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Markets and Structure of Flow

Government

markets

Middlemen

markets

Resource

markets

Manufacturer

markets

Services, money

Resources

Money

Taxes, goods

Goods and services

Services,

money

Taxes,

goods

Money

Consumer

markets Services

Resources

Money

Taxes

Money

Goods and services

Taxes,

goods

Services,

money

A Company‘s Macroenvironment

COMPANY

Substitute

Buyers

New Entrants

Rival Firms

Suppliers

IMMEDIATE INDUSTRY &

COMPETITVE ENVIRONMENT

MACROENVIRONMENT

The Economy at large

Break-even Analysis

Total Revenue

Total Costs

Fixed Expenses*

* Fixed Expenses = Marketing Expenses and Other Direct Expenses

$ M

illi

ons

15

30

35

20

10

25

5

0 50 150 100

Break-Even Volume

(90,000)

200

Units Sold (000)

Profit Loss

Demand and Supply

Pri

ce

Quantity 0

G

B

E

D

F

S

A

D

S

Elasticity

Demand is elastic and expenditure increases

when price falls from P1 to P2

(-)

(+)

Pri

ce

P1

P2

0 Quantity

Demand is inelastic and expenditure increases

when price falls from P1 to P2

(+)

(-)

Pri

ce

P2

P1

0 Quantity

e = 0

Quantity

Pri

ce

e = 0

e = - ∞

(total

inelastic

demand)

(total elastic

demand)

Quantity

Pri

ce

e = - ∞

e < - 1

e = - 1

e > - 1

The Product Life Cycle

Sal

es o

ver

pro

fits

Stages over Time

Introduction Growth Maturiy Shake-out Decline

Sales

Profits

The Life-Cycle Portfolio Matrix

C

A

Strong Average Weak

Development

Growth

Competitive

shakeout

Maturity

Decline

Saturation

THE BUSINESS UNIT‘S COMPETITIVE

POSITION

THE INDUSTRY‘S STAGE

IN THE EVOLUTIONARY

LIFE CYCLE E

F

D

B

H

G

The Product-Positioning Map

High price

Low quality

High quality

Low price

C

D

A E

B

The Four P‘s of McCarthy

Product

Place Promotion

Price

Environment

Environment

Efficiency vs. Effectiveness

Thrive Efficient

Die quickly Survive

Die slowly

STRATEGIC MANAGEMENT

OPERATIONAL

MANAGEMENT

Inefficient

Effective Ineffective

1

4 3

2

SWOT Analysis

Strengths

Opportunities Threats

Weaknesses

The Generic Value Chain

Inbound logistics

Outbound logistics

Operations Marketing and sales

Service

Primary Activities

Procurement

Technology development

Human resources management

Firm infrastructure

The Ansoff Matrix

Existing

New

Existing New

New

product

development

Market

development

Market

penetration

Diversification

PRODUCTS AND/OR SERVICES

MARKETS

BCG’s Growth-Share Matrix

High

Low

Low High

MARKET

GROWTH

RATE

RELATIVE MARKET SHARE

Star

Cash Cow Dog

Question

Mark

McKinsey 7-S Framework

Superordinate

Goals

Structure

Staff

Strategy Systems

Style Skills

Core Competencies

Banner

Brand

Business

Units

Core

Products

(Platforms)

Core

Competencies

The General Electric Business Screen

Low

High

Medium

Strong Average Weak

COMPETITIVE POSITION

INDUSTRY

ATTRACITVENESS

GE / McKinsey Multifactor Portfolio Matrix

INDUSTRY ATTRACTIVENESS

BU

SIN

ES

S S

TR

EN

GT

H

Invest

Manage

Selectively

for Earnings

Invest

Invest

Manage

Selectively

for Earnings

Manage

Selectively

for Earnings

Harvest or

Divest

Harvest or

Divest

Harvest or

Divest

Very low Moderate Very high

Very low

Moderate

Very high

MARKET

RISK

TECHNOLOGY RISK

Market and Technology Risk Bubble Diagram

A Nine-Cell Industry Attractiveness-

Competitive Strength Matrix

Business C

Business E

Strong Average

High

Low

Business F Business A

Business B

Business D

Weak

Medium

Low priority for investment

Medium priority for investment

High priority for investment

COMPETITIVE STRENGTHS/BUSINESS POSITION

LONG-TERM

INDUSTRY

ATTRACTIVENESS

Porter‘s Five Forces

Potential Entrants

Industry

competitors

Rivalry among

existing firms

Substitutes

Buyers Suppliers

Threat of

substitute products

or services

Bargaining power

of suppliers Bargaining power

of buyers

Threat of

new entrants

The Generic Strategies

Cost Leadership Differentiation

Cost Focus Differentiation Focus

Broad

Target

Narrow

Target

Lower Cost Differentiation

COMPETITIVE ADVANTAGE

COMPETITIVE

SCOPE

Leavitt‘s Diamond

Task

Technology

People Structure

Maslow‘s Hierarchy of Human Needs

Esteem Needs

(self-esteem, recognition, status)

Self-Actualization Needs

(self-development and realization)

Social Needs

(sense of belonging, love)

Safety Needs

(security, protection)

Physiological Needs

(hunger, thirst)

Managerial Grid

1 2 3 4 5 6 7 8 9

1

2

3 4

5 6

7

8 9

concern for production

con

cern

fo

r p

eop

le

Country Club Management (1,9)

Production is incidental

to lack of conflict and

„good fellowship“

Team management (9,9)

Production is from

integration of task

and human requirements

Dampened Pendulum (5,5)

(Middle of the road.)

Push for production but

don‘t go „all out“. Give some

but not all all: „be fair but firm“

Task Management (9,1)

Men are a commodity

just as machines.

A manager‘s responsibility

is to plan, direct and

control the work of those

subordinate to him

Impoverished Management (1,1)

Effective production is

unobtainable becaus people are

lazy, apathetic and indifferent.

Sound and mature relationships

are difficult to achieve because,

(human nature being what it is)

conflict is inevitable

The Business Process Re-engineering

Approach

Function 1 Function 2 Function 3 Function 4

Micro operations

Cust

om

er n

eeds

fulf

ille

d

Bu

sin

ess

pro

cess

es

Cust

om

er n

eeds

Bu

sin

ess

pro

cess

es

Cust

om

er n

eeds

fulf

ille

d

Cust

om

er n

eeds

Mic

ro o

per

ati

on

s

Activity 1 Activity 2 Activity 3 Activity 4

Total Quality Management

• Whole operation involved

• Quality srategy

• Teamwork

• Staff empowerment

• Involves customers and suppliers

• Quality systems

• Quality costing

• Problem solving

• Quality planning

• Statistical methods

• Process performance

• Quality standards

• Error detection

• rectification

Inspection

Total quality management

Quality control

Quality assurance

Supply Chain Management

The

Operation

Second-tier

suppliers

First-tier

suppliers

First-tier

customers

Second-tier

customers

Supply side Demand side

Purchasing and supply

management

Physical distribution

management

Logistics

Materials management

Supply chain management

Du Pont Scheme

Return on equity

ROE = Earnings after tax

Owner‘s equity

Financial leverage multiplier Tax effects

Return on invested capital

ROIC = Earnings before interest and tax

Invested capital

Operating profit margin

Earnings before interest and tax

Sales

Capital turnover

Sales

Invested capital

Financial structure ratio

Invested capital

Owner‘s equity

Financial cost ratio

Earnings before tax

Earnings before interest and tax

Tax effect ratio

Earnings after tax

Earnings before tax

Sales

Operating costs

Invested capital Owner‘s equity Cost of debt Tax rate

Cash

Working Capital

requirement

Fixed assets

Valley

of Death

Enterprise

Cash Flow

Enterprise

Financing

Time Break-even

point

Emerging Growth

FFF & Angels Venture

Capitalist Investment Banks &

Banks

Seed Capital

& Early Stage

Early

Growth

Later

Growth

Public

Market

Initial

Public

Offering

Mezzanine

1st

2nd

3rd

Financing Life Cycle

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