look at how to choose the best strategy under technological uncertainty, and finally, we'll synthesize the strategy options to maximize competitive advantage. So that'll be our main focus throughout this unit today and in the next session. And I think we'll skip that for now and talk a little bit about really the main topics that we're going to be discussing in this unit. We're going to revisit competitive advantage in this unit and talk about it specifically how it relates to the value chain. We're also going to talk a bit about culture and world culture and how do you create an international business and manage all of the things when you're doing business in another country. So that'll be our main focus. We'll also talk a little bit, it's not on here, but we'll talk a little bit about innovation and a little bit about management theory and some of the things that are important to think about as you implement your strategy. So let's go ahead and get started on some of the content here. I want us to talk a little bit about international value chains. And when you think about going international to whatever country or countries that you want to do business in, this can be a good growth strategy as we talked about a little bit in the last unit. And a lot of companies will try to harness competitive advantage through this international value chain. And there can be several advantages to doing this, and those are listed here. So when you locate your business in a certain area, there may be lower wages, which of course can be an advantage that adds value to your product or service. You may find that there are lower energy costs. So if you're running, say a manufacturing facility where you use a lot of electricity and other types of energy, it may make sense strategically to place that particular manufacturing facility in a place that does have low energy costs. Some organizations may decide that it makes sense to do business in a particular country or a particular region, because the tax rates are lower. Obviously that can save a lot of money. So that would again be a strategic decision. The other thing is proximity to customers. When you think about the cost of having to ship goods, for example, from one country to another, there are a lot, you know, there are taxes, there are other things that we have to deal with there. So we may find that, hey, if we can locate actually closer to our customers, we save a lot of money on shipping costs. The same goes with suppliers. Sometimes if we're having suppliers that provide our raw materials, it may make sense to locate near them. So we add value to that value chain, and that we're having to spend less money ultimately to get the raw materials that we need to produce our product. So these are some important considerations and important reasons why companies might decide to go global and internationalize their business. I would say in today's world, most businesses do think on this more international scale. Of course, technology has made that easier for us to do that. You know, ordering products online and shipping from another country has become a lot easier with technology. So let's next take a look at a little bit about culture and strategy. So I want to talk about culture in two different contexts here. I want first to talk a little bit about culture from the perspective of the organization, so an organizational culture. And then I want to talk about it a little bit more culture on that international scale a little bit. So when we think about culture, this is a key component as we're putting together a strategic plan. The reason for that is you can't do all of the work yourself. So if you think about a company developing strategy, and there's probably the CEO and upper level management, putting together this strategy, that's all great, but you need your people to be able to execute on that. They are the ones that are in front of your customers on a day to day basis, they're the ones producing your product or your service. So we want to create a culture within our organization that really supports the the strategy that we've chosen. We can define culture then as a collective behavior of a group of people. And as you already know, and as you can imagine, a lot goes into culture. It's a lot of those unspoken rules within an organization that maybe it's not a policy or not in a manual, but everyone just kind of knows that's the way that we do things. So we want to create this this mentality and this expectation of behavior that ultimately is going to support the strategic direction that we want to go. Since we do depend on our employees ultimately to really execute on that day to day basis. So then the other part of culture that unit five talks about is culture in the context of an international business. Obviously also a big consideration if you're focused on a growth strategy that is international, and that we want to consider the culture of the country in which we're operating. So we want to think about it in terms of not just the culture in selling our product, but if we have operations elsewhere, what is the the culture and what impact is that going to have on our day to day operations of running our business? And what are the unspoken rules in that culture, such as, you know, time off and maternity leave and those types of things are all considerations for culture when we decide to operate internationally. One that this is in goes into a lot of depth depth with Hofstad. So Hofstad's dimensions called cultural dimensions is a theory that identifies very specific areas of culture within another country, and looks at how do you measure them? And it's in my personal opinion, probably one of the best models to really look at culture and be able to define that a little bit better. So a lot of organizations before they decide to internationalize their business, they will use this model to look at the best place in the best fit for them to for them to go to and set up operations. We'll talk a little bit more about Hofstad a little bit later, but I think as long as we're talking about the organizational culture and culture in a country, it's good to have that conversation together. Because we can't, we can't lessen the importance of making sure that you have a culture that again supports the strategy that you that you've chosen because we need people to execute for us. As a kind of a side note here, our unit doesn't go too much into it, but there definitely is some mention, and I'm sure that you'll touch that as you read through unit five. But there's definitely a communication piece to in that and that relates to culture a little bit and that you definitely need to be communicating with your employees about your strategy in the direction that you want to go. Otherwise, how do they know what they need to execute on? How do they know what what is driving the kind of that back end of the business? So I'm very important to think about. I think I'd like to stop here for a minute and just see if there are any questions from so far today or maybe one of the last sessions that we had. I'd be happy to entertain any questions now. We don't have any questions just yet, but if anyone has a question now, feel free to put it in the chat. Again, if you join us later, you could leave a comment, but we'll just step away for just a second and because we're running a little more take delay than usual. So we'll give everyone just a second here to to see if they have any questions. OK, well, I'm not seeing any questions right now. Again, if you have any questions as we're going along, please leave them in the chat and we'll just I'll hand it back over to Dr. Portley's and we'll we'll keep going. So we just talked a little bit about culture and our unit five also talks a little bit about management theory and the reason why we talk about management theory in the context of strategy is exactly what we talked about a little bit ago that you want an organization that supports the culture or excuse me, you want a culture organizational culture that ultimately supports whatever strategy you're trying to achieve. And one of the ways that we can do that is through effective management of people. So we'll look at a couple of theories here and talk how that relates specifically to how we actually execute our strategy. So one common theory that maybe you've heard of before is McGregor's theory X and Y and this theory is pretty simple. And as you think about it, I want you to think about maybe managers that you've had and try to identify or relate which one of these management styles they tend to use. So a theory X manager tends to micromanage people when I say micromanage, the employee doesn't have a whole lot of leeway to to make decisions and really control their own schedule. They tend to theory X managers tend to believe that employees really need to be motivated by harsher means. In other words, well, if you don't do this, then this will happen. So when we when we think about a management style, a theory X style is not usually very effective in in trying to make your strategy happen. Because when we look at strategy from that bigger perspective, we want people to be able to solve problems. We want people to come to us as managers with their ideas. But if we manage with this type of style, we're not going to get all of those good ideas and that possible innovation, new ways to do things, new ways to execute our strategy. So most of the time, a theory X manager is probably someone that we don't want to work with for the most part. Theory Y manager is probably exactly what we're looking for. Very much the other extreme and that they they have trusted employees, they believe in employees, they believe in their ability to solve problems. Very important as as you can imagine when you are developing your strategy and trying to execute on your strategy. You want your employees to have commitment to the goals and objectives that you've set. And oftentimes this is as a result of rewards being in place. Whether that be you know money or recognition or there are a lot of different ways of course that we can reward people. But when we think about execution of our strategy and the fact that we're heavily reliant on our people, our employees to be able to make that effective. We definitely want to use this style to hopefully make that happen and allow them to execute and make decisions that are in the best interest of the organization and also of our strategic plan also. Theory Z is kind of tags along with Theory X and Y that we just talked about. Theory Z is a little bit different and it came out of Japanese manufacturing, car manufacturing specifically many many years ago. Theory Z focuses on people having stable employment and as a result of that stable employment they're not anxious about losing their job therefore they have higher morale. They're more productive and from a cultural perspective in terms of organizational culture this can be a very effective way of executing your strategy because you have individuals that have high morale they want to do what's best for the organization. So I'm not saying that this is better than Theory Y necessarily. It's just a different way to manage people. In my personal opinion I would say depending on the type of organization Theory Y or Theory Z would probably be the best direction to go for really looking at wanting motivated and really really innovative employees that can help us make good decisions for our customers so that we end up being successful as we go through and execute that strategy. I'll skip that for now. So we talked a little bit of at the beginning of this session about innovation and the reason why we're talking about innovation in the context of strategy is that in with the types of technology and really really fast changing technology that we have we need to think about our constant innovation. How are we going to constantly do better? There are many many examples hundreds if not thousands of companies that were once really really popular and earned a high profit and did really really well but they didn't innovate so they ended up staying stagnant and as a result of staying stagnant they eventually went out of business. So we want to think for any organization whether you're producing apps or a product or some type of service we always want to be innovating and doing things better and that helps us also execute our strategy. So when we look at innovation there was this older model of innovation where it was very much a process where okay we're going to do market research and figure out what our customers want. Then we're going to put together our business model then we're going to develop this product and then finally we're ultimately going to sell this product and do market development for the product. But usually innovation is not this rigid of a structure we want to try to create organizations that don't look at this as a process where you have to do one step in front of the other. We want to look at innovation as something that is a little bit more ongoing and that is involved in all levels of the organization not just upper level management for example. So when we when we look at innovation we want to think about some of these newer models of innovation that our unit five discusses and they talk about it in terms of design thinking so having a constant stream of new ideas so that could be a new idea for a product or a service or even a new way of doing things because that adds value and that can create a competitive advantage when we're able to save time or money by making our process better then you can pass that savings on to the customer in terms of price. So we also look at when we look at innovation we look at a lean startup so the idea that we want to search for the right thing. So the right thing that harnesses the power of our competitive advantage and our existing capabilities or capabilities that we are able to develop. We also and I think I have an example to show you of the business model canvas but this focuses on how do you do these things to create value and not just create value but how do you capture that and communicate that to the customer as you're going through this innovation process. And then also we want to look at with innovation in terms of being agile so we want to be able to change very quickly. If something isn't working we want to pivot and make a change to the product or the service or whatever the case may be. So these are the things when we think about innovation that we want to focus on a little bit more than maybe what we did in the past with that model that we looked at where it was a very very rigid process. Do you think about the most successful organizations? Those are usually the ones that are constantly trying to innovate and trying to do things better whether it be a better product or service or a better process to eventually save money and just be more be more effective from a time time perspective. So I know this is small and this is in our readings and we'll we'll talk about it a little bit and also I'll make sure that all of you get the slides to once we're done with Unit 5. But this is these are some ways that we can look at innovation in terms of strategy. There are different ways that we can map how we're going to create value as we create value around the products or services or the processes that we have within our organization. Probably next week we'll talk in a little bit more detail about this and what I may actually try to do is make each of these bigger and we'll talk about them in in in turn. But for now for this big picture perspective on the first part of Unit 5 just know that there are a lot of tools that we can use to help us ultimately build our our strategy and these are some of the ways that we can do that. So let's talk a little bit about the diffusion of innovation since we're talking about innovation a little bit. When we look at diffusion of innovation it's the understanding that when you come up with something brand new that people are not familiar with or comfortable with that there's going to be a process of acceptance of that particular product or service. So you could see on the bottom here there are innovators early adopters early majority and so forth. So this is how we can look at ultimately how people are going to accept our product. So if you think about I don't know when cell phones first came out they were very very expensive and it took a really long time for those for that product to really be in the hands of the masses. So when we look at innovators that those are those people that bought the you know the cell phone that looked like a brick and they were willing to spend all of that money just to have that new and different innovation and technology and then we can look at people as we go throughout this to laggards on the end there where there are some people that don't want to adopt a new technology and they were the last ones to get that cell phone and then as you could see there's a lot of people in between there but this is important to innovation from the perspective that we're going to market our products different or services we're going to have a different strategy for each innovation depending on how fast we expect people to accept this product or service that that we're developing and then you can see on the right hand side here of a focus on market share and as products become out of favor so think about you know the first version or the second version of a phone a cell phone obviously the market share is very low it go eventually goes down to zero because no one's buying that phone anymore so this relates to strategy in terms of we just need to know we need to know where each of our products or services are at the acceptance of customers for these products or services and that is going to depend ultimately on the strategy that that we go with for most organizations when they start getting to you know this lower market share nearing that zero they tend to come up with a new innovation and then they end up dropping that product or service and I'm sure you could think of a lot of examples of where that's happened where you know out with the old and with the new essentially and that's what happens as we think about innovation as this process as something goes out of favor there's something new usually that's going to come in and that could be technology but that could be you know just about any type of product or service that you can think of as and especially as technology gets better and easier and faster we're going to see this process happen a lot more quickly more than likely I would say let's take a moment and see if there are any questions if you have any please go ahead and put those in the chat and again you can ask questions about this unit or if you have any burning questions from the last units feel free to put them in there too well you got it just right so i'm just going to send us over to the question card without having to say anything all right well I learned from you all right well looks like we don't have any questions right now so let's just let's just push on right thank you so in the beginning of today we addressed a little bit about going global and that's definitely one potential growth strategy that companies use and related to that we have some terminology here that that I want us to talk a little bit about so international trade so selling your product or services overseas obviously is a way that you can grow your market sometimes we find that maybe our home market is saturated so then we go out and ultimately look for new markets where we can sell our product or service so when we say that we're going global this is obviously going to impact the strategy that we choose if we're operating only in our home country our strategy is going to be very different than if we have operations in several different countries and a lot of times organizations will have a different strategy for each country in which they operate just because it's the culture as we talked about a little bit ago there's so many differences that they really need to focus on a different strategy depending on where they're located so when we look at international trade or going global there are a few terms that we should keep in mind and the first one is a trade surplus and trade surplus means that a country as a whole sells more of what it produces than it actually buys from other countries so this is oftentimes a positive thing for the country itself because you're selling more ultimately than you're having to buy from from other countries the opposite of that is a trade deficit and this is when a country buys more from other countries and what it actually sells and one of the things that countries do to try to reduce a trade deficit is they engage in protectionism and protectionism is essentially when a country puts policies in place that makes it difficult for people in other countries to sell products and services within their own country so there are a lot of examples here of protectionism like tariffs and taxes that are paid on goods that are imported and by doing this they're really trying to discourage trade and their their main goal there is to try to obtain a trade surplus because it tends to be better for the country as a whole this is an interesting topic which there are whole entire classes about the topic so we can't go into a ton of detail and unit five doesn't go into a ton of detail but just be aware of of these terms and you can imagine if you are a company and an organization setting your strategy and you decide okay we're going to go into this other country you definitely want to be aware of that country's protectionist policies that may make it challenging for you to sell your product or your service in that particular country so we talked a little bit about culture we want to be aware of the culture and the countries in which we're thinking about operating but we also of course want to be aware of protectionism and the other laws that could affect our business operations once we actually go to that country so some other terms as we're talking about international trade an absolute advantage refers to the ability of a country to produce a good or a service more efficiently than another so a lot of times when a country has absolute advantage it's because of their location it's because maybe their weather is better to produce a certain type of food or produce maybe they have oil in the ground so an absolute advantage is usually when a country is just way better than than any competitor and again oftentimes that's just simply because of location this is a little bit different than comparative advantage and a comparative advantage this theory says even though a country may have a absolute advantage in many areas they should focus on what they can do most effectively so this theory says if you can't produce a good very effectively don't do that buy that import that good from somewhere else and ultimately produce what you're the most effective at and then the factor proportions theory relates to that a little bit and it says that countries would produce and export goods that required resources that were in great supply which then when those resources are in great supply it means that you're probably able to produce them a little bit less expensively so the other side of this theory is that countries would then import goods that have required resources that were in short supply so as I said we there are an entire classes and even programs for that matter on international trade theory but these are just a few examples definitely worth thinking about as you think about in the context of strategy development so as we look again a little bit deeper in international trade when we look at the country similarity theory and we're say where we are we have a strategy of going global this this theory says that we may choose a country to do business in that are in a similar stage of economic development as our own country and the reason for that is that people tend to have similar preferences you think about it from an economic perspective and a socio-economic perspective countries that tend to have the same levels of development that people have similar needs and similar preferences so if a company decides to go global for their operations it's oftentimes they'll choose a country that is similar to theirs because they know there's probably demand for that product or service that they would like to sell we can also look at the product life cycle and as we look and I we say product but we also mean services just to just to make that note too we may change our strategy based on what what where our product is ultimately in the life cycle so for example if a product is a new product we're probably going to have a different strategy for that product then we might for a product that is mature and that we've been selling for years and years so we've been talking about strategy from this really big context an overarching strategy but as we dig in companies will tend to have different strategies for each of their product lines or service offerings so think about everything that you've learned and how that relates to a specific product or service also obviously companies will also have overarching strategies as we've talked about but as they dig in sometimes it makes a lot more sense for a company to ultimately have a strategy that's different for each of their products and and services you may remember I was talking about Michael Porter a while ago Porter did has done a lot of different theories in strategy and also international trade and this model is an attempt that Porter made to explain why some countries are more competitive in certain industries so obviously we know we already talked about absolute advantage and the fact that absolute advantage is when a country simply can do something way better a lot of times because of location but these are some other reasoning and rationale for that so it could be the local characteristics of the firm that could be one reason why they can be more competitive in certain industries the demand obviously from a local perspective is going to be different so that could be a reason too we talked earlier about location of suppliers and sometimes companies will choose to go global so that they can locate near a supplier and save money that way so local suppliers and complimentary industries could be another reason for that competitive advantage and also local market resources and capabilities so when we think about local market resources think about things like raw materials but also think about the workforce and the development of the workforce and the skills and abilities of the people in a particular area or a particular region that may be attractive in order to locate in a particular place so I think at this point let's we'll finish up this slide I think and then we'll stop for today and then we'll look at the second half of unit five next week and dig into a little bit more of the details on innovation some of the models that we can use toward innovation and strategy development so when you look at essentially everything that we've been talking about specifically related to the value chain to growth strategies to developing a competitive advantage these are really the three questions that we're asking ourselves we're asking how we're going to create value not just for us but obviously for our customers too how are you going to ultimately deliver on that value and how do you capture that value and when I say capture that value I mean we want to be able to have a repeatable process a scalable process would be another way to say that so we want to be able to capture it and obviously communicate it to to our customers as well so when you think about the whole strategic process that we've been discussing and that we've gone through we do you know we look at this we look at these questions and then we look at our internal and external analysis SWAT analysis PESTLE analysis which we talked about in an earlier unit and then of course development of our mission and values and goals and tactics but ultimately these are the main questions if you think about everything that we've been discussing that we're really trying to dig into as as we're developing our strategy so let's end there for now I would like to take any questions that you may have before we close out and we will be live again next Monday so thank you all yeah well obviously thank you for taking us through all this and again yeah if anyone has any questions feel free to leave them in the chat again if you're here later feel free to leave a comment yeah we'll be here same time next Monday we'll just give everyone here a little bit of time while I'm talking if they have any any more questions for us but yeah I'm not seeing too much movement here in the chat so I think we can probably call this one I'll just go a little bit longer in case anyone has anything but yeah so again join us same time next week for the second part of our unit five review and that'll be the the last unit review that we're doing and then we'll talk about what we're doing for the full course reviews next week so so again thanks everyone for joining us thank you Dr. Portales for taking us through all that and we will see everyone next time