Commonly Used Strategic

Frameworks and Tools

Strategic Planning Process

Frame What are our objectives and constraints?

Evolve How will the strategy unfold and evolve over

time? How do we manage strategic risks?

Baseline What is the reality of our performance and

capabilities?

Forecast What do we expect of the future environment?

Search What options do we have to create value?

Choose What packages of choices will define our

strategy?

Commit How will we deliver the changes required in

the strategy?

• Define decisions to be considered

• Understand scope of potential solutions

• Clarify rules that will govern work

• Execute agreed-upon action plans

• Track ongoing progress

• Determine revisions to be made

• Determine when to compete

• Understand sources of value and past performance

• Identify major changes in market and drivers

• Analyze available capabilities

• Identify emerging trends and implications

• Isolate critical uncertainties

• Develop realistic divergent scenarios

• Establish and refine option set

• Assess possible competitive responses

• Evaluate options in given scenarios

• Decide where and how to compete

• Determine what, if any, hedging is needed

• Create coherent package

• Develop action plans for selected options

• Reallocate resources to finance plans

• Determine how to communicate changes

• Delegate key jobs to pivotal roles

Idea

Generation

Development

& Selection

Execution &

Refinement

Corporate Strategy Planning Calendar

Source: McKinsey & Company

Value Chain & Areas Where Client Can Play

Operations

Human Resources

Technology Development

Risk Management

Products Investment

Trans-

actions Sales

Credits

Securities

Fin. Products

Corp. Invest.

Other assets

Deposits

Securitization

Credits

Funding

Acct. Mgmt.

Services

Asset Mgmt.

Issuance/IPO

M & A

Advis. Serv.

Other Serv.

Payments

Trading

Clearing &

Settlement

Custody

Acquisition

Offering

Multichannel

Management

Advertising

Branding

Sales

Support

Marketing

Funding

CORE COMPETENCY SOME COMPETENCY NO COMPETENCE

Consumer

Insights

McKinsey/GE Matrix – Industry Analysis

High Medium Low

L

ow

M

ed

ium

H

igh

Business Strength S

eg

men

t A

ttra

cti

ven

ess

• The circle represents the size of the customer segment.

• The “slice” represents the share of their business potentially available to the firm

Early conclusions:

•While Large FI appears attractive in terms of size, client’s opportunity in this segment is to maximize the share it has rather than to acquire new.

• Commercial, Medium FI and Small FI appear to hold growth potential.

• It will be difficult to grow additional Retail , GSP and Subprime share.

5 4 3 2 1

1

2

3

4

=Potential Business

=Client’s Current Business Invest/Grow Manage Selectively

or for earnings Harvest

Segment Attractiveness

Small FI

GSP

Subprime

GSP

Large FI Medium FI

Retail

Commercial

Product Space Map

DRUG WHOLESALERS

Marketing

Reg. filing

Manufacturing

Trials

R&D

DRUG WHOLESALERS (e.g. MCKESSON)

PFIZER EISAI NUCLEON

Multiple Drugs Single Drug

Value Added Analysis

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

SWOT Analysis Reveals Many Obstacles

STREAGTHS

OPPORTUNITIES

WEAKNESSES

THREATS

Well defined payment & banking infrastructure

Pilots failed to produce evidence of sustainable biz case

Different payment methods available to consumers in US

Currently uncertain consumer demand

Unbanked will not be innovators and early adopters of mobile payments

Robust fraud analytics around mag-stripe technology

Stakeholders are reluctant to invest in terminals & handsets

Potential conflicts and barriers to development of a ubiquitous, interoperable solution for mobile payments due to different ideas by industry stakeholders

Banks are conservative and less eager to invest in M-Wallet

High cost of deploying of software and hardware

Adopting existing systems to changing and new standards

Risk of making the wrong costly business decisions in the new and evolving industry

Limited experience dealing with banking and payments rules

Until common industry standards developed, firms must make relationship specific investments

18 percent of US households do not have a bank account

Most large U.S banks offer customized banking applications

34 percent of US consumers now own a smart phone

Smart phone market is growing at compound annual growth rate of 17 percent

Opportunity to reduce merchants’ royalty and rewards program management costs

New marketing opportunities for couponing, targeted advertisements

15-20 percent of all gift cards are never redeemed – component of new value proposition to customers

Contactless mobile technology resident on the cell phone chip reduce payment fraud

Mobile payments may reduce PCI compliance cost for merchants

Some POS are already equipped with NFC technology

NFC is compatible and interoperable with other current systems existing hardware and communication protocols (e.g. security)

Company’s brand recognition and many location in the US

Relationships with Mobile Network Operator(s)

BCG’s Growth-Share Matrix

Star Question Mark

Dog

? Cash Cow

High Share Low Share

Hig

h G

row

th

Slo

w G

row

th

Responding to Threats to Sustainability

Response to Imitation • Building Barriers

• Learning/private information

• Contracts and relationships

• Network externalities

• Threats of retaliation

• Time lags

• Strategic complexity

• Upgrading

Response to Substitution • Not responding

• Fighting

• Switching

• Recombining

• Straddling

• Harvesting

Response to Holdup • Building bargaining power

• Bargaining hard

• Reducing asset-specificity

• Building relationships

• Developing trust

• Contracting

• Integrating

Response to Slack • Gathering information

• Monitoring behavior

• Offering performance incentives

• Shaping norms

• Bonding resources

• Changing governance

• Mobilizing for change

Added Value

Approriated Value

Strategy Wheel

Target Markets

Marketing

Sales

Distribution

Manufacturing Labor

Purchasing

Research & Development

Finance & Control

Product Line

GOALS

Definition of

how the

business is

going to

compete

Objectives for

profitability,

growth, market

share, social

responsiveness

etc.

Generic Strategies

Lower Cost Differentiation

Broad

Target

Narrow

Target

Competitive Advantage

Competitive

Scope

COST

FOCUS

FOCUSED

DIFFERENTIATION

COST

LEADERSHIPDIFFERENTIATION

Lower Cost Differentiation

Broad

Target

Narrow

Target

Competitive Advantage

Competitive

Scope

COST

FOCUS

FOCUSED

DIFFERENTIATION

COST

LEADERSHIPDIFFERENTIATION

COST

FOCUS

FOCUSED

DIFFERENTIATION

COST

LEADERSHIPDIFFERENTIATION

CORE Leveraging existing

customers, channels,

and geographies

without significant

changes to the

offering mix or

competitor base

ADJACENT Implementing significant

changes in channel,

geography, new

customers, enter new industry space

UNRELATED Radical changes to the

offering mix to serve

customers, industry

spaces, completely

unconnected to the

existing business Source: Growth Restarts: Reinvigorating Principled Revenue Growth in Mature Companies, Corporate Strategy Board, 2003

New Product Pipeline

Development

хлебные изделия кондитерские изд.

CORE

производство муки и масла

ADJACENT

UNRELATED

Производство пшеницы

Strategic Growth Around Core Competencies

Business Scenario Analysis

OPERATOR-CENTRIC MODEL

PROBABILITY OF ADOPTION

LOW

HIGH

BANK-CENTRIC MODEL COLLABORATION MODEL

Description: The mobile operator

acts independently to deploy mobile

payment applications to NFC-enabled

mobile devices. The customer may

prepay, or the operator may add

charges to the customer's existing

wireless bill.

Pros: Sufficient profits can be

recognized and allocated to all

parties.

Cons: Does not adequately address

all business concerns. Mass adoption

from merchants and consumers will

be difficult.

Concerns of risk, privacy, and fraud.

Billing and customer service

requirements challenge to mobile

operators. Lack of business

relationships between merchants and

operators.

Description: Issuing bank owns the

relationship with customer and is

responsible for getting payment into

customers' hands in much the same

way as bank cards are distributed.

The merchant relationship is owned

by the acquiring bank.

Pros: 4 Players in the payment

transaction model can be modified for

M-Payments easier. The value chain

for each participant is relatively clear

and easily understood. A merchant

gets faster transaction times and

increased spend.

Cons: Small chance for reducing

merchants’ transaction fees.

Partnerships and revenue sharing

with mobile operators would be

impossible to avoid. Multiple wallets

on consumers’ phones and hence

slower adoption. Banks are reluctant

to invest into new technology.

Description: Model involves

collaboration among banks, mobile

operators and other stake-holders in

value chain, including a potential new

third party to manage the deployment

of mobile applications.

Pros: Comparable models exist in the

credit card industry for customer

acquisition and marketing fees

between partners. Model supported

by all stakeholders. Stakeholders

focus on their own core

competencies. Creates new revenue

from incremental services.

Cons: The amount paid and collected

by each stakeholder is the source of

considerable contention. Slow

adoption due to the number of players

who must agree on standards and

business models. No comment

platform or standards.

Multigenerational Plan for Industry

GENERATION

I-STEP II-STRETCH III-LEAP

VISION

Create a Mobile Payment platform that

capitilizes on existing mobile capabilities

at POS in order to perform rudimentary

"riskless" mobile transfactions.

Smart phone use NFC technology is

used as a new channel for existing

credit and debit cards schemes.

True Open M-Wallet

STRATEGY

Partner with 3rd parties and existing

partner FI's to leverage their and

merchant's POS infrastructure and

financial resources to offer rewards and

offers redeemable by M-payments. Use

existing rails, including the ACH.

Establish infrastructure to NFC

payments initiated through credit and

debits cards issued by conventional

players. Develop consortiums of non-

competing merchants to fund joint

product/service development.

Develop partnerships among banks,

insurance, and ancillary product

companies. Establish 3rd party entities

to promote certification program to

ensure both domestic and global

interoperability.

PRODUCTS

▪ Loyalty & rewards programs

▪ Loyalty programs with other firms

▪ Gift/prepaid cards redeemed through

M-payment

▪ UPC/Bar Codes used to redeem

coupons or existing reward programs

▪ Promotional coupons in addition or

instead of email blasts or direct mail

▪ Prepaid and gift cards

▪ CASA (Checking/Savings)

▪ Virtual debit and creadit cards residing

on a chip in the smart phone

▪ Diversification into consultative selling

to other merchants

▪ Integrated banking services with full

suite of products

▪ P2P M-payments

▪ Cash disbursements

Value Chain is Complex

P

A

Y

M

E

N

T

P

R

O

C

E

S

S

O

R

S

A

C

Q

U

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R

I

N

G

B

A

N

K

S

M

O

B

I

L

E

C

A

R

R

I

E

R

S

I

S

S

U

I

N

G

B

A

N

K

S

T

R

U

S

T

E

D

S

E

R

V

I

C

E

M

E

R

C

H

A

N

T

S

H

A

N

D

S

E

T

M

A

K

E

R

S

S

O

F

T

W

A

R

E

V

E

N

D

O

R

S

C

A

R

D

B

R

A

N

D

S

T

R

A

D

E

A

S

S

O

C

I

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T

I

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N

S

Unless disintermediated, everyone must derive benefits. Otherwise, the chain will break down!

Product Life Cycle

Sales and

Profits ($)

Sales

Profit

Introduction Growth Maturity Decline

Sales

Profit

Introduction Growth Maturity Decline

Competitive

Turbulence

Tactical Implications of PLC

Stage in PLC

Introduction Growth Maturity Decline

Strategy Stimulate Primary Demand

Build Share - Solidify Position

Maintain Position Harvest

Product Basic Extensions, service

Diversify brands, items

Phase out weak items

Price Skimming or Penetration

Penetration price

Price to match or beat competition

Reduce or Hold

Communications High - build awareness and trial

High – build brand preference

Reduce–increase retention

Minimal level

Distribution Selective Intensive More intensive Selective

Porter’s 5 Forces Analysis

Industry Analysis

Attribute Rating Comments

Entry

Barriers High

▫ Minimum Efficient Scale (MES) is 200-300 clients per year.

▫ New entrants need relatively low capital requirements around $200K. ▫ None of the current players has established a well-recognized brand.

▫ There is no significant experience-based advantages for incumbents.

▫ Medical services providers do not have exclusive partnership arrangements with existing Medical Tourism facilitators.

▫ The number of players in the value chain and the number of processes that must be in place create a significant learning curve.

▫ Entrants must be comfortable navigating through complex environment

of health care, insurance and medical procedures.

Rivalry Low

▫ 100% industry growth rate per year expected to continue during the next 2-3 years.

▫ Circa 20 companies are in market; only 5 considered serious players. ▫ Lack of economies of scale, economies of scope or capacity utilization

contribute no major effects to cost differentiation.

▫ Medical Tourism firms have rather lean operations (3-5 employees) and thus much excess capacity exists.

▫ Degree of product differentiation is very small. ▫ Exit barriers are low. Partnerships can be dissolved relatively easily.

Buyer

Power Moderate

▫ Revenue coming from one single patient does not represent a large

fraction of company’s sales revenue.

▫ Patients have alternatives to treatments outside the U.S. However, these alternatives will always be 30-60% more expensive.

▫ Price elasticity for patients’ procedures varies based on procedures. ▫ $2K-3K medical procedures are a significant fraction of patients’ budgets.

Supplier

Power Low

▫ There are around 120 medical facilities worldwide, which treat the

majority of medical tourism patients.

▫ Relationship-specific investments to support transactions with specific suppliers are low and may range between $4,000 and $8,000 and

require 20-30 hours of time. ▫ Lack of marketing skills and travel agency competencies in countries

outside their own discourage suppliers from vertical integration. ▫ Stiff competition in the travel industry may prompt some companies to

consider entering this more profitable market.

Substitutes Low

▫ Available domestic medical care is the closest substitute. Currently, the

higher cost of domestic care will prevent it from becoming a major threat. ▫ The price-value of self-arranged medical trips is low, given the risk of

medical incidents stemming from lack of medical facility evaluation.

▫ Travel industry is a great complement and will continue to exert a favorable influence on medical tourism.

Value Chain & Areas Where Client Can Play

Funding

Bond Issues,

Loans,

Guarantees

Loan Program

Design &

Management

Program &

System

Management

Client

Prospecting

Risk

Management

Model

Loan

Disbursement

& Collections

Deposit

Management

There are three areas in the value chain where client could participate

today with its current skill-set.

CORE COMPETENCY SOME COMPETENCY NO COMPETENCE

Med

Ret

reat

Plane

t Hos

pita

l

Globa

l Cho

ice

Hea

lthCar

e

Pat

ient

s W

ith P

assp

orts

Brid

geHea

lth In

tern

ationa

l

Med

Voy

Safe Locations

Travel Related

Customer Service

Assurance for

Mishaps

Tourism in Host

Countries

Attractive Website

Depth of Advertising

Breadth of

Procedures Offered

Lowest Grade Highest Grade

Competitive Analysis

AGENT FEE

$2,000

TRAVEL LODGING

EXPENSES

$4,000

Value-Based Pricing Strategy

COST OF

TREATMENT

OUTSIDE U.S.

$12,000

TREATMENT

SAVINGS

$22,000

Reference Value ($40K surgery in U.S.)

Differentiation Value

Total Economic Value ($18,000)

Economics of Price Change

Price

Sales Volume

Unit Variable or

Incremental

Cost

$10

$9

Contribution

Gained from

volume

Contribution

Lost Due to

Lower Price

Unaffected

Contribution

Demand

Curve

Mapping Out Options with Decision Tree

Rf 0.07 0.5

Discount Rate 0.1 Event 7

144

Decision 5 0 144

-100 120 0.5

0.5 Event 8

Event 3 96

1 0 96

0 120

Decision 1 Decision 6

0

-100 100 0 0

0.5

Event 4

1 80

100 0 80

Decision 2

0

0 0

Decision Tree technique allows to map out possible options and to

incorporate probabilities into management’s decision making process.

Pricing Strategy

Competitive Advantage and Pricing StrategyType of Advantage

Cost Advantage

(lower C than that of competitors)

Benefit Advantage

(higher B than that of competitors)

High Price Elasticity of

Demand

(weak horizontal

differentiation)

• Modest price cuts gain lots of market

share.

• Exploit advantage through higher

market share than competitors.

• Share Strategy: Underprice competitors

to gain share.

• Modest price hikes lose lots of market

share.

• Exploit advantage through higher

market share than competitors.

• Share Strategy: Maintain price parity

with competitors (let benefit advantage

drive share increases).

Low Price Elasticity of

Demand

(strong horizontal

differentiation)

• Big price cuts gain little share.

• Exploit advantage through higher profit

margins.

• Margin Strategy: Maintain price parity

with competitors (let lower costs drive

higher margins).

• Big price hikes lose little share.

• Exploit advantage through higher profit

margins.

• Margin Strategy: Charge price premium

relative to competitors.

Firm's Price

Elasticity of

Demand