Upload
allied-consultants
View
234
Download
2
Tags:
Embed Size (px)
DESCRIPTION
Introduction to basic concepts of business strategy
Citation preview
Where do we go?How do we get there?
High
High
Low
Low
Customer valueOuter productivity‘Doing right things’
ProfitabilityInner productivity
‘Doing things right’
Corporate strategy◦ Lever brother’s strategy
Business strategy◦ Lever brother’s shampoo division’s strategy in Pakistan
Operational strategy◦ Strategy for the day to day running of a business
Functional strategies◦ marketing strategy
How marketing is going to help achieve the business strategy
◦ technology strategy How technology helps
◦ competitive Strategy Who else is doing it and how do we survive?
Competitive advantage grows out of value a firm is able to create for its buyers that exceeds the firm's cost of creating it. Value is what buyers are willing to pay, and superior value stems from offering lower prices than competitors for equivalent benefits or providing unique benefits that more than offset a higher price.
There are two basic types of competitive advantage: cost leadership and differentiation.
Michael Porter, Competitive Advantage, 1985, p.3
- Operational efficiency- Do it better. Optimize the supply chain, buy new machines, fire people, acquire competition
- Customer Intimacy- People pay better if they know and trust you
- Product Leadership- Constantly creating new products to avoid competition
Top Managers
Middle Managers
Supervisors and Employees
Implementationof strategy
Strategy
Goal Goal Goal
Actions
Emergent strategy
How to read, analyze and understand the environment?PEST –analysisSWOT –analysisPorter’s Five Forces Analysis
Political Factors.The political arena has a huge influence upon the regulation of
businesses, and the spending power of consumers and other businesses. You must consider issues such as:
1.How stable is the political environment? 2.Will government policy influence laws that regulate or tax your
business?3.What is the government's position on marketing ethics? 4. What is the government's policy on the economy? 5. Does the government have a view on culture and religion? 6. Is the government involved in trading agreements such as EU,
NAFTA, ASEAN, or others?
Marketers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international marketing. You need to look at:
1. Interest rates.2. Inflation 3. Employment level per capita. 4. Long-term prospects for the economy 5. Gross Domestic Product (GDP) per capita, and so
on
The social and cultural influences on business vary from country to country. It is very important that such factors are considered. Factors include:
1.What is the dominant religion? 2.What are attitudes to foreign products and services? 3.Does language impact upon the diffusion of products onto
markets? 4.How much time do consumers have for leisure? 5.What are the roles of men and women within society? 6.How long are the population living? Are the older generations
wealthy? 7.Do the population have a strong/weak opinion on green issues? http://www.statpak.gov.pk/depts/pco/statistics/
demographic_indicators98/demographic_indicators.html
Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points:
1. Does technology allow for products and services to be made more cheaply and to a better standard of quality?
2.Do the technologies offer consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc?
3.How is distribution changed by new technologies e.g. books via the Internet, flight tickets, auctions, etc?
4.Does technology offer companies a new way to communicate with consumers e.g. banners, Customer Relationship Management (CRM), etc?
Strength: attributes of the organization that are helpful to achieving the objective.
Weaknesses: attributes of the organization that are harmful to achieving the objective.
Opportunities: external conditions that are helpful to achieving the objective.
Threats: external conditions that are harmful to achieving the objective.
Resources: financial, intellectual, locational Customer service Efficiency Competitive advantages Infrastructure Quality Staff Management Price Delivery time Cost Capacity Relationships with key industry customers Brand and Reputation in the Market Local Language Knowledge Brand Names Ethics Environment
Political/Legal Market Trends Economic condition Expectations of stakeholders Technology Public expectations Competitors and competitive actions
Internal analysis
Strengths Weaknesses
External
Analysis
Opportunities
S-O-Strategies:Develop new methods which are suitable to the company's strength.
W-O-Strategies:Eliminate weaknesses to enable new opportunities.
ThreatsS-T-Strategies:Use strength to defend threats.
W-T-Strategies:Develop strategies to avoid weaknesses that could be targeted by threats.
New Entrants
BuyersSuppliers
Substitutes
IndustryCompetitors
Intensityof Rivalry
Threat ofSubstitutes
Threat ofNew Entrants
Bargaining Powerof Suppliers
Bargaining Powerof Buyers
Determinants of Buyer Power
Bargaining Leverage• Buyer concentration vs. firm concentration• Buyer volume• Buyer switching costs relative to firm switching costs• Buyer information• Ability to backward integrate• Substitute products• Pull-through
Price Sensitivity• Price/total purchases• Product differences• Brand identity• Impact on quality/ performance• Buyer profits• Decision maker’s incentives
Determinants of Substitution Threat• Relative price performance of substitutes• Switching costs• Buyer propensity to substitute
Rivalry Determinants• Industry growth• Fixed (or storage) costs / value added• Intermittent overcapacity• Product differences• Brand identity• Switching costs• Concentration and balance• Informational complexity• Diversity of competitors• Corporate stakes• Exit barriers
Entry Barriers• Economies of scale• Proprietary product differences• Brand identity• Switching costs• Capital requirements• Access to distribution• Absolute cost advantages Proprietary learning curve Access to necessary inputs Proprietary low-cost product design• Government policy• Expected retaliation
Determinants of Supplier Power• Differentiation of inputs• Switching costs of suppliers and firms in the industry• Presence of substitute inputs• Supplier concentration• Importance of volume to supplier• Cost relative to total purchases in the industry• Impact of inputs on cost or differentiation• Threat of forward integration relative to threat of backward integration by firms in the industry
Structural analysis within industries (???)Industry evolution:
Fragmented Industries
No form has significant market share that can strongly influence the industry outcome
Emerging industries
No rules of the game. Great uncertainty and great change
Mature Industries
Slow growth, selling to repeat buyers, greater emphasis on cost, core business processes are undergoing change, Industry profits decrease
Declining industries
An absolute decrease in unit sales over a sustained period of time.
Competitive analysis◦ What drives the competitor◦ What is the competitor doing and what can he do?
Market signals◦ Announcements, after the fact analysis and discussions
reveal the competitors true intentions Competitive moves
◦ Threatening moves: A competitor must predict and influence retaliation
◦ Perceptual lag◦ Retaliation lag◦ Conflicting goals: Retaliation can hurt the company itself◦ Denying a base: ◦ Commitment: cornerstone of defensive strategy
Product
◦ Positioning, is it differentiated enough to stand against competition
◦ What kind of Brand Equity does the product hold up?
◦ Does it fit in with what the company does? Or is known to do? (Packaging issues)
The right goal: Superior long term ROI. ◦ Don’t define goals in terms of market shares
A clear value preposition: ◦ A set of benefits that different from those of any
competitor Strategy needs to be reflected in a distinctive value chain
◦ A company must perform different activities than rivals, or perform the same activities differently.
Trade-off:◦ Company must abandon or forego products or services or
activities in order to be unique at others. Fit:
◦ Rivals can copy individual activities but not a set of reinforcing activities is much harder to copy
Continuity:◦ Frequent “Reinvention” is a sign there is no strategy at
all
IT (or technology) Strategy
Technology strategy is a planning document that explains how information technology should be utilized as part of an organization's overall business strategy.
Executive Summary - single page summary of the IT strategy
◦ High level organizational benefits ◦ Relationship to overall business strategy ◦ Resource summary
Staffing Budgets Summary of key projects
Internal Capabilities ◦ IT Project Portfolio Management - An inventory of current projects
being managed by the information technology department and their status. Note: It is not common to report current project status inside a future-looking strategy document.
◦ Current IT departmental strengths and weaknesses
External Forces ◦ Summary of changes driven from outside the organization ◦ Rising expectations of users
Example: growth of high-quality web user interfaces driven by Ajax technology Example: Availability of open-source learning management systems such as
Moodle
◦ List of new IT projects requested by the organization
Opportunities ◦ Description of new cost reduction or efficiency
increase opportunities ◦ Description of how Moore's Law (faster processors,
networks or storage at lower costs) will impact the organizations ROI for technology
Threats ◦ Description of disruptive forces that could cause the
organization to become less profitable or competitive ◦ Analysis IT usage by competition
Milestones ◦ List of monthly, quarterly or mid-year milestones and
review dates to indicate if the strategy is on track ◦ List milestone name, deliverables and metrics
IT INDUSTRY LANDSCAPE◦ Business Consulting (not strictly IT) Product vendors
◦ Product Sales teams◦ Product Resellers◦ Implementation partners = SIs◦ OEM builders Services (SIs)
◦ Training◦ Technology Consulting◦ Support and maintenance
CUSTOMER IT DEPARTMENTS◦ In house◦ Highly Outsourced
Software packed with hardware◦ Embedded◦ Telecom?◦ Standard based software
Hosted services◦ ISPs, ASPs (Salesforce.com)
- Xavor and a Product Vendor?- Xavor and an in-house IT Department (they are competition)
XAVOR SPECIFIC ANALYSIS
◦ What’s Xavor’s value preposition?◦ What isn’t Xavor doing?
- What distinguishes Xavor from an in-house development setup?